Putnam
New
Opportunities
Fund
Item 1. Report to Stockholders:
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The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
6-30-04
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From the Trustees
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John A. Hill and George Putnam, III
Dear Fellow Shareholder:
Over the past several months, Putnam has introduced a number of
voluntary reforms for the benefit of shareholders, including efforts to
add new disclosure about funds. We would like to call your attention to
new disclosures now being included in these reports. You can find
expense and risk comparison information for your fund in the pages
following the performance tables in the Performance Summary. The expense
information lets you estimate the amount you have paid for ongoing
expenses such as management fees and distribution (12b-1) fees and lets
you compare these with the average expenses for your fund's peer group,
as tracked by Lipper, an independent fund-rating company. The risk
comparison information illustrates your fund's risk relative to similar
funds as tracked by Morningstar, another independent fund-rating
company. We believe the expense and risk comparisons can serve as
valuable tools when you and your financial advisor make decisions about
your financial program. These enhancements to our reports are part of
our efforts to provide shareholders additional information about the
funds they own.
We are pleased to report that Putnam New Opportunities Fund delivered
healthy returns for the fiscal year ended June 30, 2004. During the
period, a broadening economic expansion underpinned an advance for
equity markets. You will find a detailed discussion of the fund's
performance in the following report.
As always, we appreciate your support of Putnam Investments.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
August 18, 2004
Report from Fund Management
Fund highlights
* Putnam New Opportunities Fund delivered solid performance over the
12-month period ended June 30, 2004, with class A shares posting returns
of 18.82% at net asset value (NAV) and 11.99% at public offering price
(POP).
* The fund's performance was below that of its benchmark, the Russell
Midcap Growth Index, which returned 27.33% for the period. This was
because the fund invests in a wider range of stocks than the index,
including those of larger-capitalization companies, which had more
moderate gains during the period.
* Due to declines in certain holdings, the fund's performance was below
the average return for the Lipper Multi-Cap Growth Funds category, which
was 20.53%.
* See the Performance Summary beginning on page 7 for complete fund
performance, comparative performance, and Lipper data.
Performance commentary
Your fund delivered solid returns on an absolute basis for the fiscal year
ended June 30, 2004. This was due to a recovering economy, a strong stock
market, particularly in the first half of the period, and gains in certain
software, telecommu nications, and semiconductor holdings. However, on a
relative basis, your fund's performance lagged that of its benchmark and the
average of funds in its peer group. This is primarily due to the fact that
large-company stocks in the portfolio did not perform as well as stocks of
small and midsize companies, such as those in the benchmark Russell Midcap
Growth Index. In addition, in the early months of the fiscal year, many of
the stocks that performed well were those of companies that did not meet our
quality criteria. Despite the market's preference for more speculative
stocks of smaller, less-established businesses, we remained focused on
companies with what we considered sound business models, proven management
teams, and a record of strong performance. This included stocks of large,
well-established companies, which delivered more moderate gains during most
of the fiscal year.
FUND PROFILE
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.
Market overview
Through most of the fund's fiscal year, major stock market indexes grew
steadily. Early in the period, corporate earnings reports and strong
gross domestic product (GDP) growth put investors in a positive frame of
mind. This optimism, along with continued evidence of sustained economic
growth, influenced the market through the close of the 2003 calendar
year. After the government's announcement that GDP had expanded at an
8.2% rate in the third quarter of 2003 and the Federal Reserve Board's
decision to hold interest rates steady, major market indexes posted
double-digit gains and ended the year in positive territory for the
first time since 1999. In addition, the Dow Jones Industrial Average
crossed the psychologically important 10,000 mark for the first time in
18 months.
In the early weeks of 2004, the market continued its climb, but then
began to lag as investors paused to assess the strength of the economy.
As the year progressed, market volatility intensified as already
cautious investors became nervous about rising interest rates, high
energy prices, the continued threat of terrorism, instability in Iraq,
and the potential for inflation. After three months of turbulence and
declines, stocks recovered slightly, then stayed flat in the final month
of the period as investors awaited quarterly earnings announcements and
digested the much-anticipated June 30 decision by the Fed to raise
short-term interest rates.
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MARKET SECTOR PERFORMANCE 12 MONTHS ENDED 6/30/04
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Equities
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Russell Midcap Growth Index (midsize-company growth stocks) 27.33%
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S&P 500 Index (broad stock market) 19.11%
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S&P 500/Barra Value Index (large-company value stocks) 22.26%
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MSCI EAFE Index (international stocks) 32.37%
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Bonds
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Lehman Aggregate Bond Index (broad bond market) 0.32%
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Lehman Government Bond Index (U.S. Treasury and agency
securities) -1.36%
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Citigroup World Government Bond Index (global government
bonds) 5.65%
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These indexes provide an overview of performance in different market
sectors for the 12 months ended 6/30/04.
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Strategy overview
Throughout your fund's fiscal year, we positioned the portfolio to take
advantage of the economic recovery. In the overall market, technology
stocks climbed through January, then struggled as investors assumed that
growth in this sector had already peaked. Technology represented the
largest portion of your fund's portfolio during the period, and we
believe these stocks still have room to grow, especially as competitive
businesses are compelled to boost their technology spending. The fund's
exposure to broadcasting stocks dampened performance during the fiscal
year. Although these stocks typically thrive in an improving economy as
advertising spending picks up, radio broadcasters were hurt as more
advertising dollars shifted to the Internet. During the period, we
reduced the fund's exposure to broadcasting stocks. Portfolio highlights
included stocks in the software, telecommunications, semiconductor, and
communications equipment industries.
While your fund's large-cap holdings detracted from performance, we
believe that the fund's ability to invest in companies of all sizes is
an advantage over time. We continued to use this "multi-cap" approach
during the period, targeting attractive investment opportunities across
a range of industries. In selecting companies, we look for
characteristics such as superior management, strong earnings growth
relative to other companies in the industry, sound business models,
market leadership in a particular sector, and a record of strong
performance.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY WEIGHTINGS COMPARED]
TOP INDUSTRY WEIGHTINGS COMPARED
as of 12/31/03 as of 6/30/04
Retail 12.4% 12.4%
Software 8.4% 9.5%
Electronics 10.4% 8.1%
Health-care services 7.2% 7.5%
Medical technology 4.6% 5.7%
Footnote reads:
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.
How fund holdings affected performance
Increased spending by consumers and businesses on anti-virus and other
security-related software helped boost the stock of Symantec, one of
your fund's top-performing holdings for the period. This California
software company offers products that help users -- from individuals
with PCs to businesses with more sophisticated technology
infrastructures -- secure and manage their computers. Also contributing
positively to fund performance relative to the benchmark was Marvell
Technology Group. This maker of computer chips has continued to grow
steadily and rapidly, and is a leader in two of the semiconductor
industry's major growth areas -- computer storage and broadband
communications. In the communications equipment sector, the stock of
Qualcomm, a leading supplier of cellular phone components, was a
performance highlight. The company's successful CDMA technology, which
is used for wireless communications and global positioning system (GPS)
products, has been gaining market share. Telecommunications stocks such
as American Tower flourished during the period as more wireless service
providers worked to improve the quality and capability of their
products. American Tower leases antenna space on communications towers
to wireless service providers, as well as to radio and TV broadcasters.
With more than 15,000 towers, the company benefited greatly from renewed
growth in tower rentals, primarily by wireless service providers.
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TOP HOLDINGS
(Percent of fund's net assets as of 6/30/04)
1 TJX Cos., Inc. (The) (1.3%)
Retail
2 Microsoft Corp. (1.3%)
Software
3 Marvell Technology Group, Ltd. (Bermuda) (1.3%)
Electronics
4 Juniper Networks, Inc. (1.3%)
Communications equipment
5 CDW Corp. (1.3%)
Commercial and consumer services
6 Pfizer, Inc. (1.2%)
Pharmaceuticals
7 Adobe Systems, Inc. (1.2%)
Software
8 Symantec Corp. (1.2%)
Software
9 Intel Corp. (1.1%)
Electronics
10 Fisher Scientific International, Inc. (1.1%)
Health-care services
The fund's holdings will change over time.
One disappointing market segment during the period was pharmaceuticals and
biotechnology, and especially the stocks of large industry leaders such as
Pfizer and Amgen. Within the health-care sector overall, a "speculative
rally" continued to play out during the period as investors showed a
preference for more risky stocks of less-established companies. However,
despite the recent weakness in large-cap drug company stocks, we believe
Pfizer and Amgen are fundamentally strong businesses that will perform well
as drug prescription trends improve. Also dampening performance in the
health-care sector was our decision not to include Biogen-Idec, a
biotechnology company, in the fund's portfolio. Biogen stock performed very
well, due in large part to the success of Rituxan, a treatment for
non-Hodgkin's lymphomas. Disappointing earnings news from QLogic, a computer
storage company, and Ryanair, a European discount airline, led to declines
in these fund holdings during the fiscal period. At the close of the period,
Ryanair remained in the portfolio, but Qlogic had been sold.
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 fund's management teams
The fund is managed by the Putnam Large-Cap Growth and Specialty Growth
teams. The members of the Specialty Growth Team are Daniel Miller
(Portfolio Leader), Richard Weed (Portfolio Member), Roland Gillis, and
Tony Sutton. The members of the Large-Cap Growth Team are Brian O'Toole
(Portfolio Member), Tony Elavia, Walt Pearson, and David Santos.
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.
Although a number of issues distracted investors as the period came to a
close, we remain optimistic about the outlook for the markets, the
economy, and the fund's holdings in the coming fiscal year. We believe
that nervousness and uncertainty about rising interest rates, inflation,
geopolitical instability, and the upcoming presidential election have
already been priced into stocks. At the same time, valuations for growth
stocks remain attractive, job creation and corporate earnings have been
better than expected, and corporate spending is improving.
We are positioning the fund with a focus on the business side of the
economy. As the economic recovery continues, we expect it will be led by
businesses, while spending by individual consumers may be slower as
interest rates and energy prices continue to be a concern. We see
attractive opportunities across most segments of the technology sector,
which continues to represent a significant portion of the fund's assets.
As always, your fund will remain diversified across the sectors and
stocks that we believe can reward investors over time.
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 to midsize companies. Such
investments increase the risk of greater price fluctuations.
Performance summary
This section shows your fund's performance during its fiscal year, which
ended June 30, 2004. 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.putnaminvestments.com.
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TOTAL RETURN FOR PERIODS ENDED 6/30/04
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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)
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NAV POP NAV CDSC NAV CDSC NAV POP NAV
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1 year 18.82% 11.99% 17.96% 12.96% 17.93% 16.93% 18.24% 14.10% 18.59%
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5 years -25.83 -30.10 -28.39 -29.52 -28.54 -28.54 -27.65 -30.18 -26.70
Annual average -5.80 -6.91 -6.46 -6.76 -6.50 -6.50 -6.27 -6.93 -6.02
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10 years 139.64 125.91 123.10 123.10 122.29 122.29 127.97 119.95 133.88
Annual average 9.13 8.49 8.36 8.36 8.32 8.32 8.59 8.20 8.87
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Annual average
(life of fund) 14.59 14.10 13.75 13.75 13.73 13.73 13.99 13.69 14.31
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Performance assumes reinvestment of distributions and does not account for
taxes. Returns at public offering price (POP) for class A and M shares
reflect a sales charge of 5.75% and 3.50%, respectively (which for class A
shares does not reflect a reduction in sales charges that went into effect
on January 28, 2004; 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 share returns 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 will be applied to shares exchanged or sold
within 5 days of purchase.
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 6/30/04
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Lipper Multi-Cap
Russell Midcap Growth Funds
Growth Index category average*
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1 year 27.33% 20.53%
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5 years 2.47 -11.55
Annual average 0.49 -3.22
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10 years 180.92 177.87
Annual average 10.88 10.31
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Annual average
(life of fund) 12.17 11.91
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Index and Lipper results should be compared to fund performance at net
asset value.
* Over the 1-, 5-, and 10-year periods ended 6/30/04, there were 434,
200, and 74 funds, respectively, in this Lipper category.
[GRAPHIC OMITTED: worm chart CHANGE IN THE VALUE OF A $10,000 INVESTMENT]
CHANGE IN THE VALUE OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment, 6/30/94 to 6/30/04
Fund's class A Russell Midcap
Date shares at POP Growth Index
6/30/94 9,425 10,000
6/30/95 12,854 12,643
6/30/96 18,681 15,625
6/30/97 19,477 18,374
6/30/98 25,856 22,786
6/30/99 30,461 27,415
6/30/00 48,885 40,736
6/30/01 27,816 27,900
6/30/02 18,718 20,552
6/30/03 19,014 22,063
6/30/04 $22,591 $28,092
Footnote reads:
Past performance does not indicate future results. At the end of the same
time period, a $10,000 investment in the fund's class B and class C shares
would have been valued at $22,310 and $22,229, 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 $22,797 ($21,995 at public
offering price). A $10,000 investment in the fund's class R shares would
have been valued at $23,388. See first page of performance section for
performance calculation method.
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PRICE AND DISTRIBUTION* INFORMATION 12 MONTHS ENDED 6/30/04
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Class A Class B Class C Class M Class R
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Share value: NAV POP NAV NAV NAV POP NAV
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6/30/03 $32.79 $34.79 $29.96 $31.79 $31.15 $32.28 $32.76
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6/30/04 38.96 41.12+ 35.34 37.49 36.83 38.17 38.85
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* The fund made no distributions during the period.
+ Reflects a reduction in sales charges that took effect on January 28, 2004.
Understanding 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, 2004, to
June 30, 2004. It also shows how much a $1,000 investment would be worth
at the close of the period, assuming actual returns and expenses.
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming actual returns for the 6 months ended 6/30/04
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Class A Class B Class C Class M Class R
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Expenses paid per $1,000* $6 $9 $9 $8 $7
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Ending value (after expenses) $1,033 $1,029 $1,029 $1,031 $1,032
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* 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 6/30/04. 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, 2004, use the calculation method below. To find the value of your
investment on January 1, 2004, go to www.putnaminvestments.com and log
on to your account. Click on the "Transaction History" tab in your Daily
Statement and enter 01/01/2004 in both the "from" and "to" fields.
Alternatively, call Putnam at 1-800-225-1581.
HOW TO CALCULATE THE EXPENSES YOU PAID
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Total
Value of your Expenses paid expenses
investment on 1/1/04 [DIV] $1,000 X per $1,000 = paid
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Example Based on a $10,000 investment in class A shares of your fund.
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$10,000 [DIV] $1,000 X $6 (see table above) = $60
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Comparing your fund's expenses with those of other funds
Using the SEC's method to compare expenses
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.
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming a hypothetical 5% annualized return for the 6 months ended 6/30/04
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Class A Class B Class C Class M Class R
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Expenses paid per
$1,000* $6 $9 $9 $8 $7
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Ending value (after
expenses) $1,019 $1,016 $1,016 $1,017 $1,018
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* 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 6/30/04.
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.
Using industry averages to compare expenses
You can also compare your fund's expenses with industry averages, as
determined 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.
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EXPENSE RATIO COMPARISONS USING ANNUALIZED DATA
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Class A Class B Class C Class M Class R
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Your fund's annualized
expense ratio+ 1.12% 1.87% 1.87% 1.62% 1.37%
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Average annualized expense
ratio for Lipper peer group++ 1.52% 2.27% 2.27% 2.02% 1.77%
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+ For the fund's most recent fiscal half year; may differ from expense
ratios based on one-year data in the financial highlights.
++ For class A shares, expenses shown represent the average of the expenses
of front-end load funds viewed by Lipper as having the same investment
classification or objective as the fund, calculated in accordance with
Lipper's standard reporting methodology for comparing expenses within a
given universe. All Lipper data is for the most recent fiscal periods
available as of 6/30/04. For class B, C, M and R shares, Putnam has
adjusted the Lipper total expense average to reflect higher 12b-1 fees
incurred by these classes of shares. The peer group may include funds that
are significantly larger or smaller than the fund, which may limit the
comparability of the fund's expenses to the Lipper average.
Risk comparison
As part of new initiatives to enhance disclosure, we are including a
risk comparison 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.
[GRAPHIC OMITTED: chart MORNINGSTAR [REGISTRATION MARK] RISK]
MORNINGSTAR [REGISTRATION MARK] RISK
Fund's Overall
Morningstar Risk 7.08
U.S. Stock
fund average 3.75
0% Increasing Risk 100%
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 6/30/04. A higher Overall
Morningstar Risk generally indicates that a fund's monthly returns have
varied more widely.
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.
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested
all distributions in the fund.
Net asset value (NAV) is the price, or value, of one share of a mutual
fund, without a sales charge. NAVs fluctuate with market conditions. 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 5.75% maximum sales charge for class A
shares (since reduced to 5.25%) and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B or C shares and assumes redemption at the
end of the period. Your fund's class B CDSC declines from a 5% maximum
during the first year to 1% during the sixth year. After the sixth year,
the CDSC no longer applies. The CDSC for class C shares is 1% for one
year after purchase.
Class A shares are generally subject to an initial sales charge and no
sales charge on redemption (except on certain redemptions of shares
bought without an initial sales charge).
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge only if the shares are
redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption (except on certain
redemptions of shares bought without an initial sales charge).
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
government bonds from 14 countries.
Lehman Aggregate Bond Index is an unmanaged index used as a general
measure of U.S. 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 international stocks from Europe, Australasia, and the Far East.
Russell Midcap Growth Index is an unmanaged index of all medium and
medium/small companies in the Russell 1000 Index chosen for their growth
orientation.
S&P 500/Barra Value Index is an unmanaged index of
capitalization-weighted stocks chosen for their value orientation.
S&P 500 Index is an unmanaged index of common stock performance.
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 results
at net asset value.
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.
Putnam is committed to managing our mutual funds in the best interests of
our shareholders. Our proxy voting guidelines and policies are available on
the Putnam Individual Investor Web site, www.putnaminvestments.com, by
calling Putnam's Shareholder Services at 1-800-225-1581, or on the
SEC's Web site, www.sec.gov.
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, 2004, 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, 2004, by correspondence with the custodian, provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 11, 2004
The fund's portfolio
June 30, 2004
Common stocks (99.1%) (a)
Number of shares Value
Advertising and Marketing Services (0.3%)
- -------------------------------------------------------------------------------
481,100 Lamar Advertising Co. (NON) $20,855,685
Aerospace and Defense (1.4%)
- -------------------------------------------------------------------------------
541,700 Alliant Techsystems, Inc. (NON) 34,311,278
776,100 Raytheon Co. 27,761,097
560,700 Rockwell Collins, Inc. 18,682,524
297,200 United Technologies Corp. 27,187,856
--------------
107,942,755
Airlines (0.4%)
- -------------------------------------------------------------------------------
442,055 Ryanair Holdings PLC ADR (Ireland)
(NON) 14,490,563
1,067,100 Southwest Airlines Co. 17,895,267
--------------
32,385,830
Automotive (0.7%)
- -------------------------------------------------------------------------------
436,000 CarMax, Inc. (NON) 9,535,320
607,600 Donaldson Co., Inc. 17,802,680
325,900 Gentex Corp. 12,931,712
308,400 Johnson Controls, Inc. 16,462,392
--------------
56,732,104
Banking (1.9%)
- -------------------------------------------------------------------------------
595,300 Investors Financial Services Corp. 25,943,174
148,022 M&T Bank Corp. 12,922,321
586,844 New York Community Bancorp, Inc. 11,519,748
652,100 North Fork Bancorp, Inc. 24,812,405
387,200 State Street Corp. 18,988,288
737,400 TCF Financial Corp. 42,806,070
144,200 Wells Fargo & Co. 8,252,566
--------------
145,244,572
Beverage (1.5%)
- -------------------------------------------------------------------------------
342,600 Coca-Cola Co. (The) 17,294,448
976,100 Coca-Cola Enterprises, Inc. 28,297,139
915,100 Pepsi Bottling Group, Inc. (The) 27,947,154
753,500 PepsiCo, Inc. 40,598,580
--------------
114,137,321
Biotechnology (4.4%)
- -------------------------------------------------------------------------------
588,200 Amgen, Inc. (NON) 32,098,074
1,838,361 Amylin Pharmaceuticals, Inc. (NON) 41,914,631
1,166,400 Celgene Corp. (NON) 66,788,064
174,000 Genentech, Inc. (NON) 9,778,800
742,700 Genzyme Corp. (NON) 35,151,991
345,300 Gilead Sciences, Inc. (NON) 23,135,100
387,100 IDEXX Laboratories, Inc. (NON) 24,364,074
169,200 Invitrogen Corp. (NON) 12,180,708
1,424,700 Ligand Pharmaceuticals, Inc. Class B
(NON) 24,761,286
735,900 Medicines Co. (NON) 22,452,309
283,790 Neurocrine Biosciences, Inc. (NON) 14,714,512
539,100 OSI Pharmaceuticals, Inc. (NON) 37,974,204
--------------
345,313,753
Broadcasting (0.7%)
- -------------------------------------------------------------------------------
798,300 Entercom Communications Corp. (NON) 29,776,590
1,230,100 Westwood One, Inc. (NON) 29,276,380
--------------
59,052,970
Building Materials (0.2%)
- -------------------------------------------------------------------------------
372,600 American Standard Cos., Inc. (NON) 15,019,506
Capital Goods (0.3%)
- -------------------------------------------------------------------------------
329,600 Eaton Corp. 21,338,304
Chemicals (0.2%)
- -------------------------------------------------------------------------------
577,300 Engelhard Corp. 18,652,563
Coal (0.2%)
- -------------------------------------------------------------------------------
402,900 CONSOL Energy, Inc. 14,504,400
Commercial and Consumer Services (3.0%)
- -------------------------------------------------------------------------------
1,525,600 CDW Corp. 97,272,256
680,933 Choicepoint, Inc. (NON) 31,091,401
660,623 Cintas Corp. 31,491,898
101,600 eBay, Inc. (NON) 9,342,120
500,800 Manpower, Inc. 25,425,616
662,861 Robert Half International, Inc. 19,733,372
467,400 Yahoo!, Inc. (NON) 16,980,642
--------------
231,337,305
Communications Equipment (5.3%)
- -------------------------------------------------------------------------------
1,122,907 ADTRAN, Inc. 37,471,407
881,300 Andrew Corp. (NON) 17,634,813
899,300 Aspect Communications Corp. (NON) 12,770,060
1,729,100 Avaya, Inc. (NON) 27,302,489
3,203,700 CIENA Corp. (NON) 11,917,764
3,192,000 Cisco Systems, Inc. (NON) 75,650,400
735,900 Comverse Technology, Inc. (NON) 14,673,846
3,054,700 Foundry Networks, Inc. (NON) 42,979,629
365,500 Harris Corp. 18,549,125
4,054,391 Juniper Networks, Inc. (NON) 99,616,387
533,500 Qualcomm, Inc. 38,934,830
499,100 Scientific-Atlanta, Inc. 17,218,950
--------------
414,719,700
Computers (2.7%)
- -------------------------------------------------------------------------------
487,900 Dell, Inc. (NON) 17,476,578
395,000 Hewlett-Packard Co. 8,334,500
709,100 Lexmark International, Inc. (NON) 68,449,423
604,800 NCR Corp. (NON) 29,992,032
2,174,100 Network Appliance, Inc. (NON) 46,808,373
512,100 PalmOne, Inc. (NON) 17,805,717
1,412,000 Seagate Technology (Cayman Islands)
(NON) 20,375,160
--------------
209,241,783
Conglomerates (1.2%)
- -------------------------------------------------------------------------------
1,408,600 General Electric Co. 45,638,640
378,100 Danaher Corp. 19,604,485
359,300 Harman International Industries,
Inc. 32,696,300
--------------
97,939,425
Consumer Cyclicals (0.2%)
- -------------------------------------------------------------------------------
296,600 Black & Decker Manufacturing Co. 18,427,758
Consumer Finance (0.8%)
- -------------------------------------------------------------------------------
1,309,100 AmeriCredit Corp. (NON) 25,566,723
257,200 Capital One Financial Corp. 17,587,336
632,700 MBNA Corp. 16,317,333
--------------
59,471,392
Consumer Goods (1.3%)
- -------------------------------------------------------------------------------
713,200 Avon Products, Inc. 32,907,048
159,300 Fortune Brands, Inc. 12,015,999
85,100 Gillette Co. (The) 3,608,240
1,209,600 Newell Rubbermaid, Inc. 28,425,600
447,400 Procter & Gamble Co. 24,356,456
--------------
101,313,343
Consumer Services (0.7%)
- -------------------------------------------------------------------------------
842,725 Alliance Data Systems Corp. (NON) 35,605,131
273,000 Getty Images, Inc. (Canada) (NON) 16,380,000
--------------
51,985,131
Containers (0.2%)
- -------------------------------------------------------------------------------
247,400 Ball Corp. 17,825,170
Electronics (8.1%)
- -------------------------------------------------------------------------------
13,590,736 Agere Systems, Inc. Class A (NON) 31,258,693
842,500 Arrow Electronics, Inc. (NON) 22,595,850
453,800 Broadcom Corp. Class A (NON) 21,224,226
733,900 Brooks Automation, Inc. (NON) 14,788,085
805,200 Fairchild Semiconductor Corp. Class
A (NON) 13,181,124
675,900 Integrated Circuit Systems, Inc.
(NON) 18,357,444
2,041,800 Integrated Device Technology, Inc.
(NON) 28,258,512
3,000,900 Intel Corp. (SEG) 82,824,840
272,600 International Rectifier Corp. (NON) 11,291,092
3,114,300 Intersil Corp. Class A 67,455,738
1,011,600 Jabil Circuit, Inc. (NON) 25,472,088
481,500 Linear Technology Corp. 19,004,805
3,768,486 Marvell Technology Group, Ltd.
(Bermuda) (NON) 100,618,576
371,900 Maxim Integrated Products, Inc. 19,494,998
859,100 Microchip Technology, Inc. 27,096,014
171,600 Motorola, Inc. 3,131,700
853,800 PerkinElmer, Inc. 17,110,152
4,954,420 Skyworks Solutions, Inc. (NON) 43,252,087
853,800 Storage Technology Corp. (NON) 24,760,200
1,074,900 Texas Instruments, Inc. 25,991,082
397,700 Xilinx, Inc. 13,247,387
--------------
630,414,693
Energy (2.8%)
- -------------------------------------------------------------------------------
1,022,200 BJ Services Co. (NON) 46,857,648
1,170,800 ENSCO International, Inc. 34,070,280
621,859 GlobalSantaFe Corp. (Cayman Islands) 16,479,264
579,600 Nabors Industries, Ltd. (Bermuda)
(NON) 26,209,512
608,000 National-Oilwell, Inc. (NON) 19,145,920
822,500 Patterson-UTI Energy, Inc. 27,479,725
396,100 Precision Drilling Corp. (Canada)
(NON) 19,016,761
572,700 Smith International, Inc. (NON) 31,933,752
--------------
221,192,862
Financial (1.7%)
- -------------------------------------------------------------------------------
239,200 Chicago Mercantile Exchange 34,533,304
742,400 Citigroup, Inc. 34,521,600
420,200 Fannie Mae 29,985,472
525,000 Moody's Corp. 33,946,500
--------------
132,986,876
Gaming & Lottery (1.8%)
- -------------------------------------------------------------------------------
423,700 GTECH Holdings Corp. 19,621,547
1,056,500 Harrah's Entertainment, Inc. 57,156,650
959,400 International Game Technology 37,032,840
552,000 MGM Mirage, Inc. (NON) 25,910,880
--------------
139,721,917
Health Care Services (7.5%)
- -------------------------------------------------------------------------------
439,300 AmerisourceBergen Corp. 26,261,354
324,700 Cardinal Health, Inc. 22,745,235
2,278,295 Caremark Rx, Inc. (NON) 75,047,037
1,825,600 Community Health Systems, Inc. (NON) 48,871,312
622,300 Coventry Health Care, Inc. (NON) 30,430,470
165,000 Express Scripts, Inc. Class A (NON) 13,072,950
1,422,800 Fisher Scientific International,
Inc. (NON) 82,166,700
2,348,400 Health Management Associates, Inc. 52,651,128
605,100 Henry Schein, Inc. (NON) 38,206,014
978,300 IMS Health, Inc. 22,931,352
747,800 Manor Care, Inc. 24,438,104
1,059,700 McKesson Corp. 36,379,501
497,800 Omnicare, Inc. 21,310,818
467,300 UnitedHealth Group, Inc. 29,089,425
277,826 Universal Health Services, Inc.
Class B 12,749,435
467,400 VCA Antech, Inc. (NON) 20,948,868
560,100 WellChoice, Inc. (NON) 23,188,140
--------------
580,487,843
Homebuilding (0.8%)
- -------------------------------------------------------------------------------
224,200 Centex Corp. 10,257,150
312,400 Lennar Corp. 13,970,528
55,300 NVR, Inc. (NON) 26,776,260
176,600 Ryland Group, Inc. 13,810,120
--------------
64,814,058
Industrial (0.4%)
- -------------------------------------------------------------------------------
374,500 3M Co. 33,708,745
Insurance (1.1%)
- -------------------------------------------------------------------------------
378,700 American International Group, Inc. 26,993,736
734,500 Everest Re Group, Ltd. (Barbados) 59,024,420
--------------
86,018,156
Investment Banking/Brokerage (1.5%)
- -------------------------------------------------------------------------------
4,182,900 Ameritrade Holding Corp. Class A
(NON) 47,475,915
1,723,400 E*Trade Group, Inc. (NON) 19,215,910
455,100 Eaton Vance Corp. 17,389,371
201,200 Legg Mason, Inc. 18,311,212
332,865 T. Rowe Price Group, Inc. 16,776,396
--------------
119,168,804
Lodging/Tourism (1.4%)
- -------------------------------------------------------------------------------
2,275,700 Hilton Hotels Corp. 42,464,562
727,500 Marriott International, Inc. Class A 36,287,700
774,100 Starwood Hotels & Resorts Worldwide,
Inc. 34,718,385
--------------
113,470,647
Medical Technology (5.7%)
- -------------------------------------------------------------------------------
737,950 Apogent Technologies, Inc. (NON) 23,614,400
504,800 Bausch & Lomb, Inc. 32,847,336
574,100 Becton, Dickinson and Co. 29,738,380
1,073,600 Biomet, Inc. 47,710,784
516,800 Charles River Laboratories
International, Inc. (NON) 25,256,016
275,300 Guidant Corp. 15,383,764
98,200 Kinetic Concepts, Inc. (NON) 4,900,180
457,000 Medtronic, Inc. 22,265,040
1,033,100 St. Jude Medical, Inc. (NON) 78,154,015
830,900 Varian Medical Systems, Inc. (NON) 65,931,915
524,400 Waters Corp. (NON) 25,055,832
793,100 Zimmer Holdings, Inc. (NON) 69,951,420
--------------
440,809,082
Natural Gas Utilities (0.5%)
- -------------------------------------------------------------------------------
664,100 Kinder Morgan, Inc. 39,374,489
Oil & Gas (1.6%)
- -------------------------------------------------------------------------------
723,330 Apache Corp. 31,501,022
563,200 Canadian Natural Resources, Ltd.
(Canada) 16,839,680
1,233,900 Chesapeake Energy Corp. 18,163,008
497,200 Noble Corp. (Cayman Islands) (NON) 18,838,908
302,800 Noble Energy, Inc. 15,442,800
709,825 XTO Energy, Inc. 21,145,687
--------------
121,931,105
Pharmaceuticals (4.7%)
- -------------------------------------------------------------------------------
688,700 Abbott Laboratories 28,071,412
210,000 Allergan, Inc. 18,799,200
629,850 Barr Pharmaceuticals, Inc. (NON) 21,225,945
923,200 Cephalon, Inc. (NON) 49,852,800
392,000 Forest Laboratories, Inc. (NON) 22,198,960
703,200 Johnson & Johnson 39,168,240
1,471,500 King Pharmaceuticals, Inc. (NON) 16,848,675
2,559,800 Mylan Laboratories, Inc. 51,835,950
2,777,700 Pfizer, Inc. 95,219,556
545,900 Wyeth 19,739,744
--------------
362,960,482
Photography/Imaging (0.3%)
- -------------------------------------------------------------------------------
1,339,700 Xerox Corp. (NON) 19,425,650
Restaurants (0.3%)
- -------------------------------------------------------------------------------
545,800 Starbucks Corp. (NON) 23,731,384
Retail (12.4%)
- -------------------------------------------------------------------------------
1,139,100 Abercrombie & Fitch Co. Class A 44,140,125
1,723,500 Advance Auto Parts, Inc. (NON) 76,144,230
807,100 American Eagle Outfitters, Inc.
(NON) 23,333,261
522,600 Barnes & Noble, Inc. (NON) 17,757,948
358,602 Best Buy Co., Inc. 18,195,415
770,600 Borders Group, Inc. 18,062,864
453,600 Chico's FAS, Inc. (NON) 20,484,576
844,800 Coach, Inc. (NON) 38,176,512
297,500 Costco Wholesale Corp. 12,218,325
1,477,000 Family Dollar Stores, Inc. 44,930,340
1,094,600 Home Depot, Inc. (The) 38,529,920
162,200 Kohl's Corp. (NON) 6,857,816
796,000 Lowe's Cos., Inc. 41,829,800
878,050 Michaels Stores, Inc. 48,292,750
671,500 NBTY, Inc. (NON) 19,735,385
584,000 Nordstrom, Inc. 24,884,240
1,056,565 PETCO Animal Supplies, Inc. (NON) 34,031,959
1,482,800 PETsMART, Inc. 48,116,860
911,400 RadioShack Corp. 26,093,382
570,200 Regis Corp. 25,425,218
1,045,600 Rent-A-Center, Inc. (NON) 31,294,808
1,589,300 Ross Stores, Inc. 42,529,668
2,210,900 Staples, Inc. 64,801,479
172,800 Target Corp. 7,338,816
4,344,900 TJX Cos., Inc. (The) 104,885,886
1,158,800 Wal-Mart Stores, Inc. 61,138,288
857,200 Williams-Sonoma, Inc. (NON) 28,253,312
--------------
967,483,183
Schools (2.1%)
- -------------------------------------------------------------------------------
272,800 Apollo Group, Inc. Class A (NON) 24,085,512
1,774,100 Career Education Corp. (NON) 80,827,996
1,159,600 Corinthian Colleges, Inc. (NON) 28,688,504
370,500 ITT Educational Services, Inc. (NON) 14,086,410
219,700 University of Phoenix Online (NON) 19,243,523
--------------
166,931,945
Semiconductor (1.5%)
- -------------------------------------------------------------------------------
433,500 Cognex Corp. 16,681,080
365,300 KLA-Tencor Corp. (NON) 18,038,514
2,976,800 Lam Research Corp. (NON) 79,778,240
--------------
114,497,834
Shipping (1.6%)
- -------------------------------------------------------------------------------
910,900 Expeditors International of
Washington, Inc. 45,007,569
1,020,300 J. B. Hunt Transport Services, Inc. 39,363,174
317,100 Ryder System, Inc. 12,706,197
1,206,150 Werner Enterprises, Inc. 25,449,765
--------------
122,526,705
Software (9.5%)
- -------------------------------------------------------------------------------
1,980,400 Adobe Systems, Inc. 92,088,600
3,218,300 Amdocs, Ltd. (Guernsey) (NON) 75,404,769
805,300 Autodesk, Inc. 34,474,893
536,800 Avid Technology, Inc. (NON) 29,293,176
1,272,900 BMC Software, Inc. (NON) 23,548,650
1,296,100 Check Point Software Technologies,
Ltd. (Israel) (NON) 34,981,739
2,804,400 Citrix Systems, Inc. (NON) 57,097,584
1,267,600 Cognos, Inc. (Canada) (NON) 45,836,416
367,500 Intuit, Inc. (NON) 14,178,150
1,151,600 Mercury Interactive Corp. (NON) 57,384,228
3,536,900 Microsoft Corp. (SEG) 101,013,864
1,550,200 Oracle Corp. (NON) 18,493,886
1,168,400 PeopleSoft, Inc. (NON) 21,615,400
2,070,000 Symantec Corp. (NON) 90,624,600
1,468,500 Veritas Software Corp. (NON) 40,677,450
--------------
736,713,405
Technology Services (1.7%)
- -------------------------------------------------------------------------------
616,700 Ask Jeeves, Inc. (NON) 24,069,801
1,642,400 Cognizant Technology Solutions Corp.
(NON) 41,733,384
469,900 Equifax, Inc. 11,630,025
1,098,700 Fiserv, Inc. (NON) 42,728,443
628,900 VeriSign, Inc. (NON) 12,515,110
--------------
132,676,763
Telecommunications (1.5%)
- -------------------------------------------------------------------------------
4,488,700 American Tower Corp. Class A (NON) 68,228,240
3,101,760 Crown Castle International Corp.
(NON) 45,750,966
--------------
113,979,206
Textiles (0.2%)
- -------------------------------------------------------------------------------
162,800 Nike, Inc. 12,332,100
Tobacco (0.3%)
- -------------------------------------------------------------------------------
529,100 Altria Group, Inc. 26,481,455
Waste Management (0.5%)
- -------------------------------------------------------------------------------
823,800 Stericycle, Inc. (NON) 42,623,412
--------------
Total Common stocks
(cost $6,560,004,426) $7,719,903,571
Short-term investments (1.7%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$60,705,000 Interest in $350,000,000 joint
tri-party repurchase agreement
dated June 30, 2004 with Bank of
America Securities, LLC due July 1,
2004 with respect to various U.S.
Government obligations -- maturity
value of $60,707,529 for an
effective yield of 1.5% $60,705,000
71,019,975 Putnam Prime Money Market Fund (e) 71,019,975
--------------
Total Short-term investments
(cost $131,724,975) $131,724,975
- -------------------------------------------------------------------------------
Total Investments
(cost $6,691,729,401) $7,851,628,546
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $7,789,860,162.
(NON) Non-income-producing security.
(SEG) A portion of this security was pledged and segregated with the
custodian to cover margin requirements for futures contracts and written
options at June 30, 2004.
(e) See Note 5 to the financial statements regarding investments in the
Putnam Prime Money Market Fund.
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 June 30, 2004
Aggregate Expiration Unrealized
Value face value date appreciation
- -------------------------------------------------------------------------
S&P 500 Index (Long) $855,300 $849,011 Sep-04 $6,289
- -------------------------------------------------------------------------
Written options outstanding at June 30, 2004
(premium received $281,528)
Expiration
Contract date/
Amount Strike price Value
- -------------------------------------------------------------------------
133,682 Career Education Corp. (Call) Jul. 04/$76.26 $--
174,641 Foundry Networks, Inc. (Call) Jul. 04/$14.65 73,349
58,243 Intersil Corp. (Call) Jul. 04/$21.46 51,254
110,448 Juniper Networks, Inc. (Put) Jul. 04/$18.67 9,222
89,296 Symantec Corp. (Call) Jul. 04/$49.55 9
- -------------------------------------------------------------------------
$133,834
- -------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of assets and liabilities
June 30, 2004
Assets
- -------------------------------------------------------------------------------
Investment in securities, at value (Note 1):
- -------------------------------------------------------------------------------
Unaffiliated Issuers (identified cost $6,620,709,426) $7,780,608,571
- -------------------------------------------------------------------------------
Affiliated Issuers (identified cost $71,019,975) (Note 5) 71,019,975
- -------------------------------------------------------------------------------
Cash 2,803,276
- -------------------------------------------------------------------------------
Dividends, interest and other receivables 2,610,583
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,145,553
- -------------------------------------------------------------------------------
Receivable for securities sold 171,578,883
- -------------------------------------------------------------------------------
Receivable for variation margin (Note 1) 239,388
- -------------------------------------------------------------------------------
Total assets 8,030,006,229
Liabilities
- -------------------------------------------------------------------------------
Payable for securities purchased 113,088,290
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 107,903,339
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 10,354,658
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 2,005,769
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 809,876
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 5,214
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 4,754,975
- -------------------------------------------------------------------------------
Written options outstanding, at value (premiums received
$281,528) (Note 1) 133,834
- -------------------------------------------------------------------------------
Other accrued expenses 1,090,112
- -------------------------------------------------------------------------------
Total liabilities 240,146,067
- -------------------------------------------------------------------------------
Net assets $7,789,860,162
Represented by
- -------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $12,163,217,986
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (Note 1) (5,533,411,685)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 1,160,053,861
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $7,789,860,162
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($5,075,005,028 divided by 130,253,882 shares) $38.96
- -------------------------------------------------------------------------------
Offering price per class A share (100/94.75 of $38.96)* $41.12
- -------------------------------------------------------------------------------
Net asset value and offering price per class B share
($1,674,238,176 divided by 47,379,569 shares)** $35.34
- -------------------------------------------------------------------------------
Net asset value and offering price per class C share
($55,005,094 divided by 1,467,130 shares)** $37.49
- -------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($134,156,670 divided by 3,642,299 shares) $36.83
- -------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $36.83)* $38.17
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class R share ($25,184 divided by 648 shares) $38.85
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class Y share ($851,430,010 divided by 21,212,149 shares) $40.14
- -------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial
statements.
Statement of operations
Year ended June 30, 2004
Investment income:
- -------------------------------------------------------------------------------
Dividends (net of foreign tax of $67,485) $46,120,842
- -------------------------------------------------------------------------------
Interest (including interest income of $110,983 from
investments in affiliated issuers) (Note 5) 1,067,123
- -------------------------------------------------------------------------------
Total investment income 47,187,965
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 45,959,965
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 26,288,645
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 156,443
- -------------------------------------------------------------------------------
Administrative services (Note 2) 58,869
- -------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 14,751,943
- -------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 18,379,074
- -------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 623,070
- -------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 1,189,976
- -------------------------------------------------------------------------------
Distribution fees -- Class R (Note 2) 29
- -------------------------------------------------------------------------------
Other 3,328,530
- -------------------------------------------------------------------------------
Non-recurring costs (Note 6) 243,554
- -------------------------------------------------------------------------------
Costs assumed by Manager (Note 6) (243,554)
- -------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 5) (19,413)
- -------------------------------------------------------------------------------
Total expenses 110,717,131
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (4,292,522)
- -------------------------------------------------------------------------------
Net expenses 106,424,609
- -------------------------------------------------------------------------------
Net investment loss (59,236,644)
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 1,629,606,059
- -------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (3,367,489)
- -------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 2,364
- -------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 1,454,613
- -------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the year 453
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments, futures
contracts, and written options during the year 34,872,254
- -------------------------------------------------------------------------------
Net gain on investments 1,662,568,254
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,603,331,610
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of changes in net assets
Year ended June 30
- -------------------------------------------------------------------------------
Decrease in net assets 2004 2003
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment loss $(59,236,644) $(67,267,773)
- -------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions 1,627,695,547 (1,804,402,307)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign
currencies 34,872,707 1,700,587,081
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 1,603,331,610 (171,082,999)
- -------------------------------------------------------------------------------
Decrease from capital share transactions
(Note 4) (3,093,014,749) (2,445,455,367)
- -------------------------------------------------------------------------------
Total decrease in net assets (1,489,683,139) (2,616,538,366)
Net assets
- -------------------------------------------------------------------------------
Beginning of year 9,279,543,301 11,896,081,667
- -------------------------------------------------------------------------------
End of year $7,789,860,162 $9,279,543,301
- -------------------------------------------------------------------------------
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 Year ended June 30
operating performance 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $32.79 $32.28 $47.97 $96.61 $65.61
- -------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------
Net investment loss (a) (.19)(d) (.17) (.22) (.37) (.54)
- -------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 6.36 .68 (15.47) (38.81) 38.84
- -------------------------------------------------------------------------------------------------------------
Total from
investment operations 6.17 .51 (15.69) (39.18) 38.30
- -------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (9.46) (7.30)
- -------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- (9.46) (7.30)
- -------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $38.96 $32.79 $32.28 $47.97 $96.61
- -------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 18.82 1.58 (32.71) (43.10) 60.49
- -------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $5,075,005 $6,262,164 $7,683,016 $12,595,034 $21,138,863
- -------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.09 (d) 1.09 .98 .89 .86
- -------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.52)(d) (.57) (.57) (.55) (.64)
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 60.86 42.43 76.67 67.74 53.13
- -------------------------------------------------------------------------------------------------------------
(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 an expense limitation in effect during the period. As a
result of such limitation, the expenses of the fund for the period ended
June 30, 2004 reflect a reduction of less than .01% of average net
assets for class A shares (Note 5).
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 Year ended June 30
operating performance 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $29.96 $29.72 $44.50 $91.07 $62.51
- -------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------
Net investment loss (a) (.43)(d) (.36) (.48) (.77) (.98)
- -------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 5.81 .60 (14.30) (36.34) 36.84
- -------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.38 .24 (14.78) (37.11) 35.86
- -------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (9.46) (7.30)
- -------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- (9.46) (7.30)
- -------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $35.34 $29.96 $29.72 $44.50 $91.07
- -------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 17.96 0.81 (33.21) (43.48) 59.53
- -------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,674,238 $1,850,775 $2,739,100 $6,137,938 $12,343,996
- -------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.84 (d) 1.84 1.73 1.53 1.46
- -------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (1.27)(d) (1.33) (1.32) (1.19) (1.24)
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 60.86 42.43 76.67 67.74 53.13
- -------------------------------------------------------------------------------------------------------------
(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 an expense limitation in effect during the period. As a
result of such limitation, the expenses of the fund for the period ended
June 30, 2004 reflect a reduction of less than .01% of average net
assets for class B shares (Note 5).
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS C
- -------------------------------------------------------------------------------------------------------------
For the
period
July 26,
1999+ to
Per-share Year ended June 30 June 30
operating performance 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $31.79 $31.53 $47.21 $95.94 $65.31
- -------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------
Net investment loss (a) (.45)(d) (.37) (.50) (.82) (1.13)
- -------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 6.15 .63 (15.18) (38.45) 39.06
- -------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.70 .26 (15.68) (39.27) 37.93
- -------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (9.46) (7.30)
- -------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- (9.46) (7.30)
- -------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $37.49 $31.79 $31.53 $47.21 $95.94
- -------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 17.93 0.83 (33.21) (43.53) 60.14*
- -------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $55,005 $64,015 $79,149 $136,417 $118,720
- -------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.84 (d) 1.84 1.73 1.64 1.50*
- -------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (1.27)(d) (1.32) (1.32) (1.29) (1.30)*
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 60.86 42.43 76.67 67.74 53.13
- --------------------------------------------------------------------------------------------------------------
+ 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 and does not reflect the
effect of sales charges.
(c) Includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(d) Reflects an expense limitation in effect during the period. As a
result of such limitation, the expenses of the fund for the period ended
June 30, 2004 reflect a reduction of less than .01% of average net
assets for class C shares (Note 5).
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 Year ended June 30
operating performance 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $31.15 $30.82 $46.03 $93.63 $64.05
- -------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------
Net investment loss (a) (.36)(d) (.30) (.40) (.69) (.93)
- -------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 6.04 .63 (14.81) (37.45) 37.81
- -------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.68 .33 (15.21) (38.14) 36.88
- -------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (9.46) (7.30)
- -------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- (9.46) (7.30)
- -------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $36.83 $31.15 $30.82 $46.03 $93.63
- -------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 18.24 1.07 (33.04) (43.38) 59.71
- -------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $134,157 $171,675 $223,964 $411,251 $770,194
- -------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.59 (d) 1.59 1.48 1.39 1.36
- -------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (1.02)(d) (1.07) (1.07) (1.05) (1.14)
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 60.86 42.43 76.67 67.74 53.13
- -------------------------------------------------------------------------------------------------------------
(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 an expense limitation in effect during the period. As a
result of such limitation, the expenses of the fund for the period ended
June 30, 2004 reflect a reduction of less than .01% of average net
assets for class M shares (Note 5).
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS R
- -------------------------------------------------------------------------
For the
period
Year January 21,
ended 2003+ to
Per-share June 30 June 30
operating performance 2004 2003
- -------------------------------------------------------------------------
Net asset value,
beginning of period $32.76 $28.90
- -------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------
Net investment loss (a) (.27)(d) (.10)
- -------------------------------------------------------------------------
Net realized and unrealized
gain on investments 6.36 3.96
- -------------------------------------------------------------------------
Total from
investment operations 6.09 3.86
- -------------------------------------------------------------------------
Net asset value,
end of period $38.85 $32.76
- -------------------------------------------------------------------------
Total return at
net asset value (%)(b) 18.59 13.36*
- -------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------
Net assets, end of period
(in thousands) $25 $1
- -------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.34 (d) .59*
- -------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.76)(d) (.36)*
- -------------------------------------------------------------------------
Portfolio turnover (%) 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 an expense limitation in effect during the period. As a
result of such limitation, the expenses of the fund for the period ended
June 30, 2004 reflect a reduction of less than .01% of average net
assets for class R shares (Note 5).
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 Year ended June 30
operating performance 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $33.70 $33.09 $49.05 $98.28 $66.49
- -------------------------------------------------------------------------------------------------------------
Investment operations:
- -------------------------------------------------------------------------------------------------------------
Net investment loss (a) (.10)(d) (.10) (.13) (.21) (.34)
- -------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 6.54 .71 (15.83) (39.56) 39.43
- -------------------------------------------------------------------------------------------------------------
Total from
investment operations 6.44 .61 (15.96) (39.77) 39.09
- -------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (9.46) (7.30)
- -------------------------------------------------------------------------------------------------------------
Total distributions -- -- -- (9.46) (7.30)
- -------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $40.14 $33.70 $33.09 $49.05 $98.28
- -------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 19.11 1.85 (32.54) (42.96) 60.88
- -------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $851,430 $930,912 $1,170,852 $1,703,399 $2,684,761
- -------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .84 (d) .84 .73 .64 .61
- -------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.27)(d) (.33) (.32) (.30) (.39)
- -------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 60.86 42.43 76.67 67.74 53.13
- -------------------------------------------------------------------------------------------------------------
(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 an expense limitation in effect during the period. As a
result of such limitation, the expenses of the fund for the period ended
June 30, 2004 reflect a reduction of less than .01% of average net
assets for class Y shares (Note 5).
The accompanying notes are an integral part of these financial
statements.
Notes to financial statements
June 30, 2004
Note 1
Significant accounting policies
Putnam New Opportunities Fund ("the fund") 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 shares are sold with a maximum front-end sales charge of
5.25%. Prior to January 28, 2004, the maximum front-end sales charge for
class A shares was 5.75%. Class B shares, which convert to class A
shares after approximately eight years, do not pay a front-end sales
charge but pay a higher ongoing distribution fee than class A class M
and class R shares, and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class
C shares are subject to the same fees and expenses as class B shares,
except that class C shares have a one-year 1.00% contingent deferred
sales charge and do not convert to class A shares. Class M shares are
sold with a maximum front-end sales charge of 3.50% and pay an ongoing
distribution fee that is higher than class A shares but lower than class
B and class C shares. Class R shares are sold without a front end sales
charge and pay an ongoing distribution fee that is higher than class A
shares, but lower than class B, class C and class M shares. Class R
shares are offered to qualified employee-benefit plans. 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.
Effective April 19, 2004 (May 3, 2004 for defined contribution plans
administered by Putnam) 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. Total redemption fees received by the fund
for the year ended June 30, 2004, were $1,447.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with 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 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 The fund may transfer uninvested cash balances,
including cash collateral received under security lending arrangements,
into a joint trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam
Management. These balances may be invested in issuers of high-grade
short-term investments having maturities of up to 397 days for
collateral received under security lending arrangements and up to 90
days for other cash investments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be 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.
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
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) Line of credit During the period, the fund was entered into a
committed line of credit with certain banks. The line of credit
agreement included restrictions that the fund would maintain an asset
coverage ratio of at least 300% and that borrowings would not exceed
prospectus limitations. For the period ended August 6, 2003 the fund had
no borrowings against the line of credit. Effective August 6, 2003, the
fund no longer participated in a committed line of credit.
H) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986 (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, 2004 the fund had a capital loss carryover of $5,515,781,251
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
- -------------------------------
$3,739,293,333 June 30, 2010
1,776,487,918 June 30, 2011
I) 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, 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, 2004,
the fund reclassified $59,236,644 to decrease accumulated net investment
loss and $59,234,279 to decrease paid-in-capital, with an increase to
accumulated net realized loss of $2,365.
The tax basis components of distributable earnings and the federal tax
cost as of period end were as follows:
Unrealized appreciation $1,449,305,060
Unrealized depreciation (307,030,060)
------------
Net unrealized appreciation 1,142,275,000
Capital loss carryforward (5,515,781,251)
Cost for federal income
tax purposes $6,709,353,546
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% 0f 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.
Effective January 28, 2004, Putnam Management has agreed to limit its
compensation (and, to the extent necessary, bear other expenses) through
December 31, 2004, to the extent that the fund's net expenses as a
percentage of average net assets exceed the average expense ratio for
the fund's Lipper peer group of front-end load funds.
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. Putnam
Investor Services, a division of PFTC, provides investor servicing agent
functions to the fund. During the year ended June 30, 2004, the fund
paid PFTC $18,857,802 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, 2004 the
fund's expenses were reduced by $4,292,522 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $6,240 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.
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 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, 2004, Putnam Retail Management, acting as
underwriter, received net commissions of $415,385 and $10,001 from the
sale of class A and class M shares, respectively, and received
$3,373,687 and $9,042 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,
2004, Putnam Retail Management, acting as underwriter, received $44,612
on class A and no monies on class M redemptions, respectively.
Note 3
Purchases and sales of securities
During the year ended June 30, 2004, cost of purchases and proceeds from
sales of investment securities other than short-term investments
aggregated $5,367,041,915 and $8,492,823,827, 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 1,075,507 $774,031
- ----------------------------------------------------------------
Options opened 4,267,864 2,409,926
Options exercised (1,319,845) (614,271)
Options expired (2,943,316) (1,914,502)
Options closed (513,900) (373,656)
- ----------------------------------------------------------------
Written options
outstanding at
end of year 566,310 $281,528
- ----------------------------------------------------------------
Note 4
Capital shares
At June 30, 2004, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended June 30, 2004
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 14,590,688 $535,348,614
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
14,590,688 535,348,614
Shares repurchased (75,306,819) (2,799,613,692)
- ----------------------------------------------------------------
Net decrease (60,716,131) $(2,264,265,078)
- ----------------------------------------------------------------
Year ended June 30, 2003
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 43,125,612 $1,258,711,111
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
43,125,612 1,258,711,111
Shares repurchased (90,164,299) (2,597,816,023)
- ----------------------------------------------------------------
Net decrease (47,038,687) $(1,339,104,912)
- ----------------------------------------------------------------
Year ended June 30, 2004
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 3,322,964 $111,478,488
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
3,322,964 111,478,488
Shares repurchased (17,708,510) (600,679,415)
- ----------------------------------------------------------------
Net decrease (14,385,546) $(489,200,927)
- ----------------------------------------------------------------
Year ended June 30, 2003
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 4,980,520 $133,813,898
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
4,980,520 133,813,898
Shares repurchased (35,379,784) (941,198,727)
- ----------------------------------------------------------------
Net decrease (30,399,264) $(807,384,829)
- ----------------------------------------------------------------
Year ended June 30, 2004
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 231,436 $8,172,513
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
231,436 8,172,513
Shares repurchased (777,907) (27,913,184)
- ----------------------------------------------------------------
Net decrease (546,471) $(19,740,671)
- ----------------------------------------------------------------
Year ended June 30, 2003
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 327,373 $9,439,783
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
327,373 9,439,783
Shares repurchased (824,105) (23,109,623)
- ----------------------------------------------------------------
Net decrease (496,732) $(13,669,840)
- ----------------------------------------------------------------
Year ended June 30, 2004
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 456,573 $15,939,911
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
456,573 15,939,911
Shares repurchased (2,324,721) (81,851,788)
- ----------------------------------------------------------------
Net decrease (1,868,148) $(65,911,877)
- ----------------------------------------------------------------
Year ended June 30, 2003
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 808,682 $22,475,857
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
808,682 22,475,857
Shares repurchased (2,564,505) (70,748,632)
- ----------------------------------------------------------------
Net decrease (1,755,823) $(48,272,775)
- ----------------------------------------------------------------
Year ended June 30, 2004
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
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
- ----------------------------------------------------------------
For the period January 21, 2003
(commencement of operations)
to June 30, 2003
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
Shares sold 35 $1,000
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
35 1,000
Shares repurchased -- --
- ----------------------------------------------------------------
Net increase 35 $1,000
- ----------------------------------------------------------------
Year ended June 30, 2004
- ----------------------------------------------------------------
Class Y Shares Amount
- ----------------------------------------------------------------
Shares sold 8,529,967 $320,027,855
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
8,529,967 320,027,855
Shares repurchased (14,943,384) (573,947,519)
- ----------------------------------------------------------------
Net decrease (6,413,417) $(253,919,664)
- ----------------------------------------------------------------
Year ended June 30, 2003
- ----------------------------------------------------------------
Class Y Shares Amount
- ----------------------------------------------------------------
Shares sold 9,865,836 $297,562,806
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions -- --
- ----------------------------------------------------------------
9,865,836 297,562,806
Shares repurchased (17,626,550) (534,586,817)
- ----------------------------------------------------------------
Net decrease (7,760,714) $(237,024,011)
- ----------------------------------------------------------------
At June 30, 2004, Putnam, LLC owned 35 class R shares of the
fund (5.4% of class R shares outstanding), valued at $1,360.
Note 5
Investment in Putnam Prime Money
Market Fund
The fund invests in the 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
fees paid by Putnam Prime Money Market Fund with respect to assets
invested by the fund in Putnam Prime Money Market Fund. Income
distributions earned by the fund are recorded as income in the statement
of operations and totaled $110,983 for the period ended June 30, 2004.
Note 6
Regulatory matters and litigation
On April 8, 2004, Putnam Management entered into agreements with the
Securities and Exchange Commission and the Massachusetts Securities
Division representing a final settlement of all charges brought against
Putnam Management by those agencies on October 28, 2003 in connection
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. The settlement
with the SEC requires Putnam Management to pay $5 million in
disgorgement plus a civil monetary penalty of $50 million, and the
settlement with the Massachu setts Securities Division requires Putnam
Management to pay $5 million in restitution and an administrative fine
of $50 million. The settlements also leave intact the process
established under an earlier partial settlement with the SEC under which
Putnam Management agreed to pay the amount of restitution determined by
an independent consultant, which may exceed the disgorgement and
restitution amounts specified above, pursuant to a plan to be developed
by the independent consultant.
Putnam Management, and not the investors in any Putnam fund, will bear all
costs, including restitution, civil penalties and associated legal fees
stemming from both of these proceedings. The SEC'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 has agreed to bear any
costs incurred by Putnam funds in connection with these lawsuits. Based on
currently available information, 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.
For the period ended June 30, 2004, Putnam Management has assumed
$243,554 of legal, shareholder servicing and communication, audit, and
Trustee fees incurred by the Fund in connection with these matters.
Review of these matters by counsel for Putnam Management and by separate
independent counsel for the Putnam funds and their independent Trustees
is continuing. The fund may experience increased redemptions as a
result of these matters, which could result in increased transaction
costs and operating expenses.
Federal tax information
(Unaudited)
The Form 1099 you receive in January 2005 will show the tax status of
all distributions paid to your account in calendar 2004.
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), 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 and
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 Securities and Exchange Commission.
John A. Hill (1/31/42), Trustee since 1985 and Chairman since 2000
Mr. Hill is Vice Chairman and Managing Director 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, Continuum Health Partners of New York, 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
managed by an affiliate of Putnam Management). He is also a Trustee of
Sarah Lawrence College.
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.
Ronald J. Jackson (12/17/43), Trustee since 1996
Mr. Jackson is a private investor.
Mr. Jackson is President of the Kathleen and Ronald J. Jackson
Foundation (a charitable trust). He is also a member of the Board of
Overseers of WGBH (a public television and radio station) as well as a
member of the Board of Overseers of the Peabody Essex Museum.
Mr. Jackson is the former Chairman, President, and Chief Executive
Officer of Fisher-Price, Inc. (a major toy manufacturer), from which he
retired in 1993. He previously served as President and Chief Executive
Officer of Stride-Rite, Inc. (a manufacturer and distributor of
footwear) and of Kenner Parker Toys, Inc. (a major toy and game
manufacturer). Mr. Jackson was President of Talbots, Inc. (a distributor
of women's apparel) and has held financial and marketing positions with
General Mills, Inc. and Parker Brothers (a toy and game company). Mr.
Jackson is a graduate of the University of Michigan Business School.
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) as well as a
Director of TransCanada Corporation (a gas transmission and power
company). He also serves 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 B.A. from
Cornell University.
Elizabeth T. Kennan (2/25/38), Trustee since 1992
Dr. Kennan is a Partner in Cambus-Kenneth Farm, LLC (cattle and
thoroughbred horses). She is President Emeritus of Mount Holyoke
College.
Dr. Kennan serves as Lead Director (formerly Chairman) of Northeast
Utilities and is 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 Centre College and of Midway College in
Midway, Kentucky. She is also a member of The Trustees of Reservations
and a Trustee of the National Trust for Historic Preservation. 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, Inc., a private
equity firm specializing in real estate investments, and Chairman of
Cabot Properties, Inc.
Mr. Patterson serves as Chairman of the Joslin Diabetes Center and as a
Director of Brandywine Trust Company, 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 (a publicly traded real
estate investment trust). Prior to February 1998, Mr. Patterson was
Executive Vice President and Director of Acquisitions of Cabot Partners
Limited Partnership (a registered investment advisor 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) and as a Senior Vice
President of the Beal Companies (a real estate management, investment,
and development firm).
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 serves on a number of corporate boards.
Mr. Stephens serves as a Director of Xcel Energy Incorporated (a public
utility company), TransCanada Pipelines Limited, and Norske Canada, Inc.
(a paper manufacturer). Until 2004, Mr. Stephens was a Director of Qwest
Communications. Until 2003, he 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.
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 advisor). 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
Price & Rhoads in Philadelphia. He is a graduate of Harvard College,
Harvard Business School, and Harvard Law School.
A.J.C. Smith* (4/13/34), Trustee since 1986
Mr. Smith is Chairman of Putnam Investments and a Director of and
Consultant to Marsh & McLennan Companies, Inc.
Mr. Smith is also a Director of Trident Corp. (a limited partnership
with over thirty institutional investors). He is also a Trustee of the
Carnegie Hall Society, the Educational Broadcasting Corporation, and the
National Museums of Scotland. He is Chairman of the Central Park
Conservancy and a Member of the Board of Overseers of the Joan and
Sanford I. Weill Graduate School of Medical Sciences of Cornell
University. Prior to May 2000 and November 1999, Mr. Smith was Chairman
and CEO, respectively, of Marsh & McLennan Companies, Inc.
The address of each Trustee is One Post Office Square, Boston, MA 02109.
As of June 30, 2004, there were 102 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. Putnam, III, and Smith are deemed "interested persons" by virtue
of their positions as officers or shareholders of the fund or Putnam
Management, Putnam Retail Management, or Marsh & McLennan Companies,
Inc. George Putnam, III is the President of your fund and each of the
other Putnam funds. Mr. Smith serves as a Director of Marsh & McLennan
Companies, Inc. and as Chairman 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
Managing Director, Putnam Investments
and Putnam Management
Jonathan S. Horwitz (6/4/55)
Senior Vice President and Treasurer
Since 2004
Managing Director, Putnam Investments
Patricia C. Flaherty (12/1/46)
Senior Vice President
Since 1993
Senior Vice President, Putnam Investments
and Putnam Management
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)
Vice President and Legal and Compliance
Liaison Officer
Since 2004
Vice President, Putnam Investments. 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. From 2001 to 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
Mark C. Trenchard (6/5/62)
Vice President and BSA Compliance Officer
Since 2002
Senior Vice President, Putnam Investments
Judith Cohen (6/7/45)
Clerk and Assistant Treasurer
Since 1993
Clerk and Assistant Treasurer, The Putnam Funds
The address of each Officer is One Post Office Square,
Boston, MA 02109.
Fund information
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded 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 presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment
Management, LLC
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary
Trust Company
Legal Counsel
Ropes & Gray LLP
Independent Registered
Public Accounting Firm
PricewaterhouseCoopers LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
John H. Mullin, III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
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
Patricia C. Flaherty
Senior Vice President
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
Vice President and Legal and
Compliance Liaison Officer
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
Judith Cohen
Clerk and Assistant Treasurer
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.putnaminvestments.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.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
Call 1-800-225-1581 or visit our Web site www.putnaminvestments.com.
AN013-216022 852/358/983/526 8/04
Not FDIC Insured May Lose Value No Bank Guarantee
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ----------------------------------------------------------------------------
Putnam New Opportunities Fund
Supplement to Annual Report dated 6/30/04
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 6/30/04
NAV
1 year 19.11%
5 years -24.90
Annual average -5.57
10 years 145.78
Annual average 9.41
Life of fund (since class A inception, 8/31/90)
Annual average 14.80
Share value: NAV
6/30/03 $33.70
6/30/04 $40.14
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Distributions: No. Income Capital gains Total
-- -- -- --
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Please note that past performance is not indicative of future results. More
recent returns may be more or less than those shown. Returns shown for class
Y shares for periods prior to their inception are derived from the historical
performance of class A shares, and are not adjusted to reflect the initial
sales charge currently applicable to class A shares. These returns have not
been adjusted to reflect differences in operating expenses which, for class Y
shares, typically are lower than the operating expenses applicable to class A
shares. All returns assume reinvestment of distributions at net asset value.
Investment return and principal value will fluctuate so your shares, when
redeemed, may be worth more or less than their original cost. See full report
for information on comparative benchmarks. If you have questions, please
consult your fund prospectus or call Putnam toll free at 1-800-752-9894.
Item 2. Code of Ethics:
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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.
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 and Mr. Stephens 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:
Audit Audit-Related Tax All Other
Fiscal year ended Fees Fees Fees Fees
- ----------------- ---------- ------------- ------- ---------
June 30, 2004 $96,366* $-- $3,868 $1,637
June 30, 2003 $98,833 $-- $6,831 $--
*Includes fees of $3,399 billed by the fund's independent auditor
to the fund for audit procedures necessitated by regulatory and
litigation matters. These fees were reimbursed to the fund by
Putnam.
For the fiscal years ended June 30, 2004 and June 30, 2003, the
fund's independent auditors billed aggregate non-audit fees in the
amounts of $139,133 and $61,349, 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 represent fees billed for services relating to
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.
Audit-Related Tax All Other Total Non-
Fiscal year ended Fees Fees Fees Audit Fees
- ----------------- ------------- ---- --------- ----------
June 30, 2004 $-- $-- $-- $--
June 30, 2003 $-- $-- $-- $--
Items 5-6. [Reserved]
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Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed End
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Management Investment Companies: Not applicable
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Item 8. [Reserved]
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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 on Form N-CSR, that the design and
operation of such procedures are generally effective to provide
reasonable assurance that information required to be disclosed by
the investment company in the reports that it files or submits under
the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the
Commission's rules and forms.
Although such officers reached the conclusion expressed in the
preceding paragraph, they are aware of matters that raise concerns
with respect to controls, each of which arose in connection with the
administration of 401(k) plans by Putnam Fiduciary Trust Company.
The first matter, which occurred in early 2001, involved the willful
circumvention of controls by certain Putnam employees in connection
with the correction of operational errors with respect to a 401(k)
client's investment in certain Putnam Funds, which led to losses in
five Putnam Funds (not including the registrant). Such officers
became aware of this matter in February 2004. The second matter,
which occurred in 2002, involved the willful circumvention by
certain Putnam employees of policies and procedures in connection
with the payment of Putnam corporate expenses. Such officers did
not learn that this matter involved a Putnam Fund until January
2004. Putnam has made restitution to the affected Funds,
implemented a number of personnel changes, including senior
personnel, begun to implement changes in procedures to address these
items and informed the SEC, the Funds' Trustees and independent
auditors. An internal investigation and review of procedures and
controls are currently ongoing.
In reaching the conclusion expressed herein, the registrant's
principal executive officer and principal financial officer
considered a number of factors, including the nature of the matters
described above, when the matters occurred, the individuals
involved, personnel changes that have occurred since these matters
occurred, the results to date of the current ongoing investigation
and the overall quality of controls at Putnam at this time.
(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
an 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 30, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934
an 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
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Charles E. Porter
Principal Executive Officer
Date: August 30, 2004
By (Signature and Title): /s/Steven D. Krichmar
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Steven D. Krichmar
Principal Financial Officer
Date: August 30, 2004