Putnam
Growth
Opportunities
Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
7-31-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Putnam Growth Opportunities Fund begins its fifth year of operation with a
record that should make its management team proud and its shareholders
delighted. To be sure, the fund was introduced during one of the longest
and strongest stock market advances on record, and continued uninterrupted
growth would be an unrealistic expectation; past performance -- for fund
or market -- should never be taken as a guarantee of future results. But
based on a well-tested investment strategy and backed by Putnam's
considerable research capabilities, the fund's long-term prospects appear
bright.
In the following report, your fund's managers discuss performance during
the fiscal year that ended on July 31, 1999, and the outlook for the year
ahead. The newest member of the management team, David J. Santos, has been
with Putnam since 1986, first as an analyst and currently as a portfolio
manager in the Large Cap Growth Equity Group. Dave has 13 years of
investment experience.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
September 15, 1999
Report from the Fund Managers
Jeffrey R. Lindsey
C. Beth Cotner
David J. Santos
A retreat from health-care stocks and a focus on the fast-growing
technology, media, and telecommunications sectors were the themes for
Putnam Growth Opportunities Fund's 1999 fiscal year. For the 12 months
ended July 31, 1999, the fund delivered solid performance, despite a pause
in the multi-year rally for large-company growth stocks -- its primary
investment. Although momentum slowed somewhat for these stocks, strategic
shifts in portfolio holdings allowed us to continue taking advantage of
the most promising growth sectors. In addition, our decision during the
second half of the period to shift assets out of the troubled health-care
industry proved beneficial. In particular, the fund's emphasis on
pharmaceutical companies was reduced significantly.
Total return for 12 months ended 7/31/99
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- ----------------------------------------------------------------------------
26.78% 19.47% 25.92% 20.92% 26.10% 25.10% 26.20% 21.80%
- ----------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods begins on page 6.
* BIOTECHNOLOGY: BRIGHT SPOT IN HEALTH-CARE INDUSTRY
Performance of health-care stocks suffered for several reasons in the
latter half of the fund's fiscal year. First, as the strength of the U.S.
economy continued, investors began to seek opportunities in other
industries that offered growth potential for better prices. Also, sales
for major pharmaceutical products have been disappointing, causing large
U.S. drug stocks to underperform. Finally, many investors are nervous
about potential Medicare/ Medicaid regulatory changes currently under
debate in Washington. There is a possibility that new Medicare legislation
will have a negative effect on drug pricing. As a result, we have been
pleased with our decision to reduce pharmaceutical holdings to below 10%
of the fund's net assets.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Retail 12.9%
Electronics and
electrical equipment 12.1%
Pharmaceuticals and
biotechnology 9.4%
Telecommunications
equipment 9.3%
Computer software 7.0%
Footnote reads:
*Based on net assets as of 7/31/99. Holdings will vary over time.
While drug stocks came down from their highs, biotechnology stocks
continued to provide strong returns through the end of the period. Led by
the largest companies, the biotech sector benefited from a number of
successful new products as well as consolidation activity, which is often
viewed by investors as a sign of a thriving industry. Among your fund's
biotech holdings, Biogen, Inc. and Amgen, Inc. were standouts. Biogen is
the producer and marketer of Avonex, the top-selling treatment for
multiple sclerosis. During 1998, the number of patients using Avonex
increased by 60% because of growing awareness of the product in the
marketplace and increasing acceptance of the need to treat the disease in
its early stages. Amgen has reported strong revenue and profit growth and
has an impressive line of products in development, including treatments
for rheumatoid arthritis and Parkinson's disease. While these holdings,
along with others discussed in this report, were viewed favorably at the
end of the fiscal period, all are subject to review and adjustment in
accordance with the fund's investment strategy and may vary in the future.
* TECHNOLOGY PROVES DRIVING FORCE IN FISCAL 1999
The explosive growth in business being conducted over the Internet -- also
known as e-commerce -- has been a key component of the fund's success in
fiscal 1999. As the Internet boosts data traffic, businesses need more
sophisticated equipment to handle the increased demand. Sun Microsystems,
one of your fund's technology holdings, is a beneficiary of this trend.
The company is a leading maker of workstation computers, storage devices,
and servers for powering corporate computer networks. Sun recently
announced plans for a new computer chip designed to handle complex
graphics, sound, and video at very high speeds using its Java programming
language.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
General Electric Co.
Electronics and electrical equipment
Microsoft Corp.
Computer software
Tyco International Ltd.
Conglomerate
Lucent Technologies, Inc.
Telecommunications equipment
Cisco Systems, Inc
Networking equipment
Sun Microsystems, Inc.
Computer services
Time Warner, Inc.
Entertainment
Schering-Plough Corp.
Pharmaceuticals
EMC Corp.
Computers
Nokia Corp.
Telecommunications equipment
Footnote reads:
These holdings represent 38.3% of the fund's net assets as of 7/31/99.
Portfolio holdings will vary over time.
Another technology holding boosted by strong demand was data storage
company EMC Corp. EMC's products store, retrieve, manage, protect, and
share information from all major computing environments. EMC is the leader
in this profitable and extremely competitive segment of the technology
market. The company has also been looking to expand into broader markets,
including the rapidly growing midrange data storage market.
Also benefiting from the Internet boom are companies that provide
equipment to transmit growing amounts of data at faster speeds. As the
former equipment arm of AT&T Corp., fund holding Lucent Technologies has a
solid position in the telephone equipment market and is becoming an
increasingly powerful player in the data and Internet markets. Lucent
continues to see strong demand across all its business segments and is
expected to benefit substantially as telecommunications companies seek to
upgrade their networks to handle increased demands for data services.
Lucent recently teamed up with wireless carrier Winstar Communications to
market high-speed wireless service to corporate customers. Under this
arrangement, Lucent will provide the equipment for customers to access
Winstar's network, which offers high-speed service for voice, data, and
Internet connections.
Concentrating on the best growth stocks
One of the key features of Putnam Growth Opportunities Fund is its selective
and concentrated portfolio of stocks. Typically, holdings are world-renowned
companies whose products, services, and names are recognized and respected
around the world and whose size and scale give them a competitive advantage.
However, the fund invests in fewer stocks -- an average of 40 to 50 -- than
most other large-company mutual funds, concentrating on very large,
well-established companies that are growing at rapid rates. This focus on a
select group of companies can translate into greater growth potential than a
more diversified portfolio, but it may also add a measure of volatility to
performance; major fluctuations in any one holding will likely affect this
fund more than a fund with greater diversification. Despite their large size,
the companies targeted by the fund's management team are expected to grow by a
minimum of 12% annually.
* CABLE TELEVISION, TELECOMM STOCKS THRIVE IN '99
Even outside the technology sector, companies are taking advantage of the
rapidly growing demand for complex data transmission. One example is
cable, an industry that has changed dramatically since its beginnings as a
service to improve TV reception. Today cable companies are providing
technologically advanced networks that combine high-speed Internet access,
telecommunications, and digital services. To respond to complex demands of
businesses and consumers, the cable industry has undergone a revolution
that has included intense competition and rapid consolidation as companies
try to grab a larger share of this lucrative market.
One example in the fund's portfolio is Comcast, a cable operator with
about 4.5 million subscribers in 21 U.S. states. The company offers
digital, video, and high-speed Internet access services. Adding to
Comcast's strength are its programming subsidiaries, including electronic
retailer QVC and E! Entertainment Television. Fund holding Time-Warner,
Inc. is also benefiting from its advanced cable offerings as well as from
the success of its broadcast networks, which include Cable News Network
(CNN) and Turner Network Television (TNT), among others.
The dynamic telecommunications industry also contributed to the fund's
portfolio with holdings such as MCI WorldCom, America's second-largest
long-distance phone company. The company was formed in 1997 in one of the
largest corporate mergers in history -- the $43 billion acquisition of MCI
Communications Corp. by WorldCom, Inc. The company provides
telecommunications services to businesses, governments, and consumers from
a network of fiber-optic cables and digital microwave and satellite
stations. Despite intense competition in the industry, we consider MCI
WorldCom to be well positioned, offering competitive products and services
such as its local-to-global-to-local networks, which connect directly to
customer homes and businesses instead of relying on local phone company
networks to transmit phone calls. The company recently acquired paging
company SkyTel Communications, a move that will allow expansion to
wireless messaging and data services.
Putnam Growth Opportunities Fund's class A shares ranked 50 out of 666 growth
funds (top 8%) tracked by Lipper for the 3-year period ended July 31, 1999.
Past performance is not indicative of future results. Lipper is an industry
research firm whose rankings are based on total return performance, vary over
time, and do not reflect the effects of sales charges. For the 1-year period,
the fund's class A shares ranked 151 out of 1067 (top 15%). The fund was not
ranked for longer periods. Performance of other share classes will vary.
* MORE VOLATILITY POSSIBLE FOR FISCAL 2000
Just after the close of the period, U.S. markets were experiencing
increased volatility and the Federal Reserve Board was the focus of
attention. After raising short-term interest rates by a quarter point in
June and August, the Fed has continued to express caution and appeared
poised to take more preemptive strikes to prevent inflation. We recognize
that continued volatility is possible into fiscal 2000, and we will be
watching for signs of inflation or accelerated economic growth that could
affect the interest-rate outlook and the valuation level of the portfolio.
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 7/31/99, there is no guarantee the fund will
continue to hold these securities in the future.
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.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 7/31/99
Class A Class B Class C Class M
(inception dates) (10/2/95) (8/1/97) (2/1/99) (8/1/97)
NAV POP NAV CDSC NAV CDSC NAV POP
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 26.78% 19.47% 25.92% 20.92% 26.10% 25.10% 26.20% 21.80%
- --------------------------------------------------------------------------------------
Life of fund 185.38 168.93 176.11 173.11 177.66 177.66 178.77 169.09
Annual average 31.49 29.47 30.37 29.99 30.56 30.56 30.69 29.49
- --------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 7/31/99
Standard & Russell
Poor's 1000 Consumer
500 Index Growth Index price index
- -----------------------------------------------------------------------
1 year 20.20% 24.04% 2.14%
- -----------------------------------------------------------------------
Life of fund 144.50 150.74 8.81
Annual average 26.31 27.15 2.23
- -----------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 5.75% and
3.50% respectively. Class B share returns for the 1-year and life-of-fund
periods reflect the applicable contingent deferred sales charge (CDSC),
which is 5% in the first year, declines to 1% in the sixth year, and is
eliminated thereafter. Returns shown for class B and class M shares for
periods prior to their inception are derived from the historical
performance of class A shares, adjusted to reflect both the initial sales
charge or CDSC, if any, currently applicable to each class and in the case
of class B and class M shares the higher operating expenses applicable to
such shares. For class C shares, returns for periods prior to their
inception are derived from the historical performance of class A shares,
adjusted to reflect both the CDSC currently applicable to class C shares,
which is 1% for the first year and is eliminated thereafter, and the
higher operating expenses applicable to class C shares. All returns assume
reinvestment of distributions at NAV. Investment return and principal
value will fluctuate so that an investor's shares when redeemed may be
worth more or less than their original cost. The fund's performance
reflects a voluntary expense limitation 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 Russell 1000 Consumer price
Date shares at POP Growth Index index
10/2/95 9,425 10,000 10,000
7/31/96 11,316 11,101 10,248
7/31/97 16,672 16,857 10,477
7/31/98 21,212 20,214 10,653
7/31/99 $26,893 $25,074 $10,881
Footnote reads:
Past performance is no assurance of future results. At the end of the same
time period, a $10,000 investment in the fund's class B shares would have
been valued at $27,611 ($27,311 with the contingent deferred sales
charge); a $10,000 investment in the fund's class C shares would have been
valued at $27,766 and no contingent deferred sales charges would apply. A
$10,000 investment in the fund's class M shares would have been valued at
$27,877 ($26,909 at public offering price). See first page of performance
section for performance calculation method.
<TABLE>
<CAPTION>
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 7/31/99
Class A Class B Class C Class M
- --------------------------------------------------------------------------------------
Distributions (number)*
- --------------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7/31/98 $16.99 $18.03 $16.86 -- $16.91 $17.52
- --------------------------------------------------------------------------------------
2/1/99+ -- -- -- $21.24 -- --
- --------------------------------------------------------------------------------------
7/31/99 21.54 22.85 21.23 21.50 21.34 22.11
- --------------------------------------------------------------------------------------
* The fund did not make any distributions during the period.
+ Inception of class C shares.
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 6/30/99 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (10/2/95) (8/1/97) (2/1/99) (8/1/97)
NAV POP NAV CDSC NAV CDSC NAV POP
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 32.09% 24.48% 31.10% 26.10% 31.37% 30.37% 31.45% 26.84%
- --------------------------------------------------------------------------------------------
Life of fund 195.05 178.04 185.60 182.60 187.22 187.22 188.30 178.30
Annual average 33.55 31.45 32.39 32.02 32.59 32.59 32.73 31.48
- --------------------------------------------------------------------------------------------
</TABLE>
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. 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 C shares are not subject to an initial sales charge and are subject
to a contingent deferred sales charge only if the shares are redeemed
during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B or C shares and assumes redemption at the end of
the period. Your fund's class B CDSC declines from a 5% maximum during the
first year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies. The CDSC for class C shares is 1% for one year after
purchase.
Comparative benchmarks
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* 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 into 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.
A guide to the financial statements
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values as of
the last day of the reporting period. Holdings are organized by asset type and
industry sector, country, or state to show areas of concentration and
diversification.
Statement of assets and liabilities shows how the fund's net assets and share
price is determined. All investment and non-investment assets are added
together. Any unpaid expenses and other liabilities are subtracted from this
total. The result is divided by the number of shares to determine the net
asset value per share, which is calculated separately for each class of shares.
(For funds with preferred shares, the amount subtracted from total assets
includes the net assets allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for the
reporting period. This is determined by adding up all the fund's earnings --
from dividends and interest income -- and subtracting its operating expenses.
This statement also lists any net gain or loss the fund realized on the sales
of its holdings and -- for holdings that remain in the portfolio -- any change
in unrealized gains or losses over the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of the
fund's shares. It lists distributions and their sources (net investment income
or realized capital gains) over the current reporting period and the most
recent fiscal year-end. The distributions listed here may not match the sources
listed in the Statement of operations because the distributions are determined
on a tax basis and may be paid in a different period from the one in which they
were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also includes
the current reporting period. For open-ended funds, a separate table is
provided for each share class.
Report of independent accountants
The Board of Trustees of Putnam Investment Funds and Shareholders of
Putnam Growth Opportunities Fund
We have audited the accompanying statement of assets and liabilities of
Putnam Growth Opportunities Fund, a series of the Putnam Investment Funds,
including the fund's portfolio, as of July 31, 1999, and the related
statement of operations, statement of changes in net assets and financial
highlights for the year or period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements
and financial highlights based on our audit. The statement of changes in
net assets for the year ended July 31, 1998 and the financial highlights
for each of the years or periods in the three-year period ended July 31,
1998 were audited by other auditors whose report dated September 11, 1998
expressed an unqualified opinion on that financial statement and those
financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of July 31, 1999 by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Putnam Growth Opportunities Fund as of July 31, 1999, the results of
its operations, changes in its net assets and financial highlights for the
year or period then ended, in conformity with generally accepted
accounting principles.
KPMG LLP
Boston, Massachusetts
September 7, 1999
<TABLE>
<CAPTION>
The fund's portfolio
July 31, 1999
COMMON STOCKS (98.7%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace and Defense (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
588,500 United Technologies Corp. $ 39,245,594
Banks (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
1,503,200 Firstar Corp. 39,177,150
Broadcasting (3.7%)
- --------------------------------------------------------------------------------------------------------------------------
2,145,600 AT&T Corp. -- Liberty Media, Class A (NON) 79,387,200
485,100 Clear Channel Communications, Inc. (NON) 33,744,769
--------------
113,131,969
Cable Television (2.8%)
- --------------------------------------------------------------------------------------------------------------------------
1,435,700 Comcast Corp. Class A 55,274,450
410,900 MediaOne Group Inc. (NON) 29,738,888
--------------
85,013,338
Cellular Communication (3.8%)
- --------------------------------------------------------------------------------------------------------------------------
1,119,900 Sprint PCS 67,893,938
231,400 Vodafone AirTouch PLC (United Kingdom) 48,709,700
--------------
116,603,638
Computers (3.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,514,800 EMC Corp. (NON) 91,740,075
Computer Services (6.0%)
- --------------------------------------------------------------------------------------------------------------------------
424,600 America Online, Inc. (NON) 40,390,075
443,000 Hewlett-Packard Co. 46,376,563
1,424,900 Sun Microsystems, Inc. (NON) 96,715,088
--------------
183,481,726
Computer Software (7.0%)
- --------------------------------------------------------------------------------------------------------------------------
2,047,800 Microsoft Corp. (NON) 175,726,838
1,012,900 Oracle Corp. (NON) 38,553,506
--------------
214,280,344
Conglomerates (4.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,277,500 Tyco International Ltd. 124,795,781
Consumer Products (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
614,800 Colgate-Palmolive Co. 30,355,750
Cosmetics (1.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,089,100 Estee Lauder Cos. Class A 51,800,319
Electronics and Electrical Equipment (12.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,743,800 General Electric Co. 190,074,200
371,200 Illinois Tool Works, Inc. 27,584,800
799,600 Motorola, Inc. 72,963,500
559,600 Texas Instruments, Inc. 80,582,400
--------------
371,204,900
Entertainment (5.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,335,500 Time Warner, Inc. 96,156,000
1,556,100 Viacom, Inc. Class B (NON) 65,258,944
--------------
161,414,944
Financial Services (4.5%)
- --------------------------------------------------------------------------------------------------------------------------
1,191,700 Citigroup, Inc. 53,105,131
392,300 Morgan Stanley, Dean Witter, Discover and Co. 35,356,038
211,700 Providian Financial Corp. 19,264,700
677,500 Schwab (Charles) Corp. 29,852,344
--------------
137,578,213
Insurance (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
479,400 American International Group, Inc. 55,670,325
Networking Equipment (3.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,557,300 Cisco Systems, Inc. (NON) 96,747,263
Pharmaceuticals and Biotechnology (9.4%)
- --------------------------------------------------------------------------------------------------------------------------
902,300 American Home Products Corp. 46,017,300
811,800 Amgen Inc. (NON) 62,407,125
384,800 Biogen, Inc. (NON) 26,479,050
1,878,500 Schering-Plough Corp. 92,046,500
946,600 Warner-Lambert Co. 62,475,600
--------------
289,425,575
Retail (12.9%)
- --------------------------------------------------------------------------------------------------------------------------
785,800 Costco Companies, Inc. (NON) 58,738,550
993,400 CVS Corp. 49,421,650
1,045,700 Gap, Inc. (The) 48,886,475
1,318,600 Home Depot, Inc. (The) 84,143,163
815,300 Staples, Inc. (NON) 23,541,788
1,367,300 TJX Cos., Inc. (The) 45,206,356
2,041,200 Wal-Mart Stores, Inc. 86,240,700
--------------
396,178,682
Telecommunications Equipment (9.3%)
- --------------------------------------------------------------------------------------------------------------------------
1,895,500 Lucent Technologies, Inc. 123,325,969
1,047,200 Nokia Corp. ADR (Finland) 89,077,450
201,000 QUALCOMM, Inc. (NON) 31,356,000
708,900 Tellabs, Inc. (NON) 43,641,651
--------------
287,401,070
Telephone Services (4.7%)
- --------------------------------------------------------------------------------------------------------------------------
990,200 MCI WorldCom, Inc. (NON) 81,691,500
1,207,400 Sprint Corp. 62,407,488
--------------
144,098,988
--------------
Total Common Stocks (cost $2,610,332,314) $3,029,345,644
SHORT-TERM INVESTMENTS (1.4%) (a) (cost $43,415,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$43,415,000 Interest in $369,077,000 joint repurchase agreement
dated July 30, 1999 with S. B. C. Warburg Inc.
due August 2, 1999 with respect to various U.S. Treasury
obligations -- maturity value of $43,433,198 for an
effective yield of 5.03% $ 43,415,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,653,747,314) (b) $3,072,760,644
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $3,069,303,172.
(b) The aggregate identified cost on a tax basis is $2,660,793,972, resulting in gross unrealized appreciation and
depreciation of $477,519,655 and $65,552,983, respectively, or net unrealized appreciation of $411,966,672.
(NON) Non-income-producing security.
ADR, after the name of a foreign holding stands for American Depositary Receipts, representing ownership of foreign
securities on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
July 31, 1999
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $2,653,747,314) (Note 1) $3,072,760,644
- -----------------------------------------------------------------------------------------------
Cash 510
- -----------------------------------------------------------------------------------------------
Dividends and interest receivable 454,370
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 24,219,090
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 17,694,251
- -----------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 3,145
- -----------------------------------------------------------------------------------------------
Total assets 3,115,132,010
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 30,976,779
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 8,021,314
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 4,043,458
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 315,680
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 9,306
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 7,109
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,747,086
- -----------------------------------------------------------------------------------------------
Other accrued expenses 708,106
- -----------------------------------------------------------------------------------------------
Total liabilities 45,828,838
- -----------------------------------------------------------------------------------------------
Net assets $3,069,303,172
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $2,686,014,875
- -----------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (35,725,033)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 419,013,330
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $3,069,303,172
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($1,348,515,343 divided by 62,610,731 shares) $21.54
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $21.54)* $22.85
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($1,539,408,791 divided by 72,505,940 shares)** $21.23
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($70,285,951 divided by 3,269,086 shares)** $21.50
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($90,284,937 divided by 4,230,688 shares) $21.34
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $21.34)* $22.11
- -----------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($20,808,150 divided by 965,776 shares) $21.55
- -----------------------------------------------------------------------------------------------
* 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, 1999
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends $ 6,632,490
- -----------------------------------------------------------------------------------------------
Interest 1,943,524
- -----------------------------------------------------------------------------------------------
Total investment income 8,576,014
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 9,740,052
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,619,035
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 33,034
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 18,918
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,856,992
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 8,271,805
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 189,067
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 415,308
- -----------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 1,232
- -----------------------------------------------------------------------------------------------
Reports to shareholders 112,522
- -----------------------------------------------------------------------------------------------
Registration fees 602,402
- -----------------------------------------------------------------------------------------------
Auditing 28,316
- -----------------------------------------------------------------------------------------------
Legal 12,643
- -----------------------------------------------------------------------------------------------
Postage 214,809
- -----------------------------------------------------------------------------------------------
Other 202,547
- -----------------------------------------------------------------------------------------------
Total expenses 23,318,682
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (190,242)
- -----------------------------------------------------------------------------------------------
Net expenses 23,128,440
- -----------------------------------------------------------------------------------------------
Net investment loss (14,552,426)
- -----------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (31,220,468)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 328,414,959
- -----------------------------------------------------------------------------------------------
Net gain on investments 297,194,491
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $282,642,065
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended July 31
-------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment loss $ (14,552,426) $ (2,138,308)
- ---------------------------------------------------------------------------------------------------------------
Net realized loss on investments (31,220,468) (4,490,208)
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 328,414,959 89,355,391
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 282,642,065 82,726,875
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From capital gain on investments
Class A -- (169,802)
- ---------------------------------------------------------------------------------------------------------------
Class B -- (163,947)
- ---------------------------------------------------------------------------------------------------------------
Class M -- (15,005)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 2,175,405,698 523,492,191
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 2,458,047,763 605,870,312
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 611,255,409 5,385,097
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $-- and $--, respectively) $3,069,303,172 $611,255,409
- ---------------------------------------------------------------------------------------------------------------
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 October 2, 1995+
operating performance Year ended July 31 to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $16.99 $13.38 $10.15 $8.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.09)(d) (.07)(a)(d) .03(a) .03(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 4.64 3.71 4.43 1.67
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 4.55 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 $21.54 $16.99 $13.38 $10.15
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 26.78 27.23 47.34 20.08 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,348,515 $287,291 $5,385 $2,647
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.01 1.25(a) 1.05(a) .89*(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.48) (.43)(a) .20(a) .30*(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 82.18 70.90 145.10 151.15*
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized
(a) Reflects an expense limitation in effect during the period. 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 return assumes dividend reinvestment and does not reflect the effect of sales charges. For periods prior to July 31,
1999 an expense limitation was in effect. Without the limitation, the total return would have been lower.
(c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
(d) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares
outstanding during the period.
(e) Net investment income (loss) was less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Year ended August 1, 1997+
operating performance July 31 to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $16.86 $13.38
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(d) (.24) (.18)(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 4.61 3.69
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 4.37 3.51
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.23 $16.86
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 25.92 26.25*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,539,409 $299,195
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.76 2.00*(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (1.23) (1.19)*(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 82.18 70.90
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized
(a) Reflects an expense limitation in effect during the period. 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 return assumes dividend reinvestment and does not reflect the effect of sales charges. For periods prior to July 31,
1999 an expense limitation was in effect. Without the limitation, the total return would have been lower.
(c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
(d) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares
outstanding during the period.
(e) Net investment income (loss) was less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share February 1, 1999+
operating performance to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $21.24
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(d) (.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .38
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .26
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.50
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 1.22*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $70,286
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .88*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.63)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 82.18
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized
(a) Reflects an expense limitation in effect during the period. 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 return assumes dividend reinvestment and does not reflect the effect of sales charges. For periods prior to July 31,
1999 an expense limitation was in effect. Without the limitation, the total return would have been lower.
(c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
(d) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares
outstanding during the period.
(e) Net investment income (loss) was less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Year ended August 1, 1997+
operating performance July 31 to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $16.91 $13.38
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(d) (.19) (.14)(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 4.62 3.70
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 4.43 3.56
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (.03)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.34 $16.91
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 26.20 26.63*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $90,285 $24,769
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.51 1.75*(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.98) (.93)*(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 82.18 70.90
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized
(a) Reflects an expense limitation in effect during the period. 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 return assumes dividend reinvestment and does not reflect the effect of sales charges. For periods prior to July 31,
1999 an expense limitation was in effect. Without the limitation, the total return would have been lower.
(c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
(d) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares
outstanding during the period.
(e) Net investment income (loss) was less than $0.01 per share.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 1, 1999+
operating performance to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $22.27
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)(d) --(e)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments (.72)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.72)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.55
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) (3.23)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $20,808
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .06*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) (.02)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 82.18
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized
(a) Reflects an expense limitation in effect during the period. 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 return assumes dividend reinvestment and does not reflect the effect of sales charges. For periods prior to July 31,
1999 an expense limitation was in effect. Without the limitation, the total return would have been lower.
(c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
(d) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares
outstanding during the period.
(e) Net investment income (loss) was less than $0.01 per share.
</TABLE>
Notes to financial statements
July 31, 1999
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, class C, class M and class Y shares. The
fund begun offering class C shares and class Y shares on February 1, 1999
and July 1, 1999, respectively. Class A shares are sold with a maximum
front-end sales charge of 5.75%. Class B shares, which convert to class A
shares after approximately eight years, do not pay a front-end sales
charge, but pay a higher ongoing distribution fee than class A shares, and
are subject to a contingent deferred sales charge, if those shares are
redeemed within six years of purchase. Class C shares are subject to the
same fees and expenses as class B shares, except that class C shares have
a one-year 1.00% contingent deferred sales charge and do not convert to
class A shares. Class M shares are sold with a maximum front-end sales
charge of 3.50% and pay an ongoing distribution fee that is lower than
class B shares and class C shares and higher than class A shares. Class Y
shares, which are sold at net asset value, are generally subject to the
same expenses as class A, class B, class C and class M shares, but do not
bear a distribution fee. Class Y shares are sold to defined contribution
plans that invest at least $150 million in a combination of Putnam funds
and other accounts managed by affiliates of Putnam Management.
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. Other
investments are stated at fair value following procedures approved by the
Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Management. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the market
value of which at the time of purchase is required to be in an amount at
least equal to the resale price, including accrued interest. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to the
resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Gains or losses on securities sold are determined on
the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date.
E) 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, 1999, 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, 1999, the fund had a capital loss carryover of approximately
$28,678,000 available to offset future capital gains, if any. The amount
of the carryover and the expiration dates are:
Loss Carryover Expiration
- -------------- -------------
$ 506,000 July 31, 2006
28,172,000 July 31, 2007
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, organization costs and net operating loss.
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,
1999, the fund reclassified $14,552,426 to decrease accumulated net
investment loss and $14,552,426 to decrease paid-in-capital. 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.
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.
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, 1999, fund expenses were reduced by $190,242
under expense offset arrangements with PFTC and brokerage service
arrangements. Investor servicing and custodian fees reported in the
Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
Each Trustee of the fund receives an annual Trustee fee, of which $3,041
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
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, class C and class M shares pursuant to Rule 12b-1 under
the Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam 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%,
1.00% and 1.00% of the average net assets attributable to class A, class
B, class C and class M shares, respectively. The Trustees have approved
payment by the fund at an annual rate of 0.25%, 1.00%, 1.00% and 0.75% of
the average net assets attributable to class A, class B, class C and class
M shares, respectively.
For the year ended July 31, 1999, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $2,963,687 and $124,662 from the
sale of class A and class M shares, respectively and received $1,438,385
and $8,489 in contingent deferred sales charges from redemptions of class
B and C shares, respectively. A deferred sales charge of up to 1% is
assessed on certain redemptions of class A shares. For the year ended July
31, 1999, Putnam Mutual Funds Corp., acting as underwriter received
$22,307 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended July 31, 1999, cost of purchases and proceeds from
sales of investment securities other than short-term investments
aggregated $3,449,819,884 and $1,325,033,534, respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Capital shares
At July 31, 1999, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended July 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 60,495,064 $1,226,507,333
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
60,495,064 1,226,507,333
Shares
repurchased (14,796,454) (297,764,756)
- -----------------------------------------------------------------------------
Net increase 45,698,610 $ 928,742,577
- -----------------------------------------------------------------------------
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, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 64,661,133 $1,294,888,144
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
64,661,133 1,294,888,144
Shares
repurchased (9,895,865) (194,839,289)
- -----------------------------------------------------------------------------
Net increase 54,765,268 $1,100,048,855
- -----------------------------------------------------------------------------
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 February 1, 1999
(commencement of operations)
to July 31, 1999
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 3,383,619 $ 72,850,113
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
3,383,619 72,850,113
Shares
repurchased (114,533) (2,464,821)
- -----------------------------------------------------------------------------
Net increase 3,269,086 $ 70,385,292
- -----------------------------------------------------------------------------
Year ended July 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 4,076,095 $78,161,548
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
4,076,095 78,161,548
Shares
repurchased (1,310,460) (23,322,789)
- -----------------------------------------------------------------------------
Net increase 2,765,635 $54,838,759
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
For the period July 1, 1999
(commencement of operations)
to July 31, 1999
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,006,739 $22,318,441
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
1,006,739 22,318,441
Shares
repurchased (40,963) (928,226)
- -----------------------------------------------------------------------------
Net increase 965,776 $21,390,215
- -----------------------------------------------------------------------------
Note 5
Change in independent accountants
Based on the recommendation of the Audit Committee of the fund, the Board
of Trustees has determined not to retain PricewaterhouseCoopers LLP as
this fund's independent auditor and voted to appoint KPMG LLP for the
fund's fiscal year ended July 31, 1999. During the two most recent fiscal
years, PricewaterhouseCoopers LLP audit reports contained no adverse
opinion or disclaimer of opinion; nor were its reports qualified or
modified as to uncertainty, audit scope, or accounting principle. Further,
in connection with its audits for the two most recent fiscal years and
through July 14, 1999, there were no disagreements between the fund and
PricewaterhouseCoopers LLP on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure,
which if not resolved to the satisfaction of PricewaterhouseCoopers LLP
would have caused it to make reference to the disagreements in its report
on the financial statements for such years.
Federal tax information
(Unaudited)
The Form 1099 you receive in January 2000 will show the tax status of all
distributions paid to your account in calendar 1999.
Fund information
WEB SITE
www.putnaminv.com
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
KPMG LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
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
C. Beth Cotner
Vice President and Fund Manager
Jeffrey R. Lindsey
Vice President and Fund Manager
David J. Santos
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
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' Web site: 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
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
AN061 54564 2AP/2HJ/2HK/2HL 9/99
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ----------------------------------------------------------------------------
Putnam Growth Opportunities Fund
Supplement to Annual Report dated 7/31/99
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to defined contribution plans investing $150 million or
more in one or more of Putnam's funds or private accounts. Performance of
class Y shares, which incur neither a front-end load, distribution fee, nor
contingent deferred sales charge, will differ from performance of class A,
B, and M shares, which are discussed more extensively in the annual report.
ANNUAL RESULTS AT A GLANCE
- ----------------------------------------------------------------------------
Total return
for periods ended 7/31/99 NAV
1 year 26.84
Life of fund (since class A inception, 10/2/95) 188.25
Annual average 31.86
Share value: NAV
7/31/98 --
7/1/99 (class Y share inception) $22.27
7/31/99 $21.55
- ----------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
0 $0.00 0.00 $0.00
- ----------------------------------------------------------------------------
Please note that past performance does not indicate future results. More recent
returns may be more or less than those shown. Returns shown for class Y shares
for periods prior to their inception are derived from the historical
performance of class A shares, adjusted to reflect the initial sales charge
currently applicable to class A shares. These returns have not been adjusted to
reflect differences in operating expenses which, for class Y shares, are lower
than the operating expenses applicable to class A shares. All returns assume
reinvestment of distributions at net asset value. Investment return and
principal value will fluctuate so your shares, when redeemed, may be worth more
or less than their original cost. See full report for information on
comparative benchmarks. If you have questions, please consult your fund
prospectus or call Putnam toll free at 1-800-752-9894.
