N-30D 1 mmf.txt PUTNAM MONEY MARKET FUND Putnam Money Market Fund ANNUAL REPORT ON PERFORMANCE AND OUTLOOK 9-30-01 [SCALE LOGO OMITTED] FROM THE TRUSTEES [GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III] Dear Shareholder: Money market funds were still relatively new when Putnam introduced its version on October 1, 1976. Because the concept was still not widely recognized by the investing public at that time, your fund came upon the scene as Putnam Daily Dividend Trust, a name it carried until it became Putnam Money Market Fund in 1994. Now, as the fund passes the quarter-century mark in today's worrisome market environment, not only are money market funds widely recognized but they also have become extremely popular repositories for assets in times of market uncertainty. Fund Manager Joanne Driscoll is a firm believer in strict fundamental credit analysis and, as she notes in the following report on fiscal 2001, as of the period's end, 100% of the fund's assets were invested in short-term securities of the highest quality. This dedication to safety should bring comfort to shareholders as the economy works its way back toward health. Respectfully yours, /S/ JOHN A. HILL /S/ GEORGE PUTNAM, III John A. Hill George Putnam, III Chairman of the Trustees President of the Funds November 14, 2001 REPORT FROM FUND MANAGEMENT Joanne M. Driscoll The 12 months ended September 30, 2001 encompassed some of the most compelling events ever seen in financial markets -- producing one of the most dramatic fiscal years for Putnam Money Market Fund since its inception in 1976. From the Federal Reserve Board's aggressive reduction of short-term rates starting in January to the stock market's volatility following the tragic events on September 11, short-term securities offered a welcome sanctuary for uneasy investors. Throughout this troubled year, we remained focused on strategies designed to preserve your fund's $1.00 net asset value, superb credit quality and competitive income. With inflation at historically low levels, your fund's returns were attractive in spite of the lower interest rate environment. Total return for 12 months ended 9/30/01 Class A Class B Class C Class M NAV NAV CDSC NAV CDSC NAV ----------------------------------------------------------------------- 5.04% 4.52% -0.48% 4.53% 3.53% 4.89% ----------------------------------------------------------------------- Past performance is no indication of future results. Performance information for longer periods and explanation of performance calculation methods begin on page 6. * AN UNPARALLELED YEAR IN FINANCIAL MARKETS With falling corporate profits and declining stock prices taking their toll on investor confidence, the Federal Reserve Board embarked on an unprecedented campaign to invigorate the slowing U.S. economy. From January through the end of your fund's fiscal year in September, the Fed reduced the federal funds rate and the discount rate eight times. Many of the moves came in half-a-percentage point decreases, which, by historical standards, are quite noteworthy and underscore the Fed's unwavering commitment to bolstering investor confidence and reassuring financial markets. Of course, nothing could ease the shock and tragedy of September 11th and its myriad implications for Americans. But here again, the Fed did its part to help the financial markets regain their footing. Working in tandem with other central banks, the Fed helped to restore some degree of stability by pumping billions of cash reserves into the banking system. The added liquidity is intended to help soften the impact of the terrorists' actions upon an already fragile economy. * FUND SECURED INCOME AMIDST FALLING INTEREST RATES With interest rates dropping steadily for much of the reporting period, our efforts to preserve the fund's income stream took on great importance. We aligned the fund's assets in a barbell strategy, concentrating assets in the short and long ends of the money market maturity range. The barbell configuration helps the fund to take advantage of higher income opportunities while helping to protect the stability of the $1.00 net asset value. Also, we continued to place great emphasis on strict, fundamental credit analysis. This helps assure that the fund's holdings are of the highest quality. As of the end of the year, 100% of the portfolio was invested in Tier 1 securities. This dedication to quality becomes critical in a slower-growth environment, when corporate prospects become less stable. For instance, many cyclical companies, whose business prospects are tied to the strength of the economy, have been downgraded by the rating agencies to the point that their commercial paper no longer carries money-market eligible ratings. We expect that our research will continue to enable us to sidestep such companies and avoid exposing the fund to unnecessary risk. For investors, quality also takes on added importance during an economic slowdown. This was clearly the case this year, particularly in the aftermath of September 11, when investors exhibited a flight-to-quality mentality. Ironically, heightened demand for the highest quality securities pushed yields on Tier 1 money market instruments lower and, ultimately, complicated our efforts to find attractive income opportunities. Dramatic changes in the yield curve have also made for a more challenging environment. The yield curve remains inverted, with short-term rates falling more significantly than long-term rates. In turn, long-term rates have remained high due to increasing uncertainty about the economy and concerns that Fed-induced liquidity and higher government spending could lead to inflation. All of our strategies had the intended consequence of keeping the fund's average days-to-maturity slightly longer than the average for its peer group. In a declining interest-rate environment, it is prudent to increase the average days-to-maturity to lock in income. Invariably, this has meant purchasing fixed-rate instruments rather than floating-rate instruments to lock in current rates. The fund's 57-day average maturity at the end of the fiscal year was slightly longer than that of its benchmark, the Lipper Money Market Average. * DWINDLING SUPPLY COMPLICATES INVESTMENT EFFORTS Demand for money market securities climbed dramatically during your fund's fiscal year. According to industry figures, money market assets rose by over $6.5 billion over the 12 months ended September 30, 2001. Much of the increase stems from investors' desire to shelter assets from stock market declines. This has been exacerbated by the growing global economic and political uncertainty in the aftermath of September 11. However, the supply of short-term securities has not kept pace with heightened demand. This was most evident in the contraction of commercial paper outstanding. For several months, corporations have not been issuing new short-term debt when the current commitments become due. Instead these corporations are opting to issue long-term debt, since their need for cash to fund capital spending has fallen during the economic downturn. On September 30, the fund held 99.3% of its assets in commercial paper, with 59.5% of that total invested in the United States and 39.8% offshore. The balance of the fund's assets were mainly invested in corporate bonds and notes (2.1%). * MORE RATE CUTS IN STORE AMIDST SLOWING GROWTH We believe your fund is well positioned for a softening economy. Nevertheless, further reductions in short-term interest rates are inevitable, as the Fed continues its policy of monetary easing to mitigate the ripple effect of September 11. The fund's yield, as with yields on all shorter-maturity securities, inevitably will come under some pressure. However, we believe our efforts to maintain a longer average days-to-maturity than the benchmark will be the best formula for attractive relative performance in this challenging environment. Our dedication to finding the highest quality money-market eligible securities will be as important as ever. The views expressed here are exclusively those of Putnam Management. They are not meant as investment advice. Although the described holdings were viewed favorably as of 9/30/01, there is no guarantee the fund will continue to hold these securities in the future. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve your investment at $1.00 per share, it is possible to lose money by investing in the fund. PERFORMANCE COMPARISONS (9/30/01) Current return* ------------------------------------------------------------------------ Passbook savings account 1.00% ------------------------------------------------------------------------ Taxable money market fund 7-day yield (10/2/01) 2.70 ------------------------------------------------------------------------ 3-month certificate of deposit (10/1/01) 2.54 ------------------------------------------------------------------------ Putnam Money Market Fund (7-day yield) ------------------------------------------------------------------------ Class A 2.77 ------------------------------------------------------------------------ Class B 2.28 ------------------------------------------------------------------------ Class C 2.27 ------------------------------------------------------------------------ Class M 2.62 ------------------------------------------------------------------------ The net asset value of money market mutual funds is uninsured and designed to be fixed, while distributions vary daily. Investment returns will fluctuate. The principal value on passbook savings and on bank CDs is generally insured up to certain limits by state and federal agencies. Unlike stocks, which incur more risk, CDs offer a fixed rate of return. Unlike money market funds, bank CDs may be subject to substantial penalties for early withdrawals. *Sources: FleetBoston (passbook savings), Federal Reserve Board of Governors (3-month CDs), IBC/Donaghue's Money Fund Report (taxable money market fund compound 7-day yield). PUTNAM'S POLICY ON CONFIDENTIALITY In order to conduct business with our shareholders, we must obtain certain personal information such as account holders' addresses, telephone numbers, Social Security numbers, and the names of their financial advisors. We use this information to assign an account number and to help us maintain accurate records of transactions and account balances. It is our policy to protect the confidentiality of your information, whether or not you currently own shares of our funds, and in particular, not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personal information from unauthorized use. Under certain circumstances, we share this information with outside vendors who provide services to us, such as mailing and proxy solicitation. In those cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. We may also share this information with our Putnam affiliates to service your account or provide you with information about other Putnam products or services. It is also our policy to share account information with your financial advisor, if you've listed one on your Putnam account. If you would like clarification about our confidentiality policies or have any questions or concerns, please don't hesitate to contact us at 1-800-225-1581, Monday through Friday, 8:30 a.m. to 7:00 p.m., or Saturdays from 9:00 a.m. to 5:00 p.m. Eastern Time. NEWS FROM THE TRUSTEES In July 2001, we welcomed Charles B. Curtis to Putnam's Board of Trustees. He brings an impressive list of credentials that include several key positions in Washington and directorships in education and energy-related industries. We look forward to the contributions Charles will make to the continued success of the Putnam funds. PERFORMANCE SUMMARY This section provides information about your fund's performance, which should always be considered in light of its investment strategy. Putnam Money Market Fund is designed for investors seeking current income consistent with capital preservation, stable principal, and liquidity. TOTAL RETURN FOR PERIODS ENDED 9/30/01 Class A Class B Class C Class M (inception dates) (10/1/76) (4/27/92) (2/1/99) (12/8/94) NAV NAV CDSC NAV CDSC NAV ------------------------------------------------------------------------ 1 year 5.04% 4.52% -0.48% 4.53% 3.53% 4.89% ------------------------------------------------------------------------ 5 years 29.07 25.90 23.90 26.00 26.00 28.14 Annual average 5.24 4.71 4.38 4.73 4.73 5.08 ------------------------------------------------------------------------ 10 years 57.10 49.68 49.68 49.81 49.81 54.79 Annual average 4.62 4.12 4.12 4.12 4.12 4.47 ------------------------------------------------------------------------ Annual average (life of fund) 7.14 6.61 6.61 6.61 6.61 6.98 ------------------------------------------------------------------------ Current return (end of period) ------------------------------------------------------------------------ Current 7-day yield 1 2.77% 2.28% 2.27% 2.62% ------------------------------------------------------------------------ Current 30-day yield 1 3.06 2.57 2.47 2.91 ------------------------------------------------------------------------ 1 The 7-day and 30-day yields are the two most common gauges for measuring money market mutual fund performance. COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/01 Lipper Money Consumer Market Average price index ------------------------------------------------------------------------ 1 year 4.50% 2.65% ------------------------------------------------------------------------ 5 years 26.96 12.93 Annual average 4.89 2.46 ------------------------------------------------------------------------ 10 years 54.90 29.88 Annual average 4.47 2.65 ------------------------------------------------------------------------ Annual average (life of fund) 7.14 4.62 ------------------------------------------------------------------------ Past performance is no assurance of future results. More recent returns may be more or less than those shown. Returns shown for class B and class M shares for periods prior to their inception are derived from the historical performance of class A shares, adjusted to reflect the higher operating expenses applicable to such shares. One-, five- and ten-year (when available), and life of fund returns for 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. For class C shares, returns for periods prior to their inception are derived from the historical performance of class A shares, adjusted to reflect both the CDSC currently applicable to class C shares, which is 1% for the first year and is eliminated thereafter, and the higher operating expenses applicable to class C shares. All returns assume reinvestment of distributions at NAV. Fund performance data do not take into account any adjustment for taxes payable on reinvested distributions. Investment returns will fluctuate. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve your investment at $1.00 per share, it is possible to lose money by investing in the fund. The fund's holdings do not match those in the Lipper average. Yield data more closely reflect the current earnings of the fund. DISTRIBUTION INFORMATION 12 MONTHS ENDED 9/30/01 Class A Class B Class C Class M ------------------------------------------------------------------------ Distributions (number) 12 12 12 12 ------------------------------------------------------------------------ Income $0.049317 $0.044311 $0.044362 $0.047830 ------------------------------------------------------------------------ Capital gains -- -- -- -- ------------------------------------------------------------------------ Total $0.049317 $0.044311 $0.044362 $0.047830 ------------------------------------------------------------------------ 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. 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 and class C shares generally are fund shares purchased with no initial sales charge but subject to a contingent deferred sales charge (CDSC) upon redemption. However, class B and class C shares of your fund can be acquired only through exchange of class B or class C shares from another fund or purchased by certain systematic plan shareholders. A contingent deferred sales charge is a charge applied at the time of redemption of class B and class C shares and assumes redemption at the end of the period. The CDSC schedule will vary depending on whether the shares were acquired through exchange or through a systematic investment plan purchase. Consult your prospectus for details. 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. Net asset value (NAV) is the value of all your fund's assets, minus any liabilities, divided by the number of outstanding shares, not including any initial or contingent deferred sales charge. 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. COMPARATIVE BENCHMARKS Lipper Money Market Fund Average, used for performance comparison purposes, is an arithmetic average of the total return of all money market mutual funds tracked by Lipper Analytical Services. Lipper is an independent rating organization for the mutual fund industry. Lipper rankings vary for other periods. The fund's holdings do not match those in the Lipper average. It is not possible to invest directly in an index. Consumer price index (CPI) is a commonly used measure of inflation; it does not represent an investment return. A GUIDE TO THE FINANCIAL STATEMENTS These sections of the report, as well as the accompanying Notes, preceded by the Report of independent accountants, constitute the fund's financial statements. The fund's portfolio lists all the fund's investments and their values as of the last day of the reporting period. Holdings are organized by asset type and industry sector, country, or state to show areas of concentration and diversification. Statement of assets and liabilities shows how the fund's net assets and share price are determined. All investment and noninvestment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the net assets allocated to remarketed preferred shares.) Statement of operations shows the fund's net investment gain or loss. This is done by first adding up all the fund's earnings -- from dividends and interest income -- and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings -- as well as any unrealized gains or losses over the period -- is added to or subtracted from the net investment result to determine the fund's net gain or loss for the fiscal year. Statement of changes in net assets shows how the fund's net assets were affected by distributions to shareholders and by changes in the number of the fund's shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Financial highlights provide an overview of the fund's investment results, per-share distributions, expense ratios, net investment income ratios and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlight table also includes the current reporting period. For open-end funds, a separate table is provided for each share class. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees and Shareholders of Putnam Money Market Fund In our opinion, the accompanying statement of assets and liabilities, including the fund's portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Putnam Money Market Fund (the "fund") at September 30, 2001, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned at September 30, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Boston, Massachusetts November 5, 2001
THE FUND'S PORTFOLIO September 30, 2001 COMMERCIAL PAPER (99.3%) (a) MATURITY PRINCIPAL AMOUNT DATE VALUE Domestic (59.5%) ------------------------------------------------------------------------------------------------------------------- $ 50,000,000 AIG Funding, Corp. 3.58s 10/2/01 $ 49,990,056 60,000,000 AIG Funding, Corp. 3.32s 11/5/01 59,800,800 62,000,000 Asset Securitization Cooperative Corp. 3.50s 10/19/01 61,885,472 49,000,000 Banc One Financial Corp. 3s 10/23/01 48,906,083 25,000,000 B-One Australia, Ltd. 3.43s 11/21/01 24,876,139 93,067,000 Citicorp 3.45s 10/1/01 93,040,243 40,000,000 Corporate Receivables Corp. 3.26s 12/6/01 39,757,311 44,000,000 Corporate Receivables Corp. 3.25s 11/16/01 43,813,306 44,000,000 Corporate Receivables Corp. 3.25s 11/15/01 43,817,278 90,000,000 Corporate Receivables Corp. 3.18s 11/2/01 89,737,650 42,900,000 CXC, Inc. 3.675s 10/3/01 42,886,862 46,000,000 CXC, Inc. 3.46s 10/26/01 45,885,051 50,000,000 CXC, Inc. 3.45s 11/5/01 49,827,500 43,992,000 CXC, Inc. 3.45s 10/23/01 43,895,034 17,000,000 CXC, Inc. 3.39s 11/28/01 16,905,551 52,000,000 CXC, Inc. 2.63s 12/21/01 51,688,491 93,000,000 Delaware Funding Corp. 2.50s 12/20/01 92,476,875 46,000,000 Eureka Securitization, Inc. 3.55s 10/17/01 45,922,886 25,000,000 Eureka Securitization, Inc. 3.45s 11/7/01 24,908,958 50,000,000 Eureka Securitization, Inc. 3.42s 11/9/01 49,810,000 50,000,000 Eureka Securitization, Inc. 3.41s 12/6/01 49,682,681 66,000,000 Eureka Securitization, Inc. 2.63s 12/20/01 65,609,445 20,000,000 Eureka Securitization, Inc. 2.6s 11/27/01 19,916,222 55,000,000 Falcon Asset Securitization Corp. 3.42s 10/30/01 54,843,250 62,000,000 Falcon Asset Securitization Corp. 2.50s 10/31/01 61,866,528 30,000,000 Falcon Asset Securitization Corp. 2.47s 3/20/02 29,648,025 25,000,000 Federal Home Loan Banks 3.51s 10/31/01 24,924,438 85,000,000 Federal Home Loan Banks 3.375s 11/9/01 84,681,250 50,000,000 Federal Home Loan Mtge. 3.51s 11/1/01 49,844,000 45,000,000 Federal Home Loan Mtge. 3.37s 11/29/01 44,747,250 25,000,000 Florens Containers, Inc. (Bank of America NT & SA (Letter of Credit (LOC)) 3.7s 10/12/01 24,969,167 30,000,000 Formosa Plastics Corp. (Bank of America N.A. (LOC)) 3.6s 10/5/01 29,985,000 70,000,000 General Electric Capital Intl. Funding 3.66s 10/5/01 69,964,417 68,000,000 Goldman Sachs 3.88s 11/8/01 67,714,173 60,000,000 Goldman Sachs 3.62s 11/19/01 59,698,333 235,000,000 JP Morgan Chase & Co. 3.45s 10/1/01 234,932,442 68,946,000 Jupiter Securitization Corp. 2.7s 11/9/01 68,728,820 25,520,000 Jupiter Securitization Corp. 2.7s 11/6/01 25,449,182 74,000,000 Jupiter Securitization Corp. 2.55s 10/16/01 73,916,133 85,000,000 Jupiter Securitization Corp. 2.50s 10/22/01 84,870,139 60,000,000 Lehman Brothers Holdings 4.52s 12/19/01 59,397,333 59,000,000 Lehman Brothers Holdings 4.31s 11/30/01 58,569,120 29,500,000 Minmetals Capitals & Securities, Inc. (Bank of America, N.A. (LOC)) 3.48s 10/18/01 29,448,670 40,000,000 Minmetals Capitals & Securities, Inc. (Bank of America, N.A. (LOC)) 3.47s 11/8/01 39,849,633 28,000,000 NATC California, LLC (Chase Manhattan Bank (LOC)) 3.57s 10/24/01 27,933,360 78,000,000 Old Line Funding Corp. 3.51s 10/12/01 77,908,740 68,000,000 Old Line Funding Corp. 3.50s 10/9/01 67,940,500 40,184,000 Old Line Funding Corp. 2.65s 11/19/01 40,036,101 118,000,000 Park Avenue Receivables Corp. 3.57s 10/10/01 117,882,983 120,451,000 Park Avenue Receivables Corp. 3.50s 10/1/01 120,415,868 20,437,000 Park Avenue Receivables Corp. 3.05s 10/17/01 20,407,565 79,000,000 PNC Funding Corp. 2.6s 10/4/01 78,977,178 20,066,000 Preferred Receivables Funding Corp. 3.635s 10/18/01 20,029,530 54,780,000 Preferred Receivables Funding Corp. 3.50s 10/1/01 54,774,674 62,000,000 Preferred Receivables Funding Corp. 2.68s 11/2/01 61,847,687 75,000,000 Prudential Funding Corp. 3.43s 10/15/01 74,892,812 40,000,000 Quincy Capital Corp. 3.65s 10/12/01 39,951,333 52,000,000 Receivables Capital Corp. 3.73s 11/13/01 51,762,938 63,000,000 Sheffield Receivables Corp. 2.62s 1/11/02 62,527,745 25,120,000 Sheffield Receivables Corp. 2.6s 11/30/01 25,009,332 37,000,000 Sigma Finance, Inc. 4.6s 10/11/01 36,947,994 42,000,000 Sigma Finance, Inc. 3.65s 12/17/01 41,667,850 29,000,000 Sigma Finance, Inc. 3.49s 11/7/01 28,893,167 47,000,000 Sigma Finance, Inc. 3.39s 2/28/02 46,331,699 42,441,000 Thunder Bay Funding, Inc. 3.54s 10/5/01 42,420,074 25,899,000 Thunder Bay Funding, Inc. 3.33s 10/4/01 25,889,417 60,738,000 Thunder Bay Funding, Inc. 2.7s 10/26/01 60,619,561 67,000,000 Wells Fargo Financial, Inc. 2.87s 11/15/01 66,754,296 65,000,000 Wells Fargo Financial, Inc. 2.46s 11/16/01 64,791,242 44,000,000 Windmill Funding Corp. 3.6s 10/2/01 43,991,200 38,000,000 Windmill Funding Corp. 3.56s 10/3/01 37,988,727 50,000,000 Windmill Funding Corp. 3.52s 10/18/01 49,912,000 ------------- 3,921,592,770 Foreign (39.8%) ------------------------------------------------------------------------------------------------------------------- 76,000,000 Abbey National North America Corp. 3.66s (United Kingdom) 10/9/01 75,930,460 75,000,000 Abbey National North America Corp. 2.50s (United Kingdom) 3/25/02 75,000,000 22,446,000 Aegon Funding Corp. 3.39s (Netherlands) 12/3/01 22,310,725 32,500,000 Banco de Galicia Y Buenos Aires S.A. (Bayerische Hypo- und Vereinsbank AG (LOC)) 3.45s (Germany) 10/22/01 32,431,479 58,000,000 Banco de Galicia Y Buenos Aires S.A. (Bayerische Hypo- und Vereinsbank AG (LOC)) 2.52s (Germany) 2/22/02 57,411,300 25,000,000 Banco De La Provincia De Buenos Aires (Barclays (LOC)) 3.26s (United Kingdom) 12/12/01 24,834,736 44,500,000 Banco Galicia Uruguay, S.A. (Barclays (LOC)) 3.95s (United Kingdom) 12/19/01 44,126,389 25,000,000 Banque Nationale de Paris 3.50s (France) 2/8/02 25,006,074 35,000,000 Bayerische Hypo- und Vereinsbank AG 3.6s (Germany) 10/4/01 34,986,000 34,500,000 Canadian Imperial Bank of Commerce 4.2s (Canada) 5/8/02 34,488,283 10,000,000 Canadian Imperial Bank of Commerce 3.6s (Canada) 9/20/02 9,995,036 40,000,000 Commerzbank AG 3.95s (Germany) 11/14/01 40,000,245 68,000,000 Commerzbank AG 3.63s (Germany) 12/28/01 68,000,000 33,000,000 Credit Suisse First Boston 3.93s (Switzerland) 11/19/01 32,819,875 85,000,000 Credit Suisse First Boston 3.7s (Switzerland) 1/14/02 84,073,972 82,000,000 Credit Suisse First Boston 3.04s (Switzerland) 12/17/01 81,459,893 52,000,000 Danske Bank 4.14s (Denmark) 11/2/01 51,802,660 45,000,000 Danske Bank 3.38s (Denmark) 11/30/01 44,742,275 60,000,000 Den Norske Bank 3.48s (Norway) 11/6/01 59,785,400 80,000,000 Den Norske Bank 3.42s (Norway) 11/20/01 79,612,400 23,200,000 Diageo Capital PLC 3.6s (United Kingdom) 10/5/01 23,188,400 36,000,000 Diageo Capital PLC 3.55s (United Kingdom) 12/3/01 35,772,800 53,000,000 Knights Funding Corp. (Bayerische Hypo- und Vereinsbank AG (LOC)) 3.65s (Germany) 10/29/01 52,846,155 14,935,000 Knights Funding Corp. (Bayerische Hypo- und Vereinsbank AG (LOC)) 3.46s (Germany) 10/29/01 14,893,373 36,000,000 Merita Bank, Ltd. 2.54s (Sweden) 12/24/01 36,000,042 75,000,000 National Australia Bank 2.6s (Australia) 9/20/02 75,136,233 80,000,000 Nordea North America, Inc. 3.46s (Sweden) 11/1/01 79,753,956 28,000,000 Nordea North America, Inc. 2.6s (Sweden) 2/28/02 27,694,644 64,000,000 Nordea North America, Inc. 2.47s (Sweden) 12/19/01 63,648,711 69,000,000 Paribas Finance, Inc. 3.50s (France) 10/2/01 68,986,583 40,000,000 PEMEX Capital, Inc. (Barclays (LOC)) 3.50s (United Kingdom) 10/30/01 39,883,333 50,000,000 PEMEX Capital, Inc. (Barclays (LOC)) 3.49s (United Kingdom) 10/16/01 49,922,444 54,000,000 Royal Bank of Canada 3.66s (Canada) 12/18/01 53,566,290 50,000,000 Sinochem American C.P., Inc. (ABN AMRO Bank N.V. (LOC)) 3.52s (Netherlands) 10/11/01 49,946,222 44,000,000 Sinochem American C.P., Inc. (ABN AMRO Bank N.V. (LOC)) 2.57s (Netherlands) 10/22/01 43,930,896 85,000,000 Societe Generale 2.54s (France) 12/31/01 85,002,158 60,000,000 Spintab AB 3.41s (Sweden) 11/26/01 59,676,050 50,000,000 Spintab AB 3.4s (Sweden) 12/10/01 49,664,722 50,000,000 Spintab AB 2.50s (Sweden) 12/4/01 49,781,250 30,000,000 Stadshypotek Delaware, Inc. 3.45s (Sweden) 10/22/01 29,936,750 44,000,000 Stadshypotek Delaware, Inc. 3.37s (Sweden) 12/3/01 43,736,391 62,000,000 Stadshypotek Delaware, Inc. 3.36s (Sweden) 3/4/02 61,103,067 80,000,000 Stadshypotek Delaware, Inc. 3.205s (Sweden) 2/11/02 79,045,622 25,000,000 Svenska Handelsbanken 3.58s (Sweden) 8/22/02 25,006,944 40,000,000 Swedbank 4.345s (Sweden) 5/7/02 40,002,330 60,000,000 Swedbank 3.7s (Sweden) 12/31/01 59,432,667 24,000,000 Transamerica Finance Corp. 3.65s (Netherlands) 10/9/01 23,978,100 42,000,000 Transamerica Finance Corp. 3.6s (Netherlands) 12/10/01 41,701,800 45,000,000 Transamerica Finance Corp. 3.49s (Netherlands) 10/25/01 44,890,937 50,000,000 Transamerica Finance Corp. 3s (Netherlands) 11/20/01 49,789,271 60,000,000 Transamerica Finance Corp. 2.83s (Netherlands) 2/19/02 59,330,233 59,000,000 WestDeutsche Landesbank Girozentrale 4.23s (Germany) 5/17/02 59,003,599 65,000,000 WestDeutsche Landesbank Girozentrale 3.75s (Germany) 1/10/02 65,004,366 -------------- 2,620,073,541 -------------- Total Commercial Paper (cost $6,541,666,311) $6,541,666,311 CORPORATE BONDS AND NOTES (2.1%) (a) MATURITY PRINCIPAL AMOUNT DATE VALUE ------------------------------------------------------------------------------------------------------------------- $ 43,000,000 Abbey National Treasury Services PLC FRN Ser. 1A, 2.611s (United Kingdom) 10/25/01 $ 42,990,983 20,000,000 Associates First Capital Corp. bonds 3.71s 10/1/01 20,000,000 35,000,000 Goldman Sachs Group, Inc. FRN Ser. MTN, 3.701 11/19/01 35,007,464 43,000,000 National City Bank FRN 2.755s 11/21/01 42,999,401 -------------- Total Corporate Bonds and Notes (cost $140,997,848) $ 140,997,848 ------------------------------------------------------------------------------------------------------------------- Total Investments (cost $6,682,664,159) (b) $6,682,664,159 ------------------------------------------------------------------------------------------------------------------- (a) Percentages indicated are based on net assets of $6,589,447,194. (b) The aggregate identified cost on a tax basis is the same. The rates shown on Floating Rate Notes (FRN) are the current interest rates shown at September 30, 2001, which are subject to change based on the terms of the security. DIVERSIFICATION BY COUNTRY Distribution of investments by country of issue at September 30, 2001: (as percentage of Market Value) Australia 1.1% Canada 1.5 Denmark 1.4 France 2.7 Germany 6.4 Netherlands 5.0 Norway 2.1 Sweden 10.5 Switzerland 3.0 United Kingdom 6.2 United States 60.1 ----- Total 100.0% The accompanying notes are an integral part of these financial statements.
STATEMENT OF ASSETS AND LIABILITIES September 30, 2001 Assets ------------------------------------------------------------------------------------------- Investments in securities, at amortized cost (Note 1) $6,682,664,159 ------------------------------------------------------------------------------------------- Cash 569,605 ------------------------------------------------------------------------------------------- Interest and other receivables 6,139,168 ------------------------------------------------------------------------------------------- Receivable for shares of the fund sold 67,161,336 ------------------------------------------------------------------------------------------- Total assets 6,756,534,268 Liabilities ------------------------------------------------------------------------------------------- Distributions payable to shareholders 1,031,569 ------------------------------------------------------------------------------------------- Payable for securities purchased 85,801,612 ------------------------------------------------------------------------------------------- Payable for shares of the fund repurchased 72,856,407 ------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 4,648,159 ------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 1,495,178 ------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 121,228 ------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 11,052 ------------------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 474,713 ------------------------------------------------------------------------------------------- Other accrued expenses 647,156 ------------------------------------------------------------------------------------------- Total liabilities 167,087,074 ------------------------------------------------------------------------------------------- Net assets $6,589,447,194 Represented by ------------------------------------------------------------------------------------------- Paid-in capital (Note 4) $6,589,447,194 ------------------------------------------------------------------------------------------- Net asset value, offering and redemption price per class A share ($5,215,127,123 divided by 5,215,127,123 shares) * $1.00 ------------------------------------------------------------------------------------------- Net asset value and offering price per class B share ($1,162,038,507 divided by 1,162,038,507 shares)** $1.00 ------------------------------------------------------------------------------------------- Net asset value and offering price per class C share ($90,226,233 divided by 90,226,233 shares)** $1.00 ------------------------------------------------------------------------------------------- Net asset value, offering and redemption price per class M share ($122,055,331 divided by 122,055,331 shares)* $1.00 ------------------------------------------------------------------------------------------- * Offered at net asset value. ** Class B and class C shares are available only by exchange of class B and class C shares from other Putnam funds and to certain systematic investment plan investors. Redemption price per share is equal to net asset value less an applicable contingent deferred sales charge. The accompanying notes are an integral part of these financial statements.
STATEMENT OF OPERATIONS Year ended September 30, 2001 Interest income $283,070,925 ------------------------------------------------------------------------------------------- Expenses: ------------------------------------------------------------------------------------------- Compensation of Manager (Note 2) 16,789,979 ------------------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 7,525,243 ------------------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 91,032 ------------------------------------------------------------------------------------------- Administrative services (Note 2) 41,218 ------------------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 4,060,745 ------------------------------------------------------------------------------------------- Distribution fees -- Class C (Note 2) 333,788 ------------------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 166,464 ------------------------------------------------------------------------------------------- Other 2,293,086 ------------------------------------------------------------------------------------------- Total expenses 31,301,555 ------------------------------------------------------------------------------------------- Expense reduction (Note 2) (1,272,601) ------------------------------------------------------------------------------------------- Net expenses 30,028,954 ------------------------------------------------------------------------------------------- Net investment income 253,041,971 ------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $253,041,971 ------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
STATEMENT OF CHANGES IN NET ASSETS Year ended September 30 ---------------------------------- 2001 2000 -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets -------------------------------------------------------------------------------------------------- Operations: -------------------------------------------------------------------------------------------------- Net investment income $ 253,041,971 $ 255,491,589 -------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 253,041,971 255,491,589 -------------------------------------------------------------------------------------------------- Distributions to shareholders: (Note 1) -------------------------------------------------------------------------------------------------- From net investment income Class A (210,571,237) (205,971,249) -------------------------------------------------------------------------------------------------- Class B (34,379,519) (41,749,961) -------------------------------------------------------------------------------------------------- Class C (2,870,454) (1,361,270) -------------------------------------------------------------------------------------------------- Class M (5,220,761) (6,409,109) -------------------------------------------------------------------------------------------------- Increase (decrease) from capital share transactions (Note 4) 1,991,981,676 (288,687,405) -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 1,991,981,676 (288,687,405) Net assets -------------------------------------------------------------------------------------------------- Beginning of year 4,597,465,518 4,886,152,923 -------------------------------------------------------------------------------------------------- End of year $6,589,447,194 $4,597,465,518 -------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS A ----------------------------------------------------------------------------------------------------- Per-share operating performance Year ended September 30 ----------------------------------------------------------------------------------------------------- 2001 2000 1999 1998 1997 ----------------------------------------------------------------------------------------------------- Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 ----------------------------------------------------------------------------------------------------- Net investment income .0493 .0564 .0478 .0517 .0505 ----------------------------------------------------------------------------------------------------- Total from investment operations .0493 .0564 .0478 .0517 .0505 ----------------------------------------------------------------------------------------------------- Total distributions (.0493) (.0564) (.0478) (.0517) (.0505) ----------------------------------------------------------------------------------------------------- Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 ----------------------------------------------------------------------------------------------------- Total return at net asset value (%)(a) 5.04 5.79 4.89 5.29 5.17 ----------------------------------------------------------------------------------------------------- Ratios and supplemental data ----------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $5,215,127 $3,780,309 $3,691,475 $2,598,891 $2,134,223 ----------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(b) .50 .49 .48 .58 .57 ----------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 4.77 5.69 4.73 5.20 5.06 ----------------------------------------------------------------------------------------------------- (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).
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS B ----------------------------------------------------------------------------------------------------- Per-share operating performance Year ended September 30 ----------------------------------------------------------------------------------------------------- 2001 2000 1999 1998 1997 ----------------------------------------------------------------------------------------------------- Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 ----------------------------------------------------------------------------------------------------- Net investment income .0443 .0513 .0429 .0468 .0455 ----------------------------------------------------------------------------------------------------- Total from investment operations .0443 .0513 .0429 .0468 .0455 ----------------------------------------------------------------------------------------------------- Total distributions (.0443) (.0513) (.0429) (.0468) (.0455) ----------------------------------------------------------------------------------------------------- Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 ----------------------------------------------------------------------------------------------------- Total return at net asset value (%)(a) 4.52 5.25 4.37 4.78 4.65 ----------------------------------------------------------------------------------------------------- Ratios and supplemental data ----------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $1,162,039 $649,826 $1,041,452 $759,748 $410,885 ----------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(b) 1.00 .99 .98 1.08 1.07 ----------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 4.26 5.13 4.24 4.69 4.57 ----------------------------------------------------------------------------------------------------- (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).
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS C --------------------------------------------------------------------------- For the period Per-share Year ended Feb. 1, 1999+ operating performance Sept. 30 to Sept. 30 --------------------------------------------------------------------------- 2001 2000 1999 --------------------------------------------------------------------------- Net asset value, beginning of period $1.00 $1.00 $1.00 --------------------------------------------------------------------------- Net investment income .0444 .0513 .0284 --------------------------------------------------------------------------- Total from investment operations .0444 .0513 .0284 --------------------------------------------------------------------------- Total distributions (.0444) (.0513) (.0284) --------------------------------------------------------------------------- Net asset value, end of period $1.00 $1.00 $1.00 --------------------------------------------------------------------------- Total return at net asset value (%)(a) 4.53 5.26 2.87* --------------------------------------------------------------------------- Ratios and supplemental data --------------------------------------------------------------------------- Net assets, end of period (in thousands) $90,226 $52,872 $17,091 --------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(b) 1.00 .99 .65* --------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 4.32 5.34 2.83* --------------------------------------------------------------------------- + Commencement of operations. * Not annualized. (a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) Includes amounts paid through expense offset arrangements (Note 2).
FINANCIAL HIGHLIGHTS (For a common share outstanding throughout the period) CLASS M ----------------------------------------------------------------------------------------------------- Per-share operating performance Year ended September 30 ----------------------------------------------------------------------------------------------------- 2001 2000 1999 1998 1997 ----------------------------------------------------------------------------------------------------- Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 ----------------------------------------------------------------------------------------------------- Net investment income .0478 .0551 .0463 .0502 .0490 ----------------------------------------------------------------------------------------------------- Total from investment operations .0478 .0551 .0463 .0502 .0490 ----------------------------------------------------------------------------------------------------- Total distributions (.0478) (.0551) (.0463) (.0502) (.0490) ----------------------------------------------------------------------------------------------------- Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 ----------------------------------------------------------------------------------------------------- Total return at net asset value (%)(a) 4.89 5.65 4.73 5.14 5.01 ----------------------------------------------------------------------------------------------------- Ratios and supplemental data ----------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $122,055 $114,458 $136,134 $94,833 $58,502 ----------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(b) .65 .64 .63 .73 .72 ----------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 4.70 5.51 4.58 5.04 4.92 ----------------------------------------------------------------------------------------------------- (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).
NOTES TO FINANCIAL STATEMENTS September 30, 2001 Note 1 Significant accounting policies Putnam Money Market Fund (the "fund") is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The fund seeks current income consistent with preservation of capital and maintenance of liquidity. The fund achieves its objective by investing in a portfolio of high-grade short-term obligations. The fund may invest up to 100% of its assets in the banking industry and in commercial paper and short-term corporate obligations of issuers in the personal credit institution and business credit industries. The fund offers class A, class B, class C and class M shares. Each class of shares is sold without a front-end sales charge. Class B and class C shares are offered only in exchange for class B and class C shares of other Putnam funds, or purchased by certain systematic investment plans. Class B shares, which convert to class A shares after approximately eight years, pay an ongoing distribution fee and are subject to a contingent deferred sales charge, if those shares are redeemed within six years of purchase (including any holding period of the shares in other Putnam funds). Class C shares are subject to the same fees and expenses as class B shares, except that class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Shareholders who acquired class B and class C shares through an exchange are subject to the same deferred sales charge schedule as the fund from which they were exchanged. Class M shares pay an ongoing distribution fee lower than class B and class C shares but are not subject to a contingent deferred sales charge. Expenses of the fund are borne pro-rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the distribution fees applicable to such class). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. Shares of each class would receive their pro-rata share of the net assets of the fund, if that 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 as set forth in Rule 2a-7 under the Investment Company Act of 1940. The amortized cost of an instrument is determined by valuing it at cost originally and thereafter amortizing any discount or premium from its face value at a constant rate until maturity. B) Joint trading account Pursuant to an exemptive order issued by the Securities and Exchange Commission, the fund may transfer uninvested cash balances into a joint trading account along with the cash of other registered investment companies and certain other accounts managed by Putnam Investment Management, LLC ("Putnam Management"), the fund's manager, a wholly-owned subsidiary of Putnam Investments, LLC. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. 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 Security transactions are accounted for on the trade date (date the order to buy or sell is executed). E) Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986, as amended. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. F) Interest income and distributions to shareholders Interest is recorded on the accrual basis. Income dividends are recorded daily by the fund and are paid monthly to the shareholders. G) Amortization of bond premium and accretion of bond discount Premiums and discounts from purchases of short-term investments are amortized/accreted at a constant rate until maturity. Note 2 Management fee, administrative services and other transactions Compensation of Putnam Management, for management and investment advisory services is paid quarterly based on the average net assets of the fund. Such fee is based on the following annual rates: 0.50% of the first $100 million of average net assets, 0.40% of the next $100 million, 0.35% of the next $300 million, 0.325% of the next $500 million and 0.30% thereafter. The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, LLC. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. The fund has entered into an arrangement with PFTC whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the fund's expenses. For the year ended September 30, 2001, the fund's expenses were reduced by $1,272,601 under these arrangements. Each independent Trustee of the fund receives an annual Trustee fee, of which $3,244 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 Compensation of Trustees in the Statement of operations. Accrued pension liability is included in Payable for compensation of Trustees in the Statement of assets and liabilities. The fund has adopted distribution plans (the "Plans") with respect to its class B, class C and class M 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 Investments, LLC and Putnam Retail Management GP, Inc., for services provided and expenses incurred by it in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management at an annual rate up to 0.75%, 1.00% and 1.00% of the average net assets attributable to class B, class C and class M shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.50%, 0.50% and 0.15% of the average net assets attributable to class B, class C and class M shares, respectively. For the year ended September 30, 2001, Putnam Retail Management, acting as underwriter received net commissions of $4,650,175 and $313,035 in contingent deferred sales charges from redemptions of class B shares and class C shares, respectively. A deferred sales charge of up to 1% and 0.65% is assessed on certain redemptions of class A and class M shares, respectively. For the year ended September 30, 2001, Putnam Retail Management, acting as underwriter received no monies in contingent deferred sales charges from redemptions of class A or class M shares acquired through exchanges from another fund. Note 3 Purchases and sales of securities During the year ended September 30, 2001, cost of purchases and proceeds from sales (including maturities) of investment securities (all short-term obligations) aggregated $133,437,556,152 and $131,450,496,844, respectively. Note 4 Capital shares At September 30, 2001, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares at a constant net asset value of $1.00 per share were as follows: Year ended September 30 --------------------------------------------------------------------------- Class A 2001 2000 --------------------------------------------------------------------------- Shares sold 12,053,696,344 13,559,891,513 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 205,478,374 195,361,991 --------------------------------------------------------------------------- 12,259,174,718 13,755,253,504 Shares repurchased (10,824,356,828) (13,666,419,670) --------------------------------------------------------------------------- Net increase 1,434,817,890 88,833,834 --------------------------------------------------------------------------- Year ended September 30 --------------------------------------------------------------------------- Class B 2001 2000 --------------------------------------------------------------------------- Shares sold 2,051,734,389 2,539,282,766 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 31,917,019 37,603,003 --------------------------------------------------------------------------- 2,083,651,408 2,576,885,769 Shares repurchased (1,571,439,127) (2,968,511,949) --------------------------------------------------------------------------- Net increase (decrease) 512,212,281 (391,626,180) --------------------------------------------------------------------------- Year ended September 30 --------------------------------------------------------------------------- Class C 2001 2000 --------------------------------------------------------------------------- Shares sold 724,876,309 360,862,501 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 2,592,162 1,260,996 --------------------------------------------------------------------------- 727,468,471 362,123,497 Shares repurchased (690,114,346) (326,342,248) --------------------------------------------------------------------------- Net increase 37,354,125 35,781,249 --------------------------------------------------------------------------- Year ended September 30 --------------------------------------------------------------------------- Class M 2001 2000 --------------------------------------------------------------------------- Shares sold 916,967,155 976,960,996 --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 4,993,849 6,065,448 --------------------------------------------------------------------------- 921,961,004 983,026,444 Shares repurchased (914,363,624) (1,004,702,752) --------------------------------------------------------------------------- Net increase (decrease) 7,597,380 (21,676,308) --------------------------------------------------------------------------- FEDERAL TAX INFORMATION (Unaudited) The Form 1099 you receive in January 2002 will show the tax status of all distributions paid to your account in calendar 2001. THE PUTNAM FAMILY OF FUNDS The following is a complete list of Putnam's open-end mutual funds. Please call your financial advisor or Putnam at 1-800-225-1581 to obtain a prospectus for any Putnam fund. It contains more complete information, including charges and expenses. Please read it carefully before you invest or send money. GROWTH FUNDS Asia Pacific Growth Fund Capital Appreciation Fund Capital Opportunities Fund Europe Growth Fund Global Equity Fund Global Growth Fund Global Natural Resources Fund Growth Opportunities Fund Health Sciences Trust International Growth Fund International New Opportunities Fund Investors Fund New Century Growth Fund New Opportunities Fund OTC & Emerging Growth Fund Research Fund Tax Smart Equity Fund Technology Fund Vista Fund Voyager Fund Voyager Fund II GROWTH AND INCOME FUNDS Balanced Fund Balanced Retirement Fund Classic Equity Fund * Convertible Income-Growth Trust Equity Income Fund The George Putnam Fund of Boston Global Growth and Income Fund The Putnam Fund for Growth and Income International Growth and Income Fund Mid Cap Value Fund New Value Fund Small Cap Value Fund Utilities Growth and Income Fund INCOME FUNDS American Government Income Fund Diversified Income Trust Global Governmental Income Trust High Yield Advantage Fund [DBL. DAGGER] High Yield Trust [DBL. DAGGER] High Yield Trust II Income Fund Intermediate U.S. Government Income Fund Money Market Fund ** Preferred Income Fund Strategic Income Fund U.S. Government Income Trust TAX-FREE INCOME FUNDS Municipal Income Fund Tax Exempt Income Fund Tax Exempt Money Market Fund ** Tax-Free High Yield Fund Tax-Free Insured Fund State tax-free income funds [SECTION MARK] Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey, New York, Ohio and Pennsylvania State tax-free money market funds [SECTION MARK] ** California, New York ASSET ALLOCATION FUNDS Putnam Asset Allocation Funds--three investment portfolios that spread your money across a variety of stocks, bonds, and money market investments. The three portfolios: Asset Allocation: Balanced Portfolio Asset Allocation: Conservative Portfolio Asset Allocation: Growth Portfolio * Formerly Putnam Growth and Income Fund II [DBL. DAGGER] Closed to new investors. Some exceptions may apply. Contact Putnam for details. [SECTION MARK] Not available in all states. ** An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the funds seek to preserve your investment at $1.00 per share, it is possible to lose money by investing in the fund. Check your account balances and current performance at www.putnaminvestments.com. WELCOME TO WWW.PUTNAMINVESTMENTS.COM Get up-to-date information about your funds, learn more about investing and retirement planning, and access news and economic outlooks from Putnam's Web site. The site features: * Secure access (with your Social Security number and password) to your account with all of your information, including a record of your balances and transactions, updated daily. * On-line transactions, such as exchanges, additional investments, and address changes. * Complete fund information, daily pricing, and long-term performance. * Instant access to your quarterly statements, and annual and semiannual fund reports. You can also read economic commentary from Putnam senior economic advisor Dr. Robert Goodman, use our glossary to decode investment terms, get our update on the markets, and much more. New enhancements are added to the site regularly. Bookmark us at www.putnaminvestments.com FUND INFORMATION WEB SITE www.putnaminvestments.com 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 INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP TRUSTEES John A. Hill, Chairman Jameson Adkins Baxter Charles B. Curtis Ronald J. Jackson Paul L. Joskow Elizabeth T. Kennan Lawrence J. Lasser John H. Mullin III Robert E. Patterson George Putnam, III A.J.C. Smith W. Thomas Stephens W. Nicholas Thorndike OFFICERS George Putnam, III President Charles E. Porter Executive Vice President and Treasurer Patricia C. Flaherty Senior Vice President Lawrence J. Lasser Vice President Gordon H. Silver Vice President Ian C. Ferguson Vice President Brett C. Browchuk Vice President Stephen Oristaglio Vice President Kevin A. Cronin Vice President Joanne M. Driscoll Vice President and Fund Manager Richard A. Monaghan Vice President Richard G. Leibovitch Vice President John R. Verani Vice President This report is for the information of shareholders of Putnam Money Market Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details of sales charges, investment objectives, and operating policies of the fund, and the most recent copy of Putnam's Quarterly Performance Summary and Putnam's Quarterly Ranking Summary. For more information or to request a prospectus, call toll free: 1-800-225-1581. You can also learn more at Putnam Investments' Web site: www.putnaminvestments.com. NOT FDIC INSURED, MAY LOSE VALUE, NO BANK GUARANTEE [LOGO OMITTED] PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 --------------------- PRSRT STD U.S. POSTAGE PAID PUTNAM INVESTMENTS --------------------- For account balances, economic forecasts, and the latest on Putnam funds, visit www.putnaminvestments.com AN039-76219 010/879/534 11/01