Putnam
Money Market
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
3-31-04
[GRAPHIC OMITTED: GOURDS]
[SCALE LOGO OMITTED]
From the Trustees
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III]
John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
We are pleased to report further progress in Putnam's reforms on behalf
of shareholders. The most significant news is the settlement that has
been reached with the Securities and Exchange Commission and with
regulatory authorities in the Commonwealth of Massachusetts regarding
market timing in Putnam funds. Putnam President and Chief Executive
Officer Ed Haldeman has sent a letter to all shareholders describing the
terms of the settlement. Most of the $110 million to be paid by Putnam
Investment Management, LLC will be distributed to the funds as
restitution to shareholders, thereby fulfilling an important element of
the initial settlement that Putnam reached with the SEC in November of
2003.
Over the past several months, Putnam has also introduced a number of
voluntary reforms. We would like to call your attention to one of them.
Expense comparisons for this fund can be found following the Performance
Summary of this report. The expense comparison information enables you
to estimate the amount you have actually paid for ongoing expenses such
as management fees and distribution (12b-1) fees and to compare these
expenses with the average expenses of funds in the same Lipper peer
group. We believe this information will be valuable for you and your
financial advisor when you make decisions about your financial program.
Interest-rate trends and the pace of economic growth remained paramount
in the minds of investors during the six months ended March 31, 2004.
Low yields and improving corporate earnings encouraged many investors
who had taken refuge in money market funds to reallocate assets into
stocks. Putnam Money Market Fund's management team has been
redistributing assets within the portfolio, focusing on strategies
designed to best position the fund for improving economic fundamentals
and the ensuing higher interest rates that they believe will materialize
in the coming months.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
May 19, 2004
Report from Fund Management
Fund highlights
* Putnam Money Market Fund's class A shares had a total return at net
asset value (NAV) of 0.31% for the six months ended March 31, 2004.
* The fund underperformed its benchmark, the Merrill Lynch 91-Day
Treasury Bill Index, which returned 0.50% for the period.
* The fund's returns outperformed the 0.17% average return for Lipper's
Money Market Funds category.
* See the Performance Summary beginning on page 7 for complete fund
performance, comparative performance, and Lipper data.
Performance commentary
The lack of clear, consistent evidence of economic strength may have
persuaded the Federal Reserve Board to keep interest rates at historic
lows, but it also meant that yields on fixed-income investments remained
equally depressed throughout the first half of Putnam Money Market
Fund's 2004 fiscal year. For example, the 7-day compound yield for money
market instruments stood at 0.52%* on the first day of the semiannual
period, and ended the period at 0.51%. Despite these low rates, we
maintained our focus on instruments of the highest credit quality and
portfolio diversification, while adjusting the portfolio's average days
to maturity to reflect our increasingly positive outlook for stronger
economic growth in the second half of 2004. We believe this approach
helped the fund perform well against its Lipper peer group. It did,
however, fall short of its benchmark, which is invested solely in
Treasury bills. In comparison, your fund holds a broad mix of money
market securities.
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.
* Source: imoneynet's Money Fund Report.
Market overview
During the first three months of the semiannual period, improving
economic growth led investors to anticipate that the Federal Reserve
Board (the Fed) might begin to tighten, that is, raise short-term
interest rates to minimize the risk of inflation. The yield curve, which
shows the differences in yields between shorter-term and longer-term
investments, steepened in anticipation of higher interest rates.
However, during the second half of the reporting period, announcements
of weaker economic data suggested that the U.S. economy, in fact, was
not growing as strongly as originally reported. Geopolitical pressures,
rising oil prices, and the uncertainty of an election year added to
investor concerns.
With investors and the Fed taking a wait-and-see approach, we've begun
to position the fund for what we consider an inevitable increase in
interest rates. Since the financial markets typically begin to price in
the potential for the Fed's action well in advance of the event, we
think it is prudent to begin to take steps to position the portfolio now
before a consensus emerges. In early April, prices and yields in the
futures market were reflecting a 100% likelihood of a 25 basis point
increase at the Federal Reserve Board's meeting in August.
According to Money Market Insight's March 2004 issue, assets of money
market funds, including both taxable and tax free, fell below $2
trillion in January for the first time since May 2001. This trend is the
result of low interest rates, which fell steadily from 2001 through
2003, and the stock market's recovery during the last 12 months, which
has given rise to greater investor demand for long-term investments,
primarily stock funds.
- -------------------------------------------------------------------------------
MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 3/31/04
- -------------------------------------------------------------------------------
Bonds
- -------------------------------------------------------------------------------
Lipper Money Market Funds category average 0.17%
- -------------------------------------------------------------------------------
Merrill Lynch 91-Day Treasury Bill Index (short-maturity
U.S. Treasury bills) 0.50%
- -------------------------------------------------------------------------------
Lehman Aggregate Bond Index (broad bond market) 2.98%
- -------------------------------------------------------------------------------
Citigroup World Government Bond Index (global government
bonds) 7.17%
- -------------------------------------------------------------------------------
Equities
- -------------------------------------------------------------------------------
S&P 500 Index (broad stock market) 14.08%
- -------------------------------------------------------------------------------
Russell 1000 Index (large-company stocks) 14.40%
- -------------------------------------------------------------------------------
Russell 2000 Index (stocks of small and midsize companies) 21.69%
- -------------------------------------------------------------------------------
These indexes provide an overview of performance in different market
sectors for the six months ended 3/31/04.
- -------------------------------------------------------------------------------
Strategy overview
We believe that the economy will continue to show signs of firmer growth
into the second half of fiscal 2004. We think that this situation will
eventually prompt the Fed to tighten its monetary policy and push
short-term interest rates higher. With the steepening of the yield curve
and a healthier economy, we are maintaining a slightly longer average
days to maturity than the fund's peer group. History has proven that the
announcement of favorable economic data and an ensuing rally in the
stock market contribute to a steeper yield curve, potentially increasing
the difference between short-term and long-term securities.
Consequently, we've increased the fund's allocation to floating-rate
money-market-eligible securities, which allows the portfolio to respond
more quickly to rising interest rates. Floating-rate securities
generally have a one-year maturity but reset monthly or quarterly to
reflect the current market yield. In addition to maintaining the fund's
flexibility, our focus on these securities had the intended effect of
helping to extend the fund's average days to maturity.
On March 31, the fund's average days to maturity stood at 73 days.
Although the fund began the reporting period on September 30, 2003, at
72 days, the average days to maturity fell to 67 days on February 2,
2004.
[GRAPHIC OMITTED: horizontal bar chart PORTFOLIO COMPOSITION COMPARED]
PORTFOLIO COMPOSITION COMPARED
as of 9/30/03 as of 3/31/04
Domestic money
market instruments
(exclusive of U.S.
government
obligations) 45.0% 48.8%
Foreign money
market instruments 37.8% 35.6%
U.S. government
obligations 17.2% 9.6%
Repurchase
agreements 0.0% 6.0%
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 fund holdings affected performance
After a multi-year contraction of issuance in the commercial paper
market, we have seen signs of increased activity in this
multibillion-dollar sector, which provides an attractive, low-cost
source of short-term funding for companies. These investments typically
have maturities of 30 to 90 days but can span from 0 to 270 days. For
the last three years, issuance has been slow as a result of sluggish
economic growth, which, in turn, raised investor concerns about credit
quality. Corporations also seemed willing to limit issuance out of the
need to minimize refinancing risk, which rises during periods of
declining interest rates. With increased economic activity comes the
need to rebuild inventories and expand capacity utilization. We think
corporations will turn increasingly to external funding sources to
finance that growth and that increasing issuance will be the result.
Two of the fund's largest holdings exemplify our strategy of selecting
strong financial companies in this market. With low interest rates and
the resulting high volume of mortgage origination, mortgages have become
an increasingly popular investment strategy in the asset-backed
commercial paper market. Park Granada is an asset-backed commercial
paper issuer that primarily finances high-quality/low-risk mortgages
that originate within the Countrywide Home Loans Inc., network. Park
Granada owns the mortgages for a short period of time after the loans
have closed with the originating lender but before they are securitized
in the long-term debt market. Another significant issuer, Goldman Sachs,
is one of the largest global securities and investment banking firms.
This venerable firm has benefited from strong revenues from its diverse
equity and fixed-income operations, which have offset recent weakness in
its investment banking franchise.
- ------------------------------------------------------------------
PERFORMANCE COMPARISONS (3/31/04)
- ------------------------------------------------------------------
Current return*
- ------------------------------------------------------------------
Basic statement savings account 0.30%
- ------------------------------------------------------------------
Taxable money market fund 7-day yield 0.51
- ------------------------------------------------------------------
3-month certificate of deposit 1.06
- ------------------------------------------------------------------
Putnam Money Market Fund (7-day yield)
- ------------------------------------------------------------------
Class A 0.58
- ------------------------------------------------------------------
Class B 0.07
- ------------------------------------------------------------------
Class C 0.07
- ------------------------------------------------------------------
Class M 0.43
- ------------------------------------------------------------------
Class R 0.09
- ------------------------------------------------------------------
Class T 0.33
- ------------------------------------------------------------------
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 (basic statement savings), imoneynet's Money Fund
Report (taxable money market fund compound 7-day yield), and the Federal
Reserve Board of Governors (3-month CDs).
While we are pleased to see the improving fundamentals in the commercial
paper market, we do not believe that current market conditions warrant a
wholesale shift back into this sector as of this writing. Our thinking
is supported by the fact that the yield differential between commercial
paper investments and U.S. government agency notes tightened
considerably during the reporting period. (Today, because of the
unusually low interest rates, we're seeing the basis point spreads in
the low single digits.) This tighter yield spread suggests that
investors are not being rewarded for the increased risk associated with
investing in commercial paper, which is backed by the financial credit
status of the underlying company. On the other hand, U.S. government
agency notes, such as those issued by the Federal National Mortgage
Association (FNMA) and the Federal Home Loan Bank (FHLB), carry
excellent credit ratings in addition to the competitive yields
associated with these securities today.
We decreased the fund's exposure to foreign holdings slightly during the
six months. The fund's offshore investments on March 31 consisted of
commercial paper and certificates of deposits issued by large,
financially sound banking entities in Canada and across Europe. Large
European banks, such as Societe Generale and Credit Agricole in France
and Barclays Bank PLC and HBOS Treasury Services PLC in the United
Kingdom, continue to be major issuers in the money markets. These strong
financial institutions benefit from their large diversified position in
their stable home markets, and solid retail banking franchises, which
provide a steady stream of earnings.
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), and Kevin Cronin.
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.
Lingering unemployment has been an anomaly in an otherwise robust
economic recovery. However, just after the close of the reporting
period, the government announced that March employment surged by
308,000. The prior two months were revised upward, bringing the first
quarter 2004 job growth total to 513,000. Employment data at last is
showing marked improvement. We believe the underlying strength in the
economy will foster higher interest rates in the future. In keeping with
our views, the fund's average days to maturity is currently a bit longer
than its historical average of 50 to 60 days.
We'll be watching for further evidence of solid growth and working to
position the portfolio in response to that increasing optimism. The
fund's diversification across an array of high-quality issuers, security
types and geography should prove to be advantageous, as we continue our
search for competitive income in a very challenging interest-rate
market.
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 shows your fund's performance during the first half of its
fiscal year, which ended March 31, 2004. Performance should always be
considered in light of a fund's investment strategy. Data represents
past performance. Past performance does not guarantee future results.
More recent returns may be less or more than those shown. Investment
return will fluctuate. For the most recent month-end performance, please
visit www.putnaminvestments.com.
- ----------------------------------------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 3/31/04
- ----------------------------------------------------------------------------------------------------------------
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)
- ----------------------------------------------------------------------------------------------------------------
NAV NAV CDSC NAV CDSC NAV NAV NAV
- ----------------------------------------------------------------------------------------------------------------
6 months 0.31% 0.06% -4.94% 0.06% -0.94% 0.23% 0.15% 0.18%
- ----------------------------------------------------------------------------------------------------------------
1 year 0.65 0.15 -4.85 0.15 -0.85 0.50 0.33 0.40
- ----------------------------------------------------------------------------------------------------------------
5 years 16.99 14.10 12.10 14.13 14.13 16.14 14.31 15.58
Annual average 3.19 2.67 2.31 2.68 2.68 3.04 2.71 2.94
- ----------------------------------------------------------------------------------------------------------------
10 years 49.89 42.56 42.56 42.68 42.68 47.69 42.81 46.31
Annual average 4.13 3.61 3.61 3.62 3.62 3.98 3.63 3.88
- ----------------------------------------------------------------------------------------------------------------
Annual average
(life of fund) 6.58 6.05 6.05 6.05 6.05 6.42 6.04 6.31
- ----------------------------------------------------------------------------------------------------------------
Current return
(end of period)
- ----------------------------------------------------------------------------------------------------------------
Current
7-day yield* 0.58 0.07 0.07 0.43 0.09 0.33
- ----------------------------------------------------------------------------------------------------------------
Current
30-day yield* 0.58 0.07 0.07 0.42 0.08 0.33
- ----------------------------------------------------------------------------------------------------------------
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 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 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.
- -----------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 3/31/04
- -----------------------------------------------------------------------------
Merrill Lynch Lipper Money
91-Day Market Funds
Treasury category
Bill Index average*
- -----------------------------------------------------------------------------
6 months 0.50% 0.17%
- -----------------------------------------------------------------------------
1 year 1.08 0.38
- -----------------------------------------------------------------------------
5 years 18.71 14.91
Annual average 3.49 2.82
- -----------------------------------------------------------------------------
10 years 53.52 46.28
Annual average 4.38 3.87
- -----------------------------------------------------------------------------
Annual average
(life of fund) --+ 6.57
- -----------------------------------------------------------------------------
Index and Lipper results should be compared to fund performance at net
asset value.
* Over the 6-month and 1-, 5-, and 10-year periods ended 3/31/04, there
were 411, 398, 291, and 168 funds, respectively, in this Lipper
category.
+ Inception date of index was 12/31/77, after the fund's inception.
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTION INFORMATION 6 MONTHS ENDED 3/31/04
- ---------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C Class M Class R Class T
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions
(number) 6 6 6 6 6 6
- ---------------------------------------------------------------------------------------------------------------------------------
Income $0.003076 $0.000581 $0.000583 $0.002320 $0.001468 $0.001830
- ---------------------------------------------------------------------------------------------------------------------------------
Total $0.003076 $0.000581 $0.000583 $0.002320 $0.001468 $0.001830
- ---------------------------------------------------------------------------------------------------------------------------------
Understanding your
fund's expenses
As a mutual fund investor, you pay ongoing expenses, such as management
fees, distribution fees (12b-1 fees), and other expenses. Using the
information below, you can estimate how these expenses affect your
investment and compare them with the expenses of other funds. You may
also pay one-time transaction expenses, including sales charges (loads),
and redemption fees, which are not shown in this section and would have
resulted in higher total expenses. For more information, see your fund's
prospectus or talk to your financial advisor.
Review your fund's expenses
The table below shows the expenses you would have paid on a $1,000
investment in Putnam Money Market Fund from September 30, 2003, to March
31, 2004. It also shows how much a $1,000 investment would be worth at
the close of the period, assuming actual returns and expenses.
EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming actual returns for the 6 months ended 3/31/04
- -------------------------------------------------------------------------------------------------------------
Class A Class B Class C Class M Class R Class T
- -------------------------------------------------------------------------------------------------------------
Expenses paid per $1,000* $3 $5 $5 $3 $5 $4
- -------------------------------------------------------------------------------------------------------------
Ending value
(after expenses) $1,003 $1,001 $1,001 $1,002 $1,002 $1,002
- -------------------------------------------------------------------------------------------------------------
* Expenses for each share class are calculated using the fund's annualized
expense ratio for each class, which represents the ongoing expenses as a
percentage of net assets for the six months ended 3/31/04. The expense
ratio may differ for each share class (see the table at the bottom of
the next page). Expenses are calculated by multiplying the expense ratio
by the average account value for the period; then multiplying the result
by the number of days in the reporting period; and then dividing that
result by 365 (or 366, for leap years).
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended March
31, 2004, use the calculation method below. See your September 30, 2003,
Putnam statement or call Putnam at 1-800-225-1581 to find the value of
your investment in the fund on September 30, 2003.
- -----------------------------------------------------------------------------
HOW TO CALCULATE THE EXPENSES YOU PAID
- -----------------------------------------------------------------------------
Total
Value of your Expenses paid expenses
investment on 9/30/03 [DIV] $1,000 X per $1,000 = paid
- -----------------------------------------------------------------------------
Example Based on a $10,000 investment in class A shares of your fund.
- -----------------------------------------------------------------------------
$10,000 [DIV] $1,000 X $3 (see table above) = $30
- -----------------------------------------------------------------------------
Comparing your fund's expenses with those of other funds
Using the SEC's method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines
to help investors assess fund expenses. Per these guidelines, the table
below shows your fund's expenses based on a $1,000 investment, assuming
a hypothetical 5% annualized return. You can use this information to
compare the ongoing expenses (but not transaction expenses or total
costs) of investing in the fund with those of other funds. All mutual
fund shareholder reports will provide this information to help you make
this comparison. Please note that you cannot use this information to
estimate your actual ending account balance and expenses paid during the
period.
- -------------------------------------------------------------------------------------------------------------
EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming a hypothetical 5% annualized return for the 6 months ended
3/31/04
- -------------------------------------------------------------------------------------------------------------
Class A Class B Class C Class M Class R Class T
- -------------------------------------------------------------------------------------------------------------
Expenses paid per $1,000* $3 $5 $5 $3 $5 $4
- -------------------------------------------------------------------------------------------------------------
Ending value
(after expenses) $1,045 $1,040 $1,040 $1,043 $1,040 $1,042
- -------------------------------------------------------------------------------------------------------------
* Expenses for each share class are calculated using the fund's annualized
expense ratio for each class, which represents the ongoing expenses as
a percentage of net assets for the six months ended 3/31/04. The expense
ratio may differ for each share class (see the table at the bottom of the
next page). Expenses are calculated by multiplying the expense ratio by
the average account value for the period; then multiplying the result by
the number of the days in the reporting period; and then dividing that
result by 365 (or 366, for leap years).
Using industry averages to compare expenses
You can also compare your fund's expenses with industry averages, as
determined by Lipper, an independent fund-rating agency that ranks funds
relative to others that Lipper considers to have similar investment
styles or objectives. The expense ratio for each share class shown below
indicates how much of your fund's net assets have been used to pay
ongoing expenses during the period.
- ---------------------------------------------------------------------------------------------------------------------
EXPENSE RATIO COMPARISONS USING ANNUALIZED DATA
- ---------------------------------------------------------------------------------------------------------------------
Class A Class B Class C Class M Class R Class T
- ---------------------------------------------------------------------------------------------------------------------
Your fund's annualized
expense ratio 0.52% 1.02% 1.02% 0.67% 1.02% 0.77%
- ---------------------------------------------------------------------------------------------------------------------
Average annualized expense
ratio for Lipper peer group+ 0.68% 1.18% 1.18% 0.83% 1.18% 0.93%
- ---------------------------------------------------------------------------------------------------------------------
+ For class A shares, expenses shown represent the average of the
expenses of funds viewed by Lipper as having the same investment
classification or objective as the fund, calculated in accordance with
Lipper 's standard reporting methodology for comparing expenses within a
given universe. All Lipper data are for the most recent fiscal periods
available as of March 31, 2004. For class B, C, M, R, and T shares,
Putnam has adjusted the Lipper total expense average to reflect higher
12b-1 fees incurred by these classes of shares. The peer group may
include funds that are significantly larger or smaller than the fund,
which may limit the comparability of the fund 's expenses to the Lipper
average.
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. Redemption 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 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. Redemption 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 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
did 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 1,000 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.
A note about duplicate mailings
In response to investors' requests, the SEC has modified mailing
regulations for proxy statements, semiannual and annual reports, and
prospectuses. Putnam is now able to send a single copy of these
materials to customers who share the same address. This change will
automatically apply to all shareholders except those who notify us. If
you would prefer to receive your own copy, please call Putnam at
1-800-225-1581.
Putnam is committed to managing our mutual funds in the best interests
of our shareholders. Our proxy voting guidelines and policies are
available on the Putnam Individual Investor Web site,
www.putnaminvestments.com, by calling Putnam's Shareholder Services at
1-800-225-1581, or on the SEC's Web site, www.sec.gov.
A guide to the financial statements
These sections of the report, as well as the accompanying Notes,
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 period.
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.
The fund's portfolio
March 31, 2004 (Unaudited)
Commercial paper (59.1%) (a) Maturity
Principal amount date Value
Domestic (40.1%)
- -------------------------------------------------------------------------------
$55,000,000 Amstel Funding Corp. 1.055s 5/5/04 $54,943,587
49,174,000 Amstel Funding Corp. 1.05s 4/21/04 49,143,881
20,000,000 Amstel Funding Corp. 1.08s 9/20/04 19,896,200
75,000,000 Amstel Funding Corp. 1.10s 5/28/04 74,867,083
50,000,000 Atlantic Asset Securitization Corp.
1.04s 4/22/04 49,968,222
45,042,000 Atlantic Asset Securitization Corp.
1.04s 4/5/04 45,035,494
46,000,000 Bank of America Corp. 1.04s 4/16/04 45,978,738
50,000,000 Bank of America Corp. 1.08s 6/8/04 49,896,500
30,000,000 Banc One Australia, Ltd. 1.04s 4/2/04 29,998,267
25,000,000 Banc One Australia, Ltd. 1.06s 6/18/04 24,941,847
31,000,000 Banc One Australia, Ltd. 1.10s 8/27/04 30,858,864
25,000,000 Banc One Australia, Ltd. 1.14s 6/28/04 24,929,542
39,745,000 Barton Capital Corp. 1.07s 4/8/04 39,735,550
50,000,000 CAFCO, LLC 1.05s 5/6/04 49,947,500
50,000,000 CAFCO, LLC 1.04s 6/16/04 49,888,778
40,000,000 CAFCO, LLC 1.04s 4/16/04 39,981,511
25,000,000 CIT Group, Inc. 1.05s 4/20/04 24,985,417
25,000,000 CIT Group, Inc. 1.05s 4/14/04 24,989,792
68,000,000 Citibank Credit Card Issuance Trust
(Dakota) 1.04s 5/25/04 67,891,956
50,000,000 Citibank Credit Card Issuance Trust
(Dakota) 1.04s 5/24/04 49,922,000
40,000,000 Citigroup Global Markets Holdings,
Inc. 1.045s 6/1/04 39,928,011
50,000,000 Citigroup Global Markets Holdings,
Inc. 1.04s 4/28/04 49,959,556
68,000,000 CRC Funding, LLC 1.035s 6/10/04 67,861,195
54,000,000 CXC, LLC 1.04s 4/21/04 53,967,240
25,000,000 Eureka Securitization, Inc. 1.03s 5/21/04 24,963,521
47,000,000 Eureka Securitization, Inc. 1.05s 5/12/04 46,942,425
50,000,000 Eureka Securitization, Inc. 1.05s 5/10/04 49,941,667
50,000,000 Federal Home Loan Mortgage Corp.
1.23s 5/20/04 49,914,583
50,000,000 Federal Home Loan Mortgage Corp.
1.24s 6/15/04 49,869,111
38,000,000 GE Capital International Funding
1.04s 6/24/04 37,906,689
25,000,000 GE Capital International Funding
1.04s 4/27/04 24,980,500
31,000,000 GE Capital International Funding
1.05s 6/22/04 30,924,954
40,000,000 GE Capital International Funding
1.05s 5/19/04 39,942,833
46,000,000 GE Capital International Funding
1.05s 5/11/04 45,944,992
20,000,000 GE Capital International Funding
1.05s 4/30/04 19,982,500
50,000,000 Goldman Sachs Group, Inc. 1.05s 4/13/04 49,981,042
59,000,000 Jupiter Securitization Corp. 1.06s 6/30/04 58,841,913
27,000,000 NATC California, LLC (Chase
Manhattan Bank (Letter Of Credit
(LOC)) 1.05s 4/22/04 26,982,675
80,000,000 NATC California, LLC (Chase
Manhattan Bank (LOC)) 1.05s 4/19/04 79,955,667
20,000,000 Park Granada, LLC 1.05s 6/30/04 19,946,917
30,000,000 Park Granada, LLC 1.06s 6/30/04 29,919,617
25,092,000 Park Granada, LLC 1.07s 7/13/04 25,014,438
30,000,000 Park Granada, LLC 1.07s 4/7/04 29,993,758
25,500,000 Park Granada, LLC 1.08s 8/31/04 25,382,955
41,000,000 Park Granada, LLC 1.08s 8/12/04 40,835,180
25,400,000 Receivables Capital Corp. 1.05s 4/23/04 25,382,961
--------------
1,893,067,629
Foreign (19.0%)
- -------------------------------------------------------------------------------
27,500,000 Banco Continental de Panama, S.A.
(Credit Lyonnais (LOC)) 1.05s
(France) 5/18/04 27,461,500
25,000,000 CEMEX SA de CV (Barclays Bank PLC
(LOC)) 1.06s (United Kingdom) 4/2/04 24,998,528
40,000,000 COFCO Capital Corp. 1.04s
(Rabobank Nederland (LOC))
(Netherlands) 5/4/04 39,960,711
68,000,000 Credit Suisse First Boston (USA),
Inc. 1.04s (Switzerland) 6/25/04 67,831,058
50,000,000 Credit Suisse First Boston NY 1.04s
(Switzerland) 6/15/04 49,890,222
96,000,000 DnB NOR Bank ASA 1.05s (Norway) 6/11/04 95,798,400
40,000,000 HBOS Treasury Services PLC 1.05s
(United Kingdom) 6/4/04 39,924,160
25,000,000 HBOS Treasury Services PLC 1.12s
(United Kingdom) 8/25/04 24,885,667
55,000,000 HSBC USA, Inc. 1.07s (United
Kingdom) 4/15/04 54,975,479
25,000,000 ING America Insurance Holdings 1.11s
(Netherlands) 4/30/04 24,976,875
47,000,000 Nordea North America, Inc. 1.06s
(Sweden) 4/7/04 46,990,313
40,000,000 Scotiabanc, Inc. 1.05s (Canada) 5/10/04 39,953,333
30,000,000 Societe Generale 1.05s (France) 5/19/04 29,957,125
35,000,000 Spintab AB 1.11s (Sweden) 4/13/04 34,985,971
50,000,000 Toyota Motor Credit Corp. 1.04s
(Japan) 5/18/04 49,930,667
59,000,000 WestLB AG 1.05s (Germany) 5/3/04 58,943,212
50,000,000 WestLB AG 1.08s (Germany) 9/15/04 49,748,000
14,000,000 WestLB AG 1.10s (Germany) 10/8/04 13,918,294
60,000,000 Westpac Capital Corp. 1.09s
(Australia) 6/28/04 59,838,317
60,532,000 Westpac Trust Securities NZ, Ltd.
1.11s (Australia) 7/27/04 60,311,764
--------------
895,279,596
--------------
Total Commercial paper
(cost $2,788,347,225) $2,788,347,225
Certificates of deposit (14.1%) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$28,000,000 ABN AMRO Bank NV 1.095s
(Netherlands) 10/13/04 $28,011,011
92,000,000 Barclays Bank PLC 1.092s (United
Kingdom) 11/8/04 91,989,504
49,000,000 Barclays Bank PLC 1.37s (United
Kingdom) 8/5/04 49,000,000
66,000,000 Canadian Imperial Bank of Commerce
1.074s (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 1.035s
(France) 6/7/04 65,986,754
50,000,000 Credit Agricole Indosuez, NY 1.074s
(France) 9/29/04 50,001,256
30,000,000 Credit Agricole Indosuez, NY 1.29s
(France) 12/31/04 30,000,000
50,000,000 HBOS Treasury Services PLC 1.10s
(United Kingdom) 8/26/04 50,000,000
40,000,000 HBOS Treasury Services PLC 1.15s
(United Kingdom) 4/6/04 40,000,000
66,000,000 Societe Generale 1.08s (France) 4/6/04 66,000,000
45,000,000 Societe Generale 1.40s (France) 8/5/04 45,000,000
35,000,000 Toronto Dominion Bank 1.10s (Canada) 9/20/04 34,999,994
--------------
Total Certificates of deposit
(cost $666,971,958) $666,971,958
U.S. government agency obligations (9.7%) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$36,000,000 Federal Home Loan Bank bonds 1.40s 4/1/05 $36,000,000
39,500,000 Federal Home Loan Bank bonds 1.45s 3/11/05 39,500,000
50,000,000 Federal Home Loan Mortgage Corp.
notes Ser. MTN(a), 1.40s 11/3/04 50,000,000
45,000,000 Federal Home Loan Mortgage Corp.
notes Ser. MTN, 1.45s 11/16/04 45,000,000
45,000,000 Federal Home Loan Mortgage Corp.
notes Ser. MTN3, 1.52s 12/24/04 45,000,000
45,000,000 Federal National Mortgage
Association FRN 1.324s 12/13/04 44,988,615
45,000,000 Federal National Mortgage
Association FRN 1.49s 2/8/05 45,000,000
30,000,000 Federal National Mortgage
Association notes 1.35s 4/28/05 30,000,000
45,000,000 Federal National Mortgage
Association notes 1.40s 3/29/05 45,000,000
45,000,000 Federal National Mortgage
Association notes 1.50s 11/16/04 45,000,000
31,000,000 Federal National Mortgage
Association notes 1.62s 12/8/04 31,000,000
--------------
Total U.S. government agency
obligations (cost $456,488,615) $456,488,615
Corporate bonds and notes (7.8%) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$71,000,000 HSBC USA, Inc. sr. notes FRN 1.26s 9/24/04 $71,060,121
69,000,000 ING Verzekeringen NV FRN 1.12s
(Netherlands) 4/15/04 69,000,000
27,380,000 Merrill Lynch & Co., Inc. FRN
Ser. B, 1.42s 5/21/04 27,392,647
29,000,000 Morgan Stanley Dean Witter & Co. FRN
Ser. C, 1.42s 5/14/04 29,011,637
68,000,000 Societe Generale NY deposit notes
FRN Ser. YCD1, 1.028s 12/10/04 67,983,323
59,000,000 Toyota Motor Credit Corp. FRN
Ser. MTN1, 1.03s (Japan) 1/14/05 59,000,000
45,000,000 Wells Fargo Bank NA FRN Ser. BKNT,
1.036s 2/1/05 45,000,000
--------------
Total Corporate bonds and notes
(cost $368,447,728) $368,447,728
Promissory notes (3.2%) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$50,000,000 Goldman Sachs Group, Inc. (The)
1.216s (acquired 12/16/03, cost
$50,000,000) (RES) 6/17/04 $50,000,000
50,000,000 Goldman Sachs Group, Inc. (The)
1.20s (acquired 3/3/04, cost
$50,000,000) (RES) 8/25/04 50,000,000
50,000,000 Goldman Sachs Group, Inc. (The)
1.23s (acquired 10/30/03, cost
$50,000,000) (RES) 4/29/04 50,000,000
--------------
Total Promissory notes
(cost $150,000,000) $150,000,000
Asset backed securities (0.8%) (a) (cost $36,000,000) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$36,000,000 TIAA Real Estate CDO, Ltd. 144A FRN
Ser. 03-1A, Class A1MM, 1.12s 9/28/04 $36,000,000
Short-term investments (6.0%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$220,910,00 Interest in $524,000,000 joint
tri-party repurchase agreement
dated March 31, 2004 with Goldman
Sachs & Co. due April 1, 2004 with
respect to various U.S. Government
obligations -- maturity value of
$220,916,627 for an effective yield
of 1.08% $220,910,000
61,927,000 Interest in $231,000,000 joint
tri-party repurchase agreement
dated March 31, 2004 with UBS
Securities, LLC due April 1, 2004
with respect to various U.S.
Government obligations -- maturity
value of $61,928,841 for an
effective yield of 1.07% 61,927,000
--------------
Total Short-term investments
(cost $282,837,000) $282,837,000
- -------------------------------------------------------------------------------
Total Investments
(cost $4,749,092,526) $4,749,092,526
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $4,714,236,800.
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at March 31, 2004 was
$150,000,000 or 3.2% of net assets.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
The rates shown on Floating Rate Notes (FRN) are the current interest
rates shown at March 31, 2004.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at March 31, 2004: (as a
percentage of Market Value)
Australia 2.5%
Canada 4.0
France 6.6
Germany 2.6
Japan 2.3
Netherlands 3.4
Norway 2.0
Sweden 1.7
Switzerland 2.5
United Kingdom 7.9
United States 64.5
--------
Total 100.0%
The accompanying notes are an integral part of these financial
statements.
Statement of assets and liabilities
March 31, 2004 (Unaudited)
Assets
- -------------------------------------------------------------------------------
Investments in securities, at amortized cost (Note 1) $4,749,092,526
- -------------------------------------------------------------------------------
Cash 31,452
- -------------------------------------------------------------------------------
Interest and other receivables 4,220,495
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 54,994,030
- -------------------------------------------------------------------------------
Total assets 4,808,338,503
Liabilities
- -------------------------------------------------------------------------------
Distributions payable to shareholders 303,459
- -------------------------------------------------------------------------------
Payable for securities purchased 30,000,000
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 56,767,620
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 3,851,795
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 2,455,324
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 190,700
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 11,924
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 352,713
- -------------------------------------------------------------------------------
Other accrued expenses 168,168
- -------------------------------------------------------------------------------
Total liabilities 94,101,703
- -------------------------------------------------------------------------------
Net assets $4,714,236,800
Represented by
- -------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $4,714,070,689
- -------------------------------------------------------------------------------
Accumulated realized gain on investments (Note 1) 166,111
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $4,714,236,800
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class A share ($3,908,007,037 divided by 3,907,902,550
shares)* $1.00
- -------------------------------------------------------------------------------
Net asset value and offering price per class B share
($628,713,336 divided by 628,655,408 shares)** $1.00
- -------------------------------------------------------------------------------
Net asset value and offering price per class C share
($25,435,205 divided by 25,434,881 shares)** $1.00
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class M share ($56,572,617 divided by 56,572,453 shares)* $1.00
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class R share ($27,642 divided by 27,642 shares)* $1.00
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class T share ($95,480,963 divided by 95,477,755 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
Six months ended March 31, 2004 (Unaudited)
Interest income: $31,315,811
- -------------------------------------------------------------------------------
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 8,447,019
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 4,926,190
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 49,207
- -------------------------------------------------------------------------------
Administrative services (Note 2) 21,867
- -------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,048,370
- -------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 96,237
- -------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 53,636
- -------------------------------------------------------------------------------
Distribution fees -- Class R (Note 2) 18
- -------------------------------------------------------------------------------
Distribution fees -- Class T (Note 2) 121,965
- -------------------------------------------------------------------------------
Other 703,785
- -------------------------------------------------------------------------------
Non-recurring costs (Note 5) 72,508
- -------------------------------------------------------------------------------
Costs assumed by Manager (Note 5) (72,508)
- -------------------------------------------------------------------------------
Total expenses 16,468,294
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (96,043)
- -------------------------------------------------------------------------------
Net expenses 16,372,251
- -------------------------------------------------------------------------------
Net investment income 14,943,560
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 4,246
- -------------------------------------------------------------------------------
Net gain on investments 4,246
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $14,947,806
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets
Six months ended Year ended
March 31 September 30
Decrease in net assets 2004* 2003
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $14,943,560 $51,133,227
- -------------------------------------------------------------------------------
Net realized gain on investments 4,246 161,865
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 14,947,806 51,295,092
- -------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- -------------------------------------------------------------------------------
From net investment income
Class A (14,008,224) (45,737,713)
- -------------------------------------------------------------------------------
Class B (550,431) (4,239,307)
- -------------------------------------------------------------------------------
Class C (25,968) (220,931)
- -------------------------------------------------------------------------------
Class M (172,569) (648,250)
- -------------------------------------------------------------------------------
Class R (5) (3)
- -------------------------------------------------------------------------------
Class T (186,363) (287,023)
- -------------------------------------------------------------------------------
Decrease from capital share transactions
(Note 4) (1,137,848,768) (1,051,366,625)
- -------------------------------------------------------------------------------
Total decrease in net assets (1,137,844,522) (1,051,204,760)
Net assets
- -------------------------------------------------------------------------------
Beginning of period 5,852,081,322 6,903,286,082
- -------------------------------------------------------------------------------
End of period $4,714,236,800 $5,852,081,322
- -------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
March 31
Per-share (Unaudited) Year ended September 30
operating performance 2004 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .0031 .0087 .0166 .0493 .0564 .0478
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments -- (c) -- (c) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0031 .0087 .0166 .0493 .0564 .0478
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0031) (.0087) (.0166) (.0493) (.0564) (.0478)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.0031) (.0087) (.0166) (.0493) (.0564) (.0478)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .31* .87 1.67 5.04 5.79 4.89
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,908,007 $4,745,555 $5,512,532 $5,215,127 $3,780,309 $3,691,475
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .26* .52 .50 .50 .49 .48
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .32* .88 1.68 4.77 5.69 4.73
- ---------------------------------------------------------------------------------------------------------------------------------
* 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 B
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
March 31
Per-share (Unaudited) Year ended September 30
operating performance 2004 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .0006 .0037 .0116 .0443 .0513 .0429
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments -- (c) -- (c) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0006 .0037 .0116 .0443 .0513 .0429
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0006) (.0037) (.0116) (.0443) (.0513) (.0429)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.0006) (.0037) (.0116) (.0443) (.0513) (.0429)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .06* .37 1.16 4.52 5.25 4.37
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $628,713 $874,069 $1,193,459 $1,162,039 $649,826 $1,041,452
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .51* 1.02 1.00 1.00 .99 .98
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .07* .39 1.19 4.26 5.13 4.24
- ---------------------------------------------------------------------------------------------------------------------------------
* 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 C
- ----------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
March 31 February 1, 1999+
Per-share (Unaudited) Year ended September to September 30
operating performance 2004 2003 2002 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income .0006 .0037 .0116 .0444 .0513 .0284
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments -- (c) -- (c) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0006 .0037 .0116 .0444 .0513 .0284
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0006) (.0037) (.0116) (.0444) (.0513) (.0284)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.0006) (.0037) (.0116) (.0444) (.0513) (.0284)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .06* .37 1.17 4.53 5.26 2.87*
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $25,435 $61,755 $79,227 $90,226 $52,872 $17,091
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .51* 1.02 1.00 1.00 .99 .65*
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .07* .38 1.20 4.32 5.34 2.83*
- ----------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
+ Commencement of operations.
(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
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
March 31
Per-share (Unaudited) Year ended September 30
operating performance 2004 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .0023 .0072 .0151 .0478 .0551 .0463
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments -- (c) -- (c) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0023 .0072 .0151 .0478 .0551 .0463
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0023) (.0072) (.0151) (.0478) (.0551) (.0463)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.0023) (.0072) (.0151) (.0478) (.0551) (.0463)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .23* .72 1.52 4.89 5.65 4.73
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $56,573 $74,921 $105,938 $122,055 $114,458 $136,134
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .33* .67 .65 .65 .64 .63
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .24* .74 1.55 4.70 5.51 4.58
- ---------------------------------------------------------------------------------------------------------------------------------
* 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 R
- ---------------------------------------------------------------------------------------------------
Six months
ended For the period
March 31 January 21, 2003+
Per-share (Unaudited) to September 30
=operating performance 2004 2003
- ---------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00
- ---------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------
Net investment income .0015 .0025
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments -- (c) -- (c)
- ---------------------------------------------------------------------------------------------------
Total from
investment operations .0015 .0025
- ---------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------
From net
investment income (.0015) (.0025)
- ---------------------------------------------------------------------------------------------------
Total distributions (.0015) (.0025)
- ---------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00
- ---------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .15* .25*
- ---------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $28 $1
- ---------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .51* .71*
- ---------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .04* .25*
- ---------------------------------------------------------------------------------------------------
* Not annualized.
+ Commencement of operations.
(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
- ------------------------------------------------------------------------------------------------------------------
Six months For the
ended Year period
March 31 ended Dec. 31, 2001+
Per-share (Unaudited) Sept. 30 to Sept. 30
operating performance 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------
Investment operations:
- ------------------------------------------------------------------------------------------------------------------
Net investment income .0018 .0062 .0092
- ------------------------------------------------------------------------------------------------------------------
Net realized gain on investments -- (c) -- (c) --
- ------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0018 .0062 .0092
- ------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------
From net
investment income (.0018) (.0062) (.0092)
- ------------------------------------------------------------------------------------------------------------------
Total distributions (.0018) (.0062) (.0092)
- ------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00
- ------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .18* .62 .93*
- ------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $95,481 $95,779 $12,130
- ------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .38* .77 .56*
- ------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .19* .52 .88*
- ------------------------------------------------------------------------------------------------------------------
* Not annualized.
+ Commencement of operations.
(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
March 31, 2004 (Unaudited)
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 as is believed to be 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. Each class of shares is sold without a front-end sales charge.
Class B or 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
or 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 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 (the "Code"), 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.
Effective January 28, 2004, Putnam Management has agreed to limit its
compensation (and, to the extent necessary, bear other expenses) through
December 31, 2004, to the extent that the fund's net expenses as a
percentage of average net assets exceed the average expense ratio for
the fund's Lipper peer group.
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. Putnam
Investor Services, a division of PFTC, provides investor serving agent
functions to the fund. During the six months ended March 31, 2004, the
fund paid PFTC $4,605,608 for these services.
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 six months ended March 31, 2004,
the fund's expenses were reduced by $96,043 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $4,323, as a quarterly retainer, 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 in distributing shares of the
fund. The Plans provide for payments by the fund to Putnam Retail
Management at an annual rate of 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 six months ended March 31, 2004, Putnam Retail Management,
acting as underwriter, received net commissions of $5,959,424 and
$36,927 in contingent deferred sales charges from redemptions of class B
and class C shares, respectively. A deferred sales charge of up to 1.00%
for class A and class T shares, and 0.15% for class M shares may be
assessed on certain redemptions. For the six months ended March 31,
2004, Putnam Retail Management, acting as underwriter, received no
monies in contingent deferred sales charges from redemptions of class A,
class T or class M shares acquired through an exchange from another
fund.
Note 3
Purchases and sales of securities
During the six months ended March 31, 2004, cost of purchases and
proceeds from sales (including maturities) of investment securities (all
short-term obligations) aggregated $19,711,712,784 and $20,906,037,154,
respectively.
Note 4
Capital shares
At March 31, 2004, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares at a constant net
asset value of $1.00 per share were as follows:
Six months ended Year ended
March 31, September 30,
2004 2003
- ----------------------------------------------------------------
Class A
- ----------------------------------------------------------------
Shares sold 2,335,119,197 4,838,754,924
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 13,129,918 44,288,887
- ----------------------------------------------------------------
2,348,249,115 4,883,043,811
Shares repurchased (3,185,738,296) (5,650,184,351)
- ----------------------------------------------------------------
Net decrease (837,489,181) (767,140,540)
- ----------------------------------------------------------------
Six months ended Year ended
March 31, September 30,
2004 2003
- ----------------------------------------------------------------
Class B
- ----------------------------------------------------------------
Shares sold 565,291,302 744,531,708
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 444,881 3,895,813
- ----------------------------------------------------------------
565,736,183 748,427,521
Shares repurchased (811,150,471) (1,067,816,748)
- ----------------------------------------------------------------
Net decrease (245,414,288) (319,389,227)
- ----------------------------------------------------------------
Six months ended Year ended
March 31, September 30,
2004 2003
- ----------------------------------------------------------------
Class C
- ----------------------------------------------------------------
Shares sold 59,911,172 188,630,840
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 19,591 203,687
- ----------------------------------------------------------------
59,930,763 188,834,527
Shares repurchased (96,251,126) (206,305,804)
- ----------------------------------------------------------------
Net decrease (36,320,363) (17,471,277)
- ----------------------------------------------------------------
Six months ended Year ended
March 31, September 30,
2004 2003
- ----------------------------------------------------------------
Class M
- ----------------------------------------------------------------
Shares sold 55,998,247 88,896,695
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 157,185 616,202
- ----------------------------------------------------------------
56,155,432 89,512,897
Shares repurchased (74,507,537) (120,526,766)
- ----------------------------------------------------------------
Net decrease (18,352,105) (31,013,869)
- ----------------------------------------------------------------
For the period
Jan. 21, 2003
Six months ended (commencement
March 31, of operations) to
2004 Sept. 30, 2003
- ----------------------------------------------------------------
Class R
- ----------------------------------------------------------------
Shares sold 27,507 1,000
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 4 3
- ----------------------------------------------------------------
27,511 1,003
Shares repurchased (872) --
- ----------------------------------------------------------------
Net increase 26,639 1,003
- ----------------------------------------------------------------
Six months ended Year ended
March 31, September 30,
2004 2003
- ----------------------------------------------------------------
Class T
- ----------------------------------------------------------------
Shares sold 44,314,403 119,422,469
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 177,502 277,295
- ----------------------------------------------------------------
44,491,905 119,699,764
Shares repurchased (44,791,375) (36,052,479)
- ----------------------------------------------------------------
Net increase
(decrease) (299,470) 83,647,285
- ----------------------------------------------------------------
At March 31, 2004, Putnam, LLC owned 1,004 class R shares of the fund
(3.6% of class R shares outstanding), valued at $1,004.
Note 5
Regulatory matters and litigation
On April 8, 2004, Putnam Management entered into agreements with the
Securities and Exchange Commission and the Massachusetts Securities
Division representing a final settlement of all charges brought against
Putnam Management by those agencies on October 28, 2003 in connection
with excessive short-term trading by Putnam employees and, in the case
of the charges brought by the Massachusetts Securities Division, by
participants in some Putnam-administered 401(k) plans. The settlement
with the SEC requires Putnam Management to pay $5 million in
disgorgement plus a civil monetary penalty of $50 million, and the
settlement with the Massachusetts Securities Division requires Putnam
Management to pay $5 million in restitution and an administrative fine
of $50 million. The settlements also leave intact the process
established under an earlier partial settlement with the SEC under which
Putnam Management agreed to pay the amount of restitution determined by
an independent consultant, which may exceed the disgorgement and
restitution amounts specified above, pursuant to a plan to be developed
by the independent consultant.
Putnam Management, and not the investors in any Putnam fund, will bear
all costs, including restitution, civil penalties and associated legal
fees stemming from both of these proceedings. The SEC's and
Massachusetts Securities Division's allegations and related matters also
serve as the general basis for numerous lawsuits, including purported
class action lawsuits filed against Putnam Management and certain
related parties, including certain Putnam funds. Putnam Management has
agreed to bear any costs incurred by Putnam funds in connection with
these lawsuits. Based on currently available information, Putnam
Management believes that the likelihood that the pending private
lawsuits and purported class action lawsuits will have a material
adverse financial impact on the fund is remote, and the pending actions
are not likely to materially affect its ability to provide investment
management services to its clients, including the Putnam funds.
For the period ended March 31, 2004, Putnam Management has assumed
$72,508 of legal, shareholder servicing and communication, audit, and
Trustee fees incurred by the fund in connection with these matters.
Review of these matters by counsel for Putnam Management and by separate
independent counsel for the Putnam funds and their independent Trustees
is continuing. The fund may experience increased redemptions as a result
of these matters, which could result in increased transaction costs and
operating expenses.
Note 6
Other matters
During the period, Putnam Management discovered that, in 2002, certain
Putnam Fiduciary Trust Company ("PFTC") employees circumvented controls,
which led to an inappropriate redemption from an account in the fund to
pay certain expenses of PFTC. PFTC has (i) made restitution to the
account; (ii) implemented a number of personnel changes, including
senior personnel of PFTC; (iii) begun to implement changes in procedures
to address this issue; and (iv) informed the SEC, bank regulatory
authorities, the fund's Trustees and independent auditors for each of
PFTC and the fund.
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds.
Investors should carefully consider the investment objective, risks,
charges, and expenses of a fund before investing. For a prospectus
containing this and other information for any Putnam fund or product,
call your financial advisor at 1-800-225-1581 and ask for a prospectus.
Please read the prospectus carefully before investing.
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
* A 1% redemption fee on total assets redeemed or exchanged between 6
and 90 days of purchase may be imposed for all share classes of these
funds.
+ 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 fund seeks to preserve your investment at $1.00 per share,
it is possible to lose money by investing in the fund.
With the exception of money market funds, a 2% redemption fee will be
applied to shares exchanged or sold within 5 days of purchase.
Check your account balances and the most recent month-end 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
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 Executive Officer
Patricia C. Flaherty
Senior Vice President
Steven D. Krichmar
Vice President and
Principal Financial Officer
Michael T. Healy
Assistant Treasurer and Principal Accounting Officer
Beth S. Mazor
Vice President
James P. Pappas
Vice President
Richard S. Robie, III
Vice President
Mark C. Trenchard
Vice President and BSA Compliance Officer
Francis J. McNamara, III
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, the most recent copy of Putnam's
Quarterly Performance Summary, and Putnam's Quarterly Ranking Summary.
For more recent performance, please visit www.putnaminvestments.com.
Investors should carefully consider the investment objective, risks,
charges, and expenses of a fund, which are described in its prospectus.
For this and other information or to request a prospectus, call
1-800-225-1581 toll free. Please read the prospectus carefully before
investing. 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.
SA039-213208 010/879/2LY/534/210/2XR 5/04
Not FDIC Insured May Lose Value No Bank Guarantee
Item 2. Code of Ethics:
- -----------------------
Not applicable
Item 3. Audit Committee Financial Expert:
- -----------------------------------------
Not applicable
Item 4. Principal Accountant Fees and Services:
- -----------------------------------------------
Not applicable
Items 5-6. [Reserved]
- ---------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed End
- -------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. [Reserved]
- ------------------
Item 9. Submission of Matters to a Vote of Security Holders:
- ------------------------------------------------------------
Not applicable
Item 10. Controls and Procedures:
- ---------------------------------
(a) The registrant's principal executive officer and principal
financial officer 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 generally 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.
Although such officers reached the conclusion expressed in the
preceding paragraph, they are aware of matters that raise concerns
with respect to controls, each of which arose in connection with the
administration of 401(k) plans by Putnam Fiduciary Trust Company.
The first matter, which occurred in early 2001, involved the willful
circumvention of controls by certain Putnam employees in connection
with the correction of operational errors with respect to a 401(k)
client's investment in certain Putnam Funds, which led to losses in
five Putnam Funds (not including the registrant). Such officers
became aware of this matter in February 2004. The second matter,
which occurred in 2002, involved the willful circumvention by
certain Putnam employees of policies and procedures in connection
with the payment of Putnam corporate expenses. Such officers did
not learn that this matter involved a Putnam Fund until January
2004. Putnam has made restitution to the affected Funds,
implemented a number of personnel changes, including senior
personnel, begun to implement changes in procedures to address these
items and informed the SEC, the Funds' Trustees and independent
auditors. An internal investigation and review of procedures and
controls are currently ongoing.
In reaching the conclusion expressed herein, the registrant's
principal executive officer and principal financial officer
considered a number of factors, including the nature of the matters
described above, when the matters occurred, the individuals
involved, personnel changes that have occurred since these matters
occurred, the results to date of the current ongoing investigation
and the overall quality of controls at Putnam at this time.
(b) Changes in internal control over financial reporting:
Not applicable
Item 11. Exhibits:
- ------------------
(a) Not applicable
(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
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: May 27, 2004
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/Charles E. Porter
---------------------------
Charles E. Porter
Principal Executive Officer
Date: May 27, 2004
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: May 27, 2004