As filed with the Securities and Exchange Commission on
January 28, 1998
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 28
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and
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
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ACT OF 1940
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Amendment No. 24
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(Check appropriate box or boxes)
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PUTNAM MONEY MARKET FUND Registration
No. 2-55091
811-2608
(Exact name of registrant as specified in charter)
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
/ X /
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 12
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and
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
/ X /
ACT OF 1940
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Amendment No. 14
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(Check appropriate box or boxes)
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PUTNAM TAX EXEMPT MONEY MARKET FUND Registration
No. 33-15238
811-5215
(Exact name of registrant as specified in charter)
<PAGE>
One Post Office Square, Boston, Massachusetts 02109
(Address of principal executive offices)
Registrants' Telephone Number, including Area Code
(617) 292-1000
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It is proposed that this filing will become effective
(check appropriate box)
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/ / immediately upon filing pursuant to paragraph (b)
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/ X / on January 30, 1998 pursuant to paragraph
(b)
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/ / 60 days after filing pursuant to paragraph (a) (1)
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/ / on (date) pursuant to paragraph (a) (1)
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/ / 75 days after filing pursuant to paragraph (a) (2)
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/ / on (date) pursuant to paragraph (a) (2) of Rule
---- 485.
If appropriate, check the following box:
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/ / this post-effective amendment designates a new
---- effective date for a previously filed post-
effective amendment.
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JOHN R. VERANI, Vice President
PUTNAM MONEY MARKET FUND
PUTNAM TAX EXEMPT MONEY MARKET FUND
One Post Office Square
Boston, Massachusetts 02109
(Name and address of agent for service)
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Copy to:
JOHN W. GERSTMAYR, Esquire
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
PUTNAM MONEY MARKET FUND
PUTNAM TAX EXEMPT MONEY MARKET FUND
CROSS REFERENCE SHEET
(as required by Rule 481(a))
Part A
N-1A Item No. Location
1. Cover Page....................... Cover page
2. Synopsis......................... Expenses summary
3. Condensed Financial Information.. Financial highlights;
How performance is shown
4. General Description of
Registrant....................... Objectives; How the
funds pursue their
objectives; Organization
and history
5. Management of the Fund........... Expenses summary; How
the funds are managed;
About Putnam
Investments, Inc.
5A. Management's Discussion
of Fund Performance.............. (Contained in the annual
report of each
Registrant)
6. Capital Stock and Other
Securities....................... Cover page; Organization
and history; How a fund
determines net income
and makes distributions
to shareholders; tax
information
7. Purchase of Securities Being
Offered.......................... How to buy shares;
Distribution plans; How
to sell shares; How to
exchange shares; How a
fund values its shares
8. Redemption or Repurchase......... How to buy shares; How
to sell shares; How to
exchange shares;
Organization and history
9. Pending Legal Proceedings........ Not applicable
Part B
N-1A Item No. Location
10. Cover Page....................... Cover page
11. Table of Contents................ Cover page
12. General Information and History.. Organization and history
(Part A)
13. Investment Objectives and
Policies......................... How the funds pursue
their objectives (Part
A); Investment
restrictions;
Miscellaneous investment
practices
14. Management of the Registrant..... Management (Trustees;
Trustee fees; Officers);
Additional officers
15. Control Persons and Principal
Holders of Securities............ Management (Trustees;
Officers); Charges and
expenses (Share
ownership)
16. Investment Advisory and Other
Services......................... Organization and history
(Part A); Management
(Trustees; Officers; The
management contract;
Principal underwriter;
Investor servicing agent
and custodian); Charges
and expenses;
Distribution plans;
Independent accountants
and financial statements
17. Brokerage Allocation............. Management (Portfolio
transactions); Charges
and expenses
18. Capital Stock and Other
Securities....................... Organization and history
(Part A); How a fund
determines net income
and makes distributions
to shareholders; tax
information (Part A);
Suspension of
redemptions
19. Purchase, Redemption, and Pricing
of Securities Being Offered...... How to buy shares (Part
A); How to sell shares
(Part A); How to
exchange shares (Part
A); How to buy shares;
Determination of net
asset value; Suspension
of redemptions
20. Tax Status....................... How a fund determines
net income and makes
distributions to
shareholders; tax
information (Part A);
Taxes
21. Underwriters..................... Management (Principal
underwriter); Charges
and expenses
22. Calculation of Performance Data.. How performance is shown
(Part A); Investment
performance; Standard
performance measures
23. Financial Statements............. Independent accountants
and financial statements
Part C
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C of the
Registration Statement.
PROSPECTUS
January 30, 1998
Putnam Money Market Fund
Class A, B and M shares
INVESTMENT STRATEGY: INCOME
Putnam Tax Exempt Money Market Fund
INVESTMENT STRATEGY: TAX-ADVANTAGED
This prospectus explains concisely what you should know before
investing in Putnam Money Market Fund (the "Money Market Fund")
or Putnam Tax Exempt Money Market Fund (the "Tax Exempt Money
Market Fund") (collectively, the "funds"). Please read it
carefully and keep it for future reference. You can find more
detailed information in the January 30, 1998 statement of
additional information (the "SAI"), as amended from time to time.
For a free copy of the SAI or other information, call Putnam
Investor Services at 1-800-225-1581. The SAI has been filed with
the Securities and Exchange Commission (the "Commission")
and is incorporated into this prospectus by reference. The
Commission maintains a Web site (http://www.sec.gov) that
contains the SAI, material incorporated by reference into this
prospectus and the SAI, and other information regarding
registrants that file electronically with the Commission.
An investment in a fund is neither insured nor guaranteed by the
U.S. government. There can be no assurance that a fund will be
able to maintain a stable net asset value of $1.00 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
BOSTON * LONDON * TOKYO
<PAGE>
ABOUT THE FUNDS
Expenses summary
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
This section describes the sales charges, management fees, and
annual operating expenses that apply to various classes of a
fund's shares. Use it to help you estimate the impact of
transaction costs and recurring expenses on your
investment over time.
Financial highlights
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Study these tables to see, among other things, how a fund
performed each year for the past 10 years or since it began
investment operations if it has been in operation for less than
10 years.
Objectives
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Read this section to make sure a fund's objective is consistent
with your own.
How the funds pursue their objectives
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
This section explains in detail how a fund seeks its investment
objective.
How performance is shown
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
This section describes and defines the measures used to assess
fund performance. All data are based on past investment results
and do not predict future performance.
How the funds are managed
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consult this section for information about a fund's management,
allocation of its expenses, and how it purchases and
sells securities .
Organization and history
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In this section, you will learn when a fund was introduced, how
it is organized, how it may offer shares, and who its Trustees
are.
ABOUT YOUR INVESTMENT
How to buy shares
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
This section describes the ways you may purchase shares and tells
you the minimum amounts required to open various types of
accounts.
Distribution plans
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
This section tells you what distribution fees are charged against
each class of shares.
How to sell shares
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In this section you can learn how to sell fund shares, either
directly to a fund, by check or through an investment dealer.
How to exchange shares
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Find out in this section how you may exchange fund shares for
shares of other Putnam funds. The section also explains how
exchanges can be made without sales charges and the conditions
under which sales charges may be required.
How a fund values its shares
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
This section explains how a fund determines the value of its
shares.
How a fund determines net income and makes distributions to
shareholders; tax information
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
This section describes how a fund determines dividends and the
various options you have in choosing how to receive fund
dividends. It also discusses the tax status of the payments and
counsels you to seek specific advice about your own situation.
ABOUT PUTNAM INVESTMENTS, INC.
.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Read this section to learn more about the companies that provide
marketing, investment management, and shareholder account
services to Putnam funds and their shareholders.
<PAGE>
About the funds
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing.
The following tables summarize your maximum transaction costs
from investing in a fund and expenses based on the most recent
fiscal year. The examples show the cumulative expenses
attributable to a hypothetical $1,000 investment over
specified periods.
Money Market Fund
Class A Class B Class M
shares shares shares
Shareholder transaction
expenses
Maximum sales charge
imposed on purchases
(as a percentage of
offering price) NONE NONE NONE
Deferred sales charge 5.0% in the first
(as a percentage year, declining
of the lower of to 1.0% in the
original purchase sixth year, and
price or redemption eliminated
proceeds) NONE* thereafter NONE
Tax Exempt Money Market Fund
Shareholder transaction
expenses
Maximum sales charge
imposed on purchases
(as a percentage of
offering price) NONE
Deferred sales charge
(as a percentage
of the lower of
original purchase
price or redemption
proceeds) NONE*
<PAGE>
Annual fund operating expenses
(as a percentage of average net assets)
Total fund
Management 12b-1 Other operating
fees fees expenses expenses
- ---------- ----- -------------------
Money Market Fund
Class A 0.32% NONE 0.25% 0.57%
Class B 0.32% 0.50% 0.25% 1.07%
Class M 0.32% 0.15% 0.25% 0.72%
Tax Exempt Money
Market Fund 0.45% NONE 0.35% 0.80%
The table is provided to help you understand the expenses of
investing and your share of fund operating expenses. The
expenses shown in the table do not reflect the application of
credits that reduce fund expenses.
Examples
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and, except as indicated, redemption at
the end of each period:
1 3 5 10
year years years years
Money Market Fund
Class A $6 $18 $32 $71
Class B $61 $64 $79 $116* *
Class B (no redemption) $11 $34 $59 $116**
Class M $7 $23 $40 $89
Tax Exempt Money Market Fund $8 $26 $44
$99
The examples do not represent past or future expense levels.
Actual expenses may be greater or less than those shown. Federal
regulations require the examples to assume a 5% annual return,
but actual annual return varies.
* A deferred sales charge of up to 1.00% may be assessed on
certain shares (class A shares in the case of the Money
Market Fund) that were purchased by exchange of shares of
another Putnam fund which were purchased without an initial
sales charge. See "How to buy shares."
** Reflects conversion of class B shares of the
Money Market
Fund to class A shares of the Money Market Fund
(which pay
lower ongoing expenses) approximately eight years
after
purchase. See "Alternative sales
arrangements. "
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables present per share financial information for
each of the funds. This information has been audited and
reported on by the independent accountants. The "Report of
independent accountants" and financial statements included in
each fund's annual report to shareholders for the 1997
fiscal year are incorporated by reference into this prospectus.
Each fund's annual report, which contain additional unaudited
performance information, is available without charge upon
request.
<TABLE> <CAPTION>
<PAGE>
Financial Highlights (for a share outstanding throughout the
period)
Putnam Money Market Fund
Class A
For the
eleven
months
ended
Year ended September 30, September
30, Year ended October 31,
1997 1996 1995
1994 1993 1992 1991
<S> <C> <C> <C>
<C>
Investment operations
Net investment income $.0505 $.0507 $.0521
$.0299 $.0246 $.0353 $.0598
Net realized gain -- -- --
- -- -- -- .0001
on investments
Total from investment
operations .0505 .0507 .0521
.0299 .0246 .0353 .0599
Total distributions: (.0505) (.0507) (.0521)
(.0299) (.0246) (.0353) (.0599)
Total investment return
at net asset value (%)(a) 5.17 5.19 5.33
3.03* 2.49 3.58 6.16
Net assets, end of
period(in thousands) $2,134,223 $1,659,288 $1,189,640
$1,101,171 $586,920 $839,185 $684,987
Ratio of expenses to
average net assets (%)(b) .57 .57 .62
.58* .70 .86 .77
Ratio of net investment
income to average net
assets (%) 5.06 5.00 5.23
3.03* 2.48 3.56 6.04
<PAGE>
Year ended October
31,
1990 1989 1988
Investment operations
Net investment income $.0764 $.0853 $.0655
Net realized gain
on investments -- -- --
Total from investment
operations .0764 .0853 .0655
Total distributions: (.0764) (.0853) (.0655)
Total investment return
at net asset value (%)(a) 7.92 8.87 6.75
Net assets, end of
period(in thousands) $904,186 $797,395 $659,590
Ratio of expenses to
average net assets (%)(b) .74 .85 .91
Ratio of net investment
income to average net
assets (%) 7.63 8.51 6.67
* 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 periods
ended on or after September 30, 1995 includes amounts
paid through expense offset arrangements. Prior period
ratios exclude these amounts.
/TABLE
<PAGE>
Financial Highlights (for a share outstanding throughout the
period)
Putnam Money Market Fund
Class B
<TABLE>
<CAPTION>
For the
period April
For the 27, 1992+
eleven months
Year ended to
ended
October October
Year ended September 30, September 30,
31, 31,
1997 1996 1995 1994
1993 1992
<S> <C> <C> <C> <C>
<C> <C>
Investment operations
Net investment income $.0455 $.0457 $.0469 $.0251
$.0195 $.0151
Total from investment
operations .0455 .0457 .0469 .0251
.0195 .0151
Total distributions: $(.0455) $(.0457) $(.0469) $(.0251)
$(.0195) $(.0151)
Total investment return
at net asset
value (%)(a) 4.65 4.67 4.80 2.54*
1.98 1.52*
Net assets, end of
period
(in thousands) $410,885 $438,316 $256,533 $194,187
$22,777 $2,864
Ratio of expenses to
average net
assets (%)(b) 1.07 1.07 1.12 1.03*
1.20 .70*
Ratio of net investment
income to average
net assets (%) 4.57 4.51 4.75 2.77*
1.98 1.50*
/TABLE
<PAGE>
Financial Highlights (for a share outstanding throughout the
period)
Putnam Money Market Fund
Class M
<TABLE>
<CAPTION>
For the period
December 8,
1994+
Year ended September 30, to September 30,
1997
1996 1995
<S> <C>
<C> <C>
Investment operations
Net investment income $.0490
$.0490 $.0434
Total from investment .0490
.0490 .0434
operations
Total distributions: $(.0490)
$(.0490) $(.0434)
Total investment return 5.01
5.02 4.43*
at net asset value (%)(a)
Net assets, end of period $58,502
$29,075 $8,440
(in thousands)
Ratio of expenses to .72
.72 .67*
average net assets (%)(b)
Ratio of net investment 4.92
4.82 4.29*
income to average net assets (%)
/TABLE
<PAGE>
Financial highlights (For a share outstanding throughout the
period)
Putnam Tax Exempt Money Market Fund
<TABLE><CAPTION>
Year ended September 30
1997
1996 1995 1994 1993 1992
<S> <C>
<C> <C> <C> <C> <C>
Investment operations
Net investment income $.0304
$.0298 $.0312 $.0191 $.0184 $.0297(c)
Net realized gain (loss) on investments --
-- -- -- --
Total from investment operations .0304
.0298 .0312 .0191 .0184 .0297
Total distributions $(.0304)
$(.0298) $(.0312) $(.0191) $(.0184) $(.0297)
Total investment return at net asset value (%) (b) 3.09
3.02 3.16 1.93 1.85 3.02
Net assets, end of period (in thousands) $105,442
$100,814 $73,066 $98,397 $81,076 $81,820
Ratio of expenses to average net assets (%)(a) .80
.90 .81 .71 .99 .87(c)
Ratio of net investment income to average net assets (%) 3.02
2.86 3.10 1.97 1.85 2.99(c)
<PAGE>
For the period
October 26, 1987+
Year ended
September 30 to September 30
1991
1990 1989 1988
<S> <C>
<C> <C> <C>
Investment operations
Net investment income
$.0462(c) $.0548(c) $.0578(c) $.0424(c)
Net realized gain (loss) on investments
(.0001) -- -- .0002
Total from investment operations
.0461 .0548 .0578 .0426
Total distributions:
$(.0461) $(.0548) $(.0578) $(.0426)
Total investment return at net asset value (%) (b)
4.74 5.61 5.92 4.35*
Net assets, end of period (in thousands)
$100,077 $111,705 $98,867 $83,336
Ratio of expenses to average net assets (%)(a)
.79(c) .68(c) .69(c) .58(c)*
Ratio of net investment income to average net assets (%)
4.62(c) 5.45(c) 5.79(c) 4.29(c)*
+ 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 periods
ended on or after September 30, 1995 includes amounts
paid through expense offset arrangements. Prior period
ratios exclude these amounts.
(c) 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.
</TABLE>
OBJECTIVES
Putnam Money Market Fund seeks as high a rate of current income
as Putnam Investment Management, Inc. ("Putnam Management"),
believes is consistent with preservation of capital and
maintenance of liquidity. It is designed for investors seeking
current income with stability of principal.
Putnam Tax Exempt Money Market Fund seeks as high a level of
current income exempt from federal income tax as Putnam
Management believes is consistent with preservation of capital,
maintenance of liquidity and stability of principal.
Neither fund is intended to be a complete investment program, and
there is no assurance that either fund will achieve its
objective.
HOW THE FUNDS PURSUE THEIR OBJECTIVES
Putnam Money Market Fund
Basic investment strategy
The Money Market Fund invests in a portfolio of high-quality
money market instruments. Examples of these instruments include:
o bank certificates of deposit (CDs): negotiable
certificates issued against funds deposited in a
commercial bank for a definite period of time and
earning a specified return.
o bankers' acceptances: negotiable drafts or bills of
exchange, which have been "accepted" by a bank,
meaning, in effect, that the bank has unconditionally
agreed to pay the face value of the instrument on
maturity.
o prime commercial paper: high-grade, short-term
obligations issued by banks, corporations and other
issuers.
o corporate obligations: high-grade, short-term
corporate obligations other than prime commercial
paper.
o municipal obligations: high-grade, short-term
municipal obligations.
o U.S. government securities: marketable securities
issued or guaranteed as to principal and interest by
the U.S. government or by its agencies or
instrumentalities.
o repurchase agreements: with respect to U.S. Treasury
or U.S. government agency obligations.
The Money Market Fund will invest only in high-quality securities
that Putnam Management believes present minimal credit risk.
High-quality securities are securities rated at the time of
acquisition in one of the two highest categories by at least two
nationally recognized rating services (or, if only one rating
service has rated the security, by that service) or, if the
security is unrated, judged to be of equivalent quality by Putnam
Management. The Money Market Fund will maintain a dollar-
weighted average maturity of 90 days or less and will not invest
in securities with remaining maturities of more than 397 days.
The Money Market Fund may invest in variable or floating rate
securities which bear interest at rates subject to periodic
adjustment or which provide for periodic recovery of principal on
demand. Under certain conditions, these securities may be deemed
to have remaining maturities equal to the time remaining until
the next interest adjustment date or the date on which principal
can be recovered on demand. The Money Market Fund follows
investment and valuation policies designed to maintain a stable
net asset value of $1.00 per share. There is no assurance that
the Money Market Fund will be able to maintain a stable net asset
value of $1.00 per share.
Selection of investments
The Money Market Fund may invest in bank certificates of deposit
and bankers' acceptances issued by banks having deposits in
excess of $2 billion (or the foreign currency equivalent) at the
close of the last calendar year. Should the Trustees decide to
reduce this minimum deposit requirement, shareholders would be
notified and this prospectus supplemented.
Securities issued or guaranteed as to principal and interest by
the U.S. government include a variety of Treasury securities,
which differ in their interest rates, maturities and dates of
issue. Securities issued or guaranteed by agencies or
instrumentalities of the U.S. government may or may
not be supported by the full faith and credit of the United
States or by the right of the issuer to borrow from the Treasury.
Considerations of liquidity and preservation of capital mean that
the Money Market Fund may not necessarily invest in money market
instruments paying the highest available yield at a particular
time. Consistent with its investment objective, the Money Market
Fund will attempt to maximize yields by portfolio trading and by
buying and selling portfolio investments in anticipation of or in
response to changing economic and money market conditions and
trends. The Money Market Fund will also invest to take advantage
of what Putnam Management believes to be temporary disparities in
yields of different segments of the high-grade money market or
among particular instruments within the same segment of the
market. These policies, as well as the relatively short maturity
of obligations purchased by the Money Market Fund, may result in
frequent changes in the Money Market Fund's portfolio. Portfolio
turnover may give rise to taxable gains. The Money Market Fund
does not usually pay brokerage commissions in connection with the
purchase or sale of portfolio securities. See "Management --
Portfolio Transactions -- Brokerage and research services" in the
SAI for a discussion of underwriters' commissions and dealers'
spreads involved in the purchase and sale of portfolio
securities.
Foreign investments. The Money Market Fund may invest without
limit in U.S. dollar-denominated commercial paper of foreign
issuers and in bank certificates of deposit and bankers'
acceptances payable in U.S. dollars and issued by foreign banks
(including U.S. branches of foreign banks) or by foreign branches
of U.S. banks. These investments subject the Money Market Fund
to investment risks different from those associated with domestic
investments. Such risks include the possibility of adverse
political and economic developments in such countries, the
imposition of withholding taxes on interest income, seizure or
nationalization of foreign deposits or the adoption of other
governmental restrictions which might adversely affect the
payment of principal and interest on such obligations.
Legal remedies available to investors in certain foreign
countries may be limited. Foreign settlement procedures and
trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the Money
Market Fund's assets held abroad) and expenses not present in the
settlement of domestic investments. In addition, foreign
securities may be less liquid than U.S. securities, and foreign
accounting and disclosure standards may differ from United States
standards. Special tax considerations apply to foreign
securities.
A more detailed explanation of foreign investments, and the risks
and special tax considerations associated with them, is included
in the SAI.
Interest rates. The value of the securities in the Money Market
Fund's portfolio can be expected to vary inversely with changes
in prevailing interest rates. Although the Money Market Fund's
investment policies are designed to minimize these changes and to
maintain a net asset value of $1.00 per share, there is no
assurance that these policies will be successful. Withdrawals by
shareholders could require the sale of portfolio investments at a
time when such a sale might not otherwise be desirable.
Concentration. The Money Market Fund may invest without limit in
the banking industry and in commercial paper and short-term
corporate obligations of issuers in the personal credit
institution and business credit institution industries when, in
the opinion of Putnam Management, the yield, marketability and
availability of investments meeting the Money Market Fund's
quality standards in those industries justify any additional
risks associated with the concentration of the Money Market
Fund's assets in those industries. The Money Market Fund,
however, will invest more than 25% of its assets in the personal
credit institution or business credit institution industries only
when, to Putnam Management's knowledge, the yields then available
on securities issued by companies in such industries and
otherwise suitable for investment by the Money Market Fund exceed
the yields then available on securities issued by companies in
the banking industry and otherwise suitable for investment by the
Money Market Fund.
Securities lending. The Money Market Fund may lend portfolio
securities amounting to not more than 25% of its assets to
broker-dealers. These transactions must be fully collateralized
at all times with cash and short-term debt obligations. These
transactions involve some risk to the Money Market Fund if the
other party should default on its obligation and the Money Market
Fund is delayed or prevented from recovering the collateral. The
Money Market Fund may also enter into repurchase agreements. See
"Other investment practices--repurchase agreements" below.
Putnam Tax Exempt Money Market Fund
Basic investment strategy
The Tax Exempt Money Market Fund follows the fundamental policy
that at least 80% of its net assets normally will be invested in
short-term tax-exempt securities (which are described below).
Subject to this limitation, the fund may also invest in high-
quality taxable money market instruments of the type described
under "Alternative investment strategies" below.
Under current law, to the extent distributions are derived
from interest on tax-exempt securities, they are exempt from
federal income taxes.
The Tax Exempt Money Market Fund will invest in only the
following tax-exempt securities: (i) municipal notes; (ii)
municipal bonds; (iii) municipal securities backed by the U.S.
government; (iv) short-term discount notes (tax-exempt commercial
paper); (v) participation interests in any of the foregoing; and
(vi) unrated securities or other tax-exempt instruments which
become available in the future if Putnam Management determines
they meet the quality standards discussed below. In connection
with the purchase of tax-exempt securities, the Tax Exempt Money
Market Fund may acquire stand-by commitments, which give the Tax
Exempt Money Market Fund the right to resell the security to the
dealer at a specified price. Stand-by commitments may provide
additional liquidity for the Tax Exempt Money Market Fund but are
subject to the risk that the dealer may fail to meet its
obligations. The Tax Exempt Money Market Fund does not generally
expect to pay additional consideration for stand-by commitments
or to assign any value to them.
The Tax Exempt Money Market Fund will invest only in high-quality
tax-exempt securities and other money market instruments that
Putnam Management believes present minimal credit risk. High-
quality securities are securities rated in one of the two highest
categories by at least two nationally recognized rating services
(or, if only one rating service has rated the security, by that
service) or, if the security is unrated, judged to be of
equivalent quality by Putnam Management. The Tax Exempt Money
Market Fund will maintain a dollar-weighted average maturity of
90 days or less and will not invest in securities with remaining
maturities of more than 397 days. The Tax Exempt Money Market
Fund may invest in variable or floating-rate tax-exempt
securities that bear interest at rates subject to periodic
adjustment or that provide for periodic recovery of principal on
demand. Under certain conditions, these securities may be deemed
to have remaining maturities equal to the time remaining until
the next interest adjustment date or the date on which principal
can be recovered on demand. The Tax Exempt Money Market Fund
follows investment and valuation policies designed to maintain a
stable net asset value of $1.00 per share, although there is no
assurance that these policies will be successful.
Considerations of liquidity and preservation of capital mean that
the Tax Exempt Money Market Fund may not necessarily invest in
tax-exempt securities paying the highest available yield at a
particular time. Consistent with its investment objective, the
Tax Exempt Money Market Fund will attempt to maximize yields by
portfolio trading and by buying and selling portfolio investments
in anticipation of or in response to changing economic and money
market conditions and trends. The Tax Exempt Money Market Fund
will also invest to take advantage of what Putnam Management
believes to be temporary disparities in yields of different
segments of the market for tax-exempt securities or among
particular instruments within the same segment of the market.
These policies, as well as the relatively short maturity of
obligations purchased by the Tax Exempt Money Market Fund, may
result in frequent changes in the Tax Exempt Money Market Fund's
portfolio. Portfolio turnover may give rise to taxable gains.
The Tax Exempt Money Market Fund does not usually pay brokerage
commissions in connection with the purchase of portfolio
securities. See "Management - Portfolio transactions - Brokerage
and research services" in the SAI for a discussion of
underwriters' commissions and dealers' spreads involved in the
purchase and sale of portfolio securities.
Alternative investment strategies
At times Putnam Management may judge that conditions in the
markets for tax-exempt securities make pursuing the Tax Exempt
Money Market Fund's basic investment strategy inconsistent with
the best interests of its shareholders. At such times Putnam
Management may temporarily use alternative strategies.
In implementing these defensive strategies, the Tax Exempt Money
Market Fund may invest in high-quality taxable money market
instruments, including bank certificates of deposit, bankers'
acceptances, prime commercial paper, high-grade, short-term
corporate obligations, short-term U.S. government securities or
repurchase agreements, or any other securities that Putnam
Management considers consistent with such defensive strategies.
The interest or other income from these instruments would be
subject to federal income tax.
It is impossible to predict when, or for how long, these
alternative strategies will be used by the Tax Exempt Money
Market Fund.
Tax-exempt securities
Tax-exempt securities include obligations issued by a state
(including the District of Columbia) , a territory or a
U.S. possession, or any of their agencies, instrumentalities or
other governmental units, the interest on which is, in
the opinion of bond counsel, exempt from federal income tax.
These securities are issued to obtain funds for various public
purposes, such as the construction of public facilities, the
payment of general operating expenses or the refunding of
outstanding debts.
They may also be issued to finance various private activities,
including the lending of funds to public or private institutions
for the construction of housing, educational or medical
facilities, or to fund short-term cash requirements. They may
also include certain types of industrial development bonds,
private activity bonds or notes issued by public authorities to
finance privately owned or operated facilities.
Short-term tax-exempt securities may be issued as interim
financing in anticipation of tax collections, revenue receipts or
bond sales to finance various public purposes.
The two principal classifications of tax-exempt securities are
general obligation and special obligation (or special revenue
obligation) securities.
General obligation securities involve a pledge of the credit of
an issuer possessing taxing power and are payable from the
issuer's general unrestricted revenues. Their payment may depend
on an appropriation by the issuer's legislative body. The
characteristics and methods of enforcement of general obligation
securities vary according to the law applicable to the particular
issuer.
Special obligation (or special revenue obligation) securities are
payable only from the revenues derived from a particular facility
or class of facilities, or a specific revenue source, and
generally are not payable from the unrestricted revenues of the
issuer. Industrial development bonds and private activity bonds
are in most cases special obligation securities, whose credit
quality is tied to the private user of the facilities.
Interest rates.
The value of the securities in the Tax Exempt Money Market
Fund's portfolio can be expected to vary inversely with changes
in prevailing interest rates. Although the Tax Exempt Money
Market Fund's investment policies are designed to minimize these
changes and to maintain a net asset value of $1.00 per share,
there is no assurance that these policies will be successful.
Withdrawals by shareholders could require the sale of portfolio
investments at a time when such a sale might not otherwise be
desirable.
Concentration policies
The Tax Exempt Money Market Fund will not invest more than
25% of its total assets in any one industry. Governmental
issuers of tax-exempt securities are not considered part of any
"industry." However, for this purpose (and for diversification
purposes discussed above) tax-exempt securities backed only by
the assets and revenues of privately owned or operated
facilities may be deemed to be issued by such private
owners or operators . Thus, the 25% limitation would apply to
these obligations.
It is possible that the Tax Exempt Money Market Fund may invest
more than 25% of its assets in a broader segment of the market
for tax-exempt securities, such as revenue obligations of
hospitals and other health care facilities, housing revenue
obligations, or airport revenue obligations. This would be the
case only if Putnam Management determined that the yields
available from obligations in a particular segment of the market
justified the additional risks associated with such
concentration.
Although these obligations could be supported by the credit of
governmental issuers or by the credit of nongovernmental issuers
engaged in a number of industries, economic, business, political
and other developments generally affecting the revenues of such
issuers may have a general adverse effect on all tax-exempt
securities in a particular market segment. (Examples of such
developments include proposed legislation or pending court
decisions affecting the financing of such projects and market
factors affecting the demand for the services or
products of a particular market segment.)
The Tax Exempt Money Market Fund reserves the right to invest
more than 25% of its assets in industrial development bonds and
private activity securities. The Tax Exempt Money Market Fund
also reserves the right to invest more than 25% of its assets in
securities relating to one or more states (including the District
of Columbia), territories, or U.S. possessions, or any of their
political subdivisions. As a result of such an investment, the
performance of the Tax Exempt Money Market Fund may be especially
affected by factors pertaining to the economy of the relevant
governmental issuer and other factors specifically affecting the
ability of issuers of such securities to meet their obligations.
The ability of governmental issuers to meet their obligations
will depend primarily on the availability of tax and other
revenues to those governments and on their fiscal conditions
generally. The amounts of tax and other revenues available to
governmental issuers may be affected from time to time by
economic, political, and demographic conditions within the
particular state. In addition, constitutional or statutory
restrictions may limit a government's power to raise revenues or
increase taxes. The availability of federal, state, and local
aid to issuers of such securities may also affect their ability
to meet their obligations. Payments of principal and interest on
special obligation securities will depend on the economic
condition of the facility or specific revenue source from whose
revenues the payments will be made, which in turn could be
affected by economic, political, and demographic conditions in
the particular state, territory or possession. Any reduction in
the actual or perceived ability of an issuer of tax-exempt
securities in a particular state, territory or possession to meet
its obligations (including a reduction in the rating of its
outstanding securities) would likely affect adversely the market
value and marketability of its obligations and could affect
adversely the values of tax-exempt securities issued by others in
that state, territory or possession as well.
Alternative minimum tax.
In determining compliance with the Tax Exempt Money Market
Fund's 80% test described above, it is a fundamental policy of
the fund to exclude from tax-exempt securities any securities the
interest from which may be subject to the federal alternative
minimum tax for individuals. All tax-exempt interest dividends
will, however, be included in determining the federal alternative
minimum taxable income of corporations.
Both Funds
Other investment practices
The funds may also engage in the following investment practices
, each of which may result in taxable income or capital
gains and involves certain special risks. The SAI contains more
detailed information about these practices, including limitations
designed to reduce these risks.
Repurchase agreements. Each fund may enter into repurchase
agreements, although the Tax Exempt Money Market Fund may only
enter into repurchase agreements on up to 25% of its assets.
Under a repurchase agreement, a fund purchases a debt instrument
for a relatively short period (usually not more than one week),
which the seller agrees to repurchase at a fixed time and price,
representing the fund's cost plus interest. The Money Market
Fund will enter into repurchase agreements only with commercial
banks and with registered broker-dealers who are members of a
national securities exchange or market makers in government
securities, and only if the debt instrument subject to the
repurchase agreement is a U.S. Treasury or agency obligation.
Although Putnam Management will monitor repurchase agreement
transactions to ensure that they will be fully collateralized at
all times, a fund bears a risk of loss if the other party
defaults on its obligation and the fund is delayed or prevented
from exercising its rights to dispose of the collateral. If the
other party should become involved in bankruptcy or insolvency
proceedings, it is possible that a fund may be treated as an
unsecured creditor and required to return the underlying
collateral to the other party's estate.
Forward commitments. The Tax Exempt Money Market Fund may
purchase securities for future delivery, which may increase its
overall investment exposure and involves a risk of loss if the
value of the securities declines prior to the settlement date.
These transactions involve some risk to the fund if the other
party should default on its obligation and the fund is delayed or
prevented from recovering the collateral or completing the
transaction.
Insurance
Each fund, along with three other Putnam money market
funds, has purchased liability insurance, which, among other
things, will insure a fund against a decrease in the value of a
security held by it due to the issuer's default or bankruptcy.
Most securities and instruments in which the funds invest, other
than U.S. government securities, are covered by this insurance.
Although the insurance, which is subject to certain conditions,
may provide a fund with some protection in the event of a
decrease in value of certain of its portfolio securities, the
policy does not insure or guarantee that a fund will maintain a
stable net asset value of $1.00 per share.
The maximum amount of total coverage under the policy is $30
million, subject to a deductible in respect of each loss equal to
the lesser of $1 million or 0.30% of a fund's net assets. As of
September 30 , 1997, the Money Market Fund's net assets
totaled $2,603,610,091 and the Tax Exempt Money Market
Fund's net assets totaled $105,442,136 Each of the funds
that has purchased the insurance has access to the full amount of
insurance under the policy, subject to the deductible.
Accordingly, depending upon the circumstances, a fund may not be
entitled to recover under the policy, even though it has
experienced a loss that would otherwise be insurable. The cost
to a fund of purchasing the insurance is reflected in the
expense information shown in the prospectus under the heading
"Expenses summary." The policy may be canceled under
certain conditions and may not be renewed upon its expiration.
Limiting investment risk
Specific investment restrictions help to limit investment risks
for the funds' shareholders. These restrictions prohibit a fund
, with respect to 75% of its total assets, from
acquiring more than 10% of the voting securities of any one
issuer.* They also prohibit each fund from investing more
than:
(a) (with respect to 75% of its total assets) 5% of its total
assets in securities of any one issuer (other than the U.S.
government);* or
(b) 15% of its net assets in any combination of securities that
are not readily marketable, in securities restricted as to resale
(excluding securities determined by the Trustees (or the person
designated by the Trustees to make such determinations) to be
readily marketable), and in repurchase agreements maturing in
more than seven days.
The funds have not invested more than 10% of their net assets in
the types of securities listed in item (b) and have no current
intention of doing so.
Restrictions marked with an asterisk (*) above are summaries of
fundamental investment policies. See the SAI for the full text
of these policies and other fundamental investment policies.
Except as otherwise noted in the SAI, all percentage limitations
described in this prospectus and the SAI will apply at the time
an investment is made, and will not be considered violated unless
an excess or deficiency occurs or exists immediately after and as
a result of such investment. Except for investment policies
designated as fundamental in this prospectus or the SAI, the
investment policies described in this prospectus and in the SAI
are not fundamental policies. The Trustees may change any non-
fundamental investment policy without shareholder approval. As a
matter of policy, the Trustees would not materially change a
fund's investment objective without shareholder approval.
HOW PERFORMANCE IS SHOWN
Fund advertisements may, from time to time, include performance
information. "Yield" represents an annualization of the change in
value of a shareholder account (excluding any capital changes)
for a specific seven-day period. "Effective yield" compounds a
fund's yield for a year and is, for that reason, greater than the
fund's yield. Yield and effective yield are computed separately
for each class of shares of the Money Market Fund. The yield and
effective yield calculations for the Money Market Fund's class B
shares do not reflect deduction of any contingent deferred sales
charge. "Tax-equivalent" yield for the Tax Exempt Money Market
Fund shows the effect on performance of the tax-exempt status of
distributions received from the Tax Exempt Money Market Fund. It
reflects the approximate yield that a taxable investment must
earn for shareholders at stated income levels to produce an
after-tax yield equivalent to the Tax Exempt Money Market Fund's
yield or effective yield.
"Total Return" for the one-, five- and ten-year periods (or
for the life of a class, if shorter) through the most recent
calendar quarter represents the average annual compounded rate of
return on an investment of $1,000 in the fund invested at the
maximum public offering price (in the case of class A and class M
shares) or reflecting the deduction of any applicable contingent
deferred sales charge (in the case of class B shares). Total
return may also be presented for other periods or based on
investment at reduced sales charge levels. Any quotation of
investment performance not reflecting the maximum initial sales
charge or contingent deferred sales charge would be reduced if
the sales charge were used.
All data are based on past investment results and do not predict
future performance. Investment performance, which will vary, is
based on many factors, including market conditions, portfolio
composition, fund operating expenses and, in the case of the
Money Market Fund, the class of shares the investor
purchases. Investment performance also often reflects the risks
associated with a fund's investment objective and policies.
These factors should be considered when comparing a fund's
investment results with those of other mutual funds and other
investment vehicles.
Quotations of investment performance for any period when an
expense limitation was in effect will be greater than if the
limitation had not been in effect. Fund performance may be
compared to that of various indexes. See the SAI.
HOW THE FUNDS ARE MANAGED
The Trustees are responsible for generally overseeing the conduct
of fund business. Subject to such policies as the Trustees may
determine, Putnam Management furnishes a continuing investment
program for each fund and makes investment decisions on its
behalf. Subject to the control of the Trustees, Putnam
Management also manages each fund's other affairs and business.
Each fund pays Putnam Management a quarterly fee for these
services based on average net assets. See "Expenses summary" and
the SAI.
Each fund pays all expenses not assumed by Putnam Management,
including Trustees' fees, auditing, legal, custodial, investor
servicing and shareholder reporting expenses, and in the case of
the Money Market Fund, payments under its distribution plans
(which are in turn allocated to the relevant class of shares).
Each fund also reimburses Putnam Management for the compensation
and related expenses of certain fund officers and their staff who
provide administrative services. The total reimbursement is
determined annually by the Trustees of each fund.
Putnam Management places all orders for purchases and sales of
fund securities. In selecting broker-dealers, Putnam Management
may consider research and brokerage services furnished to it and
its affiliates. Subject to seeking the most favorable price and
execution available, Putnam Management may consider sales of fund
shares (and, if permitted by law, shares of the other
Putnam funds) as a factor in the selection of broker-dealers.
ORGANIZATION AND HISTORY
Putnam Money Market Fund and Putnam Tax Exempt Money Market Fund
are Massachusetts business trusts organized on November 25, 1975
and December 3, 1986, respectively. A copy of the Agreements and
Declarations of Trust, which are governed by Massachusetts law,
are on file with the Secretary of State of The Commonwealth of
Massachusetts. Prior to September 1, 1994, Putnam Money Market
Fund was known as Putnam Daily Dividend Trust.
Each fund is an open-end, diversified management investment
company with an unlimited number of authorized shares of
beneficial interest. The Trustees of the Tax Exempt Money
Market Fund may, without shareholder approval, create two or more
series of shares representing separate investment
portfolios .
Shares of the Money Market Fund and shares of any such series of
the Tax Exempt Money Market Fund may be divided without
shareholder approval into two or more classes of shares having
such preferences and special or relative rights and privileges as
the Trustees determine. The Money Market Fund's shares are
currently divided into three classes. Only class A, B and M
shares are offered by this prospectus. The Tax Exempt Money
Market Fund's shares are not currently divided into classes.
Each fund may also offer other classes of shares with different
sales charges and expenses. Because of these different sales
charges and expenses, the investment performance of the classes
will vary. For more information, including your eligibility to
purchase any other class of shares, contact your investment
dealer or Putnam Mutual Funds (at 1-800-225-1581).
Each share has one vote, with fractional shares voting
proportionally. Shares of all classes of the Money Market Fund
will vote together as a single class except when otherwise
required by law or as determined by the Trustees. Shares are
freely transferable, are entitled to dividends as declared by the
Trustees, and, if a fund were liquidated, would receive the net
assets of that fund. Each fund may suspend the sale of
shares at any time and may refuse any order to purchase shares.
Although neither fund is required to hold annual meetings of its
shareholders, shareholders holding at least 10% of the
outstanding shares entitled to vote have the right to
call a meeting to elect or remove Trustees, or to take other
actions as provided in its Agreement and Declaration of Trust.
Although each fund is offering only its own shares in this
prospectus, it is possible that a fund might become liable for
any misstatement in the prospectus about another fund. The
Trustees of each fund have considered this factor in approving
the use of a single prospectus.
If you own fewer shares than the minimum set by the Trustees
(presently 500 shares for each fund), a fund may choose to redeem
your shares. You will receive at least 30 days' written notice
before a fund redeems your shares, and you may purchase
additional shares at any time to avoid a redemption. A fund may
also redeem shares if you own shares above a maximum amount set
by the Trustees. There is presently no maximum , but
the Trustees may , at any time, establish
one, which could apply to both present and future
shareholders.
The funds' Trustees: George Putnam,* Chairman. President of the
Putnam funds. Chairman and Director of Putnam Management and
Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director,
Marsh & McLennan Companies, Inc.; William F. Pounds, Vice
Chairman. Professor of Management, Alfred P. Sloan School of
Management, Massachusetts Institute of Technology; Jameson Adkins
Baxter, President, Baxter Associates, Inc.; Hans H. Estin, Vice
Chairman, North American Management Corp.; John A. Hill, Chairman
and Managing Director, First Reserve Corporation; Ronald J.
Jackson, Former Chairman, President and Chief Executive Officer
of Fisher-Price, Inc. , Trustee of Salem Hospital and the
Peabody Essex Museum; Paul L. Joskow,* Professor of Economics
and Management, Massachusetts Institute of Technology, Director,
New England Electric Systems, State Farm Indemnity Company and
Whitehead Institute for Biomedical Research; Elizabeth T.
Kennan, President Emeritus and Professor, Mount Holyoke College;
Lawrence J. Lasser,* Vice President of the Putnam funds.
President, Chief Executive Officer and Director of Putnam
Investments, Inc. and Putnam Management. Director, Marsh &
McLennan Companies, Inc. ; John H. Mullin, III, Chairman and
CEO of Ridgeway Farm, Director of ACX Technologies, Inc., Alex.
Brown Realty, Inc., The Liberty Corporation, and The Ryland
Group, Inc. ; Robert E. Patterson, Executive Vice President
and Director of Acquisitions, Cabot Partners Limited Partnership;
Donald S. Perkins,* Director of various corporations, including
Cummins Engine Company, Lucent Technologies, Inc., Springs
Industries, Inc. and Time Warner Inc.; George Putnam, III,*
President, New Generation Research, Inc.; A.J.C. Smith,* Chairman
and Chief Executive Officer, Marsh & McLennan Companies, Inc. ;
W. Thomas Stephens, President and Chief Executive Officer of
MacMillan Bloedel Ltd., Director of Mail-Well, Inc., Quest
Communications, The Eagle Picher Trust and New Century
Energies ; and W. Nicholas Thorndike, Director of various
corporations and charitable organizations, including Data General
Corporation, Bradley Real Estate, Inc. and Providence Journal Co.
Also, Trustee of Massachusetts General Hospital and Eastern
Utilities Associates. The Trustees are also Trustees of the
other Putnam funds. Those marked with an asterisk (*) are or may
be deemed to be "interested persons" of a fund, Putnam Management
or Putnam Mutual Funds.
About Your Investment
HOW TO BUY SHARES
Shares of the Tax Exempt Money Market Fund and class A and M
shares of the Money Market Fund. The Tax Exempt Money Market Fund
continuously offers its shares, and the Money Market Fund
continuously offers its class A and class M shares, at a price of
$1.00 per share, without a front-end or contingent deferred sales
charge ("CDSC"), except that a CDSC of up to 1% may be assessed
on certain shares of the Tax Exempt Money Market Fund and class A
shares of the Money Market Fund that were purchased by exchange
of shares of another Putnam fund which were purchased without an
initial sales charge.
You can open a fund account for $1,000 or more and make
additional investments at any time with as little as $100. You
can buy the Tax Exempt Money Market Fund's shares and the Money
Market Fund's class A and class M shares three ways - by mail, by
wire, or through most investment dealers. A CDSC of 1.00% or
0.50%, respectively, will be imposed on redemptions of shares of
the Tax Exempt Money Market Fund and class A shares of the Money
Market Fund that were purchased by exchange of shares of another
Putnam fund which were purchased without an initial sales charge
as part of a purchase of $1 million or more, if such redemption
occurs within the first or second year after the initial
purchase. The CDSC will be computed based on the lower of the
shares' cost and current net asset value. Any shares acquired by
reinvestment of distributions will be redeemed without a CDSC.
Class B shares (the Money Market Fund). Class B shares of the
Money Market Fund may only be purchased (i) by investors opening
Dollar Cost Averaging accounts pursuant to which all of the
amount invested will be reinvested in other Putnam funds within
24 months of the initial purchase and (ii) by exchange of class B
shares of another Putnam fund. Class B shares of the Money
Market Fund are sold without an initial sales charge, although a
CDSC will be imposed if you redeem shares within a specified
period after purchase. For class B shares purchased by investors
opening Dollar Cost Averaging Accounts, the CDSC will be computed
using the table below. The following types of shares may be
redeemed without charge at any time: (i) shares acquired by
reinvestment of distributions, and (ii) shares otherwise exempt
from the CDSC, as described below. For other shares, the
amount of the charge is determined as a percentage of the lesser
of the current market value or the cost of the shares being
redeemed.
In determining whether a CDSC is payable on any redemption,
Money Market Fund shares not subject to any charge will be
redeemed first, followed by shares held longest during the CDSC
period. For this purpose, the amount of any increase in a
share's value above its initial purchase price is not regarded as
a share exempt from the CDSC. Thus, when a share that has
appreciated in value is redeemed during the CDSC period, a CDSC
is assessed on its initial purchase price. For information on
how sales charges are calculated if you exchange your shares, see
"How to exchange shares." Putnam Mutual Funds receives the
entire amount of any CDSC you pay. Orders for class B shares for
$250,000 or more will be treated as orders for class A shares or
declined. Class B shares of the Money Market Fund will
automatically convert into class A shares approximately eight
years after purchase. For more information about the conversion
of class B shares, see the SAI. This discussion includes
information about how shares acquired through reinvestment of
distributions are treated for conversion purposes. This
discussion also notes certain circumstances under which a
conversion may not occur.
The Money Market Fund may sell class B shares at net asset value
without being subject to a CDSC to current and retired Trustees
(and their families), current and retired employees (and their
families) of Putnam Management and affiliates, registered
representatives and other employees (and their families) of
broker-dealers having sales agreements with Putnam Mutual Funds,
employees (and their families) of financial institutions having
sales agreements with Putnam Mutual Funds (or otherwise having an
arrangement with a broker-dealer or financial institution with
respect to sales of fund shares), financial institution trust
departments investing an aggregate of $1 million or more in
Putnam funds, clients of certain administrators of tax-qualified
plans, tax-qualified plans when proceeds from repayments of loans
to participants are invested (or reinvested) in Putnam funds,
"wrap accounts" for the benefit of clients of broker-dealers,
financial institutions or financial planners adhering to certain
standards established by Putnam Mutual Funds, and investors
meeting certain requirements who sold shares of certain Putnam
closed-end funds pursuant to a tender offer by the closed-end
fund.
In addition, the Money Market Fund may sell class B shares at net
asset value without a CDSC in connection with the acquisition by
the fund of assets of an investment company or personal holding
company. The CDSC will be waived on redemptions of shares
arising out of the death or post-purchase disability of a
shareholder or settlor of a living trust account, and on
redemptions in connection with certain withdrawals from IRA or
other retirement plans. Up to 12% of the value of shares subject
to a systematic withdrawal plan may also be redeemed each year
without a CDSC. The SAI contains additional information about
purchasing shares at reduced sales charges.
Year 1 2 3 4 5 6 7+
- -------------------------------------------------------------
Charge 5% 4% 3% 3% 2% 1% 0%
Putnam Mutual Funds pays a sales commission equal to 4.00% of
the amount invested to dealers who sell class B shares of the
Money Market Fund . These commissions are not paid on
exchanges from other Putnam funds or on sales to investors
exempt from the CDSC.
General
Unlike class A shares of the Money Market Fund, class B and class
M shares of the Money Market Fund are subject to an ongoing
distribution fee which will cause such shares to have a higher
expense ratio and to pay lower dividends than class A shares.
See "Expenses summary." Not all investment dealers sell all
classes of shares. Investment dealers may receive different
compensation depending upon which class of shares they sell. See
"Distribution Plans." For more information, consult your
investment dealer or Putnam Investor Services.
Because the funds seek to be fully invested at all times,
investments must be in Same Day Funds to be accepted. Same Day
Funds are funds credited to the account of the relevant fund's
designated bank by the Federal Reserve Bank of Boston. When
payment in Same Day Funds is available to a fund prior to the
close of regular trading on the New York Stock Exchange, that
fund will accept the order to purchase shares that day.
If you are considering redeeming or transferring shares
to another person shortly after purchase, you should pay for
those shares with wired Same Day Funds or a certified check to
avoid any delay in redemption or transfer. Otherwise,
payment may be delayed until the purchase price of those shares
has been collected or, if you exchange your shares or redeem them
by check or telephone, until 15 calendar days after the purchase
date.
After you make your initial investment in a fund, Putnam Investor
Services will establish an Investing Account for you on that
fund's records. This account is a complete record of all
transactions between you and the fund, which at all times shows
the balance of shares you own. The funds will not issue share
certificates.
Buying shares by mail. Complete the order form and send it to
Putnam Investor Services with your check, Federal Reserve Draft
or other negotiable bank draft drawn on a U.S. bank and payable
in U.S. dollars to the order of the fund in which you are
investing. If you pay by check or draft, the fund's designated
bank will make Same Day Funds available to the fund, and the fund
will accept the order, on the first business day after receipt of
your check or draft. If you pay by Federal Reserve Draft, the
funds will accept the order the day it is received provided it is
received before the close of regular trading on the New York
Stock Exchange.
Buying shares by wire. You may invest in a fund by bank wire
transfer of Same Day Funds to that fund's designated bank. For
wiring instructions, see the order form. Investments in Tax
Qualified Retirement Plans cannot be made by wire.
Any commercial bank can transfer Same Day Funds by wire. Wired
funds received by a fund's designated bank by 3:00 p.m. Boston
time are normally accepted for investment on the day received.
To be sure that a bank wire order is accepted on the same day it
is sent, your bank should wire funds as early in the day as
possible. Your bank may charge for sending Same Day Funds on
your behalf. The funds' designated bank presently does not
charge you for receipt of wired Same Day Funds, but reserves the
right to charge for this service.
Buying shares through investment dealers. You may, if you wish,
purchase shares through investment dealers, which may charge a
fee for their services. Most investment dealers have a sales
agreement with Putnam Mutual Funds and will be glad to accept
your order. If you do not have a dealer, Putnam Mutual Funds can
refer you to one. Investment dealers must follow the
instructions in the order form.
DISTRIBUTION PLANS
Putnam Money Market Fund
The Money Market Fund's class B and class M distribution plans.
The class B and class M plans provide for payments by the fund to
Putnam Mutual Funds at the annual rate of up to 0.75% and 1.00%,
respectively, of average net assets attributable to class B
shares and class M shares, respectively. The Trustees currently
limit payments under the Money Market Fund's class B and class M
plans to the annual rate of 0.50% and 0.15%, respectively, of
such assets.
Putnam Mutual Funds compensates qualifying
dealers (including , for this purpose, certain
financial institutions) for sales of class M shares of
the Money Market Fund and the maintenance of shareholder
accounts . Putnam Mutual Funds makes quarterly payments to
dealers at the annual rate of 0.15% of the average
net asset value of class M shares for which such dealers
are designated as the dealer of record.
Putnam Tax Exempt Money Market Fund
The Tax Exempt Money Market Fund's distribution plan provides for
payments by the fund to Putnam Mutual Funds at the annual rate of
up to 0.35% of the fund's average net assets. At present, no
payments are being made under the plan.
General
Payments under the plans are intended to compensate Putnam Mutual
Funds for services provided and expenses incurred by it as
principal underwriter of the funds' shares, including the
payments to dealers mentioned above.
Putnam Mutual Funds may suspend or modify its payments
to dealers. The payments are also subject to the
continuation of the relevant distribution plan, the terms of
service agreements between dealers and Putnam Mutual Funds, and
any applicable limits imposed by the National Association of
Securities Dealers, Inc.
HOW TO SELL SHARES
You can sell your shares to your fund any day the New York Stock
Exchange is open, by check, by telephone, by mail or through your
investment dealer. Your fund must receive your properly
completed application before you may sell shares; certain methods
require additional documentation (see below). To enable
shareholders to earn daily dividends as long as possible, the
funds have arranged the following methods of selling shares:
Selling shares by check. If you would like to use a fund's
check-writing service, mark the proper box on the order form and
complete the signature card and, if applicable, the resolution.
Upon receiving the properly completed order form, signature card,
and resolution, your fund will send you checks which may be made
payable to the order of any person in the amount of $500 or more.
When a check is presented for payment, a sufficient number of
full and fractional shares in your account will be redeemed at
that day's net asset value to cover the amount of the check. An
additional amount of shares will be redeemed to cover any
applicable CDSC.
Shareholders utilizing a fund's checks are subject to that fund's
bank's rules governing checking accounts. There is currently no
charge to shareholders for the use of checks. You should make
sure that there are sufficient shares in the account to cover the
amount of any check drawn plus any applicable CDSC. If
insufficient shares are in the account, the check will be
returned and no shares will be redeemed. Because dividends
declared on shares held in your account, the imposition of any
applicable CDSC, or prior withdrawals may cause the value of your
account to change, it is impossible to determine in advance your
account's total value. Accordingly, you should not write a check
for the entire value of your account or close your account by
writing a check. Redemptions by check will be confirmed at least
monthly.
Selling shares by telephone. If you would like to sell shares by
telephone with proceeds directed to your bank account, please
mark the proper box on the order form. You may sell shares by
calling toll-free 1-800-225-1581. On the following business day,
the amounts withdrawn from your account will either be mailed by
check or wired in Same Day Funds to the bank account designated
on your application. (To wire proceeds, the amount must be
$1,000 or more and your designated bank must be a commercial bank
within the United States.) You may change your designated bank
account by sending a written request to Putnam Investor Services
with your signature guaranteed by a bank, broker-dealer or
certain other financial institutions. See the SAI for more
information about how to obtain a signature guarantee.
You may use Putnam's Telephone Redemption Privilege to
redeem shares valued up to $100,000 unless you have
notified Putnam Investor Services of an address change within the
preceding 15 days. Unless you indicate otherwise on the
account application, Putnam Investor Services will be authorized
to act upon redemption and transfer instructions received by
telephone from you , or any person claiming to act as
your representative, who can provide Putnam Investor
Services with your account registration and address as it
appears on Putnam Investor Services' records.
Putnam Investor Services will employ these and other reasonable
procedures to confirm that instructions communicated by telephone
are genuine; if it fails to employ reasonable procedures, Putnam
Investor Services may be liable for any losses due to
unauthorized or fraudulent instructions. For information, consult
Putnam Investor Services.
During periods of unusual market changes and shareholder
activity, you may experience delays in contacting Putnam Investor
Services by telephone. In this event, you may wish to submit a
written redemption request, as described above , or contact
your investment dealer , as described below . The Telephone
Redemption Privilege may be modified or terminated without
notice.
Selling shares by mail. You may also sell shares of a fund by
sending a written withdrawal request to: Putnam Investor
Services, P.O. Box 41203, Providence, RI 02940-1203. If you sell
shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives
must be guaranteed by a bank, broker-dealer or certain other
financial institutions. See the SAI for more information about
how to obtain a signature guarantee.
<PAGE>
General
Putnam Investor Services may require additional documentation
from selling shareholders which are corporations, partnerships,
agents, fiduciaries or surviving joint owners. Contact Putnam
Investor Services for details. If you are currently a
shareholder and did not request the check-writing service or
telephone redemption privilege on your initial order form, you
must first complete and return an authorization form, available
from Putnam Investor Services. A shareholder may revoke
authorization for check-writing service or telephone redemption
by written notice at any time, effective when Putnam Investor
Services receives such notice.
The funds reserve the right to terminate or modify the terms of
the check-writing service or telephone redemption privilege, or
to charge shareholders for the use of these services at any time.
The funds generally send you payment for your shares the business
day after your request is received. Under unusual circumstances,
a fund may suspend redemptions, or postpone payment for more than
seven days, as permitted by federal securities law. If, however,
your request is made by telephone shortly after purchase and the
shares being sold were paid for by an uncertified check, your
fund will pay for the shares on the 15th calendar day after the
purchase of the shares. Putnam Investor Services will first
redeem shares of your fund purchased by direct cash
investment. The funds will only redeem shares for which
payment has been received.
HOW TO EXCHANGE SHARES
Shareholders of the funds who received their shares in exchange
for shares of another Putnam fund with a sales charge can
exchange their shares for shares of other Putnam funds at net
asset value. Other shareholders of the funds may need to pay a
sales charge at the time of the exchange which varies depending
on the fund to which they exchange and the amount exchanged. Not
all Putnam funds offer all classes of shares. Shareholders of
the Money Market Fund may exchange their shares only for shares
of the same class of another fund. If the other Putnam fund
offers only one class of shares, only class A shares may be
exchanged for such class. Shareholders of the Tax Exempt Money
Market Fund exchanging into funds with more than one class of
shares may exchange their shares only for class A shares. If
you exchange shares subject to a CDSC, the transaction will not
be subject to the CDSC. However, when you redeem the shares
acquired through the exchange, the redemption may be subject to
the CDSC, depending upon when you originally purchased the
shares. The CDSC will be computed using the schedule of any fund
into or from which you have exchanged your shares that would
result in your paying the highest CDSC applicable to your class
of shares. For purposes of computing the CDSC, the length of
time you have owned your shares will be measured from the date of
original purchase and will not be affected by the exchange.
To exchange your shares, simply complete an Exchange
Authorization Form and send it to Putnam Investor Services. The
form is available from Putnam Investor Services. For federal
income tax purposes, an exchange is treated as a sale of shares.
Since the net income of a fund is declared as a dividend each
time it is determined, the net asset value per share of a fund
generally remains at $1.00 immediately after each determination
and dividend declaration; therefore, an exchange generally will
not give rise to gain or loss. A Telephone Exchange Privilege is
currently available for amounts up to $500,000. Putnam Investor
Services' procedures for telephonic transactions are described
above under "How to sell shares." Ask your investment dealer or
Putnam Investor Services for prospectuses of other Putnam funds.
Shares of certain Putnam funds are not available to residents of
all states.
The exchange privilege is not intended as a vehicle for short-
term trading. Excessive exchange activity may interfere with
portfolio management and have an adverse effect on all
shareholders. In order to limit excessive exchange activity and
in other circumstances where Putnam Management or the Trustees
believe doing so would be in the best interests of your fund,
each fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any
exchange. Consult Putnam Investor Services before requesting an
exchange. See the SAI to find out more about the exchange
privilege.
HOW A FUND VALUES ITS SHARES
The Tax Exempt Money Market Fund calculates the net asset value
of a share, and the Money Market Fund calculates the net asset
value of a share of each class, by dividing the total value of
its assets, less liabilities, by the number of its shares
outstanding. Shares are valued as of the close of regular
trading on the New York Stock Exchange each day the Exchange is
open.
The funds value their portfolio investments at amortized cost
according to Securities and Exchange Commission Rule 2a-7. 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.
HOW EACH FUND DETERMINES NET INCOME AND MAKES
DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION
The funds determine their net income once each day the New York
Stock Exchange is open, as of the close of regular trading on the
Exchange. Each determination of a fund's net income includes (i)
all accrued investment income on portfolio investments of the
fund, (ii) plus or minus all realized and unrealized gains and
losses on the fund's portfolio investments, (iii) less all
accrued expenses of the fund. (The funds will not have
unrealized gains or losses so long as they value their
investments by the amortized cost method.)
All of the net income of the funds is declared each day that the
funds are open for business as a dividend to shareholders of
record at the time of each declaration. Shareholders begin
earning dividends on the day after a fund accepts their order.
Normally, each fund's dividends will be paid monthly. Since
the net income of the funds is declared as a dividend each time
it is determined, net asset value per share of the funds remain
at $1.00 immediately after each determination and dividend
declaration. A shareholder who withdraws the entire balance
of an account at any time during the month will be paid all
dividends declared through the date of the withdrawal.
Distributions paid by the Money Market Fund with respect to class
A shares will generally be greater than those paid with respect
to class B and class M shares because expenses attributable to
class B and class M shares will generally be higher.
You can choose from two distribution options:
- - Automatically reinvest all distributions in additional
shares; or
- - Receive all distributions in cash.
You can change your distribution option by notifying Putnam
Investor Services in writing. If you do not select an option
when you open your account, all distributions will be reinvested.
All distributions reinvested in additional fund shares will be
invested in shares of the class on which the distributions are
paid. You will receive a statement confirming reinvestment of
distributions in additional fund shares (or in shares of
other Putnam funds for Dividends Plus accounts) promptly
following the quarter in which the reinvestment occurs.
If a check representing a fund distribution is not cashed within
a specified period, Putnam Investor Services will notify you that
you have the option of requesting another check or reinvesting
the distribution . If Putnam Investor Services does not
receive your election, the distribution will be reinvested in
the fund. Similarly, if correspondence sent by a fund or
Putnam Investor Services is returned as "undeliverable," fund
distributions will automatically be reinvested in that fund or in
another Putnam fund.
With Putnam Dividends PLUS, you can invest distributions from net
investment income in shares of the same class of another Putnam
fund. A sales charge will apply (unless the shares were acquired
by exchange from a Putnam fund that assessed a sales charge or
the dividends are invested in another Putnam money market fund).
Contact Putnam Investor Services for details.
Each fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements necessary for it to be relieved of federal taxes on
income and gains it distributes to shareholders. Each fund will
distribute substantially all of its ordinary income and capital
gain net income, if any, on a current basis.
Distributions designated by the Tax Exempt Money Market Fund as
"exempt-interest dividends" are not generally subject to federal
income tax. However, if you receive social security or railroad
retirement benefits, you should consult your tax adviser to
determine what effect, if any, an investment in the Tax Exempt
Money Market Fund may have on the taxation of your benefits. In
addition, an investment in the Tax Exempt Money Market Fund may
result in liability for federal alternative minimum tax and for
state and local taxes, for both individual and corporate
shareholders.
All Money Market Fund and Tax Exempt Money Market
Fund distributions , other than exempt-interest
dividends , will be taxable to you as ordinary income to
the extent derived from the fund's investment income and net
short-term gains (that is, net gains from securities held for not
more than a year). Distributions designated by a fund as deriving
from net gains on securities held for more than one year but not
more than 18 months, if any, will be taxable to you as
such, regardless of how long you have held the shares.
Distributions will be taxable as described above whether received
in cash or in shares through the reinvestment of distributions.
Early in each calendar year Putnam Investor Services will
notify you of the amount and tax status of distributions paid to
you for the preceding year.
The foregoing is a summary of certain federal income tax
consequences of investing in a fund . You should consult
your tax adviser to determine the precise effect of an investment
in a fund on your particular tax situation (including
possible liability for federal alternative minimum tax and state
and local taxes).
About Putnam Investments, Inc.
Putnam Management has been managing mutual funds since 1937.
Putnam Mutual Funds is the principal underwriter of the funds
and of other Putnam funds. Putnam Fiduciary Trust Company is the
custodian of the funds. Putnam Investor Services, a division of
Putnam Fiduciary Trust Company, is the investor servicing and
transfer agent for the funds.
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are subsidiaries of Putnam Investments, Inc., which is
wholly owned by Marsh & McLennan Companies, Inc., a publicly-
owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.
<PAGE>
PUTNAM MONEY MARKET FUND
PUTNAM TAX EXEMPT MONEY MARKET FUND
One Post Office Square
Boston, MA 02109
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
CUSTODIAN
Putnam Fiduciary Trust Company
One Post Office Square
Boston, MA 02109
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. (Putnam Tax Exempt Money Market Fund)
One Post Office Square
Boston, MA 02109
Price Waterhouse LLP (Putnam Money Market Fund)
160 Federal Street
Boston, MA 02110
PUTNAMINVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581
PUTNAM MONEY MARKET FUND
One Post Office Square, Boston, MA 02109
Class A shares
INVESTMENT STRATEGY: INCOME
PROSPECTUS-JANUARY 30, 1998
This prospectus explains concisely what you should know before
investing in class A shares of Putnam Money Market Fund (the
"fund") which are offered without a sales charge through eligible
employer-sponsored retirement plans. Please read it
carefully and keep it for future reference. You can find more
detailed information about the fund in the January 30,
1998 statement of additional information (the "SAI"), as
amended from time to time. For a free copy of the SAI or for
other information, including a prospectus regarding class A
shares for other investors, call Putnam Investor Services at
1-800-752-9894. The SAI has been filed with the Securities and
Exchange Commission (the "Commission") and is incorporated
into this prospectus by reference. The Commission maintains a
Web site (http://www.sec.gov) that contains the SAI, material
incorporated by reference into this prospectus and the SAI, and
other information regarding registrants that file electronically
with the Commission.
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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PUTNAMINVESTMENTS
Putnam Defined
Contribution Plans
<PAGE>
ABOUT THE FUND
Expenses summary..........................................
Financial highlights......................................
Objective..............................................
How the fund pursues its objective.....................
How performance is shown..................................
How the fund is managed...................................
Organization and history..................................
ABOUT YOUR INVESTMENT
How to buy shares.........................................
How to sell shares........................................
How to exchange shares....................................
How the fund values its shares............................
How the fund determines net income and makes
distributions to shareholders; tax
information................................
......
ABOUT PUTNAM INVESTMENTS, INC.............................
<PAGE>
About the Fund
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing.
The following table summarizes expenses attributable to class A
shares based on the most recent fiscal year. The example shows
the cumulative expenses attributable to a hypothetical $1,000
investment in class A shares over specified periods.
Annual fund operating expenses
(as a percentage of average net assets)
Management fees
0.32%
Other expenses
0.25%
Total fund operating expenses
0.57%
The table is provided to help you understand the expenses of
investing in the fund and your share of the fund operating
expenses . The expenses shown in the table do not reflect
the application of credits that reduce fund expenses.
Example
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period:
1 3 5 10
year years years years
$6 $18 $32 $71
The example does not represent past or future expense levels, and
actual expenses may be greater or less than those shown. Federal
regulations require the example to assume a 5% annual return, but
actual annual return varies. The example does not reflect any
charges or expenses related to your employer's plan.
FINANCIAL HIGHLIGHTS
The following table presents per share financial information for
class A shares . This information has been derived from
the fund's financial statements, which have been audited and
reported on by the independent accountants. The "Report of
independent accountants" and financial statements included in the
fund's annual report to shareholders for the 1997 fiscal
year are incorporated by reference into this prospectus. The
fund's annual report, which contain additional unaudited
performance information, is available without charge upon
request.
<PAGE>
Financial Highlights
(for a share outstanding throughout the period)
Class A
<TABLE>
<CAPTION>
For the eleven
months ended
Year ended September
30, September 30, Year ended October
31,
1997 1996 1995
1994 1993 1992 1991
<S> <C> <C> <C>
<C> <C> <C> <C>
Investment operations
Net investment income $.0505 $.0507 $.0521
$.0299 $.0246 $.0353 $.0598
Net realized gain -- -- --
- -- -- -- .0001
on investments
Total from investment
operations .0505 .0507 .0521
.0299 .0246 .0353 .0599
Total distributions: (.0505) (.0507) (.0521)
(.0299) (.0246) (.0353) (.0599)
Total investment return
at net asset value (%)(a) 5.17 5.19 5.33
3.03* 2.49 3.58 6.16
Net assets, end of
period(in thousands) $2,134,223 $1,659,288 $1,189,640
$1,101,171 $586,920 $839,185 $684,987
Ratio of expenses to
average net assets (%)(b) .57 .57 .62
.58* .70 .86 .77
Ratio of net investment
income to average net
assets (%) 5.06 5.00 5.23
3.03* 2.48 3.56 6.04
/TABLE
<PAGE>
Year ended October 31,
1990 1989 1988
Investment operations
Net investment income $.0764 $.0853 $.0655
Net realized gain
on investments -- -- --
Total from investment
operations .0764 .0853 .0655
Total distributions: (.0764) (.0853) (.0655)
Total investment return
at net asset value (%)(a) 7.92 8.87 6.75
Net assets, end of
period(in thousands) $904,186 $797,395 $659,590
Ratio of expenses to
average net assets (%)(b) .74 .85 .91
Ratio of net investment
income to average net
assets (%) 7.63 8.51 6.67
* 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 periods
ended on or after September 30, 1995 includes amounts paid
through expense offset arrangements. Prior period ratios
exclude these amounts.
<PAGE>
OBJECTIVE
Putnam Money Market Fund seeks as high a rate of current income
as Putnam Investment Management, Inc., the fund's investment
manager ("Putnam Management"), believes is consistent with
preservation of capital and maintenance of liquidity. It is
designed for investors seeking current income with stability of
principal. The fund is not intended to be a complete investment
program, and there is no assurance it will achieve its objective.
HOW THE FUND PURSUES ITS OBJECTIVE
Basic investment strategy
The fund invests in a portfolio of high-quality money market
instruments. Examples of these instruments include:
o bank certificates of deposit (CDs): negotiable
certificates issued against funds deposited in a
commercial bank for a definite period of time and
earning a specified return.
o bankers' acceptances: negotiable drafts or bills of
exchange, which have been "accepted" by a bank,
meaning, in effect, that the bank has unconditionally
agreed to pay the face value of the instrument on
maturity.
o prime commercial paper: high-grade, short-term
obligations issued by banks, corporations and other
issuers.
o corporate obligations: high-grade, short-term
corporate obligations other than prime commercial
paper.
o municipal obligations: high-grade, short-term
municipal obligations.
o U.S. government securities: marketable securities
issued or guaranteed as to principal and interest by
the U.S. government or by its agencies or
instrumentalities.
o repurchase agreements: with respect to U.S. Treasury
or U.S. government agency obligations.
The fund will invest only in high-quality securities that Putnam
Management believes present minimal credit risk. High-quality
securities are securities rated at the time of acquisition in one
of the two highest categories by at least two nationally
recognized rating services (or, if only one rating service has
rated the security, by that service) or, if the security is
unrated, judged to be of equivalent quality by Putnam Management.
The fund will maintain a dollar-weighted average maturity of 90
days or less and will not invest in securities with remaining
maturities of more than 397 days. The fund may invest in
variable or floating rate securities which bear interest at rates
subject to periodic adjustment or which provide for periodic
recovery of principal on demand. Under certain conditions, these
securities may be deemed to have remaining maturities equal to
the time remaining until the next interest adjustment date or the
date on which principal can be recovered on demand. The fund
follows investment and valuation policies designed to maintain a
stable net asset value of $1.00 per share. There is no assurance
that the fund will be able to maintain a stable net asset value
of $1.00 per share.
Selection of investments
The fund may invest in bank certificates of deposit and bankers'
acceptances issued by banks having deposits in excess of $2
billion (or the foreign currency equivalent) at the close of the
last calendar year. Should the Trustees decide to reduce this
minimum deposit requirement, shareholders would be notified and
this prospectus supplemented.
Securities issued or guaranteed as to principal and interest by
the U.S. government include a variety of Treasury securities,
which differ in their interest rates, maturities and dates of
issue. Securities issued or guaranteed by agencies or
instrumentalities of the U.S. government may or may
not be supported by the full faith and credit of the United
States or by the right of the issuer to borrow from the Treasury.
Considerations of liquidity and preservation of capital mean that
the fund may not necessarily invest in money market instruments
paying the highest available yield at a particular time.
Consistent with its investment objective, the fund will attempt
to maximize yields by portfolio trading and by buying and selling
portfolio investments in anticipation of or in response to
changing economic and money market conditions and trends. The
fund will also invest to take advantage of what Putnam Management
believes to be temporary disparities in yields of different
segments of the high-grade money market or among particular
instruments within the same segment of the market. These
policies, as well as the relatively short maturity of obligations
purchased by the fund, may result in frequent changes in the
fund's portfolio. Portfolio turnover may give rise to taxable
gains. The fund does not usually pay brokerage commissions in
connection with the purchase or sale of portfolio securities.
See "Management -- Portfolio Transactions -- Brokerage and
research services" in the SAI for a discussion of underwriters'
commissions and dealers' spreads involved in the purchase and
sale of portfolio securities.
Foreign investments. The Money Market Fund may invest
without limit in U.S. dollar-denominated commercial paper of
foreign issuers and in bank certificates of deposit and bankers'
acceptances payable in U.S. dollars and issued by foreign banks
(including U.S. branches of foreign banks) or by foreign branches
of U.S. banks. These investments subject the Money Market
Fund to investment risks different from those associated with
domestic investments. Such risks include the possibility of
adverse political and economic developments in such countries,
the imposition of withholding taxes on interest income, seizure
or nationalization of foreign deposits or the adoption of other
governmental restrictions which might adversely affect the
payment of principal and interest on such obligations.
Legal remedies available to investors in certain foreign
countries may be limited. Foreign settlement procedures and
trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the
Money Market Fund's assets held abroad) and expenses not
present in the settlement of domestic investments. In addition,
foreign securities may be less liquid than U.S. securities, and
foreign accounting and disclosure standards may differ from
United States standards. Special tax considerations apply to
foreign securities.
A more detailed explanation of foreign investments, and the risks
and special tax considerations associated with them, is included
in the SAI.
Interest rates. The value of the securities in the fund's
portfolio can be expected to vary inversely with changes in
prevailing interest rates. Although the fund's investment
policies are designed to minimize these changes and to maintain a
net asset value of $1.00 per share, there is no assurance that
these policies will be successful. Withdrawals by shareholders
could require the sale of portfolio investments at a time when
such a sale might not otherwise be desirable.
Concentration. The fund may invest without limit in the banking
industry and in commercial paper and short-term corporate
obligations of issuers in the personal credit institution and
business credit institution industries when, in the opinion of
Putnam Management, the yield, marketability and availability of
investments meeting the fund's quality standards in those
industries justify any additional risks associated with the
concentration of the fund's assets in those industries. The
fund, however, will invest more than 25% of its assets in the
personal credit institution or business credit institution
industries only when, to Putnam Management's knowledge, the
yields then available on securities issued by companies in such
industries and otherwise suitable for investment by the fund
exceed the yields then available on securities issued by
companies in the banking industry and otherwise suitable for
investment by the fund.
Other investment practices
The fund may also engage in the following investment practices
, each of which may result in taxable income or capital
gains and involves certain special risks. The SAI
contains
more detailed information about these practices, including
limitations designed to reduce these risks.
Securities lending. The fund may lend portfolio securities
amounting to not more than 25% of its assets to broker-dealers.
These transactions must be fully collateralized at all times with
cash and short-term debt obligations. These transactions involve
some risk to the fund if the other party should default on its
obligation and the fund is delayed or prevented from recovering
the collateral.
Repurchase agreements. The fund may enter into repurchase
agreements on up to 25% of its assets .
Under a repurchase
agreement, the fund purchases a debt instrument for a relatively
short period (usually not more than one week), which the seller
agrees to repurchase at a fixed time and price, representing the
fund's cost plus interest. The fund will enter into repurchase
agreements only with commercial banks and with registered broker-
dealers who are members of a national securities exchange or
market makers in government securities, and only if the debt
instrument subject to the repurchase agreement is a U.S. Treasury
or agency obligation. Although Putnam Management will monitor
repurchase agreement transactions to ensure that they will be
fully collateralized at all times, the fund bears a risk of loss
if the other party defaults on its obligation and the fund is
delayed or prevented from exercising its rights to dispose of the
collateral. If the other party should become involved in
bankruptcy or insolvency proceedings, it is possible that the
fund may be treated as an unsecured creditor and required to
return the underlying collateral to the other party's estate.
Insurance
The fund, along with
four
other Putnam money market funds, has
purchased liability
insurance, which, among other things,
will insure the fund against a decrease in the value of a
security held by it due to
the issuer's default
or
bankruptcy. Most securities and instruments in which the fund
invests, other than U.S. government securities, are covered by
this insurance. Although the insurance, which is subject to
certain conditions, may provide the fund with some protection in
the event of a decrease in value of certain of its portfolio
securities ,
the policy does not insure or guarantee that
the fund will maintain a stable net asset value of $1.00 per
share.
The maximum amount of total coverage under the policy is $30
million, subject to a deductible in respect of each loss equal to
the lesser of $1 million or 0.30% of the fund's net assets. As
of
September 30 ,
1997, the fund's net assets totaled
$2,603,610,091 .
Each of the funds that has purchased the
insurance has access to the full amount of insurance under the
policy, subject to the deductible. Accordingly, depending upon
the circumstances, the fund may not be entitled to recover under
the policy, even though it has experienced a loss that would
otherwise be insurable. The annual cost to the fund of
purchasing the
insurance is
reflected in the expense
information shown in the prospectus under the heading "Expenses
summary." The policy may be canceled under certain
conditions and may not be renewed upon its expiration.
Limiting investment risk
Specific investment restrictions help to limit investment risks
for the fund's shareholders. These restrictions prohibit the
fund ,
with respect to 75% of its total assets,
from
acquiring
more than 10% of the voting securities of any one
issuer.* They also prohibit the fund from investing more than:
(a) (with respect to 75% of its total assets) 5% of its total
assets in securities of any one issuer (other than the U.S.
government);* or
(b) 15% of its net assets in any combination of securities that
are not readily marketable, in securities restricted as to resale
(excluding securities determined by the Trustees (or the person
designated by the Trustees to make such determinations) to be
readily marketable), and in repurchase agreements maturing in
more than seven days.
The fund has not invested more than 10% of its net assets in the
types of securities listed in item (b) and has no current
intention of doing so.
Restrictions marked with an asterisk (*) above are summaries of
fundamental investment policies. See the SAI for the full text
of these policies and other fundamental investment policies.
Except as otherwise noted in the SAI, all percentage limitations
described in this prospectus and the SAI will apply at the time
an investment is made, and will not be considered violated unless
an excess or deficiency occurs or exists immediately after and as
a result of such investment. Except
for investment policies
designated as fundamental in this prospectus or the SAI, the
investment policies described in this prospectus and in the SAI
are not fundamental policies. The Trustees may change any non-
fundamental investment policy without shareholder approval. As a
matter of policy, the Trustees would not materially change the
fund's investment objective without shareholder approval.
HOW PERFORMANCE IS SHOWN
Fund advertisements may, from time to time, include performance
information. "Yield" represents an annualization of the change in
value of a shareholder account (excluding any capital changes)
for a specific seven-day period. "Effective yield" compounds
a fund's yield for a year and is, for that reason, greater
than the fund's yield. Yield and effective yield are computed
separately for each class of shares of the fund.
"Total Return" for the one-, five- and ten-year periods (or for
the life of the fund, if shorter) through the most recent
calendar quarter represents the average annual compounded rate of
return on an investment of $1,000 in the fund invested at the
maximum public offering price. Total return may also be invested
for other periods or based on investment at reduced sales charge
levels.
All data are based on past investment results and do not predict
future performance.
Investment performance, which will vary, is based on many
factors, including market conditions, portfolio composition, fund
operating expenses and which class of shares the investor
purchases. Investment performance also often reflects the risks
associated with the fund's investment objective and policies.
These factors should be considered when comparing the fund's
investment results with those of other mutual funds and other
investment vehicles.
Quotations of investment performance for any period when an
expense limitation was in effect will be greater than if the
limitation had not been in effect. Fund performance may
be compared to that of various indexes. See the SAI. Because
shares sold through eligible
employer-sponsored
retirement
plans are sold without a sales charge, quotations of investment
performance reflecting the deduction of a sales charge will be
lower than the actual investment performance , over the same
period, of shares purchased through such plans.
HOW THE FUND IS MANAGED
The Trustees are responsible for generally overseeing the conduct
of fund business. Subject to such policies as the Trustees may
determine, Putnam Management furnishes a continuing investment
program for the fund and makes investment decisions on its
behalf. Subject to the control of the Trustees, Putnam
Management also manages the fund's other affairs and business.
The fund pays Putnam Management a quarterly fee for these
services based on average net assets. See "Expenses summary" and
the SAI.
The fund pays all expenses not assumed by Putnam Management,
including Trustees' fees, auditing, legal, custodial, investor
servicing and shareholder reporting expenses and payments under
its distribution
plans . The
fund also reimburses Putnam
Management for the compensation and related expenses of certain
fund officers and their staff who provide administrative
services. The total reimbursement is determined annually by the
Trustees .
Putnam Management places all orders for purchases and sales of
fund securities. In selecting broker-dealers, Putnam Management
may consider research and brokerage services furnished to it and
its affiliates. Subject to seeking the most favorable price and
execution available, Putnam Management may consider sales of fund
shares (and, if permitted by law, shares of the other
Putnam funds) as a factor in the selection of broker-dealers.
ORGANIZATION AND HISTORY
Putnam Money Market Fund is a Massachusetts business trust
organized on November 25, 1975. A copy of the Agreement and
Declaration of Trust, which is governed by Massachusetts law, is
on file with the Secretary of State of The Commonwealth of
Massachusetts. Prior to September 1, 1994, the fund was known as
Putnam Daily Dividend Trust.
The fund is an open-end, diversified management investment
company with an unlimited number of authorized shares of
beneficial interest.
Shares of the fund may be divided without shareholder approval
into two or more classes of shares having such preferences and
special or relative rights and privileges as the Trustees
determine. The fund's shares are currently divided into three
classes. Only the fund's class A shares are offered by this
prospectus. The fund also offers other classes of shares with
different sales charges and expenses. Because of these different
sales charges and expenses, the investment performance of the
classes will vary. For more information, including your
eligibility to purchase any other class of shares, contact your
investment dealer or Putnam Mutual Funds (at 1-800-225-1581).
Each share has one vote, with fractional shares voting
proportionally. Shares of all classes of the fund will vote
together as a single class except when otherwise required by law
or as determined by the Trustees. Shares are freely
transferable, are entitled to dividends as declared by the
Trustees, and, if the fund were liquidated, would receive the net
assets of the fund. The fund may suspend the sale of shares at
any time and may refuse any order to purchase shares. Although
the fund is not required to hold annual meetings of its
shareholders, shareholders holding at least 10% of the
outstanding shares entitled to vote have the right to call a
meeting to elect or remove Trustees, or to take other actions as
provided in the Agreement and Declaration of Trust.
If you own fewer shares than the minimum set by the Trustees
(presently 500 shares), the fund may choose to redeem your
shares. You will receive at least 30 days' written notice before
the fund redeems your shares, and you may purchase additional
shares at any time to avoid a redemption. The fund may also
redeem shares if you own shares above a maximum amount set by the
Trustees. There is presently no maximum, but the fund's Trustees
may , at any time, establish
one,
which could apply
to both present and future shareholders.
The fund's Trustees: George Putnam,* Chairman. President of the
Putnam funds. Chairman and Director of Putnam Management and
Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director,
Marsh & McLennan Companies, Inc.; William F. Pounds, Vice
Chairman. Professor of Management, Alfred P. Sloan School of
Management, Massachusetts Institute of Technology; Jameson Adkins
Baxter, President, Baxter Associates, Inc.; Hans H. Estin, Vice
Chairman, North American Management Corp.; John A. Hill, Chairman
and Managing Director, First Reserve Corporation; Ronald J.
Jackson, Former Chairman, President and Chief Executive Officer
of Fisher-Price, Inc. , Trustee of Salem Hospital and the
Peabody Essex Museum; Paul L.
Joskow,*
Professor of Economics
and Management, Massachusetts Institute of Technology, Director,
New England Electric Systems, State Farm Indemnity Company and
Whitehead Institute for Biomedical Research; Elizabeth T.
Kennan, President Emeritus and Professor, Mount Holyoke College;
Lawrence J. Lasser,* Vice President of the Putnam funds.
President, Chief Executive Officer and Director of Putnam
Investments, Inc. and Putnam Management. Director, Marsh &
McLennan Companies, Inc. ; John H. Mullin, III, Chairman and
CEO of Ridgeway Farm, Director of ACX Technologies, Inc., Alex.
Brown Realty, Inc., The Liberty Corporation, and The Ryland
Group, Inc. ; Robert E. Patterson, Executive Vice President
and Director of Acquisitions, Cabot Partners Limited Partnership;
Donald S. Perkins,* Director of various corporations, including
Cummins Engine Company, Lucent Technologies, Inc., Springs
Industries, Inc. and Time Warner Inc.; George Putnam, III,*
President, New Generation Research, Inc.; A.J.C. Smith,* Chairman
and Chief Executive Officer, Marsh & McLennan Companies,
Inc. ;
W.
Thomas Stephens, President and Chief Executive Officer of
MacMillan Bloedel Ltd., Director of Mail-Well, Inc., Quest
Communications, The Eagle
Picher
Trust and New Century
Energies ; and W. Nicholas Thorndike, Director of various
corporations and charitable organizations, including Data General
Corporation, Bradley Real Estate, Inc. and Providence Journal Co.
Also, Trustee of Massachusetts General Hospital and Eastern
Utilities Associates. The Trustees are also Trustees of the
other Putnam funds. Those marked with an asterisk (*) are or may
be deemed to be "interested persons" of the fund, Putnam
Management or Putnam Mutual Funds.
About Your Investment
HOW TO BUY SHARES
All orders to purchase shares must be made through your
employer's retirement plan. For more information about
how to purchase shares of the fund through your employer's plan
or limitations on the amount that may be purchased, please
consult your employer. Shares are sold to eligible employer-
sponsored retirement plans at the net asset value per share
next determined after receipt of an order by Putnam Mutual Funds.
Orders must be received by Putnam Mutual Funds before the close
of regular trading on the New York Stock Exchange in order to
receive that day's net asset value.
Because the fund
seeks to be fully invested at all times, investments must be in
Same Day Funds to be accepted. Same Day Funds are funds credited
to the account of a bank designated by Putnam Fiduciary Trust
Company with the Boston Federal Reserve Bank. When payment in
Same Day Funds is available to the fund prior to the close of
regular trading on the New York Stock Exchange, the fund will
accept the order to purchase shares that day. To
eliminate the
need for safekeeping, the fund will not issue certificates for
your shares.
Putnam
Mutual Funds will from time to time, at its expense,
provide additional promotional incentives or payments to dealers
that sell shares of the Putnam funds. These incentive or
payments may include payments for travel expenses, including
lodging, incurred in connection with trips taken by invited
registered representatives or their guests to locations within
and outside the United States for meetings or seminars of a
business nature. In some instances, these incentives or payments
may be offered only to certain dealers who have sold or may sell
significant amounts of shares. Certain dealers may not sell all
classes of shares.
HOW
TO SELL SHARES
Subject
to any restrictions imposed by your employer's plan, you
can sell your shares through the plan to the fund any day the New
York Stock Exchange is open. For more information about how to
sell shares of the fund through your employer's plan, including
any charges that may be imposed by the plan, please consult with
your employer.
Your plan administrator must send a signed letter of instruction
to Putnam Investor Services. The price you will receive is the
next net asset value calculated after the fund receives the
request in proper form. All requests must be received by the
fund prior to the close of regular trading on the New York Stock
Exchange in order to receive that day's net asset value. If your
plan sells shares having a net asset value of $100,000 or more,
the signatures of registered owners or their legal
representatives must be guaranteed by a bank, broker-dealer or
certain other financial institutions. See the SAI for more
information about where to obtain a signature guarantee.
The fund generally provides payment for redeemed shares the
business day after the request is received. Under unusual
circumstances, the fund may suspend redemptions, or postpone
payment for more than seven days, as permitted by federal
securities law. The fund will only redeem shares for which it
has received payment.
HOW TO EXCHANGE SHARES
Subject to any restrictions contained in your plan, you can
exchange your shares for shares of other Putnam funds available
through your
employer's plan
at net asset value. Contact
your plan administrator or Putnam Investor Services for more
information on how to exchange your shares or how to obtain
prospectuses of other Putnam funds in which you may invest.
Since the net income of the fund is declared as a dividend each
time it is determined, the net asset value per share of the fund
generally remains at $1.00 immediately after each determination
and dividend declaration, therefore any exchange generally will
not give rise to gain or loss.
The exchange privilege is not intended as a vehicle for short-
term trading. Excessive exchange activity may interfere with
portfolio management and have an adverse effect on all
shareholders. In order to limit excessive exchange activity and
in other circumstances where Putnam Management or the Trustees
believe doing so would be in the best interests of your fund, the
fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any
exchange. Consult Putnam Investor Services before requesting an
exchange. See the SAI to find out more about the exchange
privilege.
HOW THE FUND VALUES ITS SHARES
The fund calculates the net asset value of a share of each class,
by dividing the total value of its assets, less liabilities, by
the number of its shares outstanding. Shares are valued as of
the close of regular trading on the New York Stock Exchange each
day the Exchange is open.
The fund values its portfolio investments at amortized cost
according to Securities and Exchange Commission Rule 2a-7. 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.
HOW THE FUND DETERMINES NET INCOME AND MAKES DISTRIBUTIONS TO
SHAREHOLDERS; TAX INFORMATION
The fund determines its net income once each day the New York
Stock Exchange is open, as of the close of regular trading on the
Exchange. Each determination of the fund's net income includes
(i) all accrued investment income on portfolio investments of the
fund, (ii) plus or minus all realized and unrealized gains and
losses on the fund's portfolio investments, (iii) less all
accrued expenses of the fund. (The fund will not have unrealized
gains or losses so long as it values its investments by the
amortized cost method.)
The
terms of
your employer's
plan will govern how
your
employer's
plan may receive distributions from the fund.
Generally, periodic distributions from the fund to your
employer's plan
are reinvested in additional fund shares,
although your
employer's plan
may permit you to receive
fund distributions from net investment income in cash while
reinvesting capital gains distributions in additional shares or
to receive all fund distributions in cash. If another option is
not selected, all distributions will be reinvested in additional
fund shares.
The fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements necessary for it to be relieved of federal taxes on
income and gains it distributes to shareholders. The fund will
distribute substantially all of its ordinary income and capital
gain net income on a current basis. Generally, fund
distributions are taxable as ordinary income, except that any
distributions designated by the fund as deriving from net
gains on securities held for more than one year but not more than
18 months, if any,
will be taxed as such regardless of how
long you have held your shares. However, distributions by the
fund to employer-sponsored
retirement
plans that qualify
for tax-exempt treatment under federal income tax laws will not
be taxable. Special tax rules apply to investments through such
plans. You should consult your tax adviser to determine the
suitability of the fund as an investment through such a plan and
the tax treatment of distributions (including distributions of
amounts attributable to an investment in the fund) from such a
plan.
The foregoing is a summary of certain federal income tax
consequences of investing in the fund. You should consult your
tax adviser to determine the precise effect of an investment in
the fund on your particular tax situation (including possible
liability for state and local taxes).
ABOUT PUTNAM INVESTMENTS, INC.
Putnam Management has been managing mutual funds since 1937.
Putnam Mutual Funds is the principal underwriter of the fund and
of other Putnam funds. Putnam Defined Contribution Plans is a
division of Putnam Mutual Funds. Putnam Fiduciary Trust Company
is the
custodian of the fund .
Putnam Investor
Services, a division of Putnam Fiduciary Trust Company, is
the
investor servicing and transfer
agent for the
fund .
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are located at One Post Office Square, Boston,
Massachusetts 02109 and are subsidiaries of Putnam Investments,
Inc., which is wholly owned by Marsh & McLennan Companies, Inc.,
a publicly-owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment
management.
PUTNAM MONEY MARKET FUND
PUTNAM TAX EXEMPT MONEY MARKET FUND
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
January 30, 1998
This SAI is not a prospectus and is only authorized for
distribution when accompanied or preceded by the prospectus of
the funds dated January 30, 1998 , as revised from time to
time. This SAI contains information which may be useful to
investors but which is not included in the prospectus. If a fund
has more than one form of current prospectus, each reference to
the prospectus in this SAI shall include all of that fund's
prospectuses, unless otherwise noted. The SAI should be read
together with the applicable prospectus. Investors may obtain a
free copy of the applicable prospectus from Putnam Investor
Services, Mailing address: P.O. Box 41203, Providence, RI 02940-
1203.
Part I of this SAI contains specific information about the funds.
Part II includes information about the funds and the other Putnam
funds.
<PAGE>
Table of Contents
Part I
TAX-EXEMPT SECURITIES. . . . . . . . . . . . . . . . . . . . . .
. . . .I-3
SECURITIES RATINGS . . . . . . . . . . . . . . . . . . . . . . .
I- 6
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . .
. . . .I-8
CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . .
. . . I-10
AMORTIZED COST VALUATION AND DAILY DIVIDENDS . . . . . . . . . .
. . . I-16
INVESTMENT PERFORMANCE . . . . . . . . . . . . . . . . . . . .
.I- 17
EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIES. . . . .
. . . I-19
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . .
. . . I-20
Part II
MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . .
. . . II-1
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
II- 30
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . .
II- 36
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . .
II- 46
HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . .
II- 47
DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . .
II- 60
INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . .
II- 61
SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . .
II- 66
SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . .
II- 67
SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . .
II- 67
STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . .
II- 67
COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . .
II- 69
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . .
II- 73
<PAGE>
SAI
PART I
TAX-EXEMPT SECURITIES
General description. As used in the prospectus and in this SAI,
the term "tax-exempt securities" includes obligations issued by a
state, a territory or a U.S. possession or any of their agencies,
instrumentalities or other governmental units, the interest from
which is, in the opinion of bond counsel, exempt from federal
income tax. Such obligations are issued to obtain funds for
various public purposes, including the construction of a wide
range of public facilities, such as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets and
water and sewer works. Other public purposes for which tax-
exempt securities may be issued include the refunding of
outstanding obligations or the payment of general operating
expenses.
Short-term tax-exempt securities are generally issued by state
and local governments and public authorities as interim financing
in anticipation of tax collections, revenue receipts, or bond
sales to finance such public purposes.
In addition, certain types of "private activity" bonds may be
issued by public authorities to finance projects
such as privately operated housing facilities and certain
local facilities for supplying water , gas,
or electricity ; sewage or solid waste
disposal facilities; student loans ; or public or
private institutions for the construction of educational,
hospital , housing and other facilities. Such
obligations are included within the term tax-exempt securities if
the interest paid thereon is, in the opinion of bond counsel,
exempt from federal income tax (such interest may, however, be
subject to federal alternative minimum tax). Other types of
private activity bonds, the proceeds of which are used for the
construction, repair or improvement of, or to obtain equipment
for, privately operated industrial or commercial facilities, may
also constitute tax-exempt securities, although the
current federal tax laws place substantial limitations on the
size of such issues.
Participation interests. The Tax Exempt Money Market Fund may
invest in tax-exempt securities either by purchasing them
directly or by purchasing certificates of accrual or similar
instruments evidencing direct ownership of interest payments or
principal payments, or both, on tax-exempt securities, provided
that, in the opinion of counsel to the initial seller of each
such certificate or instrument, any discount accruing on a
certificate or instrument that is purchased at a yield not
greater than the coupon rate of interest on the related tax-
exempt securities will be exempt from federal income tax to the
same extent as interest on the tax-exempt securities. The Tax
Exempt Money Market Fund may also invest in tax-exempt securities
by purchasing from banks participation interests in all or part
of specific holdings of tax-exempt securities. These
participations may be backed in whole or in part by an
irrevocable letter of credit or guarantee of the selling bank.
The selling bank may receive a fee from the fund in connection
with the arrangement. The Tax Exempt Money Market Fund will not
purchase such participation interests unless it receives an
opinion of counsel or a ruling of the Internal Revenue Service
that interest earned by it on tax-exempt securities in which it
holds such participation interests is exempt from federal income
tax. The Tax Exempt Money Market Fund does not expect to invest
more than 5% of its assets in participation interests.
Stand-by commitments. When the Tax Exempt Money Market Fund
purchases tax-exempt securities, it has the authority to acquire
stand-by commitments from banks and broker-dealers with respect
to those tax-exempt securities. A stand-by commitment may be
considered a security independent of the tax-exempt security to
which it relates. The amount payable by a bank or dealer during
the time a stand-by commitment is exercisable, absent unusual
circumstances, would be substantially the same as the market
value of the underlying tax-exempt security to a third party at
any time. The Tax Exempt Money Market Fund expects that stand-by
commitments generally will be available without the payment of
direct or indirect consideration. The Tax Exempt Money Market
Fund does not expect to assign any value to stand-by commitments.
Yields. The yields on tax-exempt securities depend on a variety
of factors, including general money market conditions, effective
marginal tax rates, the financial condition of the issuer,
general conditions of the tax-exempt security market, the size of
a particular offering, the maturity of the obligation and the
rating of the issue. The ratings of nationally recognized
securities rating agencies represent their opinions as to the
credit quality of the tax-exempt securities which they
undertake to rate. It should be emphasized, however, that
ratings are general and are not absolute standards of quality.
Consequently, tax-exempt securities with the same maturity and
interest rate but with different ratings may have the same yield.
Yield disparities may occur for reasons not directly related to
the investment quality of particular issues or the general
movement of interest rates, and may be due to such factors
as changes in the overall demand or supply of various types of
tax-exempt securities or changes in the investment objectives of
investors. Subsequent to purchase by the Tax Exempt Money Market
Fund, an issue of tax-exempt securities or other investments may
cease to be rated or its rating may be reduced below the minimum
rating required for purchase by the Tax Exempt Money Market Fund.
Neither event will require the elimination of an investment from
the Tax Exempt Money Market Fund's portfolio, but Putnam
Management will consider such an event in its determination of
whether the fund should continue to hold an investment in its
portfolio.
"Moral obligation" bonds. The Tax Exempt Money Market Fund does
not currently intend to invest in so-called "moral obligation"
bonds, where repayment is backed by a moral commitment of an
entity other than the issuer, unless the credit of the issuer
itself, without regard to the "moral obligation," meets the
investment criteria established for investments by the fund.
Additional risks. Securities in which the Tax Exempt Money
Market Fund may invest, including tax-exempt securities, are
subject to the provisions of bankruptcy, insolvency and other
laws affecting the rights and remedies of creditors, such as the
federal Bankruptcy Code (including special provisions related to
municipalities and other public entities), and laws, if any,
which may be enacted by Congress or state legislatures extending
the time for payment of principal or interest, or both, or
imposing other constraints upon enforcement of such obligations.
There is also the possibility that as a result of litigation or
other conditions the power, ability or willingness of issuers to
meet their obligations for the payment of interest and principal
on their tax-exempt securities may be materially affected.
From time to time, proposals have been introduced before Congress
for the purpose of restricting or eliminating the federal income
tax-exemption for interest on debt obligations issued by states
and their political subdivisions. Federal tax laws limit the
types and amounts of tax-exempt bonds issuable for certain
purposes, especially industrial development bonds and private
activity bonds. Such limits may affect the future supply and
yields of these types of tax-exempt securities. Further
proposals limiting the issuance of tax-exempt bonds may well be
introduced in the future. If it appeared that the availability
of tax-exempt securities for investment by the Tax Exempt Money
Market Fund and the value of that fund's portfolio could be
materially affected by such changes in law, the Trustees of the
Tax Exempt Money Market Fund would reevaluate its investment
objective and policies and consider changes in the structure of
the fund or its dissolution.
<PAGE>
SECURITIES RATINGS
The following rating services describe rated securities as
follows:
Moody's Investors Service, Inc.
Bonds
Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edged". Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than
the Aaa securities.
Notes
MIG 1/VMIG 1 -- This designation denotes best quality. There is
present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG 2/VMIG 2 -- This designation denotes high quality. Margins
of protection are ample although not so large as in the preceding
group.
Commercial paper
Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced
by the following characteristics:
- -- Leading market positions in well established industries.
- -- High rates of return on funds employed.
- -- Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
- -- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- -- Well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations.
This will normally be evidenced by many of the characteristics
cited above to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Standard & Poor's
Bonds
AAA -- An obligation rated 'AAA' has the highest rating
assigned by Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA -- An obligation rated 'AA' differs from the
higher rated issues only in small degree. The obligor's
capacity to meet its financial commitment on the obligation is
very strong.
Notes
SP-1 -- Strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics
are given a plus sign (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
SP-3 -- Speculative capacity to pay principal and interest.
Commercial paper
A-1 -- This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted with
a plus sign (+) designation.
A-2 -- Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of
safety is not as high as for issues designated 'A-1'.
A-3 -- Issues carrying this designation have adequate capacity
for timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
<PAGE>
INVESTMENT RESTRICTIONS
As fundamental investment restrictions of each fund, which may
not be changed without a vote of a majority of the outstanding
voting securities of the relevant fund, each fund may not
and will not:
(1a) (Money Market Fund) Borrow money in excess of one-third of
the value (taken at the lower of cost or current value) of its
total assets (not including the amount borrowed) at the time the
borrowing is made, and then only as a temporary measure to
facilitate the meeting of redemption requests (not for leverage)
which might otherwise require the untimely disposition of
portfolio investments or for extraordinary or emergency purposes.
Such borrowings will be repaid before any additional investments
are made. Interest paid on such borrowings would reduce the
yield on the fund's investments.
(1b) (Tax Exempt Money Market Fund) Borrow money in excess of 10%
of the value (taken at the lower of cost or current value) of its
total assets (not including the amount borrowed) at the time the
borrowing is made, and then only from banks as a temporary
measure to facilitate the meeting of redemption requests (not for
leverage) which might otherwise require the untimely disposition
of portfolio investments or for extraordinary or emergency
purposes. Such borrowings will be repaid before any additional
investments are purchased.
(2) (For both funds) Underwrite securities issued by other
persons except to the extent that, in connection with the
disposition of its portfolio investments, it may be deemed to be
an underwriter under federal securities laws.
(3a) (Money Market Fund) Purchase securities (other than
securities of the U.S. government, its agencies or
instrumentalities) if, as a result of such purchase, more than
25% of the fund's total assets would be invested in any one
industry, except that the fund may invest up to 100% of its
assets (i) in the banking industry, (ii) in the personal credit
institution or business credit institution industries when in the
opinion of management yield differentials make such investments
desirable, or (iii) in any combination of these.
(3b) (Tax Exempt Money Market Fund) Purchase securities
(other
than securities of the U.S. government, its agencies or
instrumentalities or tax exempt securities, except tax exempt
securities backed only by the assets and revenues of
nongovernmental issuers) if as a result of such purchase more
than 25% of the fund's total assets would be invested in any one
industry.
(4) (For both funds) Purchase or sell real estate, although it
may purchase securities of issuers which deal in real estate,
securities which are secured by interests in real estate, and
securities which represent interests in real estate, and it may
acquire and dispose of real estate or interests in real estate
acquired through the exercise of its rights as a holder of debt
obligations secured by real estate or interests therein.
(5a) (Money Market Fund) Purchase or sell commodities or
commodity contracts.
(5b) (Tax Exempt Money Market Fund) Purchase or sell commodities
or commodity contracts except financial futures contracts and
related options.
(6) (For both funds) Make loans, except by purchase of debt
obligations in which the fund may invest consistent with its
investment policies, by entering into repurchase agreements, or
by lending its portfolio securities.
(7) (For both funds) With respect to 75% of its total assets,
invest in the securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the fund (taken
at current value) would be invested in the securities of such
issuer; provided that this limitation does not apply to
obligations issued or guaranteed as to interest or principal by
the U.S. government or its agencies or instrumentalities.
(8) (For both funds) With respect to 75% of its total assets,
acquire more than 10% of the outstanding voting securities of any
issuer.
(9) (Tax Exempt Money Market Fund) Issue any class of securities
which is senior to the fund's shares of beneficial interest,
except for permitted borrowings.
Although certain of the funds' fundamental investment
restrictions permit a fund to borrow money to a limited extent,
neither of the funds currently intends to do so or did so last
year. Neither of the funds currently intends to acquire rights
or warrants to subscribe for securities or did so last year,
other than such warrants or other rights which are attached to
fixed-income securities. Neither of the funds currently intends
to engage in options or futures transactions.
The Investment Company Act of 1940 provides that a "vote of a
majority of the outstanding voting securities" of a fund means
the affirmative vote of the lesser of (1) more than 50% of the
outstanding fund shares, or (2) 67% or more of the shares present
at a meeting if more than 50% of the outstanding fund shares are
represented at the meeting in person or by proxy.
It is contrary to each fund's present policy, which may be
changed without shareholder approval, to:
(For both funds) Invest in (a) securities which are not readily
marketable, (b) securities restricted as to resale (excluding
securities determined by the Trustees of the fund (or the person
designated by the Trustees of the fund to make such
determinations) to be readily marketable), and (c) repurchase
agreements maturing in more than seven days, if, as a result,
more than 15% of the fund's net assets (taken at current value)
would be invested in the aggregate in securities described in
(a), (b) and (c) above.
---------------
All percentage limitations on investments (other than pursuant to
the non-fundamental restriction above) will apply at the time of
the making of an investment and shall not be considered violated
unless an excess or deficiency occurs or exists immediately after
and as a result of such investment.
---------------
CHARGES AND EXPENSES
Management fees
Each fund pays a quarterly fee to Putnam Management based on the
average net assets of that fund, as determined at the close of
each business day during the quarter, at the following rates
expressed as a percentage of each fund's average net assets:
<TABLE> <CAPTION>
<S> <C> <C>
<C> <C>
Fund name Contract date Rates
Money Market Fund 12/21/88 0.50% of the first
$100 million, 0.40% of
the next $100 million,
0.35% of the next $300
million, 0.325% of the
next $500 million and
0.30% thereafter.
Tax Exempt Money 1/20/97 0.45% of the first
Market Fund
$500 million, 0.35% of
the next $500 million,
0.30% of the next $500
million, 0.25% of the
next $5 billion,
0.225% of the next $5
billion, 0.205% of the
next $5 billion, 0.19%
of the next $5 billion
and 0.18% thereafter.
For the past three fiscal years, pursuant to its current
management contract and, in the case of the Tax Exempt Money
Market Fund, a management contract in effect prior to January 20,
1997, under which the management fee payable to Putnam Management
was paid at the rate of 0.45% of the first $500 million, 0.35% of
the next $500 million, 0.30% of the next $500 million and 0.25%
thereafter, each fund incurred the following fees:
</TABLE>
Fiscal Management
year fee paid
Money Market Fund
1997 $8,460,127
1996 $6,008,179
1995 $4,812,695
Tax Exempt Money
Market Fund
1997 $457,535
1996 $375,635
1995 $412,686
Brokerage commissions
It is anticipated that most purchases and sales of portfolio
investments will be with the issuer or with major dealers in
money market instruments acting as principal. Accordingly, it is
not anticipated that the Money Market Fund or the Tax Exempt
Money Market Fund will pay significant brokerage commissions.
Neither fund incurred any brokerage commissions in fiscal
1995 , 1996 or 1997 .
Administrative expense reimbursement
The funds reimbursed Putnam Management for administrative
services during fiscal 1997 , including the following
amounts for compensation of certain fund officers and
contributions to the Putnam Investments, Inc. Profit Sharing
Retirement Plan for their benefit , as follows :
Portion of total
reimbursement for
compensation
Total and
reimbursement contributions
Money Market Fund $31,315 $27,610
Tax Exempt Money $5,695 $5,021
Market Fund
<PAGE>
Trustee fees
Each Trustee receives a fee for his or her services. Each
Trustee also receives fees for serving as Trustee of other Putnam
funds. The Trustees periodically review their fees to assure
that such fees continue to be appropriate in light of their
responsibilities as well as in relation to fees paid to trustees
of other mutual fund complexes. The Trustees meet monthly over a
two-day period, except in August. The Compensation Committee,
which consists solely of Trustees not affiliated with Putnam
Management and is responsible for recommending Trustee
compensation, estimates that Committee and Trustee meeting time
together with the appropriate preparation requires the equivalent
of at least three business days per Trustee meeting. The
following table shows the year each Trustee was first elected a
Trustee of the Putnam funds, the fees paid to each Trustee by
each fund for fiscal 1997 and the fees paid to each
Trustee by all of the Putnam funds during calendar year
1997:
COMPENSATION TABLE
<TABLE><CAPTION>
Pension or
Pension or retirement Estimated
retirement benefits annual
Aggregate compensation(1) from:
benefit accrued as benefits
accrued as part of
Tax from all
Tax ExemptAll Putnam
part of Money Exempt
Money Putnam funds
Trustee/Year Money MarketMoney Marketfunds (2)
Market expenses Market
expenses upon retirement (3)
--------------------------------------------------------------
- -------------------------------------------------------
<S> <C> <C> <C>
<C> <C> <C>
Jameson A. Baxter/1994 $2,453 $286 $176,000 (4)
$697 $ 96 $87,500
Hans H. Estin/1972 2,426 283 175,000
2,192 318 87,500
John A. Hill/1985 2,439 (4) 284 175,000
820 119 87,500
Ronald J. Jackson/1996 2,453 (4) 286 176,000
143 15 87,500
Paul L. Joskow (7) N/A N/A 25,500
N/A N/A 87,500
Elizabeth T. Kennan/1992 2,426 283 174,000
1,387 208 87,500
Lawrence J. Lasser/1992 2,399 280 172,000
1,040 156 87,500
John H. Mullen, III (7) N/A N/A 25,500
N/A N/A 87,500
Robert E. Patterson/1984 2,453 286 178,000
657 95 87,500
Donald S. Perkins/1982 2,453 286 178,000
2,384 346 87,500
William F. Pounds/1971(5)2,973 306 201,000
2,273 324 98,000
George Putnam/1957 2,439 284 175,000
2,514 365 87,500
George Putnam, III/1984 2,426 283 174,000
432 63 87,500
A.J.C. Smith/1986 2,372 278 170,000
1,468 212 87,500
W. Thomas Stephens (6) 204(4) 20 53,000
0 0 87,500
W. Nicholas Thorndike/1992 2,453 286
176,000 1,993 29987,500
(1) Includes an annual retainer and an attendance fee for each
meeting attended.
(2) As of December 31, 1997, there were 101 funds in the
Putnam family.
(3) Assumes that each Trustee retires at the normal retirement
date. Estimated benefits for each Trustee are based on
Trustee fee rates in effect during calendar 1997.
(4)
Includes compensation deferred pursuant to a Trustee
Compensation Deferral Plan. The total amounts of deferred
compensation payable by the Money Market Fund to Mr. Hill
, Mr. Jackson and Mr. Stephens as of
September 30, 1997 were $7,637, $3,964 and $175 ,
respectively, including income earned on such amounts.
(5)
Includes additional compensation for service as Vice
Chairman of the Putnam funds.
(6
) Elected as a Trustee in September 1997.
(7) Elected as a Trustee in November 1997.
</TABLE>
Under a Retirement Plan for Trustees of the Putnam funds (the
"Plan"), each Trustee who retires with at least five years of
service as a Trustee of the funds is entitled to receive an
annual retirement benefit equal to one-half of the average annual
compensation paid to such Trustee for the last three years of
service prior to retirement. This retirement benefit is payable
during a Trustee's lifetime, beginning the year following
retirement, for a number of years equal to such Trustee's years
of service. A death benefit is also available under the Plan
which assures that the Trustee and his or her beneficiaries will
receive benefit payments for the lesser of an aggregate period of
(i) ten years or (ii) such Trustee's total years of service.
The Plan Administrator (a committee comprised of Trustees that
are not "interested persons" of the fund, as defined in the
Investment Company Act of 1940) may terminate or amend the Plan
at any time, but no termination or amendment will result in a
reduction in the amount of benefits (i) currently being paid to a
Trustee at the time of such termination or amendment, or (ii) to
which a current Trustee would have been entitled had he
or she retired immediately prior to such termination or
amendment.
For additional information concerning the Trustees, see
"Management" in Part II of this SAI.
Share ownership
At December 31, 1997 , the officers and Trustees of each
fund as a group owned 2.6% (2,169,488.574 shares) of the
outstanding shares of each class of the Tax Exempt Money
Market Fund, and less than 1% of the outstanding shares of the
Money Market Fund , and to the knowledge of
either fund , no person owned of record or beneficially 5%
or more of the shares of either fund.
Distribution fees
During fiscal 1997 , the funds paid the following 12b-1
fees to Putnam Mutual Funds:
Class A Class B Class M
Money Market Fund $N/A $2,348,283 $69,211
Tax Exempt Money
Market Fund $0
<PAGE>
Money Market Fund
Class A contingent deferred sales charges
Class A shares of the Money Market Fund are distributed directly
through Putnam Mutual Funds, which acts as principal underwriter.
Putnam Mutual Funds does not receive any fee for its services,
except as stated below.
Putnam Mutual Funds received contingent deferred sales charges
with respect to class A shares of the Money Market Fund that were
purchased by exchange of class A shares of another Putnam fund
purchased without an initial sales charge as part of a purchase
of $1 million or more in the following amounts during the periods
indicated:
Contingent deferred
sales charges
Fiscal year
1997 $ 0
1996 $ 52,520
1995 $103,197
Class B contingent deferred sales charges
Putnam Mutual Funds received contingent deferred sales charges
upon redemptions of class B shares of the Money Market Fund in
the following amounts during the periods indicated:
Contingent deferred
sales charges
Fiscal year
1997 $1,667,220
1996 $1,618,909
1995 $2,224,454
Tax Exempt Money Market Fund
Sales charges
Shares of the Tax Exempt Money Market Fund are distributed
directly through Putnam Mutual Funds, which acts as principal
underwriter. Putnam Mutual Funds does not receive any fee for
its services.
<PAGE>
Investor servicing and custody fees and expenses
During the 1997 fiscal year, each fund incurred the
following fees and out-of-pocket expenses for investor servicing
and custody services provided by Putnam Fiduciary Trust Company:
Money Market Fund $5,217,297
Tax Exempt Money
Market Fund $217,281
AMORTIZED COST VALUATION AND DAILY DIVIDENDS
The valuation of each fund's portfolio instruments at amortized
cost is permitted in accordance with Securities and Exchange
Commission Rule 2a-7 and certain procedures adopted by the
Trustees. 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, regardless of the effect of fluctuating interest rates
on the market value of the instrument. Although the amortized
cost method provides certainty in valuation, it may result at
times in determinations of value that are higher or lower than
the price a fund would receive if the instruments were sold.
Consequently, in the absence of circumstances described below,
changes in the market value of portfolio instruments during
periods of rising or falling interest rates will not normally be
reflected either in the computation of net asset value of a
fund's portfolio or in the daily computation of net income.
Under the procedures adopted by the Trustees, the funds must
maintain a dollar-weighted average portfolio maturity of 90 days
or less, purchase only instruments having remaining maturities of
397 days or less and invest in securities determined by the
Trustees to be of high quality with minimal credit risks. The
Trustees have also established procedures designed to stabilize,
to the extent reasonably possible, each fund's price per share as
computed for the purpose of distribution, redemption and
repurchase at $1.00. These procedures include review of a fund's
portfolio holdings by the Trustees, at such intervals as they may
deem appropriate, to determine whether the fund's net asset value
calculated by using readily available market quotations deviates
from $1.00 per share, and, if so, whether such deviation may
result in material dilution or is otherwise unfair to existing
shareholders. In the event the Trustees determine that such a
deviation exists, they will take such corrective action as they
regard as necessary and appropriate, including selling portfolio
instruments prior to maturity to realize capital gains or losses
or to shorten the average portfolio maturity; withholding
dividends; redeeming of shares in kind; or establishing a net
asset value per share by using readily available market
quotations.
Since the net income of a fund is declared as a dividend each
time it is determined, the net asset value per share of that fund
remains at $1.00 per share immediately after such determination
and dividend declaration. Any increase in the value of a
shareholder's investment in a fund representing the reinvestment
of dividend income is reflected by an increase in the number of
shares of that fund in the shareholder's account on the last
business day of each month . It is expected that a fund's
net income will be positive each time it is determined. However,
if because of realized losses on sales of portfolio investments,
a sudden rise in interest rates, or for any other reason the net
income of a fund determined at any time is a negative amount, a
fund will offset such amount allocable to each then shareholder's
account from dividends accrued during the month with respect to
such account. If, at the time of payment of a dividend, such
negative amount exceeds a shareholder's accrued dividends, the
fund will reduce the number of outstanding shares by treating the
shareholder as having contributed to the capital of the fund that
number of full and fractional shares which represent the amount
of the excess. Each shareholder is deemed to have agreed to such
contribution in these circumstances by his or her investment in
the fund.
INVESTMENT PERFORMANCE
Standard performance measures
(for periods ended September 30, 1997)
Money Market Fund
Class A Class B Class M
Inception date: 10/1/76 4/27/92 12/8/94
Average annual total return*
1 year 5.17% 4.65% 5.01%
5 years 4.28 3.76 4.13
10 years 5.49 4.98 5.33
Yield
7-day
yield 5.13% 4.63% 4.98%
Effective
yield 5.26% 4.74% 5.11%
<PAGE>
Tax Exempt Money Market Fund
Inception date: 10/26/87
Average annual total return*
1 year 3.09%
5 years 2.61%
Life of fund 3.69%
Yield
Effective
yield 3.41%
7-day
yield 3.35%
Tax-equivalent
effective
yield 5.55%
*Yield quotation more closely reflects the current earnings of
the fund than total return.
* *Assumes the maximum 39.6% federal tax rate. Results for
investors subject to lower tax rates would not be as
advantageous.
Returns shown for class B and class M shares of the Money
Market Fund for periods prior to their inception are derived from
the historical performance of class A shares, adjusted to reflect
both the deduction of the CDSC, in the case of class B shares,
currently applicable to such class and the higher operating
expenses applicable to such shares.
All returns assume reinvestment of distributions at net asset
value. Returns represent past performance and
do not guarantee future results. Investment
returns and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their
original cost.
See "Standard performance measures" in Part II of this SAI for
information on how performance is calculated.
<PAGE>
EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIES
The table below shows the effect of the tax status of tax-exempt
securities
on the effective yield received by their individual holders under
the federal
income tax laws currently in effect for 1997. It gives the
approximate yield
a taxable security must earn at various income levels to produce
after-tax
yields equivalent to those of tax-exempt securities yielding from
2.0% to 8.0%.
- -----------------------------------------------------------------
- ------------
<TABLE> <CAPTION>
<S> <C> <C> <C> <C>
<C> <C> <C>
Marginal
Taxable Income* federal
Tax-exempt yield
------------------------ income
- ------------------------------------------------
tax
Single Joint rate** 2.0%
4.0% 6.0% 8.0%
- -----------------------------------------------------------------
- -------------------------------------
Equivalent taxable yield
$0-24,650 $0-41,200 15.00% 2.35%
4.71% 7.06% 9.41%
24,651-59,750 41,201-99,600 28.00 2.78
5.56 8.33 11.11
59,751-124,650 *** 99,601-151,750 *** 31.00 2.90
5.80 8.70 11.59
124,651-271,050 *** 151,751-271,050 *** 36.00 3.13
6.25 9.38 12.50
over 271,050 *** over 271,050 *** 39.60 3.31
6.62 9.93 13.25
- -----------------------------------------------------------------
- --------------------------------------
* This amount represents taxable income as defined in the
Internal Revenue Code of 1986, as amended (the "Code").
** These rates are the marginal federal income tax rates on
taxable income currently in effect for 1997 under the
Code.
*** The amount of taxable income in this bracket may be
affected by the phase-out of personal exemptions and the
limitation on itemized deductions under the Code.
Of course, there is no assurance that the Tax Exempt Money Market
Fund will achieve any specific tax-exempt yield.
While it is expected that the fund will invest principally in
obligations which pay interest exempt from federal income
tax, other income received by the fund may be taxable. The table
does not take into account any state or local taxes
payable on fund distributions.
</TABLE>
<PAGE>
ADDITIONAL OFFICERS
In addition to the persons listed as fund officers in Part II of
this SAI, each of the following persons is also a Vice President
of each fund and certain of the other Putnam funds, the total
number of which is noted parenthetically. Officers of Putnam
Management hold the same offices in Putnam Management's parent
company, Putnam Investments, Inc.
Officer Name (Age) (Number of funds)
Joanne M. Driscoll (age 27) (2 funds).
Assistant Vice President of Putnam Management.
Jerome J. Jacobs (age 39) (24 funds). Managing Director of
Putnam Management.
William F. McGue (age 46) (2 funds). Managing Director of
Putnam Management.
Brian S. Torpey (age 31) (3 funds).
Assistant Vice President of Putnam Management.
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Putnam Money Market Fund
Price Waterhouse LLP, 160 Federal Street, Boston, MA 02110, are
the Money Market Fund's independent accountants, providing audit
services, tax return review and other tax consulting services and
assistance and consultation in connection with the review of
various Securities and Exchange Commission filings. The Report
of independent accountants , financial highlights and
financial statements included in the Money Market Fund's Annual
Report for the fiscal year ended September 30, 1997 , filed
electronically on November 7, 1997 (File No. 811-2608),
are incorporated by reference into this SAI. The financial
highlights included in the prospectus and incorporated by
reference into this SAI and the financial statements incorporated
by reference into the prospectus and this SAI have been so
included and incorporated in reliance upon the Report of
the independent accountants, given on their authority as experts
in auditing and accounting.
Putnam Tax Exempt Money Market Fund
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA
02109, are the Tax Exempt Money Market Fund's independent
accountants, providing audit services, tax return review and
other tax consulting services and assistance and consultation in
connection with the review of various Securities and Exchange
Commission filings. The Report of independent
accountants , financial highlights and financial statements
included in the Tax Exempt Money Market Fund's Annual Report for
the fiscal year ended September 30, 1997 , filed
electronically on November 19, 1997, (File No. 811-5215),
are incorporated by reference into this SAI. The financial
highlights included in the prospectus and incorporated by
reference into this SAI and the financial statements incorporated
by reference into the prospectus and this SAI have been so
included and incorporated in reliance upon the Report of
the independent accountants, given on their authority as experts
in auditing and accounting.
<PAGE>
TABLE OF CONTENTS
MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . . . . . II-1
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-30
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-36
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . .II-46
HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-47
DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . .II-60
INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-61
SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . .II-66
SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . .II-67
SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . .II-67
STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . . . . .II-67
COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . . . . .II-69
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-73
<PAGE>
THE PUTNAM FUNDS
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
PART II
The following information applies generally to your fund and to
the other Putnam funds. In certain cases the discussion applies
to some but not all of the funds or their shareholders, and you
should refer to your prospectus to determine whether the matter
is applicable to you or your fund. You will also be referred to
Part I for certain information applicable to your particular
fund. Shareholders who purchase shares at net asset value
through employer-sponsored defined contribution plans should also
consult their employer for information about the extent to which
the matters described below apply to them.
MISCELLANEOUS INVESTMENT PRACTICES
YOUR FUND'S PROSPECTUS STATES WHICH OF THE FOLLOWING INVESTMENT
PRACTICES ARE AVAILABLE TO YOUR FUND. THE FACT THAT YOUR FUND IS
AUTHORIZED TO ENGAGE IN A PARTICULAR PRACTICE DOES NOT
NECESSARILY MEAN THAT IT WILL ACTUALLY DO SO. YOU SHOULD
DISREGARD ANY PRACTICE DESCRIBED BELOW WHICH IS NOT MENTIONED IN
THE PROSPECTUS.
SHORT-TERM TRADING
In seeking the fund's objective(s), Putnam Management will buy or
sell portfolio securities whenever Putnam Management believes it
appropriate to do so. In deciding whether to sell a portfolio
security, Putnam Management does not consider how long the fund
has owned the security. From time to time the fund will buy
securities intending to seek short-term trading profits. A
change in the securities held by the fund is known as "portfolio
turnover" and generally involves some expense to the fund. This
expense may include brokerage commissions or dealer markups and
other transaction costs on both the sale of securities and the
reinvestment of the proceeds in other securities. If sales of
portfolio securities cause the fund to realize net short-term
capital gains, such gains will be taxable as ordinary income. As
a result of the fund's investment policies, under certain market
conditions the fund's portfolio turnover rate may be higher than
that of other mutual funds. Portfolio turnover rate for a fiscal
year is the ratio of the lesser of purchases or sales of
portfolio securities to the monthly average of the value of
portfolio securities -- excluding securities whose maturities at
acquisition were one year or less. The fund's portfolio turnover
rate is not a limiting factor when Putnam Management considers a
change in the fund's portfolio.
Convertible Securities. Convertible securities include bonds,
debentures, notes, preferred stocks and other securities that may
be converted into or exchanged for, at a specific price or
formula within a particular period of time, a prescribed amount
of common stock or other equity securities of the same or a
different issuer. Convertible securities entitle the holder to
receive interest paid or accrued on debt or dividends paid or
accrued on preferred stock until the security matures or is
redeemed, converted or exchanged.
The market value of a convertible security is a function of its
"investment value" and its "conversion value." A security's
"investment value" represents the value of the security without
its conversion feature (i.e., a nonconvertible fixed income
security). The investment value may be determined by reference
to its credit quality and the current value of its yield to
maturity or probable call date. At any given time, investment
value is dependent upon such factors as the general level of
interest rates, the yield of similar nonconvertible securities,
the financial strength of the issuer and the seniority of the
security in the issuer's capital structure. A security's
"conversion value" is determined by multiplying the number of
shares the holder is entitled to receive upon conversion or
exchange by the current price of the underlying security.
If the conversion value of a convertible security is
significantly below its investment value, the convertible
security will trade like nonconvertible debt or preferred stock
and its market value will not be influenced greatly by
fluctuations in the market price of the underlying security.
Conversely, if the conversion value of a convertible security is
near or above its investment value, the market value of the
convertible security will be more heavily influenced by
fluctuations in the market price of the underlying security.
The fund's investments in convertible securities may at times
include securities that have a mandatory conversion feature,
pursuant to which the securities convert automatically into
common stock or other equity securities at a specified date and a
specified conversion ratio, or that are convertible at the option
of the issuer. Because conversion of the security is not at the
option of the holder, the fund may be required to convert the
security into the underlying common stock even at times when the
value of the underlying common stock or other equity security has
declined substantially.
The fund's investments in convertible securities, particularly
securities that are convertible into securities of an issuer
other than the issuer of the convertible security, may be
illiquid. The fund may not be able to dispose of such securities
in a timely fashion or for a fair price, which could result in
losses to the fund.
<PAGE>
LOWER-RATED SECURITIES
The fund may invest in lower-rated fixed-income securities
(commonly known as "junk bonds"), to the extent described in the
prospectus. The lower ratings of certain securities held by the
fund reflect a greater possibility that adverse changes in the
financial condition of the issuer or in general economic
conditions, or both, or an unanticipated rise in interest rates,
may impair the ability of the issuer to make payments of interest
and principal. The inability (or perceived inability) of issuers
to make timely payment of interest and principal would likely
make the values of securities held by the fund more volatile and
could limit the fund's ability to sell its securities at prices
approximating the values the fund had placed on such securities.
In the absence of a liquid trading market for securities held by
it, the fund at times may be unable to establish the fair value
of such securities.
Securities ratings are based largely on the issuer's historical
financial condition and the rating agencies' analysis at the time
of rating. Consequently, the rating assigned to any particular
security is not necessarily a reflection of the issuer's current
financial condition, which may be better or worse than the rating
would indicate. In addition, the rating assigned to a security
by Moody's Investors Service, Inc. or Standard & Poor's (or by
any other nationally recognized securities rating organization)
does not reflect an assessment of the volatility of the
security's market value or the liquidity of an investment in the
security. See the prospectus or Part I of this SAI for a
description of security ratings.
Like those of other fixed-income securities, the values of
lower-rated securities fluctuate in response to changes in
interest rates. A decrease in interest rates will generally
result in an increase in the value of the fund's assets.
Conversely, during periods of rising interest rates, the value of
the fund's assets will generally decline. The values of lower-
rated securities may often be affected to a greater extent by
changes in general economic conditions and business conditions
affecting the issuers of such securities and their industries.
Negative publicity or investor perceptions may also adversely
affect the values of lower-rated securities. Changes by
recognized rating services in their ratings of any fixed-income
security and changes in the ability of an issuer to make payments
of interest and principal may also affect the value of these
investments. Changes in the value of portfolio securities
generally will not affect income derived from these securities,
but will affect the fund's net asset value. The fund will not
necessarily dispose of a security when its rating is reduced
below its rating at the time of purchase. However, Putnam
Management will monitor the investment to determine whether its
retention will assist in meeting the fund's investment
objective(s).
Issuers of lower-rated securities are often highly leveraged, so
that their ability to service their debt obligations during an
economic downturn or during sustained periods of rising interest
rates may be impaired. Such issuers may not have more
traditional methods of financing available to them and may be
unable to repay outstanding obligations at maturity by
refinancing. The risk of loss due to default in payment of
interest or repayment of principal by such issuers is
significantly greater because such securities frequently are
unsecured and subordinated to the prior payment of senior
indebtedness.
At times, a substantial portion of the fund's assets may be
invested in securities of which the fund, by itself or together
with other funds and accounts managed by Putnam Management or its
affiliates, holds all or a major portion. Although Putnam
Management generally considers such securities to be liquid
because of the availability of an institutional market for such
securities, it is possible that, under adverse market or economic
conditions or in the event of adverse changes in the financial
condition of the issuer, the fund could find it more difficult to
sell these securities when Putnam Management believes it
advisable to do so or may be able to sell the securities only at
prices lower than if they were more widely held. Under these
circumstances, it may also be more difficult to determine the
fair value of such securities for purposes of computing the
fund's net asset value. In order to enforce its rights in the
event of a default of such securities, the fund may be required
to participate in various legal proceedings or take possession of
and manage assets securing the issuer's obligations on such
securities. This could increase the fund's operating expenses
and adversely affect the fund's net asset value. In the case of
tax-exempt funds, any income derived from the fund's ownership or
operation of such assets would not be tax-exempt. The ability of
a holder of a tax-exempt security to enforce the terms of that
security in a bankruptcy proceeding may be more limited than
would be the case with respect to securities of private issuers.
In addition, the fund's intention to qualify as a "regulated
investment company" under the Internal Revenue Code may limit the
extent to which the fund may exercise its rights by taking
possession of such assets.
Certain securities held by the fund may permit the issuer at its
option to "call," or redeem, its securities. If an issuer were
to redeem securities held by the fund during a time of declining
interest rates, the fund may not be able to reinvest the proceeds
in securities providing the same investment return as the
securities redeemed.
If the fund's prospectus describes so-called "zero-coupon" bonds
and "payment-in-kind" bonds as possible investments, the fund may
invest without limit in such bonds unless otherwise specified in
the prospectus. Zero-coupon bonds are issued at a significant
discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer, at its
option, to make current interest payments on the bonds either in
cash or in additional bonds. Because zero-coupon and payment-in-
kind bonds do not pay current interest in cash, their value is
subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest currently. Both
zero-coupon and payment-in-kind bonds allow an issuer to avoid
the need to generate cash to meet current interest payments.
Accordingly, such bonds may involve greater credit risks than
bonds paying interest currently in cash. The fund is required to
accrue interest income on such investments and to distribute such
amounts at least annually to shareholders even though such bonds
do not pay current interest in cash. Thus, it may be necessary
at times for the fund to liquidate investments in order to
satisfy its dividend requirements.
To the extent the fund invests in securities in the lower rating
categories, the achievement of the fund's goals is more dependent
on Putnam Management's investment analysis than would be the case
if the fund were investing in securities in the higher rating
categories. This may be particularly true with respect to tax-
exempt securities, as the amount of information about the
financial condition of an issuer of tax-exempt securities may not
be as extensive as that which is made available by corporations
whose securities are publicly traded.
INVESTMENTS IN MISCELLANEOUS FIXED-INCOME SECURITIES
Unless otherwise specified in the prospectus or elsewhere in this
SAI, if the fund may invest in inverse floating obligations,
premium securities, or interest-only or principal-only classes of
mortgage-backed securities (IOs and POs), it may do so without
limit. The fund, however, currently does not intend to invest
more than 15% of its assets in inverse floating obligations or
more than 35% of its assets in IOs and POs under normal market
conditions.
PRIVATE PLACEMENTS
The fund may invest in securities that are purchased in private
placements and, accordingly, are subject to restrictions on
resale as a matter of contract or under federal securities laws.
Because there may be relatively few potential purchasers for such
investments, especially under adverse market or economic
conditions or in the event of adverse changes in the financial
condition of the issuer, the fund could find it more difficult to
sell such securities when Putnam Management believes it advisable
to do so or may be able to sell such securities only at prices
lower than if such securities were more widely held. At times,
it may also be more difficult to determine the fair value of such
securities for purposes of computing the fund's net asset value.
LOAN PARTICIPATIONS
The fund may invest in "loan participations." By purchasing a
loan participation, the fund acquires some or all of the interest
of a bank or other lending institution in a loan to a particular
borrower. Many such loans are secured, and most impose
restrictive covenants which must be met by the borrower.
The loans in which the fund may invest are typically made by a
syndicate of banks, represented by an agent bank which has
negotiated and structured the loan and which is responsible
generally for collecting interest, principal, and other amounts
from the borrower on its own behalf and on behalf of the other
lending institutions in the syndicate and for enforcing its and
their other rights against the borrower. Each of the lending
institutions, including the agent bank, lends to the borrower a
portion of the total amount of the loan, and retains the
corresponding interest in the loan.
The fund's ability to receive payments of principal and interest
and other amounts in connection with loan participations held by
it will depend primarily on the financial condition of the
borrower. The failure by the fund to receive scheduled interest
or principal payments on a loan participation would adversely
affect the income of the fund and would likely reduce the value
of its assets, which would be reflected in a reduction in the
fund's net asset value. Banks and other lending institutions
generally perform a credit analysis of the borrower before
originating a loan or participating in a lending syndicate. In
selecting the loan participations in which the fund will invest,
however, Putnam Management will not rely solely on that credit
analysis, but will perform its own investment analysis of the
borrowers. Putnam Management's analysis may include
consideration of the borrower's financial strength and managerial
experience, debt coverage, additional borrowing requirements or
debt maturity schedules, changing financial conditions, and
responsiveness to changes in business conditions and interest
rates. Because loan participations in which the fund may invest
are not generally rated by independent credit rating agencies, a
decision by the fund to invest in a particular loan participation
will depend almost exclusively on Putnam Management's, and the
original lending institution's, credit analysis of the borrower.
Loan participations may be structured in different forms,
including novations, assignments, and participating interests.
In a novation, the fund assumes all of the rights of a lending
institution in a loan, including the right to receive payments of
principal and interest and other amounts directly from the
borrower and to enforce its rights as a lender directly against
the borrower. The fund assumes the position of a co-lender with
other syndicate members. As an alternative, the fund may
purchase an assignment of a portion of a lender's interest in a
loan. In this case, the fund may be required generally to rely
upon the assigning bank to demand payment and enforce its rights
against the borrower, but would otherwise be entitled to all of
such bank's rights in the loan. The fund may also purchase a
participating interest in a portion of the rights of a lending
institution in a loan. In such case, it will be entitled to
receive payments of principal, interest, and premium, if any, but
will not generally be entitled to enforce its rights directly
against the agent bank or the borrower, but must rely for that
purpose on the lending institution. The fund may also acquire a
loan participation directly by acting as a member of the original
lending syndicate.
The fund will in many cases be required to rely upon the lending
institution from which it purchases the loan participation to
collect and pass on to the fund such payments and to enforce the
fund's rights under the loan. As a result, an insolvency,
bankruptcy, or reorganization of the lending institution may
delay or prevent the fund from receiving principal, interest, and
other amounts with respect to the underlying loan. When the fund
is required to rely upon a lending institution to pay to the fund
principal, interest, and other amounts received by it, Putnam
Management will also evaluate the creditworthiness of the lending
institution.
The borrower of a loan in which the fund holds a participation
interest may, either at its own election or pursuant to terms of
the loan documentation, prepay amounts of the loan from time to
time. There is no assurance that the fund will be able to
reinvest the proceeds of any loan prepayment at the same interest
rate or on the same terms as those of the original loan
participation.
Corporate loans in which the fund may purchase a loan
participation are made generally to finance internal growth,
mergers, acquisitions, stock repurchases, leveraged buy-outs, and
other corporate activities. Under current market conditions,
most of the corporate loan participations purchased by the fund
will represent interests in loans made to finance highly
leveraged corporate acquisitions, known as "leveraged buy-out"
transactions. The highly leveraged capital structure of the
borrowers in such transactions may make such loans especially
vulnerable to adverse changes in economic or market conditions.
In addition, loan participations generally are subject to
restrictions on transfer, and only limited opportunities may
exist to sell such participations in secondary markets. As a
result, the fund may be unable to sell loan participations at a
time when it may otherwise be desirable to do so or may be able
to sell them only at a price that is less than their fair market
value.
Certain of the loan participations acquired by the fund may
involve revolving credit facilities under which a borrower may
from time to time borrow and repay amounts up to the maximum
amount of the facility. In such cases, the fund would have an
obligation to advance its portion of such additional borrowings
upon the terms specified in the loan participation. To the
extent that the fund is committed to make additional loans under
such a participation, it will at all times hold and maintain in a
segregated account liquid assets in an amount sufficient to meet
such commitments. Certain of the loan participations acquired by
the fund may also involve loans made in foreign currencies. The
fund's investment in such participations would involve the risks
of currency fluctuations described above with respect to
investments in the foreign securities.
MORTGAGE RELATED SECURITIES
The fund may invest in mortgage-backed securities, including
collateralized mortgage obligations ("CMOs") and certain stripped
mortgage-backed securities. CMOs and other mortgage-backed
securities represent a participation in, or are secured by,
mortgage loans.
Mortgage-backed securities have yield and maturity
characteristics corresponding to the underlying assets. Unlike
traditional debt securities, which may pay a fixed rate of
interest until maturity, when the entire principal amount comes
due, payments on certain mortgage-backed securities include both
interest and a partial repayment of principal. Besides the
scheduled repayment of principal, repayments of principal may
result from the voluntary prepayment, refinancing, or foreclosure
of the underlying mortgage loans. If property owners make
unscheduled prepayments of their mortgage loans, these
prepayments will result in early payment of the applicable
mortgage-related securities. In that event the fund may be
unable to invest the proceeds from the early payment of the
mortgage-related securities in an investment that provides as
high a yield as the mortgage-related securities. Consequently,
early payment associated with mortgage-related securities may
cause these securities to experience significantly greater price
and yield volatility than that experienced by traditional fixed-
income securities. The occurrence of mortgage prepayments is
affected by factors including the level of interest rates,
general economic conditions, the location and age of the mortgage
and other social and demographic conditions. During periods of
falling interest rates, the rate of mortgage prepayments tends to
increase, thereby tending to decrease the life of mortgage-
related securities. During periods of rising interest rates, the
rate of mortgage prepayments usually decreases, thereby tending
to increase the life of mortgage-related securities. If the life
of a mortgage-related security is inaccurately predicted, the
fund may not be able to realize the rate of return it expected.
Mortgage-backed securities are less effective than other types of
securities as a means of "locking in" attractive long-term
interest rates. One reason is the need to reinvest prepayments
of principal; another is the possibility of significant
unscheduled prepayments resulting from declines in interest
rates. These prepayments would have to be reinvested at lower
rates. As a result, these securities may have less potential for
capital appreciation during periods of declining interest rates
than other securities of comparable maturities, although they may
have a similar risk of decline in market value during periods of
rising interest rates. Prepayments may also significantly shorten
the effective maturities of these securities, especially during
periods of declining interest rates. Conversely, during periods
of rising interest rates, a reduction in prepayments may increase
the effective maturities of these securities, subjecting them to
a greater risk of decline in market value in response to rising
interest rates than traditional debt securities, and, therefore,
potentially increasing the volatility of the fund.
Prepayments may cause losses on securities purchased at a
premium. At times, some of the mortgage-backed securities in
which the fund may invest will have higher than market interest
rates and therefore will be purchased at a premium above their
par value. Unscheduled prepayments, which are made at par, will
cause the fund to experience a loss equal to any unamortized
premium.
CMOs may be issued by a U.S. government agency or instrumentality
or by a private issuer. Although payment of the principal of,
and interest on, the underlying collateral securing privately
issued CMOs may be guaranteed by the U.S. government or its
agencies or instrumentalities, these CMOs represent obligations
solely of the private issuer and are not insured or guaranteed by
the U.S. government, its agencies or instrumentalities or any
other person or entity.
Prepayments could cause early retirement of CMOs. CMOs are
designed to reduce the risk of prepayment for investors by
issuing multiple classes of securities, each having different
maturities, interest rates and payment schedules, and with the
principal and interest on the underlying mortgages allocated
among the several classes in various ways. Payment of interest
or principal on some classes or series of CMOs may be subject to
contingencies or some classes or series may bear some or all of
the risk of default on the underlying mortgages. CMOS of
different classes or series are generally retired in sequence as
the underlying mortgage loans in the mortgage pool are repaid.
If enough mortgages are repaid ahead of schedule, the classes or
series of a CMO with the earliest maturities generally will be
retired prior to their maturities. Thus, the early retirement of
particular classes or series of a CMO held by the fund would have
the same effect as the prepayment of mortgages underlying other
mortgage-backed securities. Conversely, slower than anticipated
prepayments can extend the effective maturities of CMOs,
subjecting them to a greater risk of decline in market value in
response to rising interest rates than traditional debt
securities, and, therefore, potentially increasing the volatility
of the fund.
Prepayments could result in losses on stripped mortgage-backed
securities. Stripped mortgage-backed securities are usually
structured with two classes that receive different portions of
the interest and principal distributions on a pool of mortgage
loans. The fund may invest in both the interest-only or "IO"
class and the principal-only or "PO" class. The yield to
maturity on an IO class of stripped mortgage-backed securities is
extremely sensitive not only to changes in prevailing interest
rates but also to the rate of principal payments (including
prepayments) on the underlying assets. A rapid rate of principal
prepayments may have a measurable adverse effect on the fund's
yield to maturity to the extent it invests in IOs. If the assets
underlying the IO experience greater than anticipated prepayments
of principal, the fund may fail to recoup fully its initial
investment in these securities. Conversely, POs tend to increase
in value if prepayments are greater than anticipated and decline
if prepayments are slower than anticipated.
The secondary market for stripped mortgage-backed securities may
be more volatile and less liquid than that for other mortgage-
backed securities, potentially limiting the fund's ability to buy
or sell those securities at any particular time.
SECURITIES LOANS
The fund may make secured loans of its portfolio securities, on
either a short-term or long-term basis, amounting to not more
than 25% of its total assets, thereby realizing additional
income. The risks in lending portfolio securities, as with other
extensions of credit, consist of possible delay in recovery of
the securities or possible loss of rights in the collateral
should the borrower fail financially. As a matter of policy,
securities loans are made to broker-dealers pursuant to
agreements requiring that the loans be continuously secured by
collateral consisting of cash or short-term debt obligations at
least equal at all times to the value of the securities on loan,
"marked-to-market" daily. The borrower pays to the fund an
amount equal to any dividends or interest received on securities
lent. The fund retains all or a portion of the interest received
on investment of the cash collateral or receives a fee from the
borrower. Although voting rights, or rights to consent, with
respect to the loaned securities may pass to the borrower, the
fund retains the right to call the loans at any time on
reasonable notice, and it will do so to enable the fund to
exercise voting rights on any matters materially affecting the
investment. The fund may also call such loans in order to sell
the securities.
FORWARD COMMITMENTS
The fund may enter into contracts to purchase securities for a
fixed price at a future date beyond customary settlement time
("forward commitments") if the fund sets aside, on the books and
records of its custodian, liquid assets in an amount sufficient
to meet the purchase price, or if the fund enters into offsetting
contracts for the forward sale of other securities it owns. In
the case of to-be-announced ("TBA") purchase commitments, the
unit price and the estimated principal amount are established
when the fund enters into a contract, with the actual principal
amount being within a specified range of the estimate. Forward
commitments may be considered securities in themselves, and
involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in
addition to the risk of decline in the value of the fund's other
assets. Where such purchases are made through dealers, the fund
relies on the dealer to consummate the sale. The dealer's
failure to do so may result in the loss to the fund of an
advantageous yield or price. Although the fund will generally
enter into forward commitments with the intention of acquiring
securities for its portfolio or for delivery pursuant to options
contracts it has entered into, the fund may dispose of a
commitment prior to settlement if Putnam Management deems it
appropriate to do so. The fund may realize short-term profits or
losses upon the sale of forward commitments.
The fund may enter into TBA sale commitments to hedge its
portfolio positions or to sell securities it owns under delayed
delivery arrangements. Proceeds of TBA sale commitments are not
received until the contractual settlement date. During the time
a TBA sale commitment is outstanding, equivalent deliverable
securities, or an offsetting TBA purchase commitment deliverable
on or before the sale commitment date, are held as "cover" for
the transaction. Unsettled TBA sale commitments are valued at
current market value of the underlying securities. If the TBA
sale commitment is closed through the acquisition of an
offsetting purchase commitment, the fund realizes a gain or loss
on the commitment without regard to any unrealized gain or loss
on the underlying security. If the fund delivers securities
under the commitment, the fund realizes a gain or loss from the
sale of the securities based upon the unit price established at
the date the commitment was entered into.
REPURCHASE AGREEMENTS
The fund may enter into repurchase agreements up to the limit
specified in the prospectus. A repurchase agreement is a
contract under which the fund acquires a security for a
relatively short period (usually not more than one week) subject
to the obligation of the seller to repurchase and the fund to
resell such security at a fixed time and price (representing the
fund's cost plus interest). It is the fund's present intention
to enter into repurchase agreements only with commercial banks
and registered broker-dealers and only with respect to
obligations of the U.S. government or its agencies or
instrumentalities. Repurchase agreements may also be viewed as
loans made by the fund which are collateralized by the securities
subject to repurchase. Putnam Management will monitor such
transactions to ensure that the value of the underlying
securities will be at least equal at all times to the total
amount of the repurchase obligation, including the interest
factor. If the seller defaults, the fund could realize a loss on
the sale of the underlying security to the extent that the
proceeds of sale including accrued interest are less than the
resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or
insolvency proceedings, the fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal
and interest if the fund is treated as an unsecured creditor and
required to return the underlying collateral to the seller's
estate.
Pursuant to an exemptive order issued by the Securities and
Exchange Commission, the fund may transfer uninvested cash
balances into a joint account, along with cash of other Putnam
funds and certain other accounts. These balances may be invested
in one or more repurchase agreements and/or short-term money
market instruments.
OPTIONS ON SECURITIES
WRITING COVERED OPTIONS. The fund may write covered call options
and covered put options on optionable securities held in its
portfolio, when in the opinion of Putnam Management such
transactions are consistent with the fund's investment
objective(s) and policies. Call options written by the fund give
the purchaser the right to buy the underlying securities from the
fund at a stated exercise price; put options give the purchaser
the right to sell the underlying securities to the fund at a
stated price.
The fund may write only covered options, which means that, so
long as the fund is obligated as the writer of a call option, it
will own the underlying securities subject to the option (or
comparable securities satisfying the cover requirements of
securities exchanges). In the case of put options, the fund will
hold cash and/or high-grade short-term debt obligations equal to
the price to be paid if the option is exercised. In addition,
the fund will be considered to have covered a put or call option
if and to the extent that it holds an option that offsets some or
all of the risk of the option it has written. The fund may write
combinations of covered puts and calls on the same underlying
security.
The fund will receive a premium from writing a put or call
option, which increases the fund's return on the underlying
security in the event the option expires unexercised or is closed
out at a profit. The amount of the premium reflects, among other
things, the relationship between the exercise price and the
current market value of the underlying security, the volatility
of the underlying security, the amount of time remaining until
expiration, current interest rates, and the effect of supply and
demand in the options market and in the market for the underlying
security. By writing a call option, the fund limits its
opportunity to profit from any increase in the market value of
the underlying security above the exercise price of the option
but continues to bear the risk of a decline in the value of the
underlying security. By writing a put option, the fund assumes
the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current
market value, resulting in a potential capital loss unless the
security subsequently appreciates in value.
The fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction, in
which it purchases an offsetting option. The fund realizes a
profit or loss from a closing transaction if the cost of the
transaction (option premium plus transaction costs) is less or
more than the premium received from writing the option. If the
fund writes a call option but does not own the underlying
security, and when it writes a put option, the fund may be
required to deposit cash or securities with its broker as
"margin," or collateral, for its obligation to buy or sell the
underlying security. As the value of the underlying security
varies, the fund may have to deposit additional margin with the
broker. Margin requirements are complex and are fixed by
individual brokers, subject to minimum requirements currently
imposed by the Federal Reserve Board and by stock exchanges and
other self-regulatory organizations.
PURCHASING PUT OPTIONS. The fund may purchase put options to
protect its portfolio holdings in an underlying security against
a decline in market value. Such protection is provided during
the life of the put option since the fund, as holder of the
option, is able to sell the underlying security at the put
exercise price regardless of any decline in the underlying
security's market price. In order for a put option to be
profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the
premium and transaction costs. By using put options in this
manner, the fund will reduce any profit it might otherwise have
realized from appreciation of the underlying security by the
premium paid for the put option and by transaction costs.
PURCHASING CALL OPTIONS. The fund may purchase call options to
hedge against an increase in the price of securities that the
fund wants ultimately to buy. Such hedge protection is provided
during the life of the call option since the fund, as holder of
the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying
security's market price. In order for a call option to be
profitable, the market price of the underlying security must rise
sufficiently above the exercise price to cover the premium and
transaction costs.
RISK FACTORS IN OPTIONS TRANSACTIONS
The successful use of the fund's options strategies depends on
the ability of Putnam Management to forecast correctly interest
rate and market movements. For example, if the fund were to
write a call option based on Putnam Management's expectation that
the price of the underlying security would fall, but the price
were to rise instead, the fund could be required to sell the
security upon exercise at a price below the current market price.
Similarly, if the fund were to write a put option based on Putnam
Management's expectation that the price of the underlying
security would rise, but the price were to fall instead, the fund
could be required to purchase the security upon exercise at a
price higher than the current market price.
When the fund purchases an option, it runs the risk that it will
lose its entire investment in the option in a relatively short
period of time, unless the fund exercises the option or enters
into a closing sale transaction before the option's expiration.
If the price of the underlying security does not rise (in the
case of a call) or fall (in the case of a put) to an extent
sufficient to cover the option premium and transaction costs, the
fund will lose part or all of its investment in the option. This
contrasts with an investment by the fund in the underlying
security, since the fund will not realize a loss if the
security's price does not change.
The effective use of options also depends on the fund's ability
to terminate option positions at times when Putnam Management
deems it desirable to do so. There is no assurance that the fund
will be able to effect closing transactions at any particular
time or at an acceptable price.
If a secondary market in options were to become unavailable, the
fund could no longer engage in closing transactions. Lack of
investor interest might adversely affect the liquidity of the
market for particular options or series of options. A market may
discontinue trading of a particular option or options generally.
In addition, a market could become temporarily unavailable if
unusual events -- such as volume in excess of trading or clearing
capability -- were to interrupt its normal operations.
A market may at times find it necessary to impose restrictions on
particular types of options transactions, such as opening
transactions. For example, if an underlying security ceases to
meet qualifications imposed by the market or the Options Clearing
Corporation, new series of options on that security will no
longer be opened to replace expiring series, and opening
transactions in existing series may be prohibited. If an options
market were to become unavailable, the fund as a holder of an
option would be able to realize profits or limit losses only by
exercising the option, and the fund, as option writer, would
remain obligated under the option until expiration or exercise.
Disruptions in the markets for the securities underlying options
purchased or sold by the fund could result in losses on the
options. If trading is interrupted in an underlying security,
the trading of options on that security is normally halted as
well. As a result, the fund as purchaser or writer of an option
will be unable to close out its positions until options trading
resumes, and it may be faced with considerable losses if trading
in the security reopens at a substantially different price. In
addition, the Options Clearing Corporation or other options
markets may impose exercise restrictions. If a prohibition on
exercise is imposed at the time when trading in the option has
also been halted, the fund as purchaser or writer of an option
will be locked into its position until one of the two
restrictions has been lifted. If the Options Clearing
Corporation were to determine that the available supply of an
underlying security appears insufficient to permit delivery by
the writers of all outstanding calls in the event of exercise, it
may prohibit indefinitely the exercise of put options. The fund,
as holder of such a put option, could lose its entire investment
if the prohibition remained in effect until the put option's
expiration.
Foreign-traded options are subject to many of the same risks
presented by internationally-traded securities. In addition,
because of time differences between the United States and various
foreign countries, and because different holidays are observed in
different countries, foreign options markets may be open for
trading during hours or on days when U.S. markets are closed. As
a result, option premiums may not reflect the current prices of
the underlying interest in the United States.
Over-the-counter ("OTC") options purchased by the fund and assets
held to cover OTC options written by the fund may, under certain
circumstances, be considered illiquid securities for purposes of
any limitation on the fund's ability to invest in illiquid
securities.
FUTURES CONTRACTS AND RELATED OPTIONS
Subject to applicable law, and unless otherwise specified in the
prospectus, the fund may invest without limit in the types of
futures contracts and related options identified in the
prospectus for hedging and non-hedging purposes, such as to
manage the effective duration of the fund's portfolio or as a
substitute for direct investment. A financial futures contract
sale creates an obligation by the seller to deliver the type of
financial instrument called for in the contract in a specified
delivery month for a stated price. A financial futures contract
purchase creates an obligation by the purchaser to take delivery
of the type of financial instrument called for in the contract in
a specified delivery month at a stated price. The specific
instruments delivered or taken, respectively, at settlement date
are not determined until on or near that date. The determination
is made in accordance with the rules of the exchange on which the
futures contract sale or purchase was made. Futures contracts
are traded in the United States only on commodity exchanges or
boards of trade -- known as "contract markets" -- approved for
such trading by the Commodity Futures Trading Commission (the
"CFTC"), and must be executed through a futures commission
merchant or brokerage firm which is a member of the relevant
contract market.
Although futures contracts (other than index futures) by their
terms call for actual delivery or acceptance of commodities or
securities, in most cases the contracts are closed out before the
settlement date without the making or taking of delivery.
Closing out a futures contract sale is effected by purchasing a
futures contract for the same aggregate amount of the specific
type of financial instrument or commodity with the same delivery
date. If the price of the initial sale of the futures contract
exceeds the price of the offsetting purchase, the seller is paid
the difference and realizes a gain. Conversely, if the price of
the offsetting purchase exceeds the price of the initial sale,
the seller realizes a loss. If the fund is unable to enter into
a closing transaction, the amount of the fund's potential loss is
unlimited. The closing out of a futures contract purchase is
effected by the purchaser's entering into a futures contract
sale. If the offsetting sale price exceeds the purchase price,
the purchaser realizes a gain, and if the purchase price exceeds
the offsetting sale price, he realizes a loss. In general, 40%
of the gain or loss arising from the closing out of a futures
contract traded on an exchange approved by the CFTC is treated as
short-term gain or loss, and 60% is treated as long-term gain or
loss.
Unlike when the fund purchases or sells a security, no price is
paid or received by the fund upon the purchase or sale of a
futures contract. Upon entering into a contract, the fund is
required to deposit with its custodian in a segregated account in
the name of the futures broker an amount of liquid assets. This
amount is known as "initial margin." The nature of initial
margin in futures transactions is different from that of margin
in security transactions in that futures contract margin does not
involve the borrowing of funds to finance the transactions.
Rather, initial margin is similar to a performance bond or good
faith deposit which is returned to the fund upon termination of
the futures contract, assuming all contractual obligations have
been satisfied. Futures contracts also involve brokerage costs.
Subsequent payments, called "variation margin" or "maintenance
margin," to and from the broker (or the custodian) are made on a
daily basis as the price of the underlying security or commodity
fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking to
the market." For example, when the fund has purchased a futures
contract on a security and the price of the underlying security
has risen, that position will have increased in value and the
fund will receive from the broker a variation margin payment
based on that increase in value. Conversely, when the fund has
purchased a security futures contract and the price of the
underlying security has declined, the position would be less
valuable and the fund would be required to make a variation
margin payment to the broker.
The fund may elect to close some or all of its futures positions
at any time prior to their expiration in order to reduce or
eliminate a hedge position then currently held by the fund. The
fund may close its positions by taking opposite positions which
will operate to terminate the fund's position in the futures
contracts. Final determinations of variation margin are then
made, additional cash is required to be paid by or released to
the fund, and the fund realizes a loss or a gain. Such closing
transactions involve additional commission costs.
The fund does not intend to purchase or sell futures or related
options for other than hedging purposes, if, as a result, the sum
of the initial margin deposits on the fund's existing futures and
related options positions and premiums paid for outstanding
options on futures contracts would exceed 5% of the fund's net
assets.
OPTIONS ON FUTURES CONTRACTS. The fund may purchase and write
call and put options on futures contracts it may buy or sell and
enter into closing transactions with respect to such options to
terminate existing positions. In return for the premium paid,
options on future contracts give the purchaser the right to
assume a position in a futures contract at the specified option
exercise price at any time during the period of the option. The
fund may use options on futures contracts in lieu of writing or
buying options directly on the underlying securities or
purchasing and selling the underlying futures contracts. For
example, to hedge against a possible decrease in the value of its
portfolio securities, the fund may purchase put options or write
call options on futures contracts rather than selling futures
contracts. Similarly, the fund may purchase call options or
write put options on futures contracts as a substitute for the
purchase of futures contracts to hedge against a possible
increase in the price of securities which the fund expects to
purchase. Such options generally operate in the same manner as
options purchased or written directly on the underlying
investments.
As with options on securities, the holder or writer of an option
may terminate his position by selling or purchasing an offsetting
option. There is no guarantee that such closing transactions can
be effected.
The fund will be required to deposit initial margin and
maintenance margin with respect to put and call options on
futures contracts written by it pursuant to brokers' requirements
similar to those described above in connection with the
discussion of futures contracts.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS.
Successful use of futures contracts by the fund is subject to
Putnam Management's ability to predict movements in various
factors affecting securities markets, including interest rates.
Compared to the purchase or sale of futures contracts, the
purchase of call or put options on futures contracts involves
less potential risk to the fund because the maximum amount at
risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the purchase of
a call or put option on a futures contract would result in a loss
to the fund when the purchase or sale of a futures contract would
not, such as when there is no movement in the prices of the
hedged investments. The writing of an option on a futures
contract involves risks similar to those risks relating to the
sale of futures contracts.
The use of options and futures strategies also involves the risk
of imperfect correlation among movements in the prices of the
securities underlying the futures and options purchased and sold
by the fund, of the options and futures contracts themselves,
and, in the case of hedging transactions, of the securities which
are the subject of a hedge. The successful use of these
strategies further depends on the ability of Putnam Management to
forecast interest rates and market movements correctly.
There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render
certain market clearing facilities inadequate, and thereby result
in the institution by exchanges of special procedures which may
interfere with the timely execution of customer orders.
To reduce or eliminate a position held by the fund, the fund may
seek to close out such position. The ability to establish and
close out positions will be subject to the development and
maintenance of a liquid secondary market. It is not certain that
this market will develop or continue to exist for a particular
futures contract or option. Reasons for the absence of a liquid
secondary market on an exchange include the following: (i) there
may be insufficient trading interest in certain contracts or
options; (ii) restrictions may be imposed by an exchange on
opening transactions or closing transactions or both; (iii)
trading halts, suspensions or other restrictions may be imposed
with respect to particular classes or series of contracts or
options, or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or a clearing corporation may not
at all times be adequate to handle current trading volume; or
(vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the
trading of contracts or options (or a particular class or series
of contracts or options), in which event the secondary market on
that exchange for such contracts or options (or in the class or
series of contracts or options) would cease to exist, although
outstanding contracts or options on the exchange that had been
issued by a clearing corporation as a result of trades on that
exchange would continue to be exercisable in accordance with
their terms.
U.S. TREASURY SECURITY FUTURES CONTRACTS AND OPTIONS. U.S.
Treasury security futures contracts require the seller to
deliver, or the purchaser to take delivery of, the type of U.S.
Treasury security called for in the contract at a specified date
and price. Options on U.S. Treasury security futures contracts
give the purchaser the right in return for the premium paid to
assume a position in a U.S. Treasury security futures contract at
the specified option exercise price at any time during the period
of the option.
Successful use of U.S. Treasury security futures contracts by the
fund is subject to Putnam Management's ability to predict
movements in the direction of interest rates and other factors
affecting markets for debt securities. For example, if the fund
has sold U.S. Treasury security futures contracts in order to
hedge against the possibility of an increase in interest rates
which would adversely affect securities held in its portfolio,
and the prices of the fund's securities increase instead as a
result of a decline in interest rates, the fund will lose part or
all of the benefit of the increased value of its securities which
it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the fund
has insufficient cash, it may have to sell securities to meet
daily maintenance margin requirements at a time when it may be
disadvantageous to do so.
There is also a risk that price movements in U.S. Treasury
security futures contracts and related options will not correlate
closely with price movements in markets for particular
securities. For example, if the fund has hedged against a
decline in the values of tax-exempt securities held by it by
selling Treasury security futures and the values of Treasury
securities subsequently increase while the values of its
tax-exempt securities decrease, the fund would incur losses on
both the Treasury security futures contracts written by it and
the tax-exempt securities held in its portfolio.
INDEX FUTURES CONTRACTS. An index futures contract is a contract
to buy or sell units of an index at a specified future date at a
price agreed upon when the contract is made. Entering into a
contract to buy units of an index is commonly referred to as
buying or purchasing a contract or holding a long position in
the index. Entering into a contract to sell units of an index is
commonly referred to as selling a contract or holding a short
position. A unit is the current value of the index. The fund
may enter into stock index futures contracts, debt index futures
contracts, or other index futures contracts appropriate to its
objective(s). The fund may also purchase and sell options on
index futures contracts.
For example, the Standard & Poor's 500 Composite Stock Price
Index ("S&P 500") is composed of 500 selected common stocks, most
of which are listed on the New York Stock Exchange. The S&P 500
assigns relative weightings to the common stocks included in the
Index, and the value fluctuates with changes in the market values
of those common stocks. In the case of the S&P 500, contracts
are to buy or sell 500 units. Thus, if the value of the S&P 500
were $150, one contract would be worth $75,000 (500 units x
$150). The stock index futures contract specifies that no
delivery of the actual stocks making up the index will take
place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the
difference between the contract price and the actual level of the
stock index at the expiration of the contract. For example, if
the fund enters into a futures contract to buy 500 units of the
S&P 500 at a specified future date at a contract price of $150
and the S&P 500 is at $154 on that future date, the fund will
gain $2,000 (500 units x gain of $4). If the fund enters into a
futures contract to sell 500 units of the stock index at a
specified future date at a contract price of $150 and the S&P 500
is at $152 on that future date, the fund will lose $1,000 (500
units x loss of $2).
There are several risks in connection with the use by the fund of
index futures. One risk arises because of the imperfect
correlation between movements in the prices of the index futures
and movements in the prices of securities which are the subject
of the hedge. Putnam Management will, however, attempt to reduce
this risk by buying or selling, to the extent possible, futures
on indices the movements of which will, in its judgment, have a
significant correlation with movements in the prices of the
securities sought to be hedged.
Successful use of index futures by the fund is also subject to
Putnam Management's ability to predict movements in the direction
of the market. For example, it is possible that, where the fund
has sold futures to hedge its portfolio against a decline in the
market, the index on which the futures are written may advance
and the value of securities held in the fund's portfolio may
decline. If this occurred, the fund would lose money on the
futures and also experience a decline in value in its portfolio
securities. It is also possible that, if the fund has hedged
against the possibility of a decline in the market adversely
affecting securities held in its portfolio and securities prices
increase instead, the fund will lose part or all of the benefit
of the increased value of those securities it has hedged because
it will have offsetting losses in its futures positions. In
addition, in such situations, if the fund has insufficient cash,
it may have to sell securities to meet daily variation margin
requirements at a time when it is disadvantageous to do so.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the
index futures and the portion of the portfolio being hedged, the
prices of index futures may not correlate perfectly with
movements in the underlying index due to certain market
distortions. First, all participants in the futures market are
subject to margin deposit and maintenance requirements. Rather
than meeting additional margin deposit requirements, investors
may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and
futures markets. Second, margin requirements in the futures
market are less onerous than margin requirements in the
securities market, and as a result the futures market may attract
more speculators than the securities market does. Increased
participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price
distortions in the futures market and also because of the
imperfect correlation between movements in the index and
movements in the prices of index futures, even a correct forecast
of general market trends by Putnam Management may still not
result in a profitable position over a short time period.
OPTIONS ON STOCK INDEX FUTURES. Options on index futures are
similar to options on securities except that options on index
futures give the purchaser the right, in return for the premium
paid, to assume a position in an index futures contract (a long
position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during
the period of the option. Upon exercise of the option, the
delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the index
futures contract, at exercise, exceeds (in the case of a call) or
is less than (in the case of a put) the exercise price of the
option on the index future. If an option is exercised on the
last trading day prior to its expiration date, the settlement
will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the index
on which the future is based on the expiration date. Purchasers
of options who fail to exercise their options prior to the
exercise date suffer a loss of the premium paid.
OPTIONS ON INDICES
As an alternative to purchasing call and put options on index
futures, the fund may purchase and sell call and put options on
the underlying indices themselves. Such options would be used in
a manner identical to the use of options on index futures.
INDEX WARRANTS
The fund may purchase put warrants and call warrants whose values
vary depending on the change in the value of one or more
specified securities indices ("index warrants"). Index warrants
are generally issued by banks or other financial institutions and
give the holder the right, at any time during the term of the
warrant, to receive upon exercise of the warrant a cash payment
from the issuer based on the value of the underlying index at the
time of exercise. In general, if the value of the underlying
index rises above the exercise price of the index warrant, the
holder of a call warrant will be entitled to receive a cash
payment from the issuer upon exercise based on the difference
between the value of the index and the exercise price of the
warrant; if the value of the underlying index falls, the holder
of a put warrant will be entitled to receive a cash payment from
the issuer upon exercise based on the difference between the
exercise price of the warrant and the value of the index. The
holder of a warrant would not be entitled to any payments from
the issuer at any time when, in the case of a call warrant, the
exercise price is greater than the value of the underlying index,
or, in the case of a put warrant, the exercise price is less than
the value of the underlying index. If the fund were not to
exercise an index warrant prior to its expiration, then the fund
would lose the amount of the purchase price paid by it for the
warrant.
The fund will normally use index warrants in a manner similar to
its use of options on securities indices. The risks of the
fund's use of index warrants are generally similar to those
relating to its use of index options. Unlike most index options,
however, index warrants are issued in limited amounts and are not
obligations of a regulated clearing agency, but are backed only
by the credit of the bank or other institution which issues the
warrant. Also, index warrants generally have longer terms than
index options. Although the fund will normally invest only in
exchange-listed warrants, index warrants are not likely to be as
liquid as certain index options backed by a recognized clearing
agency. In addition, the terms of index warrants may limit the
fund's ability to exercise the warrants at such time, or in such
quantities, as the fund would otherwise wish to do.
FOREIGN INVESTMENTS
The fund may invest in securities of foreign issuers that are not
actively traded in U.S. markets. These foreign investments
involve certain special risks described below.
Foreign securities are normally denominated and traded in foreign
currencies. As a result, the value of the fund's foreign
investments and the value of its shares may be affected favorably
or unfavorably by changes in currency exchange rates relative to
the U.S. dollar. There may be less information publicly
available about a foreign issuer than about a U.S. issuer, and
foreign issuers are not generally subject to accounting, auditing
and financial reporting standards and practices comparable to
those in the United States. The securities of some foreign
issuers are less liquid and at times more volatile than
securities of comparable U.S. issuers. Foreign brokerage
commissions and other fees are also generally higher than in the
United States. Foreign settlement procedures and trade
regulations may involve certain risks (such as delay in payment
or delivery of securities or in the recovery of the fund's assets
held abroad) and expenses not present in the settlement of
investments in U.S. markets.
In addition, the fund's investments in foreign securities may be
subject to the risk of nationalization or expropriation of
assets, imposition of currency exchange controls, foreign
withholding taxes or restrictions on the repatriation of foreign
currency, confiscatory taxation, political or financial
instability and diplomatic developments which could affect the
value of the fund's investments in certain foreign countries.
Dividends or interest on, or proceeds from the sale of, foreign
securities may be subject to foreign withholding taxes, and
special U.S. tax considerations may apply.
Legal remedies available to investors in certain foreign
countries may be more limited than those available with respect
to investments in the United States or in other foreign
countries. The laws of some foreign countries may limit the
fund's ability to invest in securities of certain issuers
organized under the laws of those foreign countries.
The risks described above, including the risks of nationalization
or expropriation of assets, are typically increased in connection
with investments in "emerging markets." For example, political
and economic structures in these countries may be in their
infancy and developing rapidly, and such countries may be in
their infancy and developing rapidly, and such countries may lack
the social, political and economic stability characteristic of
more developed countries. Certain of these countries have in the
past failed to recognize private property rights and have at
times nationalized and expropriated the assets of private
companies. High rates of inflation or currency devaluations may
adversely affect the economies and securities markets of such
countries. Investments in emerging markets may be considered
speculative.
The currencies of certain emerging market countries have
experienced a steady devaluation relative to the U.S. dollar, and
continued devaluations may adversely affect the value of a fund's
assets denominated in such currencies. Many emerging market
companies have experienced substantial, and in some periods
extremely high, rates of inflation for many years, and continued
inflation may adversely affect the economies and securities
markets of such countries.
In addition, unanticipated political or social developments may
affect the value of the fund's investments in emerging markets
and the availability to the fund of additional investments in
these markets. The small size, limited trading volume and
relative inexperience of the securities markets in these
countries may make the fund's investments in securities traded in
emerging markets illiquid and more volatile than investments in
securities traded in more developed countries, and the fund may
be required to establish special custodial or other arrangements
before making investments in securities traded in emerging
markets. There may be little financial or accounting information
available with respect to issuers of emerging market securities,
and it may be difficult as a result to assess the value of
prospects of an investment in such securities.
Certain of the foregoing risks may also apply to some extent to
securities of U.S. issuers that are denominated in foreign
currencies or that are traded in foreign markets, or securities
of U.S. issuers having significant foreign operations.
FOREIGN CURRENCY TRANSACTIONS
Unless otherwise specified in the prospectus or Part I of this
SAI, the fund may engage without limit in currency exchange
transactions, including purchasing and selling foreign currency,
foreign currency options, foreign currency forward contracts and
foreign currency futures contracts and related options, to manage
its exposure to foreign currencies. In addition, the fund may
write covered call and put options on foreign currencies for the
purpose of increasing its current return.
Generally, the fund may engage in both "transaction hedging" and
"position hedging." The fund may also engage in foreign currency
transactions for non-hedging purposes, subject to applicable law.
When it engages in transaction hedging, the fund enters into
foreign currency transactions with respect to specific
receivables or payables, generally arising in connection with the
purchase or sale of portfolio securities. The fund will engage
in transaction hedging when it desires to "lock in" the U.S.
dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a
foreign currency. By transaction hedging the fund will attempt
to protect itself against a possible loss resulting from an
adverse change in the relationship between the U.S. dollar and
the applicable foreign currency during the period between the
date on which the security is purchased or sold, or on which the
dividend or interest payment is earned, and the date on which
such payments are made or received.
The fund may purchase or sell a foreign currency on a spot (or
cash) basis at the prevailing spot rate in connection with the
settlement of transactions in portfolio securities denominated in
that foreign currency. If conditions warrant, for transaction
hedging purposes the fund may also enter into contracts to
purchase or sell foreign currencies at a future date ("forward
contracts") and purchase and sell foreign currency futures
contracts. A foreign currency forward contract is a negotiated
agreement to exchange currency at a future time at a rate or
rates that may be higher or lower than the spot rate. Foreign
currency futures contracts are standardized exchange-traded
contracts and have margin requirements. In addition, for
transaction hedging purposes the fund may also purchase or sell
exchange-listed and over-the-counter call and put options on
foreign currency futures contracts and on foreign currencies.
The fund may also enter into contracts to purchase or sell
foreign currencies at a future date ("forward contracts") and
purchase and sell foreign currency futures contracts.
For transaction hedging purposes the fund may also purchase
exchange-listed and over-the-counter call and put options on
foreign currency futures contracts and on foreign currencies. A
put option on a futures contract gives the fund the right to
assume a short position in the futures contract until the
expiration of the option. A put option on a currency gives the
fund the right to sell the currency at an exercise price until
the expiration of the option. A call option on a futures
contract gives the fund the right to assume a long position in
the futures contract until the expiration of the option. A call
option on a currency gives the fund the right to purchase the
currency at the exercise price until the expiration of the
option.
The fund may engage in position hedging to protect against a
decline in the value relative to the U.S. dollar of the
currencies in which its portfolio securities are denominated or
quoted (or an increase in the value of the currency in which the
securities the fund intends to buy are denominated, when the fund
holds cash or short-term investments). For position hedging
purposes, the fund may purchase or sell, on exchanges or in over-
the-counter markets, foreign currency futures contracts, foreign
currency forward contracts and options on foreign currency
futures contracts and on foreign currencies. In connection with
position hedging, the fund may also purchase or sell foreign
currency on a spot basis.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward
or futures contract. Accordingly, it may be necessary for the
fund to purchase additional foreign currency on the spot market
(and bear the expense of such purchase) if the market value of
the security or securities being hedged is less than the amount
of foreign currency the fund is obligated to deliver and a
decision is made to sell the security or securities and make
delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency
received upon the sale of the portfolio security or securities if
the market value of such security or securities exceeds the
amount of foreign currency the fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in
the underlying prices of the securities which the fund owns or
intends to purchase or sell. They simply establish a rate of
exchange which one can achieve at some future point in time.
Additionally, although these techniques tend to minimize the risk
of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the
increase in value of such currency. See "Risk factors in options
transactions" above.
The fund may seek to increase its current return or to offset
some of the costs of hedging against fluctuations in current
exchange rates by writing covered call options and covered put
options on foreign currencies. The fund receives a premium from
writing a call or put option, which increases the fund's current
return if the option expires unexercised or is closed out at a
net profit. The fund may terminate an option that it has written
prior to its expiration by entering into a closing purchase
transaction in which it purchases an option having the same terms
as the option written.
The fund's currency hedging transactions may call for the
delivery of one foreign currency in exchange for another foreign
currency and may at times not involve currencies in which its
portfolio securities are then denominated. Putnam Management
will engage in such "cross hedging" activities when it believes
that such transactions provide significant hedging opportunities
for the fund. Cross hedging transactions by the fund involve the
risk of imperfect correlation between changes in the values of
the currencies to which such transactions relate and changes in
the value of the currency or other asset or liability which is
the subject of the hedge.
The fund may also engage in non-hedging currency transactions.
For example, Putnam Management may believe that exposure to a
currency is in the fund's best interest but that securities
denominated in that currency are unattractive. In that case the
fund may purchase a currency forward contract or option in order
to increase its exposure to the currency. In accordance with SEC
regulations, the fund will segregate liquid assets in its
portfolio to cover forward contracts used for non-hedging
purposes.
The value of any currency, including U.S. dollars and foreign
currencies, may be affected by complex political and economic
factors applicable to the issuing country. In addition, the
exchange rates of foreign currencies (and therefore the values of
foreign currency options, forward contracts and futures
contracts) may be affected significantly, fixed, or supported
directly or indirectly by U.S. and foreign government actions.
Government intervention may increase risks involved in purchasing
or selling foreign currency options, forward contracts and
futures contracts, since exchange rates may not be free to
fluctuate in response to other market forces.
The value of a foreign currency option, forward contract or
futures contract reflects the value of an exchange rate, which in
turn reflects relative values of two currencies, the U.S. dollar
and the foreign currency in question. Because foreign currency
transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in
the exercise of foreign currency options, forward contracts and
futures contracts, investors may be disadvantaged by having to
deal in an odd-lot market for the underlying foreign currencies
in connection with options at prices that are less favorable than
for round lots. Foreign governmental restrictions or taxes could
result in adverse changes in the cost of acquiring or disposing
of foreign currencies.
There is no systematic reporting of last sale information for
foreign currencies and there is no regulatory requirement that
quotations available through dealers or other market sources be
firm or revised on a timely basis. Available quotation
information is generally representative of very large round-lot
transactions in the interbank market and thus may not reflect
exchange rates for smaller odd-lot transactions (less than $1
million) where rates may be less favorable. The interbank market
in foreign currencies is a global, around-the-clock market. To
the extent that options markets are closed while the markets for
the underlying currencies remain open, significant price and rate
movements may take place in the underlying markets that cannot be
reflected in the options markets.
The decision as to whether and to what extent the fund will
engage in foreign currency exchange transactions will depend on a
number of factors, including prevailing market conditions, the
composition of the fund's portfolio and the availability of
suitable transactions. Accordingly, there can be no assurance
that the fund will engage in foreign currency exchange
transactions at any given time or from time to time.
CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign
currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number
of days from the date of the contract as agreed by the parties,
at a price set at the time of the contract. In the case of a
cancelable forward contract, the holder has the unilateral right
to cancel the contract at maturity by paying a specified fee.
The contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial
banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage
for trades. A foreign currency futures contract is a
standardized contract for the future delivery of a specified
amount of a foreign currency at a price set at the time of the
contract. Foreign currency futures contracts traded in the
United States are designed by and traded on exchanges regulated
by the CFTC, such as the New York Mercantile Exchange.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the
maturity date of a forward contract may be any fixed number of
days from the date of the contract agreed upon by the parties,
rather than a predetermined date in a given month. Forward
contracts may be in any amount agreed upon by the parties rather
than predetermined amounts. Also, forward foreign exchange
contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires
no margin or other deposit.
At the maturity of a forward or futures contract, the fund either
may accept or make delivery of the currency specified in the
contract, or at or prior to maturity enter into a closing
transaction involving the purchase or sale of an offsetting
contract. Closing transactions with respect to forward contracts
are usually effected with the currency trader who is a party to
the original forward contract. Closing transactions with respect
to futures contracts are effected on a commodities exchange; a
clearing corporation associated with the exchange assumes
responsibility for closing out such contracts.
Positions in the foreign currency futures contracts may be closed
out only on an exchange or board of trade which provides a
secondary market in such contracts. Although the fund intends to
purchase or sell foreign currency futures contracts only on
exchanges or boards of trade where there appears to be an active
secondary market, there is no assurance that a secondary market
on an exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be
possible to close a futures position and, in the event of adverse
price movements, the fund would continue to be required to make
daily cash payments of variation margin.
FOREIGN CURRENCY OPTIONS. In general, options on foreign
currencies operate similarly to options on securities and are
subject to many of the risks described above. Foreign currency
options are traded primarily in the over-the-counter market,
although options on foreign currencies are also listed on several
exchanges. Options are traded not only on the currencies of
individual nations, but also on the European Currency Unit
("ECU"). The ECU is composed of amounts of a number of
currencies, and is the official medium of exchange of the
European Community's European Monetary System.
The fund will only purchase or write foreign currency options
when Putnam Management believes that a liquid secondary market
exists for such options. There can be no assurance that a liquid
secondary market will exist for a particular option at any
specific time. Options on foreign currencies are affected by all
of those factors which influence foreign exchange rates and
investments generally.
SETTLEMENT PROCEDURES. Settlement procedures relating to the
fund's investments in foreign securities and to the fund's
foreign currency exchange transactions may be more complex than
settlements with respect to investments in debt or equity
securities of U.S. issuers, and may involve certain risks not
present in the fund's domestic investments. For example,
settlement of transactions involving foreign securities or
foreign currencies may occur within a foreign country, and the
fund may be required to accept or make delivery of the underlying
securities or currency in conformity with any applicable U.S. or
foreign restrictions or regulations, and may be required to pay
any fees, taxes or charges associated with such delivery. Such
investments may also involve the risk that an entity involved in
the settlement may not meet its obligations.
FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers
do not charge a fee for currency conversion, they do realize a
profit based on the difference (the "spread") between prices at
which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the fund at one
rate, while offering a lesser rate of exchange should the fund
desire to resell that currency to the dealer.
RESTRICTED SECURITIES
The SEC Staff currently takes the view that any delegation by the
Trustees of the authority to determine that a restricted security
is readily marketable (as described in the investment
restrictions of the funds) must be pursuant to written procedures
established by the Trustees. It is the present intention of the
funds' Trustees that, if the Trustees decide to delegate such
determinations to Putnam Management or another person, they would
do so pursuant to written procedures, consistent with the Staff's
position. Should the Staff modify its position in the future,
the Trustees would consider what action would be appropriate in
light of the Staff's position at that time.
TAXES
TAXATION OF THE FUND. The fund intends to qualify each year as a
regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). In order so to
qualify and to qualify for the special tax treatment accorded
regulated investment companies and their shareholders, the fund
must, among other things:
(a) Derive at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, and
gains from the sale of stock, securities and foreign currencies,
or other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to its
business of investing in such stock, securities, or currencies;
(b) distribute with respect to each taxable year at least 90% of
the sum of its taxable net investment income, its net tax-exempt
income, and the excess, if any, of net short-term capital gains
over net long-term capital losses for such year; and
(c) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's
assets is represented by cash and cash items, U.S. government
securities, securities of other regulated investment companies,
and other securities limited in respect of any one issuer to a
value not greater than 5% of the value of the fund's total assets
and to not more than 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities (other than those of the
U.S. Government or other regulated investment companies) of any
one issuer or of two or more issuers which the fund controls and
which are engaged in the same, similar, or related trades or
businesses.
In addition, until the start of the fund's first tax year
beginning after August 5, 1997, the fund must derive less than
30% of its gross income from the sale or other disposition of
certain assets (including stock or securities and certain
options, futures contracts, forward contracts and foreign
currencies) held for less than three months in order to qualify
as a regulated investment company.
If the fund qualifies as a regulated investment company that is
accorded special tax treatment, the fund will not be subject to
federal income tax on income paid to its shareholders in the form
of dividends (including capital gain dividends).
If the fund failed to qualify as a regulated investment company
accorded special tax treatment in any taxable year, the fund
would be subject to tax on its taxable income at corporate rates,
and all distributions from earnings and profits, including any
distributions of net tax-exempt income and net long-term capital
gains, would be taxable to shareholders as ordinary income. In
addition, the fund could be required to recognize unrealized
gains, pay substantial taxes and interest and make substantial
distributions before requalifying as a regulated investment
company that is accorded special tax treatment.
If the fund fails to distribute in a calendar year substantially
all of its ordinary income for such year and substantially all of
its capital gain net income for the one-year period ending
October 31 (or later if the fund is permitted so to elect and so
elects), plus any retained amount from the prior year, the fund
will be subject to a 4% excise tax on the undistributed amounts.
A dividend paid to shareholders by the fund in January of a year
generally is deemed to have been paid by the fund on December 31
of the preceding year, if the dividend was declared and payable
to shareholders of record on a date in October, November or
December of that preceding year. The fund intends generally to
make distributions sufficient to avoid imposition of the 4%
excise tax.
FUND DISTRIBUTIONS. Distributions from the fund (other than
exempt-interest dividends, as discussed below) will be taxable to
shareholders as ordinary income to the extent derived from the
fund's investment income and net short-term gains. Pursuant to
the Taxpayer Relief Act of 1997, two different tax rates apply to
net capital gains (that is, the excess of net gains from captial
assets held more than one year over net losses from capital
assets held for not more than one year). One rate (generally
28%) applies to net gains on capital assets held for more than
one year but not more than 18 months ("mid-term gains") and a
second, preferred rate (generally 20%) applies to the balance of
such net capital gains ("adjusted net capital gains").
Distributions of net capital gains will be treated in the hands
of shareholders as mid-term gains to the extent designated by the
fund as deriving from net gains from assets held for more than
one year but not more than 18 months, and the balance will be
treated as adjusted net capital gains. Distributions of mid-term
gains and adjusted net capital gains will be taxable to
shareholders as such, regardless of how long a shareholder has
held the shares in the fund.
EXEMPT-INTEREST DIVIDENDS. The fund will be qualified to pay
exempt-interest dividends to its shareholders only if, at the
close of each quarter of the fund's taxable year, at least 50% of
the total value of the fund's assets consists of obligations the
interest on which is exempt from federal income tax.
Distributions that the fund properly designates as exempt-
interest dividends are treated as interest excludable from
shareholders' gross income for federal income tax purposes but
may be taxable for federal alternative minimum tax purposes and
for state and local purposes. If the fund intends to be
qualified to pay exempt-interest dividends, the fund may be
limited in its ability to enter into taxable transactions
involving forward commitments, repurchase agreements, financial
futures and options contracts on financial futures, tax-exempt
bond indices and other assets.
Part or all of the interest on indebtedness, if any, incurred or
continued by a shareholder to purchase or carry shares of a fund
paying exempt-interest dividends is not deductible. The portion
of interest that is not deductible is equal to the total interest
paid or accrued on the indebtedness, multiplied by the percentage
of the fund's total distributions (not including distributions
from net long-term capital gains) paid to the shareholder that
are exempt-interest dividends. Under rules used by the Internal
Revenue Service for determining when borrowed funds are
considered used for the purpose of purchasing or carrying
particular assets, the purchase of shares may be considered to
have been made with borrowed funds even though such funds are not
directly traceable to the purchase of shares.
In general, exempt-interest dividends, if any, attributable to
interest received on certain private activity obligations and
certain industrial development bonds will not be tax-exempt to
any shareholders who are "substantial users" of the facilities
financed by such obligations or bonds or who are "related
persons" of such substantial users.
A fund which is qualified to pay exempt-interest dividends will
inform investors within 60 days of the fund's fiscal year-end of
the percentage of its income distributions designated as
tax-exempt. The percentage is applied uniformly to all
distributions made during the year. The percentage of income
designated as tax-exempt for any particular distribution may be
substantially different from the percentage of the fund's income
that was tax-exempt during the period covered by the
distribution.
HEDGING TRANSACTIONS. If the fund engages in hedging
transactions, including hedging transactions in options, futures
contracts, and straddles, or other similar transactions, it will
be subject to special tax rules (including constructive sale,
mark-to-market, straddle, wash sale, and short sale rules), the
effect of which may be to accelerate income to the fund, defer
losses to the fund, cause adjustments in the holding periods of
the fund's securities, or convert short-term capital losses into
long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
The fund will endeavor to make any available elections pertaining
to such transactions in a manner believed to be in the best
interests of the fund.
Under the 30% of gross income test described above (see "Taxation
of the fund"), the fund will be restricted in selling assets held
or considered under Code rules to have been held for less than
three months, and in engaging in certain hedging transactions
(including hedging transactions in options and futures) that in
some circumstances could cause certain fund assets to be treated
as held for less than three months.
Certain of the fund's hedging activities (including its
transactions, if any, in foreign currencies or foreign
currency-denominated instruments) are likely to produce a
difference between its book income and its taxable income. If
the fund's book income exceeds its taxable income, the
distribution (if any) of such excess will be treated as (i) a
dividend to the extent of the fund's remaining earnings and
profits (including earnings and profits arising from tax-exempt
income), (ii) thereafter as a return of capital to the extent of
the recipient's basis in the shares, and (iii) thereafter as gain
from the sale or exchange of a capital asset. If the fund's book
income is less than its taxable income, the fund could be
required to make distributions exceeding book income to qualify
as a regulated investment company that is accorded special tax
treatment.
RETURN OF CAPITAL DISTRIBUTIONS. If the fund makes a
distribution to you in excess of its current and accumulated
"earnings and profits" in any taxable year, the excess
distribution will be treated as a return of capital to the extent
of your tax basis in your shares, and thereafter as capital gain.
A return of capital is not taxable, but it reduces your tax basis
in your shares, thus reducing any loss or increasing any gain on
a subsequent taxable disposition by you of your shares.
SECURITIES ISSUED OR PURCHASED AT A DISCOUNT. The fund's
investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a
discount may) require the fund to accrue and distribute income
not yet received. In order to generate sufficient cash to make
the requisite distributions, the fund may be required to sell
securities in its portfolio that it otherwise would have
continued to hold.
CAPITAL LOSS CARRYOVER. Distributions from capital gains are
made after applying any available capital loss carryovers. The
amounts and expiration dates of any capital loss carryovers
available to the fund are shown in Note 1 (Federal income taxes)
to the financial statements included in Part I of this SAI or
incorporated by reference into this SAI.
FOREIGN CURRENCY-DENOMINATED SECURITIES AND RELATED HEDGING
TRANSACTIONS. The fund's transactions in foreign currencies,
foreign currency-denominated debt securities and certain foreign
currency options, futures contracts and forward contracts (and
similar instruments) may give rise to ordinary income or loss to
the extent such income or loss results from fluctuations in the
value of the foreign currency concerned.
If more than 50% of the fund's assets at year end consists of the
securities of foreign corporations, the fund may elect to permit
shareholders to claim a credit or deduction on their income tax
returns for their pro rata portion of qualified taxes paid by the
fund to foreign countries in respect of foreign securities the
fund has held for at least the minimum period specified in the
Code. In such a case, shareholders will include in gross income
from foreign sources their pro rata shares of such taxes. A
shareholder's ability to claim a foreign tax credit or deduction
in respect of foreign taxes paid by the fund may be subject to
certain limitations imposed by the Code, as a result of which a
shareholder may not get a full credit or deduction for the amount
of such taxes. In particular, shareholders must hold their fund
shares (without protection from risk of loss) on the ex-dividend
date and for at least 15 additional days during the 30-day period
surrounding the ex-dividend date to be eligible to claim a
foreign tax credit with respect to a given dividend.
Shareholders who do not itemize on their federal income tax
returns may claim a credit (but no deduction) for such foreign
taxes.
Investment by the fund in "passive foreign investment companies"
could subject the fund to a U.S. federal income tax or other
charge on the proceeds from the sale of its investment in such a
company; however, this tax can be avoided by making an election
to mark such investments to market annually or to treat the
passive foreign investment company as a "qualified electing
fund."
A "passive foreign investment company" is any foreign
corporation: (i) 75 percent of more of the income of which for
the taxable year is passive income, or (ii) the average
percentage of the assets of which (generally by value, but by
adjusted tax basis in certain cases) that produce or are held for
the production of passive income is at least 50 percent.
Generally, passive income for this purpose means dividends,
interest (including income equivalent to interest), royalties,
rents, annuities, the excess of gains over losses from certain
property transactions and commodities transactions, and foreign
currency gains. Passive income for this purpose does not include
rents and royalties received by the foreign corporation from
active business and certain income received from related persons.
SALE OR REDEMPTION OF SHARES. The sale, exchange or redemption
of fund shares may give rise to a gain or loss. In general, any
gain realized upon a taxable disposition of shares will not be
treated as mid-term capital gain if the shares have been held for
more than 12 months but not more than 18 months, as adjusted net
capital gains if the shares have been held for more than 18
months. Otherwise the gain on the sale, exchange or redemption
of fund shares will be treated as short-term capital gain. In
general, any loss realized upon a taxable disposition of shares
will be treated as long-term loss if the shares have been held
for more than 12 months, and otherwise as short-term capital
gains. However, if a shareholder sells shares at a loss within
six months of purchase, any loss will be disallowed for Federal
income tax purposes to the extent of any exempt-interest
dividends received on such shares. In addition, any loss (not
already disallowed as provided in the preceding sentence)
realized upon a taxable disposition of shares held for six months
or less will be treated as long-term, rather than short-term, to
the extent of any long-term capital gain distributions received
by the shareholder with respect to the shares. All or a portion
of any loss realized upon a taxable disposition of fund shares
will be disallowed if other shares of the same fund are purchased
within 30 days before or after the disposition. In such a case,
the basis of the newly purchased shares will be adjusted to
reflect the disallowed loss.
SHARES PURCHASED THROUGH TAX-QUALIFIED PLANS. Special tax rules
apply to investments though defined contribution plans and other
tax-qualified plans. Shareholders should consult their tax
adviser to determine the suitability of shares of a fund as an
investment through such plans and the precise effect of an
investment on their particular tax situation.
BACKUP WITHHOLDING. The fund generally is required to withhold
and remit to the U.S. Treasury 31% of the taxable dividends and
other distributions paid to any individual shareholder who fails
to furnish the fund with a correct taxpayer identification number
(TIN), who has under-reported dividends or interest income, or
who fails to certify to the fund that he or she is not subject to
such withholding. Shareholders who fail to furnish their correct
TIN are subject to a penalty of $50 for each such failure unless
the failure is due to reasonable cause and not wilful neglect.
An individual's taxpayer identification number is his or her
social security number.
MANAGEMENT
TRUSTEES NAME (AGE)
*+GEORGE PUTNAM (71), Chairman and President. Chairman and
Director of Putnam Management and Putnam Mutual Funds. Director,
Freeport-McMoRan, Inc., Freeport Copper and Gold, Inc., McMoRan
Oil and Gas, Inc., General Mills, Inc., Houghton Mifflin Company
and Marsh & McLennan Companies, Inc.
+WILLIAM F. POUNDS (69), Vice Chairman. Professor of Management,
Alfred P. Sloan School of Management, Massachusetts Institute of
Technology. Director of IDEXX Laboratories, Inc., Perseptive
Biosystems, Inc., Management Sciences for Health, Inc., and Sun
Company, Inc.
JAMESON A. BAXTER (54), Trustee. President, Baxter Associates,
Inc. (a management and financial consultant). Director of
Avondale Federal Savings Bank, ASHTA Chemicals, Inc. and Banta
Corporation (printing and digital imaging). Chairman Emeritus of
the Board of Trustees, Mount Holyoke College.
+HANS H. ESTIN (69), Trustee. Chartered Financial Analyst and
Vice Chairman, North American Management Corp. (a registered
investment adviser).
JOHN A. HILL (55), Trustee. Chairman and Managing Director,
First Reserve Corporation (a registered investment adviser
investing in companies in the world-wide energy industry on
behalf of institutional investors). Director of Maverick Tube
Corporation, PetroCorp Incorporated, Snyder Oil Corporation,
TransMontaigne Oil Company, Weatherford Enterra, Inc. (an oil
field service company) and various private companies owned by
First Reserve Corporation, such as James River Coal and Anker
Coal Corporation, and various First Reserve Funds, such as
American Gas & Oil Investors, Ltd., AmGO II, L.P., First Reserve
Secured Energy Assets Fund, L.P., First Reserve Fund V., L.P.,
First Reserve Fund VI, L.P., and First Reserve Fund VII, L.P.
RONALD J. JACKSON (53), Trustee. Former Chairman, President and
Chief Executive Officer of Fisher-Price, Inc., Director of Safety
1st, Inc., Trustee of Salem Hospital and the Peabody Essex
Museum.
PAUL L. JOSKOW (50), Trustee. Professor of Economics and
Management, Massachusetts Institute of Technology. Director, New
England Electric System, State Farm Indemnity Company and
Whitehead Institute for Biomedical Research.
ELIZABETH T. KENNAN (59), Trustee. President Emeritus and
Professor, Mount Holyoke College. Director, the Kentucky Home
Life Insurance Companies, NYNEX Corporation, Northeast Utilities
and Talbots.
*LAWRENCE J. LASSER (54), Trustee and Vice President. President,
Chief Executive Officer and Director of Putnam Investments, Inc.
and Putnam Investment Management, Inc. Director of Marsh &
McLennan Companies, Inc. and the United Way of Massachusetts Bay.
JOHN E. MULLIN, III (56), Trustee. Chairman and CEO of Ridgeway
Farm, Director of ACX Technologies, Inc., Alex. Brown Realty,
Inc., The Liberty Corporation and The Ryland Group, Inc.
+ROBERT E. PATTERSON (52), Trustee. Executive Vice President and
Director of Acquisitions, Cabot Partners Limited Partnership (a
registered investment adviser) and Massachusetts Industrial
Finance Agency.
*DONALD S. PERKINS (70), Trustee. Director of various
corporations, including AON Corp., Cummins Engine Company, Inc.,
Current Assets L.L.C., LaSalle Street Fund, Inc., LaSalle U.S.
Realty Income and Growth Fund, Inc., Lucent Technologies Inc.,
Ryerson Tull, Inc. (a steel service corporation) Springs
Industries, Inc. (a textile manufacturer), and Time Warner Inc.
*#GEORGE PUTNAM III (46), Trustee. President, New Generation
Research, Inc. (publisher of bankruptcy information) and New
Generation Advisers, Inc. (a registered investment adviser).
Director, Massachusetts Audubon Society and The Boston Family
Office, L.L.C. (a registered investment adviser).
W. THOMAS STEPHENS (55), Trustee. President and Chief Executive
Officer of MacMillan Bloedel Ltd. Director, Mail-Well Inc. (a
supplier of envelopes and high-quality printing services), Qwest
Communications (a fiber optics manufacturer), The Eagle Picher
Trust (a trust etablished to fund the settlement of asbestos-
rerlated claims) and New Century Energies (a public utlity
company).
*A.J.C. SMITH (63), Trustee. Chairman and Chief Executive
Officer, Marsh & McLennan Companies, Inc. Director, Trident
Corp.
W. NICHOLAS THORNDIKE (64), Trustee. Director of various
corporations and charitable organizations, including Courier
Corporation, Data General Corporation, Bradley Real Estate, Inc.,
and Providence Journal Co. and Courier Corporation.
OFFICERS NAME (AGE)
CHARLES E. PORTER (59), Executive Vice President. Managing
Director of Putnam Investments, Inc. and Putnam Management.
PATRICIA C. FLAHERTY (50), Senior Vice President. Senior Vice
President of Putnam Investments, Inc. and Putnam Management.
WILLIAM N. SHIEBLER (55), Vice President. Director and Senior
Managing Director of Putnam Investments, Inc. President and
Director of Putnam Mutual Funds.
GORDON H. SILVER (50), Vice President. Director and Senior
Managing Director of Putnam Investments, Inc. and Putnam
Management.
JOHN R. VERANI (58), Vice President. Senior Vice President of
Putnam Investments, Inc. and Putnam Management.
PAUL M. O'NEIL (44), Vice President. Vice President of Putnam
Investments, Inc. and Putnam Management.
JOHN D. HUGHES (62), Senior Vice President and Treasurer.
BEVERLY MARCUS (53), Clerk and Assistant Treasurer.
*Trustees who are or may be deemed to be "interested persons" (as
defined in the Investment Company Act of 1940) of the fund,
Putnam Management or Putnam Mutual Funds.
+Members of the Executive Committee of the Trustees. The
Executive Committee meets between regular meetings of the
Trustees as may be required to review investment matters and
other affairs of the fund and may exercise all of the powers of
the Trustees.
#George Putnam, III is the son of George Putnam.
-----------------
Certain other officers of Putnam Management are officers of the
fund. SEE "ADDITIONAL OFFICERS" IN PART I OF THIS SAI. The
mailing address of each of the officers and Trustees is One Post
Office Square, Boston, Massachusetts 02109.
Except as stated below, the principal occupations of the officers
and Trustees for the last five years have been with the employers
as shown above, although in some cases they have held different
positions with such employers. Prior to 1993, Mr. Jackson was
Chairman of the Board, President and Chief Executive Officer of
Fisher-Price, Inc. Prior to 1996, Mr. Stephens was Chairman of
the Board of Directors, President and Chief Executive Officer of
Johns Manville Corporation.
Each Trustee of the fund receives an annual fee and an additional
fee for each Trustees' 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 and for special services rendered
in that connection. All of the Trustees are Trustees of all the
Putnam funds and each receives fees for his or her services. FOR
DETAILS OF TRUSTEES' FEES PAID BY THE FUND AND INFORMATION
CONCERNING RETIREMENT GUIDELINES FOR THE TRUSTEES, SEE "CHARGES
AND EXPENSES" IN PART I OF THIS SAI.
The Agreement and Declaration of Trust of the fund provides that
the fund will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the
fund, except if it is determined in the manner specified in the
Agreement and Declaration of Trust that they have not acted in
good faith in the reasonable belief that their actions were in
the best interests of the fund or that such indemnification would
relieve any officer or Trustee of any liability to the fund or
its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties. The
fund, at its expense, provides liability insurance for the
benefit of its Trustees and officers.
PUTNAM MANAGEMENT AND ITS AFFILIATES
Putnam Management is one of America's oldest and largest money
management firms. Putnam Management's staff of experienced
portfolio managers and research analysts selects securities and
constantly supervises the fund's portfolio. By pooling an
investor's money with that of other investors, a greater variety
of securities can be purchased than would be the case
individually; the resulting diversification helps reduce
investment risk. Putnam Management has been managing mutual funds
since 1937. Today, the firm serves as the investment manager for
the funds in the Putnam Family, with nearly $160 billion in
assets in over 8 million shareholder accounts at June 30, 1997.
An affiliate, The Putnam Advisory Company, Inc., manages domestic
and foreign institutional accounts and mutual funds, including
the accounts of many Fortune 500 companies. Another affiliate,
Putnam Fiduciary Trust Company, provides investment advice to
institutional clients under its banking and fiduciary powers. At
June 30, 1997, Putnam Management and its affiliates managed
nearly $207 billion in assets, including over $18 billion in tax-
exempt securities and over $51 billion in retirement plan assets.
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are subsidiaries of Putnam Investments, Inc., a holding
company which is in turn wholly owned by Marsh & McLennan
Companies, Inc., a publicly-owned holding company whose principal
operating subsidiaries are international insurance and
reinsurance brokers, investment managers and management
consultants.
Trustees and officers of the fund who are also officers of Putnam
Management or its affiliates or who are stockholders of Marsh &
McLennan Companies, Inc. will benefit from the advisory fees,
sales commissions, distribution fees, custodian fees and transfer
agency fees paid or allowed by the fund.
THE MANAGEMENT CONTRACT
Under a Management Contract between the fund and Putnam
Management, subject to such policies as the Trustees may
determine, Putnam Management, at its expense, furnishes
continuously an investment program for the fund and makes
investment decisions on behalf of the fund. Subject to the
control of the Trustees, Putnam Management also manages,
supervises and conducts the other affairs and business of the
fund, furnishes office space and equipment, provides bookkeeping
and clerical services (including determination of the fund's net
asset value, but excluding shareholder accounting services) and
places all orders for the purchase and sale of the fund's
portfolio securities. Putnam Management may place fund portfolio
transactions with broker-dealers which furnish Putnam Management,
without cost to it, certain research, statistical and quotation
services of value to Putnam Management and its affiliates in
advising the fund and other clients. In so doing, Putnam
Management may cause the fund to pay greater brokerage
commissions than it might otherwise pay.
FOR DETAILS OF PUTNAM MANAGEMENT'S COMPENSATION UNDER THE
MANAGEMENT CONTRACT, SEE "CHARGES AND EXPENSES" IN PART I OF THIS
SAI. Putnam Management's compensation under the Management
Contract may be reduced in any year if the fund's expenses exceed
the limits on investment company expenses imposed by any statute
or regulatory authority of any jurisdiction in which shares of
the fund are qualified for offer or sale. The term "expenses" is
defined in the statutes or regulations of such jurisdictions, and
generally excludes brokerage commissions, taxes, interest,
extraordinary expenses and, if the fund has a distribution plan,
payments made under such plan.
Under the Management Contract, Putnam Management may reduce its
compensation to the extent that the fund's expenses exceed such
lower expense limitation as Putnam Management may, by notice to
the fund, declare to be effective. The expenses subject to this
limitation are exclusive of brokerage commissions, interest,
taxes, deferred organizational and extraordinary expenses and, if
the fund has a distribution plan, payments required under such
plan. For the purpose of determining any such limitation on
Putnam Management's compensation, expenses of the fund shall not
reflect the application of commissions or cash management credits
that may reduce designated fund expenses. THE TERMS OF ANY
EXPENSE LIMITATION FROM TIME TO TIME IN EFFECT ARE DESCRIBED IN
THE PROSPECTUS AND/OR PART I OF THIS SAI.
In addition to the fee paid to Putnam Management, the fund
reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their assistants who
provide certain administrative services for the fund and the
other Putnam funds, each of which bears an allocated share of the
foregoing costs. The aggregate amount of all such payments and
reimbursements is determined annually by the Trustees.
THE AMOUNT OF THIS REIMBURSEMENT FOR THE FUND'S MOST RECENT
FISCAL YEAR IS INCLUDED IN "CHARGES AND EXPENSES" IN PART I OF
THIS SAI. Putnam Management pays all other salaries of officers
of the fund. The fund pays all expenses not assumed by Putnam
Management including, without limitation, auditing, legal,
custodial, investor servicing and shareholder reporting expenses.
The fund pays the cost of typesetting for its prospectuses and
the cost of printing and mailing any prospectuses sent to its
shareholders. Putnam Mutual Funds pays the cost of printing and
distributing all other prospectuses.
The Management Contract provides that Putnam Management shall not
be subject to any liability to the fund or to any shareholder of
the fund for any act or omission in the course of or connected
with rendering services to the fund in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
its duties on the part of Putnam Management.
The Management Contract may be terminated without penalty by vote
of the Trustees or the shareholders of the fund, or by Putnam
Management, on 30 days' written notice. It may be amended only
by a vote of the shareholders of the fund. The Management
Contract also terminates without payment of any penalty in the
event of its assignment. The Management Contract provides that
it will continue in effect only so long as such continuance is
approved at least annually by vote of either the Trustees or the
shareholders, and, in either case, by a majority of the Trustees
who are not "interested persons" of Putnam Management or the
fund. In each of the foregoing cases, the vote of the
shareholders is the affirmative vote of a "majority of the
outstanding voting securities" as defined in the Investment
Company Act of 1940.
PERSONAL INVESTMENTS BY EMPLOYEES OF PUTNAM MANAGEMENT
Employees of Putnam Management are permitted to engage in
personal securities transactions, subject to requirements and
restrictions set forth in Putnam Management's Code of Ethics.
The Code of Ethics contains provisions and requirements designed
to identify and address certain conflicts of interest between
personal investment activities and the interests of investment
advisory clients such as the funds. Among other things, the Code
of Ethics, consistent with standards recommended by the
Investment Company Institute's Advisory Group on Personal
Investing, prohibits certain types of transactions absent prior
approval, imposes time periods during which personal transactions
may not be made in certain securities, and requires the
submission of duplicate broker confirmations and quarterly
reporting of securities transactions. Additional restrictions
apply to portfolio managers, traders, research analysts and
others involved in the investment advisory process. Exceptions
to these and other provisions of the Code of Ethics may be
granted in particular circumstances after review by appropriate
personnel.
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS. Investment decisions for the fund and for
the other investment advisory clients of Putnam Management and
its affiliates are made with a view to achieving their respective
investment objectives. Investment decisions are the product of
many factors in addition to basic suitability for the particular
client involved. Thus, a particular security may be bought or
sold for certain clients even though it could have been bought or
sold for other clients at the same time. Likewise, a particular
security may be bought for one or more clients when one or more
other clients are selling the security. In some instances, one
client may sell a particular security to another client. It also
sometimes happens that two or more clients simultaneously
purchase or sell the same security, in which event each day's
transactions in such security are, insofar as possible, averaged
as to price and allocated between such clients in a manner which
in Putnam Management's opinion is equitable to each and in
accordance with the amount being purchased or sold by each.
There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on
other clients.
BROKERAGE AND RESEARCH SERVICES. Transactions on U.S. stock
exchanges, commodities markets and futures markets and other
agency transactions involve the payment by the fund of negotiated
brokerage commissions. Such commissions vary among different
brokers. A particular broker may charge different commissions
according to such factors as the difficulty and size of the
transaction. Transactions in foreign investments often involve
the payment of fixed brokerage commissions, which may be higher
than those in the United States. There is generally no stated
commission in the case of securities traded in the
over-the-counter markets, but the price paid by the fund usually
includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the fund includes a
disclosed, fixed commission or discount retained by the
underwriter or dealer. It is anticipated that most purchases and
sales of securities by funds investing primarily in tax-exempt
securities and certain other fixed-income securities will be with
the issuer or with underwriters of or dealers in those
securities, acting as principal. Accordingly, those funds would
not ordinarily pay significant brokerage commissions with respect
to securities transactions. SEE "CHARGES AND EXPENSES" IN PART I
OF THIS SAI FOR INFORMATION CONCERNING COMMISSIONS PAID BY THE
FUND.
It has for many years been a common practice in the investment
advisory business for advisers of investment companies and other
institutional investors to receive brokerage and research
services (as defined in the Securities Exchange Act of 1934, as
amended (the "1934 Act")) from broker-dealers that execute
portfolio transactions for the clients of such advisers and from
third parties with which such broker-dealers have arrangements.
Consistent with this practice, Putnam Management receives
brokerage and research services and other similar services from
many broker-dealers with which Putnam Management places the
fund's portfolio transactions and from third parties with which
these broker-dealers have arrangements. These services include
such matters as general economic and market reviews, industry and
company reviews, evaluations of investments, recommendations as
to the purchase and sale of investments, newspapers, magazines,
pricing services, quotation services, news services and personal
computers utilized by Putnam Management's managers and analysts.
Where the services referred to above are not used exclusively by
Putnam Management for research purposes, Putnam Management, based
upon its own allocations of expected use, bears that portion of
the cost of these services which directly relates to their
non-research use. Some of these services are of value to Putnam
Management and its affiliates in advising various of their
clients (including the fund), although not all of these services
are necessarily useful and of value in managing the fund. The
management fee paid by the fund is not reduced because Putnam
Management and its affiliates receive these services even though
Putnam Management might otherwise be required to purchase some of
these services for cash.
Putnam Management places all orders for the purchase and sale of
portfolio investments for the fund and buys and sells investments
for the fund through a substantial number of brokers and dealers.
In so doing, Putnam Management uses its best efforts to obtain
for the fund the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage
commissions as described below. In seeking the most favorable
price and execution, Putnam Management, having in mind the fund's
best interests, considers all factors it deems relevant,
including, by way of illustration, price, the size of the
transaction, the nature of the market for the security or other
investment, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the
reputation, experience and financial stability of the
broker-dealer involved and the quality of service rendered by the
broker-dealer in other transactions.
As permitted by Section 28(e) of the 1934 Act, and by the
Management Contract, Putnam Management may cause the fund to pay
a broker-dealer which provides "brokerage and research services"
(as defined in the 1934 Act) to Putnam Management an amount of
disclosed commission for effecting securities transactions on
stock exchanges and other transactions for the fund on an agency
basis in excess of the commission which another broker-dealer
would have charged for effecting that transaction. Putnam
Management's authority to cause the fund to pay any such greater
commissions is also subject to such policies as the Trustees may
adopt from time to time. Putnam Management does not currently
intend to cause the fund to make such payments. It is the
position of the staff of the Securities and Exchange Commission
that Section 28(e) does not apply to the payment of such greater
commissions in "principal" transactions. Accordingly Putnam
Management will use its best effort to obtain the most favorable
price and execution available with respect to such transactions,
as described above.
The Management Contract provides that commissions, fees,
brokerage or similar payments received by Putnam Management or an
affiliate in connection with the purchase and sale of portfolio
investments of the fund, less any direct expenses approved by the
Trustees, shall be recaptured by the fund through a reduction of
the fee payable by the fund under the Management Contract.
Putnam Management seeks to recapture for the fund soliciting
dealer fees on the tender of the fund's portfolio securities in
tender or exchange offers. Any such fees which may be recaptured
are likely to be minor in amount.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. and subject to seeking the most
favorable price and execution available and such other policies
as the Trustees may determine, Putnam Management may consider
sales of shares of the fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of
broker-dealers to execute portfolio transactions for the fund.
PRINCIPAL UNDERWRITER
Putnam Mutual Funds is the principal underwriter of shares of the
fund and the other continuously offered Putnam funds. Putnam
Mutual Funds is not obligated to sell any specific amount of
shares of the fund and will purchase shares for resale only
against orders for shares. SEE "CHARGES AND EXPENSES" IN PART I
OF THIS SAI FOR INFORMATION ON SALES CHARGES AND OTHER PAYMENTS
RECEIVED BY PUTNAM MUTUAL FUNDS.
INVESTOR SERVICING AGENT AND CUSTODIAN
Putnam Investor Services, a division of Putnam Fiduciary Trust
Company ("PFTC"), is the fund's investor servicing agent
(transfer, plan and dividend disbursing agent), for which it
receives fees which are paid monthly by the fund as an expense of
all its shareholders. The fee paid to Putnam Investor Services
is determined on the basis of the number of shareholder accounts,
the number of transactions and the assets of the fund. Putnam
Investor Services won the DALBAR Quality Tested Service Seal in
1990, 1991, 1992, 1993, 1994 and 1995. Over 10,000 tests of 38
separate shareholder service components demonstrated that Putnam
Investor Services tied for highest scores, with two other mutual
fund companies, in all categories.
PFTC is the custodian of the fund's assets. In carrying out its
duties under its custodian contract, PFTC may employ one or more
subcustodians whose responsibilities include safeguarding and
controlling the fund's cash and securities, handling the receipt
and delivery of securities and collecting interest and dividends
on the fund's investments. PFTC and any subcustodians employed
by it have a lien on the securities of the fund (to the extent
permitted by the fund's investment restrictions) to secure
charges and any advances made by such subcustodians at the end of
any day for the purpose of paying for securities purchased by the
fund. The fund expects that such advances will exist only in
unusual circumstances. Neither PFTC nor any subcustodian
determines the investment policies of the fund or decides which
securities the fund will buy or sell. PFTC pays the fees and
other charges of any subcustodians employed by it. The fund may
from time to time pay custodial expenses in full or in part
through the placement by Putnam Management of the fund's
portfolio transactions with the subcustodians or with a third-
party broker having an agreement with the subcustodians. The
fund pays PFTC an annual fee based on the fund's assets,
securities transactions and securities holdings and reimburses
PFTC for certain out-of-pocket expenses incurred by it or any
subcustodian employed by it in performing custodial services.
SEE "CHARGES AND EXPENSES" IN PART I OF THIS SAI FOR INFORMATION
ON FEES AND REIMBURSEMENTS FOR INVESTOR SERVICING AND CUSTODY
RECEIVED BY PFTC. THE FEES MAY BE REDUCED BY CREDITS ALLOWED BY
PFTC.
DETERMINATION OF NET ASSET VALUE
The fund determines the net asset value per share of each class
of shares once each day the New York Stock Exchange (the
"Exchange") is open. Currently, the Exchange is closed
Saturdays, Sundays and the following holidays: New Year's Day,
Rev. Dr. Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, the Fourth of July, Labor Day, Thanksgiving
and Christmas. The fund determines net asset value as of the
close of regular trading on the Exchange, currently 4:00 p.m.
However, equity options held by the fund are priced as of the
close of trading at 4:10 p.m., and futures contracts on U.S.
government and other fixed-income securities and index options
held by the fund are priced as of their close of trading at 4:15
p.m.
Securities for which market quotations are readily available are
valued at prices which, in the opinion of Putnam Management, most
nearly represent the market values of such securities.
Currently, such prices are determined using the last reported
sale price or, if no sales are reported (as in the case of some
securities traded over-the-counter), the last reported bid price,
except that certain securities are valued at the mean between the
last reported bid and asked prices. Short-term investments
having remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value. All other
securities and assets are valued at their fair value following
procedures approved by the Trustees. Liabilities are deducted
from the total, and the resulting amount is divided by the number
of shares of the class outstanding.
Reliable market quotations are not considered to be readily
available for long-term corporate bonds and notes, certain
preferred stocks, tax-exempt securities, and certain foreign
securities. These investments are valued at fair value on the
basis of valuations furnished by pricing services, which
determine valuations for normal, institutional-size trading units
of such securities using methods based on market transactions for
comparable securities and various relationships between
securities which are generally recognized by institutional
traders.
If any securities held by the fund are restricted as to resale,
Putnam Management determines their fair value following
procedures approved by the Trustees. The fair value of such
securities is generally determined as the amount which the fund
could reasonably expect to realize from an orderly disposition of
such securities over a reasonable period of time. The valuation
procedures applied in any specific instance are likely to vary
from case to case. However, consideration is generally given to
the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of
the restrictions on disposition of the securities (including any
registration expenses that might be borne by the fund in
connection with such disposition). In addition, specific factors
are also generally considered, such as the cost of the
investment, the market value of any unrestricted securities of
the same class, the size of the holding, the prices of any recent
transactions or offers with respect to such securities and any
available analysts' reports regarding the issuer.
Generally, trading in certain securities (such as foreign
securities) is substantially completed each day at various times
prior to the close of the Exchange. The values of these
securities used in determining the net asset value of the fund's
shares are computed as of such times. Also, because of the
amount of time required to collect and process trading
information as to large numbers of securities issues, the values
of certain securities (such as convertible bonds, U.S. government
securities, and tax-exempt securities) are determined based on
market quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange.
Occasionally, events affecting the value of such securities may
occur between such times and the close of the Exchange which will
not be reflected in the computation of the fund's net asset
value. If events materially affecting the value of such
securities occur during such period, then these securities will
be valued at their fair value following procedures approved by
the Trustees.
Money market funds generally value their portfolio securities at
amortized cost according to Rule 2a-7 under the Investment
Company Act of 1940.
HOW TO BUY SHARES
GENERAL
The prospectus contains a general description of how investors
may buy shares of the fund and states whether the fund offers
more than one class of shares. This SAI contains additional
information which may be of interest to investors.
Class A shares and class M shares are generally sold with a sales
charge payable at the time of purchase (except for class A shares
and class M shares of money market funds). As used in this SAI
and unless the context requires otherwise, the term "class A
shares" includes shares of funds that offer only one class of
shares. The prospectus contains a table of applicable sales
charges. For information about how to purchase class A or class
M shares of a Putnam fund at net asset value through an employer-
sponsored retirement plan, please consult your employer. Certain
purchases of class A shares and class M shares may be exempt from
a sales charge or, in the case of class A shares, may be subject
to a contingent deferred sales charge ("CDSC"). See "General--
Sales without sales charges or contingent deferred sales
charges," "Additional Information About Class A and Class M
shares," and "Contingent Deferred Sales Charges--Class A shares."
Class B shares and class C shares are sold subject to a CDSC
payable upon redemption within a specified period after purchase.
The prospectus contains a table of applicable CDSCs.
Class B shares will automatically convert into class A shares at
the end of the month eight years after the purchase date. Class
B shares acquired by exchanging class B shares of another Putnam
fund will convert into class A shares based on the time of the
initial purchase. Class B shares acquired through reinvestment
of distributions will convert into Class A shares based on the
date of the initial purchase to which such shares relate. For
this purpose, class B shares acquired through reinvestment of
distributions will be attributed to particular purchases of class
B shares in accordance with such procedures as the Trustees may
determine from time to time. The conversion of class B shares to
class A shares is subject to the condition that such conversions
will not constitute taxable events for Federal tax purposes.
Class Y shares, which are not subject to sales charges or a CDSC,
are available only to certain defined contribution plans. See
the prospectus that offers class Y shares for more information.
Certain purchase programs described below are not available to
defined contribution plans. Consult your employer for
information on how to purchase shares through your plan.
The fund is currently making a continuous offering of its shares.
The fund receives the entire net asset value of shares sold. The
fund will accept unconditional orders for shares to be executed
at the public offering price based on the net asset value per
share next determined after the order is placed. In the case of
class A shares and class M shares, the public offering price is
the net asset value plus the applicable sales charge, if any. No
sales charge is included in the public offering price of other
classes of shares. In the case of orders for purchase of shares
placed through dealers, the public offering price will be based
on the net asset value determined on the day the order is placed,
but only if the dealer receives the order before the close of
regular trading on the Exchange. If the dealer receives the
order after the close of the Exchange, the price will be based on
the net asset value next determined. If funds for the purchase
of shares are sent directly to Putnam Investor Services, they
will be invested at the public offering price based on the net
asset value next determined after receipt. Payment for shares of
the fund must be in U.S. dollars; if made by check, the check
must be drawn on a U.S. bank.
Initial and subsequent purchases must satisfy the minimums stated
in the prospectus, except that (i) individual investments under
certain employee benefit plans or Tax Qualified Retirement Plans
may be lower, (ii) persons who are already shareholders may make
additional purchases of $50 or more by sending funds directly to
Putnam Investor Services (see "Your investing account" below),
and (iii) for investors participating in systematic investment
plans and military allotment plans, the initial and subsequent
purchases must be $25 or more. Information about these plans is
available from investment dealers or from Putnam Mutual Funds.
As a convenience to investors, shares may be purchased through a
systematic investment plan. Pre-authorized monthly bank drafts
for a fixed amount (at least $25) are used to purchase fund
shares at the applicable public offering price next determined
after Putnam Mutual Funds receives the proceeds from the draft.
A shareholder may choose any day of the month and, if a given
month (for example, February) does not contain that particular
date, or if the date falls on a weekend or holiday, the draft
will be processed on the next business day. Further information
and application forms are available from investment dealers or
from Putnam Mutual Funds.
Except for funds that declare a distribution daily, distributions
to be reinvested are reinvested without a sales charge in shares
of the same class as of the ex-dividend date using the net asset
value determined on that date, and are credited to a
shareholder's account on the payment date. Dividends for Putnam
money market funds are credited to a shareholder's account on the
payment date. Distributions for all other funds that declare a
distribution daily are reinvested without a sales charge as of
the last day of the period for which distributions are paid using
the net asset value determined on that date, and are credited to
a shareholder's account on the payment date.
PAYMENT IN SECURITIES. In addition to cash, the fund may accept
securities as payment for fund shares at the applicable net asset
value. Generally, the fund will only consider accepting
securities to increase its holdings in a portfolio security, or
if Putnam Management determines that the offered securities are a
suitable investment for the fund and in a sufficient amount for
efficient management.
While no minimum has been established, it is expected that the
fund would not accept securities with a value of less than
$100,000 per issue as payment for shares. The fund may reject in
whole or in part any or all offers to pay for purchases of fund
shares with securities, may require partial payment in cash for
such purchases to provide funds for applicable sales charges, and
may discontinue accepting securities as payment for fund shares
at any time without notice. The fund will value accepted
securities in the manner described in the section "Determination
of Net Asset Value" for valuing shares of the fund. The fund
will only accept securities which are delivered in proper form.
The fund will not accept options or restricted securities as
payment for shares. The acceptance of securities by certain
funds in exchange for fund shares is subject to additional
requirements. For federal income tax purposes, a purchase of
fund shares with securities will be treated as a sale or exchange
of such securities on which the investor will realize a taxable
gain or loss. The processing of a purchase of fund shares with
securities involves certain delays while the fund considers the
suitability of such securities and while other requirements are
satisfied. For information regarding procedures for payment in
securities, contact Putnam Mutual Funds. Investors should not
send securities to the fund except when authorized to do so and
in accordance with specific instructions received from Putnam
Mutual Funds.
SALES WITHOUT SALES CHARGES OR CONTINGENT DEFERRED SALES CHARGES.
The fund may sell shares without a sales charge or CDSC to:
(i) current and retired Trustees of the fund; officers of
the fund; directors and current and retired U.S. full-time
employees of Putnam Management, Putnam Mutual Funds, their
parent corporations and certain corporate affiliates;
family members of and employee benefit plans for the
foregoing; and partnerships, trusts or other entities in
which any of the foregoing has a substantial interest;
(ii) employer-sponsored retirement plans, for the
repurchase of shares in connection with repayment of plan
loans made to plan participants (if the sum loaned was
obtained by redeeming shares of a Putnam fund sold with a
sales charge) (not offered by tax-exempt funds);
(iii) clients of administrators of tax-qualified employer-
sponsored retirement plans which have entered into
agreements with Putnam Mutual Funds (not offered by
tax-exempt funds);
(iv) registered representatives and other employees of
broker-dealers having sales agreements with Putnam Mutual
Funds; employees of financial institutions having sales
agreements with Putnam Mutual Funds or otherwise having an
arrangement with any such broker-dealer or financial
institution with respect to sales of fund shares; and
their spouses and children under age 21 (Putnam Mutual
Funds is regarded as the dealer of record for all such
accounts);
(v) investors meeting certain requirements who sold shares
of certain Putnam closed-end funds pursuant to a tender
offer by such closed-end fund;
(vi) a trust department of any financial institution
purchasing shares of the fund in its capacity as trustee
of any trust, if the value of the shares of the fund and
other Putnam funds purchased or held by all such trusts
exceeds $1 million in the aggregate; and
(vii) "wrap accounts" maintained for clients of broker-
dealers, financial institutions or financial planners who
have entered into agreements with Putnam Mutual Funds with
respect to such accounts.
In addition, the fund may issue its shares at net asset value
without an initial sales charge or a CDSC in connection with the
acquisition of substantially all of the securities owned by other
investment companies or personal holding companies, and the CDSC
will be waived on redemptions of shares arising out of death or
post-purchase disability or in connection with certain
withdrawals from IRA or other retirement plans. Up to 12% of the
value of shares subject to a systematic withdrawal plan may also
be redeemed each year without a CDSC. The fund may sell class M
shares at net asset value to members of qualified groups. See
"Group purchases of class A and class M shares" below. Class A
shares are available without an initial sales charge to eligible
employer-sponsored retirement plans, as described below.
PAYMENTS TO DEALERS. Putnam Mutual Funds may, at its expense,
pay concessions in addition to the payments disclosed in the
prospectus to dealers which satisfy certain criteria established
from time to time by Putnam Mutual Funds relating to increasing
net sales of shares of the Putnam funds over prior periods, and
certain other factors.
ADDITIONAL INFORMATION ABOUT CLASS A AND CLASS M SHARES
The underwriter's commission is the sales charge shown in the
prospectus less any applicable dealer discount. Putnam Mutual
Funds will give dealers ten days' notice of any changes in the
dealer discount. Putnam Mutual Funds retains the entire sales
charge on any retail sales made by it.
Putnam Mutual Funds offers several plans by which an investor may
obtain reduced sales charges on purchases of class A shares and
class M shares. The variations in sales charges reflect the
varying efforts required to sell shares to separate categories of
purchasers. These plans may be altered or discontinued at any
time.
COMBINED PURCHASE PRIVILEGE. The following persons may qualify
for the sales charge reductions or eliminations shown in the
prospectus by combining into a single transaction the purchase of
class A shares or class M shares with other purchases of any
class of shares:
(i) an individual, or a "company" as defined in Section
2(a)(8) of the Investment Company Act of 1940 (which
includes corporations which are corporate affiliates of
each other);
(ii) an individual, his or her spouse and their children
under twenty-one, purchasing for his, her or their own
account;
(iii) a trustee or other fiduciary purchasing for a single
trust estate or single fiduciary account (including a
pension, profit-sharing, or other employee benefit trust
created pursuant to a plan qualified under Section 401 of
the Internal Revenue Code of 1986, as amended (the
"Code"));
(iv) tax-exempt organizations qualifying under Section
501(c)(3) of the Internal Revenue Code (not including tax-
exempt organizations qualifying under Section 403(b)(7) (a
"403(b) plan") of the Code; and
(v) employee benefit plans of a single employer or of
affiliated employers, other than 403(b) plans.
A combined purchase currently may also include shares of any
class of other continuously offered Putnam funds (other than
money market funds) purchased at the same time through a single
investment dealer, if the dealer places the order for such shares
directly with Putnam Mutual Funds.
CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). A
purchaser of class A shares or class M shares may qualify for a
cumulative quantity discount by combining a current purchase (or
combined purchases as described above) with certain other shares
of any class of Putnam funds already owned. The applicable sales
charge is based on the total of:
(i) the investor's current purchase; and
(ii) the maximum public offering price (at the close of
business on the previous day) of:
(a) all shares held by the investor in all of the
Putnam funds (except money market funds); and
(b) any shares of money market funds acquired by
exchange from other Putnam funds; and
(iii) the maximum public offering price of all shares
described in paragraph (ii) owned by another shareholder
eligible to participate with the investor in a "combined
purchase" (see above).
To qualify for the combined purchase privilege or to obtain the
cumulative quantity discount on a purchase through an investment
dealer, when each purchase is made the investor or dealer must
provide Putnam Mutual Funds with sufficient information to verify
that the purchase qualifies for the privilege or discount. The
shareholder must furnish this information to Putnam Investor
Services when making direct cash investments.
STATEMENT OF INTENTION. Investors may also obtain the reduced
sales charges for class A shares or class M shares shown in the
prospectus for investments of a particular amount by means of a
written Statement of Intention, which expresses the investor's
intention to invest that amount (including certain "credits," as
described below) within a period of 13 months in shares of any
class of the fund or any other continuously offered Putnam fund
(excluding money market funds). Each purchase of class A shares
or class M shares under a Statement of Intention will be made at
the public offering price applicable at the time of such purchase
to a single transaction of the total dollar amount indicated in
the Statement of Intention. A Statement of Intention may include
purchases of shares made not more than 90 days prior to the date
that an investor signs a Statement; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.
An investor may receive a credit toward the amount indicated in
the Statement of Intention equal to the maximum public offering
price as of the close of business on the previous day of all
shares he or she owns on the date of the Statement of Intention
which are eligible for purchase under a Statement of Intention
(plus any shares of money market funds acquired by exchange of
such eligible shares). Investors do not receive credit for
shares purchased by the reinvestment of distributions. Investors
qualifying for the "combined purchase privilege" (see above) may
purchase shares under a single Statement of Intention.
The Statement of Intention is not a binding obligation upon the
investor to purchase the full amount indicated. The minimum
initial investment under a Statement of Intention is 5% of such
amount, and must be invested immediately. Class A shares or
class M shares purchased with the first 5% of such amount will be
held in escrow to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount
indicated is not purchased. When the full amount indicated has
been purchased, the escrow will be released. If an investor
desires to redeem escrowed shares before the full amount has been
purchased, the shares will be released from escrow only if the
investor pays the sales charge that, without regard to the
Statement of Intention, would apply to the total investment made
to date.
To the extent that an investor purchases more than the dollar
amount indicated on the Statement of Intention and qualifies for
a further reduced sales charge, the sales charge will be adjusted
for the entire amount purchased at the end of the 13-month
period, upon recovery from the investor's dealer of its portion
of the sales charge adjustment. Once received from the dealer,
which may take a period of time or may never occur, the sales
charge adjustment will be used to purchase additional shares at
the then current offering price applicable to the actual amount
of the aggregate purchases. These additional shares will not be
considered as part of the total investment for the purpose of
determining the applicable sales charge pursuant to the Statement
of Intention. No sales charge adjustment will be made unless and
until the investor's dealer returns any excess commissions
previously received.
To the extent that an investor purchases less than the dollar
amount indicated on the Statement of Intention within the 13-
month period, the sales charge will be adjusted upward for the
entire amount purchased at the end of the 13-month period. This
adjustment will be made by redeeming shares from the account to
cover the additional sales charge, the proceeds of which will be
paid to the investor's dealer and Putnam Mutual Funds in
accordance with the prospectus. If the account exceeds an amount
that would otherwise qualify for a reduced sales charge, that
reduced sales charge will be applied.
Statements of Intention are not available for certain employee
benefit plans.
Statement of Intention forms may be obtained from Putnam Mutual
Funds or from investment dealers. Interested investors should
read the Statement of Intention carefully.
GROUP PURCHASES OF CLASS A AND CLASS M SHARES. Members of
qualified groups may purchase class A shares of the fund at a
group sales charge rate of 4.50% of the public offering price
(4.71% of the net amount invested). The dealer discount on such
sales is 3.75% of the offering price. Members of qualified
groups may also purchase class M shares at net asset value.
To receive the class A or class M group rate, group members must
purchase shares through a single investment dealer designated by
the group. The designated dealer must transmit each member's
initial purchase to Putnam Mutual Funds, together with payment
and completed application forms. After the initial purchase, a
member may send funds for the purchase of shares directly to
Putnam Investor Services. Purchases of shares are made at the
public offering price based on the net asset value next
determined after Putnam Mutual Funds or Putnam Investor Services
receives payment for the shares. The minimum investment
requirements described above apply to purchases by any group
member. Only shares purchased under the class A group discount
are included in calculating the purchased amount for the purposes
of these requirements.
Qualified groups include the employees of a corporation or a sole
proprietorship, members and employees of a partnership or
association, or other organized groups of persons (the members of
which may include other qualified groups) provided that: (i) the
group has at least 25 members of which, with respect to the class
A discount only, at least 10 members participate in the initial
purchase; (ii) the group has been in existence for at least six
months; (iii) the group has some purpose in addition to the
purchase of investment company shares at a reduced sales charge;
(iv) the group's sole organizational nexus or connection is not
that the members are credit card holders of a company, policy
holders of an insurance company, customers of a bank or
broker-dealer, clients of an investment adviser or security
holders of a company; (v) with respect to the class A discount
only, the group agrees to provide its designated investment
dealer access to the group's membership by means of written
communication or direct presentation to the membership at a
meeting on not less frequently than an annual basis; (vi) the
group or its investment dealer will provide annual certification
in form satisfactory to Putnam Investor Services that the group
then has at least 25 members and, with respect to the class A
discount only, that at least ten members participated in group
purchases during the immediately preceding 12 calendar months;
and (vii) the group or its investment dealer will provide
periodic certification in form satisfactory to Putnam Investor
Services as to the eligibility of the purchasing members of the
group.
Members of a qualified group include: (i) any group which meets
the requirements stated above and which is a constituent member
of a qualified group; (ii) any individual purchasing for his or
her own account who is carried on the records of the group or on
the records of any constituent member of the group as being a
good standing employee, partner, member or person of like status
of the group or constituent member; or (iii) any fiduciary
purchasing shares for the account of a member of a qualified
group or a member's beneficiary. For example, a qualified group
could consist of a trade association which would have as its
members individuals, sole proprietors, partnerships and
corporations. The members of the group would then consist of the
individuals, the sole proprietors and their employees, the
members of the partnerships and their employees, and the
corporations and their employees, as well as the trustees of
employee benefit trusts acquiring class A shares for the benefit
of any of the foregoing.
A member of a qualified group may, depending upon the value of
class A shares of the fund owned or proposed to be purchased by
the member, be entitled to purchase class A shares of the fund at
non-group sales charge rates shown in the prospectus which may be
lower than the group sales charge rate, if the member qualifies
as a person entitled to reduced non-group sales charges. Such a
group member will be entitled to purchase at the lower rate if,
at the time of purchase, the member or his or her investment
dealer furnishes sufficient information for Putnam Mutual Funds
or Putnam Investor Services to verify that the purchase qualifies
for the lower rate.
Interested groups should contact their investment dealer or
Putnam Mutual Funds. The fund reserves the right to revise the
terms of or to suspend or discontinue group sales at any time.
QUALIFIED BENEFIT PLANS; INDIVIDUAL ACCOUNT PLANS. The terms
"class A qualified benefit plan" and "class M qualified benefit
plan" mean any employer-sponsored plan or arrangement, whether or
not tax-qualified, for which Putnam Fiduciary Trust Company or
its affiliates provide recordkeeping or other services in
connection with the purchase of class A shares or class M shares,
respectively. The term "affiliated employer" means employers who
are affiliated with each other within the meaning of Section
2(a)(3)(C) of the Investment Company Act of 1940. The term
"individual account plan" means any employee benefit plan whereby
(i) class A shares are purchased through payroll deductions or
otherwise by a fiduciary or other person for the account of
participants who are employees (or their spouses) of an employer,
or of affiliated employers, and (ii) a separate investing account
is maintained in the name of such fiduciary or other person for
the account of each participant in the plan.
The table of sales charges in the prospectus applies to sales to
employer-sponsored retirement plans that are not class A
qualified benefit plans, except that the fund may sell class A
shares at net asset value to employee benefit plans, including
individual account plans, of employers or of affiliated employers
which have at least 750 employees to whom such plan is made
available, in connection with a payroll deduction system of plan
funding (or other system acceptable to Putnam Investor Services)
by which contributions or account information for plan
participation are transmitted to Putnam Investor Services by
methods acceptable to Putnam Investor Services. The fund may
also sell class A shares at net asset value to employer-sponsored
retirement plans that initially invest at least $1 million in the
fund or that have at least 200 eligible employees. In addition,
the fund may sell class M shares at net asset value to class M
qualified benefit plans.
An employer-sponsored retirement plan participating in a "multi-
fund" program approved by Putnam Mutual Funds may include amounts
invested in the other mutual funds participating in such program
for purposes of determining whether the plan may purchase class A
shares at net asset value based on the size of the purchase as
described in the prospectus. These investments will also be
included for purposes of the discount privileges and programs
described above.
Additional information about qualified benefit plans and
individual account plans is available from investment dealers or
from Putnam Mutual Funds.
CONTINGENT DEFERRED SALES CHARGES; COMMISSIONS
CLASS A SHARES. Except as described below, a CDSC of 0.75%
(1.00% in the case of plans for which Putnam Mutual Funds and its
affiliates do not act as trustee or record-keeper) of the total
amount redeemed is imposed on redemptions of shares purchased by
class A qualified benefit plans if, within two years of a plan's
initial purchase of class A shares, it redeems 90% or more of its
cumulative purchases. Thereafter, such plan is no longer liable
for any CDSC. The two-year CDSC applicable to class A qualified
benefit plans for which Putnam Mutual Funds or its affiliates
serve as trustee or recordkeeper ("full service plans") is 0.50%
of the total amount redeemed, for full service plans that
initially invest at least $5 million but less than $10 million in
Putnam funds and other investments managed by Putnam Management
or its affiliates ("Putnam Assets"), and is 0.25% of the total
amount redeemed for full service plans that initially invest at
least $10 million but less than $20 million in Putnam Assets.
Class A qualified benefit plans that initially invest at least
$20 million in Putnam Assets, or whose dealer of record has, with
Putnam Mutual Funds' approval, waived its commission or agreed to
refund its commission to Putnam Mutual Funds in the event a CDSC
would otherwise be applicable, are not subject to any CDSC.
Similarly, class A shares purchased at net asset value by any
investor other than a class A qualified benefit plan, including
purchases pursuant to any Combined Purchase Privilege, Right of
Accumulation or Statement of Intention, are subject to a CDSC of
1.00% or 0.50%, respectively, if redeemed within the first or
second year after purchase, unless the dealer of record waived
its commission with Putnam Mutual Funds' approval. The class A
CDSC is imposed on the lower of the cost and the current net
asset value of the shares redeemed.
Except as described below for sales to class A qualified benefit
plans, Putnam Mutual Funds pays investment dealers of record
commissions on sales of class A shares of $1 million or more and
sales to employer-sponsored benefit plans that have at least 200
eligible employees and that are not class A qualified benefit
plans based on cumulative purchases of such shares, including
purchases pursuant to any Combined Purchase Privilege, Right of
Accumulation or Statement of Intention, during the one-year
period beginning with the date of the initial purchase at net
asset value. Each subsequent one-year measuring period for these
purposes will begin with the first net asset value purchase
following the end of the prior period. Such commissions are paid
at the rate of 1.00% of the amount under $3 million, 0.50% of the
next $47 million and 0.25% thereafter.
On sales at net asset value to a class A qualified benefit plan,
Putnam Mutual Funds pays commissions to the dealer of record at
the time of the sale on net monthly purchases at the following
rates: 1.00% of the first $1 million, 0.75% of the next $1
million, 0.50% of the next $3 million, 0.20% of the next $5
million, 0.15% of the next $10 million, 0.10% of the next $10
million and 0.05% thereafter, except that commissions on sales to
class A qualified benefit plans initially investing less than $20
million in Putnam funds and other investments managed by Putnam
Management or its affiliates pursuant to a proposal made by
Putnam Mutual Funds on or before April 15, 1997 are based on
cumulative purchases over a one-year measuring period at the rate
of 1.00% of the first $2 million, 0.80% of the next $1 million,
and 0.50% thereafter. On sales at net asset value to all other
class A qualified benefit plans receiving proposals from Putnam
Mutual Funds on or before April 15, 1997, Putnam Mutual Funds
pays commissions on the initial investment and on subsequent net
quarterly sales (gross sales minus gross redemptions during the
quarter) at the rate of 0.15%. Money market fund shares are
excluded from all commission calculations, except for determining
the amount initially invested by a qualified benefit plan.
Commissions on sales at net asset value to such plans are subject
to Putnam Mutual Funds' right to reclaim such commissions if the
shares are redeemed within two years.
Different CDSC and commission rates may apply to shares purchased
prior to December 1, 1995.
ALL SHARES. Investors who set up an Automatic Cash Withdrawal
Plan ("ACWP") for a share account (see "Plans available to
shareholders -- Automatic Cash Withdrawal Plan") may withdraw
through the ACWP up to 12% of the net asset value of the account
(calculated as set forth below) each year without incurring any
CDSC. Shares not subject to a CDSC (such as shares representing
reinvestment of distributions) will be redeemed first and will
count toward the 12% limitation. If there are insufficient
shares not subject to a CDSC, shares subject to the lowest CDSC
liability will be redeemed next until the 12% limit is reached.
The 12% figure is calculated on a pro rata basis at the time of
the first payment made pursuant to an ACWP and recalculated
thereafter on a pro rata basis at the time of each ACWP payment.
Therefore, shareholders who have chosen an ACWP based on a
percentage of the net asset value of their account of up to 12%
will be able to receive ACWP payments without incurring a CDSC.
However, shareholders who have chosen a specific dollar amount
(for example, $100 per month from a fund that pays income
distributions monthly) for their periodic ACWP payment should be
aware that the amount of that payment not subject to a CDSC may
vary over time depending on the net asset value of their account.
For example, if the net asset value of the account is $10,000 at
the time of payment, the shareholder will receive $100 free of
the CDSC (12% of $10,000 divided by 12 monthly payments).
However, if at the time of the next payment the net asset value
of the account has fallen to $9,400, the shareholder will receive
$94 free of any CDSC (12% of $9,400 divided by 12 monthly
payments) and $6 subject to the lowest applicable CDSC. This
ACWP privilege may be revised or terminated at any time.
No CDSC is imposed on shares of any class subject to a CDSC
("CDSC Shares") to the extent that the CDSC Shares redeemed (i)
are no longer subject to the holding period therefor, (ii)
resulted from reinvestment of distributions on CDSC Shares, or
(iii) were exchanged for shares of another Putnam fund, provided
that the shares acquired in such exchange or subsequent exchanges
(including shares of a Putnam money market fund) will continue to
remain subject to the CDSC, if applicable, until the applicable
holding period expires. In determining whether the CDSC applies
to each redemption of CDSC Shares, CDSC Shares not subject to a
CDSC are redeemed first.
The fund will waive any CDSC on redemptions, in the case of
individual, joint or Uniform Transfers to Minors Act accounts, in
the event of death or post-purchase disability of a shareholder,
for the purpose of paying benefits pursuant to tax-qualified
retirement plans ("Benefit Payments"), or, in the case of living
trust accounts, in the event of the death or post-purchase
disability of the settlor of the trust). Benefit payments
currently include, without limitation, (1) distributions from an
IRA due to death or disability, (2) a return of excess
contributions to an IRA or 401(k) plan, and (3) distributions
from retirement plans qualified under Section 401(a) of the Code
or from a 403(b) plan due to death, disability, retirement or
separation from service. These waivers may be changed at any
time. Additional waivers may apply to IRA accounts opened prior
to February 1, 1994.
DISTRIBUTION PLANS
If the fund or a class of shares of the fund has adopted a
distribution plan, the prospectus describes the principal
features of the plan. This SAI contains additional information
which may be of interest to investors.
Continuance of a plan is subject to annual approval by a vote of
the Trustees, including a majority of the Trustees who are not
interested persons of the fund and who have no direct or indirect
interest in the plan or related arrangements (the "Qualified
Trustees"), cast in person at a meeting called for that purpose.
All material amendments to a plan must be likewise approved by
the Trustees and the Qualified Trustees. No plan may be amended
in order to increase materially the costs which the fund may bear
for distribution pursuant to such plan without also being
approved by a majority of the outstanding voting securities of
the fund or the relevant class of the fund, as the case may be.
A plan terminates automatically in the event of its assignment
and may be terminated without penalty, at any time, by a vote of
a majority of the Qualified Trustees or by a vote of a majority
of the outstanding voting securities of the fund or the relevant
class of the fund, as the case may be.
Putnam Mutual Funds pays service fees to qualifying dealers at
the rates set forth in the Prospectus, except with respect to
shares held by class A qualified benefit plans. Putnam Mutual
Funds pays service fees to the dealer of record for plans for
which Putnam Fiduciary Trust or its affiliates serve as trustee
and recordkeeper at the following annual rates (expressed as a
percentage of the average net asset value (as defined below) of
the plan's class A shares): 0.25% of the first $5 million, 0.20%
of the next $5 million, 0.15% of the next $10 million, 0.10% of
the next $30 million, and 0.05% thereafter. For class A
qualified benefit plans for which Putnam Fiduciary Trust Company
or its affiliates provide some services but do not act as trustee
and recordkeeper, Putnam Mutual Funds will pay service fees to
the dealer of record of up to 0.25% of average net assets,
depending on the level of service provided by Putnam Fiduciary
Trust Company or its affiliates, by the dealer of record, and by
third parties. Service fees are paid quarterly to the dealer of
record for that quarter.
Financial institutions receiving payments from Putnam Mutual
Funds as described above may be required to comply with various
state and federal regulatory requirements, including among others
those regulating the activities of securities brokers or dealers.
Except as otherwise agreed between Putnam Mutual Funds and a
dealer, for purposes of determining the amounts payable to
dealers for shareholder accounts for which such dealers are
designated as the dealer of record, "average net asset value"
means the product of (i) the average daily share balance in such
account(s) and (ii) the average daily net asset value of the
relevant class of shares over the quarter.
Financial institutions receiving payments from Putnam Mutual
Funds as described above may be required to comply with various
state and federal regulatory requirements, including among others
those regulating the activities of securities brokers or dealers.
INVESTOR SERVICES
SHAREHOLDER INFORMATION
Each time shareholders buy or sell shares, they will receive a
statement confirming the transaction and listing their current
share balance. (Under certain investment plans, a statement may
only be sent quarterly.) Shareholders will receive a statement
confirming reinvestment of distributions in additional fund
shares (or in shares of other Putnam funds for Dividends Plus
accounts) promptly following the quarter in which the
reinvestment occurs. To help shareholders take full advantage of
their Putnam investment, they will receive a Welcome Kit and a
periodic publication covering many topics of interest to
investors. The fund also sends annual and semiannual reports
that keep shareholders informed about its portfolio and
performance, and year-end tax information to simplify their
recordkeeping. Easy-to-read, free booklets on special subjects
such as the Exchange Privilege and IRAs are available from Putnam
Investor Services. Shareholders may call Putnam Investor
Services toll-free weekdays at 1-800-225-1581 between 8:30 a.m.
and 7:00 p.m. Boston time for more information, including account
balances.
YOUR INVESTING ACCOUNT
The following information provides more detail concerning the
operation of a Putnam Investing Account. For further information
or assistance, investors should consult Putnam Investor Services.
Shareholders who purchase shares through a defined contribution
plan should note that not all of the services or features
described below may be available to them, and they should contact
their employer for details.
A shareholder may reinvest a cash distribution without a
front-end sales charge or without the reinvested shares being
subject to a CDSC, as the case may be, by delivering to Putnam
Investor Services the uncashed distribution check, endorsed to
the order of the fund. Putnam Investor Services must receive the
properly endorsed check within 1 year after the date of the
check.
The Investing Account also provides a way to accumulate shares of
the fund. In most cases, after an initial investment of $500, a
shareholder may send checks to Putnam Investor Services for $50
or more, made payable to the fund, to purchase additional shares
at the applicable public offering price next determined after
Putnam Investor Services receives the check. Checks must be
drawn on a U.S. bank and must be payable in U.S. dollars.
Putnam Investor Services acts as the shareholder's agent whenever
it receives instructions to carry out a transaction on the
shareholder's account. Upon receipt of instructions that shares
are to be purchased for a shareholder's account, shares will be
purchased through the investment dealer designated by the
shareholder. Shareholders may change investment dealers at any
time by written notice to Putnam Investor Services, provided the
new dealer has a sales agreement with Putnam Mutual Funds.
Shares credited to an account are transferable upon written
instructions in good order to Putnam Investor Services and may be
sold to the fund as described under "How to sell shares" in the
prospectus. Money market funds and certain other funds will not
issue share certificates. A shareholder may send to Putnam
Investor Services any certificates which have been previously
issued for safekeeping at no charge to the shareholder.
Putnam Mutual Funds, at its expense, may provide certain
additional reports and administrative material to qualifying
institutional investors with fiduciary responsibilities to assist
these investors in discharging their responsibilities.
Institutions seeking further information about this service
should contact Putnam Mutual Funds, which may modify or terminate
this service at any time.
Putnam Investor Services may make special services available to
shareholders with investments exceeding $1,000,000. Contact
Putnam Investor Services for details.
The fund pays Putnam Investor Services' fees for maintaining
Investing Accounts.
REINSTATEMENT PRIVILEGE
An investor who has redeemed shares of the fund may reinvest
(within 1 year) the proceeds of such sale in shares of the same
class of the fund, or may be able to reinvest (within 1 year) the
proceeds in shares of the same class of one of the other
continuously offered Putnam funds (through the Exchange Privilege
described in the prospectus), including, in the case of shares
subject to a CDSC, the amount of CDSC charged on the redemption.
Any such reinvestment would be at the net asset value of the
shares of the fund(s) the investor selects, next determined after
Putnam Mutual Funds receives a Reinstatement Authorization. The
time that the previous investment was held will be included in
determining any applicable CDSC due upon redemptions and, in the
case of class B shares, the eight-year period for conversion to
class A shares. Shareholders will receive from Putnam Mutual
Funds the amount of any CDSC paid at the time of redemption as
part of the reinstated investment, which may be treated as
capital gains to the shareholder for tax purposes. Exercise of
the Reinstatement Privilege does not alter the federal income tax
treatment of any capital gains realized on a sale of fund shares,
but to the extent that any shares are sold at a loss and the
proceeds are reinvested in shares of the fund, some or all of the
loss may be disallowed as a deduction. Consult your tax adviser.
Investors who desire to exercise the Reinstatement Privilege
should contact their investment dealer or Putnam Investor
Services.
EXCHANGE PRIVILEGE
Except as otherwise set forth in this section, by calling Putnam
Investor Services, investors may exchange shares valued up to
$500,000 between accounts with identical registrations, provided
that no certificates are outstanding for such shares and no
address change has been made within the preceding 15 days.
During periods of unusual market changes and shareholder
activity, shareholders may experience delays in contacting Putnam
Investor Services by telephone to exercise the Telephone Exchange
Privilege.
Putnam Investor Services also makes exchanges promptly after
receiving a properly completed Exchange Authorization Form and,
if issued, share certificates. If the shareholder is a
corporation, partnership, agent, or surviving joint owner, Putnam
Investor Services will require additional documentation of a
customary nature. Because an exchange of shares involves the
redemption of fund shares and reinvestment of the proceeds in
shares of another Putnam fund, completion of an exchange may be
delayed under unusual circumstances if the fund were to suspend
redemptions or postpone payment for the fund shares being
exchanged, in accordance with federal securities laws. Exchange
Authorization Forms and prospectuses of the other Putnam funds
are available from Putnam Mutual Funds or investment dealers
having sales contracts with Putnam Mutual Funds. The prospectus
of each fund describes its investment objective(s) and policies,
and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange.
Shares of certain Putnam funds are not available to residents of
all states. The fund reserves the right to change or suspend the
Exchange Privilege at any time. Shareholders would be notified
of any change or suspension. Additional information is available
from Putnam Investor Services.
Shareholders of other Putnam funds may also exchange their shares
at net asset value for shares of the fund, as set forth in the
current prospectus of each fund.
For federal income tax purposes, an exchange is a sale on which
the investor generally will realize a capital gain or loss
depending on whether the net asset value at the time of the
exchange is more or less than the investor's basis. The Exchange
Privilege may be revised or terminated at any time. Shareholders
would be notified of any such change or suspension.
DIVIDENDS PLUS
Shareholders may invest the fund's distributions of net
investment income or distributions combining net investment
income and short-term capital gains in shares of the same class
of another continuously offered Putnam fund (the "receiving
fund") using the net asset value per share of the receiving fund
determined on the date the fund's distribution is payable. No
sales charge or CDSC will apply to the purchased shares unless
the fund paying the distribution is a money market fund. The
prospectus of each fund describes its investment objective(s) and
policies, and shareholders should obtain a prospectus and
consider these objective(s) and policies carefully before
investing their distributions in the receiving fund. Shares of
certain Putnam funds are not available to residents of all
states.
The minimum account size requirement for the receiving fund will
not apply if the current value of your account in the fund paying
the distribution is more than $5,000.
Shareholders of other Putnam funds (except for money market
funds, whose shareholders must pay a sales charge or become
subject to a CDSC) may also use their distributions to purchase
shares of the fund at net asset value.
For federal tax purposes, distributions from the fund which are
reinvested in another fund are treated as paid by the fund to the
shareholder and invested by the shareholder in the receiving fund
and thus, to the extent comprised of taxable income and deemed
paid to a taxable shareholder, are taxable.
The Dividends PLUS program may be revised or terminated at any
time.
PLANS AVAILABLE TO SHAREHOLDERS
The plans described below are fully voluntary and may be
terminated at any time without the imposition by the fund or
Putnam Investor Services of any penalty. All plans provide for
automatic reinvestment of all distributions in additional shares
of the fund at net asset value. The fund, Putnam Mutual Funds or
Putnam Investor Services may modify or cease offering these plans
at any time.
AUTOMATIC CASH WITHDRAWAL PLAN ("ACWP"). An investor who owns or
buys shares of the fund valued at $10,000 or more at the current
public offering price may open an ACWP plan and have a designated
sum of money ($50 or more) paid monthly, quarterly, semi-annually
or annually to the investor or another person. (Payments from
the fund can be combined with payments from other Putnam funds
into a single check through a designated payment plan.) Shares
are deposited in a plan account, and all distributions are
reinvested in additional shares of the fund at net asset value
(except where the plan is utilized in connection with a
charitable remainder trust). Shares in a plan account are then
redeemed at net asset value to make each withdrawal payment.
Payment will be made to any person the investor designates;
however, if shares are registered in the name of a trustee or
other fiduciary, payment will be made only to the fiduciary,
except in the case of a profit-sharing or pension plan where
payment will be made to a designee. As withdrawal payments may
include a return of principal, they cannot be considered a
guaranteed annuity or actual yield of income to the investor.
The redemption of shares in connection with a plan generally will
result in a gain or loss for tax purposes. Some or all of the
losses realized upon redemption may be disallowed pursuant to the
so-called wash sale rules if shares of the same fund from which
shares were redeemed are purchased (including through the
reinvestment of fund distributions) within a period beginning 30
days before, and ending 30 days after, such redemption. In such
a case, the basis of the replacement shares will be increased to
reflect the disallowed loss. Continued withdrawals in excess of
income will reduce and possibly exhaust invested principal,
especially in the event of a market decline. The maintenance of
a plan concurrently with purchases of additional shares of the
fund would be disadvantageous to the investor because of the
sales charge payable on such purchases. For this reason, the
minimum investment accepted while a plan is in effect is $1,000,
and an investor may not maintain a plan for the accumulation of
shares of the fund (other than through reinvestment of
distributions) and a plan at the same time. The cost of
administering these plans for the benefit of those shareholders
participating in them is borne by the fund as an expense of all
shareholders. The fund, Putnam Mutual Funds or Putnam Investor
Services may terminate or change the terms of the plan at any
time. A plan will be terminated if communications mailed to the
shareholder are returned as undeliverable.
Investors should consider carefully with their own financial
advisers whether the plan and the specified amounts to be
withdrawn are appropriate in their circumstances. The fund and
Putnam Investor Services make no recommendations or
representations in this regard.
TAX QUALIFIED RETIREMENT PLANS; 403(B) AND SEP PLANS. (NOT
OFFERED BY FUNDS INVESTING PRIMARILY IN TAX-EXEMPT SECURITIES.)
Investors may purchase shares of the fund through the following
Tax Qualified Retirement Plans, available to qualified
individuals or organizations:
Standard and variable profit-sharing (including 401(k))
and money purchase pension plans; and
Individual Retirement Account Plans (IRAs).
Each of these Plans has been qualified as a prototype plan by the
Internal Revenue Service. Putnam Investor Services will furnish
services under each plan at a specified annual cost. Putnam
Fiduciary Trust Company serves as trustee under each of these
Plans.
Forms and further information on these Plans are available from
investment dealers or from Putnam Mutual Funds. In addition,
specialized professional plan administration services are
available on an optional basis; contact Putnam Defined
Contribution Plan Services at 1-800-225-2465, extension 8600.
A 403(b) Retirement Plan is available for employees of public
school systems and organizations which meet the requirements of
Section 501(c)(3) of the Internal Revenue Code. Forms and
further information on the 403(b) Plan are also available from
investment dealers or from Putnam Mutual Funds. Shares of the
fund may also be used in simplified employee pension (SEP) plans.
For further information on the Putnam prototype SEP plan, contact
an investment dealer or Putnam Mutual Funds.
Consultation with a competent financial and tax adviser regarding
these Plans and consideration of the suitability of fund shares
as an investment under the Employee Retirement Income Security
Act of 1974, or otherwise, is recommended.
SIGNATURE GUARANTEES
Redemption requests for shares having a net asset value of
$100,000 or more must be signed by the registered owners or their
legal representatives and must be guaranteed by a bank,
broker/dealer, municipal securities dealer or broker, government
securities dealer or broker, credit union, national securities
exchange, registered securities association, clearing agency,
savings association or trust company, provided such institution
is acceptable under and conforms with Putnam Fiduciary Trust
Company's signature guarantee procedures. A copy of such
procedures is available upon request. If you want your
redemption proceeds sent to an address other than your address as
it appears on Putnam's records, you must provide a signature
guarantee. Putnam Investor Services usually requires additional
documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner.
Contact Putnam Investor Services for details.
SUSPENSION OF REDEMPTIONS
The fund may not suspend shareholders' right of redemption, or
postpone payment for more than seven days, unless the New York
Stock Exchange is closed for other than customary weekends or
holidays, or if permitted by the rules of the Securities and
Exchange Commission during periods when trading on the Exchange
is restricted or during any emergency which makes it
impracticable for the fund to dispose of its securities or to
determine fairly the value of its net assets, or during any other
period permitted by order of the Commission for protection of
investors.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of
the fund. However, the Agreement and Declaration of Trust
disclaims shareholder liability for acts or obligations of the
fund and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by
the fund or the Trustees. The Agreement and Declaration of Trust
provides for indemnification out of fund property for all loss
and expense of any shareholder held personally liable for the
obligations of the fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the fund would be unable to
meet its obligations. The likelihood of such circumstances is
remote.
STANDARD PERFORMANCE MEASURES
Yield and total return data for the fund may from time to time be
presented in Part I of this SAI and in advertisements. In the
case of funds with more than one class of shares, all performance
information is calculated separately for each class. The data is
calculated as follows.
Total return for one-, five- and ten-year periods (or for such
shorter periods as the fund has been in operation or shares of
the relevant class have been outstanding) is determined by
calculating the actual dollar amount of investment return on a
$1,000 investment in the fund made at the beginning of the
period, at the maximum public offering price for class A shares
and class M shares and net asset value for other classes of
shares, and then calculating the annual compounded rate of return
which would produce that amount. Total return for a period of
one year is equal to the actual return of the fund during that
period. Total return calculations assume deduction of the fund's
maximum sales charge or CDSC, if applicable, and reinvestment of
all fund distributions at net asset value on their respective
reinvestment dates.
The fund's yield is presented for a specified thirty-day period
(the "base period"). Yield is based on the amount determined by
(i) calculating the aggregate amount of dividends and interest
earned by the fund during the base period less expenses for that
period, and (ii) dividing that amount by the product of (A) the
average daily number of shares of the fund outstanding during the
base period and entitled to receive dividends and (B) the per
share maximum public offering price for class A shares or class M
shares, as appropriate, and net asset value for other classes of
shares on the last day of the base period. The result is
annualized on a compounding basis to determine the yield. For
this calculation, interest earned on debt obligations held by the
fund is generally calculated using the yield to maturity (or
first expected call date) of such obligations based on their
market values (or, in the case of receivables-backed securities
such as the Government National Mortgage Association ("GNMAs"),
based on cost). Dividends on equity securities are accrued daily
at their stated dividend rates. The amount of expenses used in
determining the fund's yield includes, in addition to expenses
actually accrued by the fund, an estimate of the amount of
expenses that the fund would have incurred if brokerage
commissions had not been used to reduce such expenses.
If the fund is a money market fund, yield is computed by
determining the percentage net change, excluding capital changes,
in the value of an investment in one share over the seven-day
period for which yield is presented (the "base period"), and
multiplying the net change by 365/7 (or approximately 52 weeks).
Effective yield represents a compounding of the yield by adding 1
to the number representing the percentage change in value of the
investment during the base period, raising that sum to a power
equal to 365/7, and subtracting 1 from the result.
If the fund is a tax-exempt fund, the tax-equivalent yield during
the base period may be presented for shareholders in one or more
stated tax brackets. Tax-equivalent yield is calculated by
adjusting the tax-exempt yield by a factor designed to show the
approximate yield that a taxable investment would have to earn to
produce an after-tax yield equal, for that shareholder, to the
tax-exempt yield. The tax-equivalent yield will differ for
shareholders in other tax brackets.
At times, Putnam Management may reduce its compensation or assume
expenses of the fund in order to reduce the fund's expenses. The
per share amount of any such fee reduction or assumption of
expenses during the fund's past ten fiscal years (or for the life
of the fund, if shorter) is set forth in the footnotes to the
table in the section entitled "Financial highlights" in the
prospectus. Any such fee reduction or assumption of expenses
would increase the fund's yield and total return for periods
including the period of the fee reduction or assumption of
expenses.
All data are based on past performance and do not predict future
results.
COMPARISON OF PORTFOLIO PERFORMANCE
Independent statistical agencies measure the fund's investment
performance and publish comparative information showing how the
fund, and other investment companies, performed in specified time
periods. Three agencies whose reports are commonly used for such
comparisons are set forth below. From time to time, the fund may
distribute these comparisons to its shareholders or to potential
investors. THE AGENCIES LISTED BELOW MEASURE PERFORMANCE BASED
ON THEIR OWN CRITERIA RATHER THAN ON THE STANDARDIZED PERFORMANCE
MEASURES DESCRIBED IN THE PRECEDING SECTION.
LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund
rankings monthly. The rankings are based on total return
performance calculated by Lipper, generally reflecting
changes in net asset value adjusted for reinvestment of
capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a
variety of performance periods, including year-to-date,
1-year, 5-year, and 10-year performance. Lipper
classifies mutual funds by investment objective and asset
category.
MORNINGSTAR, INC. distributes mutual fund ratings twice a
month. The ratings are divided into five groups:
highest, above average, neutral, below average and lowest.
They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as
determined by Morningstar, Inc. Morningstar ratings cover
a variety of performance periods, including 1-year, 3-
year, 5-year, 10-year and overall performance. The
performance factor for the overall rating is a
weighted-average assessment of the fund's 1-year, 3-year,
5-year, and 10-year total return performance (if
available) reflecting deduction of expenses and sales
charges. Performance is adjusted using quantitative
techniques to reflect the risk profile of the fund. The
ratings are derived from a purely quantitative system that
does not utilize the subjective criteria customarily
employed by rating agencies such as Standard & Poor's and
Moody's Investor Service, Inc.
CDA/WIESENBERGER'S MANAGEMENT RESULTS publishes mutual
fund rankings and is distributed monthly. The rankings
are based entirely on total return calculated by
Weisenberger for periods such as year-to-date, 1-year,
3-year, 5-year and 10-year. Mutual funds are ranked in
general categories (e.g., international bond,
international equity, municipal bond, and maximum capital
gain). Weisenberger rankings do not reflect deduction of
sales charges or fees.
Independent publications may also evaluate the fund's
performance. The fund may from time to time refer to results
published in various periodicals, including Barrons, Financial
World, Forbes, Fortune, Investor's Business Daily, Kiplinger's
Personal Finance Magazine, Money, U.S. News and World Report and
The Wall Street Journal.
Independent, unmanaged indexes, such as those listed below, may
be used to present a comparative benchmark of fund performance.
The performance figures of an index reflect changes in market
prices, reinvestment of all dividend and interest payments and,
where applicable, deduction of foreign withholding taxes, and do
not take into account brokerage commissions or other costs.
Because the fund is a managed portfolio, the securities it owns
will not match those in an index. Securities in an index may
change from time to time.
THE CONSUMER PRICE INDEX, prepared by the U.S. Bureau of
Labor Statistics, is a commonly used measure of the rate
of inflation. The index shows the average change in the
cost of selected consumer goods and services and does not
represent a return on an investment vehicle.
THE DOW JONES INDUSTRIAL AVERAGE is an index of 30 common
stocks frequently used as a general measure of stock
market performance.
THE DOW JONES UTILITIES AVERAGE is an index of 15 utility
stocks frequently used as a general measure of stock
market performance.
CS FIRST BOSTON HIGH YIELD INDEX is a market-weighted
index including publicly traded bonds having a rating
below BBB by Standard & Poor's and Baa by Moody's.
THE LEHMAN BROTHERS AGGREGATE BOND INDEX is an index
composed of securities from The Lehman Brothers
Government/Corporate Bond Index, The Lehman Brothers
Mortgage-Backed Securities Index and The Lehman Brothers
Asset-Backed Securities Index and is frequently used as a
broad market measure for fixed-income securities.
THE LEHMAN BROTHERS ASSET-BACKED SECURITIES INDEX is an
index composed of credit card, auto, and home equity
loans. Included in the index are pass-through, bullet
(noncallable), and controlled amortization structured debt
securities; no subordinated debt is included. All
securities have an average life of at least one year.
THE LEHMAN BROTHERS CORPORATE BOND INDEX is an index of
publicly issued, fixed-rate, non-convertible
investment-grade domestic corporate debt securities
frequently used as a general measure of the performance of
fixed-income securities.
THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX is an
index of publicly issued U.S. Treasury obligations, debt
obligations of U.S. government agencies (excluding
mortgage-backed securities), fixed-rate, non-convertible,
investment-grade corporate debt securities and U.S.
dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international
agencies used as a general measure of the performance of
fixed-income securities.
THE LEHMAN BROTHERS INTERMEDIATE TREASURY BOND INDEX is an
index of publicly issued U.S. Treasury obligations with
maturities of up to ten years and is used as a general
gauge of the market for intermediate-term fixed-income
securities.
THE LEHMAN BROTHERS LONG-TERM TREASURY BOND INDEX is an
index of publicly issued U.S. Treasury obligations
(excluding flower bonds and foreign-targeted issues) that
are U.S. dollar-denominated and have maturities of 10
years or greater.
THE LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX
includes 15- and 30-year fixed rate securities backed by
mortgage pools of the Government National Mortgage
Association, Federal Home Loan Mortgage Corporation, and
Federal National Mortgage Association.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX is an index of
approximately 20,000 investment-grade, fixed-rate
tax-exempt bonds.
THE LEHMAN BROTHERS TREASURY BOND INDEX is an index of
publicly issued U.S. Treasury obligations (excluding
flower bonds and foreign-targeted issues) that are U.S.
dollar denominated, have a minimum of one year to
maturity, and are issued in amounts over $100 million.
THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX is an
index of approximately 1,482 equity securities listed on
the stock exchanges of the United States, Europe, Canada,
Australia, New Zealand and the Far East, with all values
expressed in U.S. dollars.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS
INDEX is an index of approximately 1,100 securities
representing 20 emerging markets, with all values
expressed in U.S. dollars.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX is an
index of approximately 1,045 equity securities issued by
companies located in 18 countries and listed on the stock
exchanges of Europe, Australia, and the Far East. All
values are expressed in U.S. dollars.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE INDEX is
an index of approximately 627 equity securities issued by
companies located in one of 13 European countries, with
all values expressed in U.S. dollars.
THE MORGAN STANLEY CAPITAL INTERNATIONAL PACIFIC INDEX is
an index of approximately 418 equity securities issued by
companies located in 5 countries and listed on the
exchanges of Australia, New Zealand, Japan, Hong Kong,
Singapore/Malaysia. All values are expressed in U.S.
dollars.
THE NASDAQ INDUSTRIAL AVERAGE is an index of stocks traded
in The Nasdaq Stock Market, Inc. National Market System.
THE RUSSELL 2000 INDEX is composed of the 2,000 smallest
securities in the Russell 3000 Index, representing
approximately 7% of the Russell 3000 total market
capitalization. The Russell 3000 Index is composed of
3,000 large U.S. companies ranked by market
capitalization, representing approximately 98% of the U.S.
equity market.
THE SALOMON BROTHERS LONG-TERM HIGH-GRADE CORPORATE BOND
INDEX is an index of publicly traded corporate bonds
having a rating of at least AA by Standard & Poor's or Aa
by Moody's and is frequently used as a general measure of
the performance of fixed-income securities.
THE SALOMON BROTHERS LONG-TERM TREASURY INDEX is an index
of U.S. government securities with maturities greater than
10 years.
THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX is an
index that tracks the performance of the 14 government
bond markets of Australia, Austria, Belgium Canada,
Denmark, France, Germany, Italy, Japan, Netherlands,
Spain, Sweden, United Kingdom and the United States.
Country eligibility is determined by market capitalization
and investability criteria.
THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX (non
$U.S.) is an index of foreign government bonds calculated
to provide a measure of performance in the government bond
markets outside of the United States.
STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX is an
index of common stocks frequently used as a general
measure of stock market performance.
STANDARD & POOR'S 40 UTILITIES INDEX is an index of 40
utility stocks.
STANDARD & POOR'S/BARRA VALUE INDEX is an index
constructed by ranking the securities in the Standard &
Poor's 500 Composite Stock Price Index by price-to-book
ratio and including the securities with the lowest price-
to-book ratios that represent approximately half of the
market capitalization of the Standard & Poor's 500
Composite Stock Price Index.
In addition, Putnam Mutual Funds may distribute to shareholders
or prospective investors illustrations of the benefits of
reinvesting tax-exempt or tax-deferred distributions over
specified time periods, which may include comparisons to fully
taxable distributions. These illustrations use hypothetical
rates of tax-advantaged and taxable returns and are not intended
to indicate the past or future performance of any fund.
DEFINITIONS
"Putnam Management" -- Putnam Investment Management,
Inc., the fund's investment
manager.
"Putnam Mutual Funds" -- Putnam Mutual Funds Corp., the
fund's principal underwriter.
"Putnam Fiduciary Trust -- Putnam Fiduciary Trust Company,
Company" the fund's custodian.
"Putnam Investor Services" -- Putnam Investor Services, a
division of Putnam Fiduciary
Trust Company, the fund's
investor servicing agent.
PUTNAM MONEY MARKET FUND (the "Money Market Fund")
PUTNAM TAX EXEMPT MONEY MARKET FUND (the "Tax Exempt
Money Market Fund")
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Index to Financial Statements
and Supporting Schedules:
(1) Financial Statements
for Putnam Money Market
Fund:
Statement of assets and
liabilities --September 30,
1997(a) .
Statement of operations --
year ended September 30,
1997(a) .
Statement of changes in net
assets -- periods ended
September 30, 1997 and
September 30, 1996(a) .
Financial highlights (a)(b).
Notes to financial
statements(a).
Financial Statements for
Putnam Tax Exempt Money Market
Fund:
Statement of assets and
liabilities --September 30,
1997(a) .
Statement of operations --
year ended September 30,
1997(a) .
Statement of changes in net
assets -- years ended
September 30, 1997 and
September 30, 1996(a) .
Financial highlights (a)(b).
Notes to financial
statements(a).
(2) Supporting Schedules:
Schedule I -- Portfolio
of investments owned
for Putnam Money Market
Fund and Putnam Tax
Exempt Money Market
Fund --September 30,
1997(a) .
Schedules II through IX
omitted because the
required matter is not
present.
- ---------------------- (a) Incorporated by reference into
Parts A and B.
(b)Included in Part A.
(b) Exhibits:
1a. Agreement and Declaration of
Trust, as amended and restated
on July 7, 1994 for Putnam
Money Market Fund --
Incorporated by reference to
Post-Effective Amendment No.
25 to the Money Market Fund's
Registration Statement.
1b. Agreement and Declaration of
Trust, as amended July 13,
1992, for Putnam Tax Exempt
Money Market Fund --
Incorporated by reference to
Post-Effective Amendment No. 6
to the Tax Exempt Money Market
Fund's Registration Statement.
2. By-Laws, as amended through
February 1, 1994 for Putnam
Money Market Fund and Putnam
Tax Exempt Money Market Fund -
- Incorporated by reference to
Post-Effective Amendment No.
25 to the Money Market Fund's
Registration Statement and
Post-Effective Amendment No. 9
to the Tax Exempt Money Market
Fund's Registration Statement.
3. Not applicable.
4a. Portions of Agreement and
Declaration of Trust Relating
to Shareholders' Rights for
Putnam Money Market Fund --
Incorporated by reference to
Post-Effective Amendment No.
25 to the Money Market Fund's
Registration Statement.
4b. Portions of Agreement and
Declaration of Trust Relating
to Shareholders' Rights for
Putnam Tax Exempt Money Market
Fund --Incorporated by
reference to Post-Effective
Amendment No. 7 to the Tax
Exempt Money Market Fund's
Registration Statement.
4c. Portions of By-Laws Relating
to Shareholders' Rights for
Putnam Money Market Fund and
Putnam Tax Exempt Money Market
Fund --Incorporated by
reference to Post-Effective
Amendment No. 25 to the Money
Market Fund's Registration
Statement and Post-Effective
Amendment No. 9 to the Tax
Exempt Money Market Fund's
Registration Statement.
5a. Management Contract dated
December 21, 1988 for Putnam
Money Market Fund --
Incorporated by reference to
Post-Effective Amendment No.
17 to the Money Market Fund's
Registration Statement.
5b. Management Contract dated
January 20, 1997 for Putnam
Tax Exempt Money Market Fund -
- Incorporated by reference
to Post-Effective Amendment
No. 11 to the Tax Exempt Money
Market Fund's Registration
Statement.
6a. Distributor's Contract dated
September 1, 1994 for Putnam
Money Market Fund --
Incorporated by reference to
Post-Effective Amendment No.
25 to the Money Market Fund's
Registration Statement.
6b. Distributor's Contract dated
May 6, 1994 for Putnam Tax
Exempt Money Market Fund --
Incorporated by reference to
Post-Effective Amendment No. 9
to the Tax Exempt Money Market
Fund's Registration Statement.
6c. Form of Specimen Dealer Sales
Contract for Putnam Money
Market Fund and Putnam Tax
Exempt Money Market Fund --
Incorporated by reference to
Post-Effective Amendment No.
26 to the Money Market Fund's
Registration Statement and
Post-Effective Amendment No.
10 to the Tax Exempt Money
Market Fund's Registration
Statement.
6d. Form of Specimen Financial
Institution Sales C ontract for
Putnam Money Market Fund and
Putnam Tax Exempt Money Market
Fund --Incorporated by
reference to Post-Effective
Amendment No. 26 to the Money
Market Fund's Registration
Statement and Post-Effective
Amendment No. 10 to the Tax
Exempt Money Market Fund's
Registration Statement.
7. Trustee Retirement Plan dated
October 4, 1996 --
Incorporated by reference
to Post-Effective Amendment
No. 11 to the Tax Exempt Money
Market Fund's Registration
Statement and Post-Effective
Amendment No. 27 to the Money
Market Fund's Registration
Statement.
8. Custodian Agreement with
Putnam Fiduciary Trust Company
dated May 3, 1991, as amended
July 13, 1992 for Putnam Money
Market Fund and Putnam Tax
Exempt Money Market Fund --
Incorporated by reference to
Post-Effective Amendment No.
23 to the Money Market Fund's
Registration Statement and
Post-Effective Amendment No. 7
to the Tax Exempt Money Market
Fund's Registration Statement.
9. Investor Servicing Agreement
dated June 3, 1991 with Putnam
Fiduciary Trust Company for
Putnam Money Market Fund and
Putnam Tax Exempt Money Market
Fund -- Incorporated by
reference to Post-Effective
Amendment No. 21 to the Money
Market Fund's Registration
Statement and Post-Effective
Amendment No. 5 to the Tax
Exempt Money Market Fund's
Registration Statement.
10a. Opinion of Ropes & Gray,
including consent for Putnam
Money Market Fund --
Incorporated by reference to
Post-Effective Amendment No.
23 to the Money Market Fund's
Registration Statement.
10b. Opinion of Ropes & Gray,
including consent for Putnam
Tax Exempt Money Market Fund -
- Incorporated by reference
to Post-Effective Amendment
No. 11 to the Tax Exempt Money
Market Fund's Registration
Statement.
11. Not applicable.
12. Not applicable.
13a. Class B Investment Letter from
The Putnam Management Company,
Inc. to the Registrant dated
April 24, 1992 for Putnam
Money Market Fund --
Incorporated by reference to
Post-Effective Amendment No.
22 to the Money Market Fund's
Registration Statement.
13b. Investment Letter from The
Putnam Management Company,
Inc. to Putnam Tax Exempt
Money Market Fund --
Incorporated by reference to
Pre-Effective Amendment No. 2
to the Tax Exempt Money Market
Fund's Registration Statement.
14. Not applicable.
15a. Class B Distribution Plan and
Agreement dated April 24, 1992
for Putnam Money Market Fund
-- Incorporated by reference
to Post-Effective Amendment
No. 22 to the Money Market
Fund's Registration Statement.
15b. Class M Distribution Plan and
Agreement dated November 28,
1994 for Putnam Money Market
Fund -- Incorporated by
reference to Post-Effective
Amendment No. 9 to the Money
Market Fund's Registration
Statement.
15c. Distribution Plan and
Agreement dated July 10, 1987,
as amended on January 1, 1990
for Putnam Tax Exempt Money
Market Fund --Incorporated by
reference to Post-Effective
Amendment No. 4 to the Tax
Exempt Money Market Fund's
Registration Statement.
15d. Form of Specimen Dealer
Service Agreement for Putnam
Money Market Fund and Putnam
Tax Exempt Money Market Fund -
- Exhibit 1.
15e. Form of Specimen Financial
Institution Service Agreement
for Putnam Money Market Fund
and Putnam Tax Exempt Money
Market Fund -- Exhibit
2.
16a. Schedules for computation of
performance quotations for
Putnam Money Market Fund --
Exhibit 3 .
16b. Schedules for computation of
performance quotations for
Putnam Tax Exempt Money Market
Fund -- Exhibit 4 .
17a. Financial Data Schedule for
Class A shares of Putnam Money
Market Fund --Exhibit
5 .
17b. Financial Data Schedule for
Class B shares of Putnam Money
Market Fund --Exhibit
6 .
17c. Financial Data Schedule for
Class M shares of Putnam Money
Market Fund - Exhibit
7 .
17d. Financial Data Schedule for
Putnam Tax Exempt Money Market
Fund -- Exhibit 8 .
18. Rule 18f-3(d) Plan for Putnam
Money Market Fund --
Incorporated by reference to
Post-Effective Amendment No.
26 to the Money Market Fund's
Registration Statement.
Item 25. Persons Controlled by or under Common
Control with Registrants
None.
Item 26. Number of Holders of Securities
As of December 31, 1997 , the number of record holders
of each class of securities of the Registrants was as
follows:
Number of record holders
-------------------------------------
Class A Class B Class M
------- ------- -------
Money Market Fund 88,089 21,343 3,018
Tax Exempt Money
Market Fund 4,209
N/A N/A
Item 27. Indemnification
The information required by this item for Putnam Tax Exempt
Money Market Fund is incorporated herein by reference to its
initial Registration Statement on Form N-1A under the Investment
Company Act of 1940 (File No. 811-5215).
The information required by this item for Putnam Money
Market Fund is incorporated herein by reference to Post-Effective
Amendment No. 26 to the Registrant's Registration
Statement on Form N-1A under the Investment Company Act of 1940
(File No. 811- 2608).
Items 28 and 29.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Except as set forth below, the directors and officers
of the Registrant's investment adviser have been engaged during
the past two fiscal years in no business, vocation or employment
of a substantial nature other than as directors or officers of
the investment adviser or certain of its corporate affiliates.
Certain officers of the investment adviser serve as officers of
some or all of the Putnam funds. The address of the investment
adviser, its corporate affiliates and the Putnam Funds is One
Post Office Square, Boston, Massachusetts 02109.
Name Non-Putnam business and other
connections
Michael J. Abata Prior to May, 1997, Assistant
Assistant Vice President Alliance Capital Management Corp.,
1345 Avenue of the Americas, New
York, NY 10020
Nikesh Arora Prior to April, 1997, Chief Financial
Vice President Officer, Fidelity Investments, 82
Devonshire St., Boston, MA 02110
Michael Arends Prior to May, 1997, Managing Director,
Senior Vice President Equities, Phoenix Duff & Phelps, 56
Prospect St., Hartford, CT 06101
Michael J. Atkin Prior to July, 1997, Director of
Senior Vice President Latin America, Institute of
International Finance, 2000
Pennsylvania Avenue, Washington,
D.C. 20006
Rowland T. Bankes Prior to July, 1997, Senior Fixed-
Vice President Income Trader, Jennison Associates
Capital Corp., One Financial Center,
Boston, MA 02110
Robert R. Beck Director, Charles Bridge Publishing,
Senior Vice President 85 Main St., Watertown, MA 02172
Geoffrey C. Blaisdell Prior to October, 1997, Vice President
Senior Vice President Blackrock Financial, 345 Park
Avenue, New York, NY 10010
John A. Boselli Prior to April, 1996, Senior Manager,
Vice President Price Waterhouse LLP, 200 E.
Randolph Drive, Chicago, IL 60601
<PAGE>
Jeffrey M. Bray Prior to October, 1997, Analyst,
Vice President Lehman Brothers, 3 World Financial
Center, New York, NY 10285
Ronald J. Bukovak Prior to October, 1997, Senior Manager
Vice President Valuation, Price Waterhouse, 200 E.
Randolph Drive, Chicago, IL 60601
Robert W. Burke Member-Executive Committee, The Ridge
Senior Managing Director Club, Country Club Road, Sandwich,
MA 02563; Member-Advisory Board,
Cathedral High School, 74 Union Park
St., So. Boston, MA 02118
Jack P. Chang Prior to July, 1997, Vice President
Vice President Columbia Management Company, 1300
S.W. 6th Ave., Portland, OR 97207
Mary Claire Chase Prior to January, 1997, Director of
Vice President Staff Development, Arthur D. Little
Co., 25 Acorn Park, Cambridge, MA
02140
James E. Corning Prior to October, 1996, Assistant Vice
Assistant Vice President President of Plan Investments at
State Street Bank & Trust, 1776
Heritage Dr., Quincy, MA 02171
C. Beth Cotner Director, The Lyric Stage Theater, 140
Senior Vice President Clarendon St., Boston, MA; Prior to
September, 1995, Executive Vice
President, Director of U.S. Equity
Funds, Kemper Financial Services,
120 S. LaSalle St., Chicago, IL
60603
Kevin M. Cronin Prior February, 1997, Vice President
Senior Vice President and Portfolio Manager, MFS
Investment Management, 500 Boylston
St., Boston, MA 02117
Peter J. Curran Prior to January, 1996, Vice President
Senior Vice President ITT Sheraton Director Worldwide
Staffing, ITT Sheraton Corporation,
60 State St., Boston, MA 02109
William J. Curtin Prior to August, 1996, Managing
Managing Director Director, Chief Global Fixed-Income
Strategist, Lehman Brothers, 3 World
Financial Center, New York, NY 10285
Sean G. Daly Prior to March, 1997, Assistant
Assistant Vice President Vice President-Corporate Accounting,
Fleet Financial Group, 111
Westminster St., Providence, RI
02903
Michael W. Davis Prior to August, 1997, Technical
Vice President Finance Consultant, Bank of America
Mortgage, 50 California St., San
Francisco, CA 94111; Prior to
January, 1996, Consultant, Martin
Davis and Associates, 33215
Sandpiper Rd., Freemont, CA 94555
Michael G. Dolan Chairman-Finance Council, St. Mary's
Assistant Vice President Parish, 44 Myrtle St., Melrose, MA
02176; Member, School Advisory
Board, St. Mary's School, 44 Myrtle
St., Melrose, MA 02176
Andrea Donnelly Prior to March, 1996, Equity Trader,
Assistant Vice President Hellman Jordan Management Company,
Inc., 75 State St., Suite 2420,
Boston, MA 02109
Martha A. Donovan Prior to July, 1996, Assistant
Vice President Treasurer, CBS Inc., 51 W. 52nd St.,
New York, NY 10020
Nathan Eigerman Prior to July, 1996, Quantitative
Assistant Vice President Analyst, Fidelity Management &
Research, 82 Devonshire St., Boston,
MA 02110
Irene M. Esteves Prior to January, 1997, Vice
Managing Director President, Miller Brewing Co., 3939
West Highland Blvd. Milwaukee, WI.
53201
Ian C. Ferguson Prior to April, 1996, Chief
Senior Managing Director Executive Officer, HSBC Asset
Management, Ltd., 6 Bevis Marks,
London, England
Brian J. Fullerton Prior to November, 1995, Vice
Senior Vice President President, Pension and 401(k)
Derivatives Marketing, J.P. Morgan,
60 Wall Street, New York, NY 10260
J. Peter Grant Trustee, The Dover Church, Dover, MA
Senior Vice President 02030
Donnalee Guerin Prior to September, 1996, Corporate
Assistant Vice President Service Manager, Haemonetics Corp.,
400 Wood Rd., Braintree, MA 02184.
Paul E. Haagensen Director, Haagensen Research
Senior Vice President Foundation, 630 West 168th St., New
York, NY 10032
James B. Haines Prior to February, 1997, Associate,
Assistant Vice President Benefits Department, Ropes & Gray,
One International Place, Boston, MA
02110
Matthew C. Halperin Prior to April, 1996, Portfolio
Senior Vice President Manager, Allstate Insurance, 3075
Sanders Road, Northbrook, IL 60062
Mary S. Hapij Prior to March, 1997, Research
Assistant Vice President Library Manager, Pioneering
Management Corp., 60 State Street,
Boston, MA 02109; Prior to January,
1996, Information Resource Center
Manager, Copley Real Estate
Advisers, 399 Boylston St., Boston,
MA 02116
Nigel P. Hart Prior to October, 1997, Senior Vice
Vice President President and Portfolio Manager,
Investment Advisers, 3700 First Bank
Place, Minneapolis, MN 55402
Thomas R. Haslett Prior to December, 1996, Managing
Managing Director Director and Senior Portfolio
Manager, Montgomery Asset
Management, LTD, 101 California St.,
San Franscisco, CA 94111
Timothy E. Hawkins Prior to September, 1997, Investment
Vice President Officer, Liberty Mutual, 175
Berkeley St., Boston, MA 02116
Daniel E. Herbert Prior to April, 1996, Vice President
Vice President and Analyst, Keystone Group, Inc.,
200 Berkeley St., Boston, MA 02116
Thomas J. Hoey Prior to April, 1996, Securities
Vice President Analyst, Driehaus Capital
Management, Inc., 25 East Erie St.,
Chicago, IL 60610
Jerome J. Jacobs Prior to September, 1996, Head of
Managing Director Municipal Bond Group, Vanguard
Group Investments, 100 Vanguard
Blvd., Malvern, PA 19482
Omid Kamshad Prior to January, 1996, Investment
Senior Vice President Director, Lombard Odier, 13
Southampton Place, London, England,
WC1
Mary E. Kearney Trustee, Massachusetts Eye and Ear
Managing Director Infirmary, 243 Charles St., Boston,
MA 02114
Matthew W. Keenan Prior to December, 1996, Copy Editor,
Vice President The Boston Globe, 135 Morrisey
Blvd., Boston, MA 02107
Catherine Kennedy Prior to September, 1997, Principal
Vice President Morgan Stanley, 1585 Broadway, New
York, NY 10036
Jeffrey K. Kerrigan Prior to June, 1997, Vice President,
Assistant Vice President Fleet Investments, 75 State St.,
Boston, MA 02109
David R. King Prior to October, 1997, Vice President
Vice President Massachusetts Financial Services,
500 Boylston St., Boston, MA
Deborah F. Kuenstner Prior to March, 1997, Senior Portfolio
Senior Vice President Manager, DuPont Pension Fund
Investment, 1 Right Parkway,
Wilmington, DE 19850
Thomas J. Kurey Prior to August, 1997, Vice President
Vice President Everen Securities, 77 W. Wacker,
Chicago, IL 60601
Kenneth W. Lang Prior to April, 1997, Vice President,
Vice President Montgomery Securities, 600
Montgomery St., San Francisco, CA
94111
Coleman N. Lannum, III Prior to June, 1997, Director-
Vice President Investor Relations, Mallinckrodt,
Inc., 7733 Forsyth Blvd., St. Louis,
MO 63105
Lawrence J. Lasser Director, Marsh & McLennan Companies,
President, Director Inc., 1221 Avenue of the Americas,
and Chief Executive New York, NY 10020; Board Member,
Artery Business Committee, One
Beacon Street, Boston, MA 02108;
Board of Managers, Investment and
Finance Committees, Beth Israel
Hospital, 330 Brookline Avenue,
Boston, MA 02215; Board of
Governors, Executive Committee,
Investment Company Institute, 1401
H. St., N.W., Suite 1200,
Washington, DC 20005; Board of
Overseers, Museum of Fine Arts, 465
Huntington Ave., Boston, MA 02115;
Board Member, Trust for City Hall
Plaza, Three Center Plaza, Boston,
MA 02108; Board Member, The Vault
Coordinating Committee, c/o John
Hancock Mutual Life Insurance
Company, Law Sector, T-55, P.O. Box
111, Boston, MA 02117
Joan M. Leary Prior to January, 1997, Senior Tax
Assistant Vice President Manager, KPMG, 99 High St., Boston,
MA 02110
Julian W. Lim Prior to July, 1997, Manager, Fidelity
Assistant Vice President Management & Research, 82 Devonshire
St., Boston, MA 02110
Geirulv Lode Prior to July, 1997, Vice President
Vice President Chancellor Lgt. Asset Management,
1166 Avenue of the Americas, New
York, NY 10036
Diana R. Madonna Prior to January, 1997, Librarian,
Assistant Vice President Lipper Analytical Services, Inc.,
1380 Lawrence St., Denver CO 80204
Bruce D. Martin Prior to April, 1997, Vice President,
Vice President Eaton Vance, 29 Federal St., Boston,
MA 02110; Prior to August, 1996,
Senior Research Officer, John
Hancock Mutual Life Insurance Co.,
101 Huntington Ave., Boston, MA
02190
Saba Malak Prior to October, 1997, Consultant,
Vice President The Boston Consultant, Exchange
Place, Boston, MA 02109
Kevin Maloney Trustee, Town of Hanover, NH, Trustee
Managing Director of Trust Funds, Hanover, NH 03755;
President and Board Member,
Hampshire Cooperative Nursery
School, Dartmouth College Highway,
Hanover, NH 03755
Scott M. Maxwell Prior to March, 1997, Chief Financial
Managing Director Officer-Equity Division, Lehman
Brothers, 3 World Financial Center,
New York, NY 10285
William F. McGue Member, Advisory Committee, Academy
Managing Director of Finance, 2 Oliver St., Boston, MA
02109
Mary G. McNamee Prior to December, 1996, Recruitment
Assistant Vice President Consultant, 171 Walnut St. Boston,
MA 02110
Sandeep Mehta Prior to May, 1996, Vice President,
Vice President Wellington Management Co., 100
Vanguard Blvd., Malvern, PA 19355
Carol H. Miller Board Member, The Lyric Stage Theater,
Assistant Vice President 140 Clarendon St., Boston, MA 02116
William H. Miller Prior to October, 1997, Vice
Senior Vice President President and Asset Portfolio
Manager, Delawre Management, One
Commerce Square, Philadelphia, PA;
Prior to January, 1995, Vice
President and Analyst, Janney,
Montgomery, Scott, 1801 Market St.,
Philadelphia, PA 19104
Jeanne L. Mockard Trustee, The Bryn Mawr School, 109
Senior Vice President W. Melrose Avenue, Baltimore, MD
21210
Gerard I. Moore Prior to August, 1997, Vice
Vice President President/Equity Research, Boston
Company Asset Management, One
Boston, Place, Boston, MA 02109
Kelly A. Morgan Prior to September, 1996, Senior Vice
Senior Vice President President and International
Portfolio Manager, Alliance Capital
Management, 1345 Avenue of the
Americas, New York, NY 10020
David D. Motill Prior to April, 1996, Indepdendent
Vice President Consultant, 417 Valley Forge Rd.,
Wayne, PA 19087; Prior to July,
1995, Senior Investment Analyst, SEI
Investments, One Freedom Valley
Drive, Oaks, PA 19456
Lois O'Brien Prior to March, 1996, Director,
Assistant Vice President Training and Development, J. Baker,
Inc., 555 Turnpike St., Canton, MA
02021
Gayle M. O'Connell Prior to March, 1997, Assistant
Assistant Vice President Director of Human Resources, ITT
Sheraton Corporation, 60 State St.,
Boston, MA 02109
Stephen S. Oler Prior to June, 1997, Vice President,
Senior Vice President Templeton Investment Counsel, 500 E.
Broward Blvd., Ft. Lauderdale, FL
33394; Prior to February, 1996,
Senior Vice President, Baring Asset
Management, 125 High St., Boston, MA
02110
Carmel Peters Prior to April, 1997, Managing
Senior Vice President Director/Chief Investment Officer,
Asia Pacific, Wheelock NatWest
Investment Management, Ltd, NatWest
Tower, Times Square, Causeway Bay,
Hong Kong, China; Prior to February,
1996, Chief Investment Officer, Asia
Pacific, Rothschild Asset Management
Asia Pacific, Hong Kong, Alexandra
House, Central Hong Kong, China
William Perry Prior to September, 1997, Senior
Senior Vice President Trader, Fidelity Management &
Research, 82 Devonshire St., Boston,
MA 02110
Keith Plapinger Vice Chairman and Trustee, Advent
Vice President School, 17 Brimmer St., Boston, MA
02108
Charles E. Porter Director, The Boston Fulbright
Executive Vice President Committee, 99 Garden St., Cambridge,
MA; Trustee, Anatolia College and
The American College of
Thessaloniki, 555 10 Pycea,
Thessaloniki, Greece
George Putnam Chairman and Director, Putnam Mutual
Chairman and Director Funds Corp.; Director, The Boston
Company, Inc., One Boston Place,
Boston, MA 02108; Director, Boston
Safe Deposit and Trust Company, One
Boston Place, Boston, MA 02108;
Director, Freeport-McMoRan, Inc.,
200 Park Avenue, New York, NY 10166;
Director, General Mills, Inc., 9200
Wayzata Boulevard, Minneapolis, MN
55440; Director, Houghton Mifflin
Company, One Beacon Street, Boston,
MA 02108; Director, Marsh & McLennan
Companies, Inc., 1221 Avenue of the
Americas, New York, NY 10020;
Director, Rockefeller Group, Inc.,
1230 Avenue of the Americas, New
York, NY 10020
Keith Quinton Director, Eleazar, Inc., West Wheelock
Senior Vice President St., Hanover, NH 03755
Kimberly A. Raynor Prior to April, 1996, Principal,
Vice President Principal, Scudder, Stevens & Clark,
2 International Place, Boston, MA
02110
Paul A. Rokosz Prior to November, 1996, Analyst,
Vice President Kemper Financial Services, 120 S.
Casalle St., Chicago, IL 60606
Michael V. Salm Prior to November, 1997, Mortgage
Vice President Analyst, Blackrock Financial
Management, 345 Park Ave., New York,
NY 10010; Prior to May, 1996,
Trader, Nomura Securities, 2 World
Financial Center, New York, NY 10048
Robert J. Schoen Prior to June, 1997, Sole Proprietor,
Assistant Vice President Schoen Timing Strategies, 315 E.
21st St., New York, NY 10010
Justin M. Scott Director, DSI Properties (Neja) Ltd.
Managing Director Epping Rd., Reydon, Essex CM19 5RD;
Director, DSI Management (Neja)
Ltd., Epping Rd., Reydon, Essex CM19
5RD
Max S. Senter General Partner, M.S. Senter & Sons
Senior Vice President Partnership, 4900 Fayetteville, Rd.,
Raleigh, NC 27611
Mitchell D. Schultz Prior to September, 1996, Vice
Senior Vice President President, Human Resources, The Walt
Disney Co., 500 South Buena Vista
St., Burbank, CA 91510
Edward Shadek, Jr. Prior to March, 1997, Portfolio
Vice President Manager, Newhold Asset Management,
950 Haverford Rd., Bryn Mawr, PA
19010
Gordon H. Silver Trustee, Wang Center for the
Managing Director Performing Arts, 270 Tremont St.,
Boston, MA 02116
Erin J. Spatz Prior to May, 1996, Vice
Vice President President, Pioneering Management
Organization, 60 State St., Boston,
MA 02109
Steven Spiegel Director, Ultra Corp., 29 East
Senior Managing Director Madison St., Chicago, IL 60602;
Trustee, Babson College, One College
Drive, Wellesley, MA 02157; Prior to
December, 1994, Managing
Director/Retirement, Lehman
Brothers, Inc., 200 Vesey St., World
Financial Center, New York, NY 10285
Christopher A. Spurlock Prior to May, 1997, Sales Trader,
Vice President J.P. Morgan, 60 Wall St., New York,
NY; Prior to March, 1996, Equity
Trader, Pioneer Group, 60 State St.,
Boston, MA 02109
Michael P. Stack Prior to November, 1997, Senior
Senior Vice President Vice President and Portfolio
Manager, Independence Investment
Associates, 53 State St., Boston, MA
02109
Casey Strumpf Prior to January, 1997, Director, Blue
Senior Vice President Cross and Blue Shield, 100 Summer
St., Boston, MA 02110
Maryann Sullivan Prior to August, 1996, Unit Manager,
Assistant Vice President First Data Services, 4400 Computer
Dr., Westboro, MA 01581
Heidi A. Tuchen Prior to December 1996, Vice President
Assistant Vice President and Credit Officer, Fleet Financial
Group, 75 State St., Boston, MA
02109
Scott G. Vierra Prior to September, 1997, Staffing
Vice President Lead, Cisco Systems, 250 Apollo
Drive, Chelmsford, MA 01824
David L. Waldman Prior to June, 1997, Senior Portfolio
Managing Director Manager, Lazard Feres Asset
Management, 30 Rockefeller Center,
New York, NY 10112
Paul C. Warren Prior to May, 1997, Director
Senior Vice President IDS Fund Management, LT, One Pacific
Place, Squuensway, Hong Kong, China
Eric Wetlaufer Prior to November, 1997, Managing
Managing Director Director and Portfolio Manager,
Cadence Capital Management, Exchange
Place, Boston, MA 02109
Burton Wilson Prior to March, 1997, Associate
Assistant Vice President Investments-Banking, Robertson
Stephens & Co., 555 California St.,
Suite 2600, San Francisco, CA 94104
Michael R. Yogg Prior to November, 1996, Portfolio
Senior Vice President Manager, State Street Research &
Management, One Financial Center,
Boston, MA 02111
Scott D. Zaleski Prior to May, 1997, Investment Officer
Assistant Vice President State Street Bank & Trust, 1776
Heritage Dr., Quincy, MA 02171;
Prior to September, 1996, Investment
Associate Fidelity Investments, 82
Devonshire St., Boston, MA 02109
Michael P. Zeller Prior to July, 1997, Sales Manager,
Vice President NYNEX Information Resources, 35
Village Rd., Middleton, MA 01949
William E. Zieff Prior to December, 1996, Global Asset
Managing Director Allocation, Granthham, Mayo, Van
Otterloo & Co., 40 Rowes Wharf,
Boston, MA 02110
<PAGE>
Item 29. Principal Underwriter
(a) Putnam Mutual Funds Corp. is the principal underwriter for
each of the following investment companies, including the
Registrant:
Putnam American Government Income Fund, Putnam Arizona Tax Exempt
Income Fund, Putnam Asia Pacific Growth Fund, Putnam Asset
Allocation Funds, Putnam Balanced Retirement Fund, Putnam
California Tax Exempt Income Fund, Putnam California Tax Exempt
Money Market Fund, Putnam Capital Appreciation Fund, Putnam
Convertible Income-Growth Trust, Putnam Diversified Equity Trust,
Putnam Diversified Income Trust, Putnam Diversified Income Trust
II, Putnam Equity Income Fund, Putnam Europe Growth Fund, Putnam
Federal Income Trust, Putnam Florida Tax Exempt Income Fund,
Putnam Funds Trust, The George Putnam Fund of Boston, Putnam
Global Governmental Income Trust, Putnam Global Growth Fund,
Putnam Global Natural Resources Fund, The Putnam Fund for Growth
and Income, Putnam Growth and Income Fund II, Putnam Health
Sciences Trust, Putnam High Yield Trust, Putnam High Yield
Advantage Fund, Putnam High Yield Municipal Trust, Putnam Income
Fund, Putnam Intermediate U.S. Government Income Fund, Putnam
Investment Funds, Putnam Investors Fund, Putnam Massachusetts Tax
Exempt Income Fund, Putnam Michigan Tax Exempt Income Fund,
Putnam Minnesota Tax Exempt Income Fund, Putnam Money Market
Fund, Putnam Municipal Income Fund, Putnam New Jersey Tax Exempt
Income Fund, Putnam New Opportunities Fund, Putnam New York Tax
Exempt Income Fund, Putnam New York Tax Exempt Money Market Fund,
Putnam New York Tax Exempt Opportunities Fund, Putnam Ohio Tax
Exempt Income Fund, Putnam OTC & Emerging Growth Fund, Putnam
Pennsylvania Tax Exempt Income Fund, Putnam Preferred Income
Fund, Putnam Tax Exempt Income Fund, Putnam Tax Exempt Money
Market Fund, Putnam Tax-Free Income Trust, Putnam U.S. Government
Income Trust, Putnam Utilities Growth and Income Fund, Putnam
Variable Trust, Putnam Vista Fund, Putnam Voyager Fund, Putnam
Voyager Fund II.<PAGE>
<TABLE>
<CAPTION>
(b) The directors and officers of the Registrant's principal underwriter are listed
below. The principal business address of each person is One Post Office
Square, Boston, MA 02109:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
<C> <C> <C>
John V. Adduci Vice President None
Frank Albanese Vice President None
Christopher A. Alders Senior Vice President None
Christopher S. Alpaugh Vice President None
Paulette C. Amisano Vice President None
Jeanne Antill Assistant Vice President None
Margaret Andrews Vice President None
Steven E. Asher Senior Vice President None
Scott A. Avery Senior Vice President None
Christian E. Aymond Vice President None
Suzanne J. Battit Vice President None
Steven M. Beatty Senior Vice President None
John J. Bent Vice President None
Thomas A. Beringer Vice President None
Sharon A. Berka Vice President None
Kathleen A. Blackman Assistant Vice President None
John F. Boneparth Managing Director None
Keith R. Bouchard Senior Vice President None
Linwood E. Bradford, Jr. Vice President None
Linda M. Brady Assistant Vice President None
Mary Ann Brennan Assistant Vice President None
Leslee R. Bresnahan Senior Vice President None
James D. Brockelman Senior Vice President None
Joel S. Brockman Vice President None
Timothy K. Brown Senior Vice President None
Gail D. Buckner Senior Vice President None
Robert W. Burke Senior Managing Director None
Susan D. Cabana Vice President None
Thomas C. Callahan Assistant Vice President None
Robert Capone Vice President None
Patricia A. Cartwright Assistant Vice President None
Janet Casale-Sweeney Senior Vice President None
David M. Casey Vice President None
James R. Castle, Jr. Vice President None
Mary Clare Chase Vice President None
Louis F. Chrostowski Vice President None
Daniel J. Church Vice President None
Richard B. Clark Senior Vice President None
Mary Clermont Assistant Vice President None
John C. Clinton Assistant Vice President None
Kathleen M. Collman Managing Director None
Mark L. Coneeny Senior Vice President None
Clare D. Connelly Assistant Vice President None
Donald A. Connelly Senior Vice President None
Karen E. Connolly Assistant Vice President None
Barry M. Conyers Assistant Vice President None
F. Nicholas Corvinus Senior Vice President None
Thomas A. Cosmer Senior Vice President None
Michele A. Cranston Assistant Vice President None
Chad H. Cristo Vice President None
Peter J. Curran Senior Vice President None
Jessica E. Dahill Vice President None
Kenneth L. Daly Senior Vice President None
Sean G. Daly Assistant Vice President None
Edward H. Dane Vice President None
Nancy M. Days Assistant Vice President None
Pamela De Oliveira-Smith Assistant Vice President None
Lisa M. DeMont Vice President None
Teresa F. Dennehy Vice President None
Karen E. DiStasio Vice President None
Michael G. Dolan Assistant Vice President None
Scott M. Donaldson Vice President None
Deirdre E. Duffy Senior Vice President None
Emily J. Durbin Vice President None
David B. Edlin Managing Director None
Gail A. Eisenkraft Managing Director None
James M. English Senior Vice President None
Vincent Esposito Managing Director None
Irene M. Esteves Director and Managing Director None
Mary K. Farrell Assistant Vice President None
Michael J. Fechter Vice President None
Susan H. Feldman Senior Vice President None
C. Nancy Fisher Managing Director None
Mitchell B. Fishman Senior Vice President None
Joseph C. Fiumara Vice President None
Patricia C. Flaherty Senior Vice President None
Brian J. Fullerton Senior Vice President None
Judy S. Gates Senior Vice President None
Joseph P. Gennaco Senior Vice President None
Mark P. Goodfellow Assistant Vice President None
Robert Goodman Managing Director None
Carol J. Gould Assistant Vice President None
Anthony J. Grace Assistant Vice President None
Linda K. Grace Vice President None
Daniel W. Greenwood Vice President None
Jill Grossberg Assistant Vice President None
Denise Grove Assistant Vice President None
Jeffrey P. Gubala Vice President None
Donnalee Guerin Assistant Vice President None
Salvatore P. Guerra Assistant Vice President None
James B. Haines Assistant Vice President None
Debra Hall Assistant Vice President None
James E. Halloran Vice President None
Thomas W. Halloran Senior Vice President None
Meghan C. Hannigan Assistant Vice President None
John D. Harbeck Vice President None
Bruce D. Harrington Assistant Vice President None
Craig W. Hartigan Vice President None
Howard W. Hawkins, III Vice President None
Deanna R. Hayes-Castro Vice President None
Dennis P. Hearns Senior Vice President None
Gayle A. Hedstrom Assistant Vice President None
Paul P. Heffernan Vice President None
Susan M. Heimanson Vice President None
James Hickey Vice President None
Bess J.M. Hochstein Senior Vice President None
Jeremiah K. Holly, Sr. Vice President None
Maureen A. Holmes Assistant Vice President None
Paula J. Hoyt Assistant Vice President None
William J. Hurley Managing Director and Controller None
Dwight D. Jacobsen Managing Director None
Kevin M. Joyce Senior Vice President None
Karen R. Kay Senior Vice President None
Mary E. Kearney Managing Director None
John P. Keating Vice President None
Brian J. Kelley Vice President None
A. Siobahn Kelly Assistant Vice President None
Anne Kinsman Assistant Vice President None
Deborah H. Kirk Senior Vice President None
Jill A. Koontz Senior Vice President None
Linda G. Kraunelis Assistant Vice President None
Howard H. Kreutzberg Senior Vice President None
Marjorie B. Krieger Assistant Vice President None
Charles Lacasia Vice President None
James D. Lathrop Senior Vice President None
Joan M. Leary Assistant Vice President None
Charles C. Ledbetter Vice President None
Margaret Leipsitz Assistant Vice President None
Kevin Lemire Assistant Vice President None
Anthony J. Leonard Vice President None
Eric S. Levy Senior Vice President None
Edward V. Lewandowski Senior Vice President None
Edward V. Lewandowski, Jr. Vice President None
Samuel L. Lieberman Vice President None
David M. Lifsitz Vice President None
David R. Lilien Vice President None
Ann Marie Linehan Assistant Vice President None
Lisa M. Litant Assistant Vice President None
Thomas W. Littauer Managing Director None
Maura A. Lockwood Vice President None
Rufino R. Lomba Vice President None
Gregory T. Long Vice President None
Peter V. Lucas Senior Vice President None
Kevin Lucey Assistant Vice President None
Robert F. Lucey Director None
Robert F. Lyons Assistant Vice President None
Ann Malatos Assistant Vice President None
Bonnie Mallin Vice President None
Leslie Mannix Senior Vice President None
Frederick S. Marius Vice President None
Karen A. McCafferty Vice President None
Anne B. McCarthy Assistant Vice President None
Paul McConville Vice President None
Brian McCracken Assistant Vice President None
Bruce A. McCutcheon Vice President None
Daniel E. McDermott Assistant Vice President None
Mark J. McKenna Senior Vice President None
Mary G. McNamee Assistant Vice President None
Claye A. Metelmann Vice President None
Eric D. Milgroom Assistant Vice President None
Bart D. Miller Senior Vice President None
Janis E. Miller Managing Director None
Jeffery M. Miller Managing Director None
Ronald K. Mills Vice President None
Matthew P. Mintzer Senior Vice President None
Kimberly A. Monahan Vice President None
Paul R. Moody Vice President None
Peter M. Moore Assistant Vice President None
Mitchell Moret Senior Vice President None
Jean Moses Senior Vice President None
Barry L. Mosher Assistant Vice President None
Donald E. Mullen Vice President None
Paul G. Murphy Vice President None
Brendan R. Murray Vice President None
Robert Nadherny Vice President None
Alexander L. Nelson Managing Director None
Amy Jane Newell Vice President None
John P. Nickodemus Vice President None
Gail A. Nickse Assistant Vice President None
Kristen P. O'Brien Senior Vice President None
Lois C. O'Brien Vice President None
Nancy E. O'Brien Vice President None
Gayle M. O'Connell Assistant Vice President None
Joseph R. Palombo Managing Director None
Scott A. Papes Vice President None
Cynthia O. Parr Vice President None
Dale M. Pelletier Vice President None
Samuel W. Perry Vice President None
Jennifer H. Peterson Assistant Vice President None
Kate Peterson Assistant Vice President None
John G. Phoenix Vice President None
Joseph Phoenix Senior Vice President None
Keith Plapinger Vice President None
Jeffrey P. Pollock Vice President None
Margaret J. Portorski Assitant Vice President None
Douglas H. Powell Vice President None
Howard B. Present Senior Vice President None
Jane E. Price Assistant Vice President None
Scott M. Pulkrabek Vice President None
George Putnam Director Chairman & President
Kimberly Raynor Vice President None
W. Frank Richardson Vice President None
George A. Rio Senior Vice President None
Kris Rodammer Vice President None
Debra V. Rothman Vice President None
Robert B. Rowe Vice President None
Kevin A. Rowell Senior Vice President None
Charles A. Ruys de Perez Senior Vice President None
Deborah A. Ryan Vice President None
Catherine A. Saunders Senior Vice President None
Robbin L. Saunders Vice President None
Karl W. Saur Vice President None
Michael Scanlon Vice President None
Shannon D. Schofield Vice President None
Mitchell D. Schultz Managing Director None
Curt A. Schultzberg Assistant Vice President None
Christine A. Scordato Senior Vice President None
Joseph W. Scott Assistant Vice President None
Elizabeth R. Segers Senior Vice President None
John B. Shamburg Vice President None
Kathleen G. Sharpless Managing Director None
Terence B. Shea Assistant Vice President None
William N. Shiebler Director and President Vice President
Robert J. Shull, II Vice President None
Gordon H. Silver Senior Managing Director Vice President
John Skistimas, Jr. Assistant Vice President None
Stuart C. Smith Assistant Vice President None
Peter J. Southard Vice President None
Steven Spiegel Senior Managing Director None
Nicholas T. Stanojev Senior Vice President None
Paul R. Stickney Vice President None
J. Bradely Stillwagon Vice President None
Casey Strumpf Senior Vice President None
Brian L. Sullivan Senior Vice President None
Elaine M. Sullivan Vice President None
Guy Sullivan Senior Vice President None
Kevin J. Sullivan Vice President None
Maryann Sullivan Assistant Vice President None
Moira Sullivan Vice President None
George C. Sutherland Vice President None
Maureen C. Tallon Vice President None
B. Iris Tanner Assistant Vice President None
April M. Tavares Assistant Vice President None
David S. Taylor Vice President None
John R. Telling Vice President None
Cynthia Tercha Vice President None
Tracy A. Thomas Assistant Vice President None
Richard B. Tibbetts Senior Vice President None
Patrice M. Tirado Vice President None
Janet E. Tosi Vice President None
Bonnie L. Troped Vice President None
Christine M. Twigg Assistant Vice President None
Douglas J. Vander Linde Senior Vice President None
John R. Verani Senior Vice President Vice President
Rajeshiri Vora Vice President None
Mitchell J. Waters Vice President None
Karen Waystack Assistant Vice President None
Dierdre West-Smith Assistant Vice President None
Brian Whalen Vice President None
Edward F. Whalen Senior Vice President None
Peter R. Wheeler Senior Vice President None
J. Gregg Whitaker Vice President None
J. Bennett White Vice President None
Robert A. Williams Vice President None
Leigh T. Williamson Vice President None
Jane Wolfson Senior Vice President None
Benjamin I. Woloshin Vice President None
William H. Woolverton Managing Director None
Michael P. Zeller Vice President None
Laura J. Zografos Vice President None
</TABLE>
Item 30. Location of Accounts and Records
Persons maintaining physical possession of accounts, books
and other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the Rules promulgated
thereunder are Registrants' Clerk, Beverly Marcus; Registrants'
investment adviser, Putnam Investment Management, Inc.;
Registrants' principal underwriter, Putnam Mutual Funds Corp.;
Registrants' custodian, Putnam Fiduciary Trust Company ("PFTC");
and Registrants' transfer and dividend disbursing agent, Putnam
Investor Services, a division of PFTC. The address of the Clerk,
investment adviser, principal underwriter, custodian and transfer
and dividend disbursing agent is One Post Office Square, Boston,
Massachusetts 02109.
Item 31. Management Services
None.
Item 32. Undertakings
Each Registrant undertakes to furnish to each person to whom
a prospectus of that Registrant is delivered a copy of that
Registrant's latest annual report to shareholders, upon request
and without charge.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectuses and Statement of Additional Information constituting
parts of this Post-Effective Amendment No. 28 and 12 to
the Registration Statements on Form N-1A (File No. 2-55091
and 33-15238, respectively,) of Putnam Money Market Fund
and Putnam Tax Exempt Money Market Fund, respectively ,
(the "Registration Statements") of our report dated
November 7, 1997 , relating to the financial statements and
financial highlights appearing in the September 30, 1997
Annual Report of Putnam Money Market Fund, which financial
statements and financial highlights are also incorporated by
reference into the Registration Statements . We also
consent to the references to us under the heading "Independent
Accountants and Financial Statements" in such Statement of
Additional Information and under the heading "Financial
Highlights " in such Prospectuses.
PRICE WATERHOUSE LLP
Boston, Massachusetts
January 28, 1998
CONSENT OF INDEPENDENT ACCOUNTANTS
FOR PUTNAM TAX EXEMPT MONEY MARKET FUND
We consent to the incorporation by reference in the
Prospectus and Statement of Additional Information constituting
parts of Post-Effective Amendment No. 12 to the
Registration Statement of Putnam Tax Exempt Money Market Fund on
Form N-1A (File No. 33-15238 ) of our report dated
November 11, 1997, on our audit of the financial
statements and financial highlights of the Fund, which report is
included in the Annual Report for Putnam Tax Exempt Money Market
Fund for the year ended September 30, 1997 , which is
incorporated by reference in the Registration Statement.
We also consent to the reference to our firm under the
caption "Independent Accountants and Financial Statements" in the
Statement of Additional Information and under the heading
"Financial highlights" in such Prospectus.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
January 23, 1998
<PAGE>
NOTICE
A copy of the Agreements and Declarations of Trust of Putnam
Money Market Fund and Putnam Tax Exempt Money Market Fund is on
file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this instrument is
executed on behalf of each Registrant by an officer of each
Registrant as an officer and not individually and the obligations
of or arising out of this instrument are not binding upon any of
the Trustees, officers or shareholders individually but are
binding only upon the assets and property of the Registrants.
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee of Putnam Balanced
Retirement Fund, hereby severally constitute and appoint
George Putnam, Charles E. Porter, Gordon H. Silver, Edward A.
Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of
them singly, my true and lawful attorneys, with full power to
them and each of them, to sign for me, and in my name and in the
capacity indicated below, the Registration Statement on Form N-1A
of Putnam Balanced Retirement Fund and any and all
amendments (including post-effective amendments) to said
Registration Statement and to file the same with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto my said
attorneys, and each of them acting alone, full power and
authority to do and perform each and every act and thing
requisite or necessary to be done in the premises, as fully to
all intents and purposes as he might or could do in person, and
hereby ratify and confirm all that said attorneys or any of them
may lawfully do or cause to be done by virtue thereof.
WITNESS my hand and seal on the date set forth below.
Signature Title Date
/s/ W. Thomas Stephens
- --------------------- Trustee October 3,
1997
W. Thomas Stephens
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee of Putnam Balanced
Retirement Fund, hereby severally constitute and appoint
George Putnam, Charles E. Porter, Gordon H. Silver, Edward A.
Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of
them singly, my true and lawful attorneys, with full power to
them and each of them, to sign for me, and in my name and in the
capacity indicated below, the Registration Statement on Form N-1A
of Putnam Balanced Retirement Fund and any and all
amendments (including post-effective amendments) to said
Registration Statement and to file the same with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto my said
attorneys, and each of them acting alone, full power and
authority to do and perform each and every act and thing
requisite or necessary to be done in the premises, as fully to
all intents and purposes as he might or could do in person, and
hereby ratify and confirm all that said attorneys or any of them
may lawfully do or cause to be done by virtue thereof.
WITNESS my hand and seal on the date set forth below.
Signature Title Date
/s/ John H. Mullin, III
--------------------- Trustee November 6,
1997
John H. Mullin, III
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee of Putnam Balanced Retirement
Fund, hereby severally constitute and appoint George Putnam,
Charles E. Porter, Gordon H. Silver, Edward A. Benjamin, Timothy
W. Diggins and John W. Gerstmayr, and each of them singly, my
true and lawful attorneys, with full power to them and each of
them, to sign for me, and in my name and in the capacity
indicated below, the Registration Statement on Form N-1A of
Putnam Balanced Retirement Fund and any and all amendments
(including post-effective amendments) to said Registration
Statement and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto my said attorneys, and each of
them acting alone, full power and authority to do and perform
each and every act and thing requisite or necessary to be done in
the premises, as fully to all intents and purposes as he might or
could do in person, and hereby ratify and confirm all that said
attorneys or any of them may lawfully do or cause to be done by
virtue thereof.
WITNESS my hand and seal on the date set forth below.
Signature Title Date
/s/ Paul L. Joskow
- --------------------- Trustee November 6, 1997
Paul L. Joskow
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrants certify
that they meet all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and have duly caused this Amendment to
their Registration Statement to be signed on their behalf by the
undersigned, thereunto duly authorized, in the City of Boston,
and The Commonwealth of Massachusetts, on the 28th day of
January, 1998 .
PUTNAM MONEY MARKET FUND
PUTNAM TAX EXEMPT MONEY MARKET FUND
By: Gordon H. Silver, Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to the Registration Statements of Putnam Money
Market Fund and Putnam Tax Exempt Money Market Fund have been
signed below by the following persons in the capacities and on
the dates indicated:
Signature Title
George Putnam President and Chairman of the Board;
Principal Executive Officer; Trustee
John D. Hughes Senior Vice President; Treasurer and
Principal Financial Officer
Paul G. Bucuvalas Assistant Treasurer and Principal
Accounting Officer
Jameson A. Baxter Trustee
Hans H. Estin Trustee
John A. Hill Trustee
Ronald J. Jackson Trustee
Paul L. Joskow Trustee
Elizabeth T. Kennan Trustee
Lawrence J. Lasser Trustee
John H. Mullin, III Trustee
Robert E. Patterson Trustee
Donald S. Perkins Trustee
William F. Pounds Trustee
George Putnam, III Trustee
A.J.C. Smith Trustee
W. Thomas Stephens Trustee
W. Nicholas Thorndike Trustee
By: Gordon H. Silver,
as Attorney-in-Fact
January 28th, 1998
DEALER SERVICE AGREEMENT
Between: and
PUTNAM MUTUAL FUNDS CORP.
General Distributor of
The Putnam Family of Mutual Funds
One Post Office Square
Boston, MA 02109
We are pleased to inform you that, pursuant to the terms of this
Dealer Service Agreement, we are authorized to pay you service
fees in connection with the accounts of your customers that hold
shares of certain Putnam Funds listed in SCHEDULE 1 that have
adopted distribution plans pursuant to Rule 12b-1 (the "12b-1
Funds"). Payment of the service fees is subject to your initial
and continuing satisfaction of the following terms and conditions
which may be revised by us from time to time:
1. QUALIFICATION REQUIREMENTS
(a) You have entered into a Sales Contract with us with respect
to the Putnam Family of Mutual Funds (the "Putnam Funds").
(b) You are the dealer of record for accounts in Putnam Funds
having an aggregate average net asset value of at least the
minimum amount set forth in SCHEDULE 2 (DEALER FIRM REQUIREMENTS)
during the period for which a service fee is to be paid. Putnam
Fund accounts are accounts in any open-end Putnam Fund, but
excluding any accounts for your firm's own retirement plans.
(c) One or more of your current employees must be the designated
registered representative(s) on accounts in Putnam Funds having
an aggregate average net asset value of at least the minimum
amount set forth in SCHEDULE 2 (REGISTERED REPRESENTATIVE
REQUIREMENTS) during the period for which a service fee is to be
paid.
(d) You will provide the following information and agree that we
will be entitled to rely on the accuracy of such information in
updating our records for determining the levels of service fees
payable to you under the terms of this Agreement. You understand
that such payments will be based solely on Putnam's records.
For each Putnam Fund account registered in the name of
one of your customers, you will advise us, preferably
by electronic means, before the end of the second month
in each calendar quarter, of the registered
representative's name, identification number, branch
number, and telephone number.<PAGE>
2. SERVICE FEES
(a) If you meet the qualification requirements set forth above
in Paragraph 1, you will be paid a service fee on assets in the
12b-1 Funds for which you are the dealer of record and which are
serviced by a registered representative of your firm meeting the
Registered Representative Requirements, if any, at the annual
rates specified (excluding any accounts for your firm's own
retirement plans).
(b) You understand and agree that:
(i) all service fee payments are subject to the
limitations contained in each 12b-1 Fund's Distribution
Plan, which may be varied or discontinued at any time;
(ii) you shall waive the right to receive service fee
payments to the extent any 12b-1 Fund fails to make
payments to us under its distribution plan with us;
(iii) your failure to provide the services described in
Paragraph 4 below as may be amended by us from time to
time, or otherwise comply with the terms of this
Agreement, will render you ineligible to receive
service fees; and
(iv) failure of an assigned registered representative
to provide services required by this Agreement will
render that representative's accounts ineligible as
accounts on which service fees are paid.
3. PAYMENTS AND COMMUNICATIONS TO REGISTERED REPRESENTATIVES
(a) You will pass through to your registered representatives a
significant share of the service fees paid to you pursuant to
this Agreement.
(b) You will assist us in distributing to your registered
representatives periodic statements which we will have prepared
showing the aggregate average net asset value of shares in Putnam
Funds with which they are credited on our records.<PAGE>
4. REQUIRED SERVICES
(a) You will assign one of your registered representatives to
each Putnam Fund account on your records and reassign the Putnam
Fund account should that representative leave your firm.
(b) You and your registered representatives will assist us and
our affiliates in providing the following services to
shareholders of the Putnam Funds:
(i) Maintain regular contact with shareholders in
assigned accounts and assist in answering inquiries
concerning the Putnam Funds.
(ii) Assist in distributing sales and service
literature provided by us, particularly to the
beneficial owners of accounts registered in your name
(nominee name accounts).
(iii)Assist us and our affiliates in the establishment
and maintenance of shareholder accounts and records.
(iv) Assist shareholders in effecting administrative
changes, such as changing dividend options, account
designations, address, automatic investment programs or
systematic investment plans.
(v) Assist in processing purchase and redemption
transactions.
(vi) Provide any other information or services as the
customer or we may reasonably request.
(c) You will support our marketing efforts by granting
reasonable requests for visits to your offices by our wholesalers
and by including all Putnam Funds on your "approved" list.
(d) Your compliance with the service requirements set forth in
this Agreement will be evaluated by us from time to time by
surveying shareholder satisfaction with service, by monitoring
redemption levels of shareholder accounts assigned to you and by
such other methods as we deem appropriate.
(e) The provisions of this Paragraph 4 may be amended by us from
time to time upon notice to you.
5. AMENDMENT
This Agreement, including any Schedule hereto, shall be deemed
amended as provided in any written notice delivered by us to you.<PAGE>
6. EFFECTIVE PERIOD AND TERMINATION
The provisions of this Agreement shall remain in effect for not
more than one year from the date of its execution or adoption and
thereafter for successive annual periods only so long as such
continuance is specifically approved at least annually by the
Trustees of each of the 12b-1 Funds in conformity with Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act"). This
Agreement shall automatically terminate in the event of its
assignment (as defined by the 1940 Act). In addition, this
Agreement may be terminated at any time, without the payment of
any penalty, by either party upon written notice delivered or
mailed by registered mail, postage prepaid, to the other party,
or, as provided in Rule 12b-1 under the 1940 Act, by the Trustees
of any 12b-1 Fund or by the vote of the holders of the
outstanding voting securities of any 12b-1 Fund.
7. WRITTEN REPORTS
Putnam Mutual Funds Corp. shall provide the Trustees of each of
the 12b-1 Funds, and such Trustees shall review at least
quarterly, a written report of the amounts paid to you under this
Agreement and the purposes for which such expenditures were made.
8. MISCELLANEOUS
(a) All communications mailed to us should be sent to the
address listed below. Any notice to you shall be duly given if
mailed or delivered to you at the address specified by you below.
(b) The provisions of this Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts.
Very truly yours,
PUTNAM MUTUAL FUNDS CORP.
By: ------------------------------
William N. Shiebler, President
and Chief Executive Officer<PAGE>
We accept and agree to the foregoing Agreement as of the date set
forth below.
Dealer: -------------------------
By: ----------------------------
Authorized Signature, Title
------------------------------
------------------------------
Address
Dated: -------------------------
Please return the signed Putnam copy of this Agreement to Putnam
Mutual Funds Corp., P.O. Box 41203, Providence, RI 02940-1203.<PAGE>
SCHEDULE 1:
THE 12B-1 FUNDS
Service fees will be paid on the following Putnam Funds at the
rates set forth in the Prospectus of that Fund:
Putnam Adjustable Rate U.S. Government Fund
Putnam American Government Income Fund
Putnam Arizona Tax Exempt Income Fund
Putnam Asia Pacific Growth Fund
Putnam Asset Allocation Funds
-Putnam Asset Allocation: Growth Portfolio
-Putnam Asset Allocation: Balanced Portfolio
-Putnam Asset Allocation: Conservative Portfolio
Putnam Balanced Retirement Fund
Putnam California Tax Exempt Income Trust
-Putnam California Intermediate Tax Exempt Fund
-Putnam California Tax Exempt Income Fund
Putnam Capital Appreciation Fund
Putnam Convertible Income-Growth Trust
Putnam Diversified Equity Trust
Putnam Diversified Income Trust
Putnam Equity Income Fund
Putnam Europe Growth Fund
Putnam Federal Income Trust
Putnam Florida Tax Exempt Income Fund
The George Putnam Fund of Boston
Putnam Global Governmental Income Trust
Putnam Global Growth Fund
The Putnam Fund for Growth and Income
Putnam Growth and Income Fund II
Putnam Health Sciences Trust
Putnam High Yield Advantage Fund
Putnam High Yield Trust
Putnam Income Fund
Putnam Intermediate Tax Exempt Fund
Putnam Intermediate U.S. Government Fund
Putnam Investment Funds
-Putnam International New Opportunities Fund
Putnam Investors Fund
Putnam Massachusetts Tax Exempt Income Fund
Putnam Michigan Tax Exempt Income Fund
Putnam Minnesota Tax Exempt Income Fund
Putnam Money Market Fund
Putnam Municipal Income Fund
Putnam Natural Resources Fund
Putnam New Jersey Tax Exempt Income Fund
Putnam New Opportunities Fund
Putnam New York Tax Exempt Income Trust
-Putnam New York Intermediate Tax Exempt Fund
-Putnam New York Tax Exempt Income Fund
Putnam New York Tax Exempt Opportunities Fund
Putnam Ohio Tax Exempt Income Fund
Putnam OTC Emerging Growth Fund
Putnam Overseas Growth Fund
Putnam Pennsylvania Tax Exempt Income Fund
Putnam Preferred Income Trust
Putnam Tax Exempt Income Fund
Putnam Tax-Free Income Trust
-Putnam Tax-Free High Yield Fund
-Putnam Tax-Free Insured Fund
Putnam U.S. Government Income Trust
Putnam Utilities Growth and Income Fund
Putnam Vista Fund
Putnam Voyager Fund
Putnam Voyager Fund II
SCHEDULE 2: MINIMUM ASSETS
DEALER FIRM REQUIREMENTS. The minimum aggregate average net
asset value of all accounts in Putnam Funds specified by
Paragraph 1(b) is $250,000. We will review this requirement
prior to the start of each year and inform you of any changes.
REGISTERED REPRESENTATIVE REQUIREMENTS. With respect to
Paragraph 1(c), there is no minimum asset qualification
requirement in the Putnam Funds applicable to each of your
representatives. We will review this requirement prior to the
start of each year and inform you of any changes.
NF-57
2/7/97
FINANCIAL INSTITUTION
SERVICE AGREEMENT
Between: and
PUTNAM MUTUAL FUNDS CORP.
General Distributor of
The Putnam Family of Mutual Funds
One Post Office Square
Boston, MA 02109
We are pleased to inform you that, pursuant to the terms of this
FINANCIAL INSTITUTION SERVICE AGREEMENT, we are authorized to pay
you service fees in connection with the accounts of your
customers that hold shares of certain Putnam funds listed in
SCHEDULE 1 that have adopted distribution plans pursuant to Rule
12b-1 (the "12b-1 Funds"). Payment of the service fees is
subject to your initial and continuing satisfaction of the
following terms and conditions which may be revised by us from
time to time:
1. QUALIFICATION REQUIREMENTS
(a) You have entered into a Financial Institution Sales Contract
with us with respect to the Putnam Family of Mutual Funds (the
"Putnam Funds"), whose shares you have agreed to make available
to your customers on an agency basis.
(b) You are the financial institution of record for accounts in
Putnam Funds having an aggregate average net asset value of at
least the minimum amount set forth in SCHEDULE 2 (FINANCIAL
INSTITUTION REQUIREMENTS) during the period for which a service
fee is to be paid. Putnam Fund accounts are accounts in any
open-end Putnam Fund but excluding any accounts for your
organization's own retirement plans.
(c) One or more of your current employees must be the designated
registered representative(s) in the case of a bank affiliated
dealer, or agent representative(s) in the case of a bank (both
referred to as "representatives"), on accounts in Putnam Funds
having an aggregate average net asset value of at least the
minimum amount set forth in SCHEDULE 2 (REPRESENTATIVE
REQUIREMENTS) during the period for which a service fee is to be
paid.
(d) You will provide the following information and agree that we
will be entitled to rely on the accuracy of such information in
updating our records for determining the levels of service fees
payable to you under the terms of this Agreement. You understand
that such payments will be based solely on Putnam's records:<PAGE>
For each Putnam Fund account registered in the name of one
of your customers, you will advise us, preferably by
electronic means, before the end of the second month in each
calendar quarter, of the representative's name,
identification number, branch number, and telephone number.
2. SERVICE FEES
(a) If you meet the qualification requirements set forth above in
Paragraph 1, you will be paid, at the end of each calendar
quarter, a service fee on assets of your customers in the 12b-1
Funds for which you are the financial institution of record and
which are serviced by a representative of your organization
meeting the Representative Requirements, if any at the annual
rates specified (excluding any accounts for your organization's
own retirement plans), provided that you have evaluated such
service fees and have concluded that it is consistent with
applicable laws, rules, regulations and regulatory
interpretations for you to receive such service fees.
(b) You understand and agree that:
(i) all service fee payments are subject to the limitations
contained in each 12b-1 Fund's Distribution Plan, which may
be varied or discontinued at any time;
(ii) you shall waive the right to receive service fee
payments to the extent any 12b-1 Fund fails to make
payments to us under its distribution plan with us;
(iii)your failure to provide the services described in
Paragraph 4 below as may be amended by us from time to time,
or otherwise comply with the terms of this Agreement, will
render you ineligible to receive service fees; and
(iv) failure of an assigned representative to provide
services required by this Agreement will render that
representative's accounts ineligible as accounts on which
service fees are paid.
3. PAYMENTS AND COMMUNICATIONS TO REPRESENTATIVES
(a) Where consistent with applicable laws, rules, regulations and
regulatory interpretations, you will pass through to your
representatives a significant share of the service fees paid to
you pursuant to this Agreement, or you will otherwise use the
payments of service fees to advance the objective of providing
and improving service to shareholders of the Putnam Funds in a
manner specifically approved by Putnam Mutual Funds (for example,
via training courses for representatives or shareholder
seminars).
(b) You will assist us in distributing to your representatives
periodic statements which we will have prepared showing the
aggregate average net asset value of shares in Putnam Funds with
which they are credited on our records.
4. REQUIRED SERVICES
(a) You will assign one of your representatives to each Putnam
Fund account on your records and reassign the Putnam Fund account
should that representative leave your organization.
(b) You and your representatives will assist us and our
affiliates in providing the following services to shareholders of
the Putnam Funds:
(i) Maintain regular contact with shareholders in assigned
accounts and assist in answering inquiries concerning the
Putnam Funds.
(ii) Assist in distributing sales and service literature
provided by us, particularly to the beneficial owners of
accounts registered in your name (nominee name accounts).
(iii) Assist us and our affiliates in the establishment and
maintenance of shareholder accounts and records.
(iv) Assist shareholders in effecting administrative
changes, such as changing dividend options, account
designations, address, automatic investment programs or
systematic investment plans.
(v) Assist in processing purchase and redemption
transactions.
(vi) Provide any other information or services as the
customer or we may reasonably request.
(c) You will grant reasonable requests for visits to your offices
by our wholesalers and include all Putnam Funds on your menu or
list of investments made available by you to your customers.
(d) Your compliance with the service requirements set forth in
this Agreement will be evaluated by us from time to time by
surveying shareholder satisfaction with service, by monitoring
redemption levels of shareholder accounts assigned to you and by
such other methods as we deem appropriate.
(e) The provisions of this Paragraph 4 may be amended by us from
time to time upon notice to you.
5. AMENDM ENT
This Agreement, including any Schedule hereto, shall be deemed
amended as provided in any written notice delivered by us to you.<PAGE>
6. EFFECT IVE PERIOD AND TERMINATION
The provisions of this Agreement shall remain in effect for one
year from the date of its execution or adoption and thereafter
for successive annual periods only so long as such continuance is
specifically approved at least annually by the Trustees of each
of the 12b-1 Funds in conformity with Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act"). This Agreement
shall automatically terminate in the event of its assignment (as
defined by the 1940 Act). In addition, this Agreement may be
terminated at any time, without the payment of any penalty, by
either party upon written notice to the other party, or, as
provided in Rule 12b-1 under the 1940 Act, by the Trustees of any
12b-1 Fund or by the vote of the holders of the outstanding
voting securities of any 12b-1 Fund.
7. WRITTE N REPORTS
Putnam Mutual Funds Corp. shall provide the Trustees of each of
the 12b-1 Funds, and such Trustees shall review at least
quarterly, a written report of the amounts paid to you under this
Agreement and the purposes for which such expenditures were made.
8. COMPLI ANCE WITH LAWS
With respect to the receipt of service fees under the terms of
this Agreement, you will comply with all applicable federal and
state laws and rules, and all applicable regulations and
interpretations of regulatory agencies or authorities, which may
affect your business practices, including any requirement of
written authorization or consent by your customers to your
receipt of service fees, and any requirement to provide
disclosure to your customers of such service fees.
9. MISCEL LANEOUS
(a) All communications mailed to us should be sent to the address
listed below. Any notice to you shall be duly given if mailed or
delivered to you at the address specified by you below.<PAGE>
(b) The provisions of this Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts.
Very truly yours,
PUTNAM MUTUAL FUNDS CORP.
By: --------------------------
William N. Shiebler,
President and
Chief Executive Officer
We accept and agree to the foregoing Agreement as of the date set
forth below.
Financial Institution: --------------------------
By: --------------------------
Authorized Signature, Title
--------------------------
--------------------------
Address
Dated: --------------------------
Please return the signed Putnam copy of this Agreement to Putnam
Mutual Funds Corp., P.O. Box 41203, Providence, RI 02940-1203. <PAGE>
SCHEDULE 1:
THE 12B-1 FUNDS
Service fees will be paid on the following Putnam Funds at the
rates set forth in the Prospectus of that Fund:
Putnam Adjustable Rate U.S. Government Fund
Putnam American Government Income Fund
Putnam Arizona Tax Exempt Income Fund
Putnam Asia Pacific Growth Fund
Putnam Asset Allocation Funds
-Putnam Asset Allocation: Growth Portfolio
-Putnam Asset Allocation: Balanced Portfolio
-Putnam Asset Allocation: Conservative Portfolio
Putnam Balanced Retirement Fund
Putnam California Tax Exempt Income Trust
-Putnam California Intermediate Tax Exempt Fund
-Putnam California Tax Exempt Income Fund
Putnam Capital Appreciation Fund
Putnam Convertible Income-Growth Trust
Putnam Diversified Equity Trust
Putnam Diversified Income Trust
Putnam Equity Income Fund
Putnam Europe Growth Fund
Putnam Federal Income Trust
Putnam Florida Tax Exempt Income Fund
The George Putnam Fund of Boston
Putnam Global Governmental Income Trust
Putnam Global Growth Fund
The Putnam Fund for Growth and Income
Putnam Growth and Income Fund II
Putnam Health Sciences Trust
Putnam High Yield Advantage Fund
Putnam High Yield Trust
Putnam Income Fund
Putnam Intermediate Tax Exempt Fund
Putnam Intermediate U.S. Government Fund
Putnam Investment Funds
-Putnam International New Opportunities Fund
Putnam Investors Fund
Putnam Massachusetts Tax Exempt Income Fund
Putnam Michigan Tax Exempt Income Fund
Putnam Minnesota Tax Exempt Income Fund
Putnam Money Market Fund
Putnam Municipal Income Fund
Putnam Natural Resources Fund
Putnam New Jersey Tax Exempt Income Fund
Putnam New Opportunities Fund
Putnam New York Tax Exempt Income Trust
-Putnam New York Intermediate Tax Exempt Fund
-Putnam New York Tax Exempt Income Fund
Putnam New York Tax Exempt Opportunities Fund
Putnam Ohio Tax Exempt Income Fund
Putnam OTC Emerging Growth Fund
Putnam Overseas Growth Fund
Putnam Pennsylvania Tax Exempt Income Fund
Putnam Preferred Income Trust
Putnam Tax Exempt Income Fund
Putnam Tax-Free Income Trust
-Putnam Tax-Free High Yield Fund
-Putnam Tax-Free Insured Fund
Putnam U.S. Government Income Trust
Putnam Utilities Growth and Income Fund
Putnam Vista Fund
Putnam Voyager Fund
Putnam Voyager Fund II
SCHEDULE 2: MINIMUM ASSETS
FINANCIAL INSTITUTION REQUIREMENTS. The minimum aggregate
average net asset value of all accounts in Putnam Funds specified
by Paragraph 1(b) is $250,000. We will review this requirement
prior to the start of each year and inform you of any changes.
REPRESENTATIVE REQUIREMENTS. With respect to Paragraph
1(c), there is no minimum asset qualification requirement in the
Putnam Funds applicable to each of your representatives. We will
review this requirement prior to the start of each year and
inform you of any changes. We reserve the right to set a minimum
at any time.
NF-58
2/7/97
SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS
Fund name: Putnam Money Market Fund -- Class A Shares
Fiscal period ending: 9/30/97
Inception date (if less than 10 years of performance):
TOTAL RETURN
Formula -- Average Annual Total Return: ERV = P(1+T)^n
n = Number of Time Periods 1 Year 5 Years 10 Years*
P = Initial Investment $1000 $1000 $1000
ERV = Ending Redeemable Value $1051.70 $1233.32 $1706.25
T = Average Annual
Total Return 5.17% 4.28% 5.49%*
*Life of fund, if less than 10 years
7 DAY YIELD FORMULA - DIVIDENDS DECLARED FOR LAST 7 DAYS / 7 *365
TOTAL DIVIDENDS DECLARED
PER SHARE FOR LAST 7 DAYS:
7 DAY YIELD = 5.13%
CALCULATION OF 7 DAY EFFECTIVE YIELD
Formula:
7 DAY YIELD 52.142857)
((1+-------------------- )
( 52.142857)
7 DAY EFFECTIVE YIELD = 5.26%
<PAGE>
SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS
Fund name: Putnam Money Market Fund -- Class B Shares
Fiscal period ending: 9/30/97
Inception date (if less than 10 years of performance):
TOTAL RETURN
Formula -- Average Annual Total Return: ERV = P(1+T)^n
n = Number of Time Periods 1 Year 5 Years 10 Years*
P = Initial Investment $1000 $1000 $1000
ERV = Ending Redeemable Value $1046.46 $1202.35 $1625.57
T = Average Annual
Total Return 4.65% 3.76% 4.98*
*Life of fund, if less than 10 years
7 DAY YIELD FORMULA - DIVIDENDS DECLARED FOR LAST 7 DAYS / 7 *365
TOTAL DIVIDENDS DECLARED
PER SHARE FOR LAST 7 DAYS:
7 DAY YIELD = 4.63%
CALCULATION OF 7 DAY EFFECTIVE YIELD
Formula:
7 DAY YIELD 52.142857)
((1+-------------------- )
( 52.142857)
7 DAY EFFECTIVE YIELD = 4.74%
<PAGE>
SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS
Fund name: Putnam Money Market Fund -- Class M Shares
Fiscal period ending: 9/30/97
Inception date (if less than 10 years of performance):
TOTAL RETURN
Formula -- Average Annual Total Return: ERV = P(1+T)^n
n = Number of Time Periods 1 Year 5 Years 10 Years*
P = Initial Investment $1000 $1000 $1000
ERV = Ending Redeemable Value $1050.11 $1224.04 $1680.85
T = Average Annual
Total Return 5.01% 1.13% 5.33%*
*Life of fund, if less than 10 years
7 DAY YIELD FORMULA - DIVIDENDS DECLARED FOR LAST 7 DAYS / 7 *365
TOTAL DIVIDENDS DECLARED
PER SHARE FOR LAST 7 DAYS:
7 DAY YIELD = 4.98 %
CALCULATION OF 7 DAY EFFECTIVE YIELD
Formula:
7 DAY YIELD 52.142857)
((1+-------------------- )
( 52.142857)
7 DAY EFFECTIVE YIELD = 5.11%
SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS
Fund name: Putnam Tax Exempt Money Market Fund -- Class A Shares
Fiscal period ending: 9/30/97
Inception date (if less than 10 years of performance):
TOTAL RETURN
Formula -- Average Annual Total Return: ERV = P(1+T)^n
n = Number of Time Periods 1 Year 5 Years 10 Years*
P = Initial Investment $1000 $1000 $1000
ERV = Ending Redeemable Value $1030.88 $1137.42 $1432.47
T = Average Annual
Total Return 3.09% 2.61% 3.69%*
*Life of fund, if less than 10 years
7 DAY YIELD FORMULA - DIVIDENDS DECLARED FOR LAST 7 DAYS / 7 *365
TOTAL DIVIDENDS DECLARED
PER SHARE FOR LAST 7 DAYS:
7 DAY YIELD = 3.41%
CALCULATION OF 7 DAY EFFECTIVE YIELD
Formula:
7 DAY YIELD 52.142857)
((1+-------------------- )
( 52.142857)
7 DAY EFFECTIVE YIELD = 3.35%
TAX-EXEMPT EQUIVALENT YIELD
Formula: 30 day yield
--------------- =
1-(Highest Individual Tax Rate)
3.35% 3.35%
- ------- = ---- = 5.55%
1-39.6% 60.4%
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Putnam Money Market Fund
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 2,499,902,684
<INVESTMENTS-AT-VALUE> 2,499,902,684
<RECEIVABLES> 128,445,561
<ASSETS-OTHER> 6,442
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,628,354,687
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,744,596
<TOTAL-LIABILITIES> 24,744,596
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,603,610,091
<SHARES-COMMON-STOCK> 2,134,223,127
<SHARES-COMMON-PRIOR> 1,6359,287,548
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,603,610,091
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 146,791,603
<OTHER-INCOME> 0
<EXPENSES-NET> 16,213,870
<NET-INVESTMENT-INCOME> 130,577,733
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 130,577,733
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (106,719,970)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,480,603,384
<NUMBER-OF-SHARES-REDEEMED> (15,106,672,041)
<SHARES-REINVESTED> 101,004,236
<NET-CHANGE-IN-ASSETS> 476,931,642
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,460,127
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17,521,851
<AVERAGE-NET-ASSETS> 2,110,867,255
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .0505
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.0505)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> [BLANK]
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Putnam Money Market Fund
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 2,499,902,684
<INVESTMENTS-AT-VALUE> 2,499,902,684
<RECEIVABLES> 128,445,561
<ASSETS-OTHER> 6,442
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,628,354,687
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,744,596
<TOTAL-LIABILITIES> 24,744,596
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,603,610,091
<SHARES-COMMON-STOCK> 410,885,364
<SHARES-COMMON-PRIOR> 438,315,892
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,603,610,091
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 146,791,603
<OTHER-INCOME> 0
<EXPENSES-NET> 16,213,870
<NET-INVESTMENT-INCOME> 130,577,733
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 130,577,733
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (21,583,487)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,550,729,879
<NUMBER-OF-SHARES-REDEEMED> (2,597,865,336)
<SHARES-REINVESTED> 19,704,929
<NET-CHANGE-IN-ASSETS> 476,931,642
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,460,127
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17,521,851
<AVERAGE-NET-ASSETS> 472,233,655
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .0455
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.0455)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Putnam Money Market Fund
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> CLASS M
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 2,499,902,684
<INVESTMENTS-AT-VALUE> 2,499,902,684
<RECEIVABLES> 128,445,561
<ASSETS-OTHER> 6,442
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 2,628,354,687
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 24,744,596
<TOTAL-LIABILITIES> 24,744,596
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,603,610,091
<SHARES-COMMON-STOCK> 58,501,600
<SHARES-COMMON-PRIOR> 29,075,009
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2,603,610,091
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 146,791,603
<OTHER-INCOME> 0
<EXPENSES-NET> 16,213,870
<NET-INVESTMENT-INCOME> 130,577,733
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 130,577,733
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,274,276)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 431,207,895
<NUMBER-OF-SHARES-REDEEMED> (403,964,967)
<SHARES-REINVESTED> 2,183,663
<NET-CHANGE-IN-ASSETS> 476,931,642
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,460,127
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 17,521,851
<AVERAGE-NET-ASSETS> 46,221,225
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .0490
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.0490)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
Putnam Tax Exempt Money Market Fund
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 95,957,981
<INVESTMENTS-AT-VALUE> 95,957,981
<RECEIVABLES> 14,151,250
<ASSETS-OTHER> 40,416
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 110,149,647
<PAYABLE-FOR-SECURITIES> 4,024,160
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 683,351
<TOTAL-LIABILITIES> 4,707,511
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 105,442,136
<SHARES-COMMON-STOCK> 105,442,136
<SHARES-COMMON-PRIOR> 100,813,973
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 105,442,136
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,660,143
<OTHER-INCOME> 0
<EXPENSES-NET> 602,832
<NET-INVESTMENT-INCOME> 3,057,311
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,057,311
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,057,311)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 956,290,369
<NUMBER-OF-SHARES-REDEEMED> (954,511,715)
<SHARES-REINVESTED> 2,849,509
<NET-CHANGE-IN-ASSETS> 4,628,163
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 457,535
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 812,273
<AVERAGE-NET-ASSETS> 101,304,692
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .0304
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.0304)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
