The Putnam
Fund for
Growth and
Income
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
10-31-98
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* Morningstar, Inc., an independent rating agency, has awarded The Putnam
Fund for Growth and Income class A shares 4 out of 5 stars for overall
performance (based on the 3-, 5-, and 10-year returns) within
Morningstar's domestic equity funds category as of October 31, 1998. Only
22.5% of the 2,719 domestic equity funds rated receive 4 stars.*
* In its October issue, Worth magazine commends the management team of The
Putnam Fund for Growth and Income for adding to the fund's stake in Amoco
Corporation early in 1998. Worth writes "The value of that stake rose $106
million after Amoco announced its $48.2 billion merger with Britain's BP
[British Petroleum] on August 11."+
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
14 Portfolio holdings
21 Financial statements
* Past performance is not indicative of future results. Morningstar
ratings reflect risk-adjusted performance through 10/31/98 and are subject
to change every month. Morningstar ratings are calculated from a fund's
3-, 5- and 10-year returns (with fee adjustments) in excess of 90-day
Treasury bill returns and a risk factor that reflects performance below
90-day Treasury bill returns. For 3-, 5-, and 10-year performance, the
fund received 3, 4, and 4 stars, respectively. There were 2,719, 1,622,
and 728 funds rated, respectively; 10% of funds in an investment category
receive 5 stars; the next 22.5% receive 4 stars, and the middle 35%
receive 3 stars. Performance of other share classes will vary.
+ Fund holdings are subject to change.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The Putnam Fund for Growth and Income closed fiscal 1998 with a total
return comfortably in line with its long-term results. This performance,
while hardly spectacular when compared with the numbers that shareholders
have become accustomed to seeing in recent periods, was delivered when
many other equity portfolios were showing negative returns.
Perhaps more importantly, the management team achieved these results while
holding firmly to your fund's investment style at a time when other types
of stocks were in greater favor and might have yielded more attractive
short-term results. Experience has shown that the undervalued
dividend-paying stocks your managers seek out for the fund's portfolio can
perform competitively over the long term while exposing the fund to less
risk than the overall market.
In the following report, your fund's managers develop this theme in
greater detail, particularly as this strategy related to fiscal 1998
results and their views on prospects for fiscal 1999.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
December 16, 1998
Report from the Fund Managers
David L. King
Hugh H. Mullin
Sheldon N. Simon
An eventful fiscal year ended in upbeat fashion for The Putnam Fund for
Growth and Income. Strong results in the final weeks of the period helped
the fund achieve another double-digit annual return: class A shares gained
12.15% at net asset value (5.72% at public offering price) in the year
ended October 31, 1998. This return lagged the 21.99% performance of the
S&P 500,(R) currently weighted in favor of growth stocks, because the
value stocks in which your fund invests underperformed their growth
counterparts for most of this year. However, the fund's showing is quite
close to the average annual return over its 41-year life and a solid
performance over a period when many equity funds delivered negative
returns. For long-term performance results and returns for other share
classes, please turn to the performance summary that begins on page 9 of
this report.
* VALUE STOCKS WEATHER VOLATILE MARKET
To judge only by the annual return, 1998 might seem like an average year.
The unremarkable end result, however, masked several quick spurts and
rapid retreats in the stock market. Although major stock indexes set
numerous new highs until July 1998, an ever-narrowing group of
large-capitalization growth stocks was responsible for most of these
gains. Following Russia's decision in August to restructure its external
debt, equity investors around the globe sold off their holdings, including
those in the United States. The Federal Reserve Board's decision to reduce
short-term interest rates in September and October (and again in mid
November after the close of the fund's reporting period) led to a
significant recovery for stocks, but we still see above-average volatility
in the U.S. equity market.
As managers of your fund, we remain ever aware of these risks and we apply
a value-oriented strategy in part to offset potential hazards. We search
for dividend-paying stocks that are priced below the market average
because such undervalued stocks historically perform with less volatility
over time than the overall market. In addition to insisting on this
quality of cheapness, we also analyze companies to find those that are
experiencing positive changes likely to improve their earnings power in
coming years. A portfolio of stocks combining "cheapness and change" is
well positioned, we believe, to perform competitively over the long term
while being subject to less risk than the overall stock market.
During the period, our quest for value allowed us to add to existing
positions in many high-quality companies at attractive prices. In the
first quarter of 1998, for example, we added to our holdings in oil and
technology-hardware companies; these sectors were among the most stable in
the late summer slump. Before the decline, we had also trimmed industrial
and retail companies facing slower business and consumer demand while
adding to utilities because spending for electric power and telephone
service is much steadier. Because they are traditionally perceived as
relatively stable investments, many power companies gained in value when
investors later scrambled for safety. Finally we bought more of several
financial stocks when their prices were discounted by half in August and
September. Many of these fundamentally strong companies have since
rallied.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Insurance
and finance 22.7%
Utilities 10.9%
Oil and gas 10.0%
Pharmaceuticals 7.4%
Electronics and
electrical equipment 7.2%
Footnote reads:
*Based on net assets as of 10/31/98. Holdings will vary over time.
* CONSOLIDATION IN OIL AND AUTOMOTIVE INDUSTRIES
We were encouraged that several of the fund's holdings were parties to
mergers or acquisitions during the period. We do not buy stocks in
anticipation of a takeover, but when one of our holdings attracts an offer
from an industry competitor, we see it as confirmation of our assessment
of the company's value and future potential.
Last spring, for example, German luxury automaker Daimler Benz found the
shares of fund holding Chrysler Corporation to be a compelling value. Once
joined, Daimler and Chrysler will be one of the world's largest auto
companies and positioned to achieve savings on administration and product
design. Chrysler stock responded positively to the merger.
Similarly another combination makes two already large companies into a
global giant: British Petroleum's agreement to purchase Amoco Corporation,
a fund holding. A leading distributor of gasoline and chemicals in
Midwestern states, Amoco has been less successful than other oil companies
in finding new petroleum reserves. We liked the company for its marketing
prowess and its above-average dividend yield. British Petroleum saw in
Amoco an opportunity to expand its distribution capabilities in the huge
U.S. market. The new BP Amoco should be competitively positioned as the
global oil industry consolidates further, which many analysts expect will
happen. Although this holding, as well as others discussed in this report,
was viewed favorably at the end of the period, all are subject to review
and adjustment in accordance with the fund's investment strategy and may
vary in the future.
* INTERNAL CHANGES BOOST STOCKS IN ADVERSE YEAR
Our emphasis on internal corporate change means that the performance of
the companies we select will be influenced primarily by their own
capabilities rather than by being dependent on economic growth rates. In a
year when economic worries frequently hurt stocks, three of the fund's
holdings were relatively resilient. Long-time holding Pharmacia & Upjohn,
for example, is getting the payoff for its long-term restructuring. Under
new executive leadership this year, the company has many attractive new
drugs in its development pipeline. With its strong performance, we are
monitoring its valuation level closely. IBM, a holding for a number of
years, also continues to reward shareholders by following through on a
large and systematic share repurchase plan. Our frequent conversations
with executives in the computer industry reaffirm to us that IBM is a
formidable competitor, especially in computer services.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
General Electric Co.
Conglomerate
IBM Corp.
Computer services and software
Pharmacia & Upjohn, Inc.
Pharmaceuticals
BankAmerica Corp.
Insurance and finance
Philip Morris Cos., Inc.
Consumer nondurables
Exxon Corp.
Oil and gas
Citigroup, Inc.
Insurance and finance
Merck & Co., Inc.
Pharmaceuticals
Bristol-Myers Squibb Co.
Pharmaceuticals
American Telephone and Telegraph Co.
Utilities
Footnote reads:
These holdings represent 21.4% of the fund's net assets as of 10/31/98.
Portfolio holdings will vary over time.
Another long-term holding, Duke Energy Corporation -- already a leading
electric company -- performed very well in 1998. Duke is one of the
highest quality producers and distributors of electricity. Although the
electric industry has long been a sleepy refuge for conservative
investors, Duke is a dynamic leader in adding new consumer services and
expanding its market. Near the end of the period, we sold a portion of our
position to lock in the fund's gains.
* FUNDAMENTALS CONTINUE TO BE POSITIVE
The sturdiness of your fund's portfolio in a difficult year confirms the
effectiveness of our investment process and makes us confident amid the
ongoing uncertainty regarding the economy. Although we believe that the
market overreacted to events during 1998, slowing business spending and
rising international credit concerns have been real problems, nonetheless,
and we take them into account in our research. We also, however, avoid
hasty judgments. For instance, U.S. economic growth has fallen to a lower
rate, but it is still positive, and the Fed's recent interest rate cuts
can stimulate the economy and strengthen credit markets. We are also
encouraged that since July, a broader range of stocks has shared in the
market's gains than in previous months. This is a reassuring setting for
owning a portfolio of financially sound, undervalued large companies
experiencing positive change.
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 10/31/98, there is no guarantee the fund will
continue to hold these securities in the future.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. The
Putnam Fund for Growth and Income is designed for investors seeking
capital growth and current income.
TOTAL RETURN FOR PERIODS ENDED 10/31/98
Class A Class B Class M
(inception date) (11/06/57) (4/27/92) (5/1/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
1 year 12.15% 5.72% 11.28% 6.39% 11.60% 7.71%
- ------------------------------------------------------------------------------
5 years 119.40 106.78 111.21 109.21 113.86 106.42
Annual average 17.02 15.64 16.13 15.91 16.42 15.60
- ------------------------------------------------------------------------------
10 years 320.27 296.22 288.01 288.01 298.03 284.17
Annual average 15.44 14.76 14.52 14.52 14.81 14.41
- ------------------------------------------------------------------------------
Annual average
(life of fund) 13.78 13.61 12.69 12.69 12.98 12.88
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/98
S&P 500 Consumer
Index Price Index
- ------------------------------------------------------------------------------
1 year 21.99% 1.36%
- ------------------------------------------------------------------------------
5 years 162.66 12.42
Annual average 21.31 2.37
- ------------------------------------------------------------------------------
10 years 418.25 36.27
Annual average 17.89 3.14
- ------------------------------------------------------------------------------
Annual average (life of fund) 12.31 4.38
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. Returns for class A
and class M shares reflect the current maximum initial sales charges of
5.75% and 3.50%, respectively. Class B share returns for the 1-, 5-,
10-year and life-of-fund periods reflect the applicable contingent
deferred sales charge (CDSC), which is 5% in the first year, declines to
1% in the sixth year, and is eliminated thereafter. Returns shown for
class B and class M shares for periods prior to their inception are
derived from the historical performance of class A shares, adjusted to
reflect both the initial sales charge or CDSC, if any, currently
applicable to each class and in the case of class B and class M shares,
the higher operating expenses applicable to such shares. All returns
assume reinvestment of distributions at NAV. Investment return and
principal value will fluctuate so that an investor's shares when redeemed
may be worth more or less than their original cost.
This performance information does not reflect any market volatility that
may have occurred since the date of the information. As a result, more
recent returns may be more or less than those shown.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of
a $10,000 investment since
10/31/88
Fund's class A S&P 500 Consumer Price
Date shares at POP Index Index
10/31/88 9,428 10,000 10,000
10/31/89 11,233 12,640 10,449
10/31/90 10,787 11,695 11,106
10/31/91 13,884 15,612 11,431
10/31/92 15,208 17,166 11,797
10/31/93 18,060 19,731 12,121
10/31/94 18,555 20,494 12,438
10/31/95 22,823 25,913 12,787
10/31/96 28,276 32,157 13,170
10/31/97 35,330 42,483 13,444
10/31/98 $39,622 $51,825 $13,627
Footnote reads:
Past performance is no assurance of future results. At the end of the same
time period, a $10,000 investment in the fund's class B shares would have
been valued at $38,801 and no contingent deferred sales charges would
apply; a $10,000 investment in the fund's class M shares would have been
valued at $39,803 ($38,417 at public offering price). See first page of
performance section for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 10/31/98
Class A Class B Class M
- ------------------------------------------------------------------------------
Distributions (number) 4 4 4
- ------------------------------------------------------------------------------
Income $0.241 $0.088 $0.140
- ------------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------------
Long-term 2.034 2.034 2.034
- ------------------------------------------------------------------------------
Short-term 0.568 0.568 0.568
- ------------------------------------------------------------------------------
Total $2.843 $2.690 $2.742
- ------------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------------
10/31/97 $20.87 $22.14 $20.65 $20.77 $21.52
- ------------------------------------------------------------------------------
10/31/98 20.44 21.69 20.19 20.33 21.07
- ------------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------------
Current dividend rate1 2.25% 2.12% 1.51% 1.75% 1.69%
- ------------------------------------------------------------------------------
Current 30-day SEC yield2 1.47 1.38 0.77 1.00 0.97
- ------------------------------------------------------------------------------
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 9/30/98
(most recent calendar quarter)
Class A Class B Class M
(inception date) (11/6/57) (4/27/92) (5/1/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
1 year -0.86% -6.57% -1.61% -5.93% -1.35% -4.80%
- ------------------------------------------------------------------------------
5 years 108.00 96.06 100.38 98.38 102.72 95.65
Annual average 15.77 14.41 14.91 14.68 15.18 14.37
- ------------------------------------------------------------------------------
10 years 301.34 278.40 270.67 270.67 279.99 266.67
Annual average 14.91 14.23 14.00 14.00 14.28 13.87
- ------------------------------------------------------------------------------
Annual average
(life of fund) 13.60 13.44 12.51 12.51 12.80 12.70
- ------------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns and
principal value will fluctuate so that an investor's shares, when sold,
may be worth more or less than their original cost. See first page of
performance section for performance calculation method.
TERMS AND DEFINITIONS
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.
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 5.75% maximum 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 Composite Stock Price Index is an index of common
stocks frequently used as a general measure of stock market performance.
Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities in
the fund do not match those in the indexes 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
For the fiscal year ended October 31, 1998
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, 1998, 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, 1998 by correspondence with the custodian, provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 9, 1998
<TABLE>
<CAPTION>
Portfolio of investments owned
October 31, 1998
COMMON STOCKS (98.6%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace and Defense (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
1,040,748 Lockheed Martin Corp. $ 115,913,309
550,001 Raytheon Co Class A 30,800,056
1,145,000 Raytheon Co. Class B 66,481,563
---------------
213,194,928
Automotive (2.8%)
- --------------------------------------------------------------------------------------------------------------------------
9,975,000 Ford Motor Co. 541,143,750
3,600,000 General Motors Corp. 227,025,000
4,076,129 Goodyear Tire & Rubber Co. (The) 219,601,450
---------------
987,770,200
Basic Industrial Products (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
4,000,160 Cooper Industries, Inc. 176,507,060
4,145,604 Deere (John) & Co. 146,650,742
2,686,203 Minnesota Mining & Manufacturing Co. 214,896,240
3,000,000 Owens-Illinois, Inc. (NON) 91,687,500
---------------
629,741,542
Broadcasting (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
2,740,000 Comcast Corp. Class A 135,287,500
697,600 Tele-Communications, Inc. Class A (NON) 29,386,400
---------------
164,673,900
Business Equipment and Services (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
2,050,000 Avery Dennison Corp. 84,946,875
4,843,122 Xerox Corp. 469,177,444
---------------
554,124,319
Chemicals (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
1,287,100 Dow Chemical Co. 120,504,738
8,216,222 du Pont (E.I.) de Nemours & Co., Ltd. 472,432,765
3,281,212 Eastman Chemical Co. 192,771,205
2,419,260 Witco Chemical Corp. 45,512,329
---------------
831,221,037
Communications (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
2,315,400 MediaOne Group Inc. (NON) 97,970,363
Computer Equipment (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
17,385,000 Compaq Computer Corp. 549,800,625
2,910,000 Sun Microsystems, Inc. (NON) 169,507,500
---------------
719,308,125
Computer Services and Software (4.8%)
- --------------------------------------------------------------------------------------------------------------------------
7,116,000 3Com Corp. (NON) 256,620,750
4,645,000 Computer Associates International, Inc. 182,896,875
6,206,072 IBM Corp. 921,213,813
3,600,000 NCR Corp. (NON) 121,050,000
9,400,000 Seagate Technology, Inc. (NON) 247,925,000
---------------
1,729,706,438
Conglomerates (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
1,300,000 Ogden Corp. 34,937,500
1,540,000 Temple Inland, Inc. 74,786,250
600,000 United Technologies Corp. 57,150,000
---------------
166,873,750
Consumer Non Durables (4.8%)
- --------------------------------------------------------------------------------------------------------------------------
875,000 Clorox Co. 95,593,750
3,537,425 Colgate-Palmolive Co. 312,619,934
4,508,210 Kimberly-Clark Corp. 217,521,133
15,403,968 Philip Morris Cos., Inc. 787,527,864
10,518,600 RJR Nabisco Holdings Corp. 300,437,513
---------------
1,713,700,194
Electronics and Electrical Equipment (7.2%)
- --------------------------------------------------------------------------------------------------------------------------
4,976,541 Emerson Electric Co. 328,451,706
11,036,950 General Electric Co. 965,733,125
6,533,500 Intel Corp. 582,706,531
5,700,000 Motorola, Inc. 296,400,000
6,066,308 Texas Instruments, Inc. 387,864,568
---------------
2,561,155,930
Entertainment (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
3,124,129 Viacom, Inc. Class B (NON) 187,057,224
Environmental Control (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
3,525,200 Waste Management, Inc. 159,074,650
Food and Beverages (4.4%)
- --------------------------------------------------------------------------------------------------------------------------
6,054,765 Anheuser-Busch Cos., Inc. 359,880,095
4,325,000 ConAgra, Inc. 131,642,188
1,435,000 General Mills, Inc. 105,472,500
5,719,066 Heinz (H.J.) Co. 332,420,711
1,940,000 Nabisco Holdings Corp. Class A 73,235,000
1,079,500 PepsiCo, Inc. 36,433,125
3,409,000 The Quaker Oats Co. 201,344,063
5,330,851 Sara Lee Corp. 318,185,169
---------------
1,558,612,851
Health Care (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
4,420,000 Columbia/HCA Healthcare Corp. 92,820,000
6,834,400 Tenet Healthcare Corp. (NON) 190,936,050
1,300,000 WeLLPoint Health Networks, Inc. (NON) 95,712,500
---------------
379,468,550
Insurance and Finance (22.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,270,000 Aetna Inc. 94,773,750
4,560,000 Allstate Corp. 196,365,000
3,403,800 American Express Co. 300,810,825
5,967,374 American General Corp. 408,765,119
5,127,192 AON Corp. 317,885,904
11,233,072 Bank One Corp. 549,016,394
14,451,789 BankAmerica Corp. 830,074,631
8,118,018 BankBoston Corp. 298,844,538
4,468,164 Bankers Trust New York Corp. (CUS) 280,656,551
4,330,000 Chase Manhattan Corp. 245,998,125
5,411,822 CIGNA Corp. 394,724,767
14,986,000 Citigroup, Inc. 705,278,625
6,359,590 Fannie Mae 450,338,467
311,600 First American Corp. 12,853,500
800,000 First Tennessee National Corp. 25,350,000
4,380,000 First Union Corp. 254,040,000
5,207,600 Fleet Financial Group, Inc. 207,978,525
2,330,200 Hartford Financial Services Group 123,791,875
3,068,100 Household International, Inc. 112,177,406
874,680 Huntington Bancshares, Inc. 25,147,050
6,327,000 KeyCorp 191,787,188
2,700,000 Lehman Brothers Holding, Inc. 102,431,250
3,150,400 Mercantile Bancorporation, Inc. 143,933,900
1,500,000 Merrill Lynch & Co., Inc. 88,875,000
3,219,230 Morgan (J.P.) & Co., Inc. 303,412,427
1,730,000 Morgan Stanley, Dean Witter, Discover and Co. 112,017,500
1,451,000 National City Corp. 93,317,438
3,345,000 Norwest Corp. 124,392,188
4,350,000 PNC Bank Corp. 217,500,000
862,129 Summit Bancorp 32,707,019
450,000 SunTrust Banks, Inc. 31,359,375
2,350,000 The Equitable Companies, Inc. 115,150,000
8,493,200 Washington Mutual, Inc. 317,964,175
1,103,685 Wells Fargo & Co. 408,363,450
---------------
8,118,081,962
Medical Supplies and Devices (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
9,346,327 Baxter International, Inc. 560,195,474
Metals and Mining (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
1,478,250 Aluminum Co. of America 117,151,313
3,750,000 Freeport-McMoRan Copper & Gold Co., Inc. Class A 44,765,625
2,500,000 Freeport-McMoRan Copper & Gold Co., Inc. Class B 30,781,250
---------------
192,698,188
Oil and Gas (10.0%)
- --------------------------------------------------------------------------------------------------------------------------
5,662,164 Amoco Corp. 317,788,955
4,884,455 Atlantic Richfield Co. 336,416,838
1,350,000 British Petroleum PLC ADR (United Kingdom) 119,390,625
1,150,000 Burlington Resources Inc. 47,365,625
2,295,200 Chevron, Inc. 187,058,800
3,422,400 Conoco, Inc. (NON) 85,132,200
3,215,240 Elf Aquitane ADR (France) 186,483,920
2,178,000 Enron Corp. 114,889,500
10,456,674 Exxon Corp. 745,038,023
2,900,000 Halliburton Co. 104,218,750
4,886,549 Mobil Corp. 369,850,677
4,300,000 Occidental Petroleum Corp. 85,462,500
3,500,000 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 172,375,000
3,920,500 Schlumberger Ltd. 205,826,250
5,623,400 Sonat, Inc. 170,459,313
3,535,000 Texaco, Inc. 209,669,688
3,935,000 Tosco Corp. 110,425,938
---------------
3,567,852,602
Paper and Forest Products (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,881,600 Fort James Corp. 75,852,000
5,933,581 Weyerhaeuser Co. 277,765,760
---------------
353,617,760
Pharmaceuticals (7.4%)
- --------------------------------------------------------------------------------------------------------------------------
10,933,824 American Home Products Corp. 533,023,920
5,312,891 Bristol-Myers Squibb Co. 587,406,511
4,786,438 Merck & Co., Inc. 647,365,740
16,739,148 Pharmacia & Upjohn, Inc. 886,128,647
---------------
2,653,924,818
Photography (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
4,291,904 Eastman Kodak Co. 332,622,560
Publishing (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
2,085,000 McGraw-Hill, Inc. 187,519,688
3,625,000 Times Mirror Co. Class A 200,960,938
---------------
388,480,626
REIT's (Real Estate Investment Trusts) (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
2,700,000 Equity Residential Properties Trust 113,400,000
4,250,000 Starwood Lodging Trust 120,328,125
---------------
233,728,125
Restaurants (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
2,570,000 McDonald's Corp. 171,868,750
Retail (3.3%)
- --------------------------------------------------------------------------------------------------------------------------
5,701,620 Dayton Hudson Corp. 241,606,147
16,852,993 K mart Corp. (NON) 238,048,526
3,542,632 May Department Stores Co. 216,100,552
1,736,210 Penney (J.C.) Co., Inc. 82,469,975
4,938,500 Sears, Roebuck & Co. 221,923,844
8,805,777 Toys R Us (NON) 172,263,013
---------------
1,172,412,057
Telecommunications (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
6,309,364 U S West, Inc. 361,999,760
Transportation (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
10,303,884 Burlington Northern Santa Fe Corp. 318,132,419
960,000 Delta Air Lines, Inc. 101,340,000
3,150,000 Norfolk Southern Corp. 103,753,125
2,300,000 Ryder System, Inc. 56,637,500
---------------
579,863,044
Utilities (10.9%)
- --------------------------------------------------------------------------------------------------------------------------
9,362,864 American Telephone & Telegraph Co. 582,838,284
6,653,600 Ameritech Corp. 358,878,550
7,981,398 Bell Atlantic Corp. 424,011,769
1,535,000 BellSouth Corp. 122,512,188
3,393,800 Consolidated Edison, Inc. 170,114,225
5,193,820 Duke Energy Corp. 335,975,231
374,500 Edison International 9,877,438
6,195,000 Entergy Corp. 178,106,250
5,050,000 GTE Corp. 296,371,875
1,905,000 Public Service Enterprise Group, Inc. 72,390,000
11,641,722 SBC Communications, Inc. 539,157,250
3,759,500 Sempra Energy 97,747,000
5,739,000 Southern Co. 161,768,063
4,175,382 Sprint Corp. 320,460,569
4,973,200 Texas Utilities Co. 217,577,500
---------------
3,887,786,192
---------------
Total Common Stocks (cost $30,194,029,186) $35,228,785,919
- --------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS AND NOTES (0.2%) (a) (cost $62,757,638)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$60,000,000 Apple Computer, Inc. cv. sub. notes 6s, 2001 $ 79,575,000
CONVERTIBLE PREFERRED STOCKS (0.2%) (a) (cost $ 80,004,310)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
1,375,000 K mart Financing I $3.875 cum. cv. pfd. $ 76,226,563
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (--%)(a)
PRINCIPAL AMOUNT VALUE
U.S. Government Agency Mortgage Pass-Through Certificates (--%)
- --------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association
$ 1,629 11 1/2s, with due dates from March 15, 2010 to
January 15, 2013 $ 1,816
2,232 11s, January 15, 2010 2,467
187,176 9s, with due dates from December 15, 2004 to
June 15, 2011 201,096
96,893 7 1/2s, with due dates from February 15, 2007 to
April 15, 2007 100,679
294,691 7 1/4s, with due dates from February 15, 2005 to
March 15, 2005 302,778
---------------
Total U.S. Government and Agency Obligations
(cost $561,259) $ 608,836
SHORT-TERM INVESTMENTS (1.0%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$50,000,000 Asset Securitization Cooperative Corp.
effective yield of 5.1%, February 12, 1999 $ 49,270,417
25,000,000 Ciesco L.P. effective yield of 5.08%,
December 8, 1998 24,869,472
50,000,000 Commonwealth Bank Of Australia
effective yield of 5.10%, November 25, 1998 49,830,000
50,000,000 CXC Inc. effective yield of 5.15%,
December 14, 1998 49,692,431
23,095,000 Delaware Funding Corp. effective yield of
5.45%, November 20, 1998 23,031,861
25,000,000 Eureka Securitization effective yield of 5.15%,
January 14, 1999 24,735,347
25,000,000 Ford Motor Credit Co. effective yield of 5.08%,
November 5, 1998 24,985,889
25,000,000 General Electric Capital Corp. effective yield of
5.11%, December 17, 1998 24,836,764
25,000,000 National Australia Funding (DE) Inc.
effective yield of 5.02%, December 30, 1998 24,794,319
27,000,000 Sheffield Receivables Corp. effective yield of
5.48%, November 10, 1998 26,963,010
41,841,000 Interest in $750,000,000 joint repurchase
agreement dated October 30,1998 with
Goldman Sachs & Co. due November 2, 1998
with respect to various U.S. Treasury obligations --
maturity value of $41,859,759
or an effective yield of 5.38% 41,853,506
---------------
Total Short-Term Investments (cost $364,863,016) $ 364,863,016
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $30,702,215,409) (b) $35,750,059,334
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $35,747,804,899.
(b) The aggregate identified cost on a tax basis is $30,911,537,432, resulting in gross unrealized appreciation and
depreciation of $6,673,523,057 and $1,835,001,155, respectively, or net unrealized appreciation of $4,838,521,902.
(NON) Non-income-producing security.
(CUS) This entity provides subcustodian services to the fund.
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, 1998
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost
$30,702,215,409) (Notes 1 and 2) $35,750,059,334
- -----------------------------------------------------------------------------------------------
Dividends, interest, and other receivables 61,328,534
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 43,331,572
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 156,338,004
- -----------------------------------------------------------------------------------------------
Total assets 36,011,057,444
Liabilities
- -----------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 14,695,942
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 155,380,042
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 34,910,173
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 35,008,008
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 3,393,453
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 459,155
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 6,457
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 16,652,748
- -----------------------------------------------------------------------------------------------
Other accrued expenses 2,746,567
- -----------------------------------------------------------------------------------------------
Total liabilities 263,252,545
- -----------------------------------------------------------------------------------------------
Net assets $35,747,804,899
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $28,172,373,601
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 883,659
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 2,526,703,714
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 5,047,843,925
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $35,747,804,899
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($18,814,738,487 divided by 920,343,935 shares) $20.44
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $20.44)* $21.69
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($15,671,371,081 divided by 776,012,344 shares)** $20.19
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($421,615,799 divided by 20,736,791 shares) $20.33
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $20.33)* $21.07
- -----------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($840,079,532 divided by 41,030,253 shares) $20.47
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of more than $50,000 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, 1998
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $4,277,266) $ 701,794,416
- -----------------------------------------------------------------------------------------------
Interest 28,209,647
- -----------------------------------------------------------------------------------------------
Total investment income 730,004,063
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 142,213,769
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 51,251,290
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 546,972
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 77,876
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 45,973,991
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 154,403,117
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 3,049,564
- -----------------------------------------------------------------------------------------------
Reports to shareholders 1,931,535
- -----------------------------------------------------------------------------------------------
Registration fees 1,581,726
- -----------------------------------------------------------------------------------------------
Auditing 246,458
- -----------------------------------------------------------------------------------------------
Legal 237,097
- -----------------------------------------------------------------------------------------------
Postage 4,933,000
- -----------------------------------------------------------------------------------------------
Other 3,225,213
- -----------------------------------------------------------------------------------------------
Total expenses 409,671,608
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (9,696,914)
- -----------------------------------------------------------------------------------------------
Net expenses 399,974,694
- -----------------------------------------------------------------------------------------------
Net investment income 330,029,369
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 2,838,487,178
- -----------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (2,099,741)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the year 5,925,680
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 455,264,598
- -----------------------------------------------------------------------------------------------
Net gain on investments 3,297,577,715
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $3,627,607,084
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended October 31
-------------------------------
1998 1997
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 330,029,369 $ 435,625,033
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 2,836,387,437 3,682,609,333
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 461,190,278 1,288,959,035
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,627,607,084 5,407,193,401
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (232,355,114) (321,052,336)
- ---------------------------------------------------------------------------------------------------------------
Class B (84,944,382) (179,373,282)
- ---------------------------------------------------------------------------------------------------------------
Class M (3,281,201) (4,362,788)
- ---------------------------------------------------------------------------------------------------------------
Class Y (12,369,019) (11,027,748)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (2,046,999,581) (788,135,634)
- ---------------------------------------------------------------------------------------------------------------
Class B (1,719,400,604) (614,613,992)
- ---------------------------------------------------------------------------------------------------------------
Class M (44,352,683) (9,920,170)
- ---------------------------------------------------------------------------------------------------------------
Class Y (87,596,678) (23,776,837)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 5,490,232,906 6,833,969,310
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 4,886,540,728 10,288,899,924
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 30,861,264,171 20,572,364,247
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed
net investment income of $883,659 and
$5,925,681, respectively) $35,747,804,899 $30,861,264,171
- ---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.87 $18.27 $15.77 $13.65 $14.26
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .26(c) .39(c) .43 .46(c) .44
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.15 3.91 3.19 2.50 (.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.41 4.30 3.62 2.96 .36
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.24) (.45) (.40) (.40) (.43)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (2.60) (1.25) (.72) (.44) (.54)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.84) (1.70) (1.12) (.84) (.97)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $20.44 $20.87 $18.27 $15.77 $13.65
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 12.15 24.95 23.89 23.00 2.74
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $18,814,738 $16,300,523 $11,403,813 $7,859,496 $6,009,174
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .84 .86 .92 .89 .95
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.27 1.95 2.59 3.20 3.18
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 78.75 63.88 41.26 58.40 48.76
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 brokerage service and expense offset arrangements. Prior period ratios
exclude these amounts (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.65 $18.10 $15.63 $13.56 $14.18
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .11(c) .24(c) .30 .35(c) .35
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.12 3.87 3.17 2.46 (.09)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.23 4.11 3.47 2.81 .26
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.09) (.31) (.28) (.30) (.34)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (2.60) (1.25) (.72) (.44) (.54)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.69) (1.56) (1.00) (.74) (.88)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $20.19 $20.65 $18.10 $15.63 $13.56
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 11.28 24.03 23.04 21.91 2.01
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $15,671,371 $13,511,906 $8,692,163 $5,089,359 $3,318,858
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.59 1.61 1.68 1.64 1.70
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .52 1.19 1.84 2.42 2.42
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 78.75 63.88 41.26 58.40 48.76
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 brokerage service and expense offset arrangements. Prior period ratios
exclude these amounts (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share May 1, 1995+
operating performance Year ended October 31 to October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $20.77 $18.21 $15.74 $14.24
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .16(c) .28(c) .35 .15(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.14 3.89 3.18 1.53
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.30 4.17 3.53 1.68
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.14) (.36) (.34) (.18)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (2.60) (1.25) (.72) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.74) (1.61) (1.06) (.18)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $20.33 $20.77 $18.21 $15.74
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 11.60 24.29 23.31 11.88*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $421,616 $348,129 $132,453 $21,100
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.34 1.36 1.44 .66*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .77 1.39 2.02 1.12*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 78.75 63.88 41.26 58.40
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 brokerage service and expense offset arrangements. Prior period ratios
exclude these amounts (Note 2).
(c) Per share net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS Y
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share June 15, 1994+
operating performance Year ended October 31 to October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.90 $18.29 $15.78 $13.66 $13.46
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .32(c) .44(c) .47 .49(c) .12
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.14 3.92 3.20 2.50 .19
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.46 4.36 3.67 2.99 .31
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.29) (.50) (.44) (.43) (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (2.60) (1.25) (.72) (.44) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (2.89) (1.75) (1.16) (.87) (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $20.47 $20.90 $18.29 $15.78 $13.66
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 12.40 25.27 24.24 23.28 2.28*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $840,080 $700,707 $343,935 $193,292 $27,632
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .59 .61 .68 .64 .26*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.52 2.20 2.83 3.14 1.17*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 78.75 63.88 41.26 58.40 48.76
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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 brokerage service and expense offset arrangements. Prior period ratios
exclude these amounts (Note 2).
(c) 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, 1998
Note 1
Significant accounting policies
The Putnam Fund for Growth and Income (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 are 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 invest at least $250 million in a
combination of Putnam Funds and other accounts managed by affiliates of
Putnam Management.
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 that fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
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. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. 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,
stepped-coupon bonds and payment in kind bonds are accreted according to
the yield-to-maturity basis.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The fund
does not isolate that portion of realized or unrealized gains or losses
resulting from changes in the foreign exchange rate on investments from
fluctuations arising from changes in the market prices of the securities.
Such gains and losses are included with the net realized and unrealized
gain or loss on investments. Net realized gains and losses on foreign
currency transactions represent net realized exchange gains or losses on
closed forward currency contracts, disposition of foreign currencies and
the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized appreciation
and depreciation of assets and liabilities in foreign currencies arise
from changes in the value of open forward currency contracts and assets
and liabilities other than investments at the period end, resulting from
changes in the exchange rate.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a decline
in value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the
value of a currency in which securities a fund intends to buy are
denominated, when a fund holds cash reserves and short-term investments).
The U.S. dollar value of forward currency contracts is determined using
current forward currency exchange rates supplied by a quotation service.
The market value of the contract will fluctuate with changes in currency
exchange rates. The contract is "marked to market" daily and the change in
market value is recorded as an unrealized gain or loss. When the contract
is closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and
the value at the time it was closed. The fund could be exposed to risk if
the value of the currency changes unfavorably, if the counterparties to
the contracts are unable to meet the terms of their contracts or if the
fund is unable to enter into a closing position.
G) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the year ended
October 31, 1998, the fund had no borrowings against the line of credit.
H) 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, as amended. 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.
I) 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 at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences include temporary and permanent differences of losses on wash
sale transactions, foreign currency gains and losses, nontaxable dividends
and paydowns gains and losses on mortgage-backed securities.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution under income tax regulations.
For the year ended October 31, 1998, the fund reclassified $2,121,675 to
decrease undistributed net investment income and $4,268,723 to decrease
paid-in-capital, with an increase to accumulated net realized gains of
$6,390,398. 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, 0.45% of the next $5 billion, 0.425% of the next $5
billion, 0.405% of the next $5 billion, 0.39% of the next $5 billion and
0.38% of the next $5 billion, 0.37% of the next $5 billion, 0.36% of the
next $5 billion, 0.35% of the next $5 billion and 0.34% thereafter.
As part of the subcustodian contract between the subcustodian bank and
PFTC, the subcustodian bank has a lien on the securities of the fund to
the extent permitted by the fund's investment restrictions to cover any
advances made by the subcustodian bank for the settlement of securities
purchased by the fund. At October 31, 1998 the payable to the subcustodian
bank represents the amount due for cash advance for the settlement of a
security purchased.
The fund reimburses Putnam Management an allocated amount 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 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, 1998, fund expenses were reduced by
$9,696,914 under expense offset arrangements with PFTC and brokerage
service arrangements. 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.
Each Trustee of the fund receives an annual Trustee fee, of which $22,010
has been allocated to the fund, 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 has adopted a Trustee Fee Deferral Plan (the "Deferral 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 Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension 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 to 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, 1998, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $9,626,565 and $239,026 from the
sale of class A and class M shares, respectively and $18,200,857 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, 1998, Putnam Mutual Funds
Corp., acting as underwriter received $139,132 on class A redemptions.
Note 3
Purchases and sales of securities
During the year period ended October 31, 1998, purchases and sales of
investment securities other than U.S. government obligations and
short-term investments aggregated $28,781,719,989 and $26,963,849,775,
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, 1998, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended
October 31, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 200,626,782 $4,106,230,054
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 107,077,131 2,131,887,575
- -----------------------------------------------------------------------------
307,703,913 6,238,117,629
Shares
repurchased (168,383,822) (3,435,382,037)
- -----------------------------------------------------------------------------
Net increase 139,320,091 $2,802,735,592
- -----------------------------------------------------------------------------
Year ended
October 31, 1997
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 246,322,319 $4,867,849,703
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 55,800,874 1,027,207,252
- -----------------------------------------------------------------------------
302,123,193 5,895,056,955
Shares
repurchased (145,128,774) (2,890,542,492)
- -----------------------------------------------------------------------------
Net increase 156,994,419 $3,004,514,463
- -----------------------------------------------------------------------------
Year ended
October 31, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 158,251,789 $3,216,467,703
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 85,055,954 1,674,373,024
- -----------------------------------------------------------------------------
243,307,743 4,890,840,727
Shares
repurchased (121,775,217) (2,439,743,943)
- -----------------------------------------------------------------------------
Net increase 121,532,526 $2,451,096,784
- -----------------------------------------------------------------------------
Year ended
October 31, 1997
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 203,539,064 $3,976,856,440
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 40,773,177 739,428,187
- -----------------------------------------------------------------------------
244,312,241 4,716,284,627
Shares
repurchased (70,069,670) (1,380,468,994)
- -----------------------------------------------------------------------------
Net increase 174,242,571 $3,335,815,633
- -----------------------------------------------------------------------------
Year ended
October 31, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 6,797,934 $138,377,471
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,278,900 45,149,752
- -----------------------------------------------------------------------------
9,076,834 183,527,223
Shares
repurchased (5,101,774) (103,173,353)
- -----------------------------------------------------------------------------
Net increase 3,975,060 $ 80,353,870
- -----------------------------------------------------------------------------
Year ended
October 31, 1997
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 11,324,973 $224,938,156
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 735,803 13,555,890
- -----------------------------------------------------------------------------
12,060,776 238,494,046
Shares
repurchased (2,573,873) (51,900,150)
- -----------------------------------------------------------------------------
Net increase 9,486,903 $186,593,896
- -----------------------------------------------------------------------------
Year ended
October 31, 1998
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 14,209,729 $296,190,937
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,012,281 99,965,697
- -----------------------------------------------------------------------------
19,222,010 396,156,634
Shares
repurchased (11,722,209) (240,109,974)
- -----------------------------------------------------------------------------
Net increase 7,499,801 $156,046,660
- -----------------------------------------------------------------------------
Year ended
October 31, 1997
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 23,896,961 $497,150,115
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,884,261 34,804,585
- -----------------------------------------------------------------------------
25,781,222 531,954,700
Shares
repurchased (11,053,337) (224,909,382)
- -----------------------------------------------------------------------------
Net increase 14,727,885 $307,045,318
- -----------------------------------------------------------------------------
Federal tax information
(Unaudited)
The Form 1099 you receive in January 1999 will show the tax status of all
distributions paid to your account in calendar 1998.
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund
hereby designates $2,812,196,180 as capital gain for its taxable year
ended October 31, 1998.
The fund has designated 100% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
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
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
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
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
Vice President
Anthony I. Kreisel
Vice President
David L. King
Vice President and Fund Manager
Hugh H. Mullin
Vice President and Fund Manager
Sheldon N. Simon
Vice President and Fund Manager
John R. Verani
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.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
www.putnaminv.com
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
AN022-47850 12/98
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ----------------------------------------------------------------------------
The Putnam Fund for Growth and Income
Supplement to Annual Report dated October 31, 1998
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to defined contribution plans investing $250 million or
more in one or more of Putnam's funds or private accounts. Performance of
class Y shares, which incur neither a front-end load, distribution fee, nor
contingent deferred sales charge, will differ from performance of class A,
B, and M shares, which are discussed more extensively in the annual report.
ANNUAL RESULTS AT A GLANCE
- ----------------------------------------------------------------------------
Total return
for periods ended 10/31/98 NAV
1 year 12.40%
5 years 121.87
Annual average 17.28
10 years 325.01
Annual average 15.57
Annual average, life of fund 13.81
(since class A inception, 11/6/57)
Share value: NAV
10/31/97 $20.90
10/31/98 $20.47
- ----------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
4 0.292 2.602 2.894
- ----------------------------------------------------------------------------
Please note that past performance does not indicate future results.
Investment return and principal value will fluctuate so your shares, when
redeemed, may be worth more or less than their original cost. See full
report for information on comparative benchmarks. If you have questions,
please consult your fund prospectus or call Putnam toll free at
1-800-752-9894.
