Putnam
Growth
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
4-30-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The Trustees of Putnam Growth Fund are pleased to present you with this
annual report, which covers the period from the fund's inception on May 4,
1998, through the close of the fiscal year on April 30, 1999. Currently,
the fund is only open to Putnam employees and their family members who are
Massachusetts residents. During the year, we were pleased to welcome David
Santos to the fund's management team, which also includes Jeffrey Lindsey
and Manuel Weiss. Dave has 13 years of investment experience and is
responsible for several institutional portfolios. He is also co-manager of
Putnam Global Growth Fund and Putnam Balanced Fund.
Total return for 12 months ended 4/30/99*
Net asset value Public offering price
- --------------------------------------------------------------------
22.59% 15.52%
- --------------------------------------------------------------------
Past performance is no indication of future results. More detailed
performance information begins on page 6.
* Reflects performance since inception on 5/4/98.
* TECHNOLOGY HOLDINGS BOOST PERFORMANCE
Putnam Growth Fund targets the stocks of companies across a wide range of
industries that are believed to have strong growth potential. Despite a
volatile U.S. equity market, the fund has benefited from strategic stock
selection and the strength of large-company stocks, which continued to
dramatically outperform those of smaller companies through most of the
fiscal period.
Thanks to the global growth of the Internet and the rapidly rising demand
for quick and seamless communication of data, the once-distinct lines
dividing technology-related industries are now blurring. Personal
computer, semiconductor, software, cable, cellular, data communications,
and telecommunications equipment companies are all benefiting today from
this convergence of industries that are moving to address the needs of
consumers and businesses. Certainly U.S.-based companies are leaders in
these industries, and the fund's positions in companies such as Microsoft,
Cisco Systems, Lucent Technologies, and Intel reflect this leadership.
However, the growth of the Internet is truly global and it puts
significant pressure on both corporations and individuals everywhere to
increase their spending on equipment, ranging from PCs to
telecommunications infrastructure. While these holdings, along with others
discussed in this report, were viewed favorably at the end of the fiscal
period, all are subject to review and adjustment in accordance with the
fund's investment strategy and may vary in the future.
* STRONG ECONOMY FUELS RETAIL STOCKS
Continued strength in the U.S. economy and rising consumer confidence
provided a significant boost for retail stocks throughout the period. In
1998, consumer spending rose at its fastest pace in 14 years. Thus far in
1999, a surge in early income tax refunds and home mortgage refinancings
has put more disposable income into consumer pockets. With the U.S.
economy in its ninth year of expansion, consumer spending continues to
grow as unemployment remains near three-decade lows and incomes rise. This
environment has helped the fund, which maintained an overweight position
in the retail sector, including outstanding performers such as Wal-Mart
Stores. Known for extraordinary customer service and creative in-store
promotions, Wal-Mart has experienced rapid growth and has crushed
competitors on a regular basis. The company also continues to focus on
cost-cutting initiatives, such as tighter controls on inventory.
Wal-Mart's entry into food retailing also presents enormous growth
potential. The company already derives one-quarter of its annual revenues
from food items, but is working to expand its supermarket presence. While
its Supercenters combine groceries with other retail departments, the
company is also experimenting with Wal-Mart Neighborhood Markets, which
would compete more directly with local grocers.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Retail 15.1%
Pharmaceuticals 13.0%
Conglomerates 7.5%
Computer services 7.4%
Insurance and finance 7.3%
Footnote reads:
*Based on net assets as of 4/30/99. Holdings will vary over time.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Microsoft Corp.
Computer software and services
General Electric Co.
Conglomerate
Intel Corp.
Semiconductors
Cisco Systems, Inc.
Networking
Lucent Technologies, Inc.
Telecommunications
Wal-Mart Stores, Inc.
Retail
America Online, Inc.
Internet services
IBM Corp.
Computer products and services
MCI Worldcom, Inc.
Telecommunications
Tyco International Ltd.
Conglomerate
Footnote reads:
These holdings represent 29.2% of the fund's net assets as of 4/30/99.
Portfolio holdings will vary over time.
Also in the portfolio's retail sector was Home Depot, one of the
fastest-growing large retailers in the United States. Home Depot has
benefited in particular from the low interest rate environment during the
period, which strengthened the housing market, prompting new home
construction as well as remodeling and home repairs. Strong consumer
spending has also propelled the stock of Gap, Inc., the global retailer
with more than 2,500 stores, including Gap, GapKids, Old Navy, and Banana
Republic. The company recently announced that its first-quarter profits
surged 49%. While sales at the company's mainstay Gap chain slumped in
April, its increasingly popular Old Navy stores boosted the stock's
performance. Old Navy is a five-year-old chain that sells men's, women's,
and children's casual clothing at low prices.
As Putnam Growth Fund's first fiscal year came to a close, the
unprecedented momentum of large-company growth stocks appeared to be
slowing somewhat. The fund's management team is prepared to meet the
challenges of an increasingly volatile market by taking advantage of the
fund's diversification and Putnam's equity research expertise to seek out
the strongest growth companies.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 16, 1999
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 4/30/99, there is no guarantee the fund will
continue to hold these securities in the future.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Growth Fund is designed for investors seeking long-term growth of capital
primarily from a diversified portfolio of U.S. stocks.
TOTAL RETURN FOR PERIOD ENDED 4/30/99
S&P 500 Consumer
NAV POP Index price index
- ------------------------------------------------------------------------------
Life of fund
(since 5/4/98) 22.59% 15.52% 21.82% 2.28%
- ------------------------------------------------------------------------------
PRICE AND DISTRIBUTION INFORMATION
For the period 5/4/98 to 4/30/99
- ------------------------------------------------------------------------------
Distributions (number)*
- ------------------------------------------------------------------------------
Share value: NAV POP
- ------------------------------------------------------------------------------
5/4/98 $8.50 $9.02
- ------------------------------------------------------------------------------
4/30/99 10.42 11.06
- ------------------------------------------------------------------------------
* The fund made no distributions during the fiscal period.
TOTAL RETURN FOR PERIOD ENDED 3/31/99
(most recent calendar quarter)
NAV POP
- ------------------------------------------------------------------------------
Life of fund
(since 5/4/98) 23.18% 16.08%
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will fluctuate
so that an investor's shares when redeemed may be worth more or less than
their original cost. Performance data reflect a voluntary expense
limitation currently or previously in effect. Without the limitation,
total returns would have been lower.
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.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of
a $10,000 investment since
5/4/98
Fund's shares S&P 500 Consumer price
Date at POP Index index
5/4/98 9,104 9,737 10,018
9,779 10,133 10,031
9,625 10,025 10,043
8/31/98 7,994 8,576 10,055
8,704 9,125 10,055
8,971 9,868 10,080
11/30/98 9,658 10,466 10,092
10,811 11,069 10,105
11,543 11,531 10,129
2/28/99 10,900 11,173 10,135
11,610 11,620 10,154
4/30/99 $11,552 $12,182 $10,228
Footnote reads:
Past performance is no assurance of future results.
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 or contingent deferred 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 5.75% maximum sales charge.
COMPARATIVE BENCHMARKS
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
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 indexes and performance of the fund will differ.
It is not possible to invest directly in an index.
Report of independent accountants
For the period May 4, 1998 (commencement of operations) to April 30, 1999
To the Trustees and Shareholders of
Putnam Growth Fund
(a series of Putnam Fund Trust)
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
Growth Fund (the "fund") at April 30, 1999, and the results of its
operations, the changes in its net assets and the financial highlights for
the period from May 4, 1998 (commencement of operations) to April 30,
1999, 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 audit. We conducted our audit 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 audit, which included confirmation of investments owned at April 30,
1999 by correspondence with the custodian, provides a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 14, 1999
<TABLE>
<CAPTION>
Portfolio of investments owned
April 30, 1999
COMMON STOCKS (99.2%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Advertising (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
214 Interpublic Group Co., Inc. $ 16,598
Banks (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
918 Firstar Corp. 27,597
Basic Industrial Products (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
300 Danaher Corp. 19,931
Biotechnology (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
250 Biogen N.V. (NON) 23,766
Broadcasting (3.3%)
- --------------------------------------------------------------------------------------------------------------------------
531 AT&T Corp. -- Liberty Media Group (NON) 33,918
600 CBS Corp. (NON) 27,338
320 Clear Channel Communications, Inc. (NON) 22,240
--------------
83,496
Cable Television (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
445 Comcast Corp. Class A 29,231
300 MediaOne Group Inc. (NON) 24,469
--------------
53,700
Chemicals (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
300 Praxair, Inc. 15,525
Computer Services (7.4%)
- --------------------------------------------------------------------------------------------------------------------------
77 Amazon.com, Inc. (NON) 13,249
440 America Online, Inc. 62,810
298 Comverse Technology, Inc. (NON) 19,109
323 Computer Sciences Corp. (NON) 19,239
408 EMC Corp. (NON) 44,447
427 IMS Health Inc. 12,810
100 Yahoo! Inc. (NON) 17,469
--------------
189,133
Computer Software (5.4%)
- --------------------------------------------------------------------------------------------------------------------------
176 Intuit, Inc. (NON) 15,158
1,520 Microsoft Corp. (NON) 123,595
--------------
138,753
Computers (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
272 IBM Corp. 56,899
506 Sun Microsystems, Inc. (NON) 30,265
--------------
87,164
Conglomerates (7.5%)
- --------------------------------------------------------------------------------------------------------------------------
900 General Electric Co. 94,950
648 Tyco International Ltd. 52,650
300 United Technologies Corp. 43,463
--------------
191,063
Consumer Products (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
200 Clorox Co. 23,075
200 Kimberly-Clark Corp. 12,255
--------------
35,330
Electronics and Electrical Equipment (3.7%)
- --------------------------------------------------------------------------------------------------------------------------
305 Jabil Circuit, Inc. (NON) 14,202
350 Motorola, Inc. 28,044
488 Solectron Corp. (NON) 23,668
37 Teradyne, Inc. (NON) 1,746
267 Texas Instruments, Inc. 27,267
--------------
94,927
Entertainment (2.6%)
- --------------------------------------------------------------------------------------------------------------------------
521 Time Warner, Inc. 36,470
748 Viacom, Inc. Class B (NON) 30,575
--------------
67,045
Health Care Services (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
321 Cardinal Health, Inc. 19,200
Insurance and Finance (7.3%)
- --------------------------------------------------------------------------------------------------------------------------
200 American Express Co. (NON) 26,138
250 American International Group, Inc. 29,359
664 Citigroup, Inc. 49,966
285 Morgan Stanley, Dean Witter, Discover and Co. 28,268
205 Providian Financial Corp. 26,458
239 Schwab (Charles) Corp. 26,230
--------------
186,419
Medical Supplies and Devices (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
100 Bausch & Lomb, Inc. (NON) 7,500
350 Guidant Corp. 18,791
65 VISX, Inc. (NON) 8,369
--------------
34,660
Networking and Telecommunication Equipment (6.3%)
- --------------------------------------------------------------------------------------------------------------------------
153 Ascend Communications, Inc. (NON) 14,784
650 Cisco Systems, Inc. (NON) 74,141
1,200 Lucent Technologies, Inc. 72,150
--------------
161,075
Oil and Gas (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
230 Enron Corp. 17,308
Pharmaceuticals (13.0%)
- --------------------------------------------------------------------------------------------------------------------------
250 Allergan, Inc. (NON) 22,469
500 American Home Products Corp. (NON) 30,500
392 Amgen Inc. (NON) 24,084
421 Genentech, Inc. (NON) 35,627
300 Johnson & Johnson 29,250
300 Merck & Co., Inc. 21,075
315 Pfizer, Inc. 36,245
800 Pharmacia & Upjohn, Inc. 44,800
911 Schering Plough Corp. 44,013
670 Warner-Lambert Co. 45,518
--------------
333,581
Publishing (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
334 McGraw-Hill, Inc. 18,454
Retail (15.1%)
- --------------------------------------------------------------------------------------------------------------------------
488 Best Buy Co., Inc. (NON) 23,302
500 Costco Co., Inc. (NON) 40,469
640 CVS Corp. 30,480
500 Gap, Inc. (The) 33,281
749 Home Depot, Inc. (The) 44,893
300 Kohls Corp. (NON) 19,931
488 Safeway, Inc. (NON) 26,322
356 Lowe's Co., Inc. 18,779
1,201 TJX Co., Inc. (The) 40,008
200 Tricon Global Restaurants, Inc. (NON) 12,875
944 Walgreen Co. 25,370
1,564 Wal-Mart Stores, Inc. 71,944
--------------
387,654
Semiconductors (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
1,420 Intel Corp. 86,886
Supermarkets (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
344 Kroger Co. (NON) 18,684
Telecommunications (6.2%)
- --------------------------------------------------------------------------------------------------------------------------
200 Global TeleSystems Group, Inc. (NON) 13,225
650 MCI WorldCom, Inc. (NON) 53,422
200 QUALCOMM, Inc. (NON) 40,000
300 Qwest Communications International, Inc. (NON) 25,631
250 Tellabs, Inc. (NON) 27,352
--------------
159,630
Telephone Services (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
360 Sprint Corp. 36,923
367 Sprint Corp. (PCS Group) (NON) 15,552
--------------
52,475
Transportation (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
200 FDX Corp. (NON) 22,513
--------------
Total Common Stocks (cost $1,930,456) $ 2,542,567
SHORT-TERM INVESTMENTS (1.2%) (a) (cost $32,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 32,000 Interest in $292,698,000 joint repurchase agreement
dated April 30, 1999 with Warburg Securities
due May 3, 1999 with respect to various
U.S. Treasury obligations -- maturity value of $32,013
for an effective yield of 4.87% $ 32,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,962,456) (b) $ 2,574,567
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $2,562,613.
(b) The aggregate identified cost on a tax basis is $1,962,936, resulting in gross unrealized appreciation and
depreciation of $638,416 and $26,785, respectively, or net unrealized appreciation of $611,631.
(NON) Non-income-producing security.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
April 30, 1999
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,962,456) (Note 1) $2,574,567
- -----------------------------------------------------------------------------------------------
Cash 904
- -----------------------------------------------------------------------------------------------
Dividends and other receivables 1,637
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 294
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 48,471
- -----------------------------------------------------------------------------------------------
Receivable from Manager (Note 2) 1,538
- -----------------------------------------------------------------------------------------------
Total assets 2,627,411
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 47,967
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 466
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 215
- -----------------------------------------------------------------------------------------------
Payable for auditing 12,020
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 13
- -----------------------------------------------------------------------------------------------
Payable for legal 1,440
- -----------------------------------------------------------------------------------------------
Other accrued expenses 2,677
- -----------------------------------------------------------------------------------------------
Total liabilities 64,798
- -----------------------------------------------------------------------------------------------
Net assets $2,562,613
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $2,090,592
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (140,090)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 612,111
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $2,562,613
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per share
($2,562,613 divided by 246,005 shares) $10.42
- -----------------------------------------------------------------------------------------------
Offering price per share (100/94.25 of $10.42)* $11.06
- -----------------------------------------------------------------------------------------------
* 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 April 30, 1999
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends $11,031
- -----------------------------------------------------------------------------------------------
Interest 2,465
- -----------------------------------------------------------------------------------------------
Total investment income 13,496
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 15,057
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 4,195
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 1,945
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 43
- -----------------------------------------------------------------------------------------------
Reports to shareholders 3,654
- -----------------------------------------------------------------------------------------------
Registration fees 626
- -----------------------------------------------------------------------------------------------
Auditing 12,152
- -----------------------------------------------------------------------------------------------
Legal 4,211
- -----------------------------------------------------------------------------------------------
Postage 12
- -----------------------------------------------------------------------------------------------
Other 8
- -----------------------------------------------------------------------------------------------
Fees waived by Manager (Note 2) (20,393)
- -----------------------------------------------------------------------------------------------
Total expenses 21,510
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (3,681)
- -----------------------------------------------------------------------------------------------
Net expenses 17,829
- -----------------------------------------------------------------------------------------------
Net investment loss (4,333)
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (140,090)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 612,111
- -----------------------------------------------------------------------------------------------
Net gain on investments 472,021
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $467,688
- -----------------------------------------------------------------------------------------------
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 April 30
1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment loss $ (4,333)
- ---------------------------------------------------------------------------------------------------------------
Net realized loss on investments (140,090)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 612,111
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 467,688
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 94,925
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 562,613
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period (Note 5) 2,000,000
- ---------------------------------------------------------------------------------------------------------------
End of period (including net investment income of $--) $2,562,613
- ---------------------------------------------------------------------------------------------------------------
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
Per-share May 4, 1998+
operating performance to April 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (a)(d) (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.94
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.92
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.42
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 22.59*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,563
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c)(d) .99*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(d) (.20)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 108.03*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment loss has been determined on the basis of the weighted average number of shares outstanding
during the period.
(b) Total 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 $0.08 per share. (See Note 2).
</TABLE>
Notes to financial statements
April 30, 1999
Note 1
Significant accounting policies
Putnam Growth Fund (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
fund will invest 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.
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. Discounts on original
issue bonds are accreted according to the yield-to-maturity basis.
E) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the period ended
April 30, 1999, the fund had no borrowings against the line of credit.
F) 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. At April 30, 1999, the fund had a capital loss carryover of
approximately $140,000 available to offset future net capital gain, if
any, which will expire on April 30, 2007.
G) 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. These
differences include temporary and permanent differences of losses on wash
sale transactions and book accretion/amortization. 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. For the period ended April 30, 1999, the fund reclassified
$4,333 to decrease accumulated net investment loss and $4,333 to decrease
paid-in-capital. The calculation of net investment income per share in the
financial highlights table excludes these adjustments.
H) 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 December 31, 1999, to the extent
that expenses of the fund (exclusive of brokerage commissions, interest,
taxes, deferred organizational and extraordinary expenses, 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 April 30, 1999, fund expenses were reduced by $3,681
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 April 30, 1999, Putnam Mutual Funds Corp., acting as
underwriter received no net commissions from the sale of shares of the
fund.
Note 3
Purchase and sales of securities
During the period ended April 30, 1999, purchases and sales of investment
securities other than short-term investments aggregated $4,382,814 and
$2,312,268, 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.
Note 4
Capital shares
At April 30, 1999, 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
April 30, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 10,739 $95,188
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
10,739 95,188
Shares
repurchased (28) (263)
- -----------------------------------------------------------------------------
Net increase 10,711 $94,925
- -----------------------------------------------------------------------------
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 and the issuance of
235,294 shares to Putnam Mutual Funds Corp. on May 1, 1998.
At April 30, 1999, Putnam Investments, Inc. owned 235,294 shares of the
fund (95.6% of class shares outstanding), valued at $2,451,763.
Federal tax information
(Unaudited)
The Form 1099 you receive in January 2000 will show the tax status of all
distributions paid to your account in calendar 1999.
Fund information
WEB SITE
www.putnaminv.com
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
Brett C. Browchuk
Vice President
John J. Morgan, Jr.
Vice President
C. Beth Cotner
Vice President
David J. Santos
Vice President and Fund Manager
Manuel Weiss Herrero
Vice President and Fund Manager
Jeffrey R. Lindsey
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Growth 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' Web site: 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.
52520 21E 6/99
