Putnam
New
Opportunities
Fund
SEMIANNUAL REPORT
December 31, 1997
[LOGO: BOSTON * LONDON * TOKYO]
* "As we enter the second half of fiscal 1998, we realize that
turmoil in Asian markets may continue to impact markets around
the world for some time. We will carefully consider its impact
and will seek to minimize the fund's risk in terms of exposure
to Asian markets."
-- Daniel L. Miller, manager
Putnam New Opportunities Fund
CONTENTS
4 Report from Putnam Management
10 Fund performance summary
14 Portfolio holdings
22 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
While Putnam New Opportunities Fund's performance during the first
half of fiscal 1998 was positive in absolute terms, it fell somewhat
short of the expectations of shareholders who had become accustomed
to more vibrant results. For that reason, it is useful to issue a
reminder that all sectors of the market do not move at the same pace.
Over the past year or so, stocks of the small and midsize companies
generally associated with above-average growth have actually been
lagging the market as investors willingly paid a premium for the
safety and liquidity of stocks of large, established companies.
Events in Asia that touched off a worldwide disruption in equity
markets only exacerbated the situation.
Had your fund's managers yielded to the temptation to shift
strategies in pursuit of gains available elsewhere, it could well
affect their ability to position the fund to proper advantage when
the market resumes a more traditional course. Seasoned investors can
attest to the merits of patience at times like the present.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
February 18, 1998
Report from the Fund Managers
Daniel L. Miller
Carol C. McMullen
When Putnam New Opportunities Fund entered its new fiscal year last
July, we were looking forward to an improving investment climate --
one that would deliver better times for small and midsize companies
and some respite from the market turbulence we had endured throughout
fiscal 1997. We got half our wish; small- and midsize-company stocks
rebounded, but market volatility has actually increased, masking much
of the progress our holdings have made during the period.
Perhaps the most notable event for U.S. investors was the historic
stock market selloff on October 27, when the Dow Jones Industrial
Average dropped 554 points, leaving the index 13% below its August
high. The very next day, the Dow took a dramatic turn upward, soaring
337 points and marking its biggest single-day rally in history. By
the close of the semiannual period on December 31, 1997, markets
around the world were suffering as volatility escalated in Asian
stock and currency markets.
All things considered, we believe your fund has successfully
weathered the recent turbulence while building a more diversified
portfolio, thanks in part to a strategy that allows it to take
advantage of growth opportunities from companies of all sizes. During
the period, the fund's class A shares provided a total return of
11.97% at net asset value and 5.54% at public offering price. For
complete performance information, please refer to the summary that
begins on page 10.
* MEDIA STOCKS REAP REWARDS OF NEW LEGISLATION
The media sector of the fund's portfolio proved to be a buffer
against market turbulence, delivering strong performance from many
holdings. Although it was passed in 1996, legislation that loosened
restrictions on broadcasters continued to benefit stocks in this
sector throughout 1997. Passage of the Telecommunications Act of 1996
allowed for ownership of multiple radio and television stations,
which boosted the value of many broadcasting companies poised for
expansion.
One beneficiary was Chancellor Media Corporation, which was formed in
September with the merger of Chancellor Broadcasting and Evergreen
Media Corporation -- both of which had previously been in your fund's
portfolio. The new company owns and operates 99 radio stations in 21
of the nation's largest markets.
Another outstanding performer was CBS Corporation, formerly
Westinghouse Electric. Soon to be a pure broadcasting business, the
company is better positioned to benefit from this rapidly growing
sector. CBS has already profited from numerous radio acquisitions and
continues to make improvements in other areas, such as television
programming and the launch of new cable networks.
Another advantage of stocks in the media sector is that they have
minimal foreign exposure, which has proved beneficial during the
recent Asian market turmoil. For similar reasons, outdoor advertising
and communications services were also areas of strength. While these
holdings, along with others discussed in this report, were viewed
favorably at the end of the fiscal period, all are subject to review
and adjustment in accordance with the fund's investment strategy and
may vary in the future.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Computer software 9.4%
Retail 8.2%
Pharmaceuticals
and biotechnology 6.9%
Business services 6.8%
Broadcasting 6.0%
Footnote reads:
*Based on net assets as of 12/31/97. Holdings will vary over time.
* MERGER ACTIVITY CONTINUES TO BOOST COMMUNICATIONS SERVICES STOCKS
Heavy merger and acquisition activity, such as we have seen in the
communications services sector, often signifies a healthy, thriving
industry to investors. The rising stock prices of long-distance
communications companies and competitive local exchange carriers
(CLECs) provide additional evidence that this sector is flourishing.
CLECs are the smaller telephone companies that compete in local
markets with larger providers, such as the Bell operating companies.
As a result of the Telecommunications Act of 1996, CLECs are allowed
to enter local markets on a much wider basis. CLEC stocks that have
boosted the fund's portfolio include Tel-Save Holdings, Inc.,
Intermedia Communications, and Teleport Communications, which
recently announced an agreement to merge with AT&T Corp.
* TECHNOLOGY SECTOR'S STRENGTH DAMPENED BY MARKET VOLATILITY
The fund's technology stocks were affected by ongoing market
volatility to a much greater degree than either our media or
communications holdings. On October 9, the NASDAQ Composite Index, an
index with a heavy technology weighting, reached its 47th record high
of 1997. However, technology stocks experienced their share of
declines during the year, especially in late fall, when concerns
escalated about the Asian financial crisis and its impact on
companies that provide products to Asian markets. Even prior to the
Asian crisis, the U.S. market was particularly unforgiving of the
technology sector, and the stock prices of companies with even the
slightest shortfall in earnings were punished harshly.
While this environment has been a challenging one, we were pleased
with the performance of many of the fund's technology holdings,
notably Computer Associates, Compuware, and PeopleSoft, Inc. Computer
Associates, a developer and marketer of computer software, has seen a
skyrocketing demand for its products due to the resurgence of the
mainframe computer. Despite recent troubles in Asia, the company is
taking a long-term view, targeting India and China as key areas for
the company's expansion.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Cendant Corp.
Consumer services
Computer Associates Intl., Inc.
Computer software
CBS Corp.
Broadcasting
HEALTHSOUTH Corp.
Health-care services
HBO & Co.
Health-care information services
Clear Channel Communications, Inc.
Broadcasting
General Electric Co.
Electronics and electrical equipment
CVS Corp.
Retail
EMC Corp.
Computer peripherals
USA Waste Services, Inc.
Environmental control
Footnote reads:
These holdings represent 18.3% of the fund's net assets as of
12/31/97. Portfolio holdings will vary over time.
Compuware Corporation is a provider of software products and
professional services that help information technology professionals
efficiently develop, implement, and support the applications that run
their businesses. Founded in 1973, Compuware today ranks as one of
the largest independent software providers in the world.
PeopleSoft went public in 1992 and has since developed a solid
reputation as a designer and developer of application software
products for large and midsize businesses. PeopleSoft has expanded
its product line in recent years and demand for its services
continues to grow.
* LARGE-COMPANY STOCKS SHINE IN HEALTH-CARE SECTOR
We have always focused a portion of the fund's resources on large-
company stocks while maintaining its approach of targeting growth-
oriented sectors of the economy and the strongest companies within
those sectors.
During 1997, the management team was expanded to ensure that the fund
was able to maintain its focus on small-, midsize-, and large-company
stocks as the fund's assets continue to grow. Your fund's exposure to
large-company pharmaceutical stocks proved particularly valuable in
the health-care sector during the semiannual period. The spiraling
cost of health care and the pressures on providers to contain it
represent an industry trend that has boosted the profitability of
pharmaceutical companies. Since one of the most effective ways to
keep medical costs down is to keep people out of the hospital, the
ability to develop effective drugs with fewer side effects has become
even more valuable. Successful pharmaceutical companies are being
rewarded by the market to a much greater extent than they were a few
years ago.
One such thriving company in your fund's portfolio is Bristol-Myers
Squibb. Since the merger of Bristol-Myers, originally a consumer
products company, with Squibb Corporation in 1989, the company has
become a world leader in most of its core businesses and has
developed into a pharmaceutical powerhouse. The company's strongest
growth potential comes from innovative products that are marketed in
nearly every country in the world. Bristol-Myers Squibb's latest sign
of success came in January, when it received clearance from the U.S.
Food and Drug Administration to market a migraine medication called
Excedrin Migraine. It will be the first migraine medication available
to consumers without a prescription.
Other than pharmaceuticals, the health-care sector was a mixed bag in
terms of performance during the period. Although we were disappointed
by stocks of HMOs and physician practice management companies, we
remain optimistic about the health services industry. Demographics
continue to favor every health-care sector as more and more members
of the baby-boom generation reach 50, a trend that is expected to
keep drugs, supplies, and services in strong demand.
* MORE VOLATILITY LIKELY; CONTINUED FOCUS ON STOCK SELECTION
As the second half of the fiscal year begins, we are anticipating
more volatility in world markets. We remain cautiously optimistic
about the U.S. economy and are in hopes that it will serve as a
pillar of strength among world markets by continuing to offer
moderate growth, low inflation, and low interest rates.
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 12/31/97, there is no guarantee
the fund will continue to hold these securities in the future. This
fund invests a portion of its assets in small to midsize companies.
Such investments increase the risk of greater price fluctuations.
Performance summary
This section provides information about your fund's performance,
which should always be considered in light of its 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.
TOTAL RETURN FOR PERIODS ENDED 12/31/97
Class A Class B Class M
(inception date) (8/31/90) (3/2/93) (12/1/94)
NAV POP NAV CDSC NAV POP
- --------------------------------------------------------------------
6 months 11.97% 5.54% 11.54% 6.54% 11.69% 7.79%
- --------------------------------------------------------------------
1 year 22.52 15.48 21.59 16.59 21.91 17.64
- --------------------------------------------------------------------
5 years 172.36 156.77 162.67 160.67 165.70 156.46
Annual average 22.19 20.76 21.31 21.12 21.58 20.73
- --------------------------------------------------------------------
Life of fund 534.85 498.41 499.96 499.96 510.16 488.67
Annual average 28.68 27.64 27.69 27.69 27.98 27.36
- --------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 12/31/97
S&P 500 Russell 2000 Consumer
Index Index Price Index
- --------------------------------------------------------------------
6 months 10.58% 11.04% 0.62%
- --------------------------------------------------------------------
1 year 33.36 22.36 1.70
- --------------------------------------------------------------------
5 years 151.62 113.70 13.67
Annual average 20.27 16.40 2.60
- --------------------------------------------------------------------
Life of fund 266.23 253.91 22.57
Annual average 19.36 18.81 2.81
- --------------------------------------------------------------------
Returns for class A and class M shares reflect the current maximum
initial sales charges of 5.75% and 3.50%, respectively. Class B
share returns for the 1-, 5-, and 10-year (where available) and
life-of-fund periods reflect the applicable contingent deferred
sales charge (CDSC), which is 5% in the first year, declines to 1%
in the sixth year, and is eliminated thereafter. Returns shown for
class B and class M shares for periods prior to their inception are
derived from the historical performance of class A shares, adjusted
to reflect both the initial sales charge or CDSC, if any, currently
applicable to each class and, in the case of class B and class M
shares, the higher operating expenses applicable to such shares.
All returns assume reinvestment of distributions at NAV and
represent past performance; they do not guarantee future results.
Investment return and principal value will fluctuate so that an
investor's shares when redeemed may be worth more or less than
their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 12/31/97
Class A Class B Class M
- --------------------------------------------------------------------
Distributions (number) 1 1 1
- --------------------------------------------------------------------
Income -- -- --
- --------------------------------------------------------------------
Capital gains
- --------------------------------------------------------------------
Long-term $1.09 $1.09 $1.09
- --------------------------------------------------------------------
Short-term -- -- --
- --------------------------------------------------------------------
Total $1.09 $1.09 $1.09
- --------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- --------------------------------------------------------------------
6/30/97 $44.47 $47.18 $43.08 $43.91 $45.50
- --------------------------------------------------------------------
12/31/97 48.65 51.62 46.91 47.90 49.64
- --------------------------------------------------------------------
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over
time, assuming you held the shares through the entire period and
reinvested all distributions in the fund.
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.*
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.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund *
International New Opportunities Fund
Investors Fund
New Opportunities Fund +
OTC & Emerging Growth Fund [DBL. DAGGER]
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund +
High Yield Total Return Fund
High Yield Trust +
Income Fund
Money Market Fund **
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Overseas Growth Fund
+ Closed to new investors. Some exceptions may apply. Contact Putnam
for details.
[DBL. DAGGER] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
** An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed to
maintain a price of $1.00 per share, although there is no assurance
that this price will be maintained in the future.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
Portfolio of investments owned
December 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (97.4%) *
NUMBER OF SHARES VALUE
Advertising (1.4%)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1,250,000 Lamar Advertising Co. + $ 49,687,500
3,390,000 Outdoor Systems, Inc. + 130,091,250
966,800 Universal Outdoor Holdings, Inc. + 50,273,600
---------------
230,052,350
Agriculture (0.1%)
- ------------------------------------------------------------------------------------------------------------
653,333 Delta & Pine Land Co. 19,926,657
Apparel (0.5%)
- ------------------------------------------------------------------------------------------------------------
3,405,000 Wolverine World Wide, Inc. [SECTION MARK] 77,038,125
Automotive (0.5%)
- ------------------------------------------------------------------------------------------------------------
1,843,300 Avis Rent A Car, Inc. + [SECTION MARK] 58,870,394
490,000 Budget Group, Inc. (Japan) + 16,935,625
---------------
75,806,019
Banks (1.6%)
- ------------------------------------------------------------------------------------------------------------
1,617,000 First Union Corp. 82,871,250
2,705,800 TCF Financial Corp. 91,828,088
1,217,500 Washington Mutual, Inc. 77,691,719
---------------
252,391,057
Broadcasting (6.0%)
- ------------------------------------------------------------------------------------------------------------
10,774,400 CBS Corp. 317,171,400
2,044,565 Chancellor Media Corp. + 152,575,663
3,610,100 Clear Channel Communications, Inc. + 286,777,319
756,500 Emmis Broadcasting Corp. Class A + [SECTION MARK] 34,515,313
1,402,500 Sinclair Broadcast Group, Inc. Class A 65,391,563
900,000 Univision Communications, Inc. Class A + 62,831,250
1,425,000 Westwood One, Inc. + 52,903,125
---------------
972,165,633
Building Products (0.1%)
- ------------------------------------------------------------------------------------------------------------
1,000,000 Barnett, Inc. + [SECTION MARK] 22,000,000
Business Services (6.8%)
- ------------------------------------------------------------------------------------------------------------
1,520,000 ABR Information Services, Inc. + [SECTION MARK] 36,290,000
3,133,700 Accustaff, Inc. + 72,075,100
1,700,000 Affiliated Computer Services, Inc. Class A + 44,731,250
3,351,500 Airgas, Inc. + 46,921,000
831,300 Applied Graphics Technologies, Inc. + 44,266,725
925,000 Caribiner Intl., Inc. + 41,162,500
1,820,000 Corestaff, Inc. + [SECTION MARK] 48,230,000
5,115,000 Corporate Express, Inc. + 65,855,625
1,970,000 Interim Services, Inc. + 50,973,750
865,000 Jabil Circuit, Inc. + 34,383,750
355,275 Labor Ready, Inc. + 6,839,044
2,641,500 Paychex, Inc. 133,725,938
1,425,000 PMT Services, Inc. + 19,771,875
29,000,000 Rentokil Group PLC (United Kingdom) 126,725,650
3,300,000 Robert Half International, Inc. + 132,000,000
475,000 Sanmina Corp. + 32,181,250
1,255,000 Select Appointments Holdings PLC ADR
(United Kingdom) 22,903,750
1,543,000 Snyder Communications, Inc. + 56,319,500
3,325,000 Viking Office Products, Inc. + 72,526,563
---------------
1,087,883,270
Computer Equipment (0.5%)
- ------------------------------------------------------------------------------------------------------------
1,466,300 Compaq Computer Corp. 82,754,306
Computer Peripherals (1.4%)
- ------------------------------------------------------------------------------------------------------------
8,484,700 EMC Corp. + 232,798,956
Computer Services (3.9%)
- ------------------------------------------------------------------------------------------------------------
2,480,000 America Online, Inc. + 221,185,000
1,750,000 Cambridge Technology Partners, Inc. + 72,843,750
685,000 Ciber, Inc. + 39,730,000
1,270,900 CheckFree Holding Corp. + 34,314,300
1,300,000 Computer Horizons Corp. + 59,150,000
1,000,000 Renaissance Worldwide, Inc. + 45,875,000
2,460,000 Sterling Commerce, Inc. + 94,556,250
380,800 Sapient Corp. + 23,324,000
1,285,000 Sykes Enterprises, Inc. + 25,057,500
536,100 Whittman-Hart, Inc. + 18,361,425
---------------
634,397,225
Computer Software (9.4%)
- ------------------------------------------------------------------------------------------------------------
745,300 BMC Software, Inc. + 48,910,313
6,025,200 Cadence Design Systems, Inc. + 147,617,400
400,000 Citrix Systems, Inc. + 30,400,000
6,410,700 Computer Associates Intl., Inc. 338,965,763
2,980,000 Compuware Corp. + 95,360,000
375,000 Documentum, Inc. + 15,796,875
1,935,000 Electronic Arts, Inc. + 73,167,188
185,000 Lernout & Hauspie Speech Products N.V. (Belgium) + 8,602,500
1,168,400 Microsoft Corp. + 151,015,700
2,805,000 Parametric Technology Corp. + 132,886,875
3,594,000 PeopleSoft, Inc. + 140,166,000
1,179,100 Remedy Corp. + 24,761,100
1,928,200 Saville Systems Ireland PLC ADR (Ireland) + 80,020,300
2,132,600 Security Dynamics Technologies, Inc. + [SECTION MARK] 76,240,450
2,821,500 Synopsys, Inc. + 100,868,625
1,400,000 Vantive Corp. + [SECTION MARK] 35,350,000
393,600 Viasoft, Inc. + 16,629,600
---------------
1,516,758,689
Conglomerates (0.9%)
- ------------------------------------------------------------------------------------------------------------
3,159,700 Tyco International Ltd. 142,383,981
Consumer Products (2.2%)
- ------------------------------------------------------------------------------------------------------------
1,031,300 Central Garden and Pet Co. + 27,071,625
1,714,100 Colgate-Palmolive Co. 125,986,350
1,719,300 Procter & Gamble Co. 137,221,631
2,085,800 Rexall Sundown, Inc. + 62,965,088
---------------
353,244,694
Consumer Services (3.1%)
- ------------------------------------------------------------------------------------------------------------
14,286,524 Cendant Corp. + 491,099,263
Correctional Facilities (0.5%)
- ------------------------------------------------------------------------------------------------------------
1,965,000 Corrections Corp. + 72,827,813
Cosmetics (0.6%)
- ------------------------------------------------------------------------------------------------------------
1,740,000 Estee Lauder Cos. Class A 89,501,250
Education (0.3%)
- ------------------------------------------------------------------------------------------------------------
990,100 Apollo Group, Inc. Class A + 46,782,225
97,111 Sylvan Learning Systems, Inc. + 3,787,329
---------------
50,569,554
Education Services (0.5%)
- ------------------------------------------------------------------------------------------------------------
1,082,400 CBT Group PLC ADR (Ireland) + 88,892,100
Electric Utilities (0.3%)
- ------------------------------------------------------------------------------------------------------------
1,724,000 Calenergy, Inc. + 49,565,000
Electronics and Electrical Equipment (2.4%)
- ------------------------------------------------------------------------------------------------------------
355,000 ASM Lithography Holding N.V. (Netherlands) + 23,962,500
1,020,000 Cognex Corp. + 27,795,000
3,229,500 General Electric Co. 236,964,563
925,500 Illinois Tool Works, Inc. 55,645,688
890,000 Microchip Technology, Inc. + 26,700,000
560,000 Uniphase Corp. + 23,170,000
---------------
394,237,751
Energy-Related (0.7%)
- ------------------------------------------------------------------------------------------------------------
2,465,200 Thermo Electron Corp. + 109,701,400
Entertainment (0.7%)
- ------------------------------------------------------------------------------------------------------------
559,800 Disney (Walt) Productions, Inc. 55,455,188
1,006,500 Time Warner, Inc. 62,403,000
---------------
117,858,188
Environmental Services (2.1%)
- ------------------------------------------------------------------------------------------------------------
461,700 Allied Waste Industries, Inc. + 10,763,381
5,308,300 Philip Services Corp. (Canada) + 76,306,813
535,400 U.S. Filter Corp. + 16,028,538
5,864,300 USA Waste Services, Inc. + 230,173,775
---------------
333,272,507
Financial Services (3.4%)
- ------------------------------------------------------------------------------------------------------------
1,371,100 American Express Co. 122,370,675
2,388,000 Finova Group, Inc. 118,653,750
1,544,710 FIRSTPLUS Financial Group, Inc. + 59,278,246
3,988,750 MBNA Corp. 108,942,734
1,673,100 Morgan Stanley, Dean Witter, Discover and Co. 98,922,038
612,500 Sirrom Capital Corp. 31,926,563
---------------
540,094,006
Food and Beverages (1.4%)
- ------------------------------------------------------------------------------------------------------------
3,171,900 Coca-Cola Enterprises, Inc. 112,800,694
3,014,400 PepsiCo, Inc. 109,837,200
---------------
222,637,894
Funeral/Cemetery Services (1.6%)
- ------------------------------------------------------------------------------------------------------------
2,685,000 Service Corp. International 99,177,188
3,558,800 Stewart Enterprises, Inc. Class A [SECTION MARK] 165,929,050
---------------
265,106,238
Health Care Information Systems (1.8%)
- ------------------------------------------------------------------------------------------------------------
6,015,500 HBO & Co. 288,744,000
Health Care Services (5.7%)
- ------------------------------------------------------------------------------------------------------------
1,325,500 Cardinal Health, Inc. 99,578,188
892,600 Carematrix Corp. + [SECTION MARK] 25,662,250
2,363,144 Concentra Managed Care, Inc. + [SECTION MARK] 79,756,110
10,536,200 HEALTHSOUTH Corp. + 292,379,550
915,000 Henry Schein, Inc. + 32,025,000
1,360,000 Lincare Holdings, Inc. + 77,520,000
450,000 NCS HealthCare, Inc. Class A + 11,868,750
2,748,300 Omnicare, Inc. 85,197,300
770,000 Parexel International Corp. + 28,490,000
2,200,000 Physician Sales & Service, Inc. + [SECTION MARK] 47,300,000
1,092,400 Quintiles Transnational Corp. + 41,784,300
1,410,000 Renal Treatment Centers, Inc. + [SECTION MARK] 50,936,250
1,558,333 Total Renal Care Holdings, Inc. + 42,854,167
---------------
915,351,865
Hospital Management (1.3%)
- ------------------------------------------------------------------------------------------------------------
8,187,000 Health Management Assoc., Inc. + [SECTION MARK] 206,721,750
Insurance (0.9%)
- ------------------------------------------------------------------------------------------------------------
1,643,800 HCC Insurance Holdings, Inc. 34,930,750
1,952,300 Travelers Group, Inc. 105,180,136
---------------
140,110,886
Leisure (0.2%)
- ------------------------------------------------------------------------------------------------------------
1,277,200 Signature Resorts, Inc. + 27,938,750
Lodging (2.3%)
- ------------------------------------------------------------------------------------------------------------
4,965,966 Extended Stay America, Inc. + [SECTION MARK] 61,764,202
1,570,500 Marriott International, Inc. 108,757,125
2,126,500 Prime Hospitality Corp. + 43,327,438
3,707,488 Promus Hotel Corp. + 155,714,475
---------------
369,563,240
Medical Management Services (1.5%)
- ------------------------------------------------------------------------------------------------------------
5,685,000 MedPartners, Inc. + 127,201,875
997,900 Pediatrix Medical Group, Inc. + [SECTION MARK] 42,660,225
2,375,000 Phycor, Inc. + 64,125,000
---------------
233,987,100
Medical Supplies and Devices (1.3%)
- ------------------------------------------------------------------------------------------------------------
2,603,300 Medtronic, Inc. 136,185,131
1,400,600 Sybron International Corp. + 65,740,663
---------------
201,925,794
Networking Equipment (0.7%)
- ------------------------------------------------------------------------------------------------------------
1,883,850 Cisco Systems, Inc. + 105,024,638
Nursing Homes (1.0%)
- ------------------------------------------------------------------------------------------------------------
2,370,000 Genesis Health Ventures, Inc. + [SECTION MARK] 62,508,750
2,356,200 Health Care & Retirement Corp. + [SECTION MARK] 94,837,050
---------------
157,345,800
Oil and Gas (1.1%)
- ------------------------------------------------------------------------------------------------------------
1,690,800 Halliburton Co. 87,815,925
1,048,000 Schlumberger Ltd. 84,364,000
---------------
172,179,925
Pharmaceuticals and Biotechnology (6.9%)
- ------------------------------------------------------------------------------------------------------------
1,809,100 Bristol-Myers Squibb Co. 171,186,088
2,075,000 Dura Pharmaceuticals, Inc. + 95,190,625
4,100,000 Elan Corp. PLC ADR + 209,868,750
1,710,000 Gilead Sciences, Inc. + [SECTION MARK] 65,407,500
904,200 Jones Medical Industries, Inc. 34,585,650
2,475,100 Pfizer, Inc. 184,549,644
2,654,900 Schering-Plough Corp. 164,935,663
730,800 Transkaryotic Therapies, Inc. + 25,669,350
1,301,600 Warner-Lambert Co. 161,398,400
---------------
1,112,791,670
Publishing (0.7%)
- ------------------------------------------------------------------------------------------------------------
1,881,200 Gannett Co., Inc. 116,281,675
REIT's (Real Estate Investment Trust) (0.1%)
- ------------------------------------------------------------------------------------------------------------
417,300 Starwood Lodging Trust 24,151,238
Restaurants (1.2%)
- ------------------------------------------------------------------------------------------------------------
10,797,160 J.D. Wetherspoon PLC (United Kingdom) 59,289,041
1,650,000 Landry's Seafood Restaurants, Inc. + [SECTION MARK] 39,600,000
2,010,800 Papa Johns International, Inc. + [SECTION MARK] 70,126,650
559,300 Starbucks Corp. + 21,463,138
---------------
190,478,829
Retail (8.2%)
- ------------------------------------------------------------------------------------------------------------
1,644,400 AutoZone, Inc. + 47,687,600
3,784,800 Bed Bath & Beyond, Inc. + [SECTION MARK] 145,714,800
1,303,300 Borders Group, Inc. + 40,809,560
1,630,800 CompUSA, Inc. + 50,554,800
1,075,000 Consolidated Stores Corp. + 47,232,813
1,949,100 Costco Companies, Inc. + 86,978,588
3,635,300 CVS Corp. 232,886,406
4,622,900 Dixons Group PLC (United Kingdom) 46,577,520
637,500 Dollar Tree Stores, Inc. + 26,376,563
2,448,800 Home Depot, Inc. (The) 144,173,100
241,500 Kohls Corp. + 16,452,188
973,700 Nordstrom, Inc. 58,787,138
2,525,000 Office Depot, Inc. + 60,442,188
3,488,950 Officemax, Inc. + 49,717,538
1,624,600 Rite Aid Corp. 95,343,713
1,140,000 Stage Stores, Inc. + 42,607,500
3,319,200 Wal-Mart Stores, Inc. 130,900,950
---------------
1,323,242,965
Semiconductors (3.2%)
- ------------------------------------------------------------------------------------------------------------
790,000 Altera Corp. + 26,168,750
3,125,000 Analog Devices, Inc. + 86,523,438
1,094,800 Credence Systems Corp. + [SECTION MARK] 32,433,450
540,000 Lattice Semiconductor Corp. + 25,582,500
1,940,000 Linear Technology Corp. 111,792,500
3,890,000 Maxim Integrated Products, Inc. + 134,205,000
177,800 Photronics, Inc. + 4,311,650
1,916,000 Texas Instruments, Inc. 86,220,000
---------------
507,237,288
Telecommunication Equipment (2.7%)
- ------------------------------------------------------------------------------------------------------------
1,735,000 Aspect Telecommunications Corp. + 36,218,125
756,100 Northern Telecom Ltd. (Canada) 67,292,900
2,110,000 Panamsat Corp. + 90,993,750
1,830,200 P-Com, Inc. + 31,570,950
4,023,200 Tellabs, Inc. + 212,726,700
---------------
438,802,425
Telephone Services (2.2%)
- ------------------------------------------------------------------------------------------------------------
954,400 Intermedia Communications, Inc. + [SECTION MARK] 57,979,800
852,200 McLeod, Inc. Class A + 27,270,400
142,400 Metromedia Fiber Network, Inc. Class A + 2,367,400
900,000 NEXTLINK Communications, Inc. Class A + 19,181,250
567,000 Qwest Communications International, Inc. + 33,736,500
634,100 RSL Communications, Ltd. Class A + 13,950,200
1,867,900 Sprint Corp. 109,505,638
920,000 Teleport Communications Group, Inc. Class A + 50,485,000
1,903,500 Tel-Save Holdings, Inc. + 37,832,063
---------------
352,308,251
Transportation (--%)
- ------------------------------------------------------------------------------------------------------------
44,900 C.H. Robinson Worldwide, Inc. 1,004,638
Wireless Communications (1.5%)
- ------------------------------------------------------------------------------------------------------------
2,847,800 Airtouch Communications, Inc. + 118,361,688
1,400,000 Clearnet Communications, Inc. Class A, (Canada) + 15,925,000
4,330,100 NEXTEL Communications, Inc. Class A + 112,582,600
---------------
246,869,288
---------------
Total Common Stocks (cost $11,534,076,168) $15,657,025,941
SHORT-TERM INVESTMENTS (3.6%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$20,000,000 American Home Products Corp. effective yield of
5.74%, March 11, 1998 $ 19,779,967
24,000,000 Bellsouth Telecommunications, Inc. effective yield of
6.10%, January 9, 1998 23,967,467
30,000,000 Corporate Receivables Corp. effective yield of
5.71%, March 17, 1998 29,643,125
25,000,000 Credit Suisse First Boston effective yield of
5.71%, March 4, 1998 24,599,904
25,000,000 Delaware Funding Corp. effective yield of
5.62%, January 16, 1998 24,941,458
25,000,000 Deutsche Bank Financial, Inc. effective yield of
5.69%, January 20, 1998 24,924,924
25,000,000 Falcon Asset Securitization Corp. effective yield of
6.05%, February 5, 1998 24,852,951
25,000,000 Fed Home Loan Mortgage Corp. effective yield of
5.64%, February 20, 1998 24,804,167
25,000,000 Federal National Mortgage Association effective yield of
5.62%, March 12, 1998 24,726,806
50,000,000 Federal National Mortgage Association effective yield of
5.59%, March 24, 1998 49,363,311
26,596,000 Federal National Mortgage Association effective yield of
5.58%, March 12, 1998 26,307,433
25,000,000 Ford Motor Co. S.A. De C.V. effective yield of
5.72%, March 23, 1998 24,678,250
25,000,000 General Electric Capital Corp. effective yield of
5 3/4%, February 23, 1998 24,788,368
25,000,000 General Electric Capital Corp. effective yield of
5.62%, January 14, 1998 24,949,264
25,000,000 Merrill Lynch & Co., Inc. effective yield of
5.7%, March 25, 1998 24,671,458
25,000,000 Metlife Funding, Inc. effective yield of 5 3/4%,
February 13, 1998 24,828,299
25,000,000 Morgan (J.P.) & Co., Inc. effective yield of
5.67%, April 17, 1998 24,598,375
25,000,000 National Rural Utilities Cooperative Finance Corp.
effective yield of 5.6%, April, 21, 1998 24,572,222
25,000,000 Sheffield Receivables Corp. effective yield of
5 3/4%, January 13, 1998 24,952,083
82,560,000 Interest in $509,463,000 joint repurchase agreement
dated December 31, 1997 with SBC Warburg due
January 2, 1998 with respect to various U.S. Treasury
obligations -- maturity value of $82,589,813 for an
effective yield of 6.50% 82,574,907
---------------
Total Short-Term Investments (cost $578,524,739) $ 578,524,739
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $12,112,600,907) *** $16,235,550,680
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $16,079,467,574.
*** The aggregate identified cost on a tax basis is $12,136,588,202, resulting in gross unrealized
appreciation and depreciation of $4,453,556,677 and $354,594,199, respectively, or net unrealized
appreciation of $4,098,962,478.
+ Non-income-producing security.
[SECTION MARK] Affiliated Companies (Note 5)
ADR after the name of a foreign holding stands for American Depository Receipts, representing ownership of
foreign securities on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
December 31, 1997 (Unaudited)
<S> <C>
Assets
- --------------------------------------------------------------------------------------------------
Investments in securities at value
(identified cost $12,112,600,907) (Note 1) $16,235,550,680
- --------------------------------------------------------------------------------------------------
Cash 17,146,156
- --------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 6,428,615
- --------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 18,110,612
- --------------------------------------------------------------------------------------------------
Receivable for securities sold 36,591,094
- --------------------------------------------------------------------------------------------------
Total assets 16,313,827,157
Liabilities
- --------------------------------------------------------------------------------------------------
Distributions payable to shareholders 64,081
- --------------------------------------------------------------------------------------------------
Payable for securities purchased 166,980,392
- --------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 29,717,265
- --------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 19,632,321
- --------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 4,958,362
- --------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 140,378
- --------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 14,836
- --------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 11,666,825
- --------------------------------------------------------------------------------------------------
Other accrued expenses 1,185,123
- --------------------------------------------------------------------------------------------------
Total liabilities 234,359,583
- --------------------------------------------------------------------------------------------------
Net assets $16,079,467,574
Represented by
- --------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $11,881,591,367
- --------------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (61,049,177)
- --------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments
and foreign currency transactions (Note 1) 135,974,407
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign currencies 4,122,950,977
- --------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $16,079,467,574
Computation of net asset value and offering price
- --------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($8,447,510,765 divided by 173,650,079 shares) $48.65
- --------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $48.65)* $51.62
- --------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($6,926,294,810 divided by 147,639,115 shares)** $46.91
- --------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($380,302,161 divided by 7,939,356 shares) $47.90
- --------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $47.90)* $49.64
- --------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($325,359,838 divided by 6,627,245 shares) $49.09
- --------------------------------------------------------------------------------------------------
* 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, 1997 (Unaudited)
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $252,906)
(including dividend income of $653,099 from
investments in affiliated issuers) (Note 5) $ 31,721,276
- --------------------------------------------------------------------------------------------------
Interest 10,830,494
- --------------------------------------------------------------------------------------------------
Total investment income 42,551,770
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 38,627,450
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 17,092,548
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 133,513
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 29,503
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 10,232,279
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 34,285,548
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 1,396,408
- --------------------------------------------------------------------------------------------------
Reports to shareholders 1,203,166
- --------------------------------------------------------------------------------------------------
Registration fees 150,387
- --------------------------------------------------------------------------------------------------
Auditing 68,983
- --------------------------------------------------------------------------------------------------
Legal 57,053
- --------------------------------------------------------------------------------------------------
Postage 773,110
- --------------------------------------------------------------------------------------------------
Other 1,198,682
- --------------------------------------------------------------------------------------------------
Total expenses 105,248,630
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (1,676,745)
- --------------------------------------------------------------------------------------------------
Net expenses 103,571,885
- --------------------------------------------------------------------------------------------------
Net investment loss (61,020,115)
- --------------------------------------------------------------------------------------------------
Net realized gain on investments
(including realized gain of $109,446,263 on sales of
investments in affiliated issuers) (Notes 1, 3 and 5) 772,189,997
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities
in foreign currencies during the year (227)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 976,430,413
- --------------------------------------------------------------------------------------------------
Net gain on investments 1,748,620,183
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,687,600,068
- --------------------------------------------------------------------------------------------------
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
1997* 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment loss $ (61,020,115) $ (97,001,492)
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions 772,189,997 (262,297,350)
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 976,430,186 1,063,188,318
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,687,600,068 703,889,476
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (185,202,878) (37,775,305)
- ----------------------------------------------------------------------------------------------------------------------
Class B (157,607,099) (35,446,992)
- ----------------------------------------------------------------------------------------------------------------------
Class M (8,456,807) (1,848,838)
- ----------------------------------------------------------------------------------------------------------------------
Class Y (7,008,141) (976,630)
- ----------------------------------------------------------------------------------------------------------------------
In excess of realized gain on investments
Class A -- (7,788,281)
- ----------------------------------------------------------------------------------------------------------------------
Class B -- (7,308,244)
- ----------------------------------------------------------------------------------------------------------------------
Class M -- (381,182)
- ----------------------------------------------------------------------------------------------------------------------
Class Y -- (201,355)
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 417,410,194 4,383,952,454
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 1,746,735,337 4,996,115,103
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 14,332,732,237 9,336,617,134
- ----------------------------------------------------------------------------------------------------------------------
End of period (including accumulated net investment
loss of $61,049,177 and $29,062, respectively) $16,079,467,574 $14,332,732,237
- ----------------------------------------------------------------------------------------------------------------------
*Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share December 31
operating performance (Unaudited) Year ended June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $44.47 $42.99 $29.58 $21.88 $20.83 $14.50
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (.11) (.20)(c) (.21)(c) (.12) (.06) (.12)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 5.38 2.00 13.62 8.02 1.56 6.77
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.27 1.80 13.41 7.90 1.50 6.65
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.09) (.26) -- (.15) (.45) (.32)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gains -- (.06) -- (.04) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- -- (.01) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.09) (.32) -- (.20) (.45) (.32)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $48.65 $44.47 $42.99 $29.58 $21.88 $20.83
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 11.97* 4.26 45.34 36.36 7.00 46.12
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $8,447,511 $7,381,624 $4,752,611 $1,341,877 $648,787 $318,426
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .51* 1.06 1.11 1.13 1.23 1.31
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.22)* (.48) (.54) (.55) (.82) (.98)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 37.20* 66.74 36.61 56.99 52.76 93.59
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (d) $.0483 $.0490
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended June 30, 1996 and thereafter
includes amounts paid through expense offset and brokerage service arrangements.
Prior period ratios exclude these amounts. (Note 2)
(c) Per share net investment loss has been determined on the basis of the weighted average number
of shares outstanding during the period.
(d) Average commission rate paid on security trades is required for fiscal periods beginning on or after
September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share December 31 March 1,1993+
operating performance (Unaudited) Year ended June 30 to June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $43.08 $41.96 $29.09 $21.68 $20.80 $17.76
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (.28) (.49)(c) (.48)(c) (.23) (.11) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 5.20 1.93 13.35 7.84 1.44 3.09
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 4.92 1.44 12.87 7.61 1.33 3.04
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.09) (.26) -- (.15) (.45) --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gains -- (.06) -- (.04) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- -- (.01) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.09) (.32) -- (.20) (.45) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $46.91 $43.08 $41.96 $29.09 $21.68 $20.80
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 11.54* 3.50 44.24 35.34 6.18 17.12*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $6,926,295 $6,359,447 $4,254,962 $1,013,379 $333,738 $15,698
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .88* 1.81 1.87 1.87 2.04 .67*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.60)* (1.23) (1.30) (1.30) (1.55) (.57)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 37.20* 66.74 36.61 56.99 52.76 93.59
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (d) $.0483 $.0490
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended June 30, 1996 and thereafter
includes amounts paid through expense offset and brokerage service arrangements.
Prior period ratios exclude these amounts. (Note 2)
(c) Per share net investment loss has been determined on the basis of the weighted average number
of shares outstanding during the period.
(d) Average commission rate paid on security trades is required for fiscal periods beginning on or after
September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share December 31 Dec. 1,1994+
operating performance (Unaudited) Year ended June 30 to June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $43.91 $42.66 $29.51 $24.72
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (.22) (.40)(c) (.40)(c) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 5.30 1.97 13.55 5.04
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.08 1.57 13.15 4.99
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.09) (.26) -- (.15)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gains -- (.06) -- (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- -- (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.09) (.32) -- (.20)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $47.90 $43.91 $42.66 $29.51
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 11.69* 3.75 44.56 20.40*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $380,302 $337,535 $210,404 $16,011
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .76* 1.56 1.64 .94 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.47)* (.98) (1.06) (.53)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 37.20* 66.74 36.61 56.99
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (d) $.0483 $.0490
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended June 30, 1996 and thereafter
includes amounts paid through expense offset and brokerage service arrangements.
Prior period ratios exclude these amounts. (Note 2)
(c) Per share net investment loss has been determined on the basis of the weighted average number
of shares outstanding during the period.
(d) Average commission rate paid on security trades is required for fiscal periods beginning on or after
September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share December 31 July 19,1994+
operating performance (Unaudited) Year ended June 30 to June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $44.82 $43.21 $29.66 $22.59
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (.05)(c) (.09)(c) (.11)(c) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 5.41 2.02 13.66 7.31
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 5.36 1.93 13.55 7.27
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.09) (.26) -- (.15)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net
realized gains -- (.06) -- (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Return of capital -- -- -- (.01)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.09) (.32) -- (.20)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $49.09 $44.82 $43.21 $29.66
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 12.07* 4.54 45.68 32.42*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $325,360 $254,126 $118,640 $24,538
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .38* .81 .86 .83*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.10)* (.23) (.29) (.26)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 37.20* 66.74 36.61 56.99
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (d) $.0483 $.0490
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended June 30, 1996 and thereafter
includes amounts paid through expense offset and brokerage service arrangements.
Prior period ratios exclude these amounts. (Note 2)
(c) Per share net investment loss has been determined on the basis of the weighted average number
of shares outstanding during the period.
(d) Average commission rate paid on security trades is required for fiscal periods beginning on or after
September 1, 1995.
</TABLE>
Notes to financial statements
December 31, 1997 (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 judgment 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 are 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
consistently 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. 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 Management. These balances may be
invested in one or more repurchase agreements and/or short-term
money market instruments.
C) Repurchase agreements The fund, or any joint trading account,
through its custodian, receives delivery of the underlying
securities, the market value of which at the time of purchase is
required to be in an amount at least equal to the resale price,
including accrued interest. Putnam Management is responsible for
determining that the value of these underlying securities is at all
times at least equal to the resale price, including accrued
interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual
basis. Dividend income is recorded on the ex-dividend date except
that certain dividends from foreign securities are recorded as soon
as the fund is informed of the ex-dividend date.
E) Foreign currency translation The accounting records of the fund
are maintained in U.S. dollars. The market value of foreign
securities, currency holdings, other assets and liabilities are
recorded in the books and records of the fund after translation to
U.S. dollars based on the exchange rates on that day. The cost of
each security is determined using historical exchange rates. Income
and withholding taxes are translated at prevailing exchange rates
when accrued or incurred. The fund does not isolate that portion of
realized or unrealized gains or losses resulting from changes in the
foreign exchange rate on investments from fluctuations arising from
changes in the market prices of the securities. Such gains and
losses are included with the net realized and unrealized gain or
loss on investments. Net realized gains and losses on foreign
currency transactions represent net exchange gains or losses on
closed forward currency contracts, disposition of foreign currencies
and the difference between the amount of investment income and
foreign withholding taxes recorded on the fund's books and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized
appreciation and depreciation of assets and liabilities in foreign
currencies arise from changes in the value of open forward currency
contracts and assets and liabilities other than investments at the
period end, resulting from changes in the exchange rate.
F) Line of credit The fund has entered into a committed line of
credit with certain banks. This line of credit agreement includes
restrictions that the fund maintain an asset coverage ratio of at
least 300% and borrowings must not exceed prospectus limitations.
For the six months ended December 31, 1997, the fund had no
borrowings against the line of credit.
G) Federal taxes It is the policy of the fund to distribute all of
its taxable income within the prescribed time and otherwise comply
with the provisions of the Internal Revenue Code applicable to
regulated investment companies. It is also the intention of the fund
to distribute an amount sufficient to avoid imposition of any excise
tax under Section 4982 of the Internal Revenue Code of 1986, as
amended. Therefore, no provision has been made for federal taxes on
income, capital gains or unrealized appreciation on securities held
nor for excise tax on income and capital gains.
At June 30, 1997, the fund had a capital loss carryover of
approximately $97,881,000 available to offset future net capital
gain, if any, which will expire on June 30, 2005.
H) 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 at least annually. The amount and character
of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. 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, 0.50% of the next $5
billion, 0.475% of the next $5 billion, 0.455% of the next $5
billion, 0.44% of the next $5 billion, and 0.43% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund
and their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually
by the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments,
Inc. Investor servicing agent functions are provided by Putnam
Investor Services, a division of PFTC.
For the six months ended December 31, 1997, fund expenses were
reduced by $1,676,745 under expense offset arrangements with PFTC
and brokerage 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.
Each Trustee of the fund receives an annual Trustee fee, of which
$12,910 has been allocated to the fund, 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 has adopted a Trustee Fee Deferral Plan (the "Deferral
Plan") which allows the Trustees to defer the receipt of all or a
portion of Trustees Fees payable on or after July 1, 1995. The
deferred fees remain in the fund and are invested in certain Putnam
funds until distribution in accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit
pension plan (the "Pension Plan") covering all Trustees of the fund
who have served as 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 currently limit payment by the fund to 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 six months ended December 31, 1997, Putnam Mutual Funds
Corp., acting as underwriter received net commissions of $911,330
and $41,651 from the sale of class A and class M shares,
respectively and $5,630,907 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 six
months ended December 31, 1997, Putnam Mutual Funds Corp., acting as
underwriter received $128,995 on class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended December 31, 1997, purchases and sales
of investment securities other than short-term investments
aggregated $5,812,387,557 and $5,610,184,177, 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, 1997, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were
as follows:
Six months ended
December 31, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 21,102,823 $1,014,165,110
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,792,795 176,061,365
- ------------------------------------------------------------
24,895,618 1,190,226,475
Shares
repurchased (17,243,051) (826,955,836)
- ------------------------------------------------------------
Net increase 7,652,567 $363,270,639
- ------------------------------------------------------------
Year ended
June 30, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 142,393,856 $5,850,578,384
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,061,020 42,820,121
- ------------------------------------------------------------
143,454,876 5,893,398,505
Shares
repurchased (88,012,373) (3,602,785,988)
- ------------------------------------------------------------
Net increase 55,442,503 $2,290,612,517
- ------------------------------------------------------------
Six months ended
December 31, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 5,757,564 $266,916,055
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,063,932 137,202,778
- ------------------------------------------------------------
8,821,496 404,118,833
Shares
repurchased (8,792,603) (407,716,681)
- ------------------------------------------------------------
Net increase
(decrease) 28,893 $(3,597,848)
- ------------------------------------------------------------
Year ended
June 30, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 75,798,177 $3,034,787,180
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 943,158 37,028,368
- ------------------------------------------------------------
76,741,335 3,071,815,548
Shares
repurchased (30,531,849) (1,209,675,509)
- ------------------------------------------------------------
Net increase 46,209,486 $1,862,140,039
- ------------------------------------------------------------
Six months ended
December 31, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 966,941 $45,634,167
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 165,574 7,570,044
- ------------------------------------------------------------
1,132,515 53,204,211
Shares
repurchased (880,357) (41,718,846)
- ------------------------------------------------------------
Net increase 252,158 $11,485,365
- ------------------------------------------------------------
Year ended
June 30, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 5,520,573 $225,053,765
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 50,716 2,026,092
- ------------------------------------------------------------
5,571,289 227,079,857
Shares
repurchased (2,816,758) (114,396,085)
- ------------------------------------------------------------
Net increase 2,754,531 $112,683,772
- ------------------------------------------------------------
Six months ended
December 31, 1997
- ------------------------------------------------------------
Class Y Shares Amount
- ------------------------------------------------------------
Shares sold 1,611,294 $78,221,618
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 149,625 7,008,141
- ------------------------------------------------------------
1,760,919 85,229,759
Shares
repurchased (804,091) (38,977,721)
- ------------------------------------------------------------
Net increase 956,828 $46,252,038
- ------------------------------------------------------------
Year ended
June 30, 1997
- ------------------------------------------------------------
Class Y Shares Amount
- ------------------------------------------------------------
Shares sold 4,581,487 $186,531,899
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 29,007 1,177,985
- ------------------------------------------------------------
4,610,494 187,709,884
Shares
repurchased (1,686,036) (69,193,758)
- ------------------------------------------------------------
Net increase 2,924,458 $118,516,126
- ------------------------------------------------------------
Note 5
Transactions with Affiliated Companies
Transactions during the period with companies in which the fund owns
at least 5% of the voting securities were as follows:
<TABLE>
<CAPTION>
Purchase Sales Dividend Market
Name of Affiliate cost cost Income Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ABR Information Services, Inc. $ 6,755,294 $ -- $ -- $ 36,290,000
Affiliated Computer Services
Class A -- -- -- 44,731,250
Airgas, Inc. -- 3,945,080 -- 46,921,000
Applebees Intl., Inc. -- 43,041,975 -- --
Avis Rent A Car, Inc. 49,345,489 -- -- 58,870,394
Barnett, Inc. -- 80,302,564 368,590 22,000,000
Bed Bath & Beyond, Inc. -- 1,984,565 -- 145,714,800
Carematrix Corp. -- -- -- 25,662,250
Chancellor Media
Corp. Class A 6,255,398 -- -- 152,575,663
Clearnet Communications, Inc.
Class A, (Canada) -- -- -- 15,925,000
Computer Horizons Corp. -- 25,389,137 -- 59,150,000
Concentra Managed Care, Inc. 63,484,092 6,527,599 -- 79,756,110
Corestaff, Inc. 5,770,225 1,846,984 -- 48,230,000
Credence Systems Corp. -- -- -- 32,433,450
CRA Managed Care, Inc. -- 30,884,281 -- --
Doubletree Corp. -- 57,721,125 -- --
Emcare Holdings, Inc. -- 15,701,621 -- --
Emmis Broadcasting Corp.
Class A -- 11,685,499 -- 34,515,313
Extended Stay America, Inc. -- -- -- 61,764,202
Genesis Health Ventures, Inc. 5,344,607 -- -- 62,508,750
Gilead Sciences, Inc. 5,043,295 5,804,555 -- 65,407,500
Health Care & Retirement Corp. -- 1,217,380 -- 94,837,050
Health Management Assoc., Inc. -- 1,493,180 -- 206,721,750
Inso Corp. -- 35,559,742 -- --
Interim Services, Inc. -- -- -- 50,973,750
Intermedia Communications, Inc. -- 1,690,210 -- 57,979,800
Jones Medical Industries, Inc. -- 23,963,804 -- 34,585,650
Labor Ready, Inc. -- 9,530,374 -- 6,839,044
Landry's Seafood Restaurants -- -- -- 39,600,000
Occusystems, Inc. -- 32,599,811 -- --
Papa Johns International, Inc. 6,496,438 -- -- 70,126,650
Pediatrix Medical Group, Inc. -- 2,031,222 -- 42,660,225
Physician Sales & Services, Inc. -- -- -- 47,300,000
Prime Hospitality Corp. -- 447,370 -- 43,327,438
Renal Treatment Centers, Inc. -- -- -- 50,936,250
Security Dynamics
Technologies, Inc. 14,066,779 -- -- 76,240,450
SFX Broadcasting, Inc. Class A -- 14,069,779 -- --
Stewart Enterprises, Inc. Class A 6,161,194 -- 136,732 165,929,050
Sunrise Assisted Living, Inc. -- 26,229,448 -- --
Tel-Save Holdings, Inc. -- 25,300,407 -- 37,832,063
Vantive Corp. -- -- -- 35,350,000
Wolverine World Wide, Inc. 11,844,148 -- 147,777 77,038,125
Young Broadcasting Corp. Class A -- 24,203,188 -- --
- -------------------------------------------------------------------------------------------------------------
Totals $180,566,959 $483,170,900 $653,099 $2,130,732,977
- -------------------------------------------------------------------------------------------------------------
</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
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
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
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
John J. Morgan, Jr.
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
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 the principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
SA013-36892-852/358/983/526 2/98
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ---------------------------------------------------------------------------
Putnam New Opportunities Fund
Supplement to semiannual report dated12/31/97
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 12/31/97 12.08%
One year ended 12/31/97 22.82
Annual average
(since Class A inception, 8/31/90) 28.81
- ---------------------------------------------------------------------------
Share value: NAV
6/30/97 $44.82
12/31/97 $49.09
- ---------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
0 $0.0000 $1.09 $1.09
- ---------------------------------------------------------------------------
Class Y shares are offered without an initial sales charge or CDSC. The
class Y share returns shown for periods before their inception (7/19/94)
are derived from the historical performance of class A shares for such
periods, but have not been adjusted to reflect differences in expenses,
which are lower for class Y shares than for class A shares. All returns
assume reinvestment of distributions at NAV and represent past performance;
they do not guarantee future results. Investment return will fluctuate and
may involve the loss of principal. Performance of other share classes will
vary. 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.
