Putnam 811-7513
New Century
Growth Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
6-30-02
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FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III]
Dear Fellow Shareholder:
Putnam New Century Growth Fund continued to feel the effects of
investors' disaffection with stocks as it closed its fiscal year on June
30, 2002, with a loss. This economic and market climate has given Putnam
pause and after lengthy discussions and working sessions between
Management and the Board of Trustees, your Trustees have agreed to merge
several funds.
The intent of the mergers is to provide shareholders with more focused
products that will play a consistent role in a broader investment plan.
Your fund has been scheduled for merger into Putnam Voyager Fund II,
which has a similar investment objective and strategy. Additional
details of the proposed merger can be found on page 5.
We trust that over time you will continue to find this choice a
beneficial one for your investment program, especially as the market
works its way out of its current troubles, as we are confident that it
will do. These are challenging times for equity investors, but history
has been on the side of investors who have dared to weather even
sustained periods of market retreat. We value our association with you
and look forward to helping you meet your investment objectives for many
years to come.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
August 21, 2002
REPORT FROM FUND MANAGEMENT
This fund is managed by the
Putnam Specialty Growth Team
Growth stocks have had their share of challenges during the 12 months
ending June 30, 2002. During the course of the year, the U.S. economy
was in recession, the markets were in decline, and the aftershocks of
September 11, 2001 continued to reverberate. After a strong fourth
quarter in 2001, the equity markets have ignored economic fundamentals
during the first half of 2002, despite evidence that the economy was
recovering from recession. Instead, stocks were dampened by reactions to
corporate accounting scandals in the U.S. and geopolitical turmoil
abroad. As a result, the absolute returns for Putnam New Century Growth
Fund, as well as the stock market in general, were down significantly
during your fund's fiscal year. However, your fund's relative
performance showed marked improvement from previous reporting periods.
While it still underperformed its benchmark indexes, the Russell Midcap
Growth Index and the Russell 2500 Growth Index, as well as its Lipper
peer group average, it did so by much smaller margins than it has in the
recent past.
Total return for 12 months ended 6/30/02
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- -----------------------------------------------------------------------
-28.60% -32.70% -29.17% -32.71% -29.17% -29.88% -29.00% -31.47%
- -----------------------------------------------------------------------
Past performance does not indicate future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 7.
* A VOLATILE YEAR FOR GROWTH STOCKS
The fund's fiscal year occurred during an extremely volatile period for
the economy and the stock market. In the latter half of 2001, growth
stocks performed poorly, as they continued to be dragged down by the
technology and telecommunications sectors. The economic slowdown that
had begun in earnest in the spring of 2001 continued through the third
quarter and dampened investor enthusiasm for buying stocks.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Retail 15.6%
Health care services 11.8%
Electronics 11.4%
Energy 6.6%
Broadcasting 5.5%
Footnote reads:
*Based on net assets as of 6/30/02. Holdings will vary over time.
The events of September 11, 2001, accelerated the declines of both the
economy and the stock market. After falling significantly when the
market reopened following the tragedies, stock prices recovered strongly
during the fourth quarter of 2001, buoyed by an improving economy, a
faltering bond market, and positive news from the war in Afghanistan.
Growth stocks posted the strongest returns, with the Nasdaq Composite
Index up over 30% and your fund's class A shares (at net asset value)
gaining nearly 29% during the quarter.
Fund Profile
Putnam New Century Growth Fund invests in common stocks of small,
midsize, and large companies. It targets rapidly growing companies in a
broad range of industry sectors. The fund is designed for investors
seeking aggressive growth of capital over the long term.
2002 brought a return to volatility in the equity markets, as several
high-profile corporate accounting scandals tainted the overall market
and had a significant negative effect on investor psychology.
Interestingly, the consensus assessment of business conditions during
the first half of 2002 diverged between that of economists, who pointed
to several indications of economic strength, and the perspective of
corporate CEOs, who remained pessimistic about business prospects and
the outlook for profits. Strong first-quarter GDP growth and high
productivity bolstered the arguments of economists, while corporate
executives remained swayed by lackluster profits amid a steep decline
in profit growth from the latter 1990s.
Investors, concerned about geopolitical events and the accounting
scandals at home, remained wary. Global turmoil, including conflicts in
the Middle East, concerns about stability in Afghanistan and further
terrorist attacks in the U.S., and the potential for a war in Iraq,
weighed heavily on investors' minds during the first half of 2002 and
dampened enthusiasm for buying. Issues of corporate governance have
further undermined confidence, and stocks of small, midsize, and large
companies have been under considerable pressure as the combination of
these events has masked a moderate but fundamentally healthy economy.
* MANAGEMENT KEPT FUND WELL DIVERSIFIED
To weather the volatility in the equity markets, your fund's management
team worked diligently to keep the portfolio diversified. We continued
to seek opportunities in a wide range of sectors that helped diversify
the portfolio and offered strong potential for growth. For example, the
team increased the fund's health-care weighting significantly. This was
a response to several positive long-term developments in biotechnology,
pharmaceuticals, and medical products, and a significant increase in
demand for health-care services from an aging population of baby boomers
that will continue to grow for many years. With a higher intrinsic
volatility, the fund's biotechnology stocks underperformed during the
period, but the fund's other health-care stocks, while down somewhat
with the market in general, held their ground.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Westwood One, Inc.
Broadcasting
Dollar Tree Stores, Inc.
Retail
TCF Financial Corp.
Banking
AmerisourceBergen Corp.
Health care services
Career Education Corp.
Schools
Fifth Third Bancorp
Banking
AutoZone, Inc.
Retail
QLogic Corp.
Computers
Too, Inc.
Retail
Marvell Technology Group, Ltd. (Bermuda)
Electronics
Footnote reads:
These holdings represent 20.5% of the fund's net assets as of 6/30/02.
Portfolio holdings will vary over time.
We also increased the fund's energy holdings during the period. Natural
gas prices had come under pressure in early 2002, resulting in
attractive valuations for energy stocks. We took advantage of this
opportunity and, as it turned out, the fund's energy holdings provided a
positive contribution to performance during the first six months of
2002. We have also added financial holdings to the fund, primarily
regional bank stocks, and these have outperformed the overall market, as
have broadcasting, retail, and restaurant stocks. The weak economic
environment has driven consumers to value-oriented retailers, and the
fund benefited with several holdings, including Dollar Tree and Auto
Zone.
The fund's technology holdings underperformed most of the other sectors
during the fiscal year. Despite strong performance in the fourth quarter
of 2001, the technology sector remains mired in the trough of a down
cycle. Although we are seeing signs that demand is building, and
inventories remain lean, companies have yet to begin increasing capital
spending for technology. Nevertheless, we remain invested in technology
companies, having reduced our weighting significantly over the past two
years, as we believe that the technology sector will continue to be an
important contributor to the growth of the U.S. economy.
* FUND IS POSITIONED SHOULD GROWTH STOCKS RECOVER
During the first half of 2002, we have faced considerable challenges not
directly related to the markets or the economy. In response, we have
taken several steps designed to improve the fund's risk-adjusted
returns. We believe that the fund's performance improvement in
comparison to its peers shows that the process changes we have been
talking about are beginning to work. The changes we have made include
diversifying the portfolio more broadly, expanding research coverage to
include a wider universe of stocks and sectors, and enhancing the
risk-management tools used to construct the portfolio.
With the overall market down significantly, we have positioned the
portfolio somewhat defensively, but we believe that growth stocks will
recover. When this recovery eventually occurs, our goal is to have the
portfolio structured in a way that enables the fund to outperform. While
there is no way to predict when a recovery in growth stocks will occur,
we believe it makes sense for investors to keep a portion of their
portfolio invested so that they may benefit when the recovery does come.
A good lesson is that of value stocks, which were beaten down for many
years in the 1990s and were virtually written off as an investment
strategy that no longer made sense. With the strong returns of value
stocks in the past two years, we believe that the current mood of gloom
for growth stocks may be overdone, and that the potential for strong
returns from this sector will return.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 6/30/02, there is no guarantee the fund will
continue to hold these securities in the future. The fund invests all or
a portion of its assets in small to midsize companies. Such investments
increase the risk of greater price fluctuations.
The fund is managed by the Putnam Specialty Growth Team. The members of
the team are Roland Gillis (Portfolio Leader) Daniel Miller (Portfolio
Member), Eric Wetlaufer (Portfolio Member), Dana Clark, Kenneth Doerr,
Michael Mufson, Margery Parker, Anthony Sellitto, and Richard Weed.
MERGER PROPOSED FOR PUTNAM NEW CENTURY GROWTH FUND
After careful study and lengthy working sessions with Putnam Investment
Management, your fund's Trustees have agreed to recommend the merger of
Putnam New Century Growth Fund into Putnam Voyager Fund II. Completion of
the merger is subject to the approval of shareholders. Proxy materials
have been mailed to you so you can submit your vote. Putnam Voyager Fund
II has a similar objective to that of your fund, investing in common
stocks of companies of all sizes across a range of industries for
investors seeking long-term growth of capital. If the merger is approved,
shareholders are expected to benefit from potentially lower expenses
provided by a larger asset base of the merged funds.
We encourage you to vote on this important matter by returning your
completed proxy material. Please read your proxy statement carefully
before you cast your vote. You may vote by telephone, the Internet, or
by U.S. mail. Complete instructions for voting are included in your
proxy material. The vote will take place at a meeting of shareholders on
September 12, 2002, and, if approved, the merger will take place on or
about September 30, 2002.
PUTNAM'S POLICY ON CONFIDENTIALITY
In order to conduct business with our shareholders, we must obtain certain
personal information such as account holders' addresses, telephone
numbers, Social Security numbers, and the names of their financial
advisors. We use this information to assign an account number and to help
us maintain accurate records of transactions and account balances.
It is our policy to protect the confidentiality of your information,
whether or not you currently own shares of our funds, and in particular,
not to sell information about you or your accounts to outside marketing
firms. We have safeguards in place designed to prevent unauthorized
access to our computer systems and procedures to protect personal
information from unauthorized use.
Under certain circumstances, we share this information with outside
vendors who provide services to us, such as mailing and proxy
solicitation. In those cases, the service providers enter into
confidentiality agreements with us, and we provide only the information
necessary to process transactions and perform other services related to
your account. We may also share this information with our Putnam
affiliates to service your account or provide you with information about
other Putnam products or services. It is also our policy to share
account information with your financial advisor, if you've listed one on
your Putnam account.
If you would like clarification about our confidentiality policies or
have any questions or concerns, please don't hesitate to contact us at
1-800-225-1581, Monday through Friday, 8:30 a.m. to 7:00 p.m., or
Saturdays from 9:00 a.m. to 5:00 p.m. Eastern Time.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy.
TOTAL RETURN FOR PERIODS ENDED 6/30/02
Class A Class B Class C Class M
(inception dates) (2/17/98) (1/21/00) (1/21/00) (1/21/00)
NAV POP NAV CDSC NAV CDSC NAV POP
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1 year -28.60% -32.70% -29.17% -32.71% -29.17% -29.88% -29.00% -31.47%
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Life of fund 39.36 31.33 34.86 32.86 34.86 34.86 36.36 31.61
Annual average 7.89 6.44 7.09 6.72 7.09 7.09 7.36 6.49
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 6/30/02
Russell Midcap Russell 2500 Consumer
Growth Index Growth Index* price index
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1 year -26.34% -25.72% 1.01%
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Life of fund -2.81 -7.17 10.86
Annual average -0.65 -1.69 2.41
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Past performance does not indicate future results. More recent returns
may be less or more than those shown. Investment return and principal
value will fluctuate and you may have a gain or a loss when you sell
your shares.
Performance assumes reinvestment of distributions and does not account
for taxes. Returns at public offering price (POP) for class A and M
shares reflect a sales charge of 5.75% and 3.50%, respectively. Class B
share returns reflect the applicable contingent deferred sales charge
(CDSC), which is 5% in the first year, declining to 1% in the sixth
year, and is eliminated thereafter. Class C shares reflect a 1% CDSC the
first year that is eliminated thereafter. Performance for class B, C,
and M shares before their inception are derived from the historical
performance of class A shares, adjusted for the applicable sales charge
(or CDSC) and higher operating expenses for such shares. For a portion
of the period this fund was sold on a limited basis with limited assets
and expenses. Had expenses not been limited, returns would have been
lower.
*The Russell 2500 Growth Index was added as a secondary benchmark for the
fund on 3/31/02.
PRICE AND DISTRIBUTION* INFORMATION 12 MONTHS ENDED 6/30/02
Class A Class B Class C Class M
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Share value: NAV POP NAV NAV NAV POP
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6/30/01 $14.79 $15.69 $14.64 $14.64 $14.69 $15.22
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6/30/02 10.56 11.20 10.37 10.37 10.43 10.81
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*The fund did not make any distributions during the period.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 2/17/98
Fund's class A Russell Midcap Russell 2500 Consumer price
Date shares at POP Growth Index Growth Index index
2/17/98 9,425 10,000 10,000 10,000
6/30/98 10,942 10,776 10,115 10,056
12/31/98 12,284 11,353 9,863 10,142
6/30/99 16,452 12,964 11,400 10,253
12/31/99 32,695 17,177 15,336 10,413
6/30/00 30,793 19,264 16,439 10,635
12/31/00 22,025 15,159 12,868 10,765
6/30/01 18,393 13,194 12,497 10,975
12/31/01 15,807 12,104 11,474 10,938
6/30/02 $13,133 $9,719 $9,283 $11,086
Footnote reads:
Past performance does not indicate future results. At the end of the
same time period, a $10,000 investment in the fund's class B and class C
shares would have been valued at $13,486 ($13,286 with the contingent
deferred sales charge) and $13,486, respectively, and no contingent
deferred sales charges would apply; a $10,000 investment in the fund's
class M shares would have been valued at $13,636 ($13,161 at public
offering price). 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.
Net asset value (NAV) is the price, or value, of one share of a mutual
fund, without a sales charge. NAVs fluctuate with market conditions. The
NAV is calculated by dividing the net value of all the fund's assets by
the number of outstanding shares.
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.
Class A shares are generally subject to an initial sales charge and no
sales charge on redemption (except on certain redemptions of shares
bought without 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 (except on certain
redemptions of shares bought without an initial sales charge).
COMPARATIVE BENCHMARKS
Russell Midcap Growth Index is an unmanaged index of all medium and
medium/small companies in the Russell 1000 Index chosen for their growth
orientation.
Russell 2500 Growth Index is an unmanaged index of the smallest 2,500
companies in the Russell 3000 Index chosen for their growth orientation.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Lipper Inc. is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper.
*Indexes assume reinvestment of all distributions and do not account for
fees. Securities and performance of a fund and an index will differ. You
cannot invest directly in an index.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report, as well as the accompanying Notes,
preceded by the Report of independent accountants, constitute the fund's
financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or
loss the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal year.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment income
ratios, and portfolio turnover in one summary table, reflecting the five
most recent reporting periods. In a semiannual report, the highlight table
also includes the current reporting period. For open-end funds, a separate
table is provided for each share class.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of Putnam Funds Trust and
Shareholders of Putnam New Century Growth Fund
(a series of Putnam Funds Trust)
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Putnam New
Century Growth Fund (the "fund") at June 30, 2002, and the results of
its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with accounting
principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the fund's management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of investments owned at June 30,
2002 by correspondence with the custodian, provide a reasonable basis
for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 13, 2002
THE FUND'S PORTFOLIO
June 30, 2002
COMMON STOCKS (99.0%) (a)
NUMBER OF SHARES VALUE
Advertising and Marketing Services (1.1%)
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160,000 Lamar Advertising Co. (NON) $ 5,953,600
Airlines (1.6%)
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24,600 JetBlue Airways Corp. (NON) 1,120,776
200,000 Ryanair Holdings PLC ADR (Ireland) (NON) 6,974,200
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8,094,976
Automotive (1.9%)
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64,000 Advance Auto Parts, Inc. (NON) 3,488,640
132,000 Gentex Corp. (NON) 3,626,040
23,000 SPX Corp. (NON) 2,702,500
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9,817,180
Banking (4.9%)
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6,700 Commerce Bancorp, Inc. 296,041
160,000 Fifth Third Bancorp 10,664,000
60,000 Greater Bay Bancorp 1,845,600
57,200 New York Community Bancorp, Inc. 1,526,096
225,000 TCF Financial Corp. 11,047,500
-------------
25,379,237
Biotechnology (4.0%)
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76,000 Celgene Corp. (NON) 1,162,800
151,000 Gilead Sciences, Inc. (NON) 4,964,880
45,000 IDEC Pharmaceuticals Corp. (NON) 1,595,250
162,700 ILEX Oncology, Inc. (NON) 2,292,443
139,200 InterMune, Inc. (NON) 2,937,120
174,000 Ligand Pharmaceuticals, Inc. Class B (NON) 2,523,000
32,100 Ligand Pharmaceuticals, Inc. Class B (Private) (NON) 418,905
170,000 Scios, Inc. (NON) 5,203,700
-------------
21,098,098
Broadcasting (5.5%)
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163,600 Cumulus Media, Inc. Class A (NON) 2,254,408
111,100 Entercom Communications Corp. (NON) 5,099,490
51,600 Lin TV Corp. Class A (NON) 1,395,264
110,000 Radio One, Inc. Class A (NON) 1,635,700
146,100 Radio One, Inc. Class D (NON) 2,172,507
170,819 Regent Communications, Inc. (NON) 1,205,811
452,400 Westwood One, Inc. (NON) 15,119,208
-------------
28,882,388
Commercial and Consumer Services (3.8%)
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100,000 CDW Computer Centers, Inc. (NON) 4,681,000
160,000 Choicepoint, Inc. (NON) 7,275,200
97,200 Corporate Executive Board Co. (The) (NON) 3,329,100
100,000 TMP Worldwide, Inc. (NON) 2,150,000
59,000 Weight Watchers International, Inc. (NON) 2,562,960
-------------
19,998,260
Communications Equipment (1.1%)
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237,000 Extreme Networks, Inc. (NON) 2,391,330
140,000 Polycom, Inc. (NON) 1,678,600
825,000 Sonus Networks, Inc. (NON) 1,666,500
-------------
5,736,430
Computers (3.9%)
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309,000 Emulex Corp. (NON) 6,955,590
221,900 Magma Design Automation, Inc. (NON) 3,727,920
53,400 McDATA Corp. Class A (NON) 470,454
238,000 QLogic Corp. (NON) 9,067,800
-------------
20,221,764
Consumer Goods (1.0%)
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182,900 Yankee Candle Company, Inc. (The) (NON) 4,954,761
Consumer Services (1.9%)
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230,000 Resources Connection, Inc. (NON) 6,207,700
113,200 Willis Group Holdings, Ltd. (United Kingdom) (NON) 3,725,412
-------------
9,933,112
Distribution (0.2%)
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36,000 Performance Food Group Co. (NON) 1,218,960
Electronics (11.4%)
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312,500 Applied Micro Circuits Corp. (NON) 1,478,125
74,000 Brooks-PRI Automation, Inc. (NON) 1,891,440
209,000 Exar Corp. (NON) 4,121,480
27,900 Integrated Circuit Systems, Inc. (NON) 563,301
125,800 Integrated Device Technology, Inc. (NON) 2,282,012
176,255 Intersil Corp. Class A (NON) 3,768,332
208,600 Linear Technology Corp. 6,556,298
426,000 Marvell Technology Group, Ltd. (Bermuda) (NON) 8,473,140
150,000 Maxim Integrated Products, Inc. (NON) 5,749,500
90,000 National Semiconductor Corp. (NON) 2,625,300
363,000 PMC - Sierra, Inc. (NON) 3,365,010
256,000 RF Micro Devices, Inc. (NON) 1,950,720
176,000 Semtech Corp. (NON) 4,699,200
260,700 Silicon Laboratories, Inc. (NON) 7,296,993
327,000 Skyworks Solutions, Inc. (NON) 1,814,850
82,800 Varian Semiconductor Equipment (NON) 2,809,404
-------------
59,445,105
Energy (6.6%)
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157,400 BJ Services Co. (NON) 5,332,712
42,000 Cooper Cameron Corp. (NON) 2,033,640
165,000 ENSCO International, Inc. 4,497,900
81,000 GlobalSantaFe Corp. 2,215,350
125,000 Nabors Industries, Ltd. (Barbados) (NON) 4,412,500
193,000 Patterson-UTI Energy, Inc. (NON) 5,448,390
33,000 Smith International, Inc. (NON) 2,250,270
300,000 Varco International, Inc. (NON) 5,262,000
69,000 Weatherford Intl., Ltd. (NON) 2,980,800
-------------
34,433,562
Entertainment (0.4%)
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57,200 International Speedway Corp. Class A 2,293,720
Food (0.7%)
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108,000 Krispy Kreme Doughnuts, Inc. (NON) 3,476,520
Gaming & Lottery (1.4%)
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125,000 Harrah's Entertainment, Inc. (NON) 5,543,750
28,000 International Game Technology (NON) 1,587,600
-------------
7,131,350
Health Care Services (11.8%)
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82,200 Accredo Health, Inc. (NON) 3,792,708
265,000 AdvancePCS (NON) 6,344,100
144,000 AmerisourceBergen Corp. 10,944,000
35,300 Anthem, Inc. (NON) 2,382,044
439,100 Caremark Rx, Inc. (NON) 7,245,150
197,200 Community Health Systems, Inc. (NON) 5,284,960
66,800 Cross Country, Inc. (NON) 2,525,040
50,000 Dianon Systems, Inc. (NON) 2,671,000
225,000 Health Management Associates, Inc. (NON) 4,533,750
24,000 Laboratory Corporation of America Holdings (NON) 1,095,600
130,000 Pediatrix Medical Group, Inc. (NON) 3,250,000
291,225 Province Healthcare Co. (NON) 6,511,791
60,900 Quest Diagnostics, Inc. (NON) 5,240,445
-------------
61,820,588
Investment Banking/Brokerage (0.5%)
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70,000 Federated Investors, Inc. 2,419,900
Lodging/Tourism (1.7%)
- -------------------------------------------------------------------------------------------------------------------
344,400 Extended Stay America, Inc. (NON) 5,586,168
73,400 Four Seasons Hotels, Inc. (Canada) 3,442,460
-------------
9,028,628
Medical Technology (3.1%)
- -------------------------------------------------------------------------------------------------------------------
60,000 Charles River Laboratories International, Inc. (NON) 2,103,000
3,000 Cytyc Corp. (NON) 22,860
40,000 DENTSPLY International, Inc. 1,476,400
60,100 Respironics, Inc. (NON) 2,046,405
145,400 Varian Medical Systems, Inc. (NON) 5,895,970
125,000 Zimmer Holdings, Inc. (NON) 4,457,500
-------------
16,002,135
Metals (0.1%)
- -------------------------------------------------------------------------------------------------------------------
49,200 Liquidmetal Technologies (NON) 570,720
Oil & Gas (0.9%)
- -------------------------------------------------------------------------------------------------------------------
122,000 Noble Corp. (NON) 4,709,200
Restaurants (2.0%)
- -------------------------------------------------------------------------------------------------------------------
202,500 Applebee's International, Inc. 4,608,900
90,000 CBRL Group, Inc. 2,738,700
90,000 P.F. Chang's China Bistro, Inc. (NON) 2,827,800
-------------
10,175,400
Retail (15.6%)
- -------------------------------------------------------------------------------------------------------------------
181,932 99 Cents Only Stores (NON) 4,666,556
136,300 AutoZone, Inc. (NON) 10,535,990
213,600 Bed Bath & Beyond, Inc. (NON) 8,061,264
93,200 Chico's FAS, Inc. (NON) 3,385,024
87,000 Christopher & Banks Corp. (NON) 3,680,100
301,300 Dollar Tree Stores, Inc. (NON) 11,874,233
192,400 Family Dollar Stores, Inc. 6,782,100
186,000 Foot Locker, Inc. (NON) 2,687,700
200,000 Hot Topic, Inc. (NON) 5,342,000
122,000 Michaels Stores, Inc. (NON) 4,758,000
180,000 Office Depot, Inc. (NON) 3,024,000
41,000 Ross Stores, Inc. 1,670,750
279,000 Too, Inc. (NON) 8,593,200
99,200 Wet Seal, Inc. (The) (NON) 2,410,560
127,000 Williams-Sonoma, Inc. (NON) 3,893,820
-------------
81,365,297
Schools (3.4%)
- -------------------------------------------------------------------------------------------------------------------
150,000 Apollo Group, Inc. Class A (NON) 5,913,000
240,000 Career Education Corp. (NON) 10,800,000
20,000 Education Management Corp. (NON) 814,600
-------------
17,527,600
Semiconductor (2.8%)
- -------------------------------------------------------------------------------------------------------------------
40,700 Cymer, Inc. (NON) 1,426,128
165,500 LAM Research Corp. (NON) 2,975,690
143,600 LTX Corp. (NON) 2,050,608
120,225 Mykrolis Corp. (NON) 1,419,857
120,400 Novellus Systems, Inc. (NON) 4,093,600
35,000 Photon Dynamics, Inc. (NON) 1,050,000
100,000 Photronics, Inc. (NON) 1,894,000
-------------
14,909,883
Shipping (0.2%)
- -------------------------------------------------------------------------------------------------------------------
9,600 Expeditors International of Washington, Inc. 318,336
3,500 Heartland Express, Inc. (NON) 83,755
700 Landstar Systems, Inc. (NON) 74,795
13,600 Swift Transportation Company, Inc. (NON) 316,880
-------------
793,766
Software (4.5%)
- -------------------------------------------------------------------------------------------------------------------
105,000 Cognos, Inc. (Canada) (NON) 2,329,950
201,500 Documentum, Inc. (NON) 2,418,000
60,000 Internet Security Systems, Inc. (NON) 787,200
350,000 Matrixone, Inc. (NON) 2,135,000
223,000 Network Associates, Inc. (NON) 4,297,210
152,000 Quest Software, Inc. (NON) 2,208,560
83,000 Retek, Inc. (NON) 2,016,900
71,000 Symantec Corp. (NON) 2,332,350
455,100 webMethods, Inc. (NON) 4,505,490
111,400 Witness Systems, Inc. (NON) 822,132
-------------
23,852,792
Staffing (0.2%)
- -------------------------------------------------------------------------------------------------------------------
22,500 Hewitt Associates, Inc. Class A (NON) 524,250
20,100 Medical Staffing Network Holdings, Inc. (NON) 492,450
-------------
1,016,700
Technology Services (0.7%)
- -------------------------------------------------------------------------------------------------------------------
103,500 BISYS Group, Inc. (The) (NON) 3,446,550
Telecommunications (0.1%)
- -------------------------------------------------------------------------------------------------------------------
171,400 Time Warner Telecom, Inc. Class A (NON) 287,952
-------------
Total Common Stocks (cost $536,018,134) $ 515,996,134
SHORT-TERM INVESTMENTS (1.7%) (cost $8,891,852) (a)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------
$ 8,891,852 Short-term investments held in Putnam commingled cash
account with yields ranging from 1.74% to 1.83% and
due dates ranging from July 1, 2002 to August 27, 2002 (d) $ 8,891,852
- -------------------------------------------------------------------------------------------------------------------
Total Investments (cost $544,909,986) (b) $ 524,887,986
- -------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $521,379,135.
(b) The aggregate identified cost on a tax basis is $550,716,547,
resulting in gross unrealized appreciation and depreciation of
$84,359,997 and $110,188,558, respectively, or net unrealized
depreciation of $25,828,561.
(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 custodian bank.
(d) See footnote 1 to the financial statements.
The accompanying notes are an integral part of these financial statements.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2002
Assets
- -------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $544,909,986) (Note 1) $ 524,887,986
- -------------------------------------------------------------------------------------------
Dividends, interest and other receivables 68,528
- -------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 191,596
- -------------------------------------------------------------------------------------------
Receivable for securities sold 5,492,673
- -------------------------------------------------------------------------------------------
Total assets 530,640,783
Liabilities
- -------------------------------------------------------------------------------------------
Payable for securities purchased 4,851,376
- -------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 1,991,869
- -------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,044,984
- -------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 220,455
- -------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 18,120
- -------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,658
- -------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 411,470
- -------------------------------------------------------------------------------------------
Other accrued expenses 720,716
- -------------------------------------------------------------------------------------------
Total liabilities 9,261,648
- -------------------------------------------------------------------------------------------
Net assets $ 521,379,135
Represented by
- -------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,718,950,747
- -------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (1,177,549,867)
- -------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and assets and
liabilities in foreign currencies (20,021,745)
- -------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $ 521,379,135
Computation of net asset value and offering price
- -------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($253,664,531 divided by 24,016,862 shares) $10.56
- -------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $10.56)* $11.20
- -------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($212,262,271 divided by 20,468,492 shares)** $10.37
- -------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($37,493,786 divided by 3,614,593 shares)** $10.37
- -------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($10,672,827 divided by 1,022,833 shares) $10.43
- -------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $10.43)* $10.81
- -------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($7,285,720 divided by 686,569 shares) $10.61
- -------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
STATEMENT OF OPERATIONS
Year ended June 30, 2002
Investment income:
- -------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $776) $ 705,835
- -------------------------------------------------------------------------------------------
Interest 115,795
- -------------------------------------------------------------------------------------------
Total investment income 821,630
Expenses:
- -------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 4,645,988
- -------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,480,033
- -------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 28,623
- -------------------------------------------------------------------------------------------
Administrative services (Note 2) 16,041
- -------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 841,596
- -------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,768,457
- -------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 518,496
- -------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 113,408
- -------------------------------------------------------------------------------------------
Other 2,246,602
- -------------------------------------------------------------------------------------------
Total expenses 12,659,244
- -------------------------------------------------------------------------------------------
Expense reduction (Note 2) (26,269)
- -------------------------------------------------------------------------------------------
Net expenses 12,632,975
- -------------------------------------------------------------------------------------------
Net investment loss (11,811,345)
- -------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (245,056,911)
- -------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and
liabilities in foreign currencies during the year 501
- -------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 6,247,638
- -------------------------------------------------------------------------------------------
Net loss on investments (238,808,772)
- -------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(250,620,117)
- -------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
STATEMENT OF CHANGES IN NET ASSETS
Year ended June 30
----------------------------------------
2002 2001
- -------------------------------------------------------------------------------------------------------
Decrease in net assets
- -------------------------------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------------------------------
Net investment loss $ (11,811,345) $ (16,726,181)
- -------------------------------------------------------------------------------------------------------
Net realized loss on investments (245,056,911) (671,376,586)
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign currencies 6,248,139 7,831,733
- -------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (250,620,117) (680,271,034)
- -------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (158,597,911) (30,866,876)
- -------------------------------------------------------------------------------------------------------
Total decrease in net assets (409,218,028) (711,137,910)
Net assets
- -------------------------------------------------------------------------------------------------------
Beginning of year 930,597,163 1,641,735,073
- -------------------------------------------------------------------------------------------------------
End of year (including accumulated net investment
loss of $-- and $1,022,912, respectively.) $ 521,379,135 $ 930,597,163
- -------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS A
- -----------------------------------------------------------------------------------------------------
For the period
Per-share Feb. 17, 1998+
operating performance Year ended June 30 to June 30
- -----------------------------------------------------------------------------------------------------
2002 2001 2000 1999 1998
- -----------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $14.79 $24.76 $14.84 $9.87 $8.50
- -----------------------------------------------------------------------------------------------------
Investment operations:
- -----------------------------------------------------------------------------------------------------
Net investment loss (a) (.16) (.18) (.12)(d) (.08)(d) (.02)(d)
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (4.07) (9.79) 12.87 5.05 1.39
- -----------------------------------------------------------------------------------------------------
Total from
investment operations (4.23) (9.97) 12.75 4.97 1.37
- -----------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- (2.83) -- --
- -----------------------------------------------------------------------------------------------------
Total distributions -- -- (2.83) -- --
- -----------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.56 $14.79 $24.76 $14.84 $9.87
- -----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) (28.60) (40.27) 87.16 50.35 16.12*
- -----------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $253,665 $451,848 $797,592 $5,429 $2,955
- -----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.47 1.21 1.11(d) 1.00(d) .37*(d)
- -----------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (1.35) (.97) (.72)(d) (.76)(d) (.25)*(d)
- -----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 65.25 139.27 107.86 207.77 72.22*
- -----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment loss has been determined on the basis of
the weighted average number of shares during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund reflect a reduction,
based on average net assets of 0.69%, 0.70% and 0.02% for the periods
ended June 30, 1998, June 30, 1999 and June 30, 2000, respectively.
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS B
- -----------------------------------------------------------------------------
For the period
Per-share January 21, 2000+
operating performance Year ended June 30 to June 30
- -----------------------------------------------------------------------------
2002 2001 2000
- -----------------------------------------------------------------------------
Net asset value,
beginning of period $14.64 $24.68 $27.16
- -----------------------------------------------------------------------------
Investment operations:
- -----------------------------------------------------------------------------
Net investment loss (a) (.25) (.32) (.15)(d)
- -----------------------------------------------------------------------------
Net realized and unrealized
loss on investments (4.02) (9.72) (2.33)
- -----------------------------------------------------------------------------
Total from
investment operations (4.27) (10.04) (2.48)
- -----------------------------------------------------------------------------
Net asset value,
end of period $10.37 $14.64 $24.68
- -----------------------------------------------------------------------------
Total return at
net asset value (%)(b) (29.17) (40.68) (9.13)*
- -----------------------------------------------------------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------
Net assets, end of period
(in thousands) $212,262 $375,683 $670,618
- -----------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.22 1.96 .89*(d)
- -----------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (2.10) (1.72) (.71)*(d)
- -----------------------------------------------------------------------------
Portfolio turnover (%) 65.25 139.27 107.86
- -----------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment loss has been determined on the basis of
the weighted average number of shares during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund reflect a reduction,
based on average net assets of 0.02% for the period ended June 30, 2000.
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS C
- -----------------------------------------------------------------------------
For the period
Per-share January 21, 2000+
operating performance Year ended June 30 to June 30
- -----------------------------------------------------------------------------
2002 2001 2000
- -----------------------------------------------------------------------------
Net asset value,
beginning of period $14.64 $24.68 $27.16
- -----------------------------------------------------------------------------
Investment operations:
- -----------------------------------------------------------------------------
Net investment loss (a) (.25) (.32) (.15)(d)
- -----------------------------------------------------------------------------
Net realized and unrealized
loss on investments (4.02) (9.72) (2.33)
- -----------------------------------------------------------------------------
Total from
investment operations (4.27) (10.04) (2.48)
- -----------------------------------------------------------------------------
Net asset value,
end of period $10.37 $14.64 $24.68
- -----------------------------------------------------------------------------
Total return at
net asset value (%)(b) (29.17) (40.68) (9.13)*
- -----------------------------------------------------------------------------
Ratios and supplemental data
- -----------------------------------------------------------------------------
Net assets, end of period
(in thousands) $37,494 $72,498 $136,828
- -----------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 2.22 1.96 .89*(d)
- -----------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (2.10) (1.72) (.71)*(d)
- -----------------------------------------------------------------------------
Portfolio turnover (%) 65.25 139.27 107.86
- -----------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment loss has been determined on the basis of
the weighted average number of shares during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund reflect a reduction,
based on average net assets of 0.02% for the period ended June 30, 2000.
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS M
- ---------------------------------------------------------------------------
For the period
Per-share January 21, 2000+
operating performance Year ended June to June 30
- ---------------------------------------------------------------------------
2002 2001 2000
- ---------------------------------------------------------------------------
Net asset value,
beginning of period $14.69 $24.71 $27.16
- ---------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------
Net investment loss (a) (.22) (.28) (.12)(d)
- ---------------------------------------------------------------------------
Net realized and unrealized
loss on investments (4.04) (9.74) (2.33)
- ---------------------------------------------------------------------------
Total from
investment operations (4.26) (10.02) (2.45)
- ---------------------------------------------------------------------------
Net asset value,
end of period $10.43 $14.69 $24.71
- ---------------------------------------------------------------------------
Total return at
net asset value (%)(b) (29.00) (40.55) (9.02)*
- ---------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------
Net assets, end of period
(in thousands) $10,673 $20,691 $36,697
- ---------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.97 1.71 .78*(d)
- ---------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (1.85) (1.47) (.60)*(d)
- ---------------------------------------------------------------------------
Portfolio turnover (%) 65.25 139.27 107.86
- ---------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment loss has been determined on the basis of
the weighted average number of shares during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, expenses for the fund reflect a reduction,
based on average net assets of 0.02% for the period ended June 30, 2000.
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS Y
- --------------------------------------------------------------
For the period
Per-share Year ended July 5, 2000+
operating performance June 30 to June 30
- --------------------------------------------------------------
2002 2001
- --------------------------------------------------------------
Net asset value,
beginning of period $14.83 $24.90
- --------------------------------------------------------------
Investment operations:
- --------------------------------------------------------------
Net investment loss (a) (.13) (.13)
- --------------------------------------------------------------
Net realized and unrealized
loss on investments (4.09) (9.94)
- --------------------------------------------------------------
Total from
investment operations (4.22) (10.07)
- --------------------------------------------------------------
Net asset value,
end of period $10.61 $14.83
- --------------------------------------------------------------
Total return at
net asset value (%)(b) (28.46) (40.44)*
- --------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------
Net assets, end of period
(in thousands) $7,286 $9,877
- --------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.22 .95*
- --------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (1.10) (.71)*
- --------------------------------------------------------------
Portfolio turnover (%) 65.25 139.27
- --------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment loss has been determined on the basis of
the weighted average number of shares during the period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
June 30, 2002
Note 1
Significant accounting policies
Putnam New Century Growth Fund (the "fund") is a series of Putnam Funds
Trust (the "Trust") which is registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end management investment
company. The objective of the fund is to seek long-term growth of
capital by investing primarily in equity securities of companies that
Putnam Investment Management, LLC ("Putnam Management"), the fund's
manager, an indirect, wholly-owned subsidiary of Putnam, LLC, believes
have potential for capital appreciation which is significantly greater
than that of the market averages.
The fund offers class A, class B, class C, class M and class Y shares.
Class A shares are sold with a maximum front-end sales charge of 5.75%.
Class B shares, which convert to class A shares after approximately
eight years, do not pay a front-end sales charge but pay a higher
ongoing distribution fee than class A shares, and are subject to a
contingent deferred sales charge, if those shares are redeemed within
six years of purchase. Class C shares are subject to the same fees and
expenses as class B shares, except that class C shares have a one-year
1.00% contingent deferred sales charge and do not convert to class A
shares. Class M shares are sold with a maximum front-end sales charge of
3.50% and pay an ongoing distribution fee that is higher than class A
shares but lower than class B and class C shares. 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 that fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with accounting principles generally accepted in the United States of
America and requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities in the financial
statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results could
differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sales price on its principal exchange, or if no sales
are reported -- as in the case of some securities traded
over-the-counter -- the last reported bid price. For foreign
investments, if trading or events occurring in other markets after the
close of the principal exchange in which the securities are traded are
expected to materially affect the value of the investments, then those
investments are valued, taking into consideration these events, at their
fair value following procedures approved by the Trustees. Securities
quoted in foreign currencies are translated into U.S. dollars at the
current exchange rate. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost, which
approximates market value. Other investments, including restricted
securities, are stated at fair value.
B) Joint trading account The fund may transfer uninvested cash balances,
including cash collateral received under security lending arrangements,
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 issuers of high-grade
short-term investments having maturities of up to 397 days for
collateral received under security lending arrangements and up to 90
days for other cash investments.
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. Non-cash dividends, if any, are recorded at the fair
market value of the securities received.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such gains and losses are included with the net
realized and unrealized gain or loss on investments. Net realized gains
and losses on foreign currency transactions represent net realized
exchange gains or losses on closed forward currency contracts,
disposition of foreign currencies and the difference between the amount
of investment income and foreign withholding taxes recorded on the
fund's books and the U.S. dollar equivalent amounts actually received or
paid. Net unrealized appreciation and depreciation of assets and
liabilities in foreign currencies arise from changes in the value of
open forward currency contracts and assets and liabilities other than
investments at the period end, resulting from changes in the exchange
rate. Investments in foreign securities involve certain risks, including
those related to economic instability, unfavorable political
developments, and currency fluctuations, not present with domestic
investments.
F) 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 maintains an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the year ended
June 30, 2002, the fund had no borrowings against the line of credit.
G) 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 June 30, 2002, the fund had a capital loss carryover of approximately
$1,052,404,000 available to the extent allowed by tax law to offset
future capital gains, if any. The amount of the carryover and the
expiration dates are:
Loss Carryover Expiration
- -------------- ------------------
$454,332,000 June 30, 2009
598,072,000 June 30, 2010
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Distributions from capital gains, 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 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 June 30, 2002, the fund reclassified
$12,834,257 to decrease accumulated net investment losses and
$12,834,257 to decrease paid-in-capital.
I) Expenses of the trust Expenses directly charged or attributable to
any fund will be paid from the assets of that fund. Generally, expenses
of the trust will be allocated among and charged to the assets of each
fund on a basis that the Trustees deem fair and equitable, which may be
based on the relative assets of each fund or the nature of the services
performed and relative applicability to each fund.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.70% of the
first $500 million of average net assets, 0.60% of the next $500
million, 0.55% of the next $500 million, 0.50% of the next $5 billion,
0.475% of the next $5 billion, 0.455% of the next $5 billion, 0.44% of
the next $5 billion and 0.43% thereafter.
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 wholly-owned subsidiary of Putnam,
LLC. Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
The fund has entered into an arrangement with PFTC whereby credits
realized as a result of uninvested cash balances are used to reduce a
portion of the fund's expenses. The fund also reduced expenses through
brokerage service arrangements. For the year ended June 30, 2002, the
fund's expenses were reduced by $26,269 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $1,296 has been allocated to the fund, and an additional fee for
each Trustees meeting attended. Trustees receive additional fees for
attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with
the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B, class C and class M shares pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Retail Management, a wholly-owned subsidiary of
Putnam, LLC and Putnam Retail Management GP, Inc., for services provided
and expenses incurred by it in distributing shares of the fund. The
Plans provide for payments by the fund to Putnam Retail Management at an
annual rate up to 0.35%, 1.00%, 1.00% and 1.00% of the average net
assets attributable to class A, class B, class C and class M shares,
respectively. The Trustees have approved payment by the fund at an
annual rate of 0.25%, 1.00%, 1.00% and 0.75% of the average net assets
attributable to class A, class B, class C and class M shares,
respectively.
For the year ended June 30, 2002, Putnam Retail Management, acting as
underwriter received net commissions of $116,077 and $4,761 from the
sale of class A and class M shares, respectively, and received $821,638
and $3,739 in contingent deferred sales charges from redemptions of
class B and class C shares, respectively. A deferred sales charge of up
to 1.00% and 0.65% is assessed on certain redemptions of class A and
class M shares, respectively. For the year ended June 30, 2002, Putnam
Retail Management, acting as underwriter received $8,019 and no monies
on class A and class M redemptions, respectively.
Note 3
Purchases and sales of securities
During the year ended June 30, 2002, cost of purchases and proceeds from
sales of investment securities other than short-term investments
aggregated $449,029,185 and $612,400,057, respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Capital shares
At June 30, 2002, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended June 30, 2002
- ---------------------------------------------------------------------------
Class A Shares Amount
- ---------------------------------------------------------------------------
Shares sold 10,482,808 $126,586,745
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
10,482,808 126,586,745
Shares repurchased (17,008,215) (205,196,325)
- ---------------------------------------------------------------------------
Net decrease (6,525,407) $(78,609,580)
- ---------------------------------------------------------------------------
Year ended June 30, 2001
- ---------------------------------------------------------------------------
Class A Shares Amount
- ---------------------------------------------------------------------------
Shares sold 12,057,933 $231,800,769
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
12,057,933 231,800,769
Shares repurchased (13,734,656) (252,141,481)
- ---------------------------------------------------------------------------
Net decrease (1,676,723) $(20,340,712)
- ---------------------------------------------------------------------------
Year ended June 30, 2002
- ---------------------------------------------------------------------------
Class B Shares Amount
- ---------------------------------------------------------------------------
Shares sold 2,453,092 $29,451,788
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
2,453,092 29,451,788
Shares repurchased (7,648,051) (89,660,951)
- ---------------------------------------------------------------------------
Net decrease (5,194,959) $(60,209,163)
- ---------------------------------------------------------------------------
Year ended June 30, 2001
- ---------------------------------------------------------------------------
Class B Shares Amount
- ---------------------------------------------------------------------------
Shares sold 5,584,769 $109,383,265
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
5,584,769 109,383,265
Shares repurchased (7,089,412) (126,139,015)
- ---------------------------------------------------------------------------
Net decrease (1,504,643) $(16,755,750)
- ---------------------------------------------------------------------------
Year ended June 30, 2002
- ---------------------------------------------------------------------------
Class C Shares Amount
- ---------------------------------------------------------------------------
Shares sold 600,774 $7,234,760
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
600,774 7,234,760
Shares repurchased (1,937,502) (22,818,234)
- ---------------------------------------------------------------------------
Net decrease (1,336,728) $(15,583,474)
- ---------------------------------------------------------------------------
Year ended June 30, 2001
- ---------------------------------------------------------------------------
Class C Shares Amount
- ---------------------------------------------------------------------------
Shares sold 1,856,823 $37,057,710
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
1,856,823 37,057,710
Shares repurchased (2,449,583) (45,794,827)
- ---------------------------------------------------------------------------
Net decrease (592,760) $(8,737,117)
- ---------------------------------------------------------------------------
Year ended June 30, 2002
- ---------------------------------------------------------------------------
Class M Shares Amount
- ---------------------------------------------------------------------------
Shares sold 523,780 $6,272,324
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
523,780 6,272,324
Shares repurchased (909,182) (10,814,636)
- ---------------------------------------------------------------------------
Net decrease (385,402) $(4,542,312)
- ---------------------------------------------------------------------------
Year ended June 30, 2001
- ---------------------------------------------------------------------------
Class M Shares Amount
- ---------------------------------------------------------------------------
Shares sold 415,990 $8,173,099
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
415,990 8,173,099
Shares repurchased (492,886) (8,607,000)
- ---------------------------------------------------------------------------
Net decrease (76,896) $(433,901)
- ---------------------------------------------------------------------------
Year ended June 30, 2002
- ---------------------------------------------------------------------------
Class Y Shares Amount
- ---------------------------------------------------------------------------
Shares sold 432,669 $5,302,922
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
432,669 5,302,922
Shares repurchased (412,110) (4,956,304)
- ---------------------------------------------------------------------------
Net increase 20,559 $346,618
- ---------------------------------------------------------------------------
For the period July 5, 2000
(commencement of operations) to
June 30, 2001
- ---------------------------------------------------------------------------
Class Y Shares Amount
- ---------------------------------------------------------------------------
Shares sold 965,104 $20,645,469
- ---------------------------------------------------------------------------
Shares issued in connection
with reinvestment
of distributions -- --
- ---------------------------------------------------------------------------
965,104 20,645,469
Shares repurchased (299,094) (5,244,865)
- ---------------------------------------------------------------------------
Net increase 666,010 $15,400,604
- ---------------------------------------------------------------------------
Note 5
Actions by Trustees
On April 15, 2002 the Trustees approved the merger of the Putnam New
Century Growth Fund into the Putnam Voyager Fund II. The transaction is
scheduled to occur in September 2002. It is subject to a number of
conditions and there is no guarantee it will occur.
FEDERAL TAX INFORMATION
(Unaudited)
The Form 1099 you receive in January 2003 will show the tax status of
all distributions paid to your account in calendar 2002.
TRUSTEES
Name, Address, 1 Date of Birth,
Position(s) Held with Fund
and Length of Service Principal Occupation(s)
as a Putnam Fund Trustee 2 During Past 5 Years Other Directorships Held by Trustee
- -------------------------------------------------------------------------------------------------------
Jameson A. Baxter (9/6/43), President, Baxter Director of ASHTA Chemicals, Inc.,
Trustee since 1994 Associates, Inc. Banta Corporation (a printing and
(a management digital imaging firm), Intermatic
consulting and private Corporation (manufacturer of energy
investments firm) control products), Ryerson Tull, Inc.
(a steel service corporation),
Advocate Health Care, and the
National Center for Nonprofit
Boards. Chairman Emeritus
of the Board of Trustees, Mount
Holyoke College. Also held various
positions in investment banking and
corporate finance, including Vice
President and principal of the
Regency Group and consultant to
First Boston Corp.
Charles B. Curtis (4/27/40), President and Chief Member of the Council on Foreign
Trustee since 2001 Operating Officer, Relations, the Electric Power
Nuclear Threat Research Institute Advisory Council,
Initiative (a private the Board of Directors of the Gas
foundation dedicated Technology Institute, the University
to reducing the threat of Chicago Board of Governors for
of weapons of mass Argonne National Laboratory, the
destruction), also serves Board of Directors of the
as Senior Advisor to the Environment and Natural Resources
United Nations Program Steering Committee,
Foundation John F. Kennedy School of
Government, Harvard University.
Prior to 2002, Mr. Curtis was a
member of the Board of Directors of
the Gas Technology Institute. Until
2001, Mr. Curtis was a Member of
the Department of Defense's Policy
Board and Director of EG&G
Technical Services, Inc. (fossil energy
research and development support)
and prior to May 1997, Mr. Curtis
was Deputy Secretary of Energy.
John A. Hill (1/31/42), Vice-Chairman and Director of Devon Energy
Trustee since 1985 and Managing Director, Corporation (formerly known as
Chairman since 2000 First Reserve Snyder Oil Corporation),
Corporation TransMontaigne Oil Company,
(a registered investment Continuum Health Partners of
advisor investing in New York, Sarah Lawrence College,
companies in the and various private companies owned
world-wide energy by First Reserve Corporation.
industry on behalf of Trustee of TH Lee, Putnam
institutional investors) Investment Trust (a closed-end
investment company). Prior to
acquiring First Reserve in 1983,
Mr. Hill held executive positions
with several advisory firms and
various positions with the federal
government, including Associate
Director of the Office of Manage
ment and Budget and Deputy
Director of the Federal Energy
Administration.
Ronald J. Jackson Private investor Former Chairman, President, and
(12/17/43), Chief Executive Officer of Fisher-
Trustee since 1996 Price, Inc. (a toy manufacturer).
Previously served as President and
Chief Executive Officer of Stride-
Rite, Inc. and Kenner Parker Toys.
Also held financial and marketing
positions with General Mills, Parker
Brothers, and Talbots. President of
the Kathleen and Ronald J. Jackson
Foundation (charitable trust).
Member of the Board of Overseers of
WGBH (public television and radio).
Member of the Board of Overseers of
the Peabody Essex Museum.
Paul L. Joskow (6/30/47), Elizabeth and James Director, National Grid Group
Trustee since 1997 Killian Professor of (a UK-based holding company
Economics and with interests in electric power,
Management and natural gas distribution, and
Director of the Center telecommunications networks), and
for Energy and the Whitehead Institute for
Environmental Policy Biomedical Research (a non-profit
Research, Massachusetts research institution). President of the
Institute of Technology Yale University Council. Prior to
February 2002, March 2000, and
September 1998, Dr. Joskow was a
Director of State Farm Indemnity
Company (an automobile insurance
company), Director of New England
Electric System (a public utility
holding company) and a consultant
to National Economic Research
Associates, respectively.
Elizabeth T. Kennan Chairman, Cambus- Director, Northeast Utilities, and
(2/25/38), Kenneth Bloodstock (a Talbots (a distributor of women's
Trustee since 1992 limited liability company apparel). Trustee of Centre College.
involved in thoroughbred Prior to 2001, Dr. Kennan was a
horse breeding and member of the Oversight Committee
farming), President of Folger Shakespeare Library.
Emeritus of Mount Prior to September 2000, June 2000,
Holyoke College and November 1999, Dr. Kennan
was a Director of Chastain Real
Estate, Bell Atlantic, and Kentucky
Home Life Insurance, respectively.
Prior to 1995, Dr. Kennan was a
Trustee of Notre Dame University.
For 12 years, she was on the faculty
of Catholic University.
John H. Mullin, III Chairman and CEO Director Alex. Brown Realty, Inc.,
(6/15/41), of Ridgeway Farm Sonoco Products, Inc. (a packaging
Trustee since 1997 (a limited liability company), The Liberty Corporation
company engaged in (a company engaged in the
timber and farming) broadcasting industry), and Progress
Energy, Inc. (a utility company,
formerly known as Carolina Power
& Light). Trustee Emeritus of
Washington & Lee University. Prior
to October 1997, January 1998, and
May 2001, Mr. Mullin was a Director
of Dillon, Read and Co. Inc.,
The Ryland Group, Inc., and
Graphic Packaging International
Corp., respectively.
Robert E. Patterson Senior Partner of Cabot Chairman of the Joslin Diabetes
(3/15/45), Properties, LLP and Center, Trustee of SEA Education
Trustee since 1984 Chairman of Cabot Association, and Director of
Properties, Inc. Brandywine Trust Company (a trust
company). Prior to February 1998,
Mr. Patterson was Executive Vice
President and Director of
Acquisitions of Cabot Partners
Limited Partnership. Prior to
December 2001, Mr. Patterson was
President and Trustee of Cabot
Industrial Trust (publicly traded real
estate investment trust). Prior to
1990, Mr. Patterson was Executive
Vice President of Cabot, Cabot &
Forbes Realty Advisors, the
predecessor of Cabot Partners, and
prior to that was Senior Vice
President of the Beal Companies.
W. Thomas Stephens Corporate Director Director of Qwest Communications
(9/2/42), (communications company), Xcel
Trustee since 1997 Energy Incorporated (public utility
company), TransCanada Pipelines,
Norske Canada, Inc. (paper
manufacturer) and Mail-Well
(printing and envelope company).
Prior to July 2001 and October 1999,
Mr. Stephens was Chairman of Mail-
Well and MacMillan-Bloedel (forest
products company). Prior to 1996,
Mr. Stephens was Chairman and
Chief Executive Officer of
Johns Manville.
W. Nicholas Thorndike Director of various Trustee of Northeastern University and
(3/28/33), corporations and Honorary Trustee of Massachusetts
Trustee since 1992 charitable General Hospital. Prior to
organizations, September 2000, April 2000, and
including Courier December 2001, Mr. Thorndike was
Corporation (a book a Director of Bradley Real Estate,
manufacturer) and Inc., a Trustee of Eastern Utilities
Providence Journal Co. Associates, and a Trustee of Cabot
(a newspaper publisher) Industrial Trust, respectively.
Previously served as Chairman of the
Board and managing partner of
Wellington Management/Thorndike
Doran Paine & Lewis, and Chairman
and Director of Ivest Fund.
Lawrence J. Lasser* President and Chief Director of Marsh & McLennan
(11/1/42), Executive Officer Companies, Inc. and the United Way
Trustee since 1992 of Putnam of Massachusetts Bay. Member of the
Vice President since 1981 Investments, LLC, Board of Governors of the Investment
and Putnam Investment Company Institute, Trustee of the
Management, LLC Museum of Fine Arts, Boston, a
Trustee and Member of the Finance
and Executive Committees of Beth
Israel Deaconess Medical Center,
Boston, and a Member of the
CareGroup Board of Managers
Investment Committee, the Council
on Foreign Relations, and the
Commercial Club of Boston.
George Putnam, III* President, New Director of The Boston Family
(8/10/51), Generation Research, Office, L.L.C. (registered investment
Trustee since 1984 and Inc. (a publisher of advisor), Trustee of the SEA
President since 2000 financial advisory and Education Association, Trustee of
other research services St. Mark's School, and Trustee of
relating to bankrupt and Shore Country Day School.
distressed companies) Previously, Mr. Putnam was an
and New Generation attorney with the firm of Dechert
Advisers, Inc. Price & Rhoads.
(a registered
investment adviser)
A.J.C. Smith (4/13/34),* Director of Marsh & Director of Trident Corp. (a limited
Trustee since 1986 McLennan partnership with over 30 institutional
Companies, Inc. investors). Trustee of the Carnegie
Hall Society, the Educational
Broadcasting Corporation and the
National Museums of Scotland.
Chairman of the Central Park
Conservancy. Member of the Board
of Overseers of the Joan and
Sanford I. Weill Graduate School
of Medical Sciences of Cornell
University. Fellow of the Faculty of
Actuaries in Edinburgh, the
Canadian Institute of Actuaries, and
the Conference of Actuaries.
Associate of the Society of Actuaries.
Member of the American Actuaries,
the International Actuarial
Association and the International
Association of Consulting Actuaries.
Prior to May 2000 and November
1999, Mr. Smith was Chairman and
CEO, respectively, of Marsh &
McLennan Companies, Inc.
- -------------------------------------------------------------------------------------------------------
1 The address of each Trustee is One Post Office Square, Boston, MA 02109. As of June 30, 2002,
there were 113 Putnam Funds.
2 Each Trustee serves for an indefinite term, until his or her resignation, death, or removal.
* Trustees who are or may be deemed to be "interested persons" (as defined in the Investment
Company Act of 1940) of the fund, Putnam Management or Putnam Retail Management. Messrs.
Putnam, III, Lasser, and Smith are deemed "interested persons" by virtue of their positions
as officers or shareholders of the fund, or officers of Putnam Management, Putnam Retail
Management, or Marsh & McLennan Companies, Inc., the parent company of Putnam Management and
Putnam Retail Management. George Putnam, III, is the President of your Fund and each of the
other Putnam Funds. Lawrence J. Lasser has been the President, Chief Executive Officer, and a
Director of Putnam Investments, LLC, and Putnam Management since 1985, having begun his
career there in 1969. Mr. Lasser currently also serves as a Director of Marsh & McLennan
Companies, Inc., the parent company of Putnam Management. A.J.C. Smith is a Director of
Marsh & McLennan Companies, Inc.
OFFICERS
Name, Address, 1 Date of Birth, Inception of Service
Position(s) Held with Fund with the Putnam Funds Principal Occupation(s) During Past 5 Years
- ---------------------------------------------------------------------------------------------------------------
Charles E. Porter (7/26/38), Since 1989 Managing Director, Putnam Investments,
Executive Vice President, LLC and Putnam Management
Treasurer & Principal
Financial Officer
Patricia C. Flaherty Since 1993 Senior Vice President, Putnam
(12/1/46), Investments, LLC and Putnam Management
Senior Vice President
Michael T. Healy (1/24/58), Since 2000 Managing Director, Putnam
Assistant Treasurer and Investments, LLC
Principal Accounting
Officer
Gordon H. Silver (7/3/47), Since 1990 Senior Managing Director, Putnam
Vice President Investments, LLC and Putnam Management
Brett C. Browchuk Since 1994 Managing Director, Putnam Investments,
(2/27/63), Vice President LLC and Putnam Management
Ian C. Ferguson (7/3/57), Since 1997 Senior Managing Director, Putnam
Vice President Investments, LLC and Putnam Management
Richard G. Leibovitch Since 1999 Managing Director of Putnam Investments,
(10/31/63), Vice President LLC and Putnam Management. Prior to
February 1999, Managing Director at
J.P. Morgan.
Richard A. Monaghan Since 1998 Managing Director, Putnam Investments,
(8/25/54), LLC, Putnam Management and Putnam
Vice President Retail Management
John R. Verani Since 1988 Senior Vice President, Putnam
(6/11/39), Investments, LLC and Putnam Management
Vice President
Stephen M. Oristaglio Since 2000 Senior Managing Director of Putnam
(8/21/55), Management. Prior to July 1988,
Vice President Managing Director, Swiss Bank Corp.
Daniel L. Miller Since 1990 Managing Director of Putnam Management
(8/15/57), Vice President
Brian P. O'Toole Since 2002 Managing Director of Putnam Management.
(7/23/63), Prior to June 2002, Managing Director,
Vice President Citigroup Asset Management, 100 First
Stamford Place, Stamford, CT 06902.
Eric M. Wetlaufer Since 2001 Managing Director of Putnam Management.
(4/13/62), Prior to November 1997, Managing Director
Vice President and Portfolio Manager at Cadence
Capital Management.
- ---------------------------------------------------------------------------------------------------------------
1 The address of each Officer is One Post Office Square, Boston, MA 02109.
THE PUTNAM FAMILY OF FUNDS
The following is a complete list of Putnam's open-end mutual funds.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
GROWTH FUNDS
Balanced Fund *
Growth Opportunities Fund
Health Sciences Trust
International New Opportunities Fund
New Century Growth Fund *
New Opportunities Fund
OTC & Emerging Growth Fund
Small Cap Growth Fund
Technology Fund *
Vista Fund
Voyager Fund
Voyager Fund II
BLEND FUNDS
Asia Pacific Growth Fund *
Capital Appreciation Fund
Capital Opportunities Fund
Emerging Markets Fund *
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
International Growth Fund
International Voyager Fund
Investors Fund
Research Fund
Tax Smart Equity Fund
Utilities Growth and Income Fund
VALUE FUNDS
Balanced Retirement Fund *
Classic Equity Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund *
The Putnam Fund for Growth and Income
International Growth and Income Fund
Mid Cap Value Fund
New Value Fund
Small Cap Value Fund +
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Income Trust
High Yield Advantage Fund +
High Yield Trust
Income Fund
Intermediate U.S. Government Income Fund
Money Market Fund [SECTION MARK]
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund [SECTION MARK]
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* In anticipation of mergers expected later this year, these funds are
closed to new investors.
+ Closed to new investors.
[SECTION MARK] An investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. Although the funds seek to
preserve your investment at $1.00 per share, it is possible
to lose money by investing in the fund.
Check your account balances and current performance at
www.putnaminvestments.com.
SERVICES FOR SHAREHOLDERS
HELP YOUR INVESTMENT GROW
Set up a program for systematic investing with as little as $25 a month
from a Putnam fund or from your own savings or checking account.
(Regular investing does not guarantee a profit or protect against loss
in a declining market.)
SWITCH FUNDS EASILY
You can move money from one Putnam fund to another within the same class
of shares without a service charge. (This privilege is subject to change
or termination.)
ACCESS YOUR MONEY EASILY
You can have checks sent regularly or redeem shares any business day at
the then-current net asset value, which may be more or less than the
original cost of the shares. Class B and class C shares carry a sales
charge that is applied to certain withdrawals.
HOW TO BUY ADDITIONAL SHARES
You may buy shares through your financial advisor or directly from
Putnam. To open an account by mail, send a check made payable to the
name of the fund along with a completed fund application. To add to an
existing account, complete the investment slip found at the top of your
Confirmation of Activity statement and return it with a check payable to
your fund.
VISIT US AT WWW.PUTNAMINVESTMENTS.COM
A secure section of our Web site contains complete information on your
account, including balances and transactions, updated daily. You may
also conduct transactions, such as exchanges, additional investments,
and address changes. Log on today to get your password.
USE OUR TOLL-FREE NUMBER
1-800-225-1581 Ask a helpful Putnam representative or your financial
advisor for details about any of these or other services, or see your
prospectus.
FUND INFORMATION
ABOUT PUTNAM INVESTMENTS
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition and
practice since 1830. Founded 65 years ago, Putnam Investments was built
around the concept that a balance between risk and reward is the hallmark
of a well-rounded financial program. We presently manage over 100 mutual
funds in growth, value, blend, fixed income, and international.
INVESTMENT MANAGER
Putnam Investment Management, LLC
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
President
Charles E. Porter
Executive Vice President and Treasurer
Patricia C. Flaherty
Senior Vice President
Michael T. Healy
Assistant Treasurer and Principal Accounting Officer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen M. Oristaglio
Vice President
Brian P. O'Toole
Vice President
Daniel L. Miller
Vice President
Eric M. Wetlaufer
Vice President
Richard G. Leibovitch
Vice President
Richard A. Monaghan
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of Putnam New Century
Growth Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary and
Putnam's Quarterly Ranking Summary. For more information or to request a
prospectus, call toll free: 1-800-225-1581. The fund's Statement of
Additional Information contains additional information about the fund's
Trustees and is available without charge upon request by calling
1-800-225-1581.
Visit www.putnaminvestments.com or call a representative at 1-800-225-1581.
NOT FDIC INSURED, MAY LOSE VALUE, NO BANK GUARANTEE
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
AN071-79334 2HW/2QB/2QC/2QD/2SR 8/02
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ----------------------------------------------------------------------------
Putnam New Century Growth Fund
Supplement to Annual Report dated 6/30/02
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 clients that meet the eligibility requirements
specified in the fund's prospectus for such shares. 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, C, and M shares, which are discussed more extensively in the annual
report.
ANNUAL RESULTS AT A GLANCE
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Total return for periods ended 6/30/02
NAV
1 year -28.46%
Life of fund (since class A inception, 2/17/98) 40.02
Annual average 8.01
Share value: NAV
6/30/01 $14.83
6/30/02 $10.61
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Distributions: The fund did not make any distributions during this period.
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Please note that past performance is not indicative of 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, and are not 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, typically 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.