The Putnam
Fund for
Growth and
Income
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
4-30-00
[SCALE LOGO OMITTED]
FROM THE CHAIRMAN
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[COPYRIGHT] Karsh, Ottawa
Dear Shareholder:
The markets continued to provide their share of challenges and
opportunities as your fund closed its books on the first half of fiscal
year 2000. In the following report, the fund's managers discuss
performance for the period and prospects for the months ahead.
This is the last letter to you and the other shareholders of The Putnam
Fund for Growth and Income that I will be signing. After more than 30
years as Chairman of the Trustees and President of the Putnam Funds, the
time has come for me to step aside. As of July 1, 2000, John Hill will
become Chairman. John is currently an independent Trustee and has served
on the board for the past 14 years. In addition, my son, George Putnam,
III, will take on the role of President. I am confident that the
leadership of the funds will be in exceptionally strong hands.
I will become Chairman Emeritus, remain a Putnam shareholder, and stay
in close touch with the funds. It has been my privilege to serve you.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
June 21, 2000
REPORT FROM THE FUND MANAGERS
David L. King
Hugh H. Mullin
Sheldon N. Simon
The Putnam Fund for Growth and Income struggled to defy the odds stacked
against value investing during the first six months of its fiscal year
2000. Blazing performance by a narrow band of growth companies preempted
investors' attention and resulted in continuing redistribution of
investment dollars away from traditional companies to the stocks of what
are referred to today as "new economy" companies. However, the formerly
intractable bull market in growth stocks experienced a heart-stopping
correction in early March and volatility continued through the end of
the semiannual period. Investors watched their growth stocks stumble,
while value stocks rebounded vigorously. As your fund passed its fiscal
midpoint on April 30, 2000, there were encouraging signs of a change in
investor sentiment and a broadening of the market. However, gains late
in the period were not sufficient to correct for poor performance during
the prior four months.
Total return for 6 months ended 4/30/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
----------------------------------------------------------------------
-4.65% -10.15% -5.02% -9.37% -5.04% -5.90% -4.89% -8.22%
----------------------------------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 6.
* FUND TAKES ADVANTAGE OF TOP NAMES DURING WEAKNESS
The Federal Reserve Board, concerned about signs of an increase in
inflation, raised short-term interest rates three times during the
semiannual period. The yield curve inverted, a phenomenon that
historically has signaled a slowing economy and possible recession. As
traditional old economy companies bore the weight of the rate increases,
the divergence between growth and value styles widened to an
unprecedented degree. As a result, we have had a veritable field day,
gathering up the stocks of top-name companies that reached attractive
valuations after being discarded by short-sighted momentum investors. We
believe the quality of your fund's portfolio has been significantly
enhanced through shrewd and opportunistic stock selection.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Banking 11.3%
Pharmaceuticals 9.3%
Oil and gas 8.5%
Regional Bells 7.1%
Computers 6.5%
Footnote reads:
*Based on net assets as of 4/30/00. Holdings will vary over time.
* QUALITY IS KEY
Superior companies trading at steeply discounted prices became a key
theme that characterized the investment environment during the period.
There are more than a few stories to illustrate this point; one of our
favorites is Disney. Shares of the Walt Disney Company, priced well
beyond the reach of value investors for more than a decade, were snapped
up by your fund as they entered into value territory. This world-class
entertainment company, perhaps best known for its theme parks and
animated motion pictures, is also involved in resorts, consumer
products, the Internet, and direct marketing. It operates the ABC
television network and the ABC radio networks and produces television
programming, musical recordings, and live stage plays. We believe the
company's profitability will grow substantially and the success of its
Media Networks business is leading the way.
* FUND INCREASES EXPOSURE TO PHARMACEUTICALS
Not since the mid 1990s have pharmaceutical companies represented such a
large portion of the fund. Typically these companies are too pricey to
be considered for inclusion in value portfolios. Share prices fell into
the value range for a number of reasons, not the least of which was
concern over possible governmental regulations of Medicare and
Medicaid that might affect pricing of drugs. We established positions in
Schering-Plough and Eli Lilly during the period. Both companies are
involved in the business of discovering, developing, manufacturing, and
selling drugs worldwide. Schering-Plough is enjoying strong market
growth of its allergy medication, Claritin, while Eli Lilly has won
approval in 35 countries to market Evista, a drug designed to prevent
osteoporosis in postmenopausal women. Although pharmaceutical stocks
have been out of favor, they continue to have strong fundamentals and
have already begun to rebound. We believe their value will appreciate
over the long term.
* BARGAINS ABOUND IN FINANCIAL SECTOR
Many financial companies have continued to grow earnings and dividends
despite the pressure of rising interest rates. Their ability to weather
such adverse conditions makes us quite confident that financials are
well positioned for strong performance in the future. Bank of New York
and Mellon Financial Corp. exemplify the type of high-quality, well-run,
rapidly growing companies we target. We added to the fund's positions in
these stocks as their valuations reached attractive levels.
"Perhaps as early as the end of the fund's fiscal year there should be a
slowdown evident. If that should be the case, the portfolio is well
positioned to deliver relatively better performance than the overall
market."
-- Sheldon N. Simon, manager,
The Putnam Fund for Growth and Income
Your fund has long held shares of Fannie Mae and added a position in
Freddie Mac, the other major government-sponsored mortgage reseller,
during the period. These shareholder-owned companies were created by
Congress to ensure that a continuous flow of funds is available to
mortgage lenders, thereby facilitating home ownership for low- to
middle-income Americans. Fannie Mae and Freddie Mac buy mortgages from
lenders, repackage them, and sell them as fixed-income securities.
Freddie Mac has financed one out of every six homes in the United
States; Fannie Mae can claim one of the best multiyear earnings growth
records of any U.S. company: roughly 13% per year for more than 20
years. We believe these companies will continue their tradition of
strong earnings growth to the benefit of the funds' shareholders.
* RISING OIL PRICES CREATED OPPORTUNITIES
Your fund has a reasonably large exposure to the energy sector, which
has benefited from much higher prices for oil and natural gas. Extra
benefits were reaped when we were able to buy stocks of leading
companies weakened by the impact of higher oil prices. Procter & Gamble,
a premier manufacturer of home products, including cleansers,
laundry-care and health-care goods, and cosmetics, uses petroleum in
several of its products. Share prices suffered a devastating blow after
P&G announced it had missed an earnings target. Higher oil prices were
responsible for the shortfall. Valuations for the entire consumer
staples sector seemed to fall in sympathy with P&G.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
ExxonMobil
Oil and gas
IBM Corp.
Computers
Citigroup, Inc.
Financial
SBC Communications, Inc.
Regional Bells
Merck & Co, Inc.
Pharmaceuticals
AT&T Corp.
Telecommunications
Hewlett-Packard Co.
Computers
Royal Dutch Petroleum
Oil and gas
Pharmacia Corp.
Pharmaceuticals
Bank of America Corp.
Banking
Footnote reads:
These holdings represent 22.9% of the fund's net assets as of 4/30/00.
Portfolio holdings will vary over time.
Although your fund did not own Procter & Gamble at the time, we did buy
shares when the price fell, along with shares of other strong brands,
including Avon Products and Clorox. In our opinion, the company will
soon resume its long-term record of strong earnings growth. While these
stocks, as well as others mentioned in this report, were viewed
favorably at the end of the period, all are subject to review in
accordance with your fund's investment strategy, and may change in the
future.
* FUND STRATEGY FOCUSES ON LONG-TERM PERFORMANCE
We have positioned the fund to perform well in an environment
characterized by slower economic growth and no large increase in
inflation. We believe recent inflation is primarily a short-term
phenomenon that reflects the strength of the economy and increased
energy prices. Inflation remains at a historically low level and appears
to be under control, thanks to continuing productivity gains and Fed
intervention. We believe the Fed is nearing the end of its tightening
process and that an economic slowdown will be achieved in the coming
months, perhaps by the end of your fund's fiscal year. A slowing economy
will be a positive thing for interest rates, and financial stocks, in
particular, should fare better.
You have our assurances that we will continue to take advantage of rare
buying opportunities while managing the fund with an eye on positive,
long-term performance. Whether the market continues to exhibit extreme
volatility or begins to assume a more balanced profile, your fund plays
an important role in a diversified investment program and is uniquely
positioned to provide favorable returns with less volatility over a
market cycle.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 4/30/00, there is no guarantee the fund will
continue to hold these securities in the future.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. The
Putnam Fund for Growth and Income is designed for investors seeking
capital growth and current income.
TOTAL RETURN FOR PERIODS ENDED 4/30/00
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
------------------------------------------------------------------------------
6 months -4.65% -10.15% -5.02% -9.37% -5.04% -5.90% -4.89% -8.22%
------------------------------------------------------------------------------
1 year -9.11 -14.33 -9.83 -13.93 -9.75 -10.57 -9.59 -12.77
------------------------------------------------------------------------------
5 years 110.12 98.02 102.31 100.31 102.52 102.52 104.83 97.62
Annual average 16.01 14.64 15.13 14.91 15.16 15.16 15.42 14.59
------------------------------------------------------------------------------
10 years 279.02 257.25 251.01 251.01 251.76 251.76 260.09 247.40
Annual average 14.25 13.58 13.38 13.38 13.40 13.40 13.67 13.26
------------------------------------------------------------------------------
Life of fund
Annual average 13.46 13.31 12.39 12.39 12.61 12.61 12.67 12.58
------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/00
S&P 500 [REGISTRATION MARK] Consumer
Index price index
---------------------------------------------------------
6 months 7.19% 1.84%
---------------------------------------------------------
1 year 10.13 3.01
---------------------------------------------------------
5 years 208.37 12.71
Annual average 25.25 2.42
---------------------------------------------------------
10 years 458.94 32.82
Annual average 18.78 2.88
---------------------------------------------------------
Life of fund
Annual average 12.56 4.33
---------------------------------------------------------
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-, and 10-year
(where available) 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.
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 4/30/00
Class A Class B Class C Class M
-------------------------------------------------------------------------
Distributions (number) 2 2 2 2
-------------------------------------------------------------------------
Income $0.180 $0.103 $0.137 $0.130
-------------------------------------------------------------------------
Capital gains
Long-term 1.318 1.318 1.318 1.318
-------------------------------------------------------------------------
Short-term 0.319 0.319 0.319 0.319
-------------------------------------------------------------------------
Total $1.817 $1.740 $1.774 $1.767
-------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
-------------------------------------------------------------------------
10/31/99 $21.10 $22.39 $20.82 $21.08 $20.97 $21.73
-------------------------------------------------------------------------
4/30/00 18.35 19.47 18.09 18.30 18.23 18.89
-------------------------------------------------------------------------
Current return (end of period)
-------------------------------------------------------------------------
Current dividend
rate1 1.96% 1.85% 1.17% 1.51% 1.45% 1.40%
-------------------------------------------------------------------------
Current 30-day
SEC yield2 1.39 1.31 0.64 0.64 0.89 0.86
-------------------------------------------------------------------------
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.
TOTAL RETURN FOR PERIODS ENDED 3/31/00 (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
------------------------------------------------------------------------------
6 months 0.33% -5.44% 0.02% -4.56% -0.06% -0.98% 0.11% -3.38%
------------------------------------------------------------------------------
1 year -2.97 -8.57 -3.64 -8.02 -3.60 -4.47 -3.43 -6.80
------------------------------------------------------------------------------
5 years 115.84 103.49 108.09 106.09 108.06 108.06 110.38 103.04
Annual average 16.63 15.27 15.78 15.56 15.78 15.78 16.04 15.22
------------------------------------------------------------------------------
10 years 268.28 247.11 241.31 241.31 241.99 241.99 249.82 237.57
Annual average 13.92 13.25 13.06 13.06 13.08 13.08 13.34 12.94
------------------------------------------------------------------------------
Life of fund
Annual average 13.49 13.33 12.41 12.41 12.64 12.64 12.70 12.60
------------------------------------------------------------------------------
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.
WELCOME TO WWW.PUTNAMINV.COM
Now you can use your PC to get up-to-date information about your funds,
learn more about investing and retirement planning, and access market
news and economic outlooks from Putnam.
VISIT PUTNAM'S SITE ON THE WORLD WIDE WEB FOR:
* the benefits of investing with Putnam
* Putnam's money management philosophy
* complete fund information, daily pricing and long-term performance
* your current account value, portfolio value and transaction history
* the latest on new funds and other Putnam news
You can also read Putnam economist Dr. Robert Goodman's commentary and
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The site can be accessed through any of the major online services
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you can also access it via Netscape or Microsoft Internet Explorer,
using an independent Internet service provider.
New features will be added to the site regularly. So be sure to bookmark us at
http://www.putnaminv.com
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price 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.
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
April 30, 2000 (Unaudited)
COMMON STOCKS (97.8%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Aerospace/Defense (2.1%)
-------------------------------------------------------------------------------------------------------------------
7,589,900 Boeing Co. $ 301,224,156
115,800 General Dynamics Corp. 6,774,300
6,531,500 Lockheed Martin Corp. 162,471,063
385,300 Raytheon Co. Class A 8,837,819
3,127,300 United Technologies Corp. 194,478,969
----------------
673,786,307
Airlines (0.1%)
-------------------------------------------------------------------------------------------------------------------
162,600 AMR Corp. (NON) 5,538,563
470,319 Delta Air Lines, Inc. 24,809,327
----------------
30,347,890
Automotive (2.1%)
-------------------------------------------------------------------------------------------------------------------
5,670,700 Ford Motor Co. 310,116,406
3,649,000 General Motors Corp. 341,637,625
102,200 TRW, Inc. 5,978,700
----------------
657,732,731
Banking (11.3%)
-------------------------------------------------------------------------------------------------------------------
1,040,000 AmSouth Bancorporation 15,145,000
10,542,389 Bank of America Corp. 516,577,061
4,477,800 Bank of New York Company, Inc. 183,869,663
7,079,643 Bank One Corp. 215,929,112
795,300 BB&T Corp. 21,174,863
3,181,000 Charter One Financial, Inc. 64,614,063
2,815,800 Chase Manhattan Corp. 202,913,588
3,493,600 Comerica, Inc. 148,041,300
2,717,300 Freddie Mac 124,825,969
328,400 Fifth Third Bancorp 20,730,250
512,000 First Tennessee National Corp. 9,728,000
6,822,500 First Union Corp. 217,467,188
9,348,500 Firstar Corp. 232,543,938
8,326,797 FleetBoston Financial Corp. 295,080,869
1,690,000 Huntington Bancshares, Inc. 30,842,500
598,600 KeyCorp 11,074,100
4,358,600 Mellon Financial Corp. 140,020,025
462,896 Morgan (J.P.) & Co., Inc. 59,424,274
4,644,900 National City Corp. 78,963,300
4,286,600 PNC Bank Corp. 187,002,925
122,600 State Street Corp. 11,876,875
985,000 Summit Bancorp 24,994,375
683,000 SunTrust Banks, Inc. 34,662,250
2,385,000 Synovus Financial Corp. 44,271,563
6,697,600 U.S. Bancorp 136,045,000
6,170,000 Washington Mutual, Inc. 157,720,625
9,642,150 Wells Fargo Co. 395,930,784
135,400 Zions Bancorp 5,619,100
----------------
3,587,088,560
Beverage (1.6%)
-------------------------------------------------------------------------------------------------------------------
3,383,465 Anheuser-Busch Cos., Inc. 238,745,749
729,800 Coca-Cola Enterprises, Inc. 15,553,863
7,386,000 PepsiCo, Inc. 270,973,875
----------------
525,273,487
Building Materials (--%)
-------------------------------------------------------------------------------------------------------------------
300,600 Masco Corp. 6,744,713
Cable Television (0.5%)
-------------------------------------------------------------------------------------------------------------------
1,705,000 Comcast Corp. Class A (NON) 68,306,563
907,300 MediaOne Group Inc. (NON) 68,614,563
275,100 USA Networks, Inc. (NON) 6,327,300
----------------
143,248,426
Chemicals (3.6%)
-------------------------------------------------------------------------------------------------------------------
1,217,900 Air Products & Chemicals, Inc. 37,831,019
1,600,000 Avery Dennison Corp. 105,000,000
93,380 CK Witco Corp. 1,097,215
2,278,200 Dow Chemical Co. 257,436,600
5,658,297 du Pont (E.I.) de Nemours & Co., Ltd. 268,415,464
1,750,000 Eastman Chemical Co. 91,546,875
2,866,955 Minnesota Mining & Manufacturing Co. 247,991,608
1,921,371 PPG Industries, Inc. 104,474,548
137,400 Praxair, Inc. 6,105,713
1,156,600 Rohm & Haas Co. 41,203,875
----------------
1,161,102,917
Commercial and Consumer Services (0.2%)
-------------------------------------------------------------------------------------------------------------------
1,046,300 Cendant Corp. (NON) 16,152,256
138,900 Cintas Corp. 5,503,913
229,800 H&R Block, Inc. 9,608,513
6,271,600 Service Corp. International 32,141,950
----------------
63,406,632
Communications Equipment (--%)
-------------------------------------------------------------------------------------------------------------------
121,400 Scientific-Atlanta, Inc. 7,898,588
Computers (6.5%)
-------------------------------------------------------------------------------------------------------------------
584,800 3Com Corp. (NON) 23,063,050
418,300 Apple Computer, Inc. (NON) 51,895,344
8,422,600 Compaq Computer Corp. 246,361,050
493,900 Gateway, Inc. (NON) 27,287,975
4,629,700 Hewlett-Packard Co. 625,009,500
8,039,644 IBM Corp. 897,425,262
555,000 Lexmark International Group, Inc. Class A (NON) 65,490,000
1,285,986 NCR Corp. (NON) 49,671,209
1,652,800 Seagate Technology, Inc. (NON) 83,982,900
----------------
2,070,186,290
Conglomerates (0.9%)
-------------------------------------------------------------------------------------------------------------------
1,923,100 Honeywell International Inc. 107,693,600
3,998,200 Tyco International Ltd. 183,667,313
----------------
291,360,913
Consumer Finance (0.3%)
-------------------------------------------------------------------------------------------------------------------
351,400 Capital One Financial Corp. 15,373,750
2,124,000 MBNA Corp. 56,418,750
277,800 Providian Financial Corp. 24,463,763
----------------
96,256,263
Consumer Goods (2.0%)
-------------------------------------------------------------------------------------------------------------------
2,420,900 Avon Products, Inc. 100,467,350
1,479,500 Clorox Co. 54,371,625
629,800 Colgate-Palmolive Co. 35,977,325
971,300 Gillette Co. 35,938,100
4,866,410 Kimberly-Clark Corp. 282,555,931
1,968,000 Procter & Gamble Co. 117,342,000
496,800 Unilever NV (Netherlands) 22,635,450
----------------
649,287,781
Distribution (0.3%)
-------------------------------------------------------------------------------------------------------------------
2,207,300 SYSCO Corp. 83,049,663
Electric Utilities (4.1%)
-------------------------------------------------------------------------------------------------------------------
2,800,000 Carolina Power & Light Co. 102,375,000
3,585,000 Consolidated Edison, Inc. 126,147,188
2,176,833 Dominion Resources, Inc. 97,957,485
4,058,620 Duke Energy Corp. 233,370,650
3,319,500 Edison International 63,277,969
8,400,000 Entergy Corp. 213,675,000
3,554,800 PG&E Corp. 92,202,625
2,675,000 Public Service Enterprise Group, Inc. 95,965,625
3,303,600 Reliant Energy, Inc. 87,958,350
5,273,300 Texas Utilities Co. 177,644,294
----------------
1,290,574,186
Electrical Equipment (1.2%)
-------------------------------------------------------------------------------------------------------------------
5,034,141 Emerson Electric Co. 276,248,487
2,476,000 Rockwell International Corp. 97,492,500
----------------
373,740,987
Electronics (1.7%)
-------------------------------------------------------------------------------------------------------------------
194,700 Advanced Micro Devices, Inc. (NON) 17,084,925
357,600 American Power Conversion Corp. (NON) 12,627,750
366,100 Atmel Corp. (NON) 17,916,019
416,600 LSI Logic Corp. (NON) 26,037,500
398,000 Micron Technology, Inc. 55,421,500
3,088,300 Motorola, Inc. 367,700,719
189,400 National Semiconductor Corp. (NON) 11,506,050
268,600 SCI Systems, Inc. (NON) 14,302,950
----------------
522,597,413
Energy (1.4%)
-------------------------------------------------------------------------------------------------------------------
265,700 Baker Hughes, Inc. 8,452,581
3,403,700 Halliburton Co. 150,400,994
3,333,200 Schlumberger Ltd. 255,198,125
588,925 Transocean Sedco Forex Inc. 27,679,475
----------------
441,731,175
Entertainment (0.3%)
-------------------------------------------------------------------------------------------------------------------
1,931,258 Viacom, Inc. Class B (NON) 105,012,154
Financial (4.9%)
-------------------------------------------------------------------------------------------------------------------
646,700 American Express Co. 97,045,419
1,250,000 Associates First Capital Corp. 27,734,375
14,616,600 Citigroup, Inc. 868,774,163
453,200 CIT Group, Inc. (The) 7,676,075
6,385,110 Fannie Mae 385,101,947
3,831,200 Household International, Inc. 159,952,600
150,400 MGIC Investment Corp. 7,191,000
157,900 SLM Holding Corp. 4,944,244
----------------
1,558,419,823
Food (1.8%)
-------------------------------------------------------------------------------------------------------------------
798,900 Archer Daniels Midland Co. 7,939,069
124,800 Bestfoods 6,271,200
194,400 Campbell Soup Co. 5,054,400
2,645,000 ConAgra, Inc. 49,924,375
799,500 General Mills, Inc. 29,081,813
3,502,300 Heinz (H.J.) Co. 119,078,200
4,140,000 Kellogg Co. 101,171,250
1,718,600 Quaker Oats Co. (The) 112,031,238
869,800 Ralston-Ralston Purina Group 15,384,588
9,212,802 Sara Lee Corp. 138,192,030
----------------
584,128,163
Health Care Services (2.3%)
-------------------------------------------------------------------------------------------------------------------
370,100 Aetna Inc. 21,419,538
3,615,727 Baxter International, Inc. 235,474,221
318,900 Cardinal Health, Inc. 17,559,431
3,446,322 CIGNA Corp. 274,844,180
1,654,124 Columbia/HCA Healthcare Corp. 47,039,151
4,922,900 Tenet Healthcare Corp. (NON) 125,533,950
95,800 UnitedHealth Group, Inc. 6,388,633
----------------
728,259,104
Household Furniture and Appliances (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,615,500 Newell Rubbermaid Inc. 40,690,406
Insurance (3.3%)
-------------------------------------------------------------------------------------------------------------------
774,000 AFLAC Inc. 37,780,875
6,020,200 Allstate Corp. 142,227,225
4,326,574 American General Corp. 242,288,144
3,040,188 AON Corp. 82,275,088
150,900 AXA Financial, Inc. 4,923,113
2,169,600 Chubb Corp. (The) 138,040,800
98,600 Cincinnati Financial Corp. 3,974,813
3,229,600 Hartford Financial Services Group 168,544,750
106,900 Jefferson-Pilot Corp. 7,115,531
4,865,000 Lincoln National Corp. 169,362,813
257,800 Loews Corp. 14,211,225
80,300 Progressive Corp. (The) 5,254,631
76,200 St. Paul Cos., Inc. 2,714,625
717,000 Torchmark Corp. 17,969,813
----------------
1,036,683,446
Investment Banking/Brokerage (1.9%)
-------------------------------------------------------------------------------------------------------------------
149,200 Franklin Resources, Inc. 4,811,700
492,100 Goldman Sachs Group, Inc. (The) 45,888,325
1,001,300 Lehman Brothers Holding, Inc. 82,169,181
2,527,300 Merrill Lynch & Co., Inc. 257,626,644
1,747,900 Morgan Stanley, Dean Witter, Discover and Co. 134,151,325
1,943,800 Paine Webber Group Inc. 85,284,225
161,100 T. Rowe Price Associates, Inc. 6,141,938
----------------
616,073,338
Lodging/Tourism (0.2%)
-------------------------------------------------------------------------------------------------------------------
982,400 Carnival Corp. Class A 24,437,200
477,900 Royal Caribbean Cruises Ltd. 9,946,294
809,600 Starwood Hotels & Resorts Worldwide, Inc. 23,023,000
----------------
57,406,494
Machinery (0.2%)
-------------------------------------------------------------------------------------------------------------------
896,309 Caterpillar, Inc. 35,348,186
331,100 Dover Corp. 16,824,019
128,600 Ingersoll-Rand Co. 6,036,163
----------------
58,208,368
Manufacturing (0.6%)
-------------------------------------------------------------------------------------------------------------------
3,417,800 Cooper Industries, Inc. 117,273,263
112,800 Danaher Corp. 6,443,700
1,077,380 Illinois Tool Works, Inc. 69,019,656
----------------
192,736,619
Media (1.9%)
-------------------------------------------------------------------------------------------------------------------
11,515,100 Disney (Walt) Productions, Inc. 498,747,769
2,204,000 Seagram Co., Ltd. 119,016,000
----------------
617,763,769
Medical Technology (0.1%)
-------------------------------------------------------------------------------------------------------------------
215,700 Becton, Dickson and Co. 5,527,313
576,900 Boston Scientific Corp. (NON) 15,287,850
604,145 Edwards Lifesciences Corp. 9,062,175
95,100 Stryker Corp. 6,835,313
----------------
36,712,651
Metals (0.4%)
-------------------------------------------------------------------------------------------------------------------
1,314,600 Alcoa Inc. 85,284,675
3,200,000 Freeport-McMoRan Copper & Gold Co., Inc. Class A (NON) 29,600,000
2,450,000 Freeport-McMoRan Copper & Gold Co., Inc. Class B (NON) 23,581,250
----------------
138,465,925
Natural Gas Utilities (1.3%)
-------------------------------------------------------------------------------------------------------------------
2,197,300 El Paso Energy Corp. 93,385,250
974,100 Enron Corp. 67,882,594
2,305,892 Sempra Energy 42,803,120
5,985,360 Williams Cos., Inc. 223,328,745
----------------
427,399,709
Office Equipment & Supplies (--%)
-------------------------------------------------------------------------------------------------------------------
127,600 Pitney Bowes, Inc. 5,215,650
Oil & Gas (8.5%)
-------------------------------------------------------------------------------------------------------------------
122,000 Apache Corp. 5,909,375
5,825,526 BP Amoco PLC ADR (United Kingdom) 297,101,826
2,245,000 Burlington Resources Inc. 88,256,563
2,600,100 Chevron, Inc. 221,333,513
3,165,600 Conoco, Inc. 75,380,850
5,439,568 Conoco, Inc. Class B 135,309,254
13,387,657 Exxon Mobil Corp. 1,040,053,603
1,575,800 Occidental Petroleum Corp. 33,781,213
10,180,100 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 584,083,238
1,663,900 Texaco, Inc. 82,363,050
3,410,000 Tosco Corp. 109,333,125
438,700 Unocal Corp. 14,175,494
235,100 USX-Marathon Group Inc. 5,480,769
----------------
2,692,561,873
Paper & Forest Products (1.3%)
-------------------------------------------------------------------------------------------------------------------
2,625,000 International Paper Co. 96,468,750
3,403,900 Owens-Illinois, Inc. (NON) 45,952,650
1,100,000 Temple Inland, Inc. 55,137,500
3,958,581 Weyerhaeuser Co. 211,536,672
----------------
409,095,572
Pharmaceuticals (9.3%)
-------------------------------------------------------------------------------------------------------------------
10,292,000 Abbott Laboratories 395,598,750
8,195,724 American Home Products Corp. 460,497,242
9,624,782 Bristol-Myers Squibb Co. 504,699,506
1,406,200 Johnson & Johnson 116,011,500
1,484,400 Lilly (Eli) & Co. 114,762,675
10,497,376 Merck & Co., Inc. 729,567,632
10,533,312 Pharmacia Corp. 526,007,274
3,055,100 Schering-Plough Corp. 123,158,719
----------------
2,970,303,298
Photography/Imaging (1.0%)
-------------------------------------------------------------------------------------------------------------------
3,559,404 Eastman Kodak Co. 199,104,161
4,691,800 Xerox Corp. 124,039,463
----------------
323,143,624
Publishing (0.6%)
-------------------------------------------------------------------------------------------------------------------
150,000 Gannett Co., Inc. 9,581,250
177,100 Knight-Ridder, Inc. 8,688,969
2,005,000 McGraw-Hill, Inc. 105,262,500
355,200 New York Times Co. (The) Class A 14,629,800
1,105,900 Tribune Co. 42,991,863
----------------
181,154,382
Railroads (0.8%)
-------------------------------------------------------------------------------------------------------------------
8,479,800 Burlington Northern Santa Fe Corp. 204,575,175
465,400 CSX Corp. 9,744,313
102,500 Kansas City Southern Industries, Inc. 7,367,188
985,800 Union Pacific Corp. 41,526,825
----------------
263,213,501
Real Estate (0.4%)
-------------------------------------------------------------------------------------------------------------------
2,700,000 Equity Residential Properties Trust (R) 122,850,000
Regional Bells (7.1%)
-------------------------------------------------------------------------------------------------------------------
8,411,099 Bell Atlantic Corp. 498,357,616
9,862,900 BellSouth Corp. 480,199,944
5,897,300 GTE Corp. 399,542,075
19,760,347 SBC Communications, Inc. 865,750,203
317,500 U S West, Inc. 22,602,031
----------------
2,266,451,869
Restaurants (0.1%)
-------------------------------------------------------------------------------------------------------------------
203,200 Starbucks Corp. (NON) 6,143,625
176,500 Tricon Global Restaurants, Inc. (NON) 6,023,063
----------------
12,166,688
Retail (3.1%)
-------------------------------------------------------------------------------------------------------------------
3,032,200 Albertsons, Inc. 98,736,013
238,800 Circuit City Stores, Inc. 14,044,425
394,700 Costco Wholesale Corp. (NON) 21,338,469
1,677,000 CVS Corp. 72,949,500
215,500 Dollar General Corp. 4,929,563
4,711,200 Federated Department Stores, Inc. (NON) 160,180,800
12,696,293 K mart Corp. (NON) 103,157,381
2,435,700 Kroger Co. 45,212,681
161,000 Limited, Inc. (The) 7,275,188
2,586,500 Lowe's Cos., Inc. 128,031,750
1,057,000 May Department Stores Co. 29,067,500
872,700 Penney (J.C.) Co., Inc. 12,054,169
2,969,600 Rite Aid Corp. 14,848,000
750,000 Safeway, Inc. (NON) 33,093,750
1,849,800 Sears, Roebuck & Co. 67,748,925
3,020,200 Staples, Inc. (NON) 57,572,563
1,473,500 Target Corp. 98,079,844
1,415,000 TJX Cos., Inc. (The) 27,150,313
----------------
995,470,834
Semiconductor (0.1%)
-------------------------------------------------------------------------------------------------------------------
227,700 Teradyne, Inc. (NON) 25,047,000
Software (0.7%)
-------------------------------------------------------------------------------------------------------------------
1,417,900 BMC Software, Inc. (NON) 66,375,444
2,512,800 Computer Associates International, Inc. 140,245,650
----------------
206,621,094
Technology Services (1.2%)
-------------------------------------------------------------------------------------------------------------------
82,200 Computer Sciences Corp. (NON) 6,704,438
160,700 Convergys Corp. (NON) 7,070,800
4,978,400 Electronic Data Systems Corp. 342,265,000
129,100 Fiserv, Inc. (NON) 5,930,531
339,000 Unisys Corp. (NON) 7,860,563
----------------
369,831,332
Telecommunications (3.2%)
-------------------------------------------------------------------------------------------------------------------
1,491,600 ALLTEL Corp. 99,377,850
13,572,796 AT&T Corp. (SEG) 633,679,913
147,000 CenturyTel, Inc. 3,601,500
4,430,064 Sprint Corp. 272,448,936
----------------
1,009,108,199
Textiles (--%)
-------------------------------------------------------------------------------------------------------------------
157,400 Nike, Inc. 6,837,063
Tobacco (0.7%)
-------------------------------------------------------------------------------------------------------------------
10,558,168 Philip Morris Cos., Inc. 230,959,925
Toys (--%)
-------------------------------------------------------------------------------------------------------------------
741,600 Mattel, Inc. 9,084,600
Transportation Services (--%)
-------------------------------------------------------------------------------------------------------------------
95,800 United Parcel Service, Inc. Class B 6,370,700
Trucks & Parts (--%)
-------------------------------------------------------------------------------------------------------------------
124,200 Johnson Controls, Inc. 7,863,413
Waste Management (0.5%)
-------------------------------------------------------------------------------------------------------------------
10,054,784 Waste Management, Inc. 159,619,696
----------------
Total Common Stocks (cost $27,055,331,730) $ 31,146,345,204
CONVERTIBLE PREFERRED STOCKS (0.1%) (a) (cost $62,398,917)
NUMBER OF SHARES VALUE
-------------------------------------------------------------------------------------------------------------------
1,132,825 K mart Financing I $3.875 cum. cv. pfd. $ 44,746,588
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (--%) (a)
PRINCIPAL AMOUNT VALUE
U.S. Government Agency Mortgage Obligations (--%)
-------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association Pass-Through
Certificates
$ 1,337 11 1/2s, with due dates from March 15, 2010 to
January 15, 2013 $ 1,478
957 11s, January 15, 2010 1,047
135,608 9s, with due dates from December 15, 2004 to
June 15, 2011 140,818
46,688 7 1/2s, April 15, 2007 46,235
178,294 7 1/4s, with due dates from February 15, 2005 to
March 15, 2005 177,007
----------------
Total U.S. Government and Agency Obligations
(cost $350,099) $ 366,585
SHORT-TERM INVESTMENTS (2.7%) (a)
PRINCIPAL AMOUNT VALUE
-------------------------------------------------------------------------------------------------------------------
$ 50,000,000 American Express Credit, effective yield of 6.02%,
May 5, 2000 $ 49,941,472
50,000,000 Asset Securitization Corp., effective yield of 6.03%,
May 8, 2000 49,941,375
50,000,000 Corporate Asset Fdg/cafco, effective yield of 6.20%,
June 8, 2000 49,672,778
50,000,000 Corporate Asset Fdg/cafco, effective yield of 6.03%,
May 22, 2000 49,824,125
50,000,000 Daimlerchrysler NA Hldg., effective yield of 6.00%,
May 3, 2000 49,983,333
50,358,000 Delaware Funding Corp., effective yield of 6.05%,
May 17, 2000 50,222,593
73,000,000 Federal Home Loan Mortgage, effective yield of 5.90%,
May 16, 2000 72,820,542
75,000,000 General Electric Capital, effective yield of 6.01%, May 3, 2000 74,974,958
50,000,000 Household Finance Corp., effective yield of 6.03%,
May 1, 2000 49,974,875
50,000,000 Merrill Lynch & Co., Inc., effective yield of 6.03%,
May 9, 2000 49,907,875
50,000,000 Morgan Stanley Dean Witter & Co., effective yield of 6.05%,
May 25, 2000 49,798,333
100,000,000 Preferred Receivables Fund, effective yield of 6.04%,
May 26, 2000 99,580,556
81,058,000 Thunder Bay Funding Inc., effective yield 6.04%,
May 10, 2000 80,935,602
80,000,000 Interest in $500,000,000 joint repurchase agreement
dated April 28, 2000 with Merrill Lynch due May 1, 2000
with respect to various U.S. Treasury obligations --
maturity value of $80,038,000 effective yield of 5.70% 80,000,000
----------------
Total Short-Term Investments (cost $857,578,417) $ 857,578,417
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $27,975,659,163) (b) $ 32,049,036,794
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $31,862,477,271.
(b) The aggregate identified cost on a tax basis is $28,105,187,595,
resulting in gross unrealized appreciation and depreciation of
$5,959,626,050 and $2,015,776,851, respectively, or net unrealized
appreciation of $3,943,849,199.
(NON) Non-income-producing security.
(SEG) This security was pledged and segregated with the custodian to
cover margin requirements for future contracts at April 30, 2000.
(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.
-----------------------------------------------------------------------------
Futures Contracts Outstanding at April 30, 2000 (Unaudited)
Aggregate Face Expiration Unrealized
Total Value Value Date Appreciation
-----------------------------------------------------------------------------
S&P Index 500
(Long) $409,530,000 $406,726,888 June-00 $2,803,112
-----------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2000 (Unaudited)
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $27,975,659,163) (Note 1) $32,049,036,794
-------------------------------------------------------------------------------------------
Dividends and interest receivable 40,238,603
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 42,380,991
-------------------------------------------------------------------------------------------
Receivable for securities sold 1,027,552,879
-------------------------------------------------------------------------------------------
Total assets 33,159,209,267
Liabilities
-------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 38,171,448
-------------------------------------------------------------------------------------------
Payable for variation margin 2,095,432
-------------------------------------------------------------------------------------------
Payable for securities purchased 1,113,089,879
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 90,916,314
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 32,086,045
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 6,061,245
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 311,431
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 4,945
-------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 13,347,434
-------------------------------------------------------------------------------------------
Other accrued expenses 647,823
-------------------------------------------------------------------------------------------
Total liabilities 1,296,731,996
-------------------------------------------------------------------------------------------
Net assets $31,862,477,271
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $28,355,756,841
-------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (84,517,026)
-------------------------------------------------------------------------------------------
Accumulated net realized loss on investment (Note 1) (484,943,287)
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 4,076,180,743
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $31,862,477,271
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($19,336,203,144 divided by 1,053,965,018 shares) $18.35
-------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $18.35)* $19.47
-------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($10,715,213,997 divided by 592,352,839 shares)** $18.09
-------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($66,704,404 divided by 3,644,987 shares)** $18.30
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($382,170,080 divided by 20,967,073 shares) $18.23
-------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $18.23)* $18.89
-------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($1,362,185,646 divided by 74,127,138 shares) $18.38
-------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of more
than $50,000 and on group sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six months ended April 30, 2000 (Unaudited)
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $231,238) $ 368,568,474
-------------------------------------------------------------------------------------------
Interest 5,798,775
-------------------------------------------------------------------------------------------
Total investment income 374,367,249
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 69,524,242
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 21,620,655
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 356,972
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 29,943
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 24,910,734
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 61,634,334
-------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 202,846
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 1,563,057
-------------------------------------------------------------------------------------------
Reports to shareholders 417,899
-------------------------------------------------------------------------------------------
Auditing 28,600
-------------------------------------------------------------------------------------------
Legal 113,839
-------------------------------------------------------------------------------------------
Postage 1,774,684
-------------------------------------------------------------------------------------------
Other 2,459,139
-------------------------------------------------------------------------------------------
Total expenses 184,636,944
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (3,072,706)
-------------------------------------------------------------------------------------------
Net expenses 181,564,238
-------------------------------------------------------------------------------------------
Net investment income 192,803,011
-------------------------------------------------------------------------------------------
Net realized loss on investments (Notes 1, 3 and 5) (including realized
loss of $49,488,870 on sales of investments in affiliated issuers) (365,570,037)
-------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Notes 1 and 3) (33,700,669)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and futures during the period (1,798,942,800)
-------------------------------------------------------------------------------------------
Net loss on investments (2,198,213,506)
-------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations $(2,005,410,495)
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Six months ended Year ended
April 30 October 31
2000* 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 192,803,011 $ 397,679,695
--------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (399,270,706) 3,307,455,606
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (1,798,942,800) 827,279,618
--------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (2,005,410,495) 4,532,414,919
--------------------------------------------------------------------------------------------------
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net investment income
Class A (189,977,480) (284,957,442)
--------------------------------------------------------------------------------------------------
Class B (68,479,755) (87,688,880)
--------------------------------------------------------------------------------------------------
Class C (276,669) (41,059)
--------------------------------------------------------------------------------------------------
Class M (2,897,354) (4,011,851)
--------------------------------------------------------------------------------------------------
Class Y (16,053,968) (20,574,618)
--------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (1,703,550,813) (1,557,899,919)
--------------------------------------------------------------------------------------------------
Class B (1,131,688,831) (1,254,930,451)
--------------------------------------------------------------------------------------------------
Class C (2,123,896) --
--------------------------------------------------------------------------------------------------
Class M (37,024,157) (34,678,233)
--------------------------------------------------------------------------------------------------
Class Y (129,437,430) (67,577,249)
--------------------------------------------------------------------------------------------------
Increase (decrease) from capital share
transactions (Note 4) (1,865,474,099) 2,047,012,102
--------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (7,152,394,947) 3,267,067,319
Net assets
--------------------------------------------------------------------------------------------------
Beginning of period 39,014,872,218 35,747,804,899
--------------------------------------------------------------------------------------------------
End of period (including distributions in excess of
net investment income of $84,517,026, and undistributed
net investment income of $365,189, respectively) $31,862,477,271 $39,014,872,218
--------------------------------------------------------------------------------------------------
* Unaudited.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS A
---------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share April 30
operating performance (Unaudited) Year ended October 31
---------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $21.10 $20.44 $20.87 $18.27 $15.77 $13.65
---------------------------------------------------------------------------------------------------------------
Investment operations
---------------------------------------------------------------------------------------------------------------
Net investment income .13(c) .28(c) .26(c) .39(c) .43 .46(c)
---------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.06) 2.32 2.15 3.91 3.19 2.50
---------------------------------------------------------------------------------------------------------------
Total from
investment operations (.93) 2.60 2.41 4.30 3.62 2.96
---------------------------------------------------------------------------------------------------------------
Less distributions:
---------------------------------------------------------------------------------------------------------------
From net
investment income (.18) (.28) (.24) (.45) (.40) (.40)
---------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.64) (1.66) (2.60) (1.25) (.72) (.44)
---------------------------------------------------------------------------------------------------------------
Total distributions (1.82) (1.94) (2.84) (1.70) (1.12) (.84)
---------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.35 $21.10 $20.44 $20.87 $18.27 $15.77
---------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
---------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (4.65)* 13.13 12.15 24.95 23.89 23.00
---------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $19,336,203 $22,033,789 $18,814,738 $16,300,523 $11,403,813 $7,859,496
---------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .41* .79 .84 .86 .92 .89
---------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .69* 1.32 1.27 1.95 2.59 3.20
---------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 28.21* 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
---------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share April 30
operating performance (Unaudited) Year ended October 31
---------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.82 $20.19 $20.65 $18.10 $15.63 $13.56
---------------------------------------------------------------------------------------------------------------
Investment operations
---------------------------------------------------------------------------------------------------------------
Net investment income .06(c) .12(c) .11(c) .24(c) .30 .35(c)
---------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.05) 2.29 2.12 3.87 3.17 2.46
---------------------------------------------------------------------------------------------------------------
Total from
investment operations (.99) 2.41 2.23 4.11 3.47 2.81
---------------------------------------------------------------------------------------------------------------
Less distributions:
---------------------------------------------------------------------------------------------------------------
From net
investment income (.10) (.12) (.09) (.31) (.28) (.30)
---------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.64) (1.66) (2.60) (1.25) (.72) (.44)
---------------------------------------------------------------------------------------------------------------
Total distributions (1.74) (1.78) (2.69) (1.56) (1.00) (.74)
---------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.09 $20.82 $20.19 $20.65 $18.10 $15.63
---------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
---------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (5.02)* 12.28 11.28 24.03 23.04 21.91
---------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $10,715,214 $14,777,660 $15,671,371 $13,511,906 $8,692,163 $5,089,359
---------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .78* 1.54 1.59 1.61 1.68 1.64
---------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .32* .57 .52 1.19 1.84 2.42
---------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 28.21* 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>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS C
---------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 July 26, 1999+
operating performance (Unaudited) to October 31
---------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------
Net asset value,
beginning of period $21.08 $22.07
---------------------------------------------------------------------
Investment operations
---------------------------------------------------------------------
Net investment income (c) .05 .02
---------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.05) (.91)
---------------------------------------------------------------------
Total from
investment operations (1.00) (.89)
---------------------------------------------------------------------
Less distributions:
---------------------------------------------------------------------
From net
investment income (.14) (.10)
---------------------------------------------------------------------
From net realized gain
on investments (1.64) --
---------------------------------------------------------------------
Total distributions (1.78) (.10)
---------------------------------------------------------------------
Net asset value,
end of period $18.30 $21.08
---------------------------------------------------------------------
Ratios and supplemental data
---------------------------------------------------------------------
Total return at
net asset value (%)(a) (5.04)* (4.03)*
---------------------------------------------------------------------
Net assets, end of period
(in thousands) $66,704 $21,555
---------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .78* .41*
---------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .29* .12*
---------------------------------------------------------------------
Portfolio turnover (%) 28.21* 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>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS M
-------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share April 30 May 1, 1995+
operating performance (Unaudited) Year ended October 31 to October 31
-------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.97 $20.33 $20.77 $18.21 $15.74 $14.24
-------------------------------------------------------------------------------------------------------------------
Investment operations
-------------------------------------------------------------------------------------------------------------------
Net investment income .08(c) .17(c) .16(c) .28(c) .35 .15(c)
-------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.05) 2.30 2.14 3.89 3.18 1.53
-------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.97) 2.47 2.30 4.17 3.53 1.68
-------------------------------------------------------------------------------------------------------------------
Less distributions:
-------------------------------------------------------------------------------------------------------------------
From net
investment income (.13) (.17) (.14) (.36) (.34) (.18)
-------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.64) (1.66) (2.60) (1.25) (.72) --
-------------------------------------------------------------------------------------------------------------------
Total distributions (1.77) (1.83) (2.74) (1.61) (1.06) (.18)
-------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.23 $20.97 $20.33 $20.77 $18.21 $15.74
-------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
-------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (4.89)* 12.55 11.60 24.29 23.31 11.88*
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $382,170 $479,425 $421,616 $348,129 $132,453 $21,100
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .66* 1.29 1.34 1.36 1.44 .66*
-------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .44* .82 .77 1.39 2.02 1.12*
-------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 28.21* 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
-------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share April 30
operating performance (Unaudited) Year ended October 31
-------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $21.14 $20.47 $20.90 $18.29 $15.78 $13.66
-------------------------------------------------------------------------------------------------------------------
Investment operations
-------------------------------------------------------------------------------------------------------------------
Net investment income .15(c) .33(c) .32(c) .44(c) .47 .49(c)
-------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.06) 2.33 2.14 3.92 3.20 2.50
-------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.91) 2.66 2.46 4.36 3.67 2.99
-------------------------------------------------------------------------------------------------------------------
Less distributions:
-------------------------------------------------------------------------------------------------------------------
From net
investment income (.21) (.33) (.29) (.50) (.44) (.43)
-------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.64) (1.66) (2.60) (1.25) (.72) (.44)
-------------------------------------------------------------------------------------------------------------------
Total distributions (1.85) (1.99) (2.89) (1.75) (1.16) (.87)
-------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.38 $21.14 $20.47 $20.90 $18.29 $15.78
-------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
-------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (4.56)* 13.44 12.40 25.27 24.24 23.28
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,362,186 $1,702,442 $840,080 $700,707 $343,935 $193,292
-------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .28* .54 .59 .61 .68 .64
-------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .82* 1.56 1.52 2.20 2.83 3.14
-------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 28.21* 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
April 30, 2000 (Unaudited)
Note 1
Significant accounting policies
The Putnam Fund for Growth and Income (the "fund") is registered under
the Investment Company Act of 1940, as amended, as a diversified,
open-end management investment company. The fund seeks capital growth
and current income by investing primarily in 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.
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 sale price, or, if no sales are reported -- as in the
case of some securities traded over-the-counter -- the last reported bid
price. Securities quoted in foreign currencies are translated into U.S.
dollars at the current exchange rate. Short-term investments having
remaining maturities of 60 days or less are stated at amortized cost,
which approximates market value. Other investments, including restricted
securities are stated at fair market 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) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns. The potential risk to the fund is that the change in value of
futures and options contracts may not correspond to the change in value
of the hedged instruments. In addition, losses may arise from changes in
the value of the underlying instruments, if there is an illiquid
secondary market for the contracts, or if the counterparty to the
contract is unable to perform. When the contract is closed, the fund
records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed. Realized gains and losses on purchased options are
included in realized gains and losses on investment securities. Futures
contracts are valued at the quoted daily settlement prices established
by the exchange on which they trade. Exchange traded options are valued
at the last sale price, or if no sales are reported, the last bid price
for purchased options and the last ask price for written options.
Options traded over-the-counter are valued using prices supplied by
dealers.
F) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended April 30, 2000, the fund had no borrowings against the line of
credit.
G) 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.
H) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. Reclassifications are made to the fund's capital accounts to
reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations.
Note 2
Management fee, administrative
services, and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.65% of the
first $500 million of average assets, 0.55% of the next $500 million,
0.50% of the next $500 million, 0.45% of the next $5 billion, 0.425% of
the next $5 billion, 0.405% of the next $5 billion, 0.39% of the next $5
billion, 0.38% of the next $5 billion, 0.37% of the next $5 billion,
0.36% of the next $5 billion, 0.35% of the next $5 billion and 0.34%
thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
For the six months ended April 30, 2000, fund expenses were reduced by
$3,072,706 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
$11,412 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
in the fund and are invested in certain Putnam funds until distribution
in accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B, 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 to 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 six months ended April 30, 2000, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $2,912,008 and $49,257
from the sale of class A and class M shares, respectively and
$16,644,676 and $13,416 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 six months ended April 30, 2000, Putnam Mutual Funds Corp.,
acting as underwriter received $58,849 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended April 30, 2000, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $9,670,382,700 and $14,906,750,902, respectively.
There were no purchases and sales of U.S. government obligations.
Note 4
Capital shares
At April 30, 2000, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended April 30, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 147,158,223 $2,713,729,924
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 93,015,933 1,762,357,906
---------------------------------------------------------------------------
240,174,156 4,476,087,830
Shares
repurchased (230,394,840) (4,190,027,900)
---------------------------------------------------------------------------
Net increase 9,779,316 $ 286,059,930
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
Six months ended April 30, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 46,908,270 $857,098,676
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 59,309,905 1,112,126,633
---------------------------------------------------------------------------
106,218,175 1,969,225,309
Shares
repurchased (223,640,189) (4,025,592,556)
---------------------------------------------------------------------------
Net decrease (117,422,014) $(2,056,367,247)
---------------------------------------------------------------------------
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)
---------------------------------------------------------------------------
Six months ended April 30, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 3,010,600 $54,925,644
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 118,722 2,238,663
---------------------------------------------------------------------------
3,129,322 57,164,307
Shares
repurchased (506,695) (9,044,524)
---------------------------------------------------------------------------
Net increase 2,622,627 $48,119,783
---------------------------------------------------------------------------
Year ended October 31, 1999
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
Six months ended April 30, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 2,645,966 $ 48,536,533
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,052,315 38,724,314
---------------------------------------------------------------------------
4,698,281 87,260,847
Shares
repurchased (6,592,817) (118,878,786)
---------------------------------------------------------------------------
Net decrease (1,894,536) $(31,617,939)
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
Six months ended April 30, 2000
---------------------------------------------------------------------------
Class Y Shares Amount
---------------------------------------------------------------------------
Shares sold 10,779,275 $ 197,979,708
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 7,670,746 145,475,103
---------------------------------------------------------------------------
18,450,021 343,454,811
Shares
repurchased (24,859,875) (455,123,437)
---------------------------------------------------------------------------
Net decrease (6,409,854) $(111,668,626)
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
Note 5
Transactions with Affiliated Issuers
Transactions during the six months ended April 30, 2000 with companies
in which the fund owned at least 5% of the voting securities were as
follows:
Purchase Sales Dividend Market
Affiliates cost cost Income Value
---------------------------------------------------------------------------
Name of affiliate
---------------------------------------------------------------------------
Rite Aid Corp. -- $85,072,660 -- $14,848,000
THE PUTNAM FAMILY OF FUNDS
The following is a complete list of Putnam's open-end mutual funds.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Century Growth Fund
New Opportunities Fund
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund *
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund **
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK] **
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
[DBL. DAGGER] Closed to new investors. Some exceptions may apply.
Contact Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
FUND INFORMATION
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
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
Debroah F. Kuenstner
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
SA022-61438 002/881/427/511 6/00
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
---------------------------------------------------------------------------
The Putnam Fund for Growth and Income
Supplement to Semiannual Report dated 4/30/00
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, C, and M shares, which are discussed more extensively in the semiannual
report.
ANNUAL RESULTS AT A GLANCE
---------------------------------------------------------------------------
Total return: NAV
Six months ended 4/30/00 -4.56%
1 year -8.91
5 years 112.75
Annual average 16.30
10 years 284.72
Annual average 14.42
Life of class (since 11/6/57)
Annual average 13.50
---------------------------------------------------------------------------
Share value: NAV
10/31/99 $21.14
4/30/00 $18.38
---------------------------------------------------------------------------
Capital gains
Distributions: No. Income Short-term Long-term Total
9/30/99-3/31/00 2 $0.205 $0.319 $1.318 $1.842
---------------------------------------------------------------------------
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.
