Putnam
Money
Market
Fund
ANNUAL REPORT
September 30, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Assets of money market mutual funds broke through the $1 trillion
mark for the first time in their 25-year history last week, totaling
$1.007 trillion for the period ending August 12. Assets have increased at
an average of 45.3 percent a year over the past 20 years, and have
increased by $147.2 billion, or 17.1 percent, over the past year alone
(August 13, 1996, through August 12, 1997).
-- IBC's Money Fund Report, August 22, 1997
* "As always, we continue to focus on superior credit quality and
capital preservation above all other goals, since these attributes remain
the key reasons investors choose a money market fund such as this one."
-- Joanne Driscoll, manager
Putnam Money Market Fund
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
12 Portfolio holdings
15 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
In contrast to the somewhat unsettled interest-rate environment that prevailed
when Putnam Money Market Fund's management reported to you at the fiscal
year's midpoint, stable rates kept fixed-income investors more or less calm
during the second half. Ongoing economic strength raised some questions about
inflation but current economic data continue to suggest growth slow enough to
satisfy the ever vigilant Federal Reserve Board.
I am pleased to introduce your fund's new manager, Joanne M. Driscoll. Joanne
joined Putnam in 1995 as a money market credit analyst with the Cash
Management Group. She has five years of investment industry experience. In the
following report, Joanne reviews the fund's fiscal year that ended on
September 30, 1997, and discusses prospects for the fiscal year just begun.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
November 19, 1997
Report from the Fund Manager
Joanne M. Driscoll
Putnam Money Market Fund's fiscal year concluded much as it began, in an
environment marked by solid economic growth, low inflation, and relatively
moderate interest rates. In this climate, your fund's conservative investment
strategy continued to serve shareholders well. Once again an emphasis on
superior quality, capital preservation, and current income enabled the fund to
provide a competitive total return while maintaining a stable $1.00 share
price.
* ENVIRONMENT OF STEADY GROWTH, LOW INFLATION CONTINUES
The U.S. economy maintained its ongoing strength throughout the fiscal year.
While the second quarter gross domestic product (GDP) growth slowed slightly
to an annual rate of 3.3% from 4.9% in the first quarter, summer and early
fall statistics continued to indicate healthy growth. The index of leading
economic indicators rose solidly in July and August, as did retail spending,
construction spending, and industrial production. In fact, despite the UPS
strike -- when some companies may have slowed output because of nonshipment of
parts needed for their production lines -- recent production gains have been
vigorous enough to surpass the torrid pace of capacity expansion. Consumer
confidence has been rising too, closing in on the 28-year high seen in June.
In the past, economic strength has been a traditional harbinger of higher
inflation. The current expansion has not followed suit thus far. Consumer
prices -- excluding food and energy costs, which bounce around a lot -- have
risen at a scant 2.2% annual rate this year, down from 2.6 % last year.
However, there are hints that pressures may be building. Energy prices have
moved up and labor markets remain tight with the nation's unemployment rate
for the first half of 1997 below 5% for the first time since 1973. These
factors, along with the labor-friendly UPS strike settlement, could push up
inflation in the months ahead -- and prompt the Federal Reserve Board to
tighten short-term interest rates in response.
* MONETARY POLICY STAYS ON HOLD FOR THE MOMENT
While volatility in the financial markets continues to reflect investor
sensitivity to inflationary pressures, the Fed has not raised short-term
interest rates since its March meeting. In April and May, yields on money
market securities rose in expectation of another Fed increase, but the Fed
failed to act and money market yields backed down to their current levels near
the federal funds target rate. Although the "persistent strength in demand"
that Fed officials cited as a key reason for their March interest-rate
tightening has continued, this demand has not yet led to rising prices. At
subsequent meetings during the period, the Fed found no compelling reason to
raise rates again. However, in his October congressional testimony, Fed
Chairman Alan Greenspan did warn that the economy was still on "an
unsustainable track" and had not slowed enough to eliminate the threat of
renewed inflation. It remains to be seen if and when those cautionary words
will translate into interest-rate action.
* DURATION-NEUTRAL STRUCTURE LETS FUND PURSUE VALUE AND INCOME OPPORTUNITIES
Given our expectation of higher interest rates sometime in the near future, we
have continued to keep the fund in a flexible position. During most of fiscal
1997, this meant holding portfolio duration relatively neutral in order to
take advantage of incrementally higher yields as they became available. One
such opportunity arose in the spring, just after the Fed raised interest rates
at its March meeting.
While Putnam Management did not anticipate another rate increase shortly
thereafter, many market participants did, thereby pushing up money market
security yields and depressing prices. We took advantage of this situation to
capture some extra yield by purchasing some top-quality 9-month and 1-year
securities, thus capitalizing on a rate increase that never materialized.
* HIGH-QUALITY FOCUS DRIVES SECURITY SELECTION
Superior quality and preservation of capital remain the hallmarks of your
fund's portfolio strategy, and we continue to invest in a wide spectrum of
top-quality, traditional money market securities. These include certificates
of deposit, bank notes, government agency discount notes, and both
conventional and asset-backed commercial paper (debt obligations backed by
trade and term receivable, credit cards, or auto loans).
As always, our strict quality standards remained intact throughout the annual
period. In selecting investments for the portfolio, we seek securities that
are rated by two or more nationally recognized statistical rating
organizations and receive at least two ratings within the top two categories.
If the security has been rated by only one service, its rating must be within
the service's top two categories. If a security is unrated, however, it must
be judged by Putnam Management to be of a quality equivalent to that of
securities with ratings in the top two categories. At period's end, all
portfolio holdings were rated.
* OUTLOOK: HIGHER RATES LIKELY
While many investors seem to be extending their expectations of stable
short-term interest rates, Putnam Management believes it is likely that the
Fed will move to tighten rates by early 1998. Yes, actual inflation remains
quite low, but pressures are certainly building, and the market remains
vulnerable to any news of an uptick. With its neutral portfolio duration and
conservative, quality-focused investment strategy, this fund remains well
positioned for what lies ahead. Should interest rates begin to rise, we will
be able to take advantage of higher yields to capture additional income for
the fund. In the meantime, we will continue to concentrate on preserving net
asset value and maintaining a superior quality portfolio -- which are the
chief attributes most investors seek in a money market fund.
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings were viewed
favorably as of 9/30/97, there is no guarantee the fund will continue to hold
these securities in the future. An investment in this fund is neither insured
nor guaranteed by the U.S. government, and there is no assurance that a $1.00
share price will be maintained.
PERFORMANCE COMPARISONS (9/30/97)
Current
return*
- ------------------------------------------------------------------------------
Passbook savings account 2.00%
- ------------------------------------------------------------------------------
Taxable money market fund (7-day yield) 5.04
- ------------------------------------------------------------------------------
3-month certificate of deposit 4.10
- ------------------------------------------------------------------------------
Putnam Money Market Fund (7-day yield)
- ------------------------------------------------------------------------------
Class A 5.13
- ------------------------------------------------------------------------------
Class B 4.63
- ------------------------------------------------------------------------------
Class M 4.98
- ------------------------------------------------------------------------------
The net asset value of money market mutual funds is uninsured and designed to
be fixed, while distributions vary daily. Investment returns will fluctuate.
The principal value on passbook savings and on bank CDs is generally insured
up to certain limits by state and federal agencies. Unlike stocks, which incur
more risk, CDs offer a fixed rate of return. Unlike money market funds, bank
CDs may be subject to substantial penalties for early withdrawals.
* Sources: BankBoston (passbook savings), Bank Rate Monitor (3-month CDs),
IBC/Donaghue's Money Fund Report (taxable money market fund compound 7-day
yield).
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Money Market Fund is designed for investors seeking current income
consistent with capital preservation, stable principal, and liquidity.
TOTAL RETURN FOR PERIODS ENDED 9/30/97
(most recent calendar quarter)
Class A Class B Class M
(inception date) (10/1/76) (4/27/92) (12/8/94)
NAV NAV CDSC NAV
- ------------------------------------------------------------------------------
1 year 5.17% 4.65% -0.35% 5.01%
- ------------------------------------------------------------------------------
5 years 23.33 20.24 18.24 22.40
Annual average 4.28 3.76 3.41 4.13
- ------------------------------------------------------------------------------
10 years 70.63 62.56 62.56 68.09
Annual average 5.49 4.98 4.98 5.33
- ------------------------------------------------------------------------------
Annual average 7.50 6.97 6.97 7.34
(Life of fund)
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/97
Lipper Money Consumer
Market Fund Average Price Index
- ------------------------------------------------------------------------------
1 year 4.85% 2.15%
- ------------------------------------------------------------------------------
5 years 22.82 14.08
Annual average 4.20 2.67
- ------------------------------------------------------------------------------
10 years 69.93 40.17
Annual average 5.44 3.43
- ------------------------------------------------------------------------------
Annual average 7.55 5.02
(Life of fund)
- ------------------------------------------------------------------------------
Fund performance data do not take into account any adjustment for taxes
payable on reinvested distributions. Performance data represent past
results and are not indicative of future returns. Investment returns will
fluctuate. An investment in the fund is neither insured nor guaranteed by
the U.S. government. There can be no assurance that the fund will be able
to maintain a stable net asset value of $1.00 per share. The fund's
holdings do not match those in the Lipper Average.
Returns shown for class B and class M shares for periods prior to their
inception are derived from the historical performance of class A shares,
adjusted to reflect the higher operating expenses applicable to such
shares. One-, five- (when available) and life of fund returns for Class B
shares reflect the applicable contingent deferred sales charge (CDSC),
which is 5% in the first year, declines to 1% in the sixth year, and is
eliminated thereafter. All returns assume reinvestment of distributions at
NAV and represent past performance; they do not guarantee future results.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 9/30/97
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 12 12 12
- ------------------------------------------------------------------------------
Income $0.050511 $0.045509 $0.049019
- ------------------------------------------------------------------------------
Total $0.050511 $0.045509 $0.049019
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current 7-day yield* 5.13% 4.63% 4.98%
- ------------------------------------------------------------------------------
Current 30-day yield* 5.15 4.65 5.00
- ------------------------------------------------------------------------------
* The 7-day and 30-day yields are the two most common gauges for
measuring money market mutual fund performance.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares.
Class A shares generally are fund shares purchased with an initial sales
charge. In the case of your fund, which has no initial sales charge, the
reference is to shares purchased or acquired through the exchange of class
A shares from another Putnam fund. Exchange of your fund's class A shares
into another fund may involve a sales charge, however.
Class B shares generally are fund shares purchased with no initial sales
charge but subject to a contingent deferred sales charge (CDSC) upon
redemption. However, class B shares of your fund can be acquired only
through exchange of class B shares from another fund or purchased by
certain systematic plan shareholders. A contingent deferred sales charge
is a charge applied at the time of redemption of class B shares and
assumes redemption at the end of the period. The CDSC schedule will vary
depending on whether the shares were acquired through exchange or through
a systematic investment plan purchase. Consult your prospectus for
details.
Class M shares generally have a lower initial sales charge and a higher
12b-1 fee than class A shares and no sales charge on redemption. In the
case of your fund, which has no initial sales charge, exchange of your
fund's class M shares into another fund may involve a sales charge,
however.
COMPARATIVE BENCHMARKS
Lipper Money Market Fund Average, used for performance comparison
purposes, is an arithmetic average of the total return of all money market
mutual funds tracked by Lipper Analytical Services. Lipper is an
independent rating organization for the mutual fund industry. Lipper
rankings vary for other periods. The fund's holdings do not match those in
the Lipper average. It is not possible to invest directly in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Report of independent accountants
To the Trustees and Shareholders of
Putnam Money Market Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Putnam Money
Market Fund (the "fund") at September 30, 1997, and the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of investments owned at September 30, 1997 by correspondence with
the custodian, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
November 7, 1997
Portfolio of investments owned
September 30, 1997
<TABLE>
<CAPTION>
COMMERCIAL PAPER (71.9%) * MATURITY
PRINCIPAL AMOUNT DATE VALUE
DOMESTIC (47.8%) *
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$27,500,000 AC Acquisition Holding Company 5.52s 10/29/97 $ 27,377,717
25,000,000 American Home Products 5 1/2s 10/22/97 24,915,972
30,000,000 Asset Securitization Co-op Corp. 5.54s 12/3/97 29,704,533
20,000,000 Bank of America Corp. 5.55s 2/3/98 19,611,500
25,000,000 Bank of America FSB 5.52s 10/8/97 24,969,333
25,000,000 Chase Manhattan Bank Corp. 5.68s 12/2/97 24,751,500
20,000,000 Chevron Transport Corp. 5.52s 11/19/97 19,846,667
50,000,000 Corporate Asset Funding Co. Inc. 5.51s 10/15/97 49,885,208
35,000,000 Corporate Asset Funding Co. Inc. 5 1/2s 10/21/97 34,887,708
15,000,000 Corporate Receivables Corp. 5.55s 10/29/97 14,932,938
25,000,000 Corporate Receivables Corp. 5.54s 12/4/97 24,749,931
35,000,000 Corporate Receivables Corp. 5.53s 11/17/97 34,741,933
25,000,000 Corporate Receivables Corp. 5.52s 11/14/97 24,827,500
31,000,000 Delaware Funding Corp. 5.52s 10/6/97 30,971,480
35,000,000 Delaware Funding Corp. 5.52s 10/2/97 34,989,267
35,000,000 Falcon Asset Securitization Corp. 5.52s 11/25/97 34,699,467
35,000,000 Ford Motor Credit Corp. 5 1/2s 10/2/97 34,989,306
40,000,000 General Electric Capital Corp. 5.69s 11/10/97 39,740,789
30,000,000 General Electric Capital Corp. 5.54s 11/12/97 29,801,483
20,000,000 General Motors Acceptance Corp. 5.55s 10/8/97 19,975,333
35,000,000 General Motors Acceptance Corp. 5.54s 10/15/97 34,919,208
25,000,000 General Motors Acceptance Corp. 5.54s 10/14/97 24,946,139
20,000,000 General Motors Acceptance Corp. 5.54s 10/10/97 19,969,222
30,000,000 GTE Funding Inc. 5.52s 10/14/97 29,935,600
50,000,000 Household Finance Corp. 5.52s 10/22/97 49,822,784
30,000,000 Merrill Lynch & Co, Inc. 5.68s 11/18/97 29,768,067
20,000,000 Merrill Lynch & Co. Inc. 5.6s 10/8/97 19,975,111
30,000,000 Merrill Lynch & Co. Inc. 5.54s 11/4/97 29,838,417
30,000,000 Morgan (J.P.) & Co. 5.52s 10/14/97 29,935,600
35,000,000 National Rural Utilities Cooperative
Finance Corp. 5.54s 2/17/98 34,245,944
24,000,000 National Rural Utilities Cooperative
Finance Corp. 5.51s 10/20/97 23,926,533
26,000,000 Preferred Receivable Fundings Corp. 5 5/8s 10/9/97 25,963,438
23,400,000 Preferred Receivable Fundings Corp. 5.53s 10/28/97 23,299,354
51,300,000 Preferred Receivable Fundings Corp. 5 53s 10/7/97 51,244,838
30,000,000 Safeco Credit Company 5.61s 10/23/97 29,892,475
25,000,000 Sears Roebuck Acceptance Corp. 5.55s 11/14/97 24,826,564
35,000,000 Sears Roebuck Acceptance Corp. 5.54s 10/30/97 34,838,417
30,000,000 Sears Roebuck Acceptance Corp. 5.52s 10/23/97 29,894,200
20,000,000 Sheffield Receivables Corp. 5.57s 11/3/97 19,894,789
25,000,000 Sheffield Receivables Corp. 5.56s 10/24/97 24,907,333
15,000,000 Sheffield Receivables Corp. 5.54s 10/16/97 14,963,067
25,000,000 Sheffield Receivables Corp. 5.53s 10/21/97 24,919,364
14,000,000 Sheffield Receivables Corp. 5.52s 10/1/97 13,997,853
19,000,000 USAA Capital Corp. 5.55s 10/8/97 18,976,567
--------------
$1,245,270,449
FOREIGN (24.1%) *
- ------------------------------------------------------------------------------------------------------------
15,000,000 Abbey National PLC 5.7s (United Kingdom) 10/10/97 $ 14,976,250
20,000,000 Abbey National PLC 5.51s (United Kingdom) 12/23/97 19,742,867
26,620,000 Abbey National North America Corp. DCP 5.53s
(United Kingdom) 1/14/98 26,186,552
20,000,000 Banco Credito National (Barclays (LOC)) 5.55s
(United Kingdom) 1/8/98 19,691,667
20,000,000 Banco Nacional de Mexico (Barclays (LOC)) 5.54s
(United Kingdom) 11/25/97 19,827,644
25,000,000 Canadian Imperial Bank Of Commerce 5.49s
(Canada) 10/22/97 24,916,003
28,000,000 Cemex S.A. (Credit Suisse First Boston(LOC)) 5.52s
(Switzerland) 11/6/97 27,841,147
20,000,000 Chevron UK Investment PLC 5.51s
(United Kingdom) 10/1/97 19,996,939
20,700,000 Contifinancial Corp. (Dresdner Bank AG (LOC)
5.56s (Germany) 2/26/98 20,223,647
16,061,000 Corporacion Andina de Fomento (Barclays (LOC))
5.65s (United Kingdom) 10/2/97 16,055,959
25,000,000 Credit Suisse First Boston 5.54s (Switzerland) 10/7/97 24,973,069
16,000,000 Credit Suisse First Boston 5.52s (Switzerland) 10/20/97 15,950,933
30,000,000 Den Danske Bank 5.7s (Denmark) 11/19/97 29,762,500
30,000,000 Den Danske Corporation Inc. 5.575s (Denmark) 2/13/98 29,368,167
40,000,000 Deutsche Bank Financial Inc. 5.51s (Germany) 10/3/97 39,981,633
50,000,000 Glencore Finance Services (Union Bank (LOC))
5.56s (Switzerland) 2/4/98 29,875,575
25,000,000 Glencore Finance Services (ABN AMRO Bank NV
(LOC)) 5.53s (Netherlands) 1/30/98 24,531,486
35,000,000 Glencore Finance Services (ABN AMRO Bank NV
(LOC)) 5.53s (Netherlands) 11/13/97 49,019,278
30,000,000 Glencore Finance Services (Union Bank (LOC))
5.53s (Switzerland) 10/27/97 34,763,439
17,500,000 Lloyds Bank PLC 5.55s (United Kingdom) 1/7/98 17,232,906
25,000,000 National Australia Funding 5 1/2s (Australia) 10/6/97 24,977,083
24,000,000 PEMEX Capital, Inc. (Credit Suisse First Boston
(LOC)) 5.68s (Switzerland) 10/9/97 23,965,920
30,000,000 Svenska Handelsbanken 5.74s (Sweden) 10/17/97 29,918,683
20,000,000 Svenska Handelsbanken 5.53s (Sweden) 11/12/97 19,867,894
25,000,000 Svenska Handelsbanken 5.52s (Sweden) 10/14/97 24,946,333
--------------
$ 628,593,574
--------------
Total Commercial Paper (cost $1,873,864,023) $1,873,864,023
CERTIFICATES OF DEPOSIT (15.9%) * MATURITY
PRINCIPAL AMOUNT DATE VALUE
- ------------------------------------------------------------------------------------------------------------
$23,000,000 Abbey National PLC 6.05s (United Kingdom) 6/8/98 $ 22,995,966
30,000,000 ABN AMRO Bank NV 6.15s (Netherlands) 5/11/98 29,991,155
40,000,000 Bank Of Nova Scotia 5.87s (Canada) 11/19/97 39,998,259
20,000,000 Banque Nationale De Paris 5.61s (France) 12/29/97 20,000,492
25,000,000 Bayerische Vereinsbank AG 5.85s (Germany) 11/12/97 25,008,104
30,000,000 Canadian Imperial Bank of Commerce 5.8s
(Canada) 3/2/98 29,996,329
30,000,000 Deutsche Bank 6.21s (Germany) 4/20/98 30,027,303
30,000,000 National Westminster Bank PLC 5.685s
(United Kingdom) 2/27/98 29,996,997
20,000,000 Royal Bank Of Canada 5.94s (Canada) 6/25/98 20,005,447
70,000,000 Societe Generale 5 7/8s (France) 11/24/97 70,002,579
20,000,000 Societe Generale 5.63s (France) 12/31/97 19,998,242
35,000,000 Westdeutsche Landesbank Giroz 5.66s (Germany) 10/9/97 35,004,369
40,000,000 Westpac Banking Corp. 5.97s (Australia) 8/13/98 39,990,001
--------------
Total Certificates of Deposit (cost $413,015,243) $ 413,015,243
BANK NOTES (4.0%) * MATURITY
PRINCIPAL AMOUNT DATE VALUE
- ------------------------------------------------------------------------------------------------------------
$25,000,000 Bank of America NT & SA 5.9s 3/4/98 $ 24,992,825
30,000,000 First National Bank of Boston 5.65s 11/5/97 30,000,000
25,000,000 Morgan Guaranty Trust CO. 5.965s 6/22/98 24,991,593
25,000,000 Northern Trust Corporation 5.95s 6/24/98 24,988,000
--------------
Total Bank Notes (cost $104,972,418) $ 104,972,418
SHORT-TERM INVESTMENTS (4.2%)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$33,363,000 Interest in $150,000,000 joint discount commercial
paper with New Center Asset Trust, effective
yield of 6.5%, October 1, 1997 $ 33,363,000
74,688,000 Interest in $75,000,000 joint discount commercial
paper with Bayerische Vereinsbank AG, effective
yield of 6.45%, October 1, 1997 74,688,000
--------------
Total Short-Term Investments (cost $108,051,000) $ 108,051,000
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,499,902,684) *** 2,499,902,684
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $2,603,610,091.
*** The aggregate identified cost on a tax basis is the same.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1997
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at amortized cost (Note 1) $2,499,902,684
- ---------------------------------------------------------------------------------------------------
Cash 6,442
- ---------------------------------------------------------------------------------------------------
Interest and other receivables 10,655,209
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 117,790,352
- ---------------------------------------------------------------------------------------------------
Total assets 2,628,354,687
Liabilities
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 395,398
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 21,353,200
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,141,060
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 370,316
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 30,911
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 8,581
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 196,720
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 248,410
- ---------------------------------------------------------------------------------------------------
Total liabilities 24,744,596
- ---------------------------------------------------------------------------------------------------
Net assets $2,603,610,091
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Note 4) $2,603,610,091
- ---------------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per class A share
($2,134,223,127 divided by 2,134,223,127 shares) * $1.00
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($410,885,364 divided by 410,885,364 shares)** $1.00
- ---------------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per class M share
($58,501,600 divided by 58,501,600 shares)* $1.00
- ---------------------------------------------------------------------------------------------------
* Offered at net asset value.
** Class B shares are available only by exchange of class B shares from
other Putnam funds and to certain systematic investment plan investors.
For investors who acquired class B shares through an exchange, the
applicable contingent deferred sales charge will depend upon the fund
which you exchanged.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended September 30, 1997
<S> <C>
Interest income: $146,791,603
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 8,460,127
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 5,217,297
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 72,547
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 31,315
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,348,283
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 69,211
- --------------------------------------------------------------------------------------------------
Reports to shareholders 92,115
- --------------------------------------------------------------------------------------------------
Registration fees 449,622
- --------------------------------------------------------------------------------------------------
Auditing 46,583
- --------------------------------------------------------------------------------------------------
Legal 54,982
- --------------------------------------------------------------------------------------------------
Postage 213,814
- --------------------------------------------------------------------------------------------------
Other 465,955
- --------------------------------------------------------------------------------------------------
Total expenses 17,521,851
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (1,307,981)
- --------------------------------------------------------------------------------------------------
Net expenses 16,213,870
- --------------------------------------------------------------------------------------------------
Net investment income 130,577,733
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $130,577,733
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended September 30
-------------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 130,577,733 $ 88,858,794
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 130,577,733 88,858,794
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (106,719,970) (71,786,456)
- ----------------------------------------------------------------------------------------------------------------------
Class B (21,583,487) (16,189,187)
- ----------------------------------------------------------------------------------------------------------------------
Class M (2,274,276) (883,151)
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 476,931,642 672,064,983
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 476,931,642 672,064,983
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of year 2,126,678,449 1,454,613,466
- ----------------------------------------------------------------------------------------------------------------------
End of year $2,603,610,091 $2,126,678,449
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
For the eleven
Per-share months ended Year ended
operating performance Year ended September 30 Sept. 30 October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income $.0505 $.0507 $.0521 $.0299 $.0246
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0505 .0507 .0521 .0299 .0246
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(.0505) $(.0507) $(.0521) $(.0299) $(.0246)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 5.17 5.19 5.33 3.03 * 2.49
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,134,223 $1,659,288 $1,189,640 $1,101,171 $586,920
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .57 .57 .62 .58 * .70
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.06 5.00 5.23 3.03 * 2.48
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended September 30, 1995 and thereafter,
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts (Note 2).
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
For the eleven
Per-share months ended Year ended
operating performance Year ended September 30 September 30 October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income $.0455 $.0457 $.0469 $.0251 $.0195
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0455 .0457 .0469 .0251 .0195
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(.0455) $(.0457) $(.0469) $(.0251) $(.0195)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 4.65 4.67 4.80 2.54 * 1.98
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $410,885 $438,316 $256,533 $194,187 $22,777
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.07 1.07 1.12 1.03 * 1.20
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.57 4.51 4.75 2.77 * 1.98
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended September 30, 1995 and thereafter,
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts (Note 2).
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Dec. 8, 1994+
operating performance Year ended September 30 to Sep. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income $.0490 $.0490 $.0434
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0490 .0490 .0434
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(.0490) $(.0490) $(.0434)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 5.01 5.02 4.43 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $58,502 $29,075 $8,440
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .72 .72 .67 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.92 4.82 4.29 *
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended September 30, 1995 and thereafter,
includes amounts paid through expense offset arrangements. Prior period ratios exclude
these amounts (Note 2).
</TABLE>
Notes to financial statements
September 30, 1997
Note 1
Significant accounting policies
Putnam Money Market Fund (the "fund"), is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The fund seeks current income consistent with preservation
of capital and maintenance of liquidity. The fund achieves its objective by
investing in a portfolio of high-grade short-term obligations. The fund may
invest up to 100% of its assets in the banking industry and in commercial
paper and short-term corporate obligations of issuers in the personal credit
institution and business credit industries.
The fund offers class A, class B and class M shares. Each class of shares is
sold without a front-end sales charge. Class B shares are offered only in
exchange for class B shares of other Putnam funds, or purchased certain
systematic investment plans. Shareholders who acquired class B shares through
an exchange are subject to the same contingent deferred sales charge schedule
as the fund from which they were exchanged. Class B shares, which convert to
class A shares after approximately eight years, pay an ongoing distribution
fee, and are subject to a contingent deferred sales charge if the shares are
redeemed within six years of purchase (including any holding period of the
shares in other Putnam funds). Class M shares pay an ongoing distribution fee
lower than class B shares but are not subject to a contingent deferred sales
charge.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class (including
the distribution fees applicable to such class). Each class votes as a class
only with respect to its own distribution plan or other matters on which a
class vote is required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the fund, if the
fund were liquidated. In addition, the Trustees declare separate dividends on
each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally accepted
accounting principles and requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities. Actual
results could differ from those estimates.
A) Security valuation The valuation of the fund's portfolio instruments is
determined by means of the amortized cost method as set forth in Rule 2a-7
under the Investment Company Act of 1940. The amortized cost of an instrument
is determined by valuing it at cost originally and thereafter amortizing any
discount or premium from its face value at a constant rate until maturity.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam Investment
Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc.. These balances may be invested in one
or more repurchase agreements and/or short-term money market instruments.
C) Security transactions Security transactions are accounted for on the trade
date ( date the order to buy or sell is executed).
D) Federal taxes It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. It is also
the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986, as amended. Therefore, no provision has been made for federal taxes
on income, capital gains or unrealized appreciation on securities held nor for
excise tax on income and capital gains.
E) Interest income and distributions to shareholders Interest is recorded on
the accrual basis. Income dividends (and distributions of realized gains, if
any) are recorded daily by the fund and are distributed monthly to the
shareholders.
F) Amortization of bond premium and accretion of bond discount Premiums and
discounts from purchases of short-term investments
are amortized/accreted using the straight line method.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund. Such
fee is based on the following annual rates: 0.50% of the first $100 million of
average net assets, 0.40% of the next $100 million, 0.35% of the next $300
million, 0.325% of the next $500 million, and 0.30% of any amount over $1
billion.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended September 30, 1997, fund expenses were reduced by
$1,307,981 under expense offset arrangements with PFTC. Investor servicing and
custodian fees reported in the Statement of operations exclude these credits.
The fund could have invested a portion of the assets utilized in connection
with the expense offset arrangements in an income producing asset if it had
not entered into such arrangements.
Trustees of the fund receive an annual Trustees fee of $2,232 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of the
Trustees receive additional fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which
allows the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund and are
invested in certain Putnam funds until distribution in accordance with the
Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of Trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class B and class M shares pursuant to Rule 12b-1 under the Investment Company
Act of 1940. The purpose of the Plans is to compensate Putnam Mutual Funds
Corp., a wholly-owned subsidiary of Putnam Investments Inc., for services
provided and expenses incurred by it in distributing shares of the fund. The
Plans provide for payments by the fund to Putnam Mutual Funds Corp. at an
annual rate up to 0.75% and 1.00% of the average net assets attributable to
class B and class M shares, respectively. The Trustees currently limit payment
by the fund to an annual rate of 0.50% and 0.15% of the average net assets
attributable to class B and class M shares, respectively.
For the year ended September 30, 1997, Putnam Mutual Funds Corp., acting as
underwriter received $1,667,220 in contingent deferred sales charges from
redemptions of class B shares. A deferred sales charge of up to 1% is assessed
on certain redemptions of class A shares. These charges apply to certain
shares that have been exchanged from other Putnam funds. For the year ended
September 30, 1997, Putnam Mutual Funds Corp., acting as underwriter, received
no monies on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended September 30, 1997, purchases and sales (including
maturities) of investment securities (all short-term obligations) aggregated
$59,992,782,988 and $59,564,604,104, respectively. In determining the net gain
or loss on securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Capital shares
At September 30, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares at a constant net asset
value of $1.00 per share were as follows:
Year ended
September 30
- ------------------------------------------------------------
Class A 1997 1996
- ------------------------------------------------------------
Shares sold 15,480,603,384 8,637,001,040
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 101,004,236 67,453,247
- ------------------------------------------------------------
15,581,607,620 8,704,454,287
Shares
repurchased (15,106,672,041 (8,234,806,321)
- ------------------------------------------------------------
Net increase 474,935,579 469,647,966
- ------------------------------------------------------------
Year ended
September 30
- ------------------------------------------------------------
Class B 1997 1996
- ------------------------------------------------------------
Shares sold 2,550,729,879 2,160,995,082
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 19,704,929 14,670,593
- ------------------------------------------------------------
2,570,434,808 2,175,665,675
Shares
repurchased (2,597,865,336) (1,993,883,218)
- ------------------------------------------------------------
Net increase
(decrease) (27,430,528) 181,782,457
- ------------------------------------------------------------
Year ended
September 30
- ------------------------------------------------------------
Class M 1997 1996
- ------------------------------------------------------------
Shares sold 431,207,895 133,711,096
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,183,663 845,150
- ------------------------------------------------------------
433,391,558 134,556,246
Shares
repurchased (403,964,967) (113,921,686)
- ------------------------------------------------------------
Net increase 29,426,591 20,634,560
- ------------------------------------------------------------
Federal tax information
(Unaudited)
The Form 1099 you receive in January 1998 will show the tax status of all
distributions paid to your account in calendar 1997.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund *
International New Opportunities Fund
Investors Fund
New Opportunities Fund +
OTC & Emerging Growth Fund [DBL. DAGGER]
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Total Return Fund
High Yield Trust +
Income Fund
Money Market Fund **
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
LIFESTAGE [SECTION MARK] FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Overseas Growth Fund
+ Closed to new investors. Some exceptions may apply. Contact
Putnam for details.
[DBL. DAGGER] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
** An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed
to maintain a price of $1.00 per share, although there is no
assurance that this price will be maintained in the future.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
William J. Curtin
Vice President
William F. McGue
Vice President
Joanne M. Driscoll
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Money Market
Fund. It may also be used as sales literature when preceded or accompanied by
the current prospectus, which gives details of sales charges, investment
objectives, and operating policies of the fund, and the most recent copy of
Putnam's Quarterly Performance Summary. For more information or to request a
prospectus, call toll free: 1-800-225-1581. You can also learn more at Putnam
Investments' website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution; are not insured by the Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board, or any other agency;
and involve risk, including the possible loss of the principal amount
invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
AN039-36838 11/97
