Putnam 811-7513
Technology
Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
7-31-02
[GRAPHIC OMITTED: TECH DOG]
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III]
Dear Fellow Shareholder:
Putnam Technology Fund continued to feel the effects of investors'
disaffection with stocks as it closed its semiannual period on July 31,
2002, with a loss. This economic and market climate has given Putnam
pause and after lengthy discussions and working sessions between
Management and the Board of Trustees, your Trustees agreed to merge
several funds, including your fund.
Putnam believes the merger of these funds will provide shareholders with
a product that will play a consistent role in a broader investment plan.
Following a shareholder vote approving the merger, your fund was merged
into Putnam Voyager Fund II, which has a similar investment objective
and strategy.
These are challenging times for equity investors, but history has been
on the side of investors who have dared to weather even sustained
periods of market retreat. We value our association with you and look
forward to helping you pursue your investment objectives for many years
to come.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
September 18, 2002
REPORT FROM FUND MANAGEMENT
This fund is managed by the
Putnam Technology Team
The six months ended July 31, 2002, have been painful for most equity
investors, and those invested in the technology sector have certainly
had their share of discouraging news. Over the period, a number of
factors came together to work against Putnam Technology Fund and the
market as a whole. In the first half of the year, the turmoil
surrounding corporate America combined with a sluggish recovery unnerved
many investors. As a result, the short-lived rebound in the markets, and
the technology sector in particular, that occurred during the fourth
quarter of 2001 and the beginning of 2002 all but vanished by March.
Corporations almost universally kept their spending on new technology as
low as possible. Widespread economic turbulence, when added to these
negative factors, had a pronounced negative effect on the stock prices
of technology companies throughout the sector. In such an environment,
continuing losses are no surprise, but that does not make it any easier
for us to report them to you. We would like to point out, however, that
your fund's losses at NAV were less than those sustained by its main
benchmark, the Goldman Sachs Technology Indexes, and by the average fund
in its Lipper category. Please see page 6 for more details.
Total return for 6 months ended 7/31/02
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- -----------------------------------------------------------------------
-38.25% -41.75% -38.50% -41.58% -38.23% -38.84% -38.29% -40.43%
- -----------------------------------------------------------------------
Past performance does not indicate future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 6.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Computers 30.9%
Software 22.9%
Electronics 22.5%
Technology services 10.0%
Communications equipment 9.7%
Footnote reads:
*Based on net assets as of 7/31/02. Holdings will vary over time.
* DEFENSIVE POSITIONING SOUGHT TO LIMIT FUND LOSSES
The technology sector has always been sensitive to economic trends. With
the United States struggling to emerge from recession and capital
spending on technology -- having dropped substantially in 2001 --
remaining basically flat in 2002, fund management positioned your fund
as defensively as possible within the technology sector. At the
beginning of 2002, we concentrated on large companies that are
considered market leaders, but were selling at depressed valuations.
These companies' greater size and scope enabled them to limit their
losses more effectively that their smaller counterparts and our emphasis
on them helped fund performance.
While a portion of the losses the technology sector has endured is a
response to a weak economy and reduced capital spending, there has also
been a general realigning of stock valuations to more accurately reflect
these companies' worth. The "irrational exuberance" that drove
technology stocks to new highs at the end of the 90s, in our opinion,
may not yet be completely factored out of today's prices. Some
technology sector stocks may still be overpriced on a historical basis.
We believe that as the current environment of reduced but stable
spending, along with lower expectations of technology companies
continues, the stronger, more viable businesses will again begin to
thrive as the economy recovers and demand for their products and
services increases.
* ATTRACTIVELY VALUED STOCKS PRODUCED MIXED RESULTS
Our strategy to position the fund defensively led us to consider
holdings in a number of sectors within technology: software and
printing, in particular. We were focusing on low valuations, and the
software sector seemed to be attractively valued relative to technology
stock prices overall. The software sector had room left for declines,
however, and in the second quarter of 2002, after the apparent recovery
began to peter out, many software companies saw their valuations slip
even lower. Your fund was overweighted in software, which consequently
detracted from performance. Some software holdings within the portfolio
recorded gains, such as Microsoft, which was one of your fund's best
performers, but as a whole, our exposure to the software industry
produced negative results.
Our analysis of valuations in the printing portion of the computer
industry proved much more profitable for the fund. Lexmark, a leading
producer of printers and printing supplies, fared well over the period.
Part of their success, which was fairly typical of the industry, was due
to a solid and stable revenue stream from the sale of ink cartridges, an
area of technology spending that proved to be much more consistent than
cyclical.
Fund Profile
Putnam Technology Fund is designed for investors seeking capital
appreciation through investments in common stocks of companies whose
products or services are related to technology. The fund may invest in
companies of all sizes and at different stages of growth across a range
of technology industries.
Another holding that boosted fund performance was Applied Materials, a
semiconductor equipment manufacturer. We purchased stock at what we
believed was an attractive valuation at the beginning of the period;
after the first quarter, however, we sold it as the stock price rose to
what we felt were unreasonable levels, and locked in gains.
* TEAM BELIEVES MORE FAVORABLE ENVIRONMENT IS AHEAD
After more than two straight years of losses, the light at the end of
the tunnel may be approaching for the technology sector. Over-inflated
stock prices within the sector have, by and large, been reduced to more
reasonable levels, a trend that we believe will continue until a true
recovery in the sector takes hold. We feel that the typical seasonal
surge that occurs in the fourth quarter as consumers increase their
spending on electronics for the holidays may be muted this year.
However, we believe 2003 will bring about the beginning of a cyclical
rebound for technology. We anticipate the telecommunications equipment
industry will continue to prove a challenging field for investment, and
may take longer to return to stability than other areas in technology.
Hardware and software companies, for example, we feel are already
attractive investment opportunities given our expectation of a slight
seasonal rebound in the second half of 2002 and a fundamental
improvement in 2003 and beyond. Overall, we believe the vast majority of
the deflating process in technology stocks is over, and although it is
impossible to pinpoint a bottom, we feel the opportunity for growth in
the sector in the coming months could be promising.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Intel Corp.
Electronics
Microsoft Corp.
Software
Hewlett-Packard Co.
Computers
IBM Corp.
Computers
Dell Computer Corp.
Computers
Cisco Systems, Inc.
Communications equipment
Oracle Corp.
Software
Automatic Data Processing, Inc.
Technology services
Texas Instruments, Inc.
Electronics
Lexmark International, Inc.
Computers
Footnote reads:
These holdings represent 62.6% of the fund's net assets as of 7/31/02.
Portfolio holdings will vary over time.
Despite recent losses, we feel the technology sector remains an
important part of any diversified portfolio. Following the approval of
your fund's merger with Putnam Voyager Fund II, the Putnam Large-Cap
Growth and Specialty Growth teams will continue to seek out promising
companies in the technology sector, while providing you with a more
diversified investment.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 7/31/02, there is no guarantee the fund will
continue to hold these securities in the future. The fund invests all or
a portion of its assets in small to midsize companies. Such investments
increase the risk of greater price fluctuations. The fund concentrates
its investments in one group of industries and involves more risk than a
fund that invests more broadly.
The fund is managed by the Putnam Technology Team. The members of the
team are Paul Marrkand (Portfolio Leader), Kenneth Doerr (Portfolio
Member), and Saba Malak (Portfolio Member).
A NOTE ABOUT DUPLICATE MAILINGS
In response to investors' requests, the SEC has modified mailing
regulations for proxy statements, semiannual and annual reports, and
prospectuses. Putnam is now able to send a single copy of these materials
to customers who share the same address. This change will automatically
apply to all shareholders except those who notify us. If you would prefer
to receive your own copy, please call Putnam at 1-800-225-1581.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy.
TOTAL RETURN FOR PERIODS ENDED 7/31/02
Class A Class B Class C Class M
(inception dates) (6/14/00) (6/14/00) (6/14/00) (6/14/00)
NAV POP NAV CDSC NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months -38.25% -41.75% -38.50% -41.58% -38.23% -38.84% -38.29% -40.43%
- ------------------------------------------------------------------------------
1 year -43.64 -46.82 -44.22 -47.01 -43.97 -44.53 -43.86 -45.76
- ------------------------------------------------------------------------------
Life of fund -73.41 -74.95 -73.88 -74.67 -73.77 -73.77 -73.65 -74.57
Annual average -46.28 -47.76 -46.73 -47.49 -46.62 -46.62 -46.51 -47.40
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 7/31/02
Goldman Sachs Standard & Poor's
Technology 500[REGISTRATION MARK] Consumer
Indexes Index price index
- ------------------------------------------------------------------------------
6 months -39.72% -18.74% 1.30%
- ------------------------------------------------------------------------------
1 year -44.25 -23.63 1.41
- ------------------------------------------------------------------------------
Life of fund -74.62 -36.22 4.90
Annual average -47.47 -19.03 2.23
- ------------------------------------------------------------------------------
Past performance does not indicate future results. More recent returns
may be less or more than those shown. Investment return and principal
value will fluctuate and you may have a gain or a loss when you sell
your shares.
Performance assumes reinvestment of distributions and does not account
for taxes. Returns at public offering price (POP) for class A and M
shares reflect a sales charge of 5.75% and 3.50%, respectively. Class B
share returns reflect the applicable contingent deferred sales charge
(CDSC), which is 5% in the first year, declining to 1% in the sixth
year, and is eliminated thereafter. Class C shares reflect a 1% CDSC the
first year that is eliminated thereafter. Performance for class B, C,
and M shares before their inception are derived from the historical
performance of class A shares, adjusted for the applicable sales charge
(or CDSC) and higher operating expenses for such shares.
LIPPER INFORMATION:
The average cumulative return for the 408 funds in the Lipper Science &
Technology Funds category over the 6 months ended 7/31/02 was -39.97%.
Over the 1-year and life of fund periods ended 7/31/02, annualized returns
for the category were -45.94% and -47.29%, respectively.
PRICE AND DISTRIBUTION* INFORMATION 6 MONTHS ENDED 7/31/02
Class A Class B Class C Class M
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- ------------------------------------------------------------------------------
1/31/02 $3.66 $3.88 $3.61 $3.61 $3.63 $3.76
- ------------------------------------------------------------------------------
7/31/02 2.26 2.40 2.22 2.23 2.24 2.32
- ------------------------------------------------------------------------------
*The fund did not make any distributions during this period.
TOTAL RETURN FOR PERIODS ENDED 6/30/02 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (6/14/00) (6/14/00) (6/14/00) (6/14/00)
NAV POP NAV CDSC NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months -30.08% -34.12% -30.23% -33.71% -30.42% -31.12% -30.34% -32.79%
- ------------------------------------------------------------------------------
1 year -41.76 -45.08 -42.16 -45.05 -42.16 -42.73 -42.19 -44.27
- ------------------------------------------------------------------------------
Life of fund -70.47 -72.17 -70.94 -71.81 -70.94 -70.94 -70.82 -71.85
Annual average -44.91 -46.49 -45.34 -46.15 -45.34 -45.34 -45.24 -46.19
- ------------------------------------------------------------------------------
Past performance does not indicate future results. More recent returns
may be less or more than those shown. Investment return and principal
value will fluctuate and you may have a gain or a loss when you sell
your shares.
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 price, or value, of one share of a mutual
fund, without a sales charge. NAVs fluctuate with market conditions. The
NAV is calculated by dividing the net value of all the fund's assets by
the number of outstanding shares.
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 and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B or C shares and assumes redemption at the
end of the period. Your fund's class B CDSC declines from a 5% maximum
during the first year to 1% during the sixth year. After the sixth year,
the CDSC no longer applies. The CDSC for class C shares is 1% for one
year after purchase.
Class A shares are generally subject to an initial sales charge and no
sales charge on redemption (except on certain redemptions of shares
bought without an initial sales charge).
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge only if the shares are
redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption (except on certain
redemptions of shares bought without an initial sales charge).
COMPARATIVE BENCHMARKS
Goldman Sachs Technology Indexes* are an unmanaged series of benchmarks
that measure the technology sector.
S &P 500 Index* is an unmanaged index of common stock performance.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Lipper Inc. is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper.
*Indexes assume reinvestment of all distributions and do not account for
fees. Securities and performance of a fund and an index will differ. You
cannot invest directly in an index.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report, as well as the accompanying Notes,
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.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or
loss the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment income
ratios, and portfolio turnover in one summary table, reflecting the five
most recent reporting periods. In a semiannual report, the highlight table
also includes the current reporting period. For open-end funds, a separate
table is provided for each share class.
THE FUND'S PORTFOLIO
July 31, 2002 (Unaudited)
COMMON STOCKS (95.0%) (a)
NUMBER OF SHARES VALUE
Commercial and Consumer Services (1.3%)
- -------------------------------------------------------------------------------------------------------------------
23,600 Paychex, Inc. $620,916
18,700 Tech Data Corp. (NON) 627,385
-------------
1,248,301
Communications Equipment (9.4%)
- -------------------------------------------------------------------------------------------------------------------
422,495 Cisco Systems, Inc. (NON) 5,572,709
26,900 Comverse Technology, Inc. (NON) 214,124
91,700 Nokia OYJ ADR (Finland) 1,137,080
410,000 Nortel Networks Corp. (Canada) (NON) 397,700
54,109 QUALCOMM, Inc. (NON) 1,486,915
241,200 Telefonaktiebolaget LM Ericsson AB ADR (Sweden) (NON) 231,552
-------------
9,040,080
Computers (30.9%)
- -------------------------------------------------------------------------------------------------------------------
28,400 Brocade Communications Systems, Inc. (NON) 532,500
274,700 Dell Computer Corp. (NON) 6,848,271
274,300 EMC Corp. (NON) 2,057,250
505,110 Hewlett-Packard Co. 7,147,307
100,550 IBM Corp. 7,078,720
71,600 Lexmark International, Inc. (NON) 3,499,808
27,900 NCR Corp. (NON) 734,049
62,700 Network Appliance, Inc. (NON) 530,442
331,700 Sun Microsystems, Inc. (NON) 1,300,264
-------------
29,728,611
Electronics (22.5%)
- -------------------------------------------------------------------------------------------------------------------
24,200 Analog Devices, Inc. (NON) 583,220
15,900 Celestica, Inc. (Canada) (NON) 341,055
489,400 Intel Corp. 9,195,827
15,400 International Rectifier Corp. (NON) 355,124
19,600 Jabil Circuit, Inc. (NON) 348,684
46,800 Linear Technology Corp. 1,267,344
24,300 Marvell Technology Group, Ltd. (Bermuda) (NON) 461,700
48,400 Maxim Integrated Products, Inc. (NON) 1,702,712
286,000 Motorola, Inc. 3,317,600
174,000 Texas Instruments, Inc. 4,028,100
-------------
21,601,366
Software (22.0%)
- -------------------------------------------------------------------------------------------------------------------
19,300 Adobe Systems, Inc. 462,428
18,700 Amdocs, Ltd. (Guernsey) (NON) 137,445
48,600 BEA Systems, Inc. (NON) 269,730
107,200 BMC Software, Inc. (NON) 1,441,840
141,300 Computer Associates International, Inc. 1,319,742
24,800 Electronic Arts, Inc. (NON) 1,492,464
19,800 Mercury Interactive Corp. (NON) 507,276
169,600 Microsoft Corp. (NON) 8,137,408
437,100 Oracle Corp. (NON) 4,374,934
49,700 PeopleSoft, Inc. (NON) 893,606
77,100 Rational Software Corp. (NON) 518,112
107,900 Siebel Systems, Inc. (NON) 1,014,260
35,800 VERITAS Software Corp. (NON) 602,514
-------------
21,171,759
Technology Services (8.9%)
- -------------------------------------------------------------------------------------------------------------------
114,600 Automatic Data Processing, Inc. 4,273,434
39,800 BISYS Group, Inc. (The) (NON) 919,380
21,600 Convergys Corp. (NON) 326,592
60,900 Electronic Data Systems Corp. 2,239,293
80,742 KPMG Consulting, Inc. (NON) 851,021
-------------
8,609,720
-------------
Total Common Stocks (cost $128,345,219) $91,399,837
CONVERTIBLE PREFERRED STOCKS (3.4%) (a) (NON)
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------
125,000 Bowstreet, Inc. Ser. D, 7.00% cum. cv. pfd.
(acquired 10/25/00, cost $1,500,000) (RES) $93,750
185,528 Centerpoint Broadband Technologies, Inc. Ser. D,
$0.86 cv. pfd. (acquired 10/19/00, cost $1,999,992) (RES) 1,855
319,387 CommVault Systems zero % cv. pfd. (acquired 1/30/02,
cost $1,000,001) (RES) 948,579
97,860 Convergent Networks, Inc. Ser. D, zero % cv. pfd.
(acquired 9/19/00, cost $1,600,011) (RES) 161,469
70,818 Epicentric, Inc. Ser. D, $0.381 cv. pfd. (acquired 3/7/01,
cost $337,094) (RES) 265,568
170,455 Hyperchip, Inc. Ser. C, 8.00% cv. pfd. (acquired 9/5/00,
cost $150,000) (RES) 37,500
50,000 Lightwave Microsystems Corp. Ser. G, $0.80 cv. pfd.
(acquired 10/19/00, cost $500,000) (RES) 25,000
227,459 MarketSoft Software Corp. Ser. D, zero % cv. pfd.
(acquired 12/7/00, cost $1,110,000) (RES) 454,918
294,117 NuTool, Inc. Ser. C, $0.27 cv. pfd. (acquired 11/15/00,
cost $999,998) (RES) 1,149,997
122,060 Totality Corp. Ser. D, $0.346 cum. cv. pfd. (acquired 7/27/00,
cost $528,166) (RES) 48,824
30,246 Vivace Networks, Inc. Ser. C, $0.583 cv. pfd. (acquired 9/7/00,
cost $293,991) (RES) 88,318
-------------
Total Convertible Preferred Stocks (cost $10,019,253) $3,275,778
SHORT-TERM INVESTMENTS (2.7%) (a)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------
$476,396 Short-term investments held as collateral for loaned securities
with yields ranging from 1.77% to 2.03% and due dates
ranging from August 1, 2002 to September 19, 2002 (d) $476,140
2,128,187 Short-term investments held in Putnam commingled cash account
with yields ranging from 1.70% to 1.84% and due dates ranging
from August 1, 2002 to September 25, 2002 (d) 2,128,187
-------------
Total Short-Term Investments (cost $2,604,327) $2,604,327
- -------------------------------------------------------------------------------------------------------------------
Total Investments (cost $140,968,799) (b) $97,279,942
- -------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $96,170,809.
(b) The aggregate identified cost on a tax basis is $162,188,902,
resulting in gross unrealized appreciation and depreciation of
$1,187,717 and $66,096,677, respectively, or net unrealized depreciation
of $64,908,960.
(NON) Non-income-producing security.
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at July 31, 2002 was
$3,275,778 or 3.4% of net assets.
(d) See footnote 1 to the financial statements.
ADR after the name of a foreign holding stands for American
Depositary Receipts representing ownership of foreign securities on
deposit with a custodian bank.
The accompanying notes are an integral part of these financial statements.
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2002 (Unaudited)
Assets
- -------------------------------------------------------------------------------------------
Investments in securities, at value, including $450,633 of securities on loan
(identified cost $140,968,799) (Note 1) $97,279,942
- -------------------------------------------------------------------------------------------
Dividends, interest and other receivables 11,446
- -------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 42,185
- -------------------------------------------------------------------------------------------
Total assets 97,333,573
Liabilities
- -------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 55,863
- -------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 157,276
- -------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 86,668
- -------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 44,151
- -------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 4,482
- -------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 538
- -------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 50,006
- -------------------------------------------------------------------------------------------
Collateral on securities loaned, at value (Note 1) 476,140
- -------------------------------------------------------------------------------------------
Other accrued expenses 287,640
- -------------------------------------------------------------------------------------------
Total liabilities 1,162,764
- -------------------------------------------------------------------------------------------
Net assets $96,170,809
Represented by
- -------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) 343,662,218
- -------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (1,510,269)
- -------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (202,292,283)
- -------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (43,688,857)
- -------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares
outstanding $96,170,809
Computation of net asset value and offering price
- -------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($50,806,369 divided by 22,469,139 shares) $2.26
- -------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $2.26)* $2.40
- -------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($35,760,043 divided by 16,081,426 shares)** $2.22
- -------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($5,722,762 divided by 2,571,035 shares)** $2.23
- -------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($1,706,397 divided by 762,466 shares) $2.24
- -------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $2.24)* $2.32
- -------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($2,175,238 divided by 959,856 shares) $2.27
- -------------------------------------------------------------------------------------------
* 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.
** Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
STATEMENT OF OPERATIONS
Six months ended July 31, 2002 (Unaudited)
Investment income:
- -------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $2,040) $201,579
- -------------------------------------------------------------------------------------------
Interest 49,048
- -------------------------------------------------------------------------------------------
Securities lending 2,698
- -------------------------------------------------------------------------------------------
Total investment income 253,325
Expenses:
- -------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 703,725
- -------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 207,716
- -------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 7,546
- -------------------------------------------------------------------------------------------
Administrative services (Note 2) 3,791
- -------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 94,145
- -------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 255,085
- -------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 43,333
- -------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 9,890
- -------------------------------------------------------------------------------------------
Reports to shareholders 97,305
- -------------------------------------------------------------------------------------------
Postage 127,780
- -------------------------------------------------------------------------------------------
Other 218,154
- -------------------------------------------------------------------------------------------
Total expenses 1,768,470
- -------------------------------------------------------------------------------------------
Expense reduction (Note 2) (4,876)
- -------------------------------------------------------------------------------------------
Net expenses 1,763,594
- -------------------------------------------------------------------------------------------
Net investment loss (1,510,269)
- -------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (19,308,240)
- -------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (45,171,677)
- -------------------------------------------------------------------------------------------
Net loss on investments (64,479,917)
- -------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(65,990,186)
- -------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
STATEMENT OF CHANGES IN NET ASSETS
Six months ended Year ended
July 31 January 31
2002* 2002
- -------------------------------------------------------------------------------------------------------
Decrease in net assets
- -------------------------------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------------------------------
Net investment loss $(1,510,269) $(3,186,372)
- -------------------------------------------------------------------------------------------------------
Net realized loss on investments (19,308,240) (98,901,722)
- -------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (45,171,677) (4,100,852)
- -------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (65,990,186) (106,188,946)
- -------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) (19,280,216) 48,848,077
- -------------------------------------------------------------------------------------------------------
Total decrease in net assets (85,270,402) (57,340,869)
Net assets
- -------------------------------------------------------------------------------------------------------
Beginning of period 181,441,211 238,782,080
- -------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment loss
of $1,510,269 and $--, respectively) $96,170,809 $181,441,211
- -------------------------------------------------------------------------------------------------------
* Unaudited.
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS A
- ---------------------------------------------------------------------------
Six months
ended Year For the period
Per-share July 31 ended June 14, 2000+
operating performance (Unaudited) January 31 to January 31
- ---------------------------------------------------------------------------
2002 2002 2001
- ---------------------------------------------------------------------------
Net asset value,
beginning of period $3.66 $6.31 $8.50
- ---------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------
Net investment loss (a) (.03) (.06) (.07)
- ---------------------------------------------------------------------------
Net realized and unrealized
loss on investments (1.37) (2.59) (2.12)
- ---------------------------------------------------------------------------
Total from
investment operations: (1.40) (2.65) (2.19)
- ---------------------------------------------------------------------------
Net asset value,
end of period $2.26 $3.66 $6.31
- ---------------------------------------------------------------------------
Total return at
net asset value (%)(b) (38.25)* (42.00) (25.76)*
- ---------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------
Net assets, end of period
(in thousands) $50,806 $97,486 $125,570
- ---------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.09* 1.79 1.16*
- ---------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.91)* (1.50) (.98)*
- ---------------------------------------------------------------------------
Portfolio turnover (%) 33.65* 193.95 185.25*
- ---------------------------------------------------------------------------
+ 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 and brokerage service
arrangements (Note 2).
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS B
- ---------------------------------------------------------------------------
Six months
ended Year For the period
Per-share July 31 ended June 14, 2000+
operating performance (Unaudited) January 31 to January 31
- ---------------------------------------------------------------------------
2002 2002 2001
- ---------------------------------------------------------------------------
Net asset value,
beginning of period $3.61 $6.28 $8.50
- ---------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------
Net investment loss (a) (.04) (.09) (.10)
- ---------------------------------------------------------------------------
Net realized and unrealized
loss on investments (1.35) (2.58) (2.12)
- ---------------------------------------------------------------------------
Total from
investment operations: (1.39) (2.67) (2.22)
- ---------------------------------------------------------------------------
Net asset value,
end of period $2.22 $3.61 $6.28
- ---------------------------------------------------------------------------
Total return at
net asset value (%)(b) (38.50)* (42.52) (26.12)*
- ---------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------
Net assets, end of period
(in thousands) $35,760 $64,608 $91,914
- ---------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.47* 2.54 1.63*
- ---------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (1.28)* (2.25) (1.45)*
- ---------------------------------------------------------------------------
Portfolio turnover (%) 33.65* 193.95 185.25*
- ---------------------------------------------------------------------------
+ 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 and brokerage service
arrangements (Note 2).
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS C
- ---------------------------------------------------------------------------
Six months
ended Year For the period
Per-share July 31 ended June 14, 2000+
operating performance (Unaudited) January 31 to January 31
- ---------------------------------------------------------------------------
2002 2002 2001
- ---------------------------------------------------------------------------
Net asset value,
beginning of period $3.61 $6.28 $8.50
- ---------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------
Net investment loss (a) (.04) (.09) (.10)
- ---------------------------------------------------------------------------
Net realized and unrealized
loss on investments (1.34) (2.58) (2.12)
- ---------------------------------------------------------------------------
Total from
investment operations: (1.38) (2.67) (2.22)
- ---------------------------------------------------------------------------
Net asset value,
end of period $2.23 $3.61 $6.28
- ---------------------------------------------------------------------------
Total return at
net asset value (%)(b) (38.23)* (42.52) (26.12)*
- ---------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------
Net assets, end of period
(in thousands) $5,723 $11,869 $16,395
- ---------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.47* 2.54 1.63*
- ---------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (1.28)* (2.25) (1.45)*
- ---------------------------------------------------------------------------
Portfolio turnover (%) 33.65* 193.95 185.25*
- ---------------------------------------------------------------------------
+ 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 and brokerage service
arrangements (Note 2).
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS M
- ---------------------------------------------------------------------------
Six months
ended Year For the period
Per-share July 31 ended June 14, 2000+
operating performance (Unaudited) January 31 to January 31
- ---------------------------------------------------------------------------
2002 2002 2001
- ---------------------------------------------------------------------------
Net asset value,
beginning of period $3.63 $6.29 $8.50
- ---------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------
Net investment loss (a) (.03) (.08) (.09)
- ---------------------------------------------------------------------------
Net realized and unrealized
loss on investments (1.36) (2.58) (2.12)
- ---------------------------------------------------------------------------
Total from
investment operations: (1.39) (2.66) (2.21)
- ---------------------------------------------------------------------------
Net asset value,
end of period $2.24 $3.63 $6.29
- ---------------------------------------------------------------------------
Total return at
net asset value (%)(b) (38.29)* (42.29) (26.00)*
- ---------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,706 $3,271 $4,903
- ---------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.34* 2.29 1.48*
- ---------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (1.16)* (2.00) (1.28)*
- ---------------------------------------------------------------------------
Portfolio turnover (%) 33.65* 193.95 185.25*
- ---------------------------------------------------------------------------
+ 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 and brokerage service
arrangements (Note 2).
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS Y
- --------------------------------------------------------------
Six months
ended For the period
Per-share July 31 July 2, 2001+
operating performance (Unaudited) to January 31
- --------------------------------------------------------------
2002 2002
- --------------------------------------------------------------
Net asset value,
beginning of period $3.66 $4.31
- --------------------------------------------------------------
Investment operations:
- --------------------------------------------------------------
Net investment loss (a) (.02) (.03)
- --------------------------------------------------------------
Net realized and unrealized
loss on investments (1.37) (.62)
- --------------------------------------------------------------
Total from
investment operations: (1.39) (.65)
- --------------------------------------------------------------
Net asset value,
end of period $2.27 $3.66
- --------------------------------------------------------------
Total return at
net asset value (%)(b) (37.98)* (15.08)*
- --------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------
Net assets, end of period
(in thousands) $2,175 $4,207
- --------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .97* .90*
- --------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.78)* (.75)*
- --------------------------------------------------------------
Portfolio turnover (%) 33.65* 193.95
- --------------------------------------------------------------
+ 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 and brokerage service
arrangements (Note 2).
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
July 31, 2002 (Unaudited)
Note 1
Significant accounting policies
Putnam Technology Fund (the "fund") is one of a series of Putnam Funds
Trust (the "trust") which is registered under the Investment Company Act
of 1940, as amended, as a non-diversified, open-end management
investment company. The fund's investment objective is to seek capital
appreciation. The fund intends to achieve this objective by investing
mainly in common stocks of U.S. companies in the technology industries
that Putnam Investment Management, LLC ("Putnam Management"), the fund's
manager, an indirect wholly-owned subsidiary of Putnam, LLC, believes
offer the opportunity for growth.
The fund offers class A, class B, class C, class M and class Y shares.
Class A shares are sold with a maximum front-end sales charge of 5.75%.
Class B shares, which convert to class A shares after approximately
eight years, do not pay a front-end sales charge but pay a higher
ongoing distribution fee than class A shares, and are subject to a
contingent deferred sales charge, if those shares are redeemed within
six years of purchase. Class C shares are subject to the same fees and
expenses as class B shares, except that class C shares have a one-year
1.00% contingent deferred sales charge and do not convert to class A
shares. Class M shares are sold with a maximum front-end sales charge of
3.50% and pay an ongoing distribution fee that is higher than class A
shares but lower than class B and class C shares. Class Y shares are
sold to certain eligible purchasers including participants in defined
contribution plans (including corporate IRA's), certain college savings
plans, bank trust departments and trust companies and other defined
contribution plans subject to minimum requirements.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if that fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with accounting principles generally accepted in the United States of
America and requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities in 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. For foreign
investments, if trading or events occurring in other markets after the
close of the principal exchange in which the securities are traded are
expected to materially affect the value of the investments, then those
investments are valued, taking into consideration these events, at their
fair value following procedures approved by the Trustees. 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.
B) Joint trading account The fund may transfer uninvested cash balances,
including cash collateral received under security lending arrangements,
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 issuers of high-grade
short-term investments having maturities of up to 397 days for
collateral received under security lending arrangements and up to 90
days for other cash investments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. Putnam Management is responsible for
determining that the value of these underlying securities is at all
times at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). Gains or losses on securities sold are determined
on the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date. Non-cash dividends, if any, are recorded at the fair
market value of the securities received.
E) Security lending The fund may lend securities, through its agent
Citibank N.A., to qualified borrowers in order to earn additional
income. The loans are collateralized by cash and/or securities in an
amount at least equal to the market value of the securities loaned. The
market value of securities loaned is determined daily and any additional
required collateral is allocated to the fund on the next business day.
The risk of borrower default will be borne by Citibank N.A., the fund
will bear the risk of loss with respect to the investment of the cash
collateral. Income from securities lending is included in investment
income on the Statement of operations. At July 31, 2002, the value of
securities loaned amounted to $450,633. The fund received cash
collateral of $476,140 which is pooled with collateral of other Putnam
funds into 33 issuers of high-grade short-term investments.
F) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintains an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended July 31, 2002, 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 January 31, 2002, the fund had a capital loss carryover of
approximately $156,426,000 available to the extent allowed by tax law to
offset future capital gains, if any. The amount of the carryover and the
expiration dates are:
Loss Carryover Expiration
- -------------- ------------------
$16,760,000 January 31, 2009
139,666,000 January 31, 2010
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Distributions from capital gains, if any, are recorded on the
ex-dividend date and paid at least annually. The amount and character of
income and gains to be distributed are determined in accordance with
income tax regulations, which may differ from generally accepted
accounting principles. Reclassifications are made to the fund's capital
accounts to reflect income and gains available for distribution (or
available capital loss carryovers) under income tax regulations.
I) Expenses of the trust Expenses directly charged or attributable to
any fund will be paid from the assets of that fund. Generally, expenses
of the trust will be allocated among and charged to the assets of each
fund on a basis that the Trustees deem fair and equitable, which may be
based on the relative assets of each fund or the nature of the services
performed and relative applicability to each fund.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid monthly based on the average net assets of the
fund. Such fee is based on the following annual rates: 1.00% of the
first $500 million of average net assets, 0.90% of the next $500
million, 0.85% of the next $500 million, 0.80% of the next $5 billion,
0.775% of the next $5 billion, 0.755% of the next $5 billion, 0.74% of
the next $5 billion and 0.73% thereafter.
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 wholly-owned subsidiary of Putnam,
LLC. Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
Under the subcustodian contract between the subcustodian bank and PFTC,
the subcustodian bank has a lien on the securities of the fund to the
extent permitted by the fund's investment restrictions to cover any
advances made by the subcustodian bank for the settlement of securities
purchased by the fund. At July 31, 2002, the payable to the subcustodian
bank represents the amount due for cash advance for the settlement of a
security purchased.
The fund has entered into an arrangement with PFTC whereby credits
realized as a result of uninvested cash balances are used to reduce a
portion of the fund's expenses. The fund also reduced expenses through
brokerage service arrangements. For the six months ended July 31, 2002,
the fund's expenses were reduced by $4,876 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $766 has been allocated to the fund, and an additional fee for
each Trustees meeting attended. Trustees receive additional fees for
attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with
the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B, class C and class M shares pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Retail Management, a wholly-owned subsidiary of
Putnam, LLC and Putnam Retail Management GP, Inc., for services provided
and expenses incurred by it in distributing shares of the fund. The
Plans provide for payments by the fund to Putnam Retail Management at an
annual rate up to 0.35%, 1.00%, 1.00% and 1.00% of the average net
assets attributable to class A, class B, class C and class M shares,
respectively. The Trustees have approved payment by the fund at an
annual rate of 0.25%, 1.00%, 1.00% and 0.75% of the average net assets
attributable to class A, class B, class C and class M shares,
respectively.
For the six months ended July 31, 2002, Putnam Retail Management, acting
as underwriter received net commissions of $28,848 and $714 from the
sale of class A and class M shares, respectively, and received $88,590
and $2,328 in contingent deferred sales charges from redemptions of
class B and class C shares, respectively. A deferred sales charge of up
to 1.00% and 0.65% is assessed on certain redemptions of class A and
class M shares, respectively. For the six months ended July 31, 2002,
Putnam Retail Management, acting as underwriter received $3,190 and no
monies on class A and class M redemptions, respectively.
Note 3
Purchases and sales of securities
During the six months ended July 31, 2002, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $45,413,812 and $59,969,304, respectively. There
were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At July 31, 2002, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended July 31, 2002
- ---------------------------------------------------------------------------
Class A Shares Amount
- ---------------------------------------------------------------------------
Shares sold 3,776,595 $11,960,136
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
3,776,595 11,960,136
Shares repurchased (7,966,960) (23,467,725)
- ---------------------------------------------------------------------------
Net decrease (4,190,365) $(11,507,589)
- ---------------------------------------------------------------------------
Year ended January 31, 2002
- ---------------------------------------------------------------------------
Class A Shares Amount
- ---------------------------------------------------------------------------
Shares sold 19,839,289 $78,899,149
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
19,839,289 78,899,149
Shares repurchased (13,078,061) (51,799,419)
- ---------------------------------------------------------------------------
Net increase 6,761,228 $27,099,730
- ---------------------------------------------------------------------------
Six months ended July 31, 2002
- ---------------------------------------------------------------------------
Class B Shares Amount
- ---------------------------------------------------------------------------
Shares sold 2,558,208 $7,731,203
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
2,558,208 7,731,203
Shares repurchased (4,378,552) (12,520,063)
- ---------------------------------------------------------------------------
Net decrease (1,820,344) $(4,788,860)
- ---------------------------------------------------------------------------
Year ended January 31, 2002
- ---------------------------------------------------------------------------
Class B Shares Amount
- ---------------------------------------------------------------------------
Shares sold 10,083,715 $39,423,196
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
10,083,715 39,423,196
Shares repurchased (6,820,654) (25,762,432)
- ---------------------------------------------------------------------------
Net increase 3,263,061 $13,660,764
- ---------------------------------------------------------------------------
Six months ended July 31, 2002
- ---------------------------------------------------------------------------
Class C Shares Amount
- ---------------------------------------------------------------------------
Shares sold 290,744 $906,403
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
290,744 906,403
Shares repurchased (1,004,785) (2,971,881)
- ---------------------------------------------------------------------------
Net decrease (714,041) $(2,065,478)
- ---------------------------------------------------------------------------
Year ended January 31, 2002
- ---------------------------------------------------------------------------
Class C Shares Amount
- ---------------------------------------------------------------------------
Shares sold 2,007,671 $7,608,495
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
2,007,671 7,608,495
Shares repurchased (1,332,305) (4,946,374)
- ---------------------------------------------------------------------------
Net increase 675,366 $2,662,121
- ---------------------------------------------------------------------------
Six months ended July 31, 2002
- ---------------------------------------------------------------------------
Class M Shares Amount
- ---------------------------------------------------------------------------
Shares sold 179,911 $586,715
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
179,911 586,715
Shares repurchased (319,110) (920,197)
- ---------------------------------------------------------------------------
Net decrease (139,199) $(333,482)
- ---------------------------------------------------------------------------
Year ended January 31, 2002
- ---------------------------------------------------------------------------
Class M Shares Amount
- ---------------------------------------------------------------------------
Shares sold 557,065 $2,173,901
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
557,065 2,173,901
Shares repurchased (434,751) (1,643,931)
- ---------------------------------------------------------------------------
Net increase 122,314 $529,970
- ---------------------------------------------------------------------------
Six months ended July 31, 2002
- ---------------------------------------------------------------------------
Class Y Shares Amount
- ---------------------------------------------------------------------------
Shares sold 756,485 $2,307,186
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
756,485 2,307,186
Shares repurchased (945,629) (2,891,993)
- ---------------------------------------------------------------------------
Net decrease (189,144) $(584,807)
- ---------------------------------------------------------------------------
For the period July 2, 2001
(commencement of operations) to
January 31, 2002
- ---------------------------------------------------------------------------
Class Y Shares Amount
- ---------------------------------------------------------------------------
Shares sold 1,647,426 $6,624,879
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
1,647,426 6,624,879
Shares repurchased (498,426) (1,729,387)
- ---------------------------------------------------------------------------
Net increase 1,149,000 $4,895,492
- ---------------------------------------------------------------------------
Note 5
Actions by Shareholders
On September 12, 2002 the shareholders of Putnam Technology Fund
approved the merger of the fund into Putnam Voyager Fund II. The
transaction is scheduled to occur in late September 2002.
SHAREHOLDER MEETING
A proposal to approve a merger of your fund into Putnam Voyager Fund II
was approved on September 12, 2002, as follows:
For 16,498,162 shares 84.917%
Against 2,119,473 shares 10.909%
Abstain 811,050 shares 4.174%
All tabulations are rounded to the nearest whole number.
SERVICES FOR SHAREHOLDERS
HELP YOUR INVESTMENT GROW
Set up a program for systematic investing with as little as $25 a month
from a Putnam fund or from your own savings or checking account. (Regular
investing does not guarantee a profit or protect against loss in a
declining market.)
SWITCH FUNDS EASILY
You can move money from one Putnam fund to another within the same class
of shares without a service charge. (This privilege is subject to change
or termination.)
ACCESS YOUR MONEY EASILY
You can have checks sent regularly or redeem shares any business day at
the then-current net asset value, which may be more or less than the
original cost of the shares. Class B and class C shares carry a sales
charge that is applied to certain withdrawals.
HOW TO BUY ADDITIONAL SHARES
You may buy shares through your financial advisor or directly from
Putnam. To open an account by mail, send a check made payable to the
name of the fund along with a completed fund application. To add to an
existing account, complete the investment slip found at the top of your
Confirmation of Activity statement and return it with a check payable to
your fund.
VISIT US AT WWW.PUTNAMINVESTMENTS.COM
A secure section of our Web site contains complete information on your
account, including balances and transactions, updated daily. You may
also conduct transactions, such as exchanges, additional investments,
and address changes. Log on today to get your password.
USE OUR TOLL-FREE NUMBER
1-800-225-1581 Ask a helpful Putnam representative or your financial
advisor for details about any of these or other services, or see your
prospectus.
THE PUTNAM FAMILY OF FUNDS
The following is a complete list of Putnam's open-end mutual funds.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
GROWTH FUNDS
Balanced Fund *
Growth Opportunities Fund
Health Sciences Trust
International New Opportunities Fund
New Century Growth Fund *
New Opportunities Fund
OTC & Emerging Growth Fund
Small Cap Growth Fund
Technology Fund *
Vista Fund
Voyager Fund
Voyager Fund II
BLEND FUNDS
Capital Appreciation Fund
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
International Growth Fund
International Voyager Fund
Investors Fund
Research Fund
Tax Smart Equity Fund
Utilities Growth and Income Fund
VALUE FUNDS
Balanced Retirement Fund *
Classic Equity Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund *
The Putnam Fund for Growth and Income
International Growth and Income Fund
Mid Cap Value Fund
New Value Fund
Small Cap Value Fund +
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Income Trust
High Yield Advantage Fund +
High Yield Trust
Income Fund
Intermediate U.S. Government Income Fund
Money Market Fund [SECTION MARK]
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund [SECTION MARK]
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* In anticipation of mergers expected later this year, these funds are
closed to new investors.
+ Closed to new investors.
[SECTION MARK] An investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. Although the funds seek to preserve
your investment at $1.00 per share, it is possible to lose money
by investing in the fund.
Check your account balances and current performance at
www.putnaminvestments.com.
FUND INFORMATION
ABOUT PUTNAM INVESTMENTS
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition and
practice since 1830. Founded 65 years ago, Putnam Investments was built
around the concept that a balance between risk and reward is the hallmark
of a well-rounded financial program. We presently manage over 100 mutual
funds in growth, value, blend, fixed income, and international.
INVESTMENT MANAGER
Putnam Investment Management, LLC
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
President
Charles E. Porter
Executive Vice President and Treasurer
Patricia C. Flaherty
Senior Vice President
Michael T. Healy
Assistant Treasurer and Principal Accounting Officer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen M. Oristaglio
Vice President
Brian O'Toole
Vice President
Richard G. Leibovitch
Vice President
Richard A. Monaghan
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam Technology
Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary and
Putnam's Quarterly Ranking Summary. For more information or to request a
prospectus, call toll free: 1-800-225-1581. The fund's Statement of
Additional Information contains additional information about the fund's
Trustees and is available without charge upon request by calling
1-800-225-1581.
Visit www.putnaminvestments.com or call a representative at 1-800-225-1581.
NOT FDIC INSURED, MAY LOSE VALUE, NO BANK GUARANTEE
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
SA073-84001 2SG 9/02
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ----------------------------------------------------------------------------
Putnam Technology Fund
Supplement to Semiannual Report dated 7/31/02
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares
are offered exclusively to clients that meet the eligibility requirements
specified in the fund's prospectus for such shares. Performance of class Y
shares, which incur neither a front-end load, distribution fee, nor
contingent deferred sales charge, will differ from performance of class A,
B, C, and M shares, which are discussed more extensively in the annual
report.
SEMIANNUAL RESULTS AT A GLANCE
- ----------------------------------------------------------------------------
Total return for periods ended 7/31/02
NAV
6 months -37.98%
1 year -43.39%
Life of fund (since class A inception, 6/14/00) -73.29%
Annual average -46.17%
Share value: NAV
1/31/02 $3.66
7/31/02 $2.27
- ----------------------------------------------------------------------------
Distributions: The fund did not make any distributions during this period.
- ----------------------------------------------------------------------------
Please note that past performance is not indicative of future results. More
recent returns may be more or less than those shown. Returns shown for
class Y shares for periods prior to their inception are derived from the
historical performance of class A shares, and are not adjusted to reflect
the initial sales charge currently applicable to class A shares. These
returns have not been adjusted to reflect differences in operating
expenses which, for class Y shares, typically are lower than the operating
expenses applicable to class A shares. All returns assume reinvestment of
distributions at net asset value. Investment return and principal value
will fluctuate so your shares, when redeemed, may be worth more or less
than their original cost. See full report for information on comparative
benchmarks. If you have questions, please consult your fund prospectus or
call Putnam toll free at 1-800-752-9894.