Putnam
Money
Market
Fund
SEMIANNUAL REPORT
March 31, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "[D]espite the obvious love affair individual investors have had
with mutual funds the past few years, they've also been steadily
allocating cash to money market funds, one of the most conservative
and most 'liquid' -- or easy to enter and exit -- investments
available. By next month, these assets could top $1 trillion, up
from $300 billion only four years ago."
-- The Wall Street Journal, April 3, l997
CONTENTS
4 Report from Putnam Management
7 Fund performance summary
10 Portfolio holdings
13 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[COPYRIGHT] Karsh, Ottawa
Dear Shareholder:
Prolonged anticipation of a Federal Reserve Board increase in short-term
interest rates provided most of the challenges for Fund Manager Lindsey Strong
throughout the first half of Putnam Money Market Fund's fiscal year. Thus,
when the Fed finally did raise rates by a quarter point near the end of the
period, she had already positioned the portfolio appropriately.
Lindsey also maintained the fund's conservative strategy of investing in
high-quality short-term investments. As a result, she was able to deliver
another period of competitive performance while maintaining a stable net asset
value. In the following report, Lindsey discusses in detail the driving forces
behind your fund's performance during the first half of fiscal 1997 and her
outlook for the fiscal year's second half.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
May 14, 1997
Report from the Fund Manager
Lindsey C. Strong
Putnam Money Market Fund began fiscal 1997 in an economic environment marked
by solid growth, relatively moderate interest rates, and fairly low
inflationary expectations. In fact, throughout the period's entire first half
- -- the six months ended March 31, 1997 -- an economic environment prevailed in
which momentum toward higher interest rates was building. During the first
three months of calendar l997, however, the indicators that measure the
strength of the economy pointed to a rate of growth that some financial
professionals believed could trigger a significant rise in inflation -- and
the Federal Reserve Board responded accordingly.
Your fund's conservative investment strategy, which emphasizes superior
quality short-term instruments and the pursuit of current income, served it
well in this environment. The fund once again provided a competitive total
return while continuing to focus on capital preservation and maintaining a
stable $1.00 share price.
* THE FED'S PREEMPTIVE STRIKE
After leaving interest rates alone for more than two years, the Federal
Reserve Board raised short-term interest rates by a quarter of a percentage
point on March 25, l997, explaining the move as a "preemptive strike" against
inflation. The Fed's action came on the heels of a host of data that indicated
a still robust economy. Personal income and consumer spending rose sharply,
new home sales were up, and the unemployment rate had declined to 5.2%, its
lowest level in eight years.
These positive trends were accompanied by growing concern about the prospect
of higher inflation down the road. It was this worry that prompted the Fed's
action, since rising interest rates usually have the effect of slowing
economic growth and thus can be expected to help keep inflation under control.
Because we correctly anticipated the Fed's move on interest rates, we took a
more defensive approach in managing the fund. We concentrated on maximizing
income while maintaining high quality. Since we wanted the fund to be able to
take full advantage of any rise in interest rates, we shortened the
portfolio's average maturity, thus affording an earlier opportunity to
purchase newer higher-yielding securities. By using this strategy, we have
avoided locking the portfolio into lower-yielding investments, should interest
rates continue to rise.
* SEEKING ATTRACTIVELY VALUED HIGH-QUALITY SECURITIES
We continued to invest in traditional money market securities of the highest
quality. These included certificates of deposit, commercial paper, bank notes,
and government agency discount notes. Supply was steady during the period, and
in our opinion, securities were attractively valued.
As many investors across the board became more cautious during the first three
months of l997, we saw a dramatic increase in the amount of money flowing into
money market funds. Your fund was no exception. As the new money came in, the
combination of relatively good supply and fairly low prices was helpful, since
it presented us with attractive investment opportunities to absorb the cash.
Superior portfolio quality is one of your fund's most important attributes so,
as always, our strict standards for investing in any security remained intact.
Ideally, at the time of acquisition, every holding must be rated by two or
more nationally recognized rating services 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. At
period's end, all portfolio holdings were rated. If a security is unrated,
however, it must be judged by Putnam Management to be of quality equivalent to
that of securities with ratings in the top two categories.
PERFORMANCE COMPARISONS (3/31/97)
Current
return*
- ------------------------------------------------------------
Passbook savings account 2.01%
- ------------------------------------------------------------
Taxable money market fund 7-day yield 5.08
- ------------------------------------------------------------
3-month certificate of deposit 4.03
- ------------------------------------------------------------
Putnam Money Market Fund (7-day yield)
- ------------------------------------------------------------
Class A 4.81
- ------------------------------------------------------------
Class B 4.81
- ------------------------------------------------------------
Class M 4.66
- ------------------------------------------------------------
The net asset value of money market mutual funds ins uninsured and designed
to be fixed, while distributions vary daily. Investment returns will
fluctuate. The principal value of passbook savings and band 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 funs, bank CDs may be subject to substantial penalties for early
withdrawals.
*Sources: Bank of Boston (passbook savings), Bank Rate Monitor (3-month
CDs), IBC/Donaghue's Money Fund Report (taxable money market fund 7-day
yield).
* OUTLOOK: FURTHER RATE INCREASES POSSIBLE
In the months ahead, we will be carefully monitoring the economic environment.
If the economy continues to gain strength, we believe the Fed may again take
preemptive moves against inflation with further increases in short-term rates.
Should this type of environment persist, we would continue to focus on
capturing the highest possible yields for the fund while maintaining the
portfolio's traditional high quality. To this end, we would anticipate keeping
the average maturity relatively short. We believe our emphasis on traditional
high-quality instruments should enable the fund to maintain its policy of
seeking current income and a stable share price.
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 3/31/97, there is no guarantee the fund will continue to hold
these securities in the future.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Money Market Fund is designed for investors seeking
current income, consistent with capital preservation, stable principal,
and liquidity.
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares changed
over time, assuming you held the shares through the entire period and
reinvested all distributions in the fund.
TOTAL RETURN FOR PERIODS ENDED 3/31/97
Class A Class B Class M
(inception date) (10/1/76) (4/27/92) (12/8/94)
NAV NAV CDSC NAV
- ------------------------------------------------------------------------------
6 months 2.50% 2.25% -2.75% 2.43%
- ------------------------------------------------------------------------------
1 year 5.06 4.54 -0.46 4.91
- ------------------------------------------------------------------------------
5 years 22.11 -- -- --
Annual average 4.08 -- -- --
- ------------------------------------------------------------------------------
10 years 71.21 -- -- --
Annual average 5.52 -- -- --
- ------------------------------------------------------------------------------
Life of class -- 19.05 17.05 12.33
Annual average -- 3.60 3.24 5.16
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 3/31/97
Lipper
Money Market Consumer
Average Price Index
- ------------------------------------------------------------------------------
6 months 2.35% 1.39%
- ------------------------------------------------------------------------------
1 year 4.76 2.76
- ------------------------------------------------------------------------------
5 years 21.74 14.86
Annual average 4.01 2.81
- ------------------------------------------------------------------------------
10 years 70.88 42.73
Annual average 5.50 3.62
- ------------------------------------------------------------------------------
Life of class B 21.38 14.70
Annual average 4.02 2.82
- ------------------------------------------------------------------------------
Life of class M 12.22 6.88
Annual average 5.06 2.92
- ------------------------------------------------------------------------------
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.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 3/31/97
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 6 6 6
- ------------------------------------------------------------------------------
Income $0.024771 $0.022276 $0.024032
- ------------------------------------------------------------------------------
Total $0.024771 0.022276 $0.024032
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current 7-day yield1 4.81% 4.31% 4.66%
- ------------------------------------------------------------------------------
Current 30-day yield1 4.93 4.43 4.77
- ------------------------------------------------------------------------------
1The 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.
Class A shares generally are fund shares purchased with an initial sales
charge. In the case of your fund, which has no 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 sales charge, exchange of your fund's
class M shares into another fund may involve a sales charge, however.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares.
COMPARATIVE BENCHMARKS
Lipper 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.
Portfolio of investments owned
March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMERCIAL PAPER (77.7%) MATURITY
PRINCIPAL AMOUNT DATE VALUE
DOMESTIC (52.6%)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 15,000,000 A.H. Robins Co. 5.35s 5/12/97 $ 14,906,375
30,000,000 American Home Products 5.32s 5/9/97 29,827,100
25,000,000 Asset Securitization Co-op Corp. 5.32s 6/2/97 24,767,250
18,000,000 Asset Securitization Co-op Corp. 5.32s 5/16/97 17,877,640
40,000,000 Asset Securitization Co-op Corp. 5.27s 5/19/97 39,713,078
30,000,000 Bank of America 5.32s 4/23/97 29,898,033
25,000,000 Bank of America 5.9s 3/4/98 24,992,825
25,742,000 Bank One Corp 5.3s 4/10/97 25,704,102
25,000,000 Chase Manhattan Bank Corp. 5.58s 9/29/97 24,294,118
15,000,000 Ciesco L.P. 5.29s 4/23/97 14,949,304
25,000,000 Ciesco L.P. 5.52s 4/15/97 24,942,500
40,000,000 Ciesco L.P. 5.35s 4/15/97 39,910,833
35,000,000 Corporate Asset Funding Co. Inc. 5.3s 4/24/97 34,876,333
40,000,000 Corporate Asset Funding Co. Inc. 5.3s 4/9/97 39,947,000
30,000,000 Corporate Receivables Corp. 5.35s 4/21/97 29,906,375
25,000,000 Corporate Receivables Corp. 5.34s 4/8/97 24,970,333
25,000,000 Corporate Receivables Corp. 5.28s 5/7/97 24,864,333
35,000,000 Delaware Funding Corp. 5.35s 5/8/97 34,802,347
40,000,000 Delaware Funding Corp. 5.29s 5/1/97 39,817,789
35,000,000 Falcon Asset Securization Corp. 5.35s 4/30/97 34,843,958
20,000,000 Falcon Asset Securization Corp. 5.34s 5/16/97 19,863,533
28,125,000 Falcon Asset Securization Corp. 5.33s 4/1/97 28,120,836
35,000,000 Ford Motor Credit Corp. 5.3s 4/2/97 34,989,694
50,000,000 Ford Motor Credit Corp. 5.26s 4/23/97 49,831,972
30,000,000 General Electric Capital Corp. 5.4s 7/16/97 29,518,500
20,000,000 General Electric Capital Services 5.34s 4/30/97 19,911,000
35,000,000 General Electric Capital Services 5.33s 5/5/97 34,818,632
30,000,000 General Motors Acceptance Corp. 5.33s 4/10/97 29,955,583
25,000,000 General Motors Acceptance Corp. 5.33s 4/9/97 24,966,687
30,000,000 General Motors Acceptance Corp. 5.32s 4/7/97 29,968,967
37,000,000 HJ Heinz Company 5.3s 4/18/97 36,901,950
30,000,000 Household Finance Co. 5.32s 4/15/97 29,933,500
50,000,000 Household Finance Co. 5.32s 4/3/97 49,978,371
30,000,000 IBM Credit Corp. 5.33s 4/28/97 29,875,633
10,000,000 IBM Credit Corp. 5.32s 4/8/97 9,988,177
10,000,000 IBM Credit Corp. 5.32s 4/2/97 9,997,004
20,000,000 IBM Credit Corp. 5.31s 4/14/97 19,958,700
20,000,000 Merrill Lynch & Co, Inc. 5.36s 4/22/97 19,934,489
15,000,000 Merrill Lynch & Co, Inc. 5.34s 5/21/97 14,886,525
20,000,000 Merrill Lynch & Co, Inc. 5.3s 5/21/97 19,849,833
20,091,000 Metlife Funding Inc. 5.57s 4/29/97 20,000,851
26,990,000 Metlife Funding Inc. 5.32s 5/6/97 26,846,413
17,250,000 National Rural Utilities Cooperative
Finance Corp. 5.32s 5/12/97 17,142,935
30,000,000 National Rural Utilities Cooperative
Finance Corp. 5.3s 4/8/97 29,964,667
15,000,000 NationsBank Corp. 5.38s 5/14/97 14,901,367
20,000,000 NationsBank Corp. 5.37s 7/8/97 19,704,650
85,000,000 New Center Asset Trust 6.7s 4/1/97 84,984,181
37,150,000 Preferred Receivables Funding Corp. 5.6s 4/28/97 36,988,191
20,000,000 Preferred Receivables Funding Corp. 5.37s 4/9/97 19,973,150
25,600,000 Preferred Receivables Funding Corp. 5.35s 5/15/97 25,428,800
50,000,000 Sears Roebuck Acceptance Corp. 5.34s 4/2/97 49,985,167
30,000,000 Sears Roebuck Acceptance Corp. 5.28s 5/15/97 29,802,000
50,000,000 Sheffield Receivables Corp. 5 1/2s 4/22/97 49,831,944
15,000,000 Sheffield Receivables Corp. 5.4s 4/17/97 14,961,750
21,200,000 Sheffield Receivables Corp. 5.35s 4/17/97 21,146,441
40,000,000 Sherwood Medical Company 5.3s 4/21/97 39,876,333
--------------
$1,620,600,052
FOREIGN (25.1%)
- ------------------------------------------------------------------------------------------------------------
$25,000,000 Abbey National PLC 5.4s (United Kingdom) 7/11/97 $ 24,617,500
25,000,000 Abbey National PLC 5.28s (United Kingdom) 8/21/97 24,475,667
35,000,000 Abbey National PLC 5.27s (United Kingdom) 5/20/97 34,743,819
25,000,000 ABN AMRO North American Finance 5.37s
(Netherlands) 7/8/97 24,630,812
25,000,000 ABM AMRO North American Finance 5.35s
(Netherlands) 4/15/97 24,944,271
20,000,000 Banco Nacional de Mexico (Barclays Bank (LOC))
5.37s (United Kingdom) 4/17/97 19,949,283
15,000,000 Banco Nacional de Mexico (Barclays Bank (LOC))
5.29s (United Kingdom) 4/16/97 14,964,733
25,000,000 Bank of Nova Scotia 5.26s (Canada) 4/21/97 24,923,292
25,000,000 Canadian Imperial Bank of Commerce 5.315s
(Canada) 4/17/97 24,937,253
20,000,000 CEMEX S.A. (Credit Suisse (LOC)) 5.37s
(Switzerland) 5/27/97 19,829,950
15,000,000 CEMEX S.A. (Credit Suisse (LOC)) 5.3s
(Switzerland) 6/12/97 14,838,792
30,000,000 Commonwealth Bank of Australia 5.4s (Australia) 6/17/97 29,649,000
20,000,000 Commonwealth Bank of Australia 5.39s (Australia) 7/15/97 19,682,589
15,000,000 Commonwealth Bank of Australia 5.33s (Australia) 4/28/97 14,937,816
30,000,000 Credit Suisse First Boston 5.27s (Switzerland) 5/21/97 29,776,025
37,000,000 Den Danske Bank 5.33s (Denmark) 4/11/97 36,939,741
25,000,000 Deutsche Bank Financial Inc. 5.35s (Germany) 6/6/97 24,751,076
20,000,000 Formosa Plastic USA (ABN AMRO Bank N.V.
(LOC)) 5.54s (Netherlands) 4/23/97 19,929,211
12,000,000 Formosa Plastic USA (ABN AMRO Bank N.V.
(LOC)) 5.33s (Netherlands) 4/16/97 11,971,573
40,000,000 Glencore Fin. (Union Bank (LOC)) 5.43s
(Switzerland) 8/28/97 39,095,000
37,982,000 Glencore Fin. (Union Bank (LOC)) 5.36s
(Switzerland) 5/29/97 37,648,349
20,000,000 PEMEX Capital Inc. (Credit Suisse (LOC)) 5.3s
(Switzerland) 5/12/97 19,876,333
20,000,000 PEMEX Capital Inc. (Credit Suisse (LOC)) 5.32s
(Switzerland) 4/7/97 19,979,311
85,000,000 Rabobank USA Financial Corp. 6 3/4s
(Netherlands) 4/1/97 84,984,062
60,000,000 Royal Bank of Canada 5.33s (Canada) 4/29/97 59,742,383
27,000,000 Societe Generale 5.28s (France) 8/20/97 26,437,680
20,000,000 Svenska Handelsbanken 5.38s (Sweden) 7/28/97 19,644,322
25,000,000 Svenska Handelsbanken 5.38s (Sweden) 6/23/97 24,686,166
--------------
$ 772,586,009
--------------
Total Commercial Paper (cost $2,393,220,929) $2,393,186,061
CERTIFICATES OF DEPOSIT (9.4%)* MATURITY
PRINCIPAL AMOUNT DATE VALUE
- ------------------------------------------------------------------------------------------------------------
$35,000,000 Bayerische Vereinsbank AG 5.48s (Germany) 4/7/97 $ 35,000,000
30,000,000 Canadian Imperial Bank of Commerce 5.8s
(Canada) 3/2/98 29,991,339
25,000,000 Canadian Imperial Bank of Commerce 5.35s
(Canada) 4/30/97 24,999,460
35,000,000 Deutsche Bank 5 1/2s (Germany) 6/19/97 35,011,288
50,000,000 Morgan Guaranty Trust Co. 5.49s 6/16/97 50,001,051
30,000,000 National Westminster Bank PLC 5.685s
(United Kingdom) 2/27/98 29,992,811
20,000,000 Societe Generale 5.62s (France) 4/1/97 20,000,000
20,000,000 Societe Generale 5.6s (France) 4/4/97 20,000,043
20,000,000 Societe Generale 5.48s (France) 4/8/97 19,999,912
25,000,000 Svenska Handelsbanken 5.41s (Sweden) 4/18/97 25,000,428
--------------
Total Certificates of Deposit (cost $289,996,332) $ 289,996,332
U.S GOVERNMENT & AGENCY OBLIGATIONS (2.8%)* MATURITY
PRINCIPAL AMOUNT DATE VALUE
- -----------------------------------------------------------------------------------------------------------
$25,000,000 Federal Home Loan Mortgage Corp. 5.3s 4/18/97 $ 24,933,750
Federal National Mortgage Association
25,000,000 5.48s 5/2/97 24,878,222
35,000,000 5.26s 4/16/97 34,918,177
--------------
Total U.S. Government & Agency Obligations
(cost $84,730,149) $ 84,730,149
BANK NOTES (1.6%)* MATURITY
PRINCIPAL AMOUNT DATE VALUE
- -----------------------------------------------------------------------------------------------------------
$25,000,000 First National Bank of Boston 5.47s 6/11/97 $ 25,000,000
25,000,000 First National Bank of Boston 5.34s 5/21/97 25,000,000
--------------
Total Bank Notes (cost $50,000,000) $ 50,000,000
SHORT-TERM INVESTMENTS (5.9%)*(cost $181,838,321)
PRINCIPAL AMOUNT
- ------------------------------------------------------------------------------------------------------------
$181,806,000 Interest in $576,440,000 joint repurchase
agreement dated March 31, 1997 with S.B.C.
Warburg Inc. due April 1, 1997 with respect
to various U.S. Treasury obligations -- maturity
value of $181,838,321 for an effective yield of 6.4% $ 181,838,321
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,999,750,863) *** $2,999,750,863
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $3,080,799,925
*** 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
March 31, 1997 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at amortized cost (Note 1) $2,999,750,863
- ---------------------------------------------------------------------------------------------------
Cash 265
- ---------------------------------------------------------------------------------------------------
Interest and other receivables 5,648,111
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 105,541,214
- ---------------------------------------------------------------------------------------------------
Total assets 3,110,940,453
Liabilities
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 735,601
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 26,333,016
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,040,738
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 626,260
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 25,051
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 5,622
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 218,613
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 155,627
- ---------------------------------------------------------------------------------------------------
Total liabilities 30,140,528
- ---------------------------------------------------------------------------------------------------
Net assets $3,080,799,925
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Note 4) $3,080,799,925
- ---------------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per class A share
($2,444,162,051 divided by 2,444,162,051 shares) * $1.00
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($579,490,059 divided by 579,490,059 shares)** $1.00
- ---------------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per class M share
($57,147,815 divided by 57,147,815 shares)* $1.00
- ---------------------------------------------------------------------------------------------------
* Offered at net asset value.
** Class B shares are available only by exchange of class B shares from other Putnam funds to
certain systematic investment plan investors. The applicable contingent deferred sales charge
will depend upon the fund from which you exchanged.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended March 31, 1997 (Unaudited)
<S> <C>
Interest income: $68,710,574
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 4,039,698
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,459,228
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 50,165
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 11,042
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,096,700
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 27,056
- --------------------------------------------------------------------------------------------------
Reports to shareholders 50,431
- --------------------------------------------------------------------------------------------------
Registration fees 468,011
- --------------------------------------------------------------------------------------------------
Auditing 35,352
- --------------------------------------------------------------------------------------------------
Legal 38,176
- --------------------------------------------------------------------------------------------------
Postage 99,527
- --------------------------------------------------------------------------------------------------
Other 155,996
- --------------------------------------------------------------------------------------------------
Total expenses 8,531,382
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (871,646)
- --------------------------------------------------------------------------------------------------
Net expenses 7,659,736
- --------------------------------------------------------------------------------------------------
Net investment income 61,050,838
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 61,050,838
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
March 31 September 30
1997* 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 61,050,838 $ 88,858,794
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 61,050,838 88,858,794
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (50,287,219) (71,786,456)
- ----------------------------------------------------------------------------------------------------------------------
Class B (9,895,545) (16,189,187)
- ----------------------------------------------------------------------------------------------------------------------
Class M (868,074) (883,151)
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 954,121,476 672,064,983
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 954,121,476 672,064,983
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 2,126,678,449 1,454,613,466
- ----------------------------------------------------------------------------------------------------------------------
End of period $3,080,799,925 $2,126,678,449
- ----------------------------------------------------------------------------------------------------------------------
* Unaudited
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
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the eleven
Per-share March 31 months ended
operating performance (Unaudited) Year ended September 30 Sept. 30 Year ended October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income $.0248 $.0507 $.0521 $.0299 $.0246 $.0353
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0248 .0507 .0521 .0299 .0246 .0353
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(.0248) $(.0507) $(.0521) $(.0299) $(.0246) $(.0353)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.50* 5.19 5.33 3.03* 2.49 3.58
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,444,162 $1,659,288 $1,189,640 $1,101,171 $586,920 $839,185
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .29* .57 .62 .58* .70 .86
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.47* 5.00 5.23 3.03* 2.48 3.56
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 periods ended September 31, 1995 and thereafter
includes amounts paid through expense offset service arrangements. Prior period ratios exclude
these amounts (Note 2).
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the eleven For the period
Per-share March 31 months ended Year ended April 27,1992+
operating performance (Unaudited) Year ended September 30 September 30 October 31 to October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income $.0223 $.0457 $.0469 $.0251 $.0195 $.0151
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0223 .0457 .0469 .0251 .0195 .0151
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(.0223) $(.0457) $(.0469) $(.0251) $(.0195) $(.0151)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.25* 4.67 4.80 2.54* 1.98 1.52*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $579,490 $438,316 $256,533 $194,187 $22,777 $2,864
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .54* 1.07 1.12 1.03* 1.20 .70*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.23* 4.51 4.75 2.77* 1.98 1.50*
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 periods ended September 31, 1995 and thereafter
includes amounts paid through expense offset service arrangements. Prior period ratios exclude
these amounts (Note 2).
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Year ended Dec. 8, 1994+
operating performance (Unaudited) Sept. 30 to Sep. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income $.0240 $.0490 $.0434
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0240 .0490 .0434
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(.0240) $(.0490) $(.0434)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 2.43* 5.02 4.43*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $57,148 $29,075 $8,440
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .37* .72 .67*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.41* 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 periods ended September 31, 1995 and thereafter
includes amounts paid through expense offset service arrangements. Prior period ratios exclude
these amounts (Note 2).
</TABLE>
Notes to financial statements
March 31, 1997 (Unaudited)
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 by certain
systematic investment plans. Shareholders are subject to the same contingent
deferred sales charge schedule as the fund from which they were exchanged.
Class B shares 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 class B and class M shares). 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) Repurchase agreements The fund, or any joint trading account, through its
custodian, receives delivery of the underlying securities, the market value of
which at the time of purchase is required to be in an amount at least equal to
the resale price, including accrued interest. Putnam Management is responsible
for determining that the value of these underlying securities is at all times
at least equal to the resale price, including accrued interest.
D) Security transactions Security transactions are accounted for on the trade
date ( date the order to buy or sell is executed).
E) Federal taxes It is the policy of the fund to distribute all of its taxable
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. Therefore, no provision has been made for federal taxes on income,
capital gains or unrealized appreciation on securities held and for excise tax
on income and capital gains.
F) 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. The amount and character of income and gains to be distributed
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles.
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 six months ended March 31, 1997, fund expenses were reduced by
$871,646 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 $2,060 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 "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 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 shares 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 have approved
payment by the fund at 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 six months ended March 31, 1997, Putnam Mutual Funds Corp., acting as
underwriter received no monies 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 acquired through an exchange from
another fund. For the six months ended March 31, 1997, Putnam Mutual Funds
Corp., acting as underwriter received no monies on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended March 31, 1997, purchases and sales (including
maturities) of investment securities (all short-term obligations) aggregated
$28,593,470,229 and $27,668,863,998 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, 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:
Six months ended Year ended
March 31 September 30
- ------------------------------------------------------------
Class A 1997 1996
- ------------------------------------------------------------
Shares sold 7,006,229,980 8,637,001,040
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 47,381,780 67,453,247
- ------------------------------------------------------------
7,053,611,760 8,704,454,287
Shares
repurchased (6,268,737,257) (8,234,806,321)
- ------------------------------------------------------------
Net increase 784,874,503 469,647,966
- ------------------------------------------------------------
Six months ended Year ended
March 31 September 30
- ------------------------------------------------------------
Class B 1997 1996
- ------------------------------------------------------------
Shares sold 1,327,433,148 2,160,995,082
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 9,003,946 14,670,593
- ------------------------------------------------------------
1,336,437,094 2,175,665,675
Shares
repurchased (1,195,262,927) (1,993,883,218)
- ------------------------------------------------------------
Net increase 141,174,167 181,782,457
- ------------------------------------------------------------
Six months ended Year ended
March 31 September 30
- ------------------------------------------------------------
Class M 1997 1996
- ------------------------------------------------------------
Shares sold 156,900,325 133,711,096
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 831,802 845,150
- ------------------------------------------------------------
157,732,127 134,556,246
Shares
repurchased (129,659,321) (113,921,686)
- ------------------------------------------------------------
Net increase 28,072,806 20,634,560
- ------------------------------------------------------------
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
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
Lindsey C. Strong
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 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 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
- --------------------
32894-010/879/534 5/97
