Putnam
Dividend
Income
Fund
ANNUAL REPORT
June 30, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "We believe the fund's adjustable-rate preferreds will help dampen
any potential volatility the market may experience in the coming year.
As always, we will continue to look for undervalued securities and
those that enhance the fund's call protection."
-- Jeanne L. Mockard, manager
Putnam Dividend Income Fund
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
12 Portfolio holdings
17 Financial statements
25 Results of June 5, 1997 Shareholder meeting
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Timely shifts in portfolio weightings and careful security selection made
significant contributions to Putnam Dividend Income Fund's double-digit
performance during the 12 months ended June 30, 1997. Fund Manager Jeanne
Mockard's well-timed strategy moves clearly took the edge off a challenging
period in the preferred securities markets.
Thus far, the Federal Reserve Board has not followed its March increase in
short-term interest rates with further upward notches. Nevertheless many
still believe that with regard to further increases, it is a matter of when
rather than if. In anticipation of such an event, Jeanne stepped up the
fund's weighting of adjustable-rate preferred stocks because of their
tendency toward stability in a rising-rate environment.
In the following report, she explains the rationale behind her portfolio
moves during fiscal 1997 and takes a look at prospects during the fiscal
year just begun.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
August 20, 1997
Report from the Fund Manager
Jeanne L. Mockard
The tailwinds that supported Putnam Dividend Income Fund's solid performance
in the first half of its 1997 fiscal year -- namely, declining interest rates,
increased merger activity, and the introduction of a new type of preferred
stock -- were periodically overshadowed in the second half by less favorable
developments. A modest increase in interest rates, combined with government
proposals that could potentially reduce the tax benefits of certain
preferreds, put a damper on the previously robust performance in the preferred
markets. We took steps during the period to protect the portfolio from
excessive volatility and concluded the fiscal year on June 30, 1997, with a
15.22% total return at net asset value and 27.88% at market price. Please see
page 9 for more performance information.
* ADJUSTABLE-RATE PREFERREDS CUSHION FUND THROUGH SPRING RATE INCREASE
After leaving interest rates unchanged for more than two years, the Federal
Reserve Board raised short-term interest rates by a quarter of a percentage
point in late March. A rising interest-rate environment can be challenging for
preferred stocks, which typically behave more like bonds than equities.
Fortunately, your fund had a sizable position in adjustable-rate preferreds
throughout the period. Because their dividends are adjusted periodically to
reflect changes in interest rates, the price movement of these securities is
comparable to shorter-maturity bonds. During the second half of the year, we
took advantage of opportunities to increase this allocation. By the end of
the period, 18.8% of the fund's net assets was in adjustable-rate preferreds.
* FUND LEVERAGE ELIMINATED AFTER PERIOD'S END
As part of our defensive strategy during the period, we also decided to
eliminate the fund's use of leverage. Leverage is the process of issuing
preferred shares whose dividend rate is based on interest rates for money
market securities and investing the proceeds in longer-term, higher-yielding
securities. The fund has used leverage on several occasions in the past when a
particularly wide spread existed between short- and long-term interest rates.
Generally, the result has been a higher level of income and a correspondingly
greater total return for the common shares.
In an environment in which short-term interest rates may be moving higher,
however, leverage can work against the fund, since the level of income paid to
preferred shareholders increases. Considering the strength of economic
activity in recent months and the possibility of further rate increases by the
Fed, the fund's Trustees approved Putnam Management's recommendation that the
fund be deleveraged, effective July 22, 1997. All outstanding money market
preferred shares have been redeemed as of that date.
* BUDGET PROPOSALS CAST UNCERTAINTY OVER PREFERRED MARKET
In his budget plan, President Clinton reintroduced proposals that would
eliminate the deductibility of interest on some of the securities industry's
more exotic products. Although the proposals failed to become law in previous
budget bills, the fact that they are again on the negotiating table has raised
serious concern on Wall Street as some firms' products face the prospect of
extinction.
Among the proposals is one that would eliminate the deductibility of interest
on hybrid debt/equity securities, such as trust-preferred stocks. These
securities are subordinated debt issued to trusts, which in turn issue
preferred stock to investors. As we discussed in your fund's midyear report,
the issuance of these new securities by banks and insurance companies
contributed substantially to fund performance over the last half of the
fiscal year.
Other proposals that may affect the type of securities held by the fund
include measures to reduce the dividends-received deduction from 70% to 50%.
Although the probability that the deduction will be lowered remains
uncertain, the very suggestion has caused a slowdown in the overall
issuance of preferreds. As a result, we believe it is more advantageous
than ever to maintain a portfolio of high-coupon securities -- and to
hold them as long as possible. We will continue to monitor the status
of these proposals and any effects they may have on the securities in
which your fund invests.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: COMPARATIVE PORTFOLIO COMPOSITION]
COMPARATIVE PORTFOLIO COMPOSITION*
Perpetual 61.8%
preferreds 61.2%
Adjustable-rate 18.8%
preferreds 21.7%
Sinking-fund 4.7%
preferreds 8.0%
Common stocks 3.4%
4.4%
Convertible 1.7%
securities 1.5%
Cash and
short-term 8.8%
securities 5.7%
6/30/97 [DATES FOR TOP PERCENTAGES]
6/30/96 [DATES FOR BOTTOM PERCENTAGES]
Footnote reads:
* Based on percentage of net assets. Composition will vary over time.
* SIGNIFICANT WEIGHTINGS IN FINANCIALS, INDUSTRIALS, AND UTILITIES
Companies in the financial, industrial, and public utilities sectors are the
primary issuers of preferred securities. Holdings in these three sectors made
up a large percentage of your fund's portfolio.
BankAmerica Corporation, one of the fund's largest holdings and the nation's
third largest bank, is focusing on the growth of its investment products and
mortgage lending. Strong financial performance in 1996 and the first quarter
of this year has resulted from the bank's effective operating leverage,
prudent risk management, and disciplined capital supervision. The bank's
return to shareholders in 1996 was the highest of the 15 largest U.S. banking
companies. While this portfolio holding and others discussed in this report
were viewed favorably at the end of the period, all holdings are subject to
review and adjustment in accordance with the fund's investment strategy and
may vary in the future.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
El Paso Tennessee Pipeline Co. Series A, $4.125, cum preferred
Gas pipelines
McDermott Inc. Series B, $2.60, sinking-fund cum preferred
Petroleum services
Duke Power Co. Series W, $7.00, cum preferred
Electric utility
New York State Electric & Gas Corp. Series B, $1.425,
adjustable-rate cum preferred
Gas and electric utilities
H.F. Ahmanson and Co. Series C, $2.10, deposit-shares cum
preferred
Savings and loan
Georgia Power Co. Series 93-2, $1.375 adjustable-rate cum
preferred
Electric utility
Merrill Lynch & Co., Inc. Series A, $2.25, deposit-shares cum
preferred
Securities brokerage and investment-management services
Chase Manhattan Corp. Series L, $5.754, cum preferred
Banking and financial services
Provident Companies, Inc. $2.025, deposit-shares cum preferred
Life insurance
BankAmerica Corp. Series B, $6.00 adjustable-rate cum preferred
Banking and financial services
Footnote reads:
* These holdings represent 28.0% of the fund's net assets as of 6/30/97.
Holdings will vary over time.
Baltimore Gas and Electric Company (BGE), one of your fund's utility holdings,
exemplifies the recent increase in mergers and acquisitions among electric and
natural gas providers. Deregulation in the electric utility industry is
causing major operators to attempt to consolidate their control over
exploration, generation, and distribution of electric power. Numerous electric
utilities have already merged with natural gas providers, hoping to compete
more effectively as larger entities.
BGE provides electricity to more than one million customers in central
Maryland and serves natural gas to nearly 550,000 customers. BGE and electric
utility Potomac Electric plan to merge to form the Constellation Energy Corp.
The companies anticipate that the merger, creating the tenth largest U.S.
utility, will allow the combined company to provide service more efficiently
and effectively.
Ford Motor Company, the world's second largest auto maker, is one of your
fund's industrial holdings. Ford is also the world's leading provider of auto
financing, owns the largest car rental operation in the United States (Hertz),
and has stakes in several foreign-based auto makers, including an interest in
Mazda that gives it effective control of the Japanese auto maker. Sales
outside the United States currently account for 30% of the total.
* PRUDENT SECURITY SELECTION FOR AN UNCERTAIN MARKET
Whether the Federal Reserve Board will raise rates in the coming year is a
question many market pundits will continue to entertain. Economic growth
remains strong, industrial capacity is tight, and unemployment is low, yet
inflation is nowhere in sight. In the months ahead, we will continue to employ
adjustable-rate preferreds and, to a lesser extent, sinking-fund preferreds to
help dampen potential volatility. With our sizable holdings in adjustable-rate
preferreds and the possible negative effects of leverage effectively
curtailed, we believe your fund is well positioned to make the most of
whatever uncertainty lies ahead.
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 6/30/97, 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 Dividend Income Fund is designed for investors seeking a
high level of current income eligible for the dividends-received
deduction, consistent with preservation of capital.
TOTAL RETURN FOR PERIODS ENDED 6/30/97
Merrill Lynch
Perpetual
Market Preferred Consumer
NAV price Index Price Index
- ---------------------------------------------------------------------
1 year 15.22% 27.88% 9.63% 2.30%
- ---------------------------------------------------------------------
5 years 59.54 41.47 45.89 14.34
Annual average 9.79 7.18 7.85 2.72
- ---------------------------------------------------------------------
Life of fund (since 9/28/89) 120.42 86.81 110.33 28.24
Annual average 10.74 8.40 10.07 3.26
- ---------------------------------------------------------------------
Performance data represent past results and do not reflect future
performance. They do not take into account any adjustment for taxes
payable on reinvested distributions. Investment returns, net asset value,
and market price will fluctuate so that an investor's shares, when sold,
may be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 6/30/97
- ------------------------------------------------------------------------------
Distributions (common shares)
- ------------------------------------------------------------------------------
Number 12
- ------------------------------------------------------------------------------
Income $0.780
- ------------------------------------------------------------------------------
Capital gains --
- ------------------------------------------------------------------------------
Total $0.780
- ------------------------------------------------------------------------------
Preferred shares Series A (600 shares)
- ------------------------------------------------------------------------------
Income $3,825.67
- ------------------------------------------------------------------------------
Total $3,825.67
- ------------------------------------------------------------------------------
Share value (common shares): NAV Market price
- ------------------------------------------------------------------------------
6/30/96 $10.54 $8.875
- ------------------------------------------------------------------------------
6/30/97 11.23 10.500
- ------------------------------------------------------------------------------
Current return (common shares): NAV Market price
- ------------------------------------------------------------------------------
End of period
- ------------------------------------------------------------------------------
Current dividend rate1 6.95% 7.43%
- ------------------------------------------------------------------------------
Taxable equivalent2 9.57 10.23
- ------------------------------------------------------------------------------
1 Income portion of most recent distribution, annualized and divided by NAV
or market price at end of period.
2 Assumes a corporation taxed at the 35% federal tax rate and that 100% of
the fund's distributions qualify for the 70% corporate dividends-received
deduction for investors, investment income may also be subject to the
federal alternative minimum tax.
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.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, the liquidation preference and cumulative undeclared
dividends paid on the auction preferred shares, divided by the number of
outstanding common shares.
Market price is the current trading price of one share of the fund. Market
prices are set by transactions between buyers and sellers on the New York
Stock Exchange.
COMPARATIVE BENCHMARKS
Merrill Lynch Perpetual Preferred Index is an unmanaged list of perpetual
preferred stocks that is commonly used as a general measure of performance
for the preferred-stock market. The index assumes reinvestment of all
distributions and does not take into account brokerage commissions or
other costs. The securities that make up the fund's portfolio do not match
those in the index. 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.
Report of independent accountants
For the fiscal year ended June 30, 1997
To the Trustees and Shareholders of
Putnam Dividend Income Fund
We have audited the accompanying statement of assets and liabilities of Putnam
Dividend Income Fund, including the portfolio of investments owned, as of June
30, 1997, and the related statement of operations for the year then ended and
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 June 30, 1997, 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 Dividend Income Fund as of June 30, 1997, the results of its operations
for the year then ended and 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
August 12, 1997
Portfolio of investments owned
June 30, 1997
<TABLE>
<CAPTION>
PREFERRED STOCKS (85.3%) *
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Automobiles (5.0%)
- ------------------------------------------------------------------------------------------------------------
139,452 Ford Motor Co. Ser. B, $2.063 dep. shs. cum.
Preferred ( pfd.) $ 3,922,088
65,500 General Motors Corp. Ser. B, $2.281 dep. shs.
cum. pfd. 1,776,688
114,178 General Motors Corp. Ser. G, $2.275 dep. shs.
cum. pfd. 3,311,162
--------------
9,009,938
Banks (19.0%)
- ------------------------------------------------------------------------------------------------------------
194,000 Ahmanson (H.F.) & Co. Ser. C, $2.10 dep. shs. cum. pfd. 4,998,604
50,000 BankAmerica Corp. Ser. B, $6.00 cum. Adjustable
Rate Preferred (ARP) 4,650,000
70,000 Bankers Trust New York Corp. Ser. Q, $1.423
cum. ARP [UPSIDE DOWN DELTA] 1,671,250
50,000 Chase Manhattan Corp. Ser. L, $5.754 cum. ARP 4,943,750
42,300 Chase Manhattan Corp. Ser. C, $2.71 cum. pfd. 1,279,575
19,000 Chase Manhattan Corp. Ser. B, $2.44 cum. pfd. 527,250
70,780 Chase Manhattan Corp. Ser. M, $2.10 cum. pfd. 1,813,738
53,500 Chase Manhattan Corp. Ser. F, $2.08 cum. pfd. 1,344,188
10,000 Citicorp Ser. 8-B, $8.25 cum. pfd. 992,500
13,000 Citicorp Ser. 3, $7.00 cum. ARP 1,296,750
29,800 Citicorp Ser. 2, $6.00 cum. ARP 2,801,200
45,000 Citicorp Ser. 19, $1.449 cum. ARP 1,136,250
110,566 Fleet Financial Group, Inc. Ser. E, $2.338 dep. shs.
cum. pfd. 3,040,560
71,000 Fleet Financial Group, Inc. Ser. V, $1.813 dep. shs.
cum. pfd. 1,863,750
26,100 Great Western Financial Corp. $2.075 dep. shs.
cum. pfd. 668,813
40,000 Sumitomo Bank Ltd. Ser. A, $2.031 dep. shs. cum. pfd. 1,000,000
19,570 US Bancorp Ser. A, $2.031 cum. pfd. 491,696
--------------
34,519,874
Broadcasting (0.7%)
- ------------------------------------------------------------------------------------------------------------
49,000 Newscorp Overseas Corp. Ser. A, $2.156 pfd. 1,212,750
Combined Utilities (8.4%)
- ------------------------------------------------------------------------------------------------------------
23,900 Baltimore Gas & Electric Co. Ser. 93, $7.125 cum. pfd. 2,557,300
40,000 Baltimore Gas & Electric Co. $6.99 cum. pfd. 4,170,000
10,000 Baltimore Gas & Electric Co. Ser. 93, $6.70 cum. pfd. 1,030,000
217,000 New York State Electric & Gas Corp. Ser. B, $1.425
cum. ARP 5,018,125
25,000 Pacific Gas & Electric Co. Ser. U, $1.76 cum. pfd. 653,125
7,000 Public Service Co. of Colorado $7.15 cum. pfd. 705,250
6,750 Public Service Electric & Gas Co. $6.92 cum. pfd. 715,500
14,000 San Diego Gas & Electric Co. $1.763 cum. pfd. 355,250
--------------
15,204,550
Computer Software (0.4%)
- ------------------------------------------------------------------------------------------------------------
24,000 IBM Corp. Ser. A, $1.875 dep. shs. pfd. 642,000
Electric Utilities (26.3%)
- ------------------------------------------------------------------------------------------------------------
20,000 Appalachian Power Co. $5.92 cum. pfd. 1,980,000
50,000 Connecticut Light & Power Co. Sinking Fund Ser. 92,
$3.615 cum. pfd. 1,912,500
140,000 Detroit Edison Co. $1.938 dep. shs. cum. pfd. 3,587,500
18,000 Duke Power Co. Ser. S, $7.85 cum. pfd. 1,926,000
50,825 Duke Power Co. Ser. W, $7.00 cum. pfd. 5,387,450
7,109 Entergy Arkansas, Inc. $8.52 cum. pfd. 712,677
8,916 Entergy Gulf States, Inc. $7.56 cum. pfd. 858,165
9,000 Entergy Louisiana, Inc. $7.00 cum. pfd. 904,500
20,000 Florida Power & Light Co. Ser. S, $6.98 cum. pfd. 2,125,000
200,000 Georgia Power Co. Ser. 93-2, $1.375 cum. ARP 4,975,000
50,000 Long Island Lighting Co. Sinking Fund Ser. NN, $1.95
cum. pfd. 1,237,500
20,000 Massachusetts Electric Co. $6.99 cum. pfd. 2,100,000
20,000 Niagara Mohawk Power Corp. $2.375 cum. pfd. 515,000
15,200 Niagara Mohawk Power Corp. Ser. A, $1.625
cum. ARP 300,200
6,600 Northern States Power Co. Ser. A, $5.52 cum. ARP 650,100
14,100 Northern States Power Co. Ser. B, $5.52 cum. ARP 1,406,475
5,000 Peco Energy $7.480 cum. pfd. 550,000
116,000 PSI Energy, Inc. $1.86 cum. pfd. 2,943,500
9,360 Puget Sound Energy, Inc. Ser. III, $2.125 cum. pfd. 242,190
72,000 Puget Sound Power & Light Co. $1.969 cum. pfd. 1,818,000
175,000 Puget Sound Power & Light Co. Ser. B, $1.425
cum. ARP 4,200,000
67,000 San Diego Gas & Electric Co. $1.70 cum. pfd. 1,716,875
10,000 Texas Utilities Electric Co. $6.375 cum. pfd. 992,500
75,580 Texas Utilities Electric Co. Ser. A, $1.875 dep. shs.
cum. pfd. 1,955,633
25,000 Texas Utilities Electric Co. Ser. B, $1.805 dep. shs.
cum. pfd. 662,500
20,000 Virginia Electric & Power Co. $6.98cum. pfd. 2,075,000
--------------
47,734,265
Finance (6.7%)
- ------------------------------------------------------------------------------------------------------------
9,000 Bear Stearns & Co. Ser. B, $1.97 dep. shs. cum. pfd. 226,125
40,000 Bear Stearns & Co. Ser. A, $1.375 cum. ARP 1,750,000
49,669 Berkley (W.R.) Corp. Ser. A, $1.844 cum. pfd. 1,272,768
49,500 MBNA Corp. Ser. A, $1.875 cum. pfd. 1,293,188
40,000 MBNA Corp. Ser. B, $1.745 ARP 1,075,000
166,252 Merrill Lynch & Co., Inc. Ser. A, $2.25 dep. shs. cum. pfd. 4,945,997
30,000 Morgan Stanley $3.875 dep. shs. cum. pfd. 1,620,000
--------------
12,183,078
Financial Services (1.1%)
- ------------------------------------------------------------------------------------------------------------
38,350 Household International, Inc. Ser. 92-A, $2.063 dep.
shs. cum. pfd. 1,083,388
20,000 J.P. Morgan & Co. Inc. Ser. H, $3.313 dep. shs. pfd. 1,042,500
--------------
2,125,888
Food Chains (1.4%)
- ------------------------------------------------------------------------------------------------------------
102,500 McDonalds Corp. Ser. E, $1.93 dep. shs. pfd. 2,607,344
Forest Products (1.6%)
- ------------------------------------------------------------------------------------------------------------
120,000 Boise Cascade Corp. Ser. F, $2.35 dep. shs. cum. pfd. 3,052,500
Gas Utilities (1.0%)
- ------------------------------------------------------------------------------------------------------------
71,200 Phillips Gas Co. Ser. A, $2.33 cum. pfd. 1,853,425
Health Care (0.5%)
- ------------------------------------------------------------------------------------------------------------
1,000 Rhone Poulenc Rorer Ser. 3, $5.84 dep. shs. cum. pfd. 1,010,000
Insurance (4.5%)
- ------------------------------------------------------------------------------------------------------------
24,000 AON Corp. $2.00 cum. pfd. 615,000
190,000 Provident Cos., Inc. $2.025 dep shs. cum. pfd. 4,892,500
54,000 Travelers Group $3.183 pfd. 2,706,750
--------------
8,214,250
Oil Services (4.6%)
- ------------------------------------------------------------------------------------------------------------
111,000 LASMO PLC ADS Ser. A, $2.50 cum. pfd.
(United Kingdom) 2,816,625
190,537 McDermott Inc. Sinking Fund Ser. B, $2.60 cum. pfd. 5,477,939
--------------
8,294,564
Oil and Gas (3.1%)
- ------------------------------------------------------------------------------------------------------------
105,000 El Paso Tennessee Pipeline Co. Ser. A, $4.125 cum. pfd. 5,565,000
Paper (0.3%)
- ------------------------------------------------------------------------------------------------------------
20,000 James River Corp. Ser. O, $2.063 dep. shs. cum. pfd. 500,000
Water Utilities (0.7%)
- ------------------------------------------------------------------------------------------------------------
12,000 United Water Resources, Inc. Ser. B, $7.625 cum. pfd. 1,248,000
--------------
Total Preferred Stocks (cost $151,474,702) 154,977,426
COMMON STOCKS (3.4%) *
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
50,000 Entergy Corp. $ 1,368,750
43,000 Pacific Gas & Electric Co. 1,042,750
19,100 Potomac Electric Power Co. 441,688
41,000 Public Service Enterprise Group, Inc. 1,025,000
56,000 Rochester Gas & Electric Corp. 1,179,500
34,000 Texas Utilities Electric Co. 1,170,875
--------------
Total Common Stocks (cost $6,116,882) $ 6,228,563
CONVERTIBLE PREFERRED STOCKS (1.7%) *(cost $2,677,115)
NUMBER OF SHARES VALUE
- ------------------------------------------------------------------------------------------------------------
109,270 Lehman Brothers Holding Inc. $1.955 cv. pfd. $ 3,141,513
SHORT-TERM INVESTMENTS (8.8%) * (cost $16,071,656)
PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------
$ 16,069,000 Interest in $200,289,000 joint repurchase agreement
dated June 30, 1997 with Morgan (J.P.) & Co. due
July 1, 1997 with respect to various U.S. Treasury
obligations -- maturity value of $16,071,656 for
an effective yield of 5.95% $ 16,071,656
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $176,340,355) *** $ 180,419,158
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $181,757,426.
*** The aggregate identified cost on a tax basis is $176,343,814, resulting in gross unrealized appreciation
and depreciation of $6,295,734 and $2,220,390, respectively, or net unrealized appreciation of $4,075,344.
[UPSIDE DOWN DELTA] This entity provides subcustodian services to the fund.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
June 30, 1997
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $176,340,355) (Note 1) $180,419,158
- ---------------------------------------------------------------------------------------------------
Cash 94
- ---------------------------------------------------------------------------------------------------
Dividends and interest receivable 1,118,506
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 1,293,441
- ---------------------------------------------------------------------------------------------------
Total assets 182,831,199
Liabilities
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 703,335
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 334,476
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 6,524
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 7,513
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,888
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 20,037
- ---------------------------------------------------------------------------------------------------
Total liabilities 1,073,773
- ---------------------------------------------------------------------------------------------------
Net assets $181,757,426
Represented by
- ---------------------------------------------------------------------------------------------------
Series A auction preferred shares, (600 shares issued and
outstanding at $100,000 per share) (Note 4) $ 60,000,000
- ---------------------------------------------------------------------------------------------------
Paid-in capital -- common shares (Unlimited shares
authorized; 10,821,255 shares outstanding)
(Notes 1 and 4) 122,164,096
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 280,350
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments
(Note 1) (4,765,823)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 4,078,803
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $181,757,426
Computation of net asset value
- ---------------------------------------------------------------------------------------------------
Series A auction preferred shares $ 60,000,000
- ---------------------------------------------------------------------------------------------------
Cumulative undeclared dividends on auction preferred shares --
liquidation preference (Note 4) 186,117
- ---------------------------------------------------------------------------------------------------
Net assets allocated to auction preferred shares $ 60,186,117
- ---------------------------------------------------------------------------------------------------
Net assets allocated to common shares $121,571,309
- ---------------------------------------------------------------------------------------------------
Net assets value per common share
($121,571,309 divided by 10,821,255 shares) $11.23
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended June 30, 1997
<S> <C>
Investment income:
- --------------------------------------------------------------------------------------------------
Dividends (net of foreign tax $41,653) $ 12,766,773
- --------------------------------------------------------------------------------------------------
Interest 320,885
- --------------------------------------------------------------------------------------------------
Total investment income $ 13,087,658
- --------------------------------------------------------------------------------------------------
Expenses:
Compensation of Manager (Note 2) 1,325,844
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 135,555
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 19,745
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 7,486
- --------------------------------------------------------------------------------------------------
Reports to shareholders 42,062
- --------------------------------------------------------------------------------------------------
Registration fees 350
- --------------------------------------------------------------------------------------------------
Auditing 29,691
- --------------------------------------------------------------------------------------------------
Legal 6,650
- --------------------------------------------------------------------------------------------------
Postage 12,807
- --------------------------------------------------------------------------------------------------
Exchange listing fees 24,260
- --------------------------------------------------------------------------------------------------
Preferred share auction fees 152,510
- --------------------------------------------------------------------------------------------------
Other 16,415
- --------------------------------------------------------------------------------------------------
Total expenses 1,773,375
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (53,891)
- --------------------------------------------------------------------------------------------------
Net expenses 1,719,484
- --------------------------------------------------------------------------------------------------
Net investment income 11,368,174
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 614,252
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 6,446,464
- --------------------------------------------------------------------------------------------------
Net gain on investments 7,060,716
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 18,428,890
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended June 30
-----------------------------------
1997 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 11,368,174 $ 8,669,998
- ----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 614,252 (1,398,610)
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 6,446,464 1,735,330
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 18,428,890 9,006,718
Distributions to preferred shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income (2,295,402) (708,750)
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations applicable to common shareholders
(excluding cumulative undeclared dividends on
auction preferred shares of $186,117
and $20,250, respectively) 16,133,488 8,297,968
- ----------------------------------------------------------------------------------------------------------------------
Distributions to common shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income (8,440,000) (7,791,339)
- ----------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) -- 60,000,000
- ----------------------------------------------------------------------------------------------------------------------
Auction preferred share offering costs (Note 4) -- (800,000)
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 7,693,488 59,706,629
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of year 174,063,938 114,357,309
- ----------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net
investment income of $280,350 and
distributions in excess of net investment
income of $352,422) $ 181,757,426 $174,063,938
- ----------------------------------------------------------------------------------------------------------------------
Number of fund shares
- ----------------------------------------------------------------------------------------------------------------------
Common shares outstanding at
beginning and end of year 10,821,255 10,821,255
- ----------------------------------------------------------------------------------------------------------------------
Auction preferred shares outstanding at
beginning and end of year 600 600
- ----------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
- ------------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended June 30
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year
(common shares) $10.54 $10.57 $10.84 $12.39 $11.38
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 1.05 .80 .78 1.13 1.35
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .65 .03 .01 (1.13) .97
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.70 .83 .79 -- 2.32
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income
- ------------------------------------------------------------------------------------------------------------------------------------
To preferred shareholders (.23) (.07) (.01) (.16) (.21)
- ------------------------------------------------------------------------------------------------------------------------------------
To common shareholders (.78) (.72) (.78) (1.04) (1.08)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gains
- ------------------------------------------------------------------------------------------------------------------------------------
To preferred shareholders -- -- (.06) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
To common shareholders -- -- (.24) (.38) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.01) (.79) (1.09) (1.58) (1.29)
- ------------------------------------------------------------------------------------------------------------------------------------
Auction preferred
share offering cost -- (.07) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Change in cumulative
undeclared dividends
on auction preferred shares -- -- .03 .03 (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of year
(common shares) $11.23 $10.54 $10.57 $10.84 $12.39
- ------------------------------------------------------------------------------------------------------------------------------------
Market value,
end of year
(common shares) $10.500 $8.875 $9.250 $9.750 $11.875
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return
at market value
(common shares) (%)(a) 27.88 3.51 5.82 (6.78) 8.27
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year
(total fund) (in thousands) $181,757 $174,064 $114,357 $142,629 $208,076
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b)(c) 1.51 1.23 1.07 1.42 1.70
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(b) 7.57 6.88 7.39 8.06 9.65
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 19.27 35.13 27.39 73.63 166.44
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission
rate paid (d) $.0500
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Ratios reflect net assets available to common shares only; net investment income ratio also reflects reduction for dividend
payments to preferred shareholders.
(c) The ratio of expenses to average net assets for the year ended June 30, 1996 and thereafter, includes amounts paid through
expense offset arrangements and brokerage service arrangements. Prior period ratios exclude these amounts. (Note 2)
(d) Average commission rate paid on security trades is required for fiscal periods beginning on or after September 1, 1995.
</TABLE>
Notes to financial statements
June 30, 1997
Note 1
Significant accounting policies
Putnam Dividend Income Fund ("the fund") is registered under the Investment
Company Act of 1940, as amended, as a diversified, closed-end management
investment company. The fund's objective is to seek high current income
eligible for the dividends received deduction allowed to corporations under
Section 243 of the Internal Revenue Code, consistent with preservation of
capital by investing in a portfolio of preferred and common equity securities.
The fund will invest at least 65% of its total assets in dividend-paying
securities. Preferred stocks will be rated "investment grade" at the time of
investment or, if not rated, will be of comparable quality as determined by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's Manager,
a wholly-owned subsidiary of Putnam Investments, Inc. The fund may also use
leverage by issuing preferred shares in an effort to increase the income to
the common 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. Certain
preferred stocks for which reliable market quotations are not readily
available are stated at fair value on the basis of valuations furnished by
pricing services approved by the Trustees, which determine valuations for
normal, institutional-size trading units of such securities using methods
based on market transactions for comparable securities and various
relationships between securities that are generally recognized by
institutional traders. Short-term investments having remaining maturities of
60 days or less are stated at amortized cost, which approximates market value,
and other investments are stated at fair value following procedures approved
by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam Investment
Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc.. 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. 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) Determination of net asset value Net asset value of the common shares is
determined by dividing the value of all assets of the fund (including accrued
interest and dividends), less all liabilities (including accrued expenses),
undeclared dividends on remarketed preferred shares and the liquidation value
of any outstanding remarketed preferred shares, by the total number of common
shares outstanding.
E) 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.
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. 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.
At June 30, 1997, the fund had a capital loss carryover of approximately
$4,762,000 available to offset future net capital gain, if any. The amount of
the carryover and the expiration dates are:
Loss Carryover Expiration Date
- -------------- ------------------
$ 230,000 June 30, 2003
4,532,000 June 30, 2004
G) Distributions to shareholders Distributions to common and preferred
shareholders are recorded by the fund on the ex-dividend date. At certain
times the fund may pay distributions at a level rate even though, as a result
of market conditions or investment decisions, the fund may not achieve
projected investment results for a given period. Dividends on auction rate
preferred shares become payable when, as and if declared by the Trustees. Each
dividend period for the auction rate preferred shares is generally a 49 day
period. The applicable dividend rate for the auction rate preferred shares on
June 30, 1997 was 4.295%. 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. For the year ended June
30, 1997, there were no such reclassifications.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Management, for management and investment advisory
services is paid quarterly based on the average net assets of the fund. Such
fee is based on the following annual rates: 0.75% of the first $500 million of
average net assets, 0.65% of the next $500 million, 0.60% of the next $500
million, and 0.55% of any amount over $1.5 billion.
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 June 30, 1997, fund expenses were reduced by $53,891 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 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 $670 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 invested in
the fund or in other Putnam funds until distribution in accordance with the
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.
Note 3
Purchase and sales of securities
During the year ended June 30, 1997, purchases and sales of investment
securities other than short-term investments aggregated $32,850,824 and
$44,014,290, 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
Auction preferred shares
On March 14, 1996, the fund issued 600 Auctioned Preferred Shares. Proceeds to
the fund, before underwriting expenses of $600,000 and offering expenses of
$200,000, amounted to $60,000,000. Such offering expenses were paid initially
by Putnam Management, and the fund has reimbursed Putnam Management for all
such costs. These expenses were charged against net assets of the fund
available to common shareholders.
The shares are redeemable at the option of the fund on any dividend payment
date at a redemption price of $100,000 per share, plus an amount equal to any
dividends accumulated on a daily basis but unpaid through the redemption date
(whether or not such dividends have been declared) and, in certain
circumstances, a call premium.
It is anticipated that dividends paid to holders of auction rate preferred
shares will be eligible for the Dividend Received Deduction under the Internal
Revenue Code of 1986. To the extent that the fund earns taxable income and
capital gains that are ineligible for Dividend Received Deduction, it may be
required to apportion to the holders of the auction rate preferred shares
throughout that year additional dividends as necessary to result in an
after-tax equivalent to the applicable dividend rate for the period.
Under the Investment Company Act of 1940, the fund is required to maintain
asset coverage of at least 200% with respect to the remarketed preferred
shares as of the last business day of each month in which any such shares are
outstanding. Additionally, the fund is required to meet more stringent asset
coverage requirements under terms of the auction preferred shares and the
shares' rating agencies. Should these requirements not be met, or should
dividends accrued on the remarketed preferred shares not be paid, the fund may
be restricted in its ability to declare dividends to common shareholders or
may be required to redeem certain of the remarketed preferred shares. At June
30, 1997, no such restrictions have been placed on the fund.
On June 6, 1997, the Trustees voted to redeem the outstanding preferred
shares. On July 21, 1997, 600 preferred shares were redeemed by the fund at a
redemption price of $60,000,000 plus $336,444 of cumulative and unpaid
dividends.
Results of June 5, 1997 shareholder meeting
(Unaudited)
A meeting of shareholders of the fund was held on June 5, 1997. At the
meeting, each of the nominees for Trustees was elected, as follows:
Common Shares Preferred Shares
Votes Votes
Votes for withheld Votes for withheld
Jameson Adkins Baxter 5,521,070 364,007 405 0
Hans H. Estin 5,514,386 370,691 405 0
R.J. Jackson 5,521,766 363,311 405 0
Elizabeth T. Kennan 5,519,755 365,322 405 0
Lawrence J. Lasser 5,517,066 368,011 405 0
Donald S. Perkins 5,514,713 370,364 405 0
William F. Pounds 5,514,786 370,291 405 0
George Putnam 5,514,793 370,284 405 0
George Putnam, III 5,508,537 376,540 405 0
A.J.C. Smith 5,522,178 362,899 405 0
W. Nicholas Thorndike 5,518,414 366,663 405 0
<TABLE>
<CAPTION>
Results of June 5, 1997 shareholder meeting (continued)
(Unaudited)
- --------------------------------------------------------------------------------------------------------------------------
Common Shares Preferred shares
- --------------------------------------------------------------------------------------------------------------------------
Abstentions Abstentions
Votes Votes and Broker Votes Votes and Broker
For Against Non-Votes For Against Non-Votes
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A proposal to ratify the selection of
Coopers & Lybrand LLP as auditors for
the fund was approved as follows 5,506,629 44,712 333,736 405 0 0
- --------------------------------------------------------------------------------------------------------------------------
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 5,062,339 375,857 446,881 405 0 0
- --------------------------------------------------------------------------------------------------------------------------
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 4,677,954 827,306 379,817 405 0 0
- --------------------------------------------------------------------------------------------------------------------------
A proposal to amend the fund's
fundamental investment restriction with
respect to investments in commodities
or commodity contracts was approved
as follows 4,624,041 899,821 361,215 355 50 0
- --------------------------------------------------------------------------------------------------------------------------
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 4,915,879 515.079 454,119 355 0 50
- --------------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to margin transactions was
approved as follows 4,592,837 854,766 437,474 355 0 50
- --------------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to short sales was approved
as follows 4,610,343 834,249 440,485 355 0 50
- --------------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction which
limits the fund's ability to pledge assets
was approved as follows 4,554,739 881,201 449,137 355 0 50
- --------------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to investments in restricted
securities was approved as follows 4,674,580 774,240 436,257 355 0 50
- --------------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to investments in certain oil, gas
and mineral interests was approved
as follows 5,041,502 428,828 414,747 355 0 50
- --------------------------------------------------------------------------------------------------------------------------
A proposal to eliminate the fund's
fundamental investment restriction with
respect to invest to gain control of a
company's management was approved
as follows 4,943,503 504,895 436,679 355 0 50
- --------------------------------------------------------------------------------------------------------------------------
All tabulations are rounded to nearest whole number.
</TABLE>
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
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
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
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Thomas Reilly
Vice President
Jeanne L. Mockard
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
Call 1-800-225-1581 weekdays from 9 a.m. to 5 p.m. Eastern Time for
up-to-date information about the fund's NAV.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
35086-056 7/97
