(logo)
Putnam
Equity
Income
Fund*
Annual
Report
November 30, 1993
(artwork)
For investors seeking
current income and
capital growth through
a diversified portfolio
of mainly income
producing equity
securities.
A member
of the Putnam
Family of Funds
Contents
2 How your fund performed
3 From the Chairman
4 Report from Putnam Management
Annual Report
8 Report of Independent Accountants
9 Portfolio of investments owned
16 Financial statements
30 Fund performance supplement
31 Your Trustees
*Formerly Putnam Strategic Income Trust
<PAGE>
How your
fund performed
For periods ended November 30, 1993
Total return* Fund
Class A Class B
NAV POP NAV CDSC S&P 500(R)
1 year 17.06% 10.34% -- -- 10.05%
5 years 63.99 54.51 -- -- 98.11
annualized 10.40 9.09 -- -- 14.65
10 years 163.05 148.00 -- -- 294.32
annualized 10.15 9.51 -- -- 14.71
Life-of-class
(class B shares)** -- -- 0.12% 5.11% 0.62
Share data Class A Class B
NAV POP NAV
November 30, 1992 $7.72 $8.19 --
September 13, 1993
(inception of class B shares) -- -- $8.66
November 30, 1993 $8.67 $9.20 $8.65
Distributions Investment In excess of Capital
12 months endedNumber income investment income gains Total
Class A 4 $0.31 $0.03 -- $0.34
Class B shares paid their first dividend on December 31, 1993 to
shareholders of record as of December 20, 1993.
Current returns Class A Class B
at the end of the period NAV POP NAV
Current dividend rate 3.69% 3.48% --
Current 30-day yield 3.26 3.07 2.53
Total return at end of most recent calendar quarter
Periods ended December 31, 1993
Class A Class B
NAV POP NAV CDSC
1 year 16.54% 9.90% -- --
5 years 63.13 53.71 -- --
annualized 10.28 8.98 -- --
10 years 164.63 149.41 -- --
annualized 10.22 9.57 -- --
Life-of-class** -- -- 1.48% 3.52%
*Performance data represent past results. Investment return and
net asset value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
**Effective September 13, 1993, the fund began offering class B
shares. Performance for each share class will differ.
Please see the fund performance supplement on page 30 for
additional information about performance comparisons.<PAGE>
Terms you need to know
Total return is the change in value of an investment from the
beginning to the end of a period, assuming the reinvestment of
all distributions. It may be shown at net asset value or at
public offering price.
Net asset value (NAV) is the value of all your fund's assets,
minus any liabilities, divided by the number of outstanding
shares, not reflecting any 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.
Contingent deferred sales charge (CDSC) is a charge applied at
the time of the redemption of shares rather than the time of
purchase. It generally declines and eventually disappears over a
stated period.
Class A shares are the shares of your fund offered subject to an
initial sales charge. Your fund's POP includes the maximum 5.75%
sales charge.
Class B shares are the shares of your fund offered with no
initial sales charge. Within the first six years of purchase,
they are subject to a CDSC declining from 5% to 1%. After the
sixth year, the CDSC no longer applies.
Current dividend rate is calculated by annualizing the net
investment income paid to shareholders in the fund's most recent
distribution, then dividing by the NAV or POP on the last day of
the period.
Current 30-day yield, based only on the fund's net investment
income earnings, is calculated in accordance with Securities and
Exchange Commission guidelines.
<PAGE>
From the
Chairman
(photograph of George Putnam)
(C) Karsh, Ottawa
George Putnam
Chairman
of the Trustees
Dear Shareholder:
With Putnam Equity Income Fund's merger and name change
successfully completed, we can look back on fiscal 1993 with
satisfaction for a job well done.
Since Edward Bousa assumed management in late December 1992, the
fund was able to provide double-digit returns at net asset value
and public offering price for the 12-month period ended November
30, 1993 -- both outpacing the Standard & Poor's(R) 500 Index.
Such attractive performance is attributed not only to Edward's
experience as an equity income manager, but also to the basic
value investment strategy he follows and the extensive research
he and his team conduct.
The difficult economic environment of the past few years has
caused many corporations to reevaluate and restructure their
operations. Prior to doing so, the prices of their stocks
declined to levels that, in Putnam Management's opinion, do not
accurately reflect earnings potential or intrinsic value.
This scenario has provided your fund with numerous investment
opportunities, all of which require the extensive, time-consuming
research of which Putnam is highly capable. I encourage you to
read the following Report from Putnam Management which discusses
the industries and companies in which the fund has invested
during fiscal 1993.
As we move forward in fiscal 1994, Putnam Management anticipates
continued, modest growth in the economy, relatively stable
interest rates and low inflation -- trends which favor your
fund's basic value investment strategy. I am confident in your
fund's ability to continue providing your investment with both
growth and income potential in the fiscal year ahead.
Respectfully yours,
//George Putnam's signature//
George Putnam
January 19, 1994
<PAGE>
Report from
Putnam Management
Top 10 holdings (based on % of net assets as of 11/30/93)
du Pont E.I. de Nemours & Co. Ltd.
American Brands, Inc.
American Home Products Corp.
Exxon Corp.
Philip Morris Co.'s Inc.
Mobile Corp.
Xerox Corp.
Texaco Inc.
Royal Dutch Petroleum Co.
GTE Corp.
Represents 17.6% of the portfolio. Holdings will vary in the
future.
The investment environment of fiscal 1993 was characterized by
low inflation, a lackluster economy, ill-defined consumer
sentiment and low interest rates. In short, it was an environment
that provided many outstanding opportunities for Putnam Equity
Income Fund's basic value investment strategy.
With this strategy, the performance of the fund's class A shares
outpaced the Standard & Poor's 500 Index at both net asset value
and public offering price for the one-year period ended November
30, 1993. Longer-term performance, shown in the chart at right,
reflects the fund's former option-writing strategy prior to its
change in March of 1991.
In addition to delivering double-digit returns, your fund's class
A shares provided a 12-month yield of 3.92% at NAV as of November
30, according to Lipper Analytical Services' calculations,
surpassing the average 3.06% 12-month yield of 74 equity income
funds tracked by Lipper. Lipper is an industry research firm
which calculates 12-month yield by adding the income dividends
that a fund paid over a 12-month period and dividing by the
fund's net asset value at the end of that period. Your fund's
30-day yield and performance for other periods, as well as class
B shares, can be found in the table on page 2.
Basic value investing means we look for bargain-priced stocks --
those whose prices do not reflect what we believe to be the
inherent value of company assets and earnings potential. This
strategy is not a static process. It requires diligent research,
on-going dialogue with a company's management and regular on-site
visits. It is through such stringent analysis that we were able
to provide your fund with solid performance. Described below are
the major themes that have dominated our investment decisions
throughout the fiscal year.
<PAGE>
(line graph)
Cumulative total return on a
$10,000 investment since 12/1/83
Putnam Equity Income Fund
- ----- Class A shares at NAV
_____ Class A shares at POP
***** S&P 500 Index
..... Consumer Price Index
date/ S&P Consumer fund at fund at
year 500 Price Index NAV POP
11/30/83 10000 10000 10000 9428
11/30/84 10290 10405 10476 9877
11/30/85 13281 10771 12550 11832
11/30/86 16959 10909 14775 13929
11/30/87 16153 11403 12510 11794
11/30/88 19897 11887 16040 15122
11/30/89 26032 12441 18888 17807
11/30/90 25103 13221 16893 15927
11/30/91 30229 13617 20126 18974
11/30/92 35809 14032 22472 21186
11/30/93 39415 14407 26305 24799
Past performance is no assurance of future results. Performance
of class B shares will vary from performance of class A shares
due to differences in sales charges and 12b-1 fees. For example,
$10,000 invested on September 13, 1993, subject to the maximum
contingent deferred sales charge would have been worth $9,489 if
redeemed 11/30/93. If invested on that date and not redeemed, it
would have been worth $9,988.
Cyclicals played key role Like many of the funds in Putnam's
growth and income category, a good portion of your fund's assets
were allocated to cyclical stocks. These are stocks of companies
that are heavily influenced by natural changes in general
economic activity. As investors anticipate changes in company
profits, cyclical stock prices often rise, peaking even before
the economy fully recovers from a slowdown. The prolonged, slow
growth of the economy and an increase in many companies'
productivity have sustained the performance of these securities.
Cyclical stocks are typically found in the industrial and
manufacturing sectors of the market -- automotives, high
technology, chemicals and consumer durables. While we've cut back
somewhat on the fund's cyclical exposure after realizing profits
during the first half of fiscal 1993, we continue to believe
growth in the economy is being driven more by industrial
production, with exports leading the way, than by consumer
spending.
<PAGE>
Over the past few years, many industrial companies have
streamlined their operations and cut costs in an effort to boost
profitability. One such company is Xerox Corporation. Having made
the decision to return to its most profitable roots, Xerox's main
focus will be on document processing, mainly copiers and fax
machines. In '92, this group delivered more than half the
company's revenues and contributed to approximately 80% of its
pretax profits. With cost-containment, increased productivity and
exciting new products, including DocuTech, a digital publishing
system that promises to revolutionize the printing business, we
believe Xerox is well positioned to take on a larger share of the
market. The company has paid dividends since 1930.
Another example is Rockwell International, a diversified
technology company involved in industrial automation, heavy
vehicles and telecommunication business as well as aerospace and
defense electronics operations. We selected Rockwell because we
believe it has effectively implemented cost-containment measures,
positioning itself to expand its market share and profitability
potential in the years ahead.
Insurance and finance favored Insurance and financial stocks have
been substantially represented in your fund's portfolio for some
time. Continued consolidation in this arena has decreased the
number of competitors, providing the cost-savings firms needed to
realize above-average profits. As a result, your fund's financial
and insurance holdings have benefited from the resulting price
appreciation.
American Express Company is one of the financial holdings in your
fund's portfolio. A leader in travel-related services (TRS),
American Express is also active in international banking,
investment, insurance and information services worldwide. The
company has paid dividends consistently since 1870. As part of
its restructuring, the firm sold The Boston Company, the retail
brokerage unit and most of the asset management business of
Shearson Lehman Brothers, and 78% of its stake in First Data
Corp. During the second quarter, TRS earnings soared, reflecting
reduced provisions for losses and claims and lower operating
expenses. Going forward, we believe the company has positioned
itself well for renewed growth.
Oil & gas: strong contributors As fiscal 1993 progressed, we took
advantage of opportunities and selectively purchased under-valued
stocks in the energy sector of the market, particularly from
companies specializing in the exploration and production of oil
and natural gas. We chose companies that we believed had
restructured their operations successfully and improved
profitability potential. In many instances, the companies had
increased their exploration and production spending.
<PAGE>
British Petroleum Company, a major crude oil and natural gas
enterprise with significant presence throughout the United
States, has effectively undergone a major restructuring during
the past two years. This has enabled its stock price to
appreciate well above others in the energy sector, providing us
with the opportunity to sell the fund's holdings and realize a
profit shortly after fiscal 1993 ended.
Another energy holding that we've added to the portfolio because
it looks promising is Royal Dutch Petroleum. This company owns a
majority of the Royal Dutch/Shell Group, which is a world leader
in the crude oil, natural gas and chemical industries. The
Group's petroleum operations embrace all phases of the industry,
from production and transportation to refining and marketing, and
include a strong position in petrochemicals. We believe the Group
is well-positioned to develop production and marketing ventures
throughout Europe's mature western economies and developing
eastern economies, and throughout the emerging markets of Latin
America and the Pacific Rim. Royal Dutch initiated dividend
payments in 1894.
Searching out consumer stock values Throughout the first half of
fiscal 1993, your fund was underweighted in consumer-related
stocks -- tobacco, food, health care, and consumer nondurables.
However, as the year progressed, many such companies grew
increasingly vulnerable to competition from generic products
and/or came under pressure from the Clinton administration.
Consumer stock prices then declined to such low levels that we
were able to selectively purchase certain issues that met our
stringent basic value investment criteria.
Philip Morris Companies, Inc. is one company that has qualified.
It is the largest domestic food processor, owning both General
Foods and Kraft, the second largest brewer, Miller Brewing Co.,
and the largest cigarette company in the United States. The
company has paid dividends since 1928 and has expanded outside
the U.S., building market share abroad. With cost-containment
measures firmly in place, we believe Philip Morris should be in a
good position to increase earnings and profitability over the
next several years.
If conditions in this sector continue to present us with
undervalued investment opportunities, we may selectively increase
the fund's weighting in this area during fiscal 1994.
Outlook We believe that, over the long term, the industrial side
of the economy will continue to provide the majority of value
investment opportunities. The United States has recently begun to
take back industrial and manufacturing market share from overseas
competitors, providing a positive investment environment for this
broad economic sector. We will continue to aggressively pursue
and seek to identify companies that, through significant
restructuring and innovative management, have become low-cost
producers worldwide.
The world is changing at an increasingly rapid pace and staying
ahead of industry and market trends is paramount to investment
success. We believe our disciplined, well-researched approach to
value investing puts Putnam Management at the forefront of
managing that change, and helps to competitively position Putnam
Equity Income Fund for fiscal 1994 and beyond.
(bar chart)
Top industry sectors (based on % of net assets as of 11/30/93)
Insurance & finance .............................17.2%
Utilities ......................14.8%
Oil & gas .................11.3%
Chemicals ........6.8%
Consumer nondurables .......6.7%
Health care ......6.2%<PAGE>
Putnam
Equity
Income
Fund
Annual
Report
For the Fiscal Year Ended November 30, 1993
Report of Independent Accountants
To the Trustees and Shareholders of
Putnam Equity Income Fund
We have audited the accompanying statement of assets and
liabilities of Putnam Equity Income Fund (formerly Putnam
Strategic Income Trust), including the portfolio of investments
owned, as of November 30, 1993, the related statement of
operations for the year then ended, the statement of changes in
net assets for each of the two years in the period then ended,
and the "Financial highlights" for each of the ten years in the
period then ended for class A shares and September 13, 1993
(commencement of operations) to November 30, 1993 for class B
shares. 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 November 30, 1993, 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 Equity Income Fund as
of November 30, 1993, 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 ten years in the period then ended for class A
shares and September 13, 1993 (commencement of operations) to
November 30, 1993 for class B shares, in conformity with
generally accepted accounting principles.
Coopers & Lybrand
Boston, Massachusetts
January 13, 1994
<PAGE>
Portfolio of
investments owned
November 30, 1993
Common Stocks (76.2%)(a)
Number of Shares Value
Utilities (14.4%)
31,400 Allegheny Power Systems, Inc. $ 820,325
90,000 Baltimore Gas & Electric Co. 2,272,500
12,300 Bell Atlantic Corp. 738,000
31,000 BellSouth Corp. 1,770,875
143,100 Cincinnati Gas & Electric Co. 3,845,813
70,000 Entergy Corp. 2,581,250
25,000 FPL Group, Inc. 928,125
140,000 GTE Corp. 5,197,500
70,000 General Public Utilities Corp. 2,082,500
11,100 Hawaiian Electric Industries, Inc. 399,600
20,200 Houston Industries Inc. 916,575
57,900 Montana Power Co. 1,483,688
90,000 NYNEX Corp. 3,836,250
169,500 PSI Resources, Inc. 4,364,625
30,000 Pacific Telesis Group 1,702,500
80,000 Public Service Enterprise
Group Inc. 2,590,000
40,000 Sierra Pacific Resources 805,000
147,500 Sprint Corp. 4,830,625
45,700 Telefonica de Espana ADR(b) 1,639,488
30,000 Texas Utilities Co. 1,282,500
26,000 US WEST, Inc. 1,215,500
71,500 United Illuminating Co. 2,824,250
42,400 Wicor Inc. 1,208,400
49,335,889
Insurance and Finance (11.7%)
35,400 Aetna Life & Casualty Co. 2,163,825
160,000 American Express Co. 5,020,000
69,200 American General Corp. 1,859,750
20,000 BankAmerica Corp. 887,500
28,400 Bankers Trust New York Corp. 2,172,600
69,700 Beneficial Corp. 5,140,375
21,800 CIGNA Corp. 1,378,850
153,000 Comerica Inc. 4,150,125
38,000 CoreStates Financial Corp. 969,000
70,000 Great Western Financial Corp. 1,242,500
90,000 Lincoln National Corp. $ 3,915,000
30,000 Morgan (J.P.) & Co., Inc. 2,126,250
55,900 NBD Bancorp, Inc. 1,628,088
24,000 National City Corp. 567,000
32,200 NationsBank Corp. 1,517,425
20,000 PNC Financial Corp. 592,500
10,000 St. Paul Cos., Inc. 887,500
42,300 Synovus Financial Corp. 745,538
77,000 Unitrin, Inc. 3,195,500
40,159,326
Oil and Gas (10.1%)
45,000 Amoco Corp. 2,401,875
32,100 British Petroleum Co. PLC
ADR(b) 1,901,925
23,600 Chevron Corp. 2,050,250
24,000 Equitable Resources Inc. 870,000
100,000 Exxon Corp. 6,275,000
50,000 Imperial Oil Ltd. 1,681,250
53,900 McDermott International, Inc. 1,455,300
75,000 Mobil Corp. 5,718,750
36,500 NOVA Corp. of Alberta 241,813
60,000 Occidental Petroleum Corp. 1,065,000
54,000 Royal Dutch Petroleum Co.
ADR(b) 5,454,000
86,100 Texaco Inc. 5,531,925
34,647,088
Chemicals (6.8%)
156,600 du Pont (E.I.) de Nemours
& Co., Ltd. 7,458,075
85,900 Dow Chemical Co. 4,992,938
95,400 Grace (W.R.) & Co. 3,720,600
61,100 Olin Corp. 2,749,500
35,500 Union Carbide Corp. 736,625
117,200 Witco Corp. 3,516,000
23,173,738
Health Care (5.9%)
50,000 American Cyanamid Co. $ 2,625,000
105,000 American Home Products Corp. 6,575,625
40,000 Baxter International Inc. 940,000
28,100 Bristol-Myers Squibb Co. 1,682,488
23,000 Lilly (Eli) & Co. 1,319,625
10,000 McKesson Corp. 563,750
22,200 Merck & Co., Inc. 760,350
79,000 Upjohn Co. 2,468,750
48,000 Warner-Lambert Co. 3,186,000
20,121,588
Consumer Non-Durables (5.4%)
196,300 American Brands Inc. 6,747,813
40,000 Avon Products, Inc. 1,995,000
77,500 Kimberly-Clark Corp. 4,097,813
103,000 Philip Morris Cos., Inc. 5,755,125
4,991 Windmere Corp. warrants(c) 3,119
18,598,870
Retail (3.1%)
64,000 American Stores Co. 2,648,000
70,000 K mart Corp. 1,645,000
70,000 Rite Aid Corp. 1,137,500
36,600 Sears, Roebuck & Co. 1,990,125
69,300 Shopko Stores, Inc. 744,975
103,000 Woolworth Corp. 2,394,750
10,560,350<PAGE>
Conglomerates (2.8%)
98,800 Ball Corp. 2,840,500
66,600 EG&G Inc. 1,182,150
35,000 Hanson PLC ADR(b) 735,000
87,600 National Service Industries, Inc. 2,124,300
25,500 Ogden Corp. 605,625
31,400 TRW, Inc. 2,064,550
9,552,125
Metals and Mining (2.5%)
38,300 Carpenter Technology Corp. $ 2,211,825
116,400 Freeport-McMoRan, Inc. 1,993,350
29,000 Phelps Dodge Corp. 1,268,750
70,000 Reynolds Metal Co. 3,141,250
8,615,175
Real Estate (2.3%)
20,800 Avalon Properties, Inc.(c) 405,600
90,000 Bradley Real Estate Trust 742,500
24,000 Camden Property Trust 576,000
43,200 Commercial Net Lease
Realty, Inc. 572,400
65,300 Crown American Realty Corp. 1,061,125
50,000 Health Care REIT Inc. 1,175,000
13,000 Holly Residential Properties 286,000
15,000 MGI Properties 206,250
37,000 Mark Centers Trust 578,125
60,000 Nationwide Health
Properties, Inc. 2,265,000
7,868,000
Business Equipment and Services (2.2%)
39,300 IBM Corp. 2,117,288
67,600 Xerox Corp. 5,577,000
7,694,288
Transportation (1.7%)
83,800 GATX Corp. 3,142,500
40,000 Norfolk Southern Corp. 2,710,000
5,852,500
Food and Beverages (1.4%)
30,300 Borden Inc. 518,888
30,000 CPC International Inc. 1,406,250
110,000 Flowers Industries, Inc. 2,076,250
29,000 Seagram Co. Ltd. 801,125
4,802,513
Aerospace and Defense (1.4%)
110,200 GenCorp Inc. $ 1,529,025
25,000 Northrop Corp. 950,000
65,600 Rockwell International Corp. 2,287,800
4,766,825
Basic Industrial Products (1.1%)
76,000 Sundstrand Corp. 3,040,000
20,000 Timken Co. 647,500
3,687,500<PAGE>
Forest Products (1.0%)
14,600 Boise Cascade Corp. 335,800
70,000 Federal Paper Board Co., Inc. 1,548,750
20,000 Potlatch Corp. 937,500
10,000 Union Camp Corp. 465,000
3,287,050
Consumer Services (0.9%)
15,000 Block (H.&R.), Inc. 575,625
78,000 Times Mirror Co. Class A 2,437,500
3,013,125
Automotive (0.7%)
20,000 Dana Corp. 1,095,000
25,000 General Motors Corp. 1,321,875
2,416,875
Photography (0.6%)
35,000 Eastman Kodak Co. 2,130,625
Environmental Control (0.2%)
44,800 Browning-Ferris Industries, Inc. 1,120,000
Total Common Stocks
(cost $248,394,841) $261,403,450
Convertible Bonds (5.8%)(a)
Principal Amount Value
Insurance and Finance (2.3%)
$ 500,000 Aegon NV ADR euro. cv.
sub. deb. 7s, 2001(b) $ 702,500
3,600,000 Chubb Corp. euro. cv.
deb. 6s, 1998 3,924,000
600,000 Lend Lease Financial Ltd.
cv. deb. 4 3/4s, 2003(d) 679,500
2,000,000 Old Republic International
Corp. cv. sub. deb. 5 3/4s, 2002 2,210,000
500,000 Trenwick Group, Inc. cv.
deb. 6s, 1999 542,500
8,058,500
Consumer Non-Durables (1.1%)
600,000 Fieldcrest Cannon, Inc. cv.
sub. deb. 6s, 2012 495,000
2,300,000 Guilford Mills Inc. cv. sub.
deb. 6s, 2012 2,199,375
1,000,000 L.A. Gear, Inc. cv. sub. deb.
7 3/4s, 2002 1,105,000
3,799,375
Food and Beverages (0.6%)
4,000,000 Seagram Co. Ltd. liquid
yield option cv. notes
zero %, 2006 2,077,500
Retail (0.4%)
1,200,000 American Stores Co. cv. deb.
7 1/4s, 2001 1,326,000
Oil and Gas (0.3%)
1,000,000 Noble Affiliates Inc. cv. sub.
notes 4 1/4s, 2003 970,000
Health Care (0.3%)
700,000 Hillhaven Corp. (The) cv. sub.
deb. 7 3/4s, 2002 910,000
Transportation (0.3%)
$ 1,000,000 Delta Air Lines, Inc. cv. sub.
notes 3.23s, 2003 $ 861,250
Automotive (0.2%)
750,000 Titan Wheel International Inc.
cv. sub. deb. 4 3/4s, 2000 761,250
Consumer Services (0.2%)
2,200,000 Hollinger, Inc. liquid yield
option cv. notes zero %, 2013 701,250<PAGE>
Building and Construction (0.1%)
400,000 Interface Inc. cv. deb. 8s, 2013 414,000
Total Convertible Bonds
(cost $19,928,085) $ 19,879,125
Convertible Preferred Stocks (5.8%)(a)
Number of Shares Value
Insurance and Finance (2.0%)
7,000 Citicorp Ser. 13, $5.375, cv.
pfd.(d) $ 743,750
40,000 First Bank System, Inc.
Ser. 91-A, $3.5625, cv. pfd. 2,465,000
60,000 Republic New York Corp.
$3.375, cv. pfd. 3,585,000
6,793,750
Automotive (1.5%)
50,000 Ford Motor Co. Ser. A, $4.20,
cv. pfd. 5,125,000
Transportation (1.1%)
30,000 AMR Corp. Ser. A, $3.00,
cv. pfd.(d) 1,560,000
40,000 Delta Air Lines, Inc. Ser. C,
$3.50, cv. pfd. 2,255,000
3,815,000
Metals and Mining (0.4%)
70,000 Freeport-McMoRan Copper
Co., Inc. stepped-coupon
$1.25 ($1.75, 1996), cv. pfd.(e) $ 1,540,000
Oil and Gas (0.3%)
17,200 Unocal Corp. $3.50, cv. pfd.(d) 989,000
Basic Industrial Products (0.2%)
15,000 AGCO Corp. $1.625, cv. pfd. 678,750
1 Alumax, Inc. Ser. A, $4.00, cv. pfd. 92
678,842
Consumer Non-Durables (0.2%)
11,000 Fieldcrest Cannon, Inc. Ser. A,
$3.00, cv. pfd.(d) 605,000
Forest Products (0.1%)
10,000 Boise Cascade Corp. Ser. G,
$1.58, cv. pfd. 227,500
Total Convertible Preferred Stocks
(cost $17,847,244) $ 19,774,092
Corporate Bonds and Notes (4.0%)(a)
Principal Amount Value
Insurance and Finance (1.2%)
$ 300,000 Bank of Scotland sub. notes
8.8s, 2004(d) $ 343,125
300,000 Chemical Banking Corp. sub.
deb. 8 5/8s, 2002 339,375
300,000 Comerica Inc. global sub.
notes 6 7/8s, 2008 304,313<PAGE>
300,000 Den Danske Bank sub. notes
6.55s, 2003(d) 294,938
450,000 Great Western Financial Corp.
notes 6 1/8s, 1998 450,000
300,000 Greyhound Financial Corp.
global notes 9 1/8s, 2002 346,688
400,000 Hartford National Corp. sub.
cap. notes 9.85s, 1999 463,750
450,000 Household Finance Corp.
notes 7 5/8s, 2003 477,281
300,000 Integra Financial Corp. global
sub. notes 8 1/2s, 2002 335,063
400,000 PaineWebber Group Inc.
notes 6 1/2s, 2005 380,750
300,000 Svenska Handelsbanken
global sub. notes 8.35s, 2004 336,188
4,071,471
Oil and Gas (0.6%)
325,000 Coastal Corp. sr. notes 10s, 2001 374,969
300,000 Maxus Energy Corp. global
notes 9 1/2s, 2003 301,500
300,000 McDermott Inc. global notes
9 3/8s, 2002 337,875
300,000 Occidental Petroleum Corp. sr.
notes 11 3/4s, 2011 352,125
115,000 Pennzoil Co. deb. 9s, 2017 119,313
300,000 Transcontinental Gas Pipe
Line Corp. deb. 9s, 1996 318,188
300,000 Transcontinental Gas Pipe
Line Corp. sr. deb. 9 1/8s, 2017 315,000
2,118,970
Consumer Services (0.4%)
300,000 News American Hldgs. Inc.
sr. notes 8 1/2s, 2005 323,250
300,000 Tele-Communications, Inc.
sr. deb. 9.8s, 2012 369,000
630,000 Time Warner Inc. global notes
9 1/8s, 2013 686,700
1,378,950
Utilities (0.4%)
300,000 BVPS II Funding Corp. secd.
lease oblig. bonds 9s, 2017 270,563
300,000 CTC Mansfield Funding Corp.
secd. lease oblig. bonds
11 1/8s, 2016 324,750
400,000 Texas Utilities Co. secd. lease
fac. bonds 7.46s, 2015 408,000
300,000 Toledo Edison Co. med. term
notes 7.82s, 2003 303,000
1,306,313
Conglomerates (0.2%)
300,000 Pennsylvania Central Corp.
sub. notes 10 7/8s, 2011 358,500
250,000 Tenneco Inc. deb. 10s, 2008 320,781
679,281
Food and Beverages (0.2%)
300,000 Imperial Holly Corp. sr. notes
8 3/8s, 1999 309,375
300,000 RJR Nabisco Inc. sr. notes
10 1/2s, 1998 334,688
644,063
Metals and Mining (0.2%)
300,000 ASARCO Inc. notes 7 3/8s, 2003 309,000
300,000 USX Corp. deb. 9 1/8s, 2013 316,500
625,500
Basic Industrial Products (0.2%)
300,000 Anchor Glass Container
Corp. sr. sub. deb. 9 7/8s, 2008 303,000
300,000 Owens-Illinois Inc. sr. sub.
notes 9.95s, 2004 316,500
619,500
Retail (0.2%)
$ 300,000 Sears, Roebuck & Co. deb.
8s, 1999 $ 323,250
250,000 Service Merchandise Co.,
Inc. sr. notes 8 3/8s, 2001 258,150
581,400
Automotive (0.1%)
380,000 Chrysler Corp. deb. 10.95s, 2017 458,138
Transportation (0.1%)
300,000 GATX Corp. med. term notes
9 1/2s, 2002 346,500
100,000 Viking Star Shipping Co. sr.
secd. notes 9 5/8s, 2003(d) 102,000
448,500
Energy-Related (0.1%)
300,000 Tosco Corp. 1st mtge. Ser. B,
9 5/8s, 2002 324,750
Business Equipment and Services (0.1%)
300,000 Valassis Communications Inc.
sr. sub. notes 9 3/8s, 1999 298,688
Total Corporate Bonds and Notes
(cost $13,383,874) $13,555,524
U.S. Government and Agency Obligations (3.8%)(a)
Principal Amount Value
Government National
Mortgage Association
$ 450,000 6 1/2s, TBA, January 15, 2024(f) $ 442,266
1,442,415 6 1/2s, with various due dates
to November 15, 2023 1,420,768
2,270,000 U.S. Treasury Bonds 7 1/8s,
February 15, 2023 2,464,369
6,090,000 U.S. Treasury Notes 8 7/8s,
November 15, 1997 6,944,503
870,000 U.S. Treasury Notes 4 5/8s,
November 30, 1994 878,156
880,000 U.S. Treasury Notes 4 1/4s,
October 31, 1994 884,950
Total U.S. Government and
Agency Obligations
(cost $13,095,982) $ 13,035,012
Preferred Stocks (0.5%)(a)
Number of Shares Value
35,600 Boise Cascade Corp. Ser. F,
$2.35, dep. shs. pfd. $ 934,500
8,332 Cleveland Electric Iluminating
Co. Sinking Fund, Ser. N,
$9.125, pfd. 856,113
Total Preferred Stocks
(cost $1,803,771) $ 1,790,613
Asset-Backed Securities (0.1%) (a)(cost $314,736)
Principal Amount Value
$ 328,000 Delta Air Lines Equipment
Trust 10s, 2013(d) $ 329,435
Short-Term Investments (4.1%)(a) (cost $14,300,271)
Principal Amount Value
$14,299,000 Interest in $476,193,000 joint
repurchase agreement dated
November 30, 1993 with
Kidder, Peabody & Co. Inc.
due December 1, 1993 with
respect to various U.S. Treasury
obligations -- maturity value of
$14,300,271 for an effective
yield of 3.2% $ 14,300,271
Total Investments
(cost $329,068,804)(g) $344,067,522
<PAGE>
Notes
(a) Percentages indicated are based on net assets of
$343,050,841, which correspond to a net asset value per class A
share and class B share of $8.67 and $8.65, respectively.
(b) Securities whose values are determined or significantly
influenced by trading on exchanges not in the Unites States or
Canada. ADR after the name of a foreign holding stands for
American Depository Receipt, representing ownership of foreign
securities on deposit with a domestic custodian bank.
(c) Non-income-producing security.
(d) Securities exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in
transactions exempt from registration, normally to qualified
institutional buyers. At November 30, 1993, these securities
amounted to $5,646,748 or 1.6% of net assets.
(e) The interest rate and date shown parenthetically represent
the new interest rate to be paid and the date the Fund will begin
accruing this rate.
(f) TBAs are mortgage-backed securities traded under delayed
delivery commitments settling after November 30, 1993. Although
the unit price for the trades has been established, the principal
value has not been finalized. However, the amount of the
commitment will not fluctuate more than 2.0% from the principal
amount. Income on the securities will not be earned until
settlement date. The cost of TBA purchases at November 30, 1993
was $451,125.
(g) The aggregate identified cost for federal income tax purposes
is $329,854,977, resulting in gross unrealized appreciation and
depreciation of $22,972,700 and $8,760,155, respectively, or net
unrealized appreciation of $14,212,545.
The Fund had the following industry group concentrations greater
than 10% at November 30, 1993 (as a percentage of net assets):
Insurance & Finance 17.2%
Utilities 14.8
Oil and Gas 11.3
<PAGE>
<TABLE>
<CAPTION>
Statement of
assets and liabilities
November 30,1993
<S> <C> <C>
Assets
Investments in securities, at value (identified cost
$329,068,804) (Note 1) $344,067,522
Cash 340
Dividends, interest and other receivables 2,209,896
Receivable for shares of the Fund sold 918,478
Receivable for securities sold 7,377,142
Total assets 354,573,378
Liabilities
Payable for securities purchased $10,239,392
Payable for shares of the Fund repurchased 335,223
Payable for compensation of Manager (Note 2) 540,243
Payable for administrative services (Note 2) 2,397
Payable for compensation of Trustees (Note 2) 200
Payable for investor servicing and custodian
fees (Note 2) 118,892
Payable for distribution fees (Note 2) 154,355
Other accrued expenses 131,835
Total liabilities 11,522,537
Net assets $343,050,841
Represented by
Paid-in capital (Note 4) $513,586,664
Distributions in excess of net investment income (1,170,449)
Accumulated net realized loss on investments (184,364,092)
Net unrealized appreciation of investments 14,998,718
<PAGE>
Total -- Representing net assets applicable to capital
shares outstanding $343,050,841
Computation of net asset value and offering price
Net asset value and redemption price of class A shares
($328,250,948 divided by 37,880,313 shares) $8.67
Offering price per share (100/94.25 of $8.67)* $9.20
Net asset value and offering price of class B shares
($14,799,893 divided by 1,710,376 shares)** $8.65
*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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement of
operations
Year ended November 30, 1993
<S> <C> <C>
Investment income:
Dividends (net of foreign tax of $69,172) $11,723,009
Interest 3,185,944
Total investment income 14,908,953
Expenses:
Compensation of Manager (Note 2) $2,099,538
Investor servicing and custodian fees (Note 2) 524,412
Compensation of Trustees (Note 2) 18,475
Reports to shareholders 8,051
Auditing 21,945
Legal 22,124
Postage 98,831
Administrative services (Note 2) 13,930
Distribution fees -- class A (Note 2) 781,703
Distribution fees -- class B (Note 2) 25,292
Registration fees 30,229
Other 182,301
Total expenses 3,826,831
Net investment income 11,082,122
Net realized gain on investments (Notes 1 and 3) 41,388,907
Net unrealized depreciation of investments during the year (1,645,359)
Net gain on investments 39,743,548
Net increase in net assets resulting from operations $50,825,670
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Statement of
changes in net assets
Year ended November 30
1993 1992
<S> <C> <C>
Increase (decrease) in net assets
Operations:
Net investment income $ 11,082,122 $ 20,635,339
Net realized gain on investments 41,388,907 14,620,451
Net realized loss on options -- (3,972,441)
Net unrealized appreciation (depreciation) of
investments and options (1,645,359) 11,669,302
Net increase in net assets resulting from
operations 50,825,670 42,952,651
Undistributed net investment income included
in price of shares sold and repurchased, net 102,220 (13,411)
Distributions to shareholders from:
Net investment income:
Class A (12,177,419) (19,609,410)
Class B -- --
In excess of Net investment income:
Class A (1,239,552) --
Class B -- --
Decrease from capital share transactions (Note 4) (28,586,774) (86,440,272)
Total increase (decrease) in net assets 8,924,145 (63,110,442)
Net assets
Beginning of year 334,126,696 397,237,138
End of year (including (over)/underdistributed
net investment income of $(1,170,449) and
$1,062,180, respectively) $343,050,841 $334,126,696
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Financial highlights*
(For a share outstanding throughout the period)
September 13, 1993
(commencement
of operations) to
November 30 Year ended November 30
1993*** 1993 1992 1991** 1990
Class B Class A
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $8.66 $7.72 $7.29 $6.60 $8.62
Investment Operations:
Net Investment Income .06 .28 .42 .30 .25
Net Realized/Unrealized Gain (Loss)
on Investments (.07) 1.01 .41 .93 (1.08)
Total from Investment Operations (.01) 1.29 .83 1.23 (.83)
Less Distributions from:
Net Investment Income -- (.31) (.40) (.30) (.25)
In excess of Net Investment Income -- (.03) -- -- --
Net Realized Gain on Investments -- -- -- (.24) --
Paid-in Capital -- -- -- -- (.94)
Total Distributions -- (.34) (.40) (.54) (1.19)
Net Asset Value,
End of Period $8.65 $8.67 $7.72 $7.29 $6.60
Total Investment Return at
Net Asset Value (%) (a) (.55)(b) 17.06 11.66 19.13 (10.56)
Net Assets, End of Period
(in thousands) $14,800 $328,251 $334,127 $397,237 $585,011<PAGE>
Ratio of Expenses to Average
Net Assets (%) 2.03(b) 1.16 1.23 1.20 1.09
Ratio of Net Investment Income to
Average Net Assets (%) 2.54(b) 3.40 5.57 4.13 3.30
Portfolio Turnover (%) (c) 125.85(d) 125.85(d) 340.99 198.18 222.84
See page 20 for notes to financial highlights.
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Financial highlights* (continued)
Year ended November 30
1989 1988 1987 1986 1985 1984
Class A
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $8.47 $7.87 $10.81 $10.76 $10.65 $12.19
Investment Operations:
Net Investment Income .29 .24 .21 .29 .39 .40
Net Realized/Unrealized Gain (Loss)
on Investments 1.14 1.87 (1.44) 1.47 1.53 .07
Total from Investment Operations 1.43 2.11 (1.23) 1.76 1.92 .47
Less Distributions from:
Net Investment Income (.32) (.32) (.21) (.20) (.39) (.55)
In excess of Net Investment Income -- -- -- -- -- --
Net Realized Gain on Investments (.06) (1.19) (1.50) (1.51) (1.42) (1.46)
Paid-in Capital (.90) -- -- -- -- --
Total Distributions (1.28) (1.51) (1.71) (1.71) (1.81) (2.01)
Net Asset Value,
End of Period $8.62 $8.47 $7.87 $10.81 $10.76 $10.65
Total Investment Return at
Net Asset Value (%) (a) 17.75 28.23 (15.33) 17.73 19.80 4.76
Net Assets, End of Period
(in thousands) $934,823 $1,005,981 $902,370 $1,158,887 $1,162,753 $709,307
<PAGE>
Ratio of Expenses to Average
Net Assets (%) .84 .87 .83 .73 .77 .80
Ratio of Net Investment Income to
Average Net Assets (%) 3.28 2.75 1.92 2.72 3.44 3.74
Portfolio Turnover (%) (c) 153.35 38.32 225.30 205.30 183.25 103.01
*Financial highlights for periods ended through November 30, 1992, have been restated to conform with requirements
issued by the SEC in April 1993.
**Effective March 7, 1991, the Fund's investment objective was changed from seeking high current return to seeking
current income. Information in the table previous to March 7, 1991, does not reflect the Fund's current investment
objective.
***Per-share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(a)Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b)Annualized.
(c)Portfolio turnover calculations for fiscal 1985 and thereafter include transactions in U.S. government securities
with maturities greater than one year. Prior period portfolio turnover calculations excluded all U.S. government
securities.
(d)Portfolio turnover excludes the impact of assets received from the acquisition of Putnam Equity Income Fund. (See
Note 5).
/TABLE
<PAGE>
Notes to
financial statements
November 30, 1993
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 objective of the Fund is to seek current income by
investing primarily in a diversified portfolio of
income-producing equity securities. Capital growth is a secondary
objective when consistent with seeking current income.
The Fund offers both class A and class B shares. The Fund
commenced its public offering of class B shares on September 13,
1993. Class A shares are sold with a maximum front-end sales
charge of 5.75%. Class B shares do not pay a front-end sales
charge, but pay a higher ongoing distribution fee than class A
shares, and are subject to a contingent deferred sales charge if
those shares are redeemed within six years of purchase. Expenses
of the Fund are borne pro-rata by the holders of both classes of
shares, except that each class bears expenses unique to that
class (including the distribution fees applicable to such class),
and 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 the Fund
were liquidated. In addition, the Trustees declare separate
dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its
financial statements. The 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. Market quotations are not considered to be readily
available for long-term corporate bonds and notes; such
investments are stated at fair value on the basis of valuations
furnished by a pricing service, approved by the Trustees.
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. (See paragraph F of Note 1
with respect to valuation of options outstanding.)
B) TBA purchase commitments The Fund may enter into "TBA" (to be
announced) purchase commitments to purchase securities for a
fixed unit price at a future date beyond customary settlement
time. Although the unit price has been established, the principal
value has not been finalized. However, the amount of the
commitment will not fluctuate more than 2.0% from the principal
amount. The Fund holds, and maintains until the settlement date,
cash or high-grade debt obligations in an amount sufficient to
meet the purchase price, or the Fund enters into offsetting
contracts for the forward sale of other securities it owns. TBA
purchase commitments may be considered securities in themselves,
and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in
addition to the risk of decline in the value of the Fund's other
assets.
Unsettled TBA purchase commitments are valued at the current
market value of the underlying securities, generally according to
the procedures described under "Security valuation" above.
Although the Fund will generally enter into TBA purchase
commitments with the intention of acquiring securities for its
portfolio or for delivery pursuant to options contracts it has
entered into, the Fund may dispose of a commitment prior to
settlement if the Fund Manager deems it appropriate to do so.
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 of other registered investment companies managed by
Putnam Investment Management, Inc. "Putnam Management" (formerly
known as The Putnam Management Company, Inc.), the Fund's
Manager, a wholly-owned subsidiary of Putnam Investments, Inc.
(formerly known as The Putnam Companies, Inc.), and certain other
accounts. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
D) 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. 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.
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.
Discount on zero coupon bonds is accreted according to the
effective yield method.
F) Option accounting principles When the Fund writes a call or
put option, an amount equal to the premium received by the Fund
is included in the Fund's "Statement of assets and liabilities''
as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the
current market value of the option written. The current market
value of an option is the last sale price or, in the absence of a
sale, the last offering price. If an option expires on its
stipulated expiration date, or if the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or loss if the
cost of a closing purchase transaction exceeds the premium
received when the option was written) without regard to any
unrealized gain or loss on the underlying security, and the
liability related to such option is extinguished. If a written
call option is exercised, the Fund realizes a gain or loss from
the sale of the underlying security and the proceeds of the sale
are increased by the premium originally received. If a written
put option is exercised, the amount of the premium originally
received reduces the cost of the security which the Fund
purchases upon exercise of the option.
The Fund writes covered call options; that is, options for which
it holds the underlying security or its equivalent. Accordingly,
the risk in writing a call option is that the Fund relinquishes
the opportunity of profit if the market price of the security
increases and the option is exercised. In writing a put option,
the Fund assumes the risk of incurring a loss if the market price
of the underlying security decreases and the option is exercised.
The premium paid by the Fund for the purchase of a call or put
option is included in the Fund's "Statement of assets and
liabilities'' as an investment and subsequently
"marked-to-market" to reflect the current market value of the
option. If an option the Fund has purchased expires on the
stipulated expiration date, the Fund realizes a loss in the
amount of the cost of the option. If the Fund enters into a
closing sale transaction, the Fund realizes a gain or loss,
depending on whether proceeds from the closing sale transaction
are greater or less than the cost of the option. If the Fund
exercises a call option, the cost of the securities acquired by
exercising the call is increased by the premium paid to buy the
call. If the Fund exercises a put option, it realizes a gain or
loss from the sale of the underlying security and the proceeds
from such sale are decreased by the premium originally paid.
Stock index options are similar to options on individual
securities in that the purchaser of an index option acquires the
right to buy, and the writer undertakes the obligation to sell,
an index at a stated exercise price during the term of the
option. Instead of giving the right to take or make actual
delivery of securities, the holder of a stock index option has
the right to receive a cash "exercise settlement amount." This
amount is equal to the amount by which the fixed exercise price
of the option exceeds (in the case of a put) or is less than (in
the case of a call) the closing value of the underlying index on
the date of the exercise, multiplied by a fixed "index
multiplier." The Fund writes options on stock indices only to the
extent that it holds in its portfolio underlying securities,
which, in the judgment of Putnam Management, correlate closely
with the stock index.
G) 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.
At November 30, 1993, the Fund had approximately $150,570,659 in
capital loss carryovers available to offset future realized
capital gains, to the extent provided by regulations. This amount
will expire November 30, 1998. To the extent that the capital
loss carryover is used to offset realized gains, it is unlikely
that the gains so offset will be distributed to shareholders,
since any such distribution might be taxable as ordinary income.
At November 30, 1993, the Fund has designated 100.00% of the net
investment income per share of $0.34 as qualifying for the
dividends-received deduction for corporations.
H) Distributions to shareholders Distributions to shareholders
are recorded by the Fund on the ex-dividend date. The Fund
distributes any net investment income quarterly and any net
realized gains at least annually.
I) Equalization The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and
costs of repurchases of shares of beneficial interest equivalent,
on a per share basis, to the amount of distributable investment
income on the date of the transaction is credited or charged to
undistributed net investment income. As a result, undistributed
net investment income per share is unaffected by sales or
repurchases of Fund shares.
<PAGE>
Note 2
Management fee,
administrative
services, and
other transactions
Compensation of Putnam Investment Management, 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: 0.75% of the first $100 million of
average net assets, 0.65% of the next $100 million, 0.55% of the
next $300 million, 0.50% of the next $1.0 billion, 0.45% of the
next $1.0 billion and 0.40% of any amount over $2.5 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% 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.
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 year ended November 30, 1993, the Fund paid
$13,930 for these services.
Trustees of the Fund receive an annual Trustee's fee of $1,340
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 provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided
by Putnam Investor Services, a division of PFTC. Fees paid for
these investor servicing and custodial functions for the year
ended November 30, 1993, amounted to $524,412.
Investor servicing and custodian fees reported in the Statement
of operations for the year ended November 30, 1993, have been
reduced by credits allowed by PFTC.
The Fund has adopted a distribution plan with respect to its
class A shares (the "Class A Plan") pursuant to Rule 12b-1 under
the Investment Company Act of 1940. The purpose of the Class A
Plan is to compensate Putnam Mutual Funds Corp. (formerly known
as Putnam Financial Services, Inc.), a wholly-owned subsidiary of
Putnam Investments, Inc., for services provided and expenses
incurred by it in distributing class A shares. The Trustees have
approved payment by the Fund to Putnam Mutual Funds Corp. at an
annual rate of 0.25% of the average net assets attributable to
class A shares. For the year ended November 30, 1993, the Fund
paid distribution fees of $781,703 for class A shares.
During the year ended November 30, 1993, Putnam Mutual Funds
Corp., acting as an underwriter, received net commissions of
$36,613 from the sale of class A shares of the Fund.
A deferred sales charge of up to 1.00% is assessed on certain
redemptions of class A shares purchased as part of an investment
of $1 million or more. For the year ended November 30, 1993,
Putnam Mutual Funds Corp., acting as underwriter, received no
fees on class A redemptions.
The Fund has adopted a separate distribution plan with respect to
its class B shares (the "Class B Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the
Class B Plan is to compensate Putnam Mutual Funds Corp. for
services provided and expenses incurred by it in distributing
class B shares. The Class B Plan provides for payments by the
Fund to Putnam Mutual Funds Corp. at an annual rate of 1.00% of
the Fund's average net assets attributable to class B shares. For
the period September 13, 1993 (commencement of class B
operations) to November 30, 1993, the Fund paid distribution fees
of $25,292 for class B shares.
Putnam Mutual Funds Corp. also receives the proceeds of the
contingent deferred sales charges levied on class B share
redemptions within six years of purchase. The charge is based on
declining rates, which begin at 5.00% of the net asset value of
the redeemed shares. Putnam Mutual Funds Corp. received
contingent deferred sales charges of $8,079 from such redemptions
during the period September 13, 1993 (commencement of class B
operations) to November 30, 1993.
Note 3
Purchases
and sales of
securities
During the year ended November 30, 1993, purchases and sales of
investment securities other than U.S. government obligations and
short-term investments aggregated $332,127,621 and $386,815,127,
respectively. Purchases and sales of U.S. government obligations
aggregated $59,783,944 and $46,698,933, respectively. In
determining the net gain or loss on securities sold, the cost of
securities has been determined on the identified cost basis.
<PAGE>
<TABLE>
<CAPTION>
Note 4
Capital shares
At November 30, 1993, there was an unlimited number of shares of beneficial interest
authorized, divided into two classes, class A and class B capital stock. Transactions in
capital shares were as follows:
Year ended November 30
1993 1992
Class A Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 1,464,405 $ 12,377,552 961,310 $ 7,383,105
Shares issued in connection with:
Acquisition of Equity
Income Fund (Note 5) 2,003,694 17,331,950 -- --
Reinvestment of distributions 1,045,060 8,495,437 1,607,721 12,055,328
4,513,159 38,204,939 2,569,031 19,438,433
Shares repurchased (9,907,021) (81,504,149) (13,774,777) (105,892,116)
Portion represented by undistributed
net investment income -- (95,148) -- 13,411
Net decrease (5,393,862) $(43,394,358) (11,205,746) $(86,440,272)
For the period September 13, 1993
(commencement of operations)
to November 30
1993
Class B Shares Amount
Shares sold 694,296 $ 6,025,990
Shares issued in connection with
acquisition of Equity Income Fund (Note 5) 1,050,652 9,088,137
1,744,948 15,114,127
Shares repurchased (34,572) (299,471)
Portion represented by undistributed
net investment income -- (7,072)
Net increase 1,710,376 $14,807,584
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Note 5
Acquisition of
Putnam Equity
Income Fund
On September 13, 1993, the exchange date, the Fund acquired the net assets of Putnam
Equity Income Fund by a tax-free exchange approved by the shareholders. In addition, on
September 13, 1993, Putnam Strategic Income Trust was renamed Putnam Equity Income Fund.
The net assets of the Fund immediately following the acquisition on September 13, 1993,
were $315,263,483.
Class A Class B
<S> <C> <C>
Net assets of Putnam Equity Income Fund on
September 10, 1993, valuation date (including unrealized
appreciation of $1,124,916) $17,331,950 $9,088,137
Shares of the Fund issued in the acquisition 2,003,694 1,050,652
/TABLE
<PAGE>
Fund
performance
supplement
Putnam Equity Income Fund is managed for current income and
capital growth, investing primarily in a diversified portfolio of
income-producing equity securities that Putnam Management
believes have the potential to appreciate in value over time.
Standard & Poor's 500 Index is an unmanaged list of
large-capitalization common stocks, and assumes reinvestment of
all distributions. The index does not take into account brokerage
commissions or other costs. The fund's portfolio contains
securities that do not match those in the index. The Consumer
Price Index is a commonly used measure of inflation; it does not
represent an investment return.
Performance data do not take into account any adjustment for
taxes payable on reinvested distributions or distribution fees
prior to the implementation of the fund's class A share
distribution plan in 1990.
The fund performance supplement has been prepared by Putnam
Management to provide additional information about the fund and
the indexes used for performance comparisons. The information is
not part of the portfolio of investments owned or the financial
statements and notes.
<PAGE>
Your
Trustees
George Putnam
Chairman
Chairman and President,
The Putnam Funds
William F. Pounds
Vice Chairman
Professor of Management,
Alfred P. Sloan
School of Management,
Massachusetts Institute of
Technology
Hans H. Estin
Vice Chairman,
North American
Management Corporation
John A. Hill
Principal and
Managing Director,
First Reserve Corp.
Elizabeth T. Kennan
President,
Mount Holyoke College
Lawrence J. Lasser
President and
Chief Executive Officer,
Putnam Investments, Inc.
Robert E. Patterson
Executive Vice President,
Cabot Partners
Limited Partnership
Donald S. Perkins
Director of various
corporations
George Putnam, III
President, New Generation
Research, Inc.
A.J.C. Smith
Chairman of the Board
and Chief Executive Officer
Marsh & McLennan
Companies, Inc.
W. Nicholas Thorndike
Director of various
corporations
<PAGE>
Putnam
Equity
Income
Fund
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
Investor servicing agent
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
1-800-225-1581
Custodian
Putnam Fiduciary
Trust Company
Legal counsel
Ropes & Gray
Independent accountants
Coopers & Lybrand
(DALBAR logo)
Putnam Investor Services
has received the DALBAR
award each year since the
award's 1990 inception.
In more than 10,000 tests
of 38 shareholder
service components,
Putnam outperformed
the industry standard
in every category.
<PAGE>
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
Thomas Reilly
Vice President
Edward Bousa
Vice President
and Fund Manager
William N. Shiebler
Vice President
Francis J. Mullin
Vice President
John R. Verani
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
Equity Income 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.
AOC/A94-10020
<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 and "The accompanying notes are an integral part of these
financial statements") 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.
