PUTNAM
TAX EXEMPT
MONEY MARKET
FUND
SEMIANNUAL REPORT
MARCH 31, 1995
[LOGO]
BOSTON * LONDON * TOKYO
<PAGE>
PERFORMANCE HIGHLIGHTS
"Money funds have become a competitive instrument in the
investment world,
and they're going to remain competitive for a while," says
Walter Frank,
chief economist for Money Fund Report, an Ashland,
Massachusetts, newsletter.
- -- The Wall Street Journal, April 5, 1995
Performance should always be considered in light of a fund's
investment
strategy. Putnam Tax Exempt Money Market Fund is designed for
investors
seeking current income exempt from federal income taxes,
consistent with
capital preservation, stable principal and liquidity.
SEMIANNUAL RESULTS AT A GLANCE
<TABLE><CAPTION>
<S> <C>
- --------------------------------------------------------
FUND
SHARES
TOTAL RETURN: AT NAV
- --------------------------------------------------------
<S> <C> <C> <C>
(change in value during
period plus reinvested
distributions)
6 months ended 3/31/95 1.51%
- --------------------------------------------------------
DISTRIBUTIONS: NO. INCOME TOTAL
- --------------------------------------------------------
6 $0.015019 $0.015019
CURRENT RETURN:
- --------------------------------------------------------
End of period
Current 7-day yield(1) 3.45%
Current 30-day yield(1) 3.15
Taxable equivalent(2)
7-day 5.71
30-day 5.22
- --------------------------------------------------------
<FN>
Performance data represent past results and are no assurance of
future
performance. For performance over longer periods, see page 8.
(1)The 7-day
and 30-day yields are the two most common gauges for measuring
money market
mutual fund performance. (2)Assumes maximum 39.6% federal tax
rate. Results
for investors subject to lower tax rates would not be as
advantageous. For
some investors, investment income may also be subject to the
federal
alternative minimum tax.
</TABLE>
<PAGE>
FROM THE CHAIRMAN
[PHOTO OF GEORGE PUTNAM]
(C) KARSH, OTTAWA
DEAR SHAREHOLDER:
YIELDS ON THE SHORT-TERM TAX-FREE SECURITIES IN WHICH PUTNAM
TAX EXEMPT MONEY
MARKET FUND INVESTS BENEFITED FROM THE FEDERAL RESERVE BOARD'S
INCREASES IN
SHORT-TERM INTEREST RATES OVER THE PAST SEVERAL MONTHS.
SLOWLY BUT SURELY, OPTIMISM IS RETURNING TO THE MARKETS AS
INVESTORS FINALLY
BEGIN TO RECOGNIZE THAT THE FED'S ACTIONS ARE HAVING THE
DESIRED DAMPENING
EFFECT ON INFLATION WITHOUT CHOKING OFF ECONOMIC GROWTH.
AS YOUR FUND MOVES INTO THE SECOND HALF OF FISCAL 1995, FUND
MANAGER LINDSEY
CALLEN IS OPTIMISTIC ABOUT PROSPECTS FOR THE SHORT-TERM MONEY
MARKETS, AS
WELL AS FOR YOUR FUND. IN GENERAL, THE ECONOMY REMAINS STRONG
AND INTEREST
RATES APPEAR TO BE STABILIZING.
IN THE REPORT THAT FOLLOWS, LINDSEY REVIEWS THE FISCAL YEAR'S
FIRST HALF AND
OFFERS HER INSIGHTS ABOUT THE MONTHS AHEAD.
RESPECTFULLY YOURS,
[SIGNATURE]
GEORGE PUTNAM
CHAIRMAN OF THE TRUSTEES
MAY 17, 1995
<PAGE>
REPORT FROM THE FUND MANAGER
LINDSEY M. CALLEN
For the six months ended March 31, 1995, Putnam Tax Exempt
Money Market Fund
once again delivered a steady stream of tax-exempt income while
maintaining
its hallmarks of superior quality and a stable $1.00 share
price. The higher
short-term interest rates we have seen since early in 1994
prevailed
throughout the period, providing a favorable investment climate
for your
fund.
During the period, data from key sectors like manufacturing and
employment
demonstrated ongoing improvement in the U.S. economy. This
sustained strength
motivated the Federal Reserve Board to continue its anti-
inflation policy by
raising short-term interest rates twice more, in November 1994
and again in
February 1995. However, by early March, some weakness began to
emerge in
housing sales and consumer spending. In response, the Fed did
not raise
interest rates at its March meeting, instead adopting a "wait-
and-see"
attitude until the economy's signals become more definitive.
SEEKING VALUE, SCRUTINIZING QUALITY AMID TIGHT SUPPLY
Because the fiscal year for many municipalities begins in June
or July, the
supply of new-issue tax-exempt securities is usually at a low
ebb between
January and June of each year. The pattern has repeated itself
so far in
1995. In addition, many investors have been re-assessing the
credit quality
of their portfolios in the wake of the Orange County,
California, bankruptcy,
which rocked the entire U.S. tax-exempt securities market in
early December
1994.
Your fund has always emphasized superior quality, and we will
be even more
demanding when scrutinizing potential investments in the
future. Currently,
up to 80% of your fund's investments are insured or backed by
bank letters of
credit. These features add a significant measure of quality
assurance to
<PAGE>
even those issues rated in the highest categories by nationally
recognized
rating services, making many of our holdings among the highest-
quality
securities available. We intend to maintain the portfolio's
high percentage
of insured and bank-backed securities going forward, and may
even expand it,
should appropriate investment opportunities arise.
The combination of reduced securities supply and the cautious,
re-evaluatory
stance of investors produced a rather quiet period for the
market. While
prices of tax-exempt securities fell initially after Orange
County announced
its bankruptcy, the market rebounded after January.
Nonetheless, activity
remained quite low for the rest of the period. In this
environment, we
purchased few new securities and concentrated instead on
managing the
portfolio to maximize its income potential in the current
interest-rate
climate.
CREDIT-CONSCIOUSNESS HERALDS MARKET CHANGES
It appears that issuers of tax-exempt money market securities
may face
stricter disclosure and credit quality requirements in the
fiscal year ahead.
While simply-structured, traditional tax-exempt money market
instruments have
always been the
PERFORMANCE COMPARISONS (3/31/95)
<TABLE><CAPTION>
<S> <C> <C>
CURRENT TAXABLE
RETURN*EQUIVALENT
- ---------------------------------------------------------------
- ----------
PASSBOOK SAVINGS ACCOUNT 2.17% 2.17%
- ---------------------------------------------------------------
- ----------
TAXABLE MONEY MARKET FUND 7-DAY YIELD5.58 5.58
- ---------------------------------------------------------------
- ----------
3-MONTH CERTIFICATE OF DEPOSIT 4.20 4.20
- ---------------------------------------------------------------
- ----------
PUTNAM TAX EXEMPT MONEY MARKET FUND (7-DAY YIELD)
- ---------------------------------------------------------------
- ----------
CLASS A 3.45 5.71
- ---------------------------------------------------------------
- ----------
<FN>
* The principal 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 bank CDs are
generally insured up
to certain limits by state and federal agencies. Unlike money
market funds,
early withdrawals from bank CDs may be subject to substantial
penalties.
Sources: Bank of Boston (passbook savings), Bank Rate Monitor
(3-month CDs),
IBC/Donaghue's Money Fund Report (taxable money market fund 7-
day yield).
</TABLE>
<PAGE>
mainstay of your fund's portfolio, in the past few years many
comparable
funds had begun to purchase derivative securities in order to
reach for
additional income. Unfortunately for them, the value of many of
these
securities plummeted when interest rates rose. This caused
liquidity problems
for many funds and contributed to Orange County's problems.
Now, many investors have come to realize the wisdom of your
fund's
conservative approach. In fact, even traditional instruments
are now being
scrutinized more closely for credit quality. In the next round
of securities
issuance, many municipalities may be forced to provide
additional quality
assurances such as bank letters of credit or to offer higher
rates of
interest in order to attract investors. In this newly credit-
conscious
environment, we will be redoubling our efforts to find well-
valued securities
that meet our strict criteria for quality, liquidity, and price
sensitivity.
STAYING NEUTRAL AND FLEXIBLE
With the pace of interest-rate increases slowing down in the
past six months
and their future direction somewhat uncertain, we have begun to
lengthen the
average maturity of the portfolio slightly. This places the
fund in a more
neutral position, as opposed to the more aggressive shorter
average maturity
we had adopted when interest rates were moving steadily upward.
We have also
begun to re-evaluate our floating-rate securities position,
which was
developed to maximize the fund's income when interest rates
were rising
rapidly. Once the supply of tax-exempt securities increases, we
will target
those floating-rate securities whose yields reset every three
months rather
than on a weekly basis. These moves are designed to help the
fund benefit
from potential interest rate increases while protecting it from
any declines
that might occur as the market adjusts to economic change.
<PAGE>
OUR OUTLOOK
We share the opinion of the Federal Reserve's Board of
Governors that it is
too early to tell whether the economy is indeed slowing down or
simply taking
a breather. Some weakness has emerged, although one or two
months of data do
not make a trend. The interest-rate cycle seems to be
approaching its peak,
yet rates are not excessively high and could remain at their
current levels
for some time. The supply of tax-exempt money market securities
remains
extremely low, as befits these months prior to the beginning of
the new
fiscal year for most municipalities.
Given these circumstances, we are keeping the fund flexible. We
expect to
maintain a neutral average portfolio maturity and to continue
taking
advantage of potentially higher interest rates through a
position in
floating-rate securities. Meanwhile, we believe our focus on
traditional
high-quality money market instruments should enable the fund to
maintain the
stability that is most shareholders' top priority.
[FN]
The views expressed in this report are exclusively those of
Putnam
Management, and are not meant as investment advice. Although
the described
holdings were viewed favorably as of 3/31/95, there is no
guarantee that the
fund will continue to hold these securities in the future. Past
performance
is no guarantee of future results.
<PAGE>
PERFORMANCE SUMMARY
This section provides, at a glance, information about your
fund's
performance. 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 back into the fund. We show total
return in two
ways: on a cumulative long-term basis and on average how the
fund might have
grown each year over varying periods. For comparative purposes,
we show how
the fund performed relative to appropriate indexes and
benchmarks.
TOTAL RETURN FOR PERIODS ENDED 3/31/95
<TABLE><CAPTION>
<S> <C> <C> <C>
LIPPER
FUND TAX EXEMPT CONSUMER
SHARES MONEY MARKET PRICE
AT NAV FUND AVERAGE INDEX
- ---------------------------------------------------------------
- ----------------
6 months 1.51% 1.54% 1.34%
- ---------------------------------------------------------------
- ----------------
1 year 2.65 2.68 2.85
- ---------------------------------------------------------------
- ----------------
5 years 16.80 17.01 17.64
Annual average 3.15 3.19 3.30
- ---------------------------------------------------------------
- ----------------
Life of class 32.73 32.57 31.31
Annual average 3.88 3.87 3.73
- ---------------------------------------------------------------
- ----------------
<FN>
Fund performance data do not take into account any adjustment
for taxes
payable on reinvested distributions. The fund began operations
on 10/26/87.
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.
</TABLE>
<PAGE>
TERMS AND DEFINITIONS
NET ASSET VALUE (NAV) is the value of all your fund's assets,
minus any
liabilities, divided by the number of outstanding shares.
COMPARATIVE BENCHMARKS
LIPPER TAX EXEMPT 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.
CONSUMER PRICE INDEX (CPI) is a commonly used measure of
inflation; it does
not represent an investment return.
<PAGE>
PORTFOLIO OF INVESTMEN5TS OWNED
March 31, 1995 (Unaudited)
<TABLE><CAPTION>
<C> <S>
<C> <C>
MUNICIPAL BONDS AND NOTES (86.6%)*
PRINCIPAL AMOUNT RATINGS** VALUE
ALASKA (2.3%)
- ---------------------------------------------------------------
- ----------------------
$2,380,000 AK Indl. Dev. & Expt. Auth. Variable Rate Demand
Notes (VRDN) 4.45s, 12/1/06 (Bankers Trust Co.
Letter of Credit (LOC))
VMIG1 $ 2,380,000
ARKANSAS (2.8%)
- ---------------------------------------------------------------
- ----------------------
3,000,000 University of AR VRDN 4.2s, 12/1/19 (Credit
Suisse (LOC))
VMIG1 3,000,000
CALIFORNIA (11.9%)
- ---------------------------------------------------------------
- ----------------------
3,500,000 CA Public Cap. Impts. Fin. Corp. VRDN Ser. C,
4.3s, 6/1/28 (National Westminster Bank USA
(LOC))
VMIG1 3,500,000
2,000,000 Fontana CA Certif. of Participation (COP) VRDN
(Empire Center Project), 4.2s, 7/1/21 (Sakura
Bank (LOC))
A-1 2,000,000
3,000,000 LA Cnty. Local Edl. Agcy. Tax & Rev. Antic.
Notes, 4.5s, 7/6/95
MIG1 3,005,756
4,000,000 Pomona CA Redev. Agcy. Multi-Fam. VRDN (Bauer
Group Apts.), 4.4s, 12/1/07
VMIG1 4,000,000
- --------------
12,505,756
COLORADO (3.1%)
- ---------------------------------------------------------------
- ----------------------
2,500,000 Arapahoe Cnty. CO Impt. Trust Fund Hwy. VRDN
Ser. M, 4.45s, 8/31/26
SP1+ 2,500,000
800,000 Lakewood, Multi-Fam. Hsg. VRDN 4.05s, 10/1/07
(Dai Ichi Kangyo Bank (LOC))
VMIG1 800,000
- --------------
3,300,000
GEORGIA (3.3%)
- ---------------------------------------------------------------
- ----------------------
2,500,000 Atlanta Urban Res. Fin. Auth. Rev. Notes
(Multi-Fam. Mtg.), Ser. A, 4.3s, 12/1/08 (The
Sanwa Bank LOC))
A-1+ 2,500,000
1,000,000 De Kalb Cnty. Hsg. Auth. Multi-Fam. VRDN (Wood
Hills Apt. Project), 4.25s, 12/1/07 (Bank of
Montreal (LOC))
A-1+ 1,000,000
- --------------
3,500,000
ILLINOIS (2.6%)
- ---------------------------------------------------------------
- ----------------------
1,965,000 Elmhurst IL Rev. Notes (Joint Comm. Accred.),
4s, 7/1/18 (The Sanwa Bank (LOC))
A-1+ 1,965,000
800,000 IL Hlth. Facs. Auth. VRDN (Midwest Cambridge
Project), 4.05s, 1/1/15 (Fleet National Bank
(LOC))
P-1 800,000
- --------------
2,765,000
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
INDIANA (1.9%)
- ---------------------------------------------------------------
- ----------------------
$2,000,000 Mount Vernon, Poll. Control VRDN (Southern IN
Gas & Elec. Co.), Ser. A, 3.5s, 5/1/15
AA $ 2,000,000
IOWA (3.0%)
- ---------------------------------------------------------------
- ----------------------
1,135,000 Des Moines, Private College VRDN (U of
Osteopathic Med. & Hlth.), 4s, 5/15/15 (Daiwa
Bank Trust Co. (LOC))
A-1+ 1,135,000
2,022,460 IA, Student Loan VRDN American Municipal Bond
Assurance Corp. (AMBAC) 6.125s, 12/1/95
AAA 2,022,460
- --------------
3,157,460
KENTUCKY (4.2%)
- ---------------------------------------------------------------
- ----------------------
1,442,000 Jefferson Cnty. Indl. Dev. VRDN 4s, 12/1/14
(Chemical Bank (LOC))
A-1 1,442,000
3,000,000 Ohio Cnty. Poll. Control VRDN (Big Rivers Elec.
Corp.), 4.45s, 10/1/15 (Chemical Bank (LOC))
P-1 3,000,000
- --------------
4,442,000
LOUISIANA (1.1%)
- ---------------------------------------------------------------
- ----------------------
1,130,000 Orleans, Levee Dist. Impt. VRDN 4.2s, 11/1/14
(The Fuji Bank (LOC))
VMIG1 1,130,000
MAINE (1.9%)
- ---------------------------------------------------------------
- ----------------------
2,000,000 ME State Tax Antic. Notes 4.5s, 6/30/95
VMIG1 2,003,845
MASSACHUSETTS (2.2%)
- ---------------------------------------------------------------
- ----------------------
2,300,000 MA State VRDN Ser. B, 4.5s, 12/1/97 (National
Westminster Bank (LOC))
VMIG1 2,300,000
MICHIGAN (1.8%)
- ---------------------------------------------------------------
- ----------------------
1,900,000 MI State Job Dev. Auth. VRDN 4.1s, 12/1/14
(First Bank N.A. (LOC))
A-1 1,900,000
MINNESOTA (6.2%)
- ---------------------------------------------------------------
- ----------------------
4,000,000 Duluth Tax Increment VRDN (Lake Superior Paper),
4.15s, 9/1/10 (National Australia Bank (LOC))
VMIG1 4,000,000
1,000,000 Golden Valley Indl. Dev. VRDN (Unicare Homes
Project), 4.15s, 9/1/14 (Banque Paribus (LOC))
VMIG1 1,000,000
1,500,000 St. Louis Park, Indl. Dev. VRDN (Unicare Homes
Project), 4.1s, 8/1/14 (Banque Paribus (LOC))
A-1 1,500,000
- --------------
6,500,000
MISSISSIPPI (0.9%)
- ---------------------------------------------------------------
- ----------------------
1,000,000 Jackson Cnty.VRDN (Wtr. System),4.45s, 11/1/24
VMIG1 1,000,000
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
NEVADA (3.2%)
- ---------------------------------------------------------------
- ----------------------
$3,400,000 Clark Cnty. Apartment Impt. VRDN Ser. A
Municipal Bond Insurance Association, 4.15s,
7/1/95
VMIG1 $ 3,400,000
NEW HAMPSHIRE (3.5%)
- ---------------------------------------------------------------
- ----------------------
3,700,000 NH Higher Ed. & Hlth. Fac. Auth. VRDN (VHA New
England), AMBAC, Ser. F, 4.1s, 12/1/95
AAA 3,700,000
NEW YORK (7.1%)
- ---------------------------------------------------------------
- ----------------------
3,500,000 NY City Muni-Wtr. Fin. Auth. VRDN Federal
Guaranty Insurance Company, 4.4s, 6/15/24
A-1+ 3,500,000
4,000,000 NY State Energy Research & Dev. Auth. VRDN
(Niagara-Mohawk Power), Ser. A, 4.3s, 7/1/15
(Toronto Dominion Bank (LOC))
A-1+ 4,000,000
- --------------
7,500,000
OHIO (4.7%)
- ---------------------------------------------------------------
- ----------------------
2,000,000 Evendale OH Indl. Dev. Auth. 4.15s, 7/1/21
(Ambro Bank Netherland (LOC))
P-1 2,000,000
3,000,000 Ohio Hsg. Fin. Agcy. VRDN (Multi-Fam. Hsg.
Project), Financial Security Association Insured
4.3s, 9/1/26
A-1 3,000,000
- --------------
5,000,000
OKLAHOMA (2.2%)
- ---------------------------------------------------------------
- ----------------------
2,300,000 Tulsa Cnty. Indl. Auth. Hlth. Care VRDN
(Laureate Psychiatric Project), 4.4s, 12/15/08
A-1 2,300,000
OREGON (0.9%)
- ---------------------------------------------------------------
- ----------------------
1,000,000 Klamath Falls Elec. Rev. VRDN (Salt Caves
Hydroelectric), 3.75s, 5/1/23
SP1+ 1,000,000
RHODE ISLAND (0.9%)
- ---------------------------------------------------------------
- ----------------------
1,000,000 RI Hsg. Fin. Committee VRDN 3.9s, 7/2/95
VMIG1 1,000,000
SOUTH DAKOTA (2.8%)
- ---------------------------------------------------------------
- ----------------------
2,915,000 Rapid City, Economic Dev. VRDN (Civic Ctr. Assn.
Partnership), 4.05s, 12/1/16 (Citibank N.A.
(LOC))
P-1 2,915,000
TENNESSEE (3.8%)
- ---------------------------------------------------------------
- ----------------------
4,000,000 Clarksville Pub. Bldg. Auth. VRDN 4.3s, 6/1/24
(Nations Bank of Tennessee (LOC))
A-1 4,000,000
TEXAS (4.2%)
- ---------------------------------------------------------------
- ----------------------
2,500,000 Bexar Cnty. Hsg. Fin. Corp. VRDN Ser. A, 4.5s,
11/1/06 (Sakura Bank (LOC))
A-1 2,500,000
1,900,000 Lower Neches Valley Auth. Poll. Cntl. (Chevron
USA Project), 2.7s, 2/15/17
A-1+ 1,900,000
- --------------
4,400,000
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
WISCONSIN (4.1%)
- ---------------------------------------------------------------
- ----------------------
$4,300,000 Alma, Poll. Cntl. VRDN (Dairyland Pwr. Project),
4.1s, 2/1/15 (RaboBank Nederland (LOC))
P1 $ 4,300,000
- ---------------------------------------------------------------
- ----------------------
TOTAL MUNICIPAL BONDS AND NOTES (cost
$91,399,061) $ 91,399,061
- ---------------------------------------------------------------
- ----------------------
</TABLE>
MUNICIPAL COMMERCIAL PAPER (15.9%)*
PRINCIPAL AMOUNT
RATINGS** VALUE
- ---------------------------------------------------------------
- -----------------
<TABLE><CAPTION>
<S> <C>
<C> <C>
$1,300,000 Austin, TX 4s, 6/1/95 (Swiss Bank Corp. (LOC)) A-
1+ $ 1,300,000
2,000,000 Austin, TX 4s, 5/11/95 (Swiss Bank Corp.
(LOC)) A-
1+ 2,000,000
3,000,000 Commonwealth of MA (Mass Bay Transit Auth.)
4s, 5/15/95 (ABN-Amro (LOC)) A-
1+ 3,000,000
2,500,000 Florida Power Co. 3.85s, 5/2/95 (Morgan
Guaranty (LOC)) AMT A-
1+ 2,500,000
2,000,000 Hillsboro Cnty., FL Aviation Auth. 4s, 6/1/95
(National Westminster Bank PLC (LOC)) A-
1+ 2,000,000
3,000,000 Lone Star, TX Arpt. Impt. Auth. Rev. Bonds
4.1s, 4/11/95 (Royal Bank of Canada (LOC))
VMIG1 3,000,000
3,000,000 Montgomery AL Gas & Elec. 4.15s, 6/1/95 A-
1+ 3,000,000
- ---------------------------------------------------------------
- --------------------
TOTAL MUNICIPAL COMMERCIAL PAPER (cost
$16,800,000) $ 16,800,000
- ---------------------------------------------------------------
- --------------------
TOTAL INVESTMENTS (cost $108,199,061)***
$108,199,061
- ---------------------------------------------------------------
- --------------------
<FN>
NOTES
- ---------------------------------------------------------------
- ----------------------------
* Percentages indicated are based on total net assets of
$105,605,724 which correspond to a net asset value per
share of $1.00
** The Moody's or Standard & Poor's ratings indicated are
believed to be the most recent ratings available at March
31, 1995, 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, 1995. 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" ("VMIG") 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 Investor Service, 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=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 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
*** 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, 1995, 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, 1995 (as a percentage of net assets):
Housing 12.2%
Utilities 10.7
Healthcare 10.2
<PAGE>
STATEMENT OF ASSETS AND LIABILTIES
March 31, 1995 (Unaduited)
</TABLE>
<TABLE><CAPTION>
<S> <C>
ASSETS
- ---------------------------------------------------------------
- ----------------------------
Investments in securities, at amortized cost (Note 1)$108,1
99,061
- ---------------------------------------------------------------
- ----------------------------
Cash 179,885
- ---------------------------------------------------------------
- ----------------------------
Interest and other receivables 605,418
- ---------------------------------------------------------------
- ----------------------------
Receivable for shares of the fund sold 95,651
- ---------------------------------------------------------------
- ----------------------------
TOTAL ASSETS 109,080,015
- ---------------------------------------------------------------
- ----------------------------
LIABILITIES
- ---------------------------------------------------------------
- ----------------------------
Distributions payable to shareholders 18,690
- ---------------------------------------------------------------
- ----------------------------
Payable for shares of the fund repurchased 1,270,513
- ---------------------------------------------------------------
- ----------------------------
Payable for securities purchased 2,064,995
- ---------------------------------------------------------------
- ----------------------------
Payable for compensation of Manager (Note 2) 100,559
- ---------------------------------------------------------------
- ----------------------------
Payable for administrative services (Note 2) 1,218
- ---------------------------------------------------------------
- ----------------------------
Payable for compensation of Trustees (Note 2) 173
- ---------------------------------------------------------------
- ----------------------------
Other accrued expenses 18,143
- ---------------------------------------------------------------
- ----------------------------
TOTAL LIABILITIES 3,474,291
- ---------------------------------------------------------------
- ----------------------------
NET ASSETS $105,605
,724
- ---------------------------------------------------------------
- ----------------------------
Represented by Paid-in capital (Note 4) $105,605
,724
- ---------------------------------------------------------------
- ----------------------------
Net asset value, offering and redemption price per share
($105,605,724 divided by 105,605,724 shares) $1.00
- ---------------------------------------------------------------
- ----------------------------
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
Six months ended March 31, 1995 (Unaduited)
<TABLE><CAPTION>
<S> <C>
TAX EXEMPT INTEREST INCOME $1,706,710
- ---------------------------------------------------------------
- ----------------------------
EXPENSES:
- ---------------------------------------------------------------
- ----------------------------
Compensation of Manager (Note 2) 216,150
- ---------------------------------------------------------------
- ----------------------------
Reports to shareholders 16,100
- ---------------------------------------------------------------
- ----------------------------
Auditing 8,302
- ---------------------------------------------------------------
- ----------------------------
Legal 7,150
- ---------------------------------------------------------------
- ----------------------------
Postage 229
- ---------------------------------------------------------------
- ----------------------------
Administrative services (Note 2) 145
- ---------------------------------------------------------------
- ----------------------------
Registration fee 15,161
- ---------------------------------------------------------------
- ----------------------------
Other expenses 838
- ---------------------------------------------------------------
- ----------------------------
Expense reduction (51,419)
- ---------------------------------------------------------------
- ----------------------------
TOTAL EXPENSES 212,656
- ---------------------------------------------------------------
- ----------------------------
NET INVESTMENT INCOME 1,494,054
- ---------------------------------------------------------------
- ----------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS$1,494,054
- ---------------------------------------------------------------
- ----------------------------
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
<S> <C> <C>
SIX MONTHS
ENDED YEAR ENDED
MARCH 31 SEPTEMBER 30
----------------------------
1995* 1994
- ---------------------------------------------------------------
- ----------------------------
INCREASE IN NET ASSETS
- ---------------------------------------------------------------
- ----------------------------
Operations:
- ---------------------------------------------------------------
- ----------------------------
Net investment income $ 1,494,054 $ 1,741,373
- ---------------------------------------------------------------
- ----------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS1,494,054
1,741,373
- ---------------------------------------------------------------
- ----------------------------
Distributions to shareholders from:
- ---------------------------------------------------------------
- ----------------------------
Net investment income (1,494,054) (1,741,373)
- ---------------------------------------------------------------
- ----------------------------
Increase from capital share transactions (Note 4) 7,208,397
17,321,543
- ---------------------------------------------------------------
- ----------------------------
TOTAL INCREASE IN NET ASSETS 7,208,397 17,321,543
NET ASSETS
- ---------------------------------------------------------------
- ----------------------------
Beginning of period 98,397,327 81,075,784
- ---------------------------------------------------------------
- ----------------------------
END OF PERIOD $105,605,724 $98,397,327
- ---------------------------------------------------------------
- ----------------------------
<FN>
* Unaudited.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE><CAPTION>
<S> <C> <C>
SIX MONTHS
ENDED
MARCH 31
--------------------------
1995* 1994
- ---------------------------------------------------------------
- ----------------------------
INVESTMENT OPERATIONS
- ---------------------------------------------------------------
- ----------------------------
Net investment income $.0150 $ .0191
Net realized gain (loss) on investments -- --
- ---------------------------------------------------------------
- ----------------------------
TOTAL FROM INVESTMENT OPERATIONS .0150 .0191
- ---------------------------------------------------------------
- ----------------------------
TOTAL DISTRIBUTIONS (.0150) (.0191)
- ---------------------------------------------------------------
- ----------------------------
TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%)(b) 1.51(c)
1.93
- ---------------------------------------------------------------
- ----------------------------
NET ASSETS, END OF PERIOD (in thousands)$105,606 $98,397
- ---------------------------------------------------------------
- ----------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS (%).22(c)(d) .71(d)
- ---------------------------------------------------------------
- ----------------------------
Ratio of net investment income to average net assets (%)1.55(c)
(d) 1.97(d)
- ---------------------------------------------------------------
- ----------------------------
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE><CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD
OCTOBER 26, 1987
(COMMENCEMENT
OF OPERATIONS) TO
YEAR ENDED SEPTEMBER 30 SEP
TEMBER 30
- ---------------------------------------------------------------
- ----------------------------
1993 1992 1991 1990 1989 1988
- ---------------------------------------------------------------
- ----------------------------
$.0184$.0297(a)$.0462(a)$.0548(a)$.0578(a) $.0424(a)
-- -- (.0001) -- -- .0002
- ---------------------------------------------------------------
- ----------------------------
.0184 .0297 .0461 .0548 .0578 .0426
- ---------------------------------------------------------------
- ----------------------------
(.0184) (.0297) (.0461) (.0548) (.0578) (.0426)
- ---------------------------------------------------------------
- ----------------------------
1.85 3.02 4.74 5.61 5.92 4.35(c)
- ---------------------------------------------------------------
- ----------------------------
$81,076 $81,820 $100,077$111,705 $98,867 $83,336
- ---------------------------------------------------------------
- ----------------------------
.99 .87(a) .79(a) .68(a) .69(a) .58(a)(c)
- ---------------------------------------------------------------
- ----------------------------
1.85 2.99(a) 4.62(a) 5.45(a) 5.79(a) 4.29(a)(c)
- ---------------------------------------------------------------
- ----------------------------
<FN>
* Unaudited.
(a) Reflects an 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) Not annualized.
(d) See Note 2.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1995 (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, 1994, the fund had a capital loss carryover of
approximately
$2,000 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 to offset capital
gains, it is
unlikely that 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.
The amount and character of income and gains to be distributed
are determined
in accordance with income tax regulations which may differ from
generally
accepted accounting principles. These differences include
treatment of losses
on wash sales transactions, realized and unrealized gains and
losses on
futures, options and forward currency contracts, realized gains
and losses on
<PAGE>
foreign exchange transactions, post-October losses, payment-in-
kind income,
market discount and defaulted interest income.
Reclassifications are made to
the fund's capital accounts to reflect income and gains
available for
distribution (or available capital loss carryovers) under
income tax
regulations.
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.
Trustees of the fund receive an annual Trustee's fee of $630
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.
Investor servicing and custodian fees reported in the statement
of operations
for the six months ended March 31, 1995 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 Act of 1940,
the Plan
provides for payments by the fund to Putnam Mutual Funds at an
annual rate of
up to 0.35% of the fund's average net assets. Currently, no
payments are
being made under the Plan.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the six months ended March 31, 1995, purchases and sales
(including
maturities) of investment securities (all short-term
obligations) aggregated
$197,161,660 and $138,311,915, respectively. In determining the
net gain or
loss on securities sold, the cost of securities has been
determined on the
identified cost basis.
<PAGE>
NOTE 4
CAPITAL SHARES
At March 31, 1995, 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>
<S> <C> <C>
SIX MONTHS
ENDED YEAR ENDED
MARCH 31 SEPTEMBER 30
- ----------------------------------------------------------
1995 1994
- ----------------------------------------------------------
Shares sold 285,404,532 608,686,024
Shares issued in
connection with
reinvestment of
distributions 1,302,151 1,581,308
- ----------------------------------------------------------
286,706,683 610,267,332
Shares repurchased (279,498,286) (592,945,789)
- ----------------------------------------------------------
NET INCREASE 7,208,397 17,321,543
- ----------------------------------------------------------
</TABLE>
<PAGE>
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
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
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
Gary N. Coburn
Vice President
William F. McGue
Vice President
Blake E. Anderson
Vice President
Lindsey M. Callen
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
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, 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.
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
PRINCIPAL AMOUNT
INVESTED.
<PAGE>
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
06-17789
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN
PRINTED AND EDGAR-FILED TEXTS.
(1) Rule lines for tables are omitted.
(2) Italic typefaces is displayed in normal type.
(3) Boldface type is displayed in capital letters.
(4) Headers (e.g. the names of the fund) and footers (e.g.
page numbers and OThe accompanying notes are an integral
part of these financial statementsO) are omitted.
(5) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(6) Bullet points and similar graphic symbols are omitted.
(7) Page numbering is different.
