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.*
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SEMIANNUAL RESULTS AT A GLANCE
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CLASS A CLASS B
TOTAL RETURN: NAV POP NAV CDSC
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(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
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10/31/94 $13.65 $14.48 $13.56
4/30/95 14.24 15.11 14.13
CURRENT RETURN: NAV POP NAV
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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
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Class A 2 $0.200 $0.233 $0.206 $0.639
Class B 2 0.153 0.233 0.206 0.592
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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>
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TOP 10 HOLDINGS (4/30/95)
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PHILIP MORRIS COS., INC.
TOBACCO PRODUCTS, FOOD, BREWING
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AVON PRODUCTS, INC.
COSMETICS, TOILETRIES, FASHION JEWELRY, FRAGRANCES
- ---------------------------------------------------------
EASTMAN KODAK CO.
PHOTOGRAPHY
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J.P. MORGAN & CO., INC.
FINANCIAL SERVICES
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TRW, INC.
PRODUCTS FOR SPACE, DEFENSE, AND AUTOMOTIVE MARKETS
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XEROX CORP.
PHOTOCOPYING MACHINES, OFFICE AND COMPUTER EQUIPMENT
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GENERAL ELECTRIC CO.
POWER SYSTEMS, BROADCASTING, HOME APPLIANCES, LIGHTING
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BAXTER INTERNATIONAL, INC.
MEDICAL SUPPLIES AND LABORATORY PRODUCTS
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BRISTOL-MYERS SQUIBB CO.
MEDICAL DEVICES, DRUGS, TOILETRIES, HEALTH PRODUCTS
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SPRINT CORP.
VOICE AND DATA COMMUNICATIONS SERVICES
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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%
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1 year 15.21 8.61 14.35 9.35 17.42 3.05
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5 years 80.38 70.02 -- -- 81.11 17.84
Annual average 12.52 11.20 -- -- 12.61 3.34
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10 years 290.62 268.20 -- -- 295.95 42.10
Annual average 14.60 13.92 -- -- 14.75 3.58
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Life of class B -- -- 35.76 32.76 37.22 8.89
Annual average -- -- 10.69 9.87 11.08 2.87
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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%
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5 years 70.63 60.82 -- --
Annual average 11.28 9.97 -- --
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Life of class A 280.68 258.79 -- --
Annual average 14.30 13.63 -- --
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Life of class B -- -- 31.92 28.92
Annual average -- -- 9.92 9.06
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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%)
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<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%)
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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%)
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530,155 Armstrong World Industries, Inc. 24,122,053
BUSINESS EQUIPMENT AND SERVICES (2.8%)
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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%)
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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%)
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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%)
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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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