Putnam
Vista
Fund
ANNUAL REPORT
July 31, 1998
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* Morningstar, an independent rating agency, gave the fund's class A
shares 4 out of 5 stars for 10-year risk-adjusted performance as of July
31, 1998. This rating put the fund among the top 22.5% of the 707 domestic
equity funds rated.*
* Putnam Vista Fund's class A shares were ranked in the top 25% by Lipper
Analytical Services for the 10-year period ended July 31, 1998. The fund
ranked 45 out of 181 growth funds ranked.+
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
18 Financial statements
* Past performance is not indicative of future results. Morningstar
ratings reflect risk-adjusted performance through 7/31/98 and are subject
to change every month. Morningstar ratings are calculated from a fund's
3-, 5-, and 10-year returns (with fee adjustments) in excess of 90-day
Treasury bill returns and a risk factor that reflects performance below
90-day Treasury bill returns. For both 3- and 5-year performance, the fund
received 3 stars. There were 2,572 and 1,494 domestic equity funds rated,
respectively, 10% of the funds in an investment category receive 5 stars;
the next 22.5% receive 4 stars; the middle 35% receive 3 stars; the next
22.5% receive 2 stars; the next 10% receive 1 star. Performance of other
share classes will vary.
+ Past performance is not indicative of future results. Lipper is an
industry research firm whose rankings are based on total return
performance, vary over time, and do not reflect the effects of sales
charges. Performance of other share classes will vary. For the five-year
period ended 6/30/98, the fund ranked 125 out of 341 growth funds and for
the one-year period it ranked 368 out of 908 growth funds.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The market environment that prevailed during Putnam Vista Fund's fiscal
year was an especially challenging one for the stocks of the midsize
companies in which the fund typically invests. Even so, for the 12 months
ended July 31, 1998, your fund's returns at net asset value were well
above its benchmark indexes.
Careful stock selection proved to be the decisive factor as you will see
in the accompanying report from management. Your fund's managers describe
the winnowing process they use to make their portfolio selections. They
rely heavily on Putnam's considerable equity research capability, which
involves not only careful analysis of financial statements but on-site
visits and face-to-face meetings with key company executives.
As your fund enters its fourth decade, the management team also takes a
look at prospects for fiscal 1999. I believe you will find the discussion
both interesting and informative.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
September 16, 1998
Report from the Fund Managers
Eric M. Wetlaufer, lead manager
Anthony C. Santosus
David J. Santos
Margery C. Parker
Successful stock picking was tricky business during the fiscal year ended
July 31, 1998, particularly among the midsize companies that form Putnam
Vista Fund's investment focus. Several factors conspired to produce a rash
of disappointing earnings during the year, including the economic slowdown
in Asia, a debilitating strike at General Motors, and a correction in
business inventories. As the year progressed, declining issues routinely
outnumbered advancing issues on the major exchanges, and nervous investors
generally traded from small and midsize stocks and to the largest and most
liquid names.
Your fund delivered above-average performance in this challenging
environment. For the 12 months ended July 31, 1998, the fund's class A
shares returned 16.90% at net asset value, compared with 11.21% for the
unmanaged S&P Midcap 400 Index, 8.33% for the Russell Midcap Growth Index,
and 13.15% on average for the 908 midcap funds tracked by Lipper
Analytical Services. The total return for class A shares at public
offering price was 10.21% for the year. Complete performance information,
including results for other share classes, appears on pages 9 and 10.
* INVESTORS BECOME MORE SELECTIVE IN SECOND HALF
Your fund seeks long-term capital appreciation by investing in the stocks
of midsize companies displaying rapid earnings growth. As the fund began
fiscal 1998, these growth stocks were riding the tail end of a period of
overwhelmingly positive investor sentiment -- what Federal Reserve Board
Chairman Alan Greenspan referred to as "irrational exuberance."
For six consecutive quarters (the fourth quarter of 1996 through the first
quarter of 1998), the economy had grown at a better than 3% annual rate
without any signs of the inflation that traditionally accompanies such
growth. Furthermore, announcements of earnings disappointments among
several large-capitalization stocks were contributing to favorable
perceptions of small and midsize companies in many sectors of the economy.
Asia's financial crisis put an end to all that. As investors realized the
potential impact of a significant Asian slowdown on U.S. earnings --
indeed, on the entire world economy -- they began to look more carefully at
earnings sustainability. Many traded in their smaller holdings for a
handful of large, brand-name companies, since multinationals like General
Electric and Coca-Cola theoretically have the ability to offset losses in
one part of the world by moving production and sales efforts to another.
Other investors discriminated on the basis of industry, selling off
economically sensitive and energy-related stocks as well as anything with
direct ties to Asia. Energy stocks were particularly hard hit as
slackening demand from Asia helped push the price of oil to an 11-year low
in June.
Stocks that generally performed well during this period included those
from the retail, home construction, financial, and communications sectors.
The link between these groups was the U.S. consumer. Consumer confidence
reached a 29-year high in June, owing to several quarters of strong stock
market gains, an excellent job market, and lower prices for global
commodities such as gasoline. In an environment in which the prices of
goods and services were often declining, the 3.5% gain in wages and
benefits paid to U.S. workers through July 31, 1998, represented the
largest yearly increase since 1993.
[GRAPHIC OMITTED: horizontal bar chart of TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Retail 12.8%
Computer software 8.7%
Financial services 8.6%
Health care services 5.5%
Banks 5.5%
Footnote reads:
*Based on net assets as of 7/31/98. Holdings will vary over time.
* FUND'S STOCK SCREENING PROCESS PAYS OFF
Simply identifying the industries offering the best investment potential
was not enough to assure positive results. As the year progressed,
sustained earnings growth became increasingly difficult to find, and
investors were quick to punish the stocks of companies that failed to live
up to expectations. Adding to the market's difficulties were an inventory
buildup during the winter and a brutal strike at General Motors during the
spring.
Our two-step investment approach helped guide the fund through what often
appeared to be a minefield of earnings disappointments. In the first phase
of our stock selection process we screen a list of 750 midsize growth
companies. We look for rapid earnings growth, a history of generating
strong cash flow to finance growth, and stock prices that we believe are
undervalued relative to revenues. The roughly 150 companies that pass
phase one are then thoroughly researched by our portfolio managers and
staff of analysts with an emphasis on identifying quality management and
earnings sustainability.
This extensive research paid off handsomely during the year as several of
the portfolio's best-performing stocks -- including Providian Financial,
Comcast Corporation, America Online, and Chancellor Media -- were also
among its 10 largest holdings.
The fund's position in Chancellor, a diversified media company involved in
radio, outdoor advertising, and television, increased in value by more
than 100%. Other strong performers included Capital One Financial, Costco,
TJX Companies, and VERITAS Software. While these stocks, as well as others
discussed in this report, were viewed favorably at the end of the period,
all portfolio holdings are subject to review and adjustment in accordance
with the fund's investment strategy and may vary in the future.
The fund also benefited from what it didn't own. For example, as the price
of oil declined during the period, we scaled back the portfolio's energy
position to less than 1% of assets from 4% at the start of the period. Our
efforts to trim these holdings were helped this spring when two of the
fund's oil services companies, Western Atlas and Dresser Industries, were
acquired by larger competitors.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS*
Costco Companies
Retail
Comcast Corp.
Cable television
Chancellor Media Corp.
Broadcasting
VERITAS Software Corp.
Computer software
Providian Financial Corp.
Financial services
Omnicom Group, Inc.
Advertising
Kohl's Corp.
Retail
Danaher Corp.
Basic industrial products
Tellabs, Inc.
Telecommunication equipment
America Online, Inc.
Computer services
Footnote reads:
*These holdings represent 15.8% of the fund's net assets as of 7/31/98.
Portfolio holdings will vary over time.
Of course, the fund also had its share of disappointments. Technology
stocks such as SCI Systems and Micron Technology suffered at the hands of
slackening demand for computers and falling semiconductor prices. Both
stocks were subsequently sold and the proceeds invested in software
companies such as Sterling Commerce, a provider of electronic commerce and
networking services. The fund's health-care holdings also underperformed
during the year as investors sold small and mid-cap stocks for bigger
companies.
* DEFENSIVE POSITIONING GUIDES PORTFOLIO FOR FISCAL '99
Despite moderating economic growth and this summer's correction, we think
the U.S. market is still vulnerable to setbacks. Clearly Asia's problems
are not yet behind us, and that could mean more earnings disappointments
in the coming months. As investment managers, we must have the utmost
conviction in each and every portfolio holding so that we can keep such
surprises to a minimum. Although the fund's valuation is in line with our
benchmark index (the average holding has a price/earnings ratio of 31),
the portfolio's composition is now relatively defensive with very little
exposure to economically sensitive or energy-related issues and an
emphasis on financial and retail stocks. As always, we will continue to
research our universe of midsize companies thoroughly to find stocks that
offer quality management and exciting growth prospects.
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 7/31/98, there is no guarantee the fund will
continue to hold these securities in the future.
This fund invests all or a portion of its assets in small to medium-sized
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
Vista Fund is designed for investors seeking capital appreciation
primarily through common stocks.
TOTAL RETURN FOR PERIODS ENDED 7/31/98
Class A Class B Class M
(inception date) (6/3/68) (3/1/93) (12/8/94)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
1 year 16.90% 10.21% 16.05% 11.05% 16.38% 12.29%
- ------------------------------------------------------------------------------
5 years 150.47 135.94 141.07 139.07 144.23 135.62
Annual average 20.16 18.73 19.24 19.04 19.55 18.70
- ------------------------------------------------------------------------------
10 years 422.15 392.14 381.87 381.87 394.17 376.88
Annual average 17.97 17.28 17.03 17.03 17.32 16.91
- ------------------------------------------------------------------------------
Life of fund -- -- -- -- -- --
Annual average 11.67 11.45 10.63 10.63 10.91 10.78
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 7/31/98
Standard &
Poor's Midcap Russell Midcap Consumer
400 Index Growth Index* Price Index
- ------------------------------------------------------------------------------
1 year 11.21% 8.33% 1.68%
- ------------------------------------------------------------------------------
5 years 124.53 123.34 13.02
Annual average 17.56 17.44 2.48
- ------------------------------------------------------------------------------
10 years 432.96 350.66 37.72
Annual average 18.22 16.25 3.25
- ------------------------------------------------------------------------------
Life of fund + + 373.04
Annual average + + 5.29
- ------------------------------------------------------------------------------
+The index did not exist at the time of the fund's inception.
Past performance is no assurance of future results. 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-, 5-, and
10-year (where available) 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. All returns assume
reinvestment of distributions at NAV. Investment return and principal
value will fluctuate so that an investor's shares when redeemed may be
worth more or less than their original cost.
*Putnam Management has recently undertaken a review of benchmarks for
various funds. This index replaces the Standard & Poor's Midcap 400 Index
as a performance benchmark for this fund because, in Putnam Management's
opinion, the securities tracked by this index more accurately reflect the
types of securities generally held by the fund.
[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
7/31/88
Fund's class A S&P Midcap Russell Midcap Consumer Price
Date shares at POP 400 Index Growth Index Index
7/88 9,425 10,000 10,000 10,000
7/89 11,763 13,298 12,667 10,480
7/90 12,133 14,158 13,413 11,004
7/91 13,864 17,334 15,972 11,494
7/92 16,423 20,347 17,819 11,857
7/93 19,648 23,737 20,178 12,187
7/94 20,189 24,574 21,235 12,524
7/95 26,491 30,598 27,767 12,870
7/96 33,802 32,966 29,780 13,249
7/97 42,100 47,923 41,600 13,545
7/98 $49,214 $53,296 $45,066 $13,772
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 $48,187 and no contingent deferred sales charges would
apply; a $10,000 investment in the fund's class M shares would have been
valued at $49,417 at net asset value ($47,688 at public offering price).
See first page of performance section for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 7/31/98
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 1 1 1
- ------------------------------------------------------------------------------
Income -- -- --
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term $0.918 $0.918 $0.918
- ------------------------------------------------------------------------------
Short-term 0.039 0.039 0.039
- ------------------------------------------------------------------------------
Total $0.957 $0.957 $0.957
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
7/31/97 $12.52 $13.28 $12.09 $12.34 $12.79
- ------------------------------------------------------------------------------
7/31/98 13.49 14.31 12.89 13.22 13.70
- ------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 6/30/98
(most recent calendar quarter)
Class A Class B Class M
(inception date) (6/3/68) (3/1/93) (12/8/94)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
1 year 30.38% 22.93% 29.42% 24.42% 29.70% 25.19%
- ------------------------------------------------------------------------------
5 years 159.45 144.62 149.84 147.84 153.09 144.11
Annual average 21.01 19.59 20.10 19.90 20.41 19.54
- ------------------------------------------------------------------------------
10 years 432.41 401.80 391.12 391.12 403.77 386.14
Annual average 18.20 17.50 17.25 17.25 17.55 17.13
- ------------------------------------------------------------------------------
Life of fund -- -- -- -- -- --
Annual average 11.82 11.60 10.77 10.77 11.05 10.92
- ------------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns and
principal value will fluctuate so that an investor's shares, when sold,
may be worth more or less than their original cost. See first page of
performance section for performance calculation method.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
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 shares and assumes redemption at the end of the
period. Your fund's 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.
COMPARATIVE BENCHMARKS
Standard & Poor's Midcap 400 Index* is an unmanaged, market-weighted list
of 400 medium-sized companies, each affecting the index in proportion to
market value.
Russell Midcap Growth Index* measures the performance of those Russell
Midcap companies with higher price-to-book ratios and higher forecasted
growth rates.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
*Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities in
the fund do not match those in the indexes and performance of the fund
will differ. It is not possible to invest directly in an index.
Report of independent accountants
For the fiscal year ended July 31, 1998
To the Trustees and Shareholders of
Putnam Vista Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned, 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
Vista Fund (the "fund") at July 31, 1998, and the results of its
operations, the changes in its net assets and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. 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 generally accepted auditing
standards 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 July 31, 1998 by correspondence with
the custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 14, 1998
<TABLE>
<CAPTION>
Portfolio of investments owned
July 31, 1998
COMMON STOCKS (95.2%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Advertising (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
1,548,300 Omnicom Group, Inc. $ 81,285,750
Apparel (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,821,300 Jones Apparel Group, Inc. (NON) 47,581,463
1,009,900 Tommy Hilfiger Corp. (NON) 56,617,519
--------------
104,198,982
Banks (5.5%)
- --------------------------------------------------------------------------------------------------------------------------
926,600 Firstar Corp. 46,272,088
988,700 Northern Trust Corp. 72,793,038
1,341,300 Southtrust Corp. 54,238,819
1,050,900 State Street Corp. 72,840,506
1,021,900 Summit Bancorp 45,730,025
--------------
291,874,476
Basic Industrial Products (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
1,927,000 Danaher Corp. 78,645,688
Broadcasting (3.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,850,350 Chancellor Media Corp. (NON) 89,279,388
1,044,000 Clear Channel Communications, Inc. (NON) 58,659,750
1,813,500 Sinclair Broadcast Group, Inc. Class A (NON) 47,491,031
--------------
195,430,169
Business Services (4.9%)
- --------------------------------------------------------------------------------------------------------------------------
2,001,800 Accustaff, Inc. (NON) 47,292,525
856,500 Cintas Corp. (NON) 43,520,906
1,533,950 Fiserv, Inc. (NON) 67,685,544
894,900 Keane, Inc. (NON) 48,212,738
1,031,450 Robert Half International, Inc. (NON) 54,924,713
--------------
261,636,426
Cable Television (3.8%)
- --------------------------------------------------------------------------------------------------------------------------
2,002,100 Comcast Corp. Class A 90,907,853
1,196,800 Tele-Comm Liberty Media Group, Inc. Class A (NON) 47,198,800
3,107,500 Tele-Communications TCI Ventures Group, Class A (NON) 61,178,906
--------------
199,285,559
Cellular Communications (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
550,800 Cellular Communications International, Inc. (NON) 32,462,775
Computer Distribution (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
920,400 Ingram Micro, Inc. Class A (NON) 42,913,650
Computer Equipment (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,038,800 EMC Corp. (NON) 50,901,200
Computer Services (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
645,400 America Online, Inc. (NON) 75,511,800
Computer Software (8.7%)
- --------------------------------------------------------------------------------------------------------------------------
357,900 Aspect Development, Inc. (NON) 21,831,900
1,473,900 BMC Software, Inc. (NON) 72,681,694
1,567,300 Cadence Design Systems, Inc. (NON) 45,157,831
944,600 Compuware Corp. (NON) 50,831,288
1,202,500 Intuit, Inc. (NON) 59,824,375
306,100 Legato Systems, Inc. (NON) 13,315,350
262,800 PeopleSoft, Inc. (NON) 9,904,275
1,612,200 PLATINUM Technology, Inc. (NON) 50,935,444
1,144,900 Sterling Commerce, Inc. (NON) 45,295,106
1,583,400 VERITAS Software Corp. (NON) 88,868,325
--------------
458,645,588
Consumer Durables (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
798,000 Furniture Brands International, Inc. (NON) 22,543,500
Cosmetics (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
718,100 Estee Lauder Cos. Class A 46,137,925
Educational Services (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,508,025 Apollo Group, Inc. Class A (NON) 54,100,397
Financial Services (8.6%)
- --------------------------------------------------------------------------------------------------------------------------
430,400 Capital One Financial Corp. 49,953,300
1,161,500 Finova Group, Inc. 70,778,906
894,200 Lehman Brothers Holding, Inc. 64,382,400
1,280,500 Paine Webber Group, Inc. 60,343,563
1,044,000 Providian Financial Corp. 82,019,250
1,455,800 Schwab (Charles) Corp. 54,592,500
1,201,000 SunAmerica, Inc. 73,786,438
--------------
455,856,357
Food and Beverages (4.3%)
- --------------------------------------------------------------------------------------------------------------------------
1,415,800 Coca-Cola Enterprises 46,632,913
2,249,200 International Home Foods, Inc. 52,012,750
1,623,700 Rexall Sundown, Inc. (NON) 49,015,444
959,285 Suiza Foods Corp. (NON) 49,163,356
686,700 Twinlab Corp. (NON) 28,498,050
--------------
225,322,513
Gas Pipelines (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,135,000 Williams Cos., Inc. 36,390,938
Health Care Information Systems (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
932,200 Incyte Pharmaceuticals, Inc. (NON) 33,617,463
Health Care Services (5.5%)
- --------------------------------------------------------------------------------------------------------------------------
2,987,343 Health Management Assoc., Inc. (NON) 70,202,561
1,632,400 HEALTHSOUTH Corp. (NON) 41,014,050
1,185,000 Henry Schein, Inc. (NON) 57,028,125
720,100 McKesson Corp. 58,058,063
1,676,000 Omnicare, Inc. 66,306,750
--------------
292,609,549
Hotels (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,189,200 Marriott International, Inc. Class A 38,649,000
Insurance and Finance (3.7%)
- --------------------------------------------------------------------------------------------------------------------------
840,050 AON Corp. 57,123,400
1,009,400 Hartford Financial Services Group 52,551,888
614,800 PMI Group, Inc. (The) 41,652,700
858,000 Reliastar Financial Corp. 42,578,250
--------------
193,906,238
Medical Supplies and Devices (3.2%)
- --------------------------------------------------------------------------------------------------------------------------
863,200 Quintiles Transnational Corp. (NON) 39,329,550
766,900 Sofamor Danek Group, Inc. (NON) 65,282,363
1,018,200 Steris Corp. (NON) 62,110,200
--------------
166,722,113
Networking Equipment (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,394,300 Ascend Communications, Inc. (NON) 62,002,778
2,119,400 FORE Systems, Inc. (NON) 50,468,213
--------------
112,470,991
Nursing Homes (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
930,200 Health Care & Retirement Corp. (NON) 35,115,050
351,900 Manor Care, Inc. 13,130,269
--------------
48,245,319
Office Equipment (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
2,142,800 Herman Miller, Inc. 59,462,700
991,700 HON INDUSTRIES, Inc. 28,449,394
--------------
87,912,094
Oil Services (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
133,600 Cooper Cameron Corp. (NON) 4,684,350
2,284,400 Global Industries, Ltd. (NON) 28,412,225
--------------
33,096,575
Pharmaceuticals and Biotechnology (3.3%)
- --------------------------------------------------------------------------------------------------------------------------
1,007,800 Centocor, Inc. (NON) 35,524,950
969,600 Elan Corp. PLC ADR (Ireland) (NON) 69,811,200
1,170,050 ICN Pharmaceuticals, Inc. 33,127,041
816,400 Watson Pharmaceuticals, Inc. (NON) 36,840,050
--------------
175,303,241
Publishing (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
777,500 Belo (A.H.) Corp. 16,327,500
Recreation (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
717,200 Royal Caribbean Cruises Ltd. 53,296,925
Retail (12.8%)
- --------------------------------------------------------------------------------------------------------------------------
1,046,900 Abercrombie & Fitch Co. Class A (NON) 48,615,419
956,100 Bed Bath & Beyond, Inc. (NON) 41,231,813
1,680,100 Borders Group, Inc. (NON) 52,713,138
1,617,800 Costco Companies, Inc. (NON) 91,810,150
2,519,000 Family Dollar Stores, Inc. 45,656,875
1,615,400 Kohls Corp. (NON) 79,154,600
1,606,000 Linens 'N Things, Inc. (NON) 45,168,750
1,974,100 Office Depot, Inc. (NON) 64,158,250
712,100 Payless Shoesource, Inc. (NON) 40,233,650
3,977,675 Pier 1 Imports, Inc. 61,902,567
1,052,300 Staples, Inc. (NON) 34,594,363
3,183,000 TJX Companies, Inc. (The) 74,800,500
--------------
680,040,075
Savings and Loans (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,387,100 Greenpoint Financial Corp. 55,050,531
Supermarkets (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
855,500 Dominick's Supermarkets, Inc. (NON) 38,550,969
1,103,000 Fred Meyer, Inc. (NON) 48,600,938
--------------
87,151,907
Telecommunication Equipment (2.2%)
- --------------------------------------------------------------------------------------------------------------------------
774,300 Comverse Technology, Inc. (NON) 39,537,694
1,017,300 Tellabs, Inc. (NON) 76,583,616
--------------
116,121,310
Textiles (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,644,400 Mohawk Industries, Inc. (NON) 51,181,950
1,564,300 Westpoint Stevens, Inc. (NON) 56,119,253
--------------
107,301,203
Transportation (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
406,600 Expeditors International of Washington, Inc. 16,213,175
--------------
Total Common Stocks (cost $3,904,900,406) $5,027,178,902
SHORT-TERM INVESTMENTS (4.8%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$25,000,000 Asset Securitization Corp. effective yield of 5.52%,
August 31, 1998 $ 24,885,000
28,500,000 Ciesco L.P. effective yield of 5.52%, August 7, 1998 28,473,780
25,000,000 Federal Home Loan Mortgage Corp. effective yield
of 5.46%, August 13, 1998 24,954,500
25,000,000 Federal Home Loan Mortgage Corp. effective yield
of 5.44%, September 21, 1998 24,807,510
25,000,000 Metlife Funding effective yield of 5.51%,
September 25, 1998 24,789,548
25,000,000 Preferred Receivables Funding effective yield of
5.53%, August 11, 1998 24,961,597
25,000,000 Windmill Funding effective yield of 5.55%,
August 20, 1998 24,926,771
22,864,000 Windmill Funding effective yield of 5.51%,
October 21, 1998 22,580,543
55,000,000 Interest in 750,000,000 joint tri-party repurchase
agreement dated July 31, 1998 with Goldman,
Sachs & Co. due August 3, 1998 with respect
to various U.S. Treasury obligations -- maturity
value of 55,025,942 for an effective yield
of 5.66% 55,008,647
--------------
Total Short-Term Investments (cost $255,387,896) $ 255,387,896
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $4,160,288,302) (b) $5,282,566,798
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $5,282,440,859.
(b) The aggregate identified cost on a tax basis is $4,160,474,494, resulting in gross unrealized appreciation and
depreciation of $1,253,401,776 and $131,309,472, respectively, or net unrealized appreciation of $1,122,092,304.
(NON) Non-income-producing security.
ADR after the name of a foreign holding stands for American Depository Receipts representing ownership of
foreign securities on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
July 31, 1998
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $4,160,288,302) (Note 1) $5,282,566,798
- -----------------------------------------------------------------------------------------------
Cash 7,802,055
- -----------------------------------------------------------------------------------------------
Dividends and interest receivable 776,906
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 10,117,243
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 73,712,198
- -----------------------------------------------------------------------------------------------
Total assets 5,374,975,200
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 74,312,162
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 8,773,303
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 6,426,623
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 307,608
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 67,430
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,895
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 2,227,615
- -----------------------------------------------------------------------------------------------
Other accrued expenses 416,705
- -----------------------------------------------------------------------------------------------
Total liabilities 92,534,341
- -----------------------------------------------------------------------------------------------
Net assets $5,282,440,859
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $3,751,600,308
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 408,562,055
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 1,122,278,496
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $5,282,440,859
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($3,279,627,853 divided by 243,102,380 shares) $13.49
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $13.49)* $14.31
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($1,585,960,712 divided by 123,035,390 shares)** $12.89
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($128,258,883 divided by 9,701,477 shares) $13.22
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $13.22)* $13.70
- -----------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($288,593,411 divided by 21,157,165 shares) $13.64
- -----------------------------------------------------------------------------------------------
* 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 July 31, 1998
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends $ 18,960,253
- -----------------------------------------------------------------------------------------------
Interest 7,915,717
- -----------------------------------------------------------------------------------------------
Total investment income 26,875,970
Expenses:
Compensation of Manager (Note 2) 22,974,521
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 9,896,070
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 110,735
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 34,907
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 7,338,031
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 14,039,665
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 851,519
- -----------------------------------------------------------------------------------------------
Reports to shareholders 87,801
- -----------------------------------------------------------------------------------------------
Registration fees 286,516
- -----------------------------------------------------------------------------------------------
Auditing 70,575
- -----------------------------------------------------------------------------------------------
Legal 35,507
- -----------------------------------------------------------------------------------------------
Postage 447,222
- -----------------------------------------------------------------------------------------------
Other 283,923
- -----------------------------------------------------------------------------------------------
Total expenses 56,456,992
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (1,330,165)
- -----------------------------------------------------------------------------------------------
Net expenses 55,126,827
- -----------------------------------------------------------------------------------------------
Net investment loss (28,250,857)
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 631,850,032
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 127,375,274
- -----------------------------------------------------------------------------------------------
Net gain on investments 759,225,306
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $730,974,449
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended July 31
-------------------------------
1998 1997
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment loss $ (28,250,857) $ (13,208,411)
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments 631,850,032 183,810,148
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 127,375,274 733,257,710
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 730,974,449 903,859,447
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (207,841,199) (99,903,117)
- ---------------------------------------------------------------------------------------------------------------
Class B (102,991,533) (47,494,537)
- ---------------------------------------------------------------------------------------------------------------
Class M (8,092,094) (2,886,800)
- ---------------------------------------------------------------------------------------------------------------
Class Y (18,662,362) (10,720,433)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 716,470,714 1,635,441,373
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 1,109,857,975 2,378,295,933
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 4,172,582,884 1,794,286,951
- ---------------------------------------------------------------------------------------------------------------
End of year $5,282,440,859 $4,172,582,884
- ---------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.52 $9.79 $9.23 $7.09 $7.47
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.05)(c) (.03)(c) (.03) .02 .01
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.98 3.43 1.45 2.18 .21
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.93 3.40 1.42 2.20 .22
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- -- -- (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.96) (.67) (.86) (.06) (.55)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- -- (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- -- (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.96) (.67) (.86) (.06) (.60)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.49 $12.52 $9.79 $9.23 $7.09
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 16.90 36.25 16.64 31.22 2.75
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,279,628 $2,626,464 $1,220,639 $859,403 $646,811
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) .98 1.04 1.10 1.07 1.09
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.38) (.25) (.29) .26 .29
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 110.60 82.91 106.58 114.51 93.86
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended July 31, 1996 and thereafter,
includes amounts paid through expense offset and brokerage service arrangements.
Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income (loss) has been determined on the basis of the weighted average
number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.09 $9.55 $9.08 $7.03 $7.46
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.14)(c) (.11)(c) (.10)(c) (.03) .01
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.90 3.32 1.43 2.14 .15
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.76 3.21 1.33 2.11 .16
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- -- -- (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.96) (.67) (.86) (.06) (.55)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- -- (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- -- (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.96) (.67) (.86) (.06) (.59)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $12.89 $12.09 $9.55 $9.08 $7.03
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 16.05 35.14 15.88 30.19 1.89
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,585,961 $1,212,589 $488,085 $258,522 $132,596
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) 1.73 1.79 1.81 1.82 1.87
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (1.13) (.99) (1.03) (.51) (.53)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 110.60 82.91 106.58 114.51 93.86
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended July 31, 1996 and thereafter,
includes amounts paid through expense offset and brokerage service arrangements.
Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income (loss) has been determined on the basis of the weighted average
number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Dec. 8, 1994+
operating performance Year ended July 31 to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $12.34 $9.72 $9.19 $6.73
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.11)(c) (.08)(c) (.08)(c) (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.95 3.37 1.47 2.53
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.84 3.29 1.39 2.52
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.96) (.67) (.86) (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.96) (.67) (.86) (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.22 $12.34 $9.72 $9.19
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 16.38 35.35 16.37 37.63*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $128,259 $90,788 $22,232 $3,148
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) 1.48 1.54 1.54 1.06*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.88) (.73) (.82) (.31)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 110.60 82.91 106.58 114.51
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended July 31, 1996 and thereafter,
includes amounts paid through expense offset and brokerage service arrangements.
Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income (loss) has been determined on the basis of the weighted average
number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share March 28, 1995+
operating performance Year ended July 31 to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
Net asset value,
beginning of period $12.61 $9.84 $9.24 $7.83
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.02)(c) --(c) -- .01
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.01 3.44 1.46 1.40
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.99 3.44 1.46 1.41
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.96) (.67) (.86) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.96) (.67) (.86) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.64 $12.61 $9.84 $9.24
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 17.26 36.49 17.07 18.01*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $288,593 $242,742 $63,330 $42,717
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) .73 .79 .81 .29*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.13) .02 (.01) .10*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 110.60 82.91 106.58 114.51
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended July 31, 1996 and thereafter,
includes amounts paid through expense offset and brokerage service arrangements.
Prior period ratios exclude these amounts (Note 2).
(c) Per share net investment income (loss) has been determined on the basis of the weighted average
number of shares outstanding during the period.
</TABLE>
Notes to financial statements
July 31, 1998
Note 1
Significant accounting policies
Putnam Vista Fund (the "fund") is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company. The fund seeks capital appreciation by investing primarily in
common stocks selected for above-average growth potential and that involve
certain risks. The fund may also trade securities for short-term profits.
The fund offers class A, class B, 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 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 shares. Class Y shares, which are sold at net asset value, are
generally subject to the same expenses as class A shares, class B shares,
and class M shares, but do not bear a distribution fee. Class Y shares are
sold to defined contribution plans that invest at least $250 million in a
combination of Putnam Funds and other accounts managed by affiliates of
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
Manager, a wholly-owned subsidiary of Putnam Investments, Inc.
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 divdends 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. 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, or, if no sales are reported -- as in the case of
some securities traded over-the-counter -- the last reported bid price.
Short-term investments having remaining maturities of 60 days or less are
stated at amortized cost, which approximates market value, and other
investments are stated at fair value following procedures approved by the
Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Management. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the market
value of which at the time of purchase is required to be in an amount at
least equal to the resale price, including accrued interest. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to the
resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Interest income is recorded on the accrual basis.
Dividend income is recorded on the ex-dividend date except that certain
dividends from foreign securities are recorded as soon as the fund is
informed of the ex-dividend date.
E) 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 July
31, 1998, the fund had no borrowings against the line of credit.
F) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
G) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences include temporary and permanent differences of net operating
loss and losses on wash sale transactions. Reclassifications are made to
the fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryovers) under income tax
regulations. For the year ended July 31, 1998, the fund reclassified
$28,250,857 to decrease accumulated net investment loss and $333,382 to
decrease paid-in-capital, with a decrease to accumulated net realized gain
on investments of $27,917,475. The calculation of net investment income
per share in the financial highlights table excludes these adjustments.
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: 0.65% of the first $500
million of average net assets, 0.55% of the next $500 million, 0.50% of
the next $500 million, 0.45% of the next $5 billion, 0.425% of the next $5
billion, 0.405% of the next $5 billion, 0.39% of the next $5 billion and
0.38% 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 subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended July 31, 1998, fund expenses were reduced by $1,330,165
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 $3,550
has been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
in the fund and are invested in certain Putnam funds until distribution in
accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension Plan
are equal to 50% of the Trustee's average total retainer and meeting fees
for the three years preceding retirement. Pension expense for the fund is
included in Compensation of Trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B 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 Mutual Funds Corp., a wholly-owned subsidiary of Putnam
Investments,Inc., for services provided and expenses incurred by it in
distributing shares of the fund. The Plans provide for payments by the
fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%, 1.00% and
1.00% of the average net assets attributable to class A, class B and class
M shares, respectively. The Trustees have approved payment by the fund at
an annual rate of .025%, 1.00% and 0.75% of the average net assets
attributable to class A, class B and class M shares respectively.
For the year ended July 31, 1998, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $1,358,595 and $47,844 from the
sale of class A and class M shares, respectively and $1,699,282 in
contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares. For the year ended July 31, 1998 Putnam Mutual Funds
Corp., acting as underwriter received $64,037 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended July 31, 1998, purchases and sales of investment
securities other than short-term investments aggregated $5,205,932,351 and
$5,051,532,890, respectively. There were no purchases and sales of U.S.
government obligations. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the identified cost
basis.
Note 4
Capital shares
At July 31, 1998, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended
July 31, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 100,554,869 $1,276,496,212
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 17,501,153 197,237,962
- -----------------------------------------------------------------------------
118,056,022 1,473,734,174
Shares
repurchased (84,813,029) (1,073,796,615)
- -----------------------------------------------------------------------------
Net increase 33,242,993 $399,937,559
- -----------------------------------------------------------------------------
Year ended
July 31, 1997
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 195,270,165 $2,134,263,770
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 9,086,548 93,315,278
- -----------------------------------------------------------------------------
204,356,713 2,227,579,048
Shares
repurchased (119,129,356) (1,303,118,595)
- -----------------------------------------------------------------------------
Net increase 85,227,357 $924,460,453
- -----------------------------------------------------------------------------
Year ended
July 31, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 35,912,944 $440,380,182
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,790,956 95,118,377
- -----------------------------------------------------------------------------
44,703,900 535,498,559
Shares
repurchased (21,992,849) (269,973,540)
- -----------------------------------------------------------------------------
Net increase 22,711,051 $265,525,019
- -----------------------------------------------------------------------------
Year ended
July 31, 1997
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 63,364,159 $668,893,241
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,399,637 43,820,796
- -----------------------------------------------------------------------------
67,763,796 712,714,037
Shares
repurchased (18,568,112) (194,402,982)
- -----------------------------------------------------------------------------
Net increase 49,195,684 $518,311,055
- -----------------------------------------------------------------------------
Year ended
July 31, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 4,570,124 $57,200,814
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 686,370 7,605,041
- -----------------------------------------------------------------------------
5,256,494 64,805,855
Shares
repurchased (2,911,068) (36,613,684)
- -----------------------------------------------------------------------------
Net increase 2,345,426 $28,192,171
- -----------------------------------------------------------------------------
Year ended
July 31, 1997
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 7,745,533 $83,758,963
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 271,933 2,762,887
- -----------------------------------------------------------------------------
8,017,466 86,521,850
Shares
repurchased (2,949,807) (31,754,150)
- -----------------------------------------------------------------------------
Net increase 5,067,659 $54,767,700
- -----------------------------------------------------------------------------
Year ended
July 31, 1998
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 6,182,440 $79,819,359
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,640,121 18,662,362
- -----------------------------------------------------------------------------
7,822,561 98,481,721
Shares
repurchased (5,909,265) (75,665,756)
- -----------------------------------------------------------------------------
Net increase 1,913,296 $22,815,965
- -----------------------------------------------------------------------------
Year ended
July 31, 1997
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 17,847,266 $193,641,549
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,037,848 10,720,433
- -----------------------------------------------------------------------------
18,885,114 204,361,982
Shares
repurchased (6,076,721) (66,459,817)
- -----------------------------------------------------------------------------
Net increase 12,808,393 $137,902,165
- -----------------------------------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund
hereby designates $746,335,436 as capital gain, which includes
$280,098,044 as 20% capital gain, for its taxable year ended July 31,
1998.
The Form 1099 you receive in January 1999 will show the tax status of all
distributions paid to your account in calendar 1998.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT
ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
John J. Morgan, Jr.
Vice President
Carol C. McMullen
Vice President
Eric M. Wetlaufer
Vice President and Fund Manager
Anthony C. Santosus
Vice President and Fund Manager
David J. Santos
Vice President and Fund Manager
Margery C. Parker
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Vista 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' website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other agency; and involve risk, including the possible loss of the
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- ---------------
ANO15-45516 006/317/515/376 9/98
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ---------------------------------------------------------------------------
Putnam Vista Fund
Supplement to Annual Report dated 7/30/98
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 defined contribution plans investing $250 million or
more in one or more of Putnam's funds or private accounts. 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, and M shares, which are discussed more extensively in the semiannual
report.
ANNUAL RESULTS AT A GLANCE
- ---------------------------------------------------------------------------
Total return: NAV
Six months ended 07/31/98 17.38%
One year ended 07/31/98 17.26
Life of class (since 3/28/95) 11.71
- ---------------------------------------------------------------------------
Share value: NAV
07/31/97 $12.61
07/31/98 $13.64
- ---------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
1 $0.00 $0.957 $0.957
- ---------------------------------------------------------------------------
Please note that past performance does not indicate future results.
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.
