Putnam
Growth
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
4-30-00
[SCALE LOGO OMITTED]
FROM THE CHAIRMAN
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[COPYRIGHT] Karsh, Ottawa
Dear Shareholder:
A robust environment for growth stocks prevailed throughout most of
Putnam Growth Fund's fiscal year, which ended April 30, 2000. Through
much of the period, "new economy" stocks in the technology and
biotechnology sectors were among the strongest performers in the fund's
portfolio. While the correction in the technology sector dampened the
fund's returns, results were still well ahead of the 27.58% returned by
its competitive benchmark, the Russell 1000 Growth Index.
Total return for 12 months ended 4/30/00
Net asset value Public offering price
----------------------------------------------
39.25% 31.19%
----------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods begins on page 7.
* TECHNOLOGY SURGE DOMINATES PERIOD
The greatest portion of the fund's portfolio is invested in the stocks
of large, rapidly growing companies with market capitalizations above
$10 billion. Managers David Santos, Manuel Weiss Herrero and Jeffrey
Lindsey target companies across a wide range of industries that are
enjoying rising sales and profits and offer attractive long-term growth
potential.
Extraordinary surges in the U.S. stock market during most of the period
contributed significantly to your fund's returns. At the period's
midpoint, the U.S. equity markets closed a record- breaking calendar
year. The Nasdaq Composite Index, a common measure of technology
stocks, rose 85.6% in 1999, the biggest annual gain for a major market
index in U.S. history. Also in 1999, the inclusion of Microsoft and
Intel in the Dow average and the addition of Internet stocks Yahoo! and
America Online to the S&P 500 illustrated the growing influence of
technology in today's economy.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Software 16.3%
Communications
equipment 11.1%
Semiconductor 9.9%
Conglomerates 7.4%
Telecommunications 6.6%
Footnote reads:
*Based on net assets as of 4/30/00. Holdings will vary over time.
The fund took full advantage of these powerful gains, especially in the
technology sector. David, Manny, and Jeff emphasized companies
benefiting from the continued buildup of the Internet, in particular,
those involved with Internet infrastructure. Given the portfolio's
large-cap bias, this meant the inclusion of companies such as Oracle, a
producer of information management software and the world's second
largest software company, and Microsoft, the world's largest. Your
managers believe that even in the event of a Microsoft breakup, the
value inherent to the company would continue to be recognized.
Other large-cap technology holdings include Cisco Systems, a producer
of hardware and software solutions that link computer networks, and EMC,
one of the leading names in storage-related hardware, software, and
service products. While these holdings and others discussed in this
report were viewed favorably at the end of the fiscal period, all are
subject to review in accordance with the fund's investment strategy and
may vary in the future.
The Russell 1000 Growth Index was rebalanced in June 1999 to reflect a
heavier technology weighting and the fund was restructured accordingly,
reaching a peak weighting of approximately 52% during the year. It is
important to note that in the final two months of the fiscal year,
technology stocks became increasingly volatile and began to suffer sharp
declines. Profits had been taken on some positions, while others were
affected by the volatility, bringing the technology weighting down to
approximately 50% by the end of the fiscal year. Despite this turbulence
and the Nasdaq's eventual 24% drop from its March 10 high, the fund's
managers believe the outlook remains extremely positive for this sector.
They will continue to view such events as an opportunity to invest in
fundamentally strong companies at attractive prices.
* MIDCAP HOLDINGS ALSO SHOW TECHNOLOGY INFLUENCE
Approximately 10% of your fund's portfolio is invested in mid-cap stocks
-- those with market capitalizations of $10 billion or below. Notable
mid-cap technology holdings during the period included Brocade
Communications, Metromedia Fiber Network, and VERITAS Software Corp.
Brocade makes fiber channel switches and software for connecting
computer storage systems and servers, turning them into networks that
allow users, regardless of location, to share the same storage devices.
Metromedia has built a fiber-optic communications network in North
America and plans to build networks in 16 cities throughout Europe.
Fiber optics allow for high-speed transmission of data, video, Internet,
and multimedia applications. VERITAS provides services and software to
help businesses manage and store computer data. The company's products
also speed data recovery and guard computer networks against data loss
from crashes and errors.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Cisco Systems, Inc.
Communications equipment
General Electric Co.
Conglomerates
Intel Corp.
Software
Microsoft Corp.
Software
Warner-Lambert Co.
Pharmaceuticals
VERITAS Software Corp.
Software
JDS Uniphase Corp.
Electronics
Home Depot, Inc.
Retail
Texas Instruments, Inc.
Semiconductors
EMC Corp.
Computers
Footnote reads:
These holdings represent 31.8% of the fund's net assets as of 4/30/00.
Portfolio holdings will vary over time.
* BIOTECH BENEFITS CONTRIBUTE TO PERFORMANCE
In a period dominated by new economy stocks such as Internet services,
software, and telecommunications, the health-care sector offered
biotechnology, another high growth industry in which stocks have soared.
The rally of biotech stocks began in mid 1999 and grew steadily as the
year progressed. During the period, investors were attracted to biotech
companies of all sizes and at all stages of growth. The fund took
advantage of this rally, shifting health care holdings away from
large-cap pharmaceutical companies in favor of biotech.
Although the biotech rally came to an end in the final month of the
period, the fund's managers believe this sector, like technology,
remains fundamentally strong. They are particularly confident in the
potential of PE Biosystems Group, which manufactures instruments used
for gene sequencing and has benefited from the excitement surrounding
genomics, the study of the structure and function of human genes that is
causing a revolution in the health-care industry. Other key biotech
holdings include Genentech, MedImmune, and Immunex.
* RECENT CORRECTION REPRESENTS OPPORTUNITY
Your fund's managers view this spring's market decline as a valuation
correction, rather than an indication of any fundamental problem. For
most of the fund's holdings, earnings expectations remain healthy, and
multi-year cycles still present a strong record. The managers have been
able to take profits on several top- performing holdings and as a
result, have reduced the more aggressive, mid-cap oriented portion of
the portfolio in favor of higher-quality, blue-chip companies whose
prices have been caught in the overall decline. As a result, they
consider that the overall quality of the portfolio has been upgraded and
its potential for stable growth in the future improved, which bodes well
for performance in fiscal 2001.
* UPCOMING TRANSITION
This is my last letter to you and other Putnam Growth Fund shareholders.
After more than 30 years as Chairman of the Trustees and President of
the Putnam Funds, the time has come for me to step aside. As of July 1,
2000, John Hill will become Chairman. John is currently an independent
Trustee and has served on the Board for the past 14 years. In addition,
my son, George Putnam, III, will take on the role of President. I am
confident that the leadership of the funds will be in exceptionally
strong hands. I will become Chairman Emeritus, remain a shareholder, and
stay in close touch with the funds.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 21, 2000
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 4/30/00, there is no guarantee the fund will
continue to hold these securities in the future.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Growth Fund is designed for investors seeking capital appreciation from
a diversified portfolio of U.S. stocks.
TOTAL RETURN FOR PERIODS ENDED 4/30/00
S&P Russell 1000
NAV POP 500 Index Growth Index*
--------------------------------------------------------------------
1 year 39.25% 31.19% 10.13% 27.58%
--------------------------------------------------------------------
Life of fund
(since 5/4/98) 70.71 60.87 34.16 61.42
Annual average 30.83 26.98 15.82 27.03
--------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will
fluctuate so that an investor's shares when redeemed may be worth more
or less than their original cost.
*Putnam Management has recently undertaken a review of benchmarks for
various funds. This index replaces the S&P 500 Index as a performance
benchmark for this fund because, in Putnam Management's opinion, the
securities tracked by this index more accurately reflect the types of
securities generally held by the fund.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 4/30/00
----------------------------------------------
Distributions (number)* --
----------------------------------------------
Share value: NAV POP
----------------------------------------------
4/30/99 $10.42 $11.06
----------------------------------------------
4/30/00 14.51 15.40
----------------------------------------------
*The fund did not make any distributions during the period.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 5/4/98
Fund's shares S&P 500 Russell 1000
at POP Index Growth Index
5/4/98 9,425 10,000 10,000
6/30/98 9,778 10,227 10,311
9/30/98 8,703 9,210 9,375
12/31/98 10,809 11,171 11,881
3/31/99 11,608 11,728 12,636
6/30/99 12,162 12,555 13,123
9/30/99 11,840 11,771 12,642
12/31/99 16,009 13,522 15,821
3/31/00 17,883 13,832 16,948
4/30/00 $16,087 $13,416 $16,142
Footnote reads:
Past performance is no assurance of future results. See first page of
performance section for performance calculation method.
TOTAL RETURN FOR PERIODS ENDED 3/31/00 (most recent calendar quarter)
NAV POP
----------------------------------------------
1 year 54.06% 45.19%
----------------------------------------------
Life of fund (since 5/4/98) 89.77 78.83
Annual average 39.85 35.57
----------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will
fluctuate so that an investor's shares when redeemed may be worth more
or less than their original cost.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested
all distributions in the fund.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge.
COMPARATIVE BENCHMARKS
Standard & Poor's 500 Index* is an unmanaged list of common stocks that
is frequently used as a general measure of stock market performance.
The index assumes reinvestment of all distributions and interest
payments and does not take into account brokerage fees or taxes.
Securities in the fund do not match those in the indexes and performance
of the fund will differ. It is not possible to invest directly in an
index.
Russell 1000 [REGISTRATION MARK] Growth Index* is an unmanaged list of
common stocks that measures the performance of those Russell 1000
companies with higher price-to-book ratios and higher forecasted growth
values.
*Securities indexes assume reinvestment of all distributions and interest
payments and do not take into account brokerage fees or taxes. Securities
in the fund do not match those in the indexes and performance of the fund
will differ. It is not possible to invest directly in an index.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report, preceded by the Report of independent
accountants, 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.
REPORT OF INDEPENDENT ACCOUNTANTS
For the year ended April 30, 2000
To the Trustees of Putnam Funds Trust
and Shareholders of Putnam Growth Fund
(a series of Putnam Funds Trust)
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Putnam
Growth Fund (the "fund") at April 30, 2000, and the results of its
operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements")
are the responsibility of the fund's management; our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with
auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of investments owned at
April 30, 2000 by correspondence with the custodian, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 9, 2000
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
April 30, 2000
COMMON STOCKS (95.6%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Advertising and Marketing Services (0.9%)
-------------------------------------------------------------------------------------------------------------------
429 Omnicom Group, Inc. $ 39,066
Biotechnology (3.7%)
-------------------------------------------------------------------------------------------------------------------
987 Amgen Inc. (NON) 55,272
306 Genentech, Inc. (NON) 35,802
665 Immunex Corp. (NON) 26,184
285 MedImmune, Inc. (NON) 45,582
----------------
162,840
Broadcasting (3.1%)
-------------------------------------------------------------------------------------------------------------------
400 CBS Corp. (NON) 23,500
738 Clear Channel Communications, Inc. (NON) 53,136
300 Echostar Communications Corp. Class A (NON) 19,106
373 Univision Communications Inc. Class A (NON) 40,750
----------------
136,492
Cable Television (2.6%)
-------------------------------------------------------------------------------------------------------------------
1,634 AT&T Corp.-Liberty Media Group Class A (NON) 81,598
875 Comcast Corp. Class A (NON) 35,055
----------------
116,653
Chemicals (0.7%)
-------------------------------------------------------------------------------------------------------------------
496 Avery Dennison Corp. 32,550
Communications Equipment (11.1%)
-------------------------------------------------------------------------------------------------------------------
372 Brocade Communications Systems (NON) 46,128
3,770 Cisco Systems, Inc. (NON) 261,367
436 Comverse Technology, Inc. (NON) 38,886
250 Corning Inc. 49,375
199 Juniper Networks, Inc. (NON) 42,325
332 QUALCOMM, Inc. (NON) 36,001
250 Redback Networks Inc. (NON) 19,844
----------------
493,926
Computers (6.6%)
-------------------------------------------------------------------------------------------------------------------
250 Apple Computer, Inc. (NON) 31,016
1,202 Dell Computer Corp. (NON) 60,250
633 EMC Corp. (NON) 87,947
201 Lexmark International Group, Inc. Class A (NON) 23,718
252 Network Appliance, Inc. (NON) 18,632
786 Sun Microsystems, Inc. (NON) 72,263
----------------
293,826
Conglomerates (7.4%)
-------------------------------------------------------------------------------------------------------------------
1,551 General Electric Co. 243,895
1,877 Tyco International Ltd. 86,225
----------------
330,120
Consumer Goods (1.3%)
-------------------------------------------------------------------------------------------------------------------
639 Colgate-Palmolive Co. 36,503
453 Estee Lauder Cos. Class A 19,989
----------------
56,492
Electronics (4.1%)
-------------------------------------------------------------------------------------------------------------------
587 Flextronics International Ltd. (NON) 41,237
920 JDS Uniphase Corp. (NON) 95,393
320 PerkinElmer, Inc. 17,520
156 SDL, Inc. (NON) 30,420
----------------
184,570
Entertainment (1.0%)
-------------------------------------------------------------------------------------------------------------------
784 Viacom, Inc. Class B (NON) 42,630
Financial (2.3%)
-------------------------------------------------------------------------------------------------------------------
351 American Express Co. 52,672
838 Citigroup, Inc. 49,809
----------------
102,481
Insurance (1.2%)
-------------------------------------------------------------------------------------------------------------------
497 American International Group, Inc. 54,515
Media (1.2%)
-------------------------------------------------------------------------------------------------------------------
609 Time Warner, Inc. 54,772
Medical Technology (2.2%)
-------------------------------------------------------------------------------------------------------------------
759 Allergan, Inc. 44,686
880 PE Corp.-PE Biosystems Group 52,800
----------------
97,486
Natural Gas Utilities (0.5%)
-------------------------------------------------------------------------------------------------------------------
296 Enron Corp. 20,628
Pharmaceuticals (3.9%)
-------------------------------------------------------------------------------------------------------------------
300 Forest Laboratories, Inc. (NON) 25,219
920 Schering-Plough Corp. 37,088
993 Warner-Lambert Co. 113,016
----------------
175,323
Retail (6.4%)
-------------------------------------------------------------------------------------------------------------------
1,657 Home Depot, Inc. (The) 92,896
682 Intimate Brands, Inc. 26,257
650 Kohls Corp. (NON) 31,200
840 Tandy Corp. 47,880
1,583 Wal-Mart Stores, Inc. 87,659
----------------
285,892
Semiconductor (9.9%)
-------------------------------------------------------------------------------------------------------------------
762 Applied Materials, Inc. (NON) 77,581
200 Broadcom Corp. (NON) 34,475
810 LSI Logic Corp.(NON) 50,625
508 Motorola, Inc. 60,484
170 PMC - Sierra, Inc. (NON) 32,619
483 Teradyne, Inc. (NON) 53,130
561 Texas Instruments, Inc. 91,373
585 Xilinx, Inc. (NON) 42,851
----------------
443,138
Software (16.3%)
-------------------------------------------------------------------------------------------------------------------
400 Ariba, Inc. (NON) 29,675
560 BEA Systems, Inc. (NON) 27,020
1,575 Intel Corp. 199,730
335 I2 Technologies, Inc. (NON) 43,299
797 LAM Research Corp. (NON) 36,562
100 Micromuse, Inc. (NON) 9,813
1,857 Microsoft Corp. (NON) 129,526
1,071 Oracle Corp. (NON) 85,613
284 Siebel Systems, Inc. (NON) 34,897
200 VeriSign, Inc. (NON) 27,875
930 VERITAS Software Corp. (NON) 99,750
----------------
723,760
Technology Services (2.6%)
-------------------------------------------------------------------------------------------------------------------
1,272 America Online, Inc. (NON) 76,082
310 InfoSpace.com, Inc. (NON) 22,262
148 Yahoo! Inc. (NON) 19,277
----------------
117,621
Telecommunications (6.6%)
-------------------------------------------------------------------------------------------------------------------
700 AT&T Wireless Group (NON) 22,269
535 Covad Communications Group (NON) 14,846
400 Level 3 Communications, Inc. (NON) 35,600
1,800 McLeod, Inc. Class A (NON) 45,000
880 Metromedia Fiber Network, Inc. Class A (NON) 27,170
488 Nextel Communications, Inc. Class A (NON) 53,406
1,081 Sprint PCS (NON) 59,455
372 VoiceStream Wireless Corp. (NON) 36,828
----------------
294,574
----------------
Total Common Stocks (cost $2,951,864) $ 4,259,355
SHORT-TERM INVESTMENTS (4.4%) (a) (cost $196,000)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$ 196,000 Interest in $315,337 joint repurchase agreement
dated April 28, 2000 with Warburg Securities
due May 1, 2000 with respect to various U.S.
Treasury obligations -- maturity value of
$196,096 for an effective yield of 5.71% $ 196,000
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $3,147,864) (b) $ 4,455,355
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $4,453,527.
(b) The aggregate identified cost on a tax basis is $3,153,129,
resulting in gross unrealized appreciation and depreciation of
$1,481,945 and $179,719, respectively, or net unrealized appreciation of
$1,302,226.
(NON) Non-income-producing security.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2000
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $3,147,864) (Note 1) $4,455,355
-------------------------------------------------------------------------------------------
Cash 717
-------------------------------------------------------------------------------------------
Dividends and other receivables 911
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 950
-------------------------------------------------------------------------------------------
Receivable for securities sold 29,110
-------------------------------------------------------------------------------------------
Receivable from Manager (Note 2) 188
-------------------------------------------------------------------------------------------
Total assets 4,487,231
Liabilities
-------------------------------------------------------------------------------------------
Payable for securities purchased 26,746
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 996
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 739
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 3
-------------------------------------------------------------------------------------------
Other accrued expenses 5,220
-------------------------------------------------------------------------------------------
Total liabilities 33,704
-------------------------------------------------------------------------------------------
Net assets $4,453,527
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $2,949,767
-------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 196,269
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 1,307,491
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $4,453,527
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per share
($4,453,527 divided by 306,938 shares) $14.51
-------------------------------------------------------------------------------------------
Offering price per share (100/94.25 of $14.51)* $15.40
-------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales, the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended April 30, 2000
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Dividends $ 10,656
-------------------------------------------------------------------------------------------
Interest 1,591
-------------------------------------------------------------------------------------------
Total investment income 12,247
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 22,854
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 4,990
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 2,398
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 40
-------------------------------------------------------------------------------------------
Reports to shareholders 6,019
-------------------------------------------------------------------------------------------
Registration fees 203
-------------------------------------------------------------------------------------------
Auditing 28,365
-------------------------------------------------------------------------------------------
Legal 3,853
-------------------------------------------------------------------------------------------
Postage 54
-------------------------------------------------------------------------------------------
Other 1,040
-------------------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 2) (37,082)
-------------------------------------------------------------------------------------------
Total expenses 32,734
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (2,408)
-------------------------------------------------------------------------------------------
Net expenses 30,326
-------------------------------------------------------------------------------------------
Net investment loss (18,079)
-------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 336,405
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 695,380
-------------------------------------------------------------------------------------------
Net gain on investments 1,031,785
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,013,706
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the period
May 4, 1998
(commencement
Year ended of operations)
April 30 to April, 30
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment loss $ (18,079) $ (4,333)
--------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 336,405 (140,090)
--------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 695,380 612,111
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,013,706 467,688
--------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 877,208 94,925
--------------------------------------------------------------------------------------------------
Total increase in net assets 1,890,914 562,613
Net assets
--------------------------------------------------------------------------------------------------
Beginning of year (Note 5) 2,562,613 2,000,000
--------------------------------------------------------------------------------------------------
End of year (including net investment income
of $-- and $-- respectively) $4,453,527 $2,562,613
--------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
-------------------------------------------------------------------
For the period
Per-share Year ended May 4, 1998+
operating performance April 30 to April 30
-------------------------------------------------------------------
2000 1999
-------------------------------------------------------------------
Net asset value,
beginning of period $10.42 $8.50
-------------------------------------------------------------------
Investment operations
-------------------------------------------------------------------
Net investment loss (a)(d) (.07) (.02)
-------------------------------------------------------------------
Net realized and unrealized
gain on investments 4.16 1.94
-------------------------------------------------------------------
Total from
investment operations 4.09 1.92
-------------------------------------------------------------------
Net asset value,
end of period $14.51 $10.42
-------------------------------------------------------------------
Ratios and supplemental data
-------------------------------------------------------------------
Total return at
net asset value (%)(b) 39.25 22.59*
-------------------------------------------------------------------
Net assets, end of period
(in thousands) $4,454 $2,563
-------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c)(d) 1.00 .99*
-------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%)(d) (.55) (.20)*
-------------------------------------------------------------------
Portfolio turnover (%) 89.57 108.03*
-------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment loss has been determined on the basis of
the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund reflect a reduction of
$0.14 and $0.08 per share for the periods ending April 30, 2000 and
April 30, 1999, respectively (Note 2).
NOTES TO FINANCIAL STATEMENTS
April 30, 2000
Note 1
Significant accounting policies
Putnam Growth Fund (the "fund") is a series of Putnam Funds Trust ("the
Trust") which is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
fund will invest primarily in common stocks of U.S. companies that
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
manager, a wholly-owned subsidiary of Putnam Investments, Inc., believes
offer long-term growth potential in excess of market averages.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities 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.
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 by
Putnam Investment 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 year ended
April 30, 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. These differences include temporary and permanent
differences of losses on wash sale transactions, book
accretion/amortization adjustment and net operating loss.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations. For the year ended April 30,
2000, the fund reclassified $18,079 to decrease accumulated net
investment loss and $18,033 to decrease paid-in-capital, with a decrease
to accumulated net realized gains of $46. The calculation of net
investment income per share in the financial highlights table excludes
these adjustments.
H) Expenses of the trust Expenses directly charged or attributable to
any fund will be paid from the assets of that fund. Generally, expenses
of the trust will be allocated among and charged to the assets of each
fund on a basis that the Trustees deem fair and equitable, which may be
based on the relative assets of each fund or the nature of the services
performed and relative applicability to each fund.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.70% of the
first $500 million of average net assets, 0.60% of the next $500
million, 0.55% of the next $500 million, 0.50% of the next $5 billion,
0.475% of the next $5 billion, 0.455% of the next $5 billion, 0.44% of
the next $5 billion, and 0.43% thereafter.
Putnam Management has agreed to limit its compensation (and, to the
extent necessary, bear other expenses) through April 30, 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 1.00% of the fund's average net
assets.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended April 30, 2000, fund expenses were reduced by $2,408
under expense offset arrangements with PFTC and brokerage service
arrangements. 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 Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments, Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plan provides for payment by
the fund to Putnam Mutual Funds Corp. at an annual rate of up to 0.35%
of the fund's average net assets. The fund is not currently making any
payments pursuant to the plan. For the year ended April 30, 2000, Putnam
Mutual Funds Corp., acting as underwriter received no net commissions
from the sale of shares of the fund.
Note 3
Purchases and sales of securities
During the year ended April 30, 2000, purchases and sales of investment
securities other than short-term investments aggregated $3,602,841 and
$2,917,838, respectively. There were no purchases and sales of U.S.
government obligations.
Note 4
Capital shares
At April 30, 2000, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended April 30, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 67,935 $960,572
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
67,935 960,572
Shares
repurchased (7,002) (83,364)
---------------------------------------------------------------------------
Net increase 60,933 $877,208
---------------------------------------------------------------------------
For the period May 4, 1998
(commencement of operations) to
April 30, 1999
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 10,739 $95,188
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
10,739 95,188
Shares
repurchased (28) (263)
---------------------------------------------------------------------------
Net increase 10,711 $94,925
---------------------------------------------------------------------------
Note 5
Initial capitalization and
offering of shares
The Trust was established as a Massachusetts business trust on January
22, 1996. During the period January 22, 1996 to May 4, 1998, the fund
had no operations other than those related to organizational matters,
including the initial capital contribution of $2,000,000 and the
issuance of 235,294 shares to Putnam Mutual Funds Corp. on May 1, 1998.
At April 30, 2000, Putnam Investments, Inc. owned 271,910 shares of the
fund (88.6% of shares outstanding), valued at $3,945,414.
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the
Fund hereby designates $201,534 as capital gain, for its taxable year
ended April 30, 2000.
The Form 1099 you receive in January 2001 will show the tax status of
all distributions paid to your account in calendar 2000.
FUND INFORMATION
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
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
Stephen Oristaglio
Vice President
C. Beth Cotner
Vice President
David J. Santos
Vice President and Fund Manager
Manuel Weiss Herrero
Vice President and Fund Manager
Jeffrey R. Lindsey
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam Growth
Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site: 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.
61477 21E 6/00
Putnam
U.S. Core
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
4-30-00
[SCALE LOGO OMITTED]
FROM THE CHAIRMAN
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[COPYRIGHT] Karsh, Ottawa
Dear Shareholder:
The Trustees of Putnam U.S. Core Fund are pleased to present this annual
report covering the period from May 1, 1999, through April 30, 2000.
Fund managers Robert R. Beck and Michael P. Stack were joined in
September 1999 by Paul E. Marrkand. Paul, a portfolio manager in the
Global Core Equity Group, has been with Putnam since 1987 and has 7
years of investment experience.
During its first full fiscal year, the fund comfortably outperformed its
unmanaged benchmark. Since the fund's inception on May 4, 1998, it has
compiled an equally positive return, as shown in the performance tables
starting on page 6.
Total return for 12 months ended 4/30/00
Net asset value Public offering price
---------------------------------------------------
31.12% 23.63%
---------------------------------------------------
Past performance is no indication of future results.
Performance information for longer periods begins on
page 6.
* TECHNOLOGY, TELECOMMUNICATIONS, MEDIA LEAD THE CHARGE
Technology stocks were the dominant producers during fiscal 2000, with
telecommunications and media issues running closely behind. These stocks
are clear examples of the beneficent environment created for such
companies as traditional businesses and individuals wire up to utilize
the Internet and become more fully involved in e-commerce and as the
inhabitants of the global village keep in increasingly closer touch with
one another.
Oracle Corporation, one of the largest global database software
providers, is an excellent example. Despite the sale of some shares
during the fiscal year, Oracle was one of the fund's larger holdings,
constituting 1.7% of net assets, at period's end. Because of the stock's
sharp rise -- 491% during the period -- the managers on more than one
occasion reduced Oracle's weighting and redirected the resulting
proceeds in order to maintain portfolio balance. While this holding,
along with others discussed in this report, was viewed favorably at the
end of the period, all are subject to review and adjustment in
accordance with the fund's investment strategy and may vary in the
future.
* BOTTOM-UP STOCK SELECTION STILL KEY STRATEGY
By underweighting certain sectors, such as health care and financial
services, the fund's managers were able to limit or avoid the negative
impact of these sectors' underperformance. However, individual stock
selection remains one of the most important factors in the fund's
management strategy. Successful selection, even in some of the weaker
industry sectors, contributed to the favorable results during fiscal
2000. In a beleaguered consumer staples industry, for example, the fund
was overweight relative to the benchmark; yet even so, some of the
portfolio's individual stocks in this sector made significant
contributions to the fund's positive performance.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
AT&T Corp.-Liberty Media Group
Cable television
Halliburton Co.
Energy
CBS Corp.
Broadcasting
Electronic Data Systems Corp.
Technology services
Exxon Mobil Corp.
Oil and gas
Citigroup, Inc.
Financial
Vodafone AirTouch Plc.
Telecommunications
Intel Corp.
Electronics
General Electric Co.
Conglomerate
Pharmacia Corp.
Pharmaceuticals
Footnote reads:
These holdings represented 48.8% of the fund's net assets as of 4/30/00.
Portfolio holdings will vary over time.
In their pursuit of long-term capital appreciation, the fund's managers
employ a bottom-up stock selection strategy that emphasizes what they
call growth at a reasonable price. As a first step, they look for large
but growing companies whose stocks are temporarily undervalued for one
reason or another. In selecting these companies with more than $3
billion in market capitalization, the managers use cash flow rather than
earnings as a measure of valuation. The reason is that, in their view,
companies wishing to impress investors often distort earnings.
For each company that passes this initial screening, the managers try to
identify a catalyst for change that may, over a reasonable time, improve
that company's prospects and prompt a return to a more normal valuation.
Because psychology often is just as important to the market as a
company's fundamentals, they talk with each company's management and
competitors to get a feel for the company's prospects.
Finally, the fund's managers limit the number of portfolio holdings so
each stock can have a more pronounced effect on the fund's performance.
Compared with the 100 or so holdings in a typical equity fund portfolio,
your fund had only 35 at the end of April 2000.
* OUTLOOK: MORE VOLATILITY, MORE OPPORTUNITY
The turmoil recently seen in the equity markets is largely the result of
concerns about technology valuations and inflation. These concerns are
justified and remain the greatest threats to the continued health of the
financial markets. However, given the continued positive economic
fundamentals, low inflation, and signs of economic slowing, the managers
believe the current market volatility will provide excellent
opportunities for adding to positions in companies that are leaders or
anticipated future leaders in their respective industries.
* UPCOMING TRANSITION
This is my last letter to you and other Putnam U.S. Core Fund
shareholders. After more than 30 years as Chairman of the Trustees and
President of the Putnam Funds, the time has come for me to step aside.
As of July 1, 2000, John Hill will become Chairman. John is currently an
independent Trustee and has served on the Board for the past 14 years.
In addition, my son, George Putnam, III, will take on the role of
President. I am confident that the leadership of the funds will be in
exceptionally strong hands. I will become Chairman Emeritus, remain a
shareholder, and stay in close touch with the funds.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 21, 2000
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 4/30/00, there is no guarantee the fund will
continue to hold these securities in the future. A concentrated
portfolio may add a measure of volatility, as fluctuations in any one
holding will likely affect the fund more than a fund with greater
diversification.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
U.S. Core Fund is designed for investors seeking long-term capital
appreciation primarily through common stocks of U.S. companies that are
believed to be undervalued in relation to underlying asset values or
earnings potential and have the potential for long-term appreciation.
TOTAL RETURN FOR PERIODS ENDED 4/30/00
S&P 500 Russell Consumer
NAV POP Index 1000 Index price index
------------------------------------------------------------------------------
1 year 31.12% 23.63% 10.13% 12.45% 3.01%
------------------------------------------------------------------------------
Life of fund
(since 5/4/98) 66.48 56.88 34.16 35.28 5.35
Annual average 29.19 25.39 15.82 16.30 2.64
------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will
fluctuate so that an investor's shares when redeemed may be worth more
or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 4/30/00
----------------------------------------------------------
Distributions (number) 1
----------------------------------------------------------
Income --
----------------------------------------------------------
Capital gains
Long-term $0.300
----------------------------------------------------------
Short-term 1.208
----------------------------------------------------------
Total $1.508
----------------------------------------------------------
Share value: NAV POP
----------------------------------------------------------
4/30/99 $10.73 $11.38
----------------------------------------------------------
4/30/00 12.34 13.09
----------------------------------------------------------
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 5/4/98
Fund's shares Russell 1000 S&P 500 Consumer price
at POP Index Index index
5/4/98 9,424 10,000 10,000 10,000
10/31/98 9,157 9,818 9,959 10,086
4/30/99 11,964 12,031 12,182 10,228
10/31/99 12,655 12,330 12,182 10,345
4/30/2000 $15,688 $13,528 $13,416 $10,535
Footnote reads:
Past performance is no assurance of future results. See first page of
performance section for performance calculation method.
TOTAL RETURN FOR PERIODS ENDED 3/31/00 (most recent calendar quarter)
NAV POP
----------------------------------------------------------
1 year 43.94% 35.60%
----------------------------------------------------------
Life of fund (since 5/4/98) 74.57 64.50
Annual average 33.87 29.77
----------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will
fluctuate so that an investor's shares when redeemed may be worth more
or less than their original cost.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested
all distributions in the fund.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge.
COMPARATIVE BENCHMARKS
Russell 1000 [REGISTRATION MARK] Index*+ measures the performance of the
1,000 largest companies in the Russell 3000 Index, which represents
approximately 92% of the total market capitalization of the Russell 3000
Index.
Standard & Poor's 500 [REGISTRATION MARK] Index*+ is an index of common
stocks frequently used as a general measure of stock market performance.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
*The indexes assume reinvestment of all distributions and interest payments
and do not take into account brokerage fees or taxes. Securities in the fund
do not match those in the indexes and performance of the fund will differ. It
is not possible to invest directly in an index.
+Putnam Management has recently undertaken a review of benchmarks for various
funds. The Standard & Poor's 500 Index replaces the Russell1000 Index as a
performance benchmark for this fund because, in Putnam Management's opinion,
the securities tracked by this index more accurately reflect the types of
securities generally held by the fund.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report, preceded by the Report of independent
accountants, 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.
REPORT OF INDEPENDENT ACCOUNTANTS
For the fiscal year ended April 30, 2000
To the Trustees and Shareholders of Putnam U.S. Core Fund
(a series of Putnam Funds Trust)
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Putnam U.S.
Core Fund (the "fund") at April 30, 2000, and the results of its
operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements")
are the responsibility of the fund's management; our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with
auditing standards generally accepted in the United States, which
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
investments owned at April 30, 2000 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 6, 2000
THE FUND'S PORTFOLIO
April 30, 2000
<TABLE>
<CAPTION>
COMMON STOCKS (101.9%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C> <C> <C>
Broadcasting (5.4%)
----------------------------------------------------------------------------------------------------------------------------
5,755 CBS Corp. (NON) $ 338,106
Cable Television (10.6%)
----------------------------------------------------------------------------------------------------------------------------
2,675 Adelphia Communications Corp. (NON) 132,580
8,455 AT&T Corp. - Liberty Media Group Class A (NON) 422,222
1,425 MediaOne Group, Inc. (NON) 107,766
----------------
662,568
Commercial and Consumer Services (1.8%)
----------------------------------------------------------------------------------------------------------------------------
7,251 Cendant Corp. (NON) 111,937
Communications Equipment (6.3%)
----------------------------------------------------------------------------------------------------------------------------
610 Juniper Networks, Inc. (NON) 129,739
900 Nortel Networks Corp. (Canada) 101,925
3,000 Tellabs, Inc. (NON) 164,438
----------------
396,102
Computers (3.2%)
----------------------------------------------------------------------------------------------------------------------------
2,500 Dell Computer Corp. (NON) 125,313
625 Lexmark International Group, Inc. Class A (NON) 73,750
----------------
199,063
Conglomerates (7.6%)
----------------------------------------------------------------------------------------------------------------------------
1,600 General Electric Co. 251,600
4,900 Tyco International, Ltd. 225,094
----------------
476,694
Consumer Finance (1.2%)
----------------------------------------------------------------------------------------------------------------------------
2,900 MBNA Corp. 77,031
Consumer Goods (1.9%)
----------------------------------------------------------------------------------------------------------------------------
2,000 Kimberly-Clark Corp. 116,125
Electrical Equipment (1.5%)
----------------------------------------------------------------------------------------------------------------------------
2,370 Rockwell International Corp. 93,319
Electronics (9.6%)
----------------------------------------------------------------------------------------------------------------------------
1,999 Intel Corp. 253,498
3,548 LSI Logic Corp. (NON) 221,750
650 SDL, Inc. (NON) 126,750
----------------
601,998
Energy (5.9%)
----------------------------------------------------------------------------------------------------------------------------
8,295 Halliburton Co. 366,535
Financial (6.1%)
----------------------------------------------------------------------------------------------------------------------------
625 American Express Co. 93,789
4,820 Citigroup, Inc. 286,489
----------------
380,278
Oil & Gas (5.0%)
----------------------------------------------------------------------------------------------------------------------------
4,000 Exxon Mobil Corp. 310,750
Paper & Forest Products (2.8%)
----------------------------------------------------------------------------------------------------------------------------
3,085 Sealed Air Corp. (NON) 171,603
Pharmaceuticals (9.7%)
----------------------------------------------------------------------------------------------------------------------------
3,200 American Home Products Corp. 179,800
4,674 Pharmacia Corp. 233,408
1,679 Warner-Lambert Co. 191,091
----------------
604,299
Retail (2.7%)
----------------------------------------------------------------------------------------------------------------------------
3,000 Tandy Corp. 171,000
Semiconductor (2.3%)
----------------------------------------------------------------------------------------------------------------------------
1,380 Applied Materials, Inc. (NON) 140,501
Software (8.9%)
----------------------------------------------------------------------------------------------------------------------------
900 Amdocs, Ltd. (NON) 60,919
1,100 I2 Technologies, Inc. (NON) 142,175
2,619 Microsoft Corp. (NON) 182,675
1,360 Oracle Corp. (NON) 108,715
600 VERITAS Software Corp. (NON) 64,359
----------------
558,843
Technology Services (5.3%)
----------------------------------------------------------------------------------------------------------------------------
4,800 Electronic Data Systems Corp. 330,000
Telecommunications (4.1%)
----------------------------------------------------------------------------------------------------------------------------
5,500 Vodafone AirTouch PLC (United Kingdom) 258,500
----------------
Total Common Stocks (cost $5,744,869) $ 6,365,252
SHORT-TERM INVESTMENTS (2.6%) (a) (cost $165,000)
PRINCIPAL AMOUNT VALUE
----------------------------------------------------------------------------------------------------------------------------
$165,000 Interest in $662,705,000 joint repurchase agreement
dated April 28, 2000 with Warburg Securities
due May 1, 2000 with respect to various
U.S. Treasury obligations -- maturity value
of $165,079 for an effective yield of 5.71% $ 165,000
----------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $5,909,869) (b) $ 6,530,252
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Percentages indicated are based on net assets of $6,249,185.
(b) The aggregate identified cost on a tax basis is $5,992,270,
resulting in gross unrealized appreciation and depreciation of $765,130
and $227,148, respectively, or net unrealized appreciation of $537,982.
(NON) Non-income-producing security.
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2000
<S> <C>
Assets
----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $5,909,869) (Note 1) $6,530,252
----------------------------------------------------------------------------------------------
Cash 794
----------------------------------------------------------------------------------------------
Dividends receivable 2,361
----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 108
----------------------------------------------------------------------------------------------
Receivable for securities sold 151,426
----------------------------------------------------------------------------------------------
Total assets 6,684,941
Liabilities
----------------------------------------------------------------------------------------------
Payable for securities purchased 427,541
----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,909
----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 962
----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 739
----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 3
----------------------------------------------------------------------------------------------
Other accrued expenses 4,602
----------------------------------------------------------------------------------------------
Total liabilities 435,756
----------------------------------------------------------------------------------------------
Net assets $6,249,185
Represented by
----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $5,132,572
----------------------------------------------------------------------------------------------
Accumulated net realized gain on investment (Note 1) 496,230
----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 620,383
----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $6,249,185
Computation of net asset value and offering price
----------------------------------------------------------------------------------------------
Net asset value and redemption price per share
($6,249,185 divided by 506,345 shares) $12.34
----------------------------------------------------------------------------------------------
Offering price per share (100/94.25 of $12.34)* $13.09
----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales, the offering price is reduced.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended April 30, 2000
<S> <C>
Investment income:
----------------------------------------------------------------------------------------------
Dividends $ 22,420
----------------------------------------------------------------------------------------------
Interest 2,994
----------------------------------------------------------------------------------------------
Total investment income 25,414
Expenses:
----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 28,516
----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 6,301
----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 2,398
----------------------------------------------------------------------------------------------
Administrative services (Note 2) 40
----------------------------------------------------------------------------------------------
Reports to shareholders 5,459
----------------------------------------------------------------------------------------------
Registration fees 608
----------------------------------------------------------------------------------------------
Auditing 27,166
----------------------------------------------------------------------------------------------
Legal 3,853
----------------------------------------------------------------------------------------------
Other 33
----------------------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 2) (33,731)
----------------------------------------------------------------------------------------------
Total expenses 40,643
----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (2,551)
----------------------------------------------------------------------------------------------
Net expenses 38,092
----------------------------------------------------------------------------------------------
Net investment loss (12,678)
----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 869,713
----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 176,036
----------------------------------------------------------------------------------------------
Net gain on investments 1,045,749
----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,033,071
----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the period
May 4, 1998
(commencement
Year ended of operations)
April 30 to April 30
2000 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
-------------------------------------------------------------------------------------------------------
Operations:
-------------------------------------------------------------------------------------------------------
Net investment loss $ (12,678) $ (1,358)
-------------------------------------------------------------------------------------------------------
Net realized gain on investments 869,713 139,736
-------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 176,036 444,347
-------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,033,071 582,725
-------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gain (486,718) (12,478)
-------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 2,452,046 680,539
-------------------------------------------------------------------------------------------------------
Total increase in net assets 2,998,399 1,250,786
Net assets
-------------------------------------------------------------------------------------------------------
Beginning of year (Note 5) 3,250,786 2,000,000
-------------------------------------------------------------------------------------------------------
End of year $6,249,185 $3,250,786
-------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
--------------------------------------------------------------
For the period
Per-share Year ended May 4, 1998+
operating performance April 30 to April 30
--------------------------------------------------------------
2000 1999
--------------------------------------------------------------
[S] [C] [C]
Net asset value,
beginning of period $10.73 $8.50
--------------------------------------------------------------
Investment operations
--------------------------------------------------------------
Net investment loss (a)(d) (.04) (.01)
--------------------------------------------------------------
Net realized and unrealized
gain on investments 3.16 2.29
--------------------------------------------------------------
Total from
investment operations 3.12 2.28
--------------------------------------------------------------
Less distributions:
--------------------------------------------------------------
From net realized gain (1.51) (.05)
--------------------------------------------------------------
Total distributions (1.51) (.05)
--------------------------------------------------------------
Net asset value,
end of period $12.34 $10.73
--------------------------------------------------------------
Ratios and supplemental data
--------------------------------------------------------------
Total return at
net asset value (%)(b) 31.12 26.96*
--------------------------------------------------------------
Net assets, end of period
(in thousands) $6,249 $3,251
--------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c)(d) 1.00 .99*
--------------------------------------------------------------
Ratio of net investment loss
to average net assets (%)(d) (.31) (.06)*
--------------------------------------------------------------
Portfolio turnover (%) 256.50 267.29*
--------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment loss has been determined on the basis of
the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund reflect a reduction of
$0.06 and $0.07 per share for the periods ended April 30, 2000 and April
30, 1999, respectively. (Note 2).
NOTES TO FINANCIAL STATEMENTS
April 30, 2000
Note 1
Significant accounting policies
Putnam U.S. Core Fund ("the fund") is one of a series of Putnam Funds
Trust ("the trust") which is registered under the Investment Company Act
of 1940, as amended, as a non-diversified, open-end management
investment company. The fund invests primarily in common stocks of U.S.
companies that Putnam Investment Management, Inc., ("Putnam
Management"), the fund's manager, a wholly-owned subsidiary of Putnam
Investments, Inc., believes offer long-term growth potential in excess
of market averages or are undervalued in relation to underlying asset
values or earnings potential and have the potential for long-term
growth.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities 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 by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
manager, a wholly-owned subsidiary of Putnam Investments, Inc. 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.
E) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the period ended
April 30, 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. These differences include temporary and permanent
differences of losses on wash sale transactions. Reclassifications are
made to the fund's capital accounts to reflect income and gains
available for distribution (or available capital loss carryovers) under
income tax regulations. For the year ended April 30, 2000, the fund
reclassified $12,678 to decrease distributions in excess of net
investment income with a decrease to accumulated net realized gains of
$12,678. The calculation of net investment income per share in the
financial highlights table excludes these adjustments.
H) Expenses of the trust Expenses directly charged or attributable to
any fund will be paid from the assets of that fund. Generally, expenses
of the trust will be allocated among and charged to the assets of each
fund on a basis that the Trustees deem fair and equitable, which may be
based on the relative assets of each fund or the nature of the services
performed and relative applicability to each fund.
Note 2
Management fee, administrative
services, and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.70% of the
first $500 million of average net assets, 0.60% of the next $500
million, 0.55% of the next $500 million, 0.50% of the next $5 billion,
0.475% of the next $5 billion, 0.455% of the next $5 billion, 0.44% of
the next $5 billion, and 0.43% thereafter.
Putnam Management has agreed to limit its compensation (and, to the
extent necessary, bear other expenses) through April 30, 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 1.00% of the fund's average net
assets.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by 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 year ended April 30, 2000, fund expenses were reduced by $2,551
under expense offset arrangements with PFTC and brokerage service
arrangements. 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 Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments, Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plan provides for payment by
the fund to Putnam Mutual Funds Corp. at an annual rate of up to 0.35%
of the fund's average net assets. The fund is not currently making any
payments pursuant to the plan.
For the year ended April 30, 2000, Putnam Mutual Funds Corp., acting as
underwriter received no net commissions from the sale of shares of the
fund.
Note 3
Purchases and sales of securities
During the year ended April 30, 2000, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $12,395,952 and $10,298,731, respectively. There were no
purchases or sales of U.S. government obligations.
Note 4
Capital shares
At April 30, 2000, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended April 30, 2000
---------------------------------------------------------------------------
Shares Amount
---------------------------------------------------------------------------
Shares sold 185,522 $2,282,256
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 47,164 509,192
---------------------------------------------------------------------------
232,686 2,791,448
Shares
repurchased (29,399) (339,402)
---------------------------------------------------------------------------
Net increase 203,287 $2,452,046
---------------------------------------------------------------------------
For the period May 4, 1998
(commencement of operations)
to April 30, 1999
---------------------------------------------------------------------------
Shares Amount
---------------------------------------------------------------------------
Shares sold 80,253 $800,612
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,380 12,478
---------------------------------------------------------------------------
81,633 813,090
Shares
repurchased (13,869) (132,551)
---------------------------------------------------------------------------
Net increase 67,764 $680,539
---------------------------------------------------------------------------
Note 5
Initial capitalization and offering
of shares
The Trust was established as a Massachusetts business trust on January
22, 1996. During the period January 22, 1996 to May 4, 1998, the fund
had no operations other than those related to organizational matters,
including the initial capital contribution of $2,000,000 and the
issuance of 235,294 shares to Putnam Mutual Funds Corp. on May 1, 1998.
At April 30, 2000, Putnam Investments, Inc. owned 402,703 shares of the
fund (79.5% of shares outstanding), valued at $4,969,355.
FEDERAL TAX INFORMATION
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the
Fund hereby designates $164,729 as capital gain, for its taxable year
ended April 30, 2000.
The fund has designated 2.79% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The Form 1099 you receive in January 2001 will show the tax status of
all distributions paid to your account in calendar 2000.
Results of December 2, 1999 shareholder meeting
A special meeting of shareholders of the fund was held on December 2,
1999. The meeting was held to ask for shareholder approval to change the
fund's classification under the 1940 Act from diversified to
non-diversified.
The results were as follows:
A proposal to amend the fund's fundamental investment restriction with
respect to diversification;
281,497 votes for, and 0 votes against
A proposal to amend the fund's fundamental investment restriction with
respect to investments in the voting securities of a single issuer;
281,497 votes for, and 0 votes against
FUND INFORMATION
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
John J. Morgan, Jr.
Vice President
Robert R. Beck
Vice President and Fund Manager
Michael P. Stack
Vice President and Fund Manager
Paul E. Marrkand
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam U.S. Core
Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' web site:
http://www.putnaminv.com.
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.
61449 21F 6/00
Putnam
Value
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
4-30-00
[SCALE LOGO OMITTED]
FROM THE CHAIRMAN
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[COPYRIGHT] Karsh, Ottawa
Dear Shareholder:
Putnam Value Fund's performance during fiscal year 2000 reflects the
pros and cons of adhering to a strict value investing mandate during a
period when investors were smitten with growth stocks. Five
interest-rate increases between June 1999 and April 2000 worsened the
scenario, pummeling traditional companies, including typical value fund
holdings such as financials and utilities, which were among the most
severely affected.
As a rule, value stocks produced lackluster returns for much of the
period, and yet your fund's managers were able to take advantage of
investors' disregard for many high-quality companies by purchasing
shares when valuations were low. It is precisely when the market allows
such bargains that the seeds for potentially strong capital appreciation
are sown, with the expectation that they can be harvested when these
stocks recover.
Total return for 12 months ended 4/30/00
Net asset value Public offering price
-----------------------------------------------
-10.13% -15.32%
-----------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods begins on page 6.
As your fund ended its fiscal year 2000, a shift in favor of value
stocks appeared to be in sight. A severe correction of the
technology-heavy Nasdaq market in early March, followed by continued
volatility in April, arrested investors' largely undisciplined foray
into technology stocks. Concerned investors shifted assets back to
stocks of traditional brick-and-mortar companies and took a renewed
interest in current earnings reports. During the last two months of your
fund's fiscal year, it posted an unusually strong double-digit return,
which while not sufficient to correct an otherwise negative year,
confirmed the efficacy of the value investment strategy and attested to
the fine stock selection skills of your fund's managers.
* FUND WELCOMES NEW MANAGERS TO TEAM
It is my pleasure to announce that David L. King and Jeanne L. Mockard
have recently joined the fund's management team. David has been with
Putnam since 1983 and has 18 years of investment experience. Jeanne
joined Putnam in 1985 and has 15 years of investment experience. Their
expertise in Putnam's Large Cap Value Equity and Global Large Cap Value
Equity groups ensure prudent supervision of your fund's conservative,
value investment process.
* STOCK HIGHLIGHTS FROM VARIETY OF SECTORS
Your fund holds shares in two real estate investment trusts, Equity
Residential Properties (EQR) and Equity Office Properties (EOP). EQR is
the largest owner of residential apartments in the United States, while
EOP is one of the largest owners of high-quality urban and suburban
office buildings nationwide. Both investments are particularly
attractive because their national presence renders them less vulnerable
to regional business cycles and their large size allows effective cost
structures. Non-executive Chairman Samuel Zell provides innovative
leadership and strategic vision to both companies, which are known for
their excellent management teams.
Pharmaceutical company Pharmacia & Upjohn, a long-term holding, provided
a boost when its shares appreciated on news of a planned merger with
Monsanto. Monsanto's biotechnology division was weakened from strong
resistance to bioengineered food products, and yet the company
maintained a winning hand in pharmaceuticals with the popular arthritis
drug Celebrex as its trump card. The Monsanto/Pharmacia & Upjohn merger
was completed near the end of your fund's fiscal year, and share prices
have continued to climb, as investors recognize the benefits of the
deal. The company's name has changed to Pharmacia Corp.
Hewlett-Packard (HP) was one of the best-performing stocks in the
portfolio during the period. Well known for its popular brand of PC
printers, personal computers, and measurement devices, HP became an
attractive value play when its Agilent Technologies division was
separated from its core business and spun off to a welcoming public.
This successful restructuring process unlocked a good deal of
shareholder value and put the company back on the growth curve. A
dynamic new CEO has improved investor confidence in HP's future. While
these and other stocks mentioned in this report were viewed favorably at
the end of the fiscal period, all are subject to review and adjustment
in accordance with your fund's investment strategy and may vary in the
future.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Banking 11.9%
Oil and gas 9.3%
Regional Bells 7.0%
Electric utilities 5.7%
Financial 5.5%
Footnote reads:
*Based on net assets as of 4/30/00. Holdings will vary over time.
* STYLE CONSISTENCY MAINTAINED UNDER ALL CIRCUMSTANCES
Because the market is so unpredictable, it is important to know that
your fund sticks to its stated objective and that you can count on the
fund to provide diversification to your portfolio. Although maintaining
a strict value discipline in a growth-oriented market can be a little
like swimming upstream, it can also serve as an anchor when the
direction of the current changes or during times of severe market
turbulence. Your fund's broadly diversified portfolio of
large-capitalization stocks with low price/earnings ratios and high
yields is among the most conservative and traditional of Putnam's value
fund offerings. You can expect your fund to be significantly less
volatile than the overall market, an attribute we believe cautious
investors can fully appreciate in light of recent and unprecedented
market instability.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
ExxonMobil Corp.
Oil and gas
SBC Communications, Inc.
Regional Bells
AT&T Corp.
Telecommunications
Fannie Mae
Financial
Citigroup Inc.
Financial
Bell Atlantic Corp.
Regional Bells
Royal Dutch Petroleum Co. ADR
Oil and gas
Bank of America Corp.
Banking
Hewlett-Packard Co.
Computers
BellSouth Corp.
Regional Bells
Footnote reads:
These holdings represent 19.7% of the fund's net assets as of 4/30/00.
Portfolio holdings will vary over time.
David and Jeanne believe we are likely to experience more balance in the
stock market over the course of the year. Although it is not clear that
value stocks are making a sustained comeback, there are signs we may
have reached the end of an unbridled frenzy over growth stocks. We
believe a classic value fund such as yours plays an important role in a
diversified investment program. As such, your fund is well positioned to
reward investors with positive performance and less risk over the long
term.
* UPCOMING TRANSITION
This is my last letter to you and other Putnam Value Fund shareholders.
After more than 30 years as Chairman of the Trustees and President of
the Putnam Funds, the time has come for me to step aside. As of July 1,
2000, John Hill will become Chairman. John is currently an independent
Trustee and has served on the Board for the past 14 years. In addition,
my son, George Putnam, III, will take on the role of President. I am
confident that the leadership of the funds will be in exceptionally
strong hands. I will become Chairman Emeritus, remain a shareholder,
and stay in close touch with the funds.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 21, 2000
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 4/30/00, there is no guarantee the fund will
continue to hold these securities in the future.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Value Fund is designed for investors seeking capital appreciation
primarily through investments in undervalued stocks.
TOTAL RETURN FOR PERIODS ENDED 4/30/00
Russell 1000 Consumer
NAV POP Value Index price index
---------------------------------------------------------------------
1 year -10.13% -15.32% -3.88% 3.01%
---------------------------------------------------------------------
Life of fund
(since 5/4/98) 1.41 -4.44 9.66 5.35
Annual average 0.70 -2.26 4.72 2.64
---------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. All returns assume reinvestment of
distributions at NAV. Returns for class A shares reflect the current
maximum initial sales charge of 5.75%. Investment return and principal
value will fluctuate so that an investor's shares when redeemed may be
worth more or less than their original cost. Performance data reflects
an expense limitation currently in effect. Without it, total returns
would have been lower.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 4/30/00
------------------------------------------------------
Distributions (number) 1
------------------------------------------------------
Income $0.102
------------------------------------------------------
Capital gains
Long-term 0.107
------------------------------------------------------
Total $0.209
------------------------------------------------------
Share value: NAV POP
------------------------------------------------------
4/30/99 $9.47 $10.05
------------------------------------------------------
4/30/00 8.30 8.81
------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 3/31/00 (most recent calendar quarter)
NAV POP
----------------------------------------------
1 year -2.23% -7.90%
----------------------------------------------
Life of fund (since 5/4/98) 1.50 -4.31
Annual average 0.78 -2.28
----------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will
fluctuate so that an investor's shares when redeemed may be worth more
or less than their original cost. Performance data reflects an expense
limitation currently in effect. Without it, total returns would have
been lower.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 5/4/98
Fund's class A Russell 1000 Consumer price
Date shares at POP Value Index index
5/4/98 9,434 10,000 10,000
4/30/99 10,634 11,409 10,228
4/30/00 $9,556 $10,966 $10,535
Footnote reads:
Past performance is no assurance of future results. See first page of
performance section for performance calculation method.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested
all distributions in the fund.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge for class A
shares.
COMPARATIVE BENCHMARKS
Russell 1000 [REGISTRATION MARK] Value Index measures the performance of
those Russell 1000 companies with lower price-to-book ratios and lower
forecasted growth values. Securities indexes assume reinvestment of all
distributions and interest payments and do not take in account brokerage
fees or taxes. Securities in the fund do not match those in the indexes
and performance of the fund will differ. It is not possible to invest
directly in an index.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report, preceded by the Report of independent
accountants, 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.
REPORT OF INDEPENDENT ACCOUNTANTS
For the fiscal year ended April 30, 2000
To the Trustees and Shareholders of
Putnam Value Fund
(a series of Putnam Funds Trust)
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of
Putnam Value Fund (the "fund") at April 30, 2000, and the results of its
operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements")
are the responsibility of the fund's management; our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation
of investments owned April 30, 2000 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 9, 2000
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
April 30, 2000
COMMON STOCKS (97.5%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace/Defense (1.5%)
-------------------------------------------------------------------------------------------------------------------
615 Boeing Co. $ 24,408
500 Lockheed Martin Corp. 12,438
----------------
36,846
Airlines (0.4%)
-------------------------------------------------------------------------------------------------------------------
200 Delta Air Lines, Inc. 10,550
Automotive (0.9%)
-------------------------------------------------------------------------------------------------------------------
400 Ford Motor Co. 21,875
Banking (11.9%)
-------------------------------------------------------------------------------------------------------------------
760 Bank of America Corp. 37,240
750 BB&T Corp. 19,969
700 Charter One Financial, Inc. 14,219
260 Chase Manhattan Corp. 18,736
500 Comerica, Inc. 21,188
700 Firstar Corp. 17,413
700 FleetBoston Financial Corp. 24,806
500 Mellon Financial Corp. 16,063
130 Morgan (J.P.) & Co., Inc. 16,689
450 National City Corp. 7,650
500 PNC Bank Corp. 21,813
600 Synovus Financial Corp. 11,138
600 U.S. Bancorp 12,188
150 Wachovia Corp. 9,403
400 Washington Mutual, Inc. 10,225
700 Wells Fargo Co. 28,744
----------------
287,484
Beverage (1.7%)
-------------------------------------------------------------------------------------------------------------------
200 Anheuser-Busch Cos., Inc. 14,113
100 Brown-Forman Corp. Class B 5,456
560 Fortune Brands, Inc. 14,000
300 Pepsi Bottling Group, Inc. (The) 6,469
----------------
40,038
Capital Goods (0.7%)
-------------------------------------------------------------------------------------------------------------------
200 Eaton Corp. 16,800
Chemicals (4.0%)
-------------------------------------------------------------------------------------------------------------------
110 Dow Chemical Co. 12,430
460 du Pont (E.I.) de Nemours & Co., Ltd. 21,821
600 Engelhard Corp. 10,538
250 Minnesota Mining & Manufacturing Co. 21,625
350 PPG Industries, Inc. 19,031
240 Praxair, Inc. 10,665
----------------
96,110
Combined Utilities (0.5%)
-------------------------------------------------------------------------------------------------------------------
350 Constellation Energy Group 11,572
Computers (3.0%)
-------------------------------------------------------------------------------------------------------------------
300 Compaq Computer Corp. 8,775
100 Gateway, Inc. 5,525
270 Hewlett-Packard Co. 36,450
200 IBM Corp. 22,325
----------------
73,075
Conglomerates (0.7%)
-------------------------------------------------------------------------------------------------------------------
200 Honeywell International, Inc. 11,200
100 Tyco International, Ltd. 4,594
----------------
15,794
Consumer Finance (0.8%)
-------------------------------------------------------------------------------------------------------------------
300 Capital One Financial Corp. 13,125
200 MBNA Corp. 5,313
----------------
18,438
Consumer Goods (0.7%)
-------------------------------------------------------------------------------------------------------------------
300 Kimberly-Clark Corp. 17,419
Distribution (0.7%)
-------------------------------------------------------------------------------------------------------------------
450 SYSCO Corp. 16,931
Electric Utilities (5.7%)
-------------------------------------------------------------------------------------------------------------------
470 Carolina Power & Light Co. 17,184
400 Cinergy Corp. 10,700
300 Dominion Resources, Inc. 13,500
709 DPL, Inc. 16,484
390 Duke Energy Corp. 22,425
700 Entergy Corp. 17,806
500 Pacific Gas & Electric Co. 12,969
300 Reliant Energy, Inc. 7,988
565 Texas Utilities Co. 19,033
----------------
138,089
Electrical Equipment (1.3%)
-------------------------------------------------------------------------------------------------------------------
550 Emerson Electric Co. 30,181
Electronics (1.1%)
-------------------------------------------------------------------------------------------------------------------
140 Motorola, Inc. 16,669
230 W W Grainger 9,976
----------------
26,645
Energy (1.6%)
-------------------------------------------------------------------------------------------------------------------
150 Grant Prideco, Inc. (NON) 2,888
200 Schlumberger, Ltd. 15,313
300 Transocean Sedco Forex, Inc. 14,100
150 Weatherford International, Inc. (NON) 6,094
----------------
38,395
Financial (5.5%)
-------------------------------------------------------------------------------------------------------------------
800 Citigroup, Inc. 47,550
800 Fannie Mae 48,250
200 Hartford Life, Inc. 9,850
430 Household International, Inc. 17,953
200 MGIC Investment Corp. 9,563
----------------
133,166
Food (1.6%)
-------------------------------------------------------------------------------------------------------------------
700 Archer Daniels Midland Co. 6,956
310 General Mills, Inc. 11,276
300 Heinz (H.J.) Co. 10,200
670 Sara Lee Corp. 10,050
----------------
38,482
Health Care Services (1.9%)
-------------------------------------------------------------------------------------------------------------------
200 Baxter International, Inc. 13,025
250 CIGNA Corp. 19,938
900 HEALTHSOUTH Corp. (NON) 7,256
250 Mallinckrodt, Inc. 6,719
----------------
46,938
Household Furniture and Appliances (0.4%)
-------------------------------------------------------------------------------------------------------------------
150 Whirlpool Corp. 9,769
Insurance (4.4%)
-------------------------------------------------------------------------------------------------------------------
250 AFLAC, Inc. 12,203
360 Allstate Corp. 8,505
300 American General Corp. 16,800
100 American International Group, Inc. 10,969
300 AON Corp. 8,119
500 Hartford Financial Services Group 26,094
300 Lincoln National Corp. 10,444
500 Torchmark Corp. 12,531
----------------
105,665
Investment Banking/Brokerage (1.9%)
-------------------------------------------------------------------------------------------------------------------
400 Bear Stearns Companies, Inc. (The) 17,150
300 Franklin Resources, Inc. 9,675
450 Paine Webber Group, Inc. 19,744
----------------
46,569
Lodging/Tourism (1.0%)
-------------------------------------------------------------------------------------------------------------------
330 Marriott International, Inc. Class A 10,560
460 Starwood Hotels & Resorts Worldwide, Inc. 13,081
----------------
23,641
Machinery (0.2%)
-------------------------------------------------------------------------------------------------------------------
150 Caterpillar, Inc. 5,916
Manufacturing (0.9%)
-------------------------------------------------------------------------------------------------------------------
330 Illinois Tool Works, Inc. 21,141
Media (0.7%)
-------------------------------------------------------------------------------------------------------------------
400 Disney (Walt) Productions, Inc. 17,325
Metals (0.4%)
-------------------------------------------------------------------------------------------------------------------
150 Alcoa, Inc. 9,731
Natural Gas Utilities (1.0%)
-------------------------------------------------------------------------------------------------------------------
600 Sempra Energy 11,138
340 Williams Cos., Inc. 12,686
----------------
23,824
Oil & Gas (9.3%)
-------------------------------------------------------------------------------------------------------------------
450 BP Amoco Plc ADR (United Kingdom) 22,950
300 Chevron, Inc. 25,538
500 Conoco, Inc. 11,906
442 Conoco, Inc. Class B 10,995
950 ExxonMobil Corp. 73,803
685 Royal Dutch Petroleum Co. ADR (Netherlands) 39,302
270 Tosco Corp. 8,657
200 Total S.A. ADR (France) 15,125
800 Union Pacific Resources Group, Inc. 15,350
----------------
223,626
Paper & Forest Products (2.1%)
-------------------------------------------------------------------------------------------------------------------
500 Mead Corp. 17,406
570 Owens-Illinois, Inc. (NON) 7,695
500 Weyerhaeuser Co. 26,719
----------------
51,820
Pharmaceuticals (5.1%)
-------------------------------------------------------------------------------------------------------------------
600 Abbott Laboratories 23,063
500 Bristol-Myers Squibb Co. 26,219
330 Johnson & Johnson 27,225
636 Pharmacia Corp. 31,735
350 Schering-Plough Corp. 14,109
----------------
122,351
Photography/Imaging (1.0%)
-------------------------------------------------------------------------------------------------------------------
300 Eastman Kodak Co. 16,781
300 Xerox Corp. 7,931
----------------
24,712
Publishing (1.0%)
-------------------------------------------------------------------------------------------------------------------
300 McGraw-Hill, Inc. 15,750
200 Tribune Co. 7,775
----------------
23,525
Railroads (1.0%)
-------------------------------------------------------------------------------------------------------------------
600 Union Pacific Corp. 25,275
Real Estate (2.1%)
-------------------------------------------------------------------------------------------------------------------
730 Equity Office Properties Trust (R) 19,847
700 Equity Residential Properties Trust (R) 31,850
----------------
51,697
Regional Bells (7.0%)
-------------------------------------------------------------------------------------------------------------------
700 Bell Atlantic Corp. 41,475
710 BellSouth Corp. 34,568
465 GTE Corp. 31,504
1,400 SBC Communications, Inc. 61,338
----------------
168,885
Retail (2.9%)
-------------------------------------------------------------------------------------------------------------------
300 Albertsons, Inc. 9,769
300 CVS Corp. 13,050
560 Federated Department Stores, Inc. (NON) 19,040
800 K mart Corp. (NON) 6,500
300 Sears, Roebuck & Co. 10,988
500 Staples, Inc. (NON) 9,531
----------------
68,878
Software (0.5%)
-------------------------------------------------------------------------------------------------------------------
200 Computer Associates International, Inc. 11,163
Technology Services (1.0%)
-------------------------------------------------------------------------------------------------------------------
350 Electronic Data Systems Corp. 24,063
Telecommunications (4.8%)
-------------------------------------------------------------------------------------------------------------------
400 ALLTEL Corp. 26,650
1,200 AT&T Corp. 56,014
550 Sprint Corp. 33,825
----------------
116,489
Textiles (0.5%)
-------------------------------------------------------------------------------------------------------------------
800 Shaw Industries, Inc. 12,650
Tobacco (0.7%)
-------------------------------------------------------------------------------------------------------------------
800 Philip Morris Cos., Inc. 17,500
Toys (0.5%)
-------------------------------------------------------------------------------------------------------------------
800 Hasbro, Inc. 12,750
Trucks & Parts (0.3%)
-------------------------------------------------------------------------------------------------------------------
100 Johnson Controls, Inc. 6,331
Waste Management (0.6%)
-------------------------------------------------------------------------------------------------------------------
900 Waste Management, Inc. 14,288
----------------
Total Common Stocks (cost $2,327,790) $ 2,354,412
SHORT-TERM INVESTMENTS (2.7%) (a) (cost $64,000)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$64,000 Interest in $434,310,000 joint repurchase agreement dated
April 28, 2000 with Salomon Smith Barney, Inc. due May 1, 2000
with respect to various U.S. Treasury obligations -- maturity
value of $64,030 for an effective yield of 5.71% $ 64,000
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,391,790) (b) $ 2,418,412
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $2,414,064.
(b) The aggregate identified cost on a tax basis is $2,399,836,
resulting in gross unrealized appreciation and depreciation of $199,710
and $181,134, respectively, or net unrealized appreciation of $18,576.
(NON) Non-income-producing security.
(R) Real Estate Investment Trust.
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
April 30, 2000
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $2,391,790) (Note 1) $2,418,412
-------------------------------------------------------------------------------------------
Cash 988
-------------------------------------------------------------------------------------------
Dividends and interest receivable 3,425
-------------------------------------------------------------------------------------------
Receivable for securities sold 7,831
-------------------------------------------------------------------------------------------
Receivable from Manager (Note 2) 4,125
-------------------------------------------------------------------------------------------
Total assets 2,434,781
Liabilities
-------------------------------------------------------------------------------------------
Payable for securities purchased 15,036
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 99
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 739
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 3
-------------------------------------------------------------------------------------------
Other accrued expenses 4,840
-------------------------------------------------------------------------------------------
Total liabilities 20,717
-------------------------------------------------------------------------------------------
Net assets $2,414,064
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $2,456,686
-------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 9,251
-------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (78,495)
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 26,622
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $2,414,064
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per share
($2,414,064 divided by 290,761 shares) $8.30
-------------------------------------------------------------------------------------------
Offering price per share (100/94.25 of $8.30)* $8.81
-------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales, the offering price is reduced.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended April 30, 2000
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $18) $ 49,329
-------------------------------------------------------------------------------------------
Interest 993
-------------------------------------------------------------------------------------------
Total investment income 50,322
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 15,633
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 3,525
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 2,397
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 40
-------------------------------------------------------------------------------------------
Reports to shareholders 6,335
-------------------------------------------------------------------------------------------
Registration fees 63
-------------------------------------------------------------------------------------------
Auditing 28,265
-------------------------------------------------------------------------------------------
Legal 3,841
-------------------------------------------------------------------------------------------
Postage 34
-------------------------------------------------------------------------------------------
Other 29
-------------------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 2) (37,829)
-------------------------------------------------------------------------------------------
Total expenses 22,333
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (3,088)
-------------------------------------------------------------------------------------------
Net expenses 19,245
-------------------------------------------------------------------------------------------
Net investment income 31,077
-------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (44,854)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the year (212,733)
-------------------------------------------------------------------------------------------
Net loss on investments (257,587)
-------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(226,510)
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
For the period
May 4, 1998
Year (commencement
ended of operations)
April 30 to April 30
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 31,077 $ 28,818
--------------------------------------------------------------------------------------------------
Net realized loss on investments (44,854) (7,028)
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (212,733) 239,355
--------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (226,510) 261,145
--------------------------------------------------------------------------------------------------
Distributions to shareholders
--------------------------------------------------------------------------------------------------
From net investment income (25,503) (25,001)
--------------------------------------------------------------------------------------------------
In excess of net realized gain on investments (26,753) --
--------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 335,251 121,435
--------------------------------------------------------------------------------------------------
Total increase in net assets 56,485 357,579
Net assets
--------------------------------------------------------------------------------------------------
Beginning of year (Note 5) 2,357,579 2,000,000
--------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $9,251 and $3,817, respectively) $2,414,064 $2,357,579
--------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
----------------------------------------------------------------
Year For the period
Per-share ended May 4, 1998+
operating performance April 30 to April 30
----------------------------------------------------------------
2000 1999
----------------------------------------------------------------
Net asset value,
beginning of period $9.47 $8.50
----------------------------------------------------------------
Investment operations
----------------------------------------------------------------
Net investment income (a)(d) .12 .12
----------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.08) .96
----------------------------------------------------------------
Total from
investment operations (.96) 1.08
----------------------------------------------------------------
Less distributions:
----------------------------------------------------------------
From net
investment income (.10) (.11)
----------------------------------------------------------------
In excess of net
realized gain on investments (.11) --
----------------------------------------------------------------
Total distributions (.21) (.11)
----------------------------------------------------------------
Net asset value,
end of period $8.30 $9.47
----------------------------------------------------------------
Ratios and supplemental data
----------------------------------------------------------------
Total return at
net asset value (%)(b) (10.13) 12.84*
----------------------------------------------------------------
Net assets, end of period
(in thousands) $2,414 $2,358
----------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c)(d) 1.00 .99*
----------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(d) 1.39 1.46*
----------------------------------------------------------------
Portfolio turnover (%) 98.74 117.02*
----------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund reflect a reduction of
$0.15 and $0.09 per share for the periods ended April 30, 2000 and April
30, 1999, respectively (Note 2).
NOTES TO FINANCIAL STATEMENTS
April 30, 2000
Note 1
Significant accounting policies
Putnam Value Fund (the "fund") is a series of Putnam Funds Trust (the
"trust") which is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment company.
The objective of the fund is to seek capital appreciation, and as a
secondary objective, current income by investing primarily in common
stocks of U.S. companies that Putnam Investment Management, Inc.
("Putnam Management"), the fund's manager, a wholly-owned subsidiary of
Putnam Investments, Inc. believes are undervalued in relation to
underlying asset values or earnings potential and have the potential of
long-term appreciation.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities 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. 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 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.
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 year ended
April 30, 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. These differences include temporary and permanent
differences of losses on wash sale transactions, post-October loss
deferrals, nontaxable dividends and book amortization/accretion
adjustments. Reclassifications are made to the fund's capital accounts
to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations. For
the year ended April 30, 2000, the fund reclassified $140 to decrease
undistributed net investment income with a decrease to accumulated net
realized losses of $140. The calculation of net investment income per
share in the financial highlights table excludes these adjustments.
H) Expenses of the trust Expenses directly charged or attributable to
any fund will be paid from the assets of that fund. Generally, expenses
of the trust will be allocated among and charged to the assets of each
fund on a basis that the Trustees deem fair and equitable, which may be
based on the relative assets of each fund or the nature of the services
performed and relative applicability to each fund.
Note 2
Management fee, administrative
services, and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.70% of the
first $500 million of the fund's average net assets, 0.60% of the next
$500 million, 0.55% of the next $500 million, 0.50% of the next $5
billion, 0.475% of the next $5 billion, 0.455% of the next $5 billion,
0.44% of the next $5 billion, and 0.43% thereafter.
Putnam Management has agreed to limit its compensation (and, to the
extent necessary, bear other expenses) through April 30, 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 1.00% of the fund's average net
assets.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended April 30, 2000, fund expenses were reduced by $3,088
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 Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments, Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plan provides for payment by
the fund to Putnam Mutual Funds Corp. at an annual rate of up to 0.35%
of the fund's average net assets. The fund is not currently making any
payments pursuant to the Plan.
For the year ended April 30, 2000, Putnam Mutual Funds Corp., acting
as underwriter received no net commissions from the sale of class A
shares. A deferred sales charge of up to 1% is assessed on certain
redemptions of class A shares. For the year ended April 30, 2000, Putnam
Mutual Funds Corp., acting as underwriter received no monies on class A
redemptions.
Note 3
Purchases and sales of securities
During the year ended April 30, 2000, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $2,415,274 and $2,123,219, respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Capital shares
At April 30, 2000, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended April 30, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 36,134 $289,216
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 6,342 52,256
---------------------------------------------------------------------------
42,476 341,472
Shares
repurchased (744) (6,221)
---------------------------------------------------------------------------
Net increase 41,732 $335,251
---------------------------------------------------------------------------
For the period May 4, 1998
(commencement of operations) to
April 30, 1999
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 10,687 $ 96,474
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,053 25,001
---------------------------------------------------------------------------
13,740 121,475
Shares
repurchased (5) (40)
---------------------------------------------------------------------------
Net increase 13,735 $121,435
---------------------------------------------------------------------------
Note 5
Initial capitalization and offering
of shares
The trust was established as a Massachusetts business trust on January
22, 1996. During the period January 22, 1996 to May 4, 1998, the fund
had no operations other than those related to organizational matters,
including the initial capital contribution of $2,000,000 and the
issuance of 235,294 shares to Putnam Mutual Funds Corp. on May 4, 1998.
At April 30, 2000, Putnam Investments, Inc. owned 244,355 shares of the
fund (84.0% of class A shares outstanding), valued at $2,028,147.
FEDERAL TAX INFORMATION
(Unaudited)
The fund has designated 84.75% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The Form 1099 you receive in January 2001 will show the tax status of
all distributions paid to your account in calendar 2000.
FUND INFORMATION
WEB SITE
www.putnaminv.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
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
Vice President
David L. King
Vice President and Fund Manager
Jeanne L. Mockard
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 Value Fund.
It may also be used as sales literature when preceded or accompanied by
the current prospectus, which gives details of sales charges, investment
objectives, and operating policies of the fund, and the most recent copy
of Putnam's Quarterly Performance Summary. For more information or to
request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site: 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.
61439 21G 6/00
