The Putnam
Fund for
Growth and
Income
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
10-31-00
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years during
which the global securities markets, the mutual fund industry, and
Putnam itself have experienced tremendous growth and change.
As we look to the future, we are certain that the changes that lie ahead
will be even more breathtaking in their scope. What will not change is
the Trustees' dedication to serving the best interests of our
shareholders.
We are pleased to announce the appointment of Christopher G. Miller to
your fund's management team. Before joining Putnam as an analyst in
1997, Chris was with Analytic TSA Global Asset Management. He is
currently a portfolio manager in the Quantitative Equity Group and has
seven years of investment experience.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
December 20, 2000
REPORT FROM FUND MANAGEMENT
David L. King
Hugh H. Mullin
Christopher G. Miller
The Putnam Fund for Growth and Income applied its value strategy
consistently throughout a tumultuous fiscal year ended October 31, 2000.
The period was marked by extreme volatility and considerable shifting of
market sentiment. From November 1999 through February 2000, growth
stocks, and technology stocks in particular, led the market. Investors
turned away from traditional old-economy companies. As a result, your
fund, which emphasizes undervalued stocks of high-quality, established
companies, struggled to produce even lackluster returns. However, a
shift in investor sentiment following the market correction in early
March caused a broadening of the market. It also lifted valuations for
many of your fund's holdings and enabled the fund to significantly
outperform its benchmark, the S&P 500, between March 10th and the end of
the fiscal period.* We are pleased to report that our disciplined
investment strategy has led the fund to achieve positive returns in 19
of the past 20 fiscal years.+
Total return for 12 months ended 10/31/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
-----------------------------------------------------------------------
3.92% -2.07% 3.14% -1.55% 3.16% 2.23% 3.41% -0.21%
-----------------------------------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 7.
* VALUE STOCKS RETURN TO FAVOR
Several factors were responsible for the long-awaited broadening of the
market and value stocks' return to favor. A painful shakeout of
overpriced technology stocks in March left formerly speculative
investors hungry for safer bets. Disappointed dot-com investors were
drawn to fundamentally strong companies in more mature industries.
These stocks appeared to offer a greater measure of safety, as well
as a history of healthy dividend payments, strong balance sheets,
experienced and effective management, solid earnings and cash flow.
Increased demand for more conservative investments contributed to the
recent favorable performance of value stocks.
*For the period March 10-October 31, 2000, class A share performance at
POP was 13.82% versus the S&P 500 return of 3.17% over the same period.
+At net asset value.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Banking 11.7%
Pharmaceuticals 10.6%
Oil and gas 7.9%
Regional Bells 7.0%
Financial 5.8%
Footnote reads:
*Based on net assets as of 10/31/00. Holdings will vary over time.
The Federal Reserve Board, in an effort to temper a too-hot economy,
raised short-term interest rates a total of six times and 1.75
percentage points over a nine-month period. By the end of the fiscal
year, it was clear that the Fed's moves had indeed slowed economic
growth. The market reacted by rewarding those companies whose revenues
are less sensitive to economic changes -- companies whose goods and
services will be purchased regardless of economic cycles. As a result,
sectors and industries that are traditionally associated with value
investing, including utilities, energy, and financial services, enjoyed
and continue to benefit from a more favorable market environment.
* FUND'S STRENGTH IS BROAD-BASED
Your broadly diversified fund benefited from positive results in many
sectors. During the past seven months in particular, the fund
experienced strong performance from financial, health-care, energy, and
electric and natural gas utilities stocks.
Financial stocks had begun to trade at exceptionally low valuations in
February and March, partly because of the uncertainties caused by a
hostile interest-rate environment but also because the market at the
time preferred rapid-growth stocks. As valuations for financial stocks
became increasingly attractive, your fund selectively increased its
exposure to financial companies with sound fundamentals.
The entire financial sector fell out of favor to such a degree that
stocks of even the leading companies could be purchased at deep
discounts. American International Group, Inc. (AIG) exemplifies such a
company, and is one of several strong additions to the portfolio during
the period. The premier property and casualty insurance company, AIG
specializes in commercial and industrial-insurance coverage. While its
revenues come primarily from the United States and Canada, AIG offers
insurance to more than 100 countries worldwide. Its other business areas
include commodities trading, private banking, mutual fund management,
retirement products, aircraft leasing, and currency swaps.
"The market has broadened and is paying more attention to valuations. We
are optimistic that the fund will be operating in a better style
environment."
-- Hugh H. Mullin, fund co-manager
After midyear, as it became more likely that the Fed had stopped raising
short-term interest rates, financial stocks began to rebound strongly.
Long-time fund holding Fannie Mae, a government-sponsored mortgage
reseller cited in the semiannual report, was among the fund's best
performers. 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 our
outlook may change in the future.
We took advantage of a late 1999 to early 2000 selloff of health-care
and pharmaceutical stocks and purchased a number of high-quality issues
at attractive valuations. Exposure to these sectors grew to represent
about 12% of the portfolio, which benefited the fund handsomely as
health-care companies experienced continued steady growth and rising
valuation levels. We believe these stocks will fare better in a slowing
economic environment. While many remain undervalued, a number are
approaching what we consider to be their true worth.
Among the fund's holdings, Abbott Laboratories, Inc., and Merck & Co.,
Inc., had standout performance during the period. Abbott manufactures
both health-care and consumer products, including pharmaceuticals, drugs
for veterinary use, diagnostic and screening products, infant formulas,
nutritional products including Ensure, and personal care products such
as Selsun Blue shampoo. Merck manufactures a wide range of
pharmaceutical products including ulcer treatments, antibiotics, virus
inhibitors, and vaccines. It is developing treatments for many common
ailments including asthma, arthritis, and depression. The company
provides managed-care and prescription drug services as well.
The story of the utilities sector is similar to that of the financial
sector: prices for stocks of electric and natural gas utilities
companies reached unusually low levels, and then staged a dramatic
comeback, that boosted your fund's returns. The utilities sector has
been the best-performing market sector in the United States this year to
date.
Deregulation, which originally was expected to have a negative impact on
many electric companies by driving the price for power down, in fact had
the opposite effect during the past six months. Companies that owned
power plants and continued to generate electricity did especially well,
as demand for energy peaked in the hot summer months and the price for
power increased accordingly. Deregulation allowed many of these
companies to trade freely on the market, and they were able to generate
strong cash flow and earnings. Demand for power has grown steadily over
the past 20 years and is likely to remain strong.
Reliant Energy, Inc., is one of several fund holdings that benefited
from deregulation. The company provides electricity to about 1.7 million
customers in Texas. Its subsidiary, Reliant Energy Resources, provides
natural gas to millions of customers in Arkansas, Louisiana, Minnesota,
Mississippi, Oklahoma, and Texas. Duke Energy Corp., based in North
Carolina, delivers both electricity and natural gas across the United
States and abroad. It gathers and processes natural gas and operates
both regulated and unregulated businesses. Both Reliant and Duke have
been star performers for the fund during the period. Entergy Corp., is
yet another holding that contributed positively to fund performance. It
provides electrical power to more than two million commercial and
residential customers throughout Arkansas, Texas, Louisiana, and
Mississippi, using nuclear power, natural gas, and coal to generate
electricity.
Strong performers also included Procter & Gamble -- which we purchased
shortly after the stock suffered a significant price decline caused by a
short-term earnings disappointment -- and SBC Communications, one of the
fund's top 10 holdings for more than two years. Both produced
outstanding returns during the second half of the fiscal year.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
ExxonMobil Corp.
Oil and gas
SBC Communications, Inc.
Regional Bells
Merck & Co., Inc.
Pharmaceuticals
Citigroup, Inc.
Financial
IBM Corp.
Computers
Verizon Communications
Regional Bells
Bristol-Myers Squibb Co.
Pharmaceuticals
Royal Dutch Petroleum Co. NV ADR
Netherlands
Oil and gas
Coca-Cola Co.
Beverage
Fannie Mae
Financial
Footnote reads:
These holdings represent 23.5% of the fund's net assets as of 10/31/00.
Portfolio holdings will vary over time.
Your fund's technology and basic materials holdings and its stocks that
are more cyclical in nature did not perform well. The primary reason for
their weak performance is the cooling economy. The fund's exposure in
these areas was not large, but poor returns from these stocks dampened
fund performance. It is important to note that a broadly diversified
fund such as yours will experience both positive and negative influences
as sectors, industries, and stocks rotate in and out of favor.
* PORTFOLIO POSITIONED FOR A SLOWING ECONOMY
We continue to acquire stocks that should do well in a slowing economy.
Stocks that are relatively immune to U.S. economic cycles are currently
desirable, and we have recently added to the portfolio many high-quality
companies with global reach or noncyclical appeal. Among the most
familiar are Coca-Cola, McDonald's, WorldCom, Berkshire Hathaway, and
AIG.
We believe the biggest near-term risk to capital markets is a possible
rise in inflation followed by further Fed tightenings. However, in our
opinion, the likelihood of such events occurring is small. Still, we
remain vigilant and will continue to monitor portfolio risk going
forward.
As always, your fund will continue to exercise its value strategy in all
market environments. We believe that strict adherence to our value
discipline, even when circumstances may be unfavorable, sets the stage
for superior performance when market conditions shift. We hope your
fund's improved performance during the latter half of the fiscal year
will underscore the importance and effectiveness of including value
stocks in a diversified portfolio.
We would like to remind our shareholders that in a slowing economy
investors would do well to adjust their expectations for returns. Going
forward, we believe the equity markets are likely to produce more modest
returns, and certainly the fiscal-year returns for this fund illustrate
that point. We are pleased that the characteristics of value investing
have returned to favor, and we remain optimistic that the fund's
portfolio of high-quality stocks can provide strong returns over the
long term.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 10/31/00, 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 10/31/00
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
------------------------------------------------------------------------------
1 year 3.92% -2.07% 3.14% -1.55% 3.16% 2.23% 3.41% -0.21%
------------------------------------------------------------------------------
5 years 104.08 92.37 96.67 94.67 96.79 96.79 99.06 92.10
Annual average 15.33 13.98 14.48 14.25 14.50 14.50 14.76 13.95
------------------------------------------------------------------------------
10 years 331.80 307.08 300.15 300.15 300.69 300.69 310.43 295.96
Annual average 15.75 15.07 14.87 14.87 14.89 14.89 15.17 14.75
------------------------------------------------------------------------------
Annual average
(life of fund) 13.52 13.37 12.45 12.45 12.67 12.67 12.74 12.64
------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/00
S&P 500 Consumer
Index price index
------------------------------------------------------------------------------
1 year 6.09% 3.45%
------------------------------------------------------------------------------
5 years 166.65 13.14
Annual average 21.66 2.50
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10 years 490.83 30.26
Annual average 19.44 2.68
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Annual average
(life of fund) 12.45 4.31
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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,
if 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.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 10/31/90
Fund's class A S&P 500 Consumer price
Date shares at POP Index index
10/31/90 9,425 10,000 10,000
10/31/91 12,134 13,350 10,292
10/31/92 13,291 14,679 10,622
10/31/93 15,784 16,872 10,914
10/31/94 16,217 17,524 11,199
10/31/95 19,948 22,158 11,513
10/31/96 24,714 27,497 11,858
10/31/97 30,879 36,327 12,105
10/31/98 34,630 44,315 12,277
10/31/99 39,175 55,691 12,592
10/31/00 $40,708 $59,083 $13,026
Footnote reads:
Past performance is no assurance of future results. At the end of the
same time period, a $10,000 investment in the fund's class B and class C
shares would have been valued at $40,015 and $40,069, respectively, and
no contingent deferred sales charges would apply; a $10,000 investment
in the fund's class M shares would have been valued at $41,043 ($39,596
at public offering price). See first page of performance section for
performance calculation method.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 10/31/00
Class A Class B Class C Class M
-------------------------------------------------------------------------
Distributions
(number) 4 4 4 4
-------------------------------------------------------------------------
Income $0.2565 $0.1085 $0.1575 $0.1605
-------------------------------------------------------------------------
Capital gains
Long-term 1.3990 1.3990 1.3990 1.3990
-------------------------------------------------------------------------
Short-term 0.3415 0.3415 0.3415 0.3415
-------------------------------------------------------------------------
Total $1.9970 $1.8490 $1.8980 $1.9010
-------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
-------------------------------------------------------------------------
10/31/99 $21.10 $22.39 $20.82 $21.08 $20.97 $21.73
-------------------------------------------------------------------------
10/31/00 19.81 21.02 19.53 19.75 19.68 20.39
-------------------------------------------------------------------------
Current return (end of period)
-------------------------------------------------------------------------
Current
dividend
rate1 1.82% 1.71% 1.11% 1.22% 1.36% 1.31%
-------------------------------------------------------------------------
Current 30-day
SEC yield2 1.20 1.13 0.50 0.49 0.73 0.70
-------------------------------------------------------------------------
1 Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period..
2 Based only on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 9/30/00 (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
------------------------------------------------------------------------------
1 year 5.71% -0.37% 4.94% 0.17% 4.88% 3.93% 5.20% 1.53%
------------------------------------------------------------------------------
5 years 94.26 83.04 87.05 85.05 87.24 87.24 89.41 82.78
Annual average 14.20 12.85 13.34 13.10 13.36 13.36 13.63 12.82
------------------------------------------------------------------------------
10 years 313.73 289.88 283.31 283.31 283.93 283.93 293.10 279.34
Annual average 15.26 14.58 14.38 14.38 14.40 14.40 14.67 14.26
------------------------------------------------------------------------------
Annual average
(life of fund) 13.46 13.30 12.38 12.38 12.61 12.61 12.67 12.58
------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. They do not take into account any
adjustment for taxes payable on reinvested distributions. Investment
returns and principal value will fluctuate so that an investor's shares
when sold may be worth more or less than their original cost. See first
page of performance section for performance calculation method.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested
all distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge only if the shares are
redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the 5.75% maximum sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B or C shares and assumes redemption at the
end of the period. Your fund's class B CDSC declines from a 5% maximum
during the first year to 1% during the sixth year. After the sixth
year, the CDSC no longer applies. The CDSC for class C shares is 1% for
one year after purchase.
COMPARATIVE BENCHMARKS
Standard & Poor's 500 Composite Stock Price Index is an index of common
stocks frequently used as a general measure of stock market performance.
Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities
in the fund do not match those in the indexes and performance of the
fund will differ. It is not possible to invest directly in an index
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss
for the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that
remain in the portfolio -- any change in unrealized gains or losses over
the period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment income
ratios and portfolio turnover in one summary table, reflecting the five
most recent reporting periods. In a semiannual report, the highlight
table also includes the current reporting period. For open-end funds, a
separate table is provided for each share class.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
The Putnam Fund for Growth and Income
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of The
Putnam Fund for Growth and Income (the "fund") at October 31, 2000, and
the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with
accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the
fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits, which included confirmation of investments owned at
October 31, 2000 by correspondence with the custodian, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 1, 2000
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
October 31, 2000
COMMON STOCKS (98.5%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace/Defense (2.4%)
-------------------------------------------------------------------------------------------------------------------
5,482,600 Boeing Co. $ 371,788,813
1,011,000 General Dynamics Corp. 72,349,688
3,078,200 Lockheed Martin Corp. 110,353,470
3,012,400 United Technologies Corp. 210,303,175
-------------
764,795,146
Airlines (0.1%)
-------------------------------------------------------------------------------------------------------------------
134,900 AMR Corp. (NON) 4,417,975
386,100 Delta Air Lines, Inc. 18,243,225
880,500 Southwest Airlines Co. 25,094,250
-------------
47,755,450
Automotive (1.2%)
-------------------------------------------------------------------------------------------------------------------
224,400 Delphi Automotive Systems Corp. 3,520,275
7,336,075 Ford Motor Co. 191,654,959
2,793,632 General Motors Corp. 173,554,388
136,800 Lear Corp. (NON) 3,727,800
674,200 TRW, Inc. 28,316,400
266,621 Visteon Corp. 4,715,859
-------------
405,489,681
Banking (11.7%)
-------------------------------------------------------------------------------------------------------------------
1,040,000 AmSouth Bancorporation 14,495,000
10,787,389 Bank of America Corp. 518,468,884
4,195,600 Bank of New York Company, Inc. (The) 241,509,225
6,865,743 Bank One Corp. 250,599,620
2,245,000 BB&T Corp. 71,559,375
3,831,045 Charter One Financial, Inc. 87,874,595
5,642,800 Chase Manhattan Corp. 256,747,400
4,002,500 Comerica, Inc. 241,400,781
1,151,450 Fifth Third Bancorp 59,155,744
876,300 First Tennessee National Corp. 20,154,900
5,729,500 First Union Corp. 173,675,469
9,569,500 Firstar Corp. 188,399,531
5,996,597 FleetBoston Financial Corp. 227,870,686
1,319,200 Huntington Bancshares, Inc. 18,963,500
1,947,400 KeyCorp 48,076,438
123,000 M & T Bank Corp. 6,174,600
2,709,100 Mellon Financial Corp. 130,714,075
81,878 Morgan (J.P.) & Co., Inc. 13,550,809
3,488,800 National City Corp. 74,573,100
2,419,100 PNC Financial Services Group 161,777,313
360,600 State Street Corp. 44,981,244
985,000 Summit Bancorp 36,937,500
1,094,900 SunTrust Banks, Inc. 53,444,806
2,385,000 Synovus Financial Corp. 51,426,563
6,163,300 U.S. Bancorp 149,074,819
4,738,700 Washington Mutual, Inc. 208,502,800
8,776,450 Wells Fargo Co. 406,459,341
308,900 Zions Bancorp 17,742,444
-------------
3,774,310,562
Beverage (3.8%)
-------------------------------------------------------------------------------------------------------------------
6,053,930 Anheuser-Busch Cos., Inc. 276,967,298
9,184,800 Coca-Cola Co. 554,532,300
5,076,200 Coca-Cola Enterprises, Inc. 93,275,175
376,100 Fortune Brands, Inc. 11,071,444
274,600 Pepsi Bottling Group, Inc. (The) 9,508,025
5,871,900 PepsiCo, Inc. 284,420,156
-------------
1,229,774,398
Broadcasting (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,378,569 General Motors Corp. - Class H (NON) 44,665,636
Building Materials (--%)
-------------------------------------------------------------------------------------------------------------------
502,000 Masco Corp. 9,381,125
99,900 Vulcan Materials Co. 4,195,800
-------------
13,576,925
Cable Television (0.3%)
-------------------------------------------------------------------------------------------------------------------
1,705,000 Comcast Corp. - Class A (NON) 69,478,750
649,100 USA Networks, Inc. (NON) 13,144,275
-------------
82,623,025
Chemicals (2.7%)
-------------------------------------------------------------------------------------------------------------------
1,497,300 Air Products & Chemicals, Inc. 55,868,006
699,200 Avery Dennison Corp. 35,309,600
6,374,300 Dow Chemical Co. 195,212,938
6,835,897 du Pont (E.I.) de Nemours & Co., Ltd. 310,178,826
1,950,100 Eastman Chemical Co. 83,610,538
236,000 Engelhard Corp. 4,926,500
112,500 Hercules, Inc. 2,060,156
915,655 Minnesota Mining & Manufacturing Co. 88,475,164
1,858,500 PPG Industries, Inc. 82,935,563
260,900 Praxair, Inc. 9,718,525
744,700 Rohm & Haas Co. 22,387,544
-------------
890,683,360
Commercial and Consumer Services (0.2%)
-------------------------------------------------------------------------------------------------------------------
2,208,700 Cendant Corp. (NON) 26,504,400
290,800 Cintas Corp. 13,485,850
109,800 DST Systems, Inc. (NON) 6,766,425
64,900 H&R Block, Inc. 2,316,119
6,958,100 Service Corp. International 16,090,606
-------------
65,163,400
Communications Equipment (--%)
-------------------------------------------------------------------------------------------------------------------
44,300 Scientific-Atlanta, Inc. 3,031,781
Computers (4.6%)
-------------------------------------------------------------------------------------------------------------------
640,800 3Com Corp. (NON) 11,374,200
743,900 Apple Computer, Inc. (NON) 14,552,544
8,101,600 Compaq Computer Corp. 246,369,656
8,057,036 Hewlett-Packard Co. 374,148,609
7,194,786 IBM Corp. 708,686,421
1,194,300 Lexmark International Group, Inc. - Class A (NON) 48,966,300
110,700 NCR Corp. (NON) 4,773,938
308,900 Quantum Corp. (NON) 4,633,500
870,500 Seagate Technology, Inc. (NON) 60,826,188
-------------
1,474,331,356
Conglomerates (2.5%)
-------------------------------------------------------------------------------------------------------------------
79,700 Berkshire Hathaway, Inc., Class B (NON) 167,609,100
2,182,800 Cooper Industries, Inc. 83,492,100
3,557,100 Honeywell International, Inc. 191,416,444
65,800 Textron, Inc. 3,318,788
6,574,500 Tyco International, Ltd. 372,691,969
-------------
818,528,401
Consumer Finance (1.2%)
-------------------------------------------------------------------------------------------------------------------
578,900 Capital One Financial Corp. 36,543,063
3,400,883 Household International, Inc. 171,106,926
3,250,300 MBNA Corp. 122,089,394
474,000 Providian Financial Corp. 49,296,000
-------------
379,035,383
Consumer Goods (2.9%)
-------------------------------------------------------------------------------------------------------------------
2,107,800 Avon Products, Inc. 102,228,300
2,419,300 Clorox Co. 107,961,263
992,100 Colgate-Palmolive Co. 58,295,796
1,735,200 Gillette Co. 60,515,100
3,907,110 Kimberly-Clark Corp. 257,869,260
4,256,400 Procter & Gamble Co. 304,066,575
507,400 Unilever NV (Netherlands) 25,782,263
2,830,200 Unilever PLC (United Kingdom) 19,157,673
-------------
935,876,230
Containers & Packaging (0.1%)
-------------------------------------------------------------------------------------------------------------------
3,034,300 Owens-Illinois, Inc. (NON) 18,016,156
Distribution (0.3%)
-------------------------------------------------------------------------------------------------------------------
2,082,100 SYSCO Corp. 108,659,594
Electric Utilities (3.8%)
-------------------------------------------------------------------------------------------------------------------
137,300 CMS Energy Corp. 3,707,100
2,880,300 Consolidated Edison, Inc. 101,350,556
3,209,000 CP&L Energy, Inc. 129,362,813
1,330,000 Dominion Resources, Inc. 79,218,125
2,770,820 Duke Energy Corp. 239,502,754
3,639,800 Edison International 86,900,225
5,078,500 Entergy Corp. 194,570,031
211,925 Exelon Corp. 12,741,991
1,401,100 FirstEnergy Corp. 36,253,463
2,502,800 NiSource, Inc. 62,413,575
827,100 PG&E Corp. 22,280,006
1,545,000 Public Service Enterprise Group, Inc. 64,117,500
1,450,400 Reliant Energy, Inc. 59,919,650
3,764,500 TXU Corp. 139,521,781
-------------
1,231,859,570
Electrical Equipment (1.0%)
-------------------------------------------------------------------------------------------------------------------
123,000 AVX Corp. 3,520,875
2,853,541 Emerson Electric Co. 209,556,917
2,866,600 Rockwell International Corp. 112,693,213
-------------
325,771,005
Electronics (0.6%)
-------------------------------------------------------------------------------------------------------------------
673,300 Advanced Micro Devices, Inc. (NON) 15,233,413
122,705 Agilent Technologies, Inc. (NON) 5,682,775
335,900 American Power Conversion Corp. (NON) 4,345,706
134,300 Cypress Semiconductor Corp. (NON) 5,027,856
5,130,700 Motorola, Inc. 127,946,831
133,200 National Semiconductor Corp. (NON) 3,463,200
243,900 SCI Systems, Inc. (NON) 10,487,700
234,800 Solectron Corp. (NON) 10,331,200
146,400 Vishay Intertechnology, Inc. (NON) 4,392,000
-------------
186,910,681
Energy (0.8%)
-------------------------------------------------------------------------------------------------------------------
984,500 Baker Hughes, Inc. 33,842,188
55,100 BJ Services Co. (NON) 2,889,306
3,076,900 Halliburton Co. 114,037,606
1,091,300 Schlumberger, Ltd. 83,075,213
491,100 Transocean Sedco Forex, Inc. 26,028,300
-------------
259,872,613
Entertainment (0.3%)
-------------------------------------------------------------------------------------------------------------------
1,768,958 Viacom, Inc., Class B (NON) 100,609,486
Financial (5.8%)
-------------------------------------------------------------------------------------------------------------------
334,200 American Express Co. 20,052,000
2,249,200 Associates First Capital Corp. 83,501,550
16,797,367 Citigroup, Inc. 883,961,438
969,300 CTI Group, Inc. (The) 16,902,169
7,070,210 Fannie Mae 544,406,170
3,745,600 Freddie Mac 224,736,000
645,600 MGIC Investment Corp. 43,981,500
1,200,200 USA Education, Inc. 67,061,175
-------------
1,884,602,002
Food (1.8%)
-------------------------------------------------------------------------------------------------------------------
1,069,320 Archer Daniels Midland Co. 11,762,520
363,000 Campbell Soup Co. 10,617,750
3,209,100 ConAgra, Inc. 68,594,513
2,522,200 Heinz (H.J.) Co. 105,774,763
4,859,200 Kellogg Co. 123,302,200
859,200 Quaker Oats Co. (The) 70,078,500
2,124,100 Ralston-Ralston Purina Group 51,509,425
6,112,502 Sara Lee Corp. 131,800,824
-------------
573,440,495
Gaming & Lottery (0.1%)
-------------------------------------------------------------------------------------------------------------------
600,900 MGM Grand, Inc. 20,768,606
Health Care Services (1.8%)
-------------------------------------------------------------------------------------------------------------------
250,900 Aetna, Inc. 14,505,156
1,915,427 Baxter International, Inc. 157,424,157
395,500 Cardinal Health, Inc. 37,473,625
1,855,522 CIGNA Corp. 226,280,908
538,200 HCA - The Healthcare Corp. 21,494,363
1,247,500 IMS Health, Inc. 29,472,188
708,300 Tenet Healthcare Corp. (NON) 27,845,044
256,100 UnitedHealth Group, Inc. 28,010,938
290,600 Wellpoint Health Networks, Inc. (NON) 33,982,038
-------------
576,488,417
Household Furniture and Appliances (0.1%)
-------------------------------------------------------------------------------------------------------------------
512,000 Newell Rubbermaid, Inc. 9,824,000
194,200 Whirlpool Corp. 8,447,700
-------------
18,271,700
Insurance (3.8%)
-------------------------------------------------------------------------------------------------------------------
651,800 AFLAC, Inc. 47,622,138
4,138,700 Allstate Corp. 166,582,675
3,284,374 American General Corp. 264,392,107
2,489,950 American International Group, Inc. 244,015,100
1,986,200 AON Corp. 82,303,163
1,346,700 Chubb Corp. (The) 113,711,981
274,600 Cincinnati Financial Corp. 10,091,550
185,300 CNA Financial Corp. (NON) 6,763,450
1,604,612 Hartford Financial Services Group 119,443,306
174,400 Jefferson-Pilot Corp. 11,990,000
146,100 John Hancock Financial Services (NON) 4,620,413
2,294,400 Lincoln National Corp. 110,991,600
144,700 Progressive Corp. (The) 14,216,775
647,400 Torchmark Corp. 21,566,513
170,100 UnumProvident Corp. 4,805,325
-------------
1,223,116,096
Investment Banking/Brokerage (2.7%)
-------------------------------------------------------------------------------------------------------------------
284,100 Alliance Capital Management Holding L.P. 13,636,800
55,000 Bear Stearns Companies, Inc. (The) 3,334,375
291,000 E(a)Trade Group, Inc. (NON) 4,237,688
315,300 Franklin Resources, Inc. 13,507,452
1,781,800 Goldman Sachs Group, Inc. (The) 177,845,913
670,400 Lehman Brothers Holdings, Inc. 43,240,800
3,247,600 Merrill Lynch & Co., Inc. 227,332,000
4,274,600 Morgan Stanley, Dean Witter, Discover and Co. 343,303,813
230,400 PaineWebber, Inc. 16,416,000
382,800 Stilwell Financial, Inc. 17,154,225
606,000 T. Rowe Price Associates, Inc. 28,368,375
-------------
888,377,441
Lodging/Tourism (0.2%)
-------------------------------------------------------------------------------------------------------------------
1,771,200 Carnival Corp. - Class A 43,947,900
293,700 Royal Caribbean Cruises, Ltd. 6,608,250
742,800 Starwood Hotels & Resorts Worldwide, Inc. (R) 22,005,450
-------------
72,561,600
Machinery (0.5%)
-------------------------------------------------------------------------------------------------------------------
3,138,109 Caterpillar, Inc. 110,029,947
1,129,800 Dover Corp. 47,945,888
323,000 Ingersoll-Rand Co. 12,193,250
-------------
170,169,085
Manufacturing (0.2%)
-------------------------------------------------------------------------------------------------------------------
247,600 Danaher Corp. 15,629,750
842,580 Illinois Tool Works, Inc. 46,815,851
-------------
62,445,601
Media (1.3%)
-------------------------------------------------------------------------------------------------------------------
1,307,200 Seagram Co., Ltd. 74,673,800
9,923,800 Walt Disney Co. (The) 355,396,088
-------------
430,069,888
Medical Technology (0.2%)
-------------------------------------------------------------------------------------------------------------------
5,800 Bausch & Lomb, Inc. 223,663
552,600 Becton, Dickson and Co. 18,512,100
1,281,000 Boston Scientific Corp. (NON) 20,415,938
50,300 St. Jude Medical, Inc. (NON) 2,766,500
153,500 Stryker Corp. 7,233,688
-------------
49,151,889
Metals (0.3%)
-------------------------------------------------------------------------------------------------------------------
1,480,500 Alcoa, Inc. 42,471,844
3,200,000 Freeport-McMoRan Copper & Gold Co., Inc., Class A (NON) (AFF) 24,800,000
2,450,000 Freeport-McMoRan Copper & Gold Co., Inc., Class B (NON) 19,446,875
-------------
86,718,719
Natural Gas Utilities (1.1%)
-------------------------------------------------------------------------------------------------------------------
1,539,800 El Paso Energy Corp. 96,526,213
1,614,100 Enron Corp. 132,457,081
1,766,692 Sempra Energy 36,548,441
1,875,588 Williams Cos., Inc. 78,423,023
-------------
343,954,758
Office Equipment & Supplies (--%)
-------------------------------------------------------------------------------------------------------------------
341,100 Pitney Bowes, Inc. 10,126,406
Oil & Gas (7.9%)
-------------------------------------------------------------------------------------------------------------------
107,800 Amerada Hess Corp. 6,683,600
101,000 Anadarko Petroleum Corp. 6,469,050
438,400 Apache Corp. 24,249,000
2,985,226 BP Amoco PLC ADR (United Kingdom) 152,059,949
300,300 Burlington Resources, Inc. 10,810,800
3,250,900 Chevron, Inc. 266,980,163
2,214,100 Conoco, Inc. - Class A 57,151,456
4,079,868 Conoco, Inc. - Class B 110,921,411
12,314,657 ExxonMobil Corp. 1,098,313,441
245,200 Kerr-McGee Corp. 16,014,625
1,210,800 Occidental Petroleum Corp. 24,064,650
310,000 Phillips Petroleum Co. 19,142,500
9,554,800 Royal Dutch Petroleum Co. NV ADR (Netherlands) 567,316,250
958,200 Texaco, Inc. 56,593,688
3,271,000 Tosco Corp. 93,632,375
1,172,200 Unocal Corp. 40,001,325
443,400 USX-Marathon Group, Inc. 12,054,938
-------------
2,562,459,221
Paper & Forest Products (1.0%)
-------------------------------------------------------------------------------------------------------------------
148,200 Boise Cascade Corp. 4,251,488
468,900 Georgia Pacific Corp. 12,601,688
2,088,905 International Paper Co. 76,506,146
428,800 Sealed Air Corp. (NON) 20,636,000
320,400 Smurfit-Stone Container Corp. (NON) 4,325,400
1,450,000 Temple Inland, Inc. 64,887,500
3,125,581 Weyerhaeuser Co. 146,706,958
-------------
329,915,180
Pharmaceuticals (10.6%)
-------------------------------------------------------------------------------------------------------------------
8,398,700 Abbott Laboratories, Inc. 443,556,344
6,873,224 American Home Products Corp. 436,449,724
9,696,682 Bristol-Myers Squibb Co. 590,891,559
3,393,300 Johnson & Johnson 312,607,763
2,329,200 Lilly (Eli) & Co. 208,172,250
9,848,676 Merck & Co., Inc. 885,765,298
5,795,912 Pharmacia Corp. 318,775,160
4,521,900 Schering-Plough Corp. 233,725,706
-------------
3,429,943,804
Photography/Imaging (0.5%)
-------------------------------------------------------------------------------------------------------------------
2,413,804 Eastman Kodak Co. 108,319,455
6,041,700 Xerox Corp. 50,976,844
-------------
159,296,299
Publishing (0.7%)
-------------------------------------------------------------------------------------------------------------------
247,700 Dow Jones & Co., Inc. 14,583,338
282,700 Gannett Co., Inc. 16,396,600
238,500 Knight-Ridder, Inc. 11,984,625
1,442,100 McGraw-Hill Cos., Inc. 92,564,794
863,600 New York Times Co. (The) - Class A 31,737,300
1,162,700 Tribune Co. 43,092,569
-------------
210,359,226
Railroads (0.7%)
-------------------------------------------------------------------------------------------------------------------
5,890,400 Burlington Northern Santa Fe Corp. 156,463,750
987,000 CSX Corp. 24,983,438
95,700 Kansas City Southern Industries, Inc. 831,394
275,600 Norfolk Southern Corp. 3,892,850
707,200 Union Pacific Corp. 33,150,000
-------------
219,321,432
Real Estate (--%)
-------------------------------------------------------------------------------------------------------------------
98,000 Boston Properties, Inc. (R) 3,969,000
86,900 Equity Residential Properties Trust (R) 4,089,731
-------------
8,058,731
Regional Bells (7.0%)
-------------------------------------------------------------------------------------------------------------------
9,776,700 BellSouth Corp. 472,336,819
18,630,147 SBC Communications, Inc. 1,074,726,605
12,208,619 Verizon Communications 705,810,786
-------------
2,252,874,210
Restaurants (0.4%)
-------------------------------------------------------------------------------------------------------------------
3,566,800 McDonald's Corp. 110,570,800
445,500 Starbucks Corp. (NON) 19,908,281
346,800 Tricon Global Restaurants, Inc. (NON) 10,404,000
-------------
140,883,081
Retail (2.5%)
-------------------------------------------------------------------------------------------------------------------
3,996,100 Albertsons, Inc. 94,657,619
898,200 Circuit City Stores, Inc. 11,901,150
506,700 Costco Wholesale Corp. (NON) 18,557,888
518,075 Dollar General Corp. 8,030,163
2,401,200 Federated Department Stores, Inc. (NON) 78,189,075
2,726,000 Gap, Inc. (The) 70,364,875
5,021,893 Kmart Corp. (NON) 29,817,490
1,423,900 Kroger Co. (NON) 32,126,744
903,900 Limited, Inc. (The) 22,823,475
2,934,100 Lowe's Cos., Inc. 134,051,694
1,565,600 May Department Stores Co. 41,097,000
263,500 Penney (J.C.) Co., Inc. 3,079,656
234,300 RadioShack Corp. 13,970,138
2,845,000 Rite Aid Corp. (NON) 7,290,313
677,100 Safeway, Inc. (NON) 37,028,906
1,721,200 Sears, Roebuck & Co. 51,171,276
1,435,500 Staples, Inc. (NON) 20,455,875
3,958,000 Target Corp. 109,339,750
88,600 Tiffany & Co. 3,782,113
791,300 TJX Cos., Inc. (The) 21,562,925
-------------
809,298,125
Semiconductor (--%)
-------------------------------------------------------------------------------------------------------------------
351,900 Conexant Systems, Inc. (NON) 9,259,369
119,500 Teradyne, Inc. (NON) 3,734,375
-------------
12,993,744
Software (0.9%)
-------------------------------------------------------------------------------------------------------------------
7,309,200 BMC Software, Inc. (NON) 148,468,125
4,443,800 Computer Associates International, Inc. 141,646,125
38,920 Synavant, Inc. (NON) 177,573
-------------
290,291,823
Technology Services (0.9%)
-------------------------------------------------------------------------------------------------------------------
394,700 Computer Sciences Corp. (NON) 24,866,100
732,900 Convergys Corp. (NON) 31,926,956
4,533,200 Electronic Data Systems Corp. 212,777,075
297,200 Fiserv, Inc. (NON) 15,584,425
102,500 SunGard Data Systems Inc. (NON) 5,240,313
437,900 Unisys Corp. (NON) 5,583,225
-------------
295,978,094
Telecommunications (2.6%)
-------------------------------------------------------------------------------------------------------------------
2,269,400 ALLTEL Corp. 146,234,463
13,431,996 AT&T Corp. (SEG) 311,454,407
274,600 CenturyTel, Inc. 10,572,100
5,351,364 Sprint Corp. (FON Group) 136,459,782
9,645,900 Worldcom, Inc. (NON) 229,090,125
-------------
833,810,877
Textiles (0.1%)
-------------------------------------------------------------------------------------------------------------------
907,000 Nike, Inc. 36,223,313
Tire & Rubber (--%)
-------------------------------------------------------------------------------------------------------------------
58,105 Goodyear Tire & Rubber Co. (The) 1,074,943
Tobacco (1.6%)
-------------------------------------------------------------------------------------------------------------------
13,951,296 Philip Morris Cos., Inc. 510,966,216
Toys (--%)
-------------------------------------------------------------------------------------------------------------------
153,000 Mattel, Inc. 1,979,438
Transportation Services (--%)
-------------------------------------------------------------------------------------------------------------------
182,500 United Parcel Service, Inc. - Class B 11,086,875
Trucks & Parts (0.1%)
-------------------------------------------------------------------------------------------------------------------
379,400 Johnson Controls, Inc. 22,621,725
Waste Management (0.5%)
-------------------------------------------------------------------------------------------------------------------
570,500 Republic Services, Inc. (NON) 7,666,094
8,299,684 Waste Management, Inc. 165,993,680
---------------
173,659,774
---------------
Total Common Stocks (cost $26,068,128,581) $31,884,698,673
<CAPTION>
CONVERTIBLE PREFERRED STOCKS (0.1%) (a) (cost $57,757,667)
NUMBER OF SHARES VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
1,040,000 Kmart Financing I $3.875 cum. cv. pfd. $ 31,200,000
<CAPTION>
CONVERTIBLE BONDS AND NOTES (--%) (a) (cost $5,147,808)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 13,200,000 Rite Aid Corp. cv. sub. notes 5 1/4s, 2002 $ 3,333,000
<CAPTION>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (--%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association
Pass-Through Certificates
$ 1,294 11 1/2s, with due dates from March 15, 2010 to
January 15, 2013 $ 1,436
914 11s, January 15, 2010 1,002
126,751 9s, with due dates from December 15, 2004 to
June 15, 2011 133,128
39,104 7 1/2s, April 15, 2007 39,260
146,706 7 1/4s, with due dates from February 15, 2005 to
March 15, 2005 147,765
---------------
Total U.S. Government and Agency Obligations
(cost $304,064) $ 322,591
<CAPTION>
SHORT-TERM INVESTMENTS (1.6%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 100,000,000 Daimlerchrysler NA Holdings, effective yield of 6.47%,
December 4, 2000 $ 99,406,917
72,807,000 Delaware Funding Corp., effective yield of 6.48%,
December 20, 2000 72,164,842
50,000,000 Dresdner U.S. Finance, Inc., effective yield of 6.47%,
November 14, 2000 49,883,181
100,000,000 Fannie Mae, effective yield 6.37%, December 21, 2000 99,115,278
50,000,000 Federal Home Loan Mortgage Corp., effective yield
of 6.375%, December 7, 2000 49,681,250
38,945,000 Wal-Mart Stores, Inc. (The), effective yield of 6.55%,
November 7, 2000 38,895,399
97,707,000 Interest in $949,877,000 joint repurchase agreement
dated October 31, 2000 with Merrill Lynch, Pierce,
Fenner & Smith, Inc. due November 1, 2000 with respect
to various U.S. Government obligations -- maturity value
of $97,724,913 for an effective yield of 6.60% 97,707,000
---------------
Total Short-Term Investments (cost $506,853,867) $ 506,853,867
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $26,638,191,987) (b) $32,426,408,131
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $32,358,393,907.
(b) The aggregate identified cost on a tax basis is $27,054,892,020,
resulting in gross unrealized appreciation and depreciation of
$7,316,920,332 and $1,945,404,221, respectively, or net unrealized
appreciation of $5,371,516,111.
(NON) Non-income-producing security.
(AFF) Affiliated Companies (Note 5).
(SEG) A portion of this security was pledged and segregated with the
custodian to cover margin requirements for futures contracts at October
31, 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 October 31, 2000
Aggregate Face Expiration Unrealized
Total Value Value Date Depreciation
------------------------------------------------------------------------------
S&P Index 500 (Long) $36,725,100 $36,898,500 Dec-00 $(173,400)
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $26,638,191,987) (Note 1) $32,426,408,131
-------------------------------------------------------------------------------------------
Cash 314
-------------------------------------------------------------------------------------------
Dividends, interest and other receivables 38,691,719
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 31,079,021
-------------------------------------------------------------------------------------------
Receivable for securities sold 13,166,598
-------------------------------------------------------------------------------------------
Receivable for variation margin 739,500
-------------------------------------------------------------------------------------------
Total assets 32,510,085,283
Liabilities
-------------------------------------------------------------------------------------------
Payable for securities purchased 8,614,058
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 89,872,150
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 32,380,361
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 6,612,188
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 636,174
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 18,734
-------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 12,696,927
-------------------------------------------------------------------------------------------
Other accrued expenses 860,784
-------------------------------------------------------------------------------------------
Total liabilities 151,691,376
-------------------------------------------------------------------------------------------
Net assets $32,358,393,907
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $26,432,956,920
-------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 229,402
-------------------------------------------------------------------------------------------
Accumulated net realized gain on investments
and foreign currency transactions (Note 1) 137,164,841
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 5,788,042,744
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $32,358,393,907
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($20,159,272,166 divided by 1,017,446,347 shares) $19.81
-------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $19.81)* $21.02
-------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($10,163,817,206 divided by 520,305,545 shares)** $19.53
-------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($117,762,996 divided by 5,962,796 shares)** $19.75
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($387,087,677 divided by 19,666,356 shares) $19.68
-------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $19.68)* $20.39
-------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($1,530,453,862 divided by 77,111,964 shares) $19.85
-------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of more than
$50,000 and on group sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended October 31, 2000
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Dividend (net of foreign tax of $2,759,913) (Note 5) $693,912,536
-------------------------------------------------------------------------------------------
Interest 21,419,195
-------------------------------------------------------------------------------------------
Total investment income 715,331,731
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 134,491,780
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 39,732,809
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 524,966
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 57,782
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 49,187,368
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 113,096,416
-------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 658,405
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 2,983,652
-------------------------------------------------------------------------------------------
Other 8,768,370
-------------------------------------------------------------------------------------------
Total expenses 349,501,548
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (5,843,208)
-------------------------------------------------------------------------------------------
Net expenses 343,658,340
-------------------------------------------------------------------------------------------
Net investment income 371,673,391
-------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1, 3 and 5) (including realized
loss of $256,563,918 on sales of investments in affiliated issuers) 475,880,979
-------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (55,806,785)
-------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (21,016,738)
-------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and
futures contracts during the year (87,080,799)
-------------------------------------------------------------------------------------------
Net gain on investments 311,976,657
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $683,650,048
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended October 31
---------------------------------
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 371,673,391 $ 397,679,695
--------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 399,057,456 3,307,455,606
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (87,080,799) 827,279,618
--------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 683,650,048 4,532,414,919
--------------------------------------------------------------------------------------------------
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net investment income
Class A (270,190,228) (284,957,442)
--------------------------------------------------------------------------------------------------
Class B (73,685,597) (87,688,880)
--------------------------------------------------------------------------------------------------
Class C (318,774) (41,059)
--------------------------------------------------------------------------------------------------
Class M (3,552,708) (4,011,851)
--------------------------------------------------------------------------------------------------
Class Y (23,434,809) (20,574,618)
--------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (1,809,431,159) (1,557,899,919)
--------------------------------------------------------------------------------------------------
Class B (1,187,446,369) (1,254,930,451)
--------------------------------------------------------------------------------------------------
Class C (2,660,027) --
--------------------------------------------------------------------------------------------------
Class M (39,098,055) (34,678,233)
--------------------------------------------------------------------------------------------------
Class Y (137,166,654) (67,577,249)
--------------------------------------------------------------------------------------------------
Increase (decrease) from capital share
transactions (Note 4) (3,793,143,979) 2,047,012,102
--------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (6,656,478,311) 3,267,067,319
Net assets
--------------------------------------------------------------------------------------------------
Beginning of year 39,014,872,218 35,747,804,899
--------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $229,402 and $365,189, respectively) $32,358,393,907 $39,014,872,218
--------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS A
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $21.10 $20.44 $20.87 $18.27 $15.77
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income .26(c) .28(c) .26(c) .39(c) .43
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .45 2.32 2.15 3.91 3.19
-----------------------------------------------------------------------------------------------------
Total from
investment operations .71 2.60 2.41 4.30 3.62
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.26) (.28) (.24) (.45) (.40)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.74) (1.66) (2.60) (1.25) (.72)
-----------------------------------------------------------------------------------------------------
Total distributions (2.00) (1.94) (2.84) (1.70) (1.12)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $19.81 $21.10 $20.44 $20.87 $18.27
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 3.92 13.13 12.15 24.95 23.89
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $20,159,272 $22,033,789 $18,814,738 $16,300,523 $11,403,813
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .81 .79 .84 .86 .92
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.38 1.32 1.27 1.95 2.59
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 52.23 50.36 78.75 63.88 41.26
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through brokerage service and expense offset
arrangements (Note 2).
(c) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS B
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.82 $20.19 $20.65 $18.10 $15.63
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income .12(c) .12(c) .11(c) .24(c) .30
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .44 2.29 2.12 3.87 3.17
-----------------------------------------------------------------------------------------------------
Total from
investment operations .56 2.41 2.23 4.11 3.47
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.11) (.12) (.09) (.31) (.28)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.74) (1.66) (2.60) (1.25) (.72)
-----------------------------------------------------------------------------------------------------
Total distributions (1.85) (1.78) (2.69) (1.56) (1.00)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $19.53 $20.82 $20.19 $20.65 $18.10
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 3.14 12.28 11.28 24.03 23.04
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $10,163,817 $14,777,660 $15,671,371 $13,511,906 $8,692,163
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.56 1.54 1.59 1.61 1.68
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .64 .57 .52 1.19 1.84
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 52.23 50.36 78.75 63.88 41.26
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through brokerage service and expense offset
arrangements (Note 2).
(c) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS C
--------------------------------------------------------------
For the period
Per-share Year ended July 26, 1999+
operating performance October 31 to October 31
--------------------------------------------------------------
2000 1999
--------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $21.08 $22.07
--------------------------------------------------------------
Investment operations
--------------------------------------------------------------
Net investment income (c) .11 .02
--------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .46 (.91)
--------------------------------------------------------------
Total from
investment operations .57 (.89)
--------------------------------------------------------------
Less distributions:
--------------------------------------------------------------
From net
investment income (.16) (.10)
--------------------------------------------------------------
From net realized gain
on investments (1.74) --
--------------------------------------------------------------
Total distributions (1.90) (.10)
--------------------------------------------------------------
Net asset value,
end of period $19.75 $21.08
--------------------------------------------------------------
Ratios and supplemental data
--------------------------------------------------------------
Total return at
net asset value (%)(a) 3.16 (4.03)*
--------------------------------------------------------------
Net assets, end of period
(in thousands) $117,763 $21,555
--------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.56 .41*
--------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .57 .12*
--------------------------------------------------------------
Portfolio turnover (%) 52.23 50.36
--------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through brokerage service and expense offset
arrangements (Note 2).
(c) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS M
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $20.97 $20.33 $20.77 $18.21 $15.74
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income .16(c) .17(c) .16(c) .28(c) .35
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .45 2.30 2.14 3.89 3.18
-----------------------------------------------------------------------------------------------------
Total from
investment operations .61 2.47 2.30 4.17 3.53
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.16) (.17) (.14) (.36) (.34)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.74) (1.66) (2.60) (1.25) (.72)
-----------------------------------------------------------------------------------------------------
Total distributions (1.90) (1.83) (2.74) (1.61) (1.06)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $19.68 $20.97 $20.33 $20.77 $18.21
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 3.41 12.55 11.60 24.29 23.31
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $387,088 $479,425 $421,616 $348,129 $132,453
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.31 1.29 1.34 1.36 1.44
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .89 .82 .77 1.39 2.02
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 52.23 50.36 78.75 63.88 41.26
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through brokerage service and expense offset
arrangements (Note 2).
(c) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS Y
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $21.14 $20.47 $20.90 $18.29 $15.78
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income .30(c) .33(c) .32(c) .44(c) .47
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .46 2.33 2.14 3.92 3.20
-----------------------------------------------------------------------------------------------------
Total from
investment operations .76 2.66 2.46 4.36 3.67
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.31) (.33) (.29) (.50) (.44)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.74) (1.66) (2.60) (1.25) (.72)
-----------------------------------------------------------------------------------------------------
Total distributions (2.05) (1.99) (2.89) (1.75) (1.16)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $19.85 $21.14 $20.47 $20.90 $18.29
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 4.18 13.44 12.40 25.27 24.24
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,530,454 $1,702,442 $840,080 $700,707 $343,935
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .56 .54 .59 .61 .68
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.63 1.56 1.52 2.20 2.83
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 52.23 50.36 78.75 63.88 41.26
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through brokerage service and expense offset
arrangements (Note 2).
(c) Per share net investment income has been determined on the basis
of the weighted average number of shares outstanding during the period.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 2000
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 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.
Market quotations are not considered to be readily available for certain
debt obligations; such investments are stated at fair value on the basis
of valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size
trading units of such securities using methods based on market
transactions for comparable securities and variable relationships
between securities that are generally recognized by institutional
traders.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Management. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. Putnam Management is responsible for
determining that the value of these underlying securities is at all
times at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). 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. Non-cash dividends, if any, are recorded at the fair
market value of the securities received.
E) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a decline
in value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the
value of a currency in which securities a fund intends to buy are
denominated, when a fund holds cash reserves and short-term
investments). The U.S. dollar value of forward currency contracts is
determined using current forward currency exchange rates supplied by a
quotation service. The market value of the contract will fluctuate with
changes in currency exchange rates. The contract is "marked-to-market"
daily and the change in market value is recorded as an unrealized gain
or loss. When the contract is closed, the fund records a realized gain
or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. The fund
could be exposed to risk if the value of the currency changes
unfavorably, if the counterparties to the contracts are unable to meet
the terms of their contracts or if the fund is unable to enter into a
closing position.
F) 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.
G) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the year ended
October 31, 2000, the fund had no borrowings against the line of credit.
H) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986, as amended. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held nor for excise tax on income
and capital gains.
I) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid at least annually. The amount and character of income and gains
to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. These differences include temporary and permanent
differences of losses on wash sale transactions, nontaxable dividends,
book accretion/amortization adjustments and paydown gains and losses on
mortgage-backed securities. Reclassifications are made to the fund's
capital accounts to reflect income and gains available for distribution
(or available capital loss carryovers) under income tax regulations. For
the year ended October 31, 2000, the fund reclassified $627,062 to
decrease undistributed net investment income and $4,869,959 to increase
paid-in-capital, with a decrease to accumulated net realized gains of
$4,242,897. The calculation of net investment income per share in the
financial highlights table excludes these adjustments.
Note 2
Management fee, administrative
services, and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.65% of the
first $500 million of average assets, 0.55% of the next $500 million,
0.50% of the next $500 million, 0.45% of the next $5 billion, 0.425% of
the next $5 billion, 0.405% of the next $5 billion, 0.39% of the next $5
billion, 0.38% of the next $5 billion, 0.37% of the next $5 billion,
0.36% of the next $5 billion, 0.35% of the next $5 billion, 0.34% of the
next $5 billion, 0.33% of the next $8.5 billion and 0.32% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
For the year ended October 31, 2000, fund expenses were reduced by
$5,843,208 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 $8,763
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 Retail Management, Inc., 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 Retail Management, Inc. 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 year ended October 31, 2000, Putnam Retail Management, Inc.,
acting as underwriter received net commissions of $5,368,122 and $82,819
from the sale of class A and class M shares, respectively, and
$27,066,094 and $36,435 in contingent deferred sales charges from
redemptions of class B and class C shares, respectively. A deferred
sales charge of up to 1% is assessed on certain redemptions of class A
shares. For the year ended October 31, 2000, Putnam Retail Management,
Inc., acting as underwriter received $167,196 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended October 31, 2000, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $17,101,215,533 and $24,165,794,826, respectively. There were
no purchases or sales of U.S. government obligations.
Note 4
Capital shares
At October 31, 2000, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended October 31, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 239,243,878 $4,429,495,487
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 102,020,615 1,932,885,645
---------------------------------------------------------------------------
341,264,493 6,362,381,132
Shares
repurchased (368,003,848) (6,758,766,479)
---------------------------------------------------------------------------
Net decrease (26,739,355) $ (396,385,347)
---------------------------------------------------------------------------
Year ended October 31, 1999
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 274,241,775 $5,835,048,352
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 83,808,178 1,715,528,501
---------------------------------------------------------------------------
358,049,953 7,550,576,853
Shares
repurchased (234,208,186) (4,963,563,711)
---------------------------------------------------------------------------
Net increase 123,841,767 $2,587,013,142
---------------------------------------------------------------------------
Year ended October 31, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 72,873,749 $ 1,335,252,958
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 62,322,675 1,168,430,924
---------------------------------------------------------------------------
135,196,424 2,503,683,882
Shares
repurchased (324,665,732) (5,881,668,446)
---------------------------------------------------------------------------
Net decrease (189,469,308) $(3,377,984,564)
---------------------------------------------------------------------------
Year ended October 31, 1999
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 115,563,035 $ 2,422,650,068
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 61,707,277 1,243,784,059
---------------------------------------------------------------------------
177,270,312 3,666,434,127
Shares
repurchased (243,507,803) (5,109,609,378)
---------------------------------------------------------------------------
Net decrease (66,237,491) $(1,443,175,251)
---------------------------------------------------------------------------
Year ended October 31, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 5,886,487 $108,432,641
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 147,475 2,782,469
---------------------------------------------------------------------------
6,033,962 111,215,110
Shares
repurchased (1,093,526) (19,929,280)
---------------------------------------------------------------------------
Net increase 4,940,436 $ 91,285,830
---------------------------------------------------------------------------
For the period July 26, 1999
(commencement of operations)
to 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
---------------------------------------------------------------------------
Year ended October 31, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 4,230,020 $ 77,879,556
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,191,634 41,347,251
---------------------------------------------------------------------------
6,421,654 119,226,807
Shares
repurchased (9,616,907) (174,948,793)
---------------------------------------------------------------------------
Net decrease (3,195,253) $(55,721,986)
---------------------------------------------------------------------------
Year ended October 31, 1999
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 5,770,379 $122,436,027
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,835,656 37,303,941
---------------------------------------------------------------------------
7,606,035 159,739,968
Shares
repurchased (5,481,217) (115,924,230)
---------------------------------------------------------------------------
Net increase 2,124,818 $ 43,815,738
---------------------------------------------------------------------------
Year ended October 31, 2000
---------------------------------------------------------------------------
Class Y Shares Amount
---------------------------------------------------------------------------
Shares sold 24,670,800 $457,859,091
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,468,330 160,601,463
---------------------------------------------------------------------------
33,139,130 618,460,554
Shares
repurchased (36,564,158) (672,798,466)
---------------------------------------------------------------------------
Net decrease (3,425,028) $(54,337,912)
---------------------------------------------------------------------------
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 year ended October 31, 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 affiliates
-------------------------------------------------------------------------
Freeport-McMoRan Copper &
Gold Co., Inc. - Class A $-- $ 16,907,997 $-- $24,800,000
Rite Aid Corp. -- 334,666,333 -- --
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Totals $-- $351,574,330 $-- $24,800,000
FEDERAL TAX INFORMATION
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the
Fund hereby designates $688,365,358 as capital gain, for its taxable
year ended October 31, 2000.
The fund has designated 100% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The Form 1099 you receive in January 2001 will show the tax status of
all distributions paid to your account in calendar year 2000.
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
Technology Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Fund
Balanced Retirement Fund
Classic Equity 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
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 Growth and Income Fund 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.putnaminvestments.com.
FUND INFORMATION
WEB SITE
www.putnaminvestments.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
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
John A. Hill, 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, III
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
Deborah F. Kuenstner
Vice President
David L. King
Vice President and Fund Manager
Christopher G. Miller
Vice President and Fund Manager
Hugh H. Mullin
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
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
and Putnam's Quarterly Ranking 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.putnaminvestments.com.
Not FDIC Insured, May Lose Value, No Bank Guarantee
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
---------------------
PRST STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
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For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
AN022-66571 002/881/427/511 12/00
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
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The Putnam Fund for Growth and Income
Supplement to annual Report dated 10/31/00
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 annual
report.
ANNUAL RESULTS AT A GLANCE
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Total return for periods ended 10/31/00
NAV
1 year 4.18%
5 years 106.74
Annual average 15.63
10 years 338.98
Annual average 15.94
Life of fund (since class A inception, 11/6/57)
Annual average 13.57
Share value: NAV
10/31/99 $21.14
10/31/00 $19.85
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Distributions: No. Income Capital gains Total
4 $0.3045 $1.7405 $2.0450
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Please note that past performance is not indicative of future results. More
recent returns may be more or less than those shown. Returns shown for class
Y shares for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect the initial
sales charge currently applicable to class A shares. These returns have not
been adjusted to reflect differences in operating expenses which, for class
Y shares, typically are lower than the operating expenses applicable to
class A shares. All returns assume reinvestment of distributions at net
asset value. 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.
