-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fv8+OXACpbUL9gFsFu3TiorO5oQzfzqtsuaqstlxRbaLIAIBGhdyl345ag1j8yjd 25KcvUlqvE8N7MIso0I75g== 0000928816-97-000376.txt : 19971202 0000928816-97-000376.hdr.sgml : 19971202 ACCESSION NUMBER: 0000928816-97-000376 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971201 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM MONEY MARKET FUND CENTRAL INDEX KEY: 0000081248 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046386436 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-02608 FILM NUMBER: 97730404 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ STREET 2: MAILSTOP A-14 LEGAL DEPARTMENT CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921141 MAIL ADDRESS: STREET 1: MAILSTOP A-14 LEGAL DEPARTMENT STREET 2: ONE POST OFFICE SQUARE CITY: BOSTON STATE: MA ZIP: 02109 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM DAILY DIVIDEND TRUST DATE OF NAME CHANGE: 19920703 N-30D 1 PUTNAM MONEY MARKET FUND Putnam Money Market Fund ANNUAL REPORT September 30, 1997 [LOGO: BOSTON * LONDON * TOKYO] Fund highlights * "Assets of money market mutual funds broke through the $1 trillion mark for the first time in their 25-year history last week, totaling $1.007 trillion for the period ending August 12. Assets have increased at an average of 45.3 percent a year over the past 20 years, and have increased by $147.2 billion, or 17.1 percent, over the past year alone (August 13, 1996, through August 12, 1997). -- IBC's Money Fund Report, August 22, 1997 * "As always, we continue to focus on superior credit quality and capital preservation above all other goals, since these attributes remain the key reasons investors choose a money market fund such as this one." -- Joanne Driscoll, manager Putnam Money Market Fund CONTENTS 4 Report from Putnam Management 8 Fund performance summary 12 Portfolio holdings 15 Financial statements From the Chairman [GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM] [copyright] Karsh, Ottawa Dear Shareholder: In contrast to the somewhat unsettled interest-rate environment that prevailed when Putnam Money Market Fund's management reported to you at the fiscal year's midpoint, stable rates kept fixed-income investors more or less calm during the second half. Ongoing economic strength raised some questions about inflation but current economic data continue to suggest growth slow enough to satisfy the ever vigilant Federal Reserve Board. I am pleased to introduce your fund's new manager, Joanne M. Driscoll. Joanne joined Putnam in 1995 as a money market credit analyst with the Cash Management Group. She has five years of investment industry experience. In the following report, Joanne reviews the fund's fiscal year that ended on September 30, 1997, and discusses prospects for the fiscal year just begun. Respectfully yours, /S/GEORGE PUTNAM George Putnam Chairman of the Trustees November 19, 1997 Report from the Fund Manager Joanne M. Driscoll Putnam Money Market Fund's fiscal year concluded much as it began, in an environment marked by solid economic growth, low inflation, and relatively moderate interest rates. In this climate, your fund's conservative investment strategy continued to serve shareholders well. Once again an emphasis on superior quality, capital preservation, and current income enabled the fund to provide a competitive total return while maintaining a stable $1.00 share price. * ENVIRONMENT OF STEADY GROWTH, LOW INFLATION CONTINUES The U.S. economy maintained its ongoing strength throughout the fiscal year. While the second quarter gross domestic product (GDP) growth slowed slightly to an annual rate of 3.3% from 4.9% in the first quarter, summer and early fall statistics continued to indicate healthy growth. The index of leading economic indicators rose solidly in July and August, as did retail spending, construction spending, and industrial production. In fact, despite the UPS strike -- when some companies may have slowed output because of nonshipment of parts needed for their production lines -- recent production gains have been vigorous enough to surpass the torrid pace of capacity expansion. Consumer confidence has been rising too, closing in on the 28-year high seen in June. In the past, economic strength has been a traditional harbinger of higher inflation. The current expansion has not followed suit thus far. Consumer prices -- excluding food and energy costs, which bounce around a lot -- have risen at a scant 2.2% annual rate this year, down from 2.6 % last year. However, there are hints that pressures may be building. Energy prices have moved up and labor markets remain tight with the nation's unemployment rate for the first half of 1997 below 5% for the first time since 1973. These factors, along with the labor-friendly UPS strike settlement, could push up inflation in the months ahead -- and prompt the Federal Reserve Board to tighten short-term interest rates in response. * MONETARY POLICY STAYS ON HOLD FOR THE MOMENT While volatility in the financial markets continues to reflect investor sensitivity to inflationary pressures, the Fed has not raised short-term interest rates since its March meeting. In April and May, yields on money market securities rose in expectation of another Fed increase, but the Fed failed to act and money market yields backed down to their current levels near the federal funds target rate. Although the "persistent strength in demand" that Fed officials cited as a key reason for their March interest-rate tightening has continued, this demand has not yet led to rising prices. At subsequent meetings during the period, the Fed found no compelling reason to raise rates again. However, in his October congressional testimony, Fed Chairman Alan Greenspan did warn that the economy was still on "an unsustainable track" and had not slowed enough to eliminate the threat of renewed inflation. It remains to be seen if and when those cautionary words will translate into interest-rate action. * DURATION-NEUTRAL STRUCTURE LETS FUND PURSUE VALUE AND INCOME OPPORTUNITIES Given our expectation of higher interest rates sometime in the near future, we have continued to keep the fund in a flexible position. During most of fiscal 1997, this meant holding portfolio duration relatively neutral in order to take advantage of incrementally higher yields as they became available. One such opportunity arose in the spring, just after the Fed raised interest rates at its March meeting. While Putnam Management did not anticipate another rate increase shortly thereafter, many market participants did, thereby pushing up money market security yields and depressing prices. We took advantage of this situation to capture some extra yield by purchasing some top-quality 9-month and 1-year securities, thus capitalizing on a rate increase that never materialized. * HIGH-QUALITY FOCUS DRIVES SECURITY SELECTION Superior quality and preservation of capital remain the hallmarks of your fund's portfolio strategy, and we continue to invest in a wide spectrum of top-quality, traditional money market securities. These include certificates of deposit, bank notes, government agency discount notes, and both conventional and asset-backed commercial paper (debt obligations backed by trade and term receivable, credit cards, or auto loans). As always, our strict quality standards remained intact throughout the annual period. In selecting investments for the portfolio, we seek securities that are rated by two or more nationally recognized statistical rating organizations and receive at least two ratings within the top two categories. If the security has been rated by only one service, its rating must be within the service's top two categories. If a security is unrated, however, it must be judged by Putnam Management to be of a quality equivalent to that of securities with ratings in the top two categories. At period's end, all portfolio holdings were rated. * OUTLOOK: HIGHER RATES LIKELY While many investors seem to be extending their expectations of stable short-term interest rates, Putnam Management believes it is likely that the Fed will move to tighten rates by early 1998. Yes, actual inflation remains quite low, but pressures are certainly building, and the market remains vulnerable to any news of an uptick. With its neutral portfolio duration and conservative, quality-focused investment strategy, this fund remains well positioned for what lies ahead. Should interest rates begin to rise, we will be able to take advantage of higher yields to capture additional income for the fund. In the meantime, we will continue to concentrate on preserving net asset value and maintaining a superior quality portfolio -- which are the chief attributes most investors seek in a money market fund. 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 9/30/97, there is no guarantee the fund will continue to hold these securities in the future. An investment in this fund is neither insured nor guaranteed by the U.S. government, and there is no assurance that a $1.00 share price will be maintained. PERFORMANCE COMPARISONS (9/30/97) Current return* - ------------------------------------------------------------------------------ Passbook savings account 2.00% - ------------------------------------------------------------------------------ Taxable money market fund (7-day yield) 5.04 - ------------------------------------------------------------------------------ 3-month certificate of deposit 4.10 - ------------------------------------------------------------------------------ Putnam Money Market Fund (7-day yield) - ------------------------------------------------------------------------------ Class A 5.13 - ------------------------------------------------------------------------------ Class B 4.63 - ------------------------------------------------------------------------------ Class M 4.98 - ------------------------------------------------------------------------------ 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: BankBoston (passbook savings), Bank Rate Monitor (3-month CDs), IBC/Donaghue's Money Fund Report (taxable money market fund compound 7-day yield). 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 9/30/97 (most recent calendar quarter) Class A Class B Class M (inception date) (10/1/76) (4/27/92) (12/8/94) NAV NAV CDSC NAV - ------------------------------------------------------------------------------ 1 year 5.17% 4.65% -0.35% 5.01% - ------------------------------------------------------------------------------ 5 years 23.33 20.24 18.24 22.40 Annual average 4.28 3.76 3.41 4.13 - ------------------------------------------------------------------------------ 10 years 70.63 62.56 62.56 68.09 Annual average 5.49 4.98 4.98 5.33 - ------------------------------------------------------------------------------ Annual average 7.50 6.97 6.97 7.34 (Life of fund) - ------------------------------------------------------------------------------ COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/97 Lipper Money Consumer Market Fund Average Price Index - ------------------------------------------------------------------------------ 1 year 4.85% 2.15% - ------------------------------------------------------------------------------ 5 years 22.82 14.08 Annual average 4.20 2.67 - ------------------------------------------------------------------------------ 10 years 69.93 40.17 Annual average 5.44 3.43 - ------------------------------------------------------------------------------ Annual average 7.55 5.02 (Life of fund) - ------------------------------------------------------------------------------ Fund performance data do not take into account any adjustment for taxes payable on reinvested distributions. Performance data represent past results and are not indicative of future returns. Investment returns will fluctuate. An investment in the fund is neither insured nor guaranteed by the U.S. government. There can be no assurance that the fund will be able to maintain a stable net asset value of $1.00 per share. The fund's holdings do not match those in the Lipper Average. 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- (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. All returns assume reinvestment of distributions at NAV and represent past performance; they do not guarantee future results. PRICE AND DISTRIBUTION INFORMATION 12 months ended 9/30/97 Class A Class B Class M - ------------------------------------------------------------------------------ Distributions (number) 12 12 12 - ------------------------------------------------------------------------------ Income $0.050511 $0.045509 $0.049019 - ------------------------------------------------------------------------------ Total $0.050511 $0.045509 $0.049019 - ------------------------------------------------------------------------------ Current return (end of period) - ------------------------------------------------------------------------------ Current 7-day yield* 5.13% 4.63% 4.98% - ------------------------------------------------------------------------------ Current 30-day yield* 5.15 4.65 5.00 - ------------------------------------------------------------------------------ * The 7-day and 30-day yields are the two most common gauges for measuring money market mutual fund performance. 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 value of all your fund's assets, minus any liabilities, divided by the number of outstanding shares. Class A shares generally are fund shares purchased with an initial sales charge. In the case of your fund, which has no initial 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 generally are fund shares purchased with no initial sales charge but subject to a contingent deferred sales charge (CDSC) upon redemption. However, class B shares of your fund can be acquired only through exchange of class B 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 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 initial sales charge, exchange of your fund's class M shares into another fund may involve a sales charge, however. 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. 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 portfolio of investments owned, 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, 1997, and the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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, 1997 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Boston, Massachusetts November 7, 1997 Portfolio of investments owned September 30, 1997
COMMERCIAL PAPER (71.9%) * MATURITY PRINCIPAL AMOUNT DATE VALUE DOMESTIC (47.8%) * - ------------------------------------------------------------------------------------------------------------ $27,500,000 AC Acquisition Holding Company 5.52s 10/29/97 $ 27,377,717 25,000,000 American Home Products 5 1/2s 10/22/97 24,915,972 30,000,000 Asset Securitization Co-op Corp. 5.54s 12/3/97 29,704,533 20,000,000 Bank of America Corp. 5.55s 2/3/98 19,611,500 25,000,000 Bank of America FSB 5.52s 10/8/97 24,969,333 25,000,000 Chase Manhattan Bank Corp. 5.68s 12/2/97 24,751,500 20,000,000 Chevron Transport Corp. 5.52s 11/19/97 19,846,667 50,000,000 Corporate Asset Funding Co. Inc. 5.51s 10/15/97 49,885,208 35,000,000 Corporate Asset Funding Co. Inc. 5 1/2s 10/21/97 34,887,708 15,000,000 Corporate Receivables Corp. 5.55s 10/29/97 14,932,938 25,000,000 Corporate Receivables Corp. 5.54s 12/4/97 24,749,931 35,000,000 Corporate Receivables Corp. 5.53s 11/17/97 34,741,933 25,000,000 Corporate Receivables Corp. 5.52s 11/14/97 24,827,500 31,000,000 Delaware Funding Corp. 5.52s 10/6/97 30,971,480 35,000,000 Delaware Funding Corp. 5.52s 10/2/97 34,989,267 35,000,000 Falcon Asset Securitization Corp. 5.52s 11/25/97 34,699,467 35,000,000 Ford Motor Credit Corp. 5 1/2s 10/2/97 34,989,306 40,000,000 General Electric Capital Corp. 5.69s 11/10/97 39,740,789 30,000,000 General Electric Capital Corp. 5.54s 11/12/97 29,801,483 20,000,000 General Motors Acceptance Corp. 5.55s 10/8/97 19,975,333 35,000,000 General Motors Acceptance Corp. 5.54s 10/15/97 34,919,208 25,000,000 General Motors Acceptance Corp. 5.54s 10/14/97 24,946,139 20,000,000 General Motors Acceptance Corp. 5.54s 10/10/97 19,969,222 30,000,000 GTE Funding Inc. 5.52s 10/14/97 29,935,600 50,000,000 Household Finance Corp. 5.52s 10/22/97 49,822,784 30,000,000 Merrill Lynch & Co, Inc. 5.68s 11/18/97 29,768,067 20,000,000 Merrill Lynch & Co. Inc. 5.6s 10/8/97 19,975,111 30,000,000 Merrill Lynch & Co. Inc. 5.54s 11/4/97 29,838,417 30,000,000 Morgan (J.P.) & Co. 5.52s 10/14/97 29,935,600 35,000,000 National Rural Utilities Cooperative Finance Corp. 5.54s 2/17/98 34,245,944 24,000,000 National Rural Utilities Cooperative Finance Corp. 5.51s 10/20/97 23,926,533 26,000,000 Preferred Receivable Fundings Corp. 5 5/8s 10/9/97 25,963,438 23,400,000 Preferred Receivable Fundings Corp. 5.53s 10/28/97 23,299,354 51,300,000 Preferred Receivable Fundings Corp. 5 53s 10/7/97 51,244,838 30,000,000 Safeco Credit Company 5.61s 10/23/97 29,892,475 25,000,000 Sears Roebuck Acceptance Corp. 5.55s 11/14/97 24,826,564 35,000,000 Sears Roebuck Acceptance Corp. 5.54s 10/30/97 34,838,417 30,000,000 Sears Roebuck Acceptance Corp. 5.52s 10/23/97 29,894,200 20,000,000 Sheffield Receivables Corp. 5.57s 11/3/97 19,894,789 25,000,000 Sheffield Receivables Corp. 5.56s 10/24/97 24,907,333 15,000,000 Sheffield Receivables Corp. 5.54s 10/16/97 14,963,067 25,000,000 Sheffield Receivables Corp. 5.53s 10/21/97 24,919,364 14,000,000 Sheffield Receivables Corp. 5.52s 10/1/97 13,997,853 19,000,000 USAA Capital Corp. 5.55s 10/8/97 18,976,567 -------------- $1,245,270,449 FOREIGN (24.1%) * - ------------------------------------------------------------------------------------------------------------ 15,000,000 Abbey National PLC 5.7s (United Kingdom) 10/10/97 $ 14,976,250 20,000,000 Abbey National PLC 5.51s (United Kingdom) 12/23/97 19,742,867 26,620,000 Abbey National North America Corp. DCP 5.53s (United Kingdom) 1/14/98 26,186,552 20,000,000 Banco Credito National (Barclays (LOC)) 5.55s (United Kingdom) 1/8/98 19,691,667 20,000,000 Banco Nacional de Mexico (Barclays (LOC)) 5.54s (United Kingdom) 11/25/97 19,827,644 25,000,000 Canadian Imperial Bank Of Commerce 5.49s (Canada) 10/22/97 24,916,003 28,000,000 Cemex S.A. (Credit Suisse First Boston(LOC)) 5.52s (Switzerland) 11/6/97 27,841,147 20,000,000 Chevron UK Investment PLC 5.51s (United Kingdom) 10/1/97 19,996,939 20,700,000 Contifinancial Corp. (Dresdner Bank AG (LOC) 5.56s (Germany) 2/26/98 20,223,647 16,061,000 Corporacion Andina de Fomento (Barclays (LOC)) 5.65s (United Kingdom) 10/2/97 16,055,959 25,000,000 Credit Suisse First Boston 5.54s (Switzerland) 10/7/97 24,973,069 16,000,000 Credit Suisse First Boston 5.52s (Switzerland) 10/20/97 15,950,933 30,000,000 Den Danske Bank 5.7s (Denmark) 11/19/97 29,762,500 30,000,000 Den Danske Corporation Inc. 5.575s (Denmark) 2/13/98 29,368,167 40,000,000 Deutsche Bank Financial Inc. 5.51s (Germany) 10/3/97 39,981,633 50,000,000 Glencore Finance Services (Union Bank (LOC)) 5.56s (Switzerland) 2/4/98 29,875,575 25,000,000 Glencore Finance Services (ABN AMRO Bank NV (LOC)) 5.53s (Netherlands) 1/30/98 24,531,486 35,000,000 Glencore Finance Services (ABN AMRO Bank NV (LOC)) 5.53s (Netherlands) 11/13/97 49,019,278 30,000,000 Glencore Finance Services (Union Bank (LOC)) 5.53s (Switzerland) 10/27/97 34,763,439 17,500,000 Lloyds Bank PLC 5.55s (United Kingdom) 1/7/98 17,232,906 25,000,000 National Australia Funding 5 1/2s (Australia) 10/6/97 24,977,083 24,000,000 PEMEX Capital, Inc. (Credit Suisse First Boston (LOC)) 5.68s (Switzerland) 10/9/97 23,965,920 30,000,000 Svenska Handelsbanken 5.74s (Sweden) 10/17/97 29,918,683 20,000,000 Svenska Handelsbanken 5.53s (Sweden) 11/12/97 19,867,894 25,000,000 Svenska Handelsbanken 5.52s (Sweden) 10/14/97 24,946,333 -------------- $ 628,593,574 -------------- Total Commercial Paper (cost $1,873,864,023) $1,873,864,023 CERTIFICATES OF DEPOSIT (15.9%) * MATURITY PRINCIPAL AMOUNT DATE VALUE - ------------------------------------------------------------------------------------------------------------ $23,000,000 Abbey National PLC 6.05s (United Kingdom) 6/8/98 $ 22,995,966 30,000,000 ABN AMRO Bank NV 6.15s (Netherlands) 5/11/98 29,991,155 40,000,000 Bank Of Nova Scotia 5.87s (Canada) 11/19/97 39,998,259 20,000,000 Banque Nationale De Paris 5.61s (France) 12/29/97 20,000,492 25,000,000 Bayerische Vereinsbank AG 5.85s (Germany) 11/12/97 25,008,104 30,000,000 Canadian Imperial Bank of Commerce 5.8s (Canada) 3/2/98 29,996,329 30,000,000 Deutsche Bank 6.21s (Germany) 4/20/98 30,027,303 30,000,000 National Westminster Bank PLC 5.685s (United Kingdom) 2/27/98 29,996,997 20,000,000 Royal Bank Of Canada 5.94s (Canada) 6/25/98 20,005,447 70,000,000 Societe Generale 5 7/8s (France) 11/24/97 70,002,579 20,000,000 Societe Generale 5.63s (France) 12/31/97 19,998,242 35,000,000 Westdeutsche Landesbank Giroz 5.66s (Germany) 10/9/97 35,004,369 40,000,000 Westpac Banking Corp. 5.97s (Australia) 8/13/98 39,990,001 -------------- Total Certificates of Deposit (cost $413,015,243) $ 413,015,243 BANK NOTES (4.0%) * MATURITY PRINCIPAL AMOUNT DATE VALUE - ------------------------------------------------------------------------------------------------------------ $25,000,000 Bank of America NT & SA 5.9s 3/4/98 $ 24,992,825 30,000,000 First National Bank of Boston 5.65s 11/5/97 30,000,000 25,000,000 Morgan Guaranty Trust CO. 5.965s 6/22/98 24,991,593 25,000,000 Northern Trust Corporation 5.95s 6/24/98 24,988,000 -------------- Total Bank Notes (cost $104,972,418) $ 104,972,418 SHORT-TERM INVESTMENTS (4.2%) PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------ $33,363,000 Interest in $150,000,000 joint discount commercial paper with New Center Asset Trust, effective yield of 6.5%, October 1, 1997 $ 33,363,000 74,688,000 Interest in $75,000,000 joint discount commercial paper with Bayerische Vereinsbank AG, effective yield of 6.45%, October 1, 1997 74,688,000 -------------- Total Short-Term Investments (cost $108,051,000) $ 108,051,000 - ------------------------------------------------------------------------------------------------------------ Total Investments (cost $2,499,902,684) *** 2,499,902,684 - ------------------------------------------------------------------------------------------------------------ * Percentages indicated are based on net assets of $2,603,610,091. *** The aggregate identified cost on a tax basis is the same. The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities September 30, 1997 Assets - --------------------------------------------------------------------------------------------------- Investments in securities, at amortized cost (Note 1) $2,499,902,684 - --------------------------------------------------------------------------------------------------- Cash 6,442 - --------------------------------------------------------------------------------------------------- Interest and other receivables 10,655,209 - --------------------------------------------------------------------------------------------------- Receivable for shares of the fund sold 117,790,352 - --------------------------------------------------------------------------------------------------- Total assets 2,628,354,687 Liabilities - --------------------------------------------------------------------------------------------------- Distributions payable to shareholders 395,398 - --------------------------------------------------------------------------------------------------- Payable for shares of the fund repurchased 21,353,200 - --------------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 2,141,060 - --------------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 370,316 - --------------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 30,911 - --------------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 8,581 - --------------------------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 196,720 - --------------------------------------------------------------------------------------------------- Other accrued expenses 248,410 - --------------------------------------------------------------------------------------------------- Total liabilities 24,744,596 - --------------------------------------------------------------------------------------------------- Net assets $2,603,610,091 Represented by - --------------------------------------------------------------------------------------------------- Paid-in capital (Note 4) $2,603,610,091 - --------------------------------------------------------------------------------------------------- Net asset value, offering and redemption price per class A share ($2,134,223,127 divided by 2,134,223,127 shares) * $1.00 - --------------------------------------------------------------------------------------------------- Net asset value and offering price per class B share ($410,885,364 divided by 410,885,364 shares)** $1.00 - --------------------------------------------------------------------------------------------------- Net asset value, offering and redemption price per class M share ($58,501,600 divided by 58,501,600 shares)* $1.00 - --------------------------------------------------------------------------------------------------- * Offered at net asset value. ** Class B shares are available only by exchange of class B shares from other Putnam funds and to certain systematic investment plan investors. For investors who acquired class B shares through an exchange, the applicable contingent deferred sales charge will depend upon the fund which you exchanged. The accompanying notes are an integral part of these financial statements.
Statement of operations Year ended September 30, 1997 Interest income: $146,791,603 - -------------------------------------------------------------------------------------------------- Expenses: - -------------------------------------------------------------------------------------------------- Compensation of Manager (Note 2) 8,460,127 - -------------------------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 5,217,297 - -------------------------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 72,547 - -------------------------------------------------------------------------------------------------- Administrative services (Note 2) 31,315 - -------------------------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 2,348,283 - -------------------------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 69,211 - -------------------------------------------------------------------------------------------------- Reports to shareholders 92,115 - -------------------------------------------------------------------------------------------------- Registration fees 449,622 - -------------------------------------------------------------------------------------------------- Auditing 46,583 - -------------------------------------------------------------------------------------------------- Legal 54,982 - -------------------------------------------------------------------------------------------------- Postage 213,814 - -------------------------------------------------------------------------------------------------- Other 465,955 - -------------------------------------------------------------------------------------------------- Total expenses 17,521,851 - -------------------------------------------------------------------------------------------------- Expense reduction (Note 2) (1,307,981) - -------------------------------------------------------------------------------------------------- Net expenses 16,213,870 - -------------------------------------------------------------------------------------------------- Net investment income 130,577,733 - -------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $130,577,733 - -------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets Year ended September 30 ------------------------------------- 1997 1996 - ---------------------------------------------------------------------------------------------------------------------- Increase in net assets - ---------------------------------------------------------------------------------------------------------------------- Operations: - ---------------------------------------------------------------------------------------------------------------------- Net investment income $ 130,577,733 $ 88,858,794 - ---------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 130,577,733 88,858,794 - ---------------------------------------------------------------------------------------------------------------------- Distributions to shareholders: - ---------------------------------------------------------------------------------------------------------------------- From net investment income Class A (106,719,970) (71,786,456) - ---------------------------------------------------------------------------------------------------------------------- Class B (21,583,487) (16,189,187) - ---------------------------------------------------------------------------------------------------------------------- Class M (2,274,276) (883,151) - ---------------------------------------------------------------------------------------------------------------------- Increase from capital share transactions (Note 4) 476,931,642 672,064,983 - ---------------------------------------------------------------------------------------------------------------------- Total increase in net assets 476,931,642 672,064,983 Net assets - ---------------------------------------------------------------------------------------------------------------------- Beginning of year 2,126,678,449 1,454,613,466 - ---------------------------------------------------------------------------------------------------------------------- End of year $2,603,610,091 $2,126,678,449 - ---------------------------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
Financial highlights (For a share outstanding throughout the period) CLASS A - ------------------------------------------------------------------------------------------------------------------------------------ For the eleven Per-share months ended Year ended operating performance Year ended September 30 Sept. 30 October 31 - ------------------------------------------------------------------------------------------------------------------------------------ 1997 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income $.0505 $.0507 $.0521 $.0299 $.0246 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations .0505 .0507 .0521 .0299 .0246 - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions $(.0505) $(.0507) $(.0521) $(.0299) $(.0246) - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total investment return at net asset value (%)(a) 5.17 5.19 5.33 3.03 * 2.49 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $2,134,223 $1,659,288 $1,189,640 $1,101,171 $586,920 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b) .57 .57 .62 .58 * .70 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%) 5.06 5.00 5.23 3.03 * 2.48 - ------------------------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized. (a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) The ratio of expenses to average net assets for the period ended September 30, 1995 and thereafter, includes amounts paid through expense offset arrangements. Prior period ratios exclude these amounts (Note 2).
Financial highlights (For a share outstanding throughout the period) CLASS B - ------------------------------------------------------------------------------------------------------------------------------------ For the eleven Per-share months ended Year ended operating performance Year ended September 30 September 30 October 31 - ------------------------------------------------------------------------------------------------------------------------------------ 1997 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income $.0455 $.0457 $.0469 $.0251 $.0195 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations .0455 .0457 .0469 .0251 .0195 - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions $(.0455) $(.0457) $(.0469) $(.0251) $(.0195) - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total investment return at net asset value (%)(a) 4.65 4.67 4.80 2.54 * 1.98 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $410,885 $438,316 $256,533 $194,187 $22,777 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b) 1.07 1.07 1.12 1.03 * 1.20 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%) 4.57 4.51 4.75 2.77 * 1.98 - ------------------------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized. (a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) The ratio of expenses to average net assets for the period ended September 30, 1995 and thereafter, includes amounts paid through expense offset arrangements. Prior period ratios exclude these amounts (Note 2).
Financial highlights (For a share outstanding throughout the period) CLASS M - ------------------------------------------------------------------------------------------------------------------------------------ For the period Per-share Dec. 8, 1994+ operating performance Year ended September 30 to Sep. 30 - ------------------------------------------------------------------------------------------------------------------------------------ 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Net investment income $.0490 $.0490 $.0434 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations .0490 .0490 .0434 - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions $(.0490) $(.0490) $(.0434) - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total investment return at net asset value (%)(a) 5.01 5.02 4.43 * - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $58,502 $29,075 $8,440 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b) .72 .72 .67 * - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets (%) 4.92 4.82 4.29 * - ------------------------------------------------------------------------------------------------------------------------------------ + Commencement of operations. * Not annualized. (a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) The ratio of expenses to average net assets for the period ended September 30, 1995 and thereafter, includes amounts paid through expense offset arrangements. Prior period ratios exclude these amounts (Note 2).
Notes to financial statements September 30, 1997 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 and class M shares. Each class of shares is sold without a front-end sales charge. Class B shares are offered only in exchange for class B shares of other Putnam funds, or purchased certain systematic investment plans. Shareholders who acquired class B shares through an exchange are subject to the same contingent deferred sales charge schedule as the fund from which they were exchanged. 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 the shares are redeemed within six years of purchase (including any holding period of the shares in other Putnam funds). Class M shares pay an ongoing distribution fee lower than class B 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 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 generally accepted accounting principles and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. 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, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc.. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. C) Security transactions Security transactions are accounted for on the trade date ( date the order to buy or sell is executed). D) Federal taxes It is the policy of the fund to distribute all of its 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. E) Interest income and distributions to shareholders Interest is recorded on the accrual basis. Income dividends (and distributions of realized gains, if any) are recorded daily by the fund and are distributed monthly to the shareholders. F) Amortization of bond premium and accretion of bond discount Premiums and discounts from purchases of short-term investments are amortized/accreted using the straight line method. 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% of any amount over $1 billion. The fund reimburses Putnam Management 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 wholly-owned subsidiary of Putnam Investments, Inc. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. For the year ended September 30, 1997, fund expenses were reduced by $1,307,981 under expense offset arrangements with PFTC. Investor servicing and custodian fees reported in the Statement of operations exclude these credits. The fund could have invested a portion of the assets utilized in connection with the expense offset arrangements in an income producing asset if it had not entered into such arrangements. Trustees of the fund receive an annual Trustees fee of $2,232 and an additional fee for each Trustee's meeting attended. Trustees who are not interested persons of Putnam Management and who serve on committees of the 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 in the fund and are 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 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 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 Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments 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 Mutual Funds Corp. at an annual rate up to 0.75% and 1.00% of the average net assets attributable to class B and class M shares, respectively. The Trustees currently limit payment by the fund to an annual rate of 0.50% and 0.15% of the average net assets attributable to class B and class M shares, respectively. For the year ended September 30, 1997, Putnam Mutual Funds Corp., acting as underwriter received $1,667,220 in contingent deferred sales charges from redemptions of class B shares. A deferred sales charge of up to 1% is assessed on certain redemptions of class A shares. These charges apply to certain shares that have been exchanged from other Putnam funds. For the year ended September 30, 1997, Putnam Mutual Funds Corp., acting as underwriter, received no monies on class A redemptions. Note 3 Purchases and sales of securities During the year ended September 30, 1997, purchases and sales (including maturities) of investment securities (all short-term obligations) aggregated $59,992,782,988 and $59,564,604,104, respectively. In determining the net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. Note 4 Capital shares At September 30, 1997, 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 1997 1996 - ------------------------------------------------------------ Shares sold 15,480,603,384 8,637,001,040 - ------------------------------------------------------------ Shares issued in connection with reinvestment of distributions 101,004,236 67,453,247 - ------------------------------------------------------------ 15,581,607,620 8,704,454,287 Shares repurchased (15,106,672,041 (8,234,806,321) - ------------------------------------------------------------ Net increase 474,935,579 469,647,966 - ------------------------------------------------------------ Year ended September 30 - ------------------------------------------------------------ Class B 1997 1996 - ------------------------------------------------------------ Shares sold 2,550,729,879 2,160,995,082 - ------------------------------------------------------------ Shares issued in connection with reinvestment of distributions 19,704,929 14,670,593 - ------------------------------------------------------------ 2,570,434,808 2,175,665,675 Shares repurchased (2,597,865,336) (1,993,883,218) - ------------------------------------------------------------ Net increase (decrease) (27,430,528) 181,782,457 - ------------------------------------------------------------ Year ended September 30 - ------------------------------------------------------------ Class M 1997 1996 - ------------------------------------------------------------ Shares sold 431,207,895 133,711,096 - ------------------------------------------------------------ Shares issued in connection with reinvestment of distributions 2,183,663 845,150 - ------------------------------------------------------------ 433,391,558 134,556,246 Shares repurchased (403,964,967) (113,921,686) - ------------------------------------------------------------ Net increase 29,426,591 20,634,560 - ------------------------------------------------------------ Federal tax information (Unaudited) The Form 1099 you receive in January 1998 will show the tax status of all distributions paid to your account in calendar 1997. PUTNAM GROWTH FUNDS Asia Pacific Growth Fund Capital Appreciation Fund Diversified Equity Trust Europe Growth Fund Global Growth Fund Global Natural Resources Fund Growth Opportunities Fund Health Sciences Trust International Growth Fund * International New Opportunities Fund Investors Fund New Opportunities Fund + OTC & Emerging Growth Fund [DBL. DAGGER] Vista Fund Voyager Fund Voyager Fund II PUTNAM GROWTH AND INCOME FUNDS Balanced Retirement Fund Convertible Income-Growth Trust Equity Income Fund The George Putnam Fund of Boston The Putnam Fund for Growth and Income Growth and Income Fund II International Growth and Income Fund New Value Fund Utilities Growth and Income Fund PUTNAM INCOME FUNDS American Government Income Fund Diversified Income Trust Diversified Income Trust II Federal Income Trust Global Governmental Income Trust High Yield Advantage Fund High Yield Total Return Fund High Yield Trust + Income Fund Money Market Fund ** Intermediate U.S. Government Income Fund Preferred Income Fund U.S. Government Income Trust PUTNAM 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 LIFESTAGE [SECTION MARK] 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 Overseas Growth Fund + Closed to new investors. Some exceptions may apply. Contact Putnam for details. [DBL. DAGGER] Formerly OTC Emerging Growth Fund [SECTION MARK] Not available in all states. ** An investment in a money market fund is neither insured nor guaranteed by the U.S. government. These funds are managed to maintain a price of $1.00 per share, although there is no assurance that this price will be maintained in the future. 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. Fund information INVESTMENT MANAGER Putnam Investment Management, Inc. One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Mutual Funds Corp. One Post Office Square Boston, MA 02109 CUSTODIAN Putnam Fiduciary Trust Company LEGAL COUNSEL Ropes & Gray INDEPENDENT ACCOUNTANTS Price Waterhouse LLP TRUSTEES George Putnam, Chairman William F. Pounds, Vice Chairman Jameson Adkins Baxter Hans H. Estin John A. Hill Ronald J. Jackson Elizabeth T. Kennan Lawrence J. Lasser Robert E. Patterson Donald S. Perkins George Putnam, III A.J.C. Smith W. Thomas Stephens W. Nicholas Thorndike OFFICERS George Putnam President Charles E. Porter Executive Vice President Patricia C. Flaherty Senior Vice President John D. Hughes Senior Vice President and Treasurer Lawrence J. Lasser Vice President Gordon H. Silver Vice President Gary N. Coburn Vice President William J. Curtin Vice President William F. McGue Vice President Joanne M. Driscoll Vice President and Fund Manager William N. Shiebler Vice President John R. Verani Vice President Paul M. O'Neil Vice President Beverly Marcus Clerk and Assistant Treasurer This report is for the information of shareholders of Putnam Money Market Fund. It may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details of sales charges, investment objectives, and operating policies of the fund, and the most recent copy of Putnam's Quarterly Performance Summary. For more information or to request a prospectus, call toll free: 1-800-225-1581. You can also learn more at Putnam Investments' website: http://www.putnaminv.com. Shares of mutual funds are not deposits or obligations of, or guaranteed or endorsed by, any financial institution; are not insured by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any other agency; and involve risk, including the possible loss of the principal amount invested. PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 - -------------------- Bulk Rate U.S. Postage PAID Putnam Investments - -------------------- AN039-36838 11/97 -----END PRIVACY-ENHANCED MESSAGE-----