Putnam
U.S. Core
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
10-31-98
[LOGO: BOSTON * LONDON * TOKYO]
The following report contains a list of your fund's portfolio holdings and
complete financial statements since the fund's inception on 5/4/98.
Additional details, including fund strategy, performance, and managers'
outlook, will be provided in the annual report, which will cover the 12
months ended 4/30/99.
<TABLE>
<CAPTION>
Portfolio of investments owned
October 31, 1998 (Unaudited)
COMMON STOCKS (95.9%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Broadcasting (14.8%)
- --------------------------------------------------------------------------------------------------------------------------
1,956 CBS Corp. $ 54,646
1,111 Comcast Corp. Class A 54,856
1,897 MediaOne Group Inc. (NON) 80,267
730 Tele-Communications, Inc. Class A (NON) 30,751
3,874 Tele-Communications TCI ventures Group Class A (NON) 72,153
--------------
292,673
Business Equipment and Services (2.7%)
- --------------------------------------------------------------------------------------------------------------------------
3,341 Cendant Corp. (NON) 38,213
584 HBO & Co. 15,330
--------------
53,543
Computer Services and Software (8.6%)
- --------------------------------------------------------------------------------------------------------------------------
981 Compaq Computer Corp. 31,024
1,445 Computer Associates International, Inc. 56,897
279 IBM Corp. 41,414
239 Microsoft Corp. (NON) 25,304
1,017 Parametric Technology Corp. (NON) 16,908
--------------
171,547
Consumer Durable Goods (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
300 Hasbro, Inc. 10,519
Consumer Non Durables (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
880 Philip Morris Cos., Inc. 44,990
Consumer Related (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
590 Lowe's Cos., Inc. 19,876
Electronics and Electrical Equipment (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
360 General Electric Co. 31,500
400 Intel Corp. 35,675
--------------
67,175
Entertainment (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
74 Time Warner, Inc. 6,868
487 Viacom, Inc. Class A 28,916
--------------
35,784
Food and Beverages (4.5%)
- --------------------------------------------------------------------------------------------------------------------------
893 Sara Lee Corp. 53,301
1,628 Whitman Corp. 34,900
--------------
88,201
Information Systems (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
323 Galileo International, Inc. (NON) 12,250
Insurance and Finance (14.3%)
- --------------------------------------------------------------------------------------------------------------------------
844 AFLAC Inc. 32,178
266 American Express Co. 23,508
377 American General Corp. 25,825
184 American International Group, Inc. 15,686
147 AON Corp. 9,114
266 Bank One Corp. 13,001
364 Charter One Financial, Inc. 9,987
738 First Union Corp. 42,804
1,271 Firstar Corp. 72,129
53 Wells Fargo & Co. 19,610
376 Zions Bancorp 19,952
--------------
283,794
Medical Supplies and Devices (5.5%)
- --------------------------------------------------------------------------------------------------------------------------
316 Baxter International, Inc. 18,940
304 Bergen Brunswig Corp. Class A 14,839
1,197 Tyco International Ltd. 74,139
--------------
107,918
Oil and Gas (2.6%)
- --------------------------------------------------------------------------------------------------------------------------
352 Amoco Corp. 19,756
554 Total Corp. ADR (France) 32,409
--------------
52,165
Pharmaceuticals (12.4%)
- --------------------------------------------------------------------------------------------------------------------------
240 Bristol-Myers Squibb Co. 26,535
499 Lilly (Eli) & Co. 40,388
409 Merck & Co., Inc. 55,317
283 Pfizer, Inc. 30,369
454 Pharmacia & Upjohn, Inc. 24,034
373 Schering-Plough Corp. 38,372
390 Warner-Lambert Co. 30,566
--------------
245,581
Publishing (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
335 McGraw-Hill, Inc. 30,129
Retail (7.1%)
- --------------------------------------------------------------------------------------------------------------------------
643 Costco Companies, Inc. (NON) 36,490
797 CVS Corp. 36,413
1,498 Officemax, Inc. (NON) 13,669
983 Rite Aid Corp. 39,013
354 Tricon Global Restaurants, Inc. (NON) 15,399
--------------
140,984
Telecommunications (4.9%)
- --------------------------------------------------------------------------------------------------------------------------
236 Cox Communications, Inc. (NON) 12,951
1,187 MCI WorldCom, Inc. (NON) 65,582
309 U S West, Inc. 17,729
--------------
96,262
Utilities (7.4%)
- --------------------------------------------------------------------------------------------------------------------------
248 CiNergy Corp. 8,556
286 Duke Energy Corp. 18,501
410 Peco Energy Co. 15,862
771 SBC Communications, Inc. 35,707
874 Sprint Corp. 67,080
--------------
145,706
--------------
Total Common Stocks (cost $1,812,108) $ 1,899,097
SHORT-TERM INVESTMENTS (4.6%) (a)(cost $90,027)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$90,000 Interest in $468,338,000 joint repurchase agreement
dated October 30, 1998 with Warburg Securities
due November 2, 1998, with respect to various
U.S. Treasury obligations -- maturity value of
$90,040 for an effective yield of 5.38% $ 90,027
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,902,135) (b) $ 1,989,124
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,979,697.
(b) The aggregate identified cost on a tax basis is $1,902,135, resulting in gross unrealized appreciation and
depreciation of $176,601 and $89,612, respectively, or net unrealized appreciation of $86,989.
(NON) 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
October 31, 1998 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,902,135) (Note 1) $1,989,124
- -----------------------------------------------------------------------------------------------
Cash 826
- -----------------------------------------------------------------------------------------------
Dividends receivable 2,830
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 29,229
- -----------------------------------------------------------------------------------------------
Receivable from Manager (Note 2) 2,871
- -----------------------------------------------------------------------------------------------
Total assets 2,024,880
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 32,969
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,827
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 425
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 20
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 3
- -----------------------------------------------------------------------------------------------
Other accrued expenses 9,939
- -----------------------------------------------------------------------------------------------
Total liabilities 45,183
- -----------------------------------------------------------------------------------------------
Net assets $1,979,697
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $2,037,204
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,955
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (146,451)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 86,989
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,979,697
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($1,979,697 divided by 239,577 shares) $8.26
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $8.26)* $8.76
- -----------------------------------------------------------------------------------------------
* 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 May 4, 1998 (commencement of operations) to October 31, 1998
(Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends $ 9,403
- -----------------------------------------------------------------------------------------------
Interest 1,652
- -----------------------------------------------------------------------------------------------
Total investment income 11,055
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 6,827
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,007
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 746
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 23
- -----------------------------------------------------------------------------------------------
Reports to shareholders 2,016
- -----------------------------------------------------------------------------------------------
Registration fees 609
- -----------------------------------------------------------------------------------------------
Auditing 6,012
- -----------------------------------------------------------------------------------------------
Legal 2,295
- -----------------------------------------------------------------------------------------------
Postage 643
- -----------------------------------------------------------------------------------------------
Other 4
- -----------------------------------------------------------------------------------------------
Fees waived and reimbursed by manager (Note 2) (11,429)
- -----------------------------------------------------------------------------------------------
Total expenses 9,753
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (653)
- -----------------------------------------------------------------------------------------------
Net expenses 9,100
- -----------------------------------------------------------------------------------------------
Net investment income 1,955
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (146,451)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 86,989
- -----------------------------------------------------------------------------------------------
Net loss on investments (59,462)
- -----------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $ (57,507)
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
For the period
May 4, 1998
(commencement
of operations)
to October 31
1998*
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
Decrease in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 1,955
- ---------------------------------------------------------------------------------------------------------------
Net realized loss on investments (146,451)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 86,989
- ---------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (57,507)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 37,204
- ---------------------------------------------------------------------------------------------------------------
Total decrease in net assets (20,303)
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period (Note 5) $2,000,000
- ---------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of $1,955) $1,979,697
- ---------------------------------------------------------------------------------------------------------------
* 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
May 4, 1998+
Per-share to October 31
operating performance (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (a)(d) .01
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
loss on investments (.25)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.24)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.26
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) (2.82)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,980
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c)(d) .50*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(d) .10*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 98.70*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Reflects an expense limitation in effect during the period. As a result of such limitation,
expenses for the fund reflect a reduction of $0.05 per share. (See Note 2).
</TABLE>
Notes to financial statements
October 31, 1998 (Unaudited)
Note 1
Significant accounting policies
Putnam U.S. Core Fund ("the fund") is one of 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 fund invests primarily in common stocks of U.S. companies
that Putnam Investment Management, Inc., ("Putnam Management"), the fund's
manager, a wholly-owned subsidiary of Putnam Investments, Inc., believes
offer long-term growth potential in excess of market averages or are
undervalued in relation to underlying asset values or earnings potential
and have the potential for long-term growth.
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 sale 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. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. 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 nor 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.
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: 0.70% of the first $500
million of average net assets, 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% thereafter.
Putnam Management has agreed to limit its compensation (and, to the extent
necessary, bear other expenses) through April 30, 1999, to the extent that
expenses of the fund (exclusive of brokerage commissions, interest, taxes,
extraordinary expense, credits from Putnam Fiduciary Trust Company (PFTC),
a subsidiary of Putnam Investments, Inc. and payments under the Trust's
distribution plan) would exceed an annual rate of 1.00% of the fund's
average net assets.
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 PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the period ended October 31, 1998, fund expenses were reduced by $653
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 $100 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 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.
For the period ended October 31, 1998, Putnam Mutual Funds Corp., acting
as underwriter received no net commissions from the sale of shares of the
fund.
Note 3
Purchases and sales of securities
During the period ended October 31, 1998, purchases and sales of
investment securities other than short-term investments aggregated
$3,835,362 and $1,876,803, 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 October 31, 1998 there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
For the period
May 4, 1998
(commencement of
operations) to
October 31, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 7,545 $ 63,116
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
7,545 63,116
Shares
repurchased (3,262) (25,912)
- -----------------------------------------------------------------------------
Net increase 4,283 $ 37,204
- -----------------------------------------------------------------------------
Note 5
Initial capitalization and
offering of shares
The trust was established as a Massachusetts business trust on January 22,
1996. During the period January 22, 1996 to May 4, 1998 the fund had no
operations other than those related to organizational matters, including
the initial capital contribution of $2,000,000 and the issuance of 235,294
shares to Putnam Mutual Funds Corp. on May 1, 1998.
At October 31, 1998, Putnam Investments, Inc. owned 235,294 shares of the
fund (98.21% of class shares outstanding), valued at $1,943,528.
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
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
Brett C. Browchuk
Vice President
John J. Morgan, Jr.
Vice President
Justin M. Scott
Vice President and Fund Manager
Robert R. Beck
Vice President and Fund Manager
Michael Stack
Vice President and Fund Manager
Michael Nance
Vice President and Fund Manager
John R. Verani
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam U.S. Core
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.
47860 12/98
