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:
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
3-31-05
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From the Trustees
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John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
Throughout the period ended March 31, 2005, the Federal Reserve Board's
series of gradual increases in the federal funds rate occupied much of
investors' attention. However, these increases did not begin to have a
significant impact on stock and bond prices until approximately March
2005. Also in March, we began to see a measurable increase in
longer-term interest rates, which, along with continued record-high
energy prices, has slowed the stock market's momentum. Concerns about
inflation have also begun to influence the markets once again and may
affect bond prices going forward. In such an environment, security
selection takes on even greater importance and the in-depth,
professional research and active management that mutual funds can
provide makes them an even more intelligent choice for today's
investors.
Given these trends, we want you to know that Putnam Investments'
management team, under the leadership of Chief Executive Officer Ed
Haldeman, continues to focus on improving investment performance and
remains committed to putting the interests of shareholders first. In
keeping with these goals, we are including additional disclosure about
your fund's management team in this report. Following the Outlook for
Your Fund, we provide manager compensation information that pertains to
your fund, list any changes in your fund's Portfolio Leader and
Portfolio Members during the prior year, and disclose these individuals'
other fund management responsibilities at Putnam. Furthermore, on page
14, we provide information about the most recent approval by the
Trustees of your fund's management contract with Putnam.
In the following pages, members of your fund's management team discuss
the fund's performance, the strategies used to pursue the fund's
investment objective during the reporting period, and the team's plan
for responding to recent changes in the market climate.
As always, we thank you for your continuing confidence in Putnam.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
May 18, 2005
Report from Fund Management
Fund highlights
* For the six months ended March 31, 2005, Putnam Money Market Fund's
class A shares returned 0.87%.
* The fund's benchmark, the Merrill Lynch 91-Day Treasury Bill Index,
returned 1.06%.
* The average return for the fund's Lipper category, Money Market Funds,
was 0.66%.
* See the Performance Summary beginning on page 8 for additional fund
performance, comparative performance, and Lipper data.
Performance commentary
The Federal Reserve Board's (the Fed's) efforts to raise short-term
interest rates during the first half of Putnam Money Market Fund's 2005
fiscal year produced higher yields across the entire spectrum of money
market securities. Our effort to capture these rising yields by reducing
the portfolio's average days to maturity was successful, although the
fund underperformed its benchmark index, the Merrill Lynch 91-Day
Treasury Bill Index, which is composed of short-maturity U.S. Treasury
bills. By shifting the focus of the fund from fixed-rate to
floating-rate money market securities, which reset in accordance with
changes in short-term interest rates, we made the portfolio more
sensitive to the rise in interest rates and were able to boost its
earning potential. Consequently, the fund's 7-day yield climbed almost a
full percentage point to 2.22% by March 31, 2005, and its total return
at net asset value (NAV) outperformed the average return of 0.66% for
the fund's Lipper category.
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TOTAL RETURN FOR
PERIODS ENDED 3/31/05
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Class A
(inception 10/1/76) NAV
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6 months 0.87%
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1 year 1.25
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5 years 12.73
Annual average 2.43
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10 years 45.28
Annual average 3.81
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Annual average
(life of fund) 6.39
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Current return
(end of period)
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Current 7-day yield 2.22
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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
and liquidity of assets.
Market overview
During the first half of the fund's fiscal year, the U.S. economy
continued to expand at a moderate rate, supported by respectable
corporate earnings and an improving employment picture. However,
concerns about the long-term impact of higher oil prices and interest
rates preoccupied investors, as the Fed continued to assess the impact
of its rate increases on the direction of economic growth and earnings.
Given the stronger economy, the Fed's focus has gradually shifted from
adjusting interest-rate policy to generating a self-sustaining recovery
to, most recently, seeking to contain inflation. During the six months
ended March 31, 2005, the Fed raised the federal funds rate, the rate
that banks charge each other for overnight loans, four times in
quarter-point (0.25%) increments to 2.75%. The stated goal of this
gradual approach has been to avoid any aggressive credit tightening that
could derail economic expansion.
According to iMoneyNet's March 2005 issue, taxable money market assets
stood at $1.549 trillion on March 29, 2005. At the beginning of the
fiscal year on October 1, 2004, taxable money market assets were $1.586
billion and peaked at $1.598 billion on December 29, 2004, for the six
months under review. As we expected, taxable money market fund outflows
have moderated as money market investments have become more attractive
in light of the higher interest-rate environment.
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MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 3/31/05
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Bonds
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Lipper Money Market Funds category average 0.66%
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Merrill Lynch 91-Day Treasury Bill Index (short-maturity
U.S. Treasury bills) 1.06%
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Lehman Aggregate Bond Index (broad bond market) 0.47%
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Citigroup World Government Bond Index (global government
bonds) 5.70%
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Equities
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S&P 500 Index (broad stock market) 6.88%
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Russell 1000 Index (large-company stocks) 7.71%
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Russell 2000 Index (small-company stocks) 8.00%
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These indexes provide an overview of performance in different market
sectors for the six months ended 3/31/05.
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Strategy overview
With the Fed embarking on a policy of bringing short-term interest rates
back to more neutral levels, we've been pursuing a strategy designed to
increase the fund's income stream commensurate with the rise in interest
rates. We maintained the fund's exposure to floating-rate money-market
securities while increasing the fund's holdings of commercial paper.
Floating-rate notes are more responsive to changes in interest rates as
these securities are tied to market indexes that reset on a periodic
basis. We purchased commercial paper primarily in the 90-day maturity
range that allowed the fund to lock in expected increases in the federal
funds rate.
Our strategy had the intended effect of lowering the portfolio's average
days to maturity, a measure of the fund's sensitivity to changes in
interest rates, from 51 days on September 30, 2004, to 44 days on March
31, 2005. The fund's 7-day yield rose from 1.27% at the beginning of the
semiannual period to 2.22% by March 31, 2005.
[GRAPHIC OMITTED: horizontal bar chart PORTFOLIO COMPOSITION COMPARED]
PORTFOLIO COMPOSITION COMPARED
as of 9/30/04 as of 3/31/05
Domestic money
market instruments
(exclusive of U.S.
government
obligations) 50.3% 46.1%
Foreign money
market instruments 29.8% 42.1%
U.S. government
obligations 12.8% 5.2%
Repurchase
agreements 7.1% 6.6%
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
Our goal of making the fund more responsive to rising interest rates was
largely achieved by investing in the multi-billion dollar commercial
paper market, which is a substantial source of short-term funding.
Holdings such as Amstel Funding, Park Granada, and CAFCO, which are
asset-backed commercial paper programs, exemplify this strategy.
Commercial paper issued by these companies is collateralized by
portfolios of high-quality financial assets. We believe the strength of
the supporting assets, coupled with additional structural protections,
such as bank liquidity support, makes them appropriate investments for
the fund.
One of the fund's largest issuers, Goldman Sachs Group, is a global
investment banking and securities firm with a pre-eminent franchise in
mergers and acquisitions (M&A), advisory services, and equity
underwriting. Goldman has experienced strong net revenues from
underwriting and M&A advisory work as a result of the firming economic
activity and an upswing in investment-banking activity. Furthermore, the
measured pace of interest-rate increases by the Fed helped keep the
company's fixed-income revenues steady.
The fund's investments in U.S. dollar-denominated debt of foreign
issuers also increased during the reporting period. Swedbank, a large
Swedish bank whose mortgage arm, Spintab, was among the fund's holdings,
is enjoying healthy levels of profitability and stable overall
financials as a result of its leading domestic retail banking franchise.
The fund also holds a position in an asset-backed commercial paper
conduit, Tulip Funding, which is administered by ABN AMRO, a
Netherlands-based bank with an internationally diversified business mix.
Over the six-month period, the fund's investments in these and other
foreign holdings increased from 29.8% on September 30, 2004, to 42.1% on
March 31, 2005.
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PERFORMANCE COMPARISONS (3/31/05)
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Current return*
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Regular savings account 0.50%
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Taxable money market fund 7-day yield 2.13
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3-month certificate of deposit 2.97
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Putnam Money Market Fund (7-day yield)
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Class A 2.22
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Class B 1.72
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Class C 1.72
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Class M 2.07
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Class R 1.72
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Class T 1.97
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The net asset value of money market mutual funds is uninsured and
designed to be fixed, while distributions vary daily. Investment returns
will fluctuate.The principal value on passbook savings and on bank
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 (regular savings account), imoneynet's Money
Fund Report (taxable money market fund compound 7-day yield) and the
Federal Reserve Board of Governors (3-month CDs).
U.S. government-sponsored enterprises (GSEs) continued to be an
important component of the portfolio over the course of the reporting
period. However, we have been reducing the portfolio's weighting in
these securities, since we currently believe that the corporate market
currently represents a better value. The fund's investments in U.S.
government agency notes were reduced from 12.8% on September 30, 2004,
to 5.2% on March 31, 2005. GSEs as a group -- which includes the Federal
National Mortgage Association (also known as Fannie Mae), the Federal
Home Loan Mortgage Corporation (also known as Freddie Mac), the Federal
Home Loan Bank System, and the Federal Farm Credit System -- will likely
undergo some regulatory reform over the next six to twelve months. While
the scope of change in uncertain, the general reform themes are likely
to embody greater financial strength and soundness as well as enhanced
focus on core business initiatives.
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.
Perhaps the single biggest surprise for financial markets in 2004 was
that long-term interest rates generally held steady rather than rising
significantly. As a result, bond markets confounded forecasts and posted
gains last year. But if one anticipates, as we do, that economic
expansion will continue at a more moderate but still-solid clip in 2005,
then it appears that long-term rates are highly unlikely to remain stuck
in 2004's low range. Unlike much of last year, investors today aren't
fearful of the Fed; expectations of only mild, gradual monetary
tightening are reflected in market interest rates. We do not expect that
there will be any benefit in 2005, as there was in 2004, from an
unwinding of excessive concerns about aggressive Fed rate hikes.
With our expectation of moderate economic growth and modest, gradual Fed
tightening, our investment decisions will continue to revolve around
strategies designed to keep the portfolio responsive to rising interest
rates and accruing the incremental income that comes with holding
shorter-maturity money market instruments. Independent credit analysis
and our commitment to the highest quality money-market-eligible
securities will continue to shape those investment decisions.
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 the 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.
Fund manager compensation
The total 2004 fund manager compensation that is attributable to your
fund is approximately $440,000. This amount includes a portion of 2004
compensation paid by Putnam Management to the fund managers listed in
this section for their portfolio management responsibilities, calculated
based on the fund assets they manage taken as a percentage of the total
assets they manage. The compensation amount also includes a portion of
the 2004 compensation paid to the Chief Investment Officer of the team
and the Group Chief Investment Officer of the fund's broader investment
category for their oversight responsibilities, calculated based on the
fund assets they oversee taken as a percentage of the total assets they
oversee. These percentages are determined as of the fund's fiscal
period-end. For personnel who joined Putnam Management during or after
2004, the calculation reflects annualized 2004 compensation or an
estimate of 2005 compensation, as applicable.
Other Putnam funds managed by the Portfolio Leader and Portfolio Member
Joanne Driscoll is also a 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 and
variable trust funds advised by Putnam Management or an affiliate.
Changes in your fund's Portfolio Leader and Portfolio Members
Your fund's Portfolio Leader and Portfolio Members did not change during
the year ended March 31, 2005.
Performance summary
This section shows your fund's performance during the first half of its
fiscal year, which ended March 31, 2005. Performance should always be
considered in light of a fund's investment strategy. Data represents
past performance. Past performance does not guarantee future results.
More recent returns may be less or more than those shown. Investment
return will fluctuate 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 3/31/05
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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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6 months 0.87% 0.62% -4.38% 0.62% -0.38% 0.80% 0.62% 0.75%
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1 year 1.25 0.75 -4.25 0.75 -0.25 1.10 0.75 1.00
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5 years 12.73 9.94 7.94 9.95 9.95 11.91 10.13 11.35
Annual average 2.43 1.91 1.54 1.92 1.92 2.28 1.95 2.17
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10 years 45.28 38.19 38.19 38.31 38.31 43.14 38.47 41.81
Annual average 3.81 3.29 3.29 3.30 3.30 3.65 3.31 3.55
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Annual average
(life of fund) 6.39 5.86 5.86 5.86 5.86 6.23 5.85 6.12
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Current return
(end of period)
Current
7-day yield* 2.22 1.72 1.72 2.07 1.72 1.97
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Current
30-day yield* 2.12 1.61 1.61 1.97 1.61 1.87
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Performance assumes reinvestment of distributions and does not account
for taxes. 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 3/31/05
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Merrill Lynch Lipper Money
91-Day Market Funds
Treasury category
Bill Index average*
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6 months 1.06% 0.66%
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1 year 1.67 0.91
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5 years 14.72 10.69
Annual average 2.78 2.05
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10 years 48.71 41.53
Annual average 4.05 3.53
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Annual average
(life of fund) --+ 6.37
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Index and Lipper results should be compared to fund performance at net
asset value.
* Over the 6-month and 1-, 5-, and 10-year periods ended 3/31/05, there
were 391, 383, 302, and 181 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 6 MONTHS ENDED 3/31/05
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Class A Class B Class C Class M Class R Class T
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Distributions
(number) 6 6 6 6 6 6
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Income $0.008707 $0.006222 $0.006222 $0.007960 $0.006204 $0.007459
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Total $0.008707 $0.006222 $0.006222 $0.007960 $0.006204 $0.007459
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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 October 1, 2004, to March
31, 2005. 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 3/31/05
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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* $2.65 $5.15 $5.15 $3.40 $5.15 $3.90
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Ending value (after expenses) $1,008.70 $1,006.20 $1,006.20 $1,008.00 $1,006.20 $1,007.50
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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 3/31/05.
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 March
31, 2005, use the calculation method below. To find the value of your
investment on October 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 10/01/2004 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 10/1/04 [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 $2.65 (see table above) = $26.50
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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 3/31/05
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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* $2.67 $5.19 $5.19 $3.43 $5.19 $3.93
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Ending value (after expenses) $1,022.29 $1,019.80 $1,019.80 $1,021.54 $1,019.80 $1,021.04
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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 3/31/05.
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 the average of its peer
group, as defined 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 0.53% 1.03% 1.03% 0.68% 1.03% 0.78%
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Average annualized expense
ratio for Lipper peer group+ 0.60% 1.10% 1.10% 0.75% 1.10% 0.85%
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+ Simple average of the expenses of all funds in the fund's Lipper peer
group, calculated in accordance with Lipper's standard method for
comparing fund expenses (excluding 12b-1 fees and without giving effect
to any expense offset and brokerage service arrangements that may reduce
fund expenses). This average reflects each fund's expenses for its most
recent fiscal year available to Lipper as of 3/31/05. To facilitate
comparison, Putnam has adjusted this average to reflect the 12b-1 fees
carried by each class of shares. The peer group may include funds that
are significantly smaller or larger than the fund, which may limit the
comparability of the fund's expenses to the simple average, which
typically is higher than the asset-weighted 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 global
investment-grade fixed-income securities.
Lehman Aggregate Bond Index is an unmanaged index of U.S.
investment-grade fixed-income securities.
Lipper Money Market Funds Category Average is an arithmetic average of
the total return of all Lipper Money Market 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 1,000 largest companies
in the Russell 3000 Index.
Russell 2000 Index is an unmanaged index of the 2,000 smallest companies
in the Russell 3000 Index.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for
fees. Securities and performance of a fund and an index will differ. You
cannot invest directly in an index.
Lipper 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.
Trustee approval of management contract
General conclusions
The Board of Trustees of the Putnam funds oversees the management of
each fund and, as required by law, determines annually whether to
approve the continuance of each fund's management contract with Putnam
Management. In this regard the Board of Trustees, with the assistance of
its Contract Committee consisting solely of Independent Trustees,
requests and evaluates all information it deems reasonably necessary in
the circumstances. Over the course of several months beginning in March
and ending in June of 2004, the Contract Committee reviewed the
information provided by Putnam Management and other information
developed with the assistance of the Board's independent counsel and
independent staff. The Contract Committee reviewed and discussed key
aspects of this information with all of the Independent Trustees. Upon
completion of this review, the Contract Committee recommended and the
Independent Trustees approved the continuance of your fund's contract,
effective July 1, 2004.
This approval was based on the following conclusions:
* That the fee schedule currently in effect for your fund represents
reasonable compensation in light of the nature and quality of the
services being provided to the fund, the fees paid by competitive funds
and the costs incurred by Putnam Management in providing such service,
and
* That such fee schedule represents an appropriate sharing between fund
shareholders and Putnam Management of such economies of scale as may
exist in the management of the fund at current asset levels.
These conclusions were based on a comprehensive consideration of all
information provided to the Trustees and were not the result of any
single factor. Some of the factors that figured particularly in the
Trustees' deliberations are described below.
Model fee schedules and categories; total expenses
The Trustees, working in cooperation with Putnam Management, have
developed and implemented a series of model fee schedules for the Putnam
funds designed to ensure that each fund's management fee is consistent
with the fees for similar funds in the Putnam complex and compares
favorably with fees paid by competitive funds sponsored by other
advisors. The Trustees reviewed the model fee schedule currently in
effect for the fund, including fee levels and breakpoints, and the
assignment of the fund to a particular fee category under this
structure. The Trustees also reviewed comparative fee and expense
information for competitive funds. The Trustees concluded that no
changes should be made in the fund's current fee schedule at this time.
The Trustees noted that expense ratios for a number of Putnam funds had
been increasing recently as a result of declining net assets and the
natural operation of fee breakpoints. They noted that such expense ratio
increases were currently being controlled by expense limitations
implemented in January 2004. They also noted that the competitive
landscape regarding mutual fund fees may be changing as a result of fee
reductions accepted by various other fund groups in connection with
recent regulatory settlements and greater focus on fees and expenses in
the mutual fund industry generally. The Trustees indicated an intention
to monitor these developments closely.
Economies of scale
As noted above, the Trustees concluded that the fee schedule currently
in effect for your fund represents an appropriate sharing of economies
of scale at current asset levels. The Trustees indicated their intention
to continue their ongoing consideration of economies of scale and in
particular to consider further the possible operation of such economies
in the event that a significant recovery in the equity markets or net
fund sales were to raise asset levels substantially above current
levels. In this regard, the Trustees noted that they had reviewed data
relating to the substantial increase in asset levels of the Putnam funds
that occurred during the years leading up to the market peak in 2000,
the subsequent decline in assets and the resulting impact on revenues
and expenses of Putnam Management. The Trustees also noted that recent
declines in net assets in many Putnam funds, together with significant
changes in the cost structure of Putnam Management have altered the
economics of Putnam Management's business in significant ways. The
Trustees concluded that they would monitor these changes carefully and
evaluate the resulting impact on Putnam Management's economics and the
sharing of economies of scale between the parties.
Investment performance
The quality of the investment process provided by Putnam Management
represented a major factor in the Trustees' evaluation of the quality of
services provided by Putnam Management under the Management Contracts.
The Trustees recognized that a high quality investment process -- as
measured by the experience and skills of the individuals assigned to the
management of fund portfolios, the resources made available to such
personnel, and in general the ability of Putnam Management to attract
and retain high-quality personnel -- does not guarantee favorable
investment results for every fund in every time period. The Trustees
considered the investment performance of each fund over multiple time
periods and considered information comparing the fund's performance with
various benchmarks and with the performance of competitive funds. The
Trustees noted the satisfactory investment performance of many Putnam
funds.
They also noted the disappointing investment performance of certain
funds in recent years and continued to discuss with senior management of
Putnam Management the factors contributing to such under-performance and
actions being taken to improve performance. The Trustees recognized
that, in recent years, Putnam Management has made significant changes in
its investment personnel and processes and in the fund product line in
an effort to address areas of underperformance. The Trustees indicated
their intention to continue to monitor performance trends to assess the
effectiveness of these changes and to evaluate whether additional
remedial changes are warranted. As a general matter, the Trustees
concluded that consultation between the Trustees and Putnam Management
represents the most effective way to address investment performance
problems. The Trustees believe that investors in the Putnam funds and
their financial advisors have, as a general matter, effectively placed
their trust in the Putnam organization, under the supervision of the
funds' Trustees, to make appropriate decisions regarding the management
of the funds. The Trustees believe that the termination of the
Management Contract and engagement of a new investment adviser for
under-performing funds, with all the attendant disruptions, would not
serve the interests of fund shareholders at this time and would not
necessarily provide any greater assurance of improved investment
performance.
Brokerage and soft-dollar allocations; other benefits
The Trustees considered various potential benefits that Putnam
Management may receive in connection with the services it provides under
the Management Contract with your fund. These include principally
benefits related to brokerage and soft-dollar allocations, which pertain
mainly to funds investing in equity securities. The Trustees believe
that soft-dollar credits and other potential benefits associated with
the allocation of fund brokerage represent assets of the funds that
should be used for the benefit of fund shareholders. The Trustees noted
recent trends in the allocation of fund brokerage, including commission
costs, the allocation of brokerage to firms that provide research
services to Putnam Management, and the sources and application of
available soft-dollar credits. Effective December 31, 2003, reflecting a
decision made by the Trustees earlier that year, Putnam Management
ceased allocating brokerage in connection with the sale of fund shares.
In addition, in preparing its budget for commission allocations in 2004,
Putnam Management voluntarily reduced substantially the allocation of
brokerage commissions to acquire research services from third-party
service providers. In light of evolving best practices in the mutual
fund industry, the Trustees concluded that this practice should be
further curtailed and possibly eliminated in the near future. The
Trustees indicated that they would continue to monitor the allocation of
the funds' brokerage to ensure that the principle of "best price and
execution" remains paramount in the portfolio trading process.
Comparison of retail and institutional fee schedules
The information examined by the Trustees as part of the annual contract
reviews included information regarding fees charged by Putnam Management
and its affiliates to institutional clients such as defined benefit
pension plans and college endowments. This information included
comparison of such fees with fees charged to the Putnam funds, as well
as a detailed assessment of the differences in the services provided to
these two types of clients. The Trustees devoted special attention to
these issues and reviewed recent articles by critics of mutual fund
fees, articles by the ICI defending such fee differences, and relevant
guidance provided by decisions of the courts. The Trustees observed, in
this regard, that the differences in fee rates between institutional
clients and mutual funds are by no means uniform when examined by
individual asset sectors, suggesting that differences in the pricing of
investment management services to these types of clients reflects to a
substantial degree historical competitive forces operating in separate
market places. In reaching their conclusions, the Trustees considered
the fact that fee rates across all asset sectors are higher on average
for mutual funds than for institutional clients, and also considered the
differences between the services that Putnam provides to the Putnam
funds and those that it provides to institutional clients of the firm.
Settlement of regulatory charges related to market timing
Finally, in reaching their conclusions, the Trustees considered all
matters pertinent to the administrative charges filed against Putnam
Management by the SEC and the Commonwealth of Massachusetts in October
2003 relating to market timing, the firm's settlement of those charges,
and the conclusions and recommendations of the Trustees' Audit and
Pricing Committee based on its review of these matters. The Trustees
considered the actions taken by the owner of Putnam Management and its
new senior management to terminate or discipline the individuals
involved, to implement new compliance systems, to indemnify the funds
against all costs and liabilities related to these matters, and
otherwise to ensure that the interests of the funds and their
shareholders are fully protected. The Trustees noted that, in addition
to the settlements of the regulatory charges which will provide
comprehensive restitution for any losses suffered by shareholders, the
new senior management of Putnam Management has moved aggressively to
control expense ratios of funds affected by market timing, to reduce
charges to new investors, to improve disclosure of fees and expenses,
and to emphasize the paramount role of investment performance in
achieving shareholders' investment goals.
Other information for shareholders
A note about duplicate mailings
In response to investors' requests, the SEC has modified mailing
regulations for proxy statements, semiannual and annual reports, and
prospectuses. Putnam is now able to send a single copy of these
materials to customers who share the same address. This change will
automatically apply to all shareholders except those who notify us. If
you would prefer to receive your own copy, please call Putnam at
1-800-225-1581.
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,
constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or loss
the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal period.
Statement of changes in net assets shows how the fund's net assets were
affected by 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.
The fund's portfolio
March 31, 2005 (Unaudited)
Commercial paper (68.8%) (a) Maturity
Principal amount date Value
Domestic (37.9%)
- -------------------------------------------------------------------------------
$34,000,000 Amstel Funding Corp. 3.325s 9/30/05 $33,437,923
40,000,000 Amstel Funding Corp. 2.901s 6/7/05 39,785,600
22,000,000 Amstel Funding Corp. 2.765s 5/23/05 21,911,658
55,000,000 Amstel Funding Corp. 2.664s 6/15/05 54,694,323
27,717,000 Atlantic Asset Securitization Corp.
3.033s 6/28/05 27,513,064
25,000,000 Atlantic Asset Securitization Corp.
2.737s 4/12/05 24,979,146
34,149,000 Atlantic Asset Securitization Corp.
2.568s 4/7/05 34,134,031
25,115,000 Atlantic Asset Securitization Corp.
2.532s 4/4/05 25,109,558
30,000,000 Bank of America Corp. 3.13s 8/12/05 29,657,525
25,000,000 Bank of America Corp. 2.735s 5/24/05 24,898,785
30,000,000 Bank of America Corp. 2.57s 4/14/05 29,971,617
30,000,000 CAFCO, LLC 2.932s 6/13/05 29,822,975
30,000,000 CAFCO, LLC 2.676s 5/10/05 29,912,250
20,000,000 CAFCO, LLC 2.666s 4/28/05 19,959,500
20,000,000 CAFCO, LLC 2.64s 5/2/05 19,954,017
17,000,000 CAFCO, LLC 2.487s 4/6/05 16,993,979
34,750,000 CAFCO, LLC 2.446s 4/5/05 34,740,309
16,000,000 Citibank Credit Card Issuance Trust
(Dakota) 2.914s 5/20/05 15,936,844
32,000,000 Citibank Credit Card Issuance Trust
(Dakota) 2.914s 5/17/05 31,881,422
20,000,000 Citibank Credit Card Issuance Trust
(Dakota) 2.895s 5/18/05 19,924,800
30,000,000 Citibank Credit Card Issuance Trust
(Dakota) 2.763s 5/5/05 29,922,083
17,000,000 Citibank Credit Card Issuance Trust
(Dakota) 2.753s 5/4/05 16,957,302
35,000,000 Citibank Credit Card Issuance Trust
(Dakota) 2.542s 4/4/05 34,992,388
24,500,000 CRC Funding, LLC 2.702s 5/5/05 24,436,831
30,000,000 CRC Funding, LLC 2.701s 5/17/05 29,895,733
31,000,000 CRC Funding, LLC 2.685s 4/27/05 30,939,102
30,000,000 Curzon Funding, LLC 2.844s 4/20/05 29,955,033
30,000,000 Curzon Funding, LLC 2.828s 4/28/05 29,936,550
15,000,000 CXC, LLC 2.739s 4/18/05 14,980,663
25,000,000 CXC, LLC 2.678s 4/12/05 24,979,604
36,000,000 Discover Card Master Trust I, 2000-A
(Newcastle) 3.023s 6/21/05 35,757,000
27,800,000 Discover Card Master Trust I, 2000-A
(Newcastle) 2.972s 6/13/05 27,633,702
20,000,000 Discover Card Master Trust I, 2000-A
(Newcastle) 2.827s 4/22/05 19,967,100
46,500,000 General Electric Capital Corp.
3.023s 6/24/05 46,174,500
35,000,000 General Electric Capital Corp.
3.023s 6/22/05 34,760,833
11,000,000 General Electric Capital Corp.
2.677s 5/11/05 10,967,000
10,000,000 Govco, Inc. 3.222s 9/15/05 9,852,947
10,000,000 Govco, Inc. 2.782s 5/5/05 9,973,839
20,000,000 Govco, Inc. 2.731s 5/18/05 19,928,194
10,000,000 Govco, Inc. 2.687s 5/11/05 9,969,889
46,000,000 Govco, Inc. 2.589s 4/25/05 45,919,500
30,000,000 Govco, Inc. 2.548s 4/7/05 29,986,950
17,000,000 International Lease Finance Corp.
2.61s 4/27/05 16,967,525
40,000,000 Metlife Funding 2.64s 5/2/05 39,908,033
23,000,000 NATC California, LLC (Chase
Manhattan Bank (Letter of Credit
(LOC)) 2.579s 4/20/05 22,968,196
36,000,000 NATC California, LLC (Chase
Manhattan Bank (LOC)) 2.578s 4/21/05 35,947,600
18,000,000 Park Granada, LLC 2.987s 4/1/05 18,000,000
35,000,000 Park Granada, LLC 2.726s 4/7/05 34,984,133
50,000,000 Park Granada, LLC 2.716s 4/6/05 49,981,181
50,000,000 Park Granada, LLC 2.636s 4/19/05 49,933,000
17,285,000 Thunder Bay Funding, Inc. 2.974s 6/20/05 17,171,687
17,215,000 Thunder Bay Funding, Inc. 2.861s 5/9/05 17,163,212
--------------
1,436,130,636
Foreign (30.9%)
- -------------------------------------------------------------------------------
21,908,000 Atlantis One Funding Corp. 3.012s
(Netherlands) 6/17/05 21,767,892
25,000,000 Atlantis One Funding Corp. 3s
(Netherlands) 7/25/05 24,762,014
20,000,000 Atlantis One Funding Corp. 2.518s
(Netherlands) 4/19/05 19,974,400
38,000,000 Banco Bradesco S.A. (Calyon (LOC))
2.653s (France) 6/10/05 37,803,456
21,000,000 Banco Continental de Panama, S.A.
Ser. A (Calyon (LOC)) 2.506s
(France) 4/11/05 20,985,067
22,700,000 COFCO Capital Corp. (Rabobank
Nederland (LOC)) 2.912s
(Netherlands) 5/18/05 22,614,055
23,000,000 Credit Suisse First Boston (USA),
Inc. 2.595s (Switzerland) 4/18/05 22,971,327
25,000,000 Danske Corp. 2.991s (Denmark) 8/22/05 24,705,559
18,500,000 Danske Corp. 2.93s (Denmark) 8/8/05 18,307,091
30,000,000 Danske Corp. 2.895s (Denmark) 5/23/05 29,875,200
30,000,000 Depfa Bank PLC 2.697s (Ireland) 4/12/05 29,975,342
64,000,000 Dexia Delaware, LLC 2.69s (Belgium) 5/12/05 63,802,317
17,000,000 Dexia Delaware, LLC 2.645s (Belgium) 4/22/05 16,973,374
32,000,000 Fortis Funding, LLC 3.059s (Belgium) 8/25/05 31,606,773
30,000,000 Fortis Funding, LLC 2.743s (Belgium) 5/4/05 29,924,925
47,000,000 Greenwich Capital Holdings, Inc.
FRN, 2.81s (United Kingdom) 6/27/05 47,000,000
28,000,000 Greenwich Capital Holdings, Inc.
FRN, 2.71s (United Kingdom) 4/8/05 28,000,000
27,000,000 HBOS Treasury Services PLC 3.023s
(United Kingdom) 6/29/05 26,799,750
33,000,000 HBOS Treasury Services PLC 2.901s
(United Kingdom) 6/8/05 32,820,480
37,500,000 HBOS Treasury Services PLC 2.685s
(United Kingdom) 5/9/05 37,392,729
35,000,000 HSBC Bank Canada 3.033s (United
Kingdom) 6/30/05 34,736,625
25,000,000 ING America Insurance Holdings
2.962s (Netherlands) 6/14/05 24,848,917
35,000,000 ING America Insurance Holdings
2.675s (Netherlands) 5/9/05 34,900,250
32,000,000 ING America Insurance Holdings
2.477s (Netherlands) 4/18/05 31,961,920
18,125,000 Nordea North America, Inc. 2.644s
(Sweden) 4/26/05 18,091,267
25,000,000 Spintab AB 3.258s (Sweden) 9/22/05 24,612,729
26,000,000 Spintab AB 3.025s (Sweden) 8/18/05 25,698,833
32,200,000 Spintab AB 2.72s (Sweden) 5/16/05 32,089,715
18,000,000 Spintab AB 2.673s (Sweden) 5/6/05 17,952,750
36,000,000 Toronto Dominion Holdings (USA)
2.802s (Canada) 4/29/05 35,921,740
111,850,000 Tulip Funding Corp. 2.676s
(Netherlands) 4/1/05 111,850,000
32,000,000 Tulip Funding Corp. 2.613s
(Netherlands) 4/25/05 31,943,467
40,000,000 UBS Finance (Delaware), LLC 2.807s
(Switzerland) 5/3/05 39,900,444
30,000,000 WestLB AG 2.763s (Germany) 5/3/05 29,927,600
30,000,000 WestLB AG 2.651s (Germany) 5/3/05 29,927,600
20,000,000 WestLB AG 2.485s (Germany) 4/5/05 19,994,333
40,000,000 Westpac Trust Securities NZ, Ltd.
2.616s (Australia) 4/28/05 39,920,500
--------------
1,172,340,441
--------------
Total Commercial paper
(cost $2,608,471,077) $2,608,471,077
Certificates of deposit (12.0%) (a) Maturity
Principal amount date Value
Domestic (0.7%)
- -------------------------------------------------------------------------------
$25,000,000 Citibank, N.A. 2 3/4s 5/16/05 $25,000,000
Foreign (11.3%)
- -------------------------------------------------------------------------------
17,000,000 Bank of Nova Scotia FRN, Ser. YCD,
2.646s (Canada) 1/3/06 16,996,013
45,000,000 Barclays Bank PLC Ser. YCD, 3.03s
(United Kingdom) 6/30/05 45,000,000
33,000,000 BNP Paribas Ser. ECD, 2.615s
(France) 5/9/05 32,996,538
27,000,000 BNP Paribas Ser. ECD, 2.58s (France) 4/13/05 27,000,045
31,500,000 Fortis Bank N.Y. Ser. YCD, 3.22s
(Belgium) 9/16/05 31,500,000
35,000,000 Landesbank Hessen Thuringen
Ser. ECD, 2.61s (Germany) 5/3/05 35,000,308
17,000,000 Lloyds TSB Bank PLC FRN, Ser. YCD,
2 3/4s (United Kingdom) 9/30/05 16,989,715
35,000,000 Royal Bank of Scotland PLC FRN,
Ser. YCD, 2.775s (United Kingdom) 6/20/05 34,988,625
25,000,000 Societe Generale FRN, Ser. YCD,
2.73s (France) 6/14/05 24,998,479
25,000,000 Societe Generale Ser. ECD, 3.055s
(France) 9/20/05 24,982,171
28,000,000 Societe Generale Ser. ECD, 2.72s
(France) 5/9/05 28,000,000
39,000,000 Societe Generale Ser. ECD, 2.52s
(France) 4/18/05 38,999,804
45,000,000 Svenska Handelsbanken FRN,
Ser. YCD1, 2.79s (Sweden) 4/3/06 44,986,455
27,750,000 Swedbank (New York) FRN, Ser. YCD,
2.78s (Sweden) 3/20/06 27,740,265
--------------
430,178,418
--------------
Total Certificates of deposit
(cost $455,178,418) $455,178,418
U.S. government agency obligations (5.3%) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$23,000,000 Fannie Mae FRN 2.626s 9/7/06 $22,974,616
20,000,000 Fannie Mae notes 1.6s 5/13/05 20,000,000
26,700,000 Fannie Mae notes 1.4s 5/3/05 26,700,000
30,000,000 Fannie Mae notes 1.35s 4/28/05 30,000,000
25,000,000 Federal Farm Credit Bank FRB 2.76s 7/20/06 24,990,600
36,000,000 Federal Home Loan Bank bonds,
Ser. JX05, 1.4s 4/1/05 36,000,000
25,000,000 Federal National Mortgage
Association 2.662s 6/29/05 24,835,597
15,000,000 Federal National Mortgage
Association 2.1s 4/15/05 14,987,750
--------------
Total U.S. government agency
obligations (cost $200,488,563) $200,488,563
Corporate bonds and notes (4.7%) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$20,000,000 Bank of New York Co., Inc. (The) sr.
unsec. FRN Ser. XMTN, 2.74s 4/4/06 $20,000,000
75,000,000 Morgan Stanley Group, Inc. sr. notes
FRN 3.37s 3/27/06 75,224,488
19,700,000 National City Bank FRN, Ser. BKNT,
2.78s 6/23/05 19,698,650
25,000,000 U.S. Bancorp sr. notes FRN, Ser. N,
3.17s 9/16/05 25,020,590
40,000,000 U.S. Bank N.A. FRN, Ser. BKNT, 2.95s 12/5/05 40,010,710
--------------
Total Corporate bonds and notes
(cost $179,954,438) $179,954,438
Promissory notes (4.0%) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$40,000,000 Goldman Sachs Group, Inc. (The) FRN,
2.87s (acquired 10/26/04, cost
$40,000,000) (RES) 4/22/05 $40,000,000
25,000,000 Goldman Sachs Group, Inc. (The) FRN,
2.87s (acquired 10/20/04, cost
$25,000,000) (RES) 4/18/05 25,000,000
30,000,000 Goldman Sachs Group, Inc. (The) FRN,
2.854s (acquired 2/18/05, cost
$30,000,000) (RES) 8/18/05 30,000,000
28,000,000 Goldman Sachs Group, Inc. (The) FRN,
2.84s (acquired 3/15/05, cost
$28,000,000) (RES) 9/12/05 28,000,000
27,800,000 Goldman Sachs Group, Inc. (The) FRN,
2.57s (acquired 1/4/05, cost
$27,800,000) (RES) 7/5/05 27,800,000
--------------
Total Promissory notes
(cost $150,800,000) $150,800,000
Asset backed securities (0.9%) (a) (cost
$34,694,526) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$34,694,526 TIAA Real Estate CDO, Ltd. 144A FRN,
Ser. 03-1A, Class A1MM, 2.88s
(Cayman Islands) 9/28/05 $34,694,526
Short-term investments (6.8%) (a) (cost $255,864,000)
Principal amount Value
- -------------------------------------------------------------------------------
$255,864,00 Interest in $640,000,000 joint
tri-party repurchase agreement
dated March 31, 2005 with Bank of
America Securities, LLC due April 1,
2005 with respect to various U.S.
government obligations -- maturity
value of $255,884,469 for an
effective yield of 2.88%
(collateralized by Freddie Mac and
Fannie Mae with yields ranging from
5.50% to 5.60% and due dates
ranging from December 1, 2018 to
February 1, 2035, valued at
$652,800,000) $255,864,000
- -------------------------------------------------------------------------------
Total Investments
(cost $3,885,451,022) $3,885,451,022
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $3,788,706,275.
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at March 31, 2005 was
$150,800,000 or 4.0% 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 Bonds (FRB) and Floating Rate Notes
(FRN) are the current interest rates at March 31, 2005.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at March 31, 2005: (as a
percentage of Portfolio Value)
Australia 1.0%
Belgium 4.5
Canada 1.4
Cayman Islands 0.9
Denmark 1.9
France 6.1
Germany 2.9
Ireland 0.8
Netherlands 8.3
Sweden 4.9
Switzerland 1.6
United Kingdom 7.8
United States 57.9
--------
Total 100.0%
The accompanying notes are an integral part of these financial
statements.
Statement of assets and liabilities
March 31, 2005 (Unaudited)
Assets
- -------------------------------------------------------------------------------
Investments in securities, at amortized cost (Note 1) $3,885,451,022
- -------------------------------------------------------------------------------
Cash 34,090
- -------------------------------------------------------------------------------
Interest and other receivables 2,577,581
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 30,638,303
- -------------------------------------------------------------------------------
Total assets 3,918,700,996
Liabilities
- -------------------------------------------------------------------------------
Distributions payable to shareholders 236,553
- -------------------------------------------------------------------------------
Payable for securities purchased 44,986,455
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 80,318,387
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Notes 2 and 5) 2,980,190
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 592,513
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 234,838
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 4,062
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 284,062
- -------------------------------------------------------------------------------
Other accrued expenses 357,661
- -------------------------------------------------------------------------------
Total liabilities 129,994,721
- -------------------------------------------------------------------------------
Net assets $3,788,706,275
Represented by
- -------------------------------------------------------------------------------
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) $3,788,706,275
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $3,788,706,275
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class A share ($3,149,999,983 divided by 3,149,979,257
shares)* $1.00
- -------------------------------------------------------------------------------
Net asset value and offering price per class B share
($373,304,459 divided by 373,322,293 shares)** $1.00
- -------------------------------------------------------------------------------
Net asset value and offering price per class C share
($36,620,589 divided by 36,621,280 shares)** $1.00
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class M share ($44,808,402 divided by 44,809,512 shares)* $1.00
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class R share ($948,527 divided by 948,498 shares)* $1.00
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class T share ($183,024,315 divided by 183,025,435 shares)* $1.00
- -------------------------------------------------------------------------------
* Offered at net asset value.
** Class B and class C shares are available only by exchange of class B and
class C shares from other Putnam funds and to certain systematic investment
plan investors. Redemption price per share is equal to net asset value less
an applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
Statement of operations
Six months ended March 31, 2005 (Unaudited)
Interest income (including interest income of $35,058
from investments in affiliated issuers) (Note 5): $43,802,911
- -------------------------------------------------------------------------------
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 6,265,145
- -------------------------------------------------------------------------------
Investor servicing fees (Note 2) 3,760,369
- -------------------------------------------------------------------------------
Custodian fees (Note 2) 16,141
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 50,579
- -------------------------------------------------------------------------------
Administrative services (Note 2) 60,195
- -------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,063,985
- -------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 62,719
- -------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 35,161
- -------------------------------------------------------------------------------
Distribution fees -- Class R (Note 2) 1,467
- -------------------------------------------------------------------------------
Distribution fees -- Class T (Note 2) 207,407
- -------------------------------------------------------------------------------
Other 357,541
- -------------------------------------------------------------------------------
Non-recurring costs (Notes 2 and 6) 28,970
- -------------------------------------------------------------------------------
Costs assumed by Manager (Notes 2 and 6) (28,970)
- -------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 5) (3,161)
- -------------------------------------------------------------------------------
Total expenses 11,877,548
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (329,871)
- -------------------------------------------------------------------------------
Net expenses 11,547,677
- -------------------------------------------------------------------------------
Net investment income 32,255,234
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 11,385
- -------------------------------------------------------------------------------
Net gain on investments 11,385
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $32,266,619
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of changes in net assets
Six months ended Year ended
March 31 September 30
Decrease in net assets 2005* 2004
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $32,255,234 $30,723,990
- -------------------------------------------------------------------------------
Net realized gain on investments 11,385 --
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 32,266,619 30,723,990
- -------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- -------------------------------------------------------------------------------
From net investment income
Class A (28,049,189) (28,599,137)
- -------------------------------------------------------------------------------
Class B (2,487,245) (1,338,213)
- -------------------------------------------------------------------------------
Class C (142,367) (86,784)
- -------------------------------------------------------------------------------
Class M (357,858) (349,505)
- -------------------------------------------------------------------------------
Class R (3,799) (100)
- -------------------------------------------------------------------------------
Class T (1,238,204) (488,688)
- -------------------------------------------------------------------------------
From net realized short-term gain on investments
Class A (9,454) --
- -------------------------------------------------------------------------------
Class B (1,204) --
- -------------------------------------------------------------------------------
Class C (59) --
- -------------------------------------------------------------------------------
Class M (133) --
- -------------------------------------------------------------------------------
Class R (2) --
- -------------------------------------------------------------------------------
Class T (533) --
- -------------------------------------------------------------------------------
Decrease from capital share transactions
(Note 4) (489,482,663) (1,573,730,519)
- -------------------------------------------------------------------------------
Total decrease in net assets (489,506,091) (1,573,868,956)
Net assets
- -------------------------------------------------------------------------------
Beginning of period 4,278,212,366 5,852,081,322
- -------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $-- and $23,428,
respectively) $3,788,706,275 $4,278,212,366
- -------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
March 31
Per-share (Unaudited) Year ended September 30
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .0087 (c) .0068 (c) .0087 .0166 .0493 .0564
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain
on investments -- (d) -- -- (d) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0087 .0068 .0087 .0166 .0493 .0564
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0087) (.0068) (.0087) (.0166) (.0493) (.0564)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.0087) (.0068) (.0087) (.0166) (.0493) (.0564)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .87* .68 .87 1.67 5.04 5.79
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,150,000 $3,537,907 $4,745,555 $5,512,532 $5,215,127 $3,780,309
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .26* (c) .53 (c) .52 .50 .50 .49
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .84* (c) .70 (c) .88 1.68 4.77 5.69
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) 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 periods ended March 31, 2005 and 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
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
March 31
Per-share (Unaudited) Year ended September 30
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .0062 (c) .0018 (c) .0037 .0116 .0443 .0513
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain
on investments -- (d) -- -- (d) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0062 .0018 .0037 .0116 .0443 .0513
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0062) (.0018) (.0037) (.0116) (.0443) (.0513)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.0062) (.0018) (.0037) (.0116) (.0443) (.0513)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .62* .18 .37 1.16 4.52 5.25
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $373,304 $520,456 $874,069 $1,193,459 $1,162,039 $649,826
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .51* (c) 1.03 (c) 1.02 1.00 1.00 .99
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .58* (c) .19 (c) .39 1.19 4.26 5.13
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) 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 periods ended March 31, 2005 and 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
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
March 31
Per-share (Unaudited) Year ended September 30
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .0062 (c) .0018 (c) .0037 .0116 .0444 .0513
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain
on investments -- (d) -- -- (d) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0062 .0018 .0037 .0116 .0444 .0513
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0062) (.0018) (.0037) (.0116) (.0444) (.0513)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.0062) (.0018) (.0037) (.0116) (.0444) (.0513)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .62* .18 .37 1.17 4.53 5.26
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $36,621 $40,935 $61,755 $79,227 $90,226 $52,872
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .51* (c) 1.03 (c) 1.02 1.00 1.00 .99
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .56* (c) .21 (c) .38 1.20 4.32 5.34
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) 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 periods ended March 31, 2005 and 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
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
March 31
Per-share (Unaudited) Year ended September 30
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .0080 (c) .0053 (c) .0072 .0151 .0478 .0551
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain
on investments -- (d) -- -- (d) -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0080 .0053 .0072 .0151 .0478 .0551
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0080) (.0053) (.0072) (.0151) (.0478) (.0551)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.0080) (.0053) (.0072) (.0151) (.0478) (.0551)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .80* .53 .72 1.52 4.89 5.65
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $44,808 $54,390 $74,921 $105,938 $122,055 $114,458
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .34* (c) .68 (c) .67 .65 .65 .64
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .76* (c) .55 (c) .74 1.55 4.70 5.51
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) 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 periods ended March 31, 2005 and 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
- ----------------------------------------------------------------------------------------------------------
Six months
ended For the period
March 31 Year ended January 21, 2003+
Per-share (Unaudited) September 30 to September 30
operating performance 2005 2004 2003
- ----------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------
Investment operations:
- ----------------------------------------------------------------------------------------------------------
Net investment income .0062 (c) .0027 (c) .0025
- ----------------------------------------------------------------------------------------------------------
Net realized gain
on investments -- (d) -- -- (d)
- ----------------------------------------------------------------------------------------------------------
Total from
investment operations .0062 .0027 .0025
- ----------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------
From net
investment income (.0062) (.0027) (.0025)
- ----------------------------------------------------------------------------------------------------------
Total distributions (.0062) (.0027) (.0025)
- ----------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00
- ----------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .62* .27 .25*
- ----------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $949 $131 $1
- ----------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .51* (c) 1.03 (c) .71*
- ----------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .65* (c) .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
periods ended March 31, 2005 and 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
- ---------------------------------------------------------------------------------------------------------
Six months
ended For the period
March 31 December 31, 2001+
Per-share (Unaudited) Year ended September 30 to September 30
operating performance 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------
Net investment income .0075 (c) .0043 (c) .0062 .0092
- ---------------------------------------------------------------------------------------------------------
Net realized gain
on investments -- (d) -- -- (d) --
- ---------------------------------------------------------------------------------------------------------
Total from
investment operations .0075 .0043 .0062 .0092
- ---------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------
From net
investment income (.0075) (.0043) (.0062) (.0092)
- ---------------------------------------------------------------------------------------------------------
Total distributions (.0075) (.0043) (.0062) (.0092)
- ---------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .75* .43 .62 .93*
- ---------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $183,024 $124,394 $95,779 $12,130
- ---------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .39* (c) .78 (c) .77 .56*
- ---------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .74* (c) .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
periods ended March 31, 2005 and 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
March 31, 2005 (Unaudited)
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 Putnam Investment Management, LLC
("Putnam Management"), the fund's manager, an indirect wholly-owned
subsidiary of Putnam, LLC, believes is consistent with preservation of
capital and maintenance of liquidity by investing in a diversified
portfolio of high-quality short-term obligations. The fund may invest up
to 100% of its assets in money market instruments from the banking, the
personal credit and the business credit industries.
The fund offers class A, class B, class C, class M, class R and class T
shares. Each class of shares is sold without a front-end sales charge.
Class A, class M, class R and class T shares also are not subject to a
contingent deferred sales charge. In addition to the standard offering
of class A shares, they are also sold to certain college savings plans.
Class B shares and class C shares are offered only in exchange for class
B and class C shares of other Putnam funds, or purchases by systematic
investment plans. Class B shares, which convert to class A shares after
approximately eight years, 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 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 R shares are offered to qualified employee-benefit
plans. The expenses for class A, class B, class C, class M, class R and
class T shares may differ based on each class' distribution fee, which
is identified in Note 2.
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
classes). 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 Pursuant to an exemptive order from the
Securities and Exchange Commission (the "SEC"), 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 Management. These balances may be invested in issues
of high-grade short-term investments having maturities of up to 90 days.
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 income 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.
The aggregate identified cost on a financial reporting and tax basis is
the same.
F) Distributions to shareholders Income dividends are recorded daily by
the fund and are paid monthly. Distributions of capital gains, if any,
are paid at least annually.
Note 2
Management fee, administrative
services and other transactions
Putnam Management is paid for management and investment advisory
services quarterly based on the average net assets of the fund. Such fee
is based on the following annual rates: 0.50% of the first $100 million
of average net assets, 0.40% of the next $100 million, 0.35% of the next
$300 million, 0.325% of the next $500 million and 0.30% thereafter.
Putnam Management has agreed to waive fees and reimburse expenses of the
fund through September 30, 2005 to the extent necessary to ensure that
the fund's expenses do not exceed the average expenses of the funds
viewed by Lipper Inc. as having the same investment classification or
objective as the fund. The expense reimbursement is based on a
comparison of the fund's expenses with the average annualized operating
expenses of the funds in its Lipper peer group for each calendar quarter
during the fund's last fiscal year, excluding 12b-1 fees and without
giving effect to any expense offset and brokerage service arrangements
that may reduce fund expenses. For the period ended March 31, 2005,
Putnam Management did not waive any of its management fee from the fund.
For the period ended March 31, 2005, Putnam Management has assumed
$28,970 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 six months ended March 31, 2005, the
fund paid PFTC $3,776,125 for these services.
The fund has entered into an arrangement with PFTC whereby credits
realized as a result of uninvested cash balances are used to reduce a
portion of the fund's expenses. For the six months ended March 31, 2005,
the fund's expenses were reduced by $329,871 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $3,834, 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 six months ended March 31, 2005, Putnam Retail Management,
acting as underwriter, received net commissions of $804,683 and $2,268
in contingent deferred sales charges from redemptions of class B and
class C shares, respectively.
A deferred sales charge of up to 1.00% for class A and class T shares
and 0.15% for class M shares may be assessed on certain redemptions. For
the six months ended March 31, 2005, Putnam Retail Management, acting as
underwriter, received no monies in contingent deferred sales charges
from redemptions of class A, class T or class M shares acquired through
an exchange from another fund.
Note 3
Purchases and sales of securities
During the six months ended March 31, 2005, cost of purchases and
proceeds from sales (including maturities) of investment securities (all
short-term obligations) aggregated $29,914,218,012 and $30,455,457,000,
respectively.
Note 4
Capital shares
At March 31, 2005, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares at a constant net
asset value of $1.00 per share were as follows:
Six months Year ended
ended March 31, September 30,
2005 2004
- ----------------------------------------------------------------
Class A
- ----------------------------------------------------------------
Shares sold 1,105,735,412 3,597,966,533
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 28,099,373 26,715,859
- ----------------------------------------------------------------
1,133,834,785 3,624,682,392
Shares repurchased (1,521,717,061) (4,832,212,590)
- ----------------------------------------------------------------
Net decrease (387,882,276) (1,207,530,198)
- ----------------------------------------------------------------
Six months Year ended
ended March 31, September 30,
2005 2004
- ----------------------------------------------------------------
Class B
- ----------------------------------------------------------------
Shares sold 101,035,778 744,232,880
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 2,406,445 1,093,811
- ----------------------------------------------------------------
103,442,223 745,326,691
Shares repurchased (250,595,391) (1,098,920,926)
- ----------------------------------------------------------------
Net decrease (147,153,168) (353,594,235)
- ----------------------------------------------------------------
Six months Year ended
ended March 31, September 30,
2005 2004
- ----------------------------------------------------------------
Class C
- ----------------------------------------------------------------
Shares sold 32,075,738 109,610,471
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 139,494 67,274
- ----------------------------------------------------------------
32,215,232 109,677,745
Shares repurchased (36,529,232) (130,497,709)
- ----------------------------------------------------------------
Net decrease (4,314,000) (20,819,964)
- ----------------------------------------------------------------
Six months Year ended
ended March 31, September 30,
2005 2004
- ----------------------------------------------------------------
Class M
- ----------------------------------------------------------------
Shares sold 24,546,906 86,510,681
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 359,713 319,856
- ----------------------------------------------------------------
24,906,619 86,830,537
Shares repurchased (34,488,511) (107,363,691)
- ----------------------------------------------------------------
Net decrease (9,581,892) (20,533,154)
- ----------------------------------------------------------------
Six months Year ended
ended March 31, September 30,
2005 2004
- ----------------------------------------------------------------
Class R Amount
- ----------------------------------------------------------------
Shares sold 1,893,937 922,141
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 3,263 77
- ----------------------------------------------------------------
1,897,200 922,218
Shares repurchased (1,079,951) (791,972)
- ----------------------------------------------------------------
Net increase 817,249 130,246
- ----------------------------------------------------------------
Six months Year ended
ended March 31, September 30,
2005 2004
- ----------------------------------------------------------------
Class T
- ----------------------------------------------------------------
Shares sold 91,625,383 99,916,444
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 1,269,133 460,090
- ----------------------------------------------------------------
92,894,516 100,376,534
Shares repurchased (34,263,092) (71,759,748)
- ----------------------------------------------------------------
Net increase 58,631,424 28,616,786
- ----------------------------------------------------------------
Note 5
Investment in Putnam Prime Money Market Fund
Pursuant to an exemptive order from the Securities and Exchange
Commission, the fund invests in 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 and administrative services fees paid by Putnam Prime Money
Market Fund with respect to assets invested by the fund in Putnam Prime
Money Market Fund. For the period ended March 31, 2005, management fees
paid were reduced by $3,161 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 $35,058
for the period ended March 31, 2005. During the period ended March 31,
2005, cost of purchases and cost of sales of investments in Putnam Prime
Money Market Fund aggregated $207,681,000 and $207,681,000,
respectively.
Note 6
Regulatory matters and litigation
Putnam Management has entered into agreements with the Securities and
Exchange Commission and the Massachusetts Securities Division settling
charges connected 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.
Pursuant to these settlement agreements, Putnam Management will pay a
total of $193.5 million in penalties and restitution, with $153.5
million being paid to shareholders and the funds. The restitution amount
will be allocated to shareholders pursuant to a plan developed by an
independent consultant, with payments to shareholders currently expected
by the end of the summer.
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 will bear any costs incurred by Putnam funds in
connection with these lawsuits. 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.
Putnam Investments has recorded a charge of $30 million for the
estimated cost that it believes will be necessary to address issues
relating to the calculation of certain amounts paid by the Putnam mutual
funds in previous years. The previous payments were cost reimbursements
by the Putnam funds to Putnam for transfer agent services relating to
defined contribution operations. Putnam currently anticipates that any
payments made by Putnam related to this issue will be paid to the Putnam
funds. Review of this issue is ongoing.
Results of November 11, 2004
and January 10, 2005
shareholder meetings
(Unaudited)
A special meeting of shareholders of the fund was held on November 11,
2004. At that meeting, consideration of certain proposals was adjourned
to a final meeting held on January 10, 2005.
November 11, 2004 meeting
At the meeting, each of the nominees for Trustees was elected, as follows:
Votes Votes
For Withheld
- -----------------------------------------------------------------
Jameson A. Baxter 2,266,637,696 132,221,358
Charles B. Curtis 2,266,281,290 132,577,764
Myra R. Drucker 2,288,329,209 110,529,845
Charles E. Haldeman, Jr. 2,285,451,774 113,407,280
John A. Hill 2,269,808,479 129,050,575
Ronald J. Jackson 2,267,665,703 131,193,351
Paul L. Joskow 2,270,685,775 128,173,279
Elizabeth T. Kennan 2,262,692,912 136,166,142
John H. Mullin, III 2,266,557,508 132,301,546
Robert E. Patterson 2,266,688,440 132,170,614
George Putnam, III 2,263,416,880 135,442,174
A.J.C. Smith* 2,263,406,312 135,452,742
W. Thomas Stephens 2,265,643,456 133,215,598
Richard B. Worley 2,292,440,865 106,418,189
A proposal to amend the fund's fundamental investment restriction with
respect to borrowing to allow the fund the investment flexibility
permitted by the Investment Company Act was approved as follows:
Votes Votes
For Against Abstentions
- -----------------------------------------------------------------
1,764,380,702 268,673,080 365,805,272
* Mr. Smith resigned from the Board of Trustees on January 14, 2005.
All tabulations are rounded to nearest whole number.
A proposal to amend the fund's fundamental investment restriction with
respect to making loans to enhance the fund's ability to participate in
an interfund borrowing and lending program was approved as follows:
Votes Votes
For Against Abstentions
- -----------------------------------------------------------------
1,773,689,396 264,216,949 360,952,709
A proposal to amend the fund's fundamental investment restriction with
respect to diversification of investments to enhance the fund's ability
to invest in registered investment companies such as Putnam Prime Money
Market Fund was approved as follows:
Votes Votes
For Against Abstentions
- -----------------------------------------------------------------
1,931,401,666 107,715,878 359,741,510
January 10, 2005 meeting
A proposal to amend the fund's Agreement and Declaration of Trust to
permit the fund to satisfy redemption requests other than in cash was
defeated as follows:
Votes Votes
For Against Abstentions
- -----------------------------------------------------------------
1,888,501,963 210,831,068 289,004,378
All tabulations are rounded to nearest whole number.
Fund information
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded over 65 years ago, Putnam Investments
was built around the concept that a balance between risk and reward is
the hallmark of a well-rounded financial program. We presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment
Management, LLC
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary Trust Company
Legal Counsel
Ropes & Gray LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
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
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
Daniel T. Gallagher
Senior Vice President,
Compliance Liaison and Staff Counsel
Beth S. Mazor
Vice President
James P. Pappas
Vice President
Richard S. Robie, III
Vice President
Mark C. Trenchard
Vice President and BSA Compliance Officer
Francis J. McNamara, III
Vice President and Chief Legal Officer
Charles A. Ruys de Perez
Vice President and
Chief Compliance Officer
Judith Cohen
Vice President, Clerk and
Assistant Treasurer
This report is for the information of shareholders of Putnam Money
Market Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, the most recent copy of Putnam's
Quarterly Performance Summary, and Putnam's Quarterly Ranking Summary.
For more recent performance, please visit www.putnaminvestments.com.
Investors should carefully consider the investment objective, risks,
charges, and expenses of a fund, which are described in its prospectus.
For this and other information or to request a prospectus, call
1-800-225-1581 toll free. Please read the prospectus carefully before
investing. The fund's Statement of Additional Information contains
additional information about the fund's Trustees and is available
without charge upon request by calling 1-800-225-1581.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
Call 1-800-225-1581 or visit our Web site
www.putnaminvestments.com.
SA039-223898 5/05
Not FDIC Insured May Lose Value No Bank Guarantee
Item 2. Code of Ethics:
- -----------------------
Not applicable
Item 3. Audit Committee Financial Expert:
- -----------------------------------------
Not applicable
Item 4. Principal Accountant Fees and Services:
- -----------------------------------------------
Not applicable
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:
- ---------------------------------
(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, that the design and operation of
such procedures are generally effective to provide reasonable
assurance that information required to be disclosed by the registrant
in this report 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:
- ------------------
(a) Not applicable
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act
of 2002 are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: May 27, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By (Signature and Title): /s/Charles E. Porter
---------------------------
Charles E. Porter
Principal Executive Officer
Date: May 27, 2005
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: May 27, 2005