Putnam
Technology
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
7-31-00
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years during
which the global securities markets, the mutual fund industry, and
Putnam itself have experienced tremendous growth and change.
As we look to the future, we are certain that the changes will be
breathtaking in their scope. What will not change is the Trustees'
dedication to serving the best interests of our shareholders.
We welcome the challenges that lie ahead and are confident that Putnam
and your Board will continue to face those challenges successfully as
they have for more than 60 years. We look forward to helping you meet
your financial objectives for many years to come.
Respectfully yours,
/S/ JOHN A. HILL /S/GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
September 19, 2000
REPORT FROM FUND MANAGEMENT
David J. Santos
Saba S. Malak
Paul Marrkand
We are pleased to provide this first report to shareholders of Putnam
Technology Fund. Although the fund has been in operation only since June
14, 2000, we are providing this semiannual report to coincide with the
fiscal year's midpoint of July 31. Since we are discussing such a brief
period, we are not including fund performance information. Complete
performance information will be provided in the annual report dated
January 31, 2001.
Putnam Technology Fund made its debut during a challenging time for
technology stocks. The fund began operations on the heels of a
historically steep decline for the Nasdaq Composite Index, a common
measure of technology stock performance. After delivering the largest
annual return in history for a major index in 1999, the Nasdaq corrected
swiftly and sharply in the second quarter of 2000, losing nearly 40% of
its value in just 11 weeks. The index managed a partial recovery, and
its total loss for the quarter was 13.3%.
* MARKET DECLINE BRINGS INVESTMENT OPPORTUNITIES
It is important to note that the market decline was not necessarily bad
news for the brand-new Putnam Technology Fund. In the wake of the market
decline, many stocks were selling at prices significantly lower than
their market highs. As a result, we were able to add to the portfolio
companies whose stock prices were more attractive than we had seen in
quite some time.
The fund also has benefited from its flexibility to invest across a wide
range of industries. Any company whose products or services are related
to technology may be considered for the portfolio. We look for companies
of all sizes and at different stages of growth, including midsize
companies with significant market share in new industries and global
technology giants with years of experience and profitability. The fund
may also invest in stocks of companies at their entrepreneurial stages
and hold them in the portfolio until they grow into dominant worldwide
corporations.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Software 21.3%
Electronics 19.8%
Communications
equipment 18.7%
Computers 14.1%
Telecommunications 7.8%
Footnote reads:
*Based on net assets as of 7/31/00. Holdings will vary over time.
Regardless of their size, the companies we target are
those that we believe have superior financial strength, strong
management, and solid long-term growth potential. Holdings in the
portfolio may span a wide array of industries, such as software,
hardware, semiconductors, networking, data storage, and data security.
Other targeted industries may include telecommunications, wireless,
fiber optics, and biotechnology.
* TECHNOLOGY'S LONG-TERM GROWTH POTENTIAL REMAINS POSITIVE
While the mood of the markets has changed significantly since the start
of 2000, the major growth themes have not. In technology, long-term
growth potential is still strong as consumers and businesses demand
better, faster, and more sophisticated systems for sending, receiving,
and storing data and information. We have identified the most promising
investment themes and targeted stocks of companies most likely to profit
from them.
One of those investment themes is e-commerce. Throughout the business
world, from established blue-chip giants to small emerging firms,
competitive companies know they must develop e-commerce strategies to
bring their businesses, products, and services online effectively. As a
result, businesses that provide e-commerce support have outstanding
growth potential.
As increasing amounts of data fly across corporate networks, businesses
need more efficient methods for storing and managing the information.
One of the fund's holdings, Brocade Communications Systems, is
benefiting from this demand. The company's products allow businesses to
increase the speed at which data is transported across their networks.
Brocade specializes in fiber channel switches, which help prevent
bottlenecks of data in computer storage networks. While this holding,
and others discussed in this report, was 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.
* FUND SEEKS TO BENEFIT FROM WIRELESS AND SEMICONDUCTOR DEMAND
While the number of cell-phone users continues to skyrocket around the
world, another new trend has begun to benefit wireless companies --
accessing the Internet through cell phones and other mobile devices. It
is estimated that 500 million people worldwide will be using wireless
devices to access the Internet by 2003. Demand for cellular phones and
wireless data has contributed significantly to the growth of wireless
service providers and the companies that provide wireless systems and
equipment.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Cisco Systems, Inc.
Communications equipment
Intel Corp.
Electronics
Microsoft Corp.
Software
Sun Microsystems, Inc.
Computers
EMC Corp.
Computers
Nokia (ADR) (Finland)
Telecommunications
Oracle Corp.
Software
Nortel Networks Corp. (Canada)
Communications equipment
VERITAS Software Corp.
Software
SDL, Inc.
Electronics
Footnote reads:
These holdings represent 31.8% of the fund's net assets as of 7/31/00.
Portfolio holdings will vary over time.
Fund holding Aether Systems is a standout in the wireless industry. This
company's products allow people to use handheld devices for mobile data
communications and real-time transactions. Aether's TradeRunner product
is a real-time wireless trading and financial information service
offered to customers of Morgan Stanley Dean Witter Online. Aether has
used acquisitions to expand into other growth markets. For example,
OmniSky, a company formed by Aether and 3Com, is pursuing opportunities
in wireless e-mail and wireless Internet access.
They may not be as glamorous as other technology businesses, but
semiconductor companies offer extraordinary growth potential.
Semiconductors are the "guts" of countless technological devices, and
equipment suppliers are dependent on semiconductor chip makers to meet
the demands of businesses and consumers worldwide. Fund holding RF
Micro Devices has a wide array of products, including those that power
wireless devices such as Palm Pilots [REGISTRATION MARK] and cell
phones. The company offers more than 158 products, and has several
more in development. RF's clients include Nokia, NEC, and Motorola,
and more than half of its sales are from outside the United States.
* POSITIVE OUTLOOK, DRIVEN BY TECHNOLOGY DEMAND
As we begin the fund's first complete fiscal year, several factors
contribute to our positive outlook. Since the Federal Reserve Board has
raised short-term interest rates six times in the past year, the risk of
inflation becoming a major factor in the market has been reduced.
Businesses continue to invest heavily in technology equipment in a drive
to enhance productivity and remain competitive, and the outlook for the
companies in which the fund invests remains positive.
In addition, Putnam has the expertise and resources to capitalize on the
growth potential of technology stocks. We have more than 10 analysts
dedicated exclusively to this sector, and our investment professionals
meet with the management of more than 2,000 technology companies each
year. These resources, combined with the technology sector's growth
potential, should allow the fund to excel over the long term.
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 7/31/00, there is no guarantee the fund will
continue to hold these securities in the future. The fund's
concentration of investments in a single industry group involves more
risk than a fund that invests more broadly. Investments in small and
midsize companies involve increased risk of price fluctuations.
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A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss
for the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that
remain in the portfolio -- any change in unrealized gains or losses over
the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment income
ratios and portfolio turnover in one summary table, reflecting the five
most recent reporting periods. In a semiannual report, the highlight
table also includes the current reporting period. For open-end funds, a
separate table is provided for each share class.
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
July 31, 2000 (Unaudited)
COMMON STOCKS (93.7%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Biotechnology (1.7%)
-------------------------------------------------------------------------------------------------------------------
3,152 Genentech, Inc. (NON) $ 479,498
4,245 Medimmune, Inc. (NON) 252,578
2,106 Millennium Pharmaceuticals, Inc. (NON) 202,703
----------------
934,779
Broadcasting (1.4%)
-------------------------------------------------------------------------------------------------------------------
7,030 Clear Channel Communications, Inc. (NON) 535,598
1,756 Univision Communications, Inc. Class A (NON) 218,183
----------------
753,781
Cable Television (0.6%)
-------------------------------------------------------------------------------------------------------------------
14,490 AT&T Corp. - Liberty Media Group Class A (NON) 322,403
Communications Equipment (18.7%)
-------------------------------------------------------------------------------------------------------------------
9,027 ADC Telecommunications, Inc. (NON) 378,570
7,984 Advanced Fibre Communications (NON) 342,314
4,957 Brocade Communications Systems (NON) 885,444
51,417 Cisco Systems, Inc. (NON) 3,364,600
6,885 Comverse Technology, Inc. (NON) 604,159
3,209 Corning, Inc. 750,705
4,560 Extreme Networks, Inc. (NON) 636,761
5,226 Foundry Networks, Inc. (NON) 427,552
2,170 Juniper Networks, Inc. (NON) 309,089
13,982 Nortel Networks Corp. (Canada) 1,039,911
7,658 QUALCOMM, Inc. (NON) 497,291
3,293 Redback Networks, Inc. (NON) 428,090
2,160 Sonus Networks, Inc. (NON) 402,705
2,991 Tellabs, Inc. (NON) 194,415
----------------
10,261,606
Computers (14.1%)
-------------------------------------------------------------------------------------------------------------------
6,873 Apple Computer, Inc. (NON) 349,234
4,619 Ariba, Inc. (NON) 535,515
3,700 Avici systems, Inc. (NON) 363,988
4,900 Blue Martini Software, Inc. (NON) 291,244
3,100 Corvis Corp. (NON) 255,217
15,189 Dell Computer Corp. (NON) 667,367
16,380 EMC Corp. (NON) 1,394,348
6,102 Gateway, Inc. (NON) 336,754
2,175 Hewlett-Packard Co. 237,483
4,216 IBM Corp. 474,037
1,676 Inktomi Corp. (NON) 179,332
4,197 MMC Networks, Inc. (NON) 207,489
14,997 Sun Microsystems, Inc. (NON) 1,581,246
2,728 Sycamore Networks, Inc. (NON) 336,397
3,338 VeriSign, Inc. (NON) 529,699
----------------
7,739,350
Electronics (19.8%)
-------------------------------------------------------------------------------------------------------------------
7,763 Alpha Industries, Inc. (NON) 264,427
3,276 Applied Micro Circuits Corp. (NON) 488,943
11,696 ARM Holdings PLC (United Kingdom) (NON) 401,319
2,002 Broadcom Corp. (NON) 448,949
5,984 Chartered Semiconductor Manufacturing, Ltd
ADR (Singapore) (NON) 430,848
14,013 Cypress Semiconductor Corp. (NON) 522,860
3,658 Flextronics International, Ltd. (NON) 258,975
48,878 Intel Corp. 3,262,607
3,929 JDS Uniphase Corp. (NON) 464,113
7,589 Linear Technology Corp. 419,292
12,526 LSI Logic Corp. (NON) 424,318
7,465 Micron Technology, Inc. (NON) 608,398
1,928 PMC - Sierra, Inc. (NON) 373,671
2,959 Sanmina Corp. (NON) 274,817
2,612 SDL, Inc. (NON) 906,527
12,366 Taiwan Semiconductor Manufacturing Co.
ADR (Taiwan) (NON) 375,617
9,582 Texas Instruments, Inc. 562,344
5,360 Xilinx, Inc. (NON) 402,335
----------------
10,890,360
Entertainment (0.6%)
-------------------------------------------------------------------------------------------------------------------
4,963 Viacom, Inc. Class B (NON) 329,109
Medical Technology (1.1%)
-------------------------------------------------------------------------------------------------------------------
7,050 PE Corp. 614,672
Semiconductor (2.4%)
-------------------------------------------------------------------------------------------------------------------
5,504 Applied Materials, Inc. (NON) 417,616
11,696 LAM Research Corp. (NON) 342,108
4,734 RF Micro Devices, Inc. (NON) 356,825
3,710 Teradyne, Inc. (NON) 235,121
----------------
1,351,670
Software (21.3%)
-------------------------------------------------------------------------------------------------------------------
4,021 Agile Software Corp. (NON) 222,412
6,047 Amdocs Ltd. (NON) 406,283
7,841 BEA Systems, Inc. (NON) 337,653
2,211 Business Objects S.A. (France) (NON) 208,940
2,498 Check Point Software Technologies Ltd. (Israel) (NON) 289,768
5,677 I2 Technologies, Inc. (NON) 736,591
5,956 Informatica Corp. (NON) 476,480
6,030 Interwoven, Inc. (NON) 389,312
5,619 Mercury Interactive Corp. (NON) 557,774
3,247 Micromuse, Inc. (NON) 421,248
39,831 Microsoft Corp. (NON) 2,780,702
14,218 Oracle Corp. (NON) 1,069,016
7,604 Portal Software, Inc. (NON) 382,933
5,805 Rational Software Corp. (NON) 590,659
4,532 Siebel Systems, Inc. (NON) 657,140
3,989 Software.com, Inc. (NON) 402,390
9,812 VERITAS Software Corp. (NON) 1,000,211
11,438 Vignette Corp. (NON) 387,462
3,330 webMethods, Inc. (NON) 384,615
----------------
11,701,589
Technology Services (4.2%)
-------------------------------------------------------------------------------------------------------------------
2,535 Alteon Web Systems, Inc. (NON) 334,462
9,679 America Online, Inc. (NON) 516,012
5,004 Art Technology Group, Inc. (NON) 435,348
12,519 Electronic Data Systems Corp. 538,317
7,037 InfoSpace.com, Inc. (NON) 237,499
1,996 Yahoo! Inc. (NON) 256,860
----------------
2,318,498
Telecommunications (7.8%)
-------------------------------------------------------------------------------------------------------------------
2,690 Aether Systems, Inc. (NON) 447,717
20,432 McLeodUSA, Inc. Class A (NON) 346,067
15,788 Metromedia Fiber Network, Inc. Class A (NON) 554,554
5,811 Nextel Communications, Inc. Class A (NON) 325,053
9,896 Nextlink Communications, Inc. Class A (NON) 327,187
24,446 Nokia Oyj ADR (Finland) 1,083,255
8,770 Sprint Corp. (NON) 484,543
7,838 TyCom, Ltd. (Bermuda) (NON) 266,982
10,914 Vodaphone Group PLC (United Kingdom) 470,666
----------------
4,306,024
----------------
Total Common Stocks (cost $55,076,580) $ 51,523,841
CONVERTIBLE PREFERRED STOCKS (1.0%) (a) (cost $528,166)
NUMBER OF SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
122,060 Mimecom, Inc. zero % cv. pfd. (acquired 7/27/00,
cost $528,166) (RES) $ 528,166
SHORT-TERM INVESTMENTS (7.1%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$ 1,949,000 Interest in $600,000,000 joint repurchase agreement
dated July 31, 2000 with S.B.C. Warburg, Inc. due
August 1, 2000 with respect to various U.S. Treasury
obligations -- maturity value of $1,949,357 for an
effective yield of 6.59% $ 1,949,000
1,949,000 Interest in $625,000,000 joint repurchase agreement
dated July 31, 2000 with Morgan (J.P.) & Co. due
August 1, 2000 with respect to various U.S. Treasury
obligations -- maturity value of $1,949,356 for an
effective yield of 6.58% 1,949,000
----------------
Total Short-Term Investments (cost $3,898,000) $ 3,898,000
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $59,502,746) (b) $ 55,950,007
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $54,971,210.
(b) The aggregate identified cost on a tax basis is $59,502,746,
resulting in gross unrealized appreciation and depreciation of $781,827
and $4,334,566, respectively, or net unrealized depreciation of
$3,552,739.
(NON) Non-income-producing security.
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at July 31, 2000 was
$528,166 or 1.0% of net assets.
ADR after the name of a foreign holding stands for American
Depositary Receipts representing ownership of foreign securities on
deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2000 (Unaudited)
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $59,502,746) (Note 1) $55,950,007
-------------------------------------------------------------------------------------------
Cash 1,186,148
-------------------------------------------------------------------------------------------
Dividends and interest receivable 176
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 10,005,851
-------------------------------------------------------------------------------------------
Receivable for securities sold 69,289
-------------------------------------------------------------------------------------------
Total assets 67,211,471
Liabilities
-------------------------------------------------------------------------------------------
Payable for securities purchased 11,862,988
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 322,387
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 16,646
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 3,024
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 28
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 19
-------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 7,901
-------------------------------------------------------------------------------------------
Other accrued expenses 27,268
-------------------------------------------------------------------------------------------
Total liabilities 12,240,261
-------------------------------------------------------------------------------------------
Net assets $54,971,210
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $58,629,183
-------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (44,971)
-------------------------------------------------------------------------------------------
Accumulated net realized loss on investment (Note 1) (60,263)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (3,552,739)
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $54,971,210
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($29,821,004 divided by 3,373,658 shares) $8.84
-------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $8.84)* $9.38
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class B share
($20,417,373 divided by 2,312,358 shares) ** $8.83
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class C share
($3,002,331 divided by 339,975 shares) ** $8.83
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($1,730,502 divided by 195,900 shares) $8.83
-------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $8.83)* $9.15
-------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000
or more and group sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the period June 14, 2000 (commencement of operations)
to July 31, 2000 (Unaudited)
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Dividends $ 236
-------------------------------------------------------------------------------------------
Interest 17,005
-------------------------------------------------------------------------------------------
Total investment income 17,241
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 18,272
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 3,127
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 303
-------------------------------------------------------------------------------------------
Administrative services 74
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,791
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 4,842
-------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 841
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 427
-------------------------------------------------------------------------------------------
Reports to shareholders 9,377
-------------------------------------------------------------------------------------------
Registration fees 15,487
-------------------------------------------------------------------------------------------
Auditing 6,425
-------------------------------------------------------------------------------------------
Other 1,340
-------------------------------------------------------------------------------------------
Total expenses 62,306
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (94)
-------------------------------------------------------------------------------------------
Net expenses 62,212
-------------------------------------------------------------------------------------------
Net investment loss (44,971)
-------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (60,263)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (3,552,739)
-------------------------------------------------------------------------------------------
Net loss on investments (3,613,002)
-------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(3,657,973)
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the period
June 14, 2000
(commencement of
operations)
to July 31, 2000*
---------------------------------------------------------------------------------
<S> <C>
Increase in net assets
---------------------------------------------------------------------------------
Operations:
---------------------------------------------------------------------------------
Net investment loss $ (44,971)
---------------------------------------------------------------------------------
Net realized loss on investments (60,263)
---------------------------------------------------------------------------------
Net unrealized depreciation of investments (3,552,739)
---------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (3,657,973)
---------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 55,629,183
---------------------------------------------------------------------------------
Total increase in net assets 51,971,210
Net assets
---------------------------------------------------------------------------------
Beginning of period (Note 5) 3,000,000
---------------------------------------------------------------------------------
End of period (including accumulated net investment
loss of $44,971) $54,971,210
---------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS A
--------------------------------------------
For the period
June 14, 2000+
Per-share to July 31
operating performance (Unaudited)
--------------------------------------------
2000
--------------------------------------------
<S> <C>
Net asset value,
beginning of period $8.50
--------------------------------------------
Investment operations
--------------------------------------------
Net investment loss (c) (.02)
--------------------------------------------
Net realized and unrealized
gain on investments .36
--------------------------------------------
Total from
investment operations .34
--------------------------------------------
Net asset value,
end of period $8.84
--------------------------------------------
Ratios and supplemental data
--------------------------------------------
Total return at
net asset value (%)(a) 4.00*
--------------------------------------------
Net assets, end of period
(in thousands) $29,821
--------------------------------------------
Ratio of expenses to
average net assets (%)(b) .44*
--------------------------------------------
Ratio of net investment income
to average net assets (%) (.30)*
--------------------------------------------
Portfolio turnover (%) 3.09*
--------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS B
--------------------------------------------
For the period
June 14, 2000+
Per-share to July 31
operating performance (Unaudited)
--------------------------------------------
2000
--------------------------------------------
<S> <C>
Net asset value,
beginning of period $8.50
--------------------------------------------
Investment operations
--------------------------------------------
Net investment loss (c) (.03)
--------------------------------------------
Net realized and unrealized
gain on investments .36
--------------------------------------------
Total from
investment operations .33
--------------------------------------------
Net asset value,
end of period $8.83
--------------------------------------------
Ratios and supplemental data
--------------------------------------------
Total return at
net asset value (%)(a) 3.88*
--------------------------------------------
Net assets, end of period
(in thousands) $20,417
--------------------------------------------
Ratio of expenses to
average net assets (%)(b) .45*
--------------------------------------------
Ratio of net investment loss
to average net assets (%) (.32)*
--------------------------------------------
Portfolio turnover (%) 3.09*
--------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS C
--------------------------------------------
For the period
June 14, 2000+
Per-share to July 31
operating performance (Unaudited)
--------------------------------------------
2000
--------------------------------------------
<S> <C>
Net asset value,
beginning of period $8.50
--------------------------------------------
Investment operations
--------------------------------------------
Net investment loss (c) (.03)
--------------------------------------------
Net realized and unrealized
gain on investments .36
--------------------------------------------
Total from
investment operations .33
--------------------------------------------
Net asset value,
end of period $8.83
--------------------------------------------
Ratios and supplemental data
--------------------------------------------
Total return at
net asset value (%)(a) 3.88*
--------------------------------------------
Net assets, end of period
(in thousands) $3,002
--------------------------------------------
Ratio of expenses to
average net assets (%)(b) .45*
--------------------------------------------
Ratio of net investment loss
to average net assets (%) (.34)*
--------------------------------------------
Portfolio turnover (%) 3.09*
--------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS M
--------------------------------------------
For the period
June 14, 2000+
Per-share to July 31
operating performance (Unaudited)
--------------------------------------------
2000
--------------------------------------------
<S> <C>
Net asset value,
beginning of period $8.50
--------------------------------------------
Investment operations
--------------------------------------------
Net investment loss (c) (.03)
--------------------------------------------
Net realized and unrealized
gain on investments .36
--------------------------------------------
Total from
investment operations .33
--------------------------------------------
Net asset value,
end of period $8.83
--------------------------------------------
Ratios and supplemental data
--------------------------------------------
Total return at
net asset value (%)(a) 3.88*
--------------------------------------------
Net assets, end of period
(in thousands) $1,731
--------------------------------------------
Ratio of expenses to
average net assets (%)(b) .44*
--------------------------------------------
Ratio of net investment loss
to average net assets (%) (.34)*
--------------------------------------------
Portfolio turnover (%) 3.09*
--------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
July 31, 2000 (Unaudited)
Note 1
Significant accounting policies
Putnam Technology Fund (the "fund") is one of a series of Putnam Funds
Trust (the "trust") which is registered under the Investment Company Act
of 1940, as amended, as a non-diversified, open-end management
investment company. The fund invests mainly in common stock of U. S.
companies in technology industries that Putnam Investments Management,
Inc. ("Putnam Management"), the fund's manager, a wholly-owned
subsidiary of Putnam Investments, Inc. believes offer the opportunity
for gains.
The fund offers class A, class B, class C, and class M shares. Class B,
class C, and class M shares were open to public investment on July 17,
2000. Class A shares are sold with a maximum front-end sales charge of
5.75%. Class B shares, which convert to class A shares after
approximately eight years, do not pay a front-end sales charge but pay a
higher ongoing distribution fee than class A shares, and are subject to
a contingent deferred sales charge, if those shares are redeemed within
six years of purchase. Class C shares are subject to the same fees and
expenses as class B shares, except that class C shares have a one-year
1.00% contingent deferred sales charge and do not convert to class A
shares. Class M shares are sold with a maximum front end sales charge of
3.50% and pay an ongoing distribution fee that is higher than class A
shares but lower than class B and class C shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if that fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sales price on its principal exchange, or if no sales
are reported -- as in the case of some securities traded
over-the-counter -- the last reported bid price. Securities quoted in
foreign currencies are translated into U.S. dollars at the current
exchange rate. Short-term investments having remaining maturities of 60
days or less are stated at amortized cost, which approximates market
value. Other investments, including restricted securities, are stated at
fair 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
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). Gains or losses on securities sold are determined
on the identified cost basis. Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date except that
certain dividends from foreign securities are recorded as soon as the
fund is informed of the ex-dividend date. Non-cash dividends, if any,
are recorded at the fair market value of the securities received.
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
July 31, 2000, 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.
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. 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.
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: 1.00% of the
first $500 million of average net assets, 0.90% of the next $500
million, 0.85% of the next $500 million, 0.80% of the next $5 billion
and 0.775% of the next $5 billion, 0.755% of the next $5 billion, 0.74%
of the next $5 billion and 0.73% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
For the period ended July 31, 2000, fund expenses were reduced by $94
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 Trustees
meeting attended. 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
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 a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B, class C and class M shares pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Retail Management, Inc., a wholly-owned subsidiary of
Putnam Investments Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plans provide for payments by
the fund to Putnam Retail Management, Inc. at an annual rate up to
0.35%, 1.00%, 1.00% and 1.00% of the average net assets attributable to
class A, class B, class C and class M shares, respectively. The Trustees
have approved payment by the fund at an annual rate of 0.25%, 1.00%,
1.00% and 0.75% of the average net assets attributable to class A, class
B, class C and class M shares, respectively.
For the period ended July 31, 2000, Putnam Retail Management, Inc.,
acting as underwriter received net commissions of $87,167 and $918 from
the sale of class A and class M shares, respectively, and received $--
and $2 in contingent deferred sales charges from redemptions of class B
and class C shares, respectively. A deferred sales charge of up to 1% is
assessed on certain redemptions of class A shares. For the year ended
July 31, 2000, Putnam Retail Management, Inc., acting as underwriter
received no monies on class A redemptions.
Note 3
Purchases and sales of securities
During the period ended July 31, 2000, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $56,746,357 and $1,081,346, respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Capital shares
At July 31, 2000, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
For the period June 14, 2000
(commencement of operations) to
July 31, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 3,347,954 $31,691,652
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
3,347,954 $31,691,652
Shares
repurchased (62,531) (562,488)
---------------------------------------------------------------------------
Net increase 3,285,423 $31,129,164
---------------------------------------------------------------------------
For the period June 14, 2000
(commencement of operations)
to July 31, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 2,242,781 $21,247,406
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
2,242,781 $21,247,406
Shares
repurchased (18,658) (169,829)
---------------------------------------------------------------------------
Net increase 2,224,123 $21,077,577
---------------------------------------------------------------------------
For the period June 14, 2000
(commencement of operations)
to July 31, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 253,583 $2,405,616
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
253,583 $2,405,616
Shares repurchased (1,843) (16,074)
---------------------------------------------------------------------------
Net increase 251,740 $2,389,542
---------------------------------------------------------------------------
For the period June 14, 2000
(commencement of operations) to
July 31, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 107,665 $1,032,900
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
107,665 $1,032,900
Shares
repurchased -- --
---------------------------------------------------------------------------
Net increase 107,665 $1,032,900
---------------------------------------------------------------------------
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 June 14, 2000, the fund
had no operations other than those related to organizational matters,
including the initial capital contribution of $750,000, $750,000,
$750,000, and $750,000 for class A, class B, class C and class M shares
respectively, and the issuance of 88,235 shares for each class to Putnam
Investments, Inc. on June 14, 2000.
At July 31, 2000, Putnam Investments, Inc. owned the following shares:
Fund/Class Shares % Ownership Market Value
---------------------------------------------------------------------------
A 88,235 2.6% $779,997
B 88,235 4.2% 779,115
C 88,235 29.1% 779,115
M 88,235 45.8% 779,115
OUR COMMITMENT TO QUALITY SERVICE
* CHOOSE AWARD-WINNING SERVICE
Putnam has won the DALBAR Award for Service nine times in the past ten
years and has won the Intermediary Service Award for advisors all three
years in which it has been given.*
* HELP YOUR INVESTMENTS GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings
account.+
* SWITCH FUNDS EASILY
Within the same class of shares, you can move money from one account to
another without a service charge. (This privilege is subject to change
or termination.)
* ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at
the then-current net asset value, which may be more or less than the
original cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a
helpful Putnam representative. To learn more about Putnam, visit our Web
site.
www.putnaminvestments.com
To make an additional investment in this or any other Putnam fund,
contact your financial advisor or call our toll-free number.
1-800-225-1581
*DALBAR, Inc., an independent research firm, presents the awards to financial
services firms that provide consistently excellent service.
+Regular investing, of course, does not guarantee a profit or protect against
a loss in a declining market.
THE PUTNAM FAMILY OF FUNDS
The following is a complete list of Putnam's open-end mutual funds.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Century Growth Fund
New Opportunities Fund
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Technology Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Fund
Balanced Retirement Fund
Classic Equity Fund *
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund **
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK] **
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Growth and Income Fund II
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
Check your account balances and current performance at
www.putnaminvestments.com.
FUND INFORMATION
WEB SITE
www.putnaminvestments.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
John A. Hill, 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
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
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
Stephen Oristaglio
Vice President
C. Beth Cotner
Vice President
David J. Santos
Vice President and Fund Manager
Saba S. Malak
Vice President and Fund Manager
Paul Marrkand
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam Technology
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 and
Putnam Quarterly Ranking 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:
www.putnaminvestments.com.
Not FDIC Insured, May Lose Value, No Bank Guarantee
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
---------------------
PRST STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
SA073 63674 2SG 9/00
Putnam
International
Fund 2000
SEMIANNUAL REPORT ON PERFORMANCE AND PORTFOLIO
7-31-00
[SCALE LOGO OMITTED]
The following report contains a list of your fund's portfolio holdings
and complete financial statements for the six months ended 7/31/00.
Additional details, including fund strategy, performance, and managers'
outlook, will be provided in the annual report, which will cover the 12
months ended 1/31/01.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss
for the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that
remain in the portfolio -- any change in unrealized gains or losses over
the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment income
ratios and portfolio turnover in one summary table, reflecting the five
most recent reporting periods. In a semiannual report, the highlight
table also includes the current reporting period. For open-end funds, a
separate table is provided for each share class.
THE FUND'S PORTFOLIO
July 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (92.1%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Canada (7.0%)
-------------------------------------------------------------------------------------------------------------------
1,097 Four Seasons Hotels, Inc. $ 77,170
1,159 Nortel Networks Corp. 85,628
1,224 Seagram Co., Ltd. 68,621
----------------
231,419
Finland (2.7%)
-------------------------------------------------------------------------------------------------------------------
1,978 Nokia Oyj AB Class A 87,608
France (13.3%)
-------------------------------------------------------------------------------------------------------------------
1,138 Aventis S.A. 87,608
1,380 Bouygues S.A. 84,952
4,482 Havas Advertising S.A. 101,519
1,114 Total Fina Elf S.A. Class B 165,018
100 Wanadoo S.A. 144A 1,769
----------------
440,866
Germany (6.2%)
-------------------------------------------------------------------------------------------------------------------
230 Allianz AG (NON) 86,294
835 Prosieben Media AG 117,965
----------------
204,259
Ireland (3.9%)
-------------------------------------------------------------------------------------------------------------------
2,429 Elan Corp. PLC ADR (NON) 129,800
Japan (8.6%)
-------------------------------------------------------------------------------------------------------------------
2,000 Fujitsu Ltd. (NON) 56,230
6,500 NEC Corp. 173,254
7,000 Nikko Securities Co., Ltd. 53,610
----------------
283,094
Korea (3.3%)
-------------------------------------------------------------------------------------------------------------------
766 Samsung Electric GDR 109,538
Netherlands (10.7%)
-------------------------------------------------------------------------------------------------------------------
2,483 Internationale Nederlanden Groep (ING) 165,940
2,883 Philips Electronics N.V. 130,549
2,264 United Pan-Europe N.V. (NON) 57,678
----------------
354,167
Spain (3.9%)
-------------------------------------------------------------------------------------------------------------------
4,734 Telefonica Publicidad e Informacion S.A. 42,102
4,112 Telefonica S.A. 86,472
----------------
128,574
Sweden (2.1%)
-------------------------------------------------------------------------------------------------------------------
10,575 Enea Data AB 68,631
Switzerland (12.1%)
-------------------------------------------------------------------------------------------------------------------
40 Compagnie Financiere Richemont AG 109,307
27 Nestle S.A. 56,259
97 Serono S.A. Class B 102,714
94 Swatch Group AG (The) 131,759
----------------
400,039
United Kingdom (18.3%)
-------------------------------------------------------------------------------------------------------------------
1,500 Carphone Warehouse Group PLC 144A 4,088
10,038 Granada Compass PLC (NON) 123,253
10,036 HIT Entertainment PLC 59,360
8,419 Misys PLC 78,161
6,650 Sage Group (The) PLC 55,664
64,276 Vodafone Group PLC 283,928
----------------
604,454
----------------
Total Common Stocks (cost $2,944,615) $ 3,042,449
UNITS (2.9%) (a) (cost $121,950)
NUMBER OF UNITS VALUE
-------------------------------------------------------------------------------------------------------------------
180 Nippon Television Network Corp. Structured Warrants
(Issued by Merrill Lynch International & Co. C.V.
Exp. 6/28/01) (Japan) $ 97,432
SHORT-TERM INVESTMENTS (5.4%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$89,000 Interest in $625,000,000 joint repurchase agreement
dated July 31, 2000 with Morgan (J.P.) & Co., Inc.
due August 1, 2000 with respect to various
U.S. Treasury obligations -- maturity value of
$89,016 for an effective yield of 6.58% $ 89,000
89,000 Interest in $600,000,000 joint repurchase agreement
dated July 31, 2000 with S.B.C. Warburg, Inc. due
August 1, 2000 with respect to various U.S. Treasury
obligations -- maturity value of $89,016 for an
effective yield of 6.59% 89,000
----------------
Total Short-Term Investments (cost $178,000) $ 178,000
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $3,244,565) (b) $ 3,317,881
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $3,303,269.
(b) The aggregate identified cost on a tax basis is $3,244,565, resulting in gross unrealized appreciation and
depreciation of $198,080 and $124,764, respectively, or net unrealized appreciation of $73,316.
(NON) Non-income-producing security.
144A after the name of a security represents those exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified
institutional buyers.
ADR or GDR after the name of a foreign holding stands for American Depositary Receipts or Global Depositary
Receipts, respectively, representing ownership of foreign securities on deposit with a domestic
custodian bank.
The fund had the following industry group concentrations greater than 10% at July 31, 2000 (as a percentage
of net assets):
Telecommunications 10.4%
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2000 (Unaudited)
Assets
-------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value
(identified cost $3,244,565) (Note 1) $3,317,881
-------------------------------------------------------------------------------------------
Cash 638
-------------------------------------------------------------------------------------------
Dividends, interest and other receivables 2,846
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 100
-------------------------------------------------------------------------------------------
Receivable from Manager (Note 2) 5,484
-------------------------------------------------------------------------------------------
Total assets 3,326,949
Liabilities
-------------------------------------------------------------------------------------------
Payable for securities purchased 12,160
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 167
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 538
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 28
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 3
-------------------------------------------------------------------------------------------
Other accrued expenses 10,784
-------------------------------------------------------------------------------------------
Total liabilities 23,680
-------------------------------------------------------------------------------------------
Net assets $3,303,269
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $3,176,973
-------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 4,788
-------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 48,211
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 73,297
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $3,303,269
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($3,303,269 divided by 372,805 shares) $8.86
-------------------------------------------------------------------------------------------
Offering price per class A share (100/96.75 of $8.86)* $9.16
-------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and group sales,
the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Period from May 30, 2000 (commencement of operations) to July 31, 2000 (Unaudited)
Investment income:
-------------------------------------------------------------------------------------------
<S> <C>
Interest $ 7,596
-------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $789) 6,128
-------------------------------------------------------------------------------------------
Total investment income 13,724
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 5,720
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,050
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 303
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 13
-------------------------------------------------------------------------------------------
Reports to shareholders 2,570
-------------------------------------------------------------------------------------------
Registration fees 839
-------------------------------------------------------------------------------------------
Auditing 6,175
-------------------------------------------------------------------------------------------
Legal 1,205
-------------------------------------------------------------------------------------------
Other 95
-------------------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 2) (8,533)
-------------------------------------------------------------------------------------------
Total expenses 9,437
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (501)
-------------------------------------------------------------------------------------------
Net expenses 8,936
-------------------------------------------------------------------------------------------
Net investment income 4,788
-------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 48,211
-------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities
in foreign currencies during the period (19)
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 73,316
-------------------------------------------------------------------------------------------
Net gain on investments 121,508
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $126,296
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the period May 30, 2000
(commencement of operations)
to July 31, 2000*
--------------------------------------------------------------------------------------------------
<S> <C>
Increase in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 4,788
--------------------------------------------------------------------------------------------------
Net realized gain on investments 48,211
--------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 73,297
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 126,296
--------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 176,973
--------------------------------------------------------------------------------------------------
Total increase in net assets 303,269
Net assets
--------------------------------------------------------------------------------------------------
Beginning of period (Note 5) 3,000,000
--------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income of $4,788) $3,303,269
--------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
--------------------------------------------
For the period
May 30, 2000+
Per-share to July 31
operating performance (Unaudited)
--------------------------------------------
2000
--------------------------------------------
<S> <C>
Net asset value,
beginning of period $8.50
--------------------------------------------
Investment operations
--------------------------------------------
Net investment income (b)(d) .01
--------------------------------------------
Net realized and unrealized
gain on investments .35
--------------------------------------------
Total from
investment operations .36
--------------------------------------------
Net asset value,
end of period $8.86
--------------------------------------------
Ratios and supplemental data
--------------------------------------------
Total return at
market value (%)(a) 4.24*
--------------------------------------------
Net assets, end of period
(in thousands) $3,303
--------------------------------------------
Ratio of expenses to
average net assets (%)(b)(c) .28*
--------------------------------------------
Ratio of net investment income
to average net assets (%)(b) .14*
--------------------------------------------
Portfolio turnover (%) 23.56*
--------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses of the fund reflect a reduction of
$0.02 per share (Note 2).
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
July 31, 2000 (Unaudited)
Note 1
Significant accounting policies
Putnam International Fund 2000 (the "fund") is one of a series of Putnam
Funds Trust (the "trust") which is registered under the Investment
Company Act of 1940, as amended, as a non-diversified, open-ended
management investment company. The fund seeks long-term capital
appreciation by investing mainly in common stocks of companies outside
the United States which Putnam Investments Management, Inc. ("Putnam
Management"), the fund's manager, a wholly-owned subsidiary of Putnam
Investments, Inc. believes are currently undervalued.
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 of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sales price on its principal exchange, or if no sales
are reported -- as in the case of some securities traded
over-the-counter -- the last reported bid price.
Securities quoted in foreign currencies are translated into U.S. dollars
at the current exchange rate. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost, which
approximates market value.
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). Gains or losses on securities sold are determined
on the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date. Non cash dividends, if any, are recorded at the fair
market value of the securities received.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such gains and losses are included with the net
realized and unrealized gain or loss on investments. Net realized gains
and losses on foreign currency transactions represent net realized
exchange gains or losses on closed forward currency contracts,
disposition of foreign currencies and the difference between the amount
of investment income and foreign withholding taxes recorded on the
fund's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized appreciation and depreciation of assets and
liabilities in foreign currencies arise from changes in the value of
open forward currency contracts and assets and liabilities other than
investments at the period end, resulting from changes in the exchange
rate. Investments in foreign securities involve certain risks, including
those related to economic instability, unfavorable political
developments, and currency fluctuations, not present with domestic
investments.
F) 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
July 31, 2000, the fund had no borrowings against the line of credit.
G) 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.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. Reclassifications are made to the fund's capital accounts to
reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations.
I) 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 monthly based on the average net assets of the
fund. Such fee is based on the following annual rates: 1.00% of the
first $500 million of average net assets, 0.90% of the next $500
million, 0.85% of the next $500 million, 0.80% of the next $5 billion,
0.775% of the next $5 billion, 0.755% of the next $5 billion, 0.74% of
the next $5 billion and 0.73% thereafter.
Putnam Management has agreed to limit its compensation (and, to the
extent necessary, bear other expenses) through January 31, 2001, to the
extent that expenses of the fund (exclusive of brokerage commissions,
interest, taxes, deferred organizational and extraordinary expense,
credits from Putnam Fiduciary Trust Company (PFTC), a subsidiary of
Putnam Investments, Inc. and payments under the Trust's distribution
plan) would exceed an annual rate of 1.65% 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 July 31, 2000, fund expenses were reduced by $501
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 Trustees
meeting attended. 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
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 a 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 Retail Management, Inc., 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 Retail Management, Inc. at an
annual rate of up to 0.35% of the fund's average net assets. The
Trustees currently have not approved payments pursuant to the plan.
For the period ended July 31, 2000, Putnam Retail Management, Inc.,
acting as underwriter received no net commissions from the sale of
shares. A deferred sales charge of up to 1% is assessed on certain
redemptions of shares. For the period ended July 31, 2000, Putnam Retail
Management, Inc., acting as underwriter received no monies on
redemptions.
Note 3
Purchases and sales of securities
During the period ended July 31, 2000, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $3,750,380 and $732,026, respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Capital shares
At July 31, 2000, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
For the period May 30, 2000
(commencement of operations) to
July 31, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 19,966 $177,907
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
19,966 177,907
Shares repurchased (102) (934)
---------------------------------------------------------------------------
Net increase 19,864 $176,973
---------------------------------------------------------------------------
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 30, 2000, the fund
had no operations other than those related to organizational matters,
including the initial capital contribution of $3,000,000 and the
issuance of 352,941 shares to Putnam Retail Management, Inc., a wholly-
owned subsidiary of Putnam Investments, Inc. on May 30, 2000.
At July 31, 2000, Putnam Investments, Inc. owned 352,941 shares of the
fund (94.7% of shares outstanding), valued at $3,127,057.
FUND INFORMATION
WEB SITE
www.putnaminvestments.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
John A. Hill, 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
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
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
Omid Kamshad
Vice President and Fund Manager
Paul C. Warren
Vice President and Fund Manager
Joshua L. Byrne
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam
International Fund 2000. 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
and Putnam Quarterly Ranking 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:
www.putnaminvestments.com.
Not FDIC Insured, May Lose Value, No Bank Guarantee
63672 2SL 9/00
