PUTNAM
GROWTH
FUND
SEMIANNUAL REPORT
June 30, 1995
[PUTNAM LOGO]
BOSTON * LONDON * TOKYO<PAGE>
PERFORMANCE HIGHLIGHTS
>The long-term outlook for many American companies, across
the spectrum of capitalization sizes, appears fairly strong.
Indeed, as Business Week noted in its July 10, 1995, issue,
In the United States, rising productivity, soaring profits,
and growing international revenues are sharply boosting the
market value of companies.
>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
(change in value during period
plus reinvested distributions)
6 MONTHS ENDED 6/30/95 21.33% 14.41%
SHARE VALUE: NAV POP
12/31/94 $ 9.75 $10.34
6/30/95 11.83 12.55
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 that an
investor s shares, when redeemed, may be worth more or less
than original cost. For performance over longer periods, see
pages 8 and 9. POP assumes 5.75% maximum sales charge.<PAGE>
FROM THE CHAIRMAN
Dear Shareholder:
Before describing Putnam Growth Fund s progress in fiscal
1995, I would like to report a change in your fund s name.
Shortly after the period covered by this report, the
Trustees voted to change your fund s name to Putnam Voyager
Fund II. This is related to other changes planned for the
fund this fall. For more information, please see page 9.
The stock market made a remarkable leap out of the doldrums
during the first half of 1995. Your fund clearly was among
the beneficiaries of this turnabout, as you can see by its
performance.
Over the period, a variety of companies benefited from the
market rally. Initially, stocks of larger, well-established
corporations did well. More recently, smaller-company stocks
also advanced smartly. Technology and medical devices
companies were particularly robust. Fund Manager Charles
Swanberg has sought out stocks with above-average long-term
growth potential, in line with your fund s objective.
On the pages that follow, Chuck reviews your fund s
performance in fiscal 1995 and discusses what he sees as its
prospects for the rest of the year.
Respectfully yours,
/S/ George Putnam
George Putnam
Chairman of the Trustees
August 16, 1995
<PAGE>
REPORT FORM THE FUND MANAGER
CHARLES H. SWANBERG
The rally in U.S. financial markets since November 1994 has
been truly dramatic. Stocks have been particularly robust,
with equity indexes reaching one record level after another.
Putnam Growth Fund s semiannual period spanned much of this
ebullient advance, and we were able to take full advantage
of the positive environment. For the six months ended June
30, 1995, Putnam Growth Fund s class A shares rose 21.33% at
net asset value (NAV).
Over the same period, the Standard and Poor s 500 Index had
a sizzling rise of 20.15%, while the average growth fund, as
tracked by Lipper Analytical Services gained 17.47%,* By
nearly any measure, your fund has had an exceptional half
year.
>THE REASONS BEHIND THE RALLY
A number of factors have propelled the stock market to new
highs. Most important has been the fundamental vigor of
domestic companies, many of whose earnings have continued to
surpass even the most optimistic estimates. Furthermore,
American businesses ongoing obsession with efficiency and
cost-cutting has helped amplify positive results.
Additionally, the dollar s current weakness has bolstered
the competitiveness of American exports U.S. goods and
services have become cheaper, and thus more attractive, in
many international markets.
While conditions were favorable throughout the entire six
months, your fund s performance gained the greatest momentum
over the last quarter, when many companies in its portfolio
were invigorated by stable-to-declining interest rates.
Indeed, as it grew apparent that the U.S. economy was
slowing (despite occasionally contradictory evidence),
investors began to anticipate falling
*Lipper Analytical Services, Inc., is an independent
research agency. Through 6/30/95, there were 583 growth
funds in the index. Lipper assumes reinvestment of all
distributions and does not take into account the effects of
sales charges or brokerage commissions.
<PAGE>
interest rates. Once the Federal Reserve Board s concerns
about inflation were assuaged, the Fed lived up to
expectations, lowering short-term rates at its July meeting.
Declining interest rates have historically provided a boost
for stocks, and recent weeks proved no exception.
>TECHNOLOGY HOLDINGS BOOST PERFORMANCE
An array of economic sectors performed extremely well over
the past six months, with technology outpacing all others.
Technology stocks, well-represented in your fund s
portfolio, have been spurred by many factors: booming
revenues, the anticipated release of Microsoft s Windows 95,
and stable interest rates. A number of companies in your
fund s portfolio benefited from the technology euphoria. For
nearly a year, America Online, a leading on-line services
provider, has seen its stock price rise steadily. Microsoft
and Adobe Systems, two software companies in the portfolio,
have also been stellar performers.
Semiconductor companies also excelled over the period; your
fund continues to have a nearly 8% weighting in this
industry. The extraordinary strength of holdings such as
Maxim, Analog Devices, and Linear Technology contributed
substantially to performance. Indeed, Linear Technology is
one of the best examples of the type of company your fund
targets. The sales leader among analog semiconductor
manufacturers, its market share is growing. It sells
proprietary products that are well-protected by patents, has
very little debt on its balance sheet, and can fuel business
expansion
TOP INDUSTRY SECTORS*
BUSINESS EQUIPMENT AND SERVICES 11.9%
CONSUMER SERVICES 11.4%
RETAIL 8.6%
ELECTRONICS AND ELECTRICAL EQUIPMENT 7.9%
CONSUMER NON DURABLES 7.1%
* Based on percentage of net assets on 6/30/95. Will vary
over time.<PAGE>
through earnings. Its return on equity a measure of how
efficiently resources are deployed is a high 28%. Clearly,
Linear Technology is an extremely profitable, rapidly
growing company.
Over the period, stocks of a number of medical devices
companies rose in price. One such firm, Medtronic, the
world s largest producer of pacemakers, continues to be a
positive performer for the fund. Boston Scientific, another
fund holding, had an excellent six months as well. The
company is an innovator in noninvasive surgical devices,
including laser and ultrasound equipment. We are optimistic
that both companies are poised for steadily growing
revenues, especially if they can successfully tap overseas
markets.
Elsewhere in the health-care sector, health maintenance
organization (HMO) stocks had a decidedly difficult
semiannual period. Investors, unnerved by declining
revenues, tarred the entire industry with a negative brush.
The result was a broad selloff in HMOs. We managed to avoid
this debacle, having trimmed most of the fund s holdings in
the industry in early 1995. This was another factor
underlying your fund s outperformance.
>A FEW DEFENSIVE MOVES
While we are fairly optimistic that conditions will remain
positive for equities, we have made some defensive moves in
adjusting the portfolio for the months ahead. Anticipating a
slowing U.S. economy, we purchased shares in Pioneer Hybrid,
a leading seed supplier, in mid-July. We believe this
industry is relatively insulated from the vagaries of
economic cycles. Additionally, Pioneer Hybrid satisfies many
of our investing criteria: it enjoys a large market share,
some 45%, and its sales are growing much faster than many of
its competitors. We have made some similar defensive moves
elsewhere in the portfolio.<PAGE>
TOP 10 HOLDINGS (6/30/95)
FLIGHT SAFETY INTERNATIONAL, INC.
PROVIDES TECHNOLOGY TRAINING AND SIMULATORS FOR PILOTS
MAXIM INTEGRATED PRODUCTS INC.
SEMICONDUCTOR MANUFACTURER
COCA-COLA CO.
SOFT-DRINK BOTTLER AND DISTRIBUTOR
INTERPUBLIC GROUP OF COS. INC.
OPERATES ADVERTISING AGENCIES
INFINITY BROADCASTING CORP.
OWNS AND OPERATES RADIO STATIONS
HOSPITALITY FRANCHISE SYSTEMS, INC.
MAJOR HOTEL FRANCHISE COMPANY
PAYCHEX, INC.
OPERATES COMPUTER PAYROLL SYSTEMS
DEPARTMENT 56, INC.
DESIGNS CERAMIC GIFTS
CUC INTERNATIONAL, INC.
MEMBER-BASED CONSUMER SERVICES
HORNBACH HOLDING AG
OWNS AND MANAGES HOME-IMPROVEMENT STORES
These holdings represent 20.8% of net assets. Portfolio
holdings will vary over time.
>STAYING AHEAD OF ECONOMIC AND FINANCIAL CONDITIONS
It is possible that the Fed will cut interest rates again in
the months ahead, in a move to head off too dramatic an
economic slowdown. Stocks may continue to do well even in a
leaner environment assuming corporate revenues do not
decline too much. Even if they do, many U.S. companies may
be more insulated from a downturn than they were in the past
because of corporate downsizing.
<PAGE>
Whatever happens in the months ahead, we will continue our
search for rapidly growing companies in dominant positions
in their industries. We will conduct onsite visits,
searching for companies that are relatively unburdened by
excessive government regulation and run by quality
managements (especially those with an equity stake in their
own businesses). Above all, we will maintain our focus on
the long term, evaluating the performance of companies over
time.
The views expressed here are exclusively those of Putnam
Management. They are not meant as investment advice.
Although the described holdings were viewed favorably as of
6/30/95 there is no guarantee the fund will continue to hold
these securities in the future. Investments in non-U.S.
securities may be subject to certain risks, such as currency
fluctuations and political developments.<PAGE>
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.
TOTAL RETURN FOR PERIODS ENDED 6/30/95
STANDARD CONSUMER
& POOR S PRICE
NAV POP 500 INDEX INDEX
6 MONTHS 21.33% 14.41% 20.15% 1.87%
1 YEAR 32.71 25.03 25.99 3.04
LIFE OF FUND
(since 4/14/93) 49.72 41.09 28.41 6.20
ANNUAL AVERAGE 20.04 16.86 11.98 2.76
Fund performance data do not take into account any
adjustment for taxes payable on reinvested distributions and
reflect an expense limitation in effect during the period.
Without the limitation, results would have been lower.
Performance data represent past results and is not
indicative of future results. Investment returns and
principal value will fluctuate so an investor s shares, when
sold, may be worth more or less than their original cost.
PROPOSED CHANGES TO THE FUND
Putnam Management plans to seek Trustee approval for several
changes to the fund, to take effect October 2, 1995. These
changes include an increased investment focus on
small-capitalization companies, a related increase in
management fee, to match that of similar Putnam funds and
the authorization of payments under the distribution plan
described in the prospectus, at the annual rate of 0.25% of
average net assets. The fund s investment objective of
long-term growth of capital will remain unchanged. If the
Trustees approve the changes, you will receive proxy
material in September, allowing you the opportunity to vote
on the new management fee.<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 500 INDEX is an unmanaged list of common
stocks that is frequently used as a general measure of stock
market performance. The index assumes reinvestment of all
distributions and does not take into account brokerage
commissions or other costs. The fund s portfolio contains
securities that do not match those in the index.
CONSUMER PRICE INDEX (CPI) is a commonly used measure of
inflation; it does not represent an investment return.
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
June 30, 1995 (Unaudited)
Common Stocks (90.6%)*
NUMBER OF SHARES VALUE
AEROSPACE AND DEFENSE(2.9%)
2,219 Flight Safety International, Inc. $108,176
BIOTECHNOLOGY(0.3%)
310 Thermo Cardiosystems, Inc. 11,354
BROADCASTING(3.2%)
1,372 Paging Network, Inc. 46,991
1,927 Tele-Communications
Class A 45,164
1,000 TCA Cable TV, Inc. 27,000
-------
119,155
BUSINESS EQUIPMENT AND SERVICES(11.9%)
570 Alco Standard Corp. 45,521
2,175 Corporate Express, Inc. 46,491
820 Danka Business Systems ADR 19,834
1,114 First Data Corp. 63,359
2,410 Novell, Inc. 48,049
900 Omnicom Group 54,563
14,532 Rentokil Group PLC
(United Kingdom) 62,504
870 Viking Office Products,
Inc. 31,864
730 Wolters Kluwer N.V.
(Netherlands) 64,473
-------
436,658
BUSINESS SERVICES(1.8%)
1,848 Paychex, Inc. 66,990
CELLULAR BROADCASTING(0.8%)
1,180 Vanguard Cellular Systems,
Inc. 28,320
CHEMICALS(1.1%)
1,393 Schulman (A.), Inc. 40,049
COMPUTER SERVICES AND SOFTWARE(5.1%)
860 Adobe Systems, Inc. 49,880
660 America Online, Inc. 29,040
460 Microsoft Corp. 41,573
1,549 CUC International, Inc. 65,058
-------
185,551
CONSUMER DURABLE GOODS(1.4%)
1,220 Blyth Industries, Inc. 52,003
<PAGE>
COMMON STOCKS (continued)
NUMBER OF SHARES VALUE
CONSUMER NON DURABLES(7.1%)
1,240 Bemis Inc. $ 32,240
1,880 Fastenal Co. 51,348
1,670 Gymboree Corp. 48,534
858 Luxottica Group S.P.A.
ADR (Italy) 31,853
2,000 Newell Co. 49,000
1,570 UST, Inc. 46,708
-------
259,683
CONSUMER SERVICES(11.5%)
1,452 Block (H & R), Inc. 59,714
650 Clear Channel Communications,
Inc. 41,844
1,970 Hospitality Franchise
Systems, Inc. 68,211
2,135 Infinity Broadcasting Corp.
Class A 71,256
2,120 Interpublic Group of Cos., Inc. 79,500
1,800 Loewen Group, Inc. 64,125
990 Telephone & Data Systems, Inc. 36,011
-------
420,661
ELECTRONICS AND ELECTRICAL EQUIPMENT(7.9%)
1,845 Analog Devices Inc. 62,730
980 Input/Output, Inc. 35,280
795 Linear Technology Corp. 52,470
1,719 Maxim Integrated Products Inc. 87,669
560 Xilinx, Inc. 52,640
-------
290,789
ENERGY-RELATED(1.1%)
1,045 Thermo Electron Corp. 42,061
ENVIRONMENTAL CONTROL(1.2%)
1,530 WMX Technologies, Inc. 43,414
FOOD AND BEVERAGES(5.9%)
1,340 Coca-Cola Co. 85,425
1,130 Lone Star Steakhouse &
Saloon 34,253
1,148 McDonald s Corp. 44,916
1,790 Outback Steakhouse, Inc. 51,686
-------
216,280
HEALTH CARE(3.0%)
1,670 Boston Scientific Corp. 53,231
185 Lincare Holdings, Inc. 4,914
687 Medtronic, Inc. 52,985
-------
111,130
<PAGE>
COMMON STOCKS (continued)
NUMBER OF SHARES VALUE
INSURANCE AND FINANCE(4.1%)
633 Federal Home Loan
Mortgage. Corp. $ 43,519
432 Federal National
Mortgage Assn. 40,770
254 General RE Corp. 34,004
976 MBNA Corp. 32,940
-------
151,233
MEDICAL SUPPLIES(1.0%)
1,500 Sola International, Inc. 37,313
METALS AND MINING(1.6%)
1,070 Nucor Corp. 57,245
OIL AND GAS(2.3%)
1,290 Coflexip Engineers ADR 32,734
1,850 Petro Geo-Services
ADR (Norway) 53,188
-------
85,922
PHARMACEUTICALS(4.3%)
1,880 Astra AB (Sweden) 58,047
680 Pfizer, Inc. 62,815
6 Roche Holdings AG
Rights (Switzerland) 38,747
-------
159,609
REAL ESTATE(1.0%)
2,200 Clayton Homes, Inc. 36,025
RETAIL(8.6%)
1,450 CompUSA, Inc. 48,213
1,734 Department 56, Inc. 66,326
1,360 Heilig-Meyers Co. 34,680
11,002 Iceland Group PLC
(United Kingdom) 31,547
8,100 Next PLC (United Kingdom) 44,065
1,868 Office Depot, Inc. 52,538
1,070 Sunglass Hut
International 37,450
-------
314,819
TRANSPORTATION(0.4%)
500 ValuJet Airlines, Inc. 16,438
<PAGE>
COMMON STOCKS (continued)
NUMBER OF SHARES VALUE
UTILITIES(1.1%)
547 Airtouch Communications,
Inc. $ 15,590
815 Century Telephone
Enterprises, Inc. 23,126
-------
38,716
TOTAL COMMON STOCKS
(cost $2,673,068) $3,329,594
PREFERRED STOCKS (3.2%)*
NUMBER OF SHARES VALUE
48 Hornbach Holding AG
DEM 20 pfd. (Germany) $ 64,588
42 SAP AG Systeme DEM 8.5 pfd.
Bearer (Germany) 53,263
TOTAL PREFERRED STOCKS
(cost $69,349) $ 117,851
TOTAL INVESTMENTS
(cost $2,742,417)*** $3,447,445
Notes
*Percentages indicated are based on total net assets of
$3,676,531, which correspond to a net asset value per share
of $11.83.
Non-income-producing security.
***The aggregate identified cost on a tax basis is
$2,742,424, resulting in gross unrealized appreciation and
depreciation of $725,519 and $20,498, respectively, or net
unrealized appreciation of $705,021.
ADR after the name of a holding stands for American
Depository Receipt, representing ownership of foreign
securities on deposit with a domestic custodian bank.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
ASSETS
Investments in securities, at value (identified cost
$2,742,417) (Note 1) $3,447,445
Cash 216,853
Dividends and other receivables 3,337
Receivable for securities sold 25,695
Receivable from Manager (Note 2) 17,546
Unamortized organization expenses (Note 1) 9,671
TOTAL ASSETS 3,720,547
LIABILITIES
Payable for securities purchased 12,387
Payable for shares of the fund repurchased 196
Payable for compensation of Trustees (Note 2) 70
Payable for administrative services (Note 2) 10
Payable for investor servicing
and custodian fees (Note 2) 5,579
Payable for organization expense (Note 1) 17,221
Other accrued expenses 8,553
TOTAL LIABILITIES 44,016
NET ASSETS $3,676,531
REPRESENTED BY
Paid-in capital (Notes 1 and 4) $ 2,713,950
Undistributed net investment income 1,963
Accumulated net realized gain on investment 255,576
Net unrealized appreciation of investments 705,042
TOTAL-REPRESENTING NET ASSETS APPLICABLE TO
CAPITAL SHARES OUTSTANDING $3,676,531
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
Net asset value and redemption price per share
($3,676,531 divided by 310,878 shares) $11.83
Offering price per share (100/94.25 of $11.83)* $12.55
*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.<PAGE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1995 (Unaudited)
INVESTMENT INCOME:
Dividends (net of foreign tax of $595) $15,290
Interest 149
TOTAL INVESTMENT INCOME 15,439
EXPENSES:
Compensation of Manager (Note 2) 10,952
Investor servicing and custodian fees (Note 2) 12,908
Compensation of Trustees (Note 2) 801
Auditing 10,302
Legal 9,697
Administrative services (Note 2) 20
Registration fees 200
Amortization of organization expenses (Note 1) 1,687
Other expenses 778
Fees waived by Manager (Note 2) (33,869)
TOTAL EXPENSES 13,476
NET INVESTMENT INCOME 1,963
Net realized gain on investments (Notes 1 and 3) 226,142
Net unrealized appreciation
of investments during the period 431,784
NET GAIN ON INVESTMENTS 657,926
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $659,889
The accompanying notes are an integral part of these
financial statements.<PAGE>
STATEMENT OF CHANGES OF NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30 DECEMBER 31
1995* 1994
INCREASE IN NET ASSETS
OPERATIONS:
Net investment income (loss) $ 1,963 $ (5,372)
Net realized gain on investments 226,142 144,641
Net unrealized appreciation
(depreciation) of investments 431,784 (126,638)
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 659,889 12,631
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,089)
Net realized gain on investments (169,709)
INCREASE (DECREASE) FROM CAPITAL
SHARE TRANSACTIONS (Note 4) (172,932) 453,122
TOTAL INCREASE IN NET ASSETS 486,957 294,955
NET ASSETS
Beginning of period 3,189,574 2,894,619
END OF PERIOD (including undistributed
net investment income of $1,963
and $0, respectively) $3,676,531 $3,189,574
*Unaudited.
The accompanying notes are an integral part of these
financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<S> <C> <C> <C>
For the period
April 14, 1993
SIX MONTHS FOR THE (COMMENCEMENT
ENDED YEAR ENDED OF OPERATIONS
JUNE 30 DECEMBER 31 TO DECEMBER 31
1995* 1994 1993
NET ASSET VALUE,
BEGINNING OF PERIOD $9.75 $10.29 $8.50
INVESTMENT OPERATIONS:
Net investment income (loss) (a) .01 (.02) --
Net realized and unrealized
gain on investments 2.07 .05 1.95
TOTAL FROM INVESTMENT
OPERATIONS (a) 2.08 .03 1.95
LESS DISTRIBUTIONS FROM:
Net investment income -- (.01) --
Net realized gain on investments -- (.56) (.16)
TOTAL DISTRIBUTIONS -- (.57) (.16)
NET ASSET VALUE, END OF PERIOD $11.83 $9.75 $10.29
TOTAL INVESTMENT RETURN
AT NET ASSET VALUE (%) (b) 21.33(c) .34 22.98(c)
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $3,677 $3,190 $2,895
Ratio of expenses to average
net assets (%) (a) .40(c) .92 .72(c)
Ratio of net investment income (loss)
to average net assets (%) (a) .06(c) (.18) (.04)(c)
Portfolio turnover (%) 46.00(c) 101.94 76.02(c)
*Unaudited.
(a)Reflects a voluntary expense limitation during the period.
As a result of such limitation,
expenses of the fund
for six months ended June 30, 1995,
the year ended December 31, 1994 and for the period
ended December 31, 1993
reflect a reduction of approximately $0.11, $0.16 and $0.11
respectively per share.
See Note 2.
(b)Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c)Not annualized.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
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.
B) FOREIGN CURRENCY TRANSLATION The accounting records of
the fund are maintained in U.S. dollars. The market value of
foreign securities, currency holdings, other assets and
liabilities are recorded in the books and records of the
fund after translation to U.S. dollars based on the exchange
rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding
taxes are translated at prevailing exchange rates when
accrued or incurred. The fund does not isolate that portion
of realized or unrealized gains or losses resulting from
changes in the foreign exchange rate on investments from
fluctuations arising from changes in the market prices of
the securities. Such fluctuations are included with the net
realized and unrealized gain or loss on investments. Net
realized gains and losses on foreign currency transactions
represent net exchange gains or losses on closed forward
currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and
foreign withholding taxes recorded on the fund s books and
the U.S. dollar equivalent amounts actually received or
paid.
C) 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 and certain accounts of other
registered investment companies managed by Putnam Investment
Management, Inc., 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.
D) REPURCHASE AGREEMENTS The fund, through its custodian or
any joint trading account, 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>
E) 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.
F) 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.
G) DISTRIBUTIONS TO SHAREHOLDERS Distributions to
shareholders are recorded by the fund on the ex-dividend
date.
The amount and character of income and gains to be
distributed are determined in accordance with income tax
regulations which may differ from generally accepted
accounting principles. These differences include treatment
of losses on wash sales transactions and post-October
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.
H) UNAMORTIZED ORGANIZATION EXPENSES Expenses incurred by
the fund in connection with its organization, its
registration with the Securities and Exchange Commission and
with a state 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
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 the next $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, 1995, the Manager agreed to reduce its
compensation, and to the extent necessary, bear other
expenses of the fund 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 were 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.<PAGE>
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.
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.
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, Inc., a division
of PFTC. Investor servicing and custodian fees reported in
the Statement of Operations for the six months ended June
30, 1995 have been reduced by credits allowed by PFTC.
Pursuant to the fund s underwriting agreement and to a
distribution plan adopted under Rule 12b-1 of the Investment
Company Act of 1940, although the fund is currently not
making any payments pursuant to the Plan, the fund is
permitted to pay Putnam Mutual Funds Corp. a wholly-owned
subsidiary of Putnam Investments, Inc., a quarterly
distribution fee at the annual rate of up to 0.35% of the
average net asset value of shares of the fund.
During the six months ended June 30, 1995, 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, 1995,
Putnam Mutual Funds Corp., acting as underwriter, received
no net commissions from such redemptions.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the six months ended June 30 1995, purchases and
sales of investment securities other than short-term
investments aggregated $1,477,399 and $1,740,867,
respectively. In determining the net gain or loss on
securities sold, the cost of securities has been determined
on the identified cost basis.
NOTE 4
CAPITAL SHARES
At June 30, 1995, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital
shares were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994
SHARES AMOUNT SHARES AMOUNT
Shares sold 34,388 $359,815 78,823 $798,762
Shares issued
in connection with
reinvestment
of distributions 17,582 170,795
34,388 359,815 96,405 969,557
Shares repurchased (50,549) (532,747) (50,565)(516,435)
NET INCREASE
(DECREASE) (16,161) $(172,932) 45,840 $453,122
<PAGE>
FUND INFORMATION
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust
Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John R. Verani
Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
Charles H. Swanberg
Vice President
and Fund Manager
William N. Shiebler
Vice President
Paul M. O Neil
Vice President
John D. Hughes
Vice President
and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
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 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.<PAGE>
PUTNAMINVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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Putnam
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