Putnam
Tax Exempt
Money Market
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
3-31-00
[SCALE LOGO OMITTED]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[COPYRIGHT] Karsh, Ottawa
Dear Shareholder:
The past six months have been a relatively positive period for
tax-exempt money market investors. Yields on these securities have
become unusually attractive, especially relative to yields on
longer-term municipal securities. Although the municipal market has not
experienced the inverted yield curve of the Treasury market, in which
yields on short-term securities are outpacing those on longer-term
issues, the municipal market yield curve is flatter than usual. With
longer-term municipal bonds not offering significantly higher yields
than short-term securities, investors are not being paid to assume the
greater interest-rate risks associated with these longer issues.
In this environment, it is not surprising that demand for municipal
money market investments has risen considerably. As of March 31, 2000,
demand was up approximately 10% from the same time last year. Meanwhile,
supply has been somewhat lower than it was last year, since
municipalities flush with income tax revenues require less additional
financing. In this climate, mutual funds like Putnam Tax Exempt Money
Market Fund continue to attract new assets.
Total return for 6 months ended 3/31/00
NAV
- --------------------------------------------------------------------
1.54%
- --------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 5.
* SLIGHTLY LONGER DURATION MAXIMIZES INCOME
Over the past nine months, the Federal Reserve Board raised short-term
interest rates five times, essentially taking back its three
interest-rate reductions of the fall of 1998 and then some. The Fed's
goal is to slow the rampaging economy, which grew an estimated 7.1%
during the fourth quarter of 1999 and is still going strong. Although
the Fed appears poised for another rate increase or two in the months
ahead, it may finally be nearing the end of this tightening cycle. The
economy is showing signs of reining in its heady pace, while inflation
remains fairly stable.
With interest rates on tax-exempt money market issues continuing to rise
in step with the Fed's interest-rate increases over the period, your
fund's manager, Brian S. Torpey, used duration management as a key tool
for managing the fund. To capture the highest available money market
rates, Brian kept the portfolio duration a bit longer than the market
average over the past six months, at approximately 70 days to maturity.
This slightly longer duration allowed the fund to accrue additional
income from the prevailing higher rates. Indeed, in the early days of
the fiscal year's second half, yields on municipal money market
securities may go even higher as investors withdraw money from these
instruments to pay their tax bills.
As long as the economy continues to grow, the Fed appears poised to
continue tightening interest rates over the next several months. Should
inflation threaten to accelerate, the board may raise rates even more
dramatically. In any case, Brian plans to continue to pursue the
conservative strategies that have served shareholders well thus far, and
tax-exempt money market funds such as this one will remain attractive to
investors seeking a combination of liquidity, superior quality, and
relative stability.
* UPCOMING TRANSITION
This is my last letter to you and other Putnam Tax Exempt Money Market
Fund shareholders. After more than 30 years as Chairman of the Trustees
and President of the Putnam Funds, the time has come for me to step
aside. In June, John Hill will become Chairman. John is currently an
independent Trustee and has served on the Board for the past 14 years.
In addition, my son, George Putnam, III, will take on the role of
President. I am confident that the leadership of the funds will be in
exceptionally strong hands. I will become Chairman Emeritus, remain a
shareholder, and stay in close touch with the funds.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
May 17, 2000
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 3/31/00, there is no guarantee the fund will
continue to hold these securities in the future. An investment in the
fund is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the fund seeks to
preserve your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
PERFORMANCE COMPARISONS (3/31/00)
Current After-tax
return* return
- ------------------------------------------------------------------------
Passbook savings account 1.09% 0.66%
- ------------------------------------------------------------------------
Taxable money market fund 7-day yield 5.53 3.34
- ------------------------------------------------------------------------
3-month certificate of deposit 4.24 2.56
- ------------------------------------------------------------------------
Putnam Tax Exempt Money Market Fund (7-day yield) 3.26 3.26
- ------------------------------------------------------------------------
The net asset value of money market mutual funds is uninsured and
designed to be fixed, while distributions vary daily. Investment returns
will fluctuate. The principal value on passbook savings and on bank CDs
is generally insured up to certain limits by state and federal agencies.
Unlike stocks, which incur more risk, CDs offer a fixed rate of return.
Unlike money market funds, bank CDs may be subject to substantial
penalties for early withdrawals. After-tax return assumes a 39.6%
maximum federal income tax rate.
*Sources: BankBoston (passbook savings), Bank Rate Monitor (3-month CDs),
IBC/Donaghue's Money Fund Report (taxable money market fund compound
7-day yield).
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Tax Exempt Money Market Fund is designed for investors seeking current
income exempt from federal income tax, consistent with capital
preservation, stable principal, and liquidity.
TOTAL RETURN FOR PERIODS ENDED 3/31/00 (most recent calendar quarter)
Lipper
Tax Exempt Consumer
Fund shares Money Market price
at NAV Fund Average index
- ------------------------------------------------------------------------
6 months 1.54% 1.50% 2.03%
- ------------------------------------------------------------------------
1 year 2.86 2.83 3.69
- ------------------------------------------------------------------------
5 years 15.81 15.91 13.15
Annual average 2.98 3.00 2.50
- ------------------------------------------------------------------------
10 years 35.26 35.67 33.02
Annual average 3.07 3.10 2.89
- ------------------------------------------------------------------------
Life of fund (since 10/26/87) 53.71 51.77 48.48
Annual average 3.52 3.37 3.23
- ------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------
Current 7-day yield1 3.26%
- ------------------------------------------------------------------------
Taxable equivalent2 5.40
- ------------------------------------------------------------------------
Current 30-day yield1 3.22
- ------------------------------------------------------------------------
Taxable equivalent2 5.33
- ------------------------------------------------------------------------
1 The 7-day and 30-day yields are the two most common gauges for
measuring money market mutual fund performance.
2 Assumes 39.6% maximum federal income tax rate. Results for investors
subject to lower tax rates would not be as advantageous. For some
investors, investment income may also be subject to the federal
alternative minimum tax. Investment income may be subject to state and
local taxes.
Past performance is no assurance of future results and more recent
returns may be more or less than those shown. Fund performance data do
not take into account any adjustment for taxes payable on reinvested
distributions. Investment returns will fluctuate. An investment in the
fund is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the fund seeks to
preserve your investment at $1.00 per share, it is possible to lose
money by investing in the fund. The fund's holdings do not match those
in the Lipper average. Yield data more closely reflect the current
earnings of the fund.
An investment in the fund is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although
the fund seeks to preserve your investment at $1.00 per share, it is
possible to lose money by investing in the fund. The fund's holdings do
not match those in the Lipper average. Yield data more closely reflect
the current earnings of the fund.
DISTRIBUTION INFORMATION 6 MONTHS ENDED 3/31/00
- ------------------------------------------------------------------------
Distributions (number) 6
- ------------------------------------------------------------------------
Income $0.01529
- ------------------------------------------------------------------------
Total $0.01529
- ------------------------------------------------------------------------
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested
all distributions in the fund.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Comparative benchmarks
Lipper Tax Exempt Money Market Fund Average, used for performance
comparison purposes, is an arithmetic average of the total return of all
tax exempt money market mutual funds tracked by Lipper Analytical
Services. Lipper is an independent rating organization for the mutual
fund industry. Lipper rankings vary for other periods. The fund's
holdings do not match those in the Lipper average. It is not possible to
invest directly in an index.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
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A guide to the financial statements
These sections of the report constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss
for the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that
remain in the portfolio -- any change in unrealized gains or losses over
the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment income
ratios and portfolio turnover in one summary table, reflecting the five
most recent reporting periods. In a semiannual report, the highlight
table also includes the current reporting period. For open-end funds, a
separate table is provided for each share class.
The fund's portfolio
March 31, 2000 (Unaudited)
KEY TO ABBREVIATIONS
AMBAC -- AMBAC Indemnity Corporation
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FRB -- Floating Rate Bonds
FSA -- Financial Security Assurance
G.O. Bonds -- General Obligation Bonds
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
VRDN -- Variable Rate Demand Notes
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (96.2%) (a)
PRINCIPAL AMOUNT RATING(RAT) VALUE
<S> <C> <C> <C> <C>
Alabama (1.5%)
- ----------------------------------------------------------------------------------------------------------------------------
$ 500,000 AL Rev. Bonds (U. of AL), AMBAC, 4.3s, 6/1/00 Aaa $ 500,057
1,035,000 Jefferson Cnty., Board of Ed. Warrants, Ser. A, FSA,
4 1/2s, 2/15/01 AAA 1,037,023
----------------
1,537,080
Alaska (1.2%)
- ----------------------------------------------------------------------------------------------------------------------------
1,270,000 AK State COP (AK Courthouse), AMBAC,
5s, 1/1/01 Aaa 1,275,732
Arizona (3.1%)
- ----------------------------------------------------------------------------------------------------------------------------
1,000,000 AZ State Trans. Board Hwy. Rev. Bonds,
Ser. 1990, 6s, 7/1/10 Aaa 1,014,724
1,000,000 Maricopa Cnty., School Dist. G.O. Bonds
(Phoenix Elementary), FSA, 4 3/4s, 7/1/00 Aaa 1,002,685
1,100,000 Scottsdale, G.O. Bonds, 6.9s, 7/1/07 Aaa 1,130,944
----------------
3,148,353
Delaware (4.0%)
- ----------------------------------------------------------------------------------------------------------------------------
1,000,000 DE State G.O. Bonds, Ser. C, 5s, 7/1/00 AAA 1,003,594
3,000,000 DE State Trans. Auth. Syst. Rev. Bonds,
7.2s, 7/1/03 (PRE) Aaa 3,084,613
----------------
4,088,207
Florida (9.8%)
- ----------------------------------------------------------------------------------------------------------------------------
4,000,000 FL Hsg. Fin. Agcy. VRDN (Woodlands), 4.05s,
12/1/17 (Northern Trust (LOC)) A-1+ 4,000,000
555,000 FL State Board of Ed. G.O. Bonds,
Ser. A, 7 1/4s, 6/1/23 (PRE) AAA 569,622
245,000 Kissimmee, Wtr. & Swr. Rev. Bonds, AMBAC,
5.1s, 10/1/00 Aaa 245,719
4,100,000 Orange Cnty., Hsg. Fin. Auth. VRDN
(Sundown Assoc. II), Ser. B, 4.05s, 6/1/04
(Fleet Bank (LOC)) A-1+ 4,100,000
510,000 Orlando & Orange Cnty., Expressway Auth. Rev.
Bonds, FGIC, 6 1/2s, 7/1/20 (PRE) AAA 523,391
500,000 Seminole Cnty., Local Option Gas Tax Rev. Bonds,
FGIC, 4 3/4s, 10/1/00 AAA 502,293
----------------
9,941,025
Georgia (15.5%)
- ----------------------------------------------------------------------------------------------------------------------------
1,000,000 Burke Cnty., Poll. Control Dev. Auth. Rev. Bonds
(GA Pwr. Co.), Ser. 6, AMBAC, 4 3/8s, 11/1/00 AAA 1,002,598
3,700,000 Fulton Cnty., Hsg. Auth. Multi-Fam. Hsg. VRDN
(Holcombs Landing Apts), 3.95s, 8/1/26
(First Union National Bank (LOC)) A-1 3,700,000
4,000,000 Fulton Cnty., Hsg. Auth. VRDN (Spring Creek
Crossing), 3.95s, 10/1/24 A-1 4,000,000
3,000,000 GA State G.O. Bonds, Ser. B, 5.6s, 3/1/01 Aaa 3,036,179
4,000,000 Marietta, Hsg. Auth. Multi-Fam. VRDN
(Wood Pointe Apts.), 3.3s, 10/1/07
(First Union National Bank (LOC)) A-1 4,000,000
----------------
15,738,777
Illinois (6.2%)
- ----------------------------------------------------------------------------------------------------------------------------
3,290,000 IL Dev. Fin. Auth. Indl. Dev. VRDN
(Cook Composites & Polymers), 3.9s, 2/1/09
(Societe Generale (LOC)) A-1 3,290,000
1,825,000 IL State Toll Hwy. Auth. Rev. Bonds, Ser. A,
FGIC, 4.7s, 1/1/01 Aaa 1,830,916
1,145,000 Schaumburg, Indl. Dev. Rev. Bonds
(La Quinta Motor Inns), FRB, 4s, 8/1/01
(LOC-Bk Of America NT & SA) Aa1 1,145,000
----------------
6,265,916
Iowa (0.5%)
- ----------------------------------------------------------------------------------------------------------------------------
500,000 IA State Higher Ed. Loan Auth. Rev. Bonds
(Private College Facs.), MBIA, 5s, 8/1/00 AAA 501,150
Kentucky (4.3%)
- ----------------------------------------------------------------------------------------------------------------------------
1,500,000 KY State Tpk. Auth. Econ. Road Dev. Rev. Bonds
(Revitalization Project), AMBAC, 4.9s, 7/1/00 Aaa 1,502,774
2,895,000 Mayfield, KY Multi-CityLease VRDN, 4s, 7/1/26
(PNC Bk. (LOC)) VMIG1 2,895,000
----------------
4,397,774
Maryland (3.0%)
- ----------------------------------------------------------------------------------------------------------------------------
1,000,000 Prince Georges Cnty., Solid Waste Mgt. Syst. Rev.
Bonds, 7s, 6/30/08 (PRE) Aaa 1,027,929
2,000,000 Washington Cnty., Econ. Dev. Rev. Bonds (St. James
School), 4 3/8s, 11/1/29 (PNC Bk. (LOC)) (PRE) VMIG1 2,002,564
----------------
3,030,493
Massachusetts (0.7%)
- ----------------------------------------------------------------------------------------------------------------------------
500,000 MA State G.O. Bonds, Ser. C, 7s, 12/1/10 (PRE) Aaa 509,629
225,000 MA State Hlth. & Edl. Facs. Auth. Rev. Bonds,
MBIA, 6.85s, 10/1/00 AAA 229,510
----------------
739,139
Michigan (2.0%)
- ----------------------------------------------------------------------------------------------------------------------------
2,000,000 MI Muni. Bond Auth. Rev. Notes, Ser. B-2,
4 1/4s, 8/25/00 SP-1+ 2,005,286
Minnesota (4.4%)
- ----------------------------------------------------------------------------------------------------------------------------
2,000,000 Golden Valley, Indl. Dev. VRDN (Graco Inc.),
4.1s, 12/1/02 VMIG1 2,000,000
2,000,000 Rosemount, MN Indpt. School Dist. G.O. Bonds,
Ser. C, FGIC, 5.3s, 2/1/01 AAA 2,017,877
450,000 St. Louis Park, Hosp. Rev. Bonds (Methodist Hosp.),
Ser. C, AMBAC, 7 1/4s, 7/1/18 AAA 462,991
----------------
4,480,868
Mississippi (3.0%)
- ----------------------------------------------------------------------------------------------------------------------------
3,000,000 Lee Cnty., Indl. VRDN (Hunter Douglas, Inc.), 4.05s,
10/1/00 (ABN AMRO Bank N.V. (LOC)) Aa2 3,000,000
Nebraska (3.4%)
- ----------------------------------------------------------------------------------------------------------------------------
3,500,000 American Pub. Energy Agcy. Rev. Bonds (NE Public
Gas Agency), Ser. A, AMBAC, 4s, 6/1/00 Aaa 3,503,334
New Jersey (2.9%)
- ----------------------------------------------------------------------------------------------------------------------------
2,500,000 NJ Econ. Dev. Auth. VRDN (Webro), 3.64s, 1/15/10 A-1+ 2,500,000
400,000 NJ State G.O. Bonds, 5.8s, 8/1/00 AA+ 402,065
----------------
2,902,065
Ohio (0.4%)
- ----------------------------------------------------------------------------------------------------------------------------
400,000 OH State Bldg. Auth. Rev. Bonds (State Juvenile
Correctional Facs.), Ser. A, AMBAC, 5.6s, 10/1/00 AAA 402,695
Pennsylvania (12.8%)
- ----------------------------------------------------------------------------------------------------------------------------
4,400,000 Dauphin Cnty., Gen. Auth. Rev. Bonds
(School Dist. Pooled Fin. Project II), AMBAC,
VRDN, 3.3s, 9/1/32 VMIG1 4,400,000
4,100,000 Montgomery Cnty., Higher Ed. & Hlth. Auth.
VRDN (Philadelphia Presbytery), 4s, 7/1/25 VMIG1 4,100,000
4,500,000 New Garden, PA Gen. Auth. Rev. Bonds
(Pooled Fin. Project I), AMBAC, VRDN,
5.2s, 11/1/29 A-1+ 4,500,000
----------------
13,000,000
South Carolina (2.8%)
- ----------------------------------------------------------------------------------------------------------------------------
2,800,000 SC State Pub. Svcs. Auth. Rev. Bonds, Ser. A,
AMBAC, 6 1/4s, 1/1/01 AAA 2,840,308
South Dakota (2.6%)
- ----------------------------------------------------------------------------------------------------------------------------
2,635,000 Rapic City Econ. Dev. VRDN (Civic Ctr. Assoc.
Partnership), 3.89s, 12/1/16 P-1 2,635,000
Texas (8.6%)
- ----------------------------------------------------------------------------------------------------------------------------
4,600,000 Hays, Memorial Hlth. Facs. Dev. Corp. Rev. Bonds
(Central TX Med. Ctr.), Ser. B, VRDN, 4.05s,
11/15/14 (Bank Of America (LOC)) A-1+ 4,600,000
745,000 Northside, Indpt. School Distr. G.O. Bonds,
Ser. A, PSF, 6 3/8s, 8/15/00 AAA 752,229
1,125,000 Plano, G.O. Bonds, 6 1/4s, 7/15/00 Aa 1,125,007
600,000 Trinity River, Regional Wastewater Syst. Auth.
Rev. Bonds, Ser. B, FSA, 4 1/2s, 8/1/00 Aaa 601,292
TX State G.O. Bonds, Ser. A
1,000,000 6s, 8/1/00 AAA 1,000,000
650,000 5 3/8s, 10/1/00 Aa1 655,018
----------------
8,733,546
Washington (1.0%)
- ----------------------------------------------------------------------------------------------------------------------------
1,000,000 Washington State Pub. Pwr. Supply Syst. Rev.
Bonds (Nuclear No. 2), Ser. A, 7 3/8s, 7/1/12 (PRE) Aaa 1,029,486
West Virginia (0.4%)
- ----------------------------------------------------------------------------------------------------------------------------
435,000 West Virginia Water Prog, 7.7s, 11/1/29 (PRE) Aaa 452,704
Wisconsin (2.1%)
- ----------------------------------------------------------------------------------------------------------------------------
2,000,000 Wisconsin Pub. Pwr., 7 1/2s, 7/1/10 Aaa 2,055,268
- ----------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $97,704,206) (b) $ 97,704,206
- ----------------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $101,529,839.
The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at March 31,
2000 for the securities listed. Ratings are generally ascribed to securities at the time of issuance. While the
agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings do not
necessarily represent what the agencies would ascribe to these securities at March 31, 2000. Securities rated by
Putnam are indicated by "/P" and are not publicly rated.
Moody's Investor Service, Inc. and Standard & Poor's Corp. are the leading independent rating agencies for debt
securities. Moody's uses the designation "Moody's Investment Grade", or "MIG", for most short-term municipal
obligations, adding a "V" ("VMIG") for bonds with a demand or variable feature. The designation "P" is used for tax
exempt commercial paper. Standard & Poors uses "SP" for notes maturing in three years or less, "A" for bonds with a
demand or variable feature.
Moody's Investor Service, Inc.
MIGI/VMIGI = Best quality; strong protection of cash flows, superior liquidity and broad access to refinancing
MIG2/VMIG2 = High quality; ample protection of cash flows, liquidity support and ability to refinance
Aaa = Extremely strong capacity to pay interest and repay principal
Aa = Strong capacity to pay interest and repay principal and differs from the higher rated issues only in
a small degree
P-1 = Superior capacity for repayment
P-2 = Strong capacity for repayment
Standard & Poor's Corp.
SP-1+ = Very strong capacity to pay principal and interest
SP-1 = Strong capacity to pay principal and interest
SP-2 = Satisfactory capacity to pay principal and interest
A-1+ = Extremely strong degree of safety
A-1 = Strong degree of safety
A-2 = Satisfactory capacity for timely repayment
(b) The aggregate identified cost on a tax basis is the same.
(PRE) These securities are prerefunded with callable dates within a year.
The rates shown on FRB's and VRDN's are the current interest rates at March 31, 2000, which are subject
to change based on the terms of the security.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
March 31, 2000 (Unaudited)
Assets
- ----------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at amortized cost (Note 1) $ 97,704,206
- ----------------------------------------------------------------------------------------------
Cash 261,297
- ----------------------------------------------------------------------------------------------
Interest and other receivables 946,586
- ----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 109,771
- ----------------------------------------------------------------------------------------------
Receivable for securities sold 2,830,500
- ----------------------------------------------------------------------------------------------
Total assets 101,852,360
Liabilities
- ----------------------------------------------------------------------------------------------
Distributions payable to shareholders 12,639
- ----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 156,105
- ----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 110,287
- ----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 7,455
- ----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 5,806
- ----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 837
- ----------------------------------------------------------------------------------------------
Other accrued expenses 29,392
- ----------------------------------------------------------------------------------------------
Total liabilities 322,521
- ----------------------------------------------------------------------------------------------
Net assets $101,529,839
Represented by
- ----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $101,529,839
- ----------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per share
($101,529,839 divided by 101,529,839 shares) $1.00
- ----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Statement of operations
Six months ended March 31, 2000 (Unaudited)
<S> <C>
Tax exempt interest income: $1,736,884
- ----------------------------------------------------------------------------------------------
Expenses:
- ----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 212,863
- ----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 82,627
- ----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 3,317
- ----------------------------------------------------------------------------------------------
Administrative services (Note 2) 1,704
- ----------------------------------------------------------------------------------------------
Reports to shareholders 1,716
- ----------------------------------------------------------------------------------------------
Registration fees 21,515
- ----------------------------------------------------------------------------------------------
Auditing 13,523
- ----------------------------------------------------------------------------------------------
Legal 4,242
- ----------------------------------------------------------------------------------------------
Postage 3,219
- ----------------------------------------------------------------------------------------------
Other 14,264
- ----------------------------------------------------------------------------------------------
Total expenses 358,990
- ----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (50,437)
- ----------------------------------------------------------------------------------------------
Net expenses 308,553
- ----------------------------------------------------------------------------------------------
Net investment Income 1,428,331
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,428,331
- ----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
March 31 September 30
2000* 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- -------------------------------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------------------------------
Net investment income $ 1,428,331 $ 2,032,243
- -------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,428,331 2,032,243
- -------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- -------------------------------------------------------------------------------------------------------
From net investment income (1,428,331) (2,032,243)
- -------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) 20,821,849 (1,340,657)
- -------------------------------------------------------------------------------------------------------
Total Increase (decrease) in net assets 20,821,849 (1,340,657)
Net assets
- -------------------------------------------------------------------------------------------------------
Beginning of period 80,707,990 82,048,647
- -------------------------------------------------------------------------------------------------------
End of period $101,529,839 $80,707,990
- -------------------------------------------------------------------------------------------------------
* Unaudited
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share March 31
operating performance (Unaudited) Year ended September 30
- --------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
New asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income .0153 .0254 .0299 .0304 .0298 .0312
- --------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0153 .0254 .0299 .0304 .0298 .0312
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.0153) (.0254) (.0299) (.0304) (.0298) (.0312)
- --------------------------------------------------------------------------------------------------------------------------
New asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 1.54* 2.57 3.03 3.09 3.02 3.16
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $101,530 $80,708 $82,049 $105,442 $100,814 $73,066
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .38* .73 .75 .80 .90 .81
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.51* 2.57 3.12 3.02 2.86 3.10
- --------------------------------------------------------------------------------------------------------------------------
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
</TABLE>
Notes to financial statements
March 31, 2000 (Unaudited)
Note 1
Significant accounting policies
Putnam Tax Exempt Money Market Fund (the "fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The fund seeks as high a level of current
income exempt from federal income tax as is consistent with maintenance
of liquidity and stability of principal by investing primarily in a
diversified portfolio of short-term tax-exempt securities.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the
reported amounts of increases and decreases in net assets from
operations during the reporting period. Actual results could differ from
those estimates.
A) Security valuations The valuation of the fund's portfolio instruments
is determined by means of the amortized cost method as set forth in Rule
2a-7 under the Investment Company Act of 1940. The amortized cost of an
instrument is determined by valuing it at cost originally and thereafter
amortizing any discount or premium from its face value at a constant
rate until maturity.
B) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed).
C) Federal taxes It is the policy of the fund to distribute all of its
income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986, as amended. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held nor for excise tax on income
and capital gains.
D) Interest income and distributions to shareholders Interest is
recorded on the accrual basis. Income dividends are recorded daily by
the fund and are paid monthly to the shareholders.
E) Amortization of bond premium and accretion of bond discount Premiums
and discounts from purchases of short-term investments are
amortized/accreted at a constant rate until maturity.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Investment Management, Inc. ("Putnam
Management"), the fund's manager, a wholly-owned subsidiary of Putnam
Investments, Inc., for management and investment advisory services is
paid quarterly based on the average net assets of the fund. Such fee is
based on the following annual rates: 0.45% of the first $500 million of
average net assets, 0.35% of the next $500 million, 0.30% of the next
$500 million, 0.25% of the next $5 billion, 0.225% of the next $5
billion, 0.205% of the next $5 billion, 0.190% of the next $5 billion,
0.180% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
For the six months ended March 31, 2000, fund expenses were reduced by
$50,437 under expense offset arrangements with PFTC. Investor servicing
and custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized
in connection with the expense offset arrangements in an income
producing asset if it had not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $315
has been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
in the fund and are invested in certain Putnam funds until distribution
in accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940. The purpose of the Plan
is to compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments, Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plan provides for payment by
the fund to Putnam Mutual Funds Corp. at an annual rate of up to 0.35%
of the fund's average net assets. Currently, no payments are being made
to the plan.
For the six months ended March 31, 2000, Putnam Mutual Funds Corp.,
acting as underwriter receives proceeds from contingent deferred sales
charges. These charges apply to certain shares that have been exchanged
from other Putnam funds. Putnam Mutual Funds received no monies in
contingent deferred sales charges from such redemptions.
Note 3
Purchase and sales of securities
During the six months ended March 31, 2000, purchases and sales
(including maturities) of investment securities (all short-term
obligations) aggregated $121,429,295 and $102,650,500, respectively. In
determining the net gain or loss on securities sold, the cost of
securities has been determined on the identified cost basis.
Note 4
Capital shares
At March 31, 2000, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares at a constant net
asset value of $1.00 per share were as follows:
Six months ended Year ended
March 31, September 30,
2000 1999
- ---------------------------------------------------------------------------
Shares sold 99,585,972 116,573,885
- ---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,368,330 1,903,471
- ---------------------------------------------------------------------------
100,954,302 118,477,356
Shares
repurchased (80,132,453) (119,818.013)
- ---------------------------------------------------------------------------
Net increase
(decrease) 20,821,849 (1,340,657)
- ---------------------------------------------------------------------------
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Century Growth Fund
New Opportunities Fund
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government Income Fund
Money Market Fund**
Preferred Income Fund
Strategic Income Fund*
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]**
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance.
Corporation or any other government agency. Although
the fund seek to preserve your investment at $1.00 per
share, it is possible to lose money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investments has won the DALBAR Service Award 8 times in the past
9 years. In 1997 and 1998, Putnam was the only company to win all three
DALBAR awards: for service to investors, to financial advisors, and to
variable annuity contract holders.*
* HELP YOUR INVESTMENTS GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings
account.+
* SWITCH FUNDS EASILY
Within the same class of shares, you can move money from one account to
another without a service charge. (This privilege is subject to change
or termination.)
* ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at
the then-current net asset value, which may be more or less than the
original cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a
helpful Putnam representative.
To learn more about Putnam, visit our Website.
www.putnaminv.com
To make an additional investment in this or any other Putnam fund,
contact your financial advisor or call our toll-free number.
1-800-225-1581
*DALBAR, Inc., an independent research firm, presents the awards to
financial services firms that provide consistently excellent service.
+Regular investing, of course, does not guarantee a profit or protect
against a loss in a declining market.
Fund information
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
Edward H. D'Alelio
Vice President
Brian S. Torpey
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam Money
Market Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site: www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board,
or any other agency; and involve risk, including the possible loss of
the principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
SA057-60370 062 5/00
