Putnam
Investors
Fund
[LOGO: BOSTON * LONDON * TOKYO]
ANNUAL REPORT
July 31, 1996
Fund highlights
* Each of Putnam Investors Fund's share classes has consistently placed
in the top half of all growth funds tracked by Lipper Analytical
Services, Inc., over 1-, 5-, and 10-year time periods. For the 1-, 5-,
and 10-year periods ended 7/31/96, Lipper ranked the fund's class A
shares 156 of 622 funds (top 26%), 82 of 249 funds (top 33%), and 60
of 161 funds (top 38%), respectively. For 1- and 3-year periods class
B shares (inception date, 3/1/93) ranked 190 of 622 funds (top 31%)
and 157 of 386 funds (top 41%), respectively. For 1-year period, class
M shares (inception date, 12/2/94) ranked 176 of 622 funds (top 29%).*
* "A glance at the fund's portfolio statistics indicates that only
large-cap growth stocks, which are typically less volatile than
small-company stocks, need apply for membership. . . . Large-cap
growth has been one of the best places to be, as investors have
bought virtually anything with a global market presence, seeking to
capitalize on the emerging post-communist markets."
-- Morningstar Mutual Funds, July 19, 1996
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
15 Portfolio holdings
19 Financial statements
*Lipper Analytical Services is an independent research organization that
ranks funds according to total return performance. Rankings vary over
time and do not reflect the effects of sales charges. Past performance
is no indication of future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
Putnam Investors Fund reaped the benefits of a stock market rise that
continued throughout virtually all of the fiscal year ended July 31,
1996. In the final weeks of the period, however, the market delivered a
stern reminder that such advances do not continue without interruption.
The portfolio's significant commitment to stocks of large, established
companies, which tend to be quite resilient in the face of such market
declines, cushioned the impact of this summer's correction. Meaningful
investments in industry sectors that experienced above-average growth
contributed to overall performance. The fund thus was able to close its
books on yet another year of solidly positive results.
During the year, Manuel H. Weiss joined Beth Cotner and David Santos in
the management of your fund. Manny came to Putnam in 1987 as an
investment technologist in the equity group. He has nine years of
investment experience.
The managers' report covering fiscal 1996 and the outlook for the new
fiscal year begins on the following page.
Respectfully yours,
/S/ George Putnam
George Putnam
Chairman of the Trustees
September 18, 1996
Report from the Fund Managers
C. Beth Cotner, lead manager
David J. Santos
Manuel H. Weiss
While much of Putnam Investors Fund's fiscal year, which ended July 31,
1996, encompassed a spectacular rise in the stock market, shareholders
have also had to taste a measure of bitter with the sweet. Throughout
July, investor concern over the prospect of lower-than-expected
corporate earnings contributed to a long-expected market correction.
Despite the sharpness of the correction, the fund's total return at net
asset value for all three share classes for the 12 months ended July 31,
1996, remained well above that of the average growth fund tracked by
Lipper Analytical Services, as noted on page 2. Full performance details
can be found in the performance section on pages 9-11.
Much of the fund's performance momentum can be attributed to heavy
weightings in the financial, consumer services, energy, and retail
areas, as well as to a timely reduction in the portfolio's high-
technology holdings.
* STOCK MARKET RALLY HITS SUMMER SLUMP
The stock market's strength, which endured throughout most of the fiscal
year, was supported by healthy corporate earnings growth, a favorable
interest-rate environment, an upswing in mergers and acquisitions
(especially in the entertainment and financial services industries), and
a significant inflow of cash by individual investors. Classic blue-chip
growth stocks, such as those that make up your portfolio, were
beneficiaries of all four conditions.
Many of the industries that led the stock market's rally in the fiscal
year's first half -- particularly banking, insurance, and health-care --
contributed to performance in the second half. In addition, the rally's
breadth widened to include companies whose fate is tied to the strength
of the economy, such as those in the technology and retail sectors.
Thus, following the market's peak in May, when the Dow Jones Industrial
Average and the Standard & Poor's 500 Index(registered trademark)
reached all-time highs, the stock market began to grow edgy.
As July began, investors were disheartened by disappointing earnings
reports in the technology industry. Negative foreign currency trends
arising from a strong U.S. dollar added to their concerns. A slowdown in
cash flowing into the stock market only compounded the situation. But
the announcement of June's surprisingly strong job market data on July 5
is what truly roiled the financial waters. The Dow plunged 115 points on
that day, one of its largest single-day drops ever.
A decline of such proportions will understandably affect stocks of
virtually all companies. In general, the stocks of small-capitalization
companies, which had experienced a greater run-up in prices than had the
stocks of larger companies during the rally, also lost more ground in
the correction. Your fund's significant stake in large-company stocks
thus cushioned its decline. We believe the greater resilience of larger-
cap stocks can be attributed mainly to the fact that many of the larger
companies are currently meeting or exceeding analysts' expectations or
that their size has enabled them to manage the impact of negative
foreign currency trends better.
* SECTOR STRATEGY: INVESTING AT THE HEART OF FUTURE ECONOMIC GROWTH
[GRAPHIC OMITTED: Horizontal bar chart TOP INDUSTRY SECTORS*]
Insurance and finance 13.6%
Retail 9.5%
Computer services
and software 7.6%
Pharmaceuticals 7.5%
Oil and gas 7.5%
Footnote reads:
*Based on net assets as of 7/31/96. Sector allocations will vary over
time.
Like prudent investors, managers of the best growth companies take a
long-term approach to their businesses. They are willing to spend wisely
to ensure the future, even at the risk of taking an occasional short-
term earnings hit. The most attractive companies typically have a
superior product or a business concept that they bring to the
marketplace and are able to expand their market share over time. By
seeking out larger companies with established track records, strong
financial resources, market dominance, and brand recognition, we believe
this strategy positions your fund to invest at the heart of future
economic growth.
Despite the higher interest-rate environment that prevailed during most
of fiscal 1996, your fund's heavy weighting in financial stocks was a
big contributor to performance. Stocks of money-center banks were among
the portfolio's best-performing holdings, with stocks of such concerns
as BankAmerica Corp., BankBoston Corp., and NationsBank Corp. climbing
20% or more during the fiscal year.
Financial stocks are typically interest-rate sensitive, since higher
interest rates can pinch corporate profits. These companies have offset
this vulnerability in a variety of ways, among them global-growth
strategies, mergers, and cost savings arising out of technologically
driven productivity gains. While these stocks, along with others
discussed in this report, were viewed favorably at the end of the fiscal
year, all portfolio holdings are subject to review and adjustment in
accordance with the fund's investment strategy and may well vary in the
future.
* CYCLICALS, ESPECIALLY RETAILERS, BOLSTER FUND RESULTS
Consumer cyclicals, stocks of companies whose fortunes tend to rise
during economic growth, represent another portfolio sector that has
performed well in the overall market with favorable results for your
fund. Within the category, retailing stocks have enjoyed a significant
comeback after underperforming the market for about three years. Higher
employment and consumer confidence levels, coupled with downsizing and
consolidations by many department stores, have resulted in well-managed
inventory levels and improving profit margins.
Three of the fund's top-performing stocks during the latter half of
fiscal '96 were drawn from the retailing sector. TJX, the parent company
of the nation's two largest off-price apparel operations -- T.J. Maxx
and Marshall's -- was up more than 60% on a year-to-date basis through
July. Similarly, the fund's Gucci shares were up 46%, benefiting from
strong sales activity at the high end of the retail market. Finally
Nike, the premier footwear and sports apparel fashion company, was up
45%, benefiting from heavy investment in research and development as
well as the excitement of the summer Olympics.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
Citicorp
Worldwide corporate and retail banking services provider
Gillette Co.
Global producer of toiletries, pens, and small appliances
Boeing Co.
Leading manufacturer of aircraft and space systems
PepsiCo, Inc.
Major beverage, snack food producer, restaurant operator
Sears, Roebuck & Co.
Major retailer of apparel, electronics, and home furnishings
Microsoft Corp.
Developer and marketer of computer systems and software
Cisco Systems, Inc.
Comprehensive line of computer switching products
Monsanto Co.
Major producer of chemicals, plastics, and pharmaceuticals
Johnson & Johnson
Leading health-care products and pharmaceuticals producer
Pharmacia & Upjohn, Inc.
Worldwide producer of pharmaceuticals
Footnote reads:
These holdings represent 23.5% of the fund's net assets as of 7/31/96.
Portfolio holdings will vary over time.
Technology stocks led this year's stock market boom but faltered in the
final weeks of the period. Earnings for industry leaders such as
Motorola and Hewlett-Packard were less than expected as a result of
sluggish sales. Other technology stocks were assumed to be facing
similar pressures, many without apparent justification. Fortunately we
had trimmed the fund's technology holdings in early July.
The proceeds from the sale of these securities were channeled primarily
into consumer staples. One noteworthy addition to this sector was
Gillette, a new holding that is currently one of the portfolio's 10
largest holdings. This classic blue-chip growth company is an example of
a well-diversified international company responding to the growing
global demand for premium brand name items. Having recently acquired the
largest Russian razor blade company and contemplating a joint venture
with a company in India, Gillette expects its foray into emerging
country markets to provide plenty of buying power for its products for
years to come. This strategic maneuver, we believe, will create
significant growth potential going forward.
* OUTLOOK: POSITIVE FUNDAMENTALS BODE WELL FOR NEW FISCAL YEAR
Following the close of the fund's fiscal year, employment figures for
July suggested that the economy was growing steadily without significant
inflation. The stock market, which began to climb out of its slump in
the final days of the fiscal year, applauded this news as well as a
report that the economy had expanded at a 4.2% annual rate for the
second quarter, more than double its first-quarter rate and its best
showing since 1994. Large-company stocks have been the major
beneficiaries of the market's rebound with many small-company stocks
still struggling. While it's too early to determine whether the market's
correction is over, we believe factors such as strong consumer
confidence, an improving job outlook, and continued earnings growth bode
well for the fund in its new fiscal year.
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 7/31/96, there is no guarantee the fund will
continue to hold these securities in the future.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Investors Fund is designed for investors seeking long-
term growth through quality common stocks, as well as any increased
income resulting from this growth.
This section provides, at a glance, information about your fund's
performance. 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.
TOTAL RETURN FOR PERIODS ENDED 7/31/96
Class A Class B Class M
(inception date) (12/1/25) (3/1/93) (12/2/94)
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------------
1 year 14.32% 7.76% 13.42% 8.44% 13.70% 9.68%
- -----------------------------------------------------------------------
5 years 87.71 76.94 -- -- -- --
Annual average 13.42 12.09 -- -- -- --
- -----------------------------------------------------------------------
10 years 234.32 215.19 -- -- -- --
Annual average 12.83 12.16 -- -- -- --
- -----------------------------------------------------------------------
Life of class -- -- 57.06 54.06 45.86 40.79
Annual average -- -- 14.11 13.47 25.53 22.89
- -----------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 7/31/96
Consumer
Standard & Poor's Price
500 Index Index
- -----------------------------------------------------------------------
1 year 16.47% 2.95%
- -----------------------------------------------------------------------
5 years 89.22 15.27
Annual average 13.60 2.88
- -----------------------------------------------------------------------
10 years 268.20 43.38
Annual average 13.92 3.67
- -----------------------------------------------------------------------
Life of class B 58.23 9.71
Annual average 14.36 2.75
- -----------------------------------------------------------------------
Life of class M 47.21 4.88
Annual average 26.23 2.91
- -----------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustment for taxes payable on reinvested distributions,
or, for class A shares, distribution fees prior to implementation of the
class A distribution plan in 1990. Investment returns and net asset
value will fluctuate so that an investor's shares, when sold, may be
worth more or less than their original cost. POP assumes 5.75% maximum
sales charge for class A shares and 3.50% for class M shares. CDSC for
class B shares assumes the applicable sales charge, with the maximum
being 5%.
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 7/31/86
Starting value (Insert ending Total)
$9,425 Fund's class A shares at POP $31,519
$10,000 S&P 500 Index $36,820
$10,000 Consumer Price Index $14,338
(plot points for 10-year total return mountain chart)
Date/year Fund at POP Index CPI
- --------- ----------- ------ ------
7/31/86 9,425 10,000 10,000
7/31/87 12,358 13,936 10,393
7/31/88 10,551 12,304 10,822
7/31/89 13,434 16,216 11,361
7/31/90 14,818 17,251 11,909
7/31/91 16,791 19,458 12,438
7/31/92 17,545 21,941 12,831
7/31/93 20,921 23,848 13,187
7/31/94 21,617 25,085 13,553
7/31/95 27,573 31,614 13,927
7/31/96 31,519 36,820 14,338
Footnote reads:
Past performance is no assurance of future results. A $10,000
investment in the fund's class B shares at inception on 3/1/93
would have been valued at $15,706 on 7/31/96 ($15,406 with a
redemption at the end of the period). A $10,000 investment in
the fund's class M shares at inception on 12/2/94 would have
been valued at $14,586 at net asset value on 7/31/96 $14,079
at public offering price.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 7/31/96
Class A Class B Class M
- -----------------------------------------------------------------------
Distributions (number) 1 1 1
- -----------------------------------------------------------------------
Income $0.085 $0.041 $0.071
- -----------------------------------------------------------------------
Capital gains
- -----------------------------------------------------------------------
Long-term 1.050 1.050 1.050
- -----------------------------------------------------------------------
Short-term 0.073 0.073 0.073
- -----------------------------------------------------------------------
Total $1.208 $1.164 $1.194
- -----------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- -----------------------------------------------------------------------
7/31/95 $9.05 $9.60 $8.88 $9.02 $9.35
- -----------------------------------------------------------------------
7/31/96 9.07 9.62 8.85 9.00 9.33
- -----------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 6/30/96
(most recent calendar quarter)
Class A Class B Class M
(inception date) (12/1/25) (3/1/93) (12/2/94)
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------------
1 year 25.68% 18.42% 24.81% 19.81% 24.92% 20.58%
- -----------------------------------------------------------------------
5 years 107.63 95.75 -- -- -- --
Annual
average 15.73 14.38 -- -- -- --
- -----------------------------------------------------------------------
10 years 227.93 209.16 -- -- -- --
Annual
average 12.61 11.95 -- -- -- --
- -----------------------------------------------------------------------
Life of
class -- -- 65.05 62.05 53.15 47.83
Annual
average -- -- 16.24 15.60 30.97 28.07
- -----------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns
and net asset value will fluctuate so that an investor's shares, when
sold, may be worth more or less than their original cost.
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 5.75% sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B shares and assumes redemption at the end of
the period. Your fund's CDSC declines from a 5% maximum during the first
year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies.
COMPARATIVE BENCHMARKS
Standard & Poor's 500 Index is an unmanaged list of common stocks that
is frequently used as a general measure of stock market performance. It
assumes reinvestment of all distributions and interest payments and does
not take in account brokerage fees or taxes. Securities in the fund do
not match those in the index 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.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Opportunities Fund
OTC Emerging Growth Fund
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
Intermediate U.S. Government Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds*
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments to help maximize your return and reduce your risk.
The three portfolios:
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENTS+
Putnam money market funds:
California Tax Exempt Money Market Fund
Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts++
* Not available in all states.
+ Relative to above.
++ Not offered by Putnam Investments. Certificates of deposit offer a
fixed rate of return and may be insured up to certain limits by
federal/state agencies. Savings accounts may also be insured up to
certain limits. 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.
Report of independent accountants
For the fiscal year ended July 31, 1996
To the Trustees and Shareholders of
Putnam Investors Fund
We have audited the accompanying statement of assets and liabilities of
Putnam Investors Fund, including the portfolio of investments owned, as
of July 31, 1996, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of July 31, 1996, by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Putnam Investors Fund as of July 31, 1996, the
results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended and the
financial highlights for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
September 16, 1996
<TABLE>
<CAPTION>
Portfolio of investments owned
July 31, 1996
<S> <C> <C> <C>
Common Stocks (96.6%)*
NUMBER OF SHARES VALUE
Aerospace and Defense (2.5%)
- -------------------------------------------------------------------------------------------------------------------------
343,600 Boeing Co. $ 30,408,600
Automotive (0.8%)
- -------------------------------------------------------------------------------------------------------------------------
174,300 General Motors Corp. Class H 9,935,100
Basic Industrial Products (1.2%)
- -------------------------------------------------------------------------------------------------------------------------
330,700 Case Corp. 14,633,475
Building and Construction (0.5%)
- -------------------------------------------------------------------------------------------------------------------------
134,400 Sherwin Williams Co. 6,081,600
Business Equipment and Services (7.0%)
- -------------------------------------------------------------------------------------------------------------------------
505,000 Cisco Systems, Inc. + 26,133,750
170,600 Computer Sciences Corp. + 11,600,800
290,900 Electronic Data Systems Corp. 15,381,338
273,100 First Data Corp. 21,199,388
178,000 Sun Microsystems, Inc. + 9,723,250
---------------
84,038,526
Chemicals (5.1%)
- -------------------------------------------------------------------------------------------------------------------------
261,400 du Pont (E.I.) de Nemours & Co., Ltd. 21,108,050
819,200 Monsanto Co. 25,600,000
366,300 Praxair, Inc. 14,056,763
---------------
60,764,813
Computer Services and Software (7.6%)
- -------------------------------------------------------------------------------------------------------------------------
417,150 Computer Associates Intl., Inc. 21,222,506
182,200 HBO & Co. 11,159,750
247,900 Microsoft Corp. + 29,221,213
334,300 Parametric Technology Corp. + 13,915,238
236,900 PeopleSoft, Inc. + 16,005,556
---------------
91,524,263
Conglomerates (2.2%)
- -------------------------------------------------------------------------------------------------------------------------
125,600 United Technologies Corp. 14,145,700
154,000 Textron, Inc. 12,320,000
---------------
26,465,700
Consumer Non Durables (6.4%)
- -------------------------------------------------------------------------------------------------------------------------
143,100 Clorox Co. 13,004,213
499,200 Gillette Co. 31,761,600
193,900 Nike, Inc. Class B 19,947,463
119,600 Philip Morris Cos., Inc. 12,513,150
---------------
77,226,426
Consumer Services (3.6%)
- -------------------------------------------------------------------------------------------------------------------------
174,900 Gannett Co., Inc. 11,477,813
179,200 Marriott International, Inc. 9,206,400
459,000 Mirage Resorts, Inc. + 10,327,500
225,200 Service Corp. International 12,414,150
---------------
43,425,863
Electronics and Electrical Equipment (2.9%)
- -------------------------------------------------------------------------------------------------------------------------
361,400 Honeywell, Inc. 19,154,200
209,900 Intel Corp. 15,768,738
---------------
34,922,938
Food and Beverages (2.5%)
- -------------------------------------------------------------------------------------------------------------------------
929,000 PepsiCo, Inc. 29,379,625
Insurance and Finance (13.6%)
- -------------------------------------------------------------------------------------------------------------------------
146,300 American International Group, Inc. 13,770,488
309,900 BankBoston Corp. 16,424,700
264,500 BankAmerica Corp. 21,093,875
268,800 Chase Manhattan Corp. (New) 18,681,600
388,400 Citicorp 31,800,250
162,600 Franklin Resources, Inc. 9,105,600
528,000 MBNA Corp. 14,718,000
231,300 NationsBank Corp. 19,862,888
412,650 Travelers Group Inc. 17,434,463
---------------
162,891,864
Medical Supplies and Devices (4.5%)
- -------------------------------------------------------------------------------------------------------------------------
433,300 Abbott Laboratories 19,065,200
179,800 Becton Dickinson & Co. 13,417,575
221,300 Guidant Corp. 11,230,975
205,600 Medtronic, Inc. 9,740,300
---------------
53,454,050
Metals and Mining (0.7%)
- -------------------------------------------------------------------------------------------------------------------------
297,000 Freeport-McMoRan Copper & Gold Co., Inc. Class A 8,241,750
Oil and Gas (7.5%)
- -------------------------------------------------------------------------------------------------------------------------
141,700 British Petroleum Co. PLC ADR (United Kingdom) 15,569,288
204,900 Chevron, Inc. 11,858,588
448,700 Enron Corp. 17,667,563
386,100 Halliburton Co. 20,125,463
152,200 Schlumberger Ltd. 12,176,000
289,600 Sonat, Inc. 12,344,200
---------------
89,741,102
Pharmaceuticals (7.5%)
- -------------------------------------------------------------------------------------------------------------------------
530,200 Johnson & Johnson 25,317,050
240,500 Lilly (Eli) & Co. 13,468,000
247,900 Pfizer, Inc. 17,322,013
546,350 Pharmacia & Upjohn, Inc. 22,536,938
218,400 Warner-Lambert Co. 11,902,800
---------------
90,546,801
Photography (1.9%)
- -------------------------------------------------------------------------------------------------------------------------
298,800 Eastman Kodak Co. 22,297,950
Publishing (1.0%)
- -------------------------------------------------------------------------------------------------------------------------
242,400 Harcourt General, Inc. 11,604,900
Retail (9.5%)
- -------------------------------------------------------------------------------------------------------------------------
521,100 Dayton Hudson Corp. 15,763,275
431,400 Federated Department Stores Inc. + 13,049,850
96,100 Gucci Group (Italy) 5,453,675
227,200 Home Depot, Inc. (The) 11,473,600
611,100 Officemax, Inc. + 8,097,075
401,900 Safeway, Inc. + 14,468,400
713,100 Sears, Roebuck & Co. 29,237,100
180,200 TJX Cos., Inc. (The) 5,428,525
339,900 Walgreen Co. 10,791,825
---------------
113,763,325
Telecommunications (4.9%)
- -------------------------------------------------------------------------------------------------------------------------
213,500 Ascend Communications, Inc. + 10,354,750
150,700 Cascade Communications Corp. + 9,268,050
688,500 MCI Communications Corp. 16,954,304
159,000 Tellabs, Inc. + 9,500,250
474,600 WorldCom, Inc. + 12,280,275
---------------
58,357,629
Transportation (1.1%)
- -------------------------------------------------------------------------------------------------------------------------
163,200 Burlington Northern Santa Fe Corp. 12,872,400
Utilities (2.1%)
- -------------------------------------------------------------------------------------------------------------------------
394,500 GTE Corp. 16,273,125
185,900 SBC Communications, Inc. 9,085,863
---------------
25,358,988
---------------
Total Common Stocks (cost $997,447,539) $ 1,157,937,688
Short-Term Investments (4.1%) *
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------
$20,000,000 Federal Home Loan Mortgage Corp. effective yield of 5.31%, August 12, 1996 $ 19,967,550
2,500,000 Federal National Mortgage Association effective yield of 5.06%, August 29, 1996 2,490,161
26,379,000 Interest in $500,000,000 joint repurchase agreement dated July 31, 1996 with
Lehman Brothers Inc. due August 1, 1996 with respect to various U.S. Treasury
obligations-maturity value of $26,383,140 for an effective yield of 5.65% 26,383,140
---------------
Total Short-Term Investments (cost $48,840,851) $ 48,840,851
- -------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,046,288,390)*** $ 1,206,778,539
- -------------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $1,199,292,062.
*** The aggregate identified cost on a tax basis is $1,046,591,900, resulting in gross unrealized appreciation and
depreciation of $182,014,278 and $21,827,639, respectively, or net unrealized appreciation of $160,186,639.
+ Non-income-producing security.
ADR after the name of a foreign holding stands for American Depository Receipt representing ownership of foreign
securities on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
July 31, 1996
<S> <C>
Assets
- -------------------------------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $1,046,288,390) (Note 1) $1,206,778,539
- -------------------------------------------------------------------------------------------------------------------------
Cash 354
- -------------------------------------------------------------------------------------------------------------------------
Dividends receivable 971,936
- -------------------------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 2,289,020
- -------------------------------------------------------------------------------------------------------------------------
Receivable for securities sold 1,136,192
- -------------------------------------------------------------------------------------------------------------------------
Total assets 1,211,176,041
Liabilities
- -------------------------------------------------------------------------------------------------------------------------
Distributions payable to shareholders 542,052
- -------------------------------------------------------------------------------------------------------------------------
Payable for securities purchased 7,844,232
- -------------------------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 729,777
- -------------------------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,781,552
- -------------------------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 522,093
- -------------------------------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 5,009
- -------------------------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,882
- -------------------------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 312,518
- -------------------------------------------------------------------------------------------------------------------------
Other accrued expenses 144,864
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities 11,883,979
- -------------------------------------------------------------------------------------------------------------------------
Net assets $1,199,292,062
Represented by
- -------------------------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $918,730,140
- -------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 6,575,540
- -------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 113,496,233
- -------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 160,490,149
- -------------------------------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $1,199,292,062
Computation of net asset value and offering price
- -------------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share ($1,104,264,197 divided by 121,759,351 shares) $9.07
- -------------------------------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $9.07)* $9.62
- -------------------------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share ($89,378,144 divided by 10,094,696 shares)** $8.85
- -------------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share ($5,649,721 divided by 627,491 shares) $9.00
- -------------------------------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $9.00)* $9.33
- -------------------------------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more 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 July 31, 1996
<S> <C>
Investment income:
- ---------------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $87,180) $16,536,750
- ---------------------------------------------------------------------------------------------------------
Interest 2,602,467
- ---------------------------------------------------------------------------------------------------------
Total investment income 19,139,217
Expenses:
- ---------------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 6,630,898
- ---------------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,760,045
- ---------------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 32,236
- ---------------------------------------------------------------------------------------------------------
Administrative services (Note 2) 24,306
- ---------------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 2,636,113
- ---------------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 693,408
- ---------------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 24,951
- ---------------------------------------------------------------------------------------------------------
Reports to shareholders 40,948
- ---------------------------------------------------------------------------------------------------------
Registration fees 65,256
- ---------------------------------------------------------------------------------------------------------
Auditing 64,131
- ---------------------------------------------------------------------------------------------------------
Legal 21,842
- ---------------------------------------------------------------------------------------------------------
Postage 82,010
- ---------------------------------------------------------------------------------------------------------
Other 23,954
- ---------------------------------------------------------------------------------------------------------
Total expenses 12,100,098
- ---------------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (276,962)
- ---------------------------------------------------------------------------------------------------------
Net expenses 11,823,136
- ---------------------------------------------------------------------------------------------------------
Net investment income 7,316,081
- ---------------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 191,105,305)
- ---------------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the year (54,557,549)
- ---------------------------------------------------------------------------------------------------------
Net gain on investments 136,547,756
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $143,863,837
- ---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended
July 31
----------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ------------------------------------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $7,316,081 $8,511,599
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 191,105,305 62,213,631
- ------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (54,557,549) 144,813,070
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 143,863,837 215,538,300
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income
Class A (8,965,954) --
- ------------------------------------------------------------------------------------------------------------------------------
Class B (268,401) --
- ------------------------------------------------------------------------------------------------------------------------------
Class M (17,785) --
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (118,598,143) (71,933,078)
- ------------------------------------------------------------------------------------------------------------------------------
Class B (7,315,560) (2,296,405)
- ------------------------------------------------------------------------------------------------------------------------------
Class M (289,673) (3,411)
- ------------------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 185,274,280 57,153,414
- ------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 193,682,601 198,458,820
- ------------------------------------------------------------------------------------------------------------------------------
Net assets
- ------------------------------------------------------------------------------------------------------------------------------
Beginning of year 1,005,609,461 807,150,641
- ------------------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income of
$6,575,540 and $8,443,259, respectively) $1,199,292,062 $1,005,609,461
- ------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout the period)
For the period
December 2, 1994
Year (commencement
ended of operations) to
July 31 July 31
-----------------------------------------------------
1996 1995 1996
-----------------------------------------------------
Class M
-----------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $9.02 $7.78 $8.88
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .05 .01 --
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1.12 1.96 1.13
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.17 1.97 1.13
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income (.07) -- (.04)
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (1.12) (.73) (1.12)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (1.19) (.73) (1.16)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.00 $9.02 $8.85
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 13.70 28.29(a) 13.42
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $5,650 $873 $89,378
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.51 1.56(a) 1.77
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) .16 .29(a) (.09)
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 128.21 96.75 128.21
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial Highlights (continued)
(For a share outstanding throughout the period)
For the period
March 1, 1993
(commencement
of operations) to
Year ended July 31 July 31
-----------------------------------------------------
1995 1994 1993
-----------------------------------------------------
Class B
-----------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $7.78 $8.85 $8.32
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .01 .03 (.03)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1.82 .21 .61
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.83 .24 .58
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income -- (.02) --
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- (.05)
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.73) (1.29) --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.73) (1.31) (.05)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.88 $7.78 $8.85
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 26.46 2.38 6.96(a)
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $47,906 $21,033 $4,789
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.75 1.77 .73(a)
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) .22 .08 (.12)(a)
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 96.75 100.16 134.14
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial Highlights (continued)
(For a share outstanding throughout the period)
Year Ended July 31
-----------------------------------------------------
1996 1995 1994
-----------------------------------------------------
Class A
-----------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $9.05 $7.85 $8.87
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .06 .08 .06
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1.17 1.85 .26
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.23 1.93 .32
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income (.09) -- (.05)
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (1.12) (.73) (1.29)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (1.21) (.73) (1.34)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.07 $9.05 $7.85
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 14.32 27.55 3.33
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $1,104,264 $956,830 $786,118
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.03 .99 .99
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) .69 1.03 .88
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 128.21 96.75 100.16
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial Highlights (continued)
(For a share outstanding throughout the period)
--------------------------------
1993 1992
--------------------------------
--------------------------------
<S> <C> <C>
Net asset value, beginning of period $8.57 $9.20
- ------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) .08 .12
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1.45 .21
- ------------------------------------------------------------------------------------------------------
Total from investment operations 1.53 .33
- ------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------
From net investment income (.04) (.15)
- ------------------------------------------------------------------------------------------------------
In excess of net investment income (.03) --
- ------------------------------------------------------------------------------------------------------
From net realized gain on investments (1.16) (.81)
- ------------------------------------------------------------------------------------------------------
Total distributions (1.23) (.96)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.87 $8.57
- ------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 19.24 4.49
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $804,731 $714,479
- ------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) .90 .94
- ------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets (%) .84 1.33
- ------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 134.14 100.26
- ------------------------------------------------------------------------------------------------------
(a) Not annualized.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expenses to average net assets for the period ended July 31, 1996 includes amounts paid
through expense offset arrangements. Prior period ratios exclude these amounts. (See Note 2.)
</TABLE>
Notes to financial statements
July 31, 1996
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
fund seeks long-term growth of capital and any increased income that
results from this growth by investing primarily in a portfolio
consisting of quality common stocks.
The fund offers class A, class B and class M shares. Class A shares are
sold with a maximum front-end sales charge of 5.75%. Class B shares,
which convert to class A shares after approximately eight years, do not
pay a front-end sales charge, but pay a higher ongoing distribution fee
than class A shares, and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class
M shares are sold with a maximum front-end sales charge of 3.50% and pay
an ongoing distribution fee that is lower than class B shares and higher
than class A shares.
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 the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities. Actual results could differ from those
estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sale price, or, if no sales are reported -- as in the
case of some securities traded over-the-counter -- the last reported bid
price. Short-term investments having remaining maturities of 60 days or
less are stated at amortized cost, which approximates market value.
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 managed by Putnam Investment Management,
Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc., and certain other accounts.
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 an
amount at least equal to the resale price, including accrued interest.
Putnam Management is responsible for determining that the value of these
underlying securities is at all times at least equal to the resale
price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). Interest income is recorded on the accrual basis
and dividend income is recorded on the ex-dividend date, except that
certain dividends from foreign securities are recorded as soon as the
fund is informed of the ex-dividend date.
E) 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. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held and for excise tax on income and capital
gains.
F) 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 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 treatment of losses on wash sale transactions.
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 July 31,
1996, the fund reclassified $68,340 to increase undistributed net
investment income and $68,340 to decrease paid-in-capital. 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
for the quarter. Such fee is based on the following annual rates: 0.65%
of the first $500 million of average net assets, 0.55% of the next $500
million, 0.50% of the next $500 million, and 0.45% of any amount over
$1.5 billion subject, under current law, to reduction in any year by the
amount of certain brokerage commissions and fees (less expenses)
received by affiliates of Putnam Management on the fund's portfolio
transactions.
The fund reimburses Putnam Management 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 wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the year ended July 31, 1996, fund expenses were reduced by $276,962
under expense offset arrangements with PFTC. 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.
Trustees of the fund receive an annual Trustees fee of $2,220 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
The fund adopted a Trustee Fee Deferral Plan (the "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 the fund or in other Putnam funds until distribution
in accordance with the Plan.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plans provide for payments by
the fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%,
1.00% and 1.00% of the average net assets attributable to class A, class
B and class M shares, respectively. The Trustees have approved payment
by the fund at an annual rate of 0.25%, 1.00% and 0.75% of the average
net assets attributable to class A, class B and class M shares,
respectively.
For the year ended July 31, 1996, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $261,049 and $13,169 from the
sale of class A and class M shares, respectively and $66,182 in
contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares. For the year ended July 31, 1996, Putnam Mutual Funds
Corp., acting as underwriter received $1,074 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended July 31, 1996, purchases and sales of investment
securities other than short-term obligations aggregated $1,428,518,760
and $1,382,049,581, respectively. In determining the net gain or loss on
securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Capital shares
At July 31, 1996, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended
July 31, 1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 29,556,382 $268,906,499
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 12,717,866 109,244,237
- ----------------------------------------------------
42,274,248 378,150,736
Shares
repurchased (26,285,050) (239,532,583)
- ----------------------------------------------------
Net increase 15,989,198 $138,618,153
- ----------------------------------------------------
Year ended
July 31, 1995
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 16,107,622 $126,498,124
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,899,073 61,404,571
- ----------------------------------------------------
25,006,695 187,902,695
Shares
repurchased (19,318,250) (152,210,023)
- ----------------------------------------------------
Net increase 5,688,445 $35,692,672
- ----------------------------------------------------
Year ended
July 31, 1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 7,908,988 $70,762,441
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 848,006 7,148,690
- ----------------------------------------------------
8,756,994 77,911,131
Shares
repurchased (4,056,752) (36,084,392)
- ----------------------------------------------------
Net increase 4,700,242 $41,826,739
- ----------------------------------------------------
Year ended
July 31, 1995
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 4,383,126 $34,049,532
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 314,401 2,137,928
- ----------------------------------------------------
4,697,527 36,187,460
Shares
repurchased (2,007,255) (15,512,101)
- ----------------------------------------------------
Net increase 2,690,272 $20,675,359
- ----------------------------------------------------
Year ended
July 31. 1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 821,240 $7,445,792
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 34,478 301,527
- ----------------------------------------------------
855,718 7,747,319
Shares
repurchased (325,063) (2,917,931)
- ----------------------------------------------------
Net increase 530,655 $4,829,388
- ----------------------------------------------------
December 2, 1994
(commencement of
operations) to
July 31, 1995
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 131,458 $1,070,749
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- ----------------------------------------------------
131,458 1,070,749
Shares
repurchased (34,622) (285,366)
- ----------------------------------------------------
Net increase 96,836 $785,383
- ----------------------------------------------------
Results of July 31, 1996, shareholder meeting
(Unaudited)
An annual meeting of shareholders of the fund was held on July 31, 1996.
At the meeting, each of the nominees for Trustees was elected, as
follows:
Votes for Votes withheld
- -----------------------------------------------------------------
Jameson Adkins Baxter 72,326,365 9,365,608
Hans H. Estin 72,353,260 9,338,713
John A. Hill 72,356,644 9,335,329
R.J. Jackson 72,339,794 9,352,179
Elizabeth T. Kennan 72,311,543 9,380,430
Lawrence J. Lasser 72,339,605 9,352,368
Robert E. Patterson 72,356,095 9,335,878
Donald S. Perkins 72,345,937 9,346,036
William F. Pounds 72,351,350 9,340,623
George Putnam 72,346,307 9,345,666
George Putnam, III 72,240,996 9,450,977
E. Shapiro 72,288,683 9,403,290
A.J.C. Smith 72,365,426 9,326,547
W. Nicholas Thorndike 72,341,727 9,350,246
A proposal to ratify Coopers & Lybrand L.L.P. as auditors for the fund
was approved as follows: 72,561,220 votes for, and 913,256 votes
against, with 8,217,497 abstentions and non-broker votes.
A proposal to amend the fund's fundamental investment restriction with
respect to diversification of investments was approved as follows:
64,003,388 votes for, and 6,147,913 votes against, with 11,540,673
abstentions and non-broker votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in the securities of a single issuer was approved
as follows: 67,814,421 votes for, and 7,890,723 votes against, with
11,986,831 abstentions and non-broker votes.
A proposal to amend the fund's fundamental investment restriction with
respect to making loans through purchases of debt obligations,
repurchase agreements and securities loans was approved as follows:
60,037,377 votes for, and 9,551,321 votes against, with 12,103,276
abstentions and non-broker votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in real estate was approved as follows:
61,186,807 votes for, and 8,508,636 votes against, with 11,996,531
abstentions and non-broker votes.
A proposal to amend the fund's fundamental investment restriction with
respect to concentration of its assets was approved as follows:
64,025,001 votes for, and 5,772,807 votes against, with 11,894,169
abstentions and non-broker votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in commodities or commodity contracts was
approved as follows: 59,301,481 votes for, and 10,473,241 votes against,
with 11,917,252 abstentions and non-broker votes.
A proposal to amend the fund's fundamental investment restriction with
respect to underwriting was approved as follows: 62,297,765 votes for,
and 7,126,220 votes against, with 12,267,989 abstentions and non-broker
votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in issuers that have been in operation for
less than three years was approved as follows: 62,543,189 votes for, and
7,274,033 votes against, with 11,874,754 abstentions and non-broker
votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in securities of issuers in which management
of the fund or Putnam Investment Management, Inc. owns securities was
approved as follows: 61,661,399 votes for, and 8,192,511 votes against,
with 11,838,056 abstentions and non-broker votes.
A proposal to eliminate the fund's fundamental investment restriction
which limits the fund's ability to pledge assets was approved as
follows: 59,451,450 votes for, and 10,166,516 votes against, with
12,073,966 abstentions and non-broker votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in restricted securities was approved as
follows: 59,713,349 votes for, and 9,747,140 votes against, with
12,231,443 abstentions and non-broker votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in other investment companies was approved
as follows: 63,396,998 votes for, and 6,508,904 votes against, with
11,791,028 abstentions and non-broker votes.
All tabulations are rounded to nearest whole number.
- -----------------------------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, the fund hereby
designates $1.05 per share as capital gain dividends for its taxable
year ended July 31, 1996.
The fund has designated 41.38% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The Form 1099 you receive in January 1997 will show the tax status of
all distributions paid to your account in calendar 1996.
Fund information
INVESTMENT MANAGEMENT
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT
ACCOUNTANTS
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
John J. Morgan, Jr.
Vice President
C. Beth Cotner
Vice President and Fund Manager
David J. Santos
Vice President and Fund Manager
Manuel H. Weiss
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Investors
Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information, or to request a prospectus, call toll free: 1-800-225-1581.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution, are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board
or any other agency, and involve risk, including the possible loss of
principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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27074-003/307/385 9/96
