Putnam
OTC &
Emerging
Growth Fund
ANNUAL REPORT
July 31, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "When blue-chips soared, stocks of small companies sagged. But when
the smoke clears and the next market cycle takes over, the small
caps may finally have their day."
-- Forbes, May 5, 1997
* "Small companies are turning in earnings gains at a clip their
bigger brothers should envy. . . . The newfound earnings growth
advantage has contributed to a broad-based small-stock price
advance that few analysts believe will be stymied. . . . Many
analysts figure small stocks haven't reached vertiginous
valuations and face less selling pressure should inflation
fears continue to well up . . ."
"Solid Profits Are Stoking Small Stocks"
-- The Wall Street Journal, August 11, 1997
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
14 Portfolio holdings
20 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Investors who seek the potentially above-average returns offered by small and
midsize companies and believe Putnam OTC & Emerging Growth Fund represents an
excellent means of gaining exposure to them may soon begin reaping the rewards
of their patience. Even as fiscal 1997 was drawing to a close, the stocks of
these companies at last began showing signs of gathering strength.
The wait for a turnaround in this market has been excruciating, especially as
these stocks were plagued with underperformance while the blue chips soared to
record-breaking heights. Your fund's managers, Michael Mufson and Steven
Kirson, believe all the pieces are now in place for the stocks of smaller
high-growth companies to begin a recovery. They have positioned the portfolio
to take what they believe will be maximum advantage of such an environment.
In the following report, Mike and Steve talk about the strategy they pursued
during the fiscal year and profile a number of the portfolio companies they
consider especially attractive. Then they take a look at prospects for the
fiscal year that has just begun.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
September 17, 1997
Report from the Fund Managers
Michael J. Mufson
Steven L. Kirson
A famous American industrialist once said that trouble is only opportunity in
work clothes. As we look back on the factors that influenced the performance
of Putnam OTC & Emerging Growth Fund during the first nine months of fiscal
1997, we'd have to agree.
The July 1996 stock market decline set the stage for further volatility and
disappointing performance for the stocks of smaller high-growth companies in
which your fund invests. From August through April, investor sentiment
continued to favor larger, more stable companies over aggressive small-company
and emerging-growth stocks. And when the Dow Jones Industrial Average and the
S&P 500(registered trademark) soared to record levels, these stocks failed to
follow suit -- even as the business fundamentals and earnings growth in the
small-stock arena remained strong.
As the price-to-earnings ratios of large-company stocks hit levels that many
industry pundits saw as unsustainable, valuations on small-company stocks
reached near-record lows. Nevertheless, we were not disheartened. Opportunity
was knocking. For most of the fiscal year that ended on July 31, 1997, we kept
the fund fully invested, taking advantage of the attractive prices to upgrade
the quality of stocks in the portfolio.
As a result, when small-company stocks finally shook off their extended period
of underperformance starting in April, your fund was well positioned to
participate fully in the ensuing rally. For the 12 months ended July 31, 1997,
your fund's class A shares posted a gain of 16.33% at net asset value and
9.66% at public offering price. For results of other share classes and
longer-term performance details, please turn to pages 9 and 10 of this report.
* TECHNOLOGY REMAINS TOP INDUSTRY SECTOR, "YEAR 2000" EMERGES AS THEME
To be considered for inclusion in the fund's portfolio, a company must
demonstrate leadership within a dynamic new industry or -- if operating within
an established industry -- show a pattern of increased market share through
new products or innovative services. The technology sector includes more
companies that meet our criteria than any other industry sector and
consequently tends to dominate the portfolio, comprising roughly 31% of net
assets at the fiscal year's end.
While our security selection process is a bottom-up one -- that is, we
carefully research and review portfolio candidates on a stock-by-stock basis
- -- themes or trends occasionally emerge. Over the course of the fiscal year,
we have made a significant focus on the "Year 2000" dilemma. Many software
applications and computer systems are not equipped to register dates after
December 31, 1999, and therefore pose a huge problem that many organizations
must address. In order to prevent the loss of essential data, applications,
and hardware, companies are looking for ways to reprogram existing systems,
replace soon-to-be outdated software and hardware, or devise a combined
solution.
Companies that can help corporations not only fix their problem but also
provide support and infrastructure to carry them beyond the year 2000 stand to
profit handsomely. Compuware Corp., Viasoft, Inc., Aspect Development, Inc.,
and Remedy Corp. are just a few of the fund holdings we consider
well-positioned to benefit from this opportunity. While these securities and
others discussed in this report were viewed favorably during the period, all
portfolio holdings are subject to review and adjustment in accordance with the
fund's investment strategy and may vary in the future.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Computer software 13.0%
Computer services 12.2%
Business services 7.5%
Telecommunications equipment 5.5%
Computer equipment 5.4%
Footnote reads:
*Based on net assets as of 7/31/97. Holdings will vary over time.
* INFORMATION TECHNOLOGY TRAINING BECOMES A BUSINESS SERVICES TREND
Business services is the second largest industry sector in your fund's
portfolio. Within this realm, information technology training -- both
computer- and classroom-based education -- has become big business. As
corporate America has downsized, job security has become a comfort of the
past. Having the necessary technological skills to find gainful employment or
change industries is of paramount concern to most people.
We believe companies that can help employees expand their knowledge are poised
for long-term profitability. Over the course of the fiscal year, we invested
heavily in industry leaders such as Learning Tree International, Inc., which
offers classroom-based information technology training, and CBT Group, which
offers computer-based training. Both holdings contributed to your fund's solid
performance. Other stocks that have proved their potential include for-profit
schools geared toward working adults, such as Apollo Group, Inc., Computer
Learning Corp., and Strayer Education, Inc.
* EMERGING GROWTH OPPORTUNITIES FOUND IN MANY SECTORS
In the consumer area, we have selectively increased the fund's exposure to
retail stocks geared toward the changing priorities of baby boomers. In
addition to saving for retirement and children's education, focusing on the
home is a high priority for boomers. Houseware specialty retailers in the
portfolio, such as Bed, Bath & Beyond, Inc. and Williams-Sonoma, Inc., have
performed well.
Deregulation has been a catalyst for change, consolidation, and profit in many
sectors such as telecommunications, radio broadcasting, and billboard
advertising. Many regional Bell operating companies are in the process of
upgrading infrastructure and equipment to remain competitive. Tellabs Inc. and
Advanced Fibre Communications, two fund holdings that supply products and
equipment to the regional Bells, witnessed attractive growth over the fiscal
year. Clear Channel Communications, Inc. and Outdoor Systems, Inc. are two
top-performing holdings that are leaders in radio broadcasting and billboard
advertising, respectively. New-age media have also become a hotbed of
opportunity for the fund with stocks such as America Online, Inc. leading the
charge.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Compuware Corp.
Computer software
Keane, Inc.
Computer services
Electronics for Imaging, Inc.
Computer equipment
Citrix Systems, Inc.
Computer software
Advanced Fibre Communications
Telecommunications equipment
FIRSTPLUS Financial Group, Inc.
Financial services
America Online, Inc.
Computer services
McAfee Associates, Inc.
Computer software
Viasoft, Inc.
Computer software
Technology Solutions Co.
Computer services
Footnote reads:
These holdings represent 22.8% of the fund's net assets as of 7/31/97.
Portfolio holdings will vary over time.
We trimmed back the fund's health-care exposure slightly and have become more
selective in the areas we have chosen to emphasize. A key focus is on
service-oriented companies that are capitalizing on the outsourcing trend now
sweeping across most industries. For example, Quintiles Transnational Corp.
and Parexel International Corp. are two companies that provide contract
research services on an outsourcing basis to pharmaceutical corporations.
Physician practice management groups -- the physicians' response to health
maintenance organizations -- are now coming into their own. Phycore, the
leader in multi-specialty practice management, is experiencing strong earnings
growth, as are CRA Managed Care, Inc. and OccuSystems Inc., two fund holdings
specializing in workers' compensation.
*EMERGING-GROWTH STOCKS MAY BE POised FOR SUSTAINED GROWTH
As we enter fiscal 1998, our outlook for emerging growth stocks appears more
favorable than it has been in some time. Valuations and earnings growth
potential are quite attractive when compared to that of larger-capitalization
stocks. It is also fair to say that earnings growth may well become more
difficult for larger corporations to achieve, particularly given the late
stage of the current economic expansion. Should this occur, investor interest
is likely to shift back once again to small, emerging growth companies that
have the potential to post better-than-expected earnings, thereby providing
solid appreciation potential for many of your fund's holdings.
Of course, should a downward trend in the broad stock market take hold as a
result of interest-rate and inflation fears, small-company stocks will likely
decline right along with their large-cap brethren. However, given that
valuations in the small-cap universe are already near historic lows,
emerging-growth stocks may experience less selling pressure than blue chips.
In any case, whatever the market brings, we will hold true to the fund's
objective and search for the brightest emerging growth available.
Footnote reads:
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 7/31/97, there is no guarantee the fund will continue to hold
these securities in the future. This fund invests all or a portion of its
assets in small to medium-size companies. Such investments increase the risk
of greater price fluctuations.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
OTC & Emerging Growth Fund is designed for investors seeking above-average
growth potential through investments in common stocks of small- to
medium-size emerging growth companies.
TOTAL RETURN FOR PERIODS ENDED 7/31/97
Class A Class B Class M
(11/1/82) (7/15/93) (12/2/94)
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------------------
1 year 16.33% 9.66% 15.49% 10.49% 15.78% 11.74%
- -----------------------------------------------------------------------------
5 years 187.28 170.83 176.76 174.76 180.08 170.27
Annual average 23.50 22.05 22.58 22.44 22.87 22.00
- -----------------------------------------------------------------------------
10 years 309.95 286.31 277.31 277.31 286.94 273.31
Annual average 15.15 14.47 14.20 14.20 14.49 14.08
- -----------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 7/31/97
Russell 2000 Consumer
Index Price Index
- -----------------------------------------------------------------------------
1 year 33.39% 2.23%
- -----------------------------------------------------------------------------
5 years 130.17 14.23
Annual average 18.15 2.70
- -----------------------------------------------------------------------------
10 years 192.35 41.04
Annual average 11.32 3.50
- -----------------------------------------------------------------------------
Returns for class A and class M shares reflect the current maximum initial
sales charges of 5.75% for class A shares and 3.50% for class M shares.
One-, five-, and ten-year (when available) and life-of-fund returns for
class B shares reflect the applicable contingent deferred sales charges
(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 costs applicable
to such shares. All returns assume reinvestment of distributions at NAV
and represent past performance; they do not guarantee future results.
Investment return and principal value will fluctuate so that an investor's
shares when redeemed may be worth more or less than their original cost.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of
a $10,000 investment since
7/31/97
Plot points read:
Date Fund at POP Russell 2000 Index Consumer Price Index
7/31/87 9426 10000 10000
7/31/88 8505 9020 10413
7/31/89 10747 10669 10931
7/31/90 11538 10111 11459
7/31/91 12276 11093 11968
7/31/92 13446 12702 12346
7/31/93 17874 15681 12689
7/31/94 18737 16404 13040
7/31/95 28353 20501 13401
7/31/96 33205 21917 13796
7/31/97 38628 29235 14104
Footnote reads:
Past performance is no assurance of future results. At the end
of the same time period, a $10,000 investment in the fund's
class B shares would have been valued at $37,731 and no contingent
deferred sales charges would apply; a $10,000 investment in the
fund's class M shares would have been valued at $38,694 ($37,331
at public offering price). See first page of performance section
for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 7/31/97
Class A Class B Class M
- -----------------------------------------------------------------------------
Distributions (number) 1 1 1
- -----------------------------------------------------------------------------
Income -- -- --
- -----------------------------------------------------------------------------
Capital gains
- -----------------------------------------------------------------------------
Long-term $1.078 $1.078 $1.078
- -----------------------------------------------------------------------------
Short-term -- -- --
- -----------------------------------------------------------------------------
Total $1.078 $1.078 $1.078
- -----------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- -----------------------------------------------------------------------------
7/31/96 $14.80 $15.70 $14.41 14.66 15.19
- -----------------------------------------------------------------------------
7/31/97 16.02 17.00 15.45 15.78 16.35
- -----------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 6/30/97
(most recent calendar quarter)
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------------------
1 year -7.73% -13.06% 8.43% -12.68% -8.17% -11.39%
- -----------------------------------------------------------------------------
5 years 184.20 167.92 173.81 171.81 176.93 167.29
Annual average 23.23 21.79 22.32 22.14 22.60 21.73
- -----------------------------------------------------------------------------
10 years 295.19 272.66 263.78 263.78 272.72 259.63
Annual average 14.73 14.06 13.78 13.78 14.06 13.65
- -----------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns and
principal value will fluctuate so that an investor's shares when sold may
be worth more or less than their original cost. See first page of
performance section for performance calculation method.
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 and a higher 12b-1 fee than
class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 5.75% sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the
period. Your fund's CDSC declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
COMPARATIVE BENCHMARKS
Russell 2000 Index is an unmanaged list of common stocks that is
frequently used as a measure of the performance of small company stocks.
It assumes 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.
Consumer Price Index (CPI ) is a commonly used measure of inflation; it
does not represent an investment return.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund *
International New Opportunities Fund
Investors Fund
New Opportunities Fund +
OTC & Emerging Growth Fund [DBL. DAGGER]
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Total Return Fund
High Yield Trust +
Income Fund
Money Market Fund **
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]
California, New York
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Overseas Growth Fund
+ Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[DBL. DAGGER] Formerly OTC Emerging Growth Fund
[SECTION MARK] Not available in all states.
** An investment in a money market fund is neither insured nor
guaranteed by the U.S. government. These funds are managed
to maintain a price of $1.00 per share, although there is
no assurance that this price will be maintained in the future.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
Report of independent accountants
For the fiscal year ended July 31, 1997
To the Trustees and Shareholders of
Putnam OTC & Emerging Growth Fund
We have audited the accompanying statement of assets and liabilities of Putnam
OTC & Emerging Growth Fund, formerly Putnam OTC Emerging Growth Fund,
including the portfolio of investments owned, as of July 31, 1997, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of July 31, 1997, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Putnam OTC & Emerging Growth Fund as of July 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the periods indicated therein, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
September 12, 1997
Portfolio of investments owned
July 31, 1997
<TABLE>
<CAPTION>
COMMON STOCKS (98.6%) *
NUMBER OF SHARES VALUE
Advertising (1.8%)
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
545,400 Lamar Advertising Co. + $ 15,237,113
1,270,838 Outdoor Systems, Inc. + 33,677,194
509,200 Universal Outdoor Holdings, Inc. + 18,522,150
--------------
67,436,457
Agriculture (1.1%)
- ------------------------------------------------------------------------------------------------------------
200,000 Dekalb Genetics Corp. Class B 15,287,500
626,597 Delta & Pine Land Co. 23,810,686
--------------
39,098,186
Apparel (0.9%)
- ------------------------------------------------------------------------------------------------------------
409,000 St. John Knits, Inc. 18,609,500
672,478 The North Face, Inc. + [SECTION MARK] 14,542,337
--------------
33,151,837
Automotive (0.9%)
- ------------------------------------------------------------------------------------------------------------
1,018,023 Budget Group, Inc. + [SECTION MARK] 31,813,219
Broadcasting (4.4%)
- ------------------------------------------------------------------------------------------------------------
500,000 Chancellor Broadcasting Corp. Class A + 20,625,000
755,533 Clear Channel Communications, Inc. + 47,031,929
164,700 Emmis Broadcasting Corp. Class A + 7,020,338
523,327 Evergreen Media Corp. Class A + 24,073,042
675,067 Jacor Communications, Inc. + 28,943,498
248,000 SFX Broadcasting, Inc. Class A + 14,539,000
415,148 Univision Communications Inc. Class A + 17,851,364
--------------
160,084,171
Business Services (7.5%)
- ------------------------------------------------------------------------------------------------------------
257,300 Abacus Direct Corp. + 7,719,000
665,913 Accustaff, Inc. + 18,146,129
999,800 Affiliated Computer Services, Inc. Class A + 27,119,575
1,337,952 Caribiner International., Inc. + [SECTION MARK] 48,668,004
325,100 Corestaff, Inc. + 10,078,100
389,800 First USA Paymentech, Inc. + 11,206,750
436,900 Forrester Research, Inc. + 12,997,775
587,700 Interim Services Inc. + 26,777,081
1,451,935 PMT Services, Inc. + 23,775,436
903,201 Precision Response Corp. + 10,273,911
758,600 Robert Half International, Inc. + 41,770,413
571,118 Snyder Communications, Inc. + 17,704,658
25,000 Sykes Enterprises, Inc. + 629,688
817,513 TeleTech Holdings Inc. + 16,350,260
--------------
273,216,780
Computer Equipment (5.4%)
- ------------------------------------------------------------------------------------------------------------
370,000 Avid Technology, Inc. + 12,718,750
1,533,023 Discreet Logic, Inc. + [SECTION MARK] 40,816,738
1,717,475 Electronics for Imaging, Inc. + 94,461,125
682,640 Encad, Inc. + [SECTION MARK] 24,660,370
341,900 Pinnacle Systems, Inc. + 8,803,925
488,119 Splash Technology Holdings, Inc. + [SECTION MARK] 17,938,373
--------------
199,399,281
Computer Services (12.2%)
- ------------------------------------------------------------------------------------------------------------
1,199,361 America Online, Inc. + 80,956,868
55,600 Aris Corp. + 1,501,200
250,000 Ciber, Inc. + 8,781,250
596,800 Claremont Technology Group, Inc. + [SECTION MARK] 8,280,600
72,000 Complete Business Solutions, Inc. + 1,996,500
1,295,957 Computer Management Sciences + [SECTION MARK] 25,595,151
690,000 Cotelligent Group, Inc. + [SECTION MARK] 12,075,000
797,500 Information Management Resources, Inc. + [SECTION MARK] 25,121,250
1,578,836 Keane, Inc. + 96,506,351
931,886 Metzler Group, Inc. + [SECTION MARK] 31,451,153
557,048 The Registry, Inc. + 28,200,555
591,538 Renaissance Solutions, Inc. + [SECTION MARK] 23,513,636
267,000 Romac International, Inc. + 9,945,750
278,868 Superior Consultant Holdings Corp. + [SECTION MARK] 10,039,248
1,475,800 Technology Solutions Co. + [SECTION MARK] 57,925,150
1,056,300 Whittman-Hart, Inc. + [SECTION MARK] 27,199,725
--------------
449,089,387
Computer Software (13.0%)
- ------------------------------------------------------------------------------------------------------------
343,279 Arbor Software Corp. + 14,760,997
559,467 Aspect Development, Inc. + [SECTION MARK] 18,392,478
1,880,373 Citrix Systems, Inc. + [SECTION MARK] 89,082,671
1,781,673 Compuware Corp. + 110,241,017
273,549 Documentum, Inc. + 9,061,311
340,366 Electronic Arts, Inc. + 11,402,261
13,700 Great Plains Software, Inc. + 366,475
453,102 Legato Systems, Inc. + 11,100,999
1,179,875 McAfee Associates, Inc. + 76,913,102
338,676 Micro Focus Group PLC ADR (United Kingdom) + 9,144,252
221,763 Peregrine Systems, Inc. + 3,465,047
397,699 Peritus Software Services, Inc. + 10,141,325
448,513 Remedy Corp. + 19,510,316
209,142 Security Dynamics Technologies, Inc. + 8,731,679
137,585 Siebel Systems, Inc. + 4,677,890
589,000 Vantive Corp. + 18,406,250
1,002,343 Viasoft, Inc. + [SECTION MARK] 60,641,752
37,100 Wind River Systems 1,548,925
--------------
477,588,747
Correctional Facilities (0.4%)
- ------------------------------------------------------------------------------------------------------------
300,300 Corrections Corp. + 13,307,044
Education Services (4.5%)
- ------------------------------------------------------------------------------------------------------------
200,000 Apollo Group, Inc. Class A + 7,425,000
695,400 CBT Group PLC ADR (Ireland) + 46,070,250
465,000 Computer Learning Centers, Inc. + [SECTION MARK] 22,261,875
909,203 Education Management Corp. + [SECTION MARK] 26,139,586
386,678 Learning Tree International, Inc. + 15,757,129
851,100 Strayer Education, Inc. [SECTION MARK] 31,916,250
360,380 Sylvan Learning Systems, Inc. + 14,054,820
--------------
163,624,910
Electronics and Electrical Equipment (3.5%)
- ------------------------------------------------------------------------------------------------------------
364,929 Act Manufacturing, Inc. + 13,912,918
909,000 Advanced Lighting Technologies, Inc. + [SECTION MARK] 22,952,250
450,000 Elexsys International, Inc. + 10,575,000
468,765 Flextronics International Ltd. + 14,707,502
312,500 Hadco Corp. + 20,605,469
453,250 Sanmina Corp. + 33,257,219
191,500 Uniphase Corp. + 13,069,875
--------------
129,080,233
Energy Related (1.6%)
- ------------------------------------------------------------------------------------------------------------
393,711 AES Corp. + 31,103,169
704,400 CalEnergy, Inc. + 28,396,125
--------------
59,499,294
Environmental Control (2.0%)
- ------------------------------------------------------------------------------------------------------------
425,000 American Disposal Services, Inc. + [SECTION MARK] 12,325,000
245,647 Memtec Ltd. ADR (Australia) 6,755,293
1,300,000 Philip Services Corp. (Canada) + 19,337,500
863,997 U.S. Filter Corp. + 26,081,909
184,500 United Waste Systems, Inc. + 7,887,375
--------------
72,387,077
Financial Services (4.3%)
- ------------------------------------------------------------------------------------------------------------
125,100 AmeriTrade Holding Corp. Class A + 1,923,413
175,000 Finova Group, Inc. 15,793,750
1,810,800 FIRSTPLUS Financial Group, Inc. + [SECTION MARK] 82,617,750
320,500 Metris Companies Inc. 14,542,688
565,321 Sirrom Capital Corp. 21,623,528
1,260,400 Southern Pacific Funding Corp. + [SECTION MARK] 21,584,350
--------------
158,085,479
Funeral/Cemetery Services (0.9%)
- ------------------------------------------------------------------------------------------------------------
835,000 Equity Corporation International + 20,092,188
314,800 Stewart Enterprises, Inc. Class A 13,615,100
--------------
33,707,288
Health Care Information Systems (1.6%)
- ------------------------------------------------------------------------------------------------------------
742,058 HBO & Co. (United States) 57,416,738
Hospital Management (0.8%)
- ------------------------------------------------------------------------------------------------------------
250,000 Health Management Assoc., Inc. + 7,984,375
700,134 National Surgery Centers, Inc. + [SECTION MARK] 22,316,771
--------------
30,301,146
Lodging (3.1%)
- ------------------------------------------------------------------------------------------------------------
346,219 Doubletree Corp. + 14,541,198
1,361,354 Extended Stay America, Inc. + 21,951,833
802,900 Fine Host Corp. + [SECTION MARK] 24,287,725
188,300 Four Seasons Hotel (Canada) 6,293,928
282,845 Promus Hotel Corp. + 11,119,344
885,688 Signature Resorts, Inc. + 34,098,988
--------------
112,293,016
Medical Management Services (2.8%)
- ------------------------------------------------------------------------------------------------------------
259,750 CRA Managed Care, Inc. + 13,409,594
236,500 OccuSystems, Inc. + 6,740,250
510,750 Pediatrix Medical Group, Inc. + 22,121,859
402,291 Phycor, Inc. + 13,476,749
526,811 Renal Care Group, Inc. + 15,277,505
521,000 Renal Treatment Centers, Inc. + 15,369,500
352,500 Total Renal Care Holdings, Inc. + 14,540,625
--------------
100,936,082
Medical Supplies and Devices (2.3%)
- ------------------------------------------------------------------------------------------------------------
780,843 Cooper Companies, Inc. + 21,863,604
380,000 Cytyc Corp. + 8,882,500
272,120 Henry Schein, Inc. + 10,068,440
564,629 NCS HealthCare, Inc. Class A + [SECTION MARK] 15,880,191
472,552 Neuromedical Systems, Inc. + 1,919,743
830,800 Omnicare, Inc. 24,456,675
--------------
83,071,153
Nursing Homes (0.6%)
- ------------------------------------------------------------------------------------------------------------
522,900 Alternative Living Services, Inc. + 11,275,031
823,800 Assisted Living Concepts Inc. + [SECTION MARK] 12,562,950
--------------
23,837,981
Pharmaceuticals and Biotechnology (2.9%)
- ------------------------------------------------------------------------------------------------------------
200,000 Dura Pharmaceuticals, Inc. + 7,800,000
221,900 Incyte Pharmaceuticals 14,975,115
307,000 Jones Medical Industries, Inc. 9,094,875
245,000 La Jolla Pharmaceutical Co. + 964,688
358,500 Medicis Pharmaceutical Corp. Class A + 16,177,313
926,800 Parexel International Corp. + [SECTION MARK] 35,681,800
306,940 Quintiles Transnational Corp. + 23,135,603
--------------
107,829,394
Restaurants (0.7%)
- ------------------------------------------------------------------------------------------------------------
225,000 Dave & Buster's, Inc. + 7,171,875
394,829 Landry's Seafood Restaurants, Inc. + 10,068,140
302,747 Papa Johns International, Inc. + 9,990,651
--------------
27,230,666
Retail (5.3%)
- ------------------------------------------------------------------------------------------------------------
1,424,534 Bed Bath & Beyond, Inc. + 47,008,964
677,600 Coldwater Creek Inc. + [SECTION MARK] 18,125,800
89,166 CompUSA, Inc. + 2,396,336
972,426 Consolidated Stores Corp. + 39,140,147
723,436 Dollar Tree Stores, Inc. + 30,203,453
503,200 Linens 'N Things, Inc. 14,152,500
916,251 Petco Animal Supplies, Inc. + 24,280,652
459,252 Williams-Sonoma, Inc. + 19,833,946
--------------
195,141,798
Semiconductors (4.2%)
- ------------------------------------------------------------------------------------------------------------
459,299 Aetrium, Inc. + 9,071,155
317,810 ASM Lithography Holding N.V. (Netherlands) + 25,742,610
497,400 Benchmarq Microelectronics, Inc. + [SECTION MARK] 11,191,500
80,100 CFM Technologies, Inc. + [SECTION MARK] 2,082,600
672,183 Credence Systems Corp. + 22,854,222
140,000 Cymer, Inc. + 10,220,000
518,487 Maxim Integrated Products, Inc. 35,840,414
514,400 Micrel, Inc. + [SECTION MARK] 33,757,500
50,000 Photronics, Inc. + 2,731,250
--------------
153,491,251
Specialty Consumer Products (2.5%)
- ------------------------------------------------------------------------------------------------------------
1,053,778 Blyth Industries, Inc. + 37,870,147
1,039,200 Central Garden and Pet Co. + 26,759,400
802,647 Guitar Center, Inc. + 16,855,587
280,900 Rexall Sundown, Inc. + 10,042,175
--------------
91,527,309
Telecommunication Equipment (5.5%)
- ------------------------------------------------------------------------------------------------------------
1,250,933 Advanced Fibre Communications + 87,408,943
367,200 Aspect Telecommunications Corp. + 7,762,838
347,407 ADC Telecommunications Inc. + 14,026,558
300,000 Natural Microsystems Corp. + [SECTION MARK] 10,500,000
1,050,000 Premisys Communications, Inc. + 21,508,594
353,000 Tekelec + 21,709,500
653,298 Tellabs, Inc. + 39,116,218
--------------
202,032,651
Telecommunication Services (1.9%)
- ------------------------------------------------------------------------------------------------------------
549,588 Brooks Fiber Properties, Inc. + 20,678,907
251,227 McLeod, Inc. Class A + 8,635,928
351,500 Qwest Communications International, Inc. + 10,940,438
1,277,800 Tel-Save Holdings, Inc. + 21,722,600
216,200 Teleport Communications Group Inc. Class A + 8,512,875
--------------
70,490,748
--------------
Total Common Stocks (cost $2,738,406,789) $3,616,169,323
SHORT-TERM INVESTMENTS (3.9%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$34,000,000 Federal Home Loan Mortgage Corp. for an
effective yield of 5.38%, August 7, 1997 $ 33,969,514
24,000,000 IBM Credit Corporation for an effective yield of
5.50%, August 22, 1997 23,923,000
27,636,000 Metlife Funding, Inc. for an effective yield of 5.53%,
August 12, 1997 27,589,303
56,613,000 Interest in $204,956,000 joint repurchase
agreement dated July 31,1997 with UBS
Securities due August 1, 1997 with respect
to various U.S. Treasury obligations -- maturity
value of $56,622,058 for an effective
yield of 5.76% 56,622,058
--------------
Total Short-Term Investments (cost $141,755,333) 142,103,875
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,880,162,122) *** $3,758,273,198
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $3,668,241,528.
*** The aggregate identified cost on a tax basis is $2,905,639,504,
resulting in gross unrealized appreciation and depreciation of
$921,152,794 and $68,519,100, respectively, or net unrealized
appreciation of $852,633,694.
+ Non-income-producing security.
[SECTION MARK] Affiliated Companies (Note 5)
ADR after the name of a foreign holding stands for American
Depository Receipts representing ownership of foreign securities on
deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
July 31, 1997
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $2,880,162,122) (Note 1) $3,758,273,198
- ---------------------------------------------------------------------------------------------------
Cash 940,672
- ---------------------------------------------------------------------------------------------------
Dividends and interest receivable 241,564
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 24,232,811
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 21,328,677
- ---------------------------------------------------------------------------------------------------
Total assets 3,805,016,922
Liabilities
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 109,120,804
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 21,092,475
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,656,332
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 1,848,721
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 39,256
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 3,070
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,495,812
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 1,518,924
- ---------------------------------------------------------------------------------------------------
Total liabilities 136,775,394
- ---------------------------------------------------------------------------------------------------
Net assets $3,668,241,528
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $3,094,748,669
- ---------------------------------------------------------------------------------------------------
Accumulated net investment loss (Note 1) (6,175)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments
(Note 1) (304,612,042)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 878,111,076
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $3,668,241,528
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($2,271,205,970 divided by 141,772,163 shares) $16.02
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $16.02)* $17.00
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($1,116,848,622 divided by 72,303,391 shares)** $15.45
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($177,324,615 divided by 11,240,228 shares) $15.78
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $15.78)* $16.35
- ---------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($102,862,321 divided by 6,396,138 shares) $16.08
- ---------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales, the
offering price is reduced.
**Redemption price per share is equal to net asset value less any applicable contingent deferred
sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended July 31, 1997
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends (including dividend income of $178,844 from investments
in affiliated issuers) (Note 5) $ 1,444,606
- --------------------------------------------------------------------------------------------------
Interest 8,005,368
- --------------------------------------------------------------------------------------------------
Total investment income 9,449,974
- --------------------------------------------------------------------------------------------------
Expenses:
Compensation of Manager (Note 2) 16,218,672
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 7,145,613
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 95,520
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 38,655
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 4,597,964
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 8,758,756
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 852,109
- --------------------------------------------------------------------------------------------------
Reports to shareholders 507,290
- --------------------------------------------------------------------------------------------------
Registration fees 527,512
- --------------------------------------------------------------------------------------------------
Auditing 55,185
- --------------------------------------------------------------------------------------------------
Legal 41,023
- --------------------------------------------------------------------------------------------------
Postage 1,331,895
- --------------------------------------------------------------------------------------------------
Other 495,044
- --------------------------------------------------------------------------------------------------
Total expenses 40,665,238
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (1,182,126)
- --------------------------------------------------------------------------------------------------
Net expenses 39,483,112
- --------------------------------------------------------------------------------------------------
Net investment loss (30,033,138)
- --------------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1, 3 and 5)
(including realized loss of $67,576,200 on sales of
investments in affiliated issuers) (297,209,612)
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments during the year 775,855,044
- --------------------------------------------------------------------------------------------------
Net gain on investments 478,645,432
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $448,612,294
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended July 31
------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment loss $ (30,033,138) $ (11,052,161)
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (297,209,612) 256,975,799
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments 775,855,044 (179,931,053)
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 448,612,294 65,992,585
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (126,228,370) (100,559,484)
- ----------------------------------------------------------------------------------------------------------------------
Class B (62,425,045) (28,189,713)
- ----------------------------------------------------------------------------------------------------------------------
Class M (7,461,879) (1,163,623)
- ----------------------------------------------------------------------------------------------------------------------
Class Y (5,475,224) --
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 1,239,292,050 1,352,351,653
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 1,486,313,826 1,288,431,418
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of year 2,181,927,702 893,496,284
- ----------------------------------------------------------------------------------------------------------------------
End of year (including accumulated net investment
loss of $6,175 and $0, respectively) $3,668,241,528 $2,181,927,702
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $14.80 $14.17 $10.15 $10.72 $9.05
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (.12)(d) (.08)(d) (.07) (.06) (.06)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.42 2.42 4.95 .69 2.87
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.30 2.34 4.88 .63 2.81
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized
gain on investments (1.08) (1.71) (.86) (1.20) (1.14)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.08) (1.71) (.86) (1.20) (1.14)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $16.02 $14.80 $14.17 $10.15 $10.72
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment
return at net asset value (%)(a) 16.33 17.12 51.32 4.83 32.93
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,271,206 $1,479,770 $730,188 $412,706 $364,400
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) 1.16 1.11 1.14 1.16 1.26
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.79) (.53) (.62) (.97) (.90)
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 112.84 199.52 116.10 76.66 108.20
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0461
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 period ended July 31, 1996, and thereafter
include amounts paid through brokerage service and expense offset arrangements. Prior period
ratios exclude these amounts (Note 2).
(c) Average commission rate paid on security trades is required for fiscal periods beginning on or after
September 1, 1995.
(d) Per share net investment income (loss) has been determined on the basis of the weighted
average number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 15, 1993+
operating performance Year ended July 31 to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $14.41 $13.92 $10.06 $10.70 $10.80
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (.22)(d) (.20)(d) (.10) (.07) (.01)(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.34 2.40 4.82 .63 (.09)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.12 2.20 4.72 .56 (.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized
gain on investments (1.08) (1.71) (.86) (1.20) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.08) (1.71) (.86) (1.20) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $15.45 $14.41 $13.92 $10.06 $10.70
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment
return at net asset value (%)(a) 15.49 16.37 50.13 4.15 (.92)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,116,849 $641,576 $160,197 $42,115 $455
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) 1.91 1.89 1.90 1.94 .09 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (1.55) (1.29) (1.37) (1.71) (.09)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 112.84 199.52 116.10 76.66 108.20
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0461
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 period ended July 31, 1996, and thereafter
include amounts paid through brokerage service and expense offset arrangements. Prior period
ratios exclude these amounts (Note 2).
(c) Average commission rate paid on security trades is required for fiscal periods beginning on or after
September 1, 1995.
(d) Per share net investment income (loss) has been determined on the basis of the weighted
average number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Dec. 2, 1994+
operating performance Year ended to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $14.66 $14.11 $11.10
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (.19)(d) (.16)(d) (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.39 2.42 3.92
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.20 2.26 3.87
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized
gain on investments (1.08) (1.71) (.86)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.08) (1.71) (.86)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $15.78 $14.66 $14.11
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment
return at net asset value (%)(a) 15.78 16.58 37.79 *
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $177,325 $60,432 $3,111
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) 1.66 1.68 1.10 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (1.30) (1.06) (.66)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 112.84 199.52 116.10
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0461
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 period ended July 31, 1996, and thereafter
include amounts paid through brokerage service and expense offset arrangements. Prior period
ratios exclude these amounts (Note 2).
(c) Average commission rate paid on security trades is required for fiscal periods beginning on or after
September 1, 1995.
(d) Per share net investment income (loss) has been determined on the basis of the weighted
average number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------------
Year For the period
Per-share ended July 12, 1996+
operating performance July 31 to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $14.81 $15.65
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (.09)(d) --(d)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.44 (.84)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.35 (.84)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized
gain on investments (1.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $16.08 $14.81
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment
return at net asset value (%)(a) 16.67 (5.37)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $102,862 $150
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (b) .91 .07 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%) (.53) (.02)*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 112.84 199.52
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (c) $.0461
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 period ended July 31, 1996, and thereafter
include amounts paid through brokerage service and expense offset arrangements. Prior period
ratios exclude these amounts (Note 2).
(c) Average commission rate paid on security trades is required for fiscal periods beginning on or after
September 1, 1995.
(d) Per share net investment income (loss) has been determined on the basis of the weighted
average number of shares outstanding during the period.
</TABLE>
Notes to financial statements
July 31, 1997
Note 1
Significant accounting policies
Putnam OTC & Emerging Growth Fund, formerly Putnam OTC Emerging Growth 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 through investments in common stocks of small to
medium-sized emerging growth companies traded in the over-the-counter (OTC)
market and common stocks of emerging growth companies listed on securities
exchanges. Prior to December 16, 1996, the fund's objective was to invest in
common stocks of small to medium-sized emerging growth companies traded in the
over-the-counter (OTC) market.
The fund offers class A, class B, class M and class Y shares. Class A shares
are sold with a maximum front-end sales charge of 5.75%. Class B shares, which
convert to class A shares after approximately eight years, do not pay a
front-end sales charge but pay a higher ongoing distribution fee than class A
shares, and may be subject to a contingent deferred sales charge, if those
shares are redeemed within six years of purchase. Class M shares are sold with
a maximum front end sales charge of 3.50% and pay an ongoing distribution fee
that is higher than class A shares but lower than class B shares. Class Y
shares, which are sold at net asset value, are generally subject to the same
expenses as class A, class B, and Class M shares, but do not bear a
distribution fee. Class Y shares are sold to defined contribution plans that
initially invest at least $250 million in a combination of Putnam Funds and
other accounts managed by affiliates of Putnam Investment Management, Inc.
("Putnam Management") the fund's Manager, a wholly-owned subsidiary of Putnam
Investments, Inc.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class (including
the distribution fees applicable to such class). Each class votes as a class
only with respect to its own distribution plan or other matters on which a
class vote is required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the fund, if
that fund were liquidated. In addition, the Trustees declare separate
dividends on each class of shares.
The following is a summary of significant accounting policies followed by the
fund in the preparation of its financial statements. The preparation of
financial statements is in conformity with generally accepted accounting
principles and requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities. Actual results could
differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are stated at market value, which is determined using the last
reported sale price, or, if no sales are reported -- as in the case of some
securities traded over-the-counter -- the last reported bid price. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost which approximates market value, and other investments are
stated at fair value following procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam Management.
These balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through its
custodian, receives delivery of the underlying securities, the market value of
which at the time of purchase is required to be in an amount at least equal to
the resale price, including accrued interest. Putnam Management is responsible
for determining that the value of these underlying securities is at all times
at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Interest income is recorded on the accrual basis. Dividend income
is recorded on the ex-dividend date.
E) Federal taxes It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. It is also
the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986. Therefore, no provision has been made for federal taxes on income,
capital gains or unrealized appreciation on securities held and for excise tax
on income and capital gains.
At July 31, 1997, the fund had a capital loss carryover of approximately
$35,394,000 available to offset future net capital gain, if any, which will
expire on July 31, 2005.
F) 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.
This difference includes treatment of net operating losses. Reclassifications
are made to the fund's capital accounts to reflect income and gains available
for distribution (or available capital loss carryovers) under income tax
regulations. For the year ended July 31, 1997, the fund reclassified
$30,026,963 to decrease accumulated net investment loss and $36,696,213 to
decrease paid-in-capital, with a decrease to accumulated net realized losses
on investments of $6,669,250. The calculation of net investment income per
share in the financial highlights table excludes these adjustments.
Note 2
Management fee, administrative
services, and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund. Such
fee is based on the following annual rates: 0.70% of the first $500 million of
average net assets, 0.60% of the next $500 million, 0.55% of the next $500
million, 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.
Prior to November 20, 1996, any amount over $1.5 billion was based on 0.50%.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor Services,
a division of PFTC.
For the year ended July 31, 1997, fund expenses were reduced by $1,182,126
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.
Trustees of the fund receive an annual Trustees fee of $3,310 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 "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 Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to its
class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to compensate
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments
Inc., for services provided and expenses incurred by it in distributing shares
of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds
Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the average net assets
attributable to class A, class B and class M shares, respectively. The
Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%
and 0.75% of the average net assets attributable to class A, class B and class
M shares respectively.
For the year ended July 31, 1997, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $2,377,540 and $102,706 from the sale
of class A and class M shares, respectively and $1,844,603 in contingent
deferred sales charges from redemptions of class B shares. A deferred sales
charge of up to 1% is assessed on certain redemptions of class A shares. For
the year ended July 31, 1997, Putnam Mutual Funds Corp., acting as underwriter
received $99,187 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended July 31, 1997, purchases and sales of investment
securities other than short-term investments aggregated $4,194,248,989 and
$3,096,868,477, 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 July 31, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended
July 31, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 274,298,211 $4,041,789,135
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,111,312 117,046,198
- ------------------------------------------------------------
282,409,523 4,158,835,333
Shares
repurchased (240,605,584) (3,529,210,130)
- ------------------------------------------------------------
Net increase 41,803,939 $629,625,203
- ------------------------------------------------------------
Year ended
July 31, 1996
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 152,200,446 $2,417,089,147
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 6,674,236 94,039,901
- ------------------------------------------------------------
158,874,682 2,511,129,048
Shares
repurchased (110,433,769) (1,747,181,385)
- ------------------------------------------------------------
Net increase 48,440,913 $763,947,663
- ------------------------------------------------------------
Year ended
July 31, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 58,586,365 $846,936,133
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,972,999 55,502,794
- ------------------------------------------------------------
62,559,364 902,438,927
Shares
repurchased (34,785,967) (495,363,581)
- ------------------------------------------------------------
Net increase 27,773,397 $407,075,346
- ------------------------------------------------------------
Year ended
July 31, 1996
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 47,342,283 $751,027,251
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,860,338 25,616,447
- ------------------------------------------------------------
49,202,621 776,643,698
Shares
repurchased (16,184,011) (251,940,378)
- ------------------------------------------------------------
Net increase 33,018,610 $524,703,320
- ------------------------------------------------------------
Year ended
July 31, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 15,669,638 $227,790,748
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 503,305 7,172,101
- ------------------------------------------------------------
16,172,943 234,962,849
Shares
repurchased (9,054,630) (130,538,624)
- ------------------------------------------------------------
Net increase 7,118,313 $104,424,225
- ------------------------------------------------------------
Year ended
July 31, 1996
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 5,762,407 $93,574,709
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 80,826 1,155,720
- ------------------------------------------------------------
5,843,233 94,730,429
Shares
repurchased (1,941,763) (31,178,096)
- ------------------------------------------------------------
Net increase 3,901,470 $63,552,333
- ------------------------------------------------------------
Year ended
July 31, 1997
- ------------------------------------------------------------
Class Y Shares Amount
- ------------------------------------------------------------
Shares sold 7,763,874 $116,857,479
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 378,646 5,475,224
- ------------------------------------------------------------
8,142,520 122,332,703
Shares
repurchased (1,756,477) (24,165,427)
- ------------------------------------------------------------
Net increase 6,386,043 $98,167,276
- ------------------------------------------------------------
For the Period
July 12, 1996
(commencement
of operations) to
July 31, 1996
- ------------------------------------------------------------
Class Y Shares Amount
- ------------------------------------------------------------
Shares sold 10,100 $148,418
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ------------------------------------------------------------
10,100 148,418
Shares
repurchased (5) (81)
- ------------------------------------------------------------
Net increase 10,095 148,337
- ------------------------------------------------------------
Note 5
Transactions with Affiliated Companies
Transactions during the period with companies in which the
fund owns at least 5% of the voting securities were as follows:
<TABLE>
<CAPTION>
Purchase Sales Dividend Market
Name of Affiliates cost cost Income Value
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actel Corp. $ 21,658,223 $ 21,658,223 $ -- $ --
Advanced Lighting
Technologies, Inc. 22,497,750 -- -- 22,952,250
American Disposal Services 3,140,076 2,260,376 -- 12,325,000
Aspect Development, Inc. 17,802,914 12,309,853 -- 18,392,478
Assisted Living Concepts, Inc. 6,970,544 -- -- 12,562,950
Benchmarq MicroElectronics, Inc. 15,028,296 4,185,712 -- 11,191,500
Bio-Vascular, Inc. -- 7,678,714 -- --
*Budget Group Inc. 24,534,508 -- -- 31,813,219
Caribiner International, Inc. 34,359,040 -- -- 48,668,004
Carriage Services 10,751,711 10,751,711 -- --
CFM Technologies, Inc. 25,478,703 23,159,446 -- 2,082,600
Citrix Systems 62,877,409 32,529,378 -- 89,082,671
Claremont Technology Group 17,735,531 6,346,910 -- 8,280,600
Clarify, Inc. 48,177,175 59,597,273 -- --
Coldwater Creek Inc. 15,462,349 3,658,589 -- 18,125,800
Computer Learning Centers, Inc. 8,230,806 -- -- 22,261,875
Computer Management Sciences 16,351,945 4,563,085 -- 25,595,151
Consolidated Cigar Holdings Inc. 15,487,906 15,487,906 -- --
Cotellignet Group, Inc. 14,836,037 239,630 -- 12,075,000
Discreet Logic Inc. 27,214,463 -- -- 40,816,738
Education Management Corp. 21,185,142 -- -- 26,139,586
Encad Inc. 25,484,764 -- -- 24,660,370
Fine Host Corp. 19,949,659 -- -- 24,287,725
**FIRSTPLUS Financial Group, Inc. 37,413,671 762,500 -- 82,617,750
Gadzooks, Inc. 27,078,825 27,078,825 -- --
Information Management
Resources, Inc. 24,330,653 341,600 -- 25,151,250
Mego Mortgage Corp. 12,396,180 12,396,180 -- --
Metzler Group Inc. 22,933,737 748,637 -- 31,451,153
Micrel Inc. 24,158,179 5,164,348 -- 33,757,500
Midcom Communications, Inc. 6,656,873 17,410,250 -- --
National Surgery Centers, Inc. 8,363,003 272,292 -- 22,316,771
Natural Microsystems 5,909,177 3,746,198 -- 10,500,000
NCS Healthcare Inc. Class A 10,209,301 577,965 -- 15,880,191
OneWave, Inc. 2,489,850 15,094,990 -- --
Parexel International Corp. 20,568,227 1,997,044 -- 35,681,800
Party City Corp. 3,311,675 6,845,879 -- --
Projects Software 17,959,972 25,159,191 -- --
Renaissance Solutions Inc. 7,822,835 1,367,598 -- 23,513,636
Sabratek Corp. 2,200,310 7,480,289 -- --
Southern Pacific Funding Corp. 23,844,546 135,320 -- 21,584,350
Splash Technology Holdings, Inc. 19,353,222 9,618,141 -- 17,938,373
Strayer Education, Inc. 14,275,080 149,503 178,844 31,916,250
Superior Consultant
Holdings Corp. 15,308,029 9,760,730 -- 10,039,248
Technology Solutions, Co. 58,732,871 6,049,926 -- 57,925,150
Template Software, Inc. 4,141,800 4,141,800 -- --
The North Face, Inc. 13,719,491 -- -- 14,542,337
Veeco Instruments, Inc. 16,001,932 16,001,932 -- --
Viasoft Inc. 29,420,737 6,320,161 -- 60,641,752
Whittman-Hart, Inc. 20,882,599 6,262,471 -- 27,199,725
Workgroup Technology Corp. -- 15,348,959 -- --
- --------------------------------------------------------------------------------------
Totals $924,697,726 $404,659,535 $178,844 $973,970,753
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
*Formerly known as Team Rental Group, Inc.
**Formerly known as RAC Financial Group Inc.
</TABLE>
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, the Fund hereby
designates $1.078 per share (or if different, the amount necessary to
offset net capital gain earned by the Fund) [for all share classes] as
capital gain dividends for its taxable year ended July 31, 1997.
The Form 1099 you receive in January 1998 will show the tax status of
all distributions paid to your account in calendar 1997.
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Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Michael J. Mufson
Vice President and Fund Manager
Steven L. Kirson
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam OTC & Emerging
Growth 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
- --------------------
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PAID
Putnam
Investments
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35887-024/227/673.2BB 9/97
