-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TubZ7ZJS+kFNZTr5DAIHF2mvyX/VzlZFtx9NYLOKO+7BWxWz8s4hTrk9NCofrc5P C2X3VhiBrT5+wG7jcYbZKQ== 0000928816-98-000223.txt : 19980825 0000928816-98-000223.hdr.sgml : 19980825 ACCESSION NUMBER: 0000928816-98-000223 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980824 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM NEW OPPORTUNITIES FUND CENTRAL INDEX KEY: 0000865177 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 043091455 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-06128 FILM NUMBER: 98696435 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQUARE CITY: BOSTON STATE: A6 ZIP: 02109 BUSINESS PHONE: 6172921000 N-30D 1 PUTNAM NEW OPPORTUNITIES FUND 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
COMMON STOCKS (97.3%) (a) NUMBER OF SHARES VALUE Advertising (1.6%) - ------------------------------------------------------------------------------------------------------------- 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.
Statement of assets and liabilities June 30, 1998 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.
Statement of operations Year ended June 30, 1998 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.
Statement of changes in net assets Year ended June 30 ------------------------------------ 1998 1997 - ---------------------------------------------------------------------------------------------------------------------- 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.
Financial highlights (For a share outstanding throughout the period) CLASS A - ------------------------------------------------------------------------------------------------------------------------------------ Per-share operating performance Year ended June 30 - ------------------------------------------------------------------------------------------------------------------------------------ 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ 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.
Financial highlights (For a share outstanding throughout the period) CLASS B - ------------------------------------------------------------------------------------------------------------------------------------ Per-share operating performance Year ended June 30 - ------------------------------------------------------------------------------------------------------------------------------------ 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ 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.
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 - ------------------------------------------------------------------------------------------------------------------------------------ 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.
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 - ------------------------------------------------------------------------------------------------------------------------------------ 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.
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 - ------------------------------------------------------------
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 - ----------------------------------------------------------------------------------------------- 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 - -----------------------------------------------------------------------------------------------
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. -----END PRIVACY-ENHANCED MESSAGE-----