-----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, Jgq9ZKa6cavrHdX7gdz9o45yp5Y63GKNFyEY1Y1Bi0rEjeu0UDxG01HNLEZ+tOZM ibgLFMKx0/YgZR0XgffQAw== 0000928816-99-000046.txt : 19990218 0000928816-99-000046.hdr.sgml : 19990218 ACCESSION NUMBER: 0000928816-99-000046 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990217 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: 99544650 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 SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK 12-31-98 [LOGO: BOSTON * LONDON * TOKYO] Fund highlights * "This offering might look like just another one of those funds that have latched on to bigger-cap stocks even after the current blue-chip-led market was well under way. . . . The fund's embrace of large caps doesn't amount to performance chasing, though. Part of the increase simply owes to the fact that many of the fund's long-held names have done quite well over the years, and management has simply had the good sense to hang on to them. Management has held stocks such as America Online and Telecommunications, Inc. for years, watching them grow from small fry into market leaders." -- Morningstar Mutual Funds, August 21, 1998 CONTENTS 4 Report from Putnam Management 9 Fund performance summary 13 Portfolio holdings 20 Financial statements From the Chairman [GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM] [copyright] Karsh, Ottawa Dear Shareholder: For all of the grief the stock market caused investors during the early months of Putnam New Opportunities Fund's fiscal 1999, its strong rally toward the fiscal year's midpoint considerably brightened the fund's prospects for the second half. As he writes in the following report, Fund Manager Daniel Miller was pleased by the strong showing in the portfolio's more aggressive small-company growth stocks and heartened by the signs of a more favorable environment for these issues. For all of his optimism, however, Dan holds no illusions that market volatility is behind us. But he believes that in the current low interest-rate, low inflation economic climate, the market should be able to support historically high absolute valuations. I am pleased to announce that Jeffrey R. Lindsey has joined Dan in the management of your fund. Jeff, a specialist in large-cap growth stocks, replaces Carol C. McMullen, who was recently promoted to head Putnam's extensive global investment research operation. Jeff came to Putnam in 1994 from Strategic Portfolio Management and State Street Boston. He has 14 years of investment experience. Respectfully yours, /S/GEORGE PUTNAM George Putnam Chairman of the Trustees February 17, 1999 Report from the Fund Managers Daniel L. Miller Jeffrey R. Lindsey Just after Putnam New Opportunities Fund began its 1999 fiscal year, the Dow Jones Industrial Average reached a then all-time high of 9333, only to plummet more than 512 points the following month, wiping out the entire year's gains. After registering its worst quarter in eight years in September, the Dow began a turnaround that was almost as dramatic as the late-summer plunge. Finally, following one of its most volatile years in more than a decade, the U.S. equity market finished 1998 with double-digit returns for the fourth consecutive year. During this eventful six months, your fund benefited from its ability to invest in companies of all sizes. We did take particular advantage of large-company stocks, which continued to display incredible strength in the media, technology, and pharmaceutical sectors. However, the year-end market rally also provided a much-needed boost for many of the small- and mid-cap stocks that make up your fund's more aggressive holdings. For the six months ended December 31, 1998, the fund's class A shares provided a total return of 4.92% at net asset value (NAV) and -1.11% at public offering price (POP). For the 12 months ended December 31, 1998, the returns were 24.39% at NAV and 17.23% at POP. For complete performance information, please refer to the summary that begins on page 9. * MEDIA STOCKS CONTINUE TO OUTPERFORM Once again, we are pleased to report that stocks in the media sector of the fund's portfolio were key contributors to performance. Many broadcasting, cable, and telecommunications companies continue to grow rapidly as a result of loosened restrictions on the industry. The Telecommunications Act of 1996 has also created a wave of mergers and acquisitions, as media companies are now allowed multiple ownership of properties such as TV and radio stations. The stock of Internet service provider America Online (AOL), a holding in the portfolio's media sector, increased an astounding 586% in calendar 1998. Long before it became a household name, AOL was part of your fund's portfolio. In fact, it was a holding as far back as June 1993, when our annual report to shareholders stated, "The trend in technology is clearly moving toward a vast increase in electronic services and digital transmission. . . .We believe firms with sophisticated programming capabilities will be in a position to take full advantage of emerging business opportunities." Today AOL is the number-one provider of online services, including news, Internet searches, and e-mail. During December 1998, the company drew 54.5% of all Internet users -- nearly 31 million individuals -- outpacing its nearest competitor by more than six percentage points. The company also announced that its members spent more than $1 billion with online retailers during the six-week holiday shopping season. AOL continues to seek new growth opportunities, such as its recent alliance with Bell Atlantic Corp., to offer high-speed Internet access over Bell phone lines - -- marking AOL's entry into the broadband Internet access market. While this holding, along with others discussed in this report, was viewed favorably at the end of the fiscal period, all holdings are subject to review and adjustment in accordance with the fund's investment strategy and may vary in the future. [GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS] TOP INDUSTRY SECTORS* Retail 11.3% Pharmaceuticals and biotechnology 9.2% Computer software 9.0% Broadcasting 7.2% Computer services 6.7% Footnote reads: *Based on net assets as of 12/31/98. Holdings will vary over time. * TELECOMMUNICATIONS COMPANIES BOOST RETURNS An impressive holding in the telecommunications sector was Global Crossing, Ltd., a leader in the battle to control the underwater lanes of telecommunications. The company provides global Internet and long-distance telecommunications services using a network of undersea digital fiber-optic cable systems. Global Crossing is embarking on a plan to build fiber-optic loops that will link the United States with Asia, Europe, and Latin America. Through deals with land-based carriers, the company will be able to offer phone and Internet carriers seamless connections between the world's 100 largest cities. Qwest Communications, another portfolio standout, builds fiber-optic networks for traditional telecommunications services as well as for Internet-based data, voice, and image communications. The company has constructed an impressive technologically advanced network that includes the installation of 15,000 miles of fiber-optic cable around the United States. Qwest has also partnered with Microsoft Corp. to provide Internet-related services. * SOFTWARE BOOM HELPS TECHNOLOGY HOLDINGS Our stock selection in the technology portion of the portfolio was not as effective as it was in other sectors over this period. However, there were some notable standouts. Electronic Arts, Inc., for example, is an entertainment company that creates, markets, and distributes interactive entertainment software. During 1998, the home video game business continued its recovery from a multiyear slump. As one of the largest entertainment software companies, Electronic Arts has strong software development capabilities, broad distribution channels, and financial stability, all of which give it a competitive advantage over smaller companies in this field. Data storage company EMC Corp. was also a strong performer during the period. EMC produces large-scale storage systems essential to the testing and implementation of new or revamped software and the storage of valuable data. Compuware Corporation, a provider of computer software and services, had another strong year in 1998, helping to boost your fund's returns in the technology sector. [GRAPHIC OMITTED: TOP 10 HOLDINGS] TOP 10 HOLDINGS America Online, Inc. Internet services EMC Corp. Data storage Clear Channel Communications, Inc. Broadcasting Microsoft Corp. Computer software and services Costco Companies, Inc. Retail Waste Management, Inc. Environmental services CBS Corp. Broadcasting Schering-Plough Corp. Pharmaceuticals Warner-Lambert Co. Pharmaceuticals Health Management Associates, Inc. Hospital management Footnote reads: These holdings represent 20.5% of the fund's net assets as of 12/31/98. Portfolio holdings will vary over time. * HEALTH-CARE HOLDINGS SHOW MIXED RESULTS The health-care sector of the portfolio has been a study in contrasts. Large pharmaceutical companies have been powerhouses, proving that demand for innovative drugs and services remains strong, despite volatile economic conditions. The strength of these drug companies, however, has been offset somewhat by weak performance from the fund's health-care service holdings. A difficult regulatory environment, ongoing concerns about Medicare spending cuts, and rising health-care costs continue to put pressure on health-care service companies, such as HMOs and physician practice management companies. Pharmaceutical companies that boosted the fund's health-care sector included Schering-Plough, maker of Claritin, which dominates the booming antihistamine market, and Warner-Lambert, which produces Lipitor, the cholesterol-lowering drug, and Rezulin, a treatment for type II diabetes. While the largest drug companies have been the strongest performers, there were some exceptional performers among smaller companies, such as Elan Corp., a company in the fast-growing drug-delivery sector. Companies in this industry develop new methods for administering drug treatments that are often more effective and less painful. Headquartered in Ireland, Elan has improved its capabilities by acquiring and establishing joint ventures with other drug and biotechnology companies, especially in important growth niches such as neurology. * MORE VOLATILITY POSSIBLE IN FISCAL YEAR'S SECOND HALF As we enter the second half of fiscal 1999, we are optimistic about the state of the U.S. economy, which is characterized by a low interest-rate environment and few signs of inflation on the horizon. However, with the roller-coaster ride of 1998 fresh in our minds, we have by no means ruled out the prospect of more volatility. While our outlook is constructive, we will continue to monitor carefully economic conditions in the United States and around the world, positioning the portfolio to take advantage of the most compelling growth opportunities. The views expressed here are exclusively those of Putnam Management. They are not meant as investment advice. Although the described holdings were viewed favorably as of 12/31/98, 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 12/31/98 Class A Class B Class M (inception date) (8/31/90) (3/1/93) (12/1/94) NAV POP NAV CDSC NAV POP - ------------------------------------------------------------------------------ 6 months 4.92% -1.11% 4.52% -0.48% 4.64% 0.99% - ------------------------------------------------------------------------------ 1 year 24.39 17.23 23.49 18.49 23.75 19.41 - ------------------------------------------------------------------------------ 5 years 155.33 140.69 145.98 143.98 149.09 140.35 Annual average 20.62 19.20 19.72 19.53 20.02 19.17 - ------------------------------------------------------------------------------ Life of fund 689.71 644.38 640.86 640.86 655.02 628.48 Annual average 28.16 27.25 27.18 27.18 27.47 26.92 - ------------------------------------------------------------------------------ COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 12/31/98 Russell 2000 Russell Midcap Consumer Index Growth Index Price Index - ------------------------------------------------------------------------------ 6 months -7.12% 5.36% 0.74% - ------------------------------------------------------------------------------ 1 year -2.55 17.86 1.80 - ------------------------------------------------------------------------------ 5 years 75.19 122.41 12.62 Annual average 11.87 17.34 2.41 - ------------------------------------------------------------------------------ Life of fund 244.90 318.50 24.77 Annual average 16.02 18.74 2.69 - ------------------------------------------------------------------------------ Past performance is no assurance of future results. More recent returns may be more or less than those shown. 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. Investment return and principal value will fluctuate so that an investor's shares when redeemed may be worth more or less than their original cost. PRICE AND DISTRIBUTION INFORMATION 6 months ended 12/31/98 Class A Class B Class M - ------------------------------------------------------------------------------ Distributions (number) 1 1 1 - ------------------------------------------------------------------------------ Income -- -- -- - ------------------------------------------------------------------------------ Capital gains - ------------------------------------------------------------------------------ Long-term $1.875 $1.875 $1.875 - ------------------------------------------------------------------------------ Short-term -- -- -- - ------------------------------------------------------------------------------ Total $1.875 $1.875 $1.875 - ------------------------------------------------------------------------------ Share value: NAV POP NAV NAV POP - ------------------------------------------------------------------------------ 6/30/98 $57.68 $61.20 $55.42 $56.65 $58.70 - ------------------------------------------------------------------------------ 12/31/98 58.43 61.99 55.84 57.19 59.26 - ------------------------------------------------------------------------------ TERMS AND DEFINITIONS Total return shows how the value of the fund's shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund. Class A shares are generally subject to an initial sales charge. Class B shares may be subject to a sales charge upon redemption. Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no sales charge on redemption. Net asset value (NAV) is the value of all your fund's assets, minus any liabilities, divided by the number of outstanding shares, not including any initial or contingent deferred sales charge. Public offering price (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume the maximum 5.75% sales charge for class A shares and 3.50% or class M shares. Contingent deferred sales charge (CDSC) is a charge applied at the time of the redemption of class B shares and assumes redemption at the end of the period. Your fund's CDSC declines from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. COMPARATIVE BENCHMARKS Russell 2000 Index* is composed of the 2,000 smallest securities in the Russell 3000 Index, representing approximately 7% of the Russell 3000 total market capitalization. This index is widely regarded in the industry as the premiere measure of the small capitalization stock. 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. WELCOME TO www.putnaminv.com Now you can use your PC to get up-to-date information about your funds, learn more about investing and retirement planning, and access market news and economic outlooks from Putnam. VISIT PUTNAM'S SITE ON THE WORLD WIDE WEB FOR: * the benefits of investing with Putnam * Putnam's money management philosophy * complete fund information, daily pricing and long-term performance * your current account value, portfolio value and transaction history * the latest on new funds and other Putnam news You can also read Putnam economist Dr. Robert Goodman's commentary and Putnam's Capital Markets outlook, search for a particular fund by name or objective, use our glossary to decode investment terms . . . and much more. The site can be accessed through any of the major online services (America Online, CompuServe, Prodigy) that offer web access. Of course, you can also access it via Netscape or Microsoft Internet Explorer, using an independent Internet service provider. 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Portfolio of investments owned December 31, 1998 (Unaudited) COMMON STOCKS (97.9%) (a) NUMBER OF SHARES VALUE Advertising (1.7%) - -------------------------------------------------------------------------------------------------------------------------- 2,420,000 Lamar Advertising Co. (NON) $ 90,145,000 7,955,000 Outdoor Systems, Inc. (NON) 238,650,000 --------------- 328,795,000 Airlines (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 860,000 Ryanair Holdings, PLC ADR (Ireland) (NON) 32,465,000 Apparel (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 1,150,200 Gap, Inc. (The) 64,698,750 Banks (0.7%) - -------------------------------------------------------------------------------------------------------------------------- 480,900 Firstar Corp. 44,843,925 2,178,500 TCF Financial Corp. 52,692,469 705,000 Zions Bancorp 43,974,375 --------------- 141,510,769 Broadcasting (7.2%) - -------------------------------------------------------------------------------------------------------------------------- 9,914,600 CBS Corp. 324,703,150 5,025,000 Chancellor Media Corp. (NON) 240,571,875 8,689,312 Clear Channel Communications, Inc. (NON) 473,567,504 897,000 Heftel Broadcasting Corp. Class A (NON) 44,177,250 3,372,000 Infinity Broadcasting Corp. Class A (NON) 92,308,500 4,681,600 Sinclair Broadcast Group, Inc. Class A (NON) 91,583,800 2,455,000 Univision Communications Inc. Class A (NON) 88,840,313 1,520,000 Westwood One, Inc. (NON) (AFF) 46,360,000 --------------- 1,402,112,392 Business Services (6.6%) - -------------------------------------------------------------------------------------------------------------------------- 1,842,000 Affiliated Computer Services, Inc. Class A (NON) 82,890,000 962,800 Applied Graphics Technologies, Inc. (NON) 15,886,200 739,400 Celestica Inc. (Canada) (NON) 18,253,938 6,590,000 Cendant Corp. (NON) 125,621,875 1,576,000 Interim Services Inc. (NON) 36,839,000 709,300 Lason Holdings, Inc. (NON) 41,272,394 1,626,000 Metamor Worldwide, Inc. (NON) 40,650,000 2,081,800 Modis Professional Services, Inc. (NON) 30,186,100 3,409,935 NOVA Corp./Georgia (NON) 118,282,120 3,112,250 Paychex, Inc. 160,086,345 1,578,400 Pitney Bowes, Inc. 104,273,050 14,085,000 Rentokil Group PLC (United Kingdom) 105,763,251 3,270,000 Robert Half International, Inc. (NON) 146,128,125 1,495,000 Sanmina Corp. (NON) 93,437,500 1,186,900 Select Appointments Holdings PLC ADR (United Kingdom) 25,518,350 4,355,000 Snyder Communications, Inc. (NON) (AFF) 146,981,250 --------------- 1,292,069,498 Cable Television (2.6%) - -------------------------------------------------------------------------------------------------------------------------- 3,359,300 Tele-Comm Liberty Media Group, Inc. Class A (NON) 154,737,756 4,315,700 Tele-Communications, Inc. Class A (NON) 238,712,156 4,874,500 Tele-Communications TCI Ventures Group Class A (NON) 114,855,406 --------------- 508,305,318 Computer Equipment (4.6%) - -------------------------------------------------------------------------------------------------------------------------- 3,131,700 Compaq Computer Corp. 131,335,669 5,893,500 EMC Corp. (NON) 500,947,500 648,100 IBM Corp. 119,736,475 1,789,800 Sun Microsystems, Inc. (NON) 153,251,625 --------------- 905,271,269 Computer Services (6.7%) - -------------------------------------------------------------------------------------------------------------------------- 5,187,100 America Online, Inc. (NON) 829,936,000 3,100,500 Ciber, Inc. (NON) 86,620,219 510,000 Complete Business Solutions, Inc. (NON) 17,276,250 695,000 Computer Horizons Corp. (NON) 18,504,375 889,000 Computer Sciences Corp. (NON) 57,284,938 791,000 Keane, Inc. (NON) 31,590,563 1,217,000 Mastech Corp. (NON) 34,836,625 755,000 Policy Management Systems Corp. (NON) 38,127,500 2,392,000 Sterling Commerce, Inc. (NON) 107,640,000 441,400 VeriSign, Inc. 26,097,775 2,131,900 Whittman-Hart, Inc. (NON) 58,893,738 --------------- 1,306,807,983 Computer Software (9.0%) - -------------------------------------------------------------------------------------------------------------------------- 857,000 Aspect Development, Inc. (NON) 37,975,813 2,072,350 BMC Software, Inc. (NON) 92,349,097 6,091,270 Cadence Design Systems, Inc. (NON) 181,215,283 4,135,950 Computer Associates International, Inc. 176,294,869 3,102,800 Compuware Corp. (NON) 242,406,250 2,191,100 Electronic Arts, Inc. (NON) 122,975,488 676,500 Entrust Technologies Inc. (NON) 16,151,438 1,260,000 Intuit, Inc. (NON) 91,350,000 535,000 Legato Systems, Inc. (NON) 35,276,563 475,000 Lernout & Hauspie Speech Products N.V. (Belgium) (NON) 15,496,875 2,589,800 Microsoft Corp. (NON) 359,172,888 7,807,700 Parametric Technology Corp. (NON) 126,875,125 128,240 Peregrine Systems, Inc. (NON) 5,947,130 2,280,200 PLATINUM Technology, Inc. (NON) 43,608,825 1,167,800 Software AG Systems, Inc. (NON) 21,166,375 2,720,000 Synopsys, Inc. (NON) 147,560,000 2,130,000 The Learning Company, Inc. (NON) 55,246,875 --------------- 1,771,068,894 Conglomerates (1.3%) - -------------------------------------------------------------------------------------------------------------------------- 3,414,600 Tyco International Ltd. 257,588,888 Consumer Products (0.7%) - -------------------------------------------------------------------------------------------------------------------------- 1,540,100 Colgate-Palmolive Co. 143,036,788 Cosmetics (0.7%) - -------------------------------------------------------------------------------------------------------------------------- 1,512,500 Estee Lauder Cos. Class A 129,318,750 Education (0.3%) - -------------------------------------------------------------------------------------------------------------------------- 1,896,700 Apollo Group, Inc. Class A (NON) 64,250,713 Electric Utilities (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 970,000 CalEnergy, Inc. (NON) 33,646,875 Electronics and Electrical Equipment (2.8%) - -------------------------------------------------------------------------------------------------------------------------- 982,400 American Power Conversion Corp. (NON) 47,585,000 2,195,100 Applied Materials, Inc. (NON) 93,703,331 1,366,900 ASM Lithography Holding N.V. (Netherlands) (NON) 41,690,450 2,430,100 General Electric Co. 248,022,081 1,144,170 KLA Tencor Corp. (NON) 49,628,374 382,700 Novellus Systems, Inc. (NON) 18,943,650 304,350 Teradyne, Inc. (NON) 12,896,831 465,450 Uniphase Corp. (NON) 32,290,594 --------------- 544,760,311 Energy-Related (0.1%) - -------------------------------------------------------------------------------------------------------------------------- 1,646,700 Thermo Electron Corp. (NON) 27,890,981 Entertainment (2.2%) - -------------------------------------------------------------------------------------------------------------------------- 650,000 SFX Entertainment, Inc. Class A (NON) 35,668,750 3,933,600 Time Warner, Inc. 244,129,050 2,019,300 Viacom, Inc. Class B (NON) 149,428,200 --------------- 429,226,000 Environmental Services (2.3%) - -------------------------------------------------------------------------------------------------------------------------- 3,815,000 Allied Waste Industries, Inc. (NON) 90,129,375 2,121,400 Republic Services, Inc. (NON) 39,113,313 6,995,764 Waste Management, Inc. (NON) 326,177,490 --------------- 455,420,178 Financial Services (1.7%) - -------------------------------------------------------------------------------------------------------------------------- 1,864,000 Associates First Capital Corp. 78,987,000 1,216,540 Concord EFS, Inc. (NON) 51,550,883 1,088,000 Finova Group, Inc. 58,684,000 1,236,000 Merrill Lynch & Co., Inc. 82,503,000 804,000 Morgan Stanley, Dean Witter, Discover and Co. 57,084,000 --------------- 328,808,883 Funeral/Cemetery Services (1.4%) - -------------------------------------------------------------------------------------------------------------------------- 3,087,100 Service Corp. International 117,502,744 7,345,100 Stewart Enterprises, Inc. Class A (AFF) 163,428,475 --------------- 280,931,219 Health Care Information Systems (1.7%) - -------------------------------------------------------------------------------------------------------------------------- 100,600 Eclipsys Corp. (NON) 2,917,400 8,507,900 HBO & Co. 244,070,381 1,060,000 IMS Health, Inc. 79,963,750 --------------- 326,951,531 Health Care Services (2.5%) - -------------------------------------------------------------------------------------------------------------------------- 2,381,400 Cardinal Health, Inc. 180,688,725 1,059,500 Carematrix Corp. (NON) (AFF) 32,447,188 3,090,000 Lincare Holdings, Inc. (NON) (AFF) 125,338,125 562,200 Sunrise Assisted Living, Inc. (NON) 29,164,125 4,162,250 Total Renal Care Holdings, Inc. (NON) (AFF) 123,046,516 --------------- 490,684,679 Hospital Management (1.4%) - -------------------------------------------------------------------------------------------------------------------------- 12,279,750 Health Management Assoc., Inc. (NON) 265,549,594 Insurance (0.7%) - -------------------------------------------------------------------------------------------------------------------------- 1,428,300 American International Group, Inc. 138,009,488 Lodging (0.8%) - -------------------------------------------------------------------------------------------------------------------------- 4,625,000 Extended Stay America, Inc. (NON) 48,562,500 90,400 Four Seasons Hotels, Inc. (Canada) 2,644,200 2,127,100 Prime Hospitality Corp. (NON) 22,467,494 2,785,000 Promus Hotel Corp. (NON) 90,164,375 --------------- 163,838,569 Medical Management Services (0.4%) - -------------------------------------------------------------------------------------------------------------------------- 381,600 American Oncology Resources, Inc. (NON) 5,557,050 997,900 Pediatrix Medical Group, Inc. (NON) (AFF) 59,811,631 298,600 Physician Reliance Network, Inc. (NON) 3,919,125 --------------- 69,287,806 Medical Supplies and Devices (2.1%) - -------------------------------------------------------------------------------------------------------------------------- 1,420,000 Henry Schein, Inc. (NON) 63,545,000 292,700 IDEXX Laboratories, Inc. (NON) 7,875,459 3,097,700 Omnicare, Inc. 107,645,075 5,080,000 Sybron International Corp. (NON) 138,112,500 1,010,000 Waters Corp. (NON) 88,122,500 --------------- 405,300,534 Networking & Telecommunication Equipment (3.9%) - -------------------------------------------------------------------------------------------------------------------------- 1,285,000 3Com Corp. (NON) 57,584,063 3,685,000 Ascend Communications, Inc. (NON) 242,288,750 1,882,600 Cisco Systems, Inc. (NON) 174,728,813 845,000 Comverse Technology, Inc. (NON) 59,995,000 116,400 Network Appliance, Inc. (NON) 5,238,000 1,308,140 PanAmSat Corp. (NON) 50,935,701 3,296,700 Qwest Communications International, Inc. (NON) 164,835,000 1,000,000 Tekelec (NON) 16,562,500 --------------- 772,167,827 Pharmaceuticals and Biotechnology (9.2%) - -------------------------------------------------------------------------------------------------------------------------- 1,810,900 Bristol-Myers Squibb Co. 242,321,056 1,955,000 Centocor, Inc. (NON) 88,219,375 3,805,300 Elan Corp. PLC ADR (Ireland) (NON) 264,706,181 1,025,000 Jones Medical Industries, Inc. 37,412,500 1,635,200 Lilly (Eli) & Co. 145,328,400 1,105,000 Medicis Pharmaceutical Corp. Class A (NON) (AFF) 65,885,625 2,075,800 Pfizer, Inc. 260,383,163 5,643,200 Schering-Plough Corp. 311,786,800 1,027,500 Sepracor, Inc. (NON) 90,548,438 985,000 Transkaryotic Therapies, Inc. (Malaysia) (NON) (AFF) 24,994,375 3,699,400 Warner-Lambert Co. 278,148,638 --------------- 1,809,734,551 Recreation (0.2%) - -------------------------------------------------------------------------------------------------------------------------- 929,500 International Speedway Corp. Class A (NON) 37,644,750 Restaurants (0.6%) - -------------------------------------------------------------------------------------------------------------------------- 10,141,767 J.D. Wetherspoon PLC (United Kingdom) (NON) (AFF) 30,091,677 674,200 McDonald's Corp. 51,660,575 725,000 Papa Johns International, Inc. (NON) 31,990,625 --------------- 113,742,877 Retail (11.3%) - -------------------------------------------------------------------------------------------------------------------------- 6,933,900 Bed Bath & Beyond, Inc. (NON) 236,619,338 1,935,000 Borders Group, Inc. (NON) 48,254,063 4,693,500 Costco Cos., Inc. (NON) 338,812,031 3,990,200 CVS Corp. 219,461,000 1,988,600 Dollar Tree Stores, Inc. (NON) 86,876,963 4,312,100 Home Depot, Inc. (The) 263,846,619 665,600 Kohls Corp. (NON) 40,892,800 1,415,100 Kroger Co. (NON) 85,613,550 5,632,900 Office Depot, Inc. (NON) 208,065,244 1,904,500 Rite Aid Corp. 94,391,781 2,735,700 Safeway, Inc. (NON) 166,706,719 5,722,100 TJX Cos., Inc. (The) 165,940,900 3,186,300 Wal-Mart Stores, Inc. 259,484,306 109,700 Williams-Sonoma, Inc. (NON) 4,422,281 --------------- 2,219,387,595 Semiconductors (2.8%) - -------------------------------------------------------------------------------------------------------------------------- 1,398,810 Analog Devices, Inc. (NON) 43,887,664 295,000 Applied Micro Circuits Corp. (NON) 10,020,781 1,181,000 Intel Corp. 140,022,313 1,804,700 Linear Technology Corp. 161,633,444 3,023,800 Maxim Integrated Products Inc. (NON) 132,102,263 930,000 PMC -- Sierra, Inc. (NON) 58,706,250 --------------- 546,372,715 Telecommunication Services (5.6%) - -------------------------------------------------------------------------------------------------------------------------- 1,329,500 E. Spire Communications, Inc. (NON) 8,475,563 1,027,600 Global Crossing Ltd. (NON) 46,370,450 1,180,800 Global TeleSystems Group, Inc. (NON) 65,829,600 1,485,000 Intermedia Communications, Inc. (NON) 25,616,250 1,877,400 Lucent Technologies, Inc. 206,514,000 3,482,200 MCI WorldCom, Inc. (NON) 249,847,850 1,424,800 McLeod, Inc. Class A (NON) 44,525,000 3,900,000 Metromedia Fiber Network, Inc. Class A (NON) (AFF) 130,650,000 704,000 NTL Inc. (NON) 39,732,000 2,355,000 NEXTLINK Communications, Inc. Class A (NON) 66,823,125 2,215,200 RSL Communications, Ltd. Class A (NON) 65,348,400 1,798,600 Sprint Corp. 151,307,225 --------------- 1,101,039,463 Tobacco (0.5%) - -------------------------------------------------------------------------------------------------------------------------- 1,996,000 Philip Morris Cos., Inc. 106,786,000 Wireless Communications (0.9%) - -------------------------------------------------------------------------------------------------------------------------- 1,513,200 Airtouch Communications, Inc. (NON) 109,139,550 2,255,000 American Tower Corp. Class A 66,663,438 --------------- 175,802,988 --------------- Total Common Stocks (cost $11,627,498,390) $19,190,285,426 SHORT-TERM INVESTMENTS (2.2%) (a) PRINCIPAL AMOUNT VALUE - -------------------------------------------------------------------------------------------------------------------------- $ 50,000,000 Asset Securitization Corp. for an effective yield of 5.10%, February 12, 1999 $ 49,702,500 50,000,000 Ciesco L.P. for an effective yield of 5.45%, February 3, 1999 49,750,208 50,000,000 Deutsche Bank Financial Inc. for an effective yield of 5.95%, January 6, 1999 49,958,681 50,000,000 Fed Home Loan Mortgage Corp. for an effective yield of 5.0%, March 23, 1999 49,437,500 50,000,000 Ford Motor Credit Puerto Rico for an effective yield of 5.11%, March 5, 1999 49,553,750 25,000,000 General Electric Capital Corp. for an effective yield of 5.50%, January 28, 1999 24,896,875 25,000,000 Merrill Lynch & Co. Inc for an effective yield of 5.10%, February 26, 1999 24,801,667 35,000,000 Metlife Funding for an effective yield of 5.25%, January 19, 1999 34,908,125 40,000,000 Windmill Funding for an effective yield of 5.35%, February 3, 1999 39,803,833 62,314,000 Interest in 500,000,000 joint tri-party repurchase agreement dated December 31,1998 with Lehman Brothers due January 4, 1999 with respect to various U.S. Treasury obligations -- maturity value of $62,347,580 for an effective yield of 4.85%. 62,322,395 --------------- Total Short-Term Investments (cost $435,135,534) $ 435,135,534 - -------------------------------------------------------------------------------------------------------------------------- Total Investments (cost $12,062,633,924) (b) $19,625,420,960 - -------------------------------------------------------------------------------------------------------------------------- (a) Percentages indicated are based on net assets of $19,592,480,002. (b) The aggregate identified cost on a tax basis is $12,077,188,006, resulting in gross unrealized appreciation and depreciation of $7,855,619,874 and $307,386,920, respectively, or net unrealized appreciation of $7,548,232,954. (NON) Non-income-producing security. (AFF) Affiliated Companies (Note 5). ADR after the name of a foreign holding stands for American Depository Receipts, representing ownership of foreign securities on deposit with a domestic custodian bank. The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities December 31, 1998 (Unaudited) Assets - ----------------------------------------------------------------------------------------------- Investments in securities, at value (identified cost $12,062,633,924) (Note 1) $19,625,420,960 - ----------------------------------------------------------------------------------------------- Cash 6,884,918 - ----------------------------------------------------------------------------------------------- Dividends, interest and other receivables 3,866,292 - ----------------------------------------------------------------------------------------------- Receivable for shares of the fund sold 22,082,438 - ----------------------------------------------------------------------------------------------- Receivable for securities sold 55,305,971 - ----------------------------------------------------------------------------------------------- Total assets 19,713,560,579 Liabilities - ----------------------------------------------------------------------------------------------- Payable for securities purchased 38,779,475 - ----------------------------------------------------------------------------------------------- Payable for shares of the fund repurchased 45,911,803 - ----------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 20,428,277 - ----------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 1,931,861 - ----------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 193,143 - ----------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 13,649 - ----------------------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 12,621,598 - ----------------------------------------------------------------------------------------------- Other accrued expenses 1,200,771 - ----------------------------------------------------------------------------------------------- Total liabilities 121,080,577 - ----------------------------------------------------------------------------------------------- Net assets $19,592,480,002 Represented by - ----------------------------------------------------------------------------------------------- Paid-in capital (Notes 1 and 4) $12,109,681,262 - ----------------------------------------------------------------------------------------------- Accumulated net investment loss (Note 1) ($71,137,705) - ----------------------------------------------------------------------------------------------- Distribution in excess of net realized gains on investments (Note 1) (8,840,422) - ----------------------------------------------------------------------------------------------- Net unrealized appreciation of investments and assets and liabilities in foreign currencies 7,562,776,867 - ----------------------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $19,592,480,002 Computation of net asset value and offering price - ----------------------------------------------------------------------------------------------- Net asset value and redemption price per class A share ($10,679,765,740 divided by 182,793,855 shares) $58.43 - ----------------------------------------------------------------------------------------------- Offering price per class A share (100/94.25 of $58.43)* $61.99 - ----------------------------------------------------------------------------------------------- Net asset value and offering price per class B share ($7,910,625,592 divided by 141,678,578 shares)** $55.84 - ----------------------------------------------------------------------------------------------- Net asset value and redemption price per class M share ($455,072,836 divided by 7,957,052 shares) $57.19 - ----------------------------------------------------------------------------------------------- Offering price per class M share (100/96.50 of $57.19)* $59.26 - ----------------------------------------------------------------------------------------------- Net asset value, offering price and redemption price per class Y share ($547,015,834 divided by 9,250,338 shares) $59.13 - ----------------------------------------------------------------------------------------------- * 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 Six months ended December 31, 1998 (Unaudited) Investment income: - ----------------------------------------------------------------------------------------------- Interest $22,584,558 - ----------------------------------------------------------------------------------------------- Dividends (including dividend income of $301,916 from investments in affiliated issuers) (Note 5) 12,477,036 - ----------------------------------------------------------------------------------------------- Total investment income 35,061,594 Expenses: - ----------------------------------------------------------------------------------------------- Compensation of Manager (Note 2) 41,705,596 - ----------------------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 12,358,457 - ----------------------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 149,475 - ----------------------------------------------------------------------------------------------- Administrative services (Note 2) 27,118 - ----------------------------------------------------------------------------------------------- Distribution fees -- Class A (Note 2) 11,588,850 - ----------------------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 35,114,254 - ----------------------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 1,507,256 - ----------------------------------------------------------------------------------------------- Reports to shareholders 154,644 - ----------------------------------------------------------------------------------------------- Auditing 140,973 - ----------------------------------------------------------------------------------------------- Legal 35,862 - ----------------------------------------------------------------------------------------------- Postage 1,873,406 - ----------------------------------------------------------------------------------------------- Other 2,376,002 - ----------------------------------------------------------------------------------------------- Total expenses 107,031,893 - ----------------------------------------------------------------------------------------------- Expense reduction (Note 2) (832,594) - ----------------------------------------------------------------------------------------------- Net expenses 106,199,299 - ----------------------------------------------------------------------------------------------- Net investment loss (71,137,705) - ----------------------------------------------------------------------------------------------- Net realized gain on investments (including realized loss of $(164,708,001) on sales of investments in affiliated issuers) (Notes 1, 3 and 5) 19,972,492 - ----------------------------------------------------------------------------------------------- Net unrealized depreciation of assets and liabilities in foreign currencies during the period (10,169) - ----------------------------------------------------------------------------------------------- Net unrealized appreciation of investments during the period 877,472,482 - ----------------------------------------------------------------------------------------------- Net gain on investments 897,434,805 - ----------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $826,297,100 - ----------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets Six months ended Year ended December 31 June 30 1998* 1998 - --------------------------------------------------------------------------------------------------------------- Increase in net assets - --------------------------------------------------------------------------------------------------------------- Operations: - --------------------------------------------------------------------------------------------------------------- Net investment loss $ (71,137,705) $ (135,338,935) - --------------------------------------------------------------------------------------------------------------- Net realized gain on investments 19,972,492 1,228,126,644 - --------------------------------------------------------------------------------------------------------------- Net unrealized appreciation of investments and assets and liabilities in foreign currencies 877,462,313 3,538,793,763 - --------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 826,297,100 4,631,581,472 - --------------------------------------------------------------------------------------------------------------- Distributions to shareholders: - --------------------------------------------------------------------------------------------------------------- From net realized gain on investments Class A (332,351,314) (185,202,878) - --------------------------------------------------------------------------------------------------------------- Class B (257,923,945) (157,607,099) - --------------------------------------------------------------------------------------------------------------- Class M (14,531,244) (8,456,807) - --------------------------------------------------------------------------------------------------------------- Class Y (15,917,465) (7,008,141) - --------------------------------------------------------------------------------------------------------------- Increase from capital share transactions (Note 4) 352,311,418 428,556,668 - --------------------------------------------------------------------------------------------------------------- Total increase in net assets 557,884,550 4,701,863,215 Net assets - --------------------------------------------------------------------------------------------------------------- Beginning of period 19,034,595,452 14,332,732,237 - --------------------------------------------------------------------------------------------------------------- End of period (including accumulated net investment loss of $ 71,137,705 and $-, respectively) $19,592,480,002 $19,034,595,452 - --------------------------------------------------------------------------------------------------------------- * Unaudited The accompanying notes are an integral part of these financial statements.
Financial highlights (For a share outstanding throughout the year) CLASS A - ------------------------------------------------------------------------------------------------------------------------------------ Six months ended Per-share December 31 operating performance (Unaudited) Year ended June 30 - ------------------------------------------------------------------------------------------------------------------------------------ 1998 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $57.68 $44.47 $42.99 $29.58 $21.88 $20.83 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment loss (.13)(c) (.25) (.20)(c) (.21)(c) (.12) (.06) - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain on investments 2.76 14.55 2.00 13.62 8.02 1.56 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.63 14.30 1.80 13.41 7.90 1.50 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.88) (1.09) (.26) -- (.15) (.45) - ------------------------------------------------------------------------------------------------------------------------------------ In excess of net realized gains -- -- (.06) -- (.04) -- - ------------------------------------------------------------------------------------------------------------------------------------ Return of capital -- -- -- -- (.01) -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (1.88) (1.09) (.32) -- (.20) (.45) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $58.43 $57.68 $44.47 $42.99 $29.58 $21.88 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total investment return at net asset value (%)(a) 4.92* 32.75 4.26 45.34 36.36 7.00 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $10,679,766 $10,163,886 $7,381,624 $4,752,611 $1,341,877 $648,787 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b) .47* .98 1.06 1.11 1.13 1.23 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment loss to average net assets (%) (.26)* (.49) (.48) (.54) (.55) (.82) - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 57.04* 65.21 66.74 36.61 56.99 52.76 - ------------------------------------------------------------------------------------------------------------------------------------ + 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.
Financial highlights (For a share outstanding throughout the year) CLASS B - ------------------------------------------------------------------------------------------------------------------------------------ Six months ended Per-share December 31 operating performance (Unaudited) Year ended June 30 - ------------------------------------------------------------------------------------------------------------------------------------ 1998 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $55.42 $43.08 $41.96 $29.09 $21.68 $20.80 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment loss (.32)(c) (.62) (.49)(c) (.48)(c) (.23) (.11) - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain on investments 2.62 14.05 1.93 13.35 7.84 1.44 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.30 13.43 1.44 12.87 7.61 1.33 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.88) (1.09) (.26) -- (.15) (.45) - ------------------------------------------------------------------------------------------------------------------------------------ In excess of net realized gains -- -- (.06) -- (.04) -- - ------------------------------------------------------------------------------------------------------------------------------------ Return of capital -- -- -- -- (.01) -- - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (1.88) (1.09) (.32) -- (.20) (.45) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $55.84 $55.42 $43.08 $41.96 $29.09 $21.68 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total investment return at net asset value (%)(a) 4.52* 31.78 3.50 44.24 35.34 6.18 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $7,910,626 $7,950,848 $6,359,447 $4,254,962 $1,013,379 $333,738 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b) .85* 1.73 1.81 1.87 1.87 2.04 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment loss to average net assets (%) (.63)* (1.24) (1.23) (1.30) (1.30) (1.55) - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 57.04* 65.21 66.74 36.61 56.99 52.76 - ------------------------------------------------------------------------------------------------------------------------------------ + 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.
Financial highlights (For a share outstanding throughout the year) CLASS M - ------------------------------------------------------------------------------------------------------------------------------------ Six months ended For the period Per-share December 31 Dec. 1,1994+ operating performance (Unaudited) Year ended June 30 to June 30 - ------------------------------------------------------------------------------------------------------------------------------------ 1998 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $56.65 $43.91 $42.66 $29.51 $24.72 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment loss (.26)(c) (.49) (.40)(c) (.40)(c) (.05) - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain on investments 2.68 14.32 1.97 13.55 5.04 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.42 13.83 1.57 13.15 4.99 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.88) (1.09) (.26) -- (.15) - ------------------------------------------------------------------------------------------------------------------------------------ In excess of net realized gains -- -- (.06) -- (.04) - ------------------------------------------------------------------------------------------------------------------------------------ Return of capital -- -- -- -- (.01) - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (1.88) (1.09) (.32) -- (.20) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $57.19 $56.65 $43.91 $42.66 $29.51 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total investment return at net asset value (%)(a) 4.64* 32.09 3.75 44.56 20.40* - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $455,073 $444,325 $337,535 $210,404 $16,011 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b) .72* 1.48 1.56 1.64 .94* - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment loss to average net assets (%) (.51)* (.99) (.98) (1.06) (.53)* - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 57.04* 65.21 66.74 36.61 56.99 - ------------------------------------------------------------------------------------------------------------------------------------ + 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.
Financial highlights (For a share outstanding throughout the year) CLASS Y - ------------------------------------------------------------------------------------------------------------------------------------ Six months ended For the period Per-share December 31 July 19,1994+ operating performance (Unaudited) Year ended June 30 to June 30 - ------------------------------------------------------------------------------------------------------------------------------------ 1998 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $58.28 $44.82 $43.21 $29.66 $22.59 - ------------------------------------------------------------------------------------------------------------------------------------ Investment operations - ------------------------------------------------------------------------------------------------------------------------------------ Net investment loss (.07)(c) (.13)(c) (.09)(c) (.11)(c) (.04) - ------------------------------------------------------------------------------------------------------------------------------------ Net realized and unrealized gain on investments 2.80 14.68 2.02 13.66 7.31 - ------------------------------------------------------------------------------------------------------------------------------------ Total from investment operations 2.73 14.55 1.93 13.55 7.27 - ------------------------------------------------------------------------------------------------------------------------------------ Less distributions: - ------------------------------------------------------------------------------------------------------------------------------------ From net realized gain on investments (1.88) (1.09) (.26) -- (.15) - ------------------------------------------------------------------------------------------------------------------------------------ In excess of net realized gains -- -- (.06) -- (.04) - ------------------------------------------------------------------------------------------------------------------------------------ Return of capital -- -- -- -- (.01) - ------------------------------------------------------------------------------------------------------------------------------------ Total distributions (1.88) (1.09) (.32) -- (.20) - ------------------------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $59.13 $58.28 $44.82 $43.21 $29.66 - ------------------------------------------------------------------------------------------------------------------------------------ Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------------------------ Total investment return at net asset value (%)(a) 5.04* 33.05 4.54 45.68 32.42* - ------------------------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $547,016 $476,037 $254,126 $118,640 $24,538 - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets (%)(b) .35* .73 .81 .86 .83* - ------------------------------------------------------------------------------------------------------------------------------------ Ratio of net investment loss to average net assets (%) (.13)* (.24) (.23) (.29) (.26)* - ------------------------------------------------------------------------------------------------------------------------------------ Portfolio turnover (%) 57.04* 65.21 66.74 36.61 56.99 - ------------------------------------------------------------------------------------------------------------------------------------ + 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.
Notes to financial statements December 31, 1998 (Unaudited) Note 1 Significant accounting policies Putnam New Opportunities Fund ("the fund") is registered under the Investment Company Act of 1940, as amended, as a diversified open-end management investment company. The fund seeks capital appreciation by investing principally in common stocks of companies in sectors of the economy which, in the judgment of Putnam Investment Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc. possess above-average, long-term growth potential. The fund offers class A, class B, class M and class Y shares. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge but pay a higher ongoing distribution fee than class A shares, and are subject to a contingent deferred sales charge, if those shares are redeemed within six years of purchase. Class M shares are sold with a maximum front end sales charge of 3.50% and pay an ongoing distribution fee that is higher than class A shares but lower than class B shares. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, 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. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the fund and the counterparty. Putnam Management is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest. D) Security transactions and related investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recorded as soon as the fund is informed of the ex-dividend date. E) Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The market value of foreign securities, currency holdings, and other assets and liabilities are recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when accrued or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on closed forward currency contracts, disposition of foreign currencies and the difference between the amount of investment income and foreign withholding taxes recorded on the fund's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of open forward currency contracts and assets and liabilities other than investments at the period end, resulting from changes in the exchange rate. F) Line of credit The fund has entered into a committed line of credit with certain banks. This line of credit agreement includes restrictions that the fund maintain an asset coverage ratio of at least 300% and borrowings must not exceed prospectus limitations. For the six months ended December 31, 1998, the fund had no borrowings against the line of credit. G) Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986, as amended. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. H) Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Capital gain distributions, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Reclassifications are made to the fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. Note 2 Management fee, administrative services and other transactions Compensation of Putnam Management, for management and investment advisory services is paid quarterly based on the average net assets of the fund. Such fee is based on the following annual rates: 0.70% of the first $500 million of average net assets, 0.60% of the next $500 million, 0.55% of the next $500 million, 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 six months ended December 31, 1998, fund expenses were reduced by $832,594 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 $13,010 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 have approved payment by the fund to an annual rate of 0.25%, 1.00% and 0.75% of the average net assets attributable to class A, class B and class M shares, respectively. For the six months ended December 31, 1998, Putnam Mutual Funds Corp., acting as underwriter received net commissions of $816,702 and $29,876 from the sale of class A and class M shares, respectively and $5,305,863 in contingent deferred sales charges from redemptions of class B shares. A deferred sales charge of up to 1% is assessed on certain redemptions of class A shares. For the six months ended December 31, 1998, Putnam Mutual Funds Corp., acting as underwriter received $37,782 on class A redemptions. Note 3 Purchase and sales of securities During the six months ended December 31, 1998, purchases and sales of investment securities other than short-term investments aggregated $5,148,351,932 and $5,377,891,919, 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: Six months ended December 31, 1998 - ----------------------------------------------------------------------------- Class A Shares Amount - ----------------------------------------------------------------------------- Shares sold 21,670,310 $1,117,893,002 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 6,045,736 317,279,073 - ----------------------------------------------------------------------------- 27,716,046 1,435,172,075 Shares repurchased (21,132,751) (1,076,352,544) - ----------------------------------------------------------------------------- Net increase 6,583,295 $ 358,819,531 - ----------------------------------------------------------------------------- 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 - ----------------------------------------------------------------------------- Six months ended December 31, 1998 - ----------------------------------------------------------------------------- Class B Shares Amount - ----------------------------------------------------------------------------- Shares sold 5,589,895 $276,702,390 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 4,483,251 224,924,735 - ----------------------------------------------------------------------------- 10,073,146 501,627,125 Shares repurchased (11,865,060) (575,553,377) - ----------------------------------------------------------------------------- Net decrease (1,791,914) $(73,926,252) - ----------------------------------------------------------------------------- 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) - ----------------------------------------------------------------------------- Six months ended December 31, 1998 - ----------------------------------------------------------------------------- Class M Shares Amount - ----------------------------------------------------------------------------- Shares sold 787,472 $39,340,338 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 266,436 13,692,745 - ----------------------------------------------------------------------------- 1,053,908 53,033,083 Shares repurchased (940,620) (47,140,608) - ----------------------------------------------------------------------------- Net increase 113,288 $ 5,892,475 - ----------------------------------------------------------------------------- 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 - ----------------------------------------------------------------------------- Six months ended December 31, 1998 - ----------------------------------------------------------------------------- Class Y Shares Amount - ----------------------------------------------------------------------------- Shares sold 2,221,499 $118,973,033 - ----------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 299,733 15,917,465 - ----------------------------------------------------------------------------- 2,521,232 134,890,498 Shares repurchased (1,438,847) (73,364,834) - ----------------------------------------------------------------------------- Net increase 1,082,385 $ 61,525,664 - ----------------------------------------------------------------------------- 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 - ----------------------------------------------------------------------------- Note 5 Transactions with Affiliated Companies
Transactions during the period with companies in which the fund owns at least 5% of the voting securities were as follows: Purchase Sales Dividend Market Name of Affiliate cost cost Income Value - ------------------------------------------------------------------------------------------------------------------- Accustaff, Inc. $ 44,887,394 $ -- $ -- $ -- Applied Graphics Technology 28,702,336 33,254,971 -- 15,886,200 Barnett, Inc. -- 21,829,192 -- Carematrix Corporation 3,048,618 -- -- 32,447,188 CBT Group PLC Sponsored ADR 3,153,006 33,209,078 -- -- Concentra Managed Care, Inc. -- 78,056,282 -- -- Extended Stay America, Inc. 692,065 8,175,973 -- 48,562,500 Gilead Sciences, Inc. -- 39,616,013 -- -- HCR Manor Care, Inc. -- 50,907,779 -- -- International Speedway Corp. Class A 28,187,322 -- -- 37,644,750 J.D. Wetherspoon PLC 235,766 -- 155,014 30,091,677 Landry's Seafood Restaurant Inc. -- 31,458,569 -- Lason Holdings, Inc. 33,436,814 -- -- 41,272,394 Lincare Holdings, Inc. 13,235,395 -- -- 125,338,125 Medicis Pharmaceutical Class A 4,776,704 -- -- 65,885,625 Metamor Worldwide, Inc. 1,216,210 7,125,665 -- 40,650,000 Metromedia Fiber Network Class A 23,269,662 -- -- 130,650,000 Modis Professional Services 4,562,920 117,895,292 -- 30,186,100 Papa Johns International, Inc. 472,726 25,565,175 -- 31,990,625 Pediatrix Medical Group, Inc. -- -- -- 59,811,631 PMT Services, Inc. 18,043,279 -- -- -- Rexall Sundown, Inc. 8,814,850 81,761,524 -- -- RSL Communications Ltd. Class A 43,775,240 -- -- 65,348,400 Saville Systems Ireland ADR 847,273 34,861,026 -- -- Snyder Communications, Inc. 85,037,299 -- -- 146,981,250 Stewart Enterprises, Inc. Class A 1,739,027 -- 146,902 163,428,475 Sybron International Corp. 27,185,219 -- -- 138,112,500 Total Renal Care Holdings -- -- -- 123,046,516 Transkaryotic Therapies, Inc. 6,117,047 -- -- 24,994,375 Westwood One, Inc. -- -- -- 46,360,000 - ------------------------------------------------------------------------------------------------------------------- Totals $381,436,172 $563,716,539 $301,916 $1,398,688,331 - -------------------------------------------------------------------------------------------------------------------
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 Global Governmental Income Trust High Quality Bond Fund + High Yield Advantage Fund [DBL. DAGGER] High Yield Total Return Fund High Yield Trust [DBL. DAGGER] High Yield Trust II Income Fund Intermediate U.S. Government Income Fund Money Market Fund ** Preferred Income Fund Strategic 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 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 TRUSTEES George Putnam, Chairman William F. Pounds, Vice Chairman John A. Hill, Vice Chairman Jameson Adkins Baxter Hans H. Estin 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 L. Miller Vice President and Fund Manager Jeffrey R. Lindsey Vice President and Fund Manager Richard A. Monaghan 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 www.putnaminv.com - --------------------- BULK RATE U.S. POSTAGE PAID PUTNAM INVESTMENTS - --------------------- SA013-49329 852/358/983/526/ 2/99 PUTNAM INVESTMENTS [SCALE LOGO OMITTED] - --------------------------------------------------------------------------- Putnam New Opportunities Fund Supplement to Semiannual Report dated 12/31/98 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 $150 million or more in one or more of Putnam's funds or private accounts. Performance of class Y shares, which incur neither a front-end load, distribution fee, nor contingent deferred sales charge, will differ from performance of class A, B, and M shares, which are discussed more extensively in the semiannual report. SEMIANNUAL RESULTS AT A GLANCE - --------------------------------------------------------------------------- Total return for periods ended 12/31/98 NAV 6 months 5.04% 1 year 24.71 5 years 158.22 Annual average 20.89 Life of fund (since class A inception, 8/31/90) 698.64 Annual average 28.33 Share value: NAV 6/30/98 $58.28 12/31/98 $59.13 - --------------------------------------------------------------------------- Distributions: No. Income Capital gains Total 1 -- $1.875 $1.875 - --------------------------------------------------------------------------- Please note that past performance does not indicate future results. Returns shown for class Y shares for periods prior to their inception are derived from the historical performance of class A shares, adjusted to reflect the initial sales charge currently applicable to class A shares. These returns have not been adjusted to reflect differences in operating expenses which, for class Y shares, are lower than the operating expenses applicable to class A shares. All returns assume reinvestment of distributions at net asset value. Performance data reflects an expense limitation previously in effect. Without the expense limitation, total returns would have been lower. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. See full report for information on comparative benchmarks. If you have questions, please consult your fund prospectus or call Putnam toll free at 1-800-752-9894. -----END PRIVACY-ENHANCED MESSAGE-----