Putnam
Equity
Fund 98
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
12-31-99
[LOGO: BOSTON * LONDON * TOKYO]
The following report contains a list of your fund's portfolio holdings and
complete financial statements for the six months ended 12/31/99.
Additional details, including fund strategy, performance, and managers'
outlook, will be provided in the annual report, which will cover the 12
months ended 6/30/00.
<TABLE>
<CAPTION>
The fund's portfolio
December 31, 1999 (Unaudited)
COMMON STOCKS (99.0%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Advertising (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
5,000 FreeShop.com, Inc. (NON) $ 240,000
2,100 Interep National Radio Sales, Inc. (NON) 28,088
-------------
268,088
Broadcasting (6.9%)
- --------------------------------------------------------------------------------------------------------------------------
5,200 Acme Communications, Inc. (NON) 172,900
2,400 Citadel Communications Corp. (NON) 155,700
6,500 Cumulus Media, Inc. Class A (NON) 329,875
2,000 Pegasus Communications Corp. (NON) 195,500
7,500 Pinnacle Holdings, Inc. (NON) 317,813
3,000 Radio One, Inc. (NON) 276,000
300 Wink Communications, Inc. (NON) 18,019
-------------
1,465,807
Building and Construction (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
2,700 Insituform Technologies, Inc. (NON) 76,275
Business Services (10.4%)
- --------------------------------------------------------------------------------------------------------------------------
3,000 About.com, Inc. (NON) 269,250
10,000 Braun Consulting, Inc. (NON) 715,000
3,600 Daisytek International Corp. (NON) 83,925
2,700 Loislaw.com, Inc. (NON) 105,638
1,800 Macrovision Corp. (NON) 133,200
3,600 Management Network Group, Inc. (The) (NON) 117,450
9,000 Precision Response Corp. (NON) 218,250
3,700 ProBusiness Services, Inc. (NON) 133,200
3,900 RoweCom, Inc. (NON) 176,963
6,000 U.S. Interactive, Inc. (NON) 258,000
-------------
2,210,876
Cellular Communications (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
4,400 Airgate PCS, Inc. (NON) 232,100
6,300 Price Communications Corp. (NON) 175,219
-------------
407,319
Computer Services and Software (38.6%)
- --------------------------------------------------------------------------------------------------------------------------
1,100 Allaire Corp.(NON) 160,944
5,300 Aware, Inc. (NON) 192,788
7,500 BackWeb Technologies Ltd. (Israel) (NON) 315,938
3,700 Be Free, Inc. (NON) 265,938
7,000 Brio Technology, Inc. (NON) 294,000
3,800 C-Bridge Internet Solutions, Inc. (NON) 184,775
1,400 Cysive, Inc. (NON) 100,888
1,600 Digimarc Corp. (NON) 80,000
12,000 Diversinet Corp. (NON) 264,000
11,000 DSET Corp. (NON) 411,125
5,000 EarthWeb, Inc. (NON) 251,563
8,000 E-Stamp Corp. (NON) 178,000
200 eGain Communications Corp. (NON) 7,550
2,800 Exchange Applications, Inc. (NON) 156,450
2,900 Harris Interactive, Inc. (NON) 37,881
2,100 Informatica Corp. (NON) 223,388
3,100 iGo Corp. (NON) 28,094
7,000 Inso Corp. (NON) 225,750
1,700 InterVU, Inc. (NON) 178,500
800 Keynote Systems, Inc. (NON) 59,000
3,100 McAfee.com Corp. (NON) 139,500
1,500 Micromuse, Inc. (NON) 255,000
10,000 Navidec, Inc. (NON) 120,000
5,700 Netegrity, Inc. (NON) 324,544
100 OnDisplay, Inc. (NON) 9,088
15,000 Online Resources & Communications Corp. (NON) 249,375
20,000 ON Technology Corp. (NON) 277,500
3,400 Predictive Systems, Inc. (NON) 222,700
4,000 Proxicom, Inc. (NON) 497,250
3,525 Razorfish, Inc. (NON) 335,316
14,000 SAGA Systems, Inc. (NON) 279,125
3,000 Silknet Software, Inc. (NON) 497,250
2,100 SilverStream Software, Inc. (NON) 249,900
4,800 Technology Solutions Co. (NON) 157,200
6,000 Verity, Inc. (NON) 255,375
300 Viant Corp. (NON) 29,700
3,000 Worldgate Communications, Inc. (NON) 142,688
7,500 Yesmail.com, Inc. (NON) 253,594
17,500 Zamba Corp. (NON) 304,063
-------------
8,215,740
Education (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
15,000 ProsoftTraining.com (NON) 155,625
13,500 Student Advantage, Inc. (NON) 299,531
-------------
455,156
Electric Utilities (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
7,000 Independent Energy Holdings Plc (United Kingdom) (NON) 233,188
Electronics and Electrical Equipment (11.3%)
- --------------------------------------------------------------------------------------------------------------------------
13,000 Act Manufacturing, Inc. (NON) 487,500
12,000 California Amplifier, Inc. (NON) 315,750
2,600 Exar Corp. (NON) 153,075
5,000 Helix Technology Corp. 224,063
11,000 LTX Corp. (NON) 246,125
16,000 Nanometrics, Inc. (NON) 322,000
1,500 PRI Automation, Inc. (NON) 100,688
2,700 Rudolph Technologies, Inc. (NON) 90,450
5,000 Ultimate Electronics, Inc. (NON) 123,750
2,000 Veeco Instruments, Inc. (NON) 93,625
12,700 Zygo Corp. (NON) 255,575
-------------
2,412,601
Food and Beverages (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
15,000 Gum Tech International, Inc. (NON) 240,000
Health Care (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
2,100 Accredo Health, Inc. (NON) 64,575
12,000 LifePoint Hospitals, Inc. (NON) 141,750
3,400 Province Healthcare Co. (NON) 64,600
-------------
270,925
Health Care Information Systems (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
7,100 Allscripts, Inc. (NON) 312,400
400 eBenX, Inc. (NON) 18,100
-------------
330,500
Medical Supplies and Devices (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
2,000 ArthroCare Corp. (NON) 122,000
10,000 ChromaVision Medical Systems, Inc. (NON) 152,500
2,500 ResMed, Inc. (NON) 104,375
-------------
378,875
Pharmaceuticals and Biotechnology (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
3,200 Invitrogen Corp. (NON) 192,000
4,600 Neurocrine Biosciences, Inc. (NON) 113,850
2,900 Priority Healthcare Corp. Class B (NON) 83,919
-------------
389,769
Restaurants (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,780 P.F. Chang's China Bistro, Inc. (NON) 44,278
Retail (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
8,000 Factory 2-U Stores, Inc. (NON) 227,000
6,000 Fatbrain.com, Inc. (NON) 150,375
75,000 Hanover Direct, Inc. (NON) 271,875
2,300 REX Stores Corp. (NON) 80,500
-------------
729,750
Semiconductors (7.4%)
- --------------------------------------------------------------------------------------------------------------------------
1,100 Alpha Industries, Inc. (NON) 63,044
2,600 ANADIGICS, Inc. (NON) 122,688
3,600 Emulex Corp. (NON) 405,000
4,700 Maker Communications, Inc. (NON) 200,925
2,800 Power Integrations, Inc. (NON) 134,225
100 Silicon Image, Inc. (NON) 7,006
5,300 Sipex Corp. (NON) 130,181
2,700 TriQuint Semiconductor, Inc. (NON) 300,375
4,000 Zoran Corp. (NON) 223,000
-------------
1,586,444
Specialty Consumer Products (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
4,000 Meade Instruments Corp. (NON) 114,000
Telecommunications (5.9%)
- --------------------------------------------------------------------------------------------------------------------------
700 Aether Systems, Inc. (NON) 50,138
5,000 Anaren Microwave, Inc. (NON) 270,625
700 GlobeSpan, Inc. (NON) 45,588
4,000 Lightbridge, Inc. (NON) 111,000
3,400 Natural Microsystems Corp. (NON) 159,163
3,000 Proxim, Inc. (NON) 330,000
10,000 Somera Communications, Inc. (NON) 124,375
5,800 Spectrian Corp. (NON) 163,851
-------------
1,254,740
-------------
Total Common Stocks (cost $11,829,478) $ 21,084,331
SHORT-TERM INVESTMENTS (3.0%) (a) (cost $642,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$642,000 Interest in $624,736,000 joint repurchase agreement dated
December 31, 1999 with S.B.C. Warburg Inc. due
January 3, 2000 with respect to various U.S. Treasury
obligations -- maturity value of $642,147 for an effective
yield of 2.75% $ 642,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $12,471,478) (b) $ 21,726,331
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $21,301,758.
(b) The aggregate identified cost on a tax basis is $12,486,101, resulting in gross unrealized appreciation and
depreciation of $9,443,569 and $203,339, respectively, or net unrealized appreciation of $9,240,230.
(NON) Non-income-producing security.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
December 31, 1999 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $12,471,478) (Note 1) $21,726,331
- -----------------------------------------------------------------------------------------------
Cash 62,925
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 22,791
- -----------------------------------------------------------------------------------------------
Dividend, interest and other receivables 147
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 13,359
- -----------------------------------------------------------------------------------------------
Total assets 21,825,553
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 472,719
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 22,097
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 9,155
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 1,102
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 10
- -----------------------------------------------------------------------------------------------
Other accrued expenses 18,712
- -----------------------------------------------------------------------------------------------
Total liabilities 523,795
- -----------------------------------------------------------------------------------------------
Net assets $21,301,758
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $10,512,595
- -----------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (73,858)
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 1,608,168
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 9,254,853
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $21,301,758
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($21,301,758 divided by 825,123 shares) $25.82
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $25.82)* $27.40
- -----------------------------------------------------------------------------------------------
* On single retial sales of less than $50,000. On sales of $50,000 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
Six months ended December 31, 1999 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Interest $ 5,902
- -----------------------------------------------------------------------------------------------
Dividends 1,405
- -----------------------------------------------------------------------------------------------
Total investment income 7,307
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 64,405
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 21,406
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 1,148
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 20
- -----------------------------------------------------------------------------------------------
Reports to shareholders 2,270
- -----------------------------------------------------------------------------------------------
Registration fees 1,162
- -----------------------------------------------------------------------------------------------
Auditing 17,449
- -----------------------------------------------------------------------------------------------
Legal 2,098
- -----------------------------------------------------------------------------------------------
Postage 102
- -----------------------------------------------------------------------------------------------
Other 121
- -----------------------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 2) (26,456)
- -----------------------------------------------------------------------------------------------
Total expenses 83,725
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (2,560)
- -----------------------------------------------------------------------------------------------
Net expenses 81,165
- -----------------------------------------------------------------------------------------------
Net investment loss (73,858)
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 3,288,577
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 6,371,571
- -----------------------------------------------------------------------------------------------
Net gain on investments 9,660,148
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $9,586,290
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
December 31, 1999* June 30, 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment loss $ (73,858) $ (59,769)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments 3,288,577 348,955
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 6,371,571 2,367,098
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 9,586,290 2,656,284
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments (1,967,266) (55,814)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 4,490,455 1,386,653
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 12,109,479 3,987,123
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 9,192,279 5,205,156
- ---------------------------------------------------------------------------------------------------------------
End of period (Including accumulated net investment loss
of $73,858 and $--, respectively) $21,301,758 $9,192,279
- ---------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- -------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share December 31 Year ended Dec.31, 1997+
operating performance (Unaudited) June 30 to June 30
- -------------------------------------------------------------------------------------------------------------------------------
1999 1999 1998
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $14.85 $10.52 $8.50
- -------------------------------------------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------------------------------------------
Net investment loss (a)(b) (.11) (.11) (.04)
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 13.77 4.55 2.06
- -------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 13.66 4.44 2.02
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (2.69) (0.11) --
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $25.82 $14.85 $10.52
- -------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(c) 93.91* 42.62 23.77*
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $21,302 $9,192 $5,205
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(d) .66* 1.30 .65*
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%)(a) (.58)* (1.04) (.37)*
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 95.96* 184.61 85.45*
- -------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized
(a) Reflects an expense limitation in effect during the period. As a result of such limitation, expenses for the fund reflect a
reduction of $0.04, $0.04 and $0.06 per share for the periods ended December 31, 1999, June 30, 1999 and June 30, 1998,
respectively. (Note 2)
(b) Per share net investment loss has been determined on the basis of the weighted average number of shares outstanding during
the period.
(c) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(d) Includes amounts paid through expense offset arrangements. (Note 2)
</TABLE>
Notes to financial statements
December 31, 1999 (Unaudited)
Note 1
Significant accounting policies
Putnam Equity Fund 98 (the "fund") is a series of Putnam Funds Trust (the
"trust") which is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
objective of the fund is to seek capital appreciation by investing
primarily in the equity securities of small, rapidly growing companies
that Putnam Investment Management, Inc. ("Putnam Management"), the fund's
Manager, a wholly-owned subsidiary of Putnam Investments, Inc. believes
have the potential for capital 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
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 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. Other
investments, including restricted securities, 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). 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.
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 six months
ended December 31, 1999, the fund had no borrowings against the line of
credit.
F) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
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 the fund's average net asset value, 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% of any excess thereafter.
Putnam Management has agreed to limit its compensation (and, to the extent
necessary, bear other expenses) through June 30, 2000, 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 1.30% 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 six months ended December 31, 1999, fund expenses were reduced by
$2,560 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 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-1under the Investment Company Act of 1940. The purpose of the Plan is
to compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments, Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plan provides for payment by
the fund to Putnam Mutual Funds Corp. at an annual rate of up to .35% of
the fund's average net assets. The fund is not currently making any
payments pursuant to the plan.
For the six months ended December 31, 1999, Putnam Mutual Funds Corp.,
acting as underwriter received no net commissions from the sale of shares
from the fund. A deferred sales charge of up to 1% is assessed on certain
redemptions of shares. For the six months ended December 31, 1999, Putnam
Mutual Funds Corp., acting as underwriter received no monies on
redemptions.
Note 3
Purchases and sales of securities
During the six months ended December 31, 1999, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $13,929,274 and $11,595,189, respectively. There
were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At December 31, 1999, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended December 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 170,136 $3,592,862
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 84,191 1,964,171
- -----------------------------------------------------------------------------
254,327 5,557,033
Shares
repurchased (48,184) (1,066,578)
- -----------------------------------------------------------------------------
Net increase 206,143 $4,490,455
- -----------------------------------------------------------------------------
Year ended June 30, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 266,398 $2,772,527
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,482 55,693
- -----------------------------------------------------------------------------
271,880 2,828,220
Shares
repurchased (147,521) (1,441,567)
- -----------------------------------------------------------------------------
Net increase 124,359 $1,386,653
- -----------------------------------------------------------------------------
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
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
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
John J. Morgan, Jr.
Vice President
Daniel L. Miller
Vice President
Richard M. Frucci
Vice President and Fund Manager
Roland W. Gillis
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam Equity Fund
98. 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: 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.
58384 2HF 2/00
