Putnam
New Century
Growth
Fund*
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
6-30-00
*Formerly Putnam Investment Fund 98
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years during
which the global securities markets, the mutual fund industry, and
Putnam itself have experienced tremendous growth and change.
As we look to the future, we are certain that the changes that lie ahead
will be even more breathtaking in their scope. What will not change is
the Trustees' dedication to serving the best interests of our
shareholders.
We welcome the challenges ahead and are confident that Putnam and your
Board will continue to meet those challenges successfully, as they have
for more than 60 years. We look forward to helping you meet your
financial objectives for many years to come.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
August 16, 2000
REPORT FROM FUND MANAGEMENT
Roland W. Gillis
Charles H. Swanberg
Putnam New Century Growth Fund made its public debut on January 21,
2000, about midway through the current fiscal year. (From February 1,
1998 through January 20, 2000, it had only been available to employees
of Putnam Investments.) Thanks to strategic stock selection and a
favorable environment for the New Economy companies that have been its
primary focus, the fund has generally delivered strong results since its
inception. Despite a brief setback in the second quarter of 2000, the
fund's solid performance continued during the 12-month period ended June
30, 2000. The fund's 87.16% return for class A shares at net asset value
was almost twice the 48.59% delivered by its benchmark index, the
Russell Midcap Growth Index. For additional performance information,
please see pages 6 and 7.
Total return for 12 months ended 6/30/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
----------------------------------------------------------------------
87.16% 76.35% 85.74% 80.74% 85.74% 84.74% 86.24% 79.73%
----------------------------------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 6.
* INVESTING IN TODAY'S GROWTH SECTORS
The new century offers remarkable growth potential and an astonishing
array of companies is poised to capitalize on the newest growth trends.
Your fund's mission is to sort through this maze of investment choices
and target what we believe are the most promising rapidly growing
companies. Fund holdings range from the newest Internet, software, and
telecommunications companies to more traditional businesses such as
broadcasting, retail, finance, and electronics. The fund's flex-cap
style allows us to invest in small-, midsize-, and large-company stocks
as market conditions warrant.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Software 18.0%
Electronics 14.8%
Communications
equipment 10.9%
Computers 6.3%
Telecommunications 5.5%
Footnote reads:
*Based on net assets as of 6/30/00. Holdings will vary over time.
An important investment theme during the fiscal year centered on what we
refer to as the telecommunications food chain. The Internet, broadband,
wireless technology, and fiber optics are changing the way we
communicate and creating a capital- spending boom around the world.
Companies at several points along the chain are benefiting from the
explosion in consumer demand for these new technologies, and our
strategy has been to buy promising growth companies at every level.
At the most basic level, we bought semiconductor companies that are
benefiting from the demand for telecommunications chips. Micrel, Inc. is
a good example. This manufacturer of analog, digital, and mixed-signal
circuits for communications and other electronics made Fortune
magazine's list of this year's 100 fastest-growing companies in America.
At the next level, we added equipment companies such as Nokia that use
semiconductor chips in making telecommunications devices. Nokia is the
world's No. 1 maker of mobile phones, but its products extend into other
areas including the nascent but promising mobile Internet market. At the
top level of the telecommunications food chain are the service carriers
who enlist subscribers. NEXTLINK Communications is an example. The
company offers fiber optic, DSL, and wireless service in nearly 50 U.S.
cities. While these holdings and others discussed in this report were
viewed favorably at the end of the fiscal period, all are subject to
review and adjustment in accordance with the fund's investment strategy
and may vary in the future.
Our holdings in data storage and retrieval companies are related to the
telecommunications theme. The leading technological innovations have
resulted in a dramatic increase in the amount of information traveling
around the globe, whether it's over the Internet, broadband, wireless,
or fiber optics. This information must be stored and retrieved at
various points along the way and at increasingly faster rates. Emerging
technologies such as voice recognition make this process even more
important due to the enormous amount of data involved. Fund holding
Brocade Communications Systems is typical of companies operating in this
area. Brocade makes fiber channel switches and related software for
connecting storage systems and servers, turning them into storage area
networks. Its products are sold mainly in the United States to companies
like Compaq, Data General, and Dell.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
VeriSign, Inc.
Computers
Brocade Communications Systems, Inc.
Communications equipment
Jabil Circuit, Inc.
Electronics
VERITAS Software Corp.
Software
Redback Networks, Inc.
Communications equipment
Starbucks Corp.
Restaurants
Sepracor, Inc.
Biotechnology
BroadVision, Inc.
Software
E. piphany, Inc.
Software
Metromedia Fiber Network
Telecommunications
Footnote reads:
These holdings represent 17.1% of the fund's net assets as of 6/30/00.
Portfolio holdings will vary over time.
Although technology and telecommunications are important sectors in the
portfolio, they are not the only places to find rapidly growing
companies. During the period, we continued to invest in companies
outside the technology and telecommunications sectors in order to
maintain an adequate level of portfolio diversification. Recent
investments include RadioOne, the largest broadcaster serving
Afro-American audiences in the United States; Sepracor, a pharmaceutical
company; and Starbucks, America's leading specialty coffee retailer with
growing business in Asia, Canada, and the United Kingdom.
A member of Putnam's acclaimed Specialty Growth group
Your fund is the newest in Putnam's lineup of Specialty Growth funds.
Established in 1986, the Specialty Growth team consists of 16 investment
professionals, including a group of equity research analysts dedicated
exclusively to the Specialty Growth funds. Collaboration and an active
exchange of information between the Specialty Growth professionals and
other Putnam investment teams allows us to uncover the most promising
investment opportunities. The team targets companies that are expected to
deliver superior returns over time, such as those that have a proprietary
advantage or market leadership in a particular sector, strong management
teams, sound business models, and a record of strong performance. All
Putnam Specialty Growth funds benefit from the team's stock selection
expertise, but each one targets different areas of the growth market.
* RECENT VOLATILITY PROVIDES BUYING OPPORTUNITY
The fund's strong returns for the period mask some interim volatility,
including a period where many of your fund's holdings experienced
significant losses. A number of factors came together this year to
create weakness in the market. The prices of many stocks were trading at
all-time highs after last year's run-up and were especially vulnerable
to a change in sentiment. Microsoft, the torchbearer of the new economy,
ran afoul of antitrust legislation, and a steady stream of economic data
suggested that inflation might finally break out into the economy.
Although a number of holdings fell from their highs for the year, we
used the opportunity to increase the fund's position in good companies
with attractive market niches. Market corrections are inevitable within
high-growth sectors, and we believe there is no way to predict when
these corrections will happen. Instead, our strategy is to remain fully
invested in the types of companies we think are likely to produce strong
performance over the long haul and increase our positions if the price
is right. The fund's flex-cap guidelines mean a successful startup can
remain in the portfolio as it grows in market capitalization.
* ECONOMIC PICTURE IMPROVING
After six rate increases by the Federal Reserve Board, we believe the
much-hoped-for economic soft landing could be within reach. Research
shows that a change in short-term interest rates begins to affect
industrial production within five months and that the beginning of a
tightening phase precedes the peak in year-over-year industrial
production by about 12 months, on average. Since the Fed initiated the
current tightening cycle a little more than 12 months ago, the intended
slowdown seems finally to be taking place. In all likelihood, given the
coming political election, August is the last chance the Fed will have
to raise rates.
We believe investors have an opportunity to take advantage of
beaten-down prices before the Fed reverses policy and investor sentiment
improves. As this report was being written, the fundamentals in the
market were strong, in our view, with many investors sitting on the
sidelines and waiting to jump back into the market. Against this
favorable backdrop, we believe the outlook for growth stocks remains
attractive.
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 6/30/00, 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 and midsize companies. Such investments
increase the risk of greater price fluctuations.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
New Century Growth Fund is designed for investors seeking capital
appreciation by investing primarily in the equity securities of
companies of all sizes.
TOTAL RETURN FOR PERIODS ENDED 6/30/00
Class A Class B Class C Class M
(inception dates) (2/17/98) (1/21/00) (1/21/00) (1/21/00)
NAV POP NAV CDSC NAV CDSC NAV POP
------------------------------------------------------------------------------
1 year 87.16% 76.35% 85.74% 80.74% 85.74% 84.74% 86.24% 79.73%
------------------------------------------------------------------------------
Life of fund 226.76 207.93 220.97 217.97 220.97 220.97 223.05 211.80
Annual average 64.81 60.73 63.57 62.92 63.57 63.57 64.02 61.58
------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 6/30/00
Russell Midcap Consumer
Growth Index price index
-----------------------------------------------------------
1 year 48.59% 3.67%
-----------------------------------------------------------
Life of fund 86.15 6.29
Annual average 30.48 2.65
-----------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be less or more than those shown. Recent returns were achieved
during favorable market conditions that may not be sustainable. Returns
for class A and class M shares reflect the current maximum initial sales
charges of 5.75% and 3.50%, respectively. Class B share returns for the
1-year and life-of-fund periods reflect the applicable contingent
deferred sales charge (CDSC), which is 5% in the first year, declines to
1% in the sixth year, and is eliminated thereafter. Returns shown for
class B and class M shares for periods prior to their inception are
derived from the historical performance of class A shares, adjusted to
reflect both the initial sales charge or CDSC, if any, currently
applicable to each class and in the case of class B and class M shares
the higher operating expenses applicable to such shares. For class C
shares, returns for periods prior to their inception are derived from
the historical performance of class A shares, adjusted to reflect both
the CDSC currently applicable to class C shares, which is 1% for the
first year and is eliminated thereafter, and the higher operating
expenses applicable to class C shares. All returns assume reinvestment
of distributions at NAV. Investment return and principal value will
fluctuate so that an investor's shares when redeemed may be worth more
or less than their original cost. Performance reflects an expense
limitation currently or previously in effect. Had it not been in effect,
the fund's total returns would have been lower. During a portion of
these periods, the fund was offered on a limited basis and had limited
assets. For actual class B, class C, and class M share returns, see the
financial highlights section.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 2/17/98
Fund's class A Russell Midcap Consumer price
Date shares at POP Growth Index index
2/17/98 9,424 10,000 10,000
6/30/98 10,942 10,413 10,056
6/30/99 16,452 12,528 10,253
6/30/00 $30,793 $18,615 $10,629
Footnote reads:
Past performance is no assurance of future results. At the end of the
same time period, a $10,000 investment in the fund's class B shares
would have been valued at $32,097 ($31,797 with the contingent deferred
sales charge); a $10,000 investment in the fund's class C shares would
have been valued at $32,097 and no contingent deferred sales charges
would apply. A $10,000 investment in the fund's class M shares would
have been valued at $32,305 ($31,180 at the public offering price).
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 6/30/00
Class A Class B Class C Class M
-----------------------------------------------------------------------------
Distributions
(number) 1 -- -- --
-----------------------------------------------------------------------------
Income -- -- -- --
-----------------------------------------------------------------------------
Capital gains
Long-term $0.6190 -- -- --
-----------------------------------------------------------------------------
Short-term 2.2120 -- -- --
-----------------------------------------------------------------------------
Total $2.8310 -- -- --
-----------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
-----------------------------------------------------------------------------
6/30/99 $14.84 $15.75 -- -- -- --
-----------------------------------------------------------------------------
1/21/00* -- -- $27.16 $27.16 $27.16 $28.15
-----------------------------------------------------------------------------
6/30/00 24.76 26.27 24.68 24.68 24.71 25.61
-----------------------------------------------------------------------------
*Inception date for class B, C and M 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.
Class A shares are generally subject to 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.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge for class A
shares 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.
COMPARATIVE BENCHMARKS
Russell Midcap Growth Index measures the performance of Russell Midcap
Index companies with higher price-to-book ratios and higher forecasted
growth values. The index assumes reinvestment of all distributions and
interest payments and does not take into account brokerage fees or
taxes. Securities in the fund do not match those in the index and
performance of the fund will differ. It is not possible to invest
directly in an index.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss
for the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that
remain in the portfolio -- any change in unrealized gains or losses over
the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment income
ratios and portfolio turnover in one summary table, reflecting the five
most recent reporting periods. In a semiannual report, the highlight
table also includes the current reporting period. For open-end funds, a
separate table is provided for each share class.
REPORT OF INDEPENDENT ACCOUNTANTS
For the fiscal year ended June 30, 2000
To the Trustees of Putnam Funds Trust and
the Shareholders of Putnam New Century Growth Fund
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio and the related statements of operations
and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Putnam New
Century Growth Fund (the "Fund") (formerly Putnam Investment Fund 98, a
series of Putnam Funds Trust) at June 30, 2000, and the results of its
operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with accounting principles
generally accepted in the United States. These financial statements and
financial highlights (hereafter referred to as "financial statements")
are the responsibility of the fund's management; our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with
auditing standards generally accepted in the United States, which
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
investments owned at June 30, 2000 by correspondence with the custodian,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 11, 2000
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
June 30, 2000
COMMON STOCKS (95.9%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Advertising and Marketing Services (1.1%)
-------------------------------------------------------------------------------------------------------------------
157,000 Lamar Advertising Co. (NON) $ 6,800,063
74,100 Mediaplex, Inc. (NON) 1,431,056
106,100 Omnicom Group, Inc. 9,449,531
----------------
17,680,650
Aerospace/Defense (0.7%)
-------------------------------------------------------------------------------------------------------------------
93,000 Aeroflex, Inc. (NON) 4,620,938
51,450 Anaren Microwave, Inc. (NON) 6,752,009
----------------
11,372,947
Airlines (0.5%)
-------------------------------------------------------------------------------------------------------------------
216,850 Ryanair Holdings, PLC ADR (Ireland) (NON) 7,915,025
Banking (1.0%)
-------------------------------------------------------------------------------------------------------------------
207,900 Fifth Third Bancorp 13,149,675
37,800 State Street Corp. 4,009,163
----------------
17,158,838
Beverage (0.4%)
-------------------------------------------------------------------------------------------------------------------
89,900 ITO EN, Ltd. (Japan) 6,654,538
Biotechnology (2.7%)
-------------------------------------------------------------------------------------------------------------------
73,900 Biogen, Inc. (NON) 4,766,550
92,300 Genentech, Inc. (NON) 15,875,600
185,000 Sepracor, Inc. (NON) 22,315,625
35,800 Tanox, Inc. (NON) 1,693,788
----------------
44,651,563
Broadcasting (4.4%)
-------------------------------------------------------------------------------------------------------------------
71,300 Acme Communications, Inc. (NON) 1,301,225
172,600 Citadel Communications Corp. (NON) 6,030,213
39,700 Clear Channel Communications, Inc. (NON) 2,977,500
257,800 Cox Radio, Inc. Class A (NON) 7,218,400
233,000 Entercom Communications Corp. (NON) 11,358,750
96,000 Hispanic Broadcasting Corp. (NON) 3,180,000
178,000 Infinity Broadcasting Corp. Class A (NON) 6,485,875
479,600 Radio One, Inc. Class D (NON) 10,581,175
239,800 Radio One, Inc. (NON) 7,089,088
123,300 Regent Communications, Inc. (NON) 1,059,609
3,930 Salem Communications Corp. Class A (NON) 36,475
36,900 Univision Communications, Inc. Class A (NON) 3,819,150
357,800 WestWood One, Inc. (NON) 12,209,925
----------------
73,347,385
Cable Television (0.4%)
-------------------------------------------------------------------------------------------------------------------
250,600 AT&T Corp. - Liberty Media Group Class A (NON) 6,077,050
Commercial and Consumer Services (2.4%)
-------------------------------------------------------------------------------------------------------------------
248,700 Capita Group PLC (United Kingdom) 6,086,508
22,200 Capita Group PLC 144A (United Kingdom) 543,307
356,400 Cintas Corp. 13,075,425
175,300 eBay, Inc. (NON) 9,520,981
1,500 iBeam Broadcasting Corp. (NON) 27,000
251,200 Robert Half International, Inc. (NON) 7,159,200
88,200 TeleTech Holdings, Inc. (NON) 2,739,713
----------------
39,152,134
Communications Equipment (10.9%)
-------------------------------------------------------------------------------------------------------------------
160,600 ADC Telecommunications, Inc. (NON) 13,470,325
209,500 Brocade Communications Systems, Inc. (NON) 38,439,977
130,400 Cisco Systems, Inc. (NON) 8,288,550
87,500 Comverse Technology, Inc. (NON) 8,137,500
75,000 Copper Mountain Networks, Inc. (NON) 6,609,375
91,400 Crossroads Systems, Inc. (NON) 2,307,850
124,700 Efficient Networks, Inc. (NON) 9,173,244
432,800 Finisar Corp. (NON) 11,333,950
106,800 Juniper Networks, Inc. (NON) 15,546,075
96,000 Netro Corp. (NON) 5,508,000
207,350 Nokia Oyj AB Class A, (Finland) 10,621,811
102,400 NorthEast Optic Network, Inc. (NON) 6,310,400
122,600 Proxim, Inc. (NON) 12,133,569
169,200 Redback Networks, Inc. (NON) 30,117,600
5,400 Sonus Networks, Inc. (NON) 852,525
----------------
178,850,751
Computers (6.3%)
-------------------------------------------------------------------------------------------------------------------
57,300 Ariba, Inc. (NON) 5,618,086
189,850 Dell Computer Corp. (NON) 9,361,978
45,800 Excalibur Technologies Corp. (NON) 1,829,138
195,800 Gateway, Inc. (NON) 11,111,650
63,600 Inktomi Corp. (NON) 7,520,700
89,300 McAfee.com Corp. (NON) 2,327,381
67,300 Niku Corp. (NON) 2,271,375
108,100 Parametric Technology Corp. (NON) 1,189,100
279,700 RealNetworks, Inc. (NON) 14,142,331
144,600 Symantec Corp. (NON) 7,799,363
224,463 VeriSign, Inc. (NON) 39,617,631
----------------
102,788,733
Conglomerates (0.2%)
-------------------------------------------------------------------------------------------------------------------
71,700 General Electric Co. 3,800,100
Consumer Services (0.7%)
-------------------------------------------------------------------------------------------------------------------
149,400 TMP Worldwide, Inc. (NON) 11,027,588
Distribution (0.9%)
-------------------------------------------------------------------------------------------------------------------
188,900 Black Box Corp. (NON) 14,955,567
Electronics (14.8%)
-------------------------------------------------------------------------------------------------------------------
125,100 Act Manufacturing, Inc. (NON) 5,809,331
196,200 Alpha Industries, Inc. (NON) 8,645,063
91,500 Altera Corp. (NON) 9,327,281
30,000 Ananex Corp. (NON) 2,865,000
49,900 Applied Micro Circuits Corp. (NON) 4,927,625
26,000 AudioCodes, Ltd. (Israel) 3,120,000
76,750 Aware, Inc. (NON) 3,923,844
58,700 Broadcom Corp. (NON) 12,851,631
9,700 Centillium Communications, Inc. (NON) 669,300
28,000 Cree Research, Inc. (NON) 3,738,000
16,100 Ditech Communications Corp. (NON) 1,522,456
21,200 E-Tek Dynamics, Inc. (NON) 5,592,825
118,400 Exar Corp. (NON) 10,323,000
62,100 Flextronics International, Ltd. 4,265,494
58,200 GlobeSpan, Inc. (NON) 7,104,947
688,300 Jabil Circuit, Inc. (NON) 34,156,888
234,700 Linear Technology Corp. 15,006,131
186,900 Maxim Integrated Products, Inc. (NON) 12,697,519
255,200 Micrel, Inc. (NON) 11,085,250
7,500 New Focus, Inc. (NON) 615,938
220,000 Oak Technology, Inc. (NON) 4,743,750
153,300 QLogic Corp. (NON) 10,127,381
36,900 Quantum Effect Devices, Inc. (NON) 2,103,300
105,000 RF Micro Devices, Inc. (NON) 9,200,625
195,150 Sanmina Corp. (NON) 16,685,325
42,800 SDL, Inc. (NON) 12,206,025
50,000 Semtech Corp. (NON) 3,824,219
36,600 Silicon Image, Inc. (NON) 1,825,425
42,600 TranSwitch Corp. (NON) 3,288,188
161,400 Virata Corp. (NON) 9,623,475
43,200 Vitesse Semiconductor Corp. (NON) 3,177,900
123,800 Zoran Corp. (NON) 8,163,063
----------------
243,216,199
Energy (2.4%)
-------------------------------------------------------------------------------------------------------------------
317,800 Global Marine, Inc. (NON) 8,957,988
316,300 Grant Prideco, Inc. (NON) 7,907,500
257,600 Nabors Industries, Inc. (NON) 10,706,500
161,400 Schlumberger, Ltd. 12,044,475
----------------
39,616,463
Financial (1.1%)
-------------------------------------------------------------------------------------------------------------------
234,900 Intuit, Inc. (NON) 9,718,988
17,700 Marschollek, Lautenschlaeger und Partner AG (Germany) 7,447,056
----------------
17,166,044
Health Care Services (1.2%)
-------------------------------------------------------------------------------------------------------------------
102,200 Allscripts, Inc. (NON) 2,350,600
232,100 Province Healthcare Co. (NON) 8,384,613
109,800 United Health Group Inc. 9,415,350
----------------
20,150,563
Investment Banking/Brokerage (1.5%)
-------------------------------------------------------------------------------------------------------------------
764,000 Nikko Securities Co., Ltd. (Japan) 7,583,664
207,000 Nomura Securities Co., Ltd. (Japan) 5,078,134
360,750 Schwab (Charles) Corp. 12,130,219
----------------
24,792,017
Lodging/Tourism (0.5%)
-------------------------------------------------------------------------------------------------------------------
125,300 Four Seasons Hotels, Inc. (Canada) 7,792,094
Medical Technology (2.9%)
-------------------------------------------------------------------------------------------------------------------
125,000 Cyberonics, Inc. (NON) 1,500,000
171,600 Medtronic, Inc. 8,547,825
18,150 Minimed, Inc. (NON) 2,141,700
48,200 Molecular Devices Corp. (NON) 3,334,838
74,400 Novoste Corp. (NON) 4,538,400
94,400 PE Corp. 6,218,600
36,600 Sonic Innovations, Inc. (NON) 679,388
364,300 Stryker Corp. 15,938,125
36,300 Waters Corp. (NON) 4,530,694
----------------
47,429,570
Oil & Gas (0.3%)
-------------------------------------------------------------------------------------------------------------------
177,300 EOG Resources, Inc. 5,939,550
Pharmaceuticals (1.1%)
-------------------------------------------------------------------------------------------------------------------
341,500 Pfizer, Inc. 16,392,000
42,700 Shire Pharmaceuticals Group PLC ADR (United Kingdom) (NON) 2,215,063
----------------
18,607,063
Power Producers (--%)
-------------------------------------------------------------------------------------------------------------------
16,600 Capstone Turbine Corp. (NON) 748,038
Publishing (0.6%)
-------------------------------------------------------------------------------------------------------------------
254,700 Information Holdings, Inc. (NON) 9,423,900
Restaurants (1.4%)
-------------------------------------------------------------------------------------------------------------------
610,200 Starbucks Corp. (SEG) (NON) 23,302,013
Retail (4.4%)
-------------------------------------------------------------------------------------------------------------------
144,500 99 Cents Only Stores (NON) 5,761,938
75,000 Bed Bath & Beyond, Inc. (NON) 2,718,750
77,150 Best Buy Co., Inc. (NON) 4,879,738
79,800 CDW Computer Centers, Inc. (NON) 4,987,500
177,500 Costco Wholesale Corp. (NON) 5,857,500
270,900 Dollar Tree Stores, Inc. (NON) 10,717,481
104,500 Factory 2-U Stores, Inc. (NON) 3,951,406
53,450 The Home Depot, Inc. 2,669,159
135,600 Kohls Corp. (NON) 7,542,750
135,800 Michaels Stores, Inc. (NON) 6,221,338
29,500 Priceline.com, Inc. (NON) 1,120,539
71,000 Seven-Eleven Japan Co., Ltd. (Japan) 5,953,583
125,300 Tiffany & Co. 8,457,750
13,500 Whole Foods Market, Inc. (NON) 557,719
----------------
71,397,151
Schools (0.9%)
-------------------------------------------------------------------------------------------------------------------
121,500 Career Education Corp. (NON) 5,892,750
75,000 Learning Tree International, Inc. (NON) 4,593,750
75,000 SmartForce Public Limited Co. ADR (Ireland) (NON) 3,600,000
----------------
14,086,500
Semiconductor (2.0%)
-------------------------------------------------------------------------------------------------------------------
84,900 Applied Materials, Inc. (NON) 7,694,063
68,800 ASM Lithography Holding NV (Netherlands) 3,035,800
92,400 KLA Tencor Corp. (NON) 5,411,175
174,100 LAM Research Corp. (NON) 6,528,750
129,200 LTX Corp. (NON) 4,513,925
74,000 Novellus Systems, Inc. (NON) 4,185,625
25,335 Photon Dynamics, Inc. (NON) 1,892,208
----------------
33,261,546
Software (18.0%)
-------------------------------------------------------------------------------------------------------------------
267,200 Agile Software Corp. (NON) 18,887,700
191,600 BMC Software, Inc. (NON) 6,990,406
433,300 BroadVision, Inc. (NON) 22,017,056
107,400 Click Commerce, Inc. (NON) 2,429,925
185,900 E.piphany, Inc. (NON) 19,926,156
124,400 Electronic Arts, Inc. (NON) 9,073,425
111,000 I2 Technologies, Inc. (NON) 11,573,484
167,300 Informatica Corp. (NON) 13,708,144
44,000 Interwoven, Inc. (NON) 4,839,313
8,400 ISS Group, Inc. (NON) 829,369
72,008 Kana Communications, Inc. (NON) 4,455,495
51,100 Kana Communications, Inc. (acquired 6/7/00,
cost $2,555,000) (NON) (RES) 2,845,631
116,400 Lernout & Hauspie Speech Products NV (Belgium) 5,128,875
79,300 Macromedia, Inc. (NON) 7,667,319
74,700 Micromuse, Inc. (NON) 12,361,683
116,100 Microsoft Corp. (NON) 9,288,000
151,200 Netegrity, Inc. (NON) 11,387,250
104,900 Oracle Corp. (NON) 8,818,156
189,300 Peregrine Systems, Inc. (NON) 6,566,344
109,100 Phone.com, Inc. (NON) 7,105,138
179,200 Portal Software, Inc. (NON) 11,446,400
100,400 Quest Software, Inc. (NON) 5,559,650
111,500 Rational Software Corp. (NON) 10,362,531
475,200 Sage Group (The) PLC (United Kingdom) 3,847,801
86,500 Software.com, Inc. (NON) 11,234,188
276,600 VERITAS Software Corp. (NON) 31,260,122
291,700 Vignette Corp. (NON) 15,172,958
127,800 Vitria Technology, Inc. (NON) 7,811,775
80,800 webMethods, Inc. (NON) 12,700,750
----------------
295,295,044
Technology Services (4.7%)
-------------------------------------------------------------------------------------------------------------------
138,700 Breakaway Solutions, Inc. (NON) 3,744,900
84,700 Breakaway Solutions, Inc. (acquired 5/24/00, cost $2,202,200) (NON) (RES) 2,058,210
230,400 CheckFree Holdings Corp. (NON) 11,880,000
195,100 CNET Networks, Inc. (NON) 4,792,144
97,700 Convergys Corp. (NON) 5,068,188
90,300 Go2Net, Inc. (NON) 4,543,219
130,900 InfoSpace.com, Inc. (NON) 7,232,225
87,200 Predictive Systems, Inc. (NON) 3,133,750
216,100 Proxicom, Inc. (NON) 10,345,788
40,400 Rare Medium Group, Inc. (NON) 638,825
151,900 Scient Corp. (NON) 6,702,588
47,800 Wireless Facilities, Inc. (NON) 2,434,813
117,600 Yahoo! Inc. (NON) 14,567,700
----------------
77,142,350
Telecommunications (5.5%)
-------------------------------------------------------------------------------------------------------------------
172,200 Allegiance Telecom, Inc. (NON) 11,020,800
117,200 Covad Communications Group, Inc. 144A (NON) 1,889,850
94,000 Focal Communications Corp. (NON) 3,401,625
104,900 Global Crossing Ltd. 2,760,181
1,500 GT Group Telecom, Inc. (Canada) (NON) 23,700
201,000 ICG Communications, Inc. (NON) 4,434,563
100,000 Liberty Digital, Inc. Class A (NON) 3,000,000
6,400 Marvell Technology Group Ltd. 364,800
493,400 Metromedia Fiber Network, Inc. Class A (NON) 19,581,813
114,600 Next Level Communications, Inc. (NON) 9,826,950
45,400 Nextel Communications, Inc. Class A (NON) 2,777,913
3,700 NEXTLINK Communications, Inc. Class A (NON) 140,369
69,500 Pinnacle Holdings, Inc. (NON) 3,753,000
345,600 SBA Communications Corp. (NON) 17,949,600
73,900 VoiceStream Wireless Corp. (NON) 8,594,339
----------------
89,519,503
----------------
Total Common Stocks (cost $1,606,325,514) $ 1,574,318,477
PREFERRED STOCKS (0.9%) (a) (cost $16,312,916)
NUMBER OF SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
28,600 Marschollek, Lautenschlaeger und Partner AG
$3.05 pfd. (Germany) $ 14,362,966
SHORT-TERM INVESTMENTS (5.1%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$41,000,000 Interest in $750,000,000 joint repurchase agreement
dated June 30, 2000 with Goldman Sachs & Co. due
July 3, 2000 with respect to various U.S. Treasury
obligations -- maturity value of $41,022,208 for an
effective yield of 6.5% $ 41,000,000
41,991,000 Interest in $500,000,000 joint tri-party repurchase
agreement dated June 30, 2000 with S.B.C. Warburg Inc.
due July 3, 2000 with respect to various U.S. Treasury
obligations -- maturity value of $42,014,095 for an
effective yield of 6.6% 41,991,000
----------------
Total Short-Term Investments (cost $82,991,000) $ 82,991,000
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,705,629,430) (b) $ 1,671,672,443
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,641,735,073.
(b) The aggregate identified cost on a tax basis is $1,724,931,528,
resulting in gross unrealized appreciation and depreciation of
$173,335,353 and $226,594,438, respectively, or net unrealized
depreciation of $53,259,085.
(NON) Non-income-producing security.
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at June 30, 2000 was
$4,903,841 or 0.3% of net assets.
(SEG) A portion of this security was pledged and segregated with the
custodian to cover margin requirements for futures contracts at June 30,
2000.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR after the name of a foreign holding stands for American
Depositary Receipts, representing ownership of foreign securities on
deposit with a domestic custodian bank.
-----------------------------------------------------------------------------
Futures Contracts Outstanding at June 30, 2000
Aggregate Face Expiration Unrealized
Total Value Value Date Appreciation
-----------------------------------------------------------------------------
S&P 500 Index (Long) $6,973,475 $6,951,287 Sep-00 $22,188
-----------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,705,629,430) (Note 1) $1,671,672,443
-------------------------------------------------------------------------------------------
Cash 1,303,133
-------------------------------------------------------------------------------------------
Dividends, interest and other receivables 160,198
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 6,621,575
-------------------------------------------------------------------------------------------
Receivable for securities sold 17,892,591
-------------------------------------------------------------------------------------------
Receivable for variation margin 24,893
-------------------------------------------------------------------------------------------
Total assets 1,697,674,833
Liabilities
-------------------------------------------------------------------------------------------
Payable for securities purchased 50,822,159
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 962,388
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,077,711
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 406,293
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 801
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 4,256
-------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,087,315
-------------------------------------------------------------------------------------------
Other accrued expenses 578,837
-------------------------------------------------------------------------------------------
Total liabilities 55,939,760
-------------------------------------------------------------------------------------------
Net assets $1,641,735,073
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,938,094,813
-------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (Note 1) (262,258,123)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and
assets and liabilities in foreign currencies (34,101,617)
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,641,735,073
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($797,591,673 divided by 32,218,992 shares) $24.76
-------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $24.76)* $26.27
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class B share
($670,618,410 divided by 27,168,094 shares)** $24.68
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class C share
($136,828,480 divided by 5,544,081 shares)** $24.68
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($36,696,510 divided by 1,485,131 shares) $24.71
-------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $24.71)* $25.61
-------------------------------------------------------------------------------------------
* 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.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended June 30, 2000
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Interest $ 1,296,220
-------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $49,252) 619,446
-------------------------------------------------------------------------------------------
Total investment income 1,915,666
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,536,070
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,171,287
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 3,383
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 8,546
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 663,643
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,204,861
-------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 441,628
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 89,758
-------------------------------------------------------------------------------------------
Registration fees 512,509
-------------------------------------------------------------------------------------------
Other 527,200
-------------------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (205,489)
-------------------------------------------------------------------------------------------
Total expenses 8,953,396
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (248,309)
-------------------------------------------------------------------------------------------
Net expenses 8,705,087
-------------------------------------------------------------------------------------------
Net investment loss (6,789,421)
-------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (264,756,640)
-------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Notes 1) 3,041,648
-------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Notes 1) 174,357
-------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities
in foreign currencies during the year (166,818)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the year (35,249,191)
-------------------------------------------------------------------------------------------
Net loss on investments (296,956,644)
-------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(303,746,065)
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended June 30
---------------------------------
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment loss $ (6,789,421) $ (26,584)
--------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions (261,540,635) 697,252
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments and assets and liabilities in foreign currencies (35,416,009) 909,486
--------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (303,746,065) 1,580,154
--------------------------------------------------------------------------------------------------
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (684,659) --
--------------------------------------------------------------------------------------------------
In excess of net realized gain on investments
Class A (643,516) --
--------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 1,941,380,284 893,580
--------------------------------------------------------------------------------------------------
Total increase in net assets 1,636,306,044 2,473,734
Net assets
--------------------------------------------------------------------------------------------------
Beginning of year 5,429,029 2,955,295
--------------------------------------------------------------------------------------------------
End of year $1,641,735,073 $5,429,029
--------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS A
----------------------------------------------------------------------------
For the period
Per-share Feb. 17, 1998+
operating performance Year ended June 30 to June 30
----------------------------------------------------------------------------
2000 1999 1998
----------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $14.84 $9.87 $8.50
----------------------------------------------------------------------------
Investment operations
----------------------------------------------------------------------------
Net investment loss (a)(b) (.12) (.08) (.02)
----------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 12.87 5.05 1.39
----------------------------------------------------------------------------
Total from
investment operations 12.75 4.97 1.37
----------------------------------------------------------------------------
Less distributions:
----------------------------------------------------------------------------
From net realized gain
on investments (1.46) -- --
----------------------------------------------------------------------------
In excess of net realized gain (1.37) -- --
----------------------------------------------------------------------------
Total distributions (2.83) -- --
----------------------------------------------------------------------------
Net asset value,
end of period $24.76 $14.84 $9.87
----------------------------------------------------------------------------
Ratios and supplemental data
----------------------------------------------------------------------------
Total return at
net asset value (%)(c) 87.16 50.35 16.12*
----------------------------------------------------------------------------
Net assets, end of period
(in thousands) $797,592 $5,429 $2,955
----------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(d) 1.11 1.00 .37*
----------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%)(a) (.72) (.76) (.25)*
----------------------------------------------------------------------------
Portfolio turnover (%) 107.86 207.77 72.22*
----------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the period ended June 30, 2000
reflect a reduction of $0.01 per share for each class of shares.
Expenses for the period ended ended June 30, 1998, and June 30, 1999
reflect a reduction of $0.08 and $0.06, respectively, per share for
class A shares. (Note 2)
(b) Per share net investment loss has been determined on the basis of
the weighted average number of shares during the period.
(c) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(d) Includes amounts paid through expense offset arrangements. (Note 2)
</TABLE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS B
----------------------------------------------------
For the period
Per-share Jan. 21, 2000+
operating performance to June 30
----------------------------------------------------
2000
----------------------------------------------------
Net asset value,
beginning of period $27.16
----------------------------------------------------
Investment operations
----------------------------------------------------
Net investment loss (a)(b) (.15)
----------------------------------------------------
Net realized and unrealized
gain (loss) on investments (2.33)
----------------------------------------------------
Total from
investment operations (2.48)
----------------------------------------------------
Less distributions:
----------------------------------------------------
From net realized gain
on investments --
----------------------------------------------------
In excess of net realized gain --
----------------------------------------------------
Total distributions --
----------------------------------------------------
Net asset value,
end of period $24.68
----------------------------------------------------
Ratios and supplemental data
----------------------------------------------------
Total return at
net asset value (%)(c) (9.13)*
----------------------------------------------------
Net assets, end of period
(in thousands) $670,618
----------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(d) .89*
----------------------------------------------------
Ratio of net investment loss
to average net assets (%)(a) (.71)*
----------------------------------------------------
Portfolio turnover (%) 107.86
----------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the period ended June 30, 2000
reflect a reduction of $0.01 per share for each class of shares.
Expenses for the period ended ended June 30, 1998, and June 30, 1999
reflect a reduction of $0.08 and $0.06, respectively, per share for
class A shares. (Note 2)
(b) Per share net investment loss has been determined on the basis of
the weighted average number of shares during the period.
(c) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(d) Includes amounts paid through expense offset arrangements. (Note 2)
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS C
----------------------------------------------------
For the period
Per-share Jan. 21, 2000+
operating performance to June 30
----------------------------------------------------
2000
----------------------------------------------------
Net asset value,
beginning of period $27.16
----------------------------------------------------
Investment operations
----------------------------------------------------
Net investment loss (a)(b) (.15)
----------------------------------------------------
Net realized and unrealized
gain (loss) on investments (2.33)
----------------------------------------------------
Total from
investment operations (2.48)
----------------------------------------------------
Less distributions:
----------------------------------------------------
From net realized gain
on investments --
----------------------------------------------------
In excess of net realized gain --
----------------------------------------------------
Total distributions --
----------------------------------------------------
Net asset value,
end of period $24.68
----------------------------------------------------
Ratios and supplemental data
----------------------------------------------------
Total return at
net asset value (%)(c) (9.13)*
----------------------------------------------------
Net assets, end of period
(in thousands) $136,828*
----------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(d) .89*
----------------------------------------------------
Ratio of net investment loss
to average net assets (%)(a) (.71)*
----------------------------------------------------
Portfolio turnover (%) 107.86
----------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the period ended June 30, 2000
reflect a reduction of $0.01 per share for each class of shares.
Expenses for the period ended ended June 30, 1998, and June 30, 1999
reflect a reduction of $0.08 and $0.06, respectively, per share for
class A shares. (Note 2)
(b) Per share net investment loss has been determined on the basis of
the weighted average number of shares during the period.
(c) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(d) Includes amounts paid through expense offset arrangements. (Note 2)
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS M
----------------------------------------------------
For the period
Per-share Jan. 21, 2000+
operating performance to June 30
----------------------------------------------------
2000
----------------------------------------------------
Net asset value,
beginning of period $27.16
----------------------------------------------------
Investment operations
----------------------------------------------------
Net investment loss (a)(b) (.12)
----------------------------------------------------
Net realized and unrealized
gain (loss) on investments (2.33)
----------------------------------------------------
Total from
investment operations (2.45)
----------------------------------------------------
Less distributions:
----------------------------------------------------
From net realized gain
on investments --
----------------------------------------------------
In excess of net realized gain --
----------------------------------------------------
Total distributions --
----------------------------------------------------
Net asset value,
end of period $24.71
----------------------------------------------------
Ratios and supplemental data
----------------------------------------------------
Total return at
net asset value (%)(c) (9.02)*
----------------------------------------------------
Net assets, end of period
(in thousands) $36,697
----------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(d) .78*
----------------------------------------------------
Ratio of net investment loss
to average net assets (%)(a) (.60)*
----------------------------------------------------
Portfolio turnover (%) 107.86
----------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the period ended June 30, 2000
reflect a reduction of $0.01 per share for each class of shares.
Expenses for the period ended ended June 30, 1998, and June 30, 1999
reflect a reduction of $0.08 and $0.06, respectively, per share for
class A shares. (Note 2)
(b) Per share net investment loss has been determined on the basis of
the weighted average number of shares during the period.
(c) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(d) Includes amounts paid through expense offset arrangements. (Note 2)
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
Note 1
Significant accounting policies
Putnam New Century Growth Fund (formerly 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 fund offers Class A, Class B, Class C and Class M shares. The fund
began offering Class B, Class C and Class M shares on January 21, 2000.
Effective July 3, 2000 the fund will begin offering 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.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if that fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sales price on its principal exchange, or if no sales
are reported -- as in the case of some securities traded
over-the-counter -- the last reported bid price. Securities quoted
in foreign currencies are translated into U.S. dollars at the current
exchange rate. Short-term investments having remaining maturities of
60 days or less are stated at amortized cost, which approximates market
value. Other investments, including restricted securities, are stated at
fair value following procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Management. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. Putnam Management is responsible for
determining that the value of these underlying securities is at all
times at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). Gains or losses on securities sold are determined
on the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such gains and losses are included with the net
realized and unrealized gain or loss on investments. Net realized gains
and losses on foreign currency transactions represent net realized
exchange gains or losses on closed forward currency contracts,
disposition of foreign currencies and the difference between the amount
of investment income and foreign withholding taxes recorded on the
fund's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized appreciation and depreciation of assets and
liabilities in foreign currencies arise from changes in the value of
open forward currency contracts and assets and liabilities other than
investments at the period end, resulting from changes in the exchange
rate. Investments in foreign securities involve certain risks, including
those related to economic instability, unfavorable political
developments, and currency fluctuations, not present with domestic
investments.
F) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the fund is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract is
unable to perform. When the contract is closed, the fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was
closed. Realized gains and losses on purchased options are included in
realized gains and losses on investment securities.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices
supplied by dealers.
G) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the year ended
June 30, 2000 the fund has no borrowings against the line of credit.
H) 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.
I) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. These differences include temporary and permanent
differences of losses on wash sale transactions, foreign currency gains
and losses, post-October loss deferrals and unrealized gains and losses
on certain future contracts. Reclassifications are made to the fund's
capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations. For
the year ended June 30, 2000, the fund reclassified $6,789,421 to
decrease accumulated net investment loss and $6,736,672 to decrease
paid-in-capital, with an increase to accumulated net realized losses of
$52,749. The calculation of net investment income per share in the
financial highlights table excludes these adjustments.
J) 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 June 30, 2000, to the
extent that expenses of the fund (exclusive of brokerage commissions,
interest, taxes, deferred organizational and extraordinary expense,
credits from Putnam Fiduciary Trust Company (PFTC), a subsidiary of
Putnam Investments, Inc. and payments under the Trust's distribution
plan) would exceed an annual rate of 1.00% of the fund's average net
assets.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the Fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
For the year ended June 30, 2000, fund expenses were reduced by $248,309
under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the
Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $100
has been allocated to the fund and an additional fee for each Trustees
meeting attended. Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with
the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B, class C and class M shares pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Retail Management, Inc., a wholly-owned subsidiary of
Putnam Investments Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plans provide for payments by
the fund to Putnam Retail Management, Inc. at an annual rate up to
0.35%, 1.00%, 1.00% and 1.00% of the average net assets attributable to
class A, class B, class C and class M shares, respectively. The Trustees
have approved payment by the fund at an annual rate of 0.25%, 1.00%,
1.00% and 0.75% of the average net assets attributable to
class A, class B, class C and class M shares, respectively.
For the year ended June 30, 2000, Putnam Retail Management, Inc., acting
as underwriter received net commissions of $3,215,444 and $107,078 from
the sale of class A and class M shares, respectively, and received
$276,685 and $24,782 in contingent deferred sales charges from
redemptions of class B and class C shares, respectively. A deferred
sales charge of up to 1% is assessed on certain redemptions of class A
shares. For the year ended June 30, 2000, Putnam Retail Management,
Inc., acting as underwriter received $8,695 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended June 30, 2000, purchases and sales of investment
securities other than short-term investments aggregated $2,471,483,195
and $587,984,712, respectively. There were no purchases and sales of
U.S. government obligations.
Note 4
Capital shares
At June 30, 2000, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended June 30, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 34,302,386 $994,604,839
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 236,506 6,093,100
---------------------------------------------------------------------------
34,538,892 1,000,697,939
Shares
repurchased (2,685,664) (68,042,990)
---------------------------------------------------------------------------
Net increase 31,853,228 $932,654,949
---------------------------------------------------------------------------
Year ended June 30, 1999
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 102,912 $1,249,914
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
---------------------------------------------------------------------------
102,912 1,249,914
Shares
repurchased (36,675) (356,334)
---------------------------------------------------------------------------
Net increase 66,237 $ 893,580
---------------------------------------------------------------------------
For the period January 21, 2000
(commencement of operations) to
June 30, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 28,782,760 $840,860,018
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 67,159 1,780,019
---------------------------------------------------------------------------
28,849,919 842,640,037
Shares
repurchased (1,681,825) (40,933,646)
---------------------------------------------------------------------------
Net increase 27,168,094 $801,706,391
---------------------------------------------------------------------------
For the period January 21, 2000
(commencement of operations) to
June 30, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 6,340,223 $182,295,896
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 22,100 593,748
---------------------------------------------------------------------------
6,362,323 182,889,644
Shares
repurchased (818,242) (19,266,254)
---------------------------------------------------------------------------
Net increase 5,544,081 $163,623,390
---------------------------------------------------------------------------
For the period January 21, 2000
(commencement of operations) to
June 30, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 1,577,497 $45,700,188
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,810 99,895
---------------------------------------------------------------------------
1,581,307 45,800,083
Shares
repurchased (96,176) (2,404,529)
---------------------------------------------------------------------------
Net increase 1,485,131 $43,395,554
---------------------------------------------------------------------------
FEDERAL TAX INFORMATION
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the
Fund hereby designates $102,213 as capital gain, for its taxable year
ended June 30, 2000.
The Form 1099 you receive in January 2001 will show the tax status of
all distributions paid to your account in calendar 2000.
WELCOME TO WWW.PUTNAMINVESTMENTS.COM
Now you can use your PC to get up-to-date information about your funds,
learn more about investing and retirement planning, and access market
news and economic outlooks from Putnam.
VISIT PUTNAM'S SITE ON THE WORLD WIDE WEB FOR:
* the benefits of investing with Putnam
* Putnam's money management philosophy
* complete fund information, daily pricing and long-term performance
* your current account value, portfolio value and transaction history
* the latest on new funds and other Putnam news
You can also read Putnam economist Dr. Robert Goodman's commentary and
Putnam's Capital Markets outlook, search for a particular fund by name
or objective, use our glossary to decode investment terms . . . and much
more.
The site can be accessed through any of the major online services
(America Online, CompuServe, Prodigy) that offer web access. Of course,
you can also access it via Netscape or Microsoft Internet Explorer,
using an independent Internet service provider.
New features will be added to the site regularly. So be sure to bookmark us at
http://www.putnaminvestments.com
THE PUTNAM FAMILY OF FUNDS
The following is a complete list of Putnam's open-end mutual funds.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Century Growth Fund
New Opportunities Fund
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Technology Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Fund
Balanced Retirement Fund
Classic Equity Fund *
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund **
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK] **
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Growth and Income Fund II
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
Check your account balances and current performance at
www.putnaminvestments.com.
FUND INFORMATION
WEB SITE
www.putnaminvestments.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
John A. Hill, Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
John J. Morgan, Jr.
Vice President
Daniel L. Miller
Vice President
Roland W. Gillis
Vice President and Fund Manager
Charles H. Swanberg
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam New Century
Growth Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site:
www.putnaminvestments.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.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
---------------------
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U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
AN071-63291 2HW 8/00
