Putnam
Equity
Fund 97
SEMIANNUAL REPORT
May 31, 1997
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Since Putnam Equity Fund 97 began investment operations at the start of 1997,
the stock market has undergone considerable volatility, a condition that is
reflected in the results shown in this concluding report. Although Putnam
Management's assessment of market prospects for the remainder of the year is
cautiously optimistic, there currently are no plans to introduce the fund to
the investing public. Therefore, the Trustees have accepted Putnam
Management's recommendation to close and liquidate the fund.
If you have not already received a check for the proceeds from liquidation of
your shares or a confirmation of their exchange into shares of the other
Putnam funds you designated, it should arrive soon.
Even as we acknowledge the closing of this fund, it is appropriate to note the
valuable contribution Putnam's incubated funds program has made in the
introduction of new funds to the public. Over the long term, most who have
invested in the funds during their incubation period have benefited.
We appreciate your support of the program through your investment in this
fund.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
July 16, 1997
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Equity Fund 97 is designed for investors seeking
long-term growth of capital.
TOTAL RETURN FOR PERIOD ENDED 5/31/97
S&P 500
NAV POP Index
- ------------------------------------------------------------------------------
Life of fund (since 1/2/97) -3.88% -9.42% 15.43%
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TOTAL RETURNS FOR PERIODS ENDED 6/30/97
(most recent calendar quarter)
- ------------------------------------------------------------------------------
NAV POP
- ------------------------------------------------------------------------------
Life of fund (since 1/2/97) -1.53% 7.21%
- ------------------------------------------------------------------------------
Performance data represent past results and do not reflect future
performance. Returns at POP reflect the current maximum initial sales
charges of 5.75%. They do not take into account any adjustment for taxes
payable on reinvested distributions and reflect an expense limitation in
effect during the period. Without the limitation, results would have been
lower. Investment returns and principal value will fluctuate so that an
investor's shares, when sold, may be worth more or less than their
original cost.
PRICE INFORMATION
Period ended 5/31/97
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Share value: NAV POP
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1/2/97 (inception) $8.50 $9.02
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5/31/97 8.17 8.67
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TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 5.75% sales charge.
COMPARATIVE BENCHMARKS
Standard & Poor's 500 Index is an unmanaged list of common stocks that is
frequently used as a general measure of stock market performance. The
index assumes reinvestment of all distributions and interest payments and
does not take into account brokerage fees or taxes. Securities in the fund
do not match those in the index and performance of the fund will differ.
It is not possible to invest directly in an index.
Portfolio of investments owned
May 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (82.4%) *
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Advertising (0.2%)
- ------------------------------------------------------------------------------------------------------------
204 Universal Outdoor Holdings, Inc. + $ 6,630
Broadcasting (2.9%)
- ------------------------------------------------------------------------------------------------------------
2,443 SFX Broadcasting, Inc. Class A + 78,787
Business Services (16.3%)
- ------------------------------------------------------------------------------------------------------------
1,700 Central Garden and Pet Co. + 41,013
3,633 Corestaff, Inc. + 86,284
5,278 Elexsys International, Inc. + 79,170
4,599 Precision Response Corp. + 105,202
1,998 Robert Half International, Inc. + 85,664
1,972 TeleTech Holdings Inc. + 45,603
--------------
442,936
Computer Peripherals (2.6%)
- ------------------------------------------------------------------------------------------------------------
1,760 Electronics for Imaging, Inc. + 70,180
Computer Software (10.5%)
- ------------------------------------------------------------------------------------------------------------
1,300 CBT Group PLC ADR (Ireland) + 70,850
1,300 McAfee Associates, Inc. + 85,556
2,196 Vantive Corp. + 59,018
1,324 Viasoft, Inc. + 70,172
--------------
285,596
Consumer Services (5.2%)
- ------------------------------------------------------------------------------------------------------------
2,631 Computer Learning Centers, Inc. + 76,628
2,112 Fine Host Corp. + 64,416
--------------
141,044
Electrical Equipment (4.1%)
- ------------------------------------------------------------------------------------------------------------
4,263 Advanced Lighting Technologies, Inc. + 111,371
Energy-Related (3.6%)
- ------------------------------------------------------------------------------------------------------------
2,843 Thermo Electron Corp. + 98,084
Financial Services (4.0%)
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3,400 First USA Paymentech, Inc. + 107,522
Funeral/Cemetery Services (0.9%)
- ------------------------------------------------------------------------------------------------------------
745 Stewart Enterprises, Inc. Class A 25,144
Lodging (3.3%)
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1,675 HFS, Inc. + 90,241
Pharmaceuticals (3.2%)
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2,154 Dura Pharmaceuticals, Inc. + 85,622
Restaurants (5.2%)
- ------------------------------------------------------------------------------------------------------------
3,978 Landry's Seafood Restaurants, Inc. + 73,593
4,205 Morton's Restaurant Group, Inc. + 69,908
--------------
143,501
Retail (5.4%)
- ------------------------------------------------------------------------------------------------------------
1,453 Gadzooks, Inc. + 48,221
3,262 Hot Topic, Inc. + 95,414
81 Petco Animal Supplies, Inc. + 2,167
--------------
145,802
Semiconductors and Semiconductor Capital Equipment (5.0%)
- ------------------------------------------------------------------------------------------------------------
1,760 Credence Systems Corp. + 51,920
4,105 Benchmarq Microelectronics, Inc. + 82,613
--------------
134,533
Telecommunications (6.9%)
- ------------------------------------------------------------------------------------------------------------
3,211 Intermedia Communications, Inc. + 96,731
6,166 NEXTEL Communications, Inc. Class A + 90,949
--------------
187,680
Textiles (3.1%)
- ------------------------------------------------------------------------------------------------------------
2,000 St. John Knits, Inc. 85,000
--------------
Total Common Stocks (cost $2,048,358) $2,239,673
SHORT-TERM INVESTMENTS (17.2%) (cost $466,143) *
PRINCIPAL AMOUNT VALUE
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$466,000 Interest in $580,717,000 joint repurchase agreement
dated May 30,1997 with SBC Warburg due
June 2, 1997 with respect to various U.S. Treasury
obligations -- maturity value of $466,214 for an
effective yield of 5.51% $466,143
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Total Investments (cost $2,514,501) *** $2,705,816
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* Percentages indicated are based on net assets of $2,716,683.
*** The aggregate identified cost on a tax basis is $2,514,501,
resulting in gross unrealized appreciation and depreciation of $279,525
and $88,210, respectively, or net unrealized appreciation of $191,315.
+ Non-income-producing security.
ADR after the name of a foreign holding stands for American Depository
Receipts representing ownership of foreign securities on deposit with a
domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
May 31, 1997 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $2,514,501) (Note 1) $2,705,816
- ---------------------------------------------------------------------------------------------------
Cash 100
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Receivable for securities sold 20,664
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Receivable from Manager (Note 2) 2,681
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Unamortized organization expenses (Note 1) 14,068
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Total assets 2,743,329
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 2,720
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 1,086
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Payable for organization expenses (Note 1) 14,198
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Other accrued expenses 8,642
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Total liabilities 26,646
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Net assets $2,716,683
Represented by
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Paid-in capital (Notes 1 and 4) $2,858,417
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Accumulated net investment loss (Note 1) (7,835)
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Accumulated net realized loss on investments (Note 1) (325,214)
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Net unrealized appreciation of investments 191,315
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Total -- Representing net assets applicable to
capital shares outstanding $2,716,683
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value per share ($2,716,683 divided by
332,674 shares) $8.17
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Offering price per share (100/94.25 of $8.17)* $8.67
- ---------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the
offering price is reduced.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
For the period January 2, 1997 (commencement of operations) to May 31, 1997
(Unaudited)
<S> <C>
Investment income:
Dividends $ 175
- --------------------------------------------------------------------------------------------------
Interest 1,214
- --------------------------------------------------------------------------------------------------
Total investment income 1,389
Expenses:
Compensation of Manager (Note 2) 8,841
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 4,744
- --------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 130
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Registration fees 893
- --------------------------------------------------------------------------------------------------
Auditing 6,749
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Legal 2,575
- --------------------------------------------------------------------------------------------------
Other 9
- --------------------------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 2) (11,522)
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Total expenses 12,419
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (3,195)
- --------------------------------------------------------------------------------------------------
Net expenses 9,224
- --------------------------------------------------------------------------------------------------
Net investment loss (7,835)
- --------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (325,214)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 191,315
- --------------------------------------------------------------------------------------------------
Net loss on investments (133,899)
- --------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(141,734)
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
For the period
January 2, 1997
(commencement
of operations)
to May 31, 1997*
- ------------------------------------------------------------------------------------------------------
<S> <C>
Increase in net assets
- ------------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------------
Net investment loss $ (7,835)
- ------------------------------------------------------------------------------------------------------
Net realized loss on investments (325,214)
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 191,315
- ------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (141,734)
- ------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 858,417
- ------------------------------------------------------------------------------------------------------
Total increase in net assets 716,683
Net assets
- ------------------------------------------------------------------------------------------------------
Beginning of period (Note 5) 2,000,000
- ------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment loss of $7,835) $ 2,716,683
- ------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- ----------------------------------------------------------------------------------------------------------------------------------
For the period
Jan. 2, 1997+
Per-share to May 31
operating performance (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------------
1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $8.50
- ----------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment loss (.02)(d)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
loss on investments (.31)
- ----------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.33)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.17
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (3.88)*
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,717
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Ratio of expenses to
average net assets (%)(b) .46 (d)*
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) (.29)(d)*
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 67.01 *
- ----------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0342
- ----------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of
sales charge
(b) The ratio of expenses to average net assets includes amounts paid through expense
offset arrangements. (Note 2)
(c) Average commission rate paid on security trades.
(d) Reflects an expense limitation in effect during the period. As a result of such limitation,
expenses for the fund reflect a reduction of $0.03 per share.
Notes to financial statements
May 31, 1997 (Unaudited)
Note 1
Significant accounting policies
Putnam Equity Fund 97 (the "fund") is a series of Putnam Funds Trust (the
"trust") which is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
objective of the fund is to seek long-term growth of capital by investing
primarily in common stocks of companies that Putnam Investment Management,
Inc. ("Putnam Management"), the fund's Manager, a wholly-owned subsidiary of
Putnam Investments, Inc., believes to have potential for capital appreciation
which is significantly greater than that of the market averages.
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 Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sales price, or if no sales are reported as in the case of some
securities traded over-the-counter-the last reported bid price. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost, which approximates market value, and other investments are
stated at fair market value, following procedures approved by
the Trustees.
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 Management.
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 and related investment income Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Interest income is recorded on the accrual basis. Dividend income
is recorded on the ex-dividend date.
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, as amended. 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) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date. Capital
gain distributions, if any, are recorded on the ex-dividend date and paid at
least annually. 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. Reclassifications are made to the
fund's capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations.
G) Expenses of the trust Expenses directly charged or attributable to any fund
will be paid from the assets of that fund. Generally, expenses of the trust
will be allocated among and charged to the assets of each fund on a basis that
the Trustees deem fair and equitable, which may be based on the relative
assets of each fund or the nature of the services performed and relative
applicability to each fund.
H) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange Commission and with various states, and the initial public offering
of its shares were $14,198. These expenses are being amortized on projected
net asset levels over a five-year period. The fund will reimburse Putnam
Management for the payment of these expenses.
Note 2
Management fees,
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: 0.70% of the first $500 million,
0.60% of the next $500 million, 0.55% of the next $500 million, 0.50% of the
next $5 billion, 0.475% of the next $5 billion, 0.455% of the next $5 billion,
0.44% of the next $5 billion, and 0.43% of any amount thereafter.
Putnam Management has agreed to limit its compensation (and, to the extent
necessary, bear other expenses) through December 31, 1997, to the extent that
expenses of the fund (exclusive of brokerage, interest, taxes, deferred
organizational and extraordinary expense, credits from Putnam Fiduciary Trust
Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc. and
payments under the Trust's distribution plan) would exceed an annual rate of
1.10% of the fund's average net assets.
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 (PFTC). Investor
servicing agent functions are provided by Putnam Investor Services, a division
of PFTC.
For the period January 2, 1997 (commencement of operations) to
May 31, 1997, fund expenses were reduced by $3,195 under expense offset and
brokerage service 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 $100 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 a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the Plan is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam
Investments, Inc., for services provided and expenses incurred by it in
distributing shares of the fund. The Plan provides for payment by the fund to
Putnam Mutual Funds Corp. at an annual rate of up to 0.35% of the fund's
average net assets. The fund is not currently making any payments pursuant to
the Plan.
During the period January 2, 1997 (commencement of operations) to May 31, 1997,
Putnam Mutual Funds, Corp., acting as the underwriter, received no net
commissions from the sale of shares of the fund.
Note 3
Purchase and sales of securities
During the six months ended May 31, 1997, purchases and sales of investment
securities other than short-term investments aggregated $7,106,428 and
$4,592,071, respectively. There were no purchases and sales of U.S.
government obligations. 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 May 31, 1997, 1996 there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
For the period January 2, 1997
(commencement of operations)
to May 31
- ------------------------------------------------------------
1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 159,377 1,331,243
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------
159,377 1,331,243
Shares repurchased (61,997) (472,826)
- ------------------------------------------------------------
Net increase 97,380 858,417
- ------------------------------------------------------------
Note 5
Initial capitalization and offering of shares
The fund was established as a Massachusetts business trust on January
22, 1996. During the period January 22, 1996 to January 2, 1997 the fund had
no operations other than those related to organizational matters, including
the initial capital contribution of $2,000,000, and $14,198 of initial
organizational expenses, and the issuance of 235,294 shares to Putnam Mutual
Funds Corp., a wholly-owned subsidiary of Putnam Investments, Inc. on January
2, 1997.
At May 31, 1997, Putnam Management owned 253,737 shares of the fund (76.20% of
shares outstanding), valued at $2,073,031.
Note 6
Liquidation of operations
On June 6, 1997, the Trustees approved in principle the liquidation of the
fund. The liquidation is scheduled to occur on September 8, 1997 and the fund
was closed to new investments as of May 16, 1997.
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
Brett C. Browchuk
Vice President
John J. Morgan
Vice President
Daniel L. Miller
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Equity Fund 97.
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.
34522-2DC 7/97
</TABLE>
