Putnam
Investors
Fund
ANNUAL REPORT
July 31, 1998
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* Putnam Investors Fund's class A shares ranked 67 out of the 908
growth funds tracked by Lipper Analytical Services, Inc., for the
year ended July 31, 1998, placing the fund in the top 10% of its
category.*
* "[Putnam Investors Fund's] mix of growth and risk control places
the fund on the cautious side of large growth. It could nicely
serve investors who want a core holding with a growth bent."
-- Morningstar Mutual Funds, February 6, 1998
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
14 Portfolio holdings
18 Financial statements
* Past performance is not indicative of future results. Lipper
Analytical Services is an industry research firm whose rankings are
based on total return performance, vary over time, and do not
reflect the effects of sales charges. The fund's class A shares
ranked 32 out of 341 and 32 out of 181 for 5- and 10-year
performance, respectively as of 7/31/98. Performance of other share
classes will vary.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
During the fiscal year ended July 31, 1998, Putnam Investors Fund's
performance once again reflected the market's affection for stocks
of large, financially secure, well-established corporations. In
this period of investor uncertainty exacerbated by the Asian
crisis, your fund benefited from both the sustained strength of
large-company stocks and its holdings in several dynamic
industries.
The digital revolution, the introduction of an exciting new array
of pharmaceuticals, consumers' eagerness to open their pocketbooks,
and the changing shape of financial services in the face of
megamergers provided investment themes for your fund during the
period. Semiconductor sales were soft, but the computer software,
cable TV, and telecommunications industries flourished as the world
continued to become wired. Drug companies prospered as an eager
populace increased its spending on medicines for better health and
improved quality of life. Full-service conglomerates began offering
one-stop shopping for financial products.
On the following pages, your fund's management team discusses its
strategies and prospects in this environment.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
September 16, 1998
Report from the Fund Managers
C. Beth Cotner
Manuel H. Weiss
Richard B. England
The U.S. stock market spent most of 1998 celebrating the year of
the large corporation. Investors, seeking a safe haven from
continued turmoil in Asia, bought big-company stocks in droves --
pushing their prices to new highs. Megamergers among the giants of
industry, from automobiles to banks to telecommunications, also
boosted stock prices. It seemed that in today's world of global
competition, a company just couldn't be too big.
With its portfolio of large blue-chip growth stocks, Putnam
Investors Fund was positioned to make the most of this activity.
For the fiscal year ended July 31, 1998, the fund's results for all
three share classes at net asset value were comfortably ahead of
the Standard & Poor's 500 Index. For detailed performance
information, including longer-term returns, please see pages 9 and
10.
* LARGE-CAP STOCKS PREVAIL IN UNCERTAIN MARKET
During the year, large-company growth stocks dramatically
outperformed their smaller counterparts. The S&P/BARRA 500 Growth
Index, which tracks large-cap stocks, posted a gain of 24.91%. The
S&P Midcap 400 Index posted a gain of only 11.21% and the Russell
2000 Index, a commonly used benchmark of small-company stock
performance, gained 2.31% for the period.
Several factors account for the strong performance of large
corporations. The Asian crisis is fueling doubts about the
profitability of U.S. companies, sparking a so-called flight to
quality into big companies that don't export to the region. Widely
held to be relatively safer investments, large companies, in turn,
have attracted investments from overseas - particularly from
European and Japanese investors who typically have been
underinvested in U.S. equities.
Large companies also reported attractive earnings during the course
of the year. New software technology and improved inventory control
systems are increasing corporate cash flows. Many corporations
initiated share buy-back programs, which tend to push stock prices
up. Furthermore, the year 2000 dilemma, which is problematic for
companies with computers reading only a two-digit number for the
calendar year, is generally perceived as less of a problem for
larger companies, which have greater resources to ensure that their
computers operate effectively into the 21st century.
Finally, a merger wave is reshaping corporate America, and
investors are applauding. In the 1980s, mergers represented a
marriage of stronger companies with weaker, more vulnerable
businesses. Companies also purchased smaller successful companies
in order to profit from their innovative products or new
technology. Today we are witnessing large companies merging with
other large companies to gain new products or geographic markets.
This pattern of ever-larger mergers promises to create
megacompanies that are better positioned to meet the competitive
demands of their markets and the global economy.
* HOT AREAS: TECHNOLOGY, HEALTH CARE, FINANCIAL SERVICES, RETAILING
The technology sector may have experienced its share of ups and
downs during the year, but it remains the fastest growing component
of the U.S. economy and accordingly, one of the largest sectors in
your fund's portfolio. Fallout from the crisis in Asia, a slowdown
in the personal computer industry, and the Justice Department's
investigation into distribution of Microsoft's Internet browser had
a chilling effect on technology stocks over the fiscal year.
However, the growth of the Internet, faster PCs, and the
introduction of new products such as high performance cable modems
are keeping expectations high over the longer term. The key is to
be invested in the right businesses, and for your fund, this has
translated into sizable holdings in computer software and
telecommunications equipment.
[GRAPHIC OMITTED: horizontal bar chart of TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Insurance and finance 16.9%
Retail 13.9%
Pharmaceuticals 10.2%
Computer services and software 8.8%
Conglomerates 6.2%
Footnote reads:
* Based on net assets as of 7/31/98. Holdings will vary over time.
Telecommunications is another industry in which the underlying
economics is driving consolidations. Cable operator
Tele-Communications, Inc., announced plans to merge with AT&T, in
an effort to position themselves more favorably for expansion. Both
of the stocks were fund holdings at the time of the announcement
and rallied on the news. We chose to liquidate the AT&T position
and hold TCI, which was trading at a substantial discount to its
merger value. Although this holding, as well as others discussed
in this report, was viewed favorably at the end of the fiscal
period, all are subject to review and adjustment in accordance
with the fund's investment strategy and may vary in the future.
The fund's health-care holdings were bolstered by announcements
from a number of pharmaceutical companies that have developed
blockbuster drugs to meet aging baby boomers' medical problems or
to enhance quality of life. Dubbed lifestyle drugs by the media,
these new treatments are focusing on conditions that include high
cholesterol, arthritis, obesity, and memory loss. Pfizer, Inc.,
Warner-Lambert Co., and Bristol-Myers Squibb rank among the largest
holdings within this portfolio sector as well as within the fund as
a whole. Benefiting from its heavy investment in research and
marketing, Pfizer is enjoying one of the most successful launches
ever with its introduction of Viagra, a treatment for impotency.
The company is also co-marketing Warner-Lambert's
cholesterol-reducing drug Lipitor. With the help of its sales
force, which now ranks as the largest in the U.S. pharmaceutical
industry, Pfizer is poised to become the country's leader in
pharmaceuticals.
With long-term interest rates at their lowest level in 20 years,
financial services holdings were clear winners. Positive trends in
the stock market also contributed to rising stock prices of asset
managers, including fund holdings Morgan Stanley Dean Witter and
insurer SunAmerica. Three of the fund's bank stocks rallied on news
of megamerger announcements in April. Fund holdings The Travelers
Group and BankAmerica Corp. will join with Citicorp and NationsBank
Corp., respectively. In an industry characterized by inefficiencies,
overcapacity, and shrinking profit margins, these companies' efforts
to cut costs, boost competitiveness, and expand the services they
offer resulted in a predictable jump in share prices.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Tyco International Ltd.
Conglomerates
The Travelers Group Inc.
Insurance and finance
Microsoft Corp.
Computer services and software
General Electric Co.
Conglomerates
Warner-Lambert Co.
Pharmaceuticals
Wal-Mart Stores, Inc.
Retail
Lucent Technologies, Inc.
Telecommunications and networking
BankAmerica Corp.
Banks
CVS Corp.
Retail
Pfizer, Inc.
Pharmaceuticals
These holdings represent 26.8% of the fund's net assets as of
7/31/98. Portfolio holdings will vary over time.
Lower interest rates also benefited consumer cyclical stocks,
particularly in the retailing industry. The lowest unemployment
rate in three decades helped fuel steady growth and sent consumer
confidence -- and spending -- soaring. The fund's holdings in
retailers Wal-Mart Stores, TJX Cos., and Dayton Hudson Corp., all
largely insulated from any Asian problems, also performed quite
well.
Our avoidance of semiconductor and energy-related stocks, which are
suffering in the wake of Asia's economic crisis, proved to be an
effective strategy. A rising U.S. dollar and falling Asian
currencies are putting U.S. semiconductor companies under pricing
pressures, a situation that will only worsen if Asian countries
seek to export their way to recovery. In the energy field, low
demand caused by weak Asian economies, high inventories, and an
ever-increasing number of oil fields coming on line are depressing
oil prices and squeezing profits for producers. We have also
avoided the basic industry sector, which includes chemical, steel,
and paper companies, since commodity prices are falling and slowing
demand in Asia could create a higher level of cheap imports.
* LARGE-COMPANY STOCKS MAKE SENSE FOR LONG TERM
Following the close of the fund's fiscal year, stock prices fell
noticeably from their mid-July peaks, sparking talk of a
long-anticipated 20% stock market correction. Some market observers
are interpreting evidence of a slowing economy in the second
quarter as a precursor to more of the same in the second half of
1998. We will be monitoring the data over the next few months to
determine whether the economy is stalling or simply taking a
breather.
In a recent article, Forbes noted that "stamina and endurance, more
than sprinting ability, are the qualities that define the best
marathoners and the best fund investments." We believe your fund's
more conservative approach positions it well for the long term.
We're proud of your fund's record and believe it is well positioned
to meet the challenges of an increasingly volatile stock market.
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 7/31/98, 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. 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.
TOTAL RETURN FOR PERIODS ENDED 7/31/98
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 25.75% 18.52% 24.84% 19.84% 25.14% 20.76%
- ------------------------------------------------------------------------------
5 years 184.01 167.71 172.92 170.92 177.09 167.29
Annual average 23.22 21.77 22.24 22.06 22.61 21.73
- ------------------------------------------------------------------------------
10 years 463.16 430.52 418.02 418.02 432.45 413.86
Annual average 18.87 18.16 17.88 17.88 18.20 17.78
- ------------------------------------------------------------------------------
Annual average
(life of fund) 10.62 10.53 9.53 9.53 9.81 9.76
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 7/31/98
Standard &
Poor's[REGISTRATION MARK] Consumer
500 Index Price Index
- ------------------------------------------------------------------------------
1 year 19.29% 1.68%
- ------------------------------------------------------------------------------
5 years 180.54 13.02
Annual average 22.92 2.48
- ------------------------------------------------------------------------------
10 years 445.10 37.72
Annual average 18.48 3.25
- ------------------------------------------------------------------------------
Annual average
(life of fund) --* 3.08
- ------------------------------------------------------------------------------
* The index did not exist at the time of the fund's inception.
Past performance is no assurance of future results. Returns for
class A and class M shares reflect the current maximum initial
sales charges of 5.75% and 3.50% respectively. Class B share
returns for the 1-, 5-, 10-year and life-of-fund periods reflect
the applicable contingent deferred sales charge (CDSC), which is 5%
in the first year, declines to 1% in the sixth year, and is
eliminated thereafter. Returns shown for class B and class M shares
for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect both
the initial sales charge or CDSC, if any, currently applicable to
each class and in the case of class B and class M shares, the
higher operating expenses applicable to such shares. 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
7/31/88
Fund's class A S&P 500 Consumer Price
Date shares at POP Index Index
7/88 9,420 10,000 10,000
7/89 11,995 13,193 10,498
7/90 13,231 14,050 11,004
7/91 14,993 15,843 11,493
7/92 15,666 17,869 11,856
7/93 18,680 19,429 12,186
7/94 19,302 20,432 12,524
7/95 24,619 25,767 12,869
7/96 28,143 30,036 13,249
7/97 42,189 45,698 13,544
7/98 $53,052 $54,510 $13,772
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
shares would have been valued at $51,802 and no contingent deferred
sales charges would apply; a $10,000 investment in the fund's class
M shares would have been valued at $53,245 ($51,386 at public
offering price).
PRICE AND DISTRIBUTION INFORMATION
12 months ended 7/31/98
Class A Class B Class M
- -----------------------------------------------------------------------
Distributions (number) 1 1 1
- -----------------------------------------------------------------------
Income $0.042 -- $0.017
- -----------------------------------------------------------------------
Capital gains
- -----------------------------------------------------------------------
Long-term 1.031 1.031 1.031
- -----------------------------------------------------------------------
Short-term 0.051 0.051 0.051
- -----------------------------------------------------------------------
Total $1.124 $1.082 $1.099
- -----------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- -----------------------------------------------------------------------
7/31/97 $11.98 $12.71 $11.62 $11.85 $12.28
- -----------------------------------------------------------------------
7/31/98 13.67 14.50 13.17 13.47 13.96
- -----------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 6/30/98
(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 38.86% 30.86% 37.82% 32.82% 38.23% 33.42%
- ------------------------------------------------------------------------
5 years 186.59 170.16 175.30 173.30 179.54 169.67
Annual average 23.44 21.99 22.45 22.27 22.83 21.95
- ------------------------------------------------------------------------
10 years 464.88 432.36 418.98 418.98 433.72 414.92
Annual average 18.90 18.20 17.90 17.90 18.23 17.81
- ------------------------------------------------------------------------
Annual average
(life of fund) 10.65 10.56 9.56 9.56 9.84 9.79
- ------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. 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 M shares have a lower initial sales charge and a higher 12b-1
fee than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus
any liabilities, divided by the number of outstanding shares, not
including any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share
plus the maximum sales charge levied at the time of purchase. POP
performance figures shown here assume the 5.75% maximum sales
charge for class A shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the
time of the redemption of class B shares and assumes redemption at
the end of the period. Your 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 index of common stocks
frequently used as a general measure of stock market performance.
Standard & Poor's/Barra 500 Growth Index* is a
capitalization-weighted index of all common stocks within the S&P
500 with high price-earnings ratios.
Standard & Poor's Midcap 400 Index* is an unmanaged,
capitalization-weighted list of 400 medium-sized companies. Each
affects the index performance in proportion to its market value.
Russell 2000 Index* measures the performance of the 2,000 smallest
companies in the Russell 3000 Index, which represents approximately
11% of the total market capitalization of the Russell 3000 Index.
As of the latest reconstitution, the average market capitalization
was approximately $592.0 million; the median market capitalization
was approximately $500.0 million. The largest company in the index
had an approximate market capitalization of $1,402.7 million.
Consumer Price Index (CPI) is a commonly used measure of inflation;
it does not represent an investment return.
* Securities index performance results 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 index and performance of the fund will differ. It is not
possible to invest directly in an index.
Report of independent accountants
For the fiscal year ended July 31, 1998
To the Trustees and Shareholders of
Putnam Investors Fund
In our opinion, the accompanying statement of assets and
liabilities, including the portfolio of investments owned, 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 Putnam Investors Fund (the "fund") at
July 31, 1998, and the results of its operations, the changes in
its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the
responsibility of the fund's management; our responsibility is to
express an opinion on these financial statements based on our
audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits, which included confirmation of investments owned at July
31, 1998 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 11, 1998
<TABLE>
<CAPTION>
Portfolio of investments owned
July 31, 1998
COMMON STOCKS (96.9%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Advertising (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
744,200 Interpublic Group Cos., Inc. $ 44,838,050
Apparel (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,126,800 Jones Apparel Group, Inc. (NON) 29,437,650
Banks (4.3%)
- --------------------------------------------------------------------------------------------------------------------------
1,167,500 BankAmerica Corp. 104,783,125
637,600 Comerica, Inc. 42,958,300
525,500 Fifth Third Bancorp 32,712,375
319,750 Southtrust Corp. 12,929,891
--------------
193,383,691
Basic Industrial Products (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
644,400 Owens-Illinois, Inc. (NON) 28,434,150
Broadcasting and Cable TV (4.2%)
- --------------------------------------------------------------------------------------------------------------------------
2,078,700 CBS Corp. 70,545,881
1,824,800 Tele-Communications, Inc. Class A (NON) 76,185,400
2,008,400 Tele-Communications TCI Ventures Group, Class A (NON) 39,540,375
--------------
186,271,656
Building and Construction (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
1,377,600 Masco Corp. 39,347,700
Business Equipment and Services (4.5%)
- --------------------------------------------------------------------------------------------------------------------------
624,700 Cisco Systems, Inc. (NON) 59,815,025
366,000 Dell Computer Corp. (NON) 39,745,313
1,186,600 EMC Corp. (NON) 58,143,400
882,800 Pitney Bowes, Inc. 44,581,400
--------------
202,285,138
Communications (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,003,600 MediaOne Group Inc. (NON) 48,486,425
Computer Services and Software (8.8%)
- --------------------------------------------------------------------------------------------------------------------------
1,374,700 BMC Software, Inc. (NON) 67,789,894
777,000 Computer Associates International, Inc. 25,786,688
666,000 Compuware Corp. (NON) 35,839,125
1,714,800 HBO & Co. 50,533,013
348,400 IBM Corp. 46,163,000
1,284,900 Microsoft Corp. (NON) 141,258,694
699,300 PeopleSoft, Inc. (NON) 26,354,869
--------------
393,725,283
Conglomerates (6.2%)
- --------------------------------------------------------------------------------------------------------------------------
1,399,100 General Electric Co. 124,957,119
2,440,700 Tyco International Ltd. 151,170,856
--------------
276,127,975
Consumer Non Durables (3.6%)
- --------------------------------------------------------------------------------------------------------------------------
255,700 Clorox Co. 26,209,250
601,900 Colgate-Palmolive Co. 55,638,131
626,300 Estee Lauder Cos. Class A 40,239,775
503,700 Procter & Gamble Co. 39,981,188
--------------
162,068,344
Consumer Services (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
294,600 America Online, Inc. (NON) 34,468,200
Entertainment (2.2%)
- --------------------------------------------------------------------------------------------------------------------------
619,800 Time Warner, Inc. 55,820,738
616,300 Viacom, Inc. Class B (NON) 42,216,550
--------------
98,037,288
Environmental Control (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
918,200 Waste Management, Inc. (NON) 50,615,775
Food and Beverages (1.3%)
- --------------------------------------------------------------------------------------------------------------------------
922,900 Coca-Cola Enterprises, Inc. 30,398,019
542,200 Sara Lee Corp. 27,177,775
--------------
57,575,794
Health Care Services (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
409,100 Cardinal Health, Inc. 39,299,169
1,397,900 HEALTHSOUTH Corp. (NON) 35,122,238
443,000 Quintiles Transnational Corp. (NON) 20,184,188
--------------
94,605,595
Industrial Equipment (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
729,400 Ingersoll-Rand Co. 32,230,363
Insurance and Finance (16.9%)
- --------------------------------------------------------------------------------------------------------------------------
831,700 American Express Co. 91,798,888
509,200 American International Group, Inc. 76,793,725
282,800 Associates First Capital Corp. 21,970,025
473,200 Chase Manhattan Corp. 35,785,750
1,127,100 Conseco, Inc. 47,338,200
697,000 Equitable Companies, Inc. (The) 52,318,563
1,121,900 Federal Home Loan Mortgage Corp. 53,009,775
511,700 Firstar Corp. 25,553,019
1,479,400 MBNA Corp. 49,559,900
149,100 Morgan (J.P.) & Co., Inc. 18,786,600
743,800 Morgan Stanley, Dean Witter, Discover and Co. 64,757,088
548,900 Norwest Corp. 19,726,094
141,700 Star Banc Corp. 9,901,288
780,000 SunAmerica, Inc. 47,921,250
2,141,100 Travelers Group Inc. 143,453,700
--------------
758,673,865
Lodging (1.1%)
- ---------------------------------------------------------------------------------------------------------------------------
1,359,200 Carnival Corp. Class A 50,205,450
Medical Supplies and Devices (0.4%)
- ---------------------------------------------------------------------------------------------------------------------------
195,300 McKesson Corp. 15,746,063
Oil and Gas (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
25,300 Cooper Cameron Corp. (NON) 887,081
738,800 Exxon Corp. 51,808,350
184,400 Western Atlas, Inc. (NON) 12,066,675
--------------
64,762,106
Pharmaceuticals (10.2%)
- --------------------------------------------------------------------------------------------------------------------------
731,300 Bristol-Myers Squibb Co. 83,322,494
316,400 Lilly (Eli) & Co. 21,277,900
351,800 Merck & Co., Inc. 43,381,338
884,700 Pfizer, Inc. 97,317,000
935,500 Schering-Plough Corp. 90,509,625
1,586,000 Warner-Lambert Co. 119,842,125
--------------
455,650,482
Publishing (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
693,900 Gannett Co., Inc. 44,366,231
Retail (13.9%)
- --------------------------------------------------------------------------------------------------------------------------
1,321,500 Costco Companies, Inc. (NON) 74,995,125
2,387,700 CVS Corp. 97,895,700
1,710,800 Dayton Hudson Corp. 81,797,625
1,476,300 Home Depot, Inc. (The) 61,820,063
978,300 Office Depot, Inc. (NON) 31,794,750
1,290,500 Safeway, Inc. (NON) 57,185,281
1,960,400 TJX Cos., Inc. (The) 46,069,400
1,774,300 Wal-Mart Stores, Inc. 112,002,688
1,367,700 Walgreen Co. 59,067,544
--------------
622,628,176
Telecommunications (2.4%)
- --------------------------------------------------------------------------------------------------------------------------
550,600 Ascend Communications, Inc. (NON) 24,484,494
487,900 Northern Telecom Ltd. (Canada) 28,664,125
1,036,300 WorldCom, Inc. (NON) 54,794,363
--------------
107,942,982
Telecommunications and Networking (4.6%)
- --------------------------------------------------------------------------------------------------------------------------
1,165,600 Lucent Technologies, Inc. 107,745,141
708,500 Sprint Corp. 49,595,000
642,600 Tellabs, Inc. (NON) 48,375,731
--------------
205,715,872
Utilities (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
788,000 Airtouch Communications, Inc. (NON) 46,344,250
--------------
Total Common Stocks (cost $3,264,476,297) $4,343,974,554
SHORT-TERM INVESTMENTS (3.4%) (a)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$25,000,000 Ciesco L.P. effective yield of 5.52%, August 14, 1998 $ 24,950,167
25,000,000 Federal Home Loan Mortgage Corp. effective yield
of 5.44%, September 21, 1998 24,807,333
25,000,000 Federal Home Loan Mortgage Corp. effective yield
of 5.43%, August 31, 1998 24,886,875
25,000,000 Goldman Sachs Group effective yield of 5.53%,
August 28, 1998 24,896,311
25,000,000 Preferred Receivables Funding effective yield of 5.53%,
August 11, 1998 24,961,597
29,573,000 Interest in $750,000,000 joint repurchase agreement
dated July 31, 1998 with Goldman, Sachs & Co.
due August 3, 1998 with respect to various
U.S. Treasury obligations - maturity value of
$29,586,949 for an effective yield of 5.66% 29,577,650
--------------
Total Short-Term Investments (cost $154,079,933) $ 154,079,933
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $3,418,556,230) (b) $4,498,054,487
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $4,482,540,495.
(b) The aggregate identified cost on a tax basis is $3,420,071,528 resulting in gross unrealized appreciation and
depreciation of $1,135,811,377 and $57,828,418, respectively, or net unrealized appreciation of $1,077,982,959.
(NON) Non-income-producing security.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
July 31, 1998
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $3,418,556,230) (Note 1) $4,498,054,487
- -----------------------------------------------------------------------------------------------
Cash 229,625
- -----------------------------------------------------------------------------------------------
Dividends and interest receivable 2,196,719
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 47,193,031
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 29,270,532
- -----------------------------------------------------------------------------------------------
Total assets 4,576,944,394
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 80,960,893
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 5,078,117
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 5,020,819
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 383,439
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 45,981
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,722
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,559,161
- -----------------------------------------------------------------------------------------------
Other accrued expenses 1,352,767
- -----------------------------------------------------------------------------------------------
Total liabilities 94,403,899
- -----------------------------------------------------------------------------------------------
Net assets $4,482,540,495
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $3,243,759,327
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 159,282,911
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 1,079,498,257
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $4,482,540,495
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($3,209,985,923 divided by 234,885,314 shares) $13.67
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $13.67)* $14.50
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($979,602,539 divided by 74,395,758 shares)** $13.17
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($87,730,174 divided by 6,512,897 shares) $13.47
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $13.47)* $13.96
- -----------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($205,221,859 divided by 14,983,802 shares) $13.70
- -----------------------------------------------------------------------------------------------
* 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, 1998
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $8,779) $ 23,352,413
- -----------------------------------------------------------------------------------------------
Interest 4,862,284
- -----------------------------------------------------------------------------------------------
Total investment income 28,214,697
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 15,126,428
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 4,592,686
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 49,322
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 27,380
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 5,754,314
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 5,099,760
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 380,920
- -----------------------------------------------------------------------------------------------
Reports to shareholders 84,062
- -----------------------------------------------------------------------------------------------
Registration fees 558,610
- -----------------------------------------------------------------------------------------------
Auditing 47,268
- -----------------------------------------------------------------------------------------------
Legal 23,266
- -----------------------------------------------------------------------------------------------
Postage 213,889
- -----------------------------------------------------------------------------------------------
Other 104,424
- -----------------------------------------------------------------------------------------------
Total expenses 32,062,329
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (881,439)
- -----------------------------------------------------------------------------------------------
Net expenses 31,180,890
- -----------------------------------------------------------------------------------------------
Net investment loss (2,966,193)
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 209,328,907
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 479,663,245
- -----------------------------------------------------------------------------------------------
Net gain on investments 688,992,152
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $686,025,959
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended July 31
-----------------------
1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ (2,966,193) $ 6,612,842
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments 209,328,907 212,527,952
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 479,663,245 439,344,863
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 686,025,959 658,485,657
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (6,775,789) (6,835,610)
- ---------------------------------------------------------------------------------------------------------------
Class B -- (187,272)
- ---------------------------------------------------------------------------------------------------------------
Class M (54,508) (32,178)
- ---------------------------------------------------------------------------------------------------------------
Class Y (485,625) --
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (168,375,876) (148,104,876)
- ---------------------------------------------------------------------------------------------------------------
Class B (34,003,255) (16,854,480)
- ---------------------------------------------------------------------------------------------------------------
Class M (3,482,791) (1,107,312)
- ---------------------------------------------------------------------------------------------------------------
Class Y (7,724,838) --
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 1,847,295,828 485,465,399
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 2,312,419,105 970,829,328
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 2,170,121,390 1,199,292,062
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $- and $6,133,322, respectively) $4,482,540,495 $2,170,121,390
- ---------------------------------------------------------------------------------------------------------------
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 July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $11.98 $9.07 $9.05 $7.85 $8.87
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) --(c) .05(c) .06 .08 .06
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.81 4.08 1.17 1.85 .26
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.81 4.13 1.23 1.93 .32
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.04) (.05) (.09) -- (.05)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.08) (1.17) (1.12) (.73) (1.29)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.12) (1.22) (1.21) (.73) (1.34)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.67 $11.98 $9.07 $9.05 $7.85
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 25.75 49.91 14.32 27.55 3.33
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,209,986 $1,819,333 $1,104,264 $956,830 $786,118
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .95 1.00 1.03 .99 .99
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) .03 .50 .69 1.03 .88
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 59.14 95.17 128.21 96.75 100.16
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended July 31, 1996 and thereafter,
includes amounts paid through expense offset arrangements with PFTC and brokerage service
arrangements. Prior period ratios exclude these amounts. (Note 2.)
(c) Per share net investment income (loss) 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 July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $11.62 $8.85 $8.88 $7.78 $8.85
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.09)(c) (.03)(c) -- .01 .03
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.72 3.98 1.13 1.82 .21
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.63 3.95 1.13 1.83 .24
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income -- (.01) (.04) -- (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.08) (1.17) (1.12) (.73) (1.29)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.08) (1.18) (1.16) (.73) (1.31)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.17 $11.62 $8.85 $8.88 $7.78
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 24.84 48.87 13.42 26.46 2.38
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $979,603 $303,089 $89,378 $47,906 $21,033
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.70 1.75 1.77 1.75 1.77
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.74) (.26) (.09) .22 .08
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 59.14 95.17 128.21 96.75 100.16
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended July 31, 1996 and thereafter,
includes amounts paid through expense offset arrangements with PFTC and brokerage service
arrangements. Prior period ratios exclude these amounts. (Note 2.)
(c) Per share net investment income (loss) has been determined on the basis of the
weighted average number of shares outstanding during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Dec. 2, 1994+
operating performance Year ended July 31 to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $11.85 $9.00 $9.02 $7.78
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (.06)(c) --(c) .05 .01
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.78 4.05 1.12 1.96
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.72 4.05 1.17 1.97
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.02) (.03) (.07) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.08) (1.17) (1.12) (.73)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.10) (1.20) (1.19) (.73)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.47 $11.85 $9.00 $9.02
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 25.14 49.28 13.70 28.29*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $87,730 $27,384 $5,650 $873
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.45 1.50 1.51 1.56*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) (.48) (.02) .16 .29*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 59.14 95.17 128.21 96.75
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended July 31, 1996 and thereafter,
includes amounts paid through expense offset arrangements with PFTC and brokerage service
arrangements. Prior period ratios exclude these amounts. (Note 2.)
(c) Per share net investment income (loss) 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
- ------------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Year ended Jan. 7,1997+
operating performance July 31 to July 31
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $11.99 $9.26
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .03(c) .04(c)
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 2.83 2.69
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 2.86 2.73
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.07) --
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.08) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.15) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.70 $11.99
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 26.20 29.48*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $205,222 $20,314
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .70 .42*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) .27 .37*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 59.14 95.17
- ------------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the period ended July 31, 1996 and thereafter,
includes amounts paid through expense offset arrangements with PFTC and brokerage service
arrangements. Prior period ratios exclude these amounts. (Note 2.)
(c) Per share net investment income (loss) has been determined on the basis of the
weighted average number of shares outstanding during the period.
</TABLE>
Notes to financial statements
July 31, 1998
Note 1
Significant accounting policies
Putnam Investors Fund (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, class M and class Y shares. Class
A shares are sold with a maximum front-end sales charge of 5.75%.
Class B shares, which convert to class A shares after approximately
eight years, do not pay a front-end sales charge but pay a higher
ongoing distribution fee than class A shares, and are subject to a
contingent deferred sales charge, if those shares are redeemed
within six years of purchase. Class M shares are sold with a
maximum front end sales charge of 3.50% and pay an ongoing
distribution fee that is higher than class A shares but lower than
class B shares. Class Y shares, which are sold at net asset value,
are generally subject to the same expenses as class A, class B, and
class M shares, but do not bear a distribution fee. Class Y shares
are sold to defined contribution plans that invest at least $250
million in a combination of Putnam Funds and other accounts managed
by affiliates of Putnam Investment Management, Inc. ("Putnam
Management"), the fund's Manager, a wholly-owned subsidiary of
Putnam Investments, Inc.
Expenses of the fund are borne pro-rata by the holders of each
class of shares, except that each class bears expenses unique to
that class (including the distribution fees applicable to such
class). Each class votes as a class only with respect to its own
distribution plan or other matters on which a class vote is
required by law or determined by the Trustees. Shares of each class
would receive their pro-rata share of the net assets of the fund,
if that fund were liquidated. In addition, the Trustees declare
separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its
financial statements. The preparation of financial statements is in
conformity with generally accepted accounting principles and
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities. Actual results
could differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined
using the last reported sales 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 and certain other
accounts managed by Putnam Management. These balances may be
invested in one or more repurchase agreements and/or short-term
money market instruments.
C) Repurchase agreements The fund, or any joint trading account,
through its custodian, receives delivery of the underlying
securities, the market value of which at the time of purchase is
required to be in an amount at least equal to the resale price,
including accrued interest. Collateral for certain tri-party
repurchase agreements is held at the counterparty's custodian in a
segregated account for the benefit of the fund and the
counterparty. Putnam Management is responsible for determining that
the value of these underlying securities is at all times at least
equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the
accrual basis. Dividend income is recorded on the ex-dividend date
except that certain dividends from foreign securities are recorded
as soon as the fund is informed of the ex-dividend date.
E) Line of credit The fund has entered into a committed line of
credit with certain banks. This line of credit agreement includes
restrictions that the fund maintain an asset coverage ratio of at
least 300% and borrowings must not exceed prospectus limitations.
For the year ended July 31, 1998, the fund had no borrowings
against the line of credit.
F) Federal taxes It is the policy of the fund to distribute all of
its taxable income within the prescribed time and otherwise comply
with the provisions of the Internal Revenue Code applicable to
regulated investment companies. It is also the intention of the
fund to distribute an amount sufficient to avoid imposition of any
excise tax under Section 4982 of the Internal Revenue Code of 1986,
as amended. Therefore, no provision has been made for federal taxes
on income, capital gains or unrealized appreciation on securities
held nor for excise tax on income and capital gains.
G) Distributions to shareholders Distributions to shareholders from
net investment income are recorded by the fund on the ex-dividend
date. Capital gain distributions, if any, are recorded on the
ex-dividend date and paid at least annually. The amount and
character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences include
temporary and permanent differences of losses on wash sales
transactions and net operating loss. 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, 1998, the fund
reclassified $4,148,793 to decrease distributions in excess of net
investment income and $7,732,040 to decrease paid-in-capital, with
an increase to accumulated net realized gains and losses of
$3,583,247. 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, 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 and 0.38% 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 July 31, 1998, fund expenses were reduced by
$881,439 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
$2,670 has been allocated to the fund, and an additional fee for
each Trustee's meeting attended. Trustees who are not interested
persons of Putnam Management and who serve on committees of the
Trustees receive additional fees for attendance at certain
committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral
Plan") which allows the Trustees to defer the receipt of all or a
portion of Trustees Fees payable on or after July 1, 1995. The
deferred fees remain in the fund and are invested in certain Putnam
funds until distribution in accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit
pension plan (the "Pension Plan") covering all Trustees of the fund
who have served as Trustee for at least five years. Benefits under
the Pension Plan are equal to 50% of the Trustee's average total
retainer and meeting fees for the three years preceding retirement.
Pension expense for the fund is included in Compensation of
Trustees in the Statement of operations. Accrued pension liability
is included in Payable for compensation of Trustees in the
Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect
to its class A, class B and class M shares pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the Plans
is to compensate Putnam Mutual Funds Corp., a wholly-owned
subsidiary of Putnam Investments, Inc., for services provided and
expenses incurred by it in distributing shares of the fund. The
Plans provide for payments by the fund to Putnam Mutual Funds Corp.
at an annual rate up to 0.35%, 1.00%, and 1.00% of the average net
assets attributable to class A, class B, and class M shares,
respectively. The Trustees currently limit payment by the fund to
an annual rate of 0.25%, 1.00%, and 0.75% of the average net assets
attributable to class A, class B, and class M shares respectively.
For year ended July 31, 1998, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $2,050,661 and $82,350 from
the sale of class A and class M shares, respectively and received
$625,625 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,
1998 Putnam Mutual Funds Corp., acting as underwriter received
$31,588 on class A redemptions.
Note 3
Purchases and sale of securities
During the year ended July 31, 1998, purchases and sales of
investment securities other than short-term investments aggregated
$3,251,970,500 and $1,705,658,557 respectively. There were no
purchases and sales of U.S. government obligations. 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, 1998, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were
as follows:
Year ended
July 31, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 122,394,661 $1,539,582,978
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 14,027,328 154,581,227
- -----------------------------------------------------------------------------
136,421,989 1,694,164,205
Shares
repurchased (53,383,852) (663,072,935)
- -----------------------------------------------------------------------------
Net increase 83,038,137 $1,031,091,270
- -----------------------------------------------------------------------------
Year ended
July 31, 1997
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 68,117,416 $693,486,107
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 14,830,829 134,515,580
- -----------------------------------------------------------------------------
82,948,245 828,001,687
Shares
repurchased (52,860,419) (534,953,595)
- -----------------------------------------------------------------------------
Net increase 30,087,826 $293,048,092
- -----------------------------------------------------------------------------
Year ended
July 31, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 61,119,641 $758,948,399
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,960,851 31,562,411
- -----------------------------------------------------------------------------
64,080,492 790,510,810
Shares
repurchased (15,773,720) (192,044,194)
- -----------------------------------------------------------------------------
Net increase 48,306,772 $598,466,616
- -----------------------------------------------------------------------------
Year ended
July 31, 1997
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 29,752,337 $293,036,292
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,786,799 15,795,307
- -----------------------------------------------------------------------------
31,539,136 308,831,599
Shares
repurchased (15,544,846) (150,298,849)
- -----------------------------------------------------------------------------
Net increase 15,994,290 $158,532,750
- -----------------------------------------------------------------------------
Year ended
July 31, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 5,396,575 $67,527,386
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 311,465 3,392,053
- -----------------------------------------------------------------------------
5,708,040 70,919,439
Shares
repurchased (1,506,128) (18,706,416)
- -----------------------------------------------------------------------------
Net increase 4,201,912 $52,213,023
- -----------------------------------------------------------------------------
Year ended
July 31, 1997
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,296,780 $23,465,908
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 122,472 1,102,248
- -----------------------------------------------------------------------------
2,419,252 24,568,156
Shares
repurchased (735,758) (7,211,871)
- -----------------------------------------------------------------------------
Net increase 1,683,494 $17,356,285
- -----------------------------------------------------------------------------
Year ended
July 31, 1998
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 16,062,424 $201,821,553
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 745,728 8,210,463
- -----------------------------------------------------------------------------
16,808,152 210,032,016
Shares
repurchased (3,518,401) (44,507,097)
- -----------------------------------------------------------------------------
Net increase 13,289,751 $165,524,919
- -----------------------------------------------------------------------------
For the period
January 7, 1997
(commencement of
operations) to
July 31, 1997
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,860,809 $18,408,636
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions -- --
- -----------------------------------------------------------------------------
1,860,809 18,408,636
Shares
repurchased (166,758) (1,880,364)
- -----------------------------------------------------------------------------
Net increase 1,694,051 $16,528,272
- -----------------------------------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended,
the Fund hereby designates $359,508,638 as capital gain, which
includes $190,562,724 as 20% capital gain, for its taxable year
ended July 31, 1998.
The Form 1099 you receive in January 1999 will show the tax status
of all distributions paid to your account in calendar 1998.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT
ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
John J. Morgan
Vice President
Carol McMullen
Vice President
C. Beth Cotner
Vice President and Fund Manager
Manuel H. Weiss
Vice President and Fund Manager
Richard B. England
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
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. You can also learn more
at Putnam Investments' website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or
guaranteed or endorsed by, any financial institution; are not
insured by the Federal Deposit Insurance Corporation (FDIC), the
Federal Reserve Board, or any other agency; and involve risk,
including the possible loss of the principal amount invested.
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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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AN012-45517 003/307/385/2DB 9/98
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
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Putnam
Supplement to Report dated 7/31/98
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 $250 million or more in one or more of Putnam's funds or private
accounts. Performance of class Y shares, which incur neither a front-end
load, distribution fee, nor contingent deferred sales charge, will differ
from performance of class A, B, and M shares, which are discussed more
extensively in the report.
RESULTS AT A GLANCE
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Total return
for periods ended NAV
26.20%
Five years 185.27
Annual average 23.33
10 years 465.65
Annual average 18.92
Life of fund (since class A inception, ), annual average 10.63
Share value: NAV
7/31/97 $11.99
$13.70
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Capital gains
Distributions: No. Income Short-term Long-term Total
1 .068 0.051 1.031 1.150
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Please note that past performance does not indicate future results.
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.
