PUTNAM FUND FOR GROWTH & INCOME
N-30D, 1995-07-05
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                                                 THE PUTNAM
                                                   FUND FOR
                                                 GROWTH AND
                                                     INCOME



                               [GRAPHIC OMITTED:
                                   art work]






         SEMIANNUAL REPORT
         April 30, 1995


                        [LOGO: BOSTON - LONDON - TOKYO]
<PAGE>
PERFORMANCE HIGHLIGHTS


 o Total return for the fund's class A shares has consistently surpassed that of
   the average growth and income fund tracked by Lipper Analytical Services,
   based on results for the 1-, 5-, and 10-year periods ended April 30, 1995.*

   ------------------------------------------------------------------
    SEMIANNUAL RESULTS AT A GLANCE
   ------------------------------------------------------------------
                                      CLASS A             CLASS B
    TOTAL RETURN:                   NAV     POP         NAV     CDSC
   ------------------------------------------------------------------
    (change in value during
    period plus reinvested
    distributions)
    6 months ended 4/30/95          9.62%   3.34%       9.14%   4.14%

    SHARE VALUE:                    NAV     POP         NAV
   ------------------------------------------------------------------
    10/31/94                       $13.65  $14.48      $13.56
    4/30/95                         14.24   15.11       14.13

    CURRENT RETURN:                 NAV     POP         NAV
   ------------------------------------------------------------------
    End of period
    Current dividend rate(1)        2.81%   2.65%       2.18%
    Current 30-day SEC yield(2)     3.17    2.99        2.44
 
                                           CAPITAL GAINS
                                          LONG-   SHORT-
    DISTRIBUTIONS:    NO.      INCOME      TERM     TERM    TOTAL
   ------------------------------------------------------------------
    Class A             2      $0.200    $0.233   $0.206   $0.639
    Class B             2       0.153     0.233    0.206    0.592
   ------------------------------------------------------------------

   Performance data represent past results and will differ for each share class.
   For performance over longer periods, see pages 8 and 9. POP assumes 5.75%
   maximum sales charge for class A shares. CDSC assumes 5% maximum contingent
   deferred sales charge. Effective 5/1/95, the fund began offering class M
   shares, which have a lower initial sales charge and a higher 12b-1 fee than
   class A shares and no sales charge on redemption. (1)Income portion of most
   recent distribution, annualized and divided by NAV or POP at end of period.
   (2)Based only on investment income, calculated using SEC guidelines.

  *Lipper Analytical Services is an independent research firm; rankings vary
   over time and do not reflect the effects of sales charges. The fund's class A
   shares ranked 70 out of 368 funds for one year; 49 out of 186 for 5 years;
   and 16 out of 109 for 10 years as of April 30, 1995. Past performance is not
   indicative of future results. Performance for class B shares will differ.

<PAGE>

FROM THE CHAIRMAN
                                                           [GRAPHIC OMITTED:
                                                                Photo of
                                                             George Putnam]
                                                           (C) Karsh, Ottawa
Dear Shareholder:

A strong stock market and continued economic growth provided a generally
hospitable investment environment for The Putnam Fund for Growth and Income
during the six months ended April 30, 1995. Business continued to march at a
brisk stride, though the pace since January has slowed considerably from
calendar 1994 levels.

Investors took this moderation as a sign that the economy was responding
favorably to the Federal Reserve Board's attempts to rein in growth to a
sustainable rate. The consensus in the markets seems to be that the Fed's series
of interest-rate increases may be near an end.

In the report that follows, fund managers Anthony Kreisel and David King relate
your fund's performance during the first half of fiscal 1995 to this market and
economic setting. Then, they provide a glimpse of what they believe may lie in
store for the remaining months.

Respectfully yours,

/s/ George Putnam
    George Putnam
    Chairman of the Trustees
    June 21, 1995

<PAGE>
REPORT FROM THE FUND MANAGERS
ANTHONY I. KREISEL
DAVID L. KING

   Rebounding equity and fixed-income markets, solid stock selection, and a
   value-oriented strategy all contributed to impressive total returns for The
   Putnam Fund for Growth and Income for the semiannual period ended April 30,
   1995. The period began with an unsettled stock market and rising interest
   rates. It ended with a gradual slowing of the U.S. economy and improving U.S.
   financial markets. The fund's total return was 9.62% for class A shares and
   9.14% for class B shares, both at net asset value, for the six months ended
   April 30, 1995.

 o FALLING INTEREST RATES HELP BOLSTER RETURNS
   For the first half of fiscal 1995, a notable element of the fund's strategy
   was an emphasis on interest-rate-sensitive securities. Early in the fund's
   fiscal year, in November 1994, the Federal Reserve Board raised short-term
   interest rates for the sixth time in 11 months. We believed that a recovery
   in the bond market was on the horizon, and that interest rates had neared
   their peak. It was also our belief that government bonds, which were then
   yielding around 8%, offered a return potential that was competitive with the
   long-term return potential for many stocks. We therefore allocated
   approximately 5% of the fund's portfolio to intermediate- and long-term
   government bonds.

   We also altered our course in stock selection based on the sharp correction
   in the stock market early in the fiscal year. We saw significant value in
   financial and utility stocks, which had declined dramatically in price as
   interest rates rose. Toward the end of November, nearly 40% of the portfolio
   consisted of interest-rate-sensitive securities such as utilities, banks,
   financial service companies, insurance companies, and government bonds. This
   portfolio allocation proved extremely beneficial for the fund as fixed-income
   markets rallied and interest-rate-sensitive stocks rebounded during the last
   four months of the period.
<PAGE>

 o BASIC VALUE STRATEGY STRENGTHENS PERFORMANCE
   Our strategy of seeking out stocks based on a company's long-term earnings
   power continues to keep the fund on a successful course. We look for
   companies undergoing changes that, in our opinion, have the potential to
   boost their stock prices. Often, the companies we consider to be undervalued
   are those that are restructuring, cutting costs, or undergoing management
   changes.

   One example is Eastman Kodak, the world's largest manufacturer and marketer
   of photographic related products. The company has implemented dramatic
   restructuring during the past 12 months and is now concentrating on cost
   control. Kodak stock has consistently been among our top-performing holdings.
   Another strong performer has been IBM, which has also recently undergone
   major restructuring.

 o HEALTH CARE AND INDUSTRIALS PROVE SOLID CHOICES
   The strength of the fund's holdings in the pharmaceutical and health-care
   industries clearly demonstrates the merits of our basic value strategy.
   In our semiannual report two years ago, we stated our belief that the
   prices of these stocks had fallen well below the


[GRAPHIC OMITTED: horizontal bar chart "TOP INDUSTRY SECTORS*" showing:
 Insurance and finance 16.0%; Oil and gas 10.2%; Utilities 8.7%;
 Health care 8.2% and Consumer non-durables 7.6%. Footnote reads:
 *Based on net assets on 4/30/95. Holdings will vary over time.]
<PAGE>


   companies' true value, because of uncertainty over President Clinton's
   proposed health-care reforms. At that time, we invested in those companies we
   believed offered the greatest potential for long-term growth.

   During the period, pharmaceutical and health care stocks were among the
   best-performing holdings in the fund's portfolio. One stock that rose
   significantly was American Home Products, a manufacturer of health-care
   products such as prescription drugs, medical instruments, and
   over-the-counter medications. The company is undergoing an aggressive
   cost-savings program after merging with American Cyanamid, a pharmaceutical
   and agricultural chemical company, in November 1994. Baxter International,
   another success story, is the world's largest manufacturer of disposable
   medical supplies. Baxter continues to make progress in reducing its costs,
   and its cash flow has been well ahead of expectations in the past year.

   We've also had considerable success with stocks of industrial companies that
   have focused and streamlined operations in an effort to boost profitability.
   One example is TRW Inc., a manufacturer of space, defense, and automotive
   products and systems. For its first quarter of 1995, the company experienced
   record increases in sales and earnings as a result of significant growth in
   its worldwide automotive business. In addition, TRW's productivity and
   operating margins have continued to improve.

   We will continue to seek out opportunities with industrial stocks through an
   emphasis on research and fundamental analysis -- examining factors such as
   past earnings, products, and management to determine a company's future
   potential. We believe industrial stocks will offer improving value throughout
   the entire decade of the '90s, though periods of weakness due to economic
   slowdown or recession are possible.

   A global perspective is also vital when considering the companies in which
   the fund invests. We are seeking companies that can manufacture and sell
   their products or services throughout the world, and have the potential to
   dominate global markets. Many have made a successful transition to global
   economies in need of building or upgrading their infrastructures.
<PAGE>

- ---------------------------------------------------------
 TOP 10 HOLDINGS (4/30/95)
- ---------------------------------------------------------
 PHILIP MORRIS COS., INC.
 TOBACCO PRODUCTS, FOOD, BREWING
- ---------------------------------------------------------
 AVON PRODUCTS, INC.
 COSMETICS, TOILETRIES, FASHION JEWELRY, FRAGRANCES
- ---------------------------------------------------------
 EASTMAN KODAK CO.
 PHOTOGRAPHY
- ---------------------------------------------------------
 J.P. MORGAN & CO., INC.
 FINANCIAL SERVICES
- ---------------------------------------------------------
 TRW, INC.
 PRODUCTS FOR SPACE, DEFENSE, AND AUTOMOTIVE MARKETS
- ---------------------------------------------------------
 XEROX CORP.
 PHOTOCOPYING MACHINES, OFFICE AND COMPUTER EQUIPMENT
- ---------------------------------------------------------
 GENERAL ELECTRIC CO.
 POWER SYSTEMS, BROADCASTING, HOME APPLIANCES, LIGHTING
- ---------------------------------------------------------
 BAXTER INTERNATIONAL, INC.
 MEDICAL SUPPLIES AND LABORATORY PRODUCTS
- ---------------------------------------------------------
 BRISTOL-MYERS SQUIBB CO.
 MEDICAL DEVICES, DRUGS, TOILETRIES, HEALTH PRODUCTS
- ---------------------------------------------------------
 SPRINT CORP.
 VOICE AND DATA COMMUNICATIONS SERVICES
- ---------------------------------------------------------
These holdings represent 18.4% of the fund's net assets.
Portfolio holdings will vary over time.


 o OUTLOOK: TIME-TESTED STRATEGY SHOULD CONTINUE TO SERVE FUND WELL
   Looking toward the second half of fiscal 1995, we'll probably see further
   signs of slowing U.S. economic growth. The recent strength of U.S. financial
   markets most likely will not be sustainable throughout the fiscal year.
   Therefore, our emphasis on investing for the long-term and seeking out
   undervalued companies should continue to be the fund's greatest strength.
   This conservative, value-oriented philosophy has consistently served the fund
   well through years of market ups and downs.

   The views expressed here are exclusively those of Putnam Management. They are
   not meant as investment advice. Although the described holdings were viewed
   favorably as of 4/30/95, there is no guarantee the fund will continue to hold
   these securities in the future.
<PAGE>

PERFORMANCE SUMMARY

This section provides, at a glance, information about your fund's performance.
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions back into the fund. We show total return in two ways: on a
cumulative long-term basis and on average how the fund might have grown each
year over varying periods.

Performance should always be considered in light of a fund's investment
strategy. The Putnam Fund for Growth and Income is designed for investors
seeking capital growth and current income mainly through a portfolio of
income-producing common stocks.

TOTAL RETURN FOR PERIODS ENDED 4/30/95
                           CLASS A             CLASS B             S&P
                         NAV       POP       NAV      CDSC   500 INDEX     CPI
- -------------------------------------------------------------------------------
6 months                9.62%     3.34%     9.14%     4.14%      10.45%   1.61%
- -------------------------------------------------------------------------------
1 year                 15.21      8.61     14.35      9.35       17.42    3.05
- -------------------------------------------------------------------------------
5 years                80.38     70.02       --        --        81.11   17.84
Annual average         12.52     11.20       --        --        12.61    3.34
- -------------------------------------------------------------------------------
10 years              290.62    268.20       --        --       295.95   42.10
Annual average         14.60     13.92       --        --        14.75    3.58
- -------------------------------------------------------------------------------
Life of class B          --        --      35.76     32.76       37.22    8.89
Annual average           --        --      10.69      9.87       11.08    2.87
- -------------------------------------------------------------------------------

TOTAL RETURN FOR PERIODS ENDED 3/31/95
(most recent calendar quarter)
                                      CLASS A                     CLASS B
                                  NAV          POP            NAV        CDSC
- -------------------------------------------------------------------------------
1 year                          13.87%        7.33%         13.01%       8.01%
- -------------------------------------------------------------------------------
5 years                         70.63        60.82            --          --
Annual average                  11.28         9.97            --          --
- -------------------------------------------------------------------------------
Life of class A                280.68       258.79            --          --
Annual average                  14.30        13.63            --          --
- -------------------------------------------------------------------------------
Life of class B                   --           --           31.92       28.92
Annual average                    --           --            9.92        9.06
- -------------------------------------------------------------------------------

Fund performance data do not take into account any adjustment for taxes payable
on reinvested distributions. POP assumes 5.75% maximum sales charge for class A
shares. CDSC assumes 5% maximum contingent deferred sales charge. The fund began
offering what are now known as class A shares on 11/16/57. Effective 4/27/92,
the fund began offering class B shares, and on 5/1/95, class M shares.
Performance data represent past results, and will differ for each share class.
Investment returns and principal value will fluctuate so an investor's shares,
when sold, may be worth more or less than their original cost. Past performance
is not indicative of future results.
<PAGE>

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
liabilities, divided by the number of outstanding shares, not including any
initial or contingent deferred sales charge.

PUBLIC OFFERING PRICE (POP) is the price of a mutual fund share plus the maximum
sales charge levied at the time of purchase. POP performance figures shown here
assume the maximum 5.75% sales charge for class A shares and 3.50% for class M
shares.

CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the time of the
redemption of class B shares and assumes redemption at the end of the period.
Your fund's CDSC declines from a 5% maximum during the first year to 1% during
the sixth year. After the sixth year, the CDSC no longer applies.

COMPARATIVE BENCHMARKS

STANDARD & POOR'S 500 INDEX is an unmanaged list of common stocks that is
frequently used as a general measure of stock market performance. The index
assumes reinvestment of all distributions and does not take into account
brokerage commissions or other costs. The fund's portfolio contains securities
that do not match those in the index.

CONSUMER PRICE INDEX (CPI) is a commonly used measure of inflation; it does not
represent an investment return.

Indexes assume reinvestment of all distributions and do not take into account
brokerage commissions or other costs. The fund's portfolio contains securities
that do not match those in the indexes.
<PAGE>
A PUTNAM PERSPECTIVE ON RISK AND REWARD

   You've probably been told how important it is to understand the relationship
   between an investment's potential rewards and its accompanying risks. Given
   the cautionary nature of such instructions, it may take most investors a
   while to realize that risk has a positive side.

   EVERY RISK SIGNALS A POTENTIAL REWARD. Selecting only those investments that
   offer the greatest degree of security generally leads to only modest rewards.
   Furthermore, even insured or guaranteed investments may be subject to changes
   in their rates of return or, in some cases, in their principal values.
   Experienced investors know that no investment is truly risk free and are
   therefore willing to take on some measure of risk in order to increase their
   potential gains.

   THE GREATER THE RISK, THE GREATER THE POTENTIAL REWARD. Accepting an
   appropriate level of investment risk can give you a better chance of
   outpacing inflation over time and seeking to maximize your investment's
   return. How much risk? Your financial advisor's feedback and your time
   horizon can make all the difference in determining how much risk is
   compatible with your investment goals and your peace of mind.

 o FITTING YOUR FUND SELECTION TO YOUR RISK TOLERANCE

   How do you find the right balance between investment risks and their
   potential rewards? It's helpful to understand the types of risks that can
   apply to different types of investments, and to look at your own portfolio
   with this perspective.

   For short-term goals, your first priority may be managing market risk.
   Longer-term investors may be more concerned with inflation risk. And all
   income-oriented investors should consider interest-rate, credit, and
   prepayment risks carefully. Within each of Putnam's four investment
   categories, you can select funds with differing levels of risk and reward
   potential to customize your portfolio.

 o A RUNDOWN OF RISK TYPES

   MARKET RISK Most important for stock funds, but relevant to all funds, this
   is a measure of how sensitive a fund's holdings are to changes in general
   market conditions. Remember, though, that securities that lose value quickly
   in market declines may also show the strongest gains in more favorable
   environments.

   INTEREST-RATE RISK Since bond prices fall as interest rates rise, this type
   of risk is a particular concern for fixed-income investors. However,
   interest-rate increases can also have a substantial negative effect on the
   stock market.

   INFLATION RISK If your investments cannot keep pace with inflation, your
   money will begin to lose its purchasing power. Stock investments are
   generally considered among the best ways of addressing inflation risk over
   the long term.

   CREDIT AND PREPAYMENT RISK Credit risk is the concern that the security's
   issuer will not be able to meet its payment, while prepayment risk involves
   the premature payoff of a loan, with a resulting loss of interest income.
   Professional management and in-depth research are invaluable in managing both
   these risks.

   LIQUIDITY RISK Not all investments can be readily converted into cash at
   their perceived market values. Liquidity risk can affect the price of
   securities held in the fund's portfolio and, thus, the fund's share prices.

   This list covers only the most general types of risks; however, each
   investment will also have its own specific risks. You will find a more
   detailed discussion of these risk considerations in each fund's prospectus.
<PAGE>
PUTNAM GROWTH FUNDS

Asia Pacific Growth Fund
Capital Appreciation Fund (1)
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Health Sciences Trust
Investors Fund
Natural Resources Trust
New Opportunities Fund
OTC Emerging Growth Fund
Overseas Growth Fund
Vista Fund
Voyager Fund

PUTNAM GROWTH AND INCOME FUNDS

Balanced Retirement Fund (2)
Convertible Income-Growth Trust
Dividend Growth Fund (1)
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
Utilities Growth and Income Fund

PUTNAM INCOME FUNDS

Adjustable Rate U.S. Government Fund
American Government Income Fund
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
Intermediate U.S. Government Income Fund
Preferred 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 INCOME FUNDS (3)

Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio, and Pennsylvania

LIFESTAGES(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
<PAGE>
MOST CONSERVATIVE INVESTMENTS (4)

PUTNAM MONEY MARKET FUNDS:

California Tax Exempt Money Market Fund
Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund

CDS AND SAVINGS ACCOUNTS (5)

(1) Temporarily closed to new investors.
(2) Formerly Putnam Managed Income Trust
(3) Not available in all states.
(4) Relative to above.
(5) Not offered by Putnam Investments. Certificates 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,
    including charges and expenses. Please read it carefully before you invest
    or send money.
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS OWNED
April 30, 1995 (Unaudited)


COMMON STOCKS (85.6%)<F1>
NUMBER OF SHARES                                                                          VALUE

AEROSPACE AND DEFENSE (1.5%)
- -----------------------------------------------------------------------------------------------
<C>            <S>                                                              <C>            
   1,715,850   Boeing Co.                                                       $    94,371,750
   1,099,500   Coltec Holdings, Inc.                                                 20,065,875
   1,248,400   GenCorp, Inc.                                                         15,761,050
     623,450   Rockwell International Corp.                                          27,198,006
                                                                                ---------------
                                                                                    157,396,681

AUTOMOTIVE (1.9%)
- -----------------------------------------------------------------------------------------------
     773,700   Chrysler Corp.                                                        33,365,813
   1,033,050   Dana Corp.                                                            26,601,038
   2,473,900   General Motors Corp.                                                 111,634,896
     280,500   General Motors Corp. Cl. H                                            10,799,250
     477,250   Goodyear Tire & Rubber Co. (The)                                      18,135,500
                                                                                ---------------
                                                                                    200,536,497

BASIC INDUSTRIAL PRODUCTS (1.2%)
- -----------------------------------------------------------------------------------------------
     750,000   Ball Corp.                                                            25,687,500
     564,000   CBI Industries, Inc.                                                  13,959,000
     680,750   Case Corp.                                                            17,274,031
     310,700   Cooper Industries, Inc.                                               12,117,300
     206,550   Deere (John) & Co.                                                    16,937,100
     623,400   General Signal Corp.                                                  23,143,725
      60,000   Harnischfeger Industries, Inc.                                         1,770,000
     303,100   Sundstrand Corp.                                                      16,822,050
      37,500   Varity Corp.                                                           1,584,375
                                                                                ---------------
                                                                                    129,295,081

BUILDING AND CONSTRUCTION (0.2%)
- -----------------------------------------------------------------------------------------------
     530,155   Armstrong World Industries, Inc.                                      24,122,053

BUSINESS EQUIPMENT AND SERVICES (2.8%)
- -----------------------------------------------------------------------------------------------
     497,500   Dow Jones & Co., Inc.                                                 17,412,500
   1,124,150   IBM Corp.                                                            106,513,213
     150,000   Unisys Corp.                                                           1,537,500
   1,441,200   Xerox Corp.                                                          177,447,750
                                                                                ---------------
                                                                                    302,910,963

CHEMICALS (4.8%)
- -----------------------------------------------------------------------------------------------
     249,350   Dow Chemical Co.                                                      17,329,825
   1,871,750   du Pont (E.I.) de Nemours & Co., Ltd.                                123,301,531
   1,209,350   Eastman Chemical Co.                                                  68,630,613
   2,108,690   Grace (W.R.) & Co.                                                   113,078,501
     281,900   Lubrizol Corp.                                                         9,831,263
     661,400   Olin Corp.                                                            36,955,725
   2,019,050   Union Carbide Corp.                                                   64,609,600
   3,037,800   Witco Chemical Corp.                                                  86,957,025
                                                                                ---------------
                                                                                    520,694,083
<PAGE>

COMMON STOCKS
NUMBER OF SHARES                                                                          VALUE

CONGLOMERATES (4.8%)
- -----------------------------------------------------------------------------------------------
   1,165,500   ITT Corp.                                                        $   121,794,750
     308,650   Johnson Controls, Inc.                                                16,744,263
   1,220,000   Ogden Corp.                                                           24,857,500
   2,500,000   TRW, Inc.                                                            185,937,500
   2,296,700   Tenneco, Inc.                                                        105,361,113
     858,650   United Technologies Corp.                                             62,788,781
                                                                                ---------------
                                                                                    517,483,907

CONSUMER DURABLE GOODS (0.4%)
- -----------------------------------------------------------------------------------------------
   2,326,550   Maytag Corp.                                                          40,132,988

CONSUMER NON DURABLES (7.6%)
- -----------------------------------------------------------------------------------------------
   2,596,650   American Brands, Inc.                                                105,164,325
   3,713,300   Avon Products, Inc.                                                  234,866,225
     986,950   Colgate-Palmolive Co.                                                 69,333,238
      95,000   Dimon Inc.                                                             1,520,000
   1,929,900   Kimberly-Clark Corp.                                                 109,280,588
   4,275,635   Philip Morris Cos., Inc.                                             289,674,271
     455,090   RJR Nabisco Holdings, Corp.                                           12,458,089
                                                                                ---------------
                                                                                    822,296,736

CONSUMER SERVICES (2.5%)
- -----------------------------------------------------------------------------------------------
     259,105   CBS, Inc.                                                             16,615,108
   2,830,750   Dun & Bradstreet Corp.                                               147,552,844
   1,444,450   McGraw-Hill, Inc.                                                    107,792,081
                                                                                ---------------
                                                                                    271,960,033

ELECTRONICS AND ELECTRICAL EQUIPMENT (2.5%)
- -----------------------------------------------------------------------------------------------
     501,400   Eaton Corp.                                                           28,767,825
   2,958,950   General Electric Co.                                                 165,701,200
     544,300   Honeywell, Inc.                                                       21,023,588
   3,545,000   Iberdrola S.A. ADR (Germany)                                          23,288,169
   1,807,500   Westinghouse Electric Corp.                                           27,112,500
                                                                                ---------------
                                                                                    265,893,282

ENVIRONMENTAL CONTROL (0.3%)
- -----------------------------------------------------------------------------------------------
   1,055,000   WMX Technologies, Inc.                                                28,748,750

FOOD AND BEVERAGES (1.4%)
- -----------------------------------------------------------------------------------------------
     854,000   Anheuser-Busch Cos., Inc.                                             49,638,750
      50,000   Dole Food Co.                                                          1,493,750
   2,249,300   Heinz (H.J.) Co.                                                      94,470,600
      40,000   IBP, Inc.                                                              1,480,000
                                                                                ---------------
                                                                                    147,083,100

FOREST PRODUCTS (0.8%)
- -----------------------------------------------------------------------------------------------
     341,175   Rayonier, Inc.                                                        11,301,422
     615,050   Union Camp Corp.                                                      30,829,381
     946,450   Weyerhaeuser Co.                                                      39,750,900
                                                                                ---------------
                                                                                     81,881,703
<PAGE>

COMMON STOCKS
NUMBER OF SHARES                                                                          VALUE

HEALTH CARE (8.2%)
- -----------------------------------------------------------------------------------------------
   1,756,350   American Home Products Corp.                                     $   135,458,494
   4,706,250   Baxter International, Inc.                                           163,542,188
   2,475,900   Bristol-Myers Squibb Co.                                             161,242,988
     700,000   Hafslund Nycomed AS ADR (Norway)                                      15,487,500
   1,742,300   Lilly (Eli) & Co.                                                    130,236,925
     127,600   Schering-Plough Corp.                                                  9,617,850
   1,325,000   Smithkline Beecham PLC ADR (India)                                    51,509,375
   2,232,650   Upjohn Co.                                                            80,933,563
   1,718,200   Warner-Lambert Co.                                                   137,026,450
                                                                                ---------------
                                                                                    885,055,333

INSURANCE AND FINANCE (15.4%)
- -----------------------------------------------------------------------------------------------
     694,250   AON Corp.                                                             25,600,469
   2,151,850   Aetna Life & Casualty Co.                                            122,655,450
   2,954,300   American Express Co.                                                 102,661,925
   2,313,500   American General Corp.                                                76,345,500
   2,320,500   BankAmerica Corp.                                                    114,864,750
   2,140,394   Bankers Trust New York Corp.                                         116,116,375
   1,291,055   Bear Stearns Companies, Inc.                                          26,628,009
   2,690,900   Beneficial Corp.                                                     109,654,175
   1,360,450   CIGNA Corp.                                                           98,802,681
   1,100,000   Citicorp                                                              51,012,500
   2,687,150   CoreStates Financial Corp.                                            87,668,269
     880,850   Federal National Mortgage Association                                 77,735,013
     733,750   First Chicago Corp.                                                   40,539,688
     569,100   First Fidelity Bancorp                                                27,459,075
     587,850   Household International, Inc.                                         27,555,469
   1,455,400   Lincoln National Corp.                                                59,307,550
   3,314,027   Morgan (J.P.) & Co., Inc.                                            217,483,022
   2,592,340   National City Corp.                                                   70,965,308
     754,250   NationsBank Corp.                                                     37,712,500
   1,068,000   PNC Bank Corp.                                                        26,833,500
     250,400   St. Paul Cos., Inc.                                                   12,050,500
      35,000   Student Loan Marketing Assn.                                           1,417,500
   2,180,300   USF&G Corp.                                                           32,159,425
     644,600   Wells Fargo & Co.                                                    106,923,025
                                                                                ---------------
                                                                                  1,670,151,678

METALS AND MINING (0.5%)
- -----------------------------------------------------------------------------------------------
      50,000   Alumax, Inc.                                                           1,412,500
   1,080,000   Freeport-McMoRan, Inc.                                                19,035,000
   1,693,260   Freeport-McMoRan Copper & Gold Co., Inc. Class A                      35,346,803
                                                                                ---------------
                                                                                     55,794,303

OIL AND GAS (10.0%)
- -----------------------------------------------------------------------------------------------
   1,146,200   Amoco Corp.                                                           75,219,375
      35,000   Anadarko Petroleum Corp.                                               1,439,375
     663,700   Atlantic Richfield Co.                                                75,993,650
   1,154,450   Chevron, Inc.                                                         54,692,069
      47,500   Columbia Gas System, Inc.                                              1,401,250
   2,506,850   Enron Corp.                                                           85,232,900
   1,918,150   Exxon Corp.                                                          133,551,194
     618,370   Imperial Oil Ltd.                                                     22,106,725
<PAGE>

COMMON STOCKS
NUMBER OF SHARES                                                                          VALUE

OIL AND GAS (continued)
- -----------------------------------------------------------------------------------------------
   1,114,550   McDermott International, Inc.                                    $    30,650,125
     100,000   McMoran Oil & Gas Co.                                                    275,000
   1,033,850   Mobil Corp.                                                           98,086,519
   2,320,000   Occidental Petroleum Corp.                                            53,360,000
     425,900   Pennzoil Co.                                                          20,815,863
   2,245,900   Phillips Petroleum Co.                                                78,606,500
     863,000   Royal Dutch Petroleum Co. PLC ADR (Netherlands)                      107,012,000
   2,456,550   Sonat, Inc.                                                           74,617,706
     913,700   Texaco, Inc.                                                          62,474,238
   3,389,826   Total Corp. ADS (France)                                             106,355,791
                                                                                ---------------
                                                                                  1,081,890,280

PHOTOGRAPHY (2.2%)
- -----------------------------------------------------------------------------------------------
   4,066,450   Eastman Kodak Co.                                                    233,820,875
      42,500   Polaroid Corp.                                                         1,445,000
                                                                                ---------------
                                                                                    235,265,875

REAL ESTATE (1.1%)
- -----------------------------------------------------------------------------------------------
     500,000   Avalon Properties, Inc.                                                9,812,500
     289,200   Beacon Properties Corp.                                                5,675,550
     225,000   Bradley Real Estate Trust, Inc.                                        3,403,125
     106,900   Burnham Pacific Properties, Inc.                                       1,269,438
      88,300   Chelsea GCA Realty, Inc.                                               2,152,313
     849,900   Debartolo Realty Corp.                                                11,792,363
     100,000   Federal Realty Investment Trust                                        2,037,500
     133,600   Kranzco Realty Trust                                                   2,287,900
     336,000   LTC Properties, Inc.                                                   4,368,000
     172,600   Macerich Co.                                                           3,473,575
     100,000   McArthur/Glen Realty Corp.                                             1,325,000
     440,000   Meditrust Corp.                                                       13,420,000
     166,000   National Health Investors, Inc.                                        4,357,500
     310,000   Nationwide Health Properties, Inc.                                    11,198,750
      84,200   Omega Healthcare Investors, Inc.                                       2,010,275
   2,050,900   Reliance Group Holdings, Inc.                                         11,279,950
     352,200   Smith (Charles East) Residential Realty                                8,012,550
     121,200   Storage USA, Inc.                                                      3,469,350
     228,000   Tanger Factory Outlet Center                                           5,329,500
     758,000   Taubman Centers, Inc.                                                  7,295,750
     225,000   Wellsford Residential Property Trust                                   4,556,250
                                                                                ---------------
                                                                                    118,527,139

RETAIL (4.2%)
- -----------------------------------------------------------------------------------------------
   6,547,750   K Mart Corp.                                                          90,850,031
      53,000   Kroger Co.                                                             1,351,500
   1,000,000   Limited, Inc. (The)                                                   21,375,000
     750,000   May Department Stores Co.                                             27,187,500
   1,139,350   Melville Corporation                                                  40,731,763
   2,181,250   Penney (J.C.) Co., Inc.                                               95,429,688
   2,200,000   Rite Aid Corp.                                                        51,150,000
   1,999,900   Sears, Roebuck & Co.                                                 108,494,575
     973,650   Woolworth Corp.                                                       15,578,400
                                                                                ---------------
                                                                                    452,148,457
<PAGE>

COMMON STOCKS
NUMBER OF SHARES                                                                          VALUE

TRANSPORTATION (2.6%)
- -----------------------------------------------------------------------------------------------
     258,400   CSX Corp.                                                        $    20,575,100
     495,800   Conrail, Inc.                                                         27,083,075
     973,550   Illinois Central Corp.                                                34,195,944
     964,150   Norfolk Southern Corp.                                                64,959,606
      80,000   Southern Pacific Rail Corp.                                            1,390,000
   2,706,600   Union Pacific Corp.                                                  148,524,675
                                                                                ---------------
                                                                                    296,728,400

UTILITIES (8.7%)
- -----------------------------------------------------------------------------------------------
   2,513,350   American Telephone & Telegraph Corp.                                 127,552,513
   1,200,000   Bell Atlantic Corp.                                                   65,850,000
   2,785,107   Cinergy Corp.                                                         69,975,813
   1,350,000   Frontier Corp.                                                        27,168,750
   1,420,800   Houston Industries, Inc.                                              56,121,600
   3,224,332   NYNEX Corp.                                                          131,794,571
   3,444,250   Northeast Utilities                                                   75,342,969
   1,073,850   Pacific Gas & Electric Co.                                            28,859,719
      48,000   Pacific Telesis Group                                                  1,482,000
     564,150   Public Service Co. of Colorado                                        16,995,019
   4,872,700   Sprint Corp.                                                         160,799,100
   1,521,583   Texas Utilities Co.                                                   49,641,645
   3,257,218   US WEST, Inc.                                                        134,767,395
     615,309   Union Electric Co.                                                    21,920,383
                                                                                ---------------
                                                                                    968,271,477
- -----------------------------------------------------------------------------------------------
               TOTAL COMMON STOCKS (cost $8,265,341,119)                        $ 9,274,268,799


U.S. GOVERNMENT AND AGENCY OBLIGATIONS (5.1%)<F1>
PRINCIPAL AMOUNT                                                                          VALUE
- -----------------------------------------------------------------------------------------------
               Government National Mortgage Association
$      3,917   11 1/2s, with various due dates to March 15, 2013                $         4,356
       5,449   11s, January 15, 2010                                                      6,008
     362,768   9s, with various due dates to June 15, 2011                              381,587
     201,333   7 1/2s, with various due dates to April 15, 2007                         201,458
     651,144   7 1/4s, with various due dates to March 15, 2005                         653,179
 203,240,000   U.S. Treasury Bonds 8 1/8s, August 15, 2019                          217,593,825
  85,000,000   U.S. Treasury Bonds 7 1/2s, November 15, 2016                         85,371,875
 185,000,000   U.S. Treasury Notes 7 3/4s, December 31, 1999                        191,243,750
  60,000,000   U.S. Treasury Notes 7 3/4s, November 30, 1999                         62,006,250
                                                                                ---------------
               TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
               (cost $529,708,182)                                              $   557,462,288


CONVERTIBLE PREFERRED STOCKS (2.5%)<F1>
NUMBER OF SHARES                                                                          VALUE
- -----------------------------------------------------------------------------------------------

AUTOMOTIVE (0.9%)
- -----------------------------------------------------------------------------------------------
     361,641   Chrysler Corp. 144A Ser. A, $4.625 dep. shs. cv. pfd.            $    43,306,510
     589,700   Ford Motor Co. Ser. A, $4.20, cv. pfd.                                51,967,313
                                                                                ---------------
                                                                                     95,273,823
<PAGE>

CONVERTIBLE PREFERRED STOCKS
NUMBER OF SHARES                                                                          VALUE

BASIC INDUSTRIAL PRODUCTS (--%)
- -----------------------------------------------------------------------------------------------
     214,800   Mascotech, Inc. $1.20 cv. pfd.                                   $     2,711,850

BUSINESS EQUIPMENT AND SERVICES (0.5%)
- -----------------------------------------------------------------------------------------------
   1,333,250   Unisys Corp. Ser. A, $3.75 cv. pfd.                                   53,330,000

ELECTRONICS AND ELECTRICAL EQUIPMENT (0.1%)
- -----------------------------------------------------------------------------------------------
     692,200   Westinghouse Electric Corp. 144A Ser. C, $1.30 cv. pfd.               10,383,000

INSURANCE AND FINANCE (0.5%)
- -----------------------------------------------------------------------------------------------
     419,250   Citicorp Ser. 13, $5.375 cv. pfd.                                     53,454,375

METALS AND MINING (0.1%)
- -----------------------------------------------------------------------------------------------
     450,000   Freeport-McMoRan Copper & Gold Co., Inc.
               $1.25, ($1.75, 8/1/96) dep. shs. cv. pfd. <F2>                         9,675,000

OIL AND GAS (0.2%)
- -----------------------------------------------------------------------------------------------
     909,913   Atlantic Ritchfield Co. $2.23 cv. pfd.                                23,430,260

TRANSPORTATION (0.2%)
- -----------------------------------------------------------------------------------------------
     400,000   Burlington Northern, Inc. Ser. A, $3.125, cum. cv. pfd.               25,900,000
                                                                                ---------------
               TOTAL CONVERTIBLE PREFERRED STOCKS (cost $255,370,481)           $   274,158,308


CONVERTIBLE BONDS AND NOTES (0.6%)<F1>
PRINCIPAL AMOUNT                                                                          VALUE
- -----------------------------------------------------------------------------------------------

AEROSPACE AND DEFENSE (0.1%)
- -----------------------------------------------------------------------------------------------
 $ 7,000,000   GenCorp, Inc. cv. sub. deb. 8s, 2002                             $     6,973,750

BASIC INDUSTRIAL PRODUCTS (0.1%)
- -----------------------------------------------------------------------------------------------
  12,485,000   Cooper Industries, Inc. cv. sub. 7.05s, 2015                          12,921,975

BUSINESS EQUIPMENT AND SERVICES (0.2%)
- -----------------------------------------------------------------------------------------------
  22,035,000   Unisys Corp. cv. sub. notes 8 1/4s, 2000                              24,238,500

CONSUMER SERVICES (0.2%)
- -----------------------------------------------------------------------------------------------
  41,500,000   Comcast Corp. cv. notes 1 1/8s, 2007                                  17,222,500

REAL ESTATE (--%)
- -----------------------------------------------------------------------------------------------
   1,845,000   Burnham Pacific Properties, Inc. cv. deb. 8 1/2s, 2002                 1,715,850
                                                                                ---------------
               TOTAL CONVERTIBLE BONDS AND NOTES (cost $73,368,237)             $    63,072,575


EUROBONDS (0.4%)<F1>
PRINCIPAL AMOUNT                                                                          VALUE
- -----------------------------------------------------------------------------------------------
$ 32,100,000   Banamex cv. deb. 7s, 1999                                        $    20,865,000
  19,000,000   Siemens Capital Corp. Co. Guaranty 8s, 2002                           25,032,500
                                                                                ---------------
               TOTAL EUROBONDS (cost $52,593,495)                               $    45,897,500
<PAGE>

YANKEE BONDS AND NOTES (0.3%) (cost $28,431,040)<F1>
PRINCIPAL AMOUNT                                                                          VALUE
- -----------------------------------------------------------------------------------------------
$ 79,800,000   Roche Holdings, Inc. cv. unsub. Liquid Yield Option Note
               zero %, 2010                                                     $    29,875,125


PREFERRED STOCKS (0.1%) (cost $8,625,000)<F1>
NUMBER OF SHARES                                                                          VALUE
- -----------------------------------------------------------------------------------------------

INSURANCE AND FINANCE (0.1%)
- -----------------------------------------------------------------------------------------------
     345,000   Credit Lyonnais Capital SCA 144A, Ser. DTC, $2.375, pfd.         $     6,986,150


SHORT-TERM INVESTMENTS (5.1%)<F1>
PRINCIPAL AMOUNT                                                                          VALUE
- -----------------------------------------------------------------------------------------------
$ 15,000,000   A I Credit Corp. 5.92s, May 2, 1995                              $    14,997,533
  12,000,000   American Telephone & Telegraph Co.
               6.03s, October 2, 1995                                                11,684,530
  11,000,000   American Telephone & Telegraph Co.
               6.01s, June 12, 1995                                                  10,922,871
  30,000,000   Bell Atlantic Financial Services, Inc.
               5.98s, May 10, 1995                                                   29,955,150
  10,000,000   BellSouth Telecommunications, Inc. 5.9s,
               May 11, 1995                                                           9,983,610
  25,000,000   Corporate Receivables Corp. 6.02s, June 15, 1995                      24,811,875
  25,000,000   Federal Home Loan Banks 5.95s, June 19, 1995                          24,809,931
  25,000,000   Federal Home Loan Mortgage Corp. 5.96s, June 19, 1995                 24,797,194
 136,000,000   Federal National Mortgage Assn. 5.89s to 5.94s with
               various due dates to October 10, 1995                                134,109,039
  25,000,000   Ford Motor Credit Co. 6.02s, June 8, 1995                             24,908,027
  20,000,000   GTE Florida, Inc. 5.95s, May 2, 1995                                  19,996,694
  25,000,000   General Electric Capital Corp. 6.01s, August 23, 1995                 24,524,208
  30,000,000   General Electric Capital Corp. 5.97s, May 15, 1995                    29,930,350
  20,000,000   General Motors Acceptance Corp. 5.97s, May 1, 1994                    20,000,000
  12,557,000   Metropolitan Life Funding, 6s, July 17, 1994                          12,395,852
  25,000,000   Metropolitan Life Funding 5.98s, June 5, 1995                         24,854,653
  25,000,000   Morgan (J.P.) & Co., Inc. 5.92s, May 9, 1995                          24,966,947
  18,500,000   Penney (J.C.) Funding Corp. 5.95s, May 22, 1995                       18,435,790
  15,600,000   Preferred Receivables Funding Corp. 6s, June 20, 1995                 15,470,000
  17,000,000   USAA Capital Corp. 5.95s, April 24, 1995                              16,839,038
  20,000,000   USAA Capital Corp. 5.94s, May 31, 1995                                19,901,000
   6,571,000   Interest in $510,221,000 joint repurchase agreement dated
               March 31, 1995 with Goldman Sachs & Co., Inc., due
               April 3, 1995 with respect to various U.S Treasury Bonds--
               maturity value of $ 6,574,231 for an effective yield of 6.28%          6,574,231
                                                                                ---------------
               TOTAL SHORT-TERM INVESTMENTS (cost $544,868,523)                 $   544,868,523
- -----------------------------------------------------------------------------------------------
               TOTAL INVESTMENTS (cost $9,758,306,077) <F3>                     $10,796,589,268
- -----------------------------------------------------------------------------------------------
<PAGE>

<FN>
<F1> Percentages indicated are based on net assets of $10,829,115,076, which corresponds to a
     net asset value per class A, class B and class Y shares of $14.24, $14.13 and $14.25,
     respectively.

<F2> The dividend rate and date shown parenthetically represent the new dividend rate to be
     paid and the date the fund will begin receiving dividends at this rate.

<F3> The aggregate identified cost on a tax cost basis is $9,790,651,000, resulting in gross
     unrealized appreciation and depreciation of $1,231,524,100 and $225,585,832, respectively,
     or net unrealized appreciation of $1,005,938,268.

     ADR or ADS after the name of a foreign holding stands for American Depository Receipts or
     American Depository Shares, respectively, representing ownership of foreign securities on
     deposit with a domestic custodian bank.

     144A after the name of a security represents those 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.
</FN>
</TABLE>



The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)

ASSETS
- -------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $9,758,306,077) (Note 1)                       $10,796,589,268
- -------------------------------------------------------------------------------
Cash                                                                        955
- -------------------------------------------------------------------------------
Interest and dividends receivable                                    41,454,718
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold                               41,169,098
- -------------------------------------------------------------------------------
Receivable for securities sold                                      148,203,933
- -------------------------------------------------------------------------------
TOTAL ASSETS                                                     11,027,417,972

LIABILITIES
- -------------------------------------------------------------------------------
Payable for securities purchased                                    144,069,453
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased                           33,634,618
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2)                         11,339,389
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2)                              6,621
- -------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2)                             2,692
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2)                                4,565,394
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2)            3,627,866
- -------------------------------------------------------------------------------
Other accrued expenses                                                1,056,863
- -------------------------------------------------------------------------------
TOTAL LIABILITIES                                                   198,302,896
- -------------------------------------------------------------------------------
NET ASSETS                                                      $10,829,115,076

REPRESENTED BY
- -------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4)                                 $ 9,758,864,011
- -------------------------------------------------------------------------------
Undistributed net investment income                                  25,258,394
- -------------------------------------------------------------------------------
Accumulated net realized gain on investment transactions              6,709,480
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments                        1,038,283,191
- -------------------------------------------------------------------------------
TOTAL -- REPRESENTING NET ASSETS APPLICABLE TO
CAPITAL SHARES OUTSTANDING                                      $10,829,115,076

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- -------------------------------------------------------------------------------
Net asset value and redemption price of class A shares
($6,726,811,172 divided by 472,357,570 shares)                           $14.24
- -------------------------------------------------------------------------------
Offering price per share (100/94.25 of $14.24)*                          $15.11
- -------------------------------------------------------------------------------
Net asset value and offering price of class B shares
($4,005,059,325 divided by 283,505,945 shares)+                          $14.13
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price of class Y
shares ($97,244,579 divided by 6,823,099 shares)                         $14.25
- -------------------------------------------------------------------------------

*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>

STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)

INVESTMENT INCOME:
- -------------------------------------------------------------------------------
Dividends (net of foreign tax of $241,743)                         $176,294,187
- -------------------------------------------------------------------------------
Interest                                                             32,896,918
- -------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME                                            $209,191,105

EXPENSES:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2)                                     22,151,976
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2)                        6,957,873
- -------------------------------------------------------------------------------
Compensation of Trustees (Note 2)                                        92,684
- -------------------------------------------------------------------------------
Reports to shareholders                                                 480,654
- -------------------------------------------------------------------------------
Auditing                                                                 58,879
- -------------------------------------------------------------------------------
Legal                                                                    41,774
- -------------------------------------------------------------------------------
Distribution fees-- Class A (Note 2)                                  7,601,841
- -------------------------------------------------------------------------------
Distribution fees-- Class B (Note 2)                                 17,373,355
- -------------------------------------------------------------------------------
Administrative services (Note 2)                                         42,578
- -------------------------------------------------------------------------------
Registration fees                                                       211,020
- -------------------------------------------------------------------------------
Other                                                                    30,509
- -------------------------------------------------------------------------------
TOTAL EXPENSES                                                       55,043,143
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME                                               154,147,962
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3)                     27,256,341
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period        735,175,449
- -------------------------------------------------------------------------------
NET GAIN ON INVESTMENT TRANSACTIONS                                 762,431,790
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS               $916,579,752
- -------------------------------------------------------------------------------



The accompanying notes are an integral part of these financial statements.
<PAGE>

STATEMENT OF CHANGES IN NET ASSETS

                                           SIX MONTHS ENDED          YEAR ENDED
                                                   APRIL 30          OCTOBER 31
                                                       1995*               1994
- -------------------------------------------------------------------------------
INCREASE IN NET ASSETS
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income                        $   154,147,962     $  241,197,241
- -------------------------------------------------------------------------------
Net realized gain on investments                  27,256,341        275,752,923
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments                                   735,175,449       (285,247,436)
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS                                       916,579,752        231,702,728
- -------------------------------------------------------------------------------
Distributions to shareholders from:
- -------------------------------------------------------------------------------
  Net investment income:
- -------------------------------------------------------------------------------
    Class A                                      (90,461,755)      (173,423,625)
- -------------------------------------------------------------------------------
    Class B                                      (39,742,646)       (63,658,537)
- -------------------------------------------------------------------------------
    Class Y                                         (461,982)          (215,501)
- -------------------------------------------------------------------------------
  Net realized gain on investments:
- -------------------------------------------------------------------------------
    Class A                                     (193,529,630)      (200,887,376)
- -------------------------------------------------------------------------------
    Class B                                     (109,386,554)       (75,867,323)
- -------------------------------------------------------------------------------
    Class Y                                         (882,813)              --
- -------------------------------------------------------------------------------
Increase from capital share transactions
(Note 4)                                         991,336,814      2,603,981,403
- -------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS                   1,473,451,186      2,321,631,769
- -------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------
Beginning of period                            9,355,663,890      7,034,032,121
- -------------------------------------------------------------------------------
END OF PERIOD (including undistributed
net investment income of $25,258,394
and $1,776,815, respectively)                $10,829,115,076     $9,355,663,890
- -------------------------------------------------------------------------------

*Unaudited



The accompanying notes are an integral part of these financial statements.

<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)

                                            JUNE 15, 1994                                                 APRIL 27, 1992
                                            (COMMENCEMENT                                                  (COMMENCEMENT
                                                       OF                                                             OF
                              SIX MONTHS       OPERATIONS)     SIX MONTHS                                     OPERATIONS)
                                   ENDED               TO           ENDED                                             TO
                                APRIL 30       OCTOBER 31        APRIL 30        YEAR ENDED OCTOBER 31        OCTOBER 31
- ----------------------------------------------------------------------------------------------------------------------------
                                    1995<F1>         1994            1995<F1>        1994         1993<F2>          1992<F2>
- ----------------------------------------------------------------------------------------------------------------------------
                                        CLASS Y                                          CLASS B
- ----------------------------------------------------------------------------------------------------------------------------
<S>                              <C>              <C>          <C>             <C>          <C>                 <C>     
NET ASSET VALUE,
BEGINNING OF PERIOD               $13.66           $13.46          $13.56          $14.18       $12.88            $12.69
- ----------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income                .24              .12             .18             .35          .31               .18
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
 gain (loss) on investments         1.01              .19             .98            (.09)        1.89               .26
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
ACTIVITIES                          1.25              .31            1.16             .26         2.20               .44
- ----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
- ----------------------------------------------------------------------------------------------------------------------------
  Net investment income             (.22)            (.11)           (.15)           (.34)        (.44)             (.25)
- ----------------------------------------------------------------------------------------------------------------------------
  Net realized gain on
  investments                       (.44)             --             (.44)           (.54)        (.46)              --
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS                 (.66)            (.11)           (.59)           (.88)        (.90)             (.25)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD    $14.25           $13.66          $14.13          $13.56       $14.18            $12.88
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN
AT NAV (%) <F3>                     9.74<F4>         2.28<F4>        9.14<F4>        2.01        17.86              3.47<F4>
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(in thousands)                   $97,245          $27,632      $4,005,059      $3,318,858   $1,819,793          $288,121
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)               .31<F4>          .26<F4>         .81<F4>        1.70         1.68               .97<F4>
- ----------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)           1.68<F4>         1.17<F4>        1.35<F4>        2.42         2.27              1.15<F4>
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%)             30.23<F4>        48.76           30.23<F4>       48.76        64.02             66.63
- ----------------------------------------------------------------------------------------------------------------------------

<PAGE>

<CAPTION>
FINANCIAL HIGHLIGHTS [continued]
(For a share outstanding throughout the year) [continued]




                                SIX MONTHS                                                                    YEAR
                                     ENDED                                                                   ENDED
                                  APRIL 30                   YEAR ENDED OCTOBER 31                      OCTOBER 31
- -------------------------------------------------------------------------------------------------------------------
                                      1995<F1>        1994          1993          1992          1991          1990
- -------------------------------------------------------------------------------------------------------------------
                                                                    CLASS A
- -------------------------------------------------------------------------------------------------------------------
<S>                             <C>             <C>           <C>           <C>           <C>           <C>       
NET ASSET VALUE,
BEGINNING OF PERIOD                 $13.65          $14.26        $12.92        $12.82        $10.87        $12.65
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
Net investment income                  .23             .44           .43           .48           .54           .60
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
 gain (loss) on investments           1.00            (.08)         1.88           .65          2.46         (1.01)
- -------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
ACTIVITIES                            1.23             .36          2.31          1.13          3.00          (.41)
- -------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
- -------------------------------------------------------------------------------------------------------------------
  Net investment income               (.20)           (.43)         (.51)         (.54)         (.62)         (.62)
- -------------------------------------------------------------------------------------------------------------------
  Net realized gain on
  investments                         (.44)           (.54)         (.46)         (.49)         (.43)         (.75)
- -------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS                   (.64)           (.97)         (.97)        (1.03)        (1.05)        (1.37)
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD      $14.24          $13.65        $14.26        $12.92        $12.82        $10.87
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN
AT NAV (%) <F3>                       9.62<F4>        2.74         18.75          9.53         28.71         (3.98)
- -------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(in thousands)                  $6,726,811      $6,009,174    $5,214,239    $3,517,199    $2,688,047    $1,922,814
- -------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)                 .44<F4>         .95           .93          1.07           .95           .89
- -------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)             1.73<F4>        3.18          3.18          3.72          4.45          5.01
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%)               30.23<F4>       48.76         64.02         66.63         77.06         81.33
- -------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Unaudited.
<F2> Per share net investment income has been determined on the basis of the weighted average number of shares
     outstanding during the period.
<F3> Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
<F4> Not annualized.
</FN>
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
April 30, 1995 (Unaudited)

NOTE 1
SIGNIFICANT ACCOUNTING POLICIES

The fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The fund seeks capital
growth and current income by investing primarily in a portfolio of common stocks
that offer the potential for capital growth, current income or both.

The fund offers class A, class B and class Y shares. 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. Class Y shares, which do not pay a
front-end sales charge, are generally subject to the same expenses as class A
and class B shares, but do not bear a distribution fee. Class Y shares are sold
only to defined contribution plans with an initial investment of $250 million in
a combination of Putnam funds and other investments managed by Putnam. Expenses
of the fund are borne pro-rata by the holders of each class of shares, except
that each class bears expenses unique to that class (including the distribution
fees applicable to such class). Each class votes as a class only with respect to
its own distribution plan or other matters on which a class vote is required by
law or determined by the Trustees. Shares of each class would receive their
pro-rata share of the net assets of the fund, if 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. Short-term investments having remaining maturities of 60 days or
less are stated at amortized cost which approximates market, and other
investments are stated at fair value following procedures approved by the
Trustees.

B JOINT TRADING ACCOUNT Pursuant to an exemptive order issued by the Securities
and Exchange Commission, the fund may transfer uninvested cash balances into a
joint trading account, along with the cash and certain other accounts of other
registered investment companies managed by Putnam Investment Management, Inc.
(Putnam Management), the fund's Manager, a wholly-owned subsidiary of Putnam
Investments, Inc. These balances may be invested in one or more repurchase
agreements and/or short-term money market instruments.

C REPURCHASE AGREEMENTS The fund or any joint trading account, through its
custodian, receives delivery of the underlying securities, the market value of
which at the time of purchase is
<PAGE>

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.

D SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security transactions are
accounted for on the trade date (date the order to buy or sell is executed).
Interest income is recorded on the accrual basis and dividend income is recorded
on the ex-dividend date, except that certain dividends from foreign securities
are recorded as soon as the fund is informed of the ex-dividend date.

E FEDERAL TAXES It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. It is also
the intention of the fund to distribute an amount sufficient to avoid imposition
of any excise tax under Section 4982 of the Internal Revenue Code of 1986.
Therefore, no provision has been made for federal taxes on income, capital gains
or unrealized appreciation of securities held and excise tax on income and
capital gains.


F DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded by
the fund on the ex-dividend date.

The character of income and gains to be distributed are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principles. These differences include treatment of dividend income, gains and
losses realized on paydowns for mortgage backed securities, amortization of
market discounts and certain gains and losses on foreign currency transactions.
Reclassifications are made to the fund's capital accounts to reflect income and
gains available for distribution (or available capital loss carryovers) under
income tax regulations.

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:
0.65% of the first $500 million of average net assets, 0.55% of the next $500
million, 0.50% of the next $500 million, 0.45% of the next $5 billion, 0.425% of
the next $5 billion, 0.405% of the next $5 billion, 0.39% of the next $5
billion, and 0.38% of any excess thereafter, subject to reduction in any year to
the extent that expenses (exclusive of brokerage, interest, taxes, custodian
credits and distribution fees) of the fund exceed 2.5% of the first $30 million
of average net assets, 2.0% of the next $70 million and 1.5% of any excess 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.

Trustees of the fund receive an annual Trustee's fee of $8,700 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 are being provided by Putnam Fiduciary Trust
Company (PFTC), a subsidiary of
<PAGE>

Putnam Investments. Investor 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 six months ended April 30, 1995
have been reduced by credits allowed by PFTC.

The fund has adopted distribution plans (the "Plans") with respect to its class
A shares and class B shares pursuant to Rule 12b-1 under the Investment Company
Act of 1940. The purpose of the Plans is to compensate Putnam Mutual Funds
Corp., a wholly-owned subsidiary of Putnam Investments, Inc., for services
provided and expenses incurred by it in distributing shares of the fund. The
Plans provide for payments by the fund to Putnam Mutual Funds Corp. at an annual
rate up to .35% and 1.00% of the average net assets attributable to class A and
Class B shares, respectively. The Trustees have approved payment by the fund at
an annual rate of .25% and 1.00% of the average net assets attributable to class
A and class B shares, respectively.

For the six months ended April 30, 1995, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $1,775,354 from the sale of class A
shares and $3,716,701 in contingent deferred sales charges from redemptions of
class B shares. A deferred sales charge of up to 1% is assessed on certain
redemptions of class A shares purchased as part of an investment of $1 million
or more. For the six months ended April 30, 1995, Putnam Mutual Funds Corp.,
acting as underwriter received $11,978 on class A redemptions.

NOTE 3
PURCHASES AND SALES OF SECURITIES

During the six months ended April 30, 1995, purchases and sales of investment
securities other than U.S. government obligations and short-term investments
aggregated $3,377,511,942 and $2,835,737,718, respectively. Purchases and sales
of U.S. government obligations aggregated $484,969,253 and $190,804,221,
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 April 30, 1995, there was an unlimited number of shares of beneficial
interest authorized divided into three classes, designated class A, class B and
class Y capital stock. Transactions in capital shares were as follows:

                      SIX MONTHS ENDED APRIL 30           YEAR ENDED OCTOBER 31
                                 1995                          1994
- -------------------------------------------------------------------------------
CLASS A                   SHARES         AMOUNT         SHARES           AMOUNT
- -------------------------------------------------------------------------------
Shares sold           47,870,959   $637,798,638    106,255,480   $1,437,865,777
- -------------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions         20,472,215    259,324,672     24,903,676      336,303,950
- -------------------------------------------------------------------------------
                      68,343,174    897,123,310    131,159,156    1,774,169,727
- -------------------------------------------------------------------------------
Shares repurchased   (36,059,732)  (480,540,086)   (56,613,258)    (765,234,815)
- -------------------------------------------------------------------------------
NET INCREASE          32,283,442   $416,583,224     74,545,898   $1,008,934,912
- -------------------------------------------------------------------------------
<PAGE>

                      SIX MONTHS ENDED APRIL 30           YEAR ENDED OCTOBER 31
                                 1995                          1994
- -------------------------------------------------------------------------------
CLASS B                   SHARES         AMOUNT         SHARES           AMOUNT
- -------------------------------------------------------------------------------
Shares sold           46,065,247   $610,970,004    131,189,830   $1,765,548,750
- -------------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions         11,104,303    139,558,026      9,653,561      129,687,483
- -------------------------------------------------------------------------------
                      57,169,550    750,528,030    140,843,391    1,895,236,233
- -------------------------------------------------------------------------------
Shares repurchased   (18,393,025)  (242,202,275)   (24,490,786)    (327,825,478)
- -------------------------------------------------------------------------------
NET INCREASE          38,776,525   $508,325,755    116,352,605   $1,567,410,755
- -------------------------------------------------------------------------------

                                                           JUNE 15, 1994
                                                         (COMMENCEMENT OF
                                                          OPERATIONS) TO
                      SIX MONTHS ENDED APRIL 30             OCTOBER 31
                                 1995                          1994
- -------------------------------------------------------------------------------
CLASS Y                   SHARES         AMOUNT         SHARES           AMOUNT
- -------------------------------------------------------------------------------
Shares sold            4,964,040   $ 68,764,869      2,024,404   $   27,663,387
- -------------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions            106,012      1,345,813         15,650          215,661
- -------------------------------------------------------------------------------
                       5,070,052     70,110,682      2,040,054       27,879,048
- -------------------------------------------------------------------------------
Shares repurchased      (269,137)    (3,682,847)       (17,870)        (243,312)
- -------------------------------------------------------------------------------
NET INCREASE           4,800,915   $ 66,427,835      2,022,184   $   27,635,736
- -------------------------------------------------------------------------------
<PAGE>

OUR COMMITMENT TO QUALITY SERVICE

 o CHOOSE AWARD-WINNING SERVICE.
   Putnam Investor Services has won the DALBAR Quality Tested Service Seal for
   the past five years. The award is presented annually by DALBAR Inc., an
   independent firm that monitors and evaluates the quality of service provided
   by mutual fund companies throughout the United States. During 1994, DALBAR
   ranked firms by conducting 80,000 anonymous performance evaluations based on
   55 service components.

 o 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 own checking or savings account.*

 o 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.)

 o 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 the original
   cost of the shares.

   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 representative.

 o 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
   continue purchasing shares during periods of low price levels.
<PAGE>

FUND INFORMATION


INVESTMENT MANAGER                          OFFICERS
Putnam Investment                           George Putnam 
Management, Inc.                            President
One Post Office Square
Boston, MA 02109                            Charles E. Porter
                                            Executive Vice President
MARKETING SERVICES
Putnam Mutual Funds Corp.                   Patricia C. Flaherty
One Post Office Square                      Senior Vice President
Boston, MA 02109
                                            Lawrence J. Lasser
CUSTODIAN                                   Vice President
Putnam Fiduciary Trust Company
                                            Gordon H. Silver
LEGAL COUNSEL                               Vice President
Ropes & Gray
                                            Peter Carman
TRUSTEES                                    Vice President
George Putnam, Chairman
                                            Brett C. Browchuk
William F. Pounds, Vice Chairman            Vice President

Jameson Adkins Baxter                       Thomas V. Reilly
                                            Vice President
Hans H. Estin
                                            Anthony I. Kreisel
John A. Hill                                Vice President and Fund Manager

Elizabeth T. Kennan                         David L. King
                                            Vice President and Fund Manager
Lawrence J. Lasser
                                            William N. Shiebler
Robert E. Patterson                         Vice President

Donald S. Perkins                           John R. Verani
                                            Vice President
George Putnam, III
                                            Paul M. O'Neil
Eli Shapiro                                 Vice President

A.J.C. Smith                                John D. Hughes
                                            Vice President and Treasurer
W. Nicholas Thorndike
                                            Beverly Marcus
                                            Clerk and Assistant Treasurer


This report is for the information of shareholders of The Putnam Fund for Growth
and Income. It may also be used as sales literature when preceded or accompanied
by the current prospectus, which gives details of sales charges, investment
objectives, and operating policies of the fund, and the most recent copy of
Putnam's Quarterly Performance Summary. For more information, or to request a
prospectus, call toll free 1-800-225-1581.

SHARES OF MUTUAL FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION (FDIC), THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND
INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.

<PAGE>


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              Boston, Massachusetts 02109                    Putnam
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