The Putnam
Fund for
Growth and
Income
ANNUAL REPORT
October 31, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* The Putnam Fund for Growth and Income continues to substantially
outperform the average growth and income fund tracked by Lipper
Analytical Services, based on total returns for the 1-,5- and 10-year
periods ended October 31, 1996. Over these periods, class A shares
ranked 130 out of 516, 57 out of 210, and 25 out of 123 for 1-, 5-, and
10-year performance, respectively; class B shares ranked 173 out of 516
for 1-year performance, and class M shares ranked 149 out of 516 for
1-year performance.*
* Morningstar Mutual Funds noted in its August 2, 1996, analysis that
"even within the conservative group of income-oriented equity funds,
this fund's insistence on keeping its yield above that of the S&P
500(registered trademark) index stands out."
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
14 Portfolio holdings
22 Financial statements
Footnote reads:
*Lipper Analytical Services, an independent research organization, ranks
funds according to total return performance. Rankings vary over time and
do not reflect the effects of sales charges. Past performance is not
indicative of future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
The Putnam Fund for Growth and Income, one of Putnam's oldest and most
respected funds, closed the books on yet another successful fiscal year
on October 31, 1996, with total returns well into the double digits for
all share classes. I think it is appropriate to note that, over the
years, your fund has also been a consistent performer, as shown in the
performance tables that follow the management report.
Although the stock market remained on its generally upward course
throughout most of the period, the industries leading the advance
shifted along the way. This meant adjusting the portfolio's emphasis in
response to and in anticipation of these changes. Thus industry sector
selection, as well as individual company selection, played a key role in
the management of the portfolio in this environment.
In the following report, your fund's management team provides detailed
discussion of performance and prospects as the fund enters its new
fiscal year.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
December 18, 1996
Report from the Fund Managers
David L. King
Anthony I. Kreisel
Hugh H. Mullin
The Putnam Fund for Growth and Income brought its 39th fiscal year to a
close with results that add to the fund's reputation as a solid long-
term performer. Without sacrificing its dedication to decreased price
volatility relative to other growth and income funds, the fund took
advantage of the strong stock market to post total returns of more than
20% at net asset value for all share classes for the 12 months ended
October 31, 1996. The fund's class A shares earned a total return of
23.89% at net asset value (16.78% at public offering price), as compared
with the 21.21% average total return for the 516 funds in Lipper's
growth and income category. Additional performance results for class A
shares, as well as performance results for other share classes and
comparative indexes, are listed in the performance summary that begins
on page 9.
* STOCK MARKET RISE CONTINUED DESPITE JULY CORRECTION
Continued economic growth and low inflation characterized fiscal year
1996. Overall, the strength of corporate America, exemplified by high
returns on equity and disciplined cost containment, kept the stock
market on an unprecedented positive track throughout the fiscal year. In
July, however, the market experienced a sudden but short-lived
correction, spurred by a drop in the price of technology stocks.
Although ensuing positive economic indicators quickly restored consumer
confidence and reversed the downturn, many mutual fund investors were
shaken by the interruption in the market's record-setting advances. For
your fund's shareholders, the effect of the correction was softened by
the portfolio's emphasis on undervalued companies that perform well
through both up and down markets. This strategy helped the fund
outperform the average growth and income fund during the downturn, with
a total return of -3.55% (for class A shares at net asset value) as
compared with the group average of -4.32% as reported by Lipper for July
1996.
* TOP-PERFORMING STOCKS REPRESENT WIDE RANGE OF INDUSTRIES
While the stock market as a whole has been trending upward, it is
interesting to note that there have been no clear-cut leaders among
industry sectors for the full duration of this bull market. Rather, the
rising market has rotated favor among a variety of industries, leaving
mutual fund managers with the challenge of catching each wave. Although
we were not about to ignore the potential offered by such opportunities,
we remained mindful of the fund's disciplined investment strategy and
maintained high standards in seeking quality companies whose stocks we
believed to be undervalued and poised to turn around over time.
Reflective of the market, the portfolio's top-performing holdings
represent a variety of sectors, including pharmaceutical companies,
regional banks, retail stores, and producers of consumer products. What
these diverse holdings have in common -- and what warrants their
inclusion in the fund's portfolio -- is our belief in their potential,
which is illustrated by characteristics such as strong market shares,
unique products, and managements' commitments to cost cutting,
restructuring, and global expansion. The fund's value-oriented
investment style makes it our job to identify these companies before
their stock prices reflect what we believe to be their potential worth.
[GRAPHIC OMITTED: TOP INDUSTRY SECTORS*]
Insurance and finance 16.7%
Utilities 10.6%
Oil and Gas 8.5%
Retail 6.1%
Consumer nondurables 6.0%
Footnote reads:
*Based on net assets as of 10/31/96. Holdings will vary over time.
Realization of a company's potential generally calls for some patience,
and consequently, we typically hold a stock in the fund's portfolio for
at least two to three years. Occasionally, our assessments prove
rewarding over a much shorter time frame. For example, earlier in the
fiscal year, the stocks of computer semiconductor companies had fallen
from favor. Within this industry sector, we identified Intel Corp. as a
market leader whose shares we believed were trading at a bargain price.
Approximately six months later, when investor confidence returned to the
technology sector, the market recognized Intel's position as a solid
company within an attractive industry, and we were able to sell these
shares at a considerable profit. Although technology stocks are
generally associated with growth-oriented investments that emphasize
earnings momentum, our success with Intel shows that sound research can
identify undervalued, quality investments in any industry.
The pharmaceutical industry has played an important role in the fund
over time, and fiscal year 1996 was no exception. As some of our
existing pharmaceutical holdings reached our valuation expectations
toward the end of the year, we sold our positions and began to redeploy
some of the assets into Pharmacia & Upjohn, another pharmaceutical
company. While these stocks, along with others discussed in the report,
were viewed favorably at the end of the fiscal year, all portfolio
holdings are subject to review and adjustment in accordance with the
fund's investment strategy and may vary in the future.
* EARLIER INVESTMENT IN REGIONAL BANKS BENEFITED FUND
Early in fiscal year 1995, we began to favor financial stocks,
eventually moving the insurance and finance sector to the top of the
fund's diverse industry weightings. We maintained a heavy weighting in
financial stocks throughout fiscal 1996, with an emphasis on the stocks
of regional banking concerns such as Fleet Financial Group and
NationsBank. Well-timed purchases of these rate-sensitive holdings have
benefited the fund as valuations improved.
[GRAPHIC OMITTED:
TOP 10 HOLDINGS (10/31/96)*]
U.S. Treasury Bonds
8s of November 15, 2021
Warner-Lambert Co.
Pharmaceuticals
General Motors Corp.
Automotive
IBM Corp.
Computer services and software
J. P. Morgan & Co., Inc.
Insurance and finance
Pharmacia & Upjohn, Inc.
Pharmaceuticals
Kimberly-Clark Corp.
Consumer nondurables
Fleet Financial Group, Inc.
Insurance and finance
Weyerhaeuser Co.
Forest products
TRW, Inc.
Conglomerate
Footnote reads:
* These holdings represent 18.4% of the fund's net assets as of
10/31/96. Portfolio holdings will vary over time.
As an additional but equally important benefit, financial stocks also
provide the fund with above-average dividend yields. As we have
mentioned many times before -- and as noted by independent research
firms such as Morningstar (see fund highlights on page 2) -- above-
average yields help cushion the fund against price volatility and
minimize losses during down markets.
* FUND SEEKS TO BENEFIT FROM U.S. PARTICIPATION IN GLOBAL ECONOMY
We expect slow growth with low inflation to continue to characterize the
economic climate of the United States -- a scenario that bodes well for
domestic stocks. Confusing economic signals that threaten any deviation
from this course can cause a market correction, but we believe a sustained
bear market is unlikely in the foreseeable future.
The strongest economic growth in the coming year may actually occur
overseas. To take advantage of the growing global economy, we plan to
invest increasingly in undervalued stocks of U.S.-based multinational
corporations whose products and marketing strategies we believe to be
particularly well suited to foreign consumers. In this area, we
currently favor -- among others -- Minnesota Mining and Manufacturing
Company, known more commonly as 3M. This company offers a broadly
diversified array of consumer and industrial products, and its
aggressive marketing strategies are giving it strong geographical
growth, most notably in developing countries. We expect this growing
global representation, along with innovative new products for the
domestic market, to result in higher sales and better profit margins.
No matter what the investment climate, however, we remain committed to
our value-oriented strategies and will continue to employ in-depth
research to identify investment opportunities and monitor the progress
of portfolio holdings.
Footnote reads:
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 10/31/96, there is no guarantee the fund
will continue to hold these securities in the future.
Performance summary
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.
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 in the fund.
TOTAL RETURN FOR PERIODS ENDED 10/31/96
Class A Class B Class M
(inception date) (11/16/57) (4/27/92) (5/1/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
1 year 23.89% 16.78% 23.04% 18.04% 23.31% 19.00%
- ------------------------------------------------------------------------
5 years 103.66 91.98 -- -- -- --
Annual average 15.29 13.93 -- -- -- --
- ------------------------------------------------------------------------
10 years 265.63 244.64 -- -- -- --
Annual average 13.84 13.17 -- -- -- --
- ------------------------------------------------------------------------
Life of class -- -- 86.60 84.60 37.96 33.10
Annual average -- -- 14.83 14.56 23.75 20.85
- ------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/96
S&P(registered trademark) Consumer
500 Index Price Index
- ------------------------------------------------------------------------
1 year 24.08% 2.99%
- ------------------------------------------------------------------------
5 years 105.60 15.21
Annual average 15.50 2.87
- ------------------------------------------------------------------------
10 years 292.00 43.52
Annual average 14.64 3.68
- ------------------------------------------------------------------------
Life of class B 94.62 13.48
Annual average 15.90 2.84
- ------------------------------------------------------------------------
Life of class M 42.00 4.21
Annual average 26.22 2.77
- ------------------------------------------------------------------------
Footnote reads:
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustment for taxes payable on reinvested distributions.
Investment returns and net asset value will fluctuate so that an
investor's shares, when sold, may be worth more or less than their
original cost. POP assumes 5.75% maximum sales charge for class A shares
and 3.50% for class M shares. CDSC for class B shares assumes the
applicable sales charge, with the maximum being 5%.
[GRAPHIC OMITTED:WORM CHART GROWTH OF A $10,000 INVESTMENT]
(plot points for 10-year total return mountain chart)
S&P 500
Date/year Fund at POP Index CPI
- ---------- ------------ -------- -------
10/31/86 9,425 10,000 10,000
10/31/87 9,721 10,634 10,453
10/31/88 11,491 12,212 10,898
10/31/89 13,691 15,420 11,387
10/31/90 13,147 14,261 12,103
10/31/91 16,922 19,039 12,457
10/31/92 18,535 20,929 12,856
10/31/93 22,011 24,045 13,209
10/31/94 22,615 24,975 13,554
10/31/95 27,817 31,558 13,935
10/31/96 34,464 39,200 14,352
Footnote reads:
Past performance is no assurance of future results. A $10,000 investment
in the fund's class B shares at inception on 4/27/92 would have been
valued at $18,660 on 10/31/96. ($18,460 with a redemption at the end of the
period). A $10,000 investment in the fund's class M shares at inception on
5/1/95 would have been valued at $13,796 at net asset value on 10/31/96
($13,310 at public offering price).
PRICE AND DISTRIBUTION INFORMATION
12 months ended 10/31/96
Class A Class B Class M
- ------------------------------------------------------------------------
Distributions (number) 4 4 4
- ------------------------------------------------------------------------
Income $0.400 $0.281 $0.341
- ------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------
Long-term 0.334 0.334 0.334
- ------------------------------------------------------------------------
Short-term 0.386 0.386 0.386
- ------------------------------------------------------------------------
Total $1.120 $1.001 $1.061
- ------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------
10/31/95 $15.77 $16.73 $15.63 $15.74 $16.31
- ------------------------------------------------------------------------
10/31/96 18.27 19.38 18.10 18.21 18.87
- ------------------------------------------------------------------------
Current return
- ------------------------------------------------------------------------
End of period
- ------------------------------------------------------------------------
Current dividend
rate1 2.19% 2.06% 1.55% 1.80% 1.74%
- ------------------------------------------------------------------------
Current 30-day
SEC yield2 2.42 2.28 1.68 1.92 1.85
- ------------------------------------------------------------------------
1 Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
2 Based on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 9/30/96
(most recent calendar quarter)
Class A Class B Class M
(inception date) (11/16/57) (4/27/92) (5/1/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
1 year 19.51% 12.61% 18.57% 13.57% 18.93% 14.77%
- ------------------------------------------------------------------------
5 years 102.36 90.72 -- -- -- -
Annual average 15.14 13.78 -- -- -- -
- ------------------------------------------------------------------------
10 years 274.45 253.02 -- -- -- -
Annual average 14.11 13.44 -- -- -- -
- ------------------------------------------------------------------------
Life of class -- -- 82.58 80.58 35.01 30.25
Annual average -- -- 14.56 14.27 23.54 20.46
- ------------------------------------------------------------------------
Footnote reads:
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns
and net asset value will fluctuate so that an investor's shares, when
sold, may be worth more or less than their original cost.
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.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on 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 index of common stocks frequently used
as a general measure of stock market performance. The index assumes
reinvestment of all distributions and interest payments and does not
take into account brokerage fees or taxes. Securities in the fund do not
match those in the index and performance of the fund will differ. It is
not possible to invest directly in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Report of independent accountants
To the Trustees and Shareholders of
The Putnam Fund for Growth and Income
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned, and the related statements
of operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of The
Putnam Fund for Growth and Income (the "fund") at October 31, 1996, and
the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements")
are the responsibility of the fund's management; our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of investments owned at October
31, 1996 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 9, 1996
<TABLE>
<CAPTION>
Portfolio of investments owned
October 31, 1996
<S> <C> <C> <C>
COMMON STOCKS (91.3%) *
NUMBER OF SHARES VALUE
Aerospace and Defense (0.7%)
- ------------------------------------------------------------------------------------------------------------------------
1,404,080 Lockheed Martin Corp. $125,840,670
242,500 Northrop Grumman Corp. 19,581,875
---------------
145,422,545
Automotive (4.7%)
- ------------------------------------------------------------------------------------------------------------------------
10,000 Bayerische Motoren Werke (BMW) AG (Germany) 5,836,627
6,369,636 Chrysler Corp. 214,179,011
7,797,700 Ford Motor Co. 243,678,125
7,384,620 General Motors Corp. 397,846,403
2,150,000 Goodyear Tire & Rubber Co. (The) 98,631,250
---------------
960,171,416
Basic Industrial Products (3.4%)
- ------------------------------------------------------------------------------------------------------------------------
322,400 Case Corp. 14,991,600
915,000 Caterpillar, Inc. 62,791,875
2,175,000 Cooper Industries, Inc. 87,543,750
4,604,317 Deere (John) & Co. 192,230,235
1,784,350 General Signal Corp. 72,712,263
3,558,400 Minnesota Mining & Manufacturing Co. 272,662,400
---------------
702,932,123
Building and Construction (0.4%)
- ------------------------------------------------------------------------------------------------------------------------
1,195,905 Armstrong World Industries, Inc. 79,826,659
Business Equipment and Services (2.0%)
- ------------------------------------------------------------------------------------------------------------------------
247,200 Deluxe Corp. 8,064,900
1,100,000 Dun & Bradstreet Corp. 63,662,500
3,226,410 Hewlett-Packard Co. 142,365,341
4,291,380 Xerox Corp. 199,012,748
---------------
413,105,489
Chemicals (3.7%)
- ------------------------------------------------------------------------------------------------------------------------
4,655,620 Bayer AG ADR (Germany) 176,046,665
1,207,460 Dow Chemical Co. 93,880,015
2,425,070 du Pont (E.I.) de Nemours & Co. 224,925,243
2,925,700 Eastman Chemical Co. 154,330,675
100,000 Hoechst AG (Germany) 3,751,647
3,141,100 Witco Chemical Corp. 97,374,100
---------------
750,308,345
Computer Services and Software (1.9%)
- ------------------------------------------------------------------------------------------------------------------------
3,037,390 IBM Corp. 391,823,310
Conglomerates (5.9%)
- ------------------------------------------------------------------------------------------------------------------------
2,939,300 Eaton Corp. 175,623,175
1,110,000 General Electric Co. 107,392,500
3,647,740 General Motors Corp. Class H 194,698,123
5,160,990 ITT Industries, Inc. 119,993,018
1,300,000 Ogden Corp. 23,562,500
2,163,000 Tenneco Inc. 107,068,500
3,396,850 TRW, Inc. 307,414,925
1,399,330 United Technologies Corp. 180,163,738
---------------
1,215,916,479
Consumer Durable Goods (1.0%)
- ------------------------------------------------------------------------------------------------------------------------
4,129,410 Whirlpool Corp. 195,114,623
Consumer Non Durables (6.0%)
- ------------------------------------------------------------------------------------------------------------------------
4,937,000 American Brands, Inc. 235,741,750
2,989,950 Avon Products, Inc. 162,204,788
1,079,050 Colgate-Palmolive Co. 99,272,600
3,867,340 Kimberly-Clark Corp. 360,629,455
2,733,510 Philip Morris Cos., Inc. 253,191,364
4,550,530 RJR Nabisco Holdings Corp. 131,396,554
---------------
1,242,436,511
Electronics and Electrical Equipment (1.8%)
- ------------------------------------------------------------------------------------------------------------------------
75,000 Emerson Electric Co. 6,675,000
769,100 Honeywell, Inc. 47,780,338
1,374,060 Motorola, Inc. 63,206,760
100,000 Siemens AG (Germany)+ 5,154,809
4,914,600 Texas Instruments, Inc. 236,515,125
---------------
359,332,032
Environmental Control (0.8%)
- ------------------------------------------------------------------------------------------------------------------------
4,655,160 WMX Technologies, Inc. 160,021,125
Food and Beverages (1.1%)
- ------------------------------------------------------------------------------------------------------------------------
3,000,000 Anheuser-Busch Cos., Inc. 115,500,000
1,565,800 General Mills, Inc. 89,446,325
235,000 Heinz (H.J.) Co. 8,342,500
250,000 Sara Lee Corp. 8,875,000
280,000 Whitman Corp. 6,790,000
---------------
228,953,825
Forest Products (1.8%)
- ------------------------------------------------------------------------------------------------------------------------
533,100 Rayonier, Inc. 21,124,088
170,000 Temple Inland, Inc. 8,712,500
776,000 Union Camp Corp. 37,830,000
6,723,400 Weyerhaeuser Co. 308,435,975
---------------
376,102,563
Insurance and Finance (16.7%)
- ------------------------------------------------------------------------------------------------------------------------
6,124,300 Ahmanson (H.F.) & Co. 192,149,913
5,627,340 American General Corp. 209,618,415
3,239,200 AON Corp. 187,063,800
4,877,870 Banc One Corp. 206,699,741
2,354,200 BankAmerica Corp. 215,409,300
2,710,655 Bankers Trust New York Corp. 229,050,348
3,094,000 Beneficial Corp. 180,999,000
1,513,450 CIGNA Corp. 197,505,225
1,220,400 CoreStates Financial Corp. 59,341,950
976,800 Federal National Mortgage Association 38,217,300
6,481,870 Fleet Financial Group, Inc. 323,283,266
240,000 Great Western Financial Corp. 6,720,000
4,429,100 Keycorp 206,506,788
4,516,829 Morgan (J.P.) & Co., Inc. 390,141,105
695,700 National City Corp. 30,175,988
2,092,940 NationsBank Corp. 197,259,595
190,000 Norwest Corp. 8,336,250
7,975,988 PNC Bank Corp. 289,129,565
1,700,000 St. Paul Cos., Inc. 92,437,500
4,300,000 USF&G Corp. 81,700,000
375,000 Wells Fargo & Co. 100,171,875
---------------
3,441,916,924
Medical Supplies and Devices (0.9%)
- ------------------------------------------------------------------------------------------------------------------------
196,180 Allegiance Corporation + 3,678,375
4,525,900 Baxter International, Inc. 188,390,588
---------------
192,068,963
Metals and Mining (1.1%)
- ------------------------------------------------------------------------------------------------------------------------
4,189,260 Freeport-McMoRan Copper & Gold Co., Inc. Class A 121,488,540
3,151,734 Freeport-McMoRan Copper & Gold Co., Inc. Class B 95,733,920
---------------
217,222,460
Oil and Gas (8.5%)
- ------------------------------------------------------------------------------------------------------------------------
2,778,300 Amoco Corp. 210,456,225
1,583,390 British Petroleum PLC ADR (United Kingdom) 203,663,515
3,113,950 Chevron, Inc. 204,742,213
2,060,000 Enron Corp. 95,790,000
2,301,900 Exxon Corp. 204,005,888
1,541,950 Mobil Corp. 180,022,663
7,928,427 Occidental Petroleum Corp. 194,246,462
2,707,100 PanEnergy Corp. 104,223,350
1,679,500 Phillips Petroleum Co. 68,859,500
225,300 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 37,258,988
5,746,164 Total Corp. ADR (France) 224,100,396
933,249 Union Pacific Resources Group Inc. 25,664,348
---------------
1,753,033,548
Packaging and Containers (0.9%)
- ------------------------------------------------------------------------------------------------------------------------
800,000 Ball Corp. 19,300,000
3,418,900 Crown Cork & Seal Co., Inc. 164,107,200
---------------
183,407,200
Pharmaceuticals (5.7%)
- ------------------------------------------------------------------------------------------------------------------------
3,108,500 American Home Products Corp. 190,395,625
1,914,200 Bristol-Myers Squibb Co. 202,426,650
10,195,250 Pharmacia & Upjohn, Inc. 367,029,000
6,325,560 Warner-Lambert Co. 402,463,755
---------------
1,162,315,030
Photography (1.3%)
- ------------------------------------------------------------------------------------------------------------------------
3,368,090 Eastman Kodak Co. 268,605,178
200,000 Polaroid Corp. 8,125,000
---------------
276,730,178
Publishing (0.8%)
- ------------------------------------------------------------------------------------------------------------------------
1,355,900 McGraw-Hill, Inc. 63,557,813
2,355,000 Times Mirror Co. Class A 108,918,750
---------------
172,476,563
Real Estate Investment Trust (REIT's) (0.8%)
- ------------------------------------------------------------------------------------------------------------------------
500,000 Avalon Properties, Inc. 11,562,500
605,767 Beacon Properties Corp. 17,794,406
349,900 Bradley Real Estate Trust, Inc. 5,817,088
500,000 FelCor Suite Hotels, Inc. 16,375,000
336,000 LTC Properties, Inc. 5,712,000
397,600 Macerich Co. 8,747,200
718,300 Meditrust Corp. 25,858,800
750,000 Nationwide Health Properties, Inc. 16,875,000
680,000 Simon DeBartolo Group, Inc. 17,935,000
352,200 Smith (Charles East) Residential Realty, Inc. 8,584,875
425,000 Storage USA, Inc. 14,768,750
228,000 Tanger Factory Outlet Center 5,529,000
225,000 Wellsford Residential Property Trust 5,175,000
---------------
160,734,619
Retail (6.1%)
- ------------------------------------------------------------------------------------------------------------------------
8,051,090 Dayton Hudson Corp. 278,768,991
13,770,700 K mart Corp. 134,264,325
4,341,900 May Department Stores Co. 205,697,513
1,150,000 Melville Corp. 42,837,500
5,017,790 Penney (J.C.) Co., Inc. 263,433,975
5,098,580 Rite Aid Corp. 173,351,720
3,344,600 Sears, Roebuck & Co. 161,795,025
---------------
1,260,149,049
Transportation (2.7%)
- ------------------------------------------------------------------------------------------------------------------------
1,192,000 Conrail, Inc. 113,389,000
1,012,440 Delta Air Lines, Inc. 71,756,685
2,147,020 Norfolk Southern Corp. 191,353,158
590,400 Railtrack Group PLC (United Kingdom) + 2,659,994
3,854,600 Ryder System, Inc. 114,674,350
1,241,900 Union Pacific Corp. 69,701,638
---------------
563,534,825
Utilities (10.6%)
- ------------------------------------------------------------------------------------------------------------------------
3,559,570 Bell Atlantic Corp. 214,464,093
3,142,000 BellSouth Corp. 128,036,500
267,900 Carolina Power & Light Co. 9,677,888
1,513,500 Cinergy Corp. 50,134,688
300,000 Edison International 5,925,000
5,238,900 GTE Corp. 220,688,663
918,100 Houston Industries, Inc. 21,001,538
2,553,700 Long Island Lighting Co. 46,285,813
4,571,600 Northeast Utilities Co. 49,144,700
3,983,860 NYNEX Corp. 177,281,770
1,700,000 Pacific Enterprises 52,275,000
2,300,000 Pacific Gas & Electric Co. 54,050,000
7,272,950 Pacific Telesis Group 247,280,300
2,357,900 Peco Energy Co. 59,536,975
3,045,100 Potomac Electric Power Co. 78,030,688
630,600 Public Service Co. of Colorado 23,332,200
5,289,650 Public Service Enterprise Group, Inc. 142,159,344
2,524,000 SBC Communications, Inc. 122,729,500
7,586,120 Sprint Corp. 297,755,210
727,600 Union Electric Co. 28,103,550
5,108,500 US West Communications, Inc. 155,170,688
75,000 Veba (Vereinigte Elektrizitaets Bergwerks) AG (Germany) + 3,990,613
---------------
2,187,054,721
---------------
Total Common Stocks (cost $15,532,943,927) $18,792,111,125
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (4.5%) *
PRINCIPAL AMOUNT VALUE
U.S. Government Agency Mortgage Pass-Through Certificates (--%)
- ------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association
$2,575 11 1/2s, with various due dates from March 15, 2010 to March 15, 2013 2,959
3,532 11s, January 15, 2010 3,982
277,205 9s, with various due dates from December 15, 2004 to June 15, 2011 297,131
151,110 7 1/2s, with various due dates from February 15, 2007 to April 15, 2007 153,693
473,597 7 1/4s, with various due dates from February 15, 2005 to March 15, 2005 481,535
---------------
939,300
U.S. Treasury Obligations (4.5%)
- ------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds
200,000,000 8 1/8s, August 15, 2019 $231,718,000
469,625,000 8s, November 15, 2021 539,556,859
172,495,000 6 1/4s, August 15, 2023 162,036,628
---------------
933,311,487
---------------
Total U.S. Government and Agency Obligations (cost $903,174,632) $934,250,787
CONVERTIBLE BONDS AND NOTES (0.9%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
$16,444,000 Banamex (Nassau Branch) 144A cv. jr. sub. notes 11s, 2003 (Mexico) $16,526,220
4,556,000 Banco Nacional de Mexico S.A. cv. bonds 7s, 1999 (Mexico) 4,248,470
GBP 25,000,000 British Airport Authority 144A cv. bonds 5 3/4s, 2006 (United Kingdom) 42,390,656
$48,400,000 Home Depot, Inc. cv. sub. notes 3 1/4s, 2001 48,339,500
24,600,000 Mitsubishi Bank Ltd. International Finance Bermuda cv. trust guaranteed
notes 3s, 2002 (Japan) 26,721,750
115,000,000 Roche Holdings, Inc. 144A cv. unsub. Liquid Yield Option Note zero %, 2010
(Switzerland) 50,743,750
---------------
Total Convertible Bonds and Notes (cost $176,291,344) $188,970,346
CONVERTIBLE PREFERRED STOCKS (0.4%) *
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------
484,300 Atlantic Richfield Co. $2.23 cv. pfd. $10,472,988
450,000 Freeport-McMoRan Copper Co., Inc. $1.75 cv. pfd. 12,262,500
1,390,980 Kmart Financing I $3.875 cv. pfd. 66,071,550
---------------
Total Convertible Preferred Stocks (cost $94,638,191) $88,807,038
CORPORATE BONDS AND NOTES (0.1%) *(cost $24,521,875)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
$19,000,000 Siemens Capital Corp. Co. Guaranty 8s, 2002 (Germany) $25,080,000
FOREIGN GOVERNMENT BONDS AND NOTES (0.1%) *(cost $22,777,250)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
$22,550,000 Italy (Government of) cv. notes 5s, 2001 $22,803,688
SHORT-TERM INVESTMENTS (2.3%) *
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------
$25,000,000 Ciesco L.P. effective yield of 5.37%, November 5, 1996 $24,985,083
20,000,000 Corporate Asset Funding Corp. effective yield of 5.42%, December 19, 1996 19,855,468
20,000,000 Corporate Receivables Corp. effective yield of 5.28%, December 29, 1996 19,888,533
30,000,000 Falcon Asset Securitization Corp. effective yield of 5.26%, November 15, 1996 29,938,633
20,000,000 Federal Home Loan Bank effective yield of 5.30%, November 12, 1996 19,967,611
25,000,000 Federal Home Loan Mortgage Corp. effective yield of 5.30%, December 11, 1996 24,852,777
25,000,000 Federal Home Loan Mortgage Corp. effective yield of 5.25%, February 3, 1997 24,661,861
30,000,000 Federal National Mortgage Assn. effective yield of 5.29%, December 27, 1996 29,753,135
25,000,000 Federal National Mortgage Assn. effective yield of 5.24%, March 17, 1997 24,511,722
30,000,000 Federal National Mortgage Assn. effective yield of 5.24%, January 17, 1997 29,668,900
25,000,000 Ford Motor Credit Co. effective yield of 5.33%, December 3, 1996 24,881,555
25,000,000 General Electric Capital Corp. effective yield of 5.30%, December 10, 1996 24,856,458
30,000,000 General Electric Capital Corp. effective yield of 5.30%, November 13, 1996 29,947,000
25,000,000 Household Finance Corp. effective yield of 5.30%, November 18,1996 24,937,430
25,000,000 Merrill Lynch & Co. Inc. effective yield of 5.35%, November 4, 1996 24,988,855
25,000,000 Morgan (J.P.) & Co. Inc. effective yield of 5.31%, December 16, 1996 24,834,063
10,000,000 National Rural Utilities Cooperative Finance Corp. effective yield of 5.32%,
November 5, 1996 9,994,089
30,000,000 National Rural Utilities Cooperative Finance Corp. effective yield of 5.31%,
January 16,1996 29,666,233
25,000,000 Sheffield Receivables Corp. effective yield of 5.27%, December 17, 1996 24,831,653
10,000,000 Interest in $500,000,000 joint repurchase agreement dated October 31, 1996
with Lehman Brothers Inc. due November 1, 1996 with respect to various
U.S. Treasury obligations -- maturity value of $10,001,536 for an
effective yield of 5.53% $10,001,536
6,000,000 Interest in $356,650,000 joint repurchase agreement dated October 31, 1996 with
Morgan (J.P.) & Co., Inc. due November 1, 1996 with respect to various
U.S. Treasury obligations -- maturity value of $6,000,918 for an
effective yield of 5.51% 6,000,918
---------------
Total Short-Term Investments (cost $483,004,666) $483,023,513
---------------
Total Investments (cost $17,237,351,885) *** $20,535,046,497
- ------------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $20,572,364,247.
*** The aggregate identified cost on a tax basis is
$17,275,108,735, resulting in gross unrealized appreciation and
depreciation of $3,719,422,059 and $459,484,297, respectively,
or net unrealized appreciation of $3,259,937,762.
+ Non-income producing security.
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.
ADR after the name of a foreign holding stands for American
Depository Receipts, representing ownership of foreign securities
on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
October 31, 1996
<S> <C>
Assets
- ------------------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $17,237,351,885) (Note 1) $20,535,046,497
- ------------------------------------------------------------------------------------------------------------
Cash 10,900,193
- ------------------------------------------------------------------------------------------------------------
Dividends and interest receivable 71,074,110
- ------------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 68,078,005
- ------------------------------------------------------------------------------------------------------------
Receivable for securities sold 129,169,811
- ------------------------------------------------------------------------------------------------------------
Total assets 20,814,268,616
Liabilities
- ------------------------------------------------------------------------------------------------------------
Payable for securities purchased 185,674,153
- ------------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 15,698,246
- ------------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 20,820,073
- ------------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 4,511,518
- ------------------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 37,474
- ------------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 25,187
- ------------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 9,813,539
- ------------------------------------------------------------------------------------------------------------
Other accrued expenses 5,324,179
- ------------------------------------------------------------------------------------------------------------
Total liabilities 241,904,369
- ------------------------------------------------------------------------------------------------------------
Net Assets $20,572,364,247
Represented by
- ------------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $15,851,153,592
- ------------------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 87,270,432
- ------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 1,336,245,611
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 3,297,694,612
- ------------------------------------------------------------------------------------------------------------
Total - Representing net assets applicable to capital shares outstanding $20,572,364,247
Computation of net asset value and offering price
- ------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($11,403,813,376 divided by 624,029,425 shares) $18.27
- ------------------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $18.27)* $19.38
- ------------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($8,692,162,589 divided by 480,237,247 shares) ** $18.10
- ------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($132,453,037 divided by 7,274,828 shares) $18.21
- ------------------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $18.21)* $18.87
- ------------------------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per class Y share
($343,935,245 divided by 18,802,567 shares) $18.29
- ------------------------------------------------------------------------------------------------------------
* 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.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended October 31, 1996
<S> <C>
Investment Income:
- ----------------------------------------------------------------------------------
Dividends (net of foreign tax of $1,285,147) $519,230,004
- ----------------------------------------------------------------------------------
Interest income 70,683,052
- ----------------------------------------------------------------------------------
Total investment income 589,913,056
Expenses
- ----------------------------------------------------------------------------------
Compensation of Manager (Note 2) 73,757,675
- ----------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 31,284,282
- ----------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 242,932
- ----------------------------------------------------------------------------------
Administrative services (Note 2) 75,345
- ----------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 24,268,217
- ----------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 68,898,645
- ----------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 509,346
- ----------------------------------------------------------------------------------
Reports to shareholders 1,053,507
- ----------------------------------------------------------------------------------
Registration fees 926,252
- ----------------------------------------------------------------------------------
Auditing 332,062
- ----------------------------------------------------------------------------------
Legal 302,885
- ----------------------------------------------------------------------------------
Postage 5,529,162
- ----------------------------------------------------------------------------------
Other 693,688
- ----------------------------------------------------------------------------------
Total expenses 207,873,998
- ----------------------------------------------------------------------------------
Expense reduction (Note 2) (5,077,031)
- ----------------------------------------------------------------------------------
Net expenses 202,796,967
- ----------------------------------------------------------------------------------
Net investment income 387,116,089
- ----------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 1,400,606,590
- ----------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 1,626,421,833
- ----------------------------------------------------------------------------------
Net gain on investments 3,027,028,423
- ----------------------------------------------------------------------------------
Net increase in net assets resulting from operations $3,414,144,512
- ----------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
Statment of changes in net assets
Year ended October 31
-----------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ------------------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------------------
Net investment income $387,116,089 $318,107,138
- ------------------------------------------------------------------------------------------------------------
Net realized gain on investments 1,400,606,590 567,738,792
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 1,626,421,833 1,368,165,037
- ------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,414,144,512 2,254,010,967
- ------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------
From net investment income
Class A (223,915,286) (186,528,064)
- ------------------------------------------------------------------------------------------------------------
Class B (112,039,069) (84,305,152)
- ------------------------------------------------------------------------------------------------------------
Class M (1,264,823) (104,438)
- ------------------------------------------------------------------------------------------------------------
Class Y (6,598,623) (2,521,806)
- ------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (362,744,121) (193,525,619)
- ------------------------------------------------------------------------------------------------------------
Class B (240,133,705) (109,385,623)
- ------------------------------------------------------------------------------------------------------------
Class M (1,187,122) --
- ------------------------------------------------------------------------------------------------------------
Class Y (8,902,432) (882,814)
- ------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 4,951,758,539 2,130,825,036
- ------------------------------------------------------------------------------------------------------------
Total increase in net assets 7,409,117,870 3,807,582,487
- ------------------------------------------------------------------------------------------------------------
Net assets
- ------------------------------------------------------------------------------------------------------------
Beginning of year 13,163,246,377 9,355,663,890
- ------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income of
$87,270,432 and $46,517,767, respectively) $20,572,364,247 $13,163,246,377
- ------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
June 15, 1994
(commencement
Year ended of operations) to
October 31 October 31
---------------------------------------------------------
1996 1995 1994
---------------------------------------------------------
Class Y
---------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $15.78 $13.66 $13.46
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income .47 .49(d) .12
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 3.20 2.50 .19
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.67 2.99 .31
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income (.44) (.43) (.11)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.72) (.44) --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.16) (.87) (.11)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.29 $15.78 $13.66
- ------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 24.24 23.28 2.28*
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $343,935 $193,292 $27,632
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) .68 .64 .26*
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 2.83 3.14 1.17*
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 41.26 58.40 48.76
- ------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (c) $0.0524
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial Highlights (continued)
(For a share outstanding throughout the period)
May 1, 1995
(commencement
Year ended of operations) to
October 31 October 31
---------------------------------------------------------
1996 1995 1996
---------------------------------------------------------
Class M
---------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $15.74 $14.24 $15.63
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income .35 .15(d) .30
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 3.18 1.53 3.17
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.53 1.68 3.47
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income (.34) (.18) (.28)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.72) -- (.72)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.06) (.18) (1.00)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $18.21 $15.74 $18.10
- ------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 23.31 11.88* 23.04
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $132,453 $21,100 $8,692,163
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 1.44 .66* 1.68
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 2.02 1.12* 1.84
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 41.26 58.40 41.26
- ------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (c) $0.0524 $0.0524
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Year ended October 31
---------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
Class B
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $13.56 $14.18 $12.88
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income .35(d) .35 .31(d)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 2.46 (.09) 1.89
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.81 .26 2.20
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income (.30) (.34) (.44)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.44) (.54) (.46)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (.74) (.88) (.90)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.63 $13.56 $14.18
- ------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 21.91 2.01 17.86
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $5,089,359 $3,318,858 $1,819,793
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 1.64 1.70 1.68
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 2.42 2.42 2.27
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 58.40 48.76 64.02
- ------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (c)
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
April 27, 1992
(commencement
of operations) to
October 31
--------------------------------------------------------
1992 1996 1995
--------------------------------------------------------
Class A
--------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $12.69 $15.77 $13.65
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income .18 (d) .43 .46 (d)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .26 3.19 2.50
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .44 3.62 2.96
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income (.25) (.40) (.40)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (.72) (.44)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (.25) (1.12) (.84)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.88 $18.27 $15.77
- ------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 3.47* 23.89 23.00
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $288,121 $11,403,813 $7,859,496
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) .97* .92 .89
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 1.15* 2.59 3.20
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 66.63 41.26 58.40
- ------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (c) $0.0524
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Year ended October 31
--------------------------------------------------------
1994 1993 1992
--------------------------------------------------------
--------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $14.26 $12.92 $12.82
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income .44 .43 .48
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (.08) 1.88 .65
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .36 2.31 1.13
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income (.43) (.51) (.54)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.54) (.46) (.49)
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (.97) (.97) (1.03)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $13.65 $14.26 $12.92
- ------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 2.74 18.75 9.53
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $6,009,174 $5,214,239 $3,517,199
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) .95 .93 1.07
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 3.18 3.18 3.72
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 48.76 64.02 66.63
- ------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (c)
- ------------------------------------------------------------------------------------------------------------------------------
See page 27 for notes to financial highlights.
*Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of
sales charges.
(b) The ratio of expenses to average net assets for the period ended October 31,
1995 and thereafter, includes amounts paid through expense offset arrangements. Prior
period ratios exclude these amounts (Note 2).
(c) Average commission rate paid on security trades is required for fiscal periods beginning
on or after September 1, 1995.
(d) Per share net investment income has been determined on the basis of the
weighted average number of shares outstanding during the period.
</TABLE>
Notes to financial statements
October 31, 1996
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, class M and class Y shares. Class A
shares are sold with a maximum front-end sales charge of 5.75%. Class B
shares, which convert to class A shares after approximately eight years,
do not pay a front-end sales charge but pay a higher ongoing
distribution fee than class A shares, and may be subject to a contingent
deferred sales charge, if those shares are redeemed within six years of
purchase. Class M shares are sold with a maximum front end sales charge
of 3.50% and pay an ongoing distribution fee that is higher than class A
shares but lower than class B shares. Class Y shares, which are sold at
net asset value, are generally subject to the same expenses as class A,
class B and class M shares, but do not bear a distribution fee. Class Y
shares are sold to defined contribution plans that initially invest at
least $250 million in a combination of Putnam Funds.
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 followed
by the fund in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally
accepted accounting principles and requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities. Actual results could differ from those estimates.
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. Securities quoted in foreign currencies are translated into U.S.
dollars at the current exchange rate. Short-term investments having
remaining maturities of 60 days or less are stated at amortized cost,
which approximates market value, and other investments are stated at
fair market value following procedures approved by the Trustees. Market
quotations are not considered to be readily available for long-term
corporate bonds and notes; such investments are stated at fair value on
the basis of valuations furnished by a pricing service, approved by the
Trustees, or dealers which determine valuations for normal
institutional-size trading units of such securities using methods based
on market transactions for comparable securities and various
relationships between securities that are generally recognized by
institutional traders.
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 of other
registered investment companies and certain other accounts 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 required to be in an
amount at least equal to the resale price, including accrued interest.
Putnam Management 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. 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. Discounts on zero coupon bonds, are accreted according
to the effective yield method.
E) Federal taxes It is the policy of the fund to distribute all of its
taxable 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 on securities held nor for excise tax on income and capital
gains.
F) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid annually. The amount and character of income and gains to be
distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
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.
These differences include treatment of losses on wash sale transactions,
non-taxable dividends and market discount. 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. For the year ended October 31, 1996, the fund reclassified
$2,545,623 to decrease undistributed net investment income and $690,831
to increase paid-in-capital, with an increase to accumulated net
realized gain on investments of $1,854,792. The calculation of net
investment income per share in the financial highlights table excludes
these adjustments.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.65% of the
first $500 million of average assets, 0.55% of the next $500 million,
0.50% of the next $500 million, and 0.45% of the next $5 billion, 0.425%
of the next $5 billion, 0.405% of the next $5 billion, 0.390% of the
next $5 billion and 0.380% of any excess thereafter subject, under
current law, to reduction in any year by the amount of certain brokerage
commissions and fees (less expenses) received by affiliates of Putnam
Management on the fund's portfolio transactions.
The fund reimburses Putnam Management 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.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
For the year ended October 31, 1996, fund expenses were reduced by
$5,077,031 under expense offset arrangements with PFTC. Investor
servicing and custodian fees reported in the Statement of operations
exclude these credits. The fund could have invested a portion of the
assets utilized in connection with the expense offset arrangements in an
income producing asset if it had not entered into such arrangements.
Trustees of the fund receive an annual Trustees fee of $11,268 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
The fund adopted a Trustee Fee Deferral Plan (the "Plan") which allows
the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund
and are invested in certain Putnam funds until distribution in
accordance with the Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan covering all Trustees of the Fund who have served as Trustee for at
least five years. Benefits under the plan are equal to 50% of the
Trustee's average total retainer and meeting fees for the three years
preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the
Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B and class M 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 0.35%,
1.00% and 1.00% of the average net assets attributable to class A, class
B and class M shares, respectively. The Trustees have approved payment
by the fund at an annual rate of 0.25%, 1.00% and 0.75% of the average
net assets attributable to class A, class B and class M shares,
respectively.
For the year ended October 31, 1996, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $10,503,021 and $230,930 from
the sale of class A and class M shares, respectively, and $7,920,693 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. For the year ended October 31, 1996, Putnam Mutual Funds
Corp., acting as underwriter received $44,337 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended October 31, 1996, purchases and sales of
investment securities other than U.S. government obligations and short-
term investments aggregated $10,303,557,786 and $6,720,905,944,
respectively. Purchases and sales of U.S. government obligations
aggregated $902,300,507 and $205,237, 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 October 31, 1996, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended
October 31, 1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 174,995,766 $2,992,497,428
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 32,806,678 538,127,028
- ----------------------------------------------------
207,802,444 3,530,624,456
Shares
repurchased (82,235,085) (1,402,222,592)
- ----------------------------------------------------
Net increase 125,567,359 $2,128,401,864
- ----------------------------------------------------
Year ended
October 31, 1995
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 106,699,884 $1,535,276,912
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 26,155,203 345,499,774
- ----------------------------------------------------
132,855,087 1,880,776,686
Shares
repurchased (74,467,149) (1,063,380,132)
- ----------------------------------------------------
Net increase 58,387,938 $817,396,554
- ----------------------------------------------------
Year ended
October 31, 1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 180,596,591 $3,061,568,355
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 20,249,530 328,605,353
- ----------------------------------------------------
200,846,121 3,390,173,708
Shares
repurchased (46,154,659) (781,507,908)
- ----------------------------------------------------
Net increase 154,691,462 $2,608,665,800
- ----------------------------------------------------
Year ended
October 31, 1995
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 103,563,018 $1,481,487,774
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 13,827,849 180,565,029
- ----------------------------------------------------
117,390,867 1,662,052,803
Shares
repurchased (36,574,502) (517,036,794)
- ----------------------------------------------------
Net increase 80,816,365 $1,145,016,009
- ----------------------------------------------------
Year ended
October 31, 1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 6,625,588 $113,736,760
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 141,706 2,345,665
- ----------------------------------------------------
6,767,294 116,082,425
Shares
repurchased (833,232) (14,291,401)
- ----------------------------------------------------
Net increase 5,934,062 $101,791,024
- ----------------------------------------------------
For the period
May 1, 1995
(commencement of
operations) to
October 31, 1995
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 1,408,277 $21,457,349
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 6,677 102,694
- ----------------------------------------------------
1,414,954 21,560,043
Shares
repurchased (74,188) (1,150,413)
- ----------------------------------------------------
Net increase 1,340,766 $20,409,630
- ----------------------------------------------------
Year ended
October 31, 1996
- ----------------------------------------------------
Class Y Shares Amount
- ----------------------------------------------------
Shares sold 9,693,165 $167,559,028
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 941,889 15,501,055
- ----------------------------------------------------
10,635,054 183,060,083
Shares
repurchased (4,080,903) (70,160,232)
- ----------------------------------------------------
Net increase 6,554,151 $112,899,851
- ----------------------------------------------------
Year ended
October 31, 1995
- ----------------------------------------------------
Class Y Shares Amount
- ----------------------------------------------------
Shares sold 11,259,867 $163,682,273
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 240,803 3,404,620
- ----------------------------------------------------
11,500,670 167,086,893
Shares
repurchased (1,274,438) (19,084,050)
- ----------------------------------------------------
Net increase 10,226,232 $148,002,843
- ----------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the
Fund hereby designates $.334 per share (or if different, the amount
necessary to offset net capital gain earned by the Fund) for all classes
of shares as capital gain dividends for its taxable year ended October
31, 1996.
The fund has designated 76.11% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The Form 1099 you receive in January 1997 will show the tax status of
all distributions paid to your account in calendar 1996.
Results of October 3, 1996 shareholder meeting
(Unaudited)
A meeting of shareholders of the fund was held on October 3, 1996. At
the meeting, each of the nominees for Trustees was elected, as follows:
Votes
Votes for withheld
Jameson Adkins Baxter 608,693,141 8,939,400
Hans H. Estin 608,692,635 8,939,906
John A. Hill 608,685,346 8,947,195
R.J. Jackson 608,676,833 8,955,708
Elizabeth T. Kennan 608,633,702 8,998,839
Lawrence J. Lasser 608,677,351 8,955,190
Robert E. Patterson 608,681,537 8,957,004
Donald S. Perkins 608,661,626 8,970,915
William F. Pounds 608,675,190 8,957,351
George Putnam 608,681,783 8,950,758
George Putnam, III 608,667,391 8,956,150
Eli Shapiro 608,513,785 9,118,756
A.J.C. Smith 608,688,937 8,943,604
W. Nicholas Thorndike 608,645,438 8,987,103
A proposal to ratify the selection of Price Waterhouse LLP as auditors
for the fund was approved as follows: 597,336,477 votes for, and
4,791,294 votes against, with 15,504,770 abstentions and broker non-
votes.
A proposal to amend the fund's Agreement and Declaration of Trust with
respect to the fund's permitted investments was approved as follows:
559,437,369 votes for, and 25,912,524 votes against, with 32,282,648
abstentions and broker non-votes.
A proposal to amend the fund's Agreement and Declaration of Trust with
respect to diversification of investments was approved as follows:
558,304,730 votes for, and 27,860,445 votes against, with 31,467,366
abstentions and broker non-votes.
A proposal to amend the fund's Agreement and Declaration of Trust with
respect to investments in issuers that have been in operation less than
three years was approved as follows: 553,066,847 votes for, and
30,819,800 votes against, with 33,745,894 abstentions and broker non-
votes.
A proposal to amend the fund's Agreement and Declaration of Trust with
respect to purchase of illiquid securities was approved as follows:
545,717,444 votes for, and 36,536,325 votes against, with 35,378,772
abstentions and broker non-votes.
A proposal to amend the fund's Agreement and Declaration of Trust with
respect to investments in securities of issuers in which Putnam
Investments Management, Inc. owns securities was approved as follows:
552,160,398 votes for, and 32,290,518 votes against, with 33,181,625
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to making loans by purchasing securities was approved as
follows: 552,009,361 votes for, and 31,993,884 votes against, with
33,629,296 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to making loans through repurchase agreements and securities was
approved as follows: 546,398,631 votes for, and 36,961,477 votes
against, with 34,272,433 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in the securities of a single issuer was approved
as follows: 551,510,252 votes for, and 32,242,532 votes against, with
33,879,757 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in real estate was approved as follows:
554,252,905 votes for, and 31,401,360 votes against, with 31,978,276
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to concentration of its assets was approved as follows:
560,458,189 votes for, and 25,019,430 votes against, with 32,154,922
abstentions and broker non-votes.
A proposal to amend the fund's Agreement and Declaration of Trust with
respect to pledging assets was approved as follows: 548,330,890 votes
for, and 35,121,855 votes against, with 34,179,796 abstentions and
broker non-votes.
A proposal to amend the fund's Agreement and Declaration of Trust with
respect to borrowing was approved as follows: 550,847,644 votes for, and
33,104,012 votes against, with 33,680,885 abstentions and broker non-
votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in commodities was approved as follows:
547,583,766 votes for, and 37,567,518 votes against, with 32,481,257
abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to margin transactions was approved as follows: 544,958,418
votes for, and 38,867,541 votes against, with 33,804,582 abstentions and
broker non-votes.
A proposal to amend the fund's Agreement and Declaration of Trust and
eliminate the fund's fundamental investment restriction with respect to
short sales was approved as follows: 549,728,817 votes for, and
33,996,985 votes against, with 33,906,739 abstentions and broker non-
votes.
A proposal to amend the fund's fundamental investment restriction with
respect to underwriting was approved as follows: 556,770,031 votes for,
and 25,888,945 votes against, with 34,973,565 abstentions and broker
non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to invest to gain control of a company's management was
approved as follows: 554,262,046 votes for, and 30,495,739 votes
against, with 32,874,756 abstentions and broker non-votes.
All tabulations are rounded to nearest whole number.
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investor Services has won the DALBAR Quality Tested Service Seal
for the past six years. In 1995, over 146,000 tests of 56 shareholder
service components demonstrated that Putnam outperformed the industry
standard in every category.
* HELP YOUR INVESTMENT GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings
account.*
* SWITCH FUNDS EASILY
You can move money from one account to another with the same class of
shares without a service charge. (This privilege is subject to change or
termination.)
* ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at
the then-current net asset value, which may be more or less than 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.
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.
Footnote reads:
*Regular investing of course, does not guarantee a profit or protect
against a loss in a declining market.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Thomas V. Reilly
Vice President
David L. King
Vice President and Fund Manager
Anthony I. Kreisel
Vice President and Fund Manager
Hugh H. Mullin
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
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. You can also learn more at Putnam Investments'
website: http://www.putnaminv.com.
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
the principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- -----------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- -----------------------
29190-002/881/427 12/96
