Putnam
New
Opportunities
Fund
ANNUAL REPORT
June 30, 1998
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Putnam New Opportunities Fund's class A shares ranked 30 out of 338
growth funds (top 9%) tracked by Lipper Analytical Services for the
5-year period ended June 30, 1998.*
* "We enter the new fiscal year with cautious optimism, keeping a
close watch on the world's financial markets, which may continue to be
turbulent for some time. We will continue to focus on growing companies
that have minimal exposure to foreign markets, and will keep our sights on
the long-term growth potential of the stocks we select for the portfolio."
-- Daniel L. Miller, manager
Putnam New Opportunities Fund
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
20 Financial statements
* Lipper rankings are based on total return performance, vary over time,
and do not include the effects of sales charges. For the 1-year period
ended 6/30/98, the fund's class A shares ranked 179 out of 884 growth
funds. Performance of other share classes will vary.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
You may recall that last year at this time we announced the closing of the
popular Putnam New Opportunities Fund to new investors because we believed it
was becoming too large to manage efficiently. During the previous fiscal year,
you may also recall that we added a large-company component to the portfolio.
I am pleased to report that both decisions seem to have been judicious. Fund
performance for the fiscal year ended June 30, 1998, showed significant
improvement over that of fiscal 1997.
Fiscal 1998 brought its share of challenges, with market volatility and the
situation in Asia casting shadows over equities in general and several of the
sectors in which your fund invests in particular. During the year, your fund's
management team paid close attention to technology, which continued to present
bright spots among the clouds, and media, which remained vibrant.
In the following report, the fund's management team reviews fiscal '98
strategy and performance and then discusses the outlook for the months ahead.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
August 19, 1998
Report from the Fund Managers
Daniel L. Miller
Carol C. McMullen
As we mark the close of Putnam New Opportunities Fund's eighth fiscal year,
we're pleased to report strong returns despite a volatile year for the U.S.
stock market and continued turbulence in economies around the world. Our
decision in fiscal 1997 to begin focusing a portion of the fund's assets on
large-company stocks, combined with a strong recovery for the fund's more
aggressive small and midsize holdings, has resulted in a profitable fiscal
1998. For the 12 months ended June 30, 1998, your fund's class A shares
provided a total return of 32.75% at net asset value and 25.13% at public
offering price. This is ahead of the fund's benchmark, the Russell Midcap
Growth Index, which returned 24.02% for the same 12-month period. For complete
information on the fund's performance and index comparisons, please refer to
the summary that begins on page 9.
Since we reported to you at the fiscal year's midpoint, the same factors
continued to boost your fund's returns: exceptionally strong media and
telecommunications holdings, powerful performance from large-company stocks,
and limited exposure to foreign companies and markets, many of which have been
negatively affected by the turmoil in Asian economies.
* LARGE-COMPANY STOCKS ADD POWER TO FUND'S AGGRESSIVE GROWTH STRATEGY
Throughout fiscal '98, large-company U.S. stocks continued to astound
investors with their strength and resilience. This scenario proved quite
beneficial for the fund, especially considering our decision in mid 1997 to
add large-capitalization growth stocks to the fund's portfolio. This move was
designed to allow the fund to take advantage of more opportunities while
continuing to focus on rapidly growing small and mid-cap stocks.
The rewards of the fund's large-cap focus can be found in all sectors of the
portfolio, from retail giants Wal-Mart Stores and The Home Depot to
pharmaceutical powerhouses such as Warner-Lambert and Pfizer and financial
companies such as American Express and Morgan Stanley Dean Witter. At the same
time, the fund continued to profit from the types of stocks that have been its
mainstay for the past eight years -- those of innovative small and midsize
companies with exceptional growth potential. We believe the fund will continue
to benefit from its ability to target growth companies of all sizes.
* MEDIA STILL TOPS LIST OF DYNAMIC GROWTH SECTORS
It's not a new story, but it bears repeating: media and telecommunications
companies are reaping the rewards of the Telecommunications Act of 1996, which
loosened restrictions on the industry. Although it was passed more than two
years ago, the legislation still contributes to the growth of many
broadcasting, cable, and long-distance companies. In broadcasting, the act
allows for ownership of multiple television and/or radio stations -- a change
that has generated a wave of mergers and acquisitions. Clear Channel
Communications, one of the fund's largest holdings, is considered the premier
consolidator in radio and billboard advertising. In addition to owning 183
radio stations, the company also owns 18 television stations and 88,000
outdoor display faces. Its strategy is to maximize advertising revenue by
owning billboards and radio and TV stations within the same region. This
strategy has allowed Clear Channel to increase cash flow growth in each of the
past five years.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Computer software 8.7%
Retail 8.4%
Pharmaceuticals
and biotechnology 7.9%
Broadcasting 7.1%
Business services 6.7%
Footnote reads:
* Based on net assets as of 6/30/98. Holdings will vary over time.
Two other holdings participating in the media merger mania were
Tele-Communications, Inc. (TCI) and Chancellor Media Corp. Toward the close of
the period TCI, a cable operator, announced an agreement to be acquired by
AT&T in a huge $48 billion deal, while Chancellor, the second-largest radio
broadcaster in the United States, most recently acquired LIN Television Corp.
Chancellor now owns and operates 108 radio stations and has also launched AMFM
Radio Networks, a national radio syndication subsidiary that reaches more than
60 million listeners weekly. Both Chancellor and TCI were highlights of the
fund's portfolio during the period. 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.
* HEALTH CARE: BIGGER IS BETTER IN FISCAL '98
Large pharmaceutical companies represented the good news in the health-care
sector during the period, while smaller emerging-growth companies and service
providers struggled. Within health-care services, businesses like health
maintenance organizations, hospitals, and nursing homes wrestled with ongoing
concerns about cost containment and reimbursement legislation. In other areas,
small and midsize companies in sectors such as medical devices and
biotechnology were also disappointing.
Performance in the fund's health-care sector was driven primarily by U.S. drug
companies. The fund holding that received the most worldwide attention during
the period was that of Pfizer, developer of the male impotence drug Viagra.
While some pharmaceutical companies depend heavily on one or two major
products, Pfizer is developing several new drugs that are expected to generate
impressive sales growth over the long term. The products include Zelodox, a
drug for schizophrenia, and Tovan, an antibiotic. Of course, Pfizer's most
visible success came after the FDA approval of Viagra, which resulted in the
largest new-drug launch in history and sent Pfizer's stock price soaring.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
America Online, Inc.
Computer services
Clear Channel Communications, Inc.
Broadcasting
HBO & Co.
Health-care information services
Computer Associates International, Inc.
Computer software
CBS Corp.
Broadcasting
Tele-Communications, Inc. (TCI Group)
Cable television
EMC Corp.
Computer storage devices
Warner-Lambert Co.
Pharmaceuticals
Cendant Corp.
Consumer services
Costco Companies, Inc.
Retail
These holdings represent 19.8% of the fund's net assets as of 6/30/98.
Portfolio holdings will vary over time.
* RETAIL SECTOR ENJOYS STRONG U.S. ECONOMY
The U.S. economy provided fuel for the retail sector in the form of low
unemployment, low inflation, a high level of consumer confidence, and the
drawing of more lower-income consumers into the spending stream. This sector
also benefited from its low exposure to troubled foreign economies. One strong
retail stock in the portfolio was Wal-Mart Stores, the nation's largest
retailer, which recently announced plans to enter the retail food market by
building several test supermarkets in Arkansas. Also bringing strength to the
fund were Dollar Tree, a chain of discount variety stores, Starbucks, the
coffee retailer, and Borders Group, which operates book and music superstores
throughout the United States.
Disappointments during the period included stocks in the lodging and
restaurant industries as well as the stock of Cendant Corporation, a
marketing, travel, and real estate services firm.
The company's stock price has declined substantially after recent
announcements that accounting irregularities would lead to sharply lower
restated earnings. As with any fund holding, Putnam's analysts had
conducted rigorous research and analysis of Cendant. The company's recent
difficulties, however, involve issues that we believe could not have
been detected in advance by outside analysts or portfolio managers.
* STRATEGIES CONTINUE INTO FISCAL '99
As the fiscal year came to a close, U.S. markets were beginning to experience
greater volatility with major indexes slipping considerably from their highs
earlier in the calendar year. Although we've had an outstanding year, we
expect that the markets may experience setbacks, especially in light of the
turmoil in many global economies. Therefore, we plan to maintain our focus on
growing U.S. companies that have minimal exposure to foreign markets.
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings were viewed
favorably as of 6/30/98, there is no guarantee the fund will continue to hold
these securities in the future.
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 6/30/98
Class A Class B Class M
(inception date) (8/31/90) (3/1/93) (12/1/94)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
1 year 32.75% 25.13% 31.78% 26.78% 32.09% 27.47%
- ------------------------------------------------------------------------------
5 years 193.46 176.60 182.72 180.72 186.25 176.24
Annual average 24.03 22.57 23.10 22.93 23.41 22.53
- ------------------------------------------------------------------------------
Life of fund 652.68 609.48 608.79 608.79 621.62 596.20
Annual average 29.41 28.43 28.42 28.42 28.71 28.12
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 6/30/98
S&P 500 Russell 2000 Russell Midcap Consumer
Index Index Growth Index Price Index
- ------------------------------------------------------------------------------
1 year 30.16% 16.51% 24.02% 1.68%
- ------------------------------------------------------------------------------
5 years 182.42 110.43 132.60 12.88
Annual average 23.08 16.05 18.39 2.45
- ------------------------------------------------------------------------------
Life of fund 331.10 271.35 297.20 23.86
Annual average 20.52 18.24 19.26 2.77
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. 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.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of
a $10,000 investment since
8/31/98
Fund's class A Russell 2000 Russell Midcap S & P 500
Date shares at POP Index Growth Index Index
8/31/90 9,426 10,000 10,000 10,000
6/30/91 12,841 12,227 11,844 12,828
6/30/92 16,545 14,005 13,433 14,390
6/30/93 24,176 17,647 15,264 17,075
6/30/94 25,867 18,413 15,478 17,430
6/30/95 35,271 22,116 19,512 22,037
6/30/96 51,260 27,400 24,587 27,236
6/30/97 53,444 31,874 33,117 32,027
6/30/98 $70,948 $37,137 $43,110 $39,720
Past performance is no assurance of future results. At the end of the same
time period, a $10,000 investment in the fund's class B shares would have been
valued at $70,879 and no contingent deferred sales charges would apply; a
$10,000 investment in the fund's class M shares would have been valued at
$72,162 ($69,620 at public offering price). See first page of performance
section for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 6/30/98
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
- ------------------------------------------------------------------------------
6/30/98 57.68 61.20 55.42 56.65 58.70
- ------------------------------------------------------------------------------
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 5.75% maximum sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
COMPARATIVE BENCHMARKS
Standard & Poor's 500 Index* is an unmanaged list of common stocks that is
frequently used as a general measure of stock market performance.
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.
Russell Midcap Growth Index* + is composed of all medium and medium/small
companies in the Russell 1000 Index. The Russell 1000 represents the
universe of stocks from which the most active money managers typically
select.
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 management has recently undertaken a review of benchmarks for
various funds. This index replaces the S&P 500 Index as a benchmark for
this fund because Putnam management has determined that the securities
tracked by this index more accurately reflect the types of securities
generally held by the fund.
Report of independent accountants
For the fiscal year ended June 30, 1998
To the Trustees and Shareholders of
Putnam New Opportunities Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Putnam New
Opportunities Fund (the "fund") at June 30, 1998, and the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of investments owned at June 30, 1998 by correspondence with the
custodian and the application of alternative auditing procedures where
investments purchased were not yet received by the custodian, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 14, 1998
Portfolio of investments owned
June 30, 1998
<TABLE>
<CAPTION>
COMMON STOCKS (97.3%) (a)
NUMBER OF SHARES VALUE
Advertising (1.6%)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
2,343,400 Lamar Advertising Co. (NON) $ 84,069,475
7,627,500 Outdoor Systems, Inc. (NON) 213,570,000
----------------
297,639,475
Apparel (0.2%)
- -------------------------------------------------------------------------------------------------------------
2,098,500 Wolverine World Wide, Inc. 45,511,219
Banks (0.8%)
- -------------------------------------------------------------------------------------------------------------
863,000 BankAmerica Corp. 74,595,563
2,950,800 TCF Financial Corp. 87,048,600
----------------
161,644,163
Broadcasting (7.1%)
- -------------------------------------------------------------------------------------------------------------
11,855,500 CBS Corp. 376,412,125
4,498,900 Chancellor Media Corp. 223,398,503
4,257,856 Clear Channel Communications, Inc. (NON) 464,638,536
897,000 Heftel Broadcasting Corp. Class A (NON) 40,140,750
4,740,000 Sinclair Broadcast Group, Inc. Class A (NON) 136,275,000
1,937,600 Univision Communications Inc. Class A (NON) 72,175,600
1,520,000 Westwood One, Inc. (NON) 38,332,500
----------------
1,351,373,014
Building Products (0.1%)
- -------------------------------------------------------------------------------------------------------------
1,015,100 Barnett, Inc. (AFF) 20,555,775
Business Services (6.7%)
- -------------------------------------------------------------------------------------------------------------
928,000 ABR Information Services, Inc. (NON) 22,040,000
3,856,300 Accustaff, Inc. (NON) 120,509,375
1,700,500 Affiliated Computer Services, Inc. Class A (NON) 65,469,250
687,200 Airgas, Inc. (NON) 9,878,500
1,040,000 Applied Graphics Technologies, Inc. (NON) 47,580,000
1,970,000 Interim Services Inc. (NON) 63,286,250
1,820,500 Metamor Worldwide, Inc. (NON) (AFF) 64,058,844
750,000 NOVA Corp./Georgia (NON) 26,812,500
4,023,150 Paychex, Inc. 163,691,916
1,578,400 Pitney Bowes, Inc. 75,960,500
2,328,800 PMT Services, Inc. (NON) 59,238,829
16,872,400 Rentokil Group PLC (United Kingdom) 121,217,041
3,126,300 Robert Half International, Inc. (NON) 174,682,013
965,000 Sanmina Corp. (NON) 41,856,875
1,261,000 Select Appointments Holdings PLC ADR
(United Kingdom) 37,199,500
2,160,700 Snyder Communications, Inc. (NON) 95,070,800
2,858,600 Viking Office Products, Inc. (NON) 89,688,575
----------------
1,278,240,768
Cable Television (3.4%)
- -------------------------------------------------------------------------------------------------------------
4,008,600 MediaOne Group Inc. (NON) 176,127,863
1,389,400 Tele-Comm Liberty Media Group, Inc. Class A (NON) 53,926,088
8,494,300 Tele-Communications, Inc. Class A (NON) 326,499,656
4,640,200 Tele-Communications TCI ventures Group Class A (NON) 93,094,013
----------------
649,647,620
Computer Peripherals (1.7%)
- -------------------------------------------------------------------------------------------------------------
7,023,700 EMC Corp. (NON) 314,749,556
Computer Services (6.6%)
- -------------------------------------------------------------------------------------------------------------
5,529,200 America Online, Inc. (NON) 586,095,200
1,721,900 Cambridge Technology Partners, Inc. (NON) 94,058,788
2,218,200 CBT Group PLC ADR (Ireland) (NON) (AFF) 118,673,700
896,400 CheckFree Holdings Corp. (NON) 26,387,775
1,727,400 Ciber, Inc. (NON) 65,641,200
952,100 Computer Horizons Corp. (NON) 35,287,206
1,746,350 Harbinger Corp. (NON) 42,239,841
1,267,900 Mastech Corp. (NON) 35,659,688
1,935,000 Renaissance Worldwide, Inc. 42,086,250
795,800 Sapient Corp. (NON) 41,978,450
2,755,900 Sterling Commerce, Inc. (NON) 133,661,150
524,100 Whittman-Hart, Inc. (NON) 25,353,338
----------------
1,247,122,586
Computer Software (8.7%)
- -------------------------------------------------------------------------------------------------------------
380,000 Aspect Development, Inc. (NON) 28,737,500
1,531,800 BMC Software, Inc. (NON) 79,557,863
6,145,700 Cadence Design Systems, Inc. (NON) 192,053,125
6,987,600 Computer Associates International, Inc. 388,248,525
3,465,000 Compuware Corp. (NON) 177,148,125
2,170,000 Electronic Arts, Inc. (NON) 117,180,000
679,300 Intuit, Inc. (NON) 41,607,125
2,322,300 Microsoft Corp. (NON) 251,679,263
5,622,200 Parametric Technology Corp. (NON) 152,502,175
1,065,200 Remedy Corp. (NON) 18,108,400
1,928,200 Saville Systems Ireland PLC ADR (Ireland) (NON) (AFF) 96,651,025
677,400 Software AG Systems, Inc. (NON) 19,813,950
2,002,000 Synopsys, Inc. 91,591,500
460,900 Viasoft, Inc. (NON) 7,460,819
----------------
1,662,339,395
Conglomerates (1.3%)
- -------------------------------------------------------------------------------------------------------------
3,863,300 Tyco International Ltd. (NON) 243,387,900
Consumer Products (2.4%)
- -------------------------------------------------------------------------------------------------------------
949,300 Central Garden and Pet Co. (NON) 29,546,963
1,540,100 Colgate-Palmolive Co. 135,528,800
1,305,600 Procter & Gamble Co. 118,891,200
3,215,000 Rexall Sundown, Inc. (NON) 113,328,750
1,405,000 Twinlab Corp. (NON) 61,380,938
----------------
458,676,651
Consumer Services (1.5%)
- -------------------------------------------------------------------------------------------------------------
14,412,624 Cendant Corp. (NON) 300,863,526
Cosmetics (0.6%)
- -------------------------------------------------------------------------------------------------------------
1,740,000 Estee Lauder Cos. Class A 121,256,250
Education (0.2%)
- -------------------------------------------------------------------------------------------------------------
1,327,104 Apollo Group, Inc. Class A (NON) 43,877,376
Electric Utilities (0.1%)
- -------------------------------------------------------------------------------------------------------------
741,200 Calenergy, Inc. (NON) 22,282,325
Electronics and Electrical Equipment (2.1%)
- -------------------------------------------------------------------------------------------------------------
2,652,800 General Electric Co. 241,404,800
1,855,800 Illinois Tool Works, Inc. 123,758,663
568,700 Uniphase Corp. (NON) 35,703,697
----------------
400,867,160
Energy-Related (0.6%)
- -------------------------------------------------------------------------------------------------------------
575,000 AES Corp. (NON) 30,223,438
2,469,900 Thermo Electron Corp. (NON) 84,439,706
----------------
114,663,144
Entertainment (1.2%)
- -------------------------------------------------------------------------------------------------------------
1,915,400 Time Warner, Inc. 163,646,988
1,225,600 Viacom, Inc. Class B 71,391,200
----------------
235,038,188
Environmental Services (1.3%)
- -------------------------------------------------------------------------------------------------------------
1,764,300 Allied Waste Industries, Inc. (NON) 42,343,200
410,700 American Disposal Services, Inc. (NON) 19,251,563
766,000 Eastern Environmental Services, Inc. (NON) 26,044,000
3,183,400 USA Waste Services, Inc. (NON) 157,180,375
----------------
244,819,138
Financial Services (4.1%)
- -------------------------------------------------------------------------------------------------------------
1,178,300 American Express Co. 134,326,200
1,365,000 AMRESCO, Inc. (NON) 39,755,625
1,950,000 Finova Group, Inc. 110,418,750
1,660,200 FIRSTPLUS Financial Group, Inc. (NON) 59,767,200
3,578,450 MBNA Corp. 118,088,850
1,306,000 Merrill Lynch & Co., Inc. 120,478,500
1,673,100 Morgan Stanley, Dean Witter, Discover and Co. 152,879,513
1,750,000 Sirrom Capital Corp. 45,500,000
----------------
781,214,638
Food and Beverages (0.7%)
- -------------------------------------------------------------------------------------------------------------
3,171,900 Coca-Cola Enterprises, Inc. 124,497,075
Funeral/Cemetery Services (1.7%)
- -------------------------------------------------------------------------------------------------------------
2,905,600 Service Corp. International 124,577,600
7,267,400 Stewart Enterprises, Inc. Class A (AFF) 193,494,525
----------------
318,072,125
Health Care Information Systems (2.3%)
- -------------------------------------------------------------------------------------------------------------
12,287,400 HBO & Co. 433,130,850
Health Care Services (5.2%)
- -------------------------------------------------------------------------------------------------------------
1,699,800 Cardinal Health, Inc. 159,356,250
937,600 Carematrix Corp. (NON) (AFF) 25,256,600
2,806,800 Concentra Managed Care, Inc. (NON) (AFF) 72,976,800
7,250,000 HEALTHSOUTH Corp. (NON) 193,484,375
1,144,700 Henry Schein, Inc. (NON) 52,799,288
2,734,400 Lincare Holdings, Inc. 115,015,700
457,000 NCS HealthCare, Inc. Class A (NON) 13,024,500
2,805,900 Omnicare, Inc. 106,974,938
717,500 Parexel International Corp. (NON) 26,099,063
997,900 Pediatrix Medical Group, Inc. (NON) (AFF) 37,109,406
805,000 Quintiles Transnational Corp. (NON) 39,595,938
4,162,250 Total Renal Care Holdings, Inc. (NON) (AFF) 143,597,625
----------------
985,290,483
Hospital Management (1.4%)
- -------------------------------------------------------------------------------------------------------------
8,127,900 Health Management Assoc., Inc. (NON) 271,776,656
Insurance (1.5%)
- -------------------------------------------------------------------------------------------------------------
775,600 American International Group, Inc. 113,237,600
2,748,500 Travelers Group Inc. 166,627,813
----------------
279,865,413
Leisure (0.1%)
- -------------------------------------------------------------------------------------------------------------
935,000 Signature Resorts, Inc. (NON) 15,427,500
Lodging (1.4%)
- -------------------------------------------------------------------------------------------------------------
5,065,266 Extended Stay America, Inc. (NON) (AFF) 56,984,243
1,062,600 Marriott International, Inc. Class A 34,401,675
2,127,100 Prime Hospitality Corp. (NON) 37,091,306
3,765,087 Promus Hotel Corp. (NON) 144,955,850
----------------
273,433,074
Medical Supplies and Devices (1.1%)
- -------------------------------------------------------------------------------------------------------------
1,202,200 Boston Scientific Corp. (NON) 86,107,575
3,827,000 Sybron International Corp. (NON) 96,631,750
354,100 Waters Corp. (NON) 20,869,769
----------------
203,609,094
Networking & Telecommunication Equipment (5.5%)
- -------------------------------------------------------------------------------------------------------------
1,280,000 Advanced Fibre Communications (NON) 51,280,000
2,920,000 Ascend Communications, Inc. (NON) 144,722,500
2,030,000 Aspect Telecommunications Corp. (NON) 55,571,250
1,020,000 CIENA Corp. (NON) 71,017,500
1,395,600 Cisco Systems, Inc. (NON) 128,482,425
1,305,800 FORE Systems, Inc. (NON) 34,603,700
2,630,100 Lucent Technologies, Inc. 218,791,444
2,207,800 Northern Telecom Ltd. (Canada) 125,292,650
1,192,400 P-Com, Inc. (NON) 10,917,913
2,031,900 Panamsat Corp. (NON) 115,564,313
1,135,000 Tellabs, Inc. 81,294,375
----------------
1,037,538,070
Nursing Homes (0.5%)
- -------------------------------------------------------------------------------------------------------------
2,312,000 Health Care & Retirement Corp. (NON) (AFF) 91,179,500
Oil Services (0.1%)
- -------------------------------------------------------------------------------------------------------------
652,500 National-Oilwell, Inc. (NON) 17,495,156
397,200 Smith International, Inc. (NON) 13,827,525
----------------
31,322,681
Pharmaceuticals and Biotechnology (7.9%)
- -------------------------------------------------------------------------------------------------------------
1,619,500 Bristol-Myers Squibb Co. 186,141,281
1,160,000 Centocor, Inc. (NON) 42,050,000
1,673,200 Dura Pharmaceuticals, Inc. (NON) 37,437,850
3,765,000 Elan Corp. PLC ADR (NON) 242,136,563
1,663,200 Gilead Sciences, Inc. (NON) (AFF) 53,326,350
905,200 Jones Medical Industries, Inc. 29,984,750
977,000 Medicis Pharmaceutical Corp. Class A (NON) (AFF) 35,660,500
2,141,600 Pfizer, Inc. 232,765,150
590,000 Sepracor, Inc. (NON) 24,485,000
2,978,100 Schering-Plough Corp. 272,868,413
741,800 Transkaryotic Therapies, Inc. (Malaysia) (NON) 19,101,350
549,300 Vertex Pharmaceuticals, Inc. (NON) 12,359,250
4,434,300 Warner-Lambert Co. 307,629,563
----------------
1,495,946,020
Restaurants (1.0%)
- -------------------------------------------------------------------------------------------------------------
10,061,767 J.D. Wetherspoon PLC (United Kingdom) 48,303,243
1,849,000 Landry's Seafood Restaurants, Inc. (NON) (AFF) 33,455,344
1,827,400 Papa Johns International, Inc. (NON) (AFF) 72,068,088
712,000 Starbucks Corp. (NON) 38,047,500
----------------
191,874,175
Retail (8.4%)
- -------------------------------------------------------------------------------------------------------------
3,427,900 Bed Bath & Beyond, Inc. (NON) 177,608,069
2,460,000 Borders Group, Inc. (NON) 91,020,000
4,366,500 Costco Companies, Inc. (NON) 275,362,406
3,986,200 CVS Corp. 155,212,663
1,495,148 Dollar Tree Stores, Inc. (NON) 60,740,367
623,700 Fred Meyer, Inc. (NON) 26,507,250
2,153,900 Home Depot, Inc. (The) 178,908,319
496,000 Kohls Corp. (NON) 25,730,000
2,679,900 Office Depot, Inc. 84,584,344
2,990,000 Officemax, Inc. (NON) 49,335,000
3,249,200 Rite Aid Corp. 122,048,075
1,165,600 Stage Stores, Inc. (NON) 52,743,400
4,417,800 TJX Cos., Inc. (The) 106,579,425
3,319,200 Wal-Mart Stores, Inc. 201,641,400
----------------
1,608,020,718
Semiconductors (1.5%)
- -------------------------------------------------------------------------------------------------------------
3,106,800 Analog Devices, Inc. (NON) 76,310,775
860,000 Galileo Technology Ltd. (Israel) (NON) 11,610,000
1,565,000 Linear Technology Corp. 94,389,063
3,120,000 Maxim Integrated Products Inc. (NON) 98,865,000
----------------
281,174,838
Telecommunication Services (3.2%)
- -------------------------------------------------------------------------------------------------------------
1,530,900 E. Spire Communications, Inc. (NON) 34,540,931
692,000 Global Telesystems Group Inc. (NON) 33,735,000
2,073,000 Intermedia Communications, Inc. (NON) 86,936,438
830,800 McLeod, Inc. Class A (NON) 32,297,350
570,000 Metromedia Fiber Network, Inc. Class A (NON) 26,576,250
1,435,000 NEXTLINK Communications, Inc. Class A (NON) 54,350,625
2,125,000 Qwest Communications International, Inc. (NON) 74,109,375
702,700 RSL Communications, Ltd. Class A (NON) 21,081,000
1,798,600 Sprint Corp. 126,801,300
976,200 Teleglobe Inc. 25,869,300
681,800 Tel-Save Holdings, Inc. (NON) 10,056,550
1,801,700 WorldCom, Inc. (NON) 87,269,844
----------------
613,623,963
Telephone Services (0.5%)
- -------------------------------------------------------------------------------------------------------------
1,561,900 American Telephone & Telegraph Co. 89,223,538
Wireless Communications (1.0%)
- -------------------------------------------------------------------------------------------------------------
2,404,100 Airtouch Communications, Inc. (NON) 140,489,594
964,900 Clearnet Communications, Inc. Class A, (Canada) (NON) 10,613,882
1,226,700 NEXTEL Communications, Inc. Class A (NON) 30,514,163
----------------
181,617,639
----------------
Total Common Stocks (cost $11,837,078,725) $ 18,522,393,279
SHORT-TERM INVESTMENTS (2.3%) (a)
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------
$25,000,000 Bank of America for an effective yield of 5.51%,
September 21, 1998 $ 24,686,236
25,000,000 Ciesco L.P. for an effective yield of 5.77%, July 16, 1998 24,939,896
25,000,000 Credit Suisse First Boston for an effective yield of
5.50%, September 8, 1998 24,736,459
25,000,000 Delaware Funding Corp., for an effective yield of
5.56%, July 15, 1998 24,945,945
25,000,000 Falcon Asset Securitization for an effective yield of
5.53%, July 14, 1998 24,950,077
47,796,000 Fed Home Loan Mortgage Corp. for an effective
yield 5.42%, August 27, 1998 47,385,831
18,000,000 Ford Motor Credit Puerto Rico for an effective yield
of 6.02%, July 2, 1998 17,996,990
25,000,000 General Electric Capital Corp. for an effective yield
of 5.52%, August 17, 1998 24,819,833
25,000,000 JP Morgan & Co. Inc for an effective yield of
5.50%, October 14, 1998 24,598,958
50,000,000 Merrill Lynch & Co. Inc for an effective yield of
5.55%, August 12, 1998 49,676,250
45,393,000 Metlife Funding for an effective yield of 5.54%,
July 21,1998 45,253,290
112,473,000 Interest in $750,000,000 joint repurchase agreement
dated June 30, 1998 with Goldman, Sachs & Co.
due July 1, 1998 with respect to various
U.S. Treasury obligations -- maturity value of
$112,491,120 for an effective yield of 5.80% 112,491,120
----------------
Total Short-Term Investments (cost $446,480,885) $ 446,480,885
- -------------------------------------------------------------------------------------------------------------
Total Investments (cost $12,283,559,610) (b) $ 18,968,874,164
- -------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $19,034,595,452.
(b) The aggregate identified cost on a tax basis is $12,298,113,692,
resulting in gross unrealized appreciation and depreciation of $6,959,171,530, and $288,411,058,
respectively, or net unrealized appreciation of $6,670,760,472.
(NON) Non-income-producing security.
(AFF) Affilated 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
June 30, 1998
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $12,283,559,610) (Note 1) $ 18,968,874,164
- ---------------------------------------------------------------------------------------------------
Cash 293,540
- ---------------------------------------------------------------------------------------------------
Dividends and interest receivable 3,727,782
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 26,733,398
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 177,100,214
- ---------------------------------------------------------------------------------------------------
Total assets 19,176,729,098
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 53,816,761
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 49,185,961
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 22,172,587
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 2,445,953
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 158,089
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 14,434
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 13,134,944
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 1,204,917
- ---------------------------------------------------------------------------------------------------
Total liabilities 142,133,646
- ---------------------------------------------------------------------------------------------------
Net assets $ 19,034,595,452
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $ 11,757,369,844
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 591,911,054
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 6,685,314,554
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $ 19,034,595,452
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($10,163,385,604 divided by 176,210,560 shares) $57.68
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $57.68)* $61.20
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($7,950,847,769 divided by 143,470,492 shares)** $55.42
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($444,324,951 divided by 7,843,764 shares) $56.65
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $56.65)* $58.70
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($476,037,128 divided by 8,167,953 shares) $58.28
- ---------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the
offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred
sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended June 30, 1998
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Interest $ 20,813,315
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $753,851,
including dividend income of $596,668 from
investments in affiliated issuers) (Note 5) 57,349,201
- --------------------------------------------------------------------------------------------------
Total investment income 78,162,516
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 81,116,258
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 33,724,288
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 321,339
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 57,794
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 21,806,186
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 71,289,202
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 2,938,908
- --------------------------------------------------------------------------------------------------
Reports to shareholders 1,307,641
- --------------------------------------------------------------------------------------------------
Registration fees 174,214
- --------------------------------------------------------------------------------------------------
Auditing 243,623
- --------------------------------------------------------------------------------------------------
Legal 116,821
- --------------------------------------------------------------------------------------------------
Postage 2,320,576
- --------------------------------------------------------------------------------------------------
Other 2,045,651
- --------------------------------------------------------------------------------------------------
Total expenses 217,462,501
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (3,961,050)
- --------------------------------------------------------------------------------------------------
Net expenses 213,501,451
- --------------------------------------------------------------------------------------------------
Net investment loss (135,338,935)
- --------------------------------------------------------------------------------------------------
Net realized gain on investments
(including realized gains of $203,925,515 on sales of
investments in affiliated issuers) 1,228,126,644
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities
in foreign currencies during the year (1,431)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 3,538,795,194
- --------------------------------------------------------------------------------------------------
Net gain on investments 4,766,920,407
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 4,631,581,472
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended June 30
------------------------------------
1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment loss $ (135,338,935) $ (97,001,492)
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 1,228,126,644 (262,297,350)
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 3,538,793,763 1,063,188,318
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 4,631,581,472 703,889,476
- ----------------------------------------------------------------------------------------------------------------------
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 gains
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) 428,556,668 4,383,952,454
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 4,701,863,215 4,996,115,103
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of year 14,332,732,237 9,336,617,134
- ----------------------------------------------------------------------------------------------------------------------
End of year (including accumulated net investment
loss of $ -- and $29,062 respectively) $ 19,034,595,452 $ 14,332,732,237
- ----------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $44.47 $42.99 $29.58 $21.88 $20.83
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (.25) (.20)(c) (.21)(c) (.12) (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 14.55 2.00 13.62 8.02 1.56
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 14.30 1.80 13.41 7.90 1.50
- ------------------------------------------------------------------------------------------------------------------------------------
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 $57.68 $44.47 $42.99 $29.58 $21.88
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 32.75 4.26 45.34 36.36 7.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $10,163,886 $7,381,624 $4,752,611 $1,341,877 $648,787
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .98 1.06 1.11 1.13 1.23
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.49) (.48) (.54) (.55) (.82)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 65.21 66.74 36.61 56.99 52.76
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (d) $.0470 $.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
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $43.08 $41.96 $29.09 $21.68 $20.80
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (.62) (.49)(c) (.48)(c) (.23) (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 14.05 1.93 13.35 7.84 1.44
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 13.43 1.44 12.87 7.61 1.33
- ------------------------------------------------------------------------------------------------------------------------------------
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 $55.42 $43.08 $41.96 $29.09 $21.68
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 31.78 3.50 44.24 35.34 6.18
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $7,950,848 $6,359,447 $4,254,962 $1,013,379 $333,738
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.73 1.81 1.87 1.87 2.04
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (1.24) (1.23) (1.30) (1.30) (1.55)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 65.21 66.74 36.61 56.99 52.76
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (d) $.0470 $.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
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Dec. 1,1994+
operating performance Year ended June 30 to June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 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 (.49) (.40)(c) (.40)(c) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 14.32 1.97 13.55 5.04
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 13.83 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 $56.65 $43.91 $42.66 $29.51
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 32.09 3.75 44.56 20.40*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $444,325 $337,535 $210,404 $16,011
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.48 1.56 1.64 .94*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.99) (.98) (1.06) (.53)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 65.21 66.74 36.61 56.99
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (d) $.0470 $.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
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 19,1994+
operating performance Year ended June 30 to June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1998 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 (.13)(c) (.09)(c) (.11)(c) (.04)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 14.68 2.02 13.66 7.31
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 14.55 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 $58.28 $44.82 $43.21 $29.66
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 33.05 4.54 45.68 32.42*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $476,037 $254,126 $118,640 $24,538
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .73 .81 .86 .83*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.24) (.23) (.29) (.26)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 65.21 66.74 36.61 56.99
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (d) $.0470 $.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
June 30, 1998
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, which is currently closed to new investors, 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) 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 year ended June 30, 1998, the fund had
no borrowings against the line of credit.
F) Federal taxes It is the policy of the fund to distribute all of its taxable
income within the prescribed time and otherwise comply with the provisions of
the Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986, 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.
G) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date. Capital
gain distributions, if any, are recorded on the ex-dividend date and paid at
least annually. The amount and character of income and gains to be distributed
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences include temporary
and permanent differences of losses on wash sale transactions and net
operating losses. Reclassifications are made to the fund's capital accounts to
reflect income and gains available for distribution (or available capital loss
carryovers) under income tax regulations. For the year ended June 30, 1998,
the fund reclassified $135,367,997 to decrease accumulated net investment loss
and $135,367,997 to decrease paid in capital. The calculation of net
investment income per share in the financial highlights table excludes these
adjustments.
Note 2
Management fee, administrative
services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund. Such
fee is based on the following annual rates: 0.70% of the first $500 million of
average net assets, 0.60% of the next $500 million, 0.55% of the next $500
million, and 0.50% of the next $5 billion, 0.475% of the next $5 billion,
0.455% of the next $5 billion, 0.44% of the next $5 billion, and 0.43%
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 year ended June 30, 1998, fund expenses were reduced by $3,961,050
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 $12,440 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 year ended June 30, 1998, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $1,852,676 and $80,850 from the sale
of class A and class M shares, respectively and $11,404,132 in contingent
deferred sales charges from redemptions of class B shares. A deferred sales
charge of up to 1% is assessed on certain redemptions of class A shares. For
the year ended June 30, 1998, Putnam Mutual Funds Corp., acting as underwriter
received $169,661 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended June 30, 1998, purchases and sales of investment
securities other than short-term investments aggregated $10,625,245,398 and
$10,575,466,832, respectively. There were no purchases and sales of U.S.
government obligations. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the identified cost basis.
Note 4
Capital shares
At June 30, 1998, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended
June 30, 1998
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 42,566,727 $2,162,347,087
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,792,795 176,109,174
- ------------------------------------------------------------
46,359,522 2,338,456,261
Shares
repurchased (36,146,474) (1,835,480,082)
- ------------------------------------------------------------
Net increase 10,213,048 $ 502,976,179
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Year ended
June 30, 1998
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 10,958,089 $534,080,968
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,063,932 137,202,777
- ------------------------------------------------------------
14,022,021 671,283,745
Shares
repurchased (18,161,751) (885,361,106)
- ------------------------------------------------------------
Net decrease (4,139,730) $(214,077,361)
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Year ended
June 30, 1998
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 1,779,820 $ 87,997,481
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 165,573 7,570,046
- ------------------------------------------------------------
1,945,393 95,567,527
Shares
repurchased (1,788,827) (88,903,355)
- ------------------------------------------------------------
Net increase 156,566 $ 6,664,172
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Year ended
June 30, 1998
- ------------------------------------------------------------
Class Y Shares Amount
- ------------------------------------------------------------
Shares sold 4,222,463 $222,106,964
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 149,625 7,008,141
- ------------------------------------------------------------
4,372,088 229,115,105
Shares
repurchased (1,874,552) (96,121,427)
- ------------------------------------------------------------
Net increase 2,497,536 $132,993,678
- ------------------------------------------------------------
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
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Note 5
Transactions with Affiliated Companies
Transactions during the period with companies in which the fund owned at least
5% of the voting securities were as follows:
Purchase Sales Dividend Market
cost cost Income Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ABR Information Services $ 16,600,026 $ 21,225,340 $ -- $ 22,040,000
Affiliated Computer Services
Class A 14,000 -- -- 65,469,250
Airgas Incorporated -- 54,725,501 -- 9,878,500
Applebees Intl Inc. -- 43,041,975 -- --
Applied Graphics Tecnology 47,411,451 -- -- 47,580,000
Avis Rent A Car Inc. 49,345,489 49,345,489 -- --
Barnett Inc. 345,412 80,302,564 -- 20,555,775
Bed Bath & Beyond Inc. 1,290,656 12,974,918 -- 177,608,069
Carematrix Corporation 1,245,480 -- -- 25,256,600
CBT Group PLC Sponsored ADR 5,803,599 2,239,751 -- 118,673,700
Computer Horizons Corp. 470,250 31,946,296 -- 35,287,206
Concentra Managed Care Inc. 14,495,854 6,527,599 -- 72,976,800
Credence Systems Corp. -- 24,399,780 -- --
Dura Pharmaceuticals Inc. 25,111,975 25,326,612 -- 37,437,850
Emmis Broadcasting Corp. 2,572,781 31,071,893 -- --
Extended Stay America Inc. 1,087,265 -- -- 56,984,243
Genesis Health Ventures 6,001,533 60,749,538 -- --
Gilead Sciences Inc. 5,514,902 6,475,680 -- 53,326,350
Health Care & Retirement Corp. -- 2,428,131 -- 91,179,500
Health Management Associates 1,375,101 3,303,429 -- 271,776,656
Interim Services Inc. -- -- -- 63,286,250
Intermedia Communications Inc. 9,890,269 3,456,999 -- 86,936,438
Landry's Seafood Restaurant Inc. 5,671,500 -- -- 33,455,344
Medicis Pharmaceutical Class A 43,829,512 -- -- 35,660,500
Metamor Worldwide Inc. 5,782,788 1,846,984 -- 64,058,844
Papa Johns International Inc. 6,496,438 5,200,015 -- 72,068,088
Pediatrix Medical Group Inc. -- 2,013,222 -- 37,109,406
Prime Hospitality Corp. 10,917 447,369 -- 37,091,306
Saville Systems Ireland ADR 10,032,347 -- -- 96,651,025
Security Dynamics Tech Inc. 14,634,886 34,605,449 -- --
SFX Broadcasting Inc. -- 14,069,779 -- --
Stewart Enterprises Inc. Class A 9,374,350 -- 281,082 193,494,525
Tel-Save Holdings Inc. -- 36,078,681 -- 10,056,550
Total Renal Care Holdings 19,896,130 -- -- 143,597,625
Vantive Corp. -- 12,632,215 315,586 --
Wolverine World Wide 13,507,490 20,556,143 -- 45,511,219
Young Broadcasting Corp.
Class A -- 24,203,188 -- --
- -----------------------------------------------------------------------------------------------
Totals $317,812,401 $610,994,540 $596,668 $2,025,007,619
- -----------------------------------------------------------------------------------------------
</TABLE>
Federal Tax Information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the
fund hereby designates $979,182,659 as capital gain, which includes
$710,100,147 as 20% capital gain, for its taxable year ended June 30, 1998.
For the period, interest and dividends from foreign countries were $1,296,983.
Taxes paid to foreign countries were $753,851 or $0.00 per share (for all
classes of shares).
The Form 1099 you receive in January 1999 will show the tax status of all
distributions paid to your account in calendar 1998.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities 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 [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
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
Strategic Income Fund *
High Quality Bond Fund +
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Total Return Fund
High Yield Trust [DBL. DAGGER]
High Yield Trust II
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
LIFESTAGE SM 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 Putnam Diversified Income Trust II
+Formerly Putnam Federal Income Trust
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[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.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT
ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Paul L. Joskow
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 I. 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
- --------------------
ANO13-44641-852/358/983/526 8/98
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- --------------------------------------------------------------------------
Putnam New Opportunities Fund
Supplement to Annual Report dated 6/30/98
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 annual report.
ANNUAL RESULTS AT A GLANCE
- --------------------------------------------------------------------------
Total return: NAV
One year ended 6/30/98 33.05%
Five years ended 6/30/98 24.28%
Annual average (since class A inception, 8/31/90) 29.57%
- --------------------------------------------------------------------------
Share value: NAV
6/30/97 $44.82
6/30/98 58.28
- --------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
1 $0.0000 $1.0900 $1.0900
- --------------------------------------------------------------------------
Past performance is not indicative of future results. Class Y shares are
offered without an initial sales charge or CDSC. The class Y share returns
shown for periods before their inception (July 19, 1994) 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. 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.
