The Putnam
Fund for
Growth and
Income
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
10-31-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
During most of the fiscal year that ended on October 31, 1999, the
management team of The Putnam Fund for Growth and Income battled cooling
investor sentiment toward both the stocks in which your fund invests and
the type of strategic sector diversification the team follows in managing
the fund's portfolio.
David L. King, Hugh H. Mullin, and Sheldon N. Simon, your fund's managers,
were well aware of the current popularity of chasing stocks of companies
expected to deliver above-average earnings -- especially those in
technology. But they did not lose sight of their obligation to maintain
the value-oriented strategy upon which your fund's management is based.
Over the long term, as the managers point out in the following report, the
large, well-established companies with attractively priced stocks -- the
companies upon which your fund's fine long-term record rests -- have
performed competitively and with less volatility than the market at large.
While there can never be guarantees, they are convinced that this strategy
will continue to serve investors well over time.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
December 15, 1999
Report from the Fund Managers
David L. King
Hugh H. Mullin
Sheldon N. Simon
The 1999 fiscal year of The Putnam Fund for Growth and Income, which ended
October 31, 1999, was more stable than the previous two years have been.
No spectacular events like the Asian crisis in 1997 or the Russian ruble
devaluation in 1998 plunged markets into turmoil. The most significant
negative factor this year involved the adverse effects of rising interest
rates. Rate increases by the Federal Reserve Board in June and August,
combined with upward-creeping bond yields, brought stocks down from the
record levels they had reached in July 1999. Nonetheless, the fund
achieved a solid return for the 12 months, benefiting from the strong
rebound in energy and industrial stocks and from the impressive gains in
telecommunications stocks, which contributed greatly to these results.
Total return 12 months ended 10/31/99
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- --------------------------------------------------------------------------
13.13% 6.61% 12.28% 7.28% 12.38% 11.38% 12.55% 8.60%
- --------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance calculation
methods begin on page 6.
* VALUE STOCKS GAIN BUT LAG LEADERS
Again in 1999, as in 1997 and 1998, we have been contending with investor
sentiment that regards the value stocks we focus on with skepticism. Amid
what appeared to be an uncertain environment for these stocks, many
investors have turned away from what traditionally have been considered
conservative equities -- dividend-paying stocks with below-average
valuations -- as well as from the type of strategic diversification across
sectors that we maintain in this fund. Instead, they have been investing
increasing sums in companies with expectations of above-average earnings
growth rates, especially those companies in the technology sector. Market
leadership broadened to include value stocks only in April and May of this
year.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Insurance and finance 25.1%
Utilities 14.6%
Oil and gas 10.5%
Pharmaceuticals 7.5%
Food and beverages 6.2%
Footnote reads:
*Based on net assets as of 10/31/99. Holdings will vary over time.
While we recognize the dynamism of technology and the Internet, we are not
distracted from our value-oriented strategy of owning large,
well-established businesses that are experiencing positive changes. In
some cases, in fact, these changes include applying new technologies to
cut costs and enhance efficiency. However, we ultimately insist on
well-managed companies with attractively priced stocks. Over the long
term, history has shown that these types of companies perform
competitively and with less volatility than the market average.
* STRONG PERFORMANCE IN ENERGY, TELEPHONE UTILITIES
Energy stocks had a solid year. Your fund has typically had significant
exposure to this sector because stocks of the major oil and gas companies
pay attractive dividends and have been engaged in cutting costs to
increase earnings. This year these stocks had the wind at their backs
thanks to rising oil prices and positive industry consolidation. One of
our large holdings, BP Amoco, announced a plan to acquire Atlantic
Richfield (Arco). While the merger is awaiting federal regulatory
approval, we have sold Arco at a profit and cut back our position in BP
Amoco to avoid too large a weighting in a single company. We sold a small
position in French oil company Elf Aquitane after it agreed to be acquired
by a competitor, Totalfina, in July. We also took profits on the fund's
position in Enron, a U.S. natural gas distributor, which gained
approximately 40% over the period and in our opinion was no longer
undervalued.
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 October 31, 1999. Only 22.5% of the 3,272
domestic equity funds rated received 4 stars.
Past performance is no indication of future results. Morningstar ratings
reflect risk-adjusted performance through 10/31/99 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, 3,
and 4 stars, respectively. There were 3,272, 2,047, and 757 funds rated,
respectively; the top 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.
Several of the fund's better performers were telephone companies. These
companies are benefiting from the increasing demand for voice and data
communications as businesses and consumers are buying more telephone lines
and networking services, which are required for Internet connections.
Among our top holdings are SBC Communications, which acquired Ameritech
during the year; AT&T, which purchased TeleCommunications, Inc. and
MediaOne to become a substantial presence in the cable industry; and GTE,
which is merging with another fund holding, Bell Atlantic. We also added
BellSouth during the past six months because of its attractive valuation.
These stocks experienced some volatility this year but generally ended
with gains of between 10% and 25%. One positive exception was Sprint,
which rose sharply in September and October, when it agreed to be acquired
by MCI WorldCom.
* PORTFOLIO CHANGES HIGHLIGHT FUND'S EMPHASIS ON VALUE
Financial stocks, which include global and regional U.S. banks, insurers,
and brokerages, comprised the fund's largest sector weighting throughout
the year. The group was hardly static, however. After financials gained
dramatically in the first half of the year, rising interest rates
diminished the market's enthusiasm for them in the second half. We took
this as an opportunity to add new positions in Comerica, a Detroit bank;
Associates First Capital, based in Texas; and Bank of New York, which
suffered negative publicity because of a perceived connection with a
money-laundering scandal. The bank's overall business is steady, however,
and its stock even rose sharply at the end of October. Among existing
holdings, we still await better performance from BankOne, which continues
to struggle with its credit card business. It is worth noting that near
the end of the period, Congress and the White House agreed on a
long-anticipated reform of the nation's banking laws. By permitting
financial companies to engage in a broader range of services, these
reforms will be supportive of industry consolidation that is already
occurring and should help banks and insurers achieve stronger earnings.
Our dedication to investment-style consistency
As with all other Putnam funds, your fund invests in a specific type of
stock -- undervalued equities of large, mostly dividend-paying
companies -- because of its commitment to investment-style consistency.
This philosophy requires that Putnam funds follow their investment styles
even when these styles do not lead the market. Putnam believes that style
consistency keeps risk within strict boundaries.
The alternative to style consistency is to follow the trends in the market,
but this can add risk. As Business Week wrote in its November 1, 1999
issue: "Chasing today's winners to keep up with their benchmark indexes,
managers realize, can improve their fund's returns. But the practice can
also hurt investors by leaving their portfolios dangerously concentrated in
today's favored investment style and underexposed to tomorrow's. This can
undermine your ability to reduce risk by building a diversified portfolio."
Putnam is committed to style consistency to enhance long-term risk-adjusted
returns and help investors to build diversified portfolios.
Outside of the financials sector, two significant additions included
Abbott Laboratories and Monsanto. Abbott Labs is a pharmaceutical company
that has historically been priced well beyond our valuation criteria. This
year the stock's price has stumbled because the company has made
acquisitions that some analysts do not favor. Also, as Abbott worked out a
consent decree with the Food and Drug Administration regarding
manufacturing processes at one of its facilities, uncertainty weighed down
the stock price. We view this as a rare opportunity to buy a high-quality
company with a management team that is more than capable of correcting
these difficulties and restoring the company's luster.
We added Monsanto, a specialty chemical company, in the first half of the
year. Traditionally known for herbicides, Monsanto is re-positioning
itself as a life science company to take advantage of the breakthroughs in
using genetic engineering in agriculture. Because of the difficulty of
this transition, the stock has stagnated but we expect it to perform
better as the company implements internal changes.
Finally, to maintain the fund's value profile, we believed it was
necessary to sell one of the fund's top holdings, General Electric, in the
second half of the year. GE remains an excellent company with strong
earnings, but its appreciation of nearly 50% in the fiscal year made it
fairly valued, in our opinion, and we took profits on the position.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
SBC Communications, Inc.
Utilities
Citigroup, Inc.
Insurance and finance
Exxon Corp.
Oil and gas
Bank of America Corp.
Insurance and finance
Merck & Co.
Pharmaceuticals
American Home Products Corp.
Pharmaceuticals
Royal Dutch Petroleum Co.
Oil and gas
Bell Atlantic Corp.
Utilities
Pharmacia & Upjohn, Inc.
Pharmaceuticals
Boeing Co.
Aerospace and defense
Footnote reads:
These holdings represent 18.5% of the fund's net assets as of 10/31/99.
Portfolio holdings will vary over time.
* GLOBAL ECONOMIC GROWTH ADVANTAGEOUS FOR VALUE STOCKS
As we enter fiscal year 2000, the economy continues to provide a
supportive environment for corporate earnings and equity performance in
general. Inflation, we believe, will remain near the current modest
levels, and as others become more convinced of this, interest rates are
likely to stabilize. While many commentators continue to speculate on the
Y2K computer risk, we anticipate it causing minimal and short-lived
volatility, if any. We are perhaps most upbeat about the prospect of
broadening gains in the market once investors recognize the variety of
businesses achieving strong business results just as they did this past
spring. The gathering pace of international economic growth is also
beneficial for this fund. Among their positive changes, many of the
companies we hold have successfully globalized their operations over the
years. If, as seems likely, global growth exceeds U.S. growth in 2000 for
the first time in several years, these stocks are poised to feel the
effects.
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 10/31/99, 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.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 10/31/99
Class A Class B Class C Class M
(inception dates) (11/6/57) (4/27/92) (7/26/99) (5/1/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 13.13% 6.61% 12.28% 7.28% 12.38% 11.38% 12.55% 8.60%
- --------------------------------------------------------------------------------------------
5 years 141.57 127.72 132.48 130.48 132.76 132.76 135.43 127.14
Annual average 19.29 17.89 18.38 18.17 18.41 18.41 18.68 17.83
- --------------------------------------------------------------------------------------------
10 years 299.00 276.12 269.50 269.50 270.44 270.44 278.79 265.41
Annual average 14.84 14.16 13.96 13.96 13.99 13.99 14.25 13.84
- --------------------------------------------------------------------------------------------
Annual average
(life of fund) 13.76 13.60 12.68 12.68 12.91 12.91 12.97 12.87
- --------------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/99
S&P 500(R) Consumer
Index price index
- ---------------------------------------------------------------------
1 year 25.67% 2.69%
- ---------------------------------------------------------------------
5 years 217.79 12.51
Annual average 26.02 2.39
- ---------------------------------------------------------------------
10 years 415.26 33.92
Annual average 17.82 2.96
- ---------------------------------------------------------------------
Annual average (life of fund) 12.61 4.34
- ---------------------------------------------------------------------
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 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. For class C shares, returns for
periods prior to their inception are derived from the historical
performance of class A shares, adjusted to reflect both the CDSC currently
applicable to class C shares, which is 1% for the first year and is
eliminated thereafter, and the higher operating expenses applicable to
class C 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.
[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 10/31/89
Fund's class A S&P 500 Consumer price
Date shares at POP Index index
10/31/89 9,426 10,000 10,000
10/31/90 9,051 9,252 10,628
10/31/91 11,650 12,351 10,939
10/31/92 12,761 13,581 11,290
10/31/93 15,154 15,610 11,600
10/31/94 15,570 16,214 11,903
10/31/95 19,152 20,501 12,237
10/31/96 23,728 25,441 12,604
10/31/97 29,647 33,610 12,866
10/31/98 33,248 41,001 13,041
10/31/99 $37,612 $51,526 $13,392
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 or class C shares
would have been valued at $36,950 and $37,044, respectively and no
contingent deferred sales charges would apply; a $10,000 investment in the
fund's class M shares would have been valued at $37,879 ($36,541 at public
offering price). See first page of performance section for performance
calculation method.
<TABLE>
<CAPTION>
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 10/31/99
Class A Class B Class C Class M
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Distributions (number) 4 4 1 4
- --------------------------------------------------------------------------------------
Income $0.2753 $0.1153 $0.1010 $0.1713
- --------------------------------------------------------------------------------------
Capital gains
Long-term 1.5060 1.5060 -- 1.5060
- --------------------------------------------------------------------------------------
Short-term 0.1547 0.1547 -- 0.1547
- --------------------------------------------------------------------------------------
Total $1.9360 $1.7760 $0.1010 $1.8320
- --------------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- --------------------------------------------------------------------------------------
10/31/98 $20.44 $21.69 $20.19 -- $20.33 $21.07
- --------------------------------------------------------------------------------------
7/26/99* -- -- -- $22.07 -- --
- --------------------------------------------------------------------------------------
10/31/99 21.10 22.39 20.82 21.08 20.97 21.73
- --------------------------------------------------------------------------------------
Current return (end of period)
- --------------------------------------------------------------------------------------
Current dividend rate1 1.99% 1.88% 1.21% 1.92% 1.49% 1.44%
- --------------------------------------------------------------------------------------
Current 30-day SEC yield2 1.41 1.33 0.71 0.72 0.95 0.91
- --------------------------------------------------------------------------------------
1Income portion of most recent distribution, annualized and divided by NAV or POP at
end of period.
2Based on investment income, calculated using SEC guidelines.
*Inception date of class C shares was 7/26/99.
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 9/30/99 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (11/6/57) (4/27/92) (7/26/99) (5/1/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 15.66% 8.99% 14.75% 9.75% 14.95% 13.95% 15.07% 11.06%
- ---------------------------------------------------------------------------------------------
5 years 130.71 117.42 122.28 120.28 122.48 122.48 124.90 117.09
Annual average 18.20 16.80 17.32 17.11 17.34 17.34 17.60 16.77
- ---------------------------------------------------------------------------------------------
10 years 273.29 251.90 245.37 245.37 246.47 246.47 254.33 242.00
Annual average 14.08 13.41 13.20 13.20 13.23 13.23 13.49 13.08
- ---------------------------------------------------------------------------------------------
Annual average
(life of fund) 13.65 13.49 12.57 12.57 12.80 12.80 12.85 12.76
- ---------------------------------------------------------------------------------------------
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 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 C shares are not subject to an initial sales charge and are subject
to a contingent deferred sales charge only if the shares are redeemed
during the first year.
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 or C shares and assumes redemption at the end of
the period. Your fund's 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. The CDSC for class C shares is 1% for one year after
purchase.
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, preceded by the Report of independent
accountants, 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 are determined. All investment and noninvestment 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 sources 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-end funds, a separate
table is provided for each share class.
Report of independent accountants
For the fiscal year ended October 31, 1999
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 fund's portfolio, 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, 1999, 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, 1999 by correspondence
with the custodian, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 9, 1999
</TABLE>
<TABLE>
<CAPTION>
The fund's portfolio
October 31, 1999
COMMON STOCKS (98.7%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace and Defense (3.3%)
- --------------------------------------------------------------------------------------------------------------------------
12,968,300 Boeing Co. $ 597,352,319
9,631,200 Lockheed Martin Corp. 192,624,000
2,600,000 Raytheon Co. Class A 71,337,500
2,581,500 Raytheon Co. Class B 75,186,188
5,547,200 United Technologies Corp. 335,605,600
---------------
1,272,105,607
Automotive (2.4%)
- --------------------------------------------------------------------------------------------------------------------------
8,768,300 Ford Motor Co. 481,160,463
6,240,000 General Motors Corp. 438,360,000
---------------
919,520,463
Basic Industrial Products (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
2,064,431 Caterpillar, Inc. 114,059,813
3,900,160 Cooper Industries, Inc. 167,950,640
1,497,904 Deere (John) & Co. 54,299,020
1,353,780 Illinois Tool Works, Inc. 99,164,385
4,604,255 Minnesota Mining & Manufacturing Co. 437,691,991
3,913,800 Owens-Illinois, Inc. (NON) 93,686,588
---------------
966,852,437
Business Equipment and Services (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
1,900,000 Avery Dennison Corp. 118,750,000
403,100 Hewlett-Packard Co. 29,854,594
3,398,244 IBM Corp. 334,302,254
2,900,000 NCR Corp. (NON) 96,062,500
3,380,980 Seagate Technology, Inc. (NON) 99,527,599
3,288,744 Xerox Corp. 92,084,832
---------------
770,581,779
Cable Television (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
2,745,000 Comcast Corp. Class A 115,633,125
1,895,500 MediaOne Group Inc. (NON) 134,698,969
---------------
250,332,094
Chemicals (3.7%)
- --------------------------------------------------------------------------------------------------------------------------
2,235,880 CK Witco Corp. 20,961,375
3,791,600 Dow Chemical Co. 448,356,700
4,129,261 du Pont (E.I.) de Nemours & Co., Ltd. 266,079,256
2,034,425 Eastman Chemical Co. 78,452,514
10,811,700 Monsanto Co. 416,250,450
2,670,180 PPG Industries, Inc. 161,879,663
755,000 Union Carbide Corp. 46,055,000
---------------
1,438,034,958
Computer Services and Software (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
4,275,000 Computer Associates International, Inc. 241,537,500
6,753,400 Electronic Data Systems Corp. 395,073,900
---------------
636,611,400
Conglomerates (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
4,066,400 Allied-Signal, Inc. 231,530,650
Consumer Durable Goods (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
3,828,700 Newell Rubbermaid Inc. 132,568,738
Consumer Non Durables (1.6%)
- --------------------------------------------------------------------------------------------------------------------------
7,068,210 Kimberly-Clark Corp. 446,180,756
7,582,068 Philip Morris Cos., Inc. 190,973,338
---------------
637,154,094
Consumer Services (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
6,400,000 Service Corp. International 61,200,000
Electronics and Electrical Equipment (2.6%)
- --------------------------------------------------------------------------------------------------------------------------
6,255,041 Emerson Electric Co. 375,693,400
5,527,900 Motorola, Inc. 538,624,756
2,300,000 Rockwell International Corp. 111,406,250
---------------
1,025,724,406
Entertainment (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
11,060,200 Disney (Walt) Productions, Inc. 291,712,775
5,341,458 Viacom, Inc. Class B (NON) 239,030,246
---------------
530,743,021
Environmental Control (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
11,556,284 Waste Management, Inc. 212,346,719
Food and Beverages (6.2%)
- --------------------------------------------------------------------------------------------------------------------------
4,435,965 Anheuser-Busch Cos., Inc. 318,557,737
2,660,000 ConAgra, Inc. 69,326,250
7,059,066 Heinz (H.J.) Co. 337,070,402
6,467,100 Kellogg Co. 257,471,419
9,151,000 Nabisco Group Holdings Corp. 117,247,187
1,940,000 Nabisco Holdings Corp. Class A 72,507,500
5,375,000 PepsiCo, Inc. 186,445,313
3,343,100 Quaker Oats Co. (The) 234,017,000
3,771,000 Ralston-Ralston Purina Group 118,550,813
14,543,347 Sara Lee Corp. 393,579,328
4,505,800 Seagram Co., Ltd. 222,473,875
2,050,000 SYSCO Corp. 78,796,875
---------------
2,406,043,699
Health Care (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
10,507,400 Tenet Healthcare Corp. (NON) 204,237,588
Insurance and Finance (25.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,270,000 Aetna Inc. 63,817,500
8,691,600 Allstate Corp. 249,883,500
6,517,374 American General Corp. 483,507,684
1,053,934 AmSouth Bancorporation 27,138,801
7,522,088 AON Corp. 267,034,124
4,563,900 Associates First Capital Corp. 166,582,350
3,700,000 AXA Financial, Inc. 118,631,250
10,428,389 Bank of America Corp. 671,327,542
894,700 Bank of New York Company, Inc. 37,465,563
11,695,743 Bank One Corp. 439,321,346
1,625,000 Charter One Financial, Inc. 39,914,063
1,990,000 Chase Manhattan Corp. 173,876,250
4,158,500 Chubb Corp. (The) 228,197,688
6,230,022 CIGNA Corp. 465,694,145
18,476,500 Citigroup, Inc. 1,000,040,563
1,885,000 Comerica, Inc. 112,039,688
6,127,910 Fannie Mae 433,549,633
8,748,300 First Union Corp. 373,443,056
9,728,855 Firstar Corp. 285,785,116
12,442,677 Fleet Boston Corp. 542,811,784
2,234,900 Hartford Financial Services Group 115,795,756
1,721,148 Huntington Bancshares, Inc. 50,989,010
1,900,000 Lehman Brothers Holding, Inc. 140,006,250
4,330,000 Lincoln National Corp. 199,721,250
3,660,500 Mellon Financial Corp. 135,209,719
4,806,500 Merrill Lynch & Co., Inc. 377,310,250
909,800 Morgan (J.P.) & Co., Inc. 119,070,094
5,682,000 National City Corp. 167,619,000
1,700,000 Paine Webber Group Inc. 69,275,000
6,755,800 PNC Bank Corp. 402,814,575
2,319,100 St. Paul Cos., Inc. 74,211,200
1,000,000 Summit Bancorp 34,625,000
2,853,200 SunTrust Banks, Inc. 208,818,575
1,990,000 Synovus Financial Corp. 42,660,625
11,964,500 U.S. Bancorp 443,434,281
13,999,700 Washington Mutual, Inc. 503,114,219
10,651,750 Wells Fargo Co. 509,952,531
---------------
9,774,688,981
Medical Supplies and Devices (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
4,992,227 Baxter International, Inc. 323,870,727
Metals and Mining (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
4,253,000 Alcoa Inc. 258,369,750
3,750,000 Freeport-McMoRan Copper & Gold Co., Inc. Class A (NON) 52,968,750
2,500,000 Freeport-McMoRan Copper & Gold Co., Inc. Class B (NON) 41,718,750
---------------
353,057,250
Oil and Gas (10.5%)
- --------------------------------------------------------------------------------------------------------------------------
2,218,555 Atlantic Richfield Co. 206,741,594
3,039,962 BP Amoco PLC ADR (United Kingdom) 175,557,806
2,835,400 Chevron, Inc. 258,907,463
4,759,100 Conoco, Inc. 130,577,806
8,410,368 Conoco, Inc. Class B 228,131,232
5,960,000 El Paso Energy Corp. 244,360,000
9,803,674 Exxon Corp. 726,084,606
6,846,300 Halliburton Co. 258,019,931
4,486,549 Mobil Corp. 432,951,979
4,300,000 Occidental Petroleum Corp. 98,093,750
10,439,000 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 625,687,563
3,626,700 Schlumberger Ltd. 219,642,019
784,400 Texaco, Inc. 48,142,550
4,100,000 Tosco Corp. 103,781,250
8,604,600 Williams Cos., Inc. 322,672,500
---------------
4,079,352,049
Paper and Forest Products (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
1,505,000 Champion International Corp. 87,007,813
3,432,000 International Paper Co. 180,609,000
840,000 Temple Inland, Inc. 48,825,000
7,049,181 Weyerhaeuser Co. 420,747,991
---------------
737,189,804
Pharmaceuticals (7.5%)
- --------------------------------------------------------------------------------------------------------------------------
11,933,700 Abbott Laboratories 481,823,138
12,184,324 American Home Products Corp. 636,630,929
7,447,482 Bristol-Myers Squibb Co. 572,059,711
8,251,276 Merck & Co., Inc. 656,492,147
11,270,548 Pharmacia & Upjohn, Inc. 607,905,183
---------------
2,954,911,108
Photography (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
4,791,904 Eastman Kodak Co. 330,341,882
Publishing (1.5%)
- --------------------------------------------------------------------------------------------------------------------------
3,790,000 McGraw-Hill, Inc. 225,978,750
3,625,000 Times Mirror Co. Class A 261,453,125
1,766,400 Tribune Co. 105,984,000
---------------
593,415,875
Real Estate (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
2,700,000 Equity Residential Properties Trust (R) 112,893,750
4,000,000 Starwood Hotels & Resorts Worldwide, Inc. 91,750,000
---------------
204,643,750
Retail (2.3%)
- --------------------------------------------------------------------------------------------------------------------------
1,910,000 Albertsons, Inc. 69,356,875
740,000 Dayton Hudson Corp. 47,822,500
6,502,200 Federated Department Stores, Inc. (NON) 277,562,663
17,454,193 K mart Corp. (NON) 175,632,817
5,688,948 May Department Stores Co. 197,335,384
155,010 Penney (J.C.) Co., Inc. 3,933,379
15,807,800 Rite Aid Corp. (AFF) 138,318,250
96,700 Sears, Roebuck & Co. 2,725,732
---------------
912,687,600
Telecommunications (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,550,000 U S West, Inc. 94,646,875
Transportation (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
12,608,800 Burlington Northern Santa Fe Corp. 401,905,500
664,900 CSX Corp. 27,260,900
3,435,000 Delta Air Lines, Inc. 186,992,813
1,401,000 UAL Corp. (NON) 95,355,563
1,135,700 Union Pacific Corp. 63,315,275
---------------
774,830,051
Utilities (14.6%)
- --------------------------------------------------------------------------------------------------------------------------
11,621,296 American Telephone & Telegraph Co. 543,295,588
9,568,899 Bell Atlantic Corp. 621,380,379
8,825,600 BellSouth Corp. 397,152,000
2,800,000 Carolina Power & Light Co. 96,600,000
5,956,700 Consolidated Edison, Inc. 227,471,481
3,453,700 Dominion Resources, Inc. 166,209,313
7,091,120 Duke Energy Corp. 400,648,280
3,540,300 Edison International 104,881,388
7,645,000 Entergy Corp. 228,872,188
6,565,000 GTE Corp. 492,375,000
2,715,000 Public Service Enterprise Group, Inc. 107,412,188
2,994,800 Reliant Energy, Inc. 81,608,300
21,061,847 SBC Communications, Inc. 1,072,837,813
5,000,000 Sempra Energy 102,187,500
8,536,800 Southern Co. 226,758,750
7,453,664 Sprint Corp. 553,900,406
7,000,000 Texas Utilities Co. 271,250,000
---------------
5,694,840,574
---------------
Total Common Stocks (cost $32,630,552,757) $38,524,064,179
CONVERTIBLE PREFERRED STOCKS (0.2%) (cost $89,138,399) (a)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
1,640,000 K mart Financing I $3.875 cum. cv. pfd. $ 70,725,000
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (--%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association
Pass-Through Certificates
$ 1,379 11 1/2s, with due dates from March 15, 2010 to
January 15, 2013 $ 1,551
1,497 11s, January 15, 2010 1,670
147,020 9s, with due dates from December 15, 2004 to
June 15, 2011 155,290
52,380 7 1/2s, April 15, 2007 52,954
206,308 7 1/4s, with due dates from February 15, 2005 to
March 15, 2005 207,979
---------------
Total U.S. Government and Agency Obligations
(cost $393,924) $ 419,444
SHORT-TERM INVESTMENTS (0.9%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$25,000,000 Den Danske Corp. Inc., effective yield of 5.34%,
November 10, 1999 $ 24,966,625
50,000,000 Falcon Asset Securitization Corp., effective yield of 5.38%,
December 15, 1999 49,671,222
50,000,000 Federal Home Loan Mortgage Corp., effective yield of 5.26%,
December 10, 1999 49,715,083
74,789,000 Federal National Mortgage Association, effective yield of
5.25 %, December 2, 1999 74,450,891
50,000,000 Park Avenue Receivables effective yield of 5.38%,
November 19, 1999 49,865,500
25,000,000 Sigma Finance Inc., effective yield of 5.4%, November 24, 1999 24,912,951
92,082,000 Interest in $500,000,000 joint repurchase agreement dated
October 29, 1999 with Lehman Brothers Inc. due
November 1, 1999 with respect to various U.S. Treasury
obligations -- maturity value of $92,122,056 effective yield
of 5.22% 92,082,000
---------------
Total Short-Term Investments (cost $365,664,272) $ 365,664,272
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $33,085,749,352) (b) $38,960,872,895
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $39,014,872,218.
(b) The aggregate identified cost on a tax basis is $33,215,277,783, resulting in gross unrealized appreciation and
depreciation of $8,044,786,960 and $2,299,191,848 respectively, or net unrealized appreciation of $5,745,595,112.
(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 Depositary 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, 1999
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $33,085,749,352) (Note 1) $38,960,872,895
- -----------------------------------------------------------------------------------------------
Dividends, interest, and other receivables 49,917,793
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 31,660,137
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 271,074,041
- -----------------------------------------------------------------------------------------------
Total assets 39,313,524,866
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 176,874,881
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 61,187,612
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 38,963,613
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 3,118,786
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 293,969
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 6,484
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 16,847,210
- -----------------------------------------------------------------------------------------------
Other accrued expenses 1,360,093
- -----------------------------------------------------------------------------------------------
Total liabilities 298,652,648
- -----------------------------------------------------------------------------------------------
Net assets $39,014,872,218
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $30,221,230,940
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 365,189
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 2,918,152,546
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 5,875,123,543
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $39,014,872,218
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($22,033,789,464 divided by 1,044,185,702 shares) $21.10
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $21.10)* $22.39
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($14,777,660,199 divided by 709,774,853 shares)** $20.82
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($21,554,748 divided by 1,022,360 shares)** $21.08
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($479,425,373 divided by 22,861,609 shares) $20.97
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $20.97)* $21.73
- -----------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($1,702,442,434 divided by 80,536,992 shares) $21.14
- -----------------------------------------------------------------------------------------------
* 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, 1999
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $2,878,816) including dividend
income of $11,076,964 from investments in affiliated issuers) (Note 5) $ 795,787,544
- -----------------------------------------------------------------------------------------------
Interest 24,997,517
- -----------------------------------------------------------------------------------------------
Total investment income 820,785,061
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 157,132,969
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 45,843,934
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 246,501
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 78,355
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 53,843,088
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 160,193,051
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 27,165
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 3,566,734
- -----------------------------------------------------------------------------------------------
Reports to shareholders 605,716
- -----------------------------------------------------------------------------------------------
Registration fees 496,601
- -----------------------------------------------------------------------------------------------
Auditing 53,881
- -----------------------------------------------------------------------------------------------
Legal 198,749
- -----------------------------------------------------------------------------------------------
Postage 3,352,392
- -----------------------------------------------------------------------------------------------
Other 3,676,926
- -----------------------------------------------------------------------------------------------
Total expenses 429,316,062
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (6,210,696)
- -----------------------------------------------------------------------------------------------
Net expenses 423,105,366
- -----------------------------------------------------------------------------------------------
Net investment income 397,679,695
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1, 3 and 5) (including realized
loss of $1,391,907 on sales of investments in affiliated issuers) 3,307,455,606
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 827,279,618
- -----------------------------------------------------------------------------------------------
Net gain on investments 4,134,735,224
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $4,532,414,919
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended October 31
-------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 397,679,695 $ 330,029,369
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments 3,307,455,606 2,836,387,437
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 827,279,618 461,190,278
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 4,532,414,919 3,627,607,084
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (284,957,442) (232,355,114)
- ---------------------------------------------------------------------------------------------------------------
Class B (87,688,880) (84,944,382)
- ---------------------------------------------------------------------------------------------------------------
Class C (41,059) --
- ---------------------------------------------------------------------------------------------------------------
Class M (4,011,851) (3,281,201)
- ---------------------------------------------------------------------------------------------------------------
Class Y (20,574,618) (12,369,019)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (1,557,899,919) (2,046,999,581)
- ---------------------------------------------------------------------------------------------------------------
Class B (1,254,930,451) (1,719,400,604)
- ---------------------------------------------------------------------------------------------------------------
Class M (34,678,233) (44,352,683)
- ---------------------------------------------------------------------------------------------------------------
Class Y (67,577,249) (87,596,678)
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 2,047,012,102 5,490,232,906
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 3,267,067,319 4,886,540,728
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 35,747,804,899 30,861,264,171
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $365,189 and $883,659, respectively) $39,014,872,218 $35,747,804,899
- ---------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.44 $20.87 $18.27 $15.77 $13.65
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .28(c) .26(c) .39(c) .43 .46(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.32 2.15 3.91 3.19 2.50
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.60 2.41 4.30 3.62 2.96
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.28) (.24) (.45) (.40) (.40)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.66) (2.60) (1.25) (.72) (.44)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.94) (2.84) (1.70) (1.12) (.84)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.10 $20.44 $20.87 $18.27 $15.77
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 13.13 12.15 24.95 23.89 23.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $22,033,789 $18,814,738 $16,300,523 $11,403,813 $7,859,496
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .79 .84 .86 .92 .89
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.32 1.27 1.95 2.59 3.20
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 50.36 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 includes amounts paid through brokerage service and expense offset arrangements.
(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
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.19 $20.65 $18.10 $15.63 $13.56
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .12(c) .11(c) .24(c) .30 .35(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.29 2.12 3.87 3.17 2.46
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.41 2.23 4.11 3.47 2.81
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.12) (.09) (.31) (.28) (.30)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.66) (2.60) (1.25) (.72) (.44)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.78) (2.69) (1.56) (1.00) (.74)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $20.82 $20.19 $20.65 $18.10 $15.63
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 12.28 11.28 24.03 23.04 21.91
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $14,777,660 $15,671,371 $13,511,906 $8,692,163 $5,089,359
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.54 1.59 1.61 1.68 1.64
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .57 .52 1.19 1.84 2.42
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 50.36 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 includes amounts paid through brokerage service and expense offset arrangements.
(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 C
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 26, 1999+
operating performance to October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $22.07
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .02(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.91)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.89)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.10)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.10)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.08
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (4.03)*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $21,555
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .41*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .12*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 50.36
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 includes amounts paid through brokerage service and expense offset arrangements.
(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
- ------------------------------------------------------------------------------------------------------------------------------------
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 .17(c) .16(c) .28(c) .35 .15(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.30 2.14 3.89 3.18 1.53
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.47 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 (1.66) (2.60) (1.25) (.72) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.83) (2.74) (1.61) (1.06) (.18)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $20.97 $20.33 $20.77 $18.21 $15.74
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 12.55 11.60 24.29 23.31 11.88*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $479,425 $421,616 $348,129 $132,453 $21,100
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.29 1.34 1.36 1.44 .66*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .82 .77 1.39 2.02 1.12*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 50.36 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 includes amounts paid through brokerage service and expense offset arrangements.
(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
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.47 $20.90 $18.29 $15.78 $13.66
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .33(c) .32(c) .44(c) .47 .49(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 2.33 2.14 3.92 3.20 2.50
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.66 2.46 4.36 3.67 2.99
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.33) (.29) (.50) (.44) (.43)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.66) (2.60) (1.25) (.72) (.44)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.99) (2.89) (1.75) (1.16) (.87)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $21.14 $20.47 $20.90 $18.29 $15.78
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 13.44 12.40 25.27 24.24 23.28
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,702,442 $840,080 $700,707 $343,935 $193,292
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .54 .59 .61 .68 .64
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.56 1.52 2.20 2.83 3.14
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 50.36 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 includes amounts paid through brokerage service and expense offset arrangements.
(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, 1999
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 C, class M and class Y shares. The
fund began offering Class C shares on July 26, 1999. 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 C shares are
subject to the same fees and expenses as class B shares, except that class
C shares have a one-year 1.00% contingent deferred sales charge and do not
convert to class A shares. 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 and class C shares.
Class Y shares, which are sold at net asset value, are generally subject
to the same expenses as class A, class B, class C 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
of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period.
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 sales price on its principal exchange, 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. Other investments,
including restricted securities, are stated at fair value following
procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash 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). Gains or losses on securities sold are determined on
the identified cost basis.
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 year ended October
31, 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. These
differences include temporary and permanent differences of losses on wash
sale transactions, nontaxable dividends and paydown gains and losses on
mortgage-backed securities. Reclassifications are made to the fund's
capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations. For
the year ended October 31, 1999, the fund reclassified $924,315 to
decrease undistributed net investment income and $1,845,237 to increase
paid-in-capital, with a decrease to accumulated net realized gains of
$920,922. 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,
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 year ended October 31, 1999, fund expenses were reduced by
$6,210,696 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 $11,875
has been allocated to the fund, and an additional fee for each Trustee's
meeting attended. 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
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 a 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, class C 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%,
1.00% and 1.00% of the average net assets attributable to class A, class
B, class C and class M shares, respectively. The Trustees have approved
payment by the fund at an annual rate of 0.25%, 1.00%, 1.00% and 0.75% of
the average net assets attributable to class A, class B, class C and class
M shares, respectively.
For the year ended October 31, 1999, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $7,095,702 and $168,968 from the
sale of class A and class M shares, respectively and received $21,944,729
and $931 in contingent deferred sales charges from redemptions of class B
and class C shares, respectively. A deferred sales charge of up to 1% is
assessed on certain redemptions of class A shares. For the year ended
October 31, 1999, Putnam Mutual Funds Corp., acting as underwriter
received $108,425 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended October 31, 1999, cost of purchases and proceeds
from sales of investment securities other than U.S. government obligations
and short-term investments aggregated $19,377,605,136 and $20,302,176,049,
respectively. Purchases and sales of U.S. government obligations
aggregated $-- and $174,037, respectively.
Note 4
Capital shares
At October 31, 1999, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended October 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 274,241,775 $5,835,048,352
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 83,808,178 1,715,528,501
- -----------------------------------------------------------------------------
358,049,953 7,550,576,853
Shares
repurchased (234,208,186) (4,963,563,711)
- -----------------------------------------------------------------------------
Net increase 123,841,767 $2,587,013,142
- -----------------------------------------------------------------------------
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, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 115,563,035 $ 2,422,650,068
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 61,707,277 1,243,784,059
- -----------------------------------------------------------------------------
177,270,312 3,666,434,127
Shares
repurchased (243,507,803) (5,109,609,378)
- -----------------------------------------------------------------------------
Net decrease (66,237,491) $(1,443,175,251)
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
For the period July 26, 1999
(commencement of operations)
to October 31, 1999
- -----------------------------------------------------------------------------
Class C
- -----------------------------------------------------------------------------
Shares sold 1,041,882 $21,608,231
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,718 36,452
- -----------------------------------------------------------------------------
1,043,600 21,644,683
Shares
repurchased (21,240) (434,423)
- -----------------------------------------------------------------------------
Net increase 1,022,360 $21,210,260
- -----------------------------------------------------------------------------
Year ended October 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 5,770,379 $122,436,027
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,835,656 37,303,941
- -----------------------------------------------------------------------------
7,606,035 159,739,968
Shares
repurchased (5,481,217) (115,924,230)
- -----------------------------------------------------------------------------
Net increase 2,124,818 $ 43,815,738
- -----------------------------------------------------------------------------
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, 1999
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 51,398,815 $1,091,200,456
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,280,659 88,151,867
- -----------------------------------------------------------------------------
55,679,474 1,179,352,323
Shares
repurchased (16,172,735) (341,204,110)
- -----------------------------------------------------------------------------
Net increase 39,506,739 $ 838,148,213
- -----------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Note 5
Transactions with Affiliated Issuers
Transactions during the year 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
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Name of affiliate
- -------------------------------------------------------------------------------------------------------------------
Rite Aid Corp. $393,340,289 $ 887,542 $ 4,328,692 $138,318,250
Sonat, Inc. 22,013,213 20,373,438 6,748,272 --
- -------------------------------------------------------------------------------------------------------------------
Totals $415,353,502 $21,260,980 $11,076,964 $138,318,250
</TABLE>
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund
hereby designates $2,424,256,266 as capital gain, for its taxable year
ended October 31, 1999.
The fund has designated 66.13% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The Form 1099 you receive in January 2000 will show the tax status of all
distributions paid to your account in calendar 1999.
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
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
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
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
AN022-56797 002/881/427/511 12/99
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- -----------------------------------------------------------------------------
The Putnam Fund for Growth and Income
Supplement to Annual Report dated October 31, 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 annual report.
ANNUAL RESULTS AT A GLANCE
- -----------------------------------------------------------------------------
Total return
for periods ended 10/31/99 NAV
1 year 13.44%
5 years 144.64
Annual average 19.59
10 years 304.61
Annual average 15.00
Annual average, life of fund
(since class A inception, 11/6/57) 13.80
Share value: NAV
10/31/98 $20.47
10/31/99 $21.14
- -----------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
4 $0.3283 1.6607 $1.9890
- -----------------------------------------------------------------------------
Please note that past performance does not indicate future results. 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.
