Putnam
New
Opportunities
Fund
SEMIANNUAL REPORT
December 31, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* According to Lipper Analytical Services, Putnam New Opportunities Fund's
class A share total return ranked 3 out of 255 growth funds for the five-year
period ended December 31, 1996, placing the fund in the top 2% in this
category.*
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
12 Portfolio holdings
21 Financial statements
* Lipper Analytical Services, an independent research organization, ranks funds
according to total return performance. Their rankings vary over time and do
not reflect the effects of sales charges. For periods ended 12/31/96, class A,
class B, and class M shares ranked 615, 630, and 627, respectively, out of 672
funds for 1-year performance; class B shares ranked 100 out of 430 funds for
3-year performance. Class B and class M shares were not ranked over longer
periods. Past performance is not indicative of future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
The first half of Putnam New Opportunities Fund's fiscal 1997 was a period
that certainly tested the mettle of growth-stock investors. During the six
months ended December 31, 1996, the stock market turned its back on the
high-growth industries that had previously fueled its record-breaking advance.
Thus, the stocks in which your fund typically invests languished as investors
grew increasingly wary of the market's capacity for continued advance and
began opting for stocks of large, established companies in the belief that
they would best weather any market volatility.
Fund Manager Daniel Miller views this environment as inevitable -- and
temporary. He has already been able to take advantage of stock valuations that
he believes had dropped to attractive levels, and expects to see opportunities
for other bargain-priced portfolio acquisitions. Meanwhile, Carol McMullen,
the chief investment officer of Putnam's Core Growth Equity Group, joined your
fund's management team in late 1996 to focus on growth opportunities among
large-company stocks. Carol has been with Putnam since 1995; she was
previously senior vice president and senior portfolio manager of Baring Asset
Management.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
February 19, 1997
Report from the Fund Managers
Daniel L. Miller, lead manager
Carol C. McMullen
"Be sure to put your feet in the right place, then stand firm against a
hostile wind." While Abraham Lincoln was not known for his money management
expertise, his words offer useful advice to individual investors and portfolio
managers alike. Lincoln's words not only summarize the discipline needed to
pursue long-term growth successfully, but provide an appropriate description
of the stock market environment that persisted through Putnam New
Opportunities Fund's semiannual fiscal period ended December 31, 1996.
Since its inception, the fund has had its feet firmly planted in what we
consider to be the right place and its performance has mostly confirmed our
judgment. With this in mind, the fund stood its ground when the equity
market's winds changed direction during the period. Amid a market driven by
the strength of large corporations such as those listed among the Standard &
Poor's 500(registered trademark), your fund maintained its long-term focus on
companies with above-average growth potential within fast-growing and emerging
industries. As a result, we continued to invest much of the portfolio in
midsize companies, which are more likely to exhibit the growth and quality
characteristics your fund's strategy calls for.
Unfortunately, over the period, the performance of midsize companies clearly
lagged that of larger capitalization stocks. Indeed, while the S&P 500 Index
gained 11.68% during the period -- propelled largely by the stellar
performance of technology giants IBM, Intel, Microsoft, and General Electric
- -- the midcap-oriented Russell 2000 Index returned only 5.56%. Performance
information for the fund appears on pages 9 and 10.
* MORE EFFICIENT PORTFOLIO MANAGEMENT AS FUND GROWS
Your fund is designed to pursue long-term growth, and therefore we are not apt
to change its investment style as a result of short-term market turbulence. As
we mentioned above, our management approach typically leads us toward midsize
companies -- those valued between $1 billion and $5 billion -- that possess
high-quality management and offer outstanding growth potential. At the same
time, however, your fund's increasing size and the market's interest in larger
capitalization stocks has spurred us to invest a larger portion of its assets
in companies whose capitalization is greater than $5 billion. For this segment
of the portfolio, which should enable us to enhance the fund's capital
appreciation potential, we maintain the same stringent growth and quality
requirements that govern all of the fund's investments.
As part of our added emphasis on larger companies, which now make up roughly
25% of the portfolio, this portion of the fund is now overseen by Putnam's
Core Growth Equity Group. This group specializes in the research and analysis
of the large-capitalization segment of the equity market. Placing this segment
of the fund's portfolio in the hands of specialists strengthens the fund's
management team by enabling each team member to focus on his or her area of
expertise.
* TELECOMMUNICATIONS HOLDINGS DEMONSTRATE BOTH STRENGTH AND WEAKNESS
The telecommunications deregulation act passed in February 1996 continued to
impact a significant portion of the fund's holdings during the period. 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 providers, such as
the Bell operating companies, in local markets. Your fund has derived
substantial benefits from several holdings in this industry segment. For
example, MFS Communications (which was recently acquired by WorldCom) was one
of the portfolio's strongest performers during the period. After successfully
constructing the fiber-optic networks required to attract corporate customers,
MFS is now starting to enjoy considerable success in competing with larger
telephone service providers. While this security and others discussed in this
report were viewed favorably during the period, all portfolio holdings are
subject to review and adjustment in accordance with the fund's investment
strategy and may vary in the future.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Computer software 11.2%
Business services 7.1%
Networking equipment 5.7%
Health care services 5.6%
Pharmaceuticals and
biotechnology 5.6%
Footnote reads:
* Based on net assets as of 12/31/96. Allocations and industry sectors
will vary over time.
Less profitable during the period were several of the fund's media/
entertainment holdings. While the passage of the telecommunications act
loosens restrictions on the radio and television industries and allows
ownership of multiple stations in one market, investors became concerned early
in the period that the still-evolving law will ultimately be less permissive
than was widely expected upon passage. Consequently, several of the fund's
larger media holdings that had prospered in the first few months after the
legislation was passed began to decline in value. Among these were SFX
Broadcasting and Clear Channel Communications. We believe that the final
limitations on this industry -- which will still be less restrictive than in
the past -- will allow for substantial growth and that investors' current
concerns will eventually dissipate. In addition, a significant number of
stocks in this sector have now declined to the point at which they represent
outstanding opportunities. Therefore, we remain optimistic about the sector's
prospects.
* TECHNOLOGY SECTOR CONTINUES TO THRIVE
With a significant portfolio weighting in technology-related stocks, the fund
was able to benefit from some of this sector's sturdy performance over the
past six months. Holdings in the networking and computer services segments of
the industry helped boost the fund's returns somewhat, as did the fund's
allocation to the semiconductor market.
[GRAPHIC CHART OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS*
HFS, Inc.
Hotels, motels, and real estate franchises
Cisco Systems, Inc.
Networking products
Computer Associates International, Inc.
Computer software
Healthsouth Rehabilitation Corp.
Physical therapy and rehabilitation
EMC Corp.
Computers and memory devices
Parametric Technology Corp.
Computer software
Boston Scientific Corp.
Medical products
Microsoft Corp.
Computer software
HBO & Co.
Medical information systems
Cascade Communications Corp.
Telecommunication equipment
* These holdings represent 14.2% of the fund's net assets as of 12/31/96.
Portfolio holdings will vary over time.
As computer networking becomes increasingly popular, individual and corporate
consumers continue their active search for innovative technologies and other
connectivity tools in order to create networks and to simplify Internet
access. It stands to reason, then, that companies providing such services and
products have generally prospered in recent months. For your fund, profitable
producers of networking and connectivity tools included Ascend Communications,
Cascade Communications, and Cisco Systems, producers of networking and
Internet-related products.
When investing in semiconductors, we typically select those securities with
the greatest growth potential. During the period, these were companies whose
products are essential to multimedia applications -- that is, those used to
incorporate non-computerized voices and images into communications and
computer-based applications. Here the portfolio's holdings included Analog
Devices, Linear Technologies, and Maxim Integrated Products, three solid
performers whose returns benefited the fund.
* GROWTH-ORIENTED MIDCAPS MAY PROSPER AS ECONOMIC GROWTH SLOWS
As we move into 1997, we are optimistic about the fund's prospects for
long-term growth. The economy shows few signs of deviating from its course of
slow but steady growth, benign inflation, and low interest rates. Corporate
earnings remain healthy, although we suspect that the productivity-driven
earnings of larger companies may begin to decline in 1997. If this occurs,
growth-oriented investors may turn their attention -- and, more importantly,
their investment dollars -- toward somewhat smaller companies with more
attractive internal growth potential. These smaller companies represent the
bulk of your fund's holdings, and their success may bode well for your fund --
especially in the longer term. Bear in mind, however, that there can be no
assurances that these events will take place. Regardless of the way events
unfold, we will continue to target companies of all sizes with high-quality
management and superior prospects for long-term growth.
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 12/31/96, 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 12/31/96
Class A Class B Class M
(inception date) (8/31/90) (3/1/93) (12/1/94)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months -4.72% -10.19% -5.05% -9.76% -4.95% -8.28%
- ------------------------------------------------------------------------------
1 year 10.86 4.49 10.06 5.06 10.31 6.46
- ------------------------------------------------------------------------------
5 years 179.22 163.09 -- -- -- --
Annual average 22.80 21.34 -- -- -- --
- ------------------------------------------------------------------------------
Life of class 418.16 388.41 130.51 127.51 65.45 59.64
Annual average 29.63 28.42 24.29 23.87 27.24 25.08
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 12/31/96
Standard & Poor's Russell Consumer
500 Index Index 2000 Price Index
- ------------------------------------------------------------------------------
6 months 11.68% 5.56% 1.21%
- ------------------------------------------------------------------------------
1 year 22.95 16.49 3.32
- ------------------------------------------------------------------------------
5 years 102.89 106.80 15.01
Annual average 15.19 15.63 2.84
- ------------------------------------------------------------------------------
Life of class A 174.50 189.23 20.52
Annual average 17.28 18.25 2.99
- ------------------------------------------------------------------------------
Life of class B 84.49 72.92 10.83
Annual average 17.30 15.34 2.71
- ------------------------------------------------------------------------------
Life of class M 71.59 53.66 5.94
Annual average 29.54 22.86 2.80
- ------------------------------------------------------------------------------
Footnote reads:
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 principal 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%.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 12/31/96
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 1 1 1
- ------------------------------------------------------------------------------
Income -- -- --
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term 0.319 0.319 0.319
- ------------------------------------------------------------------------------
Short-term -- -- --
- ------------------------------------------------------------------------------
Total $0.319 $0.319 $0.319
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
6/30/96 $42.99 $45.61 $41.96 $42.66 $44.21
- ------------------------------------------------------------------------------
12/31/96 40.64 43.12 39.52 40.23 41.69
- ------------------------------------------------------------------------------
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
Russell 2000 Index is composed of the 2,000 smallest securities in the Russell
3000 Index, representing approximately 7% of the Russell 3000 total market
capitalization. This index is widely regarded in the industry as the premiere
measure of the small capitalization stock. Since the fund's holdings consist
largely of mid-sized equity securities and smaller allocations to small- and
large-cap stocks, it is Putnam Management's opinion that this index is a more
appropriate benchmark than the Standard & Poor's 500 Index.
Standard & Poor's 500 Index is an unmanaged list of common stocks that is
frequently used as a general measure of stock market performance.
Consumer Price Index (CPI) is a commonly used measure of inflation; it does
not represent an investment return.
* Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities in the
fund do not match those in the indexes and performance of the fund will
differ. It is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Portfolio of investments owned
December 31, 1996 (Unaudited)
COMMON STOCKS (96.6%) *
NUMBER OF SHARES VALUE
Advertising (0.8%)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,150,000 Lamar Advertising Co. + $ 27,887,500
1,650,000 Outdoor Systems, Inc. + 46,406,250
750,000 Universal Outdoor Holdings, Inc. + 17,625,000
--------------
91,918,750
Aerospace and Defense (0.5%)
- ---------------------------------------------------------------------------------------------------------
565,000 Boeing Co. 60,101,875
Apparel (1.3%)
- ---------------------------------------------------------------------------------------------------------
443,700 Nautica Enterprises, Inc. + 11,203,425
830,700 Nike, Inc. 49,634,325
793,700 Tommy Hilfiger Corp. + 38,097,600
1,950,000 Wolverine World Wide, Inc. 56,550,000
--------------
155,485,350
Broadcasting (3.8%)
- ---------------------------------------------------------------------------------------------------------
900,000 Chancellor Broadcasting Corp. Class A + 21,375,000
3,405,000 Clear Channel Communications, Inc. + 123,005,625
157,000 Cox Radio, Inc. Class A + 2,747,500
1,090,000 Emmis Broadcasting Corp. Class A + 35,697,500
1,000,010 Evergreen Media Corp. Class A + 25,000,250
645,900 Heartland Wireless Communications, Inc. + 8,477,438
1,197,900 Infinity Broadcasting Corp. Class A + 40,279,388
1,010,000 Jacor Communications, Inc. + 27,648,750
900,000 LIN Television Corp. + 38,025,000
600,000 SFX Broadcasting, Inc. Class A + 17,850,000
1,123,600 Sinclair Broadcast Group, Inc. Class A + 29,213,600
825,400 Univision Communications Inc. Class A + 30,539,800
1,425,000 Westwood One, Inc. + 23,690,625
799,800 Young Broadcasting Corp. Class A + 23,394,150
--------------
446,944,626
Building Products (0.2%)
- ---------------------------------------------------------------------------------------------------------
1,000,000 Barnett, Inc. + 27,250,000
Business Services (7.1%)
- ---------------------------------------------------------------------------------------------------------
1,172,300 Affiliated Computer Services, Inc. Class A + 34,875,925
3,100,000 Airgas, Inc. + 68,200,000
550,000 APAC Teleservices, Inc. + 21,106,250
1,675,000 Corestaff, Inc. + 39,676,563
3,410,000 Corporate Express, Inc. + 100,381,875
1,350,000 Employee Solutions, Inc. + 27,675,000
3,615,000 First Data Corp. 131,947,500
1,400,000 Global DirectMail Corp. + 61,075,000
800,000 Interim Services Inc. + 28,400,000
691,350 Labor Ready, Inc. + 9,333,225
505,500 NOVA Corp./Georgia + 11,184,188
1,500,000 Paychex, Inc. 77,156,250
1,054,000 PMT Svcs., Inc. + 18,445,000
23,300 Precision Response Corp. + 818,413
14,500,000 Rentokil Group Ord. PLC (United Kingdom) 108,977,360
2,200,000 Robert Half International, Inc. + 75,625,000
560,100 Select Appointments Holdings PLC ADR
(United Kingdom) + 6,441,150
103,100 Snyder Communications Inc. + 2,783,700
800,000 TeleTech Holdings Inc. + 20,800,000
--------------
844,902,399
Cable Television (--%)
- ---------------------------------------------------------------------------------------------------------
701,866 Century Communications Corp. Class A + 3,991,863
Chemicals (0.7%)
- ---------------------------------------------------------------------------------------------------------
1,795,000 Praxair, Inc. 82,794,375
Computer Services (3.2%)
- ---------------------------------------------------------------------------------------------------------
3,200,000 America Online, Inc. + 106,400,000
1,750,000 Cambridge Technology Partners, Inc. + 58,734,375
1,052,900 CBT Group PLC ADR (Ireland) + 57,119,825
1,500,000 Computer Horizons Corp. + 57,750,000
700,000 National Tech. Team, Inc. + 14,000,000
181,683 Renaissance Solutions, Inc. + 8,130,314
300,000 Sykes Enterprises, Inc. + 11,250,000
1,880,000 Vanstar Corp. + 46,060,000
369,400 Whittman-Hart, Inc. + 9,465,875
233,600 XLConnect Solutions Inc. + 6,716,000
--------------
375,626,389
Computer Software (11.2%)
- ---------------------------------------------------------------------------------------------------------
2,050,000 Baan Co., N.V. (Netherlands) + 71,237,500
889,600 CCC Information Services Group + 14,233,600
633,800 Clarify, Inc. + 30,422,400
3,960,000 Computer Associates Intl., Inc. 197,010,000
375,000 Documentum, Inc. + 12,656,250
2,060,000 Electronic Arts, Inc. + 61,671,250
500,000 Forte Software, Inc. + 16,375,000
1,250,000 Inso Corp. + 49,687,500
930,000 Legato Systems, Inc. + 30,341,250
1,800,000 McAfee Associates, Inc. 79,200,000
1,687,400 Microsoft Corp. + 139,421,425
2,900,000 Parametric Technology Corp. + 148,987,500
1,619,000 PeopleSoft, Inc. + 77,610,813
700,000 Project Software & Development, Inc. + 29,662,500
1,200,000 Rational Software Corp. + 47,475,000
529,100 Remedy Corp. + 28,439,125
680,700 Saville Systems Ireland PLC ADR (Ireland) + 27,653,438
1,772,000 Security Dynamics Technologies, Inc. + 55,818,000
380,800 Sapient Corp. + 16,041,200
2,175,000 Synopsys, Inc. + 100,593,750
1,279,700 Learning Co. Inc. (The) + 18,395,688
1,400,000 Vantive Corp. + 43,750,000
558,000 Viasoft, Inc. + 26,365,500
--------------
1,323,048,689
Computer Peripherals (1.3%)
- ---------------------------------------------------------------------------------------------------------
4,647,200 EMC Corp. + 153,938,500
Consumer Products (2.1%)
- ---------------------------------------------------------------------------------------------------------
353,000 Clorox Co. 35,432,375
1,040,000 Gillette Co. 80,860,000
841,200 Kimberly-Clark Corp. 80,124,300
465,000 Procter & Gamble Co. 49,987,500
--------------
246,404,175
Consumer Services (0.1%)
- ---------------------------------------------------------------------------------------------------------
811,600 Thermolase Corp. + 12,782,700
Cosmetics (0.4%)
- ---------------------------------------------------------------------------------------------------------
747,000 Avon Products, Inc. 42,672,375
Education (0.6%)
- ---------------------------------------------------------------------------------------------------------
990,100 Apollo Group, Inc. Class A + 33,106,469
1,139,850 Learning Tree International, Inc. + 33,625,575
--------------
66,732,044
Electric Equipment (0.2%)
- ---------------------------------------------------------------------------------------------------------
1,000,000 Cognex Corp. + 18,500,000
Electric Utilities (0.5%)
- ---------------------------------------------------------------------------------------------------------
1,800,000 Calenergy, Inc. + 60,525,000
Electronics and Electrical Equipment (0.9%)
- ---------------------------------------------------------------------------------------------------------
1,035,000 General Electric Co. 102,335,625
Energy-Related (0.3%)
- ---------------------------------------------------------------------------------------------------------
1,000,000 Thermo Electron Corp. + 41,250,000
Environmental Control (0.4%)
- ---------------------------------------------------------------------------------------------------------
1,334,000 U.S. Filter Corp. + 42,354,500
Finance (1.4%)
- ---------------------------------------------------------------------------------------------------------
1,129,000 American Express Co. 63,788,500
1,487,000 Federal National Mortgage Association 55,390,750
1,041,850 TCF Financial Corp. 45,320,475
--------------
164,499,725
Financial Services (2.0%)
- ---------------------------------------------------------------------------------------------------------
1,175,035 Aames Financial Corp. 42,154,381
1,000,000 Finova Group, Inc. 64,250,000
750,000 First USA Paymentech, Inc. + 25,406,250
1,050,000 MBNA Corp. 87,150,000
1,000,000 RAC Financial Group, Inc. + 21,125,000
--------------
240,085,631
Food and Beverages (1.5%)
- ---------------------------------------------------------------------------------------------------------
849,000 Campbell Soup Co. 68,132,250
1,614,500 Coca-Cola Enterprises, Inc. 78,303,250
465,000 Pioneer Hi-Bred International, Inc. 32,550,000
--------------
178,985,500
Funeral/Cemetery Services (1.9%)
- ---------------------------------------------------------------------------------------------------------
1,206,500 Loewen Group, Inc. 47,204,313
2,650,000 Service Corp. International 74,200,000
2,900,000 Stewart Enterprises, Inc. Class A 98,600,000
--------------
220,004,313
Health Care Services (5.6%)
- ---------------------------------------------------------------------------------------------------------
850,000 ABR Information Services, Inc. + 33,468,750
486,400 Access Health, Inc. + 21,766,400
1,250,000 American Medical Response + 40,625,000
1,800,000 Cardinal Health, Inc. 104,850,000
755,000 Carematrix Corp. + 9,909,375
810,000 Emcare Holdings, Inc. + 18,832,500
2,100,000 Genesis Health Ventures, Inc. + 65,362,500
4,496,435 Healthsouth Rehabilitation Corp. + 173,674,802
1,410,000 Renal Treatment Centers, Inc. + 35,955,000
850,000 Rotech Medical Corp. + 17,850,000
1,100,000 Sunrise Assisted Living, Inc. + 30,662,500
750,000 Total Renal Care Holdings, Inc. + 27,187,500
509,500 Vencor, Inc. + 16,112,938
2,500,000 Vivra, Inc. + 69,062,500
--------------
665,319,765
HMOs (0.2%)
- ---------------------------------------------------------------------------------------------------------
699,600 Compdent Corp. + 24,660,900
Hospital Management (1.0%)
- ---------------------------------------------------------------------------------------------------------
5,500,000 Health Management Assoc., Inc. + 123,750,000
Insurance (1.6%)
- ---------------------------------------------------------------------------------------------------------
519,000 American International Group, Inc. 56,181,750
643,250 CRA Managed Care, Inc. + 28,946,250
1,800,000 HCC Insurance Holdings, Inc. 43,200,000
1,298,933 Travelers Group Inc. 58,939,085
--------------
187,267,085
Leisure (0.2%)
- ---------------------------------------------------------------------------------------------------------
650,000 Signature Resorts, Inc. + 22,912,500
Lodging (4.4%)
- ---------------------------------------------------------------------------------------------------------
1,830,000 Doubletree Corp. + 82,350,000
2,451,000 Extended Stay America, Inc. + 49,326,375
3,800,000 HFS, Inc. + 227,050,000
1,064,500 Marriott International, Inc. 58,813,625
2,057,000 Prime Hospitality Corp. + 33,169,125
1,575,500 Promus Hotel Corp. + 46,674,188
362,700 Renaissance Hotel Group N.V. (Hong Kong) + 8,523,450
842,750 Studio Plus Hotels, Inc. + 13,273,313
--------------
519,180,076
Medical Computer Services (1.5%)
- ---------------------------------------------------------------------------------------------------------
2,340,000 HBO & Co. 138,937,500
1,061,920 Medic Computer Systems, Inc. 42,808,650
--------------
181,746,150
Medical Management Services (1.5%)
- ---------------------------------------------------------------------------------------------------------
258,400 NCS HealthCare, Inc. Class A + 7,525,900
1,130,000 OccuSystems, Inc. + 30,510,000
1,038,600 Pediatrix Medical Group, Inc. + 38,428,200
1,939,100 Phycor, Inc. + 55,021,963
966,900 Phymatrix, Inc. + 13,778,325
1,850,000 Physician Reliance Network, Inc. + 14,337,500
1,200,000 Physicians Resource Group, Inc. + 21,300,000
--------------
180,901,888
Medical Supplies and Devices (4.1%)
- ---------------------------------------------------------------------------------------------------------
2,450,700 Boston Scientific Corp. + 147,042,000
400,000 Endosonics Corp. + 6,100,000
1,050,000 I-Stat Corp. + 24,937,500
1,700,000 IDEXX Laboratories, Inc. + 61,200,000
950,000 Medtronic, Inc. 64,600,000
800,000 Neuromedical Systems, Inc. + 10,600,000
2,575,000 Omnicare, Inc. 82,721,875
2,200,000 Physician Sales & Service, Inc. + 31,625,000
675,000 Spine-Tech, Inc. + 16,875,000
1,235,000 Thermo Cardiosystems, Inc. + 37,050,000
--------------
482,751,375
Networking Equipment (5.7%)
- ---------------------------------------------------------------------------------------------------------
1,125,000 Ascend Communications, Inc. + 69,890,625
1,000,000 Bay Networks Inc. + 20,875,000
265,500 Black Box Corp. + 10,951,875
3,450,000 Cabletron Systems, Inc. + 114,712,500
2,444,000 Cascade Communications Corp. + 134,725,500
3,561,400 Cisco Systems, Inc. + 226,594,075
752,000 3Com Corp. + 55,178,000
1,300,000 Shiva Corp. + 45,337,500
--------------
678,265,075
Nursing Homes (0.6%)
- ---------------------------------------------------------------------------------------------------------
2,400,000 Health Care & Retirement Corp. + 68,700,000
Office Equipment and Products (0.8%)
- ---------------------------------------------------------------------------------------------------------
1,500,000 BT Office Products International, Inc. + 13,312,500
3,100,000 Viking Office Products, Inc. + 82,731,250
--------------
96,043,750
Oil and Gas (0.6%)
- ---------------------------------------------------------------------------------------------------------
654,000 Schlumberger Ltd. 65,318,250
Pharmaceuticals and Biotechnology (5.6%)
- ---------------------------------------------------------------------------------------------------------
1,667,000 Abbott Laboratories 84,600,250
1,250,000 Biochem Pharmaceutical, Inc. + 62,812,500
1,006,800 Dura Pharmaceuticals, Inc. 48,074,700
4,000,000 Elan Corp. PLC ADR (Ireland) + 133,000,000
1,725,000 Gilead Sciences, Inc. + 43,125,000
505,000 Martek Biosciences Corp. + 10,100,000
1,583,000 Merck & Co., Inc. 125,452,750
194,100 Neurogen Corp. + 3,736,425
350,000 Parexel International Corp. + 18,068,750
1,498,000 Pfizer, Inc. 124,146,750
182,900 Quintiles Transnational Corp. + 12,117,125
--------------
665,234,250
Photography (0.5%)
- ---------------------------------------------------------------------------------------------------------
772,000 Eastman Kodak Co. 61,953,000
Publishing (1.0%)
- ---------------------------------------------------------------------------------------------------------
747,000 Gannett Co., Inc. 55,931,625
179,300 Mecklermedia Corp. + 3,541,175
748,000 Tribune Co. 58,998,500
--------------
118,471,300
Restaurants (2.4%)
- ---------------------------------------------------------------------------------------------------------
1,500,000 Applebee's International, Inc. 41,250,000
2,950,000 Boston Chicken, Inc. + 105,831,250
1,937,747 J.D. Wetherspoon PLC (United Kingdom) 38,813,844
1,525,000 Landry's Seafood Restaurants, Inc. + 32,596,875
1,317,850 Papa Johns International, Inc. + 44,477,438
1,000,000 Rainforest Cafe, Inc. + 23,500,000
--------------
286,469,407
Retail (5.2%)
- ---------------------------------------------------------------------------------------------------------
3,850,000 Bed Bath & Beyond, Inc. + 93,362,500
811,625 Boise Cascade Office Products + 17,044,125
123,700 Borders Group, Inc. + 4,437,738
3,000,000 CompUSA, Inc. + 61,875,000
1,037,000 CVS Corp. 42,905,875
3,050,000 Dixons Group PLC (United Kingdom) 28,327,180
1,696,000 Federated Department Stores + 57,876,000
4,825,000 Officemax, Inc. + 51,265,625
2,000,000 Revco D.S., Inc. + 74,000,000
1,219,000 Sears, Roebuck & Co. 56,226,375
3,150,000 Staples, Inc. + 56,896,875
1,468,000 TJX Cos., Inc. (The) 69,546,500
--------------
613,763,793
Satellite Services (0.4%)
- ---------------------------------------------------------------------------------------------------------
1,923,600 PanAmSat Corp. + 53,860,800
Semiconductors (3.7%)
- ---------------------------------------------------------------------------------------------------------
1,700,000 Analog Devices Inc. + 57,587,500
1,150,000 Credence Systems Corp. + 23,143,750
906,000 Intel Corp. 118,629,375
1,500,000 Linear Technology Corp. 65,812,500
1,550,000 Maxim Integrated Products Inc. + 67,037,500
384,300 Microchip Technology, Inc. + 19,551,263
661,000 Texas Instruments, Inc. 42,138,750
1,350,000 Xilinx, Inc. + 49,696,875
--------------
443,597,513
Specialty Consumer Products (0.2%)
- ---------------------------------------------------------------------------------------------------------
557,000 Central Garden and Pet Co. + 11,731,813
455,000 West Marine, Inc. + 12,853,750
--------------
24,585,563
Telecommunication Equipment (2.3%)
- ---------------------------------------------------------------------------------------------------------
1,063,400 Brooks Fiber Properties, Inc. + 27,116,700
336,000 Diana Corp. + 9,240,000
2,900,000 Pairgain Technologies, Inc. + 88,268,750
750,000 Premisys Communications, Inc. + 25,312,500
3,250,000 Tellabs, Inc. + 122,281,250
--------------
272,219,200
Telephone Services (3.7%)
- ---------------------------------------------------------------------------------------------------------
1,000,000 Intermedia Communications, Inc. + 25,750,000
1,200,000 IXC Communications, Inc. + 36,900,000
727,000 LCI International, Inc. + 15,630,500
1,500,000 McLeod, Inc. Class A + 38,250,000
1,770,114 MFS Communications Company, Inc. + 96,471,213
1,570,000 Sprint Corp. 62,603,750
2,150,000 Tel-Save Holdings, Inc. + 62,350,000
3,690,875 WorldCom, Inc. + 96,193,430
--------------
434,148,893
Wireless Communications (1.4%)
- ---------------------------------------------------------------------------------------------------------
1,400,000 Clearnet Communications Inc. Class A (Canada) + 15,400,000
733,800 ICG Communications, Inc. + 12,933,225
3,830,000 NEXTEL Communications, Inc. Class A + 50,029,375
820,600 Omnipoint Corp. + 15,796,550
4,700,000 Paging Network, Inc. + 71,675,000
432,700 Preferred Networks, Inc. + 2,812,550
89,500 Western Wireless Corp. Class A + 1,241,813
--------------
169,888,513
--------------
Total Common Stocks (cost $9,740,449,222) $11,444,143,450
CONVERTIBLE PREFERRED STOCKS (-%) * (cost $3,340,000)
NUMBER OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
66,800 Vanstar Fin. Trust 144A $3.375 cv. pfd. $ 3,456,900
SHORT-TERM INVESTMENTS (3.8%) *
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
$ 25,000,000 American Home Products Corp. for an effective
yield of 5.6%, February 11, 1997 $ 24,840,556
15,000,000 Bellsouth Telecomm Inc. for an effective
yield of 5.3%, February 4, 1997 14,924,917
15,000,000 Ciesco L.P. for an effective yield of 5.3%,
February 12, 1997 14,907,250
10,000,000 Ciesco L.P. for an effective yield of 5.3%,
January 30, 1997 9,957,306
40,000,000 Federal Home Loan Mortgage Corp. for an effective
yield of 5.55%, January 24, 1997 39,858,166
30,000,000 Federal Home Loan Mortgage Corp. for an effective
yield of 5.22%, January 2, 1997 29,996,265
15,000,000 Federal Home Loan Mortgage Corp. for an effective
yield of 5.21%, February 12, 1997 14,908,825
30,000,000 Federal National Mortgage Association for an effective
yield of 5 1/4%, March 17, 1997 29,671,875
25,000,000 Federal National Mortgage Association for an effective
yield of 5.24%, January 28, 1997 24,901,750
20,000,000 Ford Motor Credit Corp. for an effective yield of 5.29%,
February 27, 1997 19,832,483
25,000,000 Merrill Lynch & Co Inc. for an effective yield of 5.36%,
February 7, 1997 24,862,278
40,000,000 Merrill Lynch & Co Inc. for an effective yield of 5.35%,
January 21, 1997 39,881,111
25,000,000 Metlife Funding, Inc., for an effective yield of 5.3%,
January 14, 1997 24,952,153
20,000,000 National Rural Utilities Cooperative Finance Corp.
for an effective yield of 5.3%, January 10, 1997 19,973,500
30,000,000 Sheffield Receivables Corp. for an effective yield of
5.33%, January 16, 1997 29,933,375
85,245,000 Interest in $624,569,000 joint repurchase agreement
dated December 31, 1996, with S.B.C. Warburg Inc.,
due January 2, 1997, with respect to various
U.S. Treasury obligations -- maturing value of
$85,276,967 for an effective yield of 6.75% 85,260,983
--------------
Total Short-Term Investments (cost $448,662,178) $ 448,662,793
- ---------------------------------------------------------------------------------------------------------
Total Investments (cost $10,192,451,400) *** $11,896,263,143
- ---------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $11,842,858,069.
*** The aggregate identified cost on a tax basis is $10,208,077,720, resulting in gross unrealized
appreciation and depreciation of $2,240,557,739 and $552,372,316, respectively, or net unrealized
appreciation of $1,688,185,423.
+ Non-income-producing security.
144A after the name of a security represents those exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR or ADS after the name of a foreign holding stands for American Depository Receipts and American
Depository Shares, respectively, representing ownership of foreign securities on deposit with a
domestic custodian bank.
The accompanying notes are an integral part of these financial statments.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
December 31, 1996 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $10,192,451,400) (Note 1) $ 11,896,263,143
- ---------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 4,289,743
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 61,231,038
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 36,249,187
- ---------------------------------------------------------------------------------------------------
Total assets 11,998,033,111
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 68,643
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 178,892
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 91,927,734
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 33,448,436
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 14,739,402
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 3,573,973
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 69,648
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 15,041
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 8,776,596
- ---------------------------------------------------------------------------------------------------
Payable for organization expenses 23,788
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 2,352,889
- ---------------------------------------------------------------------------------------------------
Total liabilities 155,175,042
- ---------------------------------------------------------------------------------------------------
Net assets $11,842,858,069
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $ 10,272,439,901
- ---------------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (46,112,379)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (Note 1) (87,283,043)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 1,703,813,590
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $11,842,858,069
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($5,965,441,233 divided by 146,799,281 shares) $40.64
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $40.64)* $43.12
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($5,437,231,861 divided by 137,595,349 shares)** $39.52
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($287,471,992 divided by 7,146,600 shares) $40.23
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $40.23)* $41.69
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($152,712,983 divided by 3,733,441 shares) $40.90
- ---------------------------------------------------------------------------------------------------
* 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
Six months ended December 31, 1996 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Interest $ 17,910,023
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $62,600) 9,302,317
- --------------------------------------------------------------------------------------------------
Total investment income 27,212,340
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 27,049,679
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 11,537,237
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 119,882
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 31,302
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 6,740,208
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 24,455,076
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 948,215
- --------------------------------------------------------------------------------------------------
Reports to shareholders 503,215
- --------------------------------------------------------------------------------------------------
Registration fees 964,445
- --------------------------------------------------------------------------------------------------
Auditing 87,213
- --------------------------------------------------------------------------------------------------
Legal 112,350
- --------------------------------------------------------------------------------------------------
Postage 1,425,566
- --------------------------------------------------------------------------------------------------
Other 979,684
- --------------------------------------------------------------------------------------------------
Total expenses 74,954,072
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (1,654,597)
- --------------------------------------------------------------------------------------------------
Net expenses 73,299,475
- --------------------------------------------------------------------------------------------------
Net investment loss (46,087,135)
- --------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (71,583,904)
- --------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 13,136
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 1,479
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (379,520,362)
- --------------------------------------------------------------------------------------------------
Net loss on investments (451,089,651)
- --------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(497,176,786)
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
December 31 June 30
1996* 1996
- ----------------------------------------------------------------------------------------------------------------------
Increase in net assets
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment loss $ (46,087,135) $ (43,790,952)
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments
and foreign currency transactions (71,570,768) 90,705,125
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments and assets and
liabilities in foreign currencies (379,518,883) 1,532,698,538
- ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (497,176,786) 1,579,612,711
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (45,603,411) --
- ----------------------------------------------------------------------------------------------------------------------
Class B (42,751,343) --
- ----------------------------------------------------------------------------------------------------------------------
Class M (2,227,397) --
- ----------------------------------------------------------------------------------------------------------------------
Class Y (1,177,889) --
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 3,095,177,761 5,361,199,461
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 2,506,240,935 6,940,812,172
- ----------------------------------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 9,336,617,134 2,395,804,962
- ----------------------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment
loss of $46,112,379 and $25,244, respectively) $11,842,858,069 $9,336,617,134
- ----------------------------------------------------------------------------------------------------------------------
* Unaudited.
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
Six months July 19,1994
ended (commencement of
December 31 Year ended operations) to
(unaudited) June 30 June 30
1996 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
Class Y
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $43.21 $29.66 $22.59
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment loss (.09) (.11)(e) (.04)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments (1.90) 13.66 7.31
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (1.99) 13.55 7.27
- ---------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.32) -- (.15)
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net realized gains -- -- (.04)
- ---------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- (.01)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.32) -- (.20)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $40.90 $43.21 $29.66
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(c) (4.60)* 45.68 32.42*
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $152,713 $118,640 $24,538
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(d) .40* .86 .83*
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets (%) (.13)* (.29) (.26)*
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 32.10* 36.61 56.99
- ---------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (f) $0.0495
- ---------------------------------------------------------------------------------------------------------------------------
See page 27 for Notes to Financial Highlights
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
For the period
Six months December 1,1994
ended (commencement of
December 31 operations)
(unaudited) to June 30
1996 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
Class M
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $42.66 $29.51 $24.72
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment loss (.17) (.40)(e) (.05)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments (1.94) 13.55 5.04
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.11) 13.15 4.99
- ---------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.32) -- (.15)
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net realized gains -- -- (.04)
- ---------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- (.01)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.32) -- (.20)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $40.23 $42.66 $29.51
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(c) (4.95)* 44.56 20.40*
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $287,472 $210,404 $16,011
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(d) .78* 1.64 .94*
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets (%) (.51)* (1.06) (.53)*
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 32.10* 36.61 56.99
- ---------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (f) $0.0495
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Six months
ended
December 31
(unaudited) Year ended June 30
- ---------------------------------------------------------------------------------------------------------------------------
1996 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
Class B Class B
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $41.96 $29.09 $21.68
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment loss (.19) (.48)(e) (.23)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments (1.93) 13.35 7.84
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations (2.12) 12.87 7.61
- ---------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.32) -- (.15)
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net realized gains -- -- (.04)
- ---------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- (.01)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.32) -- (.20)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $39.52 $41.96 $29.09
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(c) (5.07)* 44.24 35.34
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $5,437,232 $4,254,962 $1,013,379
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(d) .91* 1.87 1.87
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets (%) (.63)* (1.30) (1.30)
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 32.10* 36.61 56.99
- ---------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (f) $0.0495
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
For the period
March 1,1993 Six months
(commencement of ended
Year ended operations) to December 31
June 30 June 30 (unaudited)
1994 1993 1996
- ---------------------------------------------------------------------------------------------------------------------------
Class B
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $20.80 $17.76 $42.99
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment loss (.11) (.05) (.12)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1.44 3.09 (1.91)
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.33 3.04 (2.03)
- ---------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.45) -- (.32)
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net realized gains -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.45) -- (.32)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $21.68 $20.80 $40.64
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%) (c) 6.18 17.12* (4.72)*
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $333,738 $15,698 $5,965,441
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(d) 2.04 .67* .53*
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets (%) (1.55) (.57)* (.26)*
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 52.76 93.59 32.10*
- ---------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (f) $0.0495
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Year ended June 30
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $29.58 $21.88 $20.83
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment loss (.21)(e) (.12) (.06)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 13.62 8.02 1.56
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 13.41 7.90 1.50
- ---------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (.15) (.45)
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net realized gains -- (.04) --
- ---------------------------------------------------------------------------------------------------------------------------
Return of capital -- (.01) --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions -- (.20) (.45)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $42.99 $29.58 $21.88
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%) (c) 45.34 36.36 7.00
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $4,752,611 $1,341,877 $648,787
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(d) 1.11 1.13 1.23
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets (%) (.54) (.55) (.82)
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 36.61 56.99 52.76
- ---------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (f)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Year ended June 30
- ------------------------------------------------------------------------------------------------------
1993 1992
- ------------------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $14.50 $11.56
- ------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------
Net investment loss (.12) (.02)
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 6.77 3.33(a)
- ------------------------------------------------------------------------------------------------------
Total from investment operations 6.65 3.31
- ------------------------------------------------------------------------------------------------------
Less distributions to shareholders:
- ------------------------------------------------------------------------------------------------------
From net realized gain on investments (.32) (.37)
- ------------------------------------------------------------------------------------------------------
In excess of net realized gains -- --
- ------------------------------------------------------------------------------------------------------
Return of capital -- --
- ------------------------------------------------------------------------------------------------------
Total distributions (.32) (.37)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $20.83 $14.50
- ------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(c) 46.12 28.85
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $318,426 $141,206
- ------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(d) 1.31 1.64
- ------------------------------------------------------------------------------------------------------
Ratio of net investment loss to average net assets (%) (.98) (.91)
- ------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 93.59 116.04(b)
- ------------------------------------------------------------------------------------------------------
Average commission rate paid (f)
- ------------------------------------------------------------------------------------------------------
* Not annualized.
(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) Total investment return assumes dividend reinvestment and does not reflect the efect of sales charges.
(d) The ratio of expenses to average net assets for the year ended June 30, 1996 and thereafter includes
amounts paid through expense offset arrangements. Prior period ratios exclude these amounts (Note 2)
(e) Per share net investment loss has been determined on the basis of the weighted average number of shares
outstanding during the period.
(f) Average commission rate paid on security trades si required for fiscal periods beginning on or after
September 1, 1995.
</TABLE>
Notes to financial statements
December 31, 1996 (Unaudited)
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 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
invest at least $250 million in a combination of Putnam Funds and other
accounts managed by affiliates of Putnam Management.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class (including
the distribution fees applicable to such class). Each class votes as a class
only with respect to its own distribution plan or other matters on which a
class vote is required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the fund, if
that fund were liquidated. In addition, the Trustees declare separate
dividends on each class of shares.
The following is a summary of significant accounting policies 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. Securities quoted in
foreign currencies are translated in U.S. dollars at the current exchange rate.
Short-term investments having remaining maturities of 60 days or less are
stated at amortized cost, which approximates market value, 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 and certain other accounts managed by Putnam Investment
Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc.. 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) 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 nor for excise tax
on income and capital gains.
F) 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.
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. 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.
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, and 0.50% of the next $5 billion, 0.475% of the next $5 billion,
0.455% of the next $5 billion, 0.44% of the next $5 billion, and 0.43% of any
amount over $21.5 billion.
As part of the custodian contract between the subcustodian bank and PFTC, the
subcustodian bank has a lien on the securities of the fund to the extent
permitted by the funds investment restrictions to cover any advances made by
the subcustodian bank for the settlement of securities purchased by the fund.
At December 31, 1996, the payable to the subcustodian bank represents the
amount due for cash advance for the settlement of a security purchased.
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 period ended December 31, 1996, fund expenses were reduced by
$1,654,597 under expense offset arrangements with PFTC and broker service
arrangements. Investor servicing and custodian fees reported in the Statement
of operations exclude these credits. The fund could have invested a portion of
the assets utilized in connection with the expense offset arrangements in an
income producing asset if it had not entered into such arrangements.
Trustees of the fund receive an annual Trustees fee of $7,860 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 an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of Trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B 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 period ended December 31, 1996, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $7,590,812 and $282,314 from the sale
of class A and class M shares, respectively and $3,506,932 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 period ended December 31, 1996, Putnam Mutual Funds Corp., acting as
underwriter received $98,148 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended December 31, 1996, purchases and sales of
investment securities other than short-term investments aggregated
$6,616,297,115 and $3,204,443,036, 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 December 31, 1996, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
December 31, 1996
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 71,992,359 $2,981,069,069
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,060,965 42,820,556
- ------------------------------------------------------------
73,053,324 3,023,889,625
Shares
repurchased (36,809,052) (1,521,130,991)
- ------------------------------------------------------------
Net increase 36,244,272 $1,502,758,634
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Six months ended
December 31, 1996
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 46,951,031 $1,891,304,905
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 942,861 37,016,697
- ------------------------------------------------------------
47,893,892 1,928,321,602
Shares
repurchased (11,699,279) (467,894,563)
- ------------------------------------------------------------
Net increase 36,194,613 $1,460,427,039
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Six months ended
December 31, 1996
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 2,950,417 $120,996,443
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 50,699 2,025,443
- ------------------------------------------------------------
3,001,116 122,991,886
Shares
repurchased (787,183) (32,052,614)
- ------------------------------------------------------------
Net increase 2,213,933 $ 90,939,272
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Six months ended
December 31, 1996
- ------------------------------------------------------------
Class Y Shares Amount
- ------------------------------------------------------------
Shares sold 1,458,190 $ 60,640,912
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 29,005 1,177,889
- ------------------------------------------------------------
1,487,195 61,818,801
Shares
repurchased (499,713) (20,765,985)
- ------------------------------------------------------------
Net increase 987,482 $ 41,052,816
- ------------------------------------------------------------
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
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Note 5
Transactions with Certain Companies
Transactions during the period with companies in which the fund owned at
least 5% of the voting securities were as follows:
Purchases Sales Dividend
Name of Affiliate Cost Cost Income Market Value
- ------------------------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
ABR Information Services $19,346,341 $33,468,750
Aames FInancial Corp. 56,474,293 $57,152 42,154,381
Alternative Resource Corp. 2,379,062 $23,669,473
American Medical Response 7,763,245 40,625,000
Apple South Inc. 4,113,000 38,822,312
Barnett, Inc. 552,709 27,250,000
Bed, Bath & Beyond, Inc. 14,780,824 93,362,500
CGM Information Services, Inc. 14,702,039
CRA Managed Care, Inc. 30,884,281 28,946,250
Cambridge Technology
Partners, Inc. 3,237,525 58,734,375
Centennial Cellular Corp. 18,586,280
Chancellor Broadcasting Corp.
Class A 2,292,298 21,375,000
Clearnet Communications, Inc.
Class A 3,635,812 15,400,000
Compudent Corp. 24,660,900
Computer Horizons Corp. 5,698,498 57,750,000
Core Staff, Inc. 8,690,505 39,676,563
Diana Corp. 1,321,077 9,240,000
Doubletree Corp. 17,168,541 82,350,000
Emcare Holdings, Inc. 9,016,636 1,821,018 18,832,500
Emeritus Corp. 2,798,775 13,570,171
Emmis Broadcasting, Corp.
Class A 9,376,937 35,697,500
Genesis Health Ventures, Inc. 15,572,650 65,362,500
Gilead Sciences, Inc. 2,536,641 43,125,000
Glenayre Technologies, Inc. 14,314,661 82,252,848
HCC Insurance Holdings, Inc. 7,898,388 102,500 43,200,000
Health Management
Associates, Inc. 29,855,614 123,750,000
Health Care & Retirement
Corp. 8,942,373 68,700,000
Heartland Wireless
Communications, Inc. 4,878,951 10,003,325 8,477,438
I-Stat Corp. 5,105,660 24,937,500
Inso Corp. 11,862,363 49,687,500
Intermedia Communications, Inc. 2,345,756 25,750,000
Labor Ready, Inc. 12,951,114 9,333,225
Landry's Seafood Restaurants 3,750,917 32,596,875
Learning Company, Inc. (The) 2,560,864 29,262,835 18,395,688
Learning Tree International, Inc. 25,806,050 33,625,575
Legato Systems, Inc. 30,341,250
Mecklermedia Corp. 8,114,760 3,541,175
Mentor Corp. Minn 31,788,270 64,290
Occusystems, Inc. 11,601,732 30,510,000
Olympic Financial Ltd. 30,379,230 65,154,889
P-Com Inc. 6,755,435 20,036,517
Panamsat Corp. 55,273,146 53,860,600
Pairgain Technologies, Inc. 2,055,097 88,268,750
Papa Johns Intl,. Inc. 3,159,375 3,615,896 44,477,438
Pediatrix Medical Group, Inc. 23,326,541 38,428,200
Phymatrix, Inc. 900,335 4,186,452 13,778,325
Physicians Resource Group, Inc. 20,420,050 12,429,493 21,300,000
Physician Sales & Services, Inc. 46,689,276 31,625,000
Prime Hospitality Corp. 26,777,644 33,169,125
Project Software &
Development, Inc. 10,593,018 29,662,500
Rainforest Cafe, Inc. 11,023,060 4,237,000 23,500,000
Renal Treatment Centers., Inc. 3,466,990 35,955,000
Renaissance Hotel Group N.V. 6,355,000 30,673,659 8,523,450
Rio Casino & Hotel, Inc. 14,671,092
Security Dynamics
Technologies, Inc. 10,361,242 55,818,000
SFX Broadcasting, Inc. Class A 17,850,000
Softkey International, Inc. 10,949,384
Spine-Tech, Inc. 17,872,564 16,875,000
Stewart Enterprises, Inc.
Class A 28,698,808 88,190 98,600,000
Studio Plus Hotels, Inc. 2,119,761 13,273,313
Sunrise Assisted Living, Inc. 7,649,410 30,662,500
Synopsys, Inc. 34,447,320 100,593,750
Tel-Save Holdings, Inc. 7,949,476 62,350,000
Unison Software, Inc. 10,142,458
Vantive Corp. 43,750,000
Vivra, Inc. 6,433,895 69,062,500
Wolverine World Wide, Inc. 18,712,366 32,000 56,550,000
Young Broadcasting Corp.
Class A 8,133,908 126,275 23,394,150
- -----------------------------------------------------------------------------------------------------------
Totals $752,604,041 $445,279,445 $344,132 $2,252,185,046
- -----------------------------------------------------------------------------------------------------------
</TABLE>
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
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
Brett C. Browchuk
Vice President
Daniel L. Miller
Vice President and Fund Manager
Carol C. McMullen
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. You can also learn more at Putnam
Investments' website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution, are not insured by the Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board or any other agency,
and involve risk, including the possible loss of principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
30602-852/358/983/526 2/97
PUTNAM INVESTMENTS [LOGO]
- -----------------------------------------------------------------------
Putnam New Opportunities Fund
Supplement to Semiannual Report dated December 31, 1996
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.
SEMIANNUAL RESULTS AT A GLANCE
- -----------------------------------------------------------------------
Total return: NAV
Six months ended 12/31/96 -4.60%
One year ended 12/31/96 11.14
Life of class (since 7/19/94) 84.04
Annual average 28.14
- -----------------------------------------------------------------------
Share value: NAV
6/30/96 $43.21
12/31/96 40.90
- -----------------------------------------------------------------------
Distributions: No. Income Capital gains Total
1 $0.00 $0..319 $0.319
- -----------------------------------------------------------------------
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.
