Putnam
Growth
Fund
Semiannual Report
June 30, 1994
[Putnam logo]
Boston*London*Tokyo
<PAGE>
Performance highlights
"The market correction that took place over the past several
months created favorable buying opportunities. We purchased a
number of stocks at attractive prices -- stocks we believe are
poised for solid earnings growth over the long term."
- -- Charles Swanberg, Fund Manager
Performance should always be considered in light of a fund's
investment strategy. Putnam Growth Fund is designed for investors
seeking long-term growth primarily through investments in common
stocks.
SEMIANNUAL RESULTS AT A GLANCE
Total return: NAV POP
6 months ended 6/30/94-8.26% -13.55%
(change in value during period plus reinvested distributions)
Share value: NAV POP
12/31/93 $10.29 $10.92
6/30/94 $ 9.44 $10.02
The fund's distributions are paid annually, in December.
Performance data represent past results and reflect an expense
limitation currently in effect. Without the limitation, total
return would have been lower. Investment return and net asset
value will fluctuate so an investor's shares, when redeemed, may
be worth more or less than their original cost. For comparative
performance, see page 8. POP assumes 5.75% maximum sales charge.
<PAGE>
From the Chairman
Dear Shareholder,
The first six months of 1994 served as a reminder that the
world's closely linked financial markets are always shifting and
sometimes do so dramatically.
This spring, higher interest rates in the United States lessened
fears of inflation and moderated growth while sparking volatility
that affected virtually every sector of the stock and bond
markets. Conditions now appear more stable. Most of the world's
major economies show stronger fundamentals, while Japan and
Europe appear on the brink of recovery.
Yet, some apprehension lingers. The markets continue to
overanticipate another rise in U.S. interest rates and discount
the generally good economic news. Meanwhile the dollar poses a
new concern as it loses ground to other currencies.
Most stocks in the growth category joined other investments in
losing value during the past five months. However it is important
to remember that declines in the market have traditionally paved
the way for gains that more than made up for the downturn.
In the report that follows, Fund Manager Charles Swanberg
explains how he plans to use Putnam's considerable resources in
positioning your fund to meet the challenges of the coming
months.
Respectfully yours,
George Putnam
Chairman of the Trustees
August 17, 1994
<PAGE>
Report from the fund manager
Charles Swanberg
During the past few months, we have witnessed more volatility in
the stock market than has been seen for some time. After posting
positive returns for three consecutive years, stock prices
generally declined in reaction to increases in short- and
long-term interest rates. Consequently, for the six months ended
June 30, l994, Putnam Growth Fund produced a total return of
- -8.26%. While this is slightly behind the -7.31% generated by the
Standard & Poor's(R) 400 Index, an unmanaged list of stocks of
medium-sized companies similar to those in which your fund
invests, it is also important to consider that your fund has
recently been repositioned to emphasize stocks we expect to be
less vulnerable to short-term market fluctuations. (To see how
the fund's performance compares with other indexes, turn to page
8.)
STRATEGY: REPOSITIONING FOR SLOWER GROWTH
Because we believe higher interest rates could lead to slower
economic growth over the next 6 to 12 months, we adopted a more
defensive strategy in choosing stocks for the portfolio. We took
profits in a number of holdings we believed had reached full
valuation. In addition, we added selected stocks of stable
businesses generally insensitive to economic trends. We expect
these holdings to produce strong earnings if the economy
continues to slow.
We have continued to concentrate the fund's investments in four
sectors of the economy -- retail, technology, health care, and
business services. We also maintained approximately one fifth of
the portfolio weighting in international stocks. The portfolio
has positions in the United Kingdom, France, Germany, Sweden, and
Mexico. In selecting stocks in foreign markets, we generally
emphasized companies that would benefit from economic recovery.
Shortly after the close of the semiannual period, we increased
the portfolio's cash position from 3% to 7%. We view this higher
cash position as "opportunistic," because during times of market
volatility, it provides the liquidity to purchase securities at
attractive prices as opportunities present themselves.
FOCUS: MORE RETAILING, LESS TECHNOLOGY
Retail and consumer-oriented business continue to dominate the
portfolio. We added Blockbuster Video, a video rental company,
the Loewen Group, an operator of funeral homes across the
country, and Outback Steak House, a restaurant chain. We
increased the portfolio's positions in McDonald's and Home Depot.
We emphasized the retail sector overseas, as well. In the United
Kingdom, we purchased Albertson's Stores, a food retailer, and
Next, an apparel retailer; we added Hennes and Mauritz, a Swedish
apparel retailer.
Recently, for the first time since the fund's inception, we added
a pharmaceutical stock to the portfolio -- U.S.-based Pfizer Inc.
Over the past 18 months, the prices of pharmaceutical stocks have
declined dramatically as the public debate over health care
reform raised concerns that drug companies would be subject to
price controls. In our opinion, the downward pressure on
pharmaceutical stock prices has been overdone, and we now see
some attractive buying opportunities in this area.
We took profits in some of the fund's holdings in health
maintenance organizations (HMOs). We've held HMO stocks in the
portfolio since the fund's inception. They have been strong
performers, and we took advantage of their strength.
TOP INDUSTRY SECTORS*
Retail 21.2%
Business Equipment and Services 12.4%
Consumer Services 11.2%
Broadcasting 10.3%
Computer Software 7.3%
*Based on net assets as of 6/30/94.
<PAGE>
During the period, we reduced portfolio weightings in the
broadcasting industries significantly. Most of the cuts were made
in cable television, largely because of several recent negative
developments in the cable television industry. Government
regulation has reduced cable companies' cash flows, while higher
interest rates have lowered profits. Cable companies tend to
carry substantial amounts of debt, and in a higher interest rate
environment more of their profits go to servicing that debt.
Also, many of the mergers among cable, telecommunications, and
electronics companies that would have helped construct the
information superhighway failed to materialize. The breakdown in
merger talks among these companies put cable company stocks in a
less favorable light.
Two other holdings we added or increased during the period were
business services companies: Olsten Corporation and Rentokil,
based in the United Kingdom. Rentokil provides cleaning, pest
control, security, and a number of other services for businesses.
The company is growing at the rate of 20% a year, and we expect
this growth rate to continue, at least for the next three to five
years.
SHIFT IN INVESTOR SENTIMENT SEEN AS BUSINESS SLOWS
Because we believe higher interest rates could slow economic
growth and this could cause more volatility in the stock market,
we are proceeding cautiously. As industrial production slows, we
believe we will see investors shift away from cyclical stocks --
those whose earnings and stock prices are closely tied to
movements in the economy -- and into traditional growth companies
-- those that generally rely less on economic activity to
increase earnings. We've positioned the fund to take advantage of
this anticipated change in the pace of business and shift in
investor sentiment.
TOP 10 HOLDINGS (6/30/94)
LIN Broadcasting Corp.
Block (H&R), Inc.
Luxottica Group SPA ADS
Wolters Kluwer N.V.
Danka Business Systems ADR
Hennes & Mauritz AB
Pfizer, Inc.
Telefonos de Mexico S.A., Ser. L, ADR
Hornbach Pfd.
Maxim Integrated Products Inc.
These holdings represent 20.3% of the fund's net assets.
Portfolio holdings are subject to change.
As we've seen over the past six months, substantial volatility
can occur in the stock market over a relatively short period.
That's why it's important to take a long-term view when investing
in stocks. As we move into the second half of fiscal l994, your
fund is holding the stocks of companies we believe will perform
well in a slower economic environment -- stocks that should be
less vulnerable to short-term fluctuations in the stock market
and whose earnings we expect to grow over the long term.
Although Putnam Management viewed the companies discussed here
favorably as of June 30, 1994, discussion of them here should not
be taken as investment advice. There is no assurance that these
securities will be held in the future.
Performance summary
This section provides, at a glance, information about your fund's
performance. 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 back into the
fund. We show total return in two ways: on a cumulative long-term
basis and on average how the fund might have grown each year over
varying periods. For comparative purposes, we show how the fund
performed relative to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIODS ENDING 6/30/94
Standard Consumer
& Poor's(R) Price
NAV POP 500 Index Index
6 months -8.26% -13.55% -3.35% 1.51%
1 year 8.11 1.91 1.43 2.49
Life of fund
(since 4/14/93) 12.82 6.32 1.91 3.06
Annual average 10.48 5.19 1.58 2.53
Fund performance data do not take into account any adjustment for
taxes payable on reinvested distributions. Performance data
represent past results. Investment returns and net asset value
will fluctuate so an investor's shares, when sold, may be worth
more or less than their original cost.
<PAGE>
TERMS AND DEFINITIONS
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.
COMPARATIVE BENCHMARKS
Standard & Poor's(R) 500 Index is an unmanaged list of common
stocks that is frequently used as a general measure of stock
market performance. Standard & Poor's 400 Index is an unmanaged
list of medium-capitalization common stocks. Both the indices
assume reinvestment of all distributions and do not take into
account brokerage commissions or other costs. The fund's
portfolio contains securities that do not match those in the
indices.
Consumer Price Index is a commonly used measure of inflation; it
does not represent an investment return.
<PAGE>
Report of independent accountants
For the six months ended June 30, 1994
To the Trustees and Shareholders of Putnam Growth Fund
We have audited the accompanying statement of assets and
liabilities of Putnam Growth Fund, including the portfolio of
investments owned, as of June 30, 1994, and the related statement
of operations for the six months then ended, the statement of
changes in net assets and the "Financial Highlights" for the
six months ended June 30, 1994 and for the period April 14, 1993
(commencement of operations) to December 31, 1993. 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 June 30, 1994 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 Growth Fund as of June
30, 1994, the results of its operations for the six months ended
June 30, 1994, and the changes in its net assets and the
"Financial Highlights" for the six months ended June 30, 1994 and
for the period April 14, 1993 (commencement of operations) to
December 31, 1993, in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
August 16, 1994
<PAGE>
Portfolio of investments owned
June 30, 1994
Common Stocks (97.1%)(a)
Number of Shares Value
Retail(21.2%)
1,364 Albertsons, Inc. $37,510
650 Autozone, Inc. (b) 15,844
969 Bed Bath & Beyond, Inc. (b) 27,738
235 Castorama Dubois (c) 29,213
17,157 Cifra S.A. de CV Series C (c) 39,981
1,474 Department 56, Inc. (b) 46,984
591 Gap, Inc. 25,265
340 Gymboree Corp. (b) 13,430
900 Heilig-Meyers Co. 24,413
1,150 Hennes & Mauritz AB (c) 57,385
1,153 Home Depot, Inc. 48,570
48 Hornbach Pfd. (c) 49,936
14,402 Iceland Group PLC (b)(c) 30,454
856 Lowes Companies, Inc. 29,318
11,200 Next PLC (c) 40,452
1,438 Office Depot, Inc. (b) 28,770
1,443 Sysco Corp. 32,648
1,010 Talbots, Inc. 30,300
608,211
Business Equipment and Services(12.4%)
100 Antec Corp. (b) 2,350
1,671 Cisco Systems, Inc. (b) 39,060
1,520 Danka Business Systems ADR (c) 60,610
549 First Data Corp. 22,715
700 HBO & Co. 17,675
1,300 Loewen Group, Inc. 32,013
1,850 Manpower, Inc. 38,850
1,306 Olsten Corp. 41,792
11,572 Rentokil Group Ord. (c) 38,581
1,041 Wolters Kluwer N.V. (c) 61,755
355,401
Consumer Services(11.2%)
1,180 ALC Communications Corp. (b) 36,285
1,672 Block (H & R), Inc. 65,625
1,593 Brinker International, Inc. (b) 33,453
2,000 Buffets, Inc. (b) 36,750
1,550 Hospitality Franchise Systems, Inc. (b) 37,975
1,348 McDonald's Corp. 38,924
1,750 Outback Steakhouse, Inc. (b) 42,219
532 Paychex, Inc. 15,561
500 Promus Companies, Inc. (b) 14,813
321,605
<PAGE>
Broadcasting(10.3%)
200 Cablevision Systems Corp. Cl. A (b) 9,350
700 Clear Channel Communications, Inc. (b) 26,338
1,441 Comcast Corp. Special Class A 25,938
980 Infinity Broadcasting Corp. Class A (b) 23,765
1,775 Liberty Media Corp. Class A (b) 35,056
560 LIN Broadcasting Corp. (b) 67,060
1,052 Paging Network, Inc. (b) 28,930
1,010 TCA Cable TV, Inc. 22,851
1,436 Tele-Communications, Inc. Class A (b) 29,259
840 Viacom, Inc. Class B (b) 26,565
295,112
Computer Software(7.3%)
330 America Online, Inc. (b) 18,810
1,444 CUC International, Inc. (b) 38,627
640 Compuware Corp. (b) 26,480
503 Lotus Development Corp. (b) 18,485
651 Powersoft Corp. (b) 31,574
1,004 Sybase, Inc. (b) 49,196
1,096 Wellfleet Communications, Inc. (b) 27,400
210,572
Health Care(6.8%)
2,800 Boston Scientific Corp. (b) 35,350
1,430 Health Management Associates, Inc. (b) 29,315
1,350 Lincare Holdings, Inc. (b) 26,156
360 Medtronic, Inc. 28,845
4,900 Takare PLC (c) 16,110
348 United Health Care Corp. 15,486
1,133 Value Health, Inc. (b) 43,337
194,599
Insurance and Finance(6.7%)
517 Federal Home Loan Mortgage Corp. 31,279
372 Federal National Mortgage Assn. 31,062
822 First USA, Inc. 31,544
304 General RE Corp. 33,136
430 Healthsource, Inc. (b) 12,255
1,166 MBNA Corp. 26,235
744 Student Loan Marketing Assn. 26,784
192,295
Pharmaceuticals(5.1%)
2,070 Astra AB (c) 41,912
735 Biogen, Inc. (b) 21,039
614 Genentech, Inc. (b) 30,240
850 Pfizer, Inc. 53,656
146,847
Utilities(4.0%)
1,247 Airtouch Communications, Inc. (b) 29,460
1,255 Century Telephone Enterprises 32,473
943 Telefonos de Mexico SA, Ser. L, ADR (c) 52,690
114,623
<PAGE>
Electronics and Electrical Equipment(3.2%)
960 DSC Communications Corp. (b) 18,780
550 Linear Technology Corp. 24,200
947 Maxim Integrated Products, Inc. (b) 49,244
92,224
Entertainment(3.2%)
1,766 Blockbuster Entertainment Corp. 45,695
705 Disney (Walt) Productions, Inc. 29,346
913 Marvel Entertainment Group, Inc. (b) 16,662
91,703
Chemicals(2.3%)
1,563 Schulman (A.), Inc. 40,443
650 Sigma Aldrich Corp. 26,000
66,443
Consumer Non Durables(2.2%)
1,868 Luxottica Group SPA ADS (c) 63,745
Aerospace and Defense(1.2%)
939 Flight Safety International, Inc. 35,330
Total Investments(cost $2,746,911) (d) $ 2,788,710
Notes
(a) Percentages indicated are based on total net assets of
$2,872,229, which correspond to a net asset value per share of
$9.44.
(b) Non-income-producing security.
(c) Securities whose values are determined or significantly
influenced by trading on exchanges not in the United States or
Canada. ADR or ADS after the name of a foreign holding stands for
American Depository Receipt, or American Depository Shares,
respectively, representing ownership of foreign securities on
deposit with a domestic custodian bank.
(d) The aggregate identified cost on a tax basis is $2,759,069,
resulting in gross unrealized appreciation and depreciation of
$222,978 and $193,337, respectively, or net unrealized
appreciation of $29,641.
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
June 30, 1994
<C> <C>
Assets
Investments in securities, at value (identified cost $2,746,911) (Note 1)$2,788,710
Cash 90,326
Dividends and other receivables 2,597
Unamortized organization expenses (Note 1) 13,066
Receivable from Manager (Note 3) 34,128
Total assets 2,928,827
Liabilities
Payable for securities purchased $ 27,854
Payable for compensation of Trustees (Note 3) 68
Payable for administrative services (Note 3) 10
Payable for investor servicing and custodian fees (Note 3) 7,028
Payable for organization expense (Note 1) 17,221
Other accrued expenses 4,417
Total liabilities 56,598
Net assets $2,872,229
Represented by
Paid-in capital (Note 5) $ 2,682,233
Accumulated net investment loss (3,430)
Accumulated net realized gain on investments 151,627
Net unrealized appreciation of investments 41,799
Total-Representing net assets applicable to capital shares outstanding $2,872,229
<PAGE>
Computation of net asset value and offering price
Net asset value and redemption price per share ($2,872,229
divided by 304,374 shares) $9.44
Offering price per share (100/94.25 of $9.44)* $10.02
* 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.
The accompanying notes are an integral part of these financial statements.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Statement of operations
For the six months ended June 30, 1994
<C> <C>
Investment income:
Dividends (net of foreign tax of $237) $10,823
Interest 86
Total investment income 10,909
Expenses:
Compensation of Manager (Note 3) $9,670
Investor servicing and custodian fees (Note 3) 11,696
Compensation of Trustees (Note 3) 779
Auditing 7,932
Legal 5,419
Administrative services (Note 3) 20
Amortization of organization expenses (Note 1) 1,693
Fees waived and other expenses absorbed by Manager (Note 3) (23,923)
Total expenses 13,286
Net investment loss $(2,377)
Net realized gain on investments (Notes 1 and 4) 94,814
Net unrealized depreciation of investments during the period (358,097)
Net loss on investments (263,283)
Net decrease in net assets resulting from operations $(265,660)
The accompanying notes are an integral part of these financial statements.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Statement of changes of net assets
For the period
April 14, 1993
(commencement
Six months ended of operations)
June 30, to December 31,
1994 1993*
<S> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment loss $ (2,377) $ (1,053)
Net realized gain on investments 94,814 97,794
Net unrealized appreciation (depreciation) of investments (358,097) 399,896
Net increase (decrease) in net assets resulting
from operations (265,660) 496,637
Distributions to shareholders from:
Net investment income -- --
Net realized gain on investments -- (40,981)
Increase from capital share transactions (Note 5) 243,270 438,963
Total increase (decrease) in net assets (22,390) 894,619
Net assets
Beginning of period 2,894,619 2,000,000
End of period (including accumulated net investment
loss of $3,430 and $1,053, respectively) $2,872,229 $2,894,619
* See Note 2.
The accompanying notes are an integral part of these financial statements.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout the period)
For the period
April 14, 1993
(commencement
Six months ended of operations) to
June 30, 1994 December 31, 1993*
<S> <C> <C>
Net Asset Value, Beginning of Period $10.29 $8.50
Investment Operations:
Net Investment Income (Loss) (.01)(a) --(a)
Net Realized and Unrealized Gain (Loss) on Investments (.84) 1.95
Total from Investment Operations (.85) 1.95
Less Distributions From:
Net Investment Income -- --
Net Realized Gain on Investments -- (.16)
Total Distributions -- (.16)
Net Asset Value, End of Period $9.44 $10.29
Total Investment Return at Net Asset Value (%) (b) -16.52(c) 32.37(c)
Net Assets, End of Period (In Thousands) $2,872 $2,895
Ratio of Expenses to Average Net Assets (%) .89(a)(c) 1.01(a)(c)
Ratio of Net Investment Loss to Average Net Assets (%)(.16)(a)(c) (.06)(a)(c)
Portfolio Turnover (%) 50.11(d) 76.02(d)
<PAGE>
* See Note 2.
(a) Reflects an expense limitation during the period. As a result of such limitation,
expenses of the fund for the six months ended June 30, 1994 and for the period April 14,
1993 (commencement of operations) to December 31, 1993 reflect a reduction of
approximately $0.08 and $0.11 per share, respectively. See Note 3.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect
of sales charges.
(c) Annualized.
(d) Not annualized.
/TABLE
<PAGE>
Notes to financial statements
June 30, 1994
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940,
as amended, as a diversified open-end management investment
company. The fund seeks long-term growth of capital by investing
in primarily a portfolio of common stocks.
The following is a summary of significant accounting policies
followed by the fund in the preparation of its financial
statements. The policies are in conformity with generally
accepted accounting principles.
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, except that certain U.S. government
obligations are stated at the mean between the bid and asked
prices. Short-term investments having remaining maturities of
60 days or less are stated at amortized cost which approximates
market, and other investments are stated at fair value following
procedures approved by the Trustees.
Securities quoted in foreign currencies are translated into U.S.
dollars at the current exchange rate. Gains and losses on
securities that arise from changes in exchange rates are not
segregated from gains and losses that arise from changes in
market prices of investments. The effects on net investment
income arising from changes in exchange rates are also not
segregated.
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 managed by
Putnam Investment Management, Inc. ("Putnam Management"), the
fund's Manager, a wholly-owned subsidiary of Putnam Investments,
Inc. 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 other 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. The fund's Manager 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.
<PAGE>
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 and 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.
Foreign currency-denominated receivables and payables are
"marked-to-market" using the current exchange rate. The
fluctuation between the original exchange rate and the current
exchange rate is recorded as unrealized translation gain or loss.
Upon receipt or payment, the fund realizes a gain or loss on
foreign currency amounting to the difference between
the original value and the ending value of the receivable or
payable. Foreign currency gains and losses related to interest
receivable are reported as part of interest income.
E Federal income 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 of securities held and excise tax on income and
capital gains.
F Distributions to shareholders Distributions to shareholders
are recorded by the fund on the ex-dividend date.
G Unamortized organization expenses Expenses incurred by the
fund in connection with its organization, its federal and state
registration and the initial public offering of its shares
aggregated $17,221. These expenses are being amortized by the
fund on a straight-line basis over a five-year period.
Note 2
Initial capitalization and offering of shares
The fund was established as a Massachusetts business trust under
the laws of Massachusetts on October 18, 1990.
During the period October 18, 1990, to April 13, 1993, the fund
had no operations other than those related to organizational
matters, including the initial capital contribution of $100,000
and the issuance of 11,765 shares to Putnam Investments, Inc. on
March 22, 1993. On April 14, 1993, Putnam Investments, Inc. made
a subsequent capital contribution of $1,900,000 and received
223,529 shares. There were no additional transactions until
regular investment operations commenced on April 14, 1993.
<PAGE>
At June 30, 1994, Putnam Investments, Inc. owned 281,811 shares
of the fund valued at $2,660,296.
Note 3
Management fee,administrative services, and other transactions
Compensation of Putnam Investment Management, Inc., the Fund's
Manager, a wholly-owned subsidiary of Putnam Investments, Inc.,
for management and investment advisory services is paid quarterly
based on the average net assets of the fund for the quarter. Such
fee is based on the following annual rates: 0.65% of the first
$500 million of average net assets, 0.55% of the next $500
million, 0.50% of the next $500 million and 0.45% of any
amount over $1.5 billion, subject to reduction in any year to the
extent that expenses (exclusive of distribution fees, brokerage,
interest and taxes) of the fund exceed 2.5% of the first $30
million of average net assets, 2.0% of the next $70 million and
1.5% of any amount over $100 million and by the amount of certain
brokerage commissions and fees (less expenses) received by
affiliates of the Manager on the fund's portfolio transactions.
Until September 30, 1994, the Manager has agreed to reduce its
compensation, to the extent that expenses of the fund exceed 1.0%
of the fund's average net assets. The fund's expenses subject to
this limitation are exclusive of brokerage, interest, taxes,
insurance, amortization of deferred organization expenses and
extraordinary expenses, if any, and expenses incurred under the
fund's distribution plan described below. This limitation was
accomplished by a reduction of the compensation payable under the
management contract to the Manager. As a result of the voluntary
limitation, expenses for the six months ended June 30, 1994 were
reduced by $23,923.
The fund also reimburses the Manager 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. For the six months ended June 30, 1994, the fund
incurred $20 for these services.
Trustees of the fund receive an annual Trustee's fee of $100 and
an additional fee for each Trustees' meeting attended. Trustees
who are not interested persons of the Manager and who serve on
committees of the Trustees receive additional fees for attendance
at certain committee meetings.
<PAGE>
Custodial functions for the fund's assets are being provided by
Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam
Investments, Inc. Investor servicing agent functions were
provided by Putnam Investor Services, a division of PFTC. Fees
paid for these investor servicing and custodial functions for the
six months ended June 30, 1994 amounted to $11,696. Investor
servicing and custodian fees reported in the Statement of
Operations for the six months ended June 30, 1994 have been
reduced by credits allowed by PFTC.
Although a distribution plan has been adopted under Rule 12b-1 of
the Investment Company Act of 1940, the fund is not currently
making any payments pursuant to the plan.
During the six months ended June 30, 1994, Putnam Mutual Funds
Corp., acting as an underwriter, received no net commissions from
the sale of shares of the fund.
A deferred sales charge of up to 1% is assessed on certain
redemptions of shares purchased as part of an investment of $1
million or more. For the six months ended June 30, 1994, Putnam
Mutual Funds Corp., acting as an underwriter, received no net
commissions from such redemptions.
Note 4
Purchases and sales of securities
During the six months ended June 30, 1994, purchases and sales of
investment securities other than short-term investments
aggregated $1,764,820 and $1,432,519, respectively. Purchases and
proceeds of short-term investments were $941,000 and $941,087,
respectively. There were no purchases or sales of U.S. Government
obligations during the period. In determining the net gain or
loss on securities sold, the cost of securities has been
determined on the identified cost basis.
<PAGE>
Note 5
Capital shares
At June 30, 1994, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares
were as follows:
For the period
April 14, 1993
(commencement
Six months ended of operations) to
June 30, 1994 December 31, 1993
Shares Amount Shares Amount
Shares sold 50,484 $525,548 47,188 $447,007
Shares issued in
connection with
reinvestment of
distributions -- -- 4,062 40,981
Shares
repurchased (27,310) (282,278) (5,344) (49,025)
Net increase 23,174 $243,270 45,906 $438,963
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.
<PAGE>
TRUSTEES
George Putnam, Chairman
William Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
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
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Charles Swanberg
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
<PAGE>
This report is for the information of shareholders of Putnam
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.
13351 8/94
<PAGE>
APPENDIX TO FORM N30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN
PRINTED AND EDGAR-FILED TEXTS:
(1) Rule lines for tables are omitted.
(2) Boldface and italic typefaces are displayed in normal type.
(3) Headers (e.g, the name of the fund) and footers (e.g., page
numbers) are omitted.
(4) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(5) Bullet points and similar graphic signals are omitted.
(6) Page numbering is different.
