Item 1. Report to Stockholders:
- -------------------------------
The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
Putnam
New Opportunities
Fund
6 | 30 | 05
Annual Report
[GRAPHICS OMITTED: VINEYARD COVER, SCALE AND LOGO]
GROWTH FUNDS
look for stocks of
companies that
have the potential
to grow over time.
What makes Putnam different?
[GRAPHIC OMITTED: FOUNDER]
In 1830, Massachusetts Supreme Judicial Court Justice Samuel Putnam
established The Prudent Man Rule, a legal foundation for responsible money
management.
THE PRUDENT MAN RULE
All that can be required of a trustee to invest is that he shall conduct
himself faithfully and exercise a sound discretion. He is to observe how men
of prudence, discretion, and intelligence manage their own affairs, not in
regard to speculation, but in regard to the permanent disposition of their
funds, considering the probable income, as well as the probable safety of the
capital to be invested.
[GRAPHIC OMITTED: SIGNATURE, JUSTICE SAMUEL PUTNAM 1830]
A time-honored tradition in money management
Since 1937, our values have been rooted in a profound sense of responsibility
for the money entrusted to us.
A prudent approach to investing
We use a research-driven team approach to seek consistent, dependable,
superior investment results over time, although there is no guarantee a fund
will meet its objectives.
Funds for every investment goal
We offer a broad range of mutual funds and other financial products so
investors and their advisors can build diversified portfolios.
A commitment to doing what's right for investors
We have below-average expenses and stringent investor protections, and provide
a wealth of information about the Putnam funds.
Industry-leading service
We help investors, along with their financial advisors, make informed
investment decisions with confidence.
Putnam
New Opportunities
Fund
6 | 30 | 05
Annual Report
Message from the Trustees 2
About the fund 4
The year in review 7
Performance 12
Expenses 15
Turnover 17
Risk 18
Your fund's management 19
Terms and definitions 22
Trustee approval of management contract 24
Other information for shareholders 29
Financial statements 30
Federal tax information 57
Shareholder meeting results 58
Brokerage commissions 60
About the Trustees 61
Officers 67
Cover photograph: Vineyard, Napa County, California[C] Charles O'Rear
Message from the Trustees
Dear Fellow Shareholder
During the fiscal year ended June 30, 2005, the Federal Reserve Board's more
restrictive monetary policy, along with high energy prices, began to moderate
the pace of economic expansion. International markets generally outperformed
stock and bond markets in the United States. However, the U.S. dollar
strengthened against foreign currencies, partially offsetting the effects of
these gains. Amid the uncertainties of this environment, the in-depth,
professional research and active management that mutual funds can provide
makes them an intelligent choice for today's investors.
We want you to know that Putnam Investments' management team, under the
leadership of Chief Executive Officer Ed Haldeman, continues to focus on
investment performance and remains committed to putting the interests of
shareholders first. In keeping with these goals, we have redesigned and
expanded our shareholder reports to make it easier for you to learn more about
your fund.
More information about your fund's strategy and history has been added to this
report. We have also included additional information about your fund's
management team, including compensation data pertaining to your fund.
Furthermore, on page 24 we provide information about the 2005 approval by the
Trustees of your fund's management contract with Putnam.
We would also like to take this opportunity to announce the retirement of one
of your fund's Trustees, Ronald J. Jackson, who has been an independent
Trustee of the Putnam funds since 1996. We thank him for his service.
In the following pages, members of your fund's management team discuss the
fund's performance, strategies, and their outlook for the months ahead.
Respectfully yours,
/S/ GEORGE PUTNAM, III
George Putnam, III
President of the Funds
/S/ JOHN A. HILL
John A. Hill
Chairman of the Trustees
August 17, 2005
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III]
Putnam New Opportunities Fund: investing through 15 years of unprecedented
innovation
Long before most Americans could imagine the Internet, digital music files, or
owning a cell phone small enough to fit in their pockets, Putnam New
Opportunities Fund was seeking growth potential in emerging, cutting-edge
companies. The fund was also targeting stocks in more traditional industries,
such as restaurants, retail stores, health care, and broadcasting, which can
also offer strong growth potential.
Among the holdings in the fund's portfolio shortly after it was introduced in
1990 was the stock of Symantec, then a 9-year-old emerging software company.
Today, Symantec is a leading maker of antivirus software, which has seen
explosive demand as the Internet and computer networks have become an
essential component of everyday life.
The managers of the fund focus on bottom-up stock selection in seeking
above-average growth for investors. Putnam's in-house research organization,
whose dedicated analysts work in teams, helps the management teams find growth
stocks that other investors may have overlooked. The specialized expertise of
these Putnam analysts, who visit with the managements of thousands of
companies each year, is critical to the success of the fund's growth strategy.
An important benefit of the fund's strategy is its flexibility -- it diversifies
across a range of industries and capitalizations. The fund can invest in
smaller companies that are in their emerging- or expansionary-growth phases,
and these companies can remain in the fund's portfolio until they grow to
become market leaders.
[GRAPHIC OMITTED: CD STACK]
Holdings can grow from emerging stocks to market leaders.
Many leading companies in the fund's portfolio were also in the portfolio when
they were smaller, emerging companies. The management teams have strategically
bought and sold these and other stocks of growing companies across a wide
range of industries.
[GRAPHICS OMITTED: SAFE, MOUSE, BEAKERS AND TOOLBOX]
1991
Symantec
Initial public offering was in 1989; today, the world's leading maker of
antivirus software
1993
Cisco Systems
Went public in February 1990; today, a dominant force in computer networking
systems
1995
Amgen
Established in 1980 with 3 employees; today, a leading biotechnology company
with over 14,000 employees (as of 2004)
1997
The Home Depot
Opened in 1979 with 3 stores and $7 million in sales; today, the largest
home-improvement retailer with over 1,800 stores and $73 billion in sales
(fiscal 2004)
Of course, historically, markets have been volatile at times for growing
companies; the growth potential offered by these stocks comes with the risk of
greater price fluctuations. Combining small-cap stocks with the stocks of
larger, well-established companies provides a more diversified approach to
help manage those risks.
While the next decade will bring as many extraordinary changes as the last
one, the teams managing Putnam New Opportunities Fund will continue to focus
on capturing growth potential for investors.
In-depth analysis is key to successful stock selection.
Drawing on the expertise of a dedicated team of stock analysts, the fund's
management teams seek attractive growth stocks. Once a stock is selected for
the portfolio, it is regularly assessed by the members of the teams to ensure
that it continues to meet their criteria, including:
Growth They examine each company's financials, including its sales and
earnings, and target those believed to offer growth potential.
Quality They look for high-quality companies, seeking characteristics such as
solid management teams, sound business models, a record of strong performance,
and high levels of free-cash flow.
Valuation They carefully consider how each stock is valued, seeking stocks
whose valuations are attractive relative to the company's growth potential.
[GRAPHICS OMITTED: FIRST AID KIT AND PALETTE]
2000
UnitedHealth Group
Founded in 1974 as Charter Med; today, a leading health-care services
company
2002
Adobe Systems
Went public in 1986; today, one of the largest software companies, creator
of the hugely successful Adobe Acrobat[R]
Source: Company Web sites as of 6/30/05.
Identified holdings were held during the specific year; they will vary over
time. The fund may not have continued to hold the security in the portfolio,
and may have sold it at a loss. Performance of identified holdings in a year
may not be representative of the fund's returns during the same period.
Securities purchased in the future may not generate similar returns. This is
not an offer to sell or a recommendation to buy any individual security. For
more information on current fund holdings, see page 9.
Putnam New Opportunities Fund has a multi-cap strategy, seeking to invest in
the highest-quality large-cap companies as well as small- and mid-cap growth
companies. The fund's management teams seek to identify dynamic companies that
are positioned in sectors believed to offer above-average growth potential.
The fund may be appropriate for investors who are seeking long-term growth
potential from stocks of small, midsize, and large companies.
- -----------------------------------------------------------------------------
Highlights
* For the 12 months ended June 30, 2005, Putnam New Opportunities Fund's class
A shares had a total return of 6.78% at net asset value (NAV, or without
sales charges).
* The fund's primary benchmark, the Russell 3000 Growth Index, returned 1.90%
for the same period.
* The average return for the fund's Lipper category, Multi-Cap Growth Funds,
was 5.01%.
* The fund's benchmark changed from the Russell Midcap Growth Index to the
Russell 3000 Growth Index. See the Strategy Overview section for details.
* Additional fund performance, comparative performance, and Lipper data can
be found in the performance section beginning on page 12.
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Performance
Total return for class A shares for periods ended 6/30/05
Since the fund's inception (8/31/90), annualized return is 14.04% at NAV; and
13.63% at POP.
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Annualized return Cumulative return
NAV POP NAV POP
- -----------------------------------------------------------------------------
10 years 6.50% 5.92% 87.67% 77.81%
- -----------------------------------------------------------------------------
5 years -13.17 -14.10 -50.65 -53.24
- -----------------------------------------------------------------------------
1 year 6.78 1.17 6.78 1.17
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Data is historical. Past performance does not guarantee 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 NAV do not reflect a sales charge of 5.25%. For
the most recent month-end performance, visit www.putnam.com. A short-term
trading fee of up to 2% may apply.
Report from the fund managers
The year in review
Looking back over the past 12 months, it would appear that the U.S. stock
market, and growth stocks specifically, should have had solid performance. The
economy has continued to grow at a steady pace; long-term interest rates and
mortgage rates have remained at historically low levels; and inflation has
also been low. However, growth-oriented stocks have only seen sluggish, albeit
positive performance, in part because forward-looking investors have been
concerned about other factors, including high energy prices, rising short-term
interest rates, and large trade and federal budget deficits. In this
environment, we increased the fund's focus on fundamental research and
individual stock selection. Our "all-cap" approach, which seeks outperforming
returns from stocks of companies of all sizes, produced results that were
ahead of the fund's benchmark index and Lipper category average (based on
performance at net asset value).
Market overview
In the first half of your fund's fiscal year, the stock market posted gains,
although investors were distracted by a number of concerns. While the economy
continued to expand, job creation improved, and corporate profits were
generally solid, investors grew concerned about rising short-term interest
rates, soaring energy prices, and the outcome of U.S. elections. Stocks fell
sharply from July to mid-August, responding to a series of interest-rate
increases by the Federal Reserve Board, the dramatic rise in oil prices, and a
series of destabilizing events in Iraq. However, stocks posted strong gains in
November and December, as investors responded positively to lower oil prices
and the completion of the presidential election and appeared to focus on
reports of sustained economic expansion and strong corporate earnings.
The new year brought little relief to the flat overall returns in the
stock market during 2004. From January through March 2005, growth stocks
generally declined, as investors renewed concerns about the effects of
higher short-term interest rates and energy prices on the economy and
corporate profits. Despite earnings reports that were generally positive,
investors continued to look ahead with caution. Adding to their concerns
were difficulties in the pharmaceutical and automotive industries, which
significantly underperformed the market.
In the final three months of the fiscal year, growth stocks staged a solid
recovery. Investors were finally attracted by valuations that had reached low
levels -- especially considering the generally solid fundamental health and
favorable earnings prospects of many growth-oriented companies.
Strategy overview
Drawing on the expertise of a dedicated team of stock analysts, we streamlined
the portfolio during the period. Our goal was (and remains) to invest in a
smaller number of stocks in order to better focus our research and analysis on
what we consider the most attractive investment opportunities in the
growth-stock universe. Through a systematic investment process, we develop
computer models to test companies on a number of variables -- particularly
their quality, growth potential, and valuations. Once a stock is selected for
the fund's portfolio, it is regularly assessed to ensure that it continues to
meet our criteria. Using this disciplined, company-by-company approach, we
pared the fund's holdings down significantly during the period.
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Market sector performance
These indexes provide an overview of performance in different market sectors
for the 12 months ended 6/30/05.
- -----------------------------------------------------------------------------
Equities
- -----------------------------------------------------------------------------
Russell 3000 Growth Index (multi-cap growth stocks) 1.90%
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Russell Midcap Growth Index (midsize-company growth stocks) 10.86%
- -----------------------------------------------------------------------------
S&P 500/Barra Value Index (large-company value stocks) 11.18%
- -----------------------------------------------------------------------------
MSCI EAFE Index (international stocks) 13.65%
- -----------------------------------------------------------------------------
Bonds
- -----------------------------------------------------------------------------
Lehman Aggregate Bond Index (broad bond market) 6.80%
- -----------------------------------------------------------------------------
Lehman Government Bond Index (U.S. Treasury and agency securities) 6.65%
- -----------------------------------------------------------------------------
Citigroup World Government Bond Index (global government bonds) 7.61%
- -----------------------------------------------------------------------------
It is also important to note that your fund has a new benchmark, the Russell
3000 Growth Index. Putnam management believes that this index, which includes
companies of all sizes, is a better reflection of the fund's holdings than its
former benchmark, the Russell Midcap Growth Index, which measures the
performance of a more narrowly focused group of mid-cap stocks.
Your fund's holdings
Consumer stocks made solid contributions to performance during the period. In
the retail sector, American Eagle Outfitters, a retailer of casual clothing
for 15- to 25-year-olds, was a significant contributor. After delivering
sluggish earnings in 2003, American Eagle made several improvements to its
product line in order to appeal to its target customers. In 2004, the
company's sales grew 30% -- at a time when overall retail sales were weak as
consumers worried about job losses and rising energy prices. We chose this
stock because of its growth potential as well as its valuation, which we found
to be attractive in the wake of the company's struggling sales prior to 2004.
Also in the retail sector, Michael's Stores, Inc. bolstered the fund's
performance. This specialty retailer sells a wide range of arts, crafts,
framing, floral, decorative wall decor, and seasonal products to hobbyists and
do-it-yourself home decorators in the U.S. and Canada. The company has
benefited greatly from an aging population that enjoys doing home decorating
and crafts projects.
- -----------------------------------------------------------------------------
Comparison of top industry weightings
This chart shows how the fund's top weightings have changed over the last six
months. Weightings are shown as a percentage of net assets. Holdings will vary
over time.
[GRAPHIC OMITTED: horizontal bar chart COMPARISON OF TOP INDUSTRY WEIGHTINGS]
as of as of
12/31/04 6/30/05
Medical
technology 8.5% 10.4%
- ------------------------------------------------------------------------------
Retail 8.6% 8.7%
- ------------------------------------------------------------------------------
Software 11.4% 8.7%
- ------------------------------------------------------------------------------
Electronics 5.0% 7.0%
- ------------------------------------------------------------------------------
Pharmaceuticals 8.0% 6.2%
- ------------------------------------------------------------------------------
In the technology sector, Adobe Sys tems, a computer software company, was a
strong contributor to the fund's relative returns. Adobe's strong revenue
growth in 2004 was due in large part to the growing popularity of its products
among consumers and creative arts professionals. Its most successful products
include Adobe Acrobat[R] for creating PDF files and Adobe Photoshop for editing
digital photographs. In addition to its growth potential, we selected Adobe
for its quality -- it is a fundamentally strong company that generates a lot of
free cash flow. Autodesk, another software company, also helped the fund's
relative performance due to strong sales and earnings results. Auto desk is a
world-leader in computer-aided design and engineering products.
In another move that was beneficial, management reduced or eliminated certain
poor-performing stocks from the portfolio, such as Pfizer, Inc., which
declined after one of its products, Celebrex, was linked to heart problems. We
reduced the fund's holdings over several months and eliminated the position
before the period ended.
Another stock that detracted from performance was Career Education Corp.
This stock was highly volatile over the past year, in large part due to a
management scandal that hurt earnings and made investors skeptical about
the company's prospects. We reduced this holding before the period's end
but have not yet eliminated the position. Lexmark International, a
manufacturer of computer printers, also declined due to increased
competition from Hewlett Packard. We have reduced the fund's exposure to
this holding.
- ------------------------------------------------------------------------------
Top holdings
This table shows the fund's top holdings, and the percentage of the fund's net
assets that each comprised, as of 6/30/05. The fund's holdings will change
over time.
- ------------------------------------------------------------------------------
Holding (percent of fund's net assets) Industry
- ------------------------------------------------------------------------------
Johnson & Johnson (3.8%) Pharmaceuticals
- ------------------------------------------------------------------------------
Microsoft Corp. (3.5%) Software
- ------------------------------------------------------------------------------
Cisco Systems, Inc. (2.8%) Communications equipment
- ------------------------------------------------------------------------------
Procter & Gamble Co. (The) (2.7%) Consumer goods
- ------------------------------------------------------------------------------
Intel Corp. (2.3%) Electronics
- ------------------------------------------------------------------------------
UnitedHealth Group, Inc. (2.2%) Health-care services
- ------------------------------------------------------------------------------
Home Depot, Inc. (The) (2.0%) Retail
- ------------------------------------------------------------------------------
Black & Decker Manufacturing Co. (1.7%) Consumer cyclicals
- ------------------------------------------------------------------------------
Dell, Inc. (1.6%) Computers
- ------------------------------------------------------------------------------
St. Jude Medical, Inc. (1.6%) Medical technology
- ------------------------------------------------------------------------------
Finally, Home Depot detracted from the fund's relative performance due to
short-term concerns about a potential bubble in the housing market and
competition from Lowe's, a major competitor. However, we believe the stock has
been overlooked by investors. Management has bought back shares and reduced
capital spending, the company's growth rate has been solid, and we believe the
home-improvement business should remain strong, even if new home sales
decline.
Please note that all holdings discussed in this report are subject to review
in accordance with the fund's investment strategy and may vary in the future.
- ------------------------------------------------------------------------------
The outlook for your fund
The following commentary reflects anticipated developments that could affect
your fund over the next six months, as well as your management teams' plans
for responding to them.
With inflation under control, earnings are growing at a healthy pace, and
long-term interest rates remain at low levels. We consequently believe we may
see gains in the stock market over the next 6 to 12 months. In our opinion,
there are many healthy companies that have not seen the kind of stock price
gains we believe they deserve. We also believe many strong companies that have
seen some price appreciation may be poised for further increases. Having said
that, we remain mindful of certain headwinds that have held stocks back thus
far in 2005. These concerns include continued increases in short-term interest
rates, high energy prices, a potential bubble in the housing market, and the
effects of the federal trade and budget deficits on long-term interest rates.
As always, we will monitor economic and market conditions, adjusting the
portfolio to pursue opportunities as they arise.
The views expressed in this report are exclusively those of Putnam Management.
They are not meant as investment advice. The fund invests some or all of its
assets in small and/or midsize companies. Such investments increase the risk
of greater price fluctuations.
Your fund's performance
This section shows your fund's performance during its fiscal year, which ended
June 30, 2005. Performance should always be considered in light of a fund's
investment strategy. Data represents past performance. Past performance does
not guarantee 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. For the most recent month-end
performance, please visit www.putnam.com.
- ----------------------------------------------------------------------------------------
Fund performance
Total return for periods ended 6/30/05
- ----------------------------------------------------------------------------------------
Class A Class B Class C Class M Class R
(inception dates) (8/31/90) (3/1/93) (7/26/99) (12/1/94) (1/21/03)
- ----------------------------------------------------------------------------------------
NAV POP NAV CDSC NAV CDSC NAV POP NAV
- ----------------------------------------------------------------------------------------
Annual average
(life of fund) 14.04% 13.63% 13.21% 13.21% 13.19% 13.19% 13.45% 13.18% 13.77%
- ----------------------------------------------------------------------------------------
10 years 87.67 77.81 74.68 74.68 74.11 74.11 78.51 72.26 83.17
- ----------------------------------------------------------------------------------------
Annual average 6.50 5.92 5.74 5.74 5.70 5.70 5.97 5.59 6.24
- ----------------------------------------------------------------------------------------
5 years -50.65 -53.24 -52.43 -53.25 -52.48 -52.48 -51.86 -53.55 -51.23
- ----------------------------------------------------------------------------------------
Annual average -13.17 -14.10 -13.81 -14.11 -13.82 -13.82 -13.60 -14.22 -13.38
- ----------------------------------------------------------------------------------------
1 year 6.78 1.17 5.97 0.97 5.98 4.98 6.27 2.54 6.51
- ----------------------------------------------------------------------------------------
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 5.25% and 3.50%, respectively (which for class M shares does
not reflect a reduction in sales charges that went into effect on April 1,
2005; if this reduction had been in place for all periods indicated, returns
would have been higher). 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. Class R
shares have no initial sales charge or CDSC. Performance for class B, C, M,
and R shares before their inception is derived from the historical performance
of class A shares, adjusted for the applicable sales charge (or CDSC) and
higher operating expenses for such shares.
A 2% short-term trading fee may be applied to shares exchanged or sold within
5 days of purchase.
- ----------------------------------------------------------------------------
Change in the value of a $10,000 investment ($9,475 after sales charge)
Cumulative total return from 6/30/95 to 6/30/05
[GRAPHIC OMITTED: worm chart CHANGE IN THE VALUE OF A $10,000 INVESTMENT]
Putnam New
Opportunities Fund
class A shares Russell Midcap Russell 3000
at POP Growth Index Growth Index
- ----------------------------------------------------------------------------
6/30/95 9,475 10,000 10,000
6/30/96 13,770 12,359 12,767
6/30/97 14,357 14,533 16,408
6/30/98 19,059 18,024 21,264
6/30/99 22,454 21,685 26,703
6/30/00 36,034 32,222 33,608
6/30/01 20,503 22,068 21,743
6/30/02 13,797 16,256 16,006
6/30/03 14,015 17,451 16,452
6/30/04 16,652 22,220 19,548
6/30/05 $17,781 $24,634 $19,919
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 $17,468 and $17,411, 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 $17,851 ($17,226 at public offering price). A
$10,000 investment in the fund's class R shares would have been valued at
$18,317. See first page of performance section for performance calculation
method.
The Russell 3000 Growth Index has replaced the Russell Midcap Growth Index
because it more accurately reflects the types of securities generally held by
the fund.
- ----------------------------------------------------------------------------
Comparative index returns
For periods ended 6/30/05
- ----------------------------------------------------------------------------
Russell Midcap Russell 3000 Lipper Multi-Cap Growth
Growth Index Growth Index Funds category average*
- ----------------------------------------------------------------------------
Annual average
(life of fund) 12.08% 9.69% 11.40%
- ----------------------------------------------------------------------------
10 years 146.34 99.19 137.26
Annual average 9.43 7.13 8.46
- ----------------------------------------------------------------------------
5 years -23.55 -40.73 -32.05
Annual average -5.23 -9.93 -8.58
- ----------------------------------------------------------------------------
1 year 10.86 1.90 5.01
- ----------------------------------------------------------------------------
Index and Lipper results should be compared to fund performance at net asset
value.
* Over the 1-, 5-, and 10-year periods ended 6/30/05 there were 419, 247, and
73 funds, respectively, in this Lipper category.
- ----------------------------------------------------------------------------
Fund price and distribution* information
For the 12-month period ended 6/30/05
- ----------------------------------------------------------------------------
Class A Class B Class C Class M Class R
- ----------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP NAV
- ----------------------------------------------------------------------------
6/30/04 $38.96 $41.12 $35.34 $37.49 $36.83 $38.17 $38.85
- ----------------------------------------------------------------------------
6/30/05 41.60 43.91 37.45 39.73 39.14 40.45+ 41.38
- ----------------------------------------------------------------------------
* The fund made no distributions during the period.
+ Reflects a reduction in sales charges that took effect on April 1, 2005.
- ----------------------------------------------------------------------------
Your fund's expenses
As a mutual fund investor, you pay ongoing expenses, such as management fees,
distribution fees (12b-1 fees), and other expenses. Using the information
below, you can estimate how these expenses affect your investment and compare
them with the expenses of other funds. You may also pay one-time transaction
expenses, including sales charges (loads) and redemption fees, which are not
shown in this section and would have resulted in higher total expenses. For
more information, see your fund's prospectus or talk to your financial
advisor.
- ----------------------------------------------------------------------------
Review your fund's expenses
The table below shows the expenses you would have paid on a $1,000 investment
in Putnam New Opportunities Fund from January 1, 2005, to June 30, 2005. It
also shows how much a $1,000 investment would be worth at the close of the
period, assuming actual returns and expenses.
- ----------------------------------------------------------------------------
Class A Class B Class C Class M Class R
- ----------------------------------------------------------------------------
Expenses paid
per $1,000* $5.46 $9.17 $9.16 $7.93 $6.70
- ----------------------------------------------------------------------------
Ending value
(after expenses) $1,001.70 $998.10 $998.00 $999.50 $1,000.50
- ----------------------------------------------------------------------------
* Expenses for each share class are calculated using the fund's annualized
expense ratio for each class, which represents the ongoing expenses as a
percentage of net assets for the six months ended 6/30/05. The expense ratio
may differ for each share class (see the table at the bottom of the next
page). Expenses are calculated by multiplying the expense ratio by the average
account value for the period; then multiplying the result by the number of
days in the period; and then dividing that result by the number of days in the
year.
- ----------------------------------------------------------------------------
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended June 30,
2005, use the calculation method below. To find the value of your investment
on January 1, 2005, go to www.putnam.com and log on to your account. Click on
the "Transaction History" tab in your Daily Statement and enter 01/01/2005 in
both the "from" and "to" fields. Alternatively, call Putnam at 1-800-225-1581.
- ------------------------------------------------------------------------------
How to calculate the expenses you paid
- ------------------------------------------------------------------------------
Total
Value of your Expenses paid = expenses
investment on 1/1/05 [D] $1,000 x per $1,000 paid
- ------------------------------------------------------------------------------
Example Based on a $10,000 investment in class A shares of your fund.
- ------------------------------------------------------------------------------
$10,000 [D] $1,000 x $5.46 (see table above) = $54.60
- ------------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Compare expenses using the SEC's method
The Securities and Exchange Commission (SEC) has established guidelines to
help investors assess fund expenses. Per these guidelines, the table below
shows your fund's expenses based on a $1,000 investment, assuming a
hypothetical 5% annualized return. You can use this information to compare
the ongoing expenses (but not transaction expenses or total costs) of
investing in the fund with those of other funds. All mutual fund
shareholder reports will provide this information to help you make this
comparison. Please note that you cannot use this information to estimate
your actual ending account balance and expenses paid during the period.
- -------------------------------------------------------------------------------
Class A Class B Class C Class M Class R
- -------------------------------------------------------------------------------
Expenses paid per $1,000* $5.51 $9.25 $9.25 $8.00 $6.76
- -------------------------------------------------------------------------------
Ending value (after expenses) $1,019.34 $1,015.62 $1,015.62 $1,016.86 $1,018.10
- -------------------------------------------------------------------------------
* Expenses for each share class are calculated using the fund's annualized
expense ratio for each class, which represents the ongoing expenses as a
percentage of net assets for the six months ended 6/30/05. The expense
ratio may differ for each share class (see the table at the bottom of this
page). Expenses are calculated by multiplying the expense ratio by the
average account value for the period; then multiplying the result by the
number of days in the period; and then dividing that result by the number
of days in the year.
- ----------------------------------------------------------------------------
Compare expenses using industry averages
You can also compare your fund's expenses with the average of its peer
group, as defined by Lipper, an independent fund-rating agency that ranks
funds relative to others that Lipper considers to have similar investment
styles or objectives. The expense ratio for each share class shown below
indicates how much of your fund's net assets have been used to pay ongoing
expenses during the period.
- -------------------------------------------------------------------------------
Class A Class B Class C Class M Class R
- -------------------------------------------------------------------------------
Your fund's annualized
expense ratio+ 1.10% 1.85% 1.85% 1.60% 1.35%
- -------------------------------------------------------------------------------
Average annualized expense
ratio for Lipper peer group++ 1.57% 2.32% 2.32% 2.07% 1.82%
- -------------------------------------------------------------------------------
+ For the fund's most recent fiscal half year; may differ from expense
ratios based on one-year data in the financial highlights.
++ Simple average of the expenses of all front-end load funds in the
fund's Lipper peer group, calculated in accordance with Lipper's standard
method for comparing fund expenses (excluding 12b-1 fees and without
giving effect to any expense offset and brokerage service arrangements
that may reduce fund expenses). This average reflects each fund's
expenses for its most recent fiscal year available to Lipper as of
6/30/05. To facilitate comparison, Putnam has adjusted this average to
reflect the 12b-1 fees carried by each class of shares. The peer group
may include funds that are significantly smaller or larger than the fund,
which may limit the comparability of the fund's expenses to the simple
average, which typically is higher than the asset-weighted average.
Your fund's portfolio turnover
Putnam funds are actively managed by teams of experts who buy and sell
securities based on intensive analysis of companies, industries,
economies, and markets. Portfolio turnover is a measure of how often a
fund's managers buy and sell securities for your fund. A portfolio
turnover of 100%, for example, means that the managers sold and replaced
securities valued at 100% of a fund's assets within a one-year period.
Funds with high turnover may be more likely to generate capital gains and
dividends that must be distributed to shareholders as taxable income. High
turnover may also cause a fund to pay more brokerage commissions and other
transaction costs, which may detract from performance.
- ----------------------------------------------------------------------------
Turnover comparisons
Percentage of holdings that change every year
- -----------------------------------------------------------------
2005 2004 2003 2002 2001
- -----------------------------------------------------------------
Putnam New Opportunities Fund 97% 61% 42% 77% 68%
- -----------------------------------------------------------------
Lipper Multi-Cap Growth
Funds category average 150% 150% 177% 152% 180%
- -----------------------------------------------------------------
Turnover data for the fund is calculated based on the fund's fiscal-year
period, which ends on June 30. Turnover data for the fund's Lipper
category is calculated based on the average of the turnover of each fund
in the category for its fiscal year ended during the indicated year.
Fiscal years vary across funds in the Lipper category, which may limit the
comparability of the fund's portfolio turnover rate to the Lipper average.
Comparative data for 2005 is based on information available as of 6/30/05.
Your fund's risk
This risk comparison is designed to help you understand how your fund
compares with other funds. The comparison utilizes a risk measure
developed by Morningstar, an independent fund-rating agency. This risk
measure is referred to as the fund's Overall Morningstar Risk.
- ----------------------------------------------------------------------------
Your fund's Overall Morningstar Risk
Your fund's Overall Morningstar Risk is shown alongside that of the
average fund in its broad asset class, as determined by Morningstar. The
risk bar broadens the comparison by translating the fund's Overall
Morningstar Risk into a percentile, which is based on the fund's ranking
among all funds rated by Morningstar as of June 30, 2005. A higher Overall
Morningstar Risk generally indicates that a fund's monthly returns have
varied more widely.
[GRAPHIC OMITTED: chart MORNINGSTAR RISK]
Fund's Overall
Morningstar Risk 5.84
U.S. stock
fund average 3.10
0% INCREASING RISK 100%
Morningstar determines a fund's Overall Morningstar Risk by assessing
variations in the fund's monthly returns -- with an emphasis on downside
variations -- over 3-, 5-, and 10-year periods, if available. Those
measures are weighted and averaged to produce the fund's Overall
Morningstar Risk. The information shown is provided for the fund's class A
shares only; information for other classes may vary. Overall Morningstar
Risk is based on historical data and does not indicate future results.
Morningstar does not purport to measure the risk associated with a current
investment in a fund, either on an absolute basis or on a relative basis.
Low Overall Morningstar Risk does not mean that you cannot lose money on
an investment in a fund. Copyright 2004 Morningstar, Inc. All Rights
Reserved. The information contained herein (1) is proprietary to
Morningstar and/or its content providers; (2) may not be copied or
distributed; and (3) is not warranted to be accurate, complete, or timely.
Neither Morningstar nor its content providers are responsible for any
damages or losses arising from any use of this information.
Your fund's management
Your fund is managed by the members of the Putnam Mid-Cap Growth and Small
and Emerging Growth teams. Kevin Divney is the Portfolio Leader and Brian
DeChristopher and Richard Weed are Portfolio Members of your fund. The
Portfolio Leader and Portfolio Members coordinate the teams' management of
the fund.
For a complete listing of the members of the Putnam Mid-Cap Growth and
Small and Emerging Growth teams, including those who are not Portfolio
Leaders or Portfolio Members of your fund, visit Putnam's Individual
Investor Web site at www.putnam.com.
- ----------------------------------------------------------------------------
Fund ownership by the Portfolio Leader and Portfolio Members
The table below shows how much the fund's current Portfolio Leader and
Portfolio Members have invested in the fund (in dollar ranges).
Information shown is as of June 30, 2005, and June 30, 2004.
- -----------------------------------------------------------------------------------------------------------------
$1 - $10,001 - $50,001 - $100,001 - $500,001 - $1,000,001
Year $0 $10,000 $50,000 $100,000 $500,000 $1,000,000 and over
- -----------------------------------------------------------------------------------------------------------------
Kevin Divney 2005 *
- -----------------------------------------------------------------------------------------------------------------
Portfolio Leader N/A
- -----------------------------------------------------------------------------------------------------------------
Brian DeChristopher N/A
- -----------------------------------------------------------------------------------------------------------------
Portfolio Member N/A
- -----------------------------------------------------------------------------------------------------------------
Richard Weed 2005 *
- -----------------------------------------------------------------------------------------------------------------
Portfolio Member 2004 *
- -----------------------------------------------------------------------------------------------------------------
N/A indicates the individual became a Portfolio Leader or Portfolio Member after the reporting date.
- ----------------------------------------------------------------------------
Fund manager compensation
The total 2004 fund manager compensation that is attributable to your fund
is approximately $2,800,000. This amount includes a portion of 2004
compensation paid by Putnam Management to the fund managers assigned to
the fund as of June 30, 2005, for their portfolio management
responsibilities, calculated based on the fund assets they manage taken as
a percentage of the total assets they manage. The compensation amount also
includes a portion of the 2004 compensation paid to the Chief Investment
Officers of the team and the Group Chief Investment Officer of the fund's
broader investment category for their oversight responsibilities,
calculated based on the fund assets they oversee taken as a percentage of
the total assets they oversee. This amount does not include compensation
of other personnel involved in research, trading, administration, systems,
compliance, or fund operations; nor does it include non-compensation
costs. These percentages are determined as of the fund's fiscal
period-end. For personnel who joined Putnam Management during or after
2004, the calculation reflects annualized 2004 compensation or an estimate
of 2005 compensation, as applicable. The calculation does not reflect
compensation of individuals who became portfolio team members after the
fiscal period-end.
- ----------------------------------------------------------------------------
Other Putnam funds managed by the Portfolio Leader and Portfolio Members
Kevin Divney is also a Portfolio Leader of Putnam Vista Fund.
Brian DeChristopher is also a Portfolio Member of Putnam Vista Fund.
Richard Weed is also a Portfolio Leader of Putnam Discovery Growth Fund,
Putnam OTC & Emerging Growth Fund, and Putnam Small Cap Growth Fund.
Kevin Divney, Brian DeChristopher, and Richard Weed may also manage other
accounts and variable trust funds advised by Putnam Management or an
affiliate.
- ----------------------------------------------------------------------------
Changes in your fund's Portfolio Leader and Portfolio Members
During the year ended June 30, 2005, your fund's management teams shifted
from the Putnam Large-Cap Growth and Specialty Growth teams to the Mid-Cap
Growth and Small and Emerging Growth teams. Consequently, Kevin Divney
became a Portfolio Leader of your fund. In addition, Portfolio Leader Dan
Miller and Portfolio Members Kevin Doerr and Brian O'Toole left your
fund's management team. Shortly after the close of the period, Brian
DeChristopher became a Portfolio Member of your fund, following the
departure of Portfolio Leader Paul Marrkand.
- ----------------------------------------------------------------------------
Fund ownership by Putnam's Executive Board
The table below shows how much the members of Putnam's Executive Board
have invested in the fund (in dollar ranges). Information shown is as of
June 30, 2005, and June 30, 2004.
- -----------------------------------------------------------------------------------------
$1 - $10,001 - $50,001 - $100,001
Year $0 $10,000 $50,000 $100,000 and over
- -----------------------------------------------------------------------------------------
Philippe Bibi 2005 *
- -----------------------------------------------------------------------------------------
Chief Technology Officer 2004 *
- -----------------------------------------------------------------------------------------
John Boneparth 2005 *
- -----------------------------------------------------------------------------------------
Head of Global Institutional Mgmt 2004 *
- -----------------------------------------------------------------------------------------
Joshua Brooks 2005 *
- -----------------------------------------------------------------------------------------
Deputy Head of Investments N/A
- -----------------------------------------------------------------------------------------
Kevin Cronin 2005 *
- -----------------------------------------------------------------------------------------
Head of Investments 2004 *
- -----------------------------------------------------------------------------------------
Charles Haldeman, Jr. 2005 *
- -----------------------------------------------------------------------------------------
President and CEO 2004 *
- -----------------------------------------------------------------------------------------
Amrit Kanwal 2005 *
- -----------------------------------------------------------------------------------------
Chief Financial Officer 2004 *
- -----------------------------------------------------------------------------------------
Steven Krichmar 2005 *
- -----------------------------------------------------------------------------------------
Chief of Operations 2004 *
- -----------------------------------------------------------------------------------------
Francis McNamara, III 2005 *
- -----------------------------------------------------------------------------------------
General Counsel 2004 *
- -----------------------------------------------------------------------------------------
Richard Monaghan 2005 *
- -----------------------------------------------------------------------------------------
Head of Retail Management 2004 *
- -----------------------------------------------------------------------------------------
Richard Robie, III 2005 *
- -----------------------------------------------------------------------------------------
Chief Administrative Officer 2004 *
- -----------------------------------------------------------------------------------------
Edward Shadek 2005 *
- -----------------------------------------------------------------------------------------
Deputy Head of Investments N/A
- -----------------------------------------------------------------------------------------
N/A indicates the individual was not a member of Putnam's Executive Board as of 6/30/04.
Terms and definitions
- ----------------------------------------------------------------------------
Important terms
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. NAV
is calculated by dividing the net assets of each class of shares by the
number of outstanding shares in the class.
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 5.25% maximum sales charge for class A
shares and 3.50% for class M shares (since reduced to 3.25%).
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.
- ----------------------------------------------------------------------------
Share classes
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).
Class R shares are not subject to an initial sales charge or CDSC and are
available only to certain defined contribution plans.
- ----------------------------------------------------------------------------
Comparative indexes
Citigroup World Government Bond Index is an unmanaged index of global
investment-grade fixed-income securities.
Lehman Aggregate Bond Index is an unmanaged index of U.S. investment-grade
fixed-income securities.
Lehman Government Bond Index is an unmanaged index of U.S. Treasury and
agency securities.
Morgan Stanley Capital International (MSCI) EAFE Index is an unmanaged
index of equity securities from developed countries in Western Europe, the
Far East, and Australasia.
Russell 3000 Growth Index is an unmanaged index of those companies in the
broad-market Russell 3000 Index chosen for their growth orientation.
Russell Midcap Growth Index is an unmanaged index of those companies in
the Russell Midcap Index chosen for their growth orientation.
S&P 500/Barra Value Index is an unmanaged capitalization-weighted index of
large-cap stocks chosen for their value orientation.
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.
Lipper is a third-party industry ranking entity that ranks funds (without
sales charges) with similar current investment styles or objectives as
determined by Lipper. Lipper category averages reflect performance trends
for funds within a category and are based on total return at net asset
value.
Trustee approval of management contract
- ----------------------------------------------------------------------------
General conclusions
The Board of Trustees of the Putnam funds oversees the management of each
fund and, as required by law, determines annually whether to approve the
continuance of your fund's management contract with Putnam Management. In
this regard, the Board of Trustees, with the assistance of its Contract
Committee consisting solely of Trustees who are not "interested persons"
(as such term is defined in the Investment Company Act of 1940, as
amended) of the Putnam funds (the "Independent Trustees"), requests and
evaluates all information it deems reasonably necessary under the
circumstances. Over the course of several months beginning in March and
ending in June 2005, the Contract Committee met five times to consider the
information provided by Putnam Management and other information developed
with the assistance of the Board's independent counsel and independent
staff. The Contract Committee reviewed and discussed key aspects of this
information with all of the Independent Trustees. Upon completion of this
review, the Contract Committee recommended and the Independent Trustees
approved the continuance of your fund's management contract, effective
July 1, 2005.
This approval was based on the following conclusions:
* That the fee schedule currently in effect for your fund represents
reasonable compensation in light of the nature and quality of the services
being provided to the fund, the fees paid by competitive funds and the
costs incurred by Putnam Management in providing such services, and
* That such fee schedule represents an appropriate sharing between fund
shareholders and Putnam Management of such economies of scale as may exist
in the management of the fund at current asset levels.
These conclusions were based on a comprehensive consideration of all
information provided to the Trustees and were not the result of any single
factor. Some of the factors that figured particularly in the Trustees'
deliberations and how the Trustees considered these factors are described
below, although individual Trustees may have evaluated the information
presented differently, giving different weights to various factors. It is
also important to recognize that the fee arrangements for your fund and
the other Putnam funds are the result of many years of review and
discussion between the Independent Trustees and Putnam Management, that
certain aspects of such arrangements may receive greater scrutiny in some
years than others, and that the Trustees' conclusions may be based, in
part, on their consideration of these same arrangements in prior years.
- ----------------------------------------------------------------------------
Model fee schedules and categories; total expenses
The Trustees' review of the management fees and total expenses of the
Putnam funds focused on three major themes:
* Consistency. The Trustees, working in cooperation with Putnam
Management, have developed and implemented a series of model fee schedules
for the Putnam funds designed to ensure that each fund's management fee is
consistent with the fees for similar funds in the Putnam family of funds
and compares favorably with fees paid by competitive funds sponsored by
other investment advisers. Under this approach, each Putnam fund is
assigned to one of several fee categories based on a combination of
factors, including competitive fees and perceived difficulty of
management, and a common fee schedule is implemented for all funds in a
given fee category. The Trustees reviewed the model fee schedule currently
in effect for your fund, including fee levels and breakpoints, and the
assignment of the fund to a particular fee category under this structure.
("Breakpoints" refer to reductions in fee rates that apply to additional
assets once specified asset levels are reached.) The Trustees concluded
that no changes should be made in the fund's current fee schedule at this
time.
* Competitiveness. The Trustees also reviewed comparative fee and expense
information for competitive funds, which indicated that, in a custom peer
group of competitive funds selected by Lipper Inc., your fund ranked in
the 7th percentile in management fees and in the 7th percentile in total
expenses (less any applicable 12b-1 fees) as of December 31, 2004 (the
first percentile being the least expensive funds and the 100th percentile
being the most expensive funds). The Trustees noted that expense ratios
for a number of Putnam funds, which show the percentage of fund assets
used to pay for management and administrative services, distribution
(12b-1) fees and other expenses, had been increasing recently as a result
of declining net assets and the natural operation of fee breakpoints. They
noted that such expense ratio increases were currently being controlled by
expense limitations implemented in January 2004 and which Putnam
Management, in consultation with the Contract Committee, has committed to
maintain at least through 2006. The Trustees expressed their intention to
monitor this information closely to ensure that fees and expenses of the
Putnam funds continue to meet evolving competitive standards.
* Economies of scale. The Trustees concluded that the fee schedule
currently in effect for your fund represents an appropriate sharing of
economies of scale at current asset levels. Your fund currently has the
benefit of breakpoints in its management fee that provide shareholders
with significant economies of scale, which means that the effective
management fee rate of a fund (as a percentage of fund assets) declines as
a fund grows in size and crosses specified asset thresholds. The Trustees
examined the existing breakpoint structure of the funds' management fees
in light of competitive industry practices. The Trustees considered
various possible modifications to the current breakpoint structure, but
ultimately concluded that the current breakpoint structure continues to
serve the interests of fund shareholders. Accordingly, the Trustees
continue to believe that the fee schedules currently in effect for the
funds represent an appropriate sharing of economies of scale at current
asset levels. The Trustees noted that significant redemptions in many
Putnam funds, together with significant changes in the cost structure of
Putnam Management, have altered the economics of Putnam Management's
business in significant ways. In view of these changes, the Trustees
intend to consider whether a greater sharing of the economies of scale by
fund shareholders would be appropriate if and when aggregate assets in the
Putnam funds begin to experience meaningful growth.
In connection with their review of the management fees and total expenses
of the Putnam funds, the Trustees also reviewed the costs of the services
to be provided and profits to be realized by Putnam Management and its
affiliates from the relationship with the funds. This information included
trends in revenues, expenses and profitability of Putnam Management and
its affiliates relating to the investment management and distribution
services provided to the funds. In this regard, the Trustees also reviewed
an analysis of Putnam Management's revenues, expenses and profitability
with respect to the funds' management contracts, allocated on a
fund-by-fund basis.
- ----------------------------------------------------------------------------
Investment performance
The quality of the investment process provided by Putnam Management
represented a major factor in the Trustees' evaluation of the quality of
services provided by Putnam Management under your fund's management
contract. The Trustees were assisted in their review of the funds'
investment process and performance by the work of the Investment Oversight
Committees of the Trustees, which meet on a regular monthly basis with the
funds' portfolio teams throughout the year. The Trustees concluded that
Putnam Management generally provides a high quality investment process -
as measured by the experience and skills of the individuals assigned to
the management of fund portfolios, the resources made available to such
personnel, and in general the ability of Putnam Management to attract and
retain high-quality personnel - but also recognize that this does not
guarantee favorable investment results for every fund in every time
period. The Trustees considered the investment performance of each fund
over multiple time periods and considered information comparing the fund's
performance with various benchmarks and with the performance of
competitive funds. The Trustees noted the satisfactory investment
performance of many Putnam funds. They also noted the disappointing
investment performance of certain funds in recent years and continued to
discuss with senior management of Putnam Management the factors
contributing to such underperformance and actions being taken to improve
performance. The Trustees recognized that, in recent years, Putnam
Management has made significant changes in its investment personnel and
processes and in the fund product line to address areas of
underperformance. The Trustees indicated their intention to continue to
monitor performance trends to assess the effectiveness of these changes
and to evaluate whether additional remedial changes are warranted.
In the case of your fund, the Trustees considered that your fund's Class A
share performance at net asset value was in the following percentiles of
its Lipper Inc. peer group for the one-, three- and five-year periods
ended December 31, 2004 (the first percentile being the best performing
funds and the 100th percentile being the worst performing funds):
One-year period Three-year period Five-year period
- ----------------------------------------------------------------------------
56th 64th 81st
(Because of the passage of time, these performance results may differ from
the performance results for more recent periods shown elsewhere in this
report.) The Trustees noted the disappointing performance for your fund
for the five-year period ended December 31, 2004. In this regard, the
Trustees considered that, over the last year, Putnam Management has
clarified the fund's investment philosophy and made changes to the
investment team. In addition, the fund has adopted a redesigned investment
process which incorporates a blend of quantitative techniques and
fundamental analysis.
As a general matter, the Trustees believe that cooperative efforts between
the Trustees and Putnam Management represent the most effective way to
address investment performance problems. The Trustees believe that
investors in the Putnam funds have, in effect, placed their trust in the
Putnam organization, under the oversight of the funds' Trustees, to make
appropriate decisions regarding the management of the funds. Based on the
responsiveness of Putnam Management in the recent past to Trustee concerns
about investment performance, the Trustees believe that it is preferable
to seek change within Putnam Management to address performance
shortcomings. In the Trustees' view, the alternative of terminating a
management contract and engaging a new investment adviser for an
underperforming fund would entail significant disruptions and would not
provide any greater assurance of improved investment performance.
- ----------------------------------------------------------------------------
Brokerage and soft-dollar allocations; other benefits
The Trustees considered various potential benefits that Putnam Management
may receive in connection with the services it provides under the
management contract with your fund. These include principally benefits
related to brokerage and soft-dollar allocations, whereby a portion of the
commissions paid by a fund for brokerage is earmarked to pay for research
services that may be utilized by a fund's investment adviser. The Trustees
believe that soft-dollar credits and other potential benefits associated
with the allocation of fund brokerage, which pertains mainly to funds
investing in equity securities, represent assets of the funds that should
be used for the benefit of fund shareholders. This area has been marked by
significant change in recent years. In July 2003, acting upon the Contract
Committee's recommendation, the Trustees directed that allocations of
brokerage to reward firms that sell fund shares be discontinued no later
than December 31, 2003. In addition, commencing in 2004, the allocation of
brokerage commissions by Putnam Management to acquire research services
from third-party service providers has been significantly reduced, and
continues at a modest level only to acquire research that is customarily
not available for cash. The Trustees will continue to monitor the
allocation of the funds' brokerage to ensure that the principle of "best
price and execution" remains paramount in the portfolio trading process.
The Trustees' annual review of your fund's management contract also
included the review of its distributor's contract and distribution plan
with Putnam Retail Management Limited Partnership and the custodian
agreement and investor servicing agreement with Putnam Fiduciary Trust
Company, all of which provide benefits to affiliates of Putnam Management.
- ----------------------------------------------------------------------------
Comparison of retail and institutional fee schedules
The information examined by the Trustees as part of their annual contract
review has included for many years information regarding fees charged by
Putnam Management and its affiliates to institutional clients such as
defined benefit pension plans, college endowments, etc. This information
included comparison of such fees with fees charged to the funds, as well
as a detailed assessment of the differences in the services provided to
these two types of clients. The Trustees observed, in this regard, that
the differences in fee rates between institutional clients and the mutual
funds are by no means uniform when examined by individual asset sectors,
suggesting that differences in the pricing of investment management
services to these types of clients reflect to a substantial degree
historical competitive forces operating in separate market places. The
Trustees considered the fact that fee rates across all asset sectors are
higher on average for mutual funds than for institutional clients, as well
as the differences between the services that Putnam Management provides to
the Putnam funds and those that it provides to institutional clients of
the firm, but have not relied on such comparisons to any significant
extent in concluding that the management fees paid by your fund are
reasonable.
Other information for shareholders
- ----------------------------------------------------------------------------
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.
- ----------------------------------------------------------------------------
Proxy voting
Putnam is committed to managing our mutual funds in the best interests of
our shareholders. The Putnam funds' proxy voting guidelines and
procedures, as well as information regarding how your fund voted proxies
relating to portfolio securities during the 12-month period ended June 30,
2005, are available on the Putnam Individual Investor Web site,
www.putnam.com/individual, and on the SEC's Web site, www.sec.gov. If you
have questions about finding forms on the SEC's Web site, you may call the
SEC at 1-800-SEC-0330. You may also obtain the Putnam funds' proxy voting
guidelines and procedures at no charge by calling Putnam's Shareholder
Services at 1-800-225-1581.
- ----------------------------------------------------------------------------
Fund portfolio holdings
The fund will file a complete schedule of its portfolio holdings with the
SEC for the first and third quarters of each fiscal year on Form N-Q.
Shareholders may obtain the fund's Forms N-Q on the SEC's Web site at
www.sec.gov. In addition, the fund's Forms N-Q may be reviewed and copied
at the SEC's public reference room in Washington, D.C. You may call the
SEC at 1-800-SEC-0330 for information about the SEC's Web site or the
operation of the public reference room.
Financial statements
- ----------------------------------------------------------------------------
A guide to the financial statements
These sections of the report, as well as the accompanying Notes, preceded
by the Report of Independent Registered Public Accounting Firm, 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 the fund's net investment gain or loss, 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 Registered Public Accounting Firm
To the Trustees and Shareholders of
Putnam New Opportunities Fund
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
Opportunities Fund (the "fund") at June 30, 2005, and the results of its
operations, the changes in its net assets and the financial highlights for
each of 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 the standards of the Public Company Accounting
Oversight Board (United States). Those standards 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,
2005, by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 9, 2005
The fund's portfolio 6/30/05
- ----------------------------------------------------------------------------------------------------------------------
COMMON STOCKS (100.5%)*
- ----------------------------------------------------------------------------------------------------------------------
Shares Value
- ----------------------------------------------------------------------------------------------------------------------
Aerospace and Defense (0.7%)
Raytheon Co. 596,200 $23,323,344
Rockwell Collins, Inc. 403,900 19,257,952
42,581,296
- ----------------------------------------------------------------------------------------------------------------------
Banking (1.2%)
TCF Financial Corp. 529,800 13,711,224
UnionBanCal Corp. 314,600 21,053,032
Westcorp 177,800 9,320,276
Zions Bancorp. 387,800 28,514,934
72,599,466
- ----------------------------------------------------------------------------------------------------------------------
Beverage (0.3%)
Pepsi Bottling Group, Inc. (The) 620,500 17,752,505
- ----------------------------------------------------------------------------------------------------------------------
Biotechnology (2.8%)
Affymetrix, Inc. + 297,900 16,065,747
Amgen, Inc. + 1,002,700 60,623,242
Celgene Corp. + 434,600 17,718,642
Connetics Corp. + 417,400 7,362,936
Genzyme Corp. + 896,400 53,864,676
Invitrogen Corp. + 178,800 14,892,252
170,527,495
- ----------------------------------------------------------------------------------------------------------------------
Broadcasting (0.6%)
XM Satellite Radio Holdings, Inc. Class A + 1,145,920 38,571,667
- ----------------------------------------------------------------------------------------------------------------------
Building Materials (0.3%)
Sherwin Williams Co. 345,900 16,288,431
- ----------------------------------------------------------------------------------------------------------------------
Chemicals (0.3%)
PPG Industries, Inc. 273,800 17,183,688
- ----------------------------------------------------------------------------------------------------------------------
Coal (0.4%)
CONSOL Energy, Inc. 399,400 21,399,852
- ----------------------------------------------------------------------------------------------------------------------
Commercial and Consumer Services (1.4%)
Administaff, Inc. 23,800 565,487
Corporate Executive Board Co. (The) 715,500 56,045,115
Google, Inc. Class A + 94,600 27,826,590
84,437,192
- ----------------------------------------------------------------------------------------------------------------------
Communications Equipment (4.9%)
Cisco Systems, Inc. + 8,795,300 168,078,183
F5 Networks, Inc. + 346,700 16,376,375
Harris Corp. 1,683,700 52,548,277
Nokia OYJ ADR (Finland) 1,379,900 22,961,536
Scientific-Atlanta, Inc. 991,500 32,987,205
Tellabs, Inc. + 375,800 3,269,460
296,221,036
- ----------------------------------------------------------------------------------------------------------------------
Computers (4.9%)
Anixter International, Inc. + 521,300 19,376,721
Apple Computer, Inc. + 1,018,300 37,483,623
Dell, Inc. + 2,486,000 98,221,860
Lexmark International, Inc. Class A + 291,300 18,884,979
Micros Systems, Inc. + 590,400 26,420,400
NCR Corp. + 418,300 14,690,696
Network Appliance, Inc. + 1,716,700 48,531,109
Take-Two Interactive Software, Inc. + 333,750 8,493,938
Western Digital Corp. + 1,451,600 19,480,472
291,583,798
- ----------------------------------------------------------------------------------------------------------------------
Conglomerates (0.5%)
Danaher Corp. 374,300 19,590,862
Textron, Inc. 146,100 11,081,685
30,672,547
- ----------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals (2.2%)
Black & Decker Manufacturing Co. 1,142,200 102,626,670
Harman International Industries, Inc. 327,000 26,604,720
129,231,390
- ----------------------------------------------------------------------------------------------------------------------
Consumer Finance (2.2%)
Capital One Financial Corp. 849,800 67,992,498
Countrywide Financial Corp. 704,300 27,193,023
First Marblehead Corp. (The) + 36,054 1,264,053
Providian Financial Corp. + 1,966,500 34,669,395
131,118,969
- ----------------------------------------------------------------------------------------------------------------------
Consumer Goods (4.1%)
Energizer Holdings, Inc. + 822,000 51,103,740
Newell Rubbermaid, Inc. 413,300 9,853,072
Procter & Gamble Co. (The) 3,112,900 164,205,475
Weight Watchers International, Inc. + 290,000 14,966,900
Yankee Candle Co., Inc. (The) 206,800 6,638,280
246,767,467
- ----------------------------------------------------------------------------------------------------------------------
Consumer Services (1.9%)
Alliance Data Systems Corp. + 1,248,200 50,626,992
Getty Images, Inc. + 684,100 50,801,266
Labor Ready, Inc. + 81,700 1,904,427
Valueclick, Inc. + 1,081,600 13,336,128
116,668,813
- ----------------------------------------------------------------------------------------------------------------------
Distributors (0.2%)
Hughes Supply, Inc. 389,400 10,942,140
- ----------------------------------------------------------------------------------------------------------------------
Electrical Equipment (0.4%)
WESCO International, Inc. + 740,240 23,228,731
- ----------------------------------------------------------------------------------------------------------------------
Electronics (7.0%)
Amphenol Corp. Class A 564,100 22,659,897
Arrow Electronics, Inc. + 387,400 10,521,784
Atmel Corp. + 4,579,300 10,852,941
Freescale Semiconductor, Inc. Class A + 914,100 19,205,241
Intel Corp. 5,322,300 138,699,138
International Rectifier Corp. + 366,400 17,484,608
Linear Technology Corp. 1,659,000 60,868,710
Microchip Technology, Inc. 505,800 14,981,796
Motorola, Inc. 2,250,400 41,092,304
National Semiconductor Corp. 535,900 11,805,877
SanDisk Corp. + 1,441,700 34,211,541
Storage Technology Corp. + 574,500 20,848,605
Texas Instruments, Inc. 679,900 19,084,793
422,317,235
- ----------------------------------------------------------------------------------------------------------------------
Energy (1.1%)
CAL Dive International, Inc. + 372,900 19,528,773
Cooper Cameron Corp. + 325,700 20,209,685
Superior Energy Services + 627,900 11,176,620
Unit Corp. + 339,100 14,923,791
65,838,869
- ----------------------------------------------------------------------------------------------------------------------
Entertainment (0.5%)
Pixar, Inc. + 601,200 30,090,060
- ----------------------------------------------------------------------------------------------------------------------
Financial (1.8%)
American Express Co. 389,600 20,738,408
Chicago Mercantile Exchange Holdings, Inc. (The) 98,500 29,106,750
First American Corp. 47,300 1,898,622
Moody's Corp. 1,228,000 55,210,880
106,954,660
- ----------------------------------------------------------------------------------------------------------------------
Food (0.2%)
7-Eleven, Inc. + 463,800 14,025,312
- ----------------------------------------------------------------------------------------------------------------------
Forest Products and Packaging (0.2%)
Crown Holdings, Inc. + 765,000 10,885,950
- ----------------------------------------------------------------------------------------------------------------------
Gaming & Lottery (1.1%)
Ameristar Casinos, Inc. 800,800 20,892,872
Boyd Gaming Corp. 351,700 17,982,421
GTECH Holdings Corp. 836,000 24,444,640
63,319,933
- ----------------------------------------------------------------------------------------------------------------------
Health Care Services (5.1%)
AmerisourceBergen Corp. 275,200 19,030,080
Coventry Health Care, Inc. + 276,800 19,583,600
Laboratory Corp. of America Holdings + 267,100 13,328,290
Lincare Holdings, Inc. + 551,300 22,515,092
McKesson Corp. 481,400 21,561,906
PacifiCare Health Systems, Inc. + 246,300 17,598,135
UnitedHealth Group, Inc. 2,493,000 129,985,020
VCA Antech, Inc. + 224,800 5,451,400
WellPoint, Inc. + 809,700 56,387,508
305,441,031
- ----------------------------------------------------------------------------------------------------------------------
Homebuilding (1.7%)
KB Home 212,200 16,176,006
NVR, Inc. + 102,500 83,025,000
99,201,006
- ----------------------------------------------------------------------------------------------------------------------
Insurance (2.1%)
Everest Re Group, Ltd. (Barbados) 453,900 42,212,700
Genworth Financial, Inc. Class A 496,300 15,003,149
Selective Insurance Group 294,800 14,607,340
W.R. Berkley Corp. 1,093,950 39,032,136
Zenith National Insurance Corp. 181,200 12,296,232
123,151,557
- ----------------------------------------------------------------------------------------------------------------------
Investment Banking/Brokerage (2.3%)
Bear Stearns Cos., Inc. (The) 462,400 48,061,856
Eaton Vance Corp. 587,800 14,054,298
Goldman Sachs Group, Inc. (The) 360,300 36,757,806
Lazard, Ltd. Class A (Bermuda) + 656,000 15,252,000
Lehman Brothers Holdings, Inc. 258,800 25,693,664
139,819,624
- ----------------------------------------------------------------------------------------------------------------------
Leisure (0.6%)
Brunswick Corp. 297,600 12,892,032
Polaris Industries, Inc. 394,500 21,303,000
34,195,032
- ----------------------------------------------------------------------------------------------------------------------
Lodging/Tourism (0.2%)
Choice Hotels International, Inc. 181,200 11,904,840
- ----------------------------------------------------------------------------------------------------------------------
Machinery (0.8%)
Cummins, Inc. 247,400 18,458,514
Terex Corp. + 306,800 12,087,920
Timken Co. 816,400 18,858,840
49,405,274
- ----------------------------------------------------------------------------------------------------------------------
Manufacturing (0.3%)
Mettler-Toledo International, Inc. (Switzerland) + 433,000 20,169,140
- ----------------------------------------------------------------------------------------------------------------------
Medical Technology (10.4%)
Bausch & Lomb, Inc. 299,400 24,850,200
Becton, Dickinson and Co. 584,400 30,663,468
Biomet, Inc. 1,118,300 38,737,912
C.R. Bard, Inc. 1,049,700 69,815,547
Charles River Laboratories International, Inc. + 1,008,300 48,650,475
Dade Behring Holdings, Inc. 347,300 22,577,973
Gen-Probe, Inc. + 362,642 13,138,520
Haemonetics Corp. + 593,800 24,132,032
Immucor, Inc. + 511,400 14,805,030
Kinetic Concepts, Inc. + 664,500 39,870,000
Medtronic, Inc. 1,207,400 62,531,246
Respironics, Inc. + 1,490,000 53,803,900
St. Jude Medical, Inc. + 2,159,500 94,175,795
Sybron Dental Specialties, Inc. + 320,400 12,053,448
Varian Medical Systems, Inc. + 1,608,700 60,052,771
Waters Corp. + 348,100 12,938,877
622,797,194
- ----------------------------------------------------------------------------------------------------------------------
Metals (1.2%)
AK Steel Holding Corp. + 1,638,400 10,502,144
Century Aluminum Co. + 390,200 7,960,080
Nucor Corp. 314,800 14,361,176
Phelps Dodge Corp. 300,800 27,824,000
Steel Dynamics, Inc. 477,000 12,521,250
73,168,650
- ----------------------------------------------------------------------------------------------------------------------
Oil & Gas (3.6%)
Amerada Hess Corp. 257,400 27,415,674
Burlington Resources, Inc. 927,500 51,235,100
Noble Energy, Inc. 268,600 20,319,590
Oil States International, Inc. + 442,400 11,135,208
Southwestern Energy Co. + 280,400 13,173,192
Sunoco, Inc. 375,300 42,664,104
Tesoro Petroleum Corp. 473,500 22,027,220
Valero Energy Corp. 314,100 24,848,451
212,818,539
- ----------------------------------------------------------------------------------------------------------------------
Pharmaceuticals (6.2%)
Barr Pharmaceuticals, Inc. + 856,150 41,728,751
Caremark Rx, Inc. + 774,600 34,485,192
Cephalon, Inc. + 1,147,100 45,666,051
Johnson & Johnson 3,454,400 224,536,000
Medicis Pharmaceutical Corp. Class A 212,300 6,736,279
Mylan Laboratories, Inc. 958,300 18,437,692
371,589,965
- ----------------------------------------------------------------------------------------------------------------------
Railroads (0.4%)
Canadian National Railway Co. (Canada) 461,100 26,582,415
- ----------------------------------------------------------------------------------------------------------------------
Restaurants (0.8%)
CEC Entertainment, Inc. + 613,400 25,818,006
Darden Restaurants, Inc. 605,300 19,962,794
45,780,800
- ----------------------------------------------------------------------------------------------------------------------
Retail (8.7%)
Abercrombie & Fitch Co. Class A 219,200 15,059,040
Advance Auto Parts, Inc. + 449,400 29,008,770
Aeropostale, Inc. + 958,100 32,192,160
American Eagle Outfitters, Inc. 2,365,100 72,490,315
Best Buy Co., Inc. 514,301 35,255,299
Coach, Inc. + 714,000 23,968,980
Coldwater Creek, Inc. + 796,850 19,849,534
Home Depot, Inc. (The) 3,088,800 120,154,320
Michaels Stores, Inc. 1,770,000 73,224,900
Pantry, Inc. (The) + 404,800 15,677,904
PETCO Animal Supplies, Inc. + 778,300 22,819,756
Staples, Inc. 2,950,050 62,895,066
522,596,044
- ----------------------------------------------------------------------------------------------------------------------
Schools (1.3%)
Apollo Group, Inc. Class A + 584,100 45,688,302
Career Education Corp. + 657,959 24,087,879
ITT Educational Services, Inc. + 166,000 8,867,720
78,643,901
- ----------------------------------------------------------------------------------------------------------------------
Semiconductor (0.4%)
Lam Research Corp. + 654,800 18,949,912
Photronics, Inc. + 289,800 6,763,932
25,713,844
- ----------------------------------------------------------------------------------------------------------------------
Shipping (0.5%)
J. B. Hunt Transport Services, Inc. 1,427,000 27,541,100
- ----------------------------------------------------------------------------------------------------------------------
Software (8.7%)
Adobe Systems, Inc. 2,710,400 77,571,648
Amdocs, Ltd. (Guernsey) + 699,400 18,485,142
Autodesk, Inc. 499,400 17,164,378
BMC Software, Inc. + 2,132,700 38,281,965
Citrix Systems, Inc. + 3,125,400 67,696,164
Cognos, Inc. (Canada) + 485,500 16,574,970
McAfee, Inc. + 774,000 20,263,320
Microsoft Corp. # 8,543,500 212,220,540
MicroStrategy, Inc. + 261,200 13,854,048
Symantec Corp. + 1,782,500 38,751,550
520,863,725
- ----------------------------------------------------------------------------------------------------------------------
Technology (0.2%)
Dun & Bradstreet Corp. (The) + 160,500 9,894,825
- ----------------------------------------------------------------------------------------------------------------------
Technology Services (1.9%)
Accenture, Ltd. Class A (Bermuda) + 894,000 20,266,980
Automatic Data Processing, Inc. 997,700 41,873,469
Global Payments, Inc. 320,100 21,702,780
Ingram Micro, Inc. Class A + 623,600 9,765,576
VeriSign, Inc. + 649,900 18,691,124
112,299,929
- ----------------------------------------------------------------------------------------------------------------------
Telecommunications (0.3%)
Earthlink, Inc. + 2,380,771 20,617,477
- ----------------------------------------------------------------------------------------------------------------------
Textiles (1.6%)
NIKE, Inc. Class B 1,082,700 93,761,820
- ----------------------------------------------------------------------------------------------------------------------
Total common stocks (cost $5,365,391,606) $6,019,166,234
- ----------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (0.4%) * (cost $22,083,196) Shares Value
- ----------------------------------------------------------------------------------------------------------------------
Putnam Prime Money Market Fund (e) 22,083,196 $22,083,196
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------------
Total investments (cost $5,387,474,802) $6,041,249,430
* Percentages indicated are based on net assets of $5,987,549,800.
+ Non-income-producing security.
# A portion of this security was pledged and segregated with the
custodian to cover margin requirements for futures contracts at June 30,
2005.
(e) See Note 5 to the financial statements regarding investments in
Putnam Prime Money Market Fund.
At June 30, 2005, liquid assets totaling $13,920,652 have been
designated as collateral for forward commitments and open futures
contracts.
ADR after the name of a foreign holding stands for American Depositary
Receipts, representing ownership of foreign securities on deposit with
a custodian bank.
- --------------------------------------------------------------------------------------------------
FUTURES CONTRACTS OUTSTANDING at 6/30/05
- --------------------------------------------------------------------------------------------------
Unrealized
Number of Expiration appreciation/
contracts Value date (depreciation)
- --------------------------------------------------------------------------------------------------
NASDAQ 100 Index Mini (Long) 79 $2,374,740 Sep-05 $(57,078)
Russell 2000 Index Mini (Long) 92 5,916,520 Sep-05 191,636
S&P 500 Index (Long) 5 1,494,375 Sep-05 (4,456)
- --------------------------------------------------------------------------------------------------
Total $130,102
The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities 6/30/05
- -------------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------------
Investment in securities, at value (Note 1):
Unaffiliated issuers (identified cost $5,365,391,606) $6,019,166,234
Affiliated issuers (identified cost $22,083,196) (Note 5) 22,083,196
- -------------------------------------------------------------------------------------------
Cash 79,467
- -------------------------------------------------------------------------------------------
Dividends, interest and other receivables 5,444,091
- -------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 302,355
- -------------------------------------------------------------------------------------------
Receivable for securities sold 98,002,260
- -------------------------------------------------------------------------------------------
Total assets 6,145,077,603
- -------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------
Payable for variation margin (Note 1) 113,409
- -------------------------------------------------------------------------------------------
Payable for securities purchased 60,736,807
- -------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 82,290,877
- -------------------------------------------------------------------------------------------
Payable for compensation of Manager (Notes 2 and 5) 8,029,644
- -------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 1,395,515
- -------------------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 885,455
- -------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 5,731
- -------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 3,662,483
- -------------------------------------------------------------------------------------------
Other accrued expenses 407,882
- -------------------------------------------------------------------------------------------
Total liabilities 157,527,803
Net assets $5,987,549,800
- -------------------------------------------------------------------------------------------
REPRESENTED BY
- -------------------------------------------------------------------------------------------
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) $9,968,268,145
- -------------------------------------------------------------------------------------------
Accumulated net realized loss on investments
and foreign currency transactions (Note 1) (4,634,622,523)
- -------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign currencies 653,904,178
- -------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $5,987,549,800
- -------------------------------------------------------------------------------------------
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- -------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($4,650,755,271 divided by 111,784,890 shares) $41.60
- -------------------------------------------------------------------------------------------
Offering price per class A share
(100/94.75 of $41.60)* $43.91
- -------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($784,295,056 divided by 20,943,188 shares)** $37.45
- -------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($42,826,552 divided by 1,077,806 shares)** $39.73
- -------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($104,545,463 divided by 2,671,350 shares) $39.14
- -------------------------------------------------------------------------------------------
Offering price per class M share
(100/96.75 of $39.14)* $40.45
- -------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class R share
($184,396 divided by 4,456 shares) $41.38
- -------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($404,943,062 divided by 9,424,613 shares) $42.97
- -------------------------------------------------------------------------------------------
* 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 6/30/05
- ---------------------------------------------------------------------------
INVESTMENT INCOME
- ---------------------------------------------------------------------------
Dividends (net of foreign tax of $122,921) $70,507,490
- ---------------------------------------------------------------------------
Interest (including interest income of $1,419,410
from investments in affiliated issuers) (Note 5) 1,757,408
- ---------------------------------------------------------------------------
Other income (Note 6) 3,010,524
- ---------------------------------------------------------------------------
Total investment income 75,275,422
- ---------------------------------------------------------------------------
EXPENSES
- ---------------------------------------------------------------------------
Compensation of Manager (Note 2) 35,159,932
- ---------------------------------------------------------------------------
Investor servicing fees (Note 2) 21,022,191
- ---------------------------------------------------------------------------
Custodian fees (Note 2) 323,123
- ---------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 186,509
- ---------------------------------------------------------------------------
Administrative services (Note 2) 115,905
- ---------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 11,860,206
- ---------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 11,321,067
- ---------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 471,469
- ---------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 861,994
- ---------------------------------------------------------------------------
Distribution fees -- Class R (Note 2) 546
- ---------------------------------------------------------------------------
Non-recurring costs (Notes 2 and 6) 256,854
- ---------------------------------------------------------------------------
Costs assumed by Manager (Notes 2 and 6) (256,854)
- ---------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 5) (103,341)
- ---------------------------------------------------------------------------
Other 1,792,812
- ---------------------------------------------------------------------------
Total expenses 83,012,413
- ---------------------------------------------------------------------------
Expense reduction (Note 2) (4,571,344)
- ---------------------------------------------------------------------------
Net expenses 78,441,069
- ---------------------------------------------------------------------------
Net investment loss (3,165,647)
- ---------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 886,644,417
- ---------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 11,217,378
- ---------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 2,030
- ---------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 430,519
- ---------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities
in foreign currencies during the year (1,285)
- ---------------------------------------------------------------------------
Net unrealized depreciation of investments, futures
contracts and written options during the year (506,148,398)
- ---------------------------------------------------------------------------
Net gain on investments 392,144,661
- ---------------------------------------------------------------------------
Net increase in net assets resulting from operations $388,979,014
The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets
- ---------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS
- ---------------------------------------------------------------------------------------------
Year ended Year ended
6/30/05 6/30/04
- ---------------------------------------------------------------------------------------------
Operations:
Net investment loss $(3,165,647) $(59,236,644)
- ---------------------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions 898,294,344 1,627,695,547
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments
and assets and liabilities in foreign currencies (506,149,683) 34,872,707
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 388,979,014 1,603,331,610
- ---------------------------------------------------------------------------------------------
Redemption fees (Note 1) 13,971 1,447
- ---------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (2,191,303,347) (3,093,016,196)
- ---------------------------------------------------------------------------------------------
Total decrease in net assets (1,802,310,362) (1,489,683,139)
- ---------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------
Beginning of year 7,789,860,162 9,279,543,301
- ---------------------------------------------------------------------------------------------
End of year $5,987,549,800 $7,789,860,162
The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------
PER-SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------
Year ended
6/30/05 6/30/04 6/30/03 6/30/02 6/30/01
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $38.96 $32.79 $32.28 $47.97 $96.61
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations:
Net investment income (loss) (a) .03 (d,f,g) (.19) (d) (.17) (.22) (.37)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.61 6.36 .68 (15.47) (38.81)
- ------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.64 6.17 .51 (15.69) (39.18)
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net realized gain
on investments -- -- -- -- (9.46)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- -- (9.46)
- ------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $41.60 $38.96 $32.79 $32.28 $47.97
- ------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 6.78 (g) 18.82 1.58 (32.71) (43.10)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $4,650,755 $5,075,005 $6,262,164 $7,683,016 $12,595,034
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.12 (d) 1.09 (d) 1.09 .98 .89
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) .07 (d,f,g) (.52) (d) (.57) (.57) (.55)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 97.25 60.86 42.43 76.67 67.74
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding 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 waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
June 30, 2005 and June 30, 2004 reflect a reduction of less than 0.01% of
average net assets for class A shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Reflects a special dividend which amounted to $0.15 per share and
0.39% of average net assets.
(g) Reflects a non-recurring accrual related to Putnam Management's
settlement with the SEC regarding brokerage allocation practices, which
amounted to $0.02 per share and 0.05% of average net assets for class A
shares (Note 6).
The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------
PER-SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------
Year ended
6/30/05 6/30/04 6/30/03 6/30/02 6/30/01
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $35.34 $29.96 $29.72 $44.50 $91.07
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations:
Net investment loss (a) (.24) (d,f,g) (.43) (d) (.36) (.48) (.77)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.35 5.81 .60 (14.30) (36.34)
- ------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.11 5.38 .24 (14.78) (37.11)
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net realized gain
on investments -- -- -- -- (9.46)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- -- (9.46)
- ------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $37.45 $35.34 $29.96 $29.72 $44.50
- ------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 5.97 (g) 17.96 .81 (33.21) (43.48)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $784,295 $1,674,238 $1,850,775 $2,739,100 $6,137,938
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.87 (d) 1.84 (d) 1.84 1.73 1.53
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.68) (d,f,g) (1.27) (d) (1.33) (1.32) (1.19)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 97.25 60.86 42.43 76.67 67.74
(a) Per share net investment loss has been determined on the basis of the
weighted average number of shares outstanding 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 waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
June 30, 2005 and June 30, 2004 reflect a reduction of less than 0.01% of
average net assets for class B shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Reflects a special dividend which amounted to $0.15 per share and
0.42% of average net assets.
(g) Reflects a non-recurring accrual related to Putnam Management's
ettlement with the SEC regarding brokerage allocation practices, which
amounted to $0.01 per share and 0.04% of average net assets for class B
shares (Note 6).
The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period)
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------
PER-SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------
Year ended
6/30/05 6/30/04 6/30/03 6/30/02 6/30/01
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $37.49 $31.79 $31.53 $47.21 $95.94
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (a) (.25) (d,f,g) (.45) (d) (.37) (.50) (.82)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.49 6.15 .63 (15.18) (38.45)
- ------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.24 5.70 .26 (15.68) (39.27)
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net realized gain
on investments -- -- -- -- (9.46)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- -- (9.46)
- ------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $39.73 $37.49 $31.79 $31.53 $47.21
- ------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 5.98 (g) 17.93 .83 (33.21) (43.53)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $42,827 $55,005 $64,015 $79,149 $136,417
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.87 (d) 1.84 (d) 1.84 1.73 1.64
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.68) (d,f,g) (1.27) (d) (1.32) (1.32) (1.29)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 97.25 60.86 42.43 76.67 67.74
(a) Per share net investment loss has been determined on the basis of the
weighted average number of shares outstanding 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 waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
June 30, 2005 and June 30, 2004 reflect a reduction of less than 0.01% of
average net assets for class C shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Reflects a special dividend which amounted to $0.15 per share and
0.40% of average net assets.
(g) Reflects a non-recurring accrual related to Putnam Management's
settlement with the SEC regarding brokerage allocation practices, which
amounted to $0.02 per share and 0.05% of average net assets for class C
shares (Note 6).
The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------
PER-SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------
Year ended
6/30/05 6/30/04 6/30/03 6/30/02 6/30/01
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $36.83 $31.15 $30.82 $46.03 $93.63
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations:
Net investment loss (a) (.16) (d,f,g) (.36) (d) (.30) (.40) (.69)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.47 6.04 .63 (14.81) (37.45)
- ------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.31 5.68 .33 (15.21) (38.14)
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net realized gain
on investments -- -- -- -- (9.46)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- -- (9.46)
- ------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $39.14 $36.83 $31.15 $30.82 $46.03
- ------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 6.27 (g) 18.24 1.07 (33.04) (43.38)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $104,545 $134,157 $171,675 $223,964 $411,251
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.62 (d) 1.59 (d) 1.59 1.48 1.39
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.43) (d,f,g) (1.02) (d) (1.07) (1.07) (1.05)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 97.25 60.86 42.43 76.67 67.74
(a) Per share net investment loss has been determined on the basis of the
weighted average number of shares outstanding 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 waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
June 30, 2005 and June 30, 2004 reflect a reduction of less than 0.01% of
average net assets for class M shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Reflects a special dividend which amounted to $0.15 per share and
0.40% of average net assets.
(g) Reflects a non-recurring accrual related to Putnam Management's
settlement with the SEC regarding brokerage allocation practices, which
amounted to $0.02 per share and 0.05% of average net assets for class M
shares (Note 6).
The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period)
CLASS R
- ------------------------------------------------------------------------------------------------------------------------------
PER-SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Period
6/30/05 6/30/04 1/21/03+-6/30/03
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $38.85 $32.76 $28.90
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations:
Net investment loss (a) (.09) (d,f,g) (.27) (d) (.10)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.62 6.36 3.96
- ------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.53 6.09 3.86
- ------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $41.38 $38.85 $32.76
- ------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 6.51 (g) 18.59 13.36 *
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $184 $25 $1
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.37 (d) 1.34 (d) .59 *
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.23) (d,f,g) (.76) (d) (.36) *
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 97.25 60.86 42.43
+ Commencement of operations.
* Not annualized.
(a) Per share net investment loss has been determined on the basis of
the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment.
(c) Includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
June 30, 2005 and June 30, 2004 reflect a reduction of less than 0.01%
of average net assets for class R shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Reflects a special dividend which amounted to $0.12 per share and
0.31% of average net assets.
(g) Reflects a non-recurring accrual related to Putnam Management's
settlement with the SEC regarding brokerage allocation practices, which
amounted to $0.03 per share and 0.08% of average net assets for class R
shares (Note 6).
The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period)
CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------
PER-SHARE OPERATING PERFORMANCE
- ------------------------------------------------------------------------------------------------------------------------------
Year ended
6/30/05 6/30/04 6/30/03 6/30/02 6/30/01
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $40.14 $33.70 $33.09 $49.05 $98.28
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations:
Net investment income (loss) (a) .13(d,f,g) (.10) (d) (.10) (.13) (.21)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.70 6.54 .71 (15.83) (39.56)
- ------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.83 6.44 .61 (15.96) (39.77)
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions:
From net realized gain
on investments -- -- -- -- (9.46)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- -- (9.46)
- ------------------------------------------------------------------------------------------------------------------------------
Redemption fees --(e) -- (e) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $42.97 $40.14 $33.70 $33.09 $49.05
- ------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 7.05(g) 19.11 1.85 (32.54) (42.96)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $404,943 $851,430 $930,912 $1,170,852 $1,703,399
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .87(d) .84(d) .84 .73 .64
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) .34(d,f,g) (.27)(d) (.33) (.32) (.30)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 97.25 60.86 42.43 76.67 67.74
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during the
period.
(b) Total return assumes dividend reinvestment.
(c) Includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
June 30, 2005 and June 30, 2004 reflect a reduction of less than 0.01% of
average net assets for class Y shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Reflects a special dividend which amounted to $0.17 per share and
0.43% of average net assets.
(g) Reflects a non-recurring accrual related to Putnam Management's
settlement with the SEC regarding brokerage allocation practices, which
amounted to $0.01 per share and 0.04% of average net assets for class Y
shares (Note 6).
The accompanying notes are an integral part of these financial statements.
Notes to financial statements 6/30/05
Note 1: Significant accounting policies
Putnam New Opportunities Fund (the "fund"), a Massachusetts business
trust, is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company. The fund seeks
capital appreciation by investing principally in common stocks of
companies in sectors of the economy which, in the judgment of Putnam
Investment Management, LLC ("Putnam Management"), the fund's manager, an
indirect wholly-owned subsidiary of Putnam, LLC, possess above-average,
long-term growth potential.
The fund offers class A, class B, class C, class M, class R and class Y
shares. Class A and class M shares are sold with a maximum front-end sales
charge of 5.25% and 3.25%, respectively, and do not pay a contingent
deferred sales charge. Prior to April 1, 2005, the maximum front-end sales
charge for class M shares was 3.50%. Class B shares, which convert to
class A shares after approximately eight years, do not pay a front-end
sales charge 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 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 R shares, which are offered to qualified
employee-benefit plans are sold without a front-end sales charge or a
contingent deferred sales charge. The expenses for class A, class B, class
C, class M and class R shares may differ based on each class' distribution
fee, which is identified in Note 2. Class Y shares, which are sold at net
asset value, are generally subject to the same expenses as class A, class
B, class C, class M and class R shares, but do not bear a distribution
fee. Class Y shares are sold to certain eligible purchasers including
certain defined contribution plans (including corporate IRAs), bank trust
departments, trust companies and certain college savings plans.
A 2.00% redemption fee may apply to any shares that are redeemed (either
by selling or exchanging into another fund) within 5 days of purchase. The
redemption fee is accounted for as an addition to paid-in-capital. Prior
year redemption fee balances have been reclassified to conform with
current year financial statement presentation.
Investment income, realized and unrealized gains and losses and expenses
of the fund are borne pro-rata based on the relative net assets of each
class to the total net assets of the fund, except that each class bears
expenses unique to that class (including the distribution fees applicable
to such classes). Each class votes as a class only with respect to its own
distribution plan or other matters on which a class vote is required by
law or determined by the Trustees. Shares of each class would receive
their pro-rata share of the net assets of the fund, if the fund were
liquidated. In addition, the Trustees declare separate dividends on each
class of shares.
In the normal course of business, the fund enters into contracts that may
include agreements to indemnify another party under given circumstances.
The fund's maximum exposure under these arrangements is unknown as this
would involve future claims that may be, but have not yet been, made
against the fund. However, the fund expects the risk of material loss to
be remote.
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 valued at the last reported sales price on their principal
exchange, or official closing price for certain markets. If no sales are
reported -- as in the case of some securities traded over-the-counter -- a
security is valued at its last reported bid price. Many securities markets
and exchanges outside the U.S. close prior to the close of the New York
Stock Exchange and therefore the closing prices for securities in such
markets or on such exchanges may not fully reflect events that occur after
such close but before the close of the New York Stock Exchange.
Accordingly, on certain days, the fund will fair value foreign securities
taking into account multiple factors, including movements in the U.S.
securities markets. The number of days on which fair value prices will be
used will depend on market activity and it is possible that fair value
prices will be used by the fund to a significant extent. 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 valued at amortized cost, which approximates fair value.
Other investments, including certain restricted securities, are valued at
fair value following procedures approved by the Trustees. Such valuations
and procedures are reviewed periodically by the Trustees.
B) Joint trading account Pursuant to an exemptive order from the
Securities and Exchange Commission, 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 issues 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 recorded 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, net of
applicable withholding taxes, is recognized on the ex-dividend date except
that certain dividends from foreign securities are recognized 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 earned 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,
currency gains and losses realized between the trade and settlement dates
on securities transactions 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) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on securities
it owns or in which it may invest to increase its current returns.
The potential risk to the fund is that the change in value of futures and
options contracts may not correspond to the change in value of the hedged
instruments. In addition, losses may arise from changes in the value of
the underlying instruments, if there is an illiquid secondary market for
the contracts, or if the counterparty to the contract is unable to
perform. Risks may exceed amounts recognized on the statement of assets
and liabilities. When the contract is closed, the fund records a realized
gain or loss equal to the difference between the value of the contract at
the time it was opened and the value at the time it was closed. Realized
gains and losses on purchased options are included in realized gains and
losses on investment securities. If a written call option is exercised,
the premium originally received is recorded as an addition to sales
proceeds. If a written put option is exercised, the premium originally
received is recorded as a reduction to the cost of investments.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. The fund and the broker
agree to exchange an amount of cash equal to the daily fluctuation in the
value of the futures contract. Such receipts or payments are known as
"variation margin." Exchange-traded options are valued at the last sale
price, or if no sales are reported, the last bid price for purchased
options and the last ask price for written options. Options traded
over-the-counter are valued using prices supplied by dealers. Futures and
written option contracts outstanding at period end, if any, are listed
after the fund's portfolio.
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 of 1986 (the "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 Code, 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, 2005, the fund had a capital loss carryover of $4,613,472,142
available to the extent allowed by the Code to offset future net capital
gain, if any. The amount of the carryover and the expiration dates are:
- --------------------------------
Loss Carryover Expiration
- --------------------------------
$2,836,984,224 June 30, 2010
- --------------------------------
1,776,487,918 June 30, 2011
- --------------------------------
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, foreign currency gains and losses,
both realized and unrealized gains and losses on certain futures contracts
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, 2005, the fund reclassified $3,165,647 to decrease
accumulated net investment loss and $3,660,465 to decrease
paid-in-capital, with a decrease to accumulated net realized loss of
$494,818.
The tax basis components of distributable earnings and the federal tax
cost as of period end were as follows:
Unrealized appreciation $815,875,338
Unrealized depreciation (183,125,665)
--------------
Net unrealized appreciation 632,749,673
Capital loss carryforward (4,613,472,142)
Cost for federal income
tax purposes $5,408,499,757
Note 2: Management fee, administrative services and other transactions
Putnam Management is paid for management and investment advisory services
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, 0.43% of the
next $5 billion, 0.42% of the next $5 billion, 0.41% of the next $5
billion, 0.40% of the next $5 billion, 0.39% of the next $5 billion, 0.38%
of the next $8.5 billion and 0.37% thereafter.
Putnam Management has agreed to waive fees and reimburse expenses of the
fund through June 30, 2006, to the extent necessary to ensure that the
fund's expenses do not exceed the simple average of the expenses of all
front-end load funds viewed by Lipper Inc. as having the same investment
classification or objective as the fund. The expense reimbursement is
based on a comparison of the fund's expenses with the average annualized
operating expenses of the funds in its Lipper peer group for each calendar
quarter during the fund's last fiscal year, excluding 12b-1 fees and
without giving effect to any expense offset and brokerage service
arrangements that may reduce fund expenses. For the year ended June 30,
2005, Putnam Management did not waive any of its management fee from the
fund.
For the period ended June 30, 2005, Putnam Management has assumed $256,854
of legal, shareholder servicing and communication, audit and Trustee fees
incurred by the fund in connection with certain legal and regulatory
matters (including those described in Note 6).
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The aggregate
amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company ("PFTC"), a subsidiary of Putnam, LLC. PFTC receives fees
for custody services based on the fund's asset level, the number of its
security holdings and transaction volumes. Putnam Investor Services, a
division of PFTC, provides investor servicing agent functions to the fund.
Putnam Investor Services receives fees for investor servicing based on the
number of shareholder accounts in the fund and the level of defined
contribution plan assets in the fund. During the year ended June 30, 2005,
the fund paid PFTC $20,834,890 for these services.
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, 2005, the
fund's expenses were reduced by $4,571,344 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $1,271, as a quarterly retainer, 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. George Putnam III, who is not an independent Trustee, also
receives the foregoing fees for his services as Trustee.
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 Trustee compensation and expenses in the statement of
operations. Accrued pension liability is included in Payable for Trustee
compensation and expenses in the statement of assets and liabilities. The
Trustees have terminated the Pension Plan with respect to any Trustee
first elected after 2003.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B, class C, class M and class R 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 in distributing shares of the fund. The Plans
provide for payments by the fund to Putnam Retail Management at an annual
rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net
assets attributable to class A, class B, class C, class M and class R
shares, respectively. The Trustees have approved payment by the fund at an
annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net
assets attributable to class A, class B, class C, class M and class R
shares, respectively.
For the year ended June 30, 2005, Putnam Retail Management, acting as
underwriter, received net commissions of $177,030 and $5,450 from the sale
of class A and class M shares, respectively, and received $1,925,900 and
$3,563 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, 2005, Putnam Retail
Management, acting as underwriter, received $7,803 and no monies on class
A and class M redemptions, respectively.
Note 3: Purchases and sales of securities
During the year ended June 30, 2005, cost of purchases and proceeds from
sales of investment securities other than short-term investments
aggregated $6,447,441,893 and $8,522,576,263, respectively. There were no
purchases or sales of U.S. government securities.
Written option transactions during the year are summarized as follows:
- ----------------------------------------------------------
Contract Premiums
Amounts Received
- ----------------------------------------------------------
Written options
outstanding at
beginning of year 566,310 $281,528
- ----------------------------------------------------------
Options opened 1,219,544 711,697
Options exercised (185,956) (114,131)
Options expired (1,387,177) (762,864)
Options closed (212,721) (116,230)
- ----------------------------------------------------------
Written options
outstanding at
end of year -- --
- ----------------------------------------------------------
Note 4: Capital shares
At June 30, 2005, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
- ------------------------------------------------------------------------
CLASS A Shares Amount
- ------------------------------------------------------------------------
Year ended 6/30/05:
Shares sold 22,948,084 $886,479,528
- ------------------------------------------------------------------------
Shares issued in connection
with reinvestment of distributions -- --
- ------------------------------------------------------------------------
22,948,084 886,479,528
- ------------------------------------------------------------------------
Shares repurchased (41,417,076) (1,620,097,643)
- ------------------------------------------------------------------------
Net decrease (18,468,992) $(733,618,115)
Year ended 6/30/04:
Shares sold 14,590,688 $535,347,675
- ------------------------------------------------------------------------
Shares issued in connection
with reinvestment of distributions -- --
- ------------------------------------------------------------------------
14,590,688 535,347,675
- ------------------------------------------------------------------------
Shares repurchased (75,306,819) (2,799,613,692)
- ------------------------------------------------------------------------
Net decrease (60,716,131) $(2,264,266,017)
- ------------------------------------------------------------------------
CLASS B Shares Amount
- ------------------------------------------------------------------------
Year ended 6/30/05:
Shares sold 1,409,602 $49,728,811
- ------------------------------------------------------------------------
Shares issued in connection
with reinvestment of distributions -- --
- ------------------------------------------------------------------------
1,409,602 49,728,811
- ------------------------------------------------------------------------
Shares repurchased (27,845,983) (971,691,503)
- ------------------------------------------------------------------------
Net decrease (26,436,381) $(921,962,692)
Year ended 6/30/04:
Shares sold 3,322,964 $111,478,176
- ------------------------------------------------------------------------
Shares issued in connection
with reinvestment of distributions -- --
- ------------------------------------------------------------------------
3,322,964 111,478,176
- ------------------------------------------------------------------------
Shares repurchased (17,708,510) (600,679,415)
- ------------------------------------------------------------------------
Net decrease (14,385,546) $(489,201,239)
- ------------------------------------------------------------------------
CLASS C Shares Amount
- ------------------------------------------------------------------------
Year ended 6/30/05:
Shares sold 101,542 $3,817,980
- ------------------------------------------------------------------------
Shares issued in connection
with reinvestment of distributions -- --
- ------------------------------------------------------------------------
101,542 3,817,980
- ------------------------------------------------------------------------
Shares repurchased (490,866) (18,373,952)
- ------------------------------------------------------------------------
Net decrease (389,324) $(14,555,972)
Year ended 6/30/04:
Shares sold 231,436 $8,172,503
- ------------------------------------------------------------------------
Shares issued in connection
with reinvestment of distributions -- --
- ------------------------------------------------------------------------
231,436 8,172,503
- ------------------------------------------------------------------------
Shares repurchased (777,907) (27,913,184)
- ------------------------------------------------------------------------
Net decrease (546,471) $(19,740,681)
- ------------------------------------------------------------------------
CLASS M Shares Amount
- ------------------------------------------------------------------------
Year ended 6/30/05:
Shares sold 249,786 $9,211,102
- ------------------------------------------------------------------------
Shares issued in connection
with reinvestment of distributions -- --
- ------------------------------------------------------------------------
249,786 9,211,102
- ------------------------------------------------------------------------
Shares repurchased (1,220,735) (45,132,105)
- ------------------------------------------------------------------------
Net decrease (970,949) $(35,921,003)
Year ended 6/30/04:
Shares sold 456,573 $15,939,886
- ------------------------------------------------------------------------
Shares issued in connection
with reinvestment of distributions -- --
- ------------------------------------------------------------------------
456,573 15,939,886
- ------------------------------------------------------------------------
Shares repurchased (2,324,721) (81,851,788)
- ------------------------------------------------------------------------
Net decrease (1,868,148) $(65,911,902)
- ------------------------------------------------------------------------
CLASS R Shares Amount
- ------------------------------------------------------------------------
Year ended 6/30/05:
Shares sold 5,012 $196,076
- ------------------------------------------------------------------------
Shares issued in connection
with reinvestment of distributions -- --
- ------------------------------------------------------------------------
5,012 196,076
- ------------------------------------------------------------------------
Shares repurchased (1,204) (48,601)
- ------------------------------------------------------------------------
Net increase 3,808 $147,475
Year ended 6/30/04:
Shares sold 633 $24,270
- ------------------------------------------------------------------------
Shares issued in connection
with reinvestment of distributions -- --
- ------------------------------------------------------------------------
633 24,270
- ------------------------------------------------------------------------
Shares repurchased (20) (802)
- ------------------------------------------------------------------------
Net increase 613 $23,468
- ------------------------------------------------------------------------
CLASS Y Shares Amount
- ------------------------------------------------------------------------
Year ended 6/30/05:
Shares sold 2,889,224 $114,469,140
- ------------------------------------------------------------------------
Shares issued in connection
with reinvestment of distributions -- --
- ------------------------------------------------------------------------
2,889,224 114,469,140
- ------------------------------------------------------------------------
Shares repurchased (14,676,760) (599,862,180)
- ------------------------------------------------------------------------
Net decrease (11,787,536) $(485,393,040)
Year ended 6/30/04:
Shares sold 8,529,967 $320,027,694
- ------------------------------------------------------------------------
Shares issued in connection
with reinvestment of distributions -- --
- ------------------------------------------------------------------------
8,529,967 320,027,694
- ------------------------------------------------------------------------
Shares repurchased (14,943,384) (573,947,519)
- ------------------------------------------------------------------------
Net decrease (6,413,417) $(253,919,825)
Note 5: Investment in Putnam Prime Money Market Fund
Pursuant to an exemptive order from the Securities and Exchange
Commission, the fund invests in Putnam Prime Money Market Fund, an
open-end management investment company managed by Putnam Management.
Management fees paid by the fund are reduced by an amount equal to the
management and administrative services fees paid by Putnam Prime Money
Market Fund with respect to assets invested by the fund in Putnam Prime
Money Market Fund. For the year ended June 30, 2005, management fees paid
were reduced by $103,341 relating to the fund's investment in Putnam Prime
Money Market Fund. Income distributions earned by the fund are recorded as
income in the statement of operations and totaled $1,419,410 for the
period ended June 30, 2005. During the year ended June 30, 2005, cost of
purchases and cost of sales of investments in Putnam Prime Money Market
Fund aggregated $1,576,602,478 and $1,625,539,257, respectively.
Note 6: Regulatory matters and litigation
Putnam Management has entered into agreements with the Securities and
Exchange Commission and the Massachusetts Securities Division settling
charges connected with excessive short-term trading by Putnam employees
and, in the case of the charges brought by the Massachusetts Securities
Division, by participants in some Putnam-administered 401(k) plans.
Pursuant to these settlement agreements, Putnam Management will pay a
total of $193.5 million in penalties and restitution, with $153.5 million
being paid to shareholders and the funds. The restitution amount will be
allocated to shareholders pursuant to a plan developed by an independent
consultant, with payments to shareholders following approval of the plan
by the SEC and the Massachusetts Securities Division.
The Securities and Exchange Commission's and Massachusetts Securities
Division's allegations and related matters also serve as the general basis
for numerous lawsuits, including purported class action lawsuits filed
against Putnam Management and certain related parties, including certain
Putnam funds. Putnam Management will bear any costs incurred by Putnam
funds in connection with these lawsuits. Putnam Management believes that
the likelihood that the pending private lawsuits and purported class
action lawsuits will have a material adverse financial impact on the fund
is remote, and the pending actions are not likely to materially affect its
ability to provide investment management services to its clients,
including the Putnam funds.
On March 23, 2005, Putnam Management entered into a settlement with the
Securities and Exchange Commission resolving its inquiry into Putnam
Management's alleged failure to fully and effectively disclose a former
brokerage allocation practice to the Board of Trustees and shareholders of
the Putnam Funds. This practice, which Putnam Management ceased as of
January 1, 2004, involved allocating a portion of the brokerage on mutual
fund portfolio transactions to certain broker-dealers who sold shares of
Putnam mutual funds. Under the settlement order, Putnam Management has
paid a civil penalty of $40 million and disgorgement of $1 to the
Securities and Exchange Commission. These amounts, which are included in
Other income on the Statement of operations, subsequently will be
distributed to certain Putnam funds pursuant to a plan to be approved by
the Securities and Exchange Commission. As part of the settlement, Putnam
Management neither admitted nor denied any wrongdoing.
Putnam Investments has recorded a charge of $30 million for the estimated
cost that it believes will be necessary to address issues relating to the
calculation of certain amounts paid by the Putnam mutual funds in previous
years. The previous payments were cost reimbursements by the Putnam funds
to Putnam for transfer agent services relating to defined contribution
operations. Putnam currently anticipates that any payments made by Putnam
related to this issue will be paid to the Putnam funds. Review of this
issue is ongoing.
Putnam Management and Putnam Retail Management are named as defendants in
a civil suit in which the plaintiffs allege that the management and
distribution fees paid by certain Putnam funds were excessive and seek
recovery under the Investment Company Act of 1940. Putnam Management and
Putnam Retail Management have contested the plaintiffs' claims and the
matter is currently pending in the U.S. District Court for the District of
Massachusetts. Based on currently available information, Putnam Management
believes that this action is without merit and that it is unlikely to have
a material effect on Putnam Management's and Putnam Retail Management's
ability to provide services to their clients, including the fund.
Federal tax information
(Unaudited)
The Form 1099 you receive in January 2006 will show the tax status of all
distributions paid to your account in calendar 2005.
Shareholder meeting results (Unaudited)
A special meeting of shareholders of the fund was held on November 11,
2004. At that meeting consideration of certain proposals was adjourned to
a final meeting held on January 10, 2005.
- ----------------------------------------------------------------------------
November 11, 2004 meeting
At the meeting, each of the nominees for Trustees was elected, as follows:
- ----------------------------------------------------
Votes
Votes For Withheld
- ----------------------------------------------------
Jameson A. Baxter 113,453,010 5,295,919
- ----------------------------------------------------
Charles B. Curtis 113,103,198 5,645,731
- ----------------------------------------------------
Myra R. Drucker 114,336,142 4,412,787
- ----------------------------------------------------
Charles E. Haldeman, Jr. 114,335,290 4,413,639
- ----------------------------------------------------
John A. Hill 113,462,522 5,286,407
- ----------------------------------------------------
Ronald J. Jackson* 113,496,027 5,252,902
- ----------------------------------------------------
Paul L. Joskow 113,454,552 5,294,377
- ----------------------------------------------------
Elizabeth T. Kennan 113,355,675 5,393,254
- ----------------------------------------------------
John H. Mullin, III 113,468,723 5,280,206
- ----------------------------------------------------
Robert E. Patterson 113,423,684 5,325,245
- ----------------------------------------------------
George Putnam, III 113,400,111 5,348,818
- ----------------------------------------------------
A.J.C. Smith+ 113,360,795 5,388,134
- ----------------------------------------------------
W. Thomas Stephens 113,433,818 5,315,111
- ----------------------------------------------------
Richard B. Worley 114,332,735 4,416,194
- ----------------------------------------------------
* Mr. Jackson retired from the Board of Trustees on June 10, 2005.
+ Mr. Smith retired from the Board of Trustees on January 14, 2005.
All tabulations are rounded to nearest whole number.
- ----------------------------------------------------------------------------
January 10, 2005 meeting
A proposal to amend the fund's fundamental investment restriction with
respect to borrowing to allow the fund the investment flexibility
permitted by the Investment Company Act was defeated as follows:
- ---------------------------------------------
Votes For Votes Against Abstentions
- ---------------------------------------------
72,516,047 8,322,183 37,841,141
- ---------------------------------------------
A proposal to amend the fund's fundamental investment restriction with
respect to making loans to enhance the fund's ability to participate in an
interfund borrowing and lending program was defeated as follows:
- ---------------------------------------------
Votes For Votes Against Abstentions
- ---------------------------------------------
72,912,864 8,034,507 37,732,000
- ---------------------------------------------
A proposal to amend the fund's fundamental investment restriction with
respect to diversification of investments to enhance the fund's ability to
invest in registered investment companies such as Putnam Prime Money
Market Fund was defeated as follows:
- ---------------------------------------------
Votes For Votes Against Abstentions
- ---------------------------------------------
77,103,763 4,088,773 37,486,835
- ---------------------------------------------
A proposal to amend the fund's Agreement and Declaration of Trust to
permit the fund to satisfy redemption requests other than in cash was
defeated as follows:
- ---------------------------------------------
Votes For Votes Against Abstentions
- ---------------------------------------------
67,711,783 12,439,915 38,527,673
- ---------------------------------------------
All tabulations are rounded to nearest whole number.
Brokerage commissions (Unaudited)
Brokerage commissions are paid to firms that execute trades on behalf of
your fund. When choosing these firms, Putnam is required by law to seek
the best execution of the trades, taking all relevant factors into
consideration, including expected quality of execution and commission
rate. Listed below are the largest relationships based upon brokerage
commissions for your fund and the other funds in Putnam's U.S. Small- and
Mid-Cap group for the year ended June 30, 2005. The other Putnam mutual
funds in this group are Putnam Capital Opportunities Fund, Putnam
Discovery Growth Fund, Putnam Mid Cap Value Fund, Putnam OTC & Emerging
Growth Fund, Putnam Small Cap Growth Fund, Putnam Small Cap Value Fund,
Putnam Vista Fund, Putnam VT Capital Opportunities Fund, Putnam VT
Discovery Growth Fund, Putnam VT Mid Cap Value Fund, Putnam VT New
Opportunities Fund, Putnam VT OTC & Emerging Growth Fund, Putnam VT Small
Cap Value Fund, and Putnam VT Vista Fund.
The top five firms that received brokerage commissions for trades executed
for the U.S. Small- and Mid-Cap group are (in descending order) Citigroup
Global Markets, Goldman Sachs, JP Morgan Clearing, Merrill Lynch, and SG
Cowen. Commissions paid to these firms together represented approximately
37% of the total brokerage commissions paid for the year ended June 30,
2005.
Commissions paid to the next 10 firms together represented approximately
37% of the total brokerage commissions paid during the period. These firms
are (in alphabetical order) Bank of America, Bear Stearns & Company, CIBC
World Markets, Credit Suisse First Boston, Deutsche Bank Securities,
Lazard Freres & Co., Lehman Brothers, Morgan Stanley Dean Witter, RBC
Capital Markets, and UBS Warburg.
Additional information about brokerage commissions is available on the
Securities and Exchange Commission (SEC) Web site at www.sec.gov. Putnam
funds disclose commissions by firm to the SEC in semiannual filings on
form N-SAR.
About the Trustees
- ----------------------------------------------------------------------------
Jameson A. Baxter (9/6/43), Trustee since 1994
Ms. Baxter is the President of Baxter Associates, Inc., a private
investment firm that she founded in 1986.
Ms. Baxter serves as a Director of ASHTA Chemicals, Inc., Banta
Corporation (a printing and digital imaging firm), Ryerson Tull, Inc. (a
steel service corporation), the Mutual Fund Directors Forum, Advocate
Health Care and BoardSource, formerly the National Center for Nonprofit
Boards. She is Chairman Emeritus of the Board of Trustees, Mount Holyoke
College, having served as Chairman for five years and as a board member
for thirteen years. Until 2002, Ms.Baxter was a Director of Intermatic
Corporation (a manufacturer of energy control products).
Ms. Baxter has held various positions in investment banking and corporate
finance, including Vice President and Principal of the Regency Group, and
Vice President of and Consultant to First Boston Corporation. She is a
graduate of Mount Holyoke College.
- ----------------------------------------------------------------------------
Charles B. Curtis (4/27/40), Trustee since 2001
Mr. Curtis is President and Chief Operating Officer of the Nuclear Threat
Initiative (a private foundation dealing with national security issues)
and serves as Senior Advisor to the United Nations Foundation.
Mr. Curtis is a member of the Council on Foreign Relations and the Trustee
Advisory Council of the Applied Physics Laboratory, Johns Hopkins
University. Until 2003, Mr. Curtis was a member of the Electric Power
Research Institute Advisory Council and the University of Chicago Board of
Governors for Argonne National Laboratory. Prior to 2002, Mr. Curtis was a
Member of the Board of Directors of the Gas Technology Institute and the
Board of Directors of the Environment and Natural Resources Program
Steering Committee, John F. Kennedy School of Government, Harvard
University. Until 2001, Mr. Curtis was a member of the Department of
Defense Policy Board and Director of EG&G Technical Services, Inc. (a
fossil energy research and development support company).
From August 1997 to December 1999, Mr. Curtis was a Partner at Hogan &
Hartson L.L.P., a Washington, D.C. law firm. Prior to May 1997, Mr. Curtis
was Deputy Secretary of Energy. He served as Chairman of the Federal
Energy Regulatory Commission from 1977 to 1981 and has held positions on
the staff of the U.S. House of Representatives, the U.S. Treasury
Department, and the SEC.
- ----------------------------------------------------------------------------
Myra R. Drucker (1/16/48), Trustee since 2004
Ms. Drucker is a Vice Chair of the Board of Trustees of Sarah Lawrence
College, a Trustee of Commonfund (a not-for-profit firm specializing in
asset management for educational endowments and foundations) and a member
of the Investment Committee of the Kresge Foundation (a charitable trust).
She is also an ex-officio member of the New York Stock Exchange (NYSE)
Pension Managers Advisory Committee, having served as Chair for seven
years and a member of the Executive Committee of the Committee on
Investment of Employee Benefit Assets. She is Chair of the Advisory Board
of Hamilton Lane Advisors (an investment management firm) and a member of
the Advisory Board of RCM (an investment management firm). Until August
31, 2004, Ms. Drucker was Managing Director and a member of the Board of
Directors of General Motors Asset Management and Chief Investment Officer
of General Motors Trust Bank. Ms. Drucker also served as a member of the
NYSE Corporate Accountability and Listing Standards Committee and the
NYSE/NASD IPO Advisory Committee.
Prior to joining General Motors Asset Management in 2001, Ms. Drucker held
various executive positions in the investment management industry. Ms.
Drucker served as Chief Investment Officer of Xerox Corporation (a
technology and service company in the document industry), where she was
responsible for the investment of the company's pension assets. Ms.
Drucker was also Staff Vice President and Director of Trust Investments
for International Paper (a paper, paper distribution, packaging and forest
products company) and previously served as Manager of Trust Investments
for Xerox Corporation. Ms. Drucker received a B.A. degree in Literature
and Psychology from Sarah Lawrence College and pursued graduate studies in
economics, statistics and portfolio theory at Temple University.
- ----------------------------------------------------------------------------
John A. Hill (1/31/42), Trustee since 1985 and Chairman since 2000
Mr. Hill is Vice Chairman of First Reserve Corporation, a private equity
buyout firm that specializes in energy investments in the diversified
worldwide energy industry.
Mr. Hill is a Director of Devon Energy Corporation, TransMontaigne Oil
Company and various private companies controlled by First Reserve
Corporation, as well as a Trustee of TH Lee, Putnam Investment Trust (a
closed-end investment company advised by an affiliate of Putnam
Management). He is also a Trustee of Sarah Lawrence College. Until 2005,
he was a Director of Continuum Health Partners of New York.
Prior to acquiring First Reserve Corporation in 1983, Mr. Hill held
executive positions in investment banking and investment management with
several firms and with the federal government, including Deputy Associate
Director of the Office of Management and Budget and Deputy Director of the
Federal Energy Administration. He is active in various business
associations, including the Economic Club of New York, and lectures on
energy issues in the United States and Europe. Mr. Hill holds a B.A.
degree in Economics from Southern Methodist University and pursued
graduate studies there as a Woodrow Wilson Fellow.
- ----------------------------------------------------------------------------
Paul L. Joskow (6/30/47), Trustee since 1997
Dr. Joskow is the Elizabeth and James Killian Professor of Economics and
Management, and Director of the Center for Energy and Environmental Policy
Research at the Massachusetts Institute of Technology.
Dr. Joskow serves as a Director of National Grid Transco (a UK-based
holding company with interests in electric and gas transmission and
distribution and telecommunications infrastructure) and TransCanada
Corporation (an energy company focused on natural gas transmission and
power services). Prior to February 2005, he served on the board of the
Whitehead Institute for Biomedical Research (a non-profit research
institution) and has been President of the Yale University Council since
1993. Prior to February 2002, he was a Director of State Farm Indemnity
Company (an automobile insurance company), and, prior to March 2000, he
was a Director of New England Electric System (a public utility holding
company).
Dr. Joskow has published five books and numerous articles on topics in
industrial organization, government regulation of industry, and
competition policy. He is active in industry restructuring, environmental,
energy, competition and privatization policies -- serving as an advisor to
governments and corporations worldwide. Dr. Joskow holds a Ph.D. and M.
Phil from Yale University and a B.A. from Cornell University.
- ----------------------------------------------------------------------------
Elizabeth T. Kennan (2/25/38), Trustee since 1992
Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse and
cattle breeding). She is President Emeritus of Mount Holyoke College.
Dr. Kennan served as Chairman and is now Lead Director of Northeast
Utilities. Until 2005, she was a Director of Talbots, Inc. She has served
as Director on a number of other boards, including Bell Atlantic, Chastain
Real Estate, Shawmut Bank, Berkshire Life Insurance and Kentucky Home Life
Insurance. She is a Trustee of the National Trust for Historic
Preservation, of Centre College and of Midway College in Midway, Kentucky.
She is also a member of The Trustees of Reservations. Dr. Kennan has
served on the oversight committee of the Folger Shakespeare Library, as
President of Five Colleges Incorporated, as a Trustee of Notre Dame
University and is active in various educational and civic associations.
As a member of the faculty of Catholic University for twelve years, until
1978, Dr. Kennan directed the post-doctoral program in Patristic and
Medieval Studies, taught history and published numerous articles. Dr.
Kennan holds a Ph.D. from the University of Washington in Seattle, an M.S.
from St.Hilda's College at Oxford University and an A.B. from Mount
Holyoke College. She holds several honorary doctorates.
- ----------------------------------------------------------------------------
John H. Mullin, III (6/15/41), Trustee since 1997
Mr. Mullin is the Chairman and CEO of Ridgeway Farm (a limited liability
company engaged in timber and farming).
Mr. Mullin serves as a Director of The Liberty Corporation (a broadcasting
company), Progress Energy, Inc. (a utility company, formerly known as
Carolina Power & Light) and Sonoco Products, Inc. (a packaging company).
Mr. Mullin is Trustee Emeritus of The National Humanities Center and
Washington & Lee University, where he served as Chairman of the Investment
Committee. Prior to May 2001, he was a Director of Graphic Packaging
International Corp. Prior to February 2004, he was a Director of Alex
Brown Realty, Inc.
Mr. Mullin is also a past Director of Adolph Coors Company; ACX
Technologies, Inc.; Crystal Brands, Inc.; Dillon, Read & Co., Inc.;
Fisher-Price, Inc.; and The Ryland Group, Inc. Mr. Mullin is a graduate of
Washington & Lee University and The Wharton Graduate School, University of
Pennsylvania.
- ----------------------------------------------------------------------------
Robert E. Patterson (3/15/45), Trustee since 1984
Mr. Patterson is Senior Partner of Cabot Properties, L.P. and Chairman of
Cabot Properties, Inc. (a private equity firm investing in commercial real
estate).
Mr. Patterson serves as Chairman Emeritus and Trustee of the Joslin
Diabetes Center and as a Director of Brandywine Trust Group, LLC. Prior to
June 2003, he was a Trustee of Sea Education Association. Prior to
December 2001, he was President and Trustee of Cabot Industrial Trust
(apublicly traded real estate investment trust). Prior to February 1998,
he was Executive Vice President and Director of Acquisitions of Cabot
Partners Limited Partnership (a registered investment adviser involved in
institutional real estate investments). Prior to 1990, he served as
Executive Vice President of Cabot, Cabot & Forbes Realty Advisors, Inc.
(the predecessor company of Cabot Partners).
Mr. Patterson practiced law and held various positions in state government
and was the founding Executive Director of the Massachusetts Industrial
Finance Agency. Mr. Patterson is a graduate of Harvard College and Harvard
Law School.
- ----------------------------------------------------------------------------
W. Thomas Stephens (9/2/42), Trustee since 1997
Mr. Stephens is Chairman and Chief Executive Officer of Boise Cascade,
L.L.C. (a paper, forest products and timberland assets company).
Mr. Stephens serves as a Director of TransCanada Pipelines Limited. Until
2004, Mr. Stephens was a Director of Xcel Energy Incorporated (a public
utility company), Qwest Communications, and Norske Canada, Inc. (a paper
manufacturer). Until 2003, Mr. Stephens was a Director of Mail-Well, Inc.
(a diversified printing company). He served as Chairman of Mail-Well until
2001 and as CEO of MacMillan-Bloedel, Ltd. (a forest products company)
until 1999.
Prior to 1996, Mr. Stephens was Chairman and Chief Executive Officer of
Johns Manville Corporation. He holds B.S. and M.S. degrees from the
University of Arkansas.
- ----------------------------------------------------------------------------
Richard B. Worley (11/15/45), Trustee since 2004
Mr. Worley is Managing Partner of Permit Capital, LLC, an investment
management firm.
Mr. Worley serves on the Executive Committee of the University of
Pennsylvania Medical Center, is a Trustee of The Robert Wood Johnson
Foundation (a philanthropic organization devoted to health care issues)
and is a Director of The Colonial Williamsburg Foundation (a historical
preservation organization). Mr. Worley also serves on the investment
committees of Mount Holyoke College and World Wildlife Fund (a wildlife
conservation organization).
Prior to joining Permit Capital LLC in 2002, Mr. Worley served as Chief
Strategic Officer of Morgan Stanley Investment Management. He previously
served as President, Chief Executive Officer and Chief Investment Officer
of Morgan Stanley Dean Witter Investment Management and as a Managing
Director of Morgan Stanley, a financial services firm. Mr. Worley also was
the Chairman of Miller Anderson & Sherrerd, an investment management firm.
Mr. Worley holds a B.S. degree from University of Tennessee and pursued
graduate studies in economics at the University of Texas.
- ----------------------------------------------------------------------------
Charles E. Haldeman, Jr.* (10/29/48), Trustee since 2004
Mr. Haldeman is President and Chief Executive Officer of Putnam, LLC
("Putnam Investments"). He is a member of Putnam Investments' Executive
Board of Directors and Advisory Council. Prior to November 2003, Mr.
Haldeman served as Co-Head of Putnam Investments' Investment Division.
Prior to joining Putnam Investments in 2002, Mr. Haldeman held executive
positions in the investment management industry. He previously served as
Chief Executive Officer of Delaware Investments and President & Chief
Operating Officer of United Asset Management. Mr.Haldeman was also a
partner and director of Cooke & Bieler, Inc. (an investment management
firm).
Mr. Haldeman currently serves as a Trustee of Dartmouth College and as
Emeritus Trustee of Abington Memorial Hospital. He is a graduate of
Dartmouth College, Harvard Law School and Harvard Business School. Mr.
Haldeman is also a Chartered Financial Analyst (CFA) charterholder.
- ----------------------------------------------------------------------------
George Putnam, III* (8/10/51), Trustee since 1984 and President since 2000
Mr. Putnam is President of New Generation Research, Inc. (a publisher of
financial advisory and other research services), and of New Generation
Advisers, Inc. (a registered investment advisor to private funds). Mr.
Putnam founded the New Generation companies in 1986.
Mr. Putnam is a Director of The Boston Family Office, LLC (a registered
investment adviser). He is a Trustee of St. Mark's School, Shore Country
Day School, and until 2002 was a Trustee of the Sea Education Association.
Mr. Putnam previously worked as an attorney with the law firm of Dechert
LLP (formerly known as Dechert Price & Rhoads) in Philadelphia. He is a
graduate of Harvard College, Harvard Business School and Harvard Law
School.
The address of each Trustee is One Post Office Square, Boston, MA 02109.
As of June 30, 2005, there were 108 Putnam Funds. All Trustees serve as
Trustees of all Putnam funds.
Each Trustee serves for an indefinite term, until his or her
resignation, retirement at age 72, 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, Putnam Retail Management, or Marsh & McLennan Companies,
Inc., the parent company of Putnam, LLC and its affiliated companies.
Messrs. Haldeman and Putnam III are deemed "interested persons" by
virtue of their positions as officers of the fund, Putnam Management or
Putnam Retail Management and as shareholders of Marsh & McLennan
Companies, Inc. Mr. Putnam, III is the President of your fund and each
of the other Putnam funds. Mr. Haldeman is President and Chief Executive
Officer of Putnam Investments.*
Officers
In addition to George Putnam, III, the other officers of the fund are
shown below:
Charles E. Porter (7/26/38)
Executive Vice President, Associate Treasurer
and Principal Executive Officer
Since 1989
Jonathan S. Horwitz (6/4/55)
Senior Vice President and Treasurer
Since 2004
Prior to 2004, Managing Director,
Putnam Investments
Steven D. Krichmar (6/27/58)
Vice President and Principal Financial Officer
Since 2002
Senior Managing Director, Putnam
Investments. Prior to July 2001, Partner,
PricewaterhouseCoopers LLP
Michael T. Healy (1/24/58)
Assistant Treasurer and Principal
Accounting Officer
Since 2000
Managing Director, Putnam Investments
Beth S. Mazor (4/6/58)
Vice President
Since 2002
Senior Vice President, Putnam Investments
Daniel T. Gallagher (2/27/62)
Senior Vice President, Staff Counsel
and Compliance Liaison
Since 2004
Prior to 2004, Associate, Ropes & Gray LLP;
prior to 2000, Law Clerk, Massachusetts
Supreme Judicial Court
Francis J. McNamara, III (8/19/55)
Vice President and Chief Legal Officer
Since 2004
Senior Managing Director, Putnam
Investments, Putnam Management
and Putnam Retail Management. Prior
to 2004, General Counsel, State Street
Research & Management Company
James P. Pappas (2/24/53)
Vice President
Since 2004
Managing Director, Putnam Investments
and Putnam Management. During 2002,
Chief Operating Officer, Atalanta/Sosnoff
Management Corporation; prior to 2001,
President and Chief Executive Officer,
UAM Investment Services, Inc.
Richard S. Robie, III (3/30/60)
Vice President
Since 2004
Senior Managing Director, Putnam
Investments, Putnam Management
and Putnam Retail Management. Prior
to 2003, Senior Vice President, United
Asset Management Corporation
Charles A. Ruys de Perez (10/17/57)
Vice President and Chief Compliance Officer
Since 2004
Managing Director, Putnam Investments
Mark C. Trenchard (6/5/62)
Vice President and BSA Compliance Officer
Since 2002
Senior Vice President, Putnam Investments
Judith Cohen (6/7/45)
Vice President, Clerk and Assistant Treasurer
Since 1993
Wanda M. McManus (1/4/47)
Vice President, Senior Associate Treasurer
and Assistant Clerk
Since 2005
Nancy T. Florek (6/13/57)
Vice President, Assistant Clerk,
Assistant Treasurer and Proxy Manager
Since 2005
The address of each Officer is One Post Office Square, Boston, MA 02109.
Fund information
Founded over 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 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 LLP
Independent Registered
Public Accounting Firm
PricewaterhouseCoopers LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Myra R. Drucker
Charles E. Haldeman, Jr.
Paul L. Joskow
Elizabeth T. Kennan
John H. Mullin, III
Robert E. Patterson
George Putnam, III
W. Thomas Stephens
Richard B. Worley
Officers
George Putnam, III
President
Charles E. Porter
Executive Vice President,
Associate Treasurer and
Principal Executive Officer
Jonathan S. Horwitz
Senior Vice President
and Treasurer
Steven D. Krichmar
Vice President and
Principal Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Beth S. Mazor
Vice President
Daniel T. Gallagher
Senior Vice President, Staff
Counsel and Compliance Liaison
James P. Pappas
Vice President
Richard S. Robie, III
Vice President
Mark C. Trenchard
Vice President and
BSA Compliance Officer
Francis J. McNamara, III
Vice President and
Chief Legal Officer
Charles A. Ruys de Perez
Vice President and
Chief Compliance Officer
Judith Cohen
Vice President, Clerk and
Assistant Treasurer
Wanda M. McManus
Vice President, Senior Associate
Treasurer and Assistant Clerk
Nancy T. Florek
Vice President, Assistant Clerk,
Assistant Treasurer and
Proxy Manager
This report is for the information of shareholders of Putnam New
Opportunities Fund. It may also be used as sales literature when preceded
or accompanied by the current prospectus, the most recent copy of Putnam's
Quarterly Performance Summary, and Putnam's Quarterly Ranking Summary. For
more recent performance, please visit www.putnam.com. Investors should
carefully consider the investment objective, risks, charges, and expenses
of a fund, which are described in its prospectus. For this and other
information or to request a prospectus, call 1-800-225-1581 toll free.
Please read the prospectus carefully before investing. 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.
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PUTNAM INVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
www.putnam.com
1-800-225-1581
Founded in 1937, Putnam Investments began with the principle that a
balance between risk and reward is the mark of a well-rounded financial
program. Today, we manage money with a focus on seeking consistent results
over time. This balanced approach continues to underscore everything we
do.
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
[GRAPHIC OMITTED: SCALE]
Not FDIC Insured May Lose Value No Bank Guarantee
AN013 226459 8/05
[GRAPHIC OMITTED: PUTNAM LOGO]
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Putnam New Opportunities Fund
Supplement to Annual Report dated 6/30/05
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 do not incur a front-end load, a distribution fee, or a
contingent deferred sales charge, will differ from the performance of class
A, B, C, M, and R shares, which are discussed more extensively in the annual
report.
RESULTS AT A GLANCE
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Total return for periods ended 6/30/05
NAV
Life of fund (since class A inception, 8/31/90)
Annual average 14.26%
10 years 92.45
Annual average 6.77
5 years -50.03
Annual average -12.95
1 year 7.05
Share value: NAV
6/30/04 $40.14
6/30/05 $42.97
Distributions: No. Income Capital gains Total
-- -- Long-term Short-term --
-- --
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Data represents past performance. Past performance does not guarantee 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. For the most recent month-end
performance, please visit www.putnaminvestments.com.
Performance assumes reinvestment of distributions and does not account for
taxes. Returns shown for class Y shares for periods prior to their inception
(7/19/94) 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. Returns have not been adjusted to reflect differences in
operating expenses which, for class Y shares, are lower than the operating
expenses applicable to class A shares. 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.
A short-term trading fee of up to 2% may apply.
Please see pages 15-16 of the accompanying shareholder report for a
discussion of the information appearing in the tables below:
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming actual returns for the 6 months ended 6/30/05
Class Y
Expenses paid per $1,000* $4.22
Ending value (after expenses) $1,003.30
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming a hypothetical 5% annualized return for the 6 months ended 6/30/05
Class Y
Expenses paid per $1,000* $4.26
Ending value (after expenses) $1,020.58
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EXPENSE RATIO COMPARISON USING ANNUALIZED DATA
Your fund's annualized expense ratio + 0.85%
Average annualized expense ratio for Lipper peer group ++ 1.32%
+ For the fund's most recent fiscal half year; may differ from expense
rations based on one-year data in financial highlights.
++ For class Y shares, Putnam has adjusted the Lipper total expense average
to reflect that class Y shares do not incur 12b-1 fees.
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Item 2. Code of Ethics:
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(a) All officers of the Fund, including its principal executive, financial and
accounting officers, are employees of Putnam Investment Management, LLC,
the Fund's investment manager. As such they are subject to a comprehensive
Code of Ethics adopted and administered by Putnam Investments which is
designed to protect the interests of the firm and its clients. The Fund
has adopted a Code of Ethics which incorporates the Code of Ethics of
Putnam Investments with respect to all of its officers and Trustees who are
employees of Putnam Investment Management, LLC. For this reason, the Fund
has not adopted a separate code of ethics governing its principal
executive, financial and accounting officers.
(c) In July 2004, Putnam Investment Management, LLC, the Fund's investment
manager, Putnam Retail Management Limited Partnership, the Fund's principal
underwriter, and Putnam Investments Limited, the sub-manager for a portion
of the assets of certain funds as determined by Putnam Management from time
to time, adopted several amendments to their Code of Ethics. Some of these
amendments were adopted as a result of Putnam Investment Management's
partial settlement order with the SEC on November 13, 2003. Insofar as such
Code of Ethics applies to the Fund's principal executive officer, principal
financial officer and principal accounting officer, the amendments provided
for the following: (i) a 90-day blackout period for all shares of Putnam
open-end funds (except for money market funds) purchased or sold (including
exchanges into or out of a fund) by Putnam employees and certain family
members; (ii) a one-year holding period for all access persons that operates
in the same manner as the 90-day rule; (iii) delivery by Putnam employees to
the Code of Ethics Administrator of both quarterly account statements for
all brokerage accounts (irrespective of activity in the accounts) and
account statements for any Putnam funds not held at Putnam or for any funds
sub-advised by Putnam; (iv) a prohibition of Putnam employees from making
more than 25 trades in individual securities in their personal accounts in
any given quarter; (v) the extension of the existing prohibition of access
persons from a purchase and sale or sale and purchase of an individual
security within 60 days to include trading based on tax-lot election; (vi)
the inclusion of trades in Marsh & McLennan Companies, Inc. (ultimate parent
company of Putnam Investment Management) securities in pre-clearance and
reporting requirements; (vii) a prohibition of limit and good-until-canceled
orders as inconsistent with the requirements of daily pre-clearance; (viii)
new limits and procedures for accounts managed by outside managers and
brokers, in order for trading in such accounts to be exempt from
pre-clearance requirements; (ix) a new gift and entertainment policy that
imposes a reporting obligation on all meals and entertainment and new limits
on non-meal entertainment; (x) a number of alternatives for the reporting of
irregular activity.
In December 2004, additional amendments to the Code of Ethics were adopted.
Insofar as such Code of Ethics applies to the Fund's principal executive
officer, principal financial officer and principal accounting officer, the
amendments provided for the following: (i) implementation of minimum
monetary sanctions for violations of the Code; (ii) expansion of the
definition of "access person" under the Code include all Putnam employees
with access to non-public information regarding Putnam-managed mutual fund
portfolio holdings; (iii) lengthening the period during which access persons
are required to complete quarterly reports; (iv) reducing the maximum number
of trades than can be made by Putnam employees in their personal accounts in
any calendar quarter from 25 trades to 10 trades; and (v) lengthening the
required holding period for securities by access persons from 60 days to 90
days.
In March 2005, additional amendments to the Code of Ethics were adopted,
that went into effect on April 1, 2005. Insofar as such Code of Ethics
applies to the Fund's principal executive officer, principal financial
officer and principal accounting officer, the amendments (i) prohibit Putnam
employees and their immediate family members from having any direct or
indirect personal financial interest in companies that do business with
Putnam (excluding investment holdings in public companies that are not
material to the employee), unless such interest is disclosed and approved by
the Code of Ethics Officer; (ii) prohibit Putnam employees from using Putnam
assets, letterhead or other resources in making political or campaign
contributions, solicitations or endorsements;(iii) require Putnam employees
to obtain pre-clearance of personal political or campaign contributions or
other gifts to government officials or political candidates in certain
jurisdictions and to officials or candidates with whom Putnam has or is
seeking to establish a business relationship and (iv) require Putnam
employees to obtain pre-approval from Putnam's Director of Government
Relations prior to engaging in lobbying activities.
Item 3. Audit Committee Financial Expert:
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The Funds' Audit and Pricing Committee is comprised solely of Trustees
who are "independent" (as such term has been defined by the Securities
and Exchange Commission ("SEC") in regulations implementing Section 407
of the Sarbanes-Oxley Act (the "Regulations")). The Trustees believe
that each of the members of the Audit and Pricing Committee also possess
a combination of knowledge and experience with respect to financial
accounting matters, as well as other attributes, that qualify them for
service on the Committee. In addition, the Trustees have determined
that all members of the Funds' Audit and Pricing Committee meet the
financial literacy requirements of the New York Stock Exchange's rules
and that Mr. Patterson, Mr. Stephens and Mr. Worley qualify as "audit
committee financial experts" (as such term has been defined by the
Regulations) based on their review of their pertinent experience and
education. Certain other Trustees, although not on the Audit and Pricing
Committee, would also qualify as "audit committee financial experts."
The SEC has stated that the designation or identification of a person as
an audit committee financial expert pursuant to this Item 3 of Form N-CSR
does not impose on such person any duties, obligations or liability that
are greater than the duties, obligations and liability imposed on such
person as a member of the Audit and Pricing Committee and the Board of
Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services:
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The following table presents fees billed in each of the last two fiscal
years for services rendered to the fund by the fund's independent auditors:
Fiscal year ended Audit Fees Audit-Related Fees Tax Fees All Other Fees
June 30, 2005 $108,521* $-- $3,408 $3,876
June 30, 2004 $96,366* $-- $3,868 $1,637
* Includes fees of $7,901 and $3,399 billed by the fund's independent
auditor to the fund for audit procedures necessitated by regulatory and
litigation matters for the fiscal years ended June 30, 2005 and June 30,
2004, respectively. These fees were reimbursed to the fund by Putnam.
For the fiscal years ended June 30, 2005 and June 30, 2004, the fund's
independent auditors billed aggregate non-audit fees in the amounts of $
197,609 and $ 139,133 respectively, to the fund, Putnam Management and any
entity controlling, controlled by or under common control with Putnam
Management that provides ongoing services to the fund.
Audit Fees represents fees billed for the fund's last two fiscal years.
Audit-Related Fees represents fees billed in the fund's last two fiscal
years for services traditionally performed by the fund's auditor, including
accounting consultation for proposed transactions or concerning financial
accounting and reporting standards and other audit or attest services not
required by statute or regulation.
Tax Fees represent fees billed in the fund's last two fiscal years for tax
compliance, tax planning and tax advice services. Tax planning and tax
advice services include assistance with tax audits, employee benefit plans
and requests for rulings or technical advice from taxing authorities.
All Other Fees Fees represent fees billed for services relating to an
analysis of recordkeeping fees and fund expense processing.
Pre-Approval Policies of the Audit and Pricing Committee. The Audit and
Pricing Committee of the Putnam funds has determined that, as a matter of
policy, all work performed for the funds by the funds' independent auditors
will be pre-approved by the Committee and will generally not be subject to
pre-approval procedures.
Under certain circumstances, the Audit and Pricing Committee believes that
it may be appropriate for Putnam Investment Management, LLC ("Putnam
Management") and certain of its affiliates to engage the services of the
funds' independent auditors, but only after prior approval by the Committee.
Such requests are required to be submitted in writing to the Committee and
explain, among other things, the nature of the proposed engagement, the
estimated fees, and why this work must be performed by that particular audit
firm. The Committee will review the proposed engagement at its next
meeting.
Since May 6, 2003, all work performed by the independent auditors for the
funds, Putnam Management and any entity controlling, controlled by or under
common control with Putnam Management that provides ongoing services to the
fund was pre-approved by the Committee or a member of the Committee pursuant
to the pre-approval policies discussed above. Prior to that date, the
Committee had a general policy to pre-approve the independent auditor's
engagements for non-audit services with the funds, Putnam Management and any
entity controlling, controlled by or under common control with Putnam
Management that provides ongoing services to the fund.
The following table presents fees billed by the fund's principal auditor for
services required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X.
Total
Audit-Related All Non-Audit
Fiscal year ended Fees Tax Fees Other Fees Fees
- ----------------- ------------- ---------- ----------- ----------
June 30, 2005 $-- $-- $-- $--
June 30, 2004 $-- $-- $-- $--
Item 5. Audit Committee:
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Not applicable
Item 6. Schedule of Investments:
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Not applicable
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End
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Management Investment Companies:
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Not applicable
Item 8. Purchases of Equity Securities by Closed-End Management Investment
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Companies and Affiliated Purchasers:
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Not applicable
Item 9. Submission of Matters to a Vote of Security Holders:
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Not applicable
Item 10. Controls and Procedures:
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(a) The registrant's principal executive officer and principal
financial officer have concluded, based on their evaluation of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures as of a date within 90 days of
the filing date of this report, that the design and operation of
such procedures are generally effective to provide reasonable
assurance that information required to be disclosed by the registrant
in this report is recorded, processed, summarized and reported within
the time periods specified in the Commission's rules and forms.
(b) Changes in internal control over financial reporting:
Not applicable
Item 11. Exhibits:
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(a) The Code of Ethics of The Putnam Funds, which incorporates the
Code of Ethics of Putnam Investments, is filed herewith.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act
of 2002 are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
---------------------------
Michael T. Healy
Principal Accounting Officer
Date: August 29, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By (Signature and Title): /s/Charles E. Porter
---------------------------
Charles E. Porter
Principal Executive Officer
Date: August 29, 2005
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: August 29, 2005