Putnam
Growth
Opportunities
Fund*
ANNUAL REPORT
July 31, 1997
*Formerly Putnam American Renaissance Fund
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Global competition has created a brand-new class of blue chips.
Investors no longer settle for big-cap companies with steady sales and
strong domestic market share. They want a worldwide brand name,
super-efficient production, lean management, and an outspoken commitment
to shareholder value."
-- BusinessWeek, July 7, 1997
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
14 Portfolio holdings
17 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
* Karsh, Ottawa
Dear Shareholder:
Putnam Growth Opportunities Fund certainly presented an impressive record to
investors as it began offering shares nationwide on August 1, 1997. There is
no doubt that an extraordinarily favorable market environment during the
fund's nearly two-year life as Putnam American Renaissance Fund prior to the
nationwide launch helped establish a strong track record.
At the same time, the role of your fund's managers in achieving these results
cannot be overlooked. Besides taking advantage of today's opportunities, they
have sought holdings of companies that have proved themselves in fair weather
and foul, mindful that exuberant markets such as today's do
not last forever.
In the following report, fund managers Carol McMullen and Jeffrey Lindsey
discuss their strategies during fiscal 1997 and the outlook for fiscal 1998.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
September 17, 1997
Report from the Fund Managers
Carol C. McMullen
Jeffrey R. Lindsey
When Putnam American Renaissance Fund concluded its fiscal year on July 31,
1997, it was poised for a renaissance of its own. After nearly two years of
stellar performance as an incubated fund -- offered solely to employees of
Putnam Investments and Trustees of the funds -- it was introduced to the
public as Putnam Growth Opportunities Fund on August 1, 1997. The new name is
designed to reflect more accurately your fund's strategy, which has produced
strong returns by targeting the stocks of large, well-established U.S.
companies with exceptional growth potential. For the 12 months ended July 31,
1997, your fund provided a total return of 47.34% at net asset value and
38.85% at public offering price. For complete performance information, please
refer to the summary that begins on page 9.
Of course, your fund's performance was achieved during an amazing period for
U.S. large-company stocks, with record-breaking surges in a number of market
indexes, including a rise above the once-unimaginable 8000 mark for the Dow
Jones Industrial Average. Realizing that the U.S. market is unlikely to
maintain this momentum indefinitely, we seek companies with attributes that go
far beyond their large size or blue-chip status, qualities that have helped
them retain their leadership positions and maintain rapidly accelerating
growth rates, even in shifting market conditions. In addition, most of these
companies serve international markets and earn a significant portion of their
profits abroad, which may help to minimize risk when U.S. markets
underperform.
* PHARMACEUTICALS A MAJOR HIGHLIGHT IN FISCAL '97
While seeking dynamic companies that are world leaders in their industries, we
find that they typically fit into one of six "themes" -- areas of growth that
we believe hold the most promise in markets around the globe. One such theme
is medical technology/cost containment, which includes many companies poised
to benefit from health-care trends around the world.
The spiraling cost of health care -- and the pressures on providers to contain
it -- is an industry trend that has boosted the profitability of
pharmaceutical companies. Since one of the most effective ways to keep medical
costs down is to keep people out of the hospital, the ability to develop
effective drugs with fewer side effects has become a thriving business. A
number of pharmaceutical companies in your fund's portfolio are dominating
global markets by creating innovative products for the treatment of illness
and disease.
Warner-Lambert Company, for example, recently was cleared to market Rezulin, a
drug for diabetes patients who are newly diagnosed or have problems with
traditional insulin treatments. Approximately 16 million people have diabetes,
and new guidelines for early diagnosis endorsed by the American Diabetes
Association are expected to reveal an additional 2 million. The disease is
estimated to cost the health-care system more than $100 billion annually.
Bristol-Myers Squibb, once a consumer products company, has evolved into a
pharmaceutical powerhouse. Since the merger with Squibb Corporation in 1989,
the company has become a world leader in most of its core businesses. Its
strongest growth potential comes from innovative products like Taxol, a drug
being developed for the treatment of breast cancer and AIDS-related Karposi's
sarcoma. The company markets products in nearly every country in the world,
with operations in more than 50 countries. While these holdings, along with
others discussed in this report, were viewed favorably at the end of the
fiscal period, all portfolio holdings are subject to review and adjustment in
accordance with the fund's investment strategy and may vary in the future.
Beyond the pharmaceutical companies, we remain optimistic about the entire
health-services industry, from medical devices to technology to providers that
can deliver high-quality care at a reasonable cost. Demographics continue to
favor every health-care sector as the baby-boom generation -- more of whom are
now reaching 50 years of age -- is expected to keep drugs, supplies, and
services in strong demand.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Pharmaceuticals and biotechnology 15.6%
Electronics and electrical equipment 10.9%
Financial services 6.9%
Computer software 6.8%
Food and beverage 5.9%
Footnote reads:
*Based on net assets as of 7/31/97. Holdings will vary over time.
* AMERICAN COMPANIES PROVE WORLDWIDE LEADERS IN FINANCIAL SERVICES
In the financial services industry, large U.S. companies continue to dominate
world markets by developing original products that respond to the needs of
consumers. One example is American Express Company, one of the fund's largest
financial services holdings at the close of the period. This company has
reinvigorated its product line, using creative targeted marketing. The
Membership Rewards program, for example, offers points for every dollar
charged to an American Express credit card. This program, which allows the
points to be exchanged for goods and services such as retail merchandise or
travel packages, has resulted in increased card usage. In addition, the
company has had great success with American Express Financial Advisors, a
business that has attracted baby boomers looking for personalized wealth
management services and products.
MBNA Corporation, the country's second largest credit card lender, was one of
the fund's strongest performers over the fiscal period. A large part of MBNA's
success can be attributed to creative products like its Affinity line of
credit cards, designed to target the personal interests of customers by
linking consumer spending with support for charitable organizations, sports
teams, colleges, and universities. In the first half of 1997 alone, MBNA
acquired more than 6 million new cardholders.
The insurance firm, Travelers Group, Inc., is another financial services
company whose stock performed well for your fund during the year. The company
has an impressive record of selling high-quality products to a broad base of
customers and is known for its powerful manufacturing, distribution, and
marketing capabilities. Travelers was recently added to the select group of 30
blue-chip companies that make up the Dow Jones Industrial Average. The company
also was ranked fifth on the BusinessWeek 50, a list of S&P 500(registered
trademark) companies that are deemed the "new corporate elite" based on their
strong performance.
TOP 10 HOLDINGS
General Electrical Co.
Electronics and electrical equipment
Merck & Co., Inc.
Pharmaceuticals and biotechnology
Microsoft Corp.
Computer software
Bristol-Myers Squibb Co.
Pharmaceuticals and biotechnology
Procter & Gamble Co.
Consumer products
Dayton Hudson Corp.
Retail
PepsiCo. Inc.
Food and beverages
Motorola Inc.
Electronics and electrical equipment
SmithKline Beechham PLC ADR
Pharmaceuticals and biotechnology
Warner-Lambert Co.
Pharmaceuticals and biotechnology
Footnote reads:
These holdings represent 29.4% of the fund's assets as of 7/31/97.
Portfolio holdings will vary over time.
* TECHNOLOGY REMAINS A PROMISING GROWTH THEME
While the technology industry has recently faced volatility, some impressive
returns have been generated in this sector of the portfolio. Cisco Systems and
Applied Materials, for example, were two of the fund's larger technology
holdings at the close of the period.
Founded in late 1984 by a small group of computer scientists from Stanford
University who wanted an easier way to connect different types of computer
systems, Cisco Systems shipped its first product in 1986. Since then, it has
grown into a multinational corporation with more than $5 billion in annual
revenue and more than 10,000 employees. The company went public in February
1990 and is now the third largest company on the NASDAQ composite index.
Like many of America's other great companies, Applied Materials has expanded
well beyond its role as an industry supplier. While this company is a leading
global supplier of semiconductors, its research and product development
expertise allow it to remain a dominant force in this incredibly fast-paced
industry. In fact, the company recently announced that it will invest more
than $430 million over the next 2 years to expand its product development and
demonstration laboratories.
* LOOKING AHEAD WITH CAUTIOUS OPTIMISM
As your fund begins its first year as Putnam Growth Opportunities Fund, we are
prepared for the possibility of U.S. market setbacks. But we are also
confident that the fund will weather market shifts by investing in strong,
innovative companies that can dominate their industries around the world,
respond to changing trends, and earn a significant portion of their profits
abroad.
Footnote reads:
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 7/31/97, there is no guarantee the fund will continue to hold
these securities in the future. The fund's concentrated portfolio may add a
measure of volatility to performance, as major fluctuations in any one holding
will likely affect the fund more than a fund with greater diversification.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Growth Opportunities Fund is designed for investors seeking capital
appreciation by investing primarily in stocks of well-established,
large-capitalization companies that Putnam believes will benefit from
major long-term economic trends, business conditions, and/or consumer
behavior.
TOTAL RETURN FOR PERIODS ENDED 7/31/97
(inception date) (10/2/95)
NAV POP
- ------------------------------------------------------------------------------
1 year 47.34% 38.85%
- ------------------------------------------------------------------------------
Life of fund 76.92 66.72
Annual average 36.58 32.22
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 7/31/97
Standard & Russell
Standard & Poor's 1000 Consumer
Poor's Barra Growth Growth Price
500 Index Index Index Index
- ------------------------------------------------------------------------------
1 year 52.11% 56.50% 51.85% 2.23%
- ------------------------------------------------------------------------------
Life of fund 69.70 76.03 67.51 4.77
Annual average 33.41 36.11 32.48 2.57
- ------------------------------------------------------------------------------
Returns at public offering price (POP) reflect the current maximum initial
sales charges of 5.75%. An expense limitation was in effect during this
performance period; without the limitation, total returns would have been
lower. All returns assume reinvestment of distributions at NAV and
represent past performance; they do not guarantee future results.
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.
The Fund began investment operations on 10/2/95, offering shares now known
as class A shares. On 8/1/97, after the close of the reporting period, the
fund began offering class B and class M shares. Performance for these
shares will be shown in subsequent reports and will differ from that
reported for class A shares.
[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
10/2/95
Fund's S&P Russell
class A shares Barra Growth 1000 Growth
at POP Index Index
10/2/95 9423 10000 10000
10/2/95 9423 10000 10000
10/2/95 9423 10000 10000
1/31/96 10536 10964 10804
1/31/96 10536 10964 10804
1/31/96 10536 10964 10804
4/30/96 11338 11233 11306
4/30/96 11338 11233 11306
4/30/96 11338 11233 11306
7/31/96 11316 11248 11030
7/31/96 11316 11248 11030
7/31/96 11316 11248 11030
10/31/96 12609 12471 12211
10/31/96 12609 12471 12211
10/31/96 12609 12471 12211
1/31/97 13732 14119 13773
1/31/97 13732 14119 13773
1/31/97 13732 14119 13773
4/30/97 13757 14655 13799
4/30/97 13757 14655 13799
4/30/97 13757 14655 13799
7/31/97 16672 17603 16751
Footnote reads:
Past performance is no assurance of future results.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 7/31/97
- ------------------------------------------------------------------------------
Distributions (number) 1
- ------------------------------------------------------------------------------
Income $0.035
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term 0.034
- ------------------------------------------------------------------------------
Short-term 1.156
- ------------------------------------------------------------------------------
Total $1.225
- ------------------------------------------------------------------------------
Share value: NAV POP
- ------------------------------------------------------------------------------
7/31/96 $10.15 $10.77
- ------------------------------------------------------------------------------
7/31/97 13.38 14.20
- ------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 6/30/97
(most recent calendar quarter)
(inception date) (10/2/95)
NAV POP
- ------------------------------------------------------------------------------
1 year 28.70% 21.28%
- ------------------------------------------------------------------------------
Life of fund 61.85 52.52
Annual average 31.88 27.46
- ------------------------------------------------------------------------------
Performance data represent past results and do not reflect future
performance. Investment returns and net asset value will fluctuate so that
an investor's shares when sold may be worth more or less than their
original cost. Performance data do not take into account any adjustment
for taxes payable on reinvested distributions and reflect an expense
limitation that was in effect during this performance period; without the
limitation, total returns would have been lower.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 5.75% sales charge.
COMPARATIVE BENCHMARKS
Standard & Poor's 500 Index* is an unmanaged list of common stocks that is
frequently used as a general measure of stock market performance.
Standard & Poor's Barra/Growth Index* is a capitalization-weighted index
of all common stocks within the S&P 500 with high price-earnings ratios.
Russell 1000 Growth Index*+ contains those Russell 1000 Index securities
with a greater-than-average growth orientation. Companies in the growth
index tend to exhibit higher price-to-book and price-earnings ratios,
lower dividend yields, and higher forecasted growth values than the
Russell 1000 Value Index. (The Russell 1000 Index is composed of the 1000
largest companies in the Russell 3000 Index.)
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.
+This index has replaced the S&P Barra/Growth Index as the fund's
benchmark, since, in Putnam Management's opinion, it provides a better
representation of the strategy of Putnam Growth Opportunities Fund.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund *
International New Opportunities Fund
Investors Fund
New Opportunities Fund +
OTC & Emerging Growth Fund [DBL. DAGGER]
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Total Return Fund
High Yield Trust +
Income Fund
Money Market Fund **
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM 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
LIFESTAGESM 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 Overseas Growth Fund
+ Closed to new investors. Some exceptions may apply. Contact Putnam
for details.
[DBL. DAGGER] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
** An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed to maintain a
price of $1.00 per share, although there is no assurance that this price
will be maintained in the future.
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.
Report of independent accountants
To the Shareholders of
Putnam Growth Opportunities 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 Growth
Opportunities Fund, formerly Putnam American Renaissance Fund, (the "fund") at
July 31, 1997, 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, 1997
by correspondence with the custodian and the application of alternative
auditing procedures where investments purchased were not yet received by the
custodian, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
September 12, 1997
Portfolio of investments owned
July 31, 1997
<TABLE>
<CAPTION>
COMMON STOCKS (98.0%) *
NUMBER OF SHARES VALUE
Banks (4.7%)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
1,200 Barnett Banks, Inc. $ 68,325
700 First Union Corp. 71,006
1,600 Washington Mutual, Inc. 110,600
--------------
249,931
Business Equipment and Services (0.6%)
- ------------------------------------------------------------------------------------------------------------
400 Xerox Corp. 32,900
Chemicals (1.7%)
- ------------------------------------------------------------------------------------------------------------
1,700 Praxair, Inc. 93,713
Computer Software (6.8%)
- ------------------------------------------------------------------------------------------------------------
900 Computer Associates Intl., Inc. 61,256
1,200 Microsoft Corp. + 169,800
1,000 Parametric Technology Corp. + 49,000
1,500 PeopleSoft, Inc. + 87,750
--------------
367,806
Computers (4.1%)
- ------------------------------------------------------------------------------------------------------------
2,000 EMC Corp. + 101,000
1,700 Hewlett-Packard Co. 119,106
--------------
220,106
Consumer Products (5.5%)
- ------------------------------------------------------------------------------------------------------------
1,000 Gillette Co. 99,000
1,200 Lowe's Cos., Inc. 45,150
1,000 Procter & Gamble Co. 152,125
--------------
296,275
Cosmetics (1.2%)
- ------------------------------------------------------------------------------------------------------------
1,400 Estee Lauder Cos. Class A 64,488
Electronics and Electrical Equipment (10.9%)
- ------------------------------------------------------------------------------------------------------------
1,200 Applied Materials, Inc. + 110,250
3,500 General Electric Co. 245,656
1,600 Motorola, Inc. 128,500
4,300 Westinghouse Electric Corp. 103,469
--------------
587,875
Entertainment (1.9%)
- ------------------------------------------------------------------------------------------------------------
1,900 Time Warner, Inc. 103,669
Financial Services (6.9%)
- ------------------------------------------------------------------------------------------------------------
1,300 American Express Co. 108,875
2,600 MBNA Corp. 117,000
1,000 Morgan Stanley, Dean Witter, Discover and Co. 52,313
1,300 Travelers Group Inc. 93,519
--------------
371,707
Food and Beverages (5.9%)
- ------------------------------------------------------------------------------------------------------------
1,600 Campbell Soup Co. 83,000
3,300 Coca-Cola Enterprises, Inc. 102,506
3,400 PepsiCo, Inc. 130,263
--------------
315,769
Health Care Services (3.8%)
- ------------------------------------------------------------------------------------------------------------
1,400 Cardinal Health, Inc. 87,150
4,400 HEALTHSOUTH Corp. + 116,600
--------------
203,750
Insurance (4.7%)
- ------------------------------------------------------------------------------------------------------------
1,000 Aetna Inc. 113,938
500 CIGNA Corp. 99,750
1,000 Conseco Inc. 40,750
--------------
254,438
Lodging (2.1%)
- ------------------------------------------------------------------------------------------------------------
1,600 Marriott International, Inc. 110,000
Medical Supplies and Devices (2.0%)
- ------------------------------------------------------------------------------------------------------------
1,336 Tyco International Ltd. + 108,216
Networking Equipment (2.2%)
- ------------------------------------------------------------------------------------------------------------
1,500 Cisco Systems, Inc. + 119,344
Oil and Gas (2.1%)
- ------------------------------------------------------------------------------------------------------------
1,500 Schlumberger Ltd. 114,563
Pharmaceuticals and Biotechnology (15.6%)
- ------------------------------------------------------------------------------------------------------------
2,100 Bristol-Myers Squibb Co. 164,714
1,100 Lilly (Eli) & Co. 124,300
1,900 Merck & Co., Inc. 197,481
1,700 Pfizer, Inc. 101,363
1,300 Smithkline Beecham PLC ADR (United Kingdom) 126,425
900 Warner-Lambert Co. 125,719
--------------
840,002
Publishing (1.9%)
- ------------------------------------------------------------------------------------------------------------
1,000 Gannett Co., Inc. 99,313
Retail (5.8%)
- ------------------------------------------------------------------------------------------------------------
1,800 CVS Corp. 102,375
2,200 Dayton Hudson Corp. 142,175
1,800 Wal-Mart Stores, Inc. 67,613
--------------
312,163
Semiconductors (2.2%)
- ------------------------------------------------------------------------------------------------------------
1,300 Intel Corp. 119,356
Telecommunication Equipment (3.6%)
- ------------------------------------------------------------------------------------------------------------
1,000 Northern Telecom Ltd. (Canada) 104,563
1,500 Tellabs, Inc. + 89,813
--------------
194,376
Telephone Services (1.8%)
- ------------------------------------------------------------------------------------------------------------
2,000 Sprint Corp. 99,000
--------------
Total Common Stocks (cost $4,035,780) $ 5,278,760
SHORT-TERM INVESTMENTS (2.3%) * (cost $126,020)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$ 126,000 Interest in $204,956,000 joint repurchase agreement
dated July 31, 1997 with UBS Securities due
August 1, 1997 with respect to various U.S. Treasury
obligations -- maturity value of $126,020 for an
effective yield of 5.76% $ 126,020
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $4,161,800) *** $ 5,404,780
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $5,385,097.
*** The aggregate identified cost on a tax basis is $4,162,659,
resulting in gross unrealized appreciation and depreciation of
$1,251,424 and $9,303, respectively, or net unrealized appreciation of
$1,242,121.
+ 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]
<TABLE>
<CAPTION>
Statement of assets and liabilities
July 31, 1997
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $4,161,800) (Note 1) $5,404,780
- ---------------------------------------------------------------------------------------------------
Cash 1,428
- ---------------------------------------------------------------------------------------------------
Dividends receivable 4,796
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 4,048
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 97,530
- ---------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 5,609
- ---------------------------------------------------------------------------------------------------
Total assets 5,518,191
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 100,071
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 120
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,913
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 1,071
- ---------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 8,843
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 21,076
- ---------------------------------------------------------------------------------------------------
Total liabilities 133,094
- ---------------------------------------------------------------------------------------------------
Net assets $5,385,097
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $3,805,033
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 337,084
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 1,242,980
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $5,385,097
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per share
($5,385,097 divided by 402,565 shares) $13.38
- ---------------------------------------------------------------------------------------------------
Offering price per share (100/94.25 of $13.38)* $14.20
- ---------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering
price is reduced.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended July 31, 1997
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $39) $ 38,774
- --------------------------------------------------------------------------------------------------
Interest 596
- --------------------------------------------------------------------------------------------------
Total investment income 39,370
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 25,099
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 3,297
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 2,740
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 40
- --------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 1,770
- --------------------------------------------------------------------------------------------------
Reports to shareholders 4,248
- --------------------------------------------------------------------------------------------------
Auditing 20,765
- --------------------------------------------------------------------------------------------------
Legal 5,506
- --------------------------------------------------------------------------------------------------
Postage 173
- --------------------------------------------------------------------------------------------------
Other 211
- --------------------------------------------------------------------------------------------------
Fees waived and expenses reimbursed by Manager (Note 2) (26,224)
- --------------------------------------------------------------------------------------------------
Total expenses 37,625
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (5,267)
- --------------------------------------------------------------------------------------------------
Net expenses 32,358
- --------------------------------------------------------------------------------------------------
Net investment income 7,012
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 410,793
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 1,080,288
- --------------------------------------------------------------------------------------------------
Net gain on investments 1,491,081
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,498,093
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
For the period
October 2, 1995
(commencement of
Year ended operations) to
July 31 July 31
1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- --------------------------------------------------------------------------------------------------
Operations:
- --------------------------------------------------------------------------------------------------
Net investment income $ 7,012 $ 7,280
- --------------------------------------------------------------------------------------------------
Net realized gain on investments 410,793 247,617
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 1,080,288 162,692
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,498,093 417,589
- --------------------------------------------------------------------------------------------------
Distributions to shareholders:
- --------------------------------------------------------------------------------------------------
From net investment income (9,336) (8,637)
- --------------------------------------------------------------------------------------------------
From net realized gain on investments (317,426) (3,217)
- --------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 1,567,224 240,807
- --------------------------------------------------------------------------------------------------
Total increase in net assets 2,738,555 646,542
Net assets
- --------------------------------------------------------------------------------------------------
Beginning of year 2,646,542 2,000,000
- --------------------------------------------------------------------------------------------------
End of year 5,385,097 2,646,542
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- ----------------------------------------------------------------------------------------------------------
Year For the period
Per-share ended Oct. 2, 1995+
operating performance July 31 to July 31
- ----------------------------------------------------------------------------------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $10.15 $8.50
- ----------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------
Net investment income .03(a) .03(a)
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 4.43 1.67
- ----------------------------------------------------------------------------------------------------------
Total from
investment operations 4.46 1.70
- ----------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------
From net
investment income (.04) (.04)
- ----------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.19) (.01)
- ----------------------------------------------------------------------------------------------------------
Total distributions (1.23) (.05)
- ----------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.38 $10.15
- ----------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 47.34 20.08*
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $5,385 $2,647
- ----------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.05(a) .89*(a)
- ----------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .20(a) .30*(a)
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 145.10 151.15*
- ----------------------------------------------------------------------------------------------------------
Average commission
rate paid $.0463 $.0414
- ----------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized
(a) Reflects an expense limitation in effect during the period (Note 2). As a result of such
limitation, expenses of the fund for the period ended July 31, 1997 and July 31, 1996
reflect a reduction of $0.11 and $0.11 per share respectively.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset arrangements (Note 2).
</TABLE>
Notes to financial statements
July 31, 1997
Note 1
Significant accounting policies
Putnam Growth Opportunities Fund (the "fund") is one of a series of Putnam
Investment Funds (the "trust") which is registered under the Investment
Company Act of 1940, as amended, as a diversified open-end management
investment company. Prior to August 1, 1997 the fund was known as Putnam
American Renaissance Fund. The fund seeks capital appreciation by investing
primarily in stocks of well-established, large-capitalization companies that
Putnam Investment Management, Inc. ("Putnam Management"), the fund's manager,
a wholly-owned subsidiary of Putnam Investments, Inc. believes will benefit
from major long-term economic trends, business conditions, and/or consumer
behavior.
The fund offers class A shares. Class A shares are sold with a maximum
front-end sales charge of 5.75%. Effective August 1, 1997 the fund began
offering class B and class M shares. 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 lower than class B
shares and higher than class A 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 the
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. Actual
results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price, 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.
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. 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.
E) 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.
F) 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.
This difference includes treatment of organization expenses. 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, 1997, the fund reclassified $2,324 to
increase undistributed net investment income and $1,641 to decrease
paid-in-capital, with a decrease to accumulated net realized gain on
investments of $683. The calculation of net investment income per share in the
financial highlights table excludes these adjustments.
G) 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.
H) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities and
Exchange Commission and with various states and the initial public offering of
its shares were $8,843. These expenses are being amortized on projected net
asset levels over a five-year period. The fund will reimburse Putnam
Management for the payment of these expenses.
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% of any excess
thereafter.
Putnam Management has agreed to limit its compensation (and, to the extent
necessary, bear other expenses) through November 30, 1997, to the extent that
expenses of the fund (exclusive of brokerage, interest, taxes, deferred
organizational and extraordinary expenses, credits from Putnam Fiduciary Trust
Company (PFTC), a wholly-owned 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 for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended July 31, 1997, fund expenses were reduced by $5,267 under
expense offset arrangements with PFTC. Investor servicing and custodian fees
reported in the Statement of operations exclude these credits. The fund could
have invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered into
such arrangements.
Trustees of the fund receive an annual Trustees fee of $108 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 "Plan") which allows the
Trustees to defer the receipt of all or a portion of Trustees Fees. The
deferred fees remain in the fund and are invested in certain Putnam funds
until distribution in accordance with the Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the Plan is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam
Investments, Inc., for services provided and expenses incurred by it in
distributing shares of the fund. The Plan provides for payment by the fund's
class A shares to Putnam Mutual Funds Corp. at an annual rate of up to 0.35%
of the fund's average net assets. The fund is not currently making any
payments pursuant to the Plan.
For the year ended July 31, 1997, Putnam Mutual Funds Corp., acting as
underwriter received no monies from net commissions from the sale of shares of
the fund.
Note 3
Purchase and sales of securities
During the year ended July 31, 1997, purchases and sales of investment
securities other than short-term investments aggregated $6,240,427 and
$5,065,060, 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, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended
July 31, 1997
- ------------------------------------------------------------
Shares Amount
- ------------------------------------------------------------
Shares sold 116,963 $1,315,416
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 31,358 326,433
- ------------------------------------------------------------
148,321 1,641,849
Shares
repurchased (6,623) (74,625)
- ------------------------------------------------------------
Net increase 141,698 $1,567,224
- ------------------------------------------------------------
For the period
October 2, 1995
(commencement of
operations) to
July 31, 1996
- ------------------------------------------------------------
Shares Amount
- ------------------------------------------------------------
Shares sold 26,969 $254,618
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------
26,969 254,618
Shares
repurchased (1,396) (13,811)
- ------------------------------------------------------------
Net increase 25,573 $240,807
- ------------------------------------------------------------
At July 31, 1997, Putnam Investments, Inc. owned 346,465 shares of the fund
(86.06% of shares outstanding), valued at $4,635,702.
Federal tax information
(Unaudited)
The fund has designated 15.74% of the distributions from net investment
income as qualifying for the dividends received deduction for corporations.
Pursuant to section 852 of the Internal Revenue Code, the fund hereby designates
$0.034 per share (or if different, the amount necessary to offset net capital
gain earned by the fund) [for all share classes] as capital gain dividends for
its taxable year ended July 31, 1997.
The Form 1099 you receive in January 1998 will show the tax status of all
distributions paid to your account in calendar 1997.
WELCOME TO
www.putnaminv.com
Now you can get up-to-date information about your funds, learn more
about investing and retirement planning, and access market news and an
economic outlook from Putnam experts -- with just a few clicks of the
mouse!
VISIT PUTNAM'S NEW SITE ON THE WORLD WIDE WEB TO FIND OUT:
* the benefits of investing with Putnam
* Putnam's money management philosophy
* daily fund pricing and long-term fund performance
* how to tell if your retirement savings plan is on track
* how quickly money can accumulate in a tax-deferred investment
You can also read Dr. Robert Goodman's economic commentary and Putnam's
Capital Markets Forum outlook, search for a particular Putnam fund by
name or objective . . . 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 and an independent Internet service
provider.
New features will be added to the site on an ongoing basis. So, visit us
at http://www.putnaminv.com -- often!
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
Price Waterhouse LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
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 and Fund Manager
Jeffrey R. Lindsey
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Growth
Opportunities 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 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
- --------------------
AN061-35880-2AP 9/97
