Putnam
Tax-Exempt
Money Market
Fund
Semiannual
Report
March 31, 1994
For investors seeking
current income
free from federal income
tax, consistent with capital
preservation, stable principal
and liquidity
A member
of the Putnam
Family of Funds
<TABLE>
<CAPTION>
<S> <C>
Contents
2 How your fund performed
3 From the Chairman
4 Report from Putnam Management
Semiannual Report
6 Portfolio of investments owned
10 Financial statements
15 Fund performance supplement
</TABLE>
<PAGE>
How your
fund performed
For periods ended March 31, 1994
<TABLE>
<CAPTION>
Total return* Lipper
Tax Exempt
Money Market Consumer
Fund Fund Average Price Index
<S> <C> <C> <C>
6 months 0.80% 0.93% 1.45%
1 year 1.64 1.91 2.51
3 years 8.05 8.22 9.04
annualized 2.62 2.67 2.93
5 years 20.54 20.58 20.36
annualized 3.81 3.81 3.78
Life-of-fund
(since 10/26/87) 29.30 29.15 27.67
annualized 4.08 4.07 3.87
</TABLE>
<TABLE>
<S> <C> <C> <C>
Distributions(a) Investment
6 months ended Number income Total
March 31, 1994 6 $0.007972 $0.007972
</TABLE>
Current returns at the end of the period
<TABLE>
<CAPTION>
Taxable
Fund equivalents+
<S> <C> <C>
Current 30-day yield 1.67% 2.76%
Current 7-day yield 1.61 2.67
</TABLE>
* Performance data represent past results. Investment return will fluctuate.
(a) For some investors, investment income may also be subject to the
alternative minimum tax.
+ Taxable equivalent rates cited assume the maximum federal tax rate of
39.6%. State and local taxes may also apply. Results for investors subject to
lower tax rates would not be as advantageous, although many such investors
would have the opportunity to receive attractive tax benefits from a fund
investment. Consult your tax advisor for more guidance.
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. However, since the fund's
inception on 10/26/87, no investor has ever lost a penny of principal.
Terms you need to know
Total return is the change in value of an investment from the beginning to
the end of a period, assuming the reinvestment of all distributions.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not reflecting any
sales charge.
Current yield is the rate at which an investment earns current interest
income. The 7- and 30-day yields are the two most common gauges for measuring
money market mutual fund performance.
Taxable equivalent return is the rate at which a taxable investment would
have to generate income to equal the fund's current dividend rate or
yield.
Please see the fund performance supplement on page 15 for additional
information about performance comparisons.
<PAGE>
From the
Chairman
(George Putnam photo)
George Putnam
Chairman of the Trustees
(C) Karsh, Ottawa
Dear Shareholder:
For the semiannual period ended March 31, l994, Putnam Tax Exempt Money
Market Fund once again delivered competitive performance, continuing to
produce a steady stream of tax-free income.
After several months of steadily declining interest rates, the Federal
Reserve staged a preemptive strike against inflation in early February,
increasing the Federal funds rate--the interest rate banks charge each other
for overnight loans. This action effectively raised all short-term interest
rates. Early in the semiannual period, in anticipation of the Fed's move,
Fund Manager Lindsey Callen began shortening maturities on securities in the
portfolio and increasing the fund's weightings in floating-rate securities.
This strategy allowed your fund to take advantage of higher yields.
Although inflation currently remains under control, there is a good chance
that the Fed may raise rates again in another effort to curb inflation
threats before they happen. In the coming months, Lindsey will work to
position the portfolio to take advantage of interest rate movements. At the
same time, we will continue our commitment to maintaining the fund's superior
quality and stability.
Respectfully yours,
(George Putnam Signature)
George Putnam
May 18, 1994
<PAGE>
Report from
Putnam Management
For the six-month period ended March 31, l994, Putnam Tax Exempt Money Market
Fund reported solid performance. As the table on the inside front cover
indicates, your fund's 30-day current yield of 1.67% is the equivalent of a
2.76% yield on a taxable investment for investors in the maximum federal
income tax bracket of 39.6%. Those in lower brackets would also enjoy tax
benefits, though to a lesser extent.
Capitalizing on higher interest rates After interest rates sank to historic
lows this past fall, we expected a reversal of this trend. Early in the
period, we began positioning the fund to take advantage of incrementally
higher yields. To this end, we decreased the average maturity of the
portfolio, so that we would not be locked into lower-coupon securities in a
rising interest rate environment. We also increased the number of floating-
rate securities in the portfolio. Interest rates on these securities are
reset at fixed intervals (weekly or monthly), so that when market rates rise,
the fund can benefit. By the end of the period, we had increased the
floating-rate securities position in the portfolio to 65%. The remainder of
the portfolio was invested in fixed-rate notes and tax-exempt commercial
paper.
Supply/demand dynamics During the six-month period, the demand for tax-
exempt securities increased, as investors sought to shelter some of their
income from higher federal income taxes. At the same time, supply of tax-
exempt money market securities was relatively weak. This is partly because
many state governments have become more fiscally prudent, and as they tighten
controls on their budgets, they issue fewer short-term notes to fund
municipal projects. They have also taken advantage of low long-term rates to
lengthen their issuance periods. In addition, the bulk of tax-exempt money
market instruments are issued in the summer. While we anticipate new issuance
to be somewhat lower than in past seasons, over the next several months
Putnam's credit analysts will be targeting and evaluating securities from a
wide range of states, municipalities and other issuers to find the most
attractive investments for your Fund.
Maintaining portfolio quality Superior portfolio quality is one of the most
important attributes of your fund. Ideally, every holding must be rated in
one of the two highest categories by at least two nationally recognized
rating services.
<PAGE>
* If only one rating service has rated the security, it must be in one of the
two highest categories rated by that service.
* If the securities are unrated, Putnam management must judge them to be of
equivalent quality.
In addition, we monitor the quality of each investment carefully for as long
as it remains in the portfolio, making sure it provides the right balance of
attractive yield and relative stability. We also scrutinize all kinds of
market trends and factors that could affect the financial strength of each
security's issuer in any way, working to ensure the continued high credit
quality of every portfolio holding.
Looking ahead A continuation of the strengthening economy could prompt the
Federal Reserve to raise rates again in order to keep a tight rein on
inflation. The current goal appears to be a "neutral" Federal funds rate,
usually defined as 1% over the inflation rate. Even if inflation remains
relatively low (at or below 3%), this could mean substantially higher
short-term rates in the next several months.
Over the next few months, we will be closely monitoring economic developments
in an effort to determine the trend of interest rates. We will also be
preparing the fund to be in the most advantageous position to benefit from
that trend.
Performance comparisons (3/31/94)
<TABLE>
<CAPTION>
Current Net return
return after taxes*
<S> <C> <C>
Passbook savings 2.00% 1.21%
Taxable money market
fund 7-day yield 2.93% 1.77%
3-month CD 2.60% 1.57%
Putnam Tax Exempt
MM 7-day yield 1.61% 1.61%
</TABLE>
*Assumes maximum federal income tax bracket of 39.6%. State and local income
taxes, and for some investors, the federal alternative minimum tax, will
apply. The principal value of money market mutual funds is uninsured and
designed to be fixed while distributions vary daily. The principal value on
passbook savings and bank CDs are generally insured up to certain limits by
state and federal agencies. Unlike money market mutual funds, substantial
penalties may apply to early withdrawals of bank CDs. Performance data
represent past performance. Investment returns will fluctuate. Sources: Bank
of Boston (passbook savings). Bank Rate Monitor (3-month CDs). IBC/Donoghue's
Money Fund Report (taxable money market fund 7-day yield).
<PAGE>
Portfolio of
investments owned
March 31,1994 (Unaudited)
Municipal Bonds and Notes (86.6%)(a)
<TABLE>
<CAPTION>
Principal Amount Ratings (b) Value
<S> <C> <C> <C>
California (13.2%)
$1,000,000 CA Higher Ed. Loan Auth.
Inc. Student Loan
Variable Rate Demand
Notes (VRDN) (Industrial
Bank of Japan LOC) 2.9s,
8/1/03 VMIG1 $ 1,000,000
3,100,000 CA State Rev. Antic.
Notes, 3-1/2s, 6/28/94 MIG1 3,106,644
1,000,000 Fontana, Certif. of
Participation VRDN
(Sakura Bank, Ltd. LOC),
2.85s, 7/1/21 A-1 1,000,000
3,495,000 Los Angeles Cnty., Tax &
Revenue Antic. Notes
(TRAN), Ser. A., 3s,
6/30/94 SP1+ 3,497,604
4,000,000 Pomona, Redev. Agcy.
Multi-Fam. VRDN (Bauer
Group Apts.) 2-1/2s,
12/1/07 A-1+ 4,000,000
1,000,000 San Diego Cnty., TRAN Ser.
A. 3-1/4s, 7/29/94 MIG1 1,001,672
13,605,920
Colorado (0.8%)
800,000 Lakewood, Multi-Fam.
Hsg. VRDN (Dai Ichi Kango
Bank LOC) (St. Moritz and
Diamond Head), 2.65s,
10/1/07 VMIG1 800,000
Delaware (2.0%)
2,000,000 Wilmington, Delaware
Hospital VRDN (Societe
Generale LOC)
(Franciscan Hlth.
System), Ser. A, 2.7s,
7/1/11 VMIG1 2,000,000
<PAGE>
District of Columbia (1.7%)
$1,765,000 District of Columbia
Hosp. Rev. Bonds
(Medlantic Healthcare),
Ser. A, Municipal Bond
Insurance Association
(MBIA), 3s, 8/15/94 AAA $ 1,765,000
Georgia (3.4%)
2,500,000 Atlanta, Urban Res. Fin.
Auth. Multi-Fam. Mtge.
VRDN (Sanwa Bank LOC)
(Rental-West Paces),
Ser. A, 2.45s, 12/1/08 A-1+ 2,500,000
1,000,000 Dekalb Co., Hsg. Auth.
VRDN (Bank of Montreal
LOC), 2.35s, 12/1/07 A-1+ 1,000,000
3,500,000
Illinois (4.7%)
2,000,000 Elmhurst, VRDN
(Commonwealth Bank of
Australia LOC)
(Joint Accreditation
Commission), 2.4s,
7/1/18 VMIG1 2,000,000
800,000 IL. Hlth. Fac. Auth. VRDN
(Societe Generale LOC)
(Midwest Cambridge
Project), 2.65s, 1/1/15 P-1 800,000
2,000,000 IL. State General
Obligation (G.O.)
Certif. 3-1/4s, 4/15/94 SP1+ 2,000,618
4,800,618
<PAGE>
Indiana (2.0%)
2,000,000 Mount Vernon, Poll.
Control VRDN (Southern IN
Gas & Elec. Co.), Ser. A,
2.7s, 5/1/15 AA 2,000,000
Iowa (6.1%)
$1,140,000 Des Moines, Private
College VRDN (Lloyds Bank
LOC) (U. of Osteopathic
Medicine & Hlth.), 2.65s,
5/15/15 A-1+ $1,140,000
2,000,000 Iowa State TRAN (Union
Bank of Switzerland LOC),
Ser. A, 3-1/4s, 6/30/94 SP1+ 2,002,331
3,095,000 Salix, Mid-West Pwr.
VRDN, 2.4s, 5/1/23 VMIG1 3,095,000
6,237,331
Kentucky (4.4%)
1,514,000 Jefferson Cnty., Indl.
Dev. VRDN (Chemical Bank
LOC) (Belknap Inc.
Project), 2.6s, 12/1/14 A-1 1,514,000
3,000,000 Ohio Cnty., Kentuckty
Poll. Control VRDN
(Chemical Bank LOC), 3s,
10/1/15 P-1 3,000,000
4,514,000
Louisiana (2.4%)
1,300,000 LA State Recvy. Dist.
Sales Tax VRDN (Swiss Bank
Corp. LOC), MBIA, 2.65s,
7/1/98 VMIG1 1,300,000
1,170,000 Orleans, Levee Dist.
Impt. VRDN (Fugi Bank
LOC), 3.95s, 11/1/14 VMIG1 1,170,000
2,470,000
Maryland (2.0%)
2,000,000 Baltimore, Hwy. User Rev.
Antic Notes (RAN) 3-1/2s,
6/28/94 MIG1 2,001,753
Massachusetts (3.9%)
4,000,000 MA State G.O. Bonds
(National Westminster
Bank PLC LOC), Ser. B,
VRDN, 2.65s, 12/1/97 VMIG1 4,000,000
<PAGE>
Michigan (1.9%)
$1,900,000 MI State Job Dev. Auth.
VRDN (First Bank N.A.
LOC), 2.6s, 12/1/14 A-1 $1,900,000
Minnesota (1.8%)
400,000 Alberta Lea, Indl. Dev.
VRDN (Chemical Bank LOC)
(Joyce Intl. Inc.
Project), 2.6s, 7/1/94 A-1 400,000
1,500,000 St. Louis Park, Indl. Dev.
VRDN (Banque Paribas LOC)
(Unicare Home INC.
Project), 2.55s, 8/1/14 A-1 1,500,000
1,900,000
Mississippi (1.4%)
1,400,000 Jackson Cnty, Poll.
Control VRDN (Chevron USA
Inc. Project), 2.55s,
12/1/16 P-1 1,400,000
New Hampshire (4.6%)
3,700,000 NH Higher Ed. & Hlth. Fac.
Auth. VRDN (VHA New
England Inc.), Ser. F,
American Municipal Bond
Assurance Corp., 2.2s,
12/1/25 AAA 3,700,000
1,000,000 NH State Bus. Fin. Auth.
Poll. Control VRDN,
2.95s, 11/1/20 VMIG1 1,000,000
4,700,000
New York (1.9%)
2,000,000 NY State Energy Research
& Dev. Auth. Poll. Control
VRDN (Toronto Dominion
Bank LOC) (Niagara Mohawk
Pwr.), Ser. A, 2.65s,
7/1/15 A-1+ 2,000,000
Ohio (1.9%)
$2,000,000 Evendale, Indl. Dev. VRDN
(ABN-Armo Bank LOC) (SHV
Real Estate Inc.), 2.2s,
9/1/15 A-1 $ 2,000,000
<PAGE>
Oklahoma (7.9%)
1,695,000 OK Cnty., Indl. Auth. VRDN
(Texas Commerce Bank NA
(LOC) (Fred Jones Mfg. Co.
Project), 2-3/4s,
10/1/21 A-1 1,695,000
2,000,000 OK School Dist. Cash
Managment Certif. of
Participation 3.18s,
6/29/94 SP1+ 2,002,063
3,000,000 OK State Wtr. Res. Board
State Loan Program VRDN
Ser. A. 2.85s, 9/1/23 A-1+ 3,000,000
1,465,000 Tulsa Cnty. Indl. Auth.
Hlth. Care VRDN (Laureate
Psychiatric Project),
2.4s, 12/15/08 A-1+ 1,465,000
8,162,063
Pennsylvania (2.7%)
2,800,000 Allegheny Cnty., Hosp.
Dev. Auth. VRDN
(Presbyterian Hlth.
Ctr.), Ser. C, MBIA,
2-1/4s, 3/1/20 VMIG1 2,800,000
South Dakota (2.9%)
2,940,000 Rapid City, Economic Dev.
VRDN (Bayerische
Vereinsbank AG LOC)
(Civic Ctr. Assn.
Partnership), 2.45s,
12/1/16 P-1 2,940,000
<PAGE>
Texas (5.5%)
$2,500,000 Bexar Cnty. Hsg. Fin.
Corp. VRDN (Sakura Bank,
Ltd LOC), Ser. A, 2.65s,
11/1/06 A-1 $ 2,500,000
1,250,000 Lower Neches Valley,
Poll. Control VRDN
(Chevron Corp. Project),
2.7s,
2/15/17 A-1+ 1,250,000
1,900,000 North Central Hlth. Fac.
Dev. Corp., Hosp. VRDN
(Presbyterian Med.
Ctr.), Ser. D, MBIA,
2.65s, 12/1/15 A-1 1,900,000
5,650,000
Utah (1.9%)
2,000,000 Salt Lake Cnty.
Multi-Fam. Hsg. VRDN
(Dai-Ichi Kango Bank LOC)
(James Pointe Apts.
Project), Ser. 87-A,
2.45s, 10/1/16 VMIG1 2,000,000
Washington (0.8%)
770,000 Washington State Hsg.
Fin. Auth. VRDN Ser. D,
2.8s, 1/1/26 SP1+ 770,000
Wisconsin (4.8%)
2,900,000 Alma, Poll. Control VRDN
(Rabo Bank LOC)
(Dairyland Pwr. Coop.
Project), 2.55s, 2/1/15 P-1 2,900,000
2,000,000 WI State TRAN, 3-1/4s,
6/15/94 SP1+ 2,001,473
4,901,473
Total Municipal Bonds and Notes
(cost $ 88,818,158) $88,818,158
<PAGE>
Municipal Commercial Paper Chesterfield Cnty., VA
(12.7%) (a) Rev. Bonds (Bank of New
$2,500,000 York, Nations Bank,
Mitsubishi Bank, Sanwa
Bank Liquidity), 2.4s,
4/7/94 VMIG1 $ 2,500,000
2,500,000 GA Muni Electric Auth.
Rev. Bonds (Credit Suisse
Group LOC), 2s, 4/4/94 AAA 2,500,000
500,000 Lone Star, TX Arpt. Impt.
Auth. Rev. Bonds (Bank of
New York LOC) (American
Airlines, Inc.), Ser.
B-2, 2.45s, 4/11/94 VMIG1 500,000
1,600,000 Orange Cnty., CA Apt. Rev.
Bonds (Dai-Ichi Kango
Bank LOC) (Irvine Co.),
2.45s, 4/4/94 VMIG1 1,600,000
1,900,000 Rochester, MN Hlth. Care
Fac. Rev. Bonds (May
Foundation/Mayo Med.
Ctr.), Ser. F, 2-1/2s,
5/16/94 A-1+ 1,900,000
3,000,000 Texas State G.O. Bonds,
2.4s, 6/7/94 VMIG1 3,000,000
1,100,000 W. Orange, Tax District
Rev. Bonds (Societe
Generale LOC) (Fl.
Memorial Hosp.), 2 1/2s,
6/14/94 VMIG1 1,100,000
Total Municipal Commercial Paper
(cost $13,100,000) $ 13,100,000
Total Investments
(cost $101,918,158)(c) $101,918,158
</TABLE>
(a) Percentages indicated are based on total net assets of $102,538,566,
which correspond to a net asset value per share of $ 1.00.
(b) The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at March 31, 1994 for the securities listed.
Ratings are generally ascribed to securities at the time of issuance. While
the agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings do not necessarily represent what the
agencies would ascribe to these securities at March 31, 1994. Securities
rated by Putnam are indicated by "/P" and are not publicly rated.
Moody's Investors Services, Inc. and Standard & Poor's Corp. are the leading
independent rating agencies for debt securities. Moody's uses the designation
"Moody's Investment Grade," or "MIG," for most short-term municipal
obligations, adding a "V" ("VIMIG") for bonds with a demand or variable
feature; the designation "P" is used for tax-exempt commercial paper.
Standard & Poor's uses "SP" for notes maturing in three years or less, "A"
for bonds with a demand or variable feature.
Moody's Investors Services, Inc.
MIG1/VMIG1 = Best quality; strong protection of cash flow, superior liquidity
and broad access to refinancing
MIG2/VMIG2 = High quality; ample protection of cash flow, liquidity support
and ability to refinance
AAA = Capacity to pay interest and repay principal is extremely strong
AA = Strong capacity to pay interest and repay principal and differs from the
higher rated issues only in a small degree
Standard & Poor's Corp.
P-1 = Superior capacity for repayment
P-2 = Strong capacity for repayment
SP-1 = Overwhelming safety characteristics
SP-2 = Strong capacity to pay principal and interest
A-1+ = Overwhelming degree of credit protection
A-1 = Strong degree of safety
A-2 = Considered strong but lacks solid strength for timely repayment
(c) The aggregate identified cost on a tax basis is the same.
The rates shown on Variable Rate Demand Notes (VRDN) are the current interest
rates at March 31, 1994, which are subject to change based on the terms of
the security.
The Fund had the following industry group concentrations greater than 10% on
March 31, 1994 (as a percentage of net assets):
Hospital/Healthcare 17.0%
Housing 14.8%
Pollution Control 13.2%
<PAGE>
Statement of
assets and liabilities
March 31, 1994 (Unaudited)
<TABLE>
<S> <C> <C> <C>
Assets Investments in securities, at amortized cost (Note 1) $101,918,158
Cash 3,122,476
Interest and other receivables 615,790
Receivable for shares of the Fund sold 858,496
Receivable for securities sold 14,639
Total assets 106,529,559
Liabilities Distributions payable to shareholders $ 10,157
Payable for securities purchased 2,804,898
Payable for shares of the Fund repurchased 1,023,790
Payable for compensation of Manager (Note 2) 95,263
Payable for administrative services (Note2) 2,951
Payable for compensation of Trustees (Note 2) 2,757
Payable for investor servicing and custodian fees (Note
2) 26,169
Other accrued expenses 25,008
Total Liabilities 3,990,993
Net assets $102,538,566
Represented by Paid-in capital (Notes 4 and 5) $102,538,566
Net asset value, offering and redemption price per share ($102,538,566 divided by
102,538,566 shares) $ 1.00
</TABLE>
<PAGE>
Statement of
operations
Six months ended March 31, 1994 (unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Tax exempt interest income $1,002,720
Expenses:
Compensation of Manager (Note 2) $178,928
Investor servicing and custodian
fees (Note 2) 80,567
Compensation of Trustees (Note 2) 5,535
Reports to shareholders 9,972
Auditing 7,231
Legal 5,784
Postage 9,176
Administrative services (Note 2) 3,092
Distribution fees (Note 2) 18,293
Other expenses 30,973
Total expenses 349,551
Net investment income 653,169
Net increase in net assets
resulting from operations $ 653,169
</TABLE>
Statement of
changes in net assets
<TABLE>
<CAPTION>
Six months ended Year ended
March 31 September 30
<S> <C> <C>
1994* 1993
Increase (Decrease)
in net assets
Operations:
Net investment income $ 653,169 $ 1,467,365
Net realized gain on
investments -- 3,603
Net increase in net
assets resulting
from operations 653,169 1,470,968
Distributions to
shareholders from:
Net investment income (653,169) (1,470,968)
Increase (Decrease)
from capital share
transactions
(Note 4) 21,462,782 (744,101)
Total increase
(decrease) in net
assets 21,462,782 (744,101)
Net assets
Beginning of period 81,075,784 81,819,885
End of period $102,538,566 $81,075,784
</TABLE>
*Unaudited.
<PAGE>
Financial
highlights*
(For a share
outstanding
throughout the period)
<TABLE>
<CAPTION>
For the period
October 26, 1987
Six Months (commencement
ended of operations) to
March 31 Year ended September 30 September 30
1994** 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C>
Investment
Operations
Net Investment
Income .0080 .0184 .0297(a) .0462(a) .0548(a) .0578(a) .0424(a)
Net Realized Gain (Loss) on
Investments -- -- -- (.0001) -- -- .0002
Total from Investment
Operations .0080 .0184 .0297 .0461 .0548 .0578 .0426
Total Distributions (.0080) (.0184) (.0297) (.0461) (.0548) (.0578) (.0426)
Total Investment Return at
Net Asset Value (%) (b) 1.60(c) 1.85 3.02 4.74 5.61 5.92 4.68(c)
Net Assets, End of Period
(in thousands) $102,539 $81,076 $81,820 $100,077 $111,705 $98,867 $83,336
Ratio of Expenses to
Average Net Assets (%) .88(c) .99 .87(a) .79(a) .68(a) .69(a) .62(a)(c)
Ratio of Net Investment
Income to Average Net
Assets (%) 1.64(c) 1.85 2.99(a) 4.62(a) 5.45(a) 5.79(a) 4.62(a)(c)
</TABLE>
* Financial highlights for periods ended through September 30, 1992 have
been restated to conform with requirements issued by the SEC in April
1993.
** Unaudited
(a) Reflects a voluntary expense limitation and, during the period ended
September 30, 1988, a waiver of a portion of distribution fees in effect
during the period. As a result of such limitation and waiver, expenses of
the Fund for the years ended September 30, 1992, 1991, 1990, 1989 and the
period ended September 30, 1988 reflect per share reductions of
approximately $0.0029, $0.0030, $0.0034, $0.0035 and $0.0047,
respectively.
(b) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
(c) Annualized.
<PAGE>
Notes to
financial statements
March 31, 1994 (unaudited)
Note 1 Significant accounting policies
The Fund is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company. The Fund seeks as
high a level of current income exempt from federal income tax as is
consistent with maintenance of liquidity and stability of principal by
investing primarily in a diversified portfolio of short-term tax exempt
securities.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A) Security valuations 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) Security transactions Security transactions are accounted for on the trade
date (date the order to buy or sell is executed).
C) 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 subject to Section 4982 of the Internal Revenue
Code of 1986. Therefore, no provision has been made for federal or excise
taxes on income and capital gains.
At September 30, 1993, the Fund had a capital loss carryover of approximately
$2,109 which may be available to offset realized capital gains to the extent
provided by regulations, this amount will expire September 30, 2000. To the
extent that capital loss carryovers are used so offset realized capital
gains, it is unlikely capital gains will be distributed to shareholders,
since any distribution might be taxable as ordinary income.
D) Interest income and distributions to shareholders Interest is recorded on
the accrual basis. Income distributions (and distributions of capital gains,
if any) are recorded daily by the Fund and distributed monthly to the
shareholders.
Note 2 Management fee, administrative services, and other transactions
Compensation of Putnam Investment Management, Inc., "Putnam Management," the
Fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc., 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: 0.45% of the first $500 million of average net assets, 0.35% of the
next $500 million, 0.30% of the next $500 million, and 0.25% of any amount
over $1.5 billion, subject to reduction in any year by the amount of certain
brokerage commissions and fees (less expenses) received by affiliates of the
Manager on the Fund's portfolio transactions.
The Fund also reimburses the Manager 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. For the six months
ended March 31, 1994, the Fund paid $3,092 for these services.
Trustees of the Fund receive an annual Trustee's fee of $440 and an
additional fee for each Trustees' meeting attended. Trustees who are not
interested persons of the Manager and who serve on committees of the Trustees
receive additional fees for attendance at certain committee meetings.
Custodial functions for the Fund are provided by Putnam Fiduciary Trust
Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing
agent functions are provided by Putnam Investor Services, a division of PFTC.
Fees paid for these investor servicing and custodial functions for the six
months ended March 31, 1994 amounted to $80,567.
Investor servicing and custodian fees reported in the statement of operations
for the six months ended March 31, 1994 have been reduced by credits allowed
by PFTC.
Pursuant to the Fund's underwriting agreement and to a distribution plan
adopted under Rule 12b-1 of the Investment Company
<PAGE>
Act of 1940, the Fund pays Putnam Mutual Funds Corp., a wholly-owned
subsidiary of Putnam Investments, Inc., a quarterly distribution fee at the
annual rate of 0.10% of the average broker net assets of the Fund. For the
six months ended March 31, 1994, the Fund paid distribution fees in the
amount of $18,293.
Note 3 Purchases and sales of securities
During the six months ended March 31, 1994, purchases and sales (including
maturities) of investment securities (all short-term obligations) aggregated
$214,422,632 and $195,600,000, 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 March 31, 1994, 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:
<TABLE>
<CAPTION>
Six Months ended Year ended
March 31 September 30
1994 1993
<S> <C> <C>
Shares sold 238,363,808 324,783,397
Shares issued in connection with
reinvestment of distributions 590,505 1,511,810
238,954,313 326,295,207
Shares repurchased (217,491,531) (327,039,308)
Net increase (decrease) 21,462,782 (744,101)
</TABLE>
Note 5 Reclassification of Capital Accounts
Effective October 1, 1993, The Putnam Tax Exempt Money Market Fund has
adopted the provisions of AICPA Statement of Position (SOP) 93-2
"Determination, Disclosure and Financial Statement Presentation of Income,
Capital Gain and Return of Capital Distributions, by Investment Companies."
The purpose of this SOP is to report the accumulated net investment income
(loss) and accumulated net realized gain (loss) accounts in such a manner at
to approximate amounts available for future distributions (or to offset
future realized capital gains) and to achieve uniformity in the presentation
of distributions by investment companies.
There were no cumulative adjustments, as a result of the SOP, to
undistributed net investment income or accumulated net realized gains.
Any adjustments would represent the cumulated amounts necessary to report
balances through September 30, 1993, the close of the Fund's most recent
fiscal year end for financial reporting and tax purposes.
<PAGE>
Note 6 Proposed Merger
If approved at the shareholder meeting on June 2, 1994, Putnam Tax Exempt
Money Market Fund will acquire the assets of Putnam California Tax Exempt
Money Market Fund and Putnam New York Tax Exempt Money Market Fund in
exchange for the assumption of the acquired funds' liabilities and for a
number of Tax Exempt Money Market shares equal in value to the value of the
net assets of California Tax Exempt Money Market Fund and New York Tax Exempt
Money Market Fund transferred to Tax Exempt Money Market Fund.
Fund
performance
supplement
Putnam Tax Exempt Money Market Fund is a portfolio managed for current income
free from federal income taxes, consistent with capital preservation, stable
principal and liquidity by investing primarily in a diversified portfolio of
short-term tax-exempt securities.
The Lipper Tax Exempt Money Market Fund Average, used for performance
comparison purposes, is an arithmetic average of the total return of all the
tax exempt money market mutual funds tracked by the 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.
The Consumer Price Index is a commonly used measure of inflation; it does not
represent an investment return.
The fund performance supplement has been prepared by Putnam Management to
provide additional information about the fund and the indexes used for
performance comparisons. The information is not part of the portfolio of
investments owned or the financial statements.
<PAGE>
Putnam
Tax-Exempt
Money Market
Fund
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
Investor servicing agent
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
1-800-225-1581
Custodian
Putnam Fiduciary
Trust Company
Legal Counsel
Ropes & Gray
(Dalbar Logo)
Putnam Investor Services
has received the DALBAR
award each year since
the award's 1990 inception.
In more than 10,000 tests
of 38 shareholder
service components,
Putnam outperformed
the industry standard
in every category.
A25-11893
<PAGE>
Officers
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
James P. Erickson
Vice President
Linsey Callen
Vice President
and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul O'Neil
Vice President
John D. Hughes
Vice President
and Treasurer
Beverly Marcus
Clerk and
Assistant Treasurer
Trustees
George Putnam, Chairman,
William F. Pounds, Vice Chairman,
Jameson Adkins Baxter, Hans H. Estin,
John A. Hill, Elizabeth T. Kennan,
Lawrence J. Lasser, Robert E. Patterson,
Donald S. Perkins, George Putnam, III,
A.J.C. Smith, W. Nicholas Thorndike
This report is for the information of shareholders of Putnam Tax Exempt 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.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
Paid
Boston, MA
Permit No. 53749
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED
AND EDGAR-FILED TEXTS:
(1) Bold and italic typefaces are displayed in normal type.
(2) Headers (e.g., the name of the fund) and footers (e.g., page
numbers and "The accompanying notes are an integral part of these
financial statements") are omitted.
(3) Certain tabular and columnar headings and symbols are displayed
differently in this filing.
(4) Bullet points and similar graphic signals are omitted.
(5) Page numbering is omitted.
(6) Dagger footnote symbol replaced with plus sign (+).
