Putnam
New
Opportunities
Fund
ANNUAL REPORT
June 30, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Putnam New Opportunities Fund is the Energizer Bunny of growth
funds. . . . As growth stocks have marched relentlessly upward over
the past several years, this fund has run circles around its peers."*
-- Morningstar Mutual Funds, July 5, 1996
* As of June 30, 1996, Putnam New Opportunities Fund's class A shares
ranked 1 out of 248 growth funds tracked by Lipper Analytical Services
for 5-year performance. For 3-year performance, the fund ranked 2 out
of 379 (top 1%), and for 1-year performance, the fund ranked 8 out of
619 (top 2%).+
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
21 Financial statements
*Morningstar proprietary ratings reflect historical risk-adjusted
performance as of 6/30/96. The ratings are subject to change every
month. Past performance is no guarantee of future results. Morningstar
ratings are calculated from the funds' 3-, 5-, and 10-year average
annual returns, if applicable, in excess of 90-day Treasury bill
returns with appropriate fee adjustments, and a risk factor that
reflects fund performance below 90-day T-bill returns. The 1-year
rating is calculated using the same methodology, but it is separate
from, and not a component of, the overall rating. The fund's class A
shares received Morningstar's highest rating of 5 stars for the 1-, 3-
, and 5-year periods ended 6/30/96. For the 1-, 3-, and 5-year
periods, there were 2,882, 1,583, and 997 equity funds rated,
respectively. Among the aggressive growth funds rated for the 1-, 3-
and 5-year periods ended 6/30/96, the fund was rated 6 out of 89, 4
out of 63, and 2 out of 46 funds, respectively. Performance of other
share classes will vary.
+Lipper rankings are based on total return performance, vary over
time, and do not reflect the effects of sales charges. The fund's
class B shares ranked 3 out of 379 (top 1%) for 3-year performance and
10 out of 619 (top 2%) for 1-year performance. Class M shares ranked 9
out of 619 (top 2%) for 1-year performance. Performance of other share
classes will vary. Past performance is not indicative of future
results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
Putnam New Opportunities Fund continues to capture headlines with its
standout performance record, a fact that makes us justly proud. The
numbers for the fiscal year that ended on June 30, 1996, only serve to
reconfirm that Fund Manager Daniel Miller and the Putnam team that
stands behind him must be doing something right.
Following such a sustained run of positive performance, however, we
are moved to caution that in the unsettled market that may lie ahead,
even the most successful funds may experience significant volatility.
After all, the U.S. equity market has enjoyed its longest and
strongest advance in history, and as Putnam Management has been saying
for some time now, a correction is in order.
Funds like Putnam New Opportunities, which tend to ride the crest of
rising markets, also tend to fall more sharply on the downside.
Instead of cutting and running, astute investors can often profit from
such declines by using them as opportunities to increase their
positions at bargain prices. In any case, we believe those seeking
above-average growth potential should continue to find the fund an
excellent choice over the long term, regardless of the market's ups
and downs along the way.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
August 21, 1996
Report from the Fund Manager
Daniel L. Miller
Buoyed by the strength of holdings in several key sectors, Putnam New
Opportunities Fund was able to finish fiscal 1996 with a solid
performance record despite increasing volatility in the U.S. equity
market. For the 12 months ended June 30, 1996, your fund's class A
shares gained an impressive 45.34% at net asset value and 37.00% at
public offering price. These returns handily outpaced the Standard &
Poor's 500(registered trademark) Index, which rose 25.93% over the
same period. In fact, in every year since the fund's inception in
1990, its returns have consistently surpassed the S&P 500 Index.
Please see page 9 of this report for complete performance information.
During the second half of fiscal 1996, the U.S. stock market surged to
record highs, peaking in early June. However, toward the end of the
fiscal year, some weakness began to appear in technology and smaller-
company stocks. In keeping with the strategy that has served the fund
well since inception, we drew on the strength of companies with above-
average long-term growth prospects and dominant market share. This
strategy allows the fund to invest in stocks that tend to do well
regardless of the direction of the overall economy.
* TECHNOLOGY AGAIN MAKES KEY CONTRIBUTION TO RETURNS
Technology-related stocks -- the fund's largest sector at
approximately 29% of net assets -- provided a significant boost to
performance. Holdings in the networking and computer services segments
of the industry contributed substantially to the fund's returns, while
the semiconductor market remained weak.
Among the strongest performers were stocks of companies that provide
the equipment to transmit data over long distances, such as
telecommuting applications that link computer systems between homes
and businesses. The computer services segment, another area of
strength for the fund, includes companies that assist businesses with
the installation and maintenance of computer systems. One such
holding, Cambridge Technology Partners, Inc., offers consulting and
software development services to businesses, industries, and
government agencies. The company has 22 offices, recently won 7 large
contracts in the Northeast, and is expected to open several new
offices in the United States and overseas.
Another strong holding was Alternative Resources Corporation (ARC), a
provider of technical support for businesses with complex information
technology operations. ARC, which currently serves more than 600
client companies, has profited from the trend toward outsourcing
computer services. While these stocks, along with others discussed in
this report, were viewed favorably at the end of the fiscal period,
all portfolio holdings are subject to review and adjustment in
accordance with the fund's investment strategy and may well vary in
the future.
* HEALTH-CARE SECTOR EXHIBITS SOME WEAKNESS
While we continue to believe in the potential of medical
technology/cost containment -- currently the portfolio's second-
largest sector -- there is no denying that it was weaker this year
than we have seen in some time. This is, to some extent, a reflection
of higher costs for products and services, which had its greatest
impact on companies in cost containment. This area includes companies,
such as HMOs, that seek to provide high quality health-care service at
lower costs. Because the cost increases were affecting the
profitability of many companies, we have reduced the fund's weighting
in this area. Another key segment of the health-care industry, medical
technology, delivered strong returns in the first half of fiscal 1996,
but weakened somewhat over the last six months.
[GRAPHIC OMITTED: horizontial bar chart TOP INDUSTRY SECTORS*]
Networking and communications equipment 12.1%
Computer software 10.9%
Business services 7.9%
Health care services 5.6%
Broadcasting 4.4%
* Based on net assets as of 6/30/96. Allocations and industry sectors
will vary over time.
One bright spot in medical technology/cost containment was the fund's
holdings in physician practice management services. These include
stocks of companies that provide business management services for
medical practices and clinics. One example is Phycor, Inc., a
physician practice management company that operates 36 specialty
clinics with over 2,200 physicians in 21 states. The company has an
impressive track record and continues to target physicians' practices
that are highly regarded in their communities. Also strengthening the
portfolio was Pediatrix Medical Group, which manages hospital-based
neonatal intensive care units for infants with medical complications.
* BUDGET-CONSCIOUS BUYING BOOSTS RETAIL HOLDINGS
Within the fund's value-oriented consuming sector, we continued to
focus on casual theme restaurants, office product superstores, and
discount hard-goods retailers. In this sector, we have found strength
in companies like Bed Bath & Beyond, Inc., a national operator of home
furnishing superstores that take advantage of budget-conscious buying.
Another example is PETSMART, the largest operator of pet superstores
in the United States. The company is known as an industry innovator
that seeks to make shopping for pet supplies an entertaining and
educational experience.
We have also taken advantage of a growing industry with a large,
underserved market: extended-stay hotels. These hotels cater
specifically to travelers who need lodging for relatively long periods
of time. One extended-stay hotel chain in the fund's portfolio, Studio
Plus Hotels, Inc., owns, develops, and manages facilities that provide
the flexibility of hotels combined with the amenities found in
apartments. Another of the fund's holdings, Extended Stay America,
Inc., also manages extended-stay facilities and targets business
travelers, people who are relocating, and travelers on temporary work
assignments.
[GRAPHIC OMITTED: TOP 10 HOLDINGS (6/30/96)]
HFS, Inc.
Hotel and real estate brokerage franchises
Computer Associates International, Inc.
Systems software packages
Stratacom, Inc.
Manufacturer of wide area network computer systems
Cisco Systems, Inc.
Manufacturer of computer networking products
WorldCom, Inc.
Long distance telephone services
First Data Corp.
Credit card processing services
Cascade Communications Corp.
Developer of wide area networks
U.S. Robotics Corp.
Networking access devices
Circus Circus Enterprises, Inc.
Gaming and hotels
Microsoft Corp.
Software for microcomputers
These holdings represent 13.0% of the portfolio. Holdings will vary
over time.
* CONSOLIDATION IS THE FOCUS IN MEDIA AND ENTERTAINMENT
The most significant event affecting the portfolio's media/
entertainment sector this year has been the passing of the
Telecommunications Act of 1996, which allows for ownership of multiple
television or radio stations, among other changes. Most of the fund's
holdings in this sector are companies involved in the wave of
consolidations generated by this new legislation. In radio, SFX
Broadcasting, Inc., Clear Channel Communications, and Emmis
Broadcasting have all been acquiring new stations, while several of
the fund's television station stocks, Sinclair Broadcast Group and
Young Broadcasting among them, have also benefited from acquisitions.
One of your fund's largest holdings through most of fiscal 1996,
Infinity Broadcasting Corp., provided an additional boost for the
portfolio after the announcement that Westinghouse Electric Corp.
planned to purchase it for $3.72 billion.
* PERSONAL COMMUNICATIONS ENHANCED BY NEW INDUSTRY SEGMENT
The Telecommunications Act has further implications for your fund.
Specifically, within the personal communications sector, the act
allows competitive local exchange carriers (CLECs) to enter local
markets on a much wider basis. CLECs are smaller telephone companies
that compete with the larger telephone providers -- especially the
Bell operating companies -- within local markets. Your fund has
already benefited from this new industry segment, in which we believe
there is significant further growth potential. Intermedia
Communications, Inc., one of the fund's holdings in this sector,
provides competitive telecommunications services in the Southeast and
recently acquired the telecommunications division of EMI
Communications Corp. This acquisition doubled the number of
Intermedia's service locations as well as its customer base.
* REALISTIC OUTLOOK FOR THE COMING FISCAL YEAR
As the fund enters its new fiscal year, prospects remain positive for
long-term investors. While we anticipate increased volatility over the
coming months, we also expect slow but positive growth, benign
inflation, and a stable interest-rate climate to provide a relatively
positive environment for companies with excellent long-term prospects.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described
holdings were viewed favorably as of 6/30/96, there is no guarantee
the fund will continue to hold these securities in the future. This
fund invests all or a portion of its assets in small to medium-sized
companies. Such investments increase the risk of greater price
fluctuations.
Performance summary
Performance should always be considered in light of a fund's
investment strategy. Putnam New Opportunities Fund is designed for
investors seeking long-term capital appreciation primarily through
common stock investments in companies in economic sectors with above-
average long-term growth potential.
This section provides, at a glance, information about your fund's
performance. 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.
TOTAL RETURN FOR PERIODS ENDED 6/30/96
Class A Class B Class M
(inception date) (8/31/90) (3/1/93) (12/1/94)
NAV POP NAV CDSC NAV POP
- ----------------------------------------------------------------------
1 year 45.34% 37.00% 44.24% 39.24% 44.56% 39.50%
- ----------------------------------------------------------------------
5 years 299.21 276.11 -- -- -- --
Annual average 31.90 30.34 -- -- -- --
- ----------------------------------------------------------------------
Life of class 443.82 412.60 142.77 139.77 74.05 67.94
Annual average 33.71 32.36 30.52 30.03 42.01 38.84
- ----------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 6/30/96
Standard & Poor's Consumer
500 Index Price Index
- ---------------------------------------------------------------------
1 year 25.93% 2.75%
- ---------------------------------------------------------------------
5 years 107.19 15.22
Annual average 15.68 2.87
- ---------------------------------------------------------------------
Life of class A 146.97 19.07
Annual average 16.78 3.04
- ---------------------------------------------------------------------
Life of class B 66.33 9.50
Annual average 16.51 2.76
- ---------------------------------------------------------------------
Life of class M 55.91 4.68
Annual average 32.46 2.94
- ---------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take
into account any adjustment for taxes payable on reinvested
distributions. Investment returns and net asset value will fluctuate
so that an investor's shares, when sold, may be worth more or less
than their original cost. POP assumes 5.75% maximum sales charge for
class A shares and 3.50% for class M shares. CDSC for class B shares
assumes the applicable sales charge, with the maximum being 5%.
[GRAPHIC WORM CHART OMITTED: GROWTH OF A $10,000]
Caption reads: Cumulative total return of a $10,000 investment
since 8/31/90
Starting value (Insert ending Total)
$9,425 Fund's class A shares at POP $51,260
$10,000 S&P 500 $24,697
$10,000 Consumer Price Index $11,907
(plot points for 10-year total return mountain chart)
Date/year Fund at POP S&P 500 CPI
- -----------------------------------------------
8/31/90 9,425 10,000 10,000
6/30/91 12,841 11,920 10,334
6/30/92 16,545 13,512 10,653
6/30/93 24,176 15,346 10,973
6/30/94 25,867 15,565 11,246
6/30/95 35,271 19,611 11,588
6/30/96 51,260 24,697 11,907
Past performance is no assurance of future results. A $10,000
investment in the fund's class B shares at inception on 3/1/93 would
have been valued at $24,277 on 6/30/96 ($23,977 with a redemption at
the end of the period). A $10,000 investment in the fund's class M
shares at inception on 12/1/94 would have been valued at $17,405 at
net asset value on 6/30/96, $16,794 at public offering price.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 6/30/96
Class A Class B Class M
- ----------------------------------------------------------------------
Distributions (number) 0 0 0
- ----------------------------------------------------------------------
Total $0.00 $0.00 $0.00
- ----------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ----------------------------------------------------------------------
6/30/95 $29.58 $31.38 $29.09 $29.51 $30.58
- ----------------------------------------------------------------------
6/30/96 42.99 45.61 41.96 42.66 44.21
- ----------------------------------------------------------------------
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1
fee than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus
any liabilities, divided by the number of outstanding shares, not
including any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus
the maximum sales charge levied at the time of purchase. POP
performance figures shown here assume the maximum 5.75% sales charge
for class A shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the
time of the redemption of class B shares and assumes redemption at the
end of the period. Your fund's CDSC declines from a 5% maximum during
the first year to 1% during the sixth year. After the sixth year, the
CDSC no longer applies.
COMPARATIVE BENCHMARKS
Standard & Poor's 500 Index is an unmanaged list of common stocks that
is frequently used as a general measure of stock market performance.
The index assumes reinvestment of all distributions and does not take
into account brokerage commissions or other costs. The fund's
portfolio contains securities that do not match those in the index. It
is not possible to invest directly in an index.
Consumer Price Index (CPI ) is a commonly used measure of inflation;
it does not represent an investment return.
Report of independent accountants
For the fiscal year ended June 30, 1996
To the Trustees and Shareholders of
Putnam New Opportunities Fund
We have audited the accompanying statement of assets and liabilities
of Putnam New Opportunities Fund, including the portfolio of investments
owned, as of June 30, 1996, and the related statement of operations
for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein. These financial
statements and financial highlights are the responsibility of the
fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of June 30, 1996, by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Putnam New Opportunities Fund as of June 30, 1996, the results of its
operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for
each of the periods indicated therein, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
August 15, 1996
<TABLE>
<CAPTION>
Portfolio of investments owned
June 30, 1996
<S> <C> <C> <C>
COMMON STOCKS (90.9%) *
NUMBER OF SHARES VALUE
Advertising (0.2%)
- -------------------------------------------------------------------------------------------------------
465,000 Outdoor Systems, Inc. + $16,391,250
Apparel (0.6%)
- -------------------------------------------------------------------------------------------------------
525,000 Tommy Hilfiger Corp. + 28,153,125
800,000 Wolverine World Wide, Inc. 26,000,000
--------------
54,153,125
Broadcasting (4.4%)
- -------------------------------------------------------------------------------------------------------
822,300 Chancellor Broadcasting Corp. Class A + 25,696,875
935,000 Clear Channel Communications, Inc. + 77,020,625
850,000 Emmis Broadcasting Corp. Class A + 42,500,000
775,000 Heartland Wireless Communications, Inc. + 18,406,250
1,657,900 Infinity Broadcasting Corp. Class A + 49,737,000
683,300 Jacor Communications, Inc. + 21,096,888
750,000 LIN Television Corp. + 27,000,000
1,200,000 Paxson Communications Corp + 12,750,000
1,000,000 Renaissance Communications Corp. + 32,250,000
450,000 SFX Broadcasting, Inc. Class A + 17,550,000
996,100 Sinclair Broadcast Group, Inc. Class A + 43,330,350
1,325,000 Westwood One, Inc. + 20,206,250
578,700 Young Broadcasting Corp. Class A + 22,135,275
--------------
409,679,513
Building Products (0.3%)
- -------------------------------------------------------------------------------------------------------
978,600 Barnett, Inc. + 28,134,750
Business Services (7.9%)
- -------------------------------------------------------------------------------------------------------
388,600 Affiliated Computer Services, Inc. Class A + 18,264,200
1,475,000 Airgas, Inc. + 28,025,000
1,500,000 Alco Standard Corp. 67,875,000
1,025,000 Alternative Resources Corp. + 37,668,750
891,050 Corestaff, Inc. + 39,874,488
2,000,000 Corporate Express, Inc. + 80,000,000
1,399,500 Danka Business Systems PLC ADR (United Kingdom) 40,935,375
1,400,000 First Data Corp. 111,475,000
250,000 First USA Paymentech, Inc. + 10,000,000
1,000,000 Input/Output, Inc. + 32,375,000
44,600 Labor Ready, Inc. + 1,248,800
1,066,100 Manpower, Inc. 41,844,425
573,000 NOVA Corp. / Georgia + 19,338,750
1,500,000 Paychex, Inc. 72,187,500
9,775,000 Rentokil Group Ord. PLC (United Kingdom) 62,056,568
2,200,000 Robert Half International, Inc. + 61,325,000
108,900 Sykes Enterprises, Inc. + 5,363,325
104,200 Transaction Systems Architects, Inc. Class A + 6,981,400
--------------
736,838,581
Cable Television (1.1%)
- -------------------------------------------------------------------------------------------------------
500,000 Cablevision Systems Corp. + 23,125,000
1,454,900 Century Communications Corp. Class A + 12,366,650
1,000,000 Tele-Comm Liberty Media Group, Inc. Class A + 26,500,000
2,250,000 Tele-Communications Inc. Class A + 40,781,250
--------------
102,772,900
Computer Services (3.1%)
- -------------------------------------------------------------------------------------------------------
2,300,000 America Online, Inc. + 100,625,000
2,325,000 Cambridge Technology Partners, Inc. + 70,912,500
1,023,600 CBT Group PLC ADR (Ireland) + 47,341,500
500,000 CMG Information Services, Inc. + 13,500,000
1,300,000 Computer Horizons Corp. + 51,350,000
110,050 Sapient Corp. + 4,649,613
--------------
288,378,613
Computer Software (10.9%)
- -------------------------------------------------------------------------------------------------------
103,500 Arbor Software Corp. + 6,184,125
1,150,000 Baan Co. N.V. + 39,100,000
1,355,200 Business Objects S.A., ADR (France) + 54,546,800
270,400 Clarify, Inc. + 13,384,800
1,875,000 Computer Associates Intl., Inc. 133,593,750
2,200,000 Electronic Arts, Inc. + 58,850,000
611,000 Fulcrum Technologies, Inc. + 7,866,625
1,600,000 GT Interactive Software Corp. + 26,800,000
975,000 Inso Corp. + 51,065,625
465,000 Legato Systems, Inc. + 25,575,000
223,200 Lycos, Inc. + 2,483,100
987,500 McAfee Associates, Inc. + 48,387,500
850,000 Microsoft Corp. + 102,106,250
350,000 Netscape Communications Corp. + 21,787,500
2,250,000 Parametric Technology Corp. + 97,593,750
1,000,000 PeopleSoft, Inc. + 71,250,000
371,500 Project Software & Development, Inc. + 17,414,063
549,700 Rational Software Corp. + 29,546,375
105,500 Remedy Corp. + 7,701,500
738,300 Security Dynamics Technologies, Inc. + 60,725,175
1,650,000 Softkey International, Inc. + 31,246,875
1,425,000 Synopsys, Inc. + 56,643,750
550,100 Unison Software, Inc. + 13,890,025
700,000 Vantive Corp. + 23,450,000
279,000 Viasoft, Inc. + 18,030,375
--------------
1,019,222,963
Computer Peripherals (0.7%)
- -------------------------------------------------------------------------------------------------------
3,300,000 EMC Corp. + 61,462,500
Consumer Services (0.3%)
- -------------------------------------------------------------------------------------------------------
900,000 Thermolase Corp. + 24,525,000
Energy-Related (0.5%)
- -------------------------------------------------------------------------------------------------------
1,050,000 Thermo Electron Corp. + 43,706,250
Finance (0.2%)
- -------------------------------------------------------------------------------------------------------
662,150 TCF Financial Corp. 22,016,488
Financial Services (1.8%)
- -------------------------------------------------------------------------------------------------------
700,000 First USA, Inc. 38,500,000
3,100,000 MBNA Corp. 88,350,000
1,600,000 Olympic Financial Ltd. + 36,800,000
362,400 Schwab (Charles) Corp. 8,878,800
--------------
172,528,800
Funeral/Cemetery Services (1.7%)
- -------------------------------------------------------------------------------------------------------
1,900,000 Loewen Group, Inc. 57,475,000
675,000 Service Corp. International 38,812,500
2,025,000 Stewart Enterprises, Inc. Class A 63,281,250
--------------
159,568,750
Gaming (2.2%)
- -------------------------------------------------------------------------------------------------------
2,500,000 Circus Circus Enterprises, Inc. + 102,500,000
1,550,000 Mirage Resorts, Inc. 83,700,000
1,107,400 Rio Hotel & Casino, Inc. + 17,026,275
--------------
203,226,275
HMOs (1.1%)
- -------------------------------------------------------------------------------------------------------
699,600 Compdent Corp. + 32,531,400
1,150,000 Healthsource, Inc. + 20,125,000
1,175,000 Oxford Health Plans Inc. + 48,321,875
31,000 Pacificare Health Systems, Inc. + 2,046,000
--------------
103,024,275
Health Care Information Systems (1.0%)
- -------------------------------------------------------------------------------------------------------
384,000 ABR Information Services, Inc. + 19,296,000
1,100,000 HBO & Co. 74,525,000
--------------
93,821,000
Health Care Services (5.6%)
- -------------------------------------------------------------------------------------------------------
203,900 American HomePatient, Inc. + 9,022,575
1,000,000 American Medical Response + 35,250,000
1,675,000 Apria Healthcare Group, Inc. + 52,553,125
535,000 Emcare Holdings, Inc. + 15,916,250
725,000 Emeritus Corp. + 12,778,125
2,413,300 Healthsouth Rehabilitation Corp. 86,878,800
1,114,300 Lincare Holdings, Inc. + 43,736,275
1,250,000 Medaphis Corp. + 49,687,500
283,100 Owen Healthcare, Inc. + 3,928,013
1,286,400 Renal Treatment Centers, Inc. + 36,984,000
850,000 Rotech Medical Corp. + 16,575,000
200,000 Total Renal Care Holdings, Inc. + 8,450,000
2,425,000 Vencor, Inc. + 73,962,500
2,300,000 Vivra, Inc. + 75,612,500
--------------
521,334,663
Hospital Management (1.3%)
- -------------------------------------------------------------------------------------------------------
4,100,000 Health Management Assoc., Inc. + 83,025,000
1,850,000 Physician Reliance Network, Inc. + 41,162,500
--------------
124,187,500
Insurance (0.7%)
- -------------------------------------------------------------------------------------------------------
1,035,800 Amerin Corp. + 27,707,650
1,525,000 HCC Insurance Holdings, Inc. 34,312,500
--------------
62,020,150
Lodging (4.3%)
- -------------------------------------------------------------------------------------------------------
1,366,200 Doubletree Corp. + 48,500,100
821,000 Extended Stay America, Inc. + 25,861,500
2,625,800 HFS, Inc. + 183,806,000
175,750 Interstate Hotels Co. + 3,910,438
1,200,000 La Quinta Inns, Inc. 40,200,000
540,600 Prime Hospitality Corp. + 8,919,900
1,375,000 Promus Hotel Corp. + 40,734,375
1,200,000 Renaissance Hotel Group N.V. + 25,500,000
629,900 Studio Plus Hotels, Inc. + 20,786,700
--------------
398,219,013
Medical Equipment and Supplies (3.4%)
- -------------------------------------------------------------------------------------------------------
750,000 Boston Scientific Corp. + 33,750,000
331,000 Cardiothoracic Systems, Inc. + 4,385,750
400,000 Endosonics Corp. + 7,150,000
775,000 I-Stat Corp. + 14,628,125
552,800 ICU Medical, Inc. + 7,601,000
1,400,000 Idexx Laboratories, Inc. 54,950,000
700,000 Igen, Inc. 4,900,000
775,000 Medtronic, Inc. 43,400,000
1,400,000 Mentor Corp. Minnesota 35,700,000
450,000 Neuromedical Systems, Inc. + 6,750,000
843,100 Shared Medical Systems Corp. 54,169,175
1,200,000 Thermo Cardiosystems, Inc. + 53,700,000
--------------
321,084,050
Medical Management Services (1.8%)
- -------------------------------------------------------------------------------------------------------
714,800 OccuSystems, Inc. + 26,715,650
447,000 Pediatrix Medical Group, Inc. + 21,679,500
1,387,500 Phycor, Inc. + 52,725,000
1,096,700 Phymatrix, Inc. + 25,498,275
750,000 Physicians Resource Group, Inc. + 25,031,250
777,373 Sunrise Assisted Living, Inc. + 18,656,952
--------------
170,306,627
Networking and Communications Equipment (12.1%)
- -------------------------------------------------------------------------------------------------------
861,100 Adtran, Inc. + 61,030,463
800,000 Ascend Communications, Inc. + 45,000,000
1,200,000 Cabletron Systems, Inc. + 82,350,000
1,620,400 Cascade Communications Corp. + 110,187,200
2,050,000 Cisco Systems, Inc. + 116,081,250
288,900 Diana Corp. + 11,736,563
1,725,000 Gandalf Technologies, Inc. + 13,800,000
1,637,900 Glenayre Technologies, Inc. + 81,895,000
1,011,800 Objective Systems Integrators, Inc. + 36,930,700
763,600 P-Com, Inc. + 24,053,400
1,600,000 Pairgain Technologies, Inc. + 99,200,000
800,000 Premisys Communications, Inc. + 48,800,000
1,050,000 Shiva Corp. + 84,000,000
2,300,000 Stratacom, Inc. + 129,375,000
1,200,000 Tellabs, Inc. + 80,250,000
1,250,000 U.S. Robotics Corp. + 106,875,000
54,500 Verilink Corp. + 1,389,750
--------------
1,132,954,326
Nursing Homes (1.0%)
- -------------------------------------------------------------------------------------------------------
1,519,500 Genesis Health Ventures, Inc. + 47,674,313
2,055,000 Health Care & Retirement Corp. + 48,806,250
--------------
96,480,563
Office Equipment and Products (2.5%)
- -------------------------------------------------------------------------------------------------------
1,825,900 Boise Cascade Office Products + 63,221,788
1,200,000 BT Office Products International, Inc. + 21,450,000
625,000 Global DirectMail Corp. + 24,687,500
1,300,000 U. S. Office Products Co. + 54,600,000
2,092,900 Viking Office Products, Inc. + 65,664,738
--------------
229,624,026
Pharmaceuticals and Biotechnology (3.5%)
- -------------------------------------------------------------------------------------------------------
330,500 Alpha-Beta Technology, Inc. + 2,933,188
750,000 Amgen, Inc. + 40,500,000
100,000 Astra AB ADR 4,375,000
1,725,000 Astra AB (Sweden) + 76,233,030
1,000,000 Biochem Pharmaceutical, Inc. + 37,500,000
581,700 CytoTherapeutics, Inc. + 6,471,413
1,250,000 Elan Corp. PLC ADR + 71,406,250
350,000 Fiusz Technologies Ltd. + 6,650,000
1,600,000 Gilead Sciences, Inc. + 40,400,000
505,000 Martek Biosciences Corp. + 14,771,250
600,000 Neurogen Corp. + 15,450,000
261,400 Theratech, Inc. + 5,031,950
--------------
321,722,081
Publishing (0.1%)
- -------------------------------------------------------------------------------------------------------
579,400 Mecklermedia Corp. + 11,732,850
Restaurants (4.0%)
- -------------------------------------------------------------------------------------------------------
2,070,000 Apple South, Inc. 55,372,500
968,900 Applebee's International, Inc. 31,368,138
2,100,000 Boston Chicken, Inc. + 68,250,000
1,630,621 J.D. Wetherspoon PLC (United Kingdom) 25,437,052
1,375,000 Landry's Seafood Restaurants, Inc. + 34,031,250
1,041,300 Lone Star Steakhouse & Saloon + 39,309,075
1,466,400 Outback Steakhouse, Inc. + 50,567,874
937,500 Papa Johns International, Inc. + 45,703,125
550,000 Rainforest Cafe, Inc. + 27,500,000
--------------
377,539,014
Retail (3.6%)
- -------------------------------------------------------------------------------------------------------
650,000 Autozone, Inc. + 22,587,500
3,100,000 Bed Bath & Beyond, Inc. + 82,925,000
1,000,000 CompUSA, Inc. + 34,125,000
1,492,000 Office Depot, Inc. 30,399,500
2,350,000 Officemax, Inc. + 56,106,250
850,000 PETSMART, Inc. + 40,587,500
1,300,000 Revco D.S., Inc. + 31,037,500
2,100,000 Staples, Inc. + 40,950,000
--------------
338,718,250
Semiconductors (1.9%)
- -------------------------------------------------------------------------------------------------------
1,500,000 Analog Devices Inc. + 38,250,000
650,548 Atmel Corp. + 19,597,759
654,200 Credence Systems Corp. + 8,790,813
650,000 Intel Corp. 47,734,375
1,205,000 Linear Technology Corp. 36,150,000
1,050,000 Maxim Integrated Products Inc. + 28,678,125
--------------
179,201,072
Specialty Consumer Products (0.1%)
- -------------------------------------------------------------------------------------------------------
315,300 Gemstar International Group Ltd. + 9,459,000
Telephone Services (4.1%)
- -------------------------------------------------------------------------------------------------------
321,500 Brooks Fiber Properties, Inc. + 10,609,500
906,800 Intermedia Communications, Inc. + 29,244,300
3,000,000 LCI International, Inc. + 94,125,000
1,410,100 MFS Communications Company, Inc. + 53,055,013
635,300 McLeod, Inc. Class A + 15,247,200
352,400 Premiere Technologies, Inc. + 11,100,600
1,799,100 Tel-Save Holdings, Inc. + 38,230,875
575,000 U.S. Long Distance Corp. + 20,412,500
2,050,000 WorldCom, Inc. + 113,518,750
--------------
385,543,738
Wireless Communications (2.9%)
- -------------------------------------------------------------------------------------------------------
1,625,000 Airtouch Communications, Inc. + 45,906,250
1,200,000 Centennial Cellular Corp. Class A + 20,250,000
1,175,000 Clearnet Communications Inc. Class A (Canada)+ 19,681,250
650,000 Intercel, Inc. + 13,000,000
2,700,000 NEXTEL Communications, Inc. Class A + 51,468,750
1,000,000 Omnipoint Corp. + 26,062,500
3,147,700 Paging Network, Inc. + 75,544,800
356,300 Preferred Networks, Inc. + 3,073,088
189,300 United States Cellular Corp. + 5,868,300
303,400 Western Wireless Corp. Class A + 6,485,175
--------------
267,340,113
--------------
Total Common Stocks (cost $6,403,541,999) $8,486,918,069
Short-Term Investments (8.4%) *
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------
$25,000,000 Ciesco L.P. for an effective yield of
5.50%, July 1, 1996 $25,000,000
20,000,000 Ciesco L.P. for an effective yield of 5.39%,
August 23, 1996 19,841,294
10,000,000 Corporate Receivables Corp. for an effective
yield of 5.35%, August 9, 1996 9,942,042
25,000,000 Corporate Receivables Corp. for an effective
yield of 5.30%, July 25, 1996 24,911,666
50,000,000 Delaware Funding Corp. for an effective
yield of 5.32%, July 11, 1996 49,926,111
40,000,000 Falcon Asset Securitization Corp. for an
effective yield of 5.37%, July 16, 1996 39,910,500
25,000,000 Federal Home Loan Bank for an effective
yield of 5.29%, July 29, 1996 24,897,139
12,940,000 Federal Home Loan Bank for an effective
yield of 5.17%, September 19, 1996 12,785,982
15,000,000 Federal Home Loan Bank for an effective
yield of 5.16%, October 23, 1996 14,746,521
25,000,000 Federal Home Loan Bank for an effective
yield of 5.11%, September 6, 1996 24,750,194
25,000,000 Federal Home Loan Mortgage Corp. for an
effective yield of 5.34%, September 26, 1996 24,676,111
25,000,000 Federal Home Loan Mortgage Corp. for an
effective yield of 5.25%, July 8, 1996 24,974,479
15,000,000 Federal Home Loan Mortgage Corp. for an
effective yield of 5.20%, July 15, 1996 14,969,666
18,000,000 Federal National Mortgage Association
for an effective yield of 5.27%, July 26, 1996 17,926,220
25,000,000 Federal National Mortgage Association
for an effective yield of 5.26%, September 3, 1996 24,762,118
25,000,000 Federal National Mortgage Association
for an effective yield of 5.24%, September 3, 1996 24,762,118
15,000,000 Federal National Mortgage Association
for an effective yield of 5.23%, August 6, 1996 14,921,550
20,000,000 Federal National Mortgage Association
for an effective yield of 5.20%, July 24, 1996 19,933,555
20,000,000 Federal National Mortgage Association
for an effective yield of 5.07%, August 29, 1996 19,824,333
20,000,000 Fleet National Bank for an effective
yield of 5.34%, July 12, 1996 19,967,367
20,000,000 Ford Motor Credit Corp. for an effective
yield of 5.38%, July 12, 1996 19,841,589
25,000,000 General Electric Capital Corp. for an
effective yield of 5.39%, September 9, 1996 24,736,708
20,000,000 General Electric Capital Corp. for an
effective yield of 5.36%, August 12, 1996 19,874,934
20,000,000 General Motors Acceptance Corp. for an
effective yield of 5.41%, July 22, 1996 19,936,883
22,000,000 Heinz (H.J.) Co. for an effective yield
of 5.35%, July 25, 1996 21,921,533
25,000,000 Household Finance Corp. for an effective
yield of 5.28%, July 31, 1996 24,890,000
26,033,000 Metropolitan Life Funding for an effective
yield of 5.28%, July 12, 1996 25,990,999
20,000,000 National Rural Utilities Cooperative Finance
Corp. for an effective yield of 5.27%, July 23, 1996 19,935,589
32,100,000 Preferred Receivables Funding Corp. for an
effective yield of 5.41%, August 28, 1996 31,820,213
25,400,000 Preferred Receivables Funding Corp. for an
effective yield of 5.32%, August 8, 1996 25,257,365
40,000,000 Sheffield Receivables Corp. for an effective
yield of 5.30%, July 1, 1996 40,000,000
10,000,000 USAA Capital Corp. for an effective yield of
5.34%, August 13, 1996 9,936,217
52,974,000 Interest in $500,000,000 repurchase agreement
dated June 28, 1996 with Lehman Brothers Inc. due
July 1, 1996 with respect to various U.S.
Treasury obligations-maturity value of $52,997,838 for an
effective yield of 5.5% 52,997,838
- -------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $790,612,188) $790,568,834
- -------------------------------------------------------------------------------------------------------
Total Investments (cost $7,194,154,187)*** $9,277,486,903
- -------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $9,336,617,134.
+ Non-income-producing security.
*** The aggregate identified cost on a tax basis is
$7,209,780,568, resulting in gross unrealized appreciation and
depreciation of $2,330,862,173 and $263,155,838, respectively,
or net unrealized appreciation of $2,067,706,335.
ADR after the name of a foreign holding stands for American Depository Receipts,
representing ownership of foreign securities on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
June 30, 1996
<S> <C>
Assets
Investments in securities, at value (identified cost $7,194,154,187) (Note 1) $9,277,486,903
- --------------------------------------------------------------------------------------------------------
Cash 2,616,819
- --------------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 1,193,284
- --------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 118,964,616
- --------------------------------------------------------------------------------------------------------
Receivable for securities sold 78,060,779
- --------------------------------------------------------------------------------------------------------
Total assets 9,478,322,401
Liabilities
- --------------------------------------------------------------------------------------------------------
Payable for securities purchased 111,907,555
- --------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 6,350,650
- --------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 10,433,996
- --------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 4,468,745
- --------------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 11,530
- --------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 13,486
- --------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 6,280,287
- --------------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 23,788
- --------------------------------------------------------------------------------------------------------
Other accrued expenses 2,215,230
- --------------------------------------------------------------------------------------------------------
Total liabilities 141,705,267
- --------------------------------------------------------------------------------------------------------
Net assets $9,336,617,134
Represented by
- --------------------------------------------------------------------------------------------------------
Paid-in-capital (Notes 1 and 4) $7,177,262,140
- --------------------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (25,244)
- --------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign
currency transactions (Note 1) 76,047,765
- --------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 2,083,332,473
- --------------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $9,336,617,134
Computation of net asset value and offering price
- --------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($4,752,610,948 divided by 110,555,009 shares) $42.99
- --------------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $42.99)* $45.61
- --------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($4,254,961,917 divided by 101,400,736 shares)** $41.96
- --------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($210,404,045 divided by 4,932,667 shares) $42.66
- --------------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $42.66)* $44.21
- --------------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class Y share ($118,640,224 divided by 2,745,959 shares) $43.21
- --------------------------------------------------------------------------------------------------------
* 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.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended June 30, 1996
<S> <C>
Investment income:
- ------------------------------------------------------------------------------------
Interest $20,581,757
- ------------------------------------------------------------------------------------
Dividends (net of foreign tax of $272,821) 5,852,832
- ------------------------------------------------------------------------------------
Total investment income 26,434,589
Expenses:
- ------------------------------------------------------------------------------------
Compensation of Manager (Note 2) $26,621,482
- ------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 12,379,732
- ------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 89,418
- ------------------------------------------------------------------------------------
Administrative services (Note 2) 52,249
- ------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 6,592,569
- ------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 22,085,471
- ------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 595,173
- ------------------------------------------------------------------------------------
Reports to shareholders 258,058
- ------------------------------------------------------------------------------------
Registration fees 1,856,162
- ------------------------------------------------------------------------------------
Auditing 81,853
- ------------------------------------------------------------------------------------
Legal 72,938
- ------------------------------------------------------------------------------------
Postage 823,532
- ------------------------------------------------------------------------------------
Other 420,878
- ------------------------------------------------------------------------------------
Total expenses 71,929,515
- ------------------------------------------------------------------------------------
Expense reduction (Note 2) (1,703,974)
- ------------------------------------------------------------------------------------
Net expenses 70,225,541
- ------------------------------------------------------------------------------------
Net investment loss (43,790,952)
- ------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 90,720,003
- ------------------------------------------------------------------------------------
Net realized loss on forward currency translation (Note 1) (14,878)
- ------------------------------------------------------------------------------------
Net unrealized appreciation on investments during the year 1,532,698,538
- ------------------------------------------------------------------------------------
Net gain on investments 1,623,403,663
- ------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,579,612,711
- ------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended June 30
----------------------------------
1996 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- -----------------------------------------------------------------------------------------------------
Operations:
- -----------------------------------------------------------------------------------------------------
Net investment loss $(43,790,952) $(13,274,739)
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions 90,705,125 (12,179,793)
- -----------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 1,532,698,538 508,131,057
- -----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,579,612,711 482,676,525
- -----------------------------------------------------------------------------------------------------
Distributions to shareholders:
- -----------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A -- (5,252,966)
- -----------------------------------------------------------------------------------------------------
Class B -- (3,371,127)
- -----------------------------------------------------------------------------------------------------
Class M -- (673)
- -----------------------------------------------------------------------------------------------------
Class Y -- (58,463)
- -----------------------------------------------------------------------------------------------------
In excess of net realized gain on investments
Class A -- (1,509,455)
- -----------------------------------------------------------------------------------------------------
Class B -- (968,703)
- -----------------------------------------------------------------------------------------------------
Class M -- (193)
- -----------------------------------------------------------------------------------------------------
Class Y -- (16,800)
- -----------------------------------------------------------------------------------------------------
From paid-in capital
Class A -- (202,496)
- -----------------------------------------------------------------------------------------------------
Class B -- (129,953)
- -----------------------------------------------------------------------------------------------------
Class M -- (26)
- -----------------------------------------------------------------------------------------------------
Class Y -- (2,254)
- -----------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 5,361,199,461 942,116,459
- -----------------------------------------------------------------------------------------------------
Total increase in net assets 6,940,812,172 1,413,279,875
- -----------------------------------------------------------------------------------------------------
Net assets
- -----------------------------------------------------------------------------------------------------
Beginning of year 2,395,804,962 982,525,087
- -----------------------------------------------------------------------------------------------------
End of year (including accumulated net investment loss
of $25,244 and $2,660, respectively) $9,336,617,134 $2,395,804,962
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout the period)
For the period
July 19, 1994
(commencement
Year ended of operations) to Year ended
June 30 June 30 June 30
--------------------------------------------------------
1996 1995 1996
--------------------------------------------------------
Class Y Class M
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $29.66 $22.59 $29.51
- --------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------
Net investment loss (.11)(f) (.04) (.40)(f)
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 13.66 7.31 13.55
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations 13.55 7.27 13.15
- --------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders:
- --------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (.15) --
- --------------------------------------------------------------------------------------------------------------------
In excess of net realized gains -- (.04) --
- --------------------------------------------------------------------------------------------------------------------
Return of capital -- (.01) --
- --------------------------------------------------------------------------------------------------------------------
Total distributions -- (.20) --
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $43.21 $29.66 $42.66
- --------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%) (d) 45.68 32.42 (c) 44.56
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $118,640 $24,538 $210,404
- --------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(e) .86 .83 (c) 1.64
- --------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets (%) (.29) (.26)(c) (1.06)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 36.61 56.99 36.61
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial Highlights (continued)
(For a share outstanding throughout the period)
For the period
December 1, 1994
(commencement
of operations) to
June 30 Year ended June 30
--------------------------------------------------------
1995 1996 1995
--------------------------------------------------------
Class M Class B
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $24.72 $29.09 $21.68
- --------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------
Net investment loss (.05) (.48)(f) (.23)
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 5.04 13.35 7.84
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.99 12.87 7.61
- --------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders:
- --------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.15) -- (.15)
- --------------------------------------------------------------------------------------------------------------------
In excess of net realized gains (.04) -- (.04)
- --------------------------------------------------------------------------------------------------------------------
Return of capital (.01) -- (.01)
- --------------------------------------------------------------------------------------------------------------------
Total distributions (.20) -- (.20)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $29.51 $41.96 $29.09
- --------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%) (d) 20.40 (c) 44.24 35.34
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $16,011 $4,254,962 $1,013,379
- --------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(e) .94 (c) 1.87 1.87
- --------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets (%) (.53)(c) (1.30) (1.30)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 56.99 36.61 56.99
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial Highlights (continued)
(For a share outstanding throughout the period)
For the period
March 1, 1993
Year (commencement
ended of operations) to
June 30 June 30
--------------------------------------------------------
1994 1993 1996
--------------------------------------------------------
Class B
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $20.80 $17.76 $29.58
- --------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------
Net investment loss (.11) (.05) (.21)(f)
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1.44 3.09 13.62
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.33 3.04 13.41
- --------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders:
- --------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.45) -- --
- --------------------------------------------------------------------------------------------------------------------
In excess of net realized gains -- -- --
- --------------------------------------------------------------------------------------------------------------------
Return of capital -- -- --
- --------------------------------------------------------------------------------------------------------------------
Total distributions (.45) -- --
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $21.68 $20.80 $42.99
- --------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%) (d) 6.18 17.12 (c) 45.34
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $333,738 $15,698 $4,752,611
- --------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(e) 2.04 .67 (c) 1.11
- --------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets (%) (1.55) (.57)(c) (.54)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 52.76 93.59 36.61
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial Highlights (continued)
(For a share outstanding throughout the period)
Year ended June 30
--------------------------------------------------------
1995 1994 1993
--------------------------------------------------------
Class A
--------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $21.88 $20.83 $14.50
- --------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------
Net investment loss (.12) (.06) (.12)
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 8.02 1.56 6.77
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations 7.90 1.50 6.65
- --------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders:
- --------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.15) (.45) (.32)
- --------------------------------------------------------------------------------------------------------------------
In excess of net realized gains (.04) -- --
- --------------------------------------------------------------------------------------------------------------------
Return of capital (.01) -- --
- --------------------------------------------------------------------------------------------------------------------
Total distributions (.20) (.45) (.32)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $29.58 $21.88 $20.83
- --------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%) (d) 36.36 7.00 46.12
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,341,877 $648,787 $318,426
- --------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(e) 1.13 1.23 1.31
- --------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets (%) (.55) (.82) (.98)
- --------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 56.99 52.76 93.59
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial Highlights (continued)
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------
1992
- --------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $11.56
- --------------------------------------------------------------------------
Investment operations
Net investment loss (.02)
- --------------------------------------------------------------------------
Net realized and unrealized gain on investments 3.33(a)
- --------------------------------------------------------------------------
Total from investment operations 3.31
- --------------------------------------------------------------------------
Less distributions to shareholders:
- --------------------------------------------------------------------------
From net realized gain on investments (.37)
- --------------------------------------------------------------------------
In excess of net realized gains --
- --------------------------------------------------------------------------
Return of capital --
- --------------------------------------------------------------------------
Total distributions (.37)
- --------------------------------------------------------------------------
Net asset value, end of period $14.50
- --------------------------------------------------------------------------
Total investment return at net asset value (%) (d) 28.85
- --------------------------------------------------------------------------
Net assets, end of period (in thousands) $141,206
- --------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(e) 1.64
- --------------------------------------------------------------------------
Ratio of net investment loss to average net assets (%) (.91)
- --------------------------------------------------------------------------
Portfolio turnover (%) 116.04 (b)
- --------------------------------------------------------------------------
(a) The amount shown is a balancing figure and does not accord with the
net loss on investments which excludes the unrealized appreciation
acquired from Putnam Information Sciences Trust.
(b) Portfolio turnover excludes the impact of assets received from the
acquisition of Putnam Information Sciences Trust.
(c) Not annualized.
(d) Total investment return assumes dividend reinvestment and does
not reflect the efect of sales charges.
(e) The ratio of expenses to average net assets for the year ended June 30, 1996
includes amounts paid through expense offset arrangements.
Prior period ratios exclude these amounts (Note 2)
(f) Per share net investment loss has been determined on the basis of the
weighted average number of shares outstanding during the period.
</TABLE>
Notes to financial statements
June 30, 1996
Note 1
Significant accounting policies
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 judgement
of Putnam Investment Management, Inc. ("Putnam Management"), the
fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc.
possess above-average, long-term growth potential.
The fund offers class A, class B, class M and class Y shares. Class A
shares are sold with a maximum front-end sales charge of 5.75%. Class
B shares, which convert to class A shares after approximately eight
years, do not pay a front-end sales charge but pay a higher ongoing
distribution fee than class A shares, and may be subject to a
contingent deferred sales charge, if those shares are redeemed within
six years of purchase. Class M shares are sold with a maximum front
end sales charge of 3.50 % and pay an ongoing distribution fee that is
higher than class A shares but lower than class B shares. Class Y
shares, which are sold at net asset value, are generally subject to
the same expenses as class A shares, class B and class M shares, but
do not bear a distribution fee. Class Y shares are sold to defined
contribution plans that initially invest at least $250 million in a
combination of Putnam Funds.
Expenses of the fund are borne pro-rata by the holders of each class
of shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or
other matters on which a class vote is required by law or determined
by the Trustees. Shares of each class would receive their pro-rata
share of the net assets of the fund, if that fund were liquidated. In
addition, the Trustees declare separate dividends on each class of
shares.
The following is a summary of significant accounting policies followed
by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally
accepted accounting principles and requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined
using the last reported sale price on the principal market in which
the securities are traded, or, if no sales are reported -- as in the
case of some securities traded over-the-counter -- the last reported
bid price, except that certain U.S. government obligations are stated
at the mean between the last reported bid and asked prices. Short-term
investments having remaining maturities of 60 days or less are stated
at amortized cost, which approximates market value, and other
investments are stated at fair value following procedures approved by
the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account along with the cash of
other registered investment companies managed by Putnam Management and
certain other accounts. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account,
through its custodian, receives delivery of the underlying securities,
the market value of which at the time of purchase is required to be in
an amount at least equal to the resale price, including accrued
interest. Putnam Management is responsible for determining that the
value of these underlying securities is at all times at least equal to
the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to
buy or sell is executed).
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based
on the exchange rates on that day. The cost of each security is
determined using historical exchange rates. Income and withholding
taxes are translated at prevailing exchange rates when accrued or
incurred. The fund does not isolate that portion of realized or
unrealized gains or losses resulting from changes in the foreign
exchange rate on investments from fluctuations arising from changes in
the market prices of the securities. Such fluctuations are included
with the net realized and unrealized gain or loss on investments. Net
realized gains and losses on foreign currency transactions represent
net exchange gains or losses on closed forward currency contracts,
disposition of foreign currencies and the difference between the
amount of investment income and foreign withholding taxes recorded on
the fund's books and the U.S. dollar equivalent amounts actually
received or paid. Net unrealized gains and losses on foreign currency
transactions 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.
F) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with
the provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to
distribute an amount sufficient to avoid imposition of any excise tax
under Section 4982 of the Internal Revenue Code of 1986. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held and for excise tax on
income and capital gains.
G) Distributions to shareholders Distributions to shareholders from
net investment income are recorded by the fund on the ex-dividend
date. Capital gain distributions, if any, are recorded on the ex-
dividend date and paid 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 treatment of losses on wash sales
transactions, net operating loss and post October loss deferrals.
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,
1996, the fund reclassified $43,768,368 to decrease accumulated net
investment loss and $43,783,292 to decrease paid-in-capital, with an
increase to accumulated net realized gains on investments of $14,924.
The calculation of net investment income per share in the financial
highlights table excludes these adjustments.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.70% of
the first $500 million of average net assets, 0.60% of the next $500
million, 0.55% of the next $500 million, 0.50% of the next $5 billion,
0.475% of the next $5 billion, 0.455% of the next $5 billion, 0.44% of
the next $5 billion, 0.43% of any amount over $21.5 billion subject,
under current law, to reduction in any year by the amount of certain
brokerage commissions and fees (less expenses) received by affiliates
of Putnam Management on the fund's portfolio transactions.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the year ended June 30, 1996, fund expenses were reduced by
$1,703,974 under expense offset arrangements with PFTC. Investor
servicing and custodian fees reported in the Statement of operations
exclude these credits. The fund could have invested a portion of the
assets utilized in connection with the expense offset arrangements in
an income producing asset if it had not entered into such
arrangements.
Trustees of the fund receive an annual Trustees fee of $5,580 and an
additional fee for each Trustee's meeting attended. Trustees who are
not interested persons of Putnam Management and who serve on
committees of the Trustees receive additional fees for attendance at
certain committee meetings.
The fund adopted a Trustee Fee Deferral Plan (the "Plan") which allows
the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund
and invested in the fund or in other Putnam funds until distribution
in accordance with the Plan.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B and class M shares pursuant to Rule 12b-1 under
the Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments, Inc., for services provided and expenses incurred
by it in distributing shares of the fund. The Plans provide for
payments by the fund to Putnam Mutual Funds Corp. at an annual rate up
to 0.35%, 1.00% and 1.00% of the average net assets attributable to
class A, class B and class M shares, respectively. The Trustees have
approved payment by the fund at an annual rate of 0.25%, 1.00% and
0.75% of the average net assets attributable to class A, class B and
class M shares, respectively.
For the year ended June 30, 1996, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $12,190,512 and $459,313 from
the sale of class A and class M shares, respectively and $2,472,765 in
contingent deferred sales charges from redemptions of class B shares.
A deferred sales charge of up to 1% is assessed on certain redemptions
of class A shares. For the year ended June 30, 1996, Putnam Mutual
Funds Corp., acting as underwriter received $50,583 on class A
redemptions.
Note 3
Purchase and sales of securities
During the year ended June 30, 1996, purchases and sales of investment
securities other than short-term investments aggregated $6,376,968,954
and $1,735,109,808, respectively. There were no purchases and sales of
U.S. government obligations. In determining the net gain or loss on
securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Capital shares
At June 30, 1996, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended
June 30 1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 108,115,547 $4,157,515,940
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ----------------------------------------------------
108,115,547 4,157,515,940
Shares
repurchased (42,919,318) (1,604,367,366)
- ----------------------------------------------------
Net increase 65,196,229 $2,553,148,574
- ----------------------------------------------------
Year ended
June 30 1995
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 43,682,500 $1,128,122,574
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 272,982 6,390,513
- ----------------------------------------------------
43,955,482 1,134,513,087
Shares
repurchased (28,250,033) (728,037,391)
- ----------------------------------------------------
Net increase 15,705,449 $ 406,475,696
- ----------------------------------------------------
Year ended
June 30 1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 79,329,108 $3,030,302,256
- ----------------------------------------------------
Shares issued
in connection with
reinvestment of
distributions -- --
- ----------------------------------------------------
79,329,108 3,030,302,256
Shares
repurchased (12,759,527) (468,230,792)
- ----------------------------------------------------
Net increase 66,569,581 $2,562,071,464
- ----------------------------------------------------
Year ended
June 30 1995
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 26,763,724 $688,264,693
- ----------------------------------------------------
Shares issued
in connection with
reinvestment of
distributions 173,288 4,006,394
- ----------------------------------------------------
26,937,012 692,271,087
Shares
repurchased (7,498,289) (192,825,799)
- ----------------------------------------------------
Net increase 19,438,723 $499,445,288
- ----------------------------------------------------
Year ended
June 30, 1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 4,924,723 $193,394,190
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ----------------------------------------------------
4,924,723 193,394,190
Shares
repurchased (534,648) (20,478,335)
- ----------------------------------------------------
Net increase 4,390,075 $172,915,855
- ----------------------------------------------------
For the period
December 1, 1994
(commencement of
operations) to
June 30, 1995
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 573,538 $15,676,754
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 38 892
- ----------------------------------------------------
573,576 15,677,646
Shares
repurchased (30,984) (846,834)
- ----------------------------------------------------
Net increase 542,592 $14,830,812
- ----------------------------------------------------
Year ended
June 30, 1996
- ----------------------------------------------------
Class Y Shares Amount
- ----------------------------------------------------
Shares sold 2,245,795 $85,569,219
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ----------------------------------------------------
2,245,795 85,569,219
Shares
repurchased (327,162) (12,505,651)
- ----------------------------------------------------
Net increase 1,918,633 $73,063,568
- ----------------------------------------------------
For the period
July 19, 1994
(commencement of
operations) to
June 30, 1995
- ----------------------------------------------------
Class Y Shares Amount
- ----------------------------------------------------
Shares sold 914,699 $23,722,392
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,307 77,517
- ----------------------------------------------------
918,006 23,799,909
Shares
repurchased (90,680) (2,435,246)
- ----------------------------------------------------
Net increase 827,326 $21,364,663
- ----------------------------------------------------
- ----------------------------------------------------
Federal tax information
(Unaudited)
The Form 1099 you receive in January 1997 will show the tax status of
all distributions paid to your account in calendar 1996.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
John J. Morgan, Jr.
Vice President
Daniel L. Miller
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
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, which gives details
of sales charges, investment objectives, and operating policies of the
fund, and the most recent copy of Putnam's Quarterly Performance
Summary. For more information, or to request a prospectus, call toll
free: 1-800-225-1581.
Shares of mutual funds are not deposits or obligations of, or
guaranteed or endorsed by, any financial institution, are not insured
by the Federal Deposit Insurance Corporation (FDIC), the Federal
Reserve Board or any other agency, and involve risk, including the
possible loss of principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
26302 - 852/358/983 8/96
PUTNAM INVESTMENTS [LOGO]
- ---------------------------------------------------------------------------
Putnam New Opportunities Fund
Supplement to Annual Report dated 6/30/96
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to defined contribution plans investing $250 million
or more in one or more of Putnam's funds or private accounts. Performance
of class Y shares, which incur neither a front-end load, distribution fee,
nor contingent deferred sales charge, will differ from performance of class
A, B, and M shares, which are discussed more extensively in the semiannual
report.
ANNUAL RESULTS AT A GLANCE
- ---------------------------------------------------------------------------
Total return:NAV
One year ended 6/30/96 45.68%
Life of class (since 7/19/94) 92.92
Annual average 40.07
- ---------------------------------------------------------------------------
Share value: NAV
6/30/95 $29.66
6/30/96 43.21
- ---------------------------------------------------------------------------
Please note that past performance does not indicate future results.
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.
