Putnam
Equity
Income
Fund
[Artwork]
Annual Report
November 30, 1994
[Putnam Logo]
Boston * London * Tokyo
<PAGE>
<PAGE>
PERFORMANCE HIGHLIGHTS
Lipper Analytical Services ranked the fund's class A shares in the top quartile
of the 98 equity income funds tracked for 1-year total return performance as of
November 30, 1994. *
CDA/Wiesenberger also ranked the fund's class A shares in the top quartile of
the 96 funds tracked for 1-year performance as of November 30, 1994. +
Performance should always be considered in light of a fund's investment strate-
gy. Putnam Equity Income Fund seeks 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.
FISCAL 1994 RESULTS AT A GLANCE
CLASS A CLASS B
TOTAL RETURN: NAV POP NAV CDSC
- -------------------------------------------------------------------------------
12 months ended 11/30/94
(change in value during period
plus reinvested distributions) 1.59% -4.26% 0.86% -4.03%
- -------------------------------------------------------------------------------
SHARE VALUE: NAV POP NAV
- -------------------------------------------------------------------------------
11/30/93 $8.67 $9.20 $8.65
11/30/94 8.49 9.01 8.46
- -------------------------------------------------------------------------------
CAPITAL GAINS (1)
DISTRIBUTIONS NO. INCOME LONG-TERM SHORT-TERM TOTAL
- -------------------------------------------------------------------------------
Class A 4 $0.320 -- -- $0.320
Class B 4 0.267 -- -- 0.267
CURRENT RETURN NAV POP NAV
- -------------------------------------------------------------------------------
End of period (11/30/94)
Current dividend rate (2) 3.77% 3.55% 3.12%
- -------------------------------------------------------------------------------
Current 30-day SEC yield (3) 3.79 3.57 3.05
- -------------------------------------------------------------------------------
Performance data represent past results. For performance over longer periods,
see page 8. POP assumes 5.75% maximum sales charge. CDSC assumes 5% maximum
contingent deferred sales charge. (1) Capital gains, if any, are taxable for
federal and, in most cases, state tax purposes. For some investors, investment
income may also be subject to the federal alternative minimum tax. Investment
income may be subject to state and local taxes. (2) Income portion of most re-
cent distribution, annualized and divided by NAV or POP at end of period.
(3) Based only on investment income, calculated using SEC guidelines. Prior to
3/7/91, the fund operated under different investment objectives, policies, and
strategy.
* Lipper Analytical Services is an independent research organization; rankings
vary over time and do not reflect the effects of sales charges. The fund's
class A shares ranked 16 out of 98, 25 out of 50, and 18 out of 21 equity in-
come funds for 1-, 5-, and 10-year performance, respectively, as of 11/30/94.
Past performance is not indicative of future results.
+ CDA/Wiesenberger rankings are updated monthly, based entirely on total return
and do not take into account sales charges or fees. The fund's class A shares
ranked 18 out of 96, 25 out of 45, and 11 out of 14 equity income funds for
1-, 5-, and 10-year performance, respectively, as of 11/30/94. Past performan-
ce is not indicative of future results.
<PAGE>
<PAGE>
FROM THE CHAIRMAN [Photograph of George Putnam]
* (C) Karsh, Ottawa
Dear Shareholder:
As we begin a new year, most investors won't regret the passing of the old. Sin-
ce last February, when the Federal Reserve Board began a series of increases in
interest rates, 1994 was marked by sharp corrections followed by small gains and
extended uncertainty for virtually all financial markets.
Well in advance of the Fed's first increase, fund managers Edward Bousa and
Kenneth Taubes had adopted defensive strategies designed to reduce the impact of
rising rates on Putnam Equity Income Fund's portfolio. These strategies proved
successful and fund performance at NAV managed a small positive return through
a challenging period.
Although bonds bore the brunt of the downturn, the stock market also felt the
effects of the Fed's actions. However, Putnam Management's philosophy of selec-
ting well-researched securities on an issue-by-issue basis is designed to help
protect your fund's portfolio over time.
As fiscal 1994 closed, Edward marked his second full year at your fund's helm;
Ken became co-manager during the year. Before joining Putnam in 1991, Ken was
senior vice president of the Finance Division of U.S. Trust. He has 14 years of
investment experience.
The basic value strategy Edward and his team follow has successfully prepared
your fund to provide both growth and income potential in the years ahead. In the
accompanying report, Edward and Ken discuss the fiscal year just ended and pros-
pects for the coming months.
Respectfully yours,
George Putnam
Chairman of the Trustees
January 18, 1995
* (C) Copyright
<PAGE>
<PAGE>
REPORT FROM THE FUND MANAGERS
EDWARD P. BOUSA, LEAD MANAGER
KENNETH J. TAUBES
Putnam Equity Income Fund's most recent fiscal year, the 12 months ended Novem-
ber 30, 1994, was a time of trial for financial markets worldwide. During the
period, interest rates rose from their lowest levels in recent history to a
four-year high, affecting nearly every sector of the securities markets. As a
result, your fund's total return for the period was somewhat disappointing,
1.59% for class A shares and 0.86% for class B shares at net asset value (NAV).
Even so, the fund's class A share return outpaced the market's average 1.07%
total return, as represented by the Standard & Poor's *(R) 500 Index.
Indications that your fund fared better than many other funds in its class came
from recent Lipper and CDA/Wiesenberger rankings (see page 2) and from The Wall
Street Journal's "Mutual Fund Scorecard," published on December 8, 1994, which
ranked the fund among the top 15 equity income performers (15 of 98 funds) based
on total return for the 1-year period ended November 30, 1994.
DIVERSE SECTOR STOCKS PROVIDED POSITIVE RETURNS
Your fund's basic value investment strategy -- looking for stocks that are
attractively priced relative to earnings -- continued to serve the fund well
through a challenging period. Our approach of seeking out-of-favor companies
with strong cash flows and those making positive internal changes, coupled with
Putnam's extensive research capabilities, enabled your fund to perform well re-
lative to its competitors during the period. Securities of cyclical companies
- -- those producing products such as paper for packing and chemicals used in ba-
sic industry -- showed attractive gains through September and helped support the
fund's share price, as did consumer nondurables -- chiefly pharmaceutical and
tobacco company stocks.
At the start of the fiscal year, we uncovered an exceptional buy in the health
care sector, American Cyanamid Co., whose stock
* (R) Registed mark
<PAGE>
<PAGE>
we purchased at between $45 and $50 per share. Several months later, the company
was taken over by American Home Products Corp. and the per-share value quickly
rose to $101. Your fund benefited from our early decision to increase the fund's
existing position in this security.
Diligent research enabled us to be among the first investment managers to recog-
nize the tremendous near-term growth potential of Xerox Corporation. During the
period, we met with several members of Xerox's senior management, including the
chief executive officer and chief financial officer. We identified several posi-
tive changes, including the company's restructuring for global cost competitive-
ness, increasing productivity, and exciting new products. Consequently, we in-
creased your fund's holdings in Xerox this year, as the market recognized the
importance of the company's international business in digital copiers. While no
one can assure future performance, the stock performed well for your fund in
fiscal 1994.
Our focus, too, remained with U.S. companies that have successfully expanded
operations in foreign markets. Many of your fund's top holdings, including J.P.
Morgan & Co., Avon Products, Honeywell, AT&T, Sprint, and IBM, are growing at
an impressive pace overseas.
CAREFUL STOCK SELECTION, TIMELY SHIFTS REDUCED IMPACT OF RISING RATES
Your fund's steady performance this year was as much a result of what we inves-
ted in as what we decided against. In the first
[Pie Chart - Page 5]
INDUSTRY GROUPS AS OF 11/30/94
Insurance & finance ............... 17.8%
Utilities ......................... 16.1%
Oil & gas ......................... 8.6%
Consumer nondurables .............. 7.9%
Chemicals ......................... 5.1%
Based on a percentage of net assets. Holdings will vary.
<PAGE>
<PAGE>
half of the fiscal year, the fund had minimal holdings in electric utilities
- -- stock investments which are closely linked to bonds and which declined drama-
tically as interest rates rose. Consequently, negative effects were relatively
minimal. Instead, the portfolio was overweighted during that time in telephone
utilities, which performed well.
Similarly, our selection and the subsequent outperformance of basic materials
stocks helped offset losses in the financial services sector, particularly the
stocks of two large firms, Banker Trust New York Corp. and J.P. Morgan, which
underperformed because of the weakened bond market's affect on trading results.
Real estate investments helped your fund hold its value over the period. This
sector has benefited from a stronger market fueled by general inflations fears.
While real estate invesments can be sensitive to economic adversity, in-depth
research has helped us select those issues we believe will benefit the fund over
time.
NEW VALUE FOUND IN INSURANCE AND RAILROADS
In the second half of fiscal '94, we reduced the fund's holdings in the energy
and basic materials sector, taking profits and shifting into some industry
groups that were then very depressed, notably insurance groups and railroads. In
the last two months of the period, we doubled the fund's insurance weighting,
from 3% to 6%. On such company we particularly like is Safeco Corp., a brand new
name in your fund's portfolio. This property-casualty company offered signifi-
cant value in stock price and was trading at approximately nine times its earn-
ings at the time of purchase. We believe Safeco is well positioned for growth
in a strengthening economy.
Several railroad stock are among our more promising additions to the portfolio.
Although this sector has been depressed by 15% to 20%, many companies are show-
ing strong fundamentals. One such company is Union Pacific Railroad, currently
involved in a takeover of Santa Fe Railroad, and indicating signs of above-
average profit potential. We have added a significant position in Union Pacific
to the fund's portfolio.
OUTLOOK: WELL POSITIONED FOR ALL ECONOMIC WEATHER
We consider the recent volatility in the financial markets both an
<PAGE>
<PAGE>
TOP 10 HOLDINGS (as of 11/30/94)
- -------------------------------------------------------------------------------
EXXON CORPORATION
Drilling, production, refining, and marketing of oil and natural gas
- -------------------------------------------------------------------------------
J.P. MORGAN & CO., INC.
Banking and finance, multinational
- -------------------------------------------------------------------------------
PHILIP MORRIS COMPANIES
Domestic food processing, alcohol, and tobacco
- -------------------------------------------------------------------------------
AMERICAN HOME PRODUCTS CORP.
Pharmaceuticals
- -------------------------------------------------------------------------------
CINERGY CORP.
Utilities
- -------------------------------------------------------------------------------
XEROX CORPORATION
Document processing, copiers, fax machines, digital publishing
- -------------------------------------------------------------------------------
AMERICAN BRANDS, INC.
Consumer non-durables
- -------------------------------------------------------------------------------
MOBIL CORPORATION
Crude oil, natural gas, and chemical industries
- -------------------------------------------------------------------------------
FORD MOTOR CO.
Automobiles
- -------------------------------------------------------------------------------
NYNEX CORPORATION
Telecommunications
- -------------------------------------------------------------------------------
* These holdings represent 17.4% of the fund's net assets. Portfolio holdings
are subject to change.
opportunity and a risk. We have been taking advantage of the resulting opportu-
nities for outstanding value. At the same time, we are working to minimize risk
by selecting companies with strong positive cash flows. This indicates that they
are in a position to reduce their debt or to buy back stock, should interest ra-
tes continue to go up. Either of these moves would be likely to help support the
price of outstanding securities.
If interest rates fall, the discounted cash flow value of these companies would
normally be expected to rise, and your fund would benefit from any resulting
price appreciation. Our search for companies that position the portfolio posi-
tively, no matter what the economic weather, will continue into 1995.
The views expressed throughout the report are exclusively those of Putnam Mana-
gement. They are not meant as investment advice. Although the described holdings
were viewed favorably as of 11/30/94, there is no guarantee the fund will conti-
nue to hold these securities or that they will continue to grow in the future.
<PAGE>
<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, assum-
ing you held the shares through the entire period and reinvested all distribu-
tions back into the fund. We show total return in two ways: on a cumulative
long-term basis and on average how the fund might have grown each year over
varying periods. For comparative purposes, we show how the fund performed rela-
tive to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIODS ENDED 11/30/94
STANDARD &
CLASS A CLASS B POOR'S 500
NAV POP NAV CDSC INDEX CPI
- -------------------------------------------------------------------------------
1 year 1.59% -4.26% -0.86% -4.03% 1.07% 2.68%
- -------------------------------------------------------------------------------
2 years 18.92 12.10 -- -- 11.25 5.42
Annual average 9.05 5.88 -- -- 5.48 2.68
- -------------------------------------------------------------------------------
5 years 41.49 33.29 -- -- 53.04 18.90
Annual average 7.19 5.92 -- -- 8.88 3.52
- -------------------------------------------------------------------------------
10 years 155.10 140.42 -- -- 287.03 42.17
Annual average 9.82 9.17 -- -- 14.49 3.58
- -------------------------------------------------------------------------------
Life of class -- -- 0.74 -3.17 1.39 3.38
Annual average -- -- 0.61 -2.61 1.14 2.77
- -------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 12/31/94
(Most recent calendar quarter)
CLASS A CLASS B
NAV POP NAV CDSC S&P CPI
- -------------------------------------------------------------------------------
1 year 1.27% -4.54% 0.51% -4.36% 1.36% 2.68%
- -------------------------------------------------------------------------------
5 years 43.01 34.73 -- -- 51.55 18.72
Annual average 7.42 6.14 -- -- 8.67 3.49
- -------------------------------------------------------------------------------
10 years 152.43 137.99 -- -- 281.56 42.17
Annual average 9.70 9.06 -- -- 14.33 3.58
- -------------------------------------------------------------------------------
Life of class B -- -- 2.00 -1.92 3.72 3.38
Annual average -- -- 1.54 -1.48 2.85 2.59
- -------------------------------------------------------------------------------
Fund performance data do not take into account any adjustment for taxes payable
on reinvested distributions or, for class A shares, distribution fees prior to
implementation of the class A distribution plan. The fund began operations on
July 15, 1977, offering shares now known as class A. Effective September 13,
1993, the fund began offering class B shares. Performance data represent past
results. Investment returns and net asset value will fluctuate so an investor's
shares, when sold, may be worth more or less than their original cost.
STANDARD & POOR'S 500 INDEX is an unmanaged list of common stocks that is fre-
quently used as a general measure of stock market performance. The index assumes
reinvestment of all distributions and does not take into account brokerage co-
mmissions 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>
<PAGE>
[Line Chart - Page 9]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return on a $10,000 investment since 11/30/85
FUND'S CLASS A
SHARES AT POP S&P 500 INDEX CPI
- -------------------------------------------------------------------------------
11/30/85 $ 11,291 $ 12,906 $ 10,351
11/30/86 13,292 16,481 10,484
11/30/87 11,254 15,693 10,959
11/30/88 14,431 19,330 11,425
11/30/89 16,992 25,290 11,956
11/30/90 15,198 24,388 12,707
11/30/91 18,106 29,368 13,086
11/30/92 20,217 34,789 13,485
11/30/93 23,665 38,293 13,846
11/30/94 $ 24,042 $ 38,703 $ 14,217
- -------------------------------------------------------------------------------
Past performance is no assurance of future results. A $10,000 investment in the
fund's class B shares at inception on 9/13/93 would have been valued at $10,074
on 11/30/94 ($9,683 with a redemption at the end of the period).
TERMS AND DEFINITIONS
CLASS A SHARES are generally subject to an initial sales charge.
CLASS B SHARES may be subject to a sales charge upon redemption.
NET ASSET VALUE (NAV) is the value of all your fund's assets, minus any liabili-
ties, divided by the number of outstanding shares, not including any initial or
contingent deferred sales charges.
PUBLIC OFFERING PRICE (POP) is the price of a mutual fund share plus the maximum
sales charge levied at the time of purchase. POP performance figures shown here
assume the maximum 5.75% sales charge for class A shares.
CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the time of the
redemption of class B shares and assumes redemption at the end of the period.
Your fund's CDSC declines from a 5% maximum during the first year to 1% during
the sixth year. After the sixth year, the CDSC no longer applies.
<PAGE>
<PAGE>
THE PUTNAM FUND SELECTOR *(TM)
The Putnam Fund Selector shows the many opportunities for investors within every
investment strategy. All investors should first accumulate a base of conservati-
ve, cash-equivalent investments. Then, with the help of their investment advi-
sors, they should diversify their portfolios by investing in the Putnam Family
of Funds.
[Pyramid Chart - Page 10]
Risk/Reward
PUTNAM GROWTH FUNDS
PUTNAM GROWTH AND INCOME FUNDS
PUTNAM INCOME OR TAX-FREE INCOME FUNDS
MOST CONSERVATIVE INVESTMENTS
* (TM) Trademark
<PAGE>
<PAGE>
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund Capital Appreciation Fund
Diversified Equity Trust Europe Growth Fund
Global Growth Fund Health Sciences Trust
Investors Fund Natural Resources Fund *
New Opportunities Fund OTC Emerging Growth Fund
Overseas Growth Fund Vista Fund
Voyager Fund
PUTNAM GROWTH AND INCOME FUNDS
Convertible Income-Growth Trust Dividend Growth Fund
Equity Income Fund The George Putnam Fund of Boston
The Putnam Fund for Growth and Income Managed Income Trust
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Adjustable Rate U.S. Government Fund American Government Income Fund
Balanced Government Fund Corporate Asset Trust
Diversified Income Trust Federal Income Trust
Global Governmental Income Trust High Yield Advantage Fund
High Yield Trust Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE INCOME FUNDS
Intermediate Tax Exempt Fund Municipal Income Fund
Tax Exempt Income Fund Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free funds +
Arizona, California, Florida, Massachusetts, Michigan,
Minnesota, New Jersey, New York, Ohio, and Pennsylvania
LIFESTAGE (SM) FUNDS
Putnam Asset Allocation Funds -- three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments to help
maximize your return and reduce your risk.
The three portfolios:
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
MOST CONSERVATIVE INVESTMENTS ++
Putnam money market funds:
Money Market Fund +++
Tax Exempt Money Market Fund
California Tax Exempt Money Market Fund
New York Tax Exempt Money Market Fund
CDs and savings accounts **
* Formerly Energy-Resources Trust.
+ Not available in all states.
++ Relative to above.
+++ Formerly Putnam Daily Dividend Trust.
** Not offered by Putnam Investments. Certificated of deposit offer a fixed
rate of return and may be insured, up to certain limits, by federal/state
agencies. Savings accounts may also be insured up to certain limits.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain a
prospectus for any Putnam fund. It contains more complete information, in-
cluding charges and expenses. Read it carefully before you invest or send
money.
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
For the Year Ended November 30, 1994
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, including the portfolio of investments owned, as of November
30, 1994, the related statement of operations for the year then ended, the sta-
tement of changes in net assets for each of the two years in the period then
ended and the "Financial Highlights" for each of the periods indicated therein.
These financial statements and "Financial Highlights" are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these fi-
nancial statements and "Financial Highlights" based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and "Financial High-
lights" 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 No-
vember 30, 1994 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presenta-
tion. 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, 1994, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the "Financial Highlights" for each of the periods
indicated therein, in conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
January 20, 1995
<PAGE>
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
November 30, 1994
COMMON STOCKS (79.1%)(a)
NUMBER OF SHARES VALUE
UTILITIES (15,7%)
95,900 American Telephone & Telegraph Co. $ 4,711,088
44,100 Bell Atlantic Corp. 2,210,513
41,000 BellSouth Corp. 2,126,875
270,463 Cinergy Corp. 6,017,802
55,000 Consolidated Natural Gas Co. 1,925,000
60,000 Entergy Corp. 1,350,000
86,000 GTE Corp. 2,633,750
31,000 Hawaiian Electric Industries, Inc. 984,250
39,200 Houston Industries Inc. 1,332,800
27,000 NIPSCO Industries, Inc. 789,750
133,000 NYNEX Corp. 5,004,125
52,300 Northeast Utilities 1,117,913
45,000 Pacific Enterprises 961,875
34,000 Pacific Gas & Electric Co. 811,750
102,000 Public Service Co. of Colorado 2,907,000
65,000 Shandong Huaneng Power ADR (b) 658,125
92,400 Sprint Corp. 2,760,450
45,700 Telefonica de Espana SA ADR (b) 1,765,163
147,000 Texas Utilities Co. 4,795,875
131,653 US WEST, Inc. 4,640,768
13,000 Union Electric Co. 466,375
47,500 United Illuminating Co. 1,425,000
45,400 Wicor Inc. 1,265,525
--------------
52,661,772
INSURANCE AND FINANCE (15.6%)
52,000 AON Corp. 1,644,500
55,400 Aetna Life & Casualty Co. 2,479,150
112,000 American Express Co. 3,318,000
36,000 American General Corp. 945,000
46,000 BankAmerica Corp. 1,886,000
60,400 Bankers Trust New York Corp. 3,578,700
67,000 Bear Stearns Companies, Inc. 1,046,875
124,400 Beneficial Corp. 4,540,600
29,800 CIGNA Corp. 1,888,575
79,000 Comerica Inc. 2,083,625
97,000 CoreStates Financial Corp. 2,400,750
15,000 First Chicago Corp. 697,500
16,000 First Union Corp. 638,000
61,600 Household International, Inc. 2,371,600
102,000 Lincoln National Corp. 3,965,250
30,000 Mellon Bank Corp. 993,750
119,000 Morgan (J.P.) & Co., Inc. 6,991,250
<PAGE>
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
54,000 National City Corp. $ 1,356,750
54,200 NationsBank Corp. 2,432,225
22,000 Republic New York Corp. 940,500
49,000 SAFECO Corp. 2,410,188
42,300 Synovus Financial Corp. 771,975
47,000 Torchmark Corp. 1,556,875
64,500 Wilmington Trust Corp. 1,515,750
--------------
52,453,388
OIL AND GAS (7.8%)
60,000 Amoco Corp. 3,645,000
56,200 Chevron Corp. 2,451,725
117,000 Exxon Corp. 7,063,875
37,000 Imperial Oil Ltd. 1,230,250
30,800 McDermott International, Inc. 731,500
60,300 Mobil Corp. 5,140,575
16,000 Panhandle Eastern Corp. 338,000
15,900 Pennzoil Co. 769,163
28,000 Phillips Petroleum Co. 924,000
26,000 Royal Dutch Petroleum Co. 2,824,250
40,000 Total Corp. ADS (b) 1,250,000
--------------
26,368,338
CONSUMER NON DURABLES (7.6%)
146,300 American Brands, Inc. 5,175,363
69,300 Avon Products, Inc. 4,287,938
92,000 Eastman Kodak Co. 4,197,500
82,500 Kimberly-Clark Corp. 4,135,313
20,000 Maytag Corp. 301,200
108,000 Philip Morris Cos., Inc. 6,453,000
39,000 Universal Corp. 838,500
--------------
25,388,814
CHEMICALS (5.1%)
64,000 Dexter Corp. 1,320,000
35,000 Dow Chemical Co. 2,240,000
30,600 du Pont (E.I.) de Nemours & Co., Ltd. 1,648,575
35,900 Eastman Chemical Co. 1,691,788
70,400 Grace (W.R.) & Co. 2,604,800
40,100 Olin Corp. 2,040,088
85,000 Union Carbide Corp. 2,433,125
104,200 Witco Corp. 2,735,250
--------------
16,713,626
HEALTH CARE (4.6%)
95,000 American Home Products Corp. 6,186,875
64,600 Baxter International Inc. 1,663,450
20,100 Bristol-Myers Squibb Co. 1,160,775
24,000 Lilly (Eli) & Co. 1,503,000
22,200 Merck & Co., Inc. 826,950
55,000 Warner-Lambert Co. 4,255,625
--------------
15,596,675
<PAGE>
<PAGE>
FOOD AND BEVERAGES (2.7%)
63,000 Anheuser-Busch Cos., Inc. $ 3,094,875
110,000 Flowers Industries, Inc. 1,938,750
65,000 Heinz (H.J.) Co. 2,364,375
69,000 Sara Lee Corp. 1,681,875
--------------
9,079,875
BUSINESS EQUIPMENT AND SERVICES (2.7%)
40,000 Deluxe Corp. 1,110,000
35,300 IBM Corp. 2,497,475
55,600 Xerox Corp. 5,462,700
--------------
9,070,175
TRANSPORTATION (2.5%)
10,000 Burlington Northern Inc. 487,500
3,900 CSX Corp. 271,050
30,000 Consolidated Freightways, Inc. 581,250
54,000 Illinois Central Corp. 1,633,500
33,000 Norfolk Southern Corp. 1,996,500
76,000 Union Pacific Corp. 3,534,000
--------------
8,503,800
CONGLOMERATES (2.5%)
10,000 ITT Corp. 796,250
47,500 Ogden Corp. 938,125
49,300 TRW, Inc. 3,130,550
45,000 Tenneco Inc. 1,749,375
30,000 United Technologies Corp. 1,755,000
--------------
8,369,300
REAL ESTATE (2.3%)
45,000 Bradley Real Estate Trust, Inc. 635,625
59,200 Debartolo Realty Corp. 836,200
67,000 Equity Residential Properties Trust 1,817,375
34,000 Evans Withycombe Residential 629,000
50,000 Health Care Inc. 1,043,750
52,000 LTC Properties Inc. 630,500
21,300 Macerich Co. 420,675
50,000 Nationwide Health Properties, Inc. 1,637,500
--------------
7,650,625
CONSUMER SERVICES (2.2%)
21,000 Block (H & R), Inc. 727,125
72,000 Dun & Bradstreet Corp. 3,807,000
50,000 Knight-Ridder, Inc. 2,406,250
7,000 McGraw-Hill, Inc. 475,125
--------------
7,415,500
RETAIL (1.4%)
85,000 K Mart Corp. 1,232,500
22,000 Melville Corporation 693,000
15,000 Penney (J.C.) Co., Inc. 690,000
46,600 Sears, Roebuck & Co. 2,201,850
--------------
4,817,350
<PAGE>
<PAGE>
ELECTRONICS AND ELECTRICAL EQUIPMENT (1.1%)
21,000 Eaton Corp. $ 1,000,125
25,300 Emerson Electric Co. 1,492,700
45,000 Honeywell, Inc. 1,316,250
--------------
3,809,075
AEROSPACE AND DEFENSE (1.1%)
110,200 GenCorp Inc. 1,143,325
73,900 Rockwell International Corp. 2,503,363
--------------
3,646,688
AUTOMOTIVE (1.1%)
76,800 Dana Corp. 1,660,800
50,000 General Motors Corp. 1,906,250
--------------
3,567,050
FOREST PRODUCTS (1.0%)
74,700 Potlatch Corp. 2,801,250
15,000 Weyerhaeuser Co. 575,625
--------------
3,376,875
BUILDING AND CONSTRUCTION (0.6%)
44,000 Armstrong World Industries, Inc. 1,760,000
9,300 Champion International Corp. 323,175
--------------
2,083,175
TELECOMMUNICATIONS (0.5%)
89,000 Comsat Corp. 1,724,375
BASIC INDUSTRIAL PRODUCTS (0.4%)
48,800 Ball Corp. 1,372,500
METALS AND MINING (0.3%)
505 Freeport-McMoRan Copper Co., Inc. 10,163
24,000 Reynolds Metal Co. 1,131,000
--------------
1,141,163
ENVIRONMENTAL CONTROL (0.3%)
46,000 Chemical Waste Management, Inc. 425,500
22,000 WMX Technologies, Inc. 566,500
--------------
992,000
--------------
TOTAL COMMON STOCKS (cost $267,347,863) $265,802,139
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (5.9%)(a)
PRINCIPAL AMOUNT VALUE
Government National Mortgage Association
$ 1,279,889 8 1/2s, with various due dates to November 15, 2024 $ 1,251,891
989,019 8s, Midgets, January 15, 2007 971,710
650,374 8s, with various due date to November 15, 2024 618,261
1,358,890 7 1/2s, with various due dates to June 15, 2023 1,249,813
<PAGE>
<PAGE>
Government National Mortgage Association
658,330 7s, with various due date to May 15, 2024 $ 585,296
492,070 7s, Midgets, May 15, 2009 460,547
350,000 8 1/2s, TBA, December 14, 2024 342,344
140,000 8s, TBA, December 14, 2024 133,088
505,000 U.S. Treasury Bonds 11 1/8s, August 15, 2003 605,684
995,000 U.S. Treasury Bonds 8 1/8s, August 15, 2019 995,311
2,200,000 U.S. Treasury Bonds 7 1/2s, November 15, 2024 2,076,250
2,320,000 U.S. Treasury Bonds 7 1/8s, February 15, 2023 2,081,475
2,300,000 U.S. Treasury Notes 8 7/8s, November 15, 1997 2,373,313
605,000 U.S. Treasury Notes 6 7/8s, July 31, 1999 583,447
220,000 U.S. Treasury Notes 5 7/8s, February 15, 2004 190,919
800,000 U.S. Treasury Notes 5, 1/2s, July 31, 1997 760,500
76,000 U.S. Treasury Notes 5s, January 31, 1999 68,638
2,740,000 U.S. Treasury Notes 4 5/8s, February 29, 1996 2,659,513
1,925,000 U.S. Treasury Notes 4s, January 31, 1996 1,859,430
--------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(cost $20,518,012) $ 19,867,430
CONVERTIBLE PREFERRED STOCKS (3.9%)(a)
NUMBER OF SHARES VALUE
AUTOMOTIVE (1.5%)
57,000 Ford Motor Co. Ser. A, $4.20, cv. pfd. $ 5,023,125
METALS AND MINING (0.8%)
80,000 Freeport-McMoRan Copper Co., Inc.
stepped-coupon $1.25, (7s, 8/1/96), cv. pfd. (c) 1,640,000
27,000 Pittston Mineral Corp. Ser. C, $3.125, cv. pfd. 1,093,500
--------------
2,733,500
TRANSPORTATION (0.5%)
40,000 Delta Air Lines, Inc. Ser. C, $3.50, cv. pfd. 1,815,000
OIL AND GAS (0.5%)
30,000 Ashland Oil Corp., $3.125, cv. pfd. 1,695,000
INSURANCE AND FINANCE (0.3%)
18,700 Republic New York Corp. $3.375, cv. pfd. 930,325
CONSUMER NON DURABLES (0.2%)
11,000 Fieldcrest Cannon, Inc. $3.00, cv. pfd. (d) 572,000
ELECTRONICS AND ELECTRICAL EQUIPMENT (0.1%)
23,950 Westinghouse Electric Corp. Ser. C, $1.30, cv. pfd. (d) 317,338
--------------
TOTAL CONVERTIBLE PREFERRED STOCKS (cost $13,639,386) $ 13,086,288
CORPORATE BONDS AND NOTES (3.2%)(a)
PRINCIPAL AMOUNT VALUE
INSURANCE AND FINANCE (1.1%)
$ 50,000 American Annuity Group, Inc. sr. sub. notes 11.125s,
2003 $ 49,000
250,000 BAT Capital Corp. med. term notes 6.19s, 2000 224,844
<PAGE>
<PAGE>
$ 300,000 Bank of Scotland med. term sub. notes 8.85s, 2006(d) $ 299,813
25,000 Comdata Network, Inc. sr. notes 12 1/2s, 1999 26,750
300,000 Crestar Financial Corp. sub. notes 8 3/4s, 2004 299,250
25,000 Delaware Management Holdings, Inc.
sr. notes Ser. B, 10 1/4s, 2004 24,375
300,000 Den Danske Bank sub. notes 6.55s, 2003 258,000
300,000 Ford Capital BV deb. 9s, 1998 305,813
330,000 General Motors Acceptance Corp.
med. term notes 6 3/4s, 1996 325,256
450,000 Great Western Financial Corp. notes 6 1/8s, 1998 420,188
25,000 Keystone Group, Inc. sr. secd. notes 9 3/4s, 2003 23,000
300,000 Midlantic Banks, deb. 9 7/8s, 1999 312,563
50,000 PSF Finance L.P. sr. notes 12 1/4s, 2004 51,406
400,000 Paine Webber Group Inc. notes 6 1/2s, 2005 322,750
250,000 Riggs National Corp. sub. deb. 8 1/2s, 2006 228,750
265,000 Suntrust Banks sub. notes 6 1/8s, 2004 224,588
--------------
3,396,346
CONSUMER SERVICES (0.5%)
50,000 AMC Entertainment, Inc. sr. sub. deb. 12 5/8s, 2002 53,500
30,000 Act III Broadcasting, Inc. sr. sub. notes 9 5/8s, 2003 27,300
300,000 Cablevision Systems Corp. sr. sub. reset deb. 10 3/4s,
2004 294,750
100,000 Century Communications Corp. sr. disc. notes zero %, 2003 39,000
50,000 Cinemark USA sr. notes 12s, 2002 52,500
50,000 Comcast Cellular Corp. sr. participating notes Ser. A,
zero %, 2000 32,625
50,000 General Media Corp. sr. secd. notes 10 5/8s, 2000 47,250
75,000 Insight Communications Co. sr. sub. notes
stepped-coupon 8 1/4s (11 1/4s, 3/1/96), 2000 (c) 70,500
35,000 La Quinta Motor Inns Inc. deb. 9 1/4s, 2003 32,375
75,000 Marvel Parent Holdings, Inc. sr. secd. disc. notes
zero %, 1998 46,500
300,000 News America Hldgs. Inc. sr. notes 8 1/2s, 2005 287,063
300,000 Tele-Communications, Inc. sr. deb. 9.8s, 2012 299,250
630,000 Time Warner Inc. deb. 9 1/8s, 2013 561,881
--------------
1,844,494
UTILITIES (0.4%)
250,000 Arkla, Inc. notes 8 7/8s, 1999 243,750
25,000 Chesapeake Energy sr. exch. notes 12s, 2001 25,375
65,938 Midland Cogeneration Ventures deb. 10.33s, 2002 63,300
400,000 Public Service Co. of New Hampshire deb. 15.23s, 2000 475,000
400,000 Texas Utilities Co. secd. fac. bonds, 7.46s, 2015 349,000
300,000 Toledo Edison Co. med. term notes 7.82s, 2003 255,938
--------------
1,412,363
OIL AND GAS (0.3%)
300,000 Occidental Petroleum Corp. sr. notes 11 3/4s, 2011 326,625
100,000 Oryx Energy Co. deb. 9 3/4s, 1998 96,813
50,000 Tosco Corp. 1st mtge. Ser. B, 9 5/8s, 2002 50,750
50,000 TransTexas Gas Corp. sr. secd. notes 10 1/2s, 2000 47,500
300,000 USX Corp. deb. 9.8s, 2001 308,250
--------------
829,938
AUTOMOTIVE (0.2%)
380,000 Chrysler Corp. deb. 10.95s, 2017 419,900
100,000 Hayes Wheels International Inc. notes 9 1/4s, 2002 95,000
--------------
514,900
<PAGE>
<PAGE>
FOREST PRODUCTS (0.1%)
$ 50,000 Container Corp. of America sr. notes
Ser. A, 11 1/4s, 2004 $ 50,500
250,000 Gaylord Container Corp. sr. sub. disc. deb.
stepped-coupon zero % (12 3/4s, 5/15/96), 2005 (c) 217,500
75,000 Riverwood International Corp. sr. sub.
notes 10 3/8s, 2004 73,500
--------------
341,500
HEALTH CARE (0.1%)
215,000 McGaw, Inc. sr. notes 10 3/8s, 1999 221,450
100,000 Mediplex Group, Inc. sr. sub. notes 11 3/4s, 2002 112,000
--------------
333,450
CONGLOMERATES (0.1%)
300,000 Pennsylvania Central Corp. sub. notes 10 7/8s, 2011 327,188
RETAIL (0.1%)
25,000 Loehmanns. Holdings, Inc. sr. notes 10 1/2s, 1997 24,688
300,000 Sears, Roebuck & Co. med. term notes 5.91s, 1999 272,625
25,000 Service Merchandise Co., Inc. sr. sub. deb. 8 3/8s, 2001 20,750
--------------
318,063
ELECTRONICS AND ELECTRICAL EQUIPMENT (0.1%)
280,000 Amphenol Corp. sr. sub. notes 12 3/4s, 2002 315,000
CONSUMER NON DURABLES (0.1%)
175,000 Guess Jeans, Inc. sr. sub. notes 9 1/2s, 2003 161,000
10,000 Playtex Family Products Corp. sr. sub. notes 9s, 2003 8,500
--------------
169,500
TRANSPORTATION (0.1%)
130,000 Blue Bird Body Co. sub. deb. Ser. B, 11 3/4s, 2002 130,000
35,000 Viking Star Shipping sr. secd. notes 9 5/8s, 2003 32,550
--------------
162,550
CHEMICALS (--%)
70,000 G-I Holdings, Inc. sr. notes zero %, 1998 42,000
100,000 UCC Investors Holding, Inc. sr. notes 10 1/2s, 2002 97,000
--------------
139,000
BASIC INDUSTRIAL PRODUCTS (--%)
120,000 Anchor Glass Container Corp. sr. sub. deb. 9 7/8s, 2008 108,000
25,000 Ivex Packaging Corp. sr. sub. notes 12 1/2s, 2002 25,125
--------------
133,125
BUILDING AND CONSTRUCTION (--%)
50,000 American Standard, Inc. sr. sub. deb.
stepped-coupon zero % (10 1/2s, 6/1/98), 2005 (d) 31,500
<PAGE>
<PAGE>
$ 50,000 Kaufman & Broad Home Corp. sr. sub.
notes 9 3/8s, 2003 $ 43,250
50,000 Scotsman Group Inc. sr. notes 9 1/2s, 2000 45,250
--------------
120,000
FOOD AND BEVERAGES (--%)
50,000 Fresh Del Monte Produce Corp. sr. notes,
Ser. B, 10s, 2003 37,500
75,000 Stater Brothers sr. notes 11s, 2001 70,500
--------------
108,000
COMPUTER EQUIPMENT (--%)
75,000 Anacomp, Inc. sr. sub. notes 15s, 2000 80,250
ENTERTAINMENT (--%)
60,000 Viacom International Inc. sub. deb. 8s, 2006 51,300
COMMUNICATIONS (--%)
25,000 Centennial Cellular Corp. sr. notes 8 7/8s, 2001 22,125
--------------
TOTAL CORPORATE BONDS AND NOTES (cost $11,813,781) $ 10,619,092
CONVERTIBLE BONDS AND NOTES (2.5%)(a)
PRINCIPAL AMOUNT VALUE
INSURANCE AND FINANCE (0.8%)
$2,000,000 Old Republic International Corp. cv.
sub. deb. 5 3/4s, 2002 1,922,500
700,000 Trenwick Group, Inc. cv. deb. 6s, 1999 672,000
--------------
2,594,500
TRANSPORTATION (0.5%)
2,000,000 Amr Corp. cv. sub. deb. 6 1/8s, 2024 1,590,000
CELLULAR BROADCASTING (0.4%)
3,100,000 Comcast Corp. cv. notes 1 1/8s, 2007 1,274,875
BUSINESS EQUIPMENT AND SERVICES (0.3%)
1,000,000 EMC Corp. cv. sub. notes 4 1/4s, 2001 1,230,000
REAL ESTATE (0.3%)
1,200,000 Liberty Property Trust cv. sub. deb. 8s, 2001 1,072,500
AUTOMOTIVE (0.2%)
750,000 Titan Wheel International Inc. cv. sub. deb. 4 3/4s, 2000 792,188
--------------
TOTAL CONVERTIBLE BONDS AND NOTES (cost $9,340,649) $ 8,554,063
<PAGE>
<PAGE>
YANKEE BONDS AND NOTES (0.5%)(a)
PRINCIPAL AMOUNT VALUE
$ 350,000 Australia New Zealand Bank sub. notes 6 1/4s, 2004 $ 297,719
300,000 Greyhound Financial Corp. global notes 9 1/8s, 2002 305,250
2,200,000 Hollinger, Inc. cv. sub. notes LYON, zero %, 2013 638,000
305,000 LASMO (USA) Inc. global notes 7 1/8s, 2003 269,925
30,000 Methanex Corp. sr. notes 8 7/8s, 2001 28,650
250,000 Noranda, Inc. deb. 8 1/8s, 2004 237,813
50,000 Sifto Canada, Inc. sr. notes 8 1/2s, 2000 44,500
--------------
TOTAL YANKEE BONDS AND NOTES (cost $1,970,557) $ 1,821,857
COLLATERALIZED MORTGAGE OBLIGATIONS (0.2%)(a)
PRINCIPAL AMOUNT VALUE
$ 22,047 Housing Securities Inc. Ser. 93-J, 6.66s, 2009 $ 16,632
24,573 Housing Securities Inc. Ser. 94-1, 6 1/2s, 2009 18,284
79,090 Prudential Home Loan Corp. Ser. 92-25, 8s, 2022 59,911
104,548 Prudential Home Mortgage Securities Ser. 92-13,
7 1/2s, 2007 85,860
109,617 Prudential Home Mortgage Securities Ser. 92-25,
6.33s, 2022 80,294
302,517 Prudential Home Mortgage Securities Ser. 94-A,
6.8s, 2024 (d) 240,122
233,362 Prudential Home Mortgage Securities Ser. 94-D,
6.31s, 2009 194,018
--------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(cost $714,348) $ 695,121
ASSET-BACKED SECURITIES (0.1%)(a)
PRINCIPAL AMOUNT VALUE
$ 330,000 Chase Manhattan Credit Card Master Trust
Ser. 91-1, 8 3/4s, 1999 $ 334,331
145,000 Long Island Lighting Co. Ser. P, 5 1/4s, 1996 141,647
--------------
TOTAL ASSET-BACKED SECURITIES (cost $481,495) $ 475,978
WARRANTS (--%)(a)(e)
NUMBER OF WARRANTS EXPIRATION DATE
50 General Media Corp. 12/31/00 $ 625
4,991 Windmere Corp. 01/19/98 3,119
--------------
TOTAL WARRANTS (cost $500) $ 3,744
SHORT-TERM INVESTMENTS (4.7%)(a)
PRINCIPAL AMOUNT VALUE
$ 5,000,000 Federal National Mortgage Assn. 5.45s
December 8, 1994 $ 4,994,701
10,729,000 Interest in $500,000,000 joint
repurchase agreement dated November 30, 1994 with
Banker's Trust New York Corp. due December 1, 1994
with respect to various U.S. Treasury obligations --
maturity value of $10,730,714 for an
effective yield of 5.75% $ 10,730,714
--------------
TOTAL SHORT-TERM INVESTMENTS (cost $15,725,415) $ 15,725,415
--------------
TOTAL INVESTMENTS (cost $341,552,006)(f) $336,651,127
<PAGE>
<PAGE>
NOTES
(a) Percentages indicated are based on net assets of $336,238,319, which corres-
pond to a net asset value per class A share and class B share of $8.49 and
$8.46, respectively.
(b) ADR or ADS after the name of a foreign holding stands for American Deposito-
ry Receipt or American Depository Shares, respectively, representing owner-
ship of foreign securities on deposit with a domestic custodian bank.
(c) The interest rate and date shown parenthetically represent the new interest
rate to be paid and the date the fund will begin receiving interest at this
rate.
(d) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registra-
tion, normally to qualified institutional buyers. At November 30 1994, these
securities were valued at $1,429,273 or 0.4% of net assets.
(e) Non-income-producing security.
(f) The aggregate identified cost for federal income tax purposes is
$342,471,088, resulting in gross unrealized appreciation and depreciation of
$13,998,819 and $19,818,780, respectively, or net unrealized depreciation of
$5,819,961.
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1994
ASSETS
- -------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $341,552,006) (Note 1) $336,651,127
Cash 1,089
Dividends and interest receivable 2,168,224
Receivable for shares of the fund sold 422,476
Receivable for securities sold 5,468,600
- -------------------------------------------------------------------------------
TOTAL ASSETS $344,711,516
- -------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------
Payable for securities purchased 7,244,117
Payable for shares of the fund repurchased 427,532
Payable for compensation of Manager (Note 2) 549,325
Payable for administrative services (Note 2) 4,115
Payable for compensation of Trustees (Note 2) 1,324
Payable for investor servicing and custodian fees (Note 2) 25,914
Payable for distribution fees (Note 2) 156,779
Other accrued expenses 64,091
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 8,473,197
- -------------------------------------------------------------------------------
NET ASSETS $336,238,319
- -------------------------------------------------------------------------------
REPRESENTED BY
- -------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 6) $478,512,508
Undistributed net investment income (Notes 1 and 6) 962,796
Accumulated net realized loss on investment transactions
(Notes 1 and 6) (138,336,106)
Net unrealized depreciation of investments (4,900,879)
- -------------------------------------------------------------------------------
TOTAL -- REPRESENTING NET ASSETS APPLICABLE TO
CAPITAL SHARES OUTSTANDING $336,238,319
- -------------------------------------------------------------------------------
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- -------------------------------------------------------------------------------
Net asset value and redemption price of class A shares
($304,123,957 divided by 35,840,982 shares) $8.49
Offering price per share (100/94.25 of $8.49) * $9.01
Net asset value and offering price of class B shares
($32,114,362 divided by 3,794,221 shares) + $8.46
- -------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
+ Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
STATEMENT OF OPERATIONS
Year ended November 30, 1994
INVESTMENT INCOME
- -------------------------------------------------------------------------------
Dividends (net of foreign tax of $12,796) $ 13,115,225
- -------------------------------------------------------------------------------
Interest 3,083,550
- -------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 16,198,775
- -------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,186,967
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 264,730
- -------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 17,130
- -------------------------------------------------------------------------------
Reports to shareholders 84,451
- -------------------------------------------------------------------------------
Auditing 20,801
- -------------------------------------------------------------------------------
Legal 19,523
- -------------------------------------------------------------------------------
Postage 69,053
- -------------------------------------------------------------------------------
Registration fees 10,002
- -------------------------------------------------------------------------------
Administrative services (Note 2) 10,032
- -------------------------------------------------------------------------------
Distribution fees -- class A (Note 2) 797,114
- -------------------------------------------------------------------------------
Distribution fees -- class B (Note 2) 233,518
- -------------------------------------------------------------------------------
Other 33,523
- -------------------------------------------------------------------------------
TOTAL EXPENSES 3,746,844
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 12,451,931
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 12,857,401
- -------------------------------------------------------------------------------
Net unrealized depreciation of investments during the year (19,899,597)
- -------------------------------------------------------------------------------
NET LOSS ON INVESTMENT TRANSACTIONS (7,042,196)
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 5,409,735
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Year ended November 30
1994 1993
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $12,451,931 $11,082,122
- -------------------------------------------------------------------------------
Net realized gain on investments 12,857,401 41,388,907
- -------------------------------------------------------------------------------
Net unrealized depreciation of investments (19,899,597) (1,645,359)
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 5,409,735 50,825,670
- -------------------------------------------------------------------------------
Undistributed net investment income included in
price of shares sold and repurchased, net -- 102,220
- -------------------------------------------------------------------------------
Distributions to shareholders:
From net investment income:
Class A (11,953,233) (12,177,419)
- -------------------------------------------------------------------------------
Class B (684,178) --
- -------------------------------------------------------------------------------
From net realized gain on investments
Class A -- (1,239,552)
- -------------------------------------------------------------------------------
Increase (decrease) from capital share transactions
(Note 4) 415,154 (28,586,774)
- -------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (6,812,522) 8,924,145
- -------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------
Beginning of year 343,050,841 334,126,696
- -------------------------------------------------------------------------------
End of year (including undistributed and
distributions in excess of net investment income
of $962,796 and $1,170,449, respectively) $336,238,319 $343,050,841
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
September 13, 1993
(commencement of
Year ended operations) to
November 30 November 30 Year ended November 30
1994 1993+ 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
Class B Class A
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $8.65 $8.66 $8.67 $7.72 $7.29
- ------------------------------------------------------------------------------------------------------------
Investment operations
Net investment income .26 .06 .32 .28 .42
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (.18) (.07) (.18) 1.01 .41
- ------------------------------------------------------------------------------------------------------------
Total from investment operations .08 (.01) .14 1.29 .83
- ------------------------------------------------------------------------------------------------------------
Less distributions
From net investment income (.27) -- (.32) (.31) (.40)
- ------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- -- (.03) --
- ------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Paid-in capital -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------
Total distributions (.27) -- (.32) (.34) (.40)
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.46 $8.65 $8.49 $8.67 $7.72
- ------------------------------------------------------------------------------------------------------------
Total investment return at
net asset value (%) (a) 0.86 (.12)(b) 1.59 17.06 11.66
- ------------------------------------------------------------------------------------------------------------
Net asset, end of period
(in thousands) $32,114 $14,800 $304,124 $328,251 $334,127
- ------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) 1.78 .44(b) 1.04 1.16 1.23
- ------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.02 .55(b) 3.67 3.40 5.57
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 82.49 125.85(c) 82.49 125.85(c) 340.99
- ------------------------------------------------------------------------------------------------------------
<FN>
+ Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
++ 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.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Not annualized.
(c) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam Equity Income Fund. (See Note 5).
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (Continued)
(For a share outstanding throughout the period)
Year ended November 30
1991++ 1990 1989 1988 1987 1986 1985
- -----------------------------------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $6.60 $8.62 $8.47 $7.87 $10.81 $10.76 $10.65
- -----------------------------------------------------------------------------------------------------------------------------------
Investment operations
Net investment income .30 .25 .29 .24 .21 .29 .39
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments .93 (1.08) 1.14 1.87 (1.44) 1.47 1.53
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.23 (.83) 1.43 2.11 (1.23) 1.76 1.92
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions
From net investment income (.30) (.25) (.32) (.32) (.21) (.20) (.39)
- -----------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.24) -- (.06) (1.19) (1.50) (1.51) (1.42)
- -----------------------------------------------------------------------------------------------------------------------------------
Paid-in capital -- (.94) (.90) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.54) (1.19) (1.28) (1.51) (1.71) (1.71) (1.81)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.29 $6.60 $8.62 $8.47 $7.87 $10.81 $10.76
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return at
net asset value (%) (a) 19.13 (10.56) 17.75 28.23 (15.33) 17.73 19.80
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset, end of period
(in thousands) $397,237 $585,011 $934,823 $1,005,981 $902,370 $1,158,887 $1,162,753
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) 1.20 1.09 .84 .87 .83 .73 .77
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.13 3.30 3.28 2.75 1.92 2.72 3.44
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 198.18 222.84 153.35 38.32 225.30 205.30 183.25
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
November 30, 1994
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
The fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The 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 front-end
sales charge, but pay a higher ongoing distribution fee than class A shares, and
may be subject to a contingent deferred sales charge if those shares are re-
deemed within six year of purchase. Expenses of the fund are borne pro-rata by
the sharesholders of both classes of shares. 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 motters on
which a clss 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 consistenly follo-
wes by the fund in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principals.
A SECURITY VALUATION Investments for which market quotations are readily avail-
able are stated at market value, which is determined using the last reported sa-
le price, or, if no sales are reported -- as in the case of some securities tra-
ded 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 cor-
porate bonds and notes; such investments are stated at fair market 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.
B TBA PURCHASE COMMITMENTS The fund may enter into "TBA" (to be announced) pur-
chase 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 commit-
ment will not fluctuate more than 2% 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 off-
setting
<PAGE>
<PAGE>
contracts for the forward sale of other securities it owns. TBA purchase commit-
ments 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 compa-
nies managed by Putnam Investment Management, Inc. ("Putnam Management"), the
fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc., and cer-
tain 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). In-
terest 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 and stepped-coupon bonds is accreted according to the
effective yield method.
F FEDERAL TAXES It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the In-
ternal 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. There-
fore, no provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held and excise tax on income and capital
gains.
At November 30, 1994, the fund had approximately $137,310,000 in capital loss
carryovers available to offset future realized capital gains, to the extent pro-
vided 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 di-
stributions might be taxable as ordinary income.
<PAGE>
<PAGE>
G 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.
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 principals. The differences include treatment of wash sales and post
October loss deferrals. Reclassifi-cations are made to the fund's capital acco-
unts to reflect income and gains available for distribution (or available capi-
tal loss carryovers) under income tax regulations. Current year reclassifica-
tions were excluded from the calculation of net investment income per share
shown in Financial Highlights.
For the year ended November 30, 1994, the fund reclassified $113,698 to decrease
undistributed net investment income, $179,207 to decrease accumulated net reali-
zed loss on investments, with a decrease of $65,509 to paid-in capital.
H EQUALIZATION Prior to December 1, 1993, the fund used the accounting practice
known as equalization to keep a continuing shareholder's per-share interest in
undistributed net investment income unaffected by sales or repurchases of fund
shares. This was accomplished by allocating a per-share portion of the proceeds
from sales and the costs of repurchases of shares to undistributed net invest-
ment income.
As of December 1, 1993, the fund discontinued using equalization. This change
had no effect on the fund's total net assets, net asset value per share, or its
net increase (decrease) in net assets from operations and did not have a mate-
rial effect on the per share amounts shown in the financial highlights. In Ma-
nagement.s opinion, discontinuing the use of equalization will result in less
distortion of undistributed net investment income as compared to income avail-
able for distribution for federal income tax purposes. The cumulative effect of
this change was to decrease undistrib-uted net investment income and increase
paid-in-capital previously reported through November 30, 1993, by $7,054,922.
NOTE 2
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Management for management and investment advisory servi-
ces is paid quarterly based on the average net assets of the fund for the quar-
ter. 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 billion and
0.40% of any amount over $2.5 billion, subject, under current law, to reduction
in any year to the extent that expenses (exclusive of distribution fees, bro-
kerage, interest, taxes and custodian credits) 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 expense) 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 ser-
vices 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 $960 and an additional
fee for each Trustees'
<PAGE>
<PAGE>
meeting attended. Trustees who are not interested persons of the Manager and who
are interested persons of the Manager and who serve on committees of the Trutees
receive additional fee 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. Investors servicing
agent functions are provided by Putnam Investor Services, a division of PFTC.
Investor servicing and custodian fees reported in the Statement of operations
for the year ended November 30, 1994 haven been reduced by credits allowed by
PFTC. Such credits amounted to $198,304.
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., a
wholly-owned subsidiary of Putnam Investments, Inc., for services provided and
expenses incurred by it in distributing class A shares. The Trustees have appro-
ved 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.
During the year ended November 30, 1994, Putnam Mutual Funds Corp., acting as
the underwriter, received net commissions of $63,412 from the sale of class A
shares of the fund. A deferred sales charge of up to 1.00% is assessed on cer-
tain redemptions of class A shares purchased as part of an investment of $1 mi-
llion or more. For the year ended November 30, 1994, Putnam Mutual Funds Corp.,
acting as the underwriter, received no fees on such 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.
Putnam Mutual Funds Corp., acting as the underwriter, 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 be-
gin at 5.0% of the net asset value of the redeemed shares. Putnam Mutual Funds
Corp. received $50,066 in contingent deferred sales charges from such redemp-
tions for the year ended November 30, 1994.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the year ended November 30, 1994, purchases and sales of investment secu-
rities other than U.S. government obligations and short-term investments aggre-
gated $237,343,626 and $248,227,437, respectively. Purchases and sales of U.S.
government obligations aggregated $35,482,922 and $26,539,613, 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 November 30, 1994, there was an unlimited number of shares of beneficial in-
terest authorized, divided into two classes, class A and class B capital shares.
Transactions in capital shares were as follows:
<PAGE>
<PAGE>
YEAR ENDED NOVEMBER 30 1994
CLASS A SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 3,457,816 $ 30,105,552
- -------------------------------------------------------------------------------
Reinvestment of distributions 918,284 7,952,180
- -------------------------------------------------------------------------------
4,376,100 38,057,732
- -------------------------------------------------------------------------------
Shares repurchased (6,415,431) (55,788,277)
- -------------------------------------------------------------------------------
NET (DECREASE) (2,039,331) $(17,730,545)
- -------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30 1993
CLASS A SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 1,464,405 $ 12,377,552
- -------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of Equity Income Fund (Note 5) 2,003,694 17,331,950
- -------------------------------------------------------------------------------
Reinvestment of distributions 1,045,060 8,495,437
- -------------------------------------------------------------------------------
4,513,159 38,204,939
- -------------------------------------------------------------------------------
Shares repurchased (9,907,021) (81,504,149)
- -------------------------------------------------------------------------------
Portion represented by undistributed
net investment income -- (95,148)
- -------------------------------------------------------------------------------
NET (DECREASE) (5,393,862) $(43,394,358)
- -------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30 1994
CLASS B SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 2,834,343 $ 24,651,645
- -------------------------------------------------------------------------------
Reinvestment of distributions 64,999 562,591
- -------------------------------------------------------------------------------
2,899,342 25,214,236
- -------------------------------------------------------------------------------
Shares repurchased (815,497) (7,068,537)
- -------------------------------------------------------------------------------
NET INCREASE 2,083,845 $ 18,145,699
- -------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30 1993
CLASS B SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 694,296 $ 6,025,990
- -------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of Equity Income Fund (Note 5) 1,050,652 9,088,137
- -------------------------------------------------------------------------------
Reinvestment of distributions -- --
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
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
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
- -------------------------------------------------------------------------------
<PAGE>
<PAGE>
NOTE 6
RECLASSIFICATION OF CAPITAL ACCOUNTS
Effective December 1, 1993, Putnam Equity Income Fund adopted the provisions of
the AICPA Statement of Position (SOP) 93-2 "Determination, Disclosure and Finan-
cial Statement Presentation of Income, Capital Gain and Return of Capital Dis-
tributions, by Investment Companies." The purpose of this SOP is to report the
accumulated net realized gain (loss) accounts in such a manner as to approximate
amounts available for future distributions (or to offset future realized capital
gains) and to achieve uniformity in the presentation of distributions by invest-
ment companies.
As a result of the SOP, the fund reclassified $9,487,345 to increase undistribu-
ted net investment income, $32,991,378 to decrease accumulated net realized loss
and $42,478,723 to decrease paid-in capital.
These adjustments represent the cumulative amounts necessary to report these ba-
lances through November 30, 1993.
<PAGE>
<PAGE>
OUR COMMITMENT TO QUALITY SERVICE
CHOOSE AWARD-WINNING SERVICE.
Putnam Investor Services has won the DALBAR Quality Tested Service Seal every
year since the award.s 1990 inception. DALBAR, an independent research firm, ran
more than 10,000 tests of 38 shareholder service components. In every category,
Putnam outperformed the industry standard.
HELP YOUR INVESTMENT GROW.
Set up a systematic program for investing with as little as $25 a month from a
Putnam fund or from your checking or savings account. *
SWITCH FUNDS EASILY.
You can move money from one account to another with the same class of shares
without a service charge. (This privilege is subject to change or termination.)
ACCESS YOUR MONEY QUICKLY.
You can get checks sent regularly or redeem shares any business day at the then-
current net asset value, which may be more or less than their original cost.
For details about any of these or other services, contact your financial advisor
or call the toll-free number shown below and speak with a helpful Putnam repre-
sentative.
To make an additional investment in this or any other Putnam fund, contact your
financial advisor or call our toll-free number:
1-800-225-1581.
* Regular investing, of course, does not guarantee a profit or protect against
a loss in a declining market. Investors should consider their ability to con-
tinue purchasing shares during periods of low price levels.
<PAGE>
<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
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman William F. Pounds, Vice Chairman
Jameson Adkins Baxter Hans H. Estin
John A. Hill Elizabeth T. Kennan
Lawrence J. Lasser Robert E. Patterson
Donald S. Perkins George Putnam, III
A.J.C. Smith W. Nicholas Thorndike
OFFICERS
George Putnam Charles E. Porter
President Executive Vice President
Patricia C. Flaherty John R. Verani
Senior Vice President Vice President
Lawrence J. Lasser Gordon H. Silver
Vice President Vice President
Peter Carman Brett C. Browchuk
Vice President Vice President
Thomas V. Reilly Edward P. Bousa
Vice President Vice President and Fund Manager
Kenneth J. Taubes William N. Shiebler
Vice President and Fund Manager Vice President
Paul M. O.Neil John D. Hughes
Vice President 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 cu-
rrent propecturs, which gives datails of sales charges, investment objectives
and operating policies of the fund, and the most recent copy of Putnam's Quar-
terly Performance Summary. For more information, or to request a prospectus,
call toll-free: 1-800-225-1581.
<PAGE>
<PAGE>
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
Paid
Putnam
Investments
012/192-15838
<PAGE>
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED AND
EDGAR-FILED TEXTS:
(1) Boldface typeface is displayed with capital letters, italic typeface is
displayed in normal type.
(2) Because the printed page breaks are not reflected, certain tabular and
columnar headings and symbols are displayed differently in this filing.
(3) Bullet points and similar graphic signals are omitted.
(4) Page numbering has been omitted.
(5) The trademark symbol has been replaced by (TM).
(6) The copyright symbol has been replaced by (C).
(7) The dagger symbol has been replaced by (+).
(8) The registered mark symbol has been replaced by (R).
