Putnam
Investment
Fund 98
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
12-31-98
[LOGO: BOSTON * LONDON * TOKYO]
The following report contains a list of your fund's portfolio holdings and
complete financial statements since the fund's inception on 2/17/98.
Additional details, including fund strategy, performance, and managers'
outlook, will be provided in the annual report, which will cover the 12
months ended 6/30/99.
<TABLE>
<CAPTION>
Portfolio of investments owned
December 31, 1998 (Unaudited)
COMMON STOCKS (97.8%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Advertising (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
800 Lamar Advertising Co. (NON) $ 29,800
1,000 Outdoor Systems, Inc. (NON) 30,000
--------------
59,800
Airlines (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
830 Ryanair Holdings, PLC ADR (Ireland) (NON) 31,333
Apparel (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
640 Gucci Group N.V. (Netherlands) 31,120
250 Nike, Inc. 10,141
--------------
41,261
Banks (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
430 Fifth Third Bancorp 30,664
210 Northern Trust Corp. 18,336
--------------
49,000
Basic Industrial Products (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,100 Asyst Technologies, Inc. (NON) 22,413
Broadcasting (3.6%)
- --------------------------------------------------------------------------------------------------------------------------
480 Chancellor Media Corp. (NON) 22,980
1,000 Citadel Communications Corp. (NON) 25,875
1,330 Infinity Broadcasting Corp. Class A (NON) 36,409
700 Univision Communications Inc. Class A (NON) 25,331
--------------
110,595
Business Equipment and Services (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
560 Cintas Corp. 39,445
Business Services (2.8%)
- --------------------------------------------------------------------------------------------------------------------------
200 Interpublic Group Cos. Inc. 15,950
858 NOVA Corp./Georgia (NON) 29,762
200 Paychex, Inc. 10,288
954 Snyder Communications, Inc. (NON) 32,198
--------------
88,198
Cable Television (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,146 USA Networks, Inc. (NON) 37,961
Computer Services (11.0%)
- --------------------------------------------------------------------------------------------------------------------------
142 America Online, Inc. (NON) 22,720
1,400 Aware, Inc. (NON) 38,063
6,030 Capita Group PLC (United Kingdom) 55,374
675 CMG Information Services, Inc. (NON) 71,888
270 Complete Business Solutions, Inc. (NON) 9,146
200 Comverse Technology, Inc. (NON) 14,200
590 IMS Health Inc. 44,508
235 Keane, Inc. (NON) 9,385
1,700 Mylex Corp. (NON) 20,400
970 VeriSign, Inc. (NON) 57,351
--------------
343,035
Computer Software (15.3%)
- --------------------------------------------------------------------------------------------------------------------------
900 Aspect Development, Inc. (NON) 39,881
294 BMC Software, Inc. (NON) 13,101
230 Cadence Design Systems, Inc. (NON) 6,843
170 Citrix Systems, Inc. (NON) 16,501
210 Compuware Corp. (NON) 16,406
350 Concord Communications, Inc. (NON) 19,863
700 Exchange Applications, Inc. (NON) 13,738
320 Gateway 2000, Inc. (NON) 16,380
789 Intuit, Inc. (NON) 57,203
680 Legato Systems, Inc. (NON) 44,838
260 Lycos, Inc. (NON) 14,446
810 New Era of Networks, Inc. (NON) 35,640
1,320 Parametric Technology Corp. (NON) 21,450
800 Peregrine Systems, Inc. (NON) 37,100
2,500 Rogue Wave Software, Inc. (NON) 21,875
877 The Learning Company, Inc. (NON) 22,747
930 TSI International Software, Ltd. (NON) 44,524
125 VERITAS Software Corp. (NON) 7,492
700 Visual Networks, Inc. (NON) 26,250
--------------
476,278
Computers (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
720 Apple Computer, Inc. 29,475
Conglomerates (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
130 Taylor Nelson Sofres PLC (United Kingdom) 165
2,300 Taylor Nelson Sofres PLC 144A (United Kingdom) 2,917
--------------
3,082
Consumer Non Durables (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
530 Luxottica Group S.P.A. ADR (Italy) 6,360
Consumer Services (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
111 Hillenbrand Industries, Inc. 6,313
Education (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
710 Apollo Group, Inc. Class A (NON) 24,051
Electric Utilities (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
530 CalEnergy, Inc. (NON) 18,384
Electronic Components (4.5%)
- --------------------------------------------------------------------------------------------------------------------------
875 Applied Micro Circuits Corp. (NON) 29,723
2,540 Metromedia Fiber Network, Inc. Class A (NON) 85,080
756 Sipex Corp. (NON) 26,555
--------------
141,358
Electronics and Electrical Equipment (3.0%)
- --------------------------------------------------------------------------------------------------------------------------
800 American Power Conversion Corp. (NON) 38,750
530 Applied Materials, Inc. (NON) 22,624
320 KCI Konecranes International PLC (Finland) 14,441
1,800 Nanometrics, Inc. (NON) 14,063
100 Teradyne, Inc. (NON) 4,238
--------------
94,116
Energy-Related (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
450 Advanced Energy Industries, Inc. (NON) 11,250
Entertainment (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
820 SFX Entertainment, Inc. Class A (NON) 44,998
Financial Services (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
220 Concord EFS, Inc. (NON) 9,323
83 Marschollek, Lautenschlaeger und Partner AG (Germany) 47,648
--------------
56,971
Food and Beverages (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
500 Interstate Bakeries Corp. 13,219
Health Care Information Systems (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
100 Eclipsys Corp. 2,900
1,000 Medquist, Inc. (NON) 39,500
--------------
42,400
Home Furnishings (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
760 Select Comfort Corp. (NON) 20,093
Hospital Management and Medical Services (0.1%)
- --------------------------------------------------------------------------------------------------------------------------
119 Advance Paradigm, Inc. (NON) 4,165
Insurance (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
370 AFLAC Inc. 16,280
Manufacturing (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
3,000 American Bank Note Holographics, Inc. (NON) 52,500
Medical Management Services (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
780 American Oncology Resources, Inc. (NON) 11,359
500 Pediatrix Medical Group, Inc. (NON) 29,969
300 Sunrise Assisted Living, Inc. (NON) 15,563
--------------
56,891
Medical Supplies and Devices (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
260 Medtronic, Inc. 19,305
300 Stryker Corp. 16,519
263 Sybron International Corp. (NON) 7,150
740 Thermo Cardiosystems, Inc. (NON) 7,724
--------------
50,698
Networking (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
280 3Com Corp. (NON) 12,548
1,000 Digital River, Inc. (NON) 35,500
700 Entrust Technologies Inc. (NON) 16,713
--------------
64,761
Networking Equipment (4.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,330 Ascend Communications, Inc. (NON) 87,448
500 Concur Technologies, Inc. (NON) 15,250
600 Network Appliance, Inc. (NON) 27,000
--------------
129,698
Office Equipment (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
150 Avery Dennison Corp. 6,759
Oil and Gas (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,830 Input/output, Inc. (NON) 13,382
531 Schlumberger Ltd. 24,492
--------------
37,874
Packaging and Containers (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
300 Sealed Air Corp. (NON) 15,319
Pharmaceuticals (3.9%)
- --------------------------------------------------------------------------------------------------------------------------
550 Inhale Therapeutic Systems (NON) 18,150
100 Merck & Co., Inc. 14,769
700 Sepracor, Inc. (NON) 61,688
860 Vertex Pharmaceuticals, Inc. (NON) 25,585
--------------
120,192
Pharmaceuticals and Biotechnology (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
140 Genentech, Inc. (NON) 11,156
600 Medicis Pharmaceutical Corp. Class A (NON) 35,775
--------------
46,931
Publishing (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
70 Wolters Kluwer N.V. (Netherlands) 14,965
Restaurants (3.1%)
- --------------------------------------------------------------------------------------------------------------------------
800 P.F. Chang's China Bistro, Inc. (NON) 18,200
3,095 PizzaExpress PLC (United Kingdom) 41,145
690 Starbucks Corp. (NON) 38,726
--------------
98,071
Retail (5.2%)
- --------------------------------------------------------------------------------------------------------------------------
480 Borders Group, Inc. (NON) 11,970
60 CompUSA, Inc. (NON) 784
594 Costco Companies, Inc. (NON) 42,879
1,177 Dollar Tree Stores, Inc. (NON) 51,420
547 Kohls Corp. (NON) 33,606
350 Safeway, Inc. (NON) 21,328
--------------
161,987
Semiconductors (4.5%)
- --------------------------------------------------------------------------------------------------------------------------
280 Altera Corp. (NON) 17,045
607 KLA Tencor Corp. (NON) 26,329
630 Linear Technology Corp. 56,424
530 Maxim Integrated Products Inc. (NON) 23,154
345 Novellus Systems, Inc. (NON) 17,078
--------------
140,030
Specialty Consumer Products (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
1,000 Guitar Center, Inc. (NON) 24,625
Telecommunication Equipment (3.3%)
- --------------------------------------------------------------------------------------------------------------------------
1,500 GeoTel Communications Corp. (NON) 55,875
800 Qwest Communications International, Inc. (NON) 40,000
450 Tekelec (NON) 7,453
--------------
103,328
Telecommunications (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
320 Energis PLC, ADR (NON) 35,840
350 Global Crossing Ltd. (NON) 15,794
314 PanAmSat Corp. (NON) 12,226
--------------
63,860
Telephone Services (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
200 RSL Communications, Ltd. Class A (NON) 5,900
Wireless Communications (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
700 American Tower Corp. Class A 20,694
--------------
Total Common Stocks (cost $2,255,082) $ 3,046,917
PREFERRED STOCKS (0.4%)(a) (cost $10,430)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
59 Fresenius Medical Care AG 9.00% pfd. (Germany) $ 12,436
SHORT-TERM INVESTMENTS (2.2%)(a) (cost $70,009)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 70,000 Interest in $456,109,000 joint repurchase agreement
dated December 31, 1998 with Merrill Lynch,
Pierce, Fenner, & Smith, Inc. due January 4, 1999 with
respect to various U.S. Treasury obligations -- maturity
value of $70,037 for an effective yield of 4.80% $ 70,009
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,335,521)(b) $ 3,129,362
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $3,115,708.
(b) The aggregate identified cost on a tax basis is $2,335,521, resulting in gross unrealized appreciation and
depreciation of $838,877 and $45,036, respectively, or net unrealized appreciation of $793,841.
(NON) Non-income-producing security.
ADR after the name of a foreign holding stands for American Depository 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
December 31, 1998 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $2,335,521) (Note 1) $ 3,129,362
- -----------------------------------------------------------------------------------------------
Cash 9,458
- -----------------------------------------------------------------------------------------------
Dividends and interest receivable 431
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 4,736
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 100
- -----------------------------------------------------------------------------------------------
Receivable from Manager (Note 2) 21,583
- -----------------------------------------------------------------------------------------------
Total assets 3,165,670
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 28,709
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 10,222
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 588
- -----------------------------------------------------------------------------------------------
Payable for compensation of trustee (Note 2) 61
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 10
- -----------------------------------------------------------------------------------------------
Other accrued expenses 10,372
- -----------------------------------------------------------------------------------------------
Total liabilities 49,962
- -----------------------------------------------------------------------------------------------
Net assets $3,115,708
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $ 2,401,317
- -----------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (9,278)
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (70,172)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 793,841
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $3,115,708
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per share
($3,115,708 divided by 281,185 shares) $11.08
- -----------------------------------------------------------------------------------------------
Offering price per share (100/94.25 of $11.08)* $11.76
- -----------------------------------------------------------------------------------------------
* 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
Six months ended December 31, 1998 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Interest $ 17
- -----------------------------------------------------------------------------------------------
Dividends 3,976
- -----------------------------------------------------------------------------------------------
Total investment income 3,993
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 9,312
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,516
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 935
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 20
- -----------------------------------------------------------------------------------------------
Reports to shareholders 3,285
- -----------------------------------------------------------------------------------------------
Registration fees 702
- -----------------------------------------------------------------------------------------------
Auditing 16,846
- -----------------------------------------------------------------------------------------------
Legal 1,225
- -----------------------------------------------------------------------------------------------
Other 44
- -----------------------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 2) (21,583)
- -----------------------------------------------------------------------------------------------
Total expenses 13,302
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (31)
- -----------------------------------------------------------------------------------------------
Net expenses 13,271
- -----------------------------------------------------------------------------------------------
Net investment loss (9,278)
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (62,940)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities
in foreign currencies during the period 45
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 388,890
- -----------------------------------------------------------------------------------------------
Net gain on investments 325,995
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $316,717
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
For the period
February 17, 1998
(commencement
Six months ended of operations)
December 31 to June 30
-------------------------------
1998* 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment loss $ (9,278) $ (6,502)
- ---------------------------------------------------------------------------------------------------------------
Net realized loss on investments (62,940) (7,232)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign currencies 388,935 404,906
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 316,717 391,172
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) (156,304) 564,123
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 160,413 955,295
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period (Note 5) 2,955,295 2,000,000
- ---------------------------------------------------------------------------------------------------------------
End of period (including accumulated net
investment loss of $9,278 and $-, respectively) $3,115,708 $2,955,295
- ---------------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share December 31 February 17+
operating performance (Unaudited) to June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $9.87 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (b)(d) (.03) (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.24 1.39
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.21 1.37
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $11.08 $9.87
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return at
net asset value (%)(a) 12.26* 16.12*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,116 $2,955
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b)(c) .50* .37*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%)(b) (.35)* (.25)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 92.07* 72.22*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Reflects an expense limitation in effect during the period. As a result of such limitation,
expenses for the fund reflect a reduction of $0.08 and $0.06 per share, respectively for the periods
ended December 31, 1998 and June 30, 1998. (see Note 2)
(c) Includes amounts paid through expense offset arrangements. (Note 2)
(d) Per share net investment loss has been determined on the basis of the weighted average number
of shares during the period.
</TABLE>
Notes to financial statements
December 31, 1998 (Unaudited)
Note 1
Significant accounting policies
Putnam Investment Fund 98 (the "fund") is a series of Putnam Funds Trust
(the "Trust") which is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment
company. The objective of the fund is to seek long-term growth of capital
by investing primarily in equity securities of companies that Putnam
Investment Management, Inc. ("Putnam Management"), the fund's Manager, a
wholly-owned subsidiary of Putnam Investments, Inc., believes have
potential for capital appreciation which is significantly greater than
that of the market averages.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally
accepted accounting principles and requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price on the principal market in which the securities are
traded, or, if no sales are reported -- as in the case of some securities
traded over-the-counter -- the last reported bid price. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost, which approximates market value, and other investments are
stated at fair value following procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Management. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the market
value of which at the time of purchase is required to be in an amount at
least equal to the resale price, including accrued interest. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty.
Putnam Management is responsible for determining that the value of these
underlying securities is at all times at least equal to the resale price,
including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Interest income is recorded on the accrual basis.
Dividend income is recorded on the ex-dividend date except that certain
dividends from foreign securities are recorded as soon as the fund is
informed of the ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The fund
does not isolate that portion of realized or unrealized gains or losses
resulting from changes in the foreign exchange rate on investments from
fluctuations arising from changes in the market prices of the securities.
Such gains and losses are included with the net realized and unrealized
gain or loss on investments. Net realized gains and losses on foreign
currency transactions represent net realized exchange gains or losses on
closed forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized appreciation
and depreciation of assets and liabilities in foreign currencies arise
from changes in the value of open forward currency contracts and assets
and liabilities other than investments at the period end, resulting from
changes in the exchange rate.
F) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations.
For the six months ended December 31, 1998, the fund had no borrowings
against the line of credit.
G) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
At June 30, 1998, the fund had a capital loss carryover of approximately
$7,232 available to offset future net capital gain, if any, which will
expire on June 30, 2006.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations.
I) Expenses of the trust Expenses directly charged or attributable to any
fund will be paid from the assets of that fund. Generally, expenses of the
trust will be allocated among and charged to the assets of each fund on a
basis that the Trustees deem fair and equitable, which may be based on the
relative assets of each fund or the nature of the services performed and
relative applicability to each fund.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid 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 July 31, 1999, to the extent that
expenses of the fund (exclusive of brokerage commissions, interest, taxes,
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 six months ended December 31, 1998, fund expenses were reduced by
$31 under expense offset arrangements with PFTC. Investor servicing and
custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized in
connection with the expense offset arrangements in an income producing
asset if it had not entered into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $100 has
been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
in the fund and are invested in certain Putnam funds until distribution in
accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension Plan
are equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund is
included in Compensation of Trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
The fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940. The purpose of the Plan is
to compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments, Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plan provides for payment by
the fund to Putnam Mutual Funds Corp. at an annual rate of up to 0.35% of
the fund's average net assets. The fund is not currently making any
payments pursuant to the plan.
For the six months ended December 31, 1998, Putnam Mutual Funds Corp.,
acting as underwriter received no net commissions from the sale of shares
of the fund. A deferred sales charge of up to 1% is assessed on certain
redemptions of shares. For the six months ended December 31, 1998, Putnam
Mutual Funds Corp., acting as underwriter received no monies on
redemptions.
Note 3
Purchase and sales of securities
During the six months ended December 31, 1998, purchases and sales of
investment securities other than short-term investments aggregated
$2,396,207 and $2,578,653, respectively. There were no purchases and sales
of U.S. government obligations. In determining the net gain or loss on
securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Capital shares
At December 31, 1998, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended
December 31, 1998
- -----------------------------------------------------------------------------
Shares Amount
- -----------------------------------------------------------------------------
Shares sold 11,671 $ 112,266
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
11,671 112,266
Shares
repurchased (30,013) (268,570)
- -----------------------------------------------------------------------------
Net decrease (18,342) $(156,304)
- -----------------------------------------------------------------------------
For the period
February 17, 1998
(commencement
of operations)
to June 30, 1998
- -----------------------------------------------------------------------------
Shares Amount
- -----------------------------------------------------------------------------
Shares sold 77,395 $ 687,677
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
77,395 687,677
Shares
repurchased (13,162) (123,554)
- -----------------------------------------------------------------------------
Net increase 64,233 $ 564,123
- -----------------------------------------------------------------------------
Note 5
Initial capitalization and
offering of shares
The fund was established as a Massachusetts business trust on January 22,
1996. During the period January 22, 1996 to February 17, 1998, the fund
had no operations other than those related to organizational matters,
including the initial capital contribution of $2,000,000 and the issuance
of 235,294 shares to Putnam Mutual Funds Corp., a wholly-owned subsidiary
of Putnam Investments, Inc. on February 13, 1998.
At December 31, 1998, Putnam Investments, Inc. owned 235,294 shares of the
fund (83.7% of shares outstanding), valued at $2,607,058.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
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
Charles Swanberg
Vice President and Fund Manager
Roland Gillis
Vice President and Fund Manager
John R. Verani
Vice President
Richard A. Monaghan
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Investment
Fund 98. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' website:
http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
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