Putnam
Value
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:
Putnam Value Fund's first year of operation encompassed a historic period
for the stock market. Major equity indexes set several new record highs
throughout the year. Also, stock markets around the world experienced a
steep decline followed by a rapid recovery in the second half of 1998.
When Russia announced a currency devaluation and debt restructuring in
August, equities from Moscow to New York fell dramatically in price --
then, after an easing of monetary policy in the United States and other
developed nations, rallied back to their previous levels. Later, near the
end of the 12-month period, the type of value stocks in which your fund
invests emerged as leaders in equity markets after several years of
lagging. This surge helped your fund finish the year with handsome gains.
Total return for 12 months ended 4/30/99*
NAV POP
- ----------------------------------------------------------------
12.84% 6.34%
- ----------------------------------------------------------------
Past performance is no indication of future results. Additional
performance information begins on page 6.
* Reflects performance since inception on 5/4/98.
* FUND SEIZES OPPORTUNITIES IN VOLATILE MARKETS
The elevated level of volatility in equity markets during the past year
provided many opportunities for this fund's management team to execute its
value strategy of buying stocks at discounted prices. Fund Manager Edward
Bousa and his colleagues in the Global Value Equities Group invest in
stocks with qualities of "cheapness and change" -- combining both an
attractive price and the potential for positive change that can improve
performance. The investment team focuses its research on large,
well-established companies in solid financial condition. By emphasizing
these companies and employing a value strategy, they have largely avoided
weaker companies and stocks with inflated expectations. The goal is to
provide competitive capital appreciation while experiencing less
volatility than the overall market.
During the past 12 months, Edward took advantage of pessimism in many
industrial sectors to add new holdings. Examples included Sun
Microsystems, a maker of computer components that became undervalued in
1998 as the industry hit a low point in its business cycle. During the
global financial crisis in August and September, Edward's team concluded
there was no threat to the long-term earnings of many high-quality
companies. Morgan Stanley and Citigroup are examples of stocks added to
the fund amid the turmoil that subsequently recovered. Other stocks added
included three airlines, Delta, American (AMR Corp.), and United (UAL
Corp.), as well as Fortune Brands, a consumer products company. All
performed well during the fiscal period. Although Edward sold Sun
Microsystems and Morgan Stanley after they appreciated, other new
additions remained attractively priced during the fund's fiscal year.
While these holdings, as well as others mentioned in this report, were
viewed favorably at the end of the period, all are subject to review and
adjustment in accordance with the fund's investment strategy and may vary
in the future.
* MARKET CONDITIONS START TO FAVOR VALUE STOCKS
For much of the annual period, the returns of value stocks lagged behind
the results of a small group of companies with high rates of earnings
growth. This trend had been in place since early 1997, when slower
economic growth in many regions of the world hurt the earnings of many
industrial, energy, and basic materials stocks in the fund. The outlook
for world economic growth is now improving after two years of
sluggishness. One harbinger of this improvement was a rise in oil prices
during February and March, which gained momentum when OPEC nations agreed
to reduce petroleum production. In April, indications of stronger economic
growth in Asia and continuing strength in the U.S. economy created strong
demand for undervalued stocks in many sectors, such as industrial
cyclicals, natural resources, and basic materials, where the fund has
significant weightings.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Banks 13.2%
Oil and gas 12.2%
Telephone services 8.0%
Financial services 6.3%
Insurance 4.6%
Footnote reads:
*Based on net assets as of 4/30/99. Holdings will vary over time.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Citigroup, Inc.
Financial services
BankAmerica Corp.
Banks
Mobil Corp.
Oil and gas
Exxon Corp.
Oil and gas
GTE Corp.
Telephone services
AT&T Corp.
Telephone services
Bank One Corp.
Banks
SBC Communications, Inc.
Telephone services
Weyerhaeuser Co.
Paper and forest products
Chevron, Inc.
Oil and gas
Footnote reads:
These holdings represent 19.2% of the fund's net assets as of 4/30/99.
Portfolio holdings will vary over time.
* MERGER ACTIVITY PROVES ADVANTAGEOUS
Another trend that gave impetus to the fund's returns was unprecedented
merger activity in many industries. Mergers had set a record in 1997 and
doubled it again in 1998. The pace has remained strong in early 1999,
especially in the oil, financial, and telecommunications sectors.
The fund had holdings in British Petroleum, which acquired Amoco during
the annual period and announced a plan to acquire a third company. The
fund also held both Exxon and Mobil, two companies that agreed to merge in
December 1998. In each of these cases, the stocks of the smaller companies
rapidly appreciated with the merger announcements. In the financial
sector, the fund owned Mercantile Bankcorp, which agreed to be acquired by
Firstar Corp. at a 29% premium over the stock's price. In telephone
services, the fund owned SBC Communications and Ameritech, two regional
operators that announced a merger plan now under review by federal
authorities. If approved, it would create the largest domestic telephone
company. Finally, the fund owned AT&T, which during the period acquired
TCI, a cable television company, and most of MediaOne. These acquisitions
are part of AT&T's effort to become a dominant player in the emerging
business of providing households with Internet access, telephone service,
and television entertainment through cable connections.
* FUND POSITIONED FOR VALUE RALLY OR VOLATILITY
As we look ahead to the fund's second year of operations, there is reason
for optimism that its value investment style might be particularly timely.
Whether the fund's investment style is in favor or out of favor, though,
its emphasis on undervalued stocks serves to limit volatility. Because
most of the fund's holdings pay dividends and do not carry inflated
expectations, they tend to be insulated from severe market movements. With
this disciplined value investment process in place, the fund seeks
attractive risk-adjusted capital appreciation over long periods.
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
Value Fund is designed for investors seeking capital appreciation
primarily through investments in undervalued common stocks.
TOTAL RETURN FOR PERIOD ENDED 4/30/99
(inception 5/4/98) NAV POP
- ------------------------------------------------------------------------------
Life of fund 12.84% 6.34%
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIOD ENDED 4/30/99
Russell 1000
Value Consumer
Index price index
- ------------------------------------------------------------------------------
Life of fund 12.70% 2.28%
- ------------------------------------------------------------------------------
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.
PRICE AND DISTRIBUTION INFORMATION
For the period 5/4/98 to 4/30/99
- ------------------------------------------------------------------------------
Distributions (number) 1
- ------------------------------------------------------------------------------
Income $0.105
- ------------------------------------------------------------------------------
Capital gains --
- ------------------------------------------------------------------------------
Total $0.105
- ------------------------------------------------------------------------------
Share value: NAV POP
- ------------------------------------------------------------------------------
5/4/98 $8.50 $9.02
- ------------------------------------------------------------------------------
4/30/99 9.47 10.05
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current dividend rate1 1.11% 1.05%
- ------------------------------------------------------------------------------
Current 30-day SEC yield2 1.06 1.00
- ------------------------------------------------------------------------------
1Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
2Based on investment income, calculated using SEC guidelines.
[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 Russell 1000 Consumer price
Date at POP Value Index index
5/4/98 9,159 9,732 10,018
6/98 9,181 9,857 10,031
7/98 8,948 9,683 10,043
8/98 7,795 8,242 10,055
9/98 8,138 8,715 10,055
10/98 8,771 9,390 10,080
11/98 9,248 9,827 10,092
12/98 9,400 10,162 10,105
1/99 9,512 10,243 10,129
2/99 9,388 10,098 10,135
3/99 9,669 10,307 10,154
4/99 $10,634 $11,270 $10,228
Footnote reads:
Past performance is no assurance of future results.
TOTAL RETURN FOR PERIOD ENDED 3/31/99
(most recent calendar quarter)
(inception 5/4/98) NAV POP
- ------------------------------------------------------------------------------
Life of fund 2.59% -3.32%
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. 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.
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 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
Russell 1000(R) Value Index measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth
rates. Securities indexes assume reinvestment of all distributions and
interest payments and do 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.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Report of independent accountants
For the period May 4, 1998 (commencement of operations) to April 30, 1999
To the Trustees and Shareholders of
Putnam Value 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
Value 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 (97.3%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace and Defense (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
500 Boeing Co. $ 20,313
250 Raytheon Co. Class B 17,563
--------------
37,876
Airlines (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
250 AMR Corp. 17,453
100 Delta Air Lines, Inc. 6,344
280 UAL Corp. (NON) 22,610
--------------
46,407
Automotive (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
400 Ford Motor Co. 25,575
320 General Motors Corp. 28,460
300 Lear Corp. 13,763
300 TRW, Inc. 12,581
--------------
80,379
Banks (13.2%)
- --------------------------------------------------------------------------------------------------------------------------
800 Bank of America Corp. 57,600
700 Bank One Corp. 41,300
500 BankBoston Corp. 24,500
330 Chase Manhattan Corp. 27,308
400 Mercantile Bancorp., Inc. 22,800
500 PNC Bank Corp. 28,938
200 Summit Bancorp 8,475
500 Synovus Financial Corp. 11,063
550 U.S. Bancorp 20,384
150 Wachovia Corp. 13,181
600 Washington Mutual, Inc. 24,675
700 Wells Fargo Co. 30,231
--------------
310,455
Building Products (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
400 Sherwin Williams Co. 12,450
Business Equipment and Services (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
200 Illinois Tool Works, Inc. 15,400
100 Pitney Bowes, Inc. 6,994
--------------
22,394
Chemicals (3.3%)
- --------------------------------------------------------------------------------------------------------------------------
230 Dow Chemical Co. 30,173
400 du Pont (E.I.) de Nemours & Co., Ltd. 28,250
300 PPG Industries, Inc. 19,481
--------------
77,904
Computers (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
400 Apple Computer, Inc. 18,400
200 Compaq Computer Corp. 4,463
100 IBM Corp. 20,919
--------------
43,782
Conglomerates (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
300 Allied-Signal, Inc. 17,625
300 Minnesota Mining & Manufacturing Co. 26,700
--------------
44,325
Consumer Durables (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
300 Whirlpool Corp. 19,913
Consumer Products (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
200 Colgate-Palmolive Co. 20,488
450 Fortune Brands, Inc. 17,775
--------------
38,263
Consumer Services (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
600 Service Corp. International 12,450
Containers (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
700 Owens-Illinois, Inc. (NON) 20,300
Electric Utilities (4.5%)
- --------------------------------------------------------------------------------------------------------------------------
500 Ameren Corp. 19,344
450 Duke Energy Corp. 25,200
800 Edison International 19,600
700 Entergy Corp. 21,875
800 OGE Energy Corp. 18,950
--------------
104,969
Electronics and Electrical Equipment (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
350 Emerson Electric Co. 22,575
100 Micron Technology, Inc. 3,713
250 Motorola, Inc. 20,031
--------------
46,319
Entertainment (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
500 Disney (Walt) Productions, Inc. 15,875
Environmental Control (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
600 Republic Services, Inc. 12,338
Farm Equipment (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
370 Deere (John) & Co. 15,910
Financial Services (6.3%)
- --------------------------------------------------------------------------------------------------------------------------
640 Charter One Financial, Inc. 20,000
800 Citigroup, Inc. 60,200
260 Fannie Mae 18,444
200 Merrill Lynch & Co., Inc. 16,788
400 Paine Webber Group Inc. 18,775
200 The Equitable Cos., Inc. 13,463
--------------
147,670
Food and Beverages (4.1%)
- --------------------------------------------------------------------------------------------------------------------------
350 Bestfoods 17,566
400 Kellogg Co. 14,800
900 Pepsi Bottling Group, Inc. (The) 18,956
850 Sara Lee Corp. 18,913
650 SYSCO Corp. 19,297
120 The Quaker Oats Co. 7,748
--------------
97,280
Health Care Services (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
800 HEALTHSOUTH Corp. (NON) 10,750
300 Tenet Healthcare Corp. 7,088
--------------
17,838
Insurance (4.6%)
- --------------------------------------------------------------------------------------------------------------------------
600 Ace Ltd. 18,150
510 Allstate Corp. 18,551
300 American General Corp. 22,200
300 CIGNA Corp. 26,156
300 The Chubb Corp. 17,775
200 Torchmark Corp. 6,838
--------------
109,670
Lodging (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
500 Starwood Hotels & Resorts Worldwide, Inc. 18,344
Machinery (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
100 Caterpillar, Inc. 6,438
Medical Supplies and Devices (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
250 Baxter International, Inc. 15,750
Metals and Mining (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
350 Alcoa Inc. 21,788
Office Equipment (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
300 Xerox Corp. 17,625
Oil and Gas (12.2%)
- --------------------------------------------------------------------------------------------------------------------------
300 Burlington Resources Inc. 13,819
250 BP Amoco PLC ADR (United Kingdom) 28,297
330 Chevron, Inc. 32,918
700 Conoco, Inc. 18,988
300 Consolidated Natural Gas Co. 17,850
400 El Paso Energy Corp. 14,700
600 Exxon Corp. 49,838
700 Halliburton Co. 29,838
500 Mobil Corp. 52,375
600 Tosco Corp. 16,050
300 Williams Cos., Inc. 14,175
--------------
288,848
Paper and Forest Products (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
460 Champion International Corp. 25,156
500 Weyerhaeuser Co. 33,563
--------------
58,719
Pharmaceuticals and Biotechnology (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
400 American Home Products Corp. 24,400
300 Pharmacia & Upjohn, Inc. 16,800
--------------
41,200
Publishing (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
400 McGraw-Hill, Inc. 22,100
250 Tribune Co. 20,859
--------------
42,959
Railroads (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
750 Burlington Northern Santa Fe Corp. 27,469
REITs (Real Estate Investment Trust) (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
500 Equity Residential Properties Trust 23,125
Retail (3.0%)
- --------------------------------------------------------------------------------------------------------------------------
400 Albertsons, Inc. 20,600
450 Federated Department Stores, Inc. 21,009
500 Rite Aid Corp. 11,642
400 Sears, Roebuck & Co. 18,400
--------------
71,651
Specialty Consumer Products (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
600 Mattel, Inc. 15,525
500 Hasbro, Inc. 17,063
--------------
32,588
Telecommunications (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
370 ALLTEL Corp. 24,952
Telephone Services (8.0%)
- --------------------------------------------------------------------------------------------------------------------------
900 American Telephone & Telegraph Co. 45,450
450 Ameritech Corp. 30,797
550 Bell Atlantic Corp. 31,694
700 GTE Corp. 46,856
600 SBC Communications, Inc. 33,600
--------------
188,397
Tobacco (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
600 Philip Morris Cos., Inc. 21,038
Transportation (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
200 FDX Corp. (NON) 22,513
Trucking (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
175 Ryder System, Inc. 4,616
Utilities (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
900 Sempra Energy 18,675
500 Western Resources, Inc. 13,594
--------------
32,269
--------------
Total Common Stocks (cost $2,054,516) $ 2,295,056
CONVERTIBLE BONDS AND NOTES (0.8%) (a) (cost $21,294)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 20,000 Micron Technology, Inc. cv. sub. notes 7s, 2004 $ 19,875
CONVERTIBLE PREFERRED STOCKS (0.2%) (a) (cost $4,779)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
100 El Paso Energy Capital Trust $2.375 cv. pfd. $ 5,013
SHORT-TERM INVESTMENTS (2.0%) (a) (cost $46,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 46,000 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 $46,019 for an
effective yield of 4.87% $ 46,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,126,589) (b) $ 2,365,944
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $2,357,579.
(b) The aggregate identified cost on a tax basis is $2,131,209, resulting in gross unrealized appreciation and
depreciation of $304,973 and $70,238, respectively, or net unrealized appreciation of $234,735.
(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 $2,126,589) (Note 1) $2,365,944
- -----------------------------------------------------------------------------------------------
Cash 567
- -----------------------------------------------------------------------------------------------
Dividends and interest receivable 2,454
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 32,047
- -----------------------------------------------------------------------------------------------
Receivable from manager (Note 2) 3,361
- -----------------------------------------------------------------------------------------------
Total assets 2,404,373
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 30,067
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 99
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 215
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 13
- -----------------------------------------------------------------------------------------------
Payable for auditing expense 12,020
- -----------------------------------------------------------------------------------------------
Payable for legal expense 1,440
- -----------------------------------------------------------------------------------------------
Other accrued expenses 2,940
- -----------------------------------------------------------------------------------------------
Total liabilities 46,794
- -----------------------------------------------------------------------------------------------
Net assets $2,357,579
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $2,121,435
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 3,817
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (7,028)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 239,355
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $2,357,579
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per share
($2,357,579 divided by 249,029 shares) $9.47
- -----------------------------------------------------------------------------------------------
Offering price per share (100/94.25 of $9.47)* $10.05
- -----------------------------------------------------------------------------------------------
* 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 (net of foreign tax of $62) $ 44,011
- -----------------------------------------------------------------------------------------------
Interest 981
- -----------------------------------------------------------------------------------------------
Total investment income $ 44,992
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 13,727
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 3,836
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 1,945
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 43
- -----------------------------------------------------------------------------------------------
Reports to shareholders 4,136
- -----------------------------------------------------------------------------------------------
Registration fees 632
- -----------------------------------------------------------------------------------------------
Auditing 12,152
- -----------------------------------------------------------------------------------------------
Legal 4,211
- -----------------------------------------------------------------------------------------------
Postage 12
- -----------------------------------------------------------------------------------------------
Fees waived and reimbursed by manager (Note 2) (21,091)
- -----------------------------------------------------------------------------------------------
Total expenses 19,603
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (3,429)
- -----------------------------------------------------------------------------------------------
Net expenses 16,174
- -----------------------------------------------------------------------------------------------
Net investment income 28,818
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (7,028)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 239,355
- -----------------------------------------------------------------------------------------------
Net gain on investments 232,327
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $261,145
- -----------------------------------------------------------------------------------------------
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 income $ 28,818
- ---------------------------------------------------------------------------------------------------------------
Net realized loss on investments (7,028)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 239,355
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 261,145
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income (25,001)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 121,435
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 357,579
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period (Note 5) $2,000,000
- ---------------------------------------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $3,817) $2,357,579
- ---------------------------------------------------------------------------------------------------------------
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 income (a)(d) .12
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .96
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.08
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $9.47
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 12.84*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,358
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c)(d) .99*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(d) 1.46*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 117.02*
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 $0.09 per share. (Note 1).
</TABLE>
Notes to financial statements
April 30, 1999
Note 1
Significant accounting policies
Putnam Value Fund (the "fund") is a series of Putnam Fund 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 capital appreciation, and as a secondary
objective, current income by investing 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 are undervalued in relation to underlying asset values or
earnings potential and have the potential of long-term appreciation.
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 discount 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 and for excise tax on income and capital
gains.
At April 30, 1999, the fund had a capital loss carryover of approximately
$2,000 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 on nontaxable dividends. 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 year ended April 30, 1999, the fund required no such
reclassifications.
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 for
the quarter. Such fee is based on the following annual rates: 0.70% of the
first $500 million of the fund's 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 $3,429
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") with respect to its
class A shares 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 payments by the fund to Putnam Mutual Funds Corp. at
an annual rate up to 0.35% of the average net assets attributable to class
A shares. 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 class A shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares. For the period ended April 30, 1999, Putnam Mutual Funds
Corp., acting as underwriter received no monies on class A redemptions.
Note 3
Purchases and sales of securities
During the period ended April 30, 1999, purchases and sales of investment
securities other than short-term investments aggregated $4,178,930 and
$2,091,313, 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 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
- -----------------------------------------------------------------------------
Shares Amount
- -----------------------------------------------------------------------------
Shares sold 10,687 $ 96,474
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,053 25,001
- -----------------------------------------------------------------------------
13,740 121,475
Shares
repurchased (5) (40)
- -----------------------------------------------------------------------------
Net increase 13,735 $121,435
- -----------------------------------------------------------------------------
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., a wholly-owned subsidiary of Putnam
Investments, Inc. on May 4, 1998.
At April 30, 1999, Putnam Investments, Inc. owned 238,311 shares of the
fund (95.70% of shares outstanding), valued at $2,256,805.
Federal tax information
(Unaudited)
The fund has designated 100% of the distributions from net investment
income as qualifying for the dividends received deduction for corporations.
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
Thomas V. Reilly
Vice President
Anthony I. Kreisel
Vice President
Edward P. Bousa
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 Value 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.
52504 21G 6/99
