Putnam
Money
Market
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
9-30-98
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
There's no doubt that the past several months have represented a trying
time for most investors. Fortunately, the unprecedented string of
international events that rattled global stock and bond markets had a
relatively salutary effect on domestic money markets. Indeed, as foreign
investors panicked about plummeting stock markets, they began a flight to
quality -- selling hedge funds and emerging-markets funds in favor of the
relative safety of U.S. Treasury bonds and money market funds. At the same
time, however, short-term interest rates continued to fall, limiting the
yields available on money market securities. Putnam Money Market Fund's
recent performance reflects this mixed environment. For the 12 months
ended September 30, 1998, the fund's class A shares returned 5.29% at net
asset value. You can find additional performance information on pages 4, 5
and 6.
* SLOWER ECONOMY PROMPTS FEDERAL RESERVE ACTION
For most of the annual period, the U.S. economy continued to grow,
although its pace slowed considerably as the effects of Asian, Russian,
and Latin American financial crises began to emerge. After posting a
torrid 5.5% gain during the first quarter of 1998, gross domestic product
growth dropped back to 1.8% in the second quarter. By the end of
September, government reports found exports slumping, manufacturing
activity deteriorating, construction spending flattening, and consumer
confidence slipping.
Against this backdrop of waning economic strength and escalating fears of
spreading global financial woes, many analysts and money market
participants began to expect the Federal Reserve Board to reduce
short-term interest rates. In fact, interest rates on money market
securities had already been trending downward for some time. Your fund's
manager, Joanne Driscoll, attributes this to global stock market
volatility, concerns about credit quality among lower-rated bonds, and the
ongoing flight to quality that drove security prices up. At the end of
September, the Fed finally took action, lowering the federal funds rate
for the first time in nearly three years by one quarter of a percentage
point.
With interest rates falling throughout the period, Joanne has redoubled
efforts to maintain current income while preserving capital and staying
focused on investments of superior quality. Extending portfolio duration
has been one of the most important elements of her strategy. While
portfolio duration was relatively neutral -- neither short nor long -- at
the fund's fiscal midpoint, Joanne has since lengthened it to match or
even slightly exceed the average maintained by the fund's peer group. This
slightly longer duration has helped the fund lock in the highest available
money market yields while reducing the frequency with which the fund must
reinvest assets in the current falling interest-rate environment.
* CREDIT QUALITY AND CAPITAL PRESERVATION ARE KEY CONCERNS FOR MORE
INVESTORS
The recent downshift in the U.S. economy has brought concerns about credit
quality and capital preservation to the forefront for many investors. High
quality money market funds like yours have remained attractive throughout
this period, experiencing record inflows of new capital. In fact, total
assets of all taxable money market funds stood at over $1 trillion by
September 30.
Putnam Money Market Fund has always made capital preservation and credit
quality top priorities, investing in a wide spectrum of superior quality
money market securities. Over the past six months, your fund manager has
bolstered quality even further by increasing the portfolio's holdings of
securities issued by U.S. government agencies, which are the highest
quality investments available. This move was designed to further insulate
the portfolio from the increasing market volatility.
As always, fund management continues to seek portfolio investments that
are rated by two or more nationally recognized rating services, with at
least two ratings in the top two categories. If a security has been rated
by only one service, its rating must be within the service's top two
categories.
In the coming months, your fund's manager will continue to pursue the
conservative strategies that have served shareholders well thus far. She
will remain especially watchful of credit quality and focused on
preserving capital while continuing to seek out appropriate opportunities
to generate current income in today's low interest-rate environment.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
November 18, 1998
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 9/30/98, there is no guarantee the fund will
continue to hold these securities in the future. An investment in the fund
is not insured or guaranteed by the Federal Deposit Insurance Corporation
or any other government agency. Although the fund seeks to preserve your
investment at $1.00 per share, it is possible to lose money by investing
in the fund.
PERFORMANCE COMPARISONS (9/30/98)
Current
return*
- ----------------------------------------------------------------
Passbook savings account 1.74%
- ----------------------------------------------------------------
Taxable money market fund (7-day yield) 5.05
- ----------------------------------------------------------------
3-month certificate of deposit 3.96
- ----------------------------------------------------------------
Putnam Money Market Fund (7-day yield)
- ----------------------------------------------------------------
Class A 5.32
- ----------------------------------------------------------------
Class B 4.82
- ----------------------------------------------------------------
Class M 5.17
- ----------------------------------------------------------------
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 AND YIELDS FOR PERIODS ENDED 9/30/98
Class A Class B Class M
(inception date) (10/1/76) (4/27/92) (12/8/94)
NAV NAV CDSC NAV
- ------------------------------------------------------------------------------
1 year 5.29% 4.78% -0.22% 5.14%
- ------------------------------------------------------------------------------
5 years 26.71 23.54 21.54 25.75
Annual average 4.85 4.32 3.98 4.69
- ------------------------------------------------------------------------------
10 years 68.45 60.50 60.50 65.93
Annual average 5.35 4.84 4.84 5.19
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current 7-day yield1 5.32% 4.82% 4.82% 5.17%
- ------------------------------------------------------------------------------
Current 30-day yield1 5.31 4.86 4.86 5.16
- ------------------------------------------------------------------------------
1The 7-day and 30-day yields are the two most common gauges for measuring
money market mutual fund performance.
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/98
Lipper Money Consumer
Market Average Price Index
- ------------------------------------------------------------------------------
1 year 4.93% 1.36%
- ------------------------------------------------------------------------------
5 years 25.60 12.61
Annual average 4.66 2.40
- ------------------------------------------------------------------------------
10 years 67.34 36.39
Annual average 5.28 3.15
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. Fund performance data
do not take into account any adjustment for taxes payable on reinvested
distributions. Investment returns will fluctuate. An investment in the
fund is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the fund seeks to
preserve your investment at $1.00 per share, it is possible to lose money
by investing in the fund. The fund's holdings do not match those in the
Lipper average. Yield data more closely reflect the current earnings of
the fund.
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.
This performance information does not reflect any market volatility that
may have occurred since the date of the information. As a result, more
recent returns may be more or less than those shown.
DISTRIBUTION INFORMATION
12 months ended 9/30/98
Class A Class B Class M
- --------------------------------------------------------------------
Distributions (number) 12 12 12
- --------------------------------------------------------------------
Income $0.051708 $0.046753 $0.050201
- --------------------------------------------------------------------
Total $0.051708 $0.046753 $0.050201
- --------------------------------------------------------------------
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 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.
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 and performance of the fund will differ. 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
For the fiscal year ended September 30, 1998
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, 1998, 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, 1998 by correspondence
with the custodian, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 10, 1998
<TABLE>
<CAPTION>
Portfolio of investments owned
September 30, 1998
COMMERCIAL PAPER (85.4%) (a) MATURITY
PRINCIPAL AMOUNT DATE VALUE
Domestic (61.9%)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$30,000,000 Asset Securitization Co-op Corp. 5.51s 11/6/98 $ 29,830,108
25,000,000 Asset Securitization Co-op Corp. 5.51s 11/2/98 24,873,729
25,000,000 Asset Securitization Co-op Corp. 5.51s 10/29/98 24,889,035
25,000,000 Bank Of New York Co. 5 1/2s 10/30/98 24,885,417
19,500,000 Bellsouth Capital Funding Corp. 5.52s 10/9/98 19,473,090
25,000,000 Chevron Transport Corp. 5.52s 10/16/98 24,938,667
25,000,000 Chevron Transport Corp. 5.52s 10/7/98 24,973,167
25,000,000 Chevron Transport Corp. 5.51s 11/4/98 24,866,076
22,000,000 Ciesco L. P. 5.51s 10/20/98 21,932,656
30,000,000 Corporate Asset Funding Co. Inc. 5.51s 10/7/98 29,967,858
20,000,000 Corporate Asset Funding Co. Inc. 5.49s 11/19/98 19,847,500
35,000,000 Corporate Receivables Corp. 5 1/2s 11/20/98 34,727,292
33,000,000 Corporate Receivables Corp. 5.46s 12/10/98 32,644,645
28,000,000 Corporate Receivables Corp. 5.45s 12/11/98 27,694,800
20,000,000 Corporate Receivables Corp. 5.45s 10/7/98 19,978,806
25,000,000 CXC Inc. 5.52s 10/22/98 24,915,667
25,000,000 CXC Inc. 5.49s 11/18/98 24,813,188
19,000,000 CXC Inc. 5.45s 12/9/98 18,798,653
40,000,000 CXC Inc. 5.38s 12/8/98 39,587,533
30,000,000 Eureka Securitization Inc. 5.55s 10/9/98 29,958,375
20,000,000 Eureka Securitization Inc. 5.52s 11/12/98 19,868,133
25,000,000 Eureka Securitization Inc. 5.51s 11/20/98 24,804,854
35,000,000 Eureka Securitization Inc. 5.51s 11/2/98 34,823,221
16,000,000 Eureka Securitization Inc. 5.47s 12/2/98 15,846,840
37,000,000 Falcon Asset Securitization Corp. 5.53s 10/5/98 36,971,582
18,180,000 Falcon Asset Securitization Corp. 5.2s 12/3/98 18,011,936
27,000,000 Florens Containers, Inc.
(Bank of America (LOC)) 5.52s 11/9/98 26,834,400
25,000,000 Florens Containers, Inc.
(Bank of America (LOC)) 5 1/2s 12/14/98 24,713,541
29,000,000 Ford Motor Credit Puerto Rico, Inc. 5.53s 10/2/98 28,991,091
21,000,000 Ford Motor Credit Puerto Rico, Inc. 5.53s 10/1/98 20,996,774
25,000,000 Ford Motor Credit Puerto Rico, Inc. 5.51s 10/7/98 24,973,215
14,250,000 Formosa Plastics Corp.
(Bank of America (LOC)) 5.46s 12/16/98 14,083,584
25,000,000 Formosa Plastics Corp.
(Bank of America (LOC)) 5.4s 12/17/98 24,707,500
30,500,000 Formosa Plastics Corp.
(Bank of America (LOC)) 5.37s 12/18/98 30,140,583
40,000,000 General Electric Capital Corp. 5 1/2s, 11/3/98 39,792,222
24,900,000 General Electric Capital Corp. 5.48s 11/17/98 24,718,064
40,000,000 General Electric Capital Corp. 5.36s 1/26/99 39,297,244
91,014,000 General Motors Acceptance Corp. 5.8s 10/1/98 90,999,337
35,000,000 Goldman Sachs 5 1/2s 11/25/98 34,700,556
33,000,000 Goldman Sachs 5.24s 2/25/99 32,289,107
40,000,000 Goldman Sachs 5.24s 2/24/99 39,144,133
129,000,000 Household Finance Corp. 5.8s 10/1/98 128,979,217
40,000,000 International Business Machines Corp. 5.52s 10/6/98 39,963,200
26,000,000 Lehman Brothers Hldg. 5.6s 10/30/98 25,878,667
22,000,000 Lehman Brothers Hldg. 5.55s 11/12/98 21,854,158
18,000,000 Lehman Brothers Hldg. 5.53s 11/30/98 17,831,335
31,000,000 Lehman Brothers Hldg. 5.53s 11/12/98 30,795,236
20,000,000 Merrill Lynch & Co., Inc. 5.53s 11/30/98 19,812,594
25,000,000 Merrill Lynch & Co., Inc. 5.52s 10/14/98 24,946,333
25,000,000 Merrill Lynch & Co., Inc. 5.51s 12/2/98 24,758,937
30,000,000 Merrill Lynch & Co., Inc. 5 1/2s 12/3/98 29,706,667
35,000,000 Morgan (J.P.) & Co., Inc. 5.546s 7/7/99 34,984,175
30,000,000 Morgan (J.P.) & Co., Inc. 5.51s 11/5/98 29,834,700
33,481,000 Morgan (J.P.) & Co., Inc. 5.46s 12/21/98 33,064,608
25,000,000 Morgan Stanley Dean Witter & Co. 5.3s 2/10/99 24,510,486
20,000,000 Morgan Stanley Dean Witter & Co. 5.3s 2/26/99 19,561,278
33,000,000 Morgan Stanley Dean Witter & Co. 5 1/4s 3/10/99 32,225,187
35,000,000 National Rural Utilities
Cooperative Finance Corp. 5.47s 11/19/98 34,734,097
20,000,000 National Rural Utilities
Co-operative Finance Corp. 5.1s 2/12/99 19,617,500
30,000,000 NationsBank Corp. 5.42s 10/8/98 29,963,867
27,000,000 Orix America, Inc. (Bank of America (LOC)) 5.37s 10/9/98 26,963,753
30,000,000 Orix America, Inc. (Bank of America (LOC)) 5.33s 10/9/98 29,960,025
32,000,000 PNC Bank NA 5.51s 10/27/98 31,867,760
25,000,000 PNC Bank NA 5 1/2s 11/23/98 24,793,750
30,000,000 Preferred Receivable Fundings Corp. 5.53s 10/13/98 29,940,092
20,277,000 Preferred Receivables Fundings Corp. 5.49s 11/6/98 20,162,587
21,650,000 Preferred Receivables Fundings Corp. 5 1/4s 11/18/98 21,498,450
31,000,000 Sheffield Receivables Corp. 5.58s 10/22/98 30,894,290
30,000,000 Sheffield Receivables Corp. 5.54s 10/14/98 29,935,367
20,000,000 Windmill Funding Corp. 5.54s 10/15/98 19,953,833
25,000,000 Windmill Funding Corp. 5.53s 10/23/98 24,911,674
13,349,000 Windmill Funding Corp. 5.51s 11/10/98 13,265,231
40,000,000 Windmill Funding Corp. 5.48s 11/18/98 39,701,644
--------------
$2,137,174,877
Foreign (23.5%)
- --------------------------------------------------------------------------------------------------------------------------
$24,000,000 Abbey National North America Corp. 5 1/2s
(United Kingdom) 11/23/98 $ 23,802,000
25,000,000 Banco Nacional De Comercio Ext.
(Barclays (LOC)) 5.47s (United Kingdom) 10/13/98 24,950,618
22,000,000 Banco Nacional De Comercio Ext.
(Barclays (LOC)) 5.46s (United Kingdom) 10/13/98 21,956,623
20,000,000 Banco Nacional De Mexico, S. A.
(Barclays (LOC)) 5.52s (United Kingdom) 11/3/98 19,895,733
33,000,000 Banco Nacional De Mexico, S. A.
(Barclays (LOC)) 5.52s (United Kingdom) 10/28/98 32,858,320
15,000,000 Banco Nacional De Mexico, S. A.
(Barclays (LOC)) 5.51s (United Kingdom) 12/10/98 14,836,996
25,000,000 Bank Of Nova Scotia 5.52s (Canada) 10/20/98 24,923,333
20,000,000 Canadian Imperial Bank Of Commerce
5.66s (Canada) 2/26/99 19,996,065
34,000,000 Commonwealth Bank of Australia 5.47s (Australia) 12/17/98 33,597,043
22,000,000 Commonwealth Bank of Australia 5.46s (Australia) 12/31/98 21,693,027
22,000,000 Commonwealth Bank of Australia 5.45s (Australia) 10/19/98 21,936,719
25,000,000 Contifinancial Corp 5.53s
(Dresdner (LOC)) (Germany) 11/5/98 24,861,750
26,000,000 Contifinancial Corp. 5.53s (Dresdner
(LOC)) (Germany) 10/27/98 25,892,165
25,000,000 Contifinancial Corp. 5.53s
(Dresdner (LOC)) (Germany) 10/20/98 24,923,194
16,000,000 Credit Suisse First Boston 5.51s (Switzerland) 11/13/98 15,892,249
40,000,000 Credit Suisse First Boston 5.51s (Switzerland) 10/21/98 39,871,433
26,000,000 Credit Suisse First Boston 5 1/2s (Switzerland) 12/7/98 25,729,889
35,000,000 Credit Suisse First Boston 5.45s (Switzerland) 12/9/98 34,629,097
31,000,000 Demir Funding Corp. (Bayerische
Vereinsbank (LOC)) 5.52s (Germany) 10/13/98 30,938,207
25,000,000 Deutsche Bank Financial Inc. 5.51s (Germany) 10/26/98 24,900,514
39,000,000 Diageo Capital PLC 5.52s (United Kingdom) 10/8/98 38,952,160
40,000,000 Diageo Capital PLC 5.51s (United Kingdom) 10/2/98 39,987,756
20,000,000 Garanti Funding Corp. (Bayerische
Vereinsbank (LOC)) 5 1/2s (Germany) 11/4/98 19,893,056
31,000,000 Galicia Buenos Aires Funding Corp.
(Dresdner Bank AG (LOC)) 5.14s (Germany) 3/9/99 30,291,822
21,000,000 Girsa Funding Corp. (Societe General (LOC))
5.54s (France) 1/27/99 20,615,432
35,000,000 Scotiabanc Inc. 5.53 (Canada) 10/5/98 34,973,118
35,000,000 Svenska Handelsbanken 5.51s (Sweden) 11/4/98 34,812,507
21,250,000 TEB Funding Corporation
(Societe General (LOC)) 5.42s (France) 12/2/98 21,048,444
20,000,000 Transportation de Gas del Sur S. A.
(Dresdner Bank AG (LOC)) 5.52s (Germany) 10/19/98 19,941,733
12,960,000 United Bank of Switzerland 5 3/4s (Switzerland) 10/1/98 12,957,930
30,000,000 United Bank of Switzerland 5.46s (Switzerland) 12/8/98 29,686,050
--------------
$ 811,244,983
--------------
Total Commercial Paper (cost $2,948,419,860) $2,948,419,860
CERTIFICATES OF DEPOSIT (5.9%) (a) MATURITY
PRINCIPAL AMOUNT DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
$30,000,000 Bank Of New York Co. 5 1/2s 2/17/99 $ 29,964,348
30,000,000 Canadian Imperial Bank of Commerce
5.55s (Canada) 10/6/98 30,000,000
11,000,000 Credit Suisse 5.6s (Switzerland) 10/13/98 10,999,688
25,000,000 Fleet National Bank 5.59s 11/30/98 25,000,000
25,000,000 National Australia Bank 5.85s (Australia) 10/5/98 25,000,000
27,000,000 Rabobank Nederland 5.71s (Netherlands) 5/21/99 26,984,992
21,000,000 Societe Generale 5.785s (France) 5/12/99 20,995,488
16,000,000 Societe Generale 5.7s (France) 3/3/99 15,992,336
20,000,000 Societe Generale 5.695s (France) 3/23/99 19,995,330
--------------
Total Certificates of Deposit (cost $204,932,182) $ 204,932,182
U.S. GOVERNMENT & AGENCY OBLIGATIONS (4.8%) (a) MATURITY
PRINCIPAL AMOUNT DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
$40,000,000 Federal Home Loan Banks 5.06s 12/28/98 $ 39,499,622
50,000,000 Federal National Mortgage Associations 5.21s 12/23/98 49,392,165
80,000,000 Federal National Mortgage Association 5.12s 3/4/99 78,236,444
--------------
Total U. S. Government & Agency Obligations
(cost $167,128,231) $ 167,128,231
BANK NOTES (2.9%) (a) MATURITY
PRINCIPAL AMOUNT DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
$20,000,000 First National Bank of Boston 5.65s 11/10/98 $ 20,000,000
26,000,000 First National Bank of Boston 5.59s 10/8/98 26,000,000
30,000,000 First National Bank of Boston 5.58s 11/13/98 30,000,000
25,000,000 Westpac Banking Corp 6s (Australia) 12/11/98 25,000,000
--------------
Total Bank Notes (cost $101,000,000) $ 101,000,000
FOREIGN GOVERNMENT BONDS AND NOTES (1.2%) (a)(cost $41,460,300)
PRINCIPAL AMOUNT MATURITY DATE VALUE
- --------------------------------------------------------------------------------------------------------------------------
$42,000,000 Canada Treasury bills 5.55s 10/6/98 $ 41,460,300
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $3,462,940,573) (b) $3,462,940,573
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $3,453,472,446.
(b) 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, 1998
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at amortized cost (Note 1) $3,462,940,573
- -----------------------------------------------------------------------------------------------
Cash 937
- -----------------------------------------------------------------------------------------------
Interest and other receivables 9,193,567
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 39,344,767
- -----------------------------------------------------------------------------------------------
Total assets 3,511,479,844
Liabilities
- -----------------------------------------------------------------------------------------------
Distributions payable to shareholders 553,570
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 21,498,450
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 32,318,931
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,492,063
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 379,994
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 43,474
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 7,588
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 346,670
- -----------------------------------------------------------------------------------------------
Other accrued expenses 366,658
- -----------------------------------------------------------------------------------------------
Total liabilities 58,007,398
- -----------------------------------------------------------------------------------------------
Net assets $3,453,472,446
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Note 4) $3,453,472,446
- -----------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per class
A share ($2,598,891,158 divided by 2,598,891,158 shares) * $1.00
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($759,748,495 divided by 759,748,495 shares)** $1.00
- -----------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per class M share
($94,832,793 divided by 94,832,793 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, 1998
<S> <C>
Interest income $156,701,286
- -----------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 8,788,929
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 5,412,041
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 72,026
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 24,582
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,403,508
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 101,771
- -----------------------------------------------------------------------------------------------
Reports to shareholders 108,499
- -----------------------------------------------------------------------------------------------
Registration fees 548,980
- -----------------------------------------------------------------------------------------------
Auditing 54,633
- -----------------------------------------------------------------------------------------------
Legal 30,473
- -----------------------------------------------------------------------------------------------
Postage 319,275
- -----------------------------------------------------------------------------------------------
Other 411,228
- -----------------------------------------------------------------------------------------------
Total expenses 18,275,945
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (1,455,975)
- -----------------------------------------------------------------------------------------------
Net expenses 16,819,970
- -----------------------------------------------------------------------------------------------
Net investment income 139,881,316
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $139,881,316
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended September 30
-------------------------------
1998 1997
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 139,881,316 $ 130,577,733
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 139,881,316 130,577,733
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (113,849,258) (106,719,970)
- ---------------------------------------------------------------------------------------------------------------
Class B (22,607,932) (21,583,487)
- ---------------------------------------------------------------------------------------------------------------
Class M (3,424,126) (2,274,276)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 849,862,355 476,931,642
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 849,862,355 476,931,642
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 2,603,610,091 2,126,678,449
- ---------------------------------------------------------------------------------------------------------------
End of year $3,453,472,446 $2,603,610,091
- ---------------------------------------------------------------------------------------------------------------
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
operating performance Year ended September 30 Sept. 30++
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income $.0517 $.0505 $.0507 $.0521 $.0299
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0517 .0505 .0507 .0521 .0299
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(.0517) $(.0505) $(.0507) $(.0521) $(.0299)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 5.29 5.17 5.19 5.33 3.03*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,598,891 $2,134,223 $1,659,288 $1,189,640 $1,101,171
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .58 .57 .57 .62 .58*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.20 5.06 5.00 5.23 3.03*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
++ The fiscal year end has advanced from October 31 to September 30.
* 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
operating performance Year ended September 30 Sept. 30++
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net investment income $.0468 $.0455 $.0457 $.0469 $.0251
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0468 .0455 .0457 .0469 .0251
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(.0468) $(.0455) $(.0457) $(.0469) $(.0251)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 4.78 4.65 4.67 4.80 2.54*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $759,748 $410,885 $438,316 $256,533 $194,187
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.08 1.07 1.07 1.12 1.03*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.69 4.57 4.51 4.75 2.77*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
++ The fiscal year end has advanced from October 31 to September 30.
* 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 Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net investment income $.0502 $.0490 $.0490 $.0434
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0502 .0490 .0490 .0434
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $(.0502) $(.0490) $(.0490) $(.0434)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 5.14 5.01 5.02 4.43*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $94,833 $58,502 $29,075 $8,440
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .73 .72 .72 .67*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.04 4.92 4.82 4.29*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
++ The fiscal year end has advanced from October 31 to September 30.
* 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, 1998
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 investments 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
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, 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%
thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended September 30, 1998, fund expenses were reduced by
$1,455,975 under expense offset arrangements with PFTC. Investor servicing
and custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized in
connection with the expense offset arrangements in an income producing
asset if it had not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $1,690
has been allocated to the fund, 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 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 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, 1998, Putnam Mutual Funds Corp., acting
as underwriter received $3,309,921 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. For the year ended
September 30, 1998, Putnam Mutual Funds Corp., acting as the underwriter
received no monies in contingent deferred sales charges from redemptions
of class A shares acquired through an exchange from another fund. For the
year ended September 30, 1998, 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, 1998, purchases and sales (including
maturities) of investment securities (all short-term obligations)
aggregated $65,217,124,270 and $64,264,846,755, 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, 1998, 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 1998 1997
- --------------------------------------------------------------------
Shares sold 6,667,169,273 15,480,603,384
- --------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 108,688,157 101,004,236
- --------------------------------------------------------------------
6,775,857,430 15,581,607,620
Shares
repurchased (6,311,189,399) (15,106,672,041)
- --------------------------------------------------------------------
Net increase 464,668,031 474,935,579
- --------------------------------------------------------------------
Year ended
September 30
- --------------------------------------------------------------------
Class B 1998 1997
- --------------------------------------------------------------------
Shares sold 2,232,701,520 2,550,729,879
- --------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 20,739,502 19,704,929
- --------------------------------------------------------------------
2,253,441,022 2,570,434,808
Shares
repurchased (1,904,577,891) (2,597,865,336)
- --------------------------------------------------------------------
Net increase
(decrease) 348,863,131 (27,430,528)
- --------------------------------------------------------------------
Year ended
September 30
- --------------------------------------------------------------------
Class M 1998 1997
- --------------------------------------------------------------------
Shares sold 361,506,694 431,207,895
- --------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,282,134 2,183,663
- --------------------------------------------------------------------
364,788,828 433,391,558
Shares
repurchased (328,457,635) (403,964,967)
- --------------------------------------------------------------------
Net increase 36,331,193 29,426,591
- --------------------------------------------------------------------
Federal tax information
(Unaudited)
The Form 1099 you receive in January 1999 will show the tax status of all
distributions paid to your account in calendar 1998.
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
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
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
Ian C. Ferguson
Vice President
Steven M. Oristaglio
Vice President
Jerome J. Jacobs
Vice President
Blake E. Anderson
Vice President
Joanne Driscoll
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
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.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
www.putnaminv.com
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
AN039 47017 010/879/534 11/98
