Putnam
Money Market
Fund
Item 1. Report to Stockholders:
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The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
9-30-04
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From the Trustees
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John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
During the past several months, Putnam introduced a number of reforms
for the benefit of shareholders, including increasing the amount of
disclosure for our funds. Beginning with this month's reports, we inform
you of any change during the prior year of the Portfolio Leader and
Portfolio Members of your fund's management team. Additionally, we list
the other fund management responsibilities of your fund's Portfolio
Leader and Portfolio Members. This new information, which you can find
following the Outlook for Your Fund, complements the expense comparison
we added to your fund's report earlier this year.
We are also pleased to announce that three new Trustees have joined your
fund's Board of Trustees. Nominated by your fund's independent Trustees,
these individuals have had outstanding careers as leaders in the
investment management industry. Myra R. Drucker is a Vice Chair of the
Board of Trustees of Sarah Lawrence College and serves as Chair of the
New York Stock Exchange (NYSE) Pension Managers Advisory Committee and
as a Trustee of Commonfund, a not-for-profit asset management firm.
Richard B. Worley is Managing Partner of Permit Capital LLC, an
investment management firm. Both Ms. Drucker and Mr. Worley are
independent Trustees (i.e., Trustees who are not "interested persons" of
your fund or its investment advisor). Charles E. Haldeman, Jr., the
third new Trustee, is President and Chief Executive Officer of Putnam
Investments.
During the period covered by the following report, Putnam Money Market
Fund delivered respectable results. In the following pages, the fund
managers discuss fund performance, strategy, and their outlook for
fiscal 2005.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
November 17, 2004
Report from Fund Management
Fund highlights
* For the fiscal year ended September 30, 2004, Putnam Money Market
Fund's class A shares returned 0.68%.
* The return of the fund's benchmark, the Merrill Lynch 91-Day Treasury
Bill Index, was 1.10%.
* The average return for the fund's Lipper category, Money Market Funds,
was 0.42%.
* See the Performance Summary beginning on page 8 for additional fund
performance, comparative performance, and Lipper data.
Performance commentary
During the first half of Putnam Money Market Fund's 2004 fiscal year, we
focused our efforts on positioning the portfolio for an eventual
increase in interest rates. This focus proved rewarding in the second
half of the year, as the Federal Reserve Board (the Fed) initiated a
series of quarter-point interest-rate increases over the summer months.
By curtailing the fund's exposure to longer-maturity U.S. government
agency notes and raising its weighting in floating-rate instruments, we
were able to keep the fund's average days to maturity shorter. We also
added incremental income by taking advantage of distortions in pricing
among money market-eligible securities, especially when investors'
expectations of the Fed's potential tightening of interest rates led to
a widening of yields among different types of securities. These
strategies had the intended effect of increasing the fund's
responsiveness to the rise in interest rates and helped it outperform
the average return of 0.42% for its Lipper Money Market Funds category.
However, the fund lagged its benchmark, the Merrill Lynch 91-Day
Treasury Bill Index, which is composed of short-maturity U.S. Treasury
bills.
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TOTAL RETURN FOR
PERIODS ENDED 9/30/04
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Class A
(inception 10/1/76) NAV
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1 year 0.68%
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5 years 14.74
Annual average 2.79
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10 years 47.68
Annual average 3.98
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Annual average
(life of fund) 6.47
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Current return
(end of period)
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Current 7-day yield 1.27
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Data is historical. Past performance does not guarantee future results.
More recent returns may be less or more than those shown. Investment
return will fluctuate. Performance assumes reinvestment of
distributions. Returns at NAV do not reflect a sales charge. For the
most recent month-end performance, visit www.putnaminvestments.com. The
7-day yield is one of the most common gauges for measuring money market
mutual fund performance. Yield more closely reflects current performance
than total return.
FUND PROFILE
By emphasizing high-quality, short-term fixed-income securities, Putnam
Money Market Fund seeks to protect principal by seeking to maintain a
constant $1.00 share price while providing shareholders with easy access
to their money. Putnam Money Market Fund may be appropriate for
investors seeking current income consistent with capital preservation,
stability of principal, and liquidity of assets.
Market overview
The economy may be prospering, but such growth usually comes with a
price tag: higher interest rates, which the Fed uses as a brake to
control inflation resulting from rising prices. So far the Fed's
short-term interest rate hikes have been slow and steady, and we expect
this pace to continue into 2005. This should give investors, consumers,
and businesses time to adjust. Despite volatile energy prices, inflation
remains relatively low and global competitive forces are working to keep
prices in check. Midway through the fiscal year, there was clear
evidence that a solid recovery was taking hold. The U.S. economy
expanded at more than 4% in the first three months of 2004. Investors
began anticipating tightening by the Fed, and market yields began to
reflect that view. At its May 4 meeting, the Fed noted the higher risk
for inflation, setting the stage for rate increases -- but at a steady,
measured pace. At its June 30 meeting, the Fed raised the federal funds
rate, the rate banks charge each other for overnight loans, by one
quarter of a percentage point from a 45-year low of 1 percent.
Additional increases in August and September brought the federal funds
rate to 1.75% by the period's end.
According to Money Market Insight's September 2004 issue, assets of
taxable money market funds continued to fall during the course of the
fiscal year. While it appears that money funds may be destined for a
third consecutive year of asset decline, the outflows have slowed.
Historically low interest rates and the stock market's recovery, which
is creating greater demand for long-term investments, are contributing
to the redistribution of assets. We think outflows may begin to moderate
into 2005 and that asset flows may even flatten out or show a slight
increase, as yield-sensitive investors reconsider their short-term asset
strategies in light of the higher interest rates now available from
money market investments.
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MARKET SECTOR PERFORMANCE 12 MONTHS ENDED 9/30/04
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Bonds
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Lipper Money Market Funds category average 0.42%
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Merrill Lynch 91-Day Treasury Bill Index (short-maturity
U.S. Treasury bills) 1.10%
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Lehman Aggregate Bond Index (broad bond market) 3.68%
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Citigroup World Government Bond Index (global government
bonds) 7.00%
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Equities
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S&P 500 Index (broad stock market) 13.87%
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Russell 1000 Index (large-company stocks) 13.90%
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Russell 2000 Index (stocks of small and midsize companies) 18.77%
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These indexes provide an overview of performance in different market
sectors for the 12 months ended 9/30/04.
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Strategy overview
Through experience, we have learned that investors often overreact in
their estimation of how far or how fast interest rates will move. This
creates a buying opportunity when investor optimism about the strength
of the economy overshoots a more conservative scenario, which is more in
keeping with how we seek to manage the fund. For example, interest rates
began to spike up sharply in June, when investors began to anticipate a
50-basis-point rate increase at the Fed's August meeting and demand for
shorter-term securities increased. The yield curve steepened to reflect
investors' anticipation of aggressive Fed tightening and their
expectations of sharply higher interest rates.
We believed a more gradual approach was likely and shortened the
portfolio's average days to maturity to a lesser degree. Given the
distortion in prices that resulted from investors' more bullish economic
outlook and expectation for sharply rising interest rates, slightly
longer-maturity money market securities became attractively priced. As a
result, we maintained our laddering approach of structuring the
portfolio, which involves investing in a diverse range of securities and
maturities, taking advantage of attractively priced points on the curve.
When investors realized they had overestimated the degree of the
increase, the markets settled back down and began to reflect an outlook
that was more in keeping with our view -- that is, a more measured
removal of the extraordinary monetary stimulus of recent years.
[GRAPHIC OMITTED: horizontal bar chart PORTFOLIO COMPOSITION COMPARED]
PORTFOLIO COMPOSITION COMPARED
as of 3/31/04 as of 9/30/04
Domestic money
market instruments
(exclusive of U.S.
government
obligations) 48.8% 50.3%
Foreign money
market instruments 35.6% 29.8%
U.S. government
obligations 9.6% 12.8%
Repurchase
agreements 6.0% 7.1%
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 three years of a declining-to-flat interest-rate environment, the
anticipation and arrival of higher rates prompted a major shift in the
fund's strategy during the course of the fiscal year ended September 30,
2004. Investments in U.S. government agency notes were reduced steadily
during the first half of the year and hovered in the 8% range of total
net assets for much of May, June, and July, as we endeavored to keep the
fund's average days to maturity low. During the first half of the fiscal
year, the fund's average days to maturity was running in the 70- to
80-day range. In recent months, this measure of the fund's sensitivity
to changes in interest rates fell to the 40- to 50-day range. On
September 30, the fund's average days to maturity stood at 51 days.
In August, however, with the successive Fed tightenings priced into
these securities, we began buying agency notes with a maturity of six
months -- still short enough to provide the flexibility we wanted. In
addition, August and September are large issuance months for this
market, creating plenty of buying opportunities. By September 30, these
securities represented about 13% of the fund's assets.
These short-term, fixed-rate agency notes, such as those issued by
Federal National Mortgage Association (FNMA), carry excellent credit
ratings. FNMA, the fund's largest issuer, is among the world's largest
financial institutions as well as the leading source for residential
mortgage financing in the United States. Organized as a public company
operating under federal charter, FNMA is classified as a Government
Sponsored Enterprise (GSE), which underlies the vital role the company
plays in facilitating borrower accessibility to residential mortgage
credit.
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PERFORMANCE COMPARISONS (9/30/04)
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Current return*
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Basic statement savings account 0.25%
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Taxable money market fund 7-day yield 1.09
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3-month certificate of deposit 1.86
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Putnam Money Market Fund (7-day yield)
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Class A 1.27
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Class B 0.78
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Class C 0.78
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Class M 1.12
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Class R 0.78
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Class T 1.01
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The net asset value of money market mutual funds is uninsured and
designed to be fixed, while distributions vary daily. Investment returns
will fluctuate.The principal value on passbook savings accounts and on
bank certificates of deposit (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: Bank of America (basic statement savings), Federal Reserve
Board of Governors (3-month CDs), and imoneynet's Money Fund Report
(taxable money market fund compound 7-day yield).
FNMA debt securities are widely held globally, in recognition of the
integrity of the GSE system in supporting the housing market as well as
the company's good financial track record over many years.
The fund's foreign exposure continues to add valuable diversity to the
portfolio. These investments include three-month to one-year maturities
of commercial paper and certificates of deposits issued by large,
financially sound banking entities. The fund's foreign weighting,
consisting mostly of European and Canadian banks, dropped (as a
percentage of net assets) from 38.3% on September 30, 2003, to 30.6% at
the close of the reporting period.
We have an increasingly positive outlook for the commercial paper
sector. Prior to the recovery, sluggish economic growth and high-profile
corporate failures such as Enron and Worldcom raised investor concerns
about credit quality and contributed to a multi-year contraction of
issuance. However, the increased economic activity we have seen this
year has spurred the need to rebuild inventories and expand capacity,
and companies are increasing issuance to meet their financing needs.
Goldman Sachs Group, another of the fund's largest issuers, is a leading
global investment banking and securities firm, with a pre-eminent
franchise in mergers and acquisition, advisory services, and equity
underwriting. Despite lackluster performance in these businesses over
the past few years, earnings at the company have cycled back to record
levels, as management has redirected resources to its fixed-income and
commodity trading, asset management and prime brokerage businesses.
Govco Incorporated, which is an asset-backed commercial paper issuer, is
one of our more recent acquisitions. The company is managed by
Citigroup, and all of the assets held by and backing Govco are fully
guaranteed by the full faith and credit of the U.S. or U.K. governments.
Therefore, we consider our protection from any credit risk associated
with the program as among the strongest in the market.
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 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.
We believe that short-term interest rates are likely to rise steadily in
25-basis-point increments until a level of 3.25% is reached in the
middle of 2005. It's also likely that a period of tightening will be
followed by a period in which the Fed takes stock of the impact of its
tightening.
Given our outlook, we expect to continue our current strategies of
limiting the fund's exposure to longer-term, fixed-rate securities and
increasing its allocation to floating-rate instruments, which respond
more quickly to changes in interest rates. We'll also seek to take
advantage of distortions in pricing among the various money
market-eligible securities to enhance the fund's diversification across
an array of high-quality issuers, security types, and geographies, as we
endeavor to capture the highest yields possible consistent with the
fund's strategy.
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.
Your fund's management
Your fund is managed by the members of the Putnam Fixed-Income Money
Market Team. Joanne Driscoll is the Portfolio Leader and Jonathan Topper
is the Portfolio Member of your fund. The Portfolio Leader and Portfolio
Member coordinate the team's management of the fund.
For a complete listing of the members of the Putnam Fixed-Income Money
Market Team, including those who are not Portfolio Leaders or Portfolio
Members of your fund, visit Putnam's Individual Investor Web site at
www.putnaminvestments.com.
Other mutual funds managed by the Portfolio Leader and Portfolio Members
Joanne Driscoll is also the Portfolio Leader of Putnam Prime Money
Market Fund and Putnam Tax Exempt Money Market Fund.
Jonathan Topper is also a Portfolio Member of Putnam Prime Money Market
Fund and Putnam Tax Exempt Money Market Fund.
Joanne Driscoll and Jonathan Topper may also manage other accounts
advised by Putnam Management or an affiliate.
Changes in your fund's Portfolio Leader and Portfolio Members
During the year ended September 30, 2004, Portfolio Member Jim Prusko
left your fund's management team, and Portfolio Member Jonathan Topper
joined your fund's management team.
Performance summary
This section shows your fund's performance during its fiscal year, which
ended September 30, 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 and principal
value will fluctuate and you may have a gain or a loss when you sell
your shares. For the most recent month-end performance, please visit
www.putnaminvestments.com.
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TOTAL RETURN FOR PERIODS ENDED 9/30/04
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Class A Class B Class C Class M Class R Class T
(inception dates) (10/1/76) (4/27/92) (2/1/99) (12/8/94) (1/21/03) (12/31/01)
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NAV NAV CDSC NAV CDSC NAV NAV NAV
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1 year 0.68% 0.18% -4.82% 0.18% -0.82% 0.53% 0.27% 0.43%
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5 years 14.74 11.90 9.90 11.91 11.91 13.91 12.10 13.34
Annual average 2.79 2.27 1.91 2.28 2.28 2.64 2.31 2.54
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10 years 47.68 40.47 40.47 40.59 40.59 45.50 40.70 44.13
Annual average 3.98 3.46 3.46 3.47 3.47 3.82 3.47 3.72
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Annual average
(life of fund) 6.47 5.94 5.94 5.95 5.95 6.31 5.93 6.21
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Current return
(end of period)
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Current
7-day yield* 1.27 0.78 0.78 1.12 0.78 1.01
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Current
30-day yield* 1.14 0.64 0.64 0.99 0.64 0.89
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Performance assumes reinvestment of distributions. None of the share
classes carry an initial sales charge. Class B shares reflect the
applicable contingent deferred sales charge (CDSC), which is 5% in the
first year, declines to 1% in the sixth year, and is eliminated
thereafter. Class C shares reflect a 1% CDSC for the first year that is
eliminated thereafter. Class A, M, R, and T shares have no 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.
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/04
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Merrill Lynch Lipper Money
91-Day Market Funds
Treasury category
Bill Index average*
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1 year 1.10% 0.42%
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5 years 16.54 12.71
Annual average 3.11 2.42
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10 years 51.35 44.26
Annual average 4.23 3.73
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Annual average
(life of fund) --+ 6.46
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Index and Lipper results should be compared to fund performance at net
asset value.
* Over the 1-, 5-, and 10-year periods ended 9/30/04, there were 400,
298, and 168 funds, respectively, in this Lipper category.
+ Inception date of index was 12/31/77, after the fund's inception.
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DISTRIBUTION INFORMATION 12 MONTHS ENDED 9/30/04
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Class A Class B Class C Class M Class R Class T
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Distributions
(number) 12 12 12 12 12 12
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Income $0.006834 $0.001836 $0.001843 $0.005328 $0.002716 $0.004330
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Total $0.006834 $0.001836 $0.001843 $0.005328 $0.002716 $0.004330
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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 April 1, 2004, to September
30, 2004. It also shows how much a $1,000 investment would be worth at
the close of the period, assuming actual returns and expenses.
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming actual returns for the 6 months ended 9/30/04
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Class A Class B Class C Class M Class R Class T
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Expenses paid per
$1,000* $2.71 $5.20 $5.20 $3.46 $5.20 $3.95
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Ending value (after
expenses) $1,003.80 $1,001.30 $1,001.30 $1,003.00 $1,001.30 $1,002.50
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* 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 9/30/04.
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 period; and then
dividing that result by the number of days in the year.
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended
September 30, 2004, use the calculation method below. To find the value
of your investment on April 1, 2004, go to www.putnaminvestments.com and
log on to your account. Click on the "Transaction History" tab in your
Daily Statement and enter 04/01/2004 in both the "from" and "to" fields.
Alternatively, call Putnam at 1-800-225-1581.
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HOW TO CALCULATE THE EXPENSES YOU PAID
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Total
Value of your Expenses paid expenses
investment on 4/1/04 [DIV] $1,000 X per $1,000 = paid
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Example Based on a $10,000 investment in class A shares of your fund.
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$10,000 [DIV] $1,000 X $2.71 (see table above) = $27.10
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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.
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming a hypothetical 5% annualized return for the 6 months ended 9/30/04
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Class A Class B Class C Class M Class R Class T
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Expenses paid per
$1,000* $2.73 $5.25 $5.25 $3.49 $5.25 $3.99
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Ending value
(after expenses) $1,022.30 $1,019.80 $1,019.80 $1,021.55 $1,019.80 $1,021.05
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* 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 9/30/04.
The expense ratio may differ for each share class (see the table at the
bottom of this 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 period; and then dividing that
result by the number of days in the year.
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.
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EXPENSE RATIO COMPARISONS USING ANNUALIZED DATA
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Class A Class B Class C Class M Class R Class T
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Your fund's annualized
expense ratio+ 0.54% 1.04% 1.04% 0.69% 1.04% 0.79%
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Average annualized expense
ratio for Lipper peer group++ 0.67% 1.17% 1.17% 0.82% 1.17% 0.92%
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+ For the fund's most recent fiscal half year; may differ from expense
ratios based on one-year data in the financial highlights.
++ 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 is for the most recent fiscal periods
available as of 9/30/04. 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. NAV
is calculated by dividing the net assets of each class of shares by the
number of outstanding shares in the class.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B or C shares and assumes redemption at the
end of the period. Your fund's class B CDSC declines from a 5% maximum
during the first year to 1% during the sixth year. After the sixth year,
the CDSC no longer applies. The CDSC for class C shares is 1% for one
year after purchase.
Class A shares generally are fund shares purchased with an initial sales
charge. In the case of your fund, which has no sales charge, the
reference is to shares purchased or acquired through the exchange of
class A shares from another Putnam fund. Exchange of your fund's class A
shares into another fund may involve a sales charge, however.
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge only if the shares are
redeemed during the first year.
Class M shares generally have a lower initial sales charge and a higher
12b-1 fee than class A shares and no sales charge on redemption. In the
case of your fund, which has no sales charge, the reference is to shares
purchased or acquired through the exchange of class M shares from
another Putnam fund. Exchange of your fund's class M shares into another
fund may involve a sales charge, however.
Class R shares are not subject to an initial sales charge or CDSC and
are available only to certain defined contribution plans.
Class T shares are not subject to an initial sales charge or sales
charge on redemption (except on certain redemptions of shares bought
without an initial sales charge); however, they are subject to a 12b-1
fee.
Comparative indexes
Citigroup 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.
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 or Lipper
category will differ. You cannot invest directly in an index.
Lipper is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper. Lipper category averages reflect
performance trends for funds within a category and are based on results
at net asset value.
Putnam's policy on confidentiality
In order to conduct business with our shareholders, we must obtain
certain personal information such as account holders' addresses,
telephone numbers, Social Security numbers, and the names of their
financial advisors. We use this information to assign an account number
and to help us maintain accurate records of transactions and account
balances.
It is our policy to protect the confidentiality of your information,
whether or not you currently own shares of our funds, and in particular,
not to sell information about you or your accounts to outside marketing
firms. We have safeguards in place designed to prevent unauthorized
access to our computer systems and procedures to protect personal
information from unauthorized use.
Under certain circumstances, we share this information with outside
vendors who provide services to us, such as mailing and proxy
solicitation. In those cases, the service providers enter into
confidentiality agreements with us, and we provide only the information
necessary to process transactions and perform other services related to
your account. We may also share this information with our Putnam
affiliates to service your account or provide you with information about
other Putnam products or services. It is also our policy to share
account information with your financial advisor, if you've listed one on
your Putnam account.
If you would like clarification about our confidentiality policies or
have any questions or concerns, please don't hesitate to contact us at
1-800-225-1581, Monday through Friday, 8:30 a.m. to 7:00 p.m., or
Saturdays from 9:00 a.m. to 5:00 p.m. Eastern Time.
Proxy voting
Putnam is committed to managing our mutual funds in the best interests
of our shareholders. The Putnam funds' proxy voting guidelines and
procedures, as well as information regarding how your fund voted proxies
relating to portfolio securities during the 12-month period ended June
30, 2004, are available on the Putnam Individual Investor Web site,
www.putnaminvestments.com/individual, and on the SEC's Web site,
www.sec.gov. If you have questions about finding forms on the SEC's Web
site, you may call the SEC at 1-800-SEC-0330. You may also obtain the
Putnam funds' proxy voting guidelines and procedures at no charge by
calling Putnam's Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
For periods ending on or after July 9, 2004, the fund will file a
complete schedule of its portfolio holdings with the SEC for the first
and third quarters of each fiscal year on Form N-Q. Shareholders may
obtain the fund's Forms N-Q on the SEC's Web site at www.sec.gov. In
addition, the fund's Forms N-Q may be reviewed and copied at the SEC's
public reference room in Washington, D.C. You may call the SEC at
1-800-SEC-0330 for information about the SEC's Web site or the operation
of the public reference room.
A guide to the financial statements
These sections of the report, as well as the accompanying Notes,
preceded by the Report of Independent Registered Public Accounting Firm,
constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or
loss the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal year.
Statement of changes in net assets shows how the fund's net assets were
affected by the fund's net investment gain or loss, 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.
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders
of Putnam Money Market Fund
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Putnam Money
Market Fund (the "fund") at September 30, 2004, and the results of its
operations, the changes in its net assets and the financial highlights
for each of the periods indicated, in conformity with accounting
principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the fund's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
investments owned at September 30, 2004, by correspondence with the
custodian, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 5, 2004
The fund's portfolio
September 30, 2004
Commercial paper (58.3%) (a) Maturity
Principal amount date Value
Domestic (42.8%)
- -------------------------------------------------------------------------------
$35,000,000 Amstel Funding Corp. 2.10s 3/29/05 34,634,542
37,000,000 Amstel Funding Corp. 1.83s 12/15/04 36,858,937
42,000,000 Amstel Funding Corp. 1.78s 12/27/04 41,819,330
20,000,000 Amstel Funding Corp. 1.685s 11/26/04 19,947,578
30,086,000 Atlantic Asset Securitization Corp.
1.67s 10/25/04 30,052,504
19,557,000 Atlantic Asset Securitization Corp.
1.63s 10/1/04 19,557,000
40,000,000 Bank of America Corp. 1.88s 12/22/04 39,828,711
34,000,000 Bank of America Corp. 1.68s 11/22/04 33,917,493
40,000,000 Bank of America Corp. 1.62s 10/29/04 39,949,600
50,000,000 CAFCO, LLC 1.61s 10/22/04 49,953,042
30,000,000 CIT Group, Inc. 1.85s 11/30/04 29,907,500
25,000,000 CIT Group, Inc. 1.62s 10/28/04 24,969,625
26,825,000 CIT Group, Inc. 1.56s 10/7/04 26,818,026
30,000,000 Citibank Credit Card Issuance Trust
(Dakota) 1.84s 12/16/04 29,883,467
31,000,000 Citibank Credit Card Issuance Trust
(Dakota) 1.81s 11/16/04 30,928,304
45,000,000 Citibank Credit Card Issuance Trust
(Dakota) 1.80s 11/5/04 44,921,250
16,000,000 Citibank Credit Card Issuance Trust
(Dakota) 1.79s 10/5/04 15,996,818
20,000,000 Citibank Credit Card Issuance Trust
(Dakota) 1.64s 10/28/04 19,975,400
25,000,000 Citicorp 1.75s 11/30/04 24,927,083
23,000,000 Citicorp 1.75s 11/29/04 22,934,035
50,000,000 Citigroup Global Markets Holdings,
Inc. 1.65s 11/17/04 49,892,292
50,000,000 CRC Funding, LLC 1.88s 12/17/04 49,798,944
30,000,000 CRC Funding, LLC 1.88s 12/16/04 29,880,933
40,000,000 Discover Card Master Trust I, 2000-A
(Newcastle) 1.81s 11/2/04 39,935,644
30,000,000 Discover Card Master Trust I, 2000-A
(Newcastle) 1.64s 10/25/04 29,967,200
35,000,000 General Electric Capital Corp. 2.03s 3/16/05 34,672,381
16,000,000 General Electric Capital Corp. 2.02s 3/21/05 15,846,480
40,000,000 General Electric Capital Corp. 1.80s 12/14/04 39,852,000
40,000,000 General Electric Capital Corp. 1.66s 11/18/04 39,911,467
41,000,000 General Electric Capital Corp. 1.50s 10/6/04 40,991,458
21,850,000 Govco, Inc. 1.88s 12/21/04 21,757,574
20,000,000 Govco, Inc. 1.80s 12/7/04 19,933,000
27,500,000 Govco, Inc. 1.69s 11/24/04 27,430,288
22,500,000 Govco, Inc. 1.67s 11/17/04 22,450,944
39,000,000 Govco, Inc. 1.57s 10/21/04 38,965,983
50,000,000 Govco, Inc. 1.50s 10/7/04 49,987,500
30,000,000 Morgan Stanley Dean Witter & Co.
1.78s 10/14/04 29,980,717
57,000,000 NATC California, LLC (Chase
Manhattan Bank (Letter of Credit
(LOC)) 1.58s 10/21/04 56,949,667
20,000,000 NATC California, LLC (Chase
Manhattan Bank (LOC)) 1.56s 10/19/04 19,984,400
20,000,000 Old Line Funding Corp. 1.68s 10/28/04 19,974,800
47,000,000 Old Line Funding Corp. 1.63s 10/18/04 46,963,823
30,000,000 Park Granada, LLC 1.75s 10/6/04 29,992,708
11,000,000 Park Granada, LLC 1.73s 10/8/04 10,996,300
40,000,000 Park Granada, LLC 1.68s 10/1/04 40,000,000
20,000,000 Park Granada, LLC 1.67s 11/9/04 19,963,817
25,000,000 Park Granada, LLC 1.62s 10/12/04 24,987,625
50,000,000 Preferred Receivables Funding Corp
1.66s 10/1/04 50,000,000
23,169,000 Preferred Receivables Funding Corp
1.61s 10/25/04 23,144,132
45,000,000 Sheffield Receivables Corp. 1.674s 1/25/05 44,998,562
40,000,000 Sheffield Receivables Corp. 1.58s 10/25/04 39,957,867
46,810,000 Thunder Bay Funding, Inc. 1.70s 10/20/04 46,768,423
48,000,000 Thunder Bay Funding, Inc. 1.66s 11/15/04 47,900,400
35,000,000 Thunder Bay Funding, Inc. 1.55s 10/15/04 34,978,903
26,234,000 Thunder Bay Funding, Inc. 1.53s 10/25/04 26,207,241
27,000,000 Thunder Bay Funding, Inc. 1.30s 10/12/04 26,989,275
19,750,000 Windmill Funding Corp. 1.73s 11/17/04 19,705,392
-------------
1,829,498,385
Foreign (15.5%)
- -------------------------------------------------------------------------------
36,000,000 Aegon Funding Corp. 1.59s
(Netherlands) 10/25/04 35,961,840
28,000,000 Atlantis One Funding Corp. 1.94s
(Netherlands) 2/22/05 27,782,720
27,000,000 Atlantis One Funding Corp. 1.60s
(Netherlands) 10/20/04 26,977,200
27,000,000 Atlantis One Funding Corp. 1.53s
(Netherlands) 10/18/04 26,980,493
32,000,000 COFCO Capital Corp. (Rabobank
Nederland (LOC)) 1.86s (Netherlands) 11/29/04 31,902,453
50,000,000 Credit Suisse First Boston (USA),
Inc. 1.57s (Switzerland) 10/5/04 49,991,278
35,000,000 HBOS Treasury Services PLC 1.745s
(United Kingdom) 12/20/04 34,864,278
22,000,000 HBOS Treasury Services PLC 1.525s
(United Kingdom) 10/13/04 21,988,817
30,000,000 HBOS Treasury Services PLC 1.195s
(United Kingdom) 10/15/04 29,986,058
35,000,000 Household Finance Corp. 1.73s
(United Kingdom) 11/3/04 34,944,496
26,000,000 Household Finance Corp. 1.66s
(United Kingdom) 11/15/04 25,946,050
20,000,000 Household Finance Corp. 1.65s
(United Kingdom) 11/4/04 19,968,833
31,000,000 Household Finance Corp. 1.52s
(United Kingdom) 10/13/04 30,984,293
50,000,000 ING (U.S.) Funding, LLC 1.70s
(Netherlands) 12/23/04 49,804,028
30,000,000 Nordea North America, Inc. 2.08s
(Sweden) 3/16/05 29,712,267
40,000,000 Scotiabanc, Inc. 1.93s (Canada) 12/31/04 39,804,856
40,000,000 Swedbank 1.28s (Sweden) 12/28/04 39,874,844
30,000,000 WestLB AG 1.93s (Germany) 12/31/04 29,853,641
25,000,000 WestLB AG 1.93s (Germany) 12/29/04 24,880,715
15,000,000 WestLB AG 1.745s (Germany) 12/17/04 14,944,015
25,000,000 WestLB AG 1.60s (Germany) 10/27/04 24,971,110
14,000,000 WestLB AG 1.10s (Germany) 10/8/04 13,997,006
--------------
666,121,291
--------------
Total Commercial paper
(cost $2,495,619,676) $2,495,619,676
Certificates of deposit (15.9%) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$28,000,000 ABN AMRO Bank N.V. Ser. ECD,
1.095s (Netherlands) 10/13/04 $28,000,674
25,000,000 Bank of Nova Scotia Ser. YCD, 1.752s
(Canada) 3/4/05 25,006,458
27,000,000 Barclays Bank PLC Ser. YCD1,
2.043s (United Kingdom) 3/24/05 26,996,767
92,000,000 Barclays Bank PLC Ser. YCD,
1.092s (United Kingdom) 11/8/04 91,998,221
26,750,000 Calyon Ser. YCD 1.53s (France) 10/14/04 26,750,000
27,000,000 Calyon North America, Inc. Ser. ECD,
2.12s (France) 3/30/05 26,993,223
25,000,000 Citibank, N.A. 1.86s 12/20/04 25,000,000
30,000,000 Credit Agricole Indosuez, N.Y. 1.29s
(France) 12/31/04 30,000,000
46,000,000 Credit Suisse Ser. ECD, 1.621s
(Switzerland) 10/15/04 46,000,000
24,700,000 Fortis Bank N.Y. Ser. YCD, 1.60s
(Belgium) 10/15/04 24,695,627
22,000,000 Landesbank Hessen Thuringen
Ser. ECD, 1.875s (Germany) 12/30/04 21,996,951
17,000,000 Lloyds TSB Bank PLC Ser. YCD,
2.202s (United Kingdom) 9/30/05 16,989,715
35,000,000 Royal Bank of Scotland PLC Ser. YCD,
1.949s (United Kingdom) 6/20/05 34,988,625
25,000,000 Societe Generale Ser. YCD, 2.264s
(France) 6/14/05 24,994,740
68,000,000 Societe Generale Ser. YCD1, 1.675s
(France) 12/10/04 67,995,404
25,000,000 Societe Generale Ser. ECD, 2.00s
(France) 3/7/05 25,000,000
30,000,000 Societe Generale Ser. ECD, 1.65s
(France) 11/22/04 30,000,000
32,000,000 State Street Bank & Trust Co. 1.60s 10/20/04 32,000,000
50,000,000 State Street Bank & Trust Co. 1.55s 10/4/04 50,000,000
25,000,000 Wells Fargo Bank N.A. 1.79s 11/12/04 25,000,000
--------------
Total Certificates of
deposit (cost $680,406,405) $680,406,405
U.S. government agency mortgage obligations (13.1%) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$25,500,000 Federal Home Loan Bank 1.55s 10/13/04 $25,486,825
36,000,000 Federal Home Loan Bank bonds 1.40s 4/1/05 36,000,000
39,500,000 Federal Home Loan Bank bonds
Ser. HL05, 1.45s 3/11/05 39,500,000
24,000,000 Federal Home Loan Mortgage Corp.
1.98s 3/8/05 23,791,440
28,000,000 Federal Home Loan Mortgage Corp.
1.70s 11/30/04 27,920,667
59,698,000 Federal Home Loan Mortgage Corp.
1.60s 11/9/04 59,594,523
45,000,000 Federal Home Loan Mortgage Corp.
notes Ser. MTN3, 1.52s 12/24/04 45,000,000
15,000,000 Federal National Mortgage
Association 2.10s 4/15/05 14,828,500
27,000,000 Federal National Mortgage
Association 1.85s 1/25/05 26,839,050
22,000,000 Federal National Mortgage
Association 1.70s 12/1/04 21,936,628
30,000,000 Federal National Mortgage
Association 1.61s 11/10/04 29,946,333
20,000,000 Federal National Mortgage
Association notes 1.60s 5/13/05 20,000,000
45,000,000 Federal National Mortgage
Association notes 1.49s 2/8/05 45,000,000
45,000,000 Federal National Mortgage
Association notes 1.40s 3/29/05 45,000,000
26,700,000 Federal National Mortgage
Association notes 1.40s 5/3/05 26,700,000
30,000,000 Federal National Mortgage
Association notes 1.35s 4/28/05 30,000,000
45,000,000 Federal National Mortgage
Association notes 1.324s 12/13/04 44,988,615
--------------
Total U.S. government agency
mortgage obligations
(cost $562,532,581) $562,532,581
Promissory notes (4.3%) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$50,000,000 Goldman Sachs Group, Inc (The)
1.945s (acquired 8/25/04, cost
$50,000,000) (RES) 2/18/05 $50,000,000
55,000,000 Goldman Sachs Group, Inc (The)
1.837s (acquired 6/17/04, cost
$55,000,000) (RES) 12/15/04 55,000,000
45,000,000 Goldman Sachs Group, Inc (The) 1.38s
(acquired 4/29/04, cost
$45,000,000) (RES) 10/26/04 45,000,000
36,000,000 Goldman Sachs Group, Inc (The) 1.30s
(acquired 4/15/04, cost
$36,000,000) (RES) 10/15/04 36,000,000
--------------
Total Promissory notes
(cost $186,000,000) $186,000,000
Corporate bonds and notes (2.9%) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$19,700,000 National City Bank FRN Ser. BKNT,
1.763s 6/23/05 $19,695,682
59,000,000 Toyota Motor Credit Corp. FRN
Ser. MTN1, 1.697s (Japan) 1/14/05 59,000,000
45,000,000 Wells Fargo Bank N.A. FRN Ser. BKNT,
1.59s 2/1/05 45,000,000
--------------
Total Corporate bonds and notes
(cost $123,695,682) $123,695,682
Asset backed securities (0.8%) (cost $34,694,526) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$34,694,526 TIAA Real Estate CDO, Ltd. 144A FRN
Ser. 03-1A, Class A1MM, 1.87s
(Cayman Islands) 3/28/05 $34,694,526
Short-term investments (7.3%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$145,584,00 Interest in $253,000,000 joint
tri-party repurchase agreement dated
September 30, 2004 with Bank of
America Securities, LLC due October
1, 2004 with respect to various U.S.
Government obligations -- maturity
value of $145,591,643 for an
effective yield of 1.89% $145,584,000
168,468,000 Interest in $250,000,000 joint
tri-party repurchase agreement dated
September 30, 2004 with Merrill
Lynch Government Securities due
October 1, 2004 with respect to
various U.S. Government obligations
-- maturity value of $168,476,891
for an effective yield of 1.90% 168,468,000
--------------
Total Short-term investments
(cost $314,052,000) $314,052,000
- -------------------------------------------------------------------------------
Total Investments
(cost $4,397,000,870) $4,397,000,870
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $4,278,212,366.
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at September 30, 2004
was $186,000,000 or 4.3% 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 at September 30, 2004.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at September 30, 2004:
(as a percentage of Market Value)
Belgium 0.5%
Canada 1.5
Cayman Islands 0.8
France 5.3
Germany 3.0
Japan 1.3
Netherlands 5.2
Sweden 1.6
Switzerland 2.2
United Kingdom 8.4
United States 70.2
--------
Total 100.0%
The accompanying notes are an integral part of these financial
statements.
Statement of assets and liabilities
September 30, 2004
Assets
- -------------------------------------------------------------------------------
Investments in securities, at amortized cost (Note 1) $4,397,000,870
- -------------------------------------------------------------------------------
Cash 65,835
- -------------------------------------------------------------------------------
Interest and other receivables 3,347,978
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 37,787,232
- -------------------------------------------------------------------------------
Total assets 4,438,201,915
Liabilities
- -------------------------------------------------------------------------------
Distributions payable to shareholders 1,108,470
- -------------------------------------------------------------------------------
Payable for securities purchased 44,682,142
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 107,645,377
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Notes 2 and 5) 3,482,212
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 2,116,555
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 217,588
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 8,150
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 313,690
- -------------------------------------------------------------------------------
Other accrued expenses 415,365
- -------------------------------------------------------------------------------
Total liabilities 159,989,549
- -------------------------------------------------------------------------------
Net assets $4,278,212,366
Represented by
- -------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $4,278,188,938
- -------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 23,428
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $4,278,212,366
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class A share ($3,537,906,661 divided by 3,537,861,533
shares)* $1.00
- -------------------------------------------------------------------------------
Net asset value and offering price per class B share
($520,455,719 divided by 520,475,461 shares)** $1.00
- -------------------------------------------------------------------------------
Net asset value and offering price per class C share
($40,935,199 divided by 40,935,280 shares)** $1.00
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class M share ($54,389,853 divided by 54,391,404 shares)* $1.00
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class R share ($131,245 divided by 131,249 shares)* $1.00
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class T share ($124,393,689 divided by 124,394,011 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
any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
Statement of operations
Year ended September 30, 2004
Interest income (including interest income of $150,541 from
investments in affiliated issuers) (Note 5) $60,893,778
- -------------------------------------------------------------------------------
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 15,545,271
- -------------------------------------------------------------------------------
Investor servicing fees (Note 2) 9,251,811
- -------------------------------------------------------------------------------
Custodian fees (Note 2) 190,166
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 101,999
- -------------------------------------------------------------------------------
Administrative services (Note 2) 46,174
- -------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 3,501,891
- -------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 202,969
- -------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 95,576
- -------------------------------------------------------------------------------
Distribution fees -- Class R (Note 2) 159
- -------------------------------------------------------------------------------
Distribution fees -- Class T (Note 2) 261,118
- -------------------------------------------------------------------------------
Other 1,306,215
- -------------------------------------------------------------------------------
Non-recurring costs (Notes 2 and 6) 189,110
- -------------------------------------------------------------------------------
Costs assumed by Manager (Notes 2 and 6) (189,110)
- -------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 5) (26,305)
- -------------------------------------------------------------------------------
Total expenses 30,477,044
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (307,256)
- -------------------------------------------------------------------------------
Net expenses 30,169,788
- -------------------------------------------------------------------------------
Net investment income 30,723,990
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $30,723,990
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of changes in net assets
Year ended September 30
Decrease in net assets 2004 2003
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $30,723,990 $51,133,227
- -------------------------------------------------------------------------------
Net realized gain on investments -- 161,865
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 30,723,990 51,295,092
- -------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- -------------------------------------------------------------------------------
From net investment income
Class A (28,599,137) (45,737,713)
- -------------------------------------------------------------------------------
Class B (1,338,213) (4,239,307)
- -------------------------------------------------------------------------------
Class C (86,784) (220,931)
- -------------------------------------------------------------------------------
Class M (349,505) (648,250)
- -------------------------------------------------------------------------------
Class R (100) (3)
- -------------------------------------------------------------------------------
Class T (488,688) (287,023)
- -------------------------------------------------------------------------------
Decrease from capital share transactions
(Note 4) (1,573,730,519) (1,051,366,625)
- -------------------------------------------------------------------------------
Total decrease in net assets (1,573,868,956) (1,051,204,760)
Net assets
- -------------------------------------------------------------------------------
Beginning of year 5,852,081,322 6,903,286,082
- -------------------------------------------------------------------------------
End of year (including undistributed net
investment income of $23,428 and $--,
respectively) $4,278,212,366 $5,852,081,322
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS A
- -------------------------------------------------------------------------------------------------------------------------
Per-share Year ended September 30
operating performance 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------------------
Net investment income .0068 (c) .0087 .0166 .0493 .0564
- -------------------------------------------------------------------------------------------------------------------------
Net realized gain
on investments -- -- (d) -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0068 .0087 .0166 .0493 .0564
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0068) (.0087) (.0166) (.0493) (.0564)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (.0068) (.0087) (.0166) (.0493) (.0564)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .68 .87 1.67 5.04 5.79
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,537,907 $4,745,555 $5,512,532 $5,215,127 $3,780,309
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .53 (c) .52 .50 .50 .49
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .70 (c) .88 1.68 4.77 5.69
- -------------------------------------------------------------------------------------------------------------------------
(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) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund
during the period. As a result of such waivers, the expenses of the fund for the period ended September 30, 2004
reflect a reduction of less than 0.01% of average net assets for class A shares (Note 5).
(d) Amount represents less than $0.0001 per share.
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS B
- -------------------------------------------------------------------------------------------------------------------------
Per-share Year ended September 30
operating performance 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------------------
Net investment income .0018 (c) .0037 .0116 .0443 .0513
- -------------------------------------------------------------------------------------------------------------------------
Net realized gain
on investments -- -- (d) -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0018 .0037 .0116 .0443 .0513
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0018) (.0037) (.0116) (.0443) (.0513)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (.0018) (.0037) (.0116) (.0443) (.0513)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .18 .37 1.16 4.52 5.25
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $520,456 $874,069 $1,193,459 $1,162,039 $649,826
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.03 (c) 1.02 1.00 1.00 .99
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .19 (c) .39 1.19 4.26 5.13
- -------------------------------------------------------------------------------------------------------------------------
(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) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund
during the period. As a result of such waivers, the expenses of the fund for the period ended September 30, 2004
reflect a reduction of less than 0.01% of average net assets for class B shares (Note 5).
(d) 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
- -------------------------------------------------------------------------------------------------------------------------
Per-share Year ended September 30
operating performance 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------------------
Net investment income .0018 (c) .0037 .0116 .0444 .0513
- -------------------------------------------------------------------------------------------------------------------------
Net realized gain
on investments -- -- (d) -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0018 .0037 .0116 .0444 .0513
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0018) (.0037) (.0116) (.0444) (.0513)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (.0018) (.0037) (.0116) (.0444) (.0513)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .18 .37 1.17 4.53 5.26
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $40,935 $61,755 $79,227 $90,226 $52,872
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.03 (c) 1.02 1.00 1.00 .99
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .21 (c) .38 1.20 4.32 5.34
- -------------------------------------------------------------------------------------------------------------------------
(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) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund
during the period. As a result of such waivers, the expenses of the fund for the period ended September 30, 2004
reflect a reduction of less than 0.01% of average net assets for class C shares (Note 5).
(d) Amount represents less than $0.0001 per share.
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS M
- -------------------------------------------------------------------------------------------------------------------------
Per-share Year ended September 30
operating performance 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------------------
Net investment income .0053 (c) .0072 .0151 .0478 .0551
- -------------------------------------------------------------------------------------------------------------------------
Net realized gain
on investments -- -- (d) -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0053 .0072 .0151 .0478 .0551
- -------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0053) (.0072) (.0151) (.0478) (.0551)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions (.0053) (.0072) (.0151) (.0478) (.0551)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .53 .72 1.52 4.89 5.65
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $54,390 $74,921 $105,938 $122,055 $114,458
- -------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .68 (c) .67 .65 .65 .64
- -------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .55 (c) .74 1.55 4.70 5.51
- -------------------------------------------------------------------------------------------------------------------------
(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) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund
during the period. As a result of such waivers, the expenses of the fund for the period ended September 30, 2004
reflect a reduction of less than 0.01% of average net assets for class M shares (Note 5).
(d) 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
- ----------------------------------------------------------------------------------------------------------------
Year For the period
ended January 21, 2003+
Per-share September 30 to September 30
operating performance 2004 2003
- ----------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------
Investment operations:
- ----------------------------------------------------------------------------------------------------------------
Net investment income .0027 (c) .0025
- ----------------------------------------------------------------------------------------------------------------
Net realized gain
on investments -- -- (d)
- ----------------------------------------------------------------------------------------------------------------
Total from
investment operations .0027 .0025
- ----------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------
From net
investment income (.0027) (.0025)
- ----------------------------------------------------------------------------------------------------------------
Total distributions (.0027) (.0025)
- ----------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .27 .25*
- ----------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $131 $1
- ----------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.03 (c) .71*
- ----------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .30 (c) .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) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund
during the period. As a result of such waivers, the expenses of the fund for the period ended September 30, 2004
reflect a reduction of less than 0.01% of average net assets for class R shares (Note 5).
(d) Amount represents less than $0.0001 per share.
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS T
- -------------------------------------------------------------------------------------------------------------------
For the period
December 31, 2001+
Per-share Year ended September 30 to September 30
operating performance 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------------
Net investment income .0043 (c) .0062 .0092
- -------------------------------------------------------------------------------------------------------------------
Net realized gain
on investments -- -- (d) --
- -------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0043 .0062 .0092
- -------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------
From net
investment income (.0043) (.0062) (.0092)
- -------------------------------------------------------------------------------------------------------------------
Total distributions (.0043) (.0062) (.0092)
- -------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00
- -------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .43 .62 .93*
- -------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $124,394 $95,779 $12,130
- -------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .78 (c) .77 .56*
- -------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .46 (c) .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) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund
during the period. As a result of such waivers, the expenses of the fund for the period ended September 30,
2004 reflect a reduction of less than 0.01% of average net assets for class T shares (Note 5).
(d) Amount represents less than $0.0001 per share.
The accompanying notes are an integral part of these financial statements.
Notes to financial statements
September 30, 2004
Note 1
Significant accounting policies
Putnam Money Market Fund (the "fund"), a Massachusetts business trust,
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.
In addition to the standard offering of class A shares, they are also
sold to certain college savings plans. Class B and class C shares are
offered only in exchange for class B and class C shares of other Putnam
funds, or purchased by systematic investment plans. Class B shares,
which convert to class A shares after approximately eight years, pay a
higher ongoing distribution fee than class A (which does not have an
approved distribution fee), class M and class T shares, and are subject
to a contingent deferred sales charge, if those shares are redeemed
within six years of purchase (including any holding period of the shares
in other Putnam funds). Class C shares are subject to the same fees and
expenses as class B shares, except that class C shares have a one-year
1.00% contingent deferred sales charge and do not convert to class A
shares. Shareholders who acquired class B 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 shares pay an ongoing
distribution fee that is higher than class A shares but lower than class
B, class C, class R and class T 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.
Class T shares pay an ongoing distribution fee that is higher than class
A and class M shares, but lower than class B, class C and class R shares
and are not subject to a contingent deferred sales charge.
Investment income, realized gains and losses and expenses of the fund
are borne pro-rata based on the relative net assets of each class to the
total net assets of the fund, 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
into a joint trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam
Investment Management, LLC ("Putnam Management"), the fund's manager, an
indirect wholly-owned subsidiary of Putnam, LLC. These balances may be
invested in issuers of high-grade short-term investments having
maturities of up to 397 days for collateral received under security
lending arrangements and up to 90 days for other cash investments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. Putnam Management is responsible for
determining that the value of these underlying securities is at all
times at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are recorded on the trade date (the date the order to buy
or sell is executed). Interest is recorded on the accrual basis.
Premiums and discounts from purchases of short-term investments are
amortized/accreted at a constant rate until maturity. Gains or losses on
securities sold are determined on the identified cost basis.
E) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code of 1986 (the "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 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.
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. The amount and
character of income and gains to be distributed are determined in
accordance with income tax regulations, which may differ from generally
accepted accounting principles. These differences include temporary and
permanent differences of dividends payable. Reclassifications are made
to the fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryovers) under income tax
regulations. For the year ended September 30, 2004, the fund
reclassified $161,865 to decrease distributions in excess of net
investment income, with a decrease to accumulated net realized gains of
$161,865.
The tax basis components of distributable earnings and the federal tax
cost as of period end were as follows:
Undistributed ordinary income $1,131,898
The aggregate identified cost on a financial reporting and tax basis is
the same.
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 September 30, 2005, 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. For the year ended September 30, 2004,
Putnam Management did not waive any of its management fee to the fund.
For the period ended September 30, 2004, Putnam Management has assumed
$189,110 of legal, shareholder servicing and communication, audit and
Trustee fees incurred by the fund in connection with certain legal and
regulatory matters (including those described in Note 6).
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 servicing agent
functions to the fund. During the year ended September 30, 2004, the
fund paid PFTC $9,003,219 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 year ended September 30, 2004,
the fund's expenses were reduced by $307,256 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $4,026, 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 Trustees have terminated the Pension Plan with
respect to any Trustee first elected after 2003.
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 an annual rate of 0.50%, 0.50%, 0.15%, 0.50% and
0.25% of the average net assets attributable to class B, class C, class
M, class R and class T shares, respectively.
For the year ended September 30, 2004, Putnam Retail Management, acting
as underwriter, received net commissions of $7,330,017 and $47,876 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 year ended September 30, 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 year ended September 30, 2004, cost of purchases and proceeds
from sales (including maturities) of investment securities (all
short-term obligations) aggregated $43,390,926,358 and $44,955,657,626,
respectively.
Note 4
Capital shares
At September 30, 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:
Year ended Year ended
September 30, September 30,
2004 2003
- ----------------------------------------------------------------
Class A
- ----------------------------------------------------------------
Shares sold 3,597,966,533 4,838,754,924
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 26,715,859 44,288,887
- ----------------------------------------------------------------
3,624,682,392 4,883,043,811
Shares repurchased (4,832,212,590) (5,650,184,351)
- ----------------------------------------------------------------
Net decrease (1,207,530,198) (767,140,540)
- ----------------------------------------------------------------
Year ended Year ended
September 30, September 30,
2004 2003
- ----------------------------------------------------------------
Class B
- ----------------------------------------------------------------
Shares sold 744,232,880 744,531,708
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 1,093,811 3,895,813
- ----------------------------------------------------------------
745,326,691 748,427,521
Shares repurchased (1,098,920,926) (1,067,816,748)
- ----------------------------------------------------------------
Net decrease (353,594,235) (319,389,227)
- ----------------------------------------------------------------
Year ended Year ended
September 30, September 30,
2004 2003
- ----------------------------------------------------------------
Class C
- ----------------------------------------------------------------
Shares sold 109,610,471 188,630,840
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 67,274 203,687
- ----------------------------------------------------------------
109,677,745 188,834,527
Shares repurchased (130,497,709) (206,305,804)
- ----------------------------------------------------------------
Net decrease (20,819,964) (17,471,277)
- ----------------------------------------------------------------
Year ended Year ended
September 30, September 30,
2004 2003
- ----------------------------------------------------------------
Class M
- ----------------------------------------------------------------
Shares sold 86,510,681 88,896,695
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 319,856 616,202
- ----------------------------------------------------------------
86,830,537 89,512,897
Shares repurchased (107,363,691) (120,526,766)
- ----------------------------------------------------------------
Net decrease (20,533,154) (31,013,869)
- ----------------------------------------------------------------
For the period
Jan. 21, 2003
Year (commencement
ended of operations) to
September 30, September 30,
2004 2003
- ----------------------------------------------------------------
Class R
- ----------------------------------------------------------------
Shares sold 922,141 1,000
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 77 3
- ----------------------------------------------------------------
922,218 1,003
Shares repurchased (791,972) --
- ----------------------------------------------------------------
Net increase 130,246 1,003
- ----------------------------------------------------------------
Year ended Year ended
September 30, September 30,
2004 2003
- ----------------------------------------------------------------
Class T
- ----------------------------------------------------------------
Shares sold 99,916,444 119,422,469
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 460,090 277,295
- ----------------------------------------------------------------
100,376,534 119,699,764
Shares repurchased (71,759,748) (36,052,479)
- ----------------------------------------------------------------
Net increase 28,616,786 83,647,285
- ----------------------------------------------------------------
At September 30, 2004, Putnam, LLC owned 1,005 class R shares of
the fund (0.8% of class R shares outstanding), valued at $1,005.
Note 5
Investment in Putnam
Prime Money Market Fund
The fund invests in the Putnam Prime Money Market Fund, an open-end
management investment company managed by Putnam Management. Management
fees paid by the fund are reduced by an amount equal to the management
fees paid by Putnam Prime Money Market Fund with respect to assets
invested by the fund in Putnam Prime Money Market Fund. For the year
ended September 30, 2004, management fees paid were reduced by $26,305
relating to the fund's investment in Putnam Prime Money Market Fund.
Income distributions earned by the fund are recorded as income in the
statement of operations and totaled $150,541 for the period ended
September 30, 2004.
Note 6
Regulatory matters
and litigation
On April 8, 2004, Putnam Management entered into agreements with the
Securities and Exchange Commission ("SEC") 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.
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.
Federal tax information
(Unaudited)
The Form 1099 you receive in January 2005 will show the tax status of
all distributions paid to your account in calendar 2004.
About the Trustees
Jameson A. Baxter (9/6/43), Trustee since 1994
Ms. Baxter is the President of Baxter Associates, Inc., a private
investment firm that she founded in 1986.
Ms. Baxter serves as a Director of ASHTA Chemicals, Inc., Banta
Corporation (a printing and digital imaging firm), Ryerson Tull, Inc. (a
steel service corporation), Advocate Health Care and BoardSource,
formerly the National Center for Nonprofit Boards. She is Chairman
Emeritus of the Board of Trustees, Mount Holyoke College, having served
as Chairman for five years and as a board member for thirteen years.
Until 2002, Ms. Baxter was a Director of Intermatic Corporation (a
manufacturer of energy control products).
Ms. Baxter has held various positions in investment banking and
corporate finance, including Vice President and Principal of the Regency
Group, and Vice President of and Consultant to First Boston Corporation.
She is a graduate of Mount Holyoke College.
Charles B. Curtis (4/27/40), Trustee since 2001
Mr. Curtis is President and Chief Operating Officer of the Nuclear
Threat Initiative (a private foundation dealing with national security
issues) and serves as Senior Advisor to the United Nations Foundation.
Mr. Curtis is a member of the Council on Foreign Relations and the
Trustee Advisory Council of the Applied Physics Laboratory, Johns
Hopkins University. Until 2003, Mr. Curtis was a member of the Electric
Power Research Institute Advisory Council and the University of Chicago
Board of Governors for Argonne National Laboratory. Prior to 2002, Mr.
Curtis was a Member of the Board of Directors of the Gas Technology
Institute and the Board of Directors of the Environment and Natural
Resources Program Steering Committee, John F. Kennedy School of
Government, Harvard University. Until 2001, Mr. Curtis was a member of
the Department of Defense Policy Board and Director of EG&G Technical
Services, Inc. (a fossil energy research and development support
company).
From August 1997 to December 1999, Mr. Curtis was a Partner at Hogan &
Hartson L.L.P., a Washington, D.C. law firm. Prior to May 1997, Mr.
Curtis was Deputy Secretary of Energy. He served as Chairman of the
Federal Energy Regulatory Commission from 1977 to 1981 and has held
positions on the staff of the U.S. House of Representatives, the U.S.
Treasury Department, and the SEC.
Myra R. Drucker (1/16/48)
Ms. Drucker is a Vice Chair of the Board of Trustees of Sarah Lawrence
College, a Trustee of Commonfund (a not-for-profit firm specializing in
asset management for educational endowments and foundations) and a
member of the Investment Committee of the Kresge Foundation (a
charitable trust). She is also Chair of the New York Stock Exchange
(NYSE) Pension Managers Advisory Committee and a member of the Executive
Committee of the Committee on Investment of Employee Benefit Assets.
Until August 31, 2004, Ms. Drucker was Managing Director and a member of
the Board of Directors of General Motors Asset Management and Chief
Investment Officer of General Motors Trust Bank. Ms. Drucker also served
as a member of the NYSE Corporate Accountability and Listing Standards
Committee and the NYSE/NASD IPO Advisory Committee.
Prior to joining General Motors Asset Management in 2001, Ms. Drucker
held various executive positions in the investment management industry.
Ms. Drucker served as Chief Investment Officer of Xerox Corporation (a
technology and service company in the document industry), where she was
responsible for the investment of the company 's pension assets. Ms.
Drucker was also Staff Vice President and Director of Trust Investments
for International Paper (a paper, paper distribution, packaging and
forest products company) and previously served as Manager of Trust
Investments for Xerox Corporation. Ms. Drucker received a B.A. degree in
Literature and Psychology from Sarah Lawrence College and pursued
graduate studies in economics, statistics and portfolio theory at Temple
University.
John A. Hill (1/31/42), Trustee since 1985 and Chairman since 2000
Mr. Hill is Vice Chairman of First Reserve Corporation, a private equity
buyout firm that specializes in energy investments in the diversified
worldwide energy industry.
Mr. Hill is a Director of Devon Energy Corporation, TransMontaigne Oil
Company, Continuum Health Partners of New York and various private
companies controlled by First Reserve Corporation, as well as a Trustee
of TH Lee, Putnam Investment Trust (a closed-end investment company
advised by an affiliate of Putnam Management). He is also a Trustee of
Sarah Lawrence College.
Prior to acquiring First Reserve Corporation in 1983, Mr. Hill held
executive positions in investment banking and investment management with
several firms and with the federal government, including Deputy
Associate Director of the Office of Management and Budget and Deputy
Director of the Federal Energy Administration. He is active in various
business associations, including the Economic Club of New York, and
lectures on energy issues in the United States and Europe. Mr. Hill
holds a B.A. degree in Economics from Southern Methodist University and
pursued graduate studies there as a Woodrow Wilson Fellow.
Ronald J. Jackson (12/17/43), Trustee since 1996
Mr. Jackson is a private investor.
Mr. Jackson is President of the Kathleen and Ronald J. Jackson
Foundation (a charitable trust). He is also a member of the Board of
Overseers of WGBH (a public television and radio station) as well as a
member of the Board of Overseers of the Peabody Essex Museum.
Mr. Jackson is the former Chairman, President and Chief Executive
Officer of Fisher-Price, Inc. (a major toy manufacturer), from which he
retired in 1993. He previously served as President and Chief Executive
Officer of Stride-Rite, Inc. (a manufacturer and distributor of
footwear) and of Kenner Parker Toys, Inc. (a major toy and game
manufacturer). Mr. Jackson was President of Talbots, Inc. (a distributor
of women's apparel) and has held financial and marketing positions with
General Mills, Inc. and Parker Brothers (a toy and game company). Mr.
Jackson is a graduate of Michigan State University Business School.
Paul L. Joskow (6/30/47), Trustee since 1997
Dr. Joskow is the Elizabeth and James Killian Professor of Economics and
Management, and Director of the Center for Energy and Environmental
Policy Research at the Massachusetts Institute of Technology.
Dr. Joskow serves as a Director of National Grid Transco (a UK-based
holding company with interests in electric and gas transmission and
distribution and telecommunications infrastructure) and TransCanada
Corporation (an energy company focused on natural gas transmission and
power services). He also serves on the board of the Whitehead Institute
for Biomedical Research (a non-profit research institution) and has been
President of the Yale University Council since 1993. Prior to February
2002, he was a Director of State Farm Indemnity Company (an automobile
insurance company), and, prior to March 2000, he was a Director of New
England Electric System (a public utility holding company).
Dr. Joskow has published five books and numerous articles on topics in
industrial organization, government regulation of industry, and
competition policy. He is active in industry restructuring,
environmental, energy, competition and privatization policies -- serving
as an advisor to governments and corporations worldwide. Dr. Joskow
holds a Ph.D. and M. Phil from Yale University and B.A. from Cornell
University.
Elizabeth T. Kennan (2/25/38), Trustee since 1992
Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse and
cattle breeding). She is President Emeritus of Mount Holyoke College.
Dr. Kennan served as Chairman and is now Lead Director of Northeast
Utilities and is a Director of Talbots, Inc. She has served as Director
on a number of other boards, including Bell Atlantic, Chastain Real
Estate, Shawmut Bank, Berkshire Life Insurance and Kentucky Home Life
Insurance. She is a Trustee of the National Trust for Historic
Preservation, of Centre College and of Midway College in Midway,
Kentucky. She is also a member of The Trustees of Reservations. Dr.
Kennan has served on the oversight committee of the Folger Shakespeare
Library, as President of Five Colleges Incorporated, as a Trustee of
Notre Dame University and is active in various educational and civic
associations.
As a member of the faculty of Catholic University for twelve years,
until 1978, Dr. Kennan directed the post-doctoral program in Patristic
and Medieval Studies, taught history and published numerous articles.
Dr. Kennan holds a Ph.D. from the University of Washington in Seattle,
an M.S. from St. Hilda's College at Oxford University and an A.B. from
Mount Holyoke College. She holds several honorary doctorates.
John H. Mullin, III (6/15/41), Trustee since 1997
Mr. Mullin is the Chairman and CEO of Ridgeway Farm (a limited liability
company engaged in timber and farming).
Mr. Mullin serves as a Director of The Liberty Corporation (a
broadcasting company), Progress Energy, Inc. (a utility company,
formerly known as Carolina Power & Light) and Sonoco Products, Inc. (a
packaging company). Mr. Mullin is Trustee Emeritus of The National
Humanities Center and Washington & Lee University, where he served as
Chairman of the Investment Committee. Prior to May 2001, he was a
Director of Graphic Packaging International Corp. Prior to February
2004, he was a Director of Alex Brown Realty, Inc.
Mr. Mullin is also a past Director of Adolph Coors Company; ACX
Technologies, Inc.; Crystal Brands, Inc.; Dillon, Read & Co., Inc.;
Fisher-Price, Inc.; and The Ryland Group, Inc. Mr. Mullin is a graduate
of Washington & Lee University and The Wharton Graduate School,
University of Pennsylvania.
Robert E. Patterson (3/15/45), Trustee since 1984
Mr. Patterson is Senior Partner of Cabot Properties, L.P. and Chairman
of Cabot Properties, Inc. (a private equity firm investing in commercial
real estate).
Mr. Patterson serves as Chairman of the Joslin Diabetes Center and as a
Director of Brandywine Trust Company. Prior to June 2003, he was a
Trustee of Sea Education Association. Prior to December 2001, he was
President and Trustee of Cabot Industrial Trust (a publicly traded real
estate investment trust). Prior to February 1998, he was Executive Vice
President and Director of Acquisitions of Cabot Partners Limited
Partnership (a registered investment adviser involved in institutional
real estate investments). Prior to 1990, he served as Executive Vice
President of Cabot, Cabot & Forbes Realty Advisors, Inc. (the
predecessor company of Cabot Partners) and as a Senior Vice President of
the Beal Companies (a real estate management, investment and development
firm).
Mr. Patterson practiced law and held various positions in state
government and was the founding Executive Director of the Massachusetts
Industrial Finance Agency. Mr. Patterson is a graduate of Harvard
College and Harvard Law School.
W. Thomas Stephens (9/2/42), Trustee since 1997
Mr. Stephens serves on a number of corporate boards.
Effective November 2004, Mr. Stephens is expected to become Chief
Executive Officer of Boise Cascade, L.L.C. (a paper, forest products and
timberland assets company). Mr. Stephens serves as a Director of
TransCanada Pipelines Limited. Until 2004, Mr. Stephens was a Director
of Xcel Energy Incorporated (a public utility company), Qwest
Communications, and Norske Canada, Inc. (a paper manufacturer). Until
2003, Mr. Stephens was a Director of Mail-Well, Inc. (a diversified
printing company). He served as Chairman of Mail-Well until 2001 and as
CEO of MacMillan-Bloedel, Ltd. (a forest products company) until 1999.
Prior to 1996, Mr. Stephens was Chairman and Chief Executive Officer of
Johns Manville Corporation. He holds B.S. and M.S. degrees from the
University of Arkansas.
Richard B. Worley (11/15/45)
Mr. Worley is Managing Partner of Permit Capital, LLC, an investment
management firm.
Mr. Worley serves on the Executive Committee of the University of
Pennsylvania Medical Center, is a Trustee of The Robert Wood Johnson
Foundation (a philanthropic organization devoted to health care issues)
and is a Director of The Colonial Williamsburg Foundation (a historical
preservation organization). Mr. Worley also serves on the investment
committees of Mount Holyoke College and World Wildlife Fund (a wildlife
conservation organization).
Prior to joining Permit Capital LLC in 2002, Mr. Worley served as Chief
Strategic Officer of Morgan Stanley Investment Management. He previously
served as President, Chief Executive Officer and Chief Investment
Officer of Morgan Stanley Dean Witter Investment Management and as a
Managing Director of Morgan Stanley, a financial services firm. Mr.
Worley also was the Chairman of Miller Anderson & Sherrerd, an
investment management firm.
Mr. Worley holds a B.S. degree from University of Tennessee and pursued
graduate studies in economics at the University of Texas.
Charles E. Haldeman, Jr.* (10/29/48)
Mr. Haldeman is President and Chief Executive Officer of Putnam, LLC
("Putnam Investments"). He is a member of Putnam Investments' Executive
Board of Directors and Advisory Council. Prior to November 2003, Mr.
Haldeman served as Co-Head of Putnam Investments' Investment Division.
Prior to joining Putnam Investments in 2002, Mr. Haldeman held executive
positions in the investment management industry. He previously served as
Chief Executive Officer of Delaware Investments and President & Chief
Operating Officer of United Asset Management. Mr. Haldeman was also a
partner and director of Cooke & Bieler, Inc. (an investment management
firm).
Mr. Haldeman currently serves as a Trustee of Dartmouth College and as
Emeritus Trustee of Abington Memorial Hospital. He is a graduate of
Dartmouth College, Harvard Law School and Harvard Business School. Mr.
Haldeman is also a Chartered Financial Analyst (CFA) charterholder.
George Putnam, III* (8/10/51), Trustee since 1984 and President
since 2000
Mr. Putnam is President of New Generation Research, Inc. (a publisher of
financial advisory and other research services), and of New Generation
Advisers, Inc. (a registered investment advisor to private funds). Mr.
Putnam founded the New Generation companies in 1986.
Mr. Putnam is a Director of The Boston Family Office, LLC (a registered
investment adviser). He is a Trustee of St. Mark's School, Shore Country
Day School, and until 2002 was a Trustee of the Sea Education
Association.
Mr. Putnam previously worked as an attorney with the law firm of Dechert
LLP (formerly known as Dechert Price & Rhoads) in Philadelphia. He is a
graduate of Harvard College, Harvard Business School and Harvard Law
School.
A.J.C. Smith* (4/13/34), Trustee since 1986
Mr. Smith is the Chairman of Putnam Investments and Director of and
Consultant to Marsh & McLennan Companies, Inc.
Mr. Smith is also a Director of Trident Corp. (a limited partnership
with over thirty institutional investors). He is also a Trustee of the
Carnegie Hall Society, the Educational Broadcasting Corporation, and the
National Museums of Scotland. He is Chairman of the Central Park
Conservancy and a Member of the Board of Overseers of the Joan and
Sanford I. Weill Graduate School of Medical Sciences of Cornell
University. Prior to May 2000 and November 1999, Mr. Smith was Chairman
and CEO, respectively, of Marsh & McLennan Companies, Inc.
The address of each Trustee is One Post Office Square, Boston, MA 02109.
As of September 30, 2004, there were 102 Putnam Funds. All Trustees
other than Ms. Drucker and Messrs. Worley and Haldeman serve as Trustees
of all Putnam funds. Ms. Drucker and Messrs. Worley and Haldeman
currently serve as Trustees of 81 Putnam funds.
Each Trustee serves for an indefinite term, until his or her
resignation, retirement at age 72, death, or removal.
* Trustees who are or may be deemed to be "interested persons" (as
defined in the Investment Company Act of 1940) of the fund, Putnam
Management, Putnam Retail Management, or Marsh & McLennan Companies,
Inc., the parent company of Putnam, LLC and its affiliated companies.
Messrs. Haldeman, Putnam, III, and Smith are deemed "interested persons"
by virtue of their positions as officers of the fund, Putnam Management,
Putnam Retail Management or Marsh & McLennan Companies, Inc. and as
shareholders of Marsh & McLennan Companies, Inc. Mr. Putnam, III is the
President of your fund and each of the other Putnam funds. Mr. Haldeman
is President and Chief Executive Officer of Putnam Investments. Mr.
Smith serves as a Director of and Consultant to Marsh & McLennan
Companies, Inc. and as Chairman of Putnam Investments.
Officers
In addition to George Putnam, III, the other officers of the
fund are shown below:
Charles E. Porter (7/26/38)
Executive Vice President, Associate Treasurer and Principal
Executive Officer
Since 1989
Managing Director, Putnam Investments
and Putnam Management
Jonathan S. Horwitz (6/4/55)
Senior Vice President and Treasurer
Since 2004
Managing Director, Putnam Investments
Steven D. Krichmar (6/27/58)
Vice President and Principal Financial Officer
Since 2002
Senior Managing Director, Putnam Investments. Prior to July
2001, Partner, PricewaterhouseCoopers LLP
Michael T. Healy (1/24/58)
Assistant Treasurer and Principal
Accounting Officer
Since 2000
Managing Director, Putnam Investments
Beth S. Mazor (4/6/58)
Vice President
Since 2002
Senior Vice President, Putnam Investments
Daniel T. Gallagher (2/27/62)
Vice President and Legal and Compliance Liaison Officer
Since 2004
Vice President, Putnam Investments. Prior to 2004,
Associate, Ropes & Gray LLP; prior to 2000, Law Clerk,
Massachusetts Supreme Judicial Court
Francis J. McNamara, III (8/19/55)
Vice President and Chief Legal Officer
Since 2004
Senior Managing Director, Putnam
Investments, Putnam Management and
Putnam Retail Management. Prior to 2004, General Counsel,
State Street Research & Management Company
James P. Pappas (2/24/53)
Vice President
Since 2004
Managing Director, Putnam Investments and Putnam Management.
From 2001 to 2002, Chief Operating Officer, Atalanta/Sosnoff
Management Corporation; prior to 2001, President and Chief
Executive Officer, UAM Investment Services, Inc.
Richard S. Robie, III (3/30/60)
Vice President
Since 2004
Senior Managing Director, Putnam
Investments, Putnam Management and
Putnam Retail Management. Prior to 2003, Senior Vice
President, United Asset Management Corporation
Charles A. Ruys de Perez (10/17/57)
Vice President and Chief Compliance Officer
Since 2004
Managing Director, Putnam Investments
Mark C. Trenchard (6/5/62)
Vice President and BSA Compliance Officer
Since 2002
Senior Vice President, Putnam Investments
Judith Cohen (6/7/45)
Clerk and Assistant Treasurer
Since 1993
Clerk and Assistant Treasurer, The Putnam Funds
The address of each Officer is One Post Office Square,
Boston, MA 02109.
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual
funds. 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
Floating Rate Income Fund
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 Portfolios
Putnam Asset Allocation Portfolios--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.
Services for shareholders
Investor services
Help your investment grow Set up a program for systematic investing with
as little as $25 a month from a Putnam fund or from your own savings or
checking account. (Regular investing does not guarantee a profit or
protect against loss in a declining market.)
Switch funds easily* You can move money from one Putnam fund to another
within the same class of shares without a service charge.
Access your money easily You can have checks sent regularly or redeem
shares any business day at the then-current net asset value, which may
be more or less than the original cost of the shares. Class B and class
C shares carry a sales charge that is applied to certain withdrawals.
How to buy additional shares You may buy shares through your financial
advisor or directly from Putnam. To open an account by mail, send a
check made payable to the name of the fund along with a completed fund
application. To add to an existing account, complete the investment
slip found at the top of your Confirmation of Activity statement and
return it with a check payable to your fund.
For more information
Visit www.putnaminvestments.com A secure section of our Web site
contains complete information on your account, including balances and
transactions, updated daily. You may also conduct transactions, such as
exchanges, additional investments, and address changes. Log on today to
get your password.
Use our toll-free number 1-800-225-1581 Ask a helpful Putnam
representative or your financial advisor for details about any of these
or other services, or see your prospectus.
* This privilege is subject to change or termination. An exchange of funds
may result in a taxable event. In addition, a 2% redemption fee will be
applied to shares exchanged or sold within 5 days of purchase, and
certain funds have imposed a 1% redemption fee on total assets redeemed
or exchanged between 6 and 90 days of purchase.
Fund information
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded over 65 years ago, Putnam Investments
was built around the concept that a balance between risk and reward is
the hallmark of a well-rounded financial program. We presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment
Management, LLC
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary Trust Company
Legal Counsel
Ropes & Gray LLP
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Myra R. Drucker
Charles E. Haldeman, Jr.
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
Richard B. Worley
Officers
George Putnam, III
President
Charles E. Porter
Executive Vice President,
Associate Treasurer and Principal Executive
Officer
Jonathan S. Horwitz
Senior Vice President and Treasurer
Steven D. Krichmar
Vice President and
Principal Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Beth S. Mazor
Vice President
Daniel T. Gallagher
Vice President and Legal
and Compliance Liaison Officer
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
Charles A. Ruys de Perez
Vice President and Chief Compliance 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.
AN039-216516 11/04
Not FDIC Insured May Lose Value No Bank Guarantee
Item 2. Code of Ethics:
- -----------------------
All officers of the Fund, including its principal executive, financial and
accounting officers, are employees of Putnam Investment Management, LLC,
the Fund's investment manager. As such they are subject to a comprehensive
Code of Ethics adopted and administered by Putnam Investments which is
designed to protect the interests of the firm and its clients. The Fund
has adopted a Code of Ethics which incorporates the Code of Ethics of
Putnam Investments with respect to all of its officers and Trustees who are
employees of Putnam Investment Management, LLC. For this reason, the Fund
has not adopted a separate code of ethics governing its principal
executive, financial and accounting officers.
Item 3. Audit Committee Financial Expert:
- -----------------------------------------
The Funds' Audit and Pricing Committee is comprised solely of Trustees
who are "independent" (as such term has been defined by the Securities
and Exchange Commission ("SEC") in regulations implementing Section 407
of the Sarbanes-Oxley Act (the "Regulations")). The Trustees believe
that each of the members of the Audit and Pricing Committee also possess
a combination of knowledge and experience with respect to financial
accounting matters, as well as other attributes, that qualify them for
service on the Committee. In addition, the Trustees have determined
that all members of the Funds' Audit and Pricing Committee meet the
financial literacy requirements of the New York Stock Exchange's rules
and that Mr. Patterson and Mr. Stephens qualify as "audit committee
financial experts" (as such term has been defined by the Regulations)
based on their review of their pertinent experience and education.
Certain other Trustees, although not on the Audit and Pricing Committee,
would also qualify as "audit committee financial experts." The SEC has
stated that the designation or identification of a person as an audit
committee financial expert pursuant to this Item 3 of Form N-CSR does
not impose on such person any duties, obligations or liability that are
greater than the duties, obligations and liability imposed on such
person as a member of the Audit and Pricing Committee and the Board of
Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services:
- -----------------------------------------------
The following table presents fees billed in each of the last two
fiscal years for services rendered to the fund by the fund's
independent auditors:
Audit Audit-Related Tax All Other
Fiscal year ended Fees Fees Fees Fees
- ----------------- ---------- ------------- ------- ---------
September 30, 2004 $85,872* $-- $2,887 $908
September 30, 2003 $77,215 $-- $3,759 $--
*Includes fees of $ 4,367 billed by the fund's independent auditor
to the fund for audit procedures necessitated by regulatory and
litigation matters. These fees were reimbursed to the fund by
Putnam.
For the fiscal years ended September 30, 2004 and September 30,
2003, the fund's independent auditors billed aggregate non-audit
fees in the amounts of $136,056 and $77,353, respectively, to the
fund, Putnam Management and any entity controlling, controlled by or
under common control with Putnam Management that provides ongoing
services to the fund.
Audit Fees represents fees billed for the fund's last two fiscal
years.
Audit-Related Fees represents fees billed in the fund's last two
fiscal years for services traditionally performed by the fund's
auditor, including accounting consultation for proposed transactions
or concerning financial accounting and reporting standards and other
audit or attest services not required by statute or regulation.
Tax Fees represent fees billed in the fund's last two fiscal years
for tax compliance, tax planning and tax advice services. Tax
planning and tax advice services include assistance with tax audits,
employee benefit plans and requests for rulings or technical advice
from taxing authorities.
All Other Fees Fees represent fees billed for services relating to
fund expense processing.
Pre-Approval Policies of the Audit and Pricing Committee. The Audit
and Pricing Committee of the Putnam funds has determined that, as a
matter of policy, all work performed for the funds by the funds'
independent auditors will be pre-approved by the Committee and will
generally not be subject to pre-approval procedures.
Under certain circumstances, the Audit and Pricing Committee
believes that it may be appropriate for Putnam Investment
Management, LLC ("Putnam Management") and certain of its affiliates
to engage the services of the funds' independent auditors, but only
after prior approval by the Committee. Such requests are required
to be submitted in writing to the Committee and explain, among other
things, the nature of the proposed engagement, the estimated fees,
and why this work must be performed by that particular audit firm.
The Committee will review the proposed engagement at its next
meeting.
Since May 6, 2003, all work performed by the independent auditors
for the funds, Putnam Management and any entity controlling,
controlled by or under common control with Putnam Management that
provides ongoing services to the fund was pre-approved by the
Committee or a member of the Committee pursuant to the pre-approval
policies discussed above. Prior to that date, the Committee had a
general policy to pre-approve the independent auditor's engagements
for non-audit services with the funds, Putnam Management and any
entity controlling, controlled by or under common control with
Putnam Management that provides ongoing services to the fund.
The following table presents fees billed by the fund's principal
auditor for services required to be approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X.
Audit-Related Tax All Other Total Non-
Fiscal year ended Fees Fees Fees Audit Fees
- ----------------- ------------- ---- --------- ----------
September 30, 2004 $-- $-- $-- $--
September 30, 2003 $-- $-- $-- $--
Item 5. Audit Committee: Not applicable
- -------------------------
Item 6. Schedule of Investments: Not applicable
- --------------------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End
- -------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. Purchases of Equity Securities by Closed-End Management Investment
- --------------------------------------------------------------------------
Companies and Affiliated Purchasers: Not applicable
------------------------------------
Item 9. Submission of Matters to a Vote of Security Holders:
- ------------------------------------------------------------
Not applicable
Item 10. Controls and Procedures:
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(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.
(b) Changes in internal control over financial reporting:
Not applicable
Item 11. Exhibits:
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(a) The Code of Ethics of The Putnam Funds, which incorporates the
Code of Ethics of Putnam Investments, is filed herewith.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act
of 2002 are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: November 30, 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: November 30, 2004
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: November 30, 2004