The Putnam
Fund for
Growth and
Income
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
4-30-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The dedication of the management team of The Putnam Fund for Growth and
Income to the fund's investment style once again proved its worth toward
the midpoint of the fund's fiscal year. In April, the type of value stocks
in which the fund invests took a positive turn, with a favorable effect on
performance for the semiannual period.
The shift was a long time in coming. As the managers explain in the
following report, prices of these stocks had lagged those of growth stocks
since early 1997. A team less committed to style consistency might have
yielded to the temptation to switch to the better-performing stocks in
hopes of capturing short-term gains.
Experience has shown us, however, that over the long haul such maneuvers
often prove to be illusory. While one can never count past performance as
a guarantee of future results, your fund's four decades of solid growth
tend to confirm the efficacy of the fund's long-standing strategy. The
managers provide greater detail of the fund's performance during the first
half of fiscal 1999, then offer their outlook for prospects in the second
half.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 16, 1999
Report from the Fund Managers
David L. King
Hugh H. Mullin
Sheldon N. Simon
With more than 40 years of history, The Putnam Fund for Growth and Income
has experienced a large number of changes in market sentiment. As we write
this update on performance to conclude the first half of the fund's 1999
fiscal year, the market is showing signs of yet another transition. The
type of value stocks in which your fund invests, which have lagged behind
growth stocks since early 1997, are now beginning to move out in front. In
April, a broad range of energy and industrial stocks led the market higher
while large growth companies fell back slightly.
This is welcome news for your fund, of course, and during the semiannual
period the fund achieved unusually strong returns. Nevertheless, it is
important to recall that throughout its long history, the fund has
performed competitively with less volatility than the overall market --
even when its style was out of favor. We believe the strategy of
emphasizing stocks of large, established companies with qualities of
"cheapness and change," while value-oriented, suits a variety of market
conditions. For the fund's historic performance information, please turn
to the tables that begin on page 7.
Total return for 6 months ended 4/30/99
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- ----------------------------------------------------------------
18.68% 11.84% 18.28% 13.28% 18.40% 14.24%
- ----------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods begins on page 7.
* VALUE STOCKS SHOW NEW LIFE IN SEMIANNUAL PERIOD
Despite unusual volatility in the market over the past six months, your
fund has registered relatively steady gains. Initially it benefited from
large positions in financial stocks and several cyclical technology
companies. We had built these positions in part by taking advantage of two
buying opportunities in the middle of 1998: a cyclical downturn in
technology stocks and the sharp decline among financial stocks following
Russia's August debt crisis. Financials began a slow and steady comeback
in the autumn, while technology companies achieved somewhat faster gains.
In January and February, we sold the fund's positions in companies such as
Intel, Sun Microsystems, and Texas Instruments at substantial profits when
they no longer qualified as value stocks.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Insurance and finance 23.9%
Oil and gas 11.7%
Utilities 11.1%
Pharmaceuticals 5.9%
Food and
beverages 5.6%
Footnote reads:
*Based on net assets as of 4/30/99. Holdings will vary over time.
"The long-sought broadening of the market may finally be at hand -- and the
move into such old-line blue-chips as chemicals, machinery, and paper may
give the aging bull a shot of adrenaline."
- -- Business Week, May 3, 1999
As we were taking profits in technology, however, energy and basic
materials stocks started to perk up thanks to strengthening oil prices. It
appeared that after nearly two years of economic weakness in other regions
of the globe, demand for oil and other commodities was no longer falling.
Supplies should begin to decline because oil companies have reduced
production in the past year and OPEC nations decided in March to cut
future output. Following the OPEC action, investors quickly bid up the
shares of energy, basic materials, capital goods, and other industrial
stocks in the United States during April. The fund's weightings in these
sectors have grown because of a few recent stock purchases and general
price appreciation. Although this value-oriented trend is nascent, we
believe it is justified for fundamental reasons and could be sustainable.
* FUND BENEFITS FROM FLOURISHING MERGER ACTIVITY
During the semiannual period, several holdings benefited from another type
of change that is sweeping the market -- mergers and acquisitions. We have
mentioned several of these in recent reports as the number and size of
these consolidations have set records. While we do not specifically target
stocks that are candidates for acquisition, consolidation within an
industry is a positive trend that can improve stock performance and one of
the positive changes we use as a key selection criterion. Also, we believe
that effective managers are willing to undertake a variety of measures --
including mergers -- that have the potential to increase shareholder
value. Mergers have contributed substantially to the fund's performance
during the past six months. In most cases, they have meant a short-term
increase in the share prices of the acquired companies and enhanced
long-term competitive positions for the combined entities. Mergers have
also contributed to the broadening of market participation, because many
leading stocks are now in position to acquire companies that have lagged
behind.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Citigroup, Inc.
Insurance and finance
Bank of America Corp.
Insurance and finance
Exxon Corp.
Oil and gas
IBM Corp.
Computer services and software
General Electric Co.
Electronics and electrical equipment
Pharmacia & Upjohn, Inc.
Pharmaceuticals
Bank One Corp.
Insurance and finance
SBC Communications, Inc.
Utilities
American Home Products Corp.
Pharmaceuticals
American Telephone & Telegraph Co.
Utilities
Footnote reads:
These holdings represent 19.1% of the fund's net assets as of 4/30/99.
Portfolio holdings will vary over time.
In the oil industry, three fund holdings are on their way to becoming one:
British Petroleum completed its acquisition of Amoco during the period and
went on to announce the acquisition of Atlantic Richfield. Sonat, an oil
exploration company in the portfolio, agreed to be acquired by El Paso
Energy.
An example of positive change: industry consolidation
One of the positive changes that we look for while analyzing companies is
industry consolidation -- a process in which mergers and acquisitions reduce
competition in an industry and allow the most effective corporate leaders to
achieve greater market share. When there are too many companies in an
industry producing the same or similar products, prices fall and profit
margins narrow across the board. The oil industry provides a recent case in
point. During the 1990s, the worldwide oil supply has generally outpaced
demand, keeping prices low and profits weak for many oil companies. In the
past year or so, several large mergers have occurred around the world, which
in the future will limit the number of competitors and make it easier for the
remaining companies to manage production at profitable levels.
Similarly, in the financials sector, fund holding Mercantile
Bancorporation, based in St. Louis, accepted a deal from Firstar that
included a 29% premium over its then-current share price. The fund also
owned both BankBoston and Fleet Financial Services, which recently
announced a forthcoming merger; the combined FleetBoston Bank will
dominate banking in the New England region. In a noteworthy international
combination, Deutsche Bank acquired fund holding Bankers Trust New York,
which we had long considered an undervalued stock, as Germany's largest
bank sought to gain a greater presence in the thriving American market. We
sold Bankers Trust at a profit following the announcement.
At the close of the semiannual period, fund holding MediaOne Group was in
talks with two other holdings, AT&T and Comcast, as these companies vied
to shape the future of Internet service distribution through the coaxial
cables used for cable television. While these holdings, along with others
discussed in this report, were viewed favorably at the end of the fiscal
period, all are subject to review and adjustment in accordance with the
fund's investment strategy and may vary in the future.
* NEW HOLDINGS REPRESENT DIVERSE OPPORTUNITIES
Our strategy's versatility allows us to take advantage of opportunities
among a variety of companies and industries, which is reflected in several
purchases over the period. After avoiding Boeing during its past two years
of weakening profits and production delays, we added it to the portfolio
when a new chief financial officer demonstrated better cost-management
abilities than her predecessor. Now we have confidence that both the
company's earnings and its productivity are on the mend. While we bought
the stock because of these fundamental changes, its appreciation toward
the end of the six-month period -- reflecting the recovery in industrial
cyclical stocks -- further boosted our confidence in the company.
Morningstar, 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 its 3-, 5-, and 10-year returns) within Morningstar's domestic
equity funds category as of April 30, 1999. Only 22.5% of the 2,976 domestic
equity funds rated received 4 stars.
Past performance is not indicative of future results. Morningstar ratings
reflect risk-adjusted performance through 4/30/99 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 2,976, 1,816, and 742 funds rated,
respectively; the top 10% of funds in an investment category receive 5 stars;
the next 22.5% receive 4 stars, the middle 35% receive 3 stars; the next
22.5% receive 2 stars; and the bottom 10% receive 1 star. Performance of
other share classes will vary.
We added to Dow Chemical, an existing holding, because we had growing
confidence in the company's ability to achieve consistent profitability in
an industry largely influenced by cyclical demand. Dow is one of the
low-cost producers of ethylene, a major product for industrial uses, and
the company was able to post profits even as demand for ethylene recently
bottomed. During the industry's recent weakness, the company purchased a
large portion of its outstanding equity. This action helped to stabilize
the stock price in the short term and makes it likely that during the next
cyclical upswing earnings-per-share growth should be unusually strong.
We also added RiteAid, a large drugstore chain, when the stock fell by
close to 50% following the announcement of poor quarterly earnings from
1998's fourth quarter. We saw a lot of value in the company because it is
a well-managed franchise with many fundamental strengths. The earnings
disappointment resulted from heavy spending on expansion in a short time
period. Since we added the stock it has remained undervalued but in our
view the company's long-term earnings growth prospects are still strong.
* FUND PREPARED FOR VARIETY OF MARKET CONDITIONS
As the fund enters the second half of its 1999 fiscal year, the current
broadening of participation in the market's gains is a reassuring sign --
not merely because it favors your fund's investment style, but because it
signals greater health in the stock market and more optimism among
investors. We believe that optimism is supported by continuing economic
growth with low inflation in the United States and by an improving outlook
overseas.
While your fund does not generally invest internationally, the majority of
its holdings are fundamentally strong large companies precisely because
they have globalized their operations successfully in recent decades.
Recessions in other regions of the globe depressed the earnings growth of
these well-managed companies in the past couple of years, but most of them
remained profitable. The results in the past six months affirm that our
research process can identify companies with effective leaders who
maintain profitability and undertake positive changes even amid adverse
conditions. With this selection process in place, conditions more
favorable to value stocks are helpful, but not essential, to your fund's
successful long-term performance.
The views expressed here are exclusively those of Putnam Management. They
are not meant as investment advice. Although the described holdings were
viewed favorably as of 4/30/99, 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 4/30/99
Class A Class B Class M
(inception dates) (11/6/57) (4/27/92) (5/1/95)
NAV POP NAV CDSC NAV POP
- -------------------------------------------------------------------------------
6 months 18.68% 11.84% 18.28% 13.28% 18.40% 14.24%
- -------------------------------------------------------------------------------
1 year 13.86 7.34 13.03 8.03 13.33 9.35
- -------------------------------------------------------------------------------
5 years 166.35 151.10 156.58 154.58 159.73 150.65
Annual average 21.64 20.22 20.74 20.55 21.03 20.17
- -------------------------------------------------------------------------------
10 years 349.97 323.94 316.21 316.21 326.74 311.66
Annual average 16.23 15.54 15.33 15.33 15.62 15.20
- -------------------------------------------------------------------------------
Annual average
(life of fund) 14.07 13.91 12.99 12.99 13.27 13.18
- -------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/99
S&P 500(R) Consumer
Index price index
- -------------------------------------------------------------------------------
6 months 22.32% 1.47%
- -------------------------------------------------------------------------------
1 year 21.82 2.28
- -------------------------------------------------------------------------------
5 years 228.92 12.75
Annual average 26.89 2.43
- -------------------------------------------------------------------------------
10 years 461.10 35.01
Annual average 18.83 3.05
- -------------------------------------------------------------------------------
Annual average (life of fund) 8.62 4.19
- -------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. 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 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.
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 4/30/99
Class A Class B Class M
- ----------------------------------------------------------------------------
Distributions (number) 2 2 2
- ----------------------------------------------------------------------------
Income $0.220 $0.144 $0.170
- ----------------------------------------------------------------------------
Capital gains
Long-term 1.506 1.506 1.506
- ----------------------------------------------------------------------------
Short-term -- -- --
- ----------------------------------------------------------------------------
Total $1.726 $1.650 $1.676
- ----------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ----------------------------------------------------------------------------
10/31/98 $20.44 $21.69 $20.19 $20.33 $21.07
- ----------------------------------------------------------------------------
4/30/99 22.35 23.71 22.06 22.22 23.03
- ----------------------------------------------------------------------------
Current return (end of period)
- ----------------------------------------------------------------------------
Current dividend rate1 1.88% 1.77% 1.21% 1.43% 1.38%
- ----------------------------------------------------------------------------
Current 30-day SEC yield2 1.19 1.12 0.47 0.71 0.69
- -----------------------------------------------------------------------------
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 3/31/99 (most recent calendar quarter)
Class A Class B Class M
(inception dates) (11/6/57) (4/27/92) (5/1/95)
NAV POP NAV CDSC NAV POP
- -------------------------------------------------------------------------------
6 months 19.58% 12.69% 19.10% 14.10% 19.29% 15.14%
- -------------------------------------------------------------------------------
1 year 6.48 0.38 5.65 0.81 5.94 2.22
- -------------------------------------------------------------------------------
5 years 153.29 138.73 144.05 142.05 146.99 138.40
Annual average 20.43 19.01 19.54 19.34 19.82 18.98
- -------------------------------------------------------------------------------
10 years 334.85 309.90 301.97 301.97 312.22 297.82
Annual average 15.83 15.15 14.93 14.93 15.22 14.81
- -------------------------------------------------------------------------------
Annual average
(life of fund) 13.92 13.75 12.83 12.83 13.12 13.02
- -------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. 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 summary for method of calculation.
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 funds' class B 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.
A guide to the financial statements
These sections of the report constitute the fund's financial
statements.
The fund's portfolio lists all the fund's investments and their values as of
the last day of the reporting period. Holdings are organized by asset type
and industry sector, country, or state to show areas of concentration and
diversification.
Statement of assets and liabilities shows how the fund's net assets and share
price is determined. All investment and non-investment assets are added
together. Any unpaid expenses and other liabilities are subtracted from this
total. The result is divided by the number of shares to determine the net
asset value per share, which is calculated separately for each class of
shares. (For funds with preferred shares, the amount subtracted from total
assets includes the net assets allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for the
reporting period. This is determined by adding up all the fund's earnings --
from dividends and interest income -- and subtracting its operating expenses.
This statement also lists any net gain or loss the fund realized on the sales
of its holdings and -- for holdings that remain in the portfolio -- any change
in unrealized gains or losses over the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of the
fund's shares. It lists distributions and their sources (net investment income
or realized capital gains) over the current reporting period and the most
recent fiscal year-end. The distributions listed here may not match the
amounts listed in the Statement of Operations because the distributions are
determined on a tax basis and may be paid in a different period from the one
in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also includes
the current reporting period. For open-ended funds, a separate table is
provided for each share class.
<TABLE>
<CAPTION>
The fund's portfolio
April 30, 1999 (Unaudited)
COMMON STOCKS (98.6%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace and Defense (2.8%)
- --------------------------------------------------------------------------------------------------------------------------
8,927,600 Boeing Co. $ 362,683,750
2,000,000 Raytheon Co. Class A 138,375,000
3,778,400 Raytheon Co. Class B 265,432,600
2,688,000 United Technologies Corp. 389,424,000
---------------
1,155,915,350
Automotive (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
8,213,100 Ford Motor Co. 525,125,081
5,550,000 General Motors Corp. 493,603,125
---------------
1,018,728,206
Basic Industrial Products (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
1,585,631 Caterpillar, Inc. 102,074,996
3,356,760 Cooper Industries, Inc. 162,383,265
3,834,404 Deere (John) & Co. 164,879,372
1,353,780 Illinois Tool Works, Inc. 104,241,060
3,765,755 Minnesota Mining & Manufacturing Co. 335,152,195
3,495,700 Owens-Illinois, Inc. (NON) 101,375,300
---------------
970,106,188
Business Equipment and Services (1.2%)
- --------------------------------------------------------------------------------------------------------------------------
2,135,550 Avery Dennison Corp. 145,751,288
5,862,644 Xerox Corp. 344,430,335
---------------
490,181,623
Cable Television (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
1,560,000 Comcast Corp. Class A 102,472,500
1,895,500 MediaOne Group Inc. (NON) 154,601,719
---------------
257,074,219
Chemicals (3.1%)
- --------------------------------------------------------------------------------------------------------------------------
3,399,900 Dow Chemical Co. 446,024,381
8,789,222 du Pont (E.I.) de Nemours & Co., Ltd. 620,738,804
2,265,925 Eastman Chemical Co. 126,183,698
383,900 PPG Industries, Inc. 24,929,506
2,419,260 Witco Chemical Corp. 46,117,144
---------------
1,263,993,533
Computer Equipment (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
550,000 Apple Computer, Inc. (NON) 25,300,000
3,305,900 Compaq Computer Corp. 73,762,894
---------------
99,062,894
Computer Services and Software (3.6%)
- --------------------------------------------------------------------------------------------------------------------------
5,857,400 Computer Associates International, Inc. 250,037,763
1,798,400 Electronic Data Systems Corp. 96,664,000
3,860,072 IBM Corp. 807,478,812
2,900,000 NCR Corp. (NON) 118,900,000
7,440,000 Seagate Technology, Inc. (NON) 207,390,000
---------------
1,480,470,575
Conglomerates (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
5,745,800 Allied-Signal, Inc. (NON) 337,565,750
1,300,000 Ogden Corp. 33,556,250
---------------
371,122,000
Consumer Non Durables (2.7%)
- --------------------------------------------------------------------------------------------------------------------------
3,483,725 Colgate-Palmolive Co. 356,864,080
5,308,210 Kimberly-Clark Corp. 325,459,626
10,962,268 Philip Morris Cos., Inc. 384,364,522
709,000 Procter & Gamble Co. 66,513,063
---------------
1,133,201,291
Electronics and Electrical Equipment (3.9%)
- --------------------------------------------------------------------------------------------------------------------------
6,425,041 Emerson Electric Co. 414,415,145
6,755,000 General Electric Co. 712,652,500
6,137,900 Motorola, Inc. 491,799,238
---------------
1,618,866,883
Entertainment (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
4,200,000 Disney (Walt) Productions, Inc. 133,350,000
5,748,258 Viacom, Inc. Class B (NON) 234,960,046
---------------
368,310,046
Environmental Control (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
2,259,784 Waste Management, Inc. 127,677,796
Food and Beverages (5.6%)
- --------------------------------------------------------------------------------------------------------------------------
5,319,565 Anheuser-Busch Cos., Inc. 388,993,191
8,657,200 ConAgra, Inc. 215,347,850
712,400 General Mills, Inc. 52,094,250
7,059,066 Heinz (H.J.) Co. 329,570,144
5,698,900 Kellogg Co. 210,859,300
1,940,000 Nabisco Holdings Corp. Class A 73,356,250
2,726,700 PepsiCo, Inc. 100,717,481
3,982,900 The Quaker Oats Co. 257,145,981
849,600 Ralston-Ralston Purina Group 25,912,800
6,900,000 RJR Nabisco Holdings Corp. 177,675,000
14,543,347 Sara Lee Corp. 323,589,471
2,119,700 Seagram Co., Ltd. 121,617,788
605,700 SYSCO Corp. 17,981,719
---------------
2,294,861,225
Health Care (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
10,540,900 Tenet Healthcare Corp. (NON) 249,028,763
262,800 WeLLPoint Health Networks, Inc. (NON) 18,461,700
---------------
267,490,463
Insurance and Finance (23.9%)
- --------------------------------------------------------------------------------------------------------------------------
1,270,000 Aetna Inc. 111,363,125
5,800,000 Allstate Corp. 210,975,000
1,007,800 American Express Co. 131,706,863
6,517,374 American General Corp. 482,285,676
4,515,592 AON Corp. 309,318,052
14,451,789 Bank of America Corp. (NON) 1,040,528,808
11,895,743 Bank One Corp. 701,848,837
7,478,012 BankBoston Corp. 366,422,588
5,195,380 Chase Manhattan Corp. 429,917,695
5,751,822 CIGNA Corp. 501,486,981
14,871,000 Citigroup, Inc. 1,119,042,750
4,976,410 Fannie Mae 353,014,084
563,300 First American Corp. 21,863,081
2,230,000 First Union Corp. 123,486,250
4,762,600 Fleet Financial Group, Inc. 205,089,463
1,696,800 Hartford Financial Services Group 100,005,150
1,564,680 Huntington Bancshares, Inc. 55,448,348
455,100 KeyCorp 14,079,656
2,300,000 Lehman Brothers Holding, Inc. 127,793,750
1,877,400 Lincoln National Corp. 180,347,738
3,520,000 Mercantile Bancorporation, Inc. 200,640,000
4,576,500 Merrill Lynch & Co., Inc. 384,139,969
3,358,143 Morgan (J.P.) & Co., Inc. 452,509,769
1,841,000 National City Corp. 132,091,750
1,269,600 Paine Webber Group Inc. 59,591,850
6,755,800 PNC Bank Corp. 390,991,925
862,129 Summit Bancorp 36,532,716
1,363,200 SunTrust Banks, Inc. 97,468,800
1,450,000 Synovus Financial Corp. 32,081,250
1,780,000 The Chubb Corp. 105,465,000
1,850,000 The Equitable Companies, Inc. 124,528,125
8,593,800 U.S. Bancorp 318,507,713
12,854,300 Washington Mutual, Inc. 528,633,088
10,106,750 Wells Fargo & Co. 436,485,266
---------------
9,885,691,116
Medical Supplies and Devices (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
5,292,227 Baxter International, Inc. 333,410,301
Metals and Mining (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
3,910,100 Alcoa Inc. (NON) 243,403,725
3,750,000 Freeport-McMoRan Copper & Gold Co., Inc. Class A (AFF) 54,609,375
2,500,000 Freeport-McMoRan Copper & Gold Co., Inc. Class B 38,281,250
---------------
336,294,350
Oil and Gas (11.7%)
- --------------------------------------------------------------------------------------------------------------------------
3,898,055 Atlantic Richfield Co. 327,192,992
2,399,981 BP Amoco PLC ADR (United Kingdom) (NON) 271,647,836
4,294,800 Chevron, Inc. 428,406,300
4,923,300 Conoco, Inc. 133,544,513
1,520,000 Elf Aquitane ADR (France) 118,750,000
1,369,600 Enron Corp. 103,062,400
10,456,674 Exxon Corp. 868,557,484
5,357,900 Halliburton Co. 228,380,488
4,686,549 Mobil Corp. 490,916,008
6,000,000 Occidental Petroleum Corp. 121,125,000
9,784,700 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 574,239,581
4,850,500 Schlumberger Ltd. 309,825,688
6,423,400 Sonat, Inc. (AFF) 229,636,550
1,755,000 Texaco, Inc. 110,126,250
4,211,300 Tosco Corp. 112,652,275
8,574,600 Williams Cos., Inc. 405,149,850
---------------
4,833,213,215
Paper and Forest Products (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
2,046,300 Fort James Corp. 77,759,400
2,513,100 International Paper Co. 133,979,644
840,000 Temple Inland, Inc. 57,960,000
6,707,281 Weyerhaeuser Co. 450,226,237
---------------
719,925,281
Pharmaceuticals (5.9%)
- --------------------------------------------------------------------------------------------------------------------------
10,567,924 American Home Products Corp. 644,643,364
9,396,882 Bristol-Myers Squibb Co. 597,289,312
6,403,476 Merck & Co., Inc. 449,844,189
694,900 Monsanto Co. 31,444,225
12,616,748 Pharmacia & Upjohn, Inc. 706,537,888
---------------
2,429,758,978
Photography (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
4,791,904 Eastman Kodak Co. 357,595,836
Publishing (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
3,790,000 McGraw-Hill, Inc. 209,397,500
3,625,000 Times Mirror Co. Class A 212,062,500
1,499,300 Tribune Co. 125,097,844
---------------
546,557,844
Real Estate (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
2,700,000 Equity Residential Properties Trust (R) 124,875,000
4,000,000 Starwood Hotels & Resorts Worldwide, Inc. 146,750,000
---------------
271,625,000
Retail (4.0%)
- --------------------------------------------------------------------------------------------------------------------------
2,235,000 Albertsons, Inc. (NON) 115,102,500
2,539,920 Dayton Hudson Corp. 170,968,365
7,672,200 Federated Department Stores, Inc. (NON) 358,195,838
17,454,193 K mart Corp. (NON) 259,631,121
100,100 Kroger Co. (NON) 5,436,681
5,688,948 May Department Stores Co. 226,491,241
1,794,310 Penney (J.C.) Co., Inc. 81,865,394
8,811,700 Rite Aid Corp. 205,422,756
5,108,500 Sears, Roebuck & Co. 234,991,000
---------------
1,658,104,896
Specialty Consumer Products (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
10,752,355 Mattel, Inc. 278,217,186
Telecommunications (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
3,463,100 Nortel Networks Corp. (Canada) 236,140,131
6,074,164 U S West, Inc. 317,754,704
---------------
553,894,835
Transportation (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
1,576,300 AMR Corp. (NON) 110,045,444
11,583,800 Burlington Northern Santa Fe Corp. 424,256,675
3,485,000 Delta Air Lines, Inc. 221,079,688
3,500,000 Norfolk Southern Corp. 114,406,250
2,090,000 UAL Corp. (NON) 168,767,500
---------------
1,038,555,557
Utilities (11.1%)
- --------------------------------------------------------------------------------------------------------------------------
12,719,296 American Telephone & Telegraph Co. 642,324,448
6,428,600 Ameritech Corp. 439,957,313
9,568,899 Bell Atlantic Corp. 551,407,805
4,493,800 Consolidated Edison, Inc. 204,187,038
380,500 Dominion Resources, Inc. 15,648,063
6,502,620 Duke Energy Corp. 364,146,720
4,595,000 Edison International 112,577,500
7,645,000 Entergy Corp. 238,906,250
5,050,000 GTE Corp. 338,034,375
2,715,000 Public Service Enterprise Group, Inc. 108,600,000
11,641,722 SBC Communications, Inc. 651,936,432
5,000,000 Sempra Energy 103,750,000
7,963,900 Southern Co. 215,523,044
3,814,482 Sprint Corp. 391,222,810
5,140,000 Texas Utilities Co. 204,315,000
---------------
4,582,536,798
---------------
Total Common Stocks (cost $31,063,969,427) $40,742,443,485
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 $ 94,425,000
CONVERTIBLE PREFERRED STOCKS (0.2%) (a) (cost $70,906,996)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
1,230,000 K mart Financing I $3.875 cum. cv. pfd. $ 66,727,500
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (--%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association
Pass-Through Certificates
$ 1,590 11 1/2s, with due dates from March 15, 2010 to
January 15, 2013 $ 1,801
2,170 11s, January 15, 2010 2,430
167,626 9s, with due dates from December 15, 2004 to
June 15, 2011 180,161
61,589 7 1/2s, April 15, 2007 63,745
243,209 7 1/4s, with due dates from February 15, 2005 to
March 15, 2005 248,993
---------------
Total U.S. Government and Agency Obligations
(cost $458,936) $ 497,130
SHORT-TERM INVESTMENTS (0.9%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 30,000,000 Ciesco L.P., effective yield of 4.83%, May 3, 1999 $ 29,991,950
50,000,000 Corporate Receivables, effective yield of 4.82%,
June 21, 1999 49,658,583
50,000,000 Delaware Funding Corp., effective yield of 4.80%,
July 23, 1999 49,446,667
50,000,000 Federal Home Loan Banks, effective yield of 4.70%,
June 30, 1999 49,608,333
25,000,000 General Electric Capital Corp., effective yield of 4.84%,
May 28, 1999 24,909,250
50,000,000 Preferred Receivables, effective yield of 4.88%, May 13, 1999 49,918,667
42,000,000 Sigma Finance Inc., effective yield of 4.83%, May 10, 1999 41,949,195
36,405,000 Interest in $292,698,000 joint repurchase agreement
dated April 30, 1999 with SBC Warburg Securities due
May 3, 1999 with respect to various U.S. Treasury
obligations -- maturity value of $36,419,774 for
an effective yield of 4.87% 36,405,000
53,216,000 Interest in $600,000,000 joint repurchase agreement
dated April 30, 1999 with Salomon, Smith, Barney due
May 3, 1999 with respect to various U.S. Treasury
obligations -- maturity value of $53,237,597 for an
effective yield of 4.87% 53,216,000
---------------
Total Short-Term Investments (cost $385,103,645) $ 385,103,645
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $31,583,196,642) (b) $41,289,196,760
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $41,333,349,391.
(b) The aggregate identified cost on a tax basis is $31,792,518,666, resulting in gross unrealized appreciation and
depreciation of $10,328,732,588 and $832,054,494, respectively, or net unrealized appreciation of $9,496,678,094.
(NON) Non-income-producing security.
(AFF) Affiliated Companies (Note 5).
(R) Real Estate Investment Trust.
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
April 30, 1999 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $31,583,196,642) (Notes 1 and 2) $41,289,196,760
- -----------------------------------------------------------------------------------------------
Cash 20,439,803
- -----------------------------------------------------------------------------------------------
Dividends, interest, and other receivables 51,800,505
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 70,550,716
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 740,723,719
- -----------------------------------------------------------------------------------------------
Total assets 42,172,711,503
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 696,966,129
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 80,358,699
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 38,278,761
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 3,843,979
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 213,599
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 25,294
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 18,560,223
- -----------------------------------------------------------------------------------------------
Other accrued expenses 1,115,428
- -----------------------------------------------------------------------------------------------
Total liabilities 839,362,112
- -----------------------------------------------------------------------------------------------
Net assets $41,333,349,391
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $30,206,988,990
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (160,156,748)
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 1,580,517,031
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 9,706,000,118
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $41,333,349,391
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($22,819,174,611 divided by 1,020,951,445 shares) $22.35
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $22.35)* $23.71
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($16,842,567,357 divided by 763,612,274 shares)** $22.06
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($501,706,040 divided by 22,583,215 shares) $22.22
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $22.22)* $23.03
- -----------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($1,169,901,383 divided by 52,246,175 shares) $22.39
- -----------------------------------------------------------------------------------------------
* 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
Six months ended April 30, 1999 (Unaudited)
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $899,338) (including dividend
income of $4,657,136 from investments in affiliated issuers) (Note 5) $ 376,303,462
- -----------------------------------------------------------------------------------------------
Interest 12,506,168
- -----------------------------------------------------------------------------------------------
Total investment income 388,809,630
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 76,664,132
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 23,928,917
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 91,971
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 37,807
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 25,837,400
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 80,618,446
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 1,718,347
- -----------------------------------------------------------------------------------------------
Reports to shareholders 265,042
- -----------------------------------------------------------------------------------------------
Registration fees 524,623
- -----------------------------------------------------------------------------------------------
Auditing 63,526
- -----------------------------------------------------------------------------------------------
Legal 106,589
- -----------------------------------------------------------------------------------------------
Postage 1,441,771
- -----------------------------------------------------------------------------------------------
Other 2,078,616
- -----------------------------------------------------------------------------------------------
Total expenses 213,377,187
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (3,039,412)
- -----------------------------------------------------------------------------------------------
Net expenses 210,337,775
- -----------------------------------------------------------------------------------------------
Net investment income 178,471,855
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 1,697,326,207
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the period 4,658,156,193
- -----------------------------------------------------------------------------------------------
Net gain on investments 6,355,482,400
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $6,533,954,255
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
April 30 October 31
1999* 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 178,471,855 $ 330,029,369
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions 1,697,326,207 2,836,387,437
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 4,658,156,193 461,190,278
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 6,533,954,255 3,627,607,084
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (213,901,352) (232,355,114)
- ---------------------------------------------------------------------------------------------------------------
Class B (110,859,867) (84,944,382)
- ---------------------------------------------------------------------------------------------------------------
Class M (3,677,969) (3,281,201)
- ---------------------------------------------------------------------------------------------------------------
Class Y (11,073,074) (12,369,019)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (1,412,774,324) (2,046,999,581)
- ---------------------------------------------------------------------------------------------------------------
Class B (1,138,006,645) (1,719,400,604)
- ---------------------------------------------------------------------------------------------------------------
Class M (31,447,846) (44,352,683)
- ---------------------------------------------------------------------------------------------------------------
Class Y (61,284,075) (87,596,678)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 2,034,615,389 5,490,232,906
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 5,585,544,492 4,886,540,728
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 35,747,804,899 30,861,264,171
- ---------------------------------------------------------------------------------------------------------------
End of period (including distributions in excess
of net investment income and undistributed net
investment income of $160,156,748 and
$883,659, respectively) $41,333,349,391 $35,747,804,899
- ---------------------------------------------------------------------------------------------------------------
* Unaudited
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
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share April 30
operating performance (Unaudited) Year ended October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.44 $20.87 $18.27 $15.77 $13.65 $14.26
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .13(c) .26(c) .39(c) .43 .46(c) .44
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.51 2.15 3.91 3.19 2.50 (.08)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.64 2.41 4.30 3.62 2.96 .36
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.22) (.24) (.45) (.40) (.40) (.43)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.51) (2.60) (1.25) (.72) (.44) (.54)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.73) (2.84) (1.70) (1.12) (.84) (.97)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $22.35 $20.44 $20.87 $18.27 $15.77 $13.65
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 18.68* 12.15 24.95 23.89 23.00 2.74
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $22,819,175 $18,814,738 $16,300,523 $11,403,813 $7,859,496 $6,009,174
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .40* .84 .86 .92 .89 .95
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .62* 1.27 1.95 2.59 3.20 3.18
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 27.32* 78.75 63.88 41.26 58.40 48.76
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total 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
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share April 30
operating performance (Unaudited) Year ended October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.19 $20.65 $18.10 $15.63 $13.56 $14.18
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .05(c) .11(c) .24(c) .30 .35(c) .35
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.47 2.12 3.87 3.17 2.46 (.09)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.52 2.23 4.11 3.47 2.81 .26
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.14) (.09) (.31) (.28) (.30) (.34)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.51) (2.60) (1.25) (.72) (.44) (.54)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.65) (2.69) (1.56) (1.00) (.74) (.88)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $22.06 $20.19 $20.65 $18.10 $15.63 $13.56
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 18.28* 11.28 24.03 23.04 21.91 2.01
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $16,842,567 $15,671,371 $13,511,906 $8,692,163 $5,089,359 $3,318,858
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .77* 1.59 1.61 1.68 1.64 1.70
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .24* .52 1.19 1.84 2.42 2.42
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 27.32* 78.75 63.88 41.26 58.40 48.76
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total 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
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 May 1, 1995+
operating performance (Unaudited) Year ended October 31 to October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.33 $20.77 $18.21 $15.74 $14.24
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .08(c) .16(c) .28(c) .35 .15(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.49 2.14 3.89 3.18 1.53
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.57 2.30 4.17 3.53 1.68
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.17) (.14) (.36) (.34) (.18)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.51) (2.60) (1.25) (.72) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.68) (2.74) (1.61) (1.06) (.18)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $22.22 $20.33 $20.77 $18.21 $15.74
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 18.40* 11.60 24.29 23.31 11.88*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $501,706 $421,616 $348,129 $132,453 $21,100
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .65* 1.34 1.36 1.44 .66*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .37* .77 1.39 2.02 1.12*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 27.32* 78.75 63.88 41.26 58.40
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total 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
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 June 15, 1994+
operating performance (Unaudited) Year ended October 31 to October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.47 $20.90 $18.29 $15.78 $13.66 $13.46
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .16(c) .32(c) .44(c) .47 .49(c) .12
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 3.52 2.14 3.92 3.20 2.50 .19
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 3.68 2.46 4.36 3.67 2.99 .31
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.25) (.29) (.50) (.44) (.43) (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.51) (2.60) (1.25) (.72) (.44) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.76) (2.89) (1.75) (1.16) (.87) (.11)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $22.39 $20.47 $20.90 $18.29 $15.78 $13.66
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 18.84* 12.40 25.27 24.24 23.28 2.28*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,169,901 $840,080 $700,707 $343,935 $193,292 $27,632
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .27* .59 .61 .68 .64 .26*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .74* 1.52 2.20 2.83 3.14 1.17*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 27.32* 78.75 63.88 41.26 58.40 48.76
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total 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
April 30, 1999 (Unaudited)
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 value 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 $150 million in a combination of Putnam funds and other
accounts managed by affiliates of Putnam Investment Management, Inc. ("Putnam
Management"), the fund's Manager, a wholly-owned subsidiary of Putnam
Investments, Inc.
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 Management.
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.
E) 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 six months ended April 30, 1999, the
fund had no borrowings against the line of credit.
F) 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.
G) 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. Reclassifications are made to the
fund's capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations.
Note 2
Management fee, administrative
services, and other transactions
Compensation of Putnam 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 net assets, 0.55% of the next $500 million, 0.50% of the next $500
million, 0.45% of the next $5 billion, 0.425% of the next $5 billion, 0.405%
of the next $5 billion, 0.39% of the next $5 billion, 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.
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 six months ended April 30, 1999, fund expenses were reduced by
$3,039,412 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 $21,550 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 six months ended April 30, 1999, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $3,635,320 and $88,309 from the sale of
class A and class M shares, respectively and $11,632,445 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 six months
ended April 30, 1999, Putnam Mutual Funds Corp., acting as underwriter received
$69,038 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended April 30, 1999, purchases and sales of investment
securities other than U.S. government obligations and short-term investments
aggregated $10,359,624,789 and $11,196,305,500, respectively. In determining
the net gain or loss on securities sold, the cost of securities has been
determined on the identified cost basis.
Note 4
Capital shares
At April 30, 1999, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended April 30, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 144,859,867 $3,043,555,002
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 74,813,862 1,519,877,724
- -----------------------------------------------------------------------------
219,673,729 4,563,432,726
Shares
repurchased (119,066,219) (2,490,157,318)
- -----------------------------------------------------------------------------
Net increase 100,607,510 $2,073,275,408
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
Six months ended April 30, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 62,386,866 $1,287,873,149
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 57,708,005 1,157,782,434
- -----------------------------------------------------------------------------
120,094,871 2,445,655,583
Shares
repurchased (132,494,941) (2,751,787,219)
- -----------------------------------------------------------------------------
Net decrease (12,400,070) $ (306,131,636)
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
Six months ended April 30, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,790,115 $58,023,778
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,678,130 33,894,994
- -----------------------------------------------------------------------------
4,468,245 91,918,772
Shares
repurchased (2,621,821) (54,593,797)
- -----------------------------------------------------------------------------
Net increase 1,846,424 $37,324,975
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
Six months ended April 30, 1999
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 16,306,146 $338,415,306
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,554,597 72,357,149
- -----------------------------------------------------------------------------
19,860,743 410,772,455
Shares
repurchased (8,644,821) (180,625,813)
- -----------------------------------------------------------------------------
Net increase 11,215,922 $230,146,642
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
Note 5
Transactions with Affiliated Issuers
Transactions during the six months ended April 30, 1999 with companies in which
the fund owns at least 5% of the voting securities were as follows:
Purchase Sales Dividend Market
Affiliates cost cost Income Value
- -----------------------------------------------------------------------------
Name of affiliate
- -----------------------------------------------------------------------------
Freeport-McMoRan
Copper & Gold Co.,
Inc.
Class A $ -- $ -- $ -- $ 54,609,375
Sonat, Inc. 22,013,213 -- 3,279,636 229,636,550
Times Mirror New
Ser. A -- -- 1,377,500 212,062,500
- -----------------------------------------------------------------------------
Totals $22,013,213 $ -- $4,657,136 $496,308,425
Fund information
WEB SITE
www.putnaminv.com
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
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
Richard A. Monaghan
Vice President
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' Web site: 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
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com.
SA0222-52503 6/99
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ----------------------------------------------------------------------------
The Putnam Fund for Growth and Income
Supplement to Semiannual Report dated April 30, 1999
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 $150 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 semiannual
report.
ANNUAL RESULTS AT A GLANCE
- ----------------------------------------------------------------------------
Total return
for periods ended 4/30/99 NAV
6 months 18.84%
1 year 14.18
5 years 169.71
Annual average 21.95
10 years 355.67
Annual average 16.38
Life of fund, annual average (since class A inception, 11/6/57) 14.11
Share value: NAV
10/31/98 $20.47
4/30/99 $22.39
- ----------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
4 $0.501 1.506 $2.007
- ----------------------------------------------------------------------------
Please note that past performance does not indicate future results. More
recent returns may be more or less than those shown. Returns shown for class
Y shares for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect the initial
sales charge currently applicable to class A shares. These returns have not
been adjusted to reflect differences in operating expenses which, for class
Y shares, are lower than the operating expenses applicable to class A
shares. All returns assume reinvestment of distributions at net asset value.
Performance data reflects an expense limitation previously in effect.
Without the expense limitation, total returns would have been lower.
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.
