Putnam
Growth
Opportunities
Fund
ANNUAL REPORT
July 31, 1998
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "For the 12 months ended June 30, 1998, all three share classes of
Putnam Growth Opportunities Fund ranked in the top 10% of the 884 growth
funds tracked by Lipper Analytical Services. The fund's class A, B, and M
shares were ranked 63, 78 and 72, respectively, of 884.*
* "While we're keeping a wary eye on developments in Asia, we believe that
the situation there also offers opportunities to many of the large-cap,
global companies in which we invest. Additionally, strength in recovering
European economies has helped to offset the Asian difficulties. The
emergence of the EMU should add to this strength."
-- Jeffrey R. Lindsey, manager
Putnam Growth Opportunities
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
16 Financial statements
* Past performance is not indicative of future results. Lipper rankings are
based on total return performance, vary over time, and do not reflect the
effects of sales charges. The fund was not ranked for longer periods.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
During the fiscal year ended July 31, 1998, Putnam Growth Opportunities
Fund once again demonstrated the ability of a portfolio of stocks of
financially strong, well-established industry leaders with proven patterns
of growth to perform well in a challenging market environment. In this
period of investor uncertainty exacerbated by the Asian crisis, your fund
benefited both from the sustained strength of large-company stocks and its
holdings in several dynamic industries.
The digital revolution, the graying of America, consumers' rising demand
for bargains, and the changing shape of financial services in the face of
megamergers provided investment themes for your fund during the period.
Semiconductor sales were soft, but the cable TV and telecommunications
industries flourished as the world continued to become wired. Drug
companies prospered as an aging population increased its spending on
medicines. Full-service conglomerates began offering one-stop shopping for
financial products.
On the following pages, your fund's management team discusses its
strategies and prospects in this environment.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
September 16, 1998
Report from the Fund Managers
Carol C. McMullen
Jeffrey R. Lindsey
C. Beth Cotner
As the strength of large-capitalization stocks continued to buoy the U.S.
stock market, Putnam Growth Opportunities Fund benefited from their vigor.
Throughout the 12 months ended July 31, 1998, large-cap stocks' liquidity
and stability of earnings combined with an ongoing series of mergers and
stock buy-back programs to produce handsome rewards for investors. While
we have noted in previous reports that the record-breaking momentum of
large-company stocks is unlikely to endure indefinitely, your fund has
certainly made the most of it for fiscal 1998. For the 12 months ended
July 31, 1998, your fund's class A shares provided a total return of
27.23% at net asset value and 19.88% at public offering price. For
complete performance information, please refer to the summary that begins
on page 9.
During the fund's fiscal year, investors' expectations were shaken by the
ongoing financial crisis in Asian markets. However, despite the occasional
U.S. market shock, large-cap company stocks have generally held their
value, with profits from vibrant European markets helping to offset any
shortfalls from operations in Asia. As of the end of the year, we believed
that large-cap stocks were fairly valued relative to their fundamentals
and in terms of the current U.S. economic conditions of low interest rates
and minimal inflation. While remaining cautious on valuations, we see no
reason at present to diverge from the four main investment themes that
have driven our strategy over the past 12 months: the transformation to
the digital age, the confident consumer, the financial services
revolution, and "prescription for growth" in health care.
* DIGITAL REVOLUTION COMES HOME
Some sources estimate that in 1997, for the first time, people in the
United States sent more messages by e-mail than through the U.S. Postal
Service. Driven by the explosive popularity of the Internet and reflecting
the continued upsurge in the numbers of wired homes, our position in
America Online has become one of the fund's largest. With more than 12
million customers, AOL is the undisputed leader in bringing the digital
revolution into U.S. homes, and its growth shows no signs of slowing.
Advertising revenue has surged, and as online shopping continues to build
(electronic commerce, currently at $8 billion, is estimated to reach $230
billion by 2002), the company's profits should continue to keep pace.
Lucent Technologies, another of the fund's top 10 holdings, is the leading
company in one of the strongest areas of the technology sector:
telecommunication equipment. Cable companies (MediaOne Group, a new
addition to your portfolio) and entertainment companies (Viacom), driven
by the convergence of the digital revolution and entertainment, have also
displayed rapid growth. Viacom has successfully restructured, revamping
its Blockbuster video rental division and selling off the slower divisions
of its business. 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.
Elsewhere in technology, demand for semiconductors has fallen sharply as
their prices have declined, driven down by the Asian currency crisis. As a
result, we have eliminated semiconductor companies from your portfolio.
[GRAPHIC OMITTED: horizontal bar chart of TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Pharmaceuticals
and biotechnology 14.9%
Retail 14.3%
Financial services 10.1%
Cable television 6.0%
Telecommunication
equipment 5.2%
Footnote reads:
* Based on net assets as of 7/31/98. Holdings will vary over time.
* CONSUMERS: OLDER - AND SPENDING MORE WISELY
In 1950, the number of people in the United States who were over age 65
stood at 12.2 million. By 2010, that number is projected to reach 40
million.1 The industry sector most affected by the graying of America is
health care, specifically the medical technology and pharmaceutical
industries. However, our focus on companies positioned to take advantage
of this trend has also led us outside these industries. For example, your
fund has a significant investment in Tyco International, a global consumer
staples conglomerate, in part because of its recent purchase of medical
equipment manufacturer U.S. Surgical. We expect this new division, which
specializes in disposable medical products, to provide a significant boost
in Tyco's earnings per share.
As people in the United States age, they require more prescriptions (from
2.12 billion prescriptions in 1995 to an estimated 2.57 billion in 2002)2
and spend more on them (currently $388 per person per year at ages 45-54;
$427 per person per year at ages 55-63)2. Given this demographic trend,
the growth potential in the pharmaceutical industry is extraordinary by
any standard; within this industry, we seek to target those companies
capable of dominating global markets with a steady stream of new,
innovative, and profitable drugs. It's no wonder that Warner-Lambert,
Schering-Plough, and Pfizer are all among the fund's top 10 holdings.
With the exception of a slight dip in 1996, U.S. consumer confidence has
been on a steady rise since 1994 and shows no sign of abating. We expect
the trend to continue upward as long as inflation and unemployment remain
low. But people in the United States are now searching harder for bargains
- - and companies that provide them are flourishing. Discount retailers,
such as Costco, Home Depot, and Wal-Mart, are taking most of the revenue
growth rather than traditional department stores. While department store
revenues have essentially remained flat since 1990, discount store revenue
has climbed from just under $50 billion in 1990 to an estimated $248
billion by 2000. The fund's positions in these companies reflect our
belief that Americans will continue to seek out good value at a fair price.
1 Source: Administration on Aging
2 Source: JP Morgan, IND Pharmacies, Chain Store Pharmacies
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Warner-Lambert Co.
Pharmaceuticals and biotechnology
Schering-Plough Corp.
Pharmaceuticals and biotechnology
Microsoft Corp.
Computer software
Lucent Technologies, Inc.
Telecommunications equipment
Pfizer, Inc.
Pharmaceuticals and biotechnology
Tyco International Ltd.
Conglomerate
General Electric Co.
Electronics and electrical equipment
Wal-Mart Stores, Inc.
Retail
America Online, Inc.
Computer services
Tele-Communications, Inc.
Cable television
These holdings represent 35.2% of the fund's net assets as of 7/31/98.
Portfolio holdings will vary over time.
* FINANCIAL SERVICES FOR THE DIGITAL AGE
Once upon a time, savings and loans marketed mortgages, banks lent money,
brokers traded stocks and bonds, and insurance companies sold insurance.
Now we're seeing the rise of an all-in-one approach to financial services,
with companies offering integrated services, a variety of financial
products, global reach, and, of course, Internet distribution.
The Travelers Group, Inc., which has performed well for your fund during
the year, is in the process of reshaping its operations to take advantage
of these trends. The company's pending merger with Citicorp will be the
culmination of this process. Once involved primarily in consumer finance,
Travelers is now active in brokerage, investment banking, asset
management, consumer lending, life insurance, and property and casualty
insurance. The combined company, which will be known as Citigroup, will
add consumer and commercial banking to this list of services. We believe
that increased market leverage and the opportunity for significant cost
savings will lead to strong profits for this forthcoming giant of global
financial services.
* OPTIMISTIC OUTLOOK TEMPERED BY REALISM
While we are pleased with your fund's performance to date, it would be
wise to keep firmly in mind that current performance is dependent upon
certain specific factors: moderate U.S. economic growth, low inflation,
and low interest rates. In addition, the basic fundamentals of the
large-cap companies in which the fund invests remain generally sound. A
change in any one of these factors could have a negative effect on
performance. However, we believe our ongoing focus on the best large
growth companies - financially strong, well-established leaders with
demonstrated growth - has the potential to deliver attractive results in a
variety of market environments.
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. Investments in a highly
focused portfolio with a relatively small number of holdings may be
subject to greater risk than a more broadly diversified portfolio.
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
promising growth themes worldwide.
TOTAL RETURN FOR PERIODS ENDED 7/31/98
Class A Class B Class M
(inception date) (10/2/95) (8/1/97) (8/1/97)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
1 year 27.23% 19.88% 26.25% 21.25% 26.63% 22.16%
- ------------------------------------------------------------------------------
Life of fund 125.10 112.12 119.27 116.27 120.90 113.23
Annual average 33.20 30.44 31.97 31.33 32.32 30.68
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 7/31/98
Russell
Standard & 1000 Consumer
Poor's Growth Price
500 Index Index Index
- ------------------------------------------------------------------------------
1 year 19.29% 19.92% 1.68%
- ------------------------------------------------------------------------------
Life of fund 102.47 100.87 6.53
Annual average 28.27 27.91 2.26
- ------------------------------------------------------------------------------
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. The fund's performance
reflects a voluntary expense limitation currently or previously in effect.
Without the limitation, total return would have been lower.
[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 class A S&P 500 Russell 1000
Date shares at POP Index Growth Index
10/95 9,423 10,561 10,455
3/96 11,171 11,017 11,016
6/96 11,851 11,791 11,717
9/96 12,319 12,206 12,139
12/96 12,847 13,093 12,872
3/97 12,884 13,560 12,949
6/97 15,252 16,311 16,289
9/97 16,436 17,270 16,546
12/97 16,705 17,877 16,798
3/98 19,339 20,784 19,343
6/98 21,050 22,002 20,221
7/98 $21,212 $20,247 $20,087
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 $21,927 at NAV, $21,627 at CDSC; a $10,000 investment in
the fund's class M shares would have been valued at $22,090 ($21,323 at
POP).
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 0.013 0.013 0.013
- ------------------------------------------------------------------------------
Short-term 0.012 0.012 0.012
- ------------------------------------------------------------------------------
Total $0.025 $0.025 $0.025
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
7/31/97 $13.38 $14.20 -- -- --
- ------------------------------------------------------------------------------
8/1/97* -- -- $13.38 $13.38 $13.87
- ------------------------------------------------------------------------------
7/31/98 16.99 18.03 16.86 16.91 17.52
- ------------------------------------------------------------------------------
* Inception date of class B and class M shares.
TOTAL RETURN FOR PERIODS ENDED 6/30/98
(most recent calendar quarter)
Class A Class B Class M
(inception date) (10/2/95) (8/1/97) (8/1/97)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
1 year 38.01% 30.05% 37.00% 32.00% 37.33% 32.57%
- ------------------------------------------------------------------------------
Life of fund 123.38 110.50 117.84 114.84 119.33 111.72
Annual average 34.09 31.21 32.86 32.19 33.20 31.49
- ------------------------------------------------------------------------------
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 500 Index* is an unmanaged list of common stocks that is
frequently used as a general measure of stock market performance.
Russell 1000 Growth Index* The Russell 1000 Growth Index contains those
Russell 1000 securities with a greater-than-average growth orientation.
Companies in this 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.
Report of independent accountants
For the fiscal year ended July 31, 1998
To the Trustees and 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 (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 11, 1998
<TABLE>
<CAPTION>
Portfolio of investments owned
July 31, 1998
COMMON STOCKS (99.4%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Banks (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
75,600 BankAmerica Corp. $ 6,785,100
Broadcasting (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
412,600 CBS Corp. 14,002,613
Business Services (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
138,300 Pitney Bowes, Inc. 6,984,150
Cable Television (6.0%)
- --------------------------------------------------------------------------------------------------------------------------
218,600 MediaOne Group Inc. (NON) 10,561,113
233,400 Tele-Comm Liberty Media Group, Inc. Class A (NON) 9,204,713
397,100 Tele-Communications, Inc. Class A (NON) 16,578,925
--------------
36,344,751
Computer Services (2.8%)
- --------------------------------------------------------------------------------------------------------------------------
147,900 America Online, Inc. 17,304,300
Computer Software (4.4%)
- --------------------------------------------------------------------------------------------------------------------------
89,700 Computer Associates International, Inc. 2,976,919
219,000 Microsoft Corp. (NON) 24,076,313
--------------
27,053,232
Computers (3.5%)
- --------------------------------------------------------------------------------------------------------------------------
194,700 Compaq Computer Corp. 6,400,763
306,500 EMC Corp. (NON) 15,018,500
--------------
21,419,263
Conglomerates (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
338,700 Tyco International Ltd. 20,978,231
Consumer Products (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
134,900 Colgate-Palmolive Co. 12,469,819
Cosmetics (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
152,400 Estee Lauder Cos. Class A 9,791,700
Electronics and Electrical Equipment (4.8%)
- --------------------------------------------------------------------------------------------------------------------------
232,600 General Electric Co. 20,774,088
156,700 Illinois Tool Works, Inc. 8,784,994
--------------
29,559,082
Entertainment (4.5%)
- --------------------------------------------------------------------------------------------------------------------------
167,800 Time Warner, Inc. 15,112,488
175,600 Viacom, Inc. Class B (NON) 12,028,600
--------------
27,141,088
Environmental Control (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
42,300 Waste Management, Inc. (NON) 2,331,788
Financial Services (10.1%)
- --------------------------------------------------------------------------------------------------------------------------
103,200 American Express Co. 11,390,700
303,100 MBNA Corp. 10,153,850
114,400 Merrill Lynch & Co., Inc. 11,154,000
146,600 Morgan Stanley, Dean Witter, Discover and Co. 12,763,363
241,000 Travelers Group Inc. 16,147,000
--------------
61,608,913
Food and Beverages (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
184,900 Coca-Cola Enterprises, Inc. 6,090,144
Health Care Information Systems (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
395,500 HBO & Co. 11,654,891
Health Care Services (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
148,900 Cardinal Health, Inc. 14,303,706
Insurance (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
74,400 American International Group, Inc. 11,220,450
Medical Supplies and Devices (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
144,100 Boston Scientific Corp. (NON) 11,041,663
Networking Equipment (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
124,800 Cisco Systems, Inc. (NON) 11,949,600
Pharmaceuticals and Biotechnology (14.9%)
- --------------------------------------------------------------------------------------------------------------------------
141,900 Bristol-Myers Squibb Co. 16,167,731
201,800 Pfizer, Inc. 22,198,000
261,100 Schering-Plough Corp. 25,261,425
364,600 Warner-Lambert Co. 27,550,080
--------------
91,177,236
Retail (14.3%)
- --------------------------------------------------------------------------------------------------------------------------
221,400 Costco Companies, Inc. (NON) 12,564,450
349,500 CVS Corp. 14,329,500
123,100 Dayton Hudson Corp. 5,885,719
363,700 Home Depot, Inc. (The) 15,229,938
284,900 Rite Aid Corp. 11,253,550
433,500 TJX Cos., Inc. (The) 10,187,250
280,200 Wal-Mart Stores, Inc. 17,687,625
--------------
87,138,032
Telecommunication Equipment (5.2%)
- --------------------------------------------------------------------------------------------------------------------------
246,700 Lucent Technologies, Inc. 22,804,331
121,400 Tellabs, Inc. (NON) 9,139,144
--------------
31,943,475
Telephone Services (3.9%)
- --------------------------------------------------------------------------------------------------------------------------
157,500 Sprint Corp. 11,025,000
245,900 WorldCom, Inc. 13,001,963
--------------
24,026,963
Wireless Communications (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
221,800 Airtouch Communications, Inc. (NON) 13,044,613
--------------
Total Common Stocks (cost $516,766,432) $ 607,364,803
SHORT-TERM INVESTMENTS (1.0%) (a)(cost $6,430,011)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$6,429,000 Interest in $750,000,000 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
$6,432,032 for an effective yield of 5.66% $ 6,430,011
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $523,196,443) (b) $ 613,794,814
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $611,255,409.
(b) The aggregate identified cost on a tax basis is $523,371,971, resulting in gross unrealized appreciation and
depreciation of $100,693,996 and $10,271,153, respectively, or net unrealized appreciation of $90,422,843.
(NON) Non-income-producing security.
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 $523,196,443) (Note 1) $613,794,814
- -----------------------------------------------------------------------------------------------
Cash 170,989
- -----------------------------------------------------------------------------------------------
Dividends receivable 205,971
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 7,170,120
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 2,436,840
- -----------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 4,377
- -----------------------------------------------------------------------------------------------
Total assets 623,783,111
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 9,087,453
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,890,940
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 931,460
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 70,548
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 3,293
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 893
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 319,548
- -----------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 8,843
- -----------------------------------------------------------------------------------------------
Other accrued expenses 214,724
- -----------------------------------------------------------------------------------------------
Total liabilities 12,527,702
- -----------------------------------------------------------------------------------------------
Net assets $611,255,409
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $525,161,603
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (4,504,565)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 90,598,371
- -----------------------------------------------------------------------------------------------
Total - Representing net assets applicable to
capital shares outstanding $611,255,409
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($287,291,107 divided by 16,912,121 shares) $16.99
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $16.99)* $18.03
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($299,195,482 divided by 17,740,672 shares)** $16.86
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($24,768,820 divided by 1,465,053 shares) $16.91
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $16.91)* $17.52
- -----------------------------------------------------------------------------------------------
* 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 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 (net of foreign tax of $4,122) $ 1,682,778
- -----------------------------------------------------------------------------------------------
Interest 345,324
- -----------------------------------------------------------------------------------------------
Total investment income 2,028,102
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,840,408
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 576,715
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 11,201
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 8,314
- -----------------------------------------------------------------------------------------------
Distribution fees - Class A (Note 2) 311,350
- -----------------------------------------------------------------------------------------------
Distribution fees - Class B (Note 2) 1,261,070
- -----------------------------------------------------------------------------------------------
Distribution fees - Class M (Note 2) 84,490
- -----------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 1,232
- -----------------------------------------------------------------------------------------------
Reports to shareholders 43,164
- -----------------------------------------------------------------------------------------------
Registration fees 154,436
- -----------------------------------------------------------------------------------------------
Auditing 26,379
- -----------------------------------------------------------------------------------------------
Legal 5,930
- -----------------------------------------------------------------------------------------------
Postage 43,586
- -----------------------------------------------------------------------------------------------
Other 27,430
- -----------------------------------------------------------------------------------------------
Fees waived by Manager (Note 2) (108,408)
- -----------------------------------------------------------------------------------------------
Total expenses 4,287,297
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (120,887)
- -----------------------------------------------------------------------------------------------
Net expenses 4,166,410
- -----------------------------------------------------------------------------------------------
Net investment loss (2,138,308)
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (4,490,208)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 89,355,391
- -----------------------------------------------------------------------------------------------
Net gain on investments 84,865,183
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $82,726,875
- -----------------------------------------------------------------------------------------------
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 income (loss) $ (2,138,308) $ 7,012
- ---------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (4,490,208) 410,793
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 89,355,391 1,080,288
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 82,726,875 1,498,093
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income -- (9,336)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (169,802) (317,426)
- ---------------------------------------------------------------------------------------------------------------
Class B (163,947) --
- ---------------------------------------------------------------------------------------------------------------
Class M (15,005) --
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 523,492,191 1,567,224
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 605,870,312 2,738,555
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 5,385,097 2,646,542
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $- and $-, respectively) $611,255,409 $5,385,097
- ---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Oct. 2, 1995+
operating performance Year ended July 31 to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $13.38 $10.15 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(a) (.07)(d) .03 .03
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 3.71 4.43 1.67
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.64 4.46 1.70
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- (.04) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.03) (1.19) (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.03) (1.23) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $16.99 $13.38 $10.15
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 27.23 47.34 20.08*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $287,291 $5,385 $2,647
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(c) 1.25 1.05 .89*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%)(a) (.43) .20 .30*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 70.90 145.10 151.15*
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 reflect a reduction of $0.01 per share for each of class A, B and M, for
the period ended July 31, 1998 and $0.11 per share for each of the periods ended July 31, 1997
and July 31, 1996.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges
and reflects an expense limitation currently in effect. Without the limitation, the total return
would have been lower.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Per share net investment loss has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share August 1, 1997+
operating performance to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $13.38
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(a) (.18)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 3.69
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.51
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $16.86
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 26.25
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $299,195
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(c) 2.00
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment (loss)
to average net assets (%)(a) (1.19)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 70.90
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 reflect a reduction of $0.01 per share for each of class A, B and M, for
the period ended July 31, 1998 and $0.11 per share for each of the periods ended July 31, 1997
and July 31, 1996.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges
and reflects an expense limitation currently in effect. Without the limitation, the total return
would have been lower.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Per share net investment loss has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share August 1, 1997+
operating performance to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $13.38
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(a) (.14)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 3.70
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.56
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $16.91
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 26.63
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $24,769
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(a)(c) 1.75
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%)(a) (.93)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 70.90
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 reflect a reduction of $0.01 per share for each of class A, B and M, for
the period ended July 31, 1998 and $0.11 per share for each of the periods ended July 31, 1997
and July 31, 1996.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges
and reflects an expense limitation currently in effect. Without the limitation, the total return
would have been lower.
(c) Includes amounts paid through expense offset arrangements (Note 2).
(d) Per share net investment loss has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
Notes to financial statements
July 31, 1998
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. The fund invests primarily in common stocks of
companies that Putnam Investment Management, Inc. ("Putnam Management"),
the fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc.,
believes have potential for capital appreciation significantly greater
than that of the market averages.
The fund offers class A, class B and class M shares. Class B and class M
shares commenced operations on August 1, 1997. 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 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, 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 re-purchase 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.
At July 31, 1998 the fund had a capital loss carryover of approximately
$506,488 available to offset future net capital gain, if any, which will
expire on July 31, 2006.
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 losses on wash
sale transactions, post-October loss deferrals and organization costs.
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 $2,138,308 to increase undistributed net
investment income and $2,135,621 to decrease paid-in-capital, with an
increase to accumulated net realized losses of $2,687. The calculation of
net investment income per share in the financial highlights table excludes
these adjustments.
H) 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.
I) 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% thereafter.
Putnam Management has agreed to limit its compensation (and, to the extent
necessary, bear other expenses) through July 31, 1998, to the extent that
expenses of the fund (exclusive of brokerage commissions, interest, taxes,
deferred organizational and extraordinary expense, credits from Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
and payments under the Trust's distribution plan) would exceed an annual
rate of 1.00% of the fund's average net assets.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the year ended July 31, 1998, fund expenses were reduced by $120,887
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 $960 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 currently limit payment by the fund to an
annual rate of 0.25%, 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 $1,132,608 and $61,116 from the
sale of class A and class M shares, respectively, and $155,857 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 $2,362 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 $700,198,954 and
$182,978,093, 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 19,027,520 $ 279,728,139
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 12,807 164,435
- -----------------------------------------------------------------------------
19,040,327 279,892,574
Shares
repurchased (2,530,771) (37,177,983)
- -----------------------------------------------------------------------------
Net increase 16,509,556 $ 242,714,591
- -----------------------------------------------------------------------------
Year ended
July 31, 1997
- -----------------------------------------------------------------------------
Class A 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
August 1, 1997
(commencement of
operations) to
July 31, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 19,821,376 $290,193,248
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 12,262 156,947
- -----------------------------------------------------------------------------
19,833,638 290,350,195
Shares
repurchased (2,092,966) (30,848,946)
- -----------------------------------------------------------------------------
Net increase 17,740,672 $259,501,249
- -----------------------------------------------------------------------------
For the period
August 1, 1997
(commencement of
operations) to
July 31, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,625,623 $23,686,551
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,156 14,812
- -----------------------------------------------------------------------------
1,626,779 23,701,363
Shares
repurchased (161,726) (2,425,012)
- -----------------------------------------------------------------------------
Net increase 1,465,053 $21,276,351
- -----------------------------------------------------------------------------
Federal Tax Information
(Unaudited)
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
Carol C. McMullen
Vice President and Fund Manager
Jeffrey R. Lindsey
Vice President and Fund Manager
C. Beth Cotner
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 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 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
- ---------------
AN061-45522 9/98
