<PAGE> 1
PUTNAM
UTILITIES
GROWTH AND
INCOME FUND
[ARTWORK]
SEMIANNUAL REPORT
APRIL 30, 1994
[LOGO]
BOSTON * LONDON * TOKYO
<PAGE> 2
Performance highlights
o "Competition is starting to roil the $187 billion electric-utility industry.
Long made up of hundreds of regional monopolies... the industry now is
scrambling to forestall customer defections, entice new business and expand
beyond old boundaries." -The Wall Street Journal, May 9, 1994
o Total returns at net asset value for class A shares of the fund outperformed
the Standard and Poor's(R) Utilities Index since inception, and for the
6-month, 1-year, and 3-year periods ended April 30, 1994. (See page 8.)
o Performance should always be considered in light of a fund's investment
strategy. The Putnam Utilities Growth and Income Fund is designed for
investors seeking capital growth and current income through equity and debt
securities issued by public utility companies.
SEMIANNUAL RESULTS AT A GLANCE
<TABLE>
<CAPTION>
Six months ended 4/30/94 Class A Class B
<S> <C> <C> <C> <C>
Total return: NAV POP NAV CDSC
(change in value plus
reinvested distributions) -7.36% -12.65% -7.73% -12.12%
Current return: NAV POP NAV
(end of period:)
Current dividend rate1 4.95% 4.67% 4.19%
Current 30-day
SEC yield2 4.93 4.64 4.21
Share value: NAV POP NAV
10/31/93 $10.56 $11.20 $10.52
4/30/94 $9.29 $9.86 $9.25
</TABLE>
<TABLE>
<CAPTION>
Capital gains
Short- Long-
Distributions: No. Income term term Total
<S> <C> <C> <C> <C> <C>
Class A 2 $0.230 $0.115 $0.167 $0.512
Class B 2 0.194 0.115 0.167 0.476
</TABLE>
Performance data represent past results. For performance over longer periods,
see pages 8 and 9. POP assumes 5.75% maximum sales charge. CDSC assumes 5%
maximum contingent deferred sales charge.
1Income portion of most recent distribution, divided by NAV or POP at end of
period.
2Based only on investment income, calculated per SEC guidelines.
2
<PAGE> 3
From the Chairman
[PHOTOGRAPH OF GEORGE PUTNAM]
(c) KARSH, OTTAWA
Dear Shareholder:
Many shareholders have been asking us whether we think the volatility that
hit the securities markets in February and March was a prelude to further
decline during the rest of 1994. We have been pointing out that the recent
adjustments in the markets are a natural occurrence at this stage of the
economic recovery.
Some volatility will likely continue for a while as investors digest new
realities in areas such as interest rates, inflation, and the pace of
the recovery. But the economy is still strong, interest rates remain
historically low, and inflation appears under control. In our view,
overall prospects for the long term are still positive.
Seasoned investors know there will occasionally be periods of rough going.
But experience has also taught them that long-term investment programs
should rarely be altered in response to short-term events.
In the report that follows, fund managers Sheldon Simon and Chris Ray
discuss the performance of Putnam Utilities Growth and Income Fund in this
market environment.
Respectfully yours,
[Signature of George Putnam]
George Putnam
June 15, 1994
(c) Copyright
3
<PAGE> 4
Report from the fund managers
Sheldon N. Simon, lead manager
Christopher A. Ray
In our last report, we noted that the extremely favorable market
conditions contributing to Putnam Utilities Growth and Income Fund's
strong performance in fiscal 1993 could not be expected to prevail
forever. While there is always satisfaction in having anticipated market
trends correctly, in this case, it might also have been rewarding to be
wrong. Three interest-rate increases in less than three months - as well
as other, more industry-specific factors - made the semiannual period
ended April 30, 1994, particularly challenging for your fund.
While the resulting performance is disappointing in absolute terms, the
fund's combination of utility stocks and bonds enabled it to outperform
the Standard and Poor's(R) Utility Index, which contains only stocks. For
the six months ended April 30, 1994, total return for the fund's class A
shares was -7.36% and for class B, -7.73%, both at net asset value.
Although negative, both figures compare favorably with the -11.18% return
posted by the S&P Utility Index.
o RISING INTEREST RATES: HOW YOUR FUND IS AFFECTED
Your fund benefited during the long period of declining rates, and
consequently was likely to lag once rates reversed direction. Utility
stocks tend to be slow-growing, high-yielding investments which, like
bonds, are typically held by investors seeking current income. As a
result, their prices have become closely tied to the bond market. So when
rates rise, the dividends paid on utility stocks, like the interest paid
on bonds, become less attractive - and prices fall.
Keep in mind, though, that utility stocks have greater appreciation
potential than most bonds and that they have historically outperformed
most fixed-income investments. While bonds continue to play an important
role in your fund's strategy, we believe carefully selected utility stocks
continue to offer attractive opportunities, especially in light of their
recently corrected prices, and are consequently maintaining our emphasis
on these investments.
4
<PAGE> 5
o INCREASED COMPETITION INCREASES CHALLENGES
The implementation of the National Energy Policy Act in 1993 introduced
the forces of competition to an industry once well insulated from them.
Public utilities must now contend with competition from independent power
generators and co-generators that can often offer municipal and corporate
customers significant savings on their power needs. New regulatory
developments appear likely to increase the level of competition; some
analysts believe that, in the future, independents may be able to compete
for retail power business as well.
This helps explain why we have reduced the fund's position in electric
utilities. At one point last year, these stocks were almost 50% of the
portfolio; now they are about one third. The stocks we favor are
characterized by improving fundamentals, such as strong cash flows and
prices that appear attractive relative to earnings. We are also looking
for companies poised to benefit from a more competitive environment. Low
cost structures, innovative management, and the vision to explore growth
possibilities outside the United States may prove instrumental in this
regard.
o PURSUING OVERSEAS OPPORTUNITIES
Over the next 10 years, increasing power needs around the world appear
likely to generate approximately 700 new power plants. As many as 600 of
these are expected to be built outside the United States.* Consequently,
your fund, which has the flexibility to invest up to 25% of its assets
overseas, is beginning to take advantage of it. While dividend yields for
non-U.S. utility stocks are generally lower than those of domestic utility
stocks, we believe their growth potential may be greater.
*Source: International Herald Tribune, March 26, 1994.
5
<PAGE> 6
One of our first overseas purchases was Bolivian Power Company. Based in
LaPaz, Bolivia, this company uses low-cost hydroelectric power plants -
the most cost-effective power source available - to provide electric
services to customers. If Bolivia's economy should begin to benefit from
increased economic activity worldwide, the company's growth potential
could improve substantially.
Another recent purchase: Tele Danmark, the leading provider of
telecommunication services in Denmark. In addition to traditional
telephone operations, Tele Danmark is involved with equipment servicing
and supply, data communications, and cable TV, and is one of only two
mobile telephone providers within Denmark. Its longer-term goals include
developing a low-cost hub for international traffic, which could mean
significant growth opportunities in the future.
Portfolio Allocation by Industry
as of April 30, 1994
[pie chart]
<TABLE>
<S> <C>
Telephone utilities 18.4%
Oil and gas 5.6%
Gas utilities 5.0%
Electric utilities 39.9%
Short-term investments 4.8%
Nonutility holdings 12.3%
Other utilities 14.0%
</TABLE>
Reflects combined stock and bond portfolio, based on percentages of net
assets as of 4/30/94.
6
<PAGE> 7
o ADJUSTING ALLOCATIONS
Our focus on equities over bonds this year reflects our perception that
utility stocks currently offer better relative values than bonds. While
this has put the fund's current income under some pressure, we believe
that the benefits to total return should justify our decision.
As we reduced holdings in electric utilities, we built up those in
telephone-based utilities to just under 20% of assets at the end of the
period. Our rationale: These stocks appear more attractive in terms of
price. We also believe they have the potential to improve if the economy
continues to strengthen. Furthermore, they should do so to a greater
degree than those of electric companies.
As a buffer toward some of the special risks unique to the utilities
industries, your fund also maintains a diversification sleeve of
nonutility holdings. During the last two months of the period, we boosted
these holdings to 17% of assets - a decision we consider instrumental in
helping to limit the fund's decline this spring. By the end of the
period, we had cut the nonutility allocation back to about 12%.
The market corrections we have recently experienced are probably the most
significant to affect this sector in the past 20 years. While there can,
of course, be no guarantees, we believe that the bulk of the damage in
the bond market has been done for the year, and that the fund is now
positioned to profit from opportunities that arise over the rest of
fiscal 1994.
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 April 30, 1994, there is no guarantee the fund
will continue to hold these securities in the future.
7
<PAGE> 8
PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares
changed over time, assuming you held the shares through the entire period
and reinvested all distributions back into the fund.
We show total return in two ways: On a cumulative long-term basis and how
the fund might have grown each year, on average, over varying periods
(see the tables below).
We provide total returns for varying lengths of time ending on April 30,
1994, the close of the fiscal period covered in this report. To make
comparisons with other investments easier, we also provide data for
periods ending on March 31, 1994, the most recent calendar quarter.
Finally, we have provided terms and definitions as they apply to your
fund.
TOTAL RETURN FOR PERIODS ENDING 4/30/94
<TABLE>
<CAPTION>
S&P
Class A Class B S&P Utilities
NAV POP NAV CDSC 500(R) Index Index
------- --- ------- ---- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
6 months -7.36% -12.65% -7.73% -12.12% -2.31% -11.18%
1 year 0.59 -5.21 -0.22 -4.87 5.31 -0.86
3 years 32.97 25.32 - - 31.12 32.55
Annual average 9.96 7.81 - - 9.45 9.85
Life of class A 36.21 28.36 - - 54.68 35.22
Annual average 9.37 7.50 - - 13.62 9.14
Life of class B - - 18.09 15.09 15.02 20.41
Annual average - - 8.62 7.24 7.25 9.73
</TABLE>
Performance data shown on pages 8 and 9 represent past results.
Investment returns and principal value of the fund will fluctuate so an
investor's shares, when sold, may be worth more or less than their
original cost. Fund performance data do not take into account any
adjustment for taxes payable on reinvested distributions. The fund began
operations on November 19, 1990, offering shares now known as class A
shares. Effective April 27, 1992, the fund began offering class B shares.
Performance for the share classes will differ.
8
<PAGE> 9
TOTAL RETURN FOR PERIODS ENDING 3/31/94
(most recent calendar quarter)
<TABLE>
<CAPTION>
Class A Class B
NAV POP NAV CDSC
------- --- ------- ----
<S> <C> <C> <C> <C>
6 months -9.07% -14.27% -9.34% -13.66%
1 year -1.66 -7.31 -2.44 -7.00
3 years 27.85 20.49 - -
Annual average 8.53 6.41 - -
Life of class A 33.57 25.87 - -
Annual average 8.97 7.07 - -
Life of class B - - 15.92 11.92
Annual average - - 7.95 6.01
</TABLE>
The fund began operations on November 19, 1990, offering shares now known
as class A. Effective April 27, 1992, the fund began offering class B
shares. Performance for the share classes will differ.
TERMS AND DEFINITIONS
CLASS A fund shares are generally subject to an initial sales charge.
CLASS B fund shares may be subject to a sales charge on redemption.
NET ASSET VALUE (NAV) is the value of all fund assets, minus liabilities,
divided by the number of outstanding shares. It does not include any
initial or contingent deferred sales charges.
PUBLIC OFFERING PRICE (POP) is the price of a fund share plus the maximum
sales charge levied at the time of purchase. POP performance figures
shown here assume the maximum 5.75% sales charge.
CONTINGENT DEFERRED SALES CHARGE (CDSC) is applied on redemption of fund
shares. Your fund's CDSC declines from a 5% maximum during the first year
to 1% during the sixth year. After the sixth year, the CDSC no longer
applies.
COMPARATIVE BENCHMARKS
STANDARD & POOR'S 500 INDEX* is an unmanaged list of common stocks that
is frequently used as a general measure of stock market performance.
STANDARD & POOR'S UTILITY INDEX* is an unmanaged list of common stocks
issued by public utility companies.
*The indexes assume reinvestment of all distributions and do not take
into account brokerage commissions or other costs. The fund's portfolio
contains securities that do not match those in the indexes.
9
<PAGE> 10
The Putnam Fund Selector(TM)
The Putnam Fund Selector shows the many opportunities for investors
within every investment strategy. All investors should first accumulate a
base of conservative, cash-equivalent investments. Then, with the help of
your investment advisor, diversify your portfolio by investing in the
Putnam Family of Funds.
[Pyramid Graphic]
Risk/Reward
PUTNAM GROWTH FUNDS
PUTNAM GROWTH
AND INCOME FUNDS
PUTNAM INCOME or TAX-FREE FUNDS
MOST CONSERVATIVE INVESTMENTS
10
<PAGE> 11
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Energy-Resources Trust
Europe Growth Fund
Diversified Equity Trust
Global Growth Fund
Health Sciences Trust
Investors Fund
New Opportunities Fund
OTC Emerging Growth Fund
Overseas Growth Fund
Vista Fund
Voyager Fund
PUTNAM GROWTH
AND INCOME FUNDS
Convertible Income-Growth Trust
Dividend Growth Fund
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Managed Income Trust
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Adjustable Rate U.S. Government Fund
American Government Income Fund
Balanced Government Fund
Corporate Asset Trust
Diversified Income Trust
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Intermediate Tax Exempt Fund
Tax-Free Insured Fund
Tax-Free High Yield Fund
STATE TAX-FREE INCOME FUNDS*
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio, and Pennsylvania
LIFESTAGE(SM) FUNDS
Putnam Asset Allocation Funds-three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments to help
maximize your return and reduce your risk.
The three portfolios:
Putnam Asset Allocation: Growth Portfolio
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
MOST CONSERVATIVE INVESTMENTS+
PUTNAM MONEY MARKET FUNDS
Daily Dividend
Trust Tax Exempt Money Market Fund
CDS AND SAVINGS ACCOUNTS++
*Not available in all states.
+Relative to above.
++Not offered by Putnam Investments. Certificates of deposit offer a fixed rate
of return and may be insured, up to certain limits, by federal/state agencies.
Savings accounts may also be insured up to certain limits.
Please call your financial advisor or Putnam to obtain a prospectus for any
Putnam fund. It contains more complete information, including charges and
expenses. Read it carefully before you invest or send money.
11
<PAGE> 12
PORTFOLIO OF INVESTMENTS OWNED
April 30, 1994 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (76.2%) (a)
NUMBER OF SHARES VALUE
<S> <C>
ELECTRIC UTILITIES (27.1%)
620,000 Allegheny Power Systems, Inc. $ 14,647,500
260,000 Boston Edison Co. 7,540,000
310,000 Carolina Power & Light Co. 8,253,750
150,000 Compania Boliviana Energia ADR (b) 3,731,250
31,300 Costanera ADR (b) 939,000
470,000 Detroit Edison Co. 12,690,000
430,000 Detroit Power & Light Co., Inc. 9,191,250
240,000 Eastern Utilities Assoc. 6,060,000
71,200 Enersis, S.A., ADR (b) 1,459,600
1,475,697 Entergy Corp. 45,193,221
301,600 FPL Group, Inc. 10,669,100
451,400 General Public Utilities Corp. 13,767,700
250,000 Hawaiian Electric Industries, Inc. 8,500,000
282,000 IES Industries, Inc. 8,107,500
150,000 Idaho Power Co. 3,956,250
133,400 KU Energy Corp. 3,618,475
610,800 Montana Power Co. 14,964,600
310,000 New England Electric Systems Inc. 11,625,000
550,000 Northeast Utilities 13,681,250
592,900 PSI Resources, Inc. 13,266,138
140,000 PacifiCorp 2,502,500
400,000 Pinnacle West Capital Corp. 8,250,000
610,000 Public Service Co. of Colorado 18,071,250
400,000 SCE Corp. 6,400,000
540,000 Southern Co. 10,530,000
855,400 Texas Utilities Co. 30,152,850
300,000 Union Electric Co. 10,537,500
200,000 United Illuminating Co. 7,325,000
------------
305,630,684
TELEPHONE UTILITIES (18.1%)
100,000 ALLTEL Corp. 2,687,500
150,000 American Telephone & Telegraph Co. 7,668,750
350,000 Ameritech Corp. 13,781,250
423,100 Bell Atlantic Corp. 21,895,425
200,000 BellSouth Corp. 12,175,000
100,000 British Telecommunications PLC ADR (b) 3,825,000
700,000 GTE Corp. 22,137,500
870,000 NYNEX Corp. 31,646,250
240,000 Pacific Telesis Group 7,680,000
120,000 Rochester Telephone Corp. 5,490,000
450,000 Southwestern Bell Corp. 18,675,000
400,000 Sprint Corp. 14,700,000
536,400 Tele Danmark A/S ADS (b) 13,410,000
100,000 Telefonos de Mexico S.A., Ser. L, ADR (b) 5,887,500
549,998 US WEST, Inc. 22,412,419
------------
204,071,594
COMBINED UTILITIES (6.9%)
250,000 Baltimore Gas & Electric Co. 6,031,250
295,700 CMS Energy Corp. 6,579,325
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<S> <C>
COMBINED UTILITIES (CONTINUED)
400,000 Cincinnati Gas & Electric Co. $ 9,150,000
225,000 NIPSCO Industries, Inc. 7,115,625
350,000 Pacific Gas & Electric Co. 9,275,000
200,000 Public Service Enterprise Group Inc. 5,775,000
100,000 Rochester Gas & Electric Corp. 2,462,500
100,000 San Diego Gas & Electric Co. 2,250,000
318,800 Sierra Pacific Resources 5,977,500
420,000 UGI Corp. (New) 9,135,000
480,000 Western Resources, Inc. 14,160,000
------------
77,911,200
OIL AND GAS (5.6%)
20,000 Chevron Corp. 1,780,000
275,000 Equitable Resources, Inc. 9,934,375
80,000 Exxon Corp. 5,030,000
60,000 Mobil Corp. 4,695,000
235,000 National Fuel Gas Co. 7,050,000
20,000 New Jersey Resources Corp. 495,000
100,000 Questar Corp. 3,325,000
46,200 Royal Dutch Petroleum Co. ADR 5,035,800
500,000 Sonat, Inc. 15,187,500
400,000 Williams Cos., Inc. 10,300,000
------------
62,832,675
GAS UTILITIES (4.1%)
500,000 Consolidated Natural Gas Co. 19,687,500
200,000 K N Energy, Inc. 4,675,000
100,000 MCN Corp. 3,987,500
100,000 NICOR Inc. 2,662,500
635,600 Pacific Enterprises 14,539,350
6,900 Peoples Energy Corp. 213,900
15,000 Washington Energy Co. 245,625
------------
46,011,375
TOBACCO (2.6%)
375,000 American Brands, Inc. 12,703,125
300,000 Philip Morris Cos., Inc. 16,350,000
------------
29,053,125
REAL ESTATE (2.3%)
160,600 Avalon Properties, Inc. 3,774,100
630,000 Crown American Realty Trust 9,056,250
160,000 Federal Realty Investment Trust 3,940,000
116,100 McArthur/Glen Realty Corp. 2,539,688
181,700 Simon Property Group, Inc. 4,860,475
135,000 Southwestern Properties Trust, Inc. 1,788,750
------------
25,959,263
BANKS (2.0%)
110,000 Bankers Trust New York Corp. 7,356,250
250,000 Comerica Inc. 7,000,000
300,000 National City Corp. 8,025,000
------------
22,381,250
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<S> <C>
PHARMACEUTICALS (1.7%)
105,000 American Home Products Corp. $ 6,063,750
97,100 Bristol-Myers Squibb Co. 5,231,260
100,000 Lilly (Eli) & Co. 4,925,000
40,000 Upjohn Co. 1,070,000
25,000 Warner-Lambert Co. 1,696,875
--------------
18,986,885
INSURANCE (1.6%)
180,000 Aetna Life & Casualty Co. 9,360,000
350,000 American General Corp. 8,925,000
--------------
18,285,000
RETAIL (1.4%)
500,000 K mart Corp. 8,250,000
450,000 Woolworth Corp. 7,481,250
--------------
15,731,250
PIPELINES (1.4%)
125,000 Enron Corp. 3,703,125
300,000 Panhandle Eastern Corp. 6,037,500
340,000 Westcoast Energy, Inc. 5,865,000
--------------
15,605,625
FOOD (0.7%)
300,000 Fleming Cos., Inc. 7,537,500
CELLULAR COMMUNICATIONS (0.5%)
240,000 Airtouch Communications 5,910,000
WATER UTILITIES (0.3%)
104,500 Pennsylvania Enterprises, Inc. 3,161,125
SPECIALTY CONSUMER PRODUCTS (-%)
13,700 Tambrands Inc. 505,188
Total Common Stocks (cost $901,537,755) $ 859,573,739
--------------
</TABLE>
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES (15.5%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C>
ELECTRIC UTILITIES (12.8%)
$ 4,000,000 Allegheny Generating Co. 6 7/8s, 2023 $ 3,445,000
3,500,000 BVPS Funding Corp. Sinking Fund coll. lease bonds
8.33s, 2007 3,605,000
7,000,000 Boston Edison Co. 9 3/8s, 2021 7,616,875
2,000,000 Chugach Electric Co. 1st mtge. Ser. A, 9.14s, 2022 2,227,500
5,000,000 Columbus Southern Power Corp. 8.7s, 2022 5,018,750
5,000,000 Commonwealth Edison Co. 7 3/4s, 2023 4,634,375
3,000,000 Commonwealth Edison Co. 6 1/2s, 2000 2,838,750
4,000,000 Consumers Power Co., mtge. 8 3/4s, 1998 4,187,500
5,500,000 Dayton Power & Light Co., 1st. mtge. 8.15s, 2026 5,620,313
4,000,000 Delmarva Power & Light Co. 5.69s, 1998 3,820,000
3,000,000 Detroit Edison Co. 7.79s, 2023 2,853,750
3,000,000 Detroit Edison Co. 1st mtge. 6.34s, 2000 2,838,750
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
<S> <C>
ELECTRIC UTILITIES (CONTINUED)
$ 4,000,000 Georgia Power Co. 1st mtge. 9.23s, 2019 $ 3,942,500
4,500,000 Gulf States Utilities Co. 6.41s, 2001 4,190,625
4,993,389 Indiana-Michigan Power Co. secd. lease oblig. bonds
9.82s, 2022 5,573,870
3,000,000 Interstate Power Co. 7 5/8s, 2023 2,825,625
7,000,000 Kansas City Power & Light Co. 5 3/4s, 1998 6,741,875
5,000,000 Midwest Power Systems mtge. 8 1/8s, 2023 5,006,250
5,000,000 NY State Electric & Gas Corp. 1st mtge. 8 7/8s, 2021 5,262,500
2,000,000 Nova Scotia Power Corp. 9.4s, 2021 2,222,500
3,000,000 PacifiCorp 9.15s, 2011 3,309,375
5,000,000 Pennsylvania Power & Light Co. 1st mtge. 9 1/4s, 2019 5,325,000
6,000,000 Philadelphia Electric Co. 5 3/8s, 1998 5,606,250
7,000,000 Public Service Co. of New Hampshire 8 7/8s, 1996 7,306,250
6,500,000 Puget Sound Power & Light Co. 1st mtge. 7 7/8s, 1997 6,719,375
6,000,000 System Energy Resources, Inc., 1st mtge. 8 1/4s, 2002 6,172,500
5,000,000 Texas Utilities Electric Co. secd. lease fac. bonds 7.46s, 2015 4,593,750
4,000,000 Texas Utilities Electric Co. 1st mtge. 7 3/8s, 1999 3,952,500
10,000,000 Toledo Edison Co. med. term notes 7.82s, 2003 8,943,750
7,500,000 Union Electric Co. 1st mtge. 8 3/4s, 2021 7,978,125
-------------
144,379,183
COMBINED UTILITIES (1.5%)
3,000,000 Australian Gas & Light Co. 6 3/8s, 2003 2,722,500
5,000,000 Old Dominion Electric Co. Ser. 93-A, 1st mtge.
Sinking Fund, 7.78s, 2023 4,740,625
4,000,000 Pacific Gas & Electric Co. 1st. mtge., Ser. 93-B, 5 3/8s, 1998 3,767,500
4,650,000 San Diego Gas & Electric Co. Ser. JJ, 1st mtge. 9 5/8s, 2020 5,202,188
-------------
16,432,813
GAS UTILITIES (0.9%)
4,000,000 Michigan Consolidated Gas Co. 8s, 2002 4,060,000
3,000,000 ONEOK Inc. deb. 9.7s, 2019 3,316,875
3,000,000 Washington National Gas Co. 1st mtge. 8.4s, 2022 3,076,875
-------------
10,453,750
TELEPHONE UTILITIES (0.3%)
3,400,000 New England Telephone & Telegraph Co. 7 7/8s, 2029 3,559,375
-------------
TOTAL CORPORATE BONDS (cost $179,975,189) $ 174,825,121
-------------
</TABLE>
<TABLE>
<CAPTION>
PREFERRED STOCKS (2.1%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
19,370 Cleveland Electric Illuminating Co. Sinking Fund,
Ser. N, $9.125, pfd. $ 1,883,733
414,800 Coastal Corp. $0.53125 pfd. 9,955,200
458,000 Public Service Co. of New Hampshire 1st mtge. $2.65 pfd. 11,793,500
-------------
Total Preferred Stocks (cost $26,368,405) $ 23,632,433
-------------
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCKS (0.5%) (a)
(COST $7,200,000)
NUMBER OF SHARES VALUE
<S> <C> <C>
500,000 Westinghouse Electric Senior C $ 1.30 cv. pfd. (c) $ 6,187,500
</TABLE>
<TABLE>
<CAPTION>
FOREIGN BONDS AND NOTES (0.5%) (a) (d)
(cost $5,283,540)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
$5,000,000 Hydro Quebec bonds, 9.4s, 2021 $ 5,525,000
</TABLE>
<TABLE>
<CAPTION>
CONVERTIBLE BONDS (0.3%) (a) (COST $2,756,251)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
$5,000,000 Cellular Communications, Inc.
cv. sub. deb., zero%, 1999 (c) $ 3,793,750
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS (4.8%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
$20,000,000 Federal Home Loan Banks 4s, July 27, 1994 $ 19,806,667
34,355,000 Interest in $504,971,000 joint repurchase agreement
dated April 29, 1994 with Kidder Peabody & Co., Inc.
due May 2,1994 with respect to various U.S. Treasury
obligations - maturity value of $34,365,163 for an
effective yield of 3.55% 34,361,775
--------------
Total Short-Term (cost $54,168,442) $ 54,168,442
--------------
Total Investments (cost $1,177,309,582) (e) $1,127,705,985
--------------
</TABLE>
(a) Percentages indicated are based on total net assets of $1,128,517,174,
which correspond to a net asset value per share for class A and class B
shareholders of $9.29 and $9.25 respectively.
(b) Securities whose values are determined or significantly influenced by
trading on exchanges non in the United States or Canada. ADR or ADS after
the name of a foreign holding stands for American Depository Receipts or
American Depository Shares, respectively, representing foreign securities
on deposit with a domestic custodian bank.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At April 30, 1994, this
security amounted to $9,981,250 or 0.9% of total net assets.
(d) U.S. Dollar-denominated
(e) The aggregate identified cost on a tax basis is $1,177,366,595, resulting
in gross unrealized appreciation and depreciation of $30,352,831 and
$80,013,441 respectively, or net unrealized depreciation of $49,660,610.
Concentrations in the Utilities industry as a percentage of net assets:
<TABLE>
<S> <C>
Common stocks 56.5%
Corporate bonds 15.5
Preferred stocks 2.1
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 17
Statement of assets and liabilities
April 30, 1994 (Unaudited)
<TABLE>
<S> <C>
Assets
Investments in securities, at value
(identified cost $1,177,309,582) (Note 1) $1,127,705,985
Cash 198,431
Dividends, interest and other receivables 9,006,877
Receivable for shares of the fund sold 3,307,087
Receivable for securities sold 18,737,314
Unamortized organization expenses (Note 1) 7,383
--------------
Total assets 1,158,963,077
Liabilities
Payable for securities purchased $ 26,117,822
Payable for shares of the fund repurchased 1,606,252
Payable for compensation of Manager (Note 2) 1,789,239
Payable for administrative services (Note 2) 10,451
Payable for compensation of Trustees (Note 2) 394
Payable for investor servicing and custodian fees (Note 2) 309,569
Payable for distribution fees (Note 2) 560,100
Other accrued expenses 52,076
Total liabilities 30,445,903
--------------
Net assets $1,128,517,174
Represented by
Paid-in capital (Notes 1 and 4) $1,161,155,741
Undistributed net investment income 102,743
Accumulated net realized gain on investment transactions 16,862,287
Net unrealized depreciation of investments (49,603,597)
Total - Representing net assets applicable --------------
to capital shares outstanding $1,128,517,174
Computation of net asset value and offering price --------------
Net asset value and redemption price of Class A per
share ($592,685,577 divided by 63,823,835 shares) $9.29
Offering price per share (100/94.25 of $9.29)* $9.86
Net asset value and offering price of Class B per share
($535,831,597 divided by 57,944,670)+ $9.25
</TABLE>
* 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.
17
<PAGE> 18
Statement of operations
Six months ended April 30, 1994 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 8,512,442
Dividends (net foreign tax of $43,448) 25,790,869
--------------
Total investment income 34,303,311
==============
EXPENSES:
Compensation of Manager (Note 2) $ 3,725,399
Investor servicing and custodian fees (Note 2) 876,775
Compensation of Trustees (Note 2) 19,149
Reports to shareholders 49,398
Auditing 16,461
Legal 8,242
Postage 108,425
Distribution fees - Class A (Note 2) 784,919
Distribution fees - Class B (Note 2) 2,762,981
Amortization of organization expenses (Note 1) 1,964
Administrative services (Note 2) 16,037
Registration fees 31,805
Other 44,530
--------------
TOTAL EXPENSES 8,446,085
==============
NET INVESTMENT INCOME 25,857,226
==============
Net realized gain on investments (Notes 1 and 3) 12,549,374
Net unrealized depreciation of investments during the period (132,363,115)
--------------
NET LOSS ON INVESTMENTS (119,813,741)
==============
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (93,956,515)
==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 19
Statement of changes in net assets
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
APRIL 30 OCTOBER 31
---------------- ----------
1994* 1993
---------------- ----------
<S> <C> <C>
Operations:
Net investment income $ 25,857,226 $ 38,890,050
Net realized gain on investments 12,549,374 40,194,488
Net unrealized appreciation (depreciation)
of investments (132,363,115) 65,555,087
Net increase (decrease) in net assets
resulting from operations (93,956,515) 144,639,625
Undistributed net investment income included in
price of shares sold and repurchased, net - 649,258
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Class A (14,797,499) (27,572,961)
Class B (10,956,984) (11,920,400)
In excess of net investment income:
Class A - (172,869)
Class B - (950,764)
Net realized gain on investments:
Class A (18,167,997) (237,269)
Class B (15,616,213) (73,301)
Increase from capital share transactions (Note 4) 45,733,775 609,744,505
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (107,761,433) 714,105,824
NET ASSETS
Beginning of period 1,236,278,607 522,172,783
End of period (including undistributed and distributions
in excess of net investment income of
$102,743 and $(1,123,633), respectively) $1,128,517,174 $1,236,278,607
============== ==============
</TABLE>
*Unaudited.
The accompanying notes are an integral part of these financial statements.
19
<PAGE> 20
Financial Highlights*
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the
period
April 27, 1992
Six months Year (commencement
ended ended of operations) to
April 30 October 31 October 31
---------- ---------- -----------------
1994 1993 1992
Class B
---------------------------------------------------
<S> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.52 $9.22 $8.87
Investment Operations:
Net Investment Income .21 .42 .26
Net Realized and Unrealized
Gain on Investments (1.01) 1.34 .36
Total for Investment Operations (.80) 1.76 .62
Less Distributions from:
Net Investment Income (.19) (.43) (.27)
In excess of net
investment income - (.03) -
Net Realized Gain
on Investments (.28) - -
Total Distributions (.47) (.46) (.27)
Net Asset Value, End of Period $9.25 $10.52 $9.22
Total Investment Return at
Net Asset Value (%) (d) 19.54 13.84(b)
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $535,832 $551,794 $103,075
-------- -------- --------
Ratio of Expenses to
Average Net Assets (%) 1.85(b) 1.86 1.83(b)
Ratio of Net Investment Income
to Average Net Assets (%) 3.99(b) 3.98 4.78(b)
Portfolio Turnover (%) 41.51(c) 123.57 21.16
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
For the
period
November 19, 1990
Six months Year Year (commencement
ended ended ended of operations) to
April 30 October 31 October 31 October 31
---------- ---------- ---------- ------------------
1994 1993 1992 1991
---------- ---------- ---------- ------------------
Class A
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.56 $9.24 $8.91 $8.50
Investment Operations:
Net Investment Income .24 .51 .52 .52(a)
Net Realized and Unrealized
Gain on Investments (1.00) 1.33 .37 .36
Total for Investment Operations (.76) 1.84 .89 .88
Less Distributions from:
Net Investment Income (.23) (.51) (.56) (.47)
In excess of net
investment income - - - -
Net Realized Gain
on Investments (.28) (.01) - -
Total Distributions (.51) (.52) (.56) (.47)
Net Asset Value, End of Period $9.29 $10.56 $9.24 $8.91
Total Investment Return at
Net Asset Value (%) (d) 20.40 10.31 11.26(b)
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $592,686 $684,484 $419,098 $158,918
Ratio of Expenses to -------- -------- -------- ----------
Average Net Assets (%) 1.08(b) 1.12 1.32 1.29(a)(b)
Ratio of Net Investment Income
to Average Net Assets (%) 4.76(b) 4.97 5.60 5.94(a)(b)
Portfolio Turnover (%) 41.51(c) 123.57 21.16 111.19(c)
</TABLE>
*Financial highlights for periods through October 31, 1992, have been
restated to conform with requirements issued by the SEC in April 1993. As
of November 1, 1993, the Fund discontinued the use of equalization
accounting. See Note 1 of Notes to Financial Statements.
+Unaudited
(a) Reflects a voluntary expense limitation during the period. As a result of
such limitation, expenses of the fund for the period ended October 31,
1991, reflect a reduction of approximately $0.04 per share. See Note 2.
(b) Annualized.
(c) Not annualized.
(d) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
21
<PAGE> 22
Notes to financial statements
April 30, 1994 (Unaudited)
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The fund
seeks capital growth and current income primarily through investments in
equity and debt securities issued by public utility companies.
The fund offers both Class A and Class B shares. The fund commenced its
public offering of Class B shares on April 27, 1992. Class A shares are
sold with a maximum front-end sales charge of 5.75%. Class B shares 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. Expenses
of the fund are borne pro-rata by the holders of both classes of shares,
except that each class bears expenses unique to that class (including the
distribution fees applicable to such class), and votes as a class only
with respect to its own distribution plan or other matters on which a class
vote is required by law to determined by the Trustees. Shares of each class
would receive their pro-rata share of the net assets of the fund if the
fund were liquidated. In addition, the Trustees declare separate dividends
on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
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, except
that certain U.S. government obligations are stated at the mean between the
last reported bid and asked prices. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost which a
pproximates market, and other investments are stated at fair value
following procedures approved by the Trustees. Market quotations are not
considered to be readily available for long-term corporate bonds and notes;
such investments are stated at fair value on the basis of valuations
furnished by a pricing service, approved by the Trustees, which determines
valuations for normal, institutional-size trading units of such securities
using methods based on market transactions for comparable securities and
vari ous relationships between securities which are generally recognized by
institutional traders.
B JOINT TRADING ACCOUNT Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested cash
balances into a joint trading account. The order permits the fund's cash
balance to be deposited into a single joint account along with the cash of
other registered investment companies managed by Putnam Investment
Management Inc., the fund's manager, a wholly-owned subsidiary of Putnam
Investments. These balances may be invested in one or more repurchased
agreements and/or short-term money market instruments.
22
<PAGE> 23
C REPURCHASE AGREEMENTS The Fund, or any other 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. The Fund's
Manager is responsible for determining that the value of these underlying
securities is at all times at least equal to the resale price, including
accrued interest.
D SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Interest income is recorded on the accrual basis and dividend
income is recorded on the ex-dividend date.
E FEDERAL TAXES It is the policy of the Fund to distribute all of its 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 of securities held, and
excise tax on income and capital gains.
F DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded by
the Fund on the ex-dividend date.
G UNAMORTIZED ORGANIZATION EXPENSES Expenses incurred by the Fund in
connection with its organization, aggregated $23,433. These expenses are
being amortized on a straight-line basis over a 5-year period.
H EQUALIZATION Prior to September 1, 1993, the Fund used the accounting
practice known as equalization to keep a continuing shareholder's per share
interest in undistributed net investment income unaffected by sales or
repurchases of Fund shares. This was accomplished by allocating a per share
portion of the proceeds from sales and the costs of repurchases of shares
to undistributed net investment income.
As of September 1, 1993, the Fund discontinued using equalization. This
change has no effect on the Fund's total net assets, net asset value per
share, or its net increase (decrease) in net assets from operations.
Discontinuing the use of equalization will result in simpler financial
statements. The cumulative effect of the change was to decrease
undistributed net investment income and increase paid in capital previously
reported through 1993 by $3,284,461.
Note 2
Management fee, administrative
services,and other transactions
Compensation of Putnam Investment Management, Inc. 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: 0.70% of the first $500 million of average net assets, 0.60%
of the next $500 million, 0.55% of the next $500 million, 0.50% of any
amount over $1.5 billion, subject to reduction in any year under current
law to the extent that expenses (exclusive of brokerage, interest and
taxes) of the Fund exceed 2.5% of the
23
<PAGE> 24
first $30 million of average net assets, 2.0% of the next $70 million and
1.5% of any amount over $100 million and by the amount of certain brokerage
commissions and fees (less expenses) received by affiliates of the Manager
on the Fund's portfolio transactions.
The Fund also reimburses the Manager 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. For the six months
ended April 30, 1994, the Fund paid $16,037 for these services.
Trustees of the Fund receive an annual Trustee's fee of $2,730 and an
additional fee for each Trustees' meeting attended. Trustees who are not
interested persons of the Manager and who serve on committees of the
Trustees receive additional fees for attendance at certain committee
meetings.
Custodial functions are being provided to the Fund by Putnam Fiduciary
Trust Company (PFTC), a subsidiary of Putnam Investments. Investor
servicing agent functions are currently provided by Putnam Investor
Services, a division of PFTC.
Fees paid for these investor servicing and custodial functions for the six
months ended April 30, 1994 amounted to $876,755.
Investor servicing and custodian fees reported in the Statement of
operations for the six months ended April 30, 1994, have been reduced by
credits allowed by PFTC.
The Fund has adopted a distribution plan with respect to its class A shares
(the "Class A Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940. The purpose of class A Plan is to compensate Putnam Mutual
Funds Corp. (formerly known as Putnam Financial Services, Inc.) a wholly
owned subsidiary of Putnam Investments Inc., for services provided and
expenses incurred by it in distributing class A shares. The Trustees have
approved payment by The Fund to Putnam Mutual Funds Corp. at an annual rate
of 0.25% of average net assets attributable to class A shares. For the six
months ended April 30, 1994, the Fund paid Putnam Mutual Funds Corp.
distribution fees of $784,919 for class A shares.
The Fund has adopted a separate distribution plan with respect to its class
B shares (the "Class B Plan ) pursuant to Rule 12b-1 under the Investment
Company Act of 1940. The purpose of Class B Plan is to compensate Putnam
Mutual Funds Corp. for services provided and expenses incurred by it in
distributing class B shares. The Class B Plan provides for payments by the
Fund to Putnam Mutual Funds Corp. at an annual rate of 1.00% of the Fund's
average net assets attributable to class B shares. Payments under the plan
cannot exceed 1.00% without shareholder approval. For the six months ended
April 30, 1994, the Fund paid Putnam Mutual Funds Corp. distribution fees
of $2,762,981 for class B shares.
24
<PAGE> 25
During the six months ended April 30, 1994, Putnam Mutual Funds Corp.,
acting as an underwriter, received net commissions of $255,747 from the
sale of class A shares.
Putnam Mutual Funds Corp. also receives the proceeds on the contingent
deferred sales charges on its Class B certain share redemptions within six
years of purchase. The charge is based on declining rates, which begin at
5.00% of the net asset value of the redeemed shares. Putnam Mutual Funds
Corp. has received any contingent deferred sales charges of $677,869 from
redemptions during the six months ended April 30, 1994.
A deferred sales charge of up to 1.00% is assessed on certain redemptions
of Class A shares purchased as part of an investment of $1 million or more.
For the six months ended April 30, 1994, Putnam Mutual Funds Corp., acting
as underwriter, received $4,834 on Class A redemptions.
Note 3
Purchases and sales of securities
During the six months ended April 30, 1994, purchases and sales of
investment securities other than short-term investments aggregated
$486,717,962 and $480,523,617, respectively. In determining the net gain or
loss on securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Capital shares
At April 30, 1994, there was an unlimited number of shares of beneficial
interest authorized, divided into two classes, designated Class A and Class
B capital shares.
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30 1994
CLASS A SHARES AMOUNT
- ------------------------- ------ ------
<S> <C> <C>
Shares sold 8,192,188 $ 80,104,770
Shares issued in connection with
reinvestment of distributions
2,877,566 $ 28,040,475
11,069,755 $ 108,145,245
Shares repurchased
(12,080,595) $ (117,430,281)
Portion represented by
undistributed net investment income
- -
------------ --------------
Net increase (1,010,841) $ (9,285,036)
============ ==============
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30 1994
CLASS B SHARES AMOUNT
- ------------------------- ------ ------
<S> <C> <C>
Shares sold 12,636,948 $ 124,029,290
Shares issued in connection with
reinvestment of distributions
2,387,742 $ 23,205,972
15,024,690 $ 147,235,262
Shares repurchased
(9,550,942) $ (92,216,451)
Portion represented by
undistributed net investment income
- -
---------- --------------
Net increase 5,473,748 $ 55,018,811
========== ==============
</TABLE>
25
<PAGE> 26
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1993
CLASS A SHARES AMOUNT
- --------------------- ------ ------
<S> <C> <C>
Shares sold 27,864,206 $279,912,275
Shares issued in connection with
reinvestment of distributions
2,198,303 $21,882,646
30,062,509 $301,794,921
Shares repurchased
(10,595,862) $(106,373,479)
Portion represented by
undistributed net investment income
- $(304,640)
----------- ------------
Net increase 19,466,647 $195,116,802
=========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1993
CLASS B SHARES AMOUNT
- --------------------- ------ ------
<S> <C> <C>
Shares sold 43,138,289 $434,011,920
Shares issued in connection with
reinvestment of distributions
1,045,890 $10,504,722
44,184,179 $444,516,642
Shares repurchased
(2,892,200) $ (29,544,321)
Portion represented by
undistributed net investment income
- (344,618)
---------- -------------
Net increase 41,291,979 $ 414,627,703
========== =============
</TABLE>
Note 5
Reclassification of Capital Accounts
Effective November 1, 1993, Putnam Utilities Growth and Income Fund has adopted
the provisions of Statement of Position (SOP) 93-2 "Determination, Disclosure
and Financial Statement Presentation of Income, Capital Gain and return of
Capital distributions by investment Companies." The SOP requires the Fund to
report the undistributed net investment income (accumulated loss) and
accumulated net realized gain (loss) accounts in such a manner as to
approximate amounts available for future tax distributions (or to offset
future realized capital gains) in implementing the SOP the Fund has
reclassified $4,483,557 to decrease accumulated net realized gain. $4,408,094
to decrease undistributed net investments income, with an increase of $75,463
to increase paid-in capital. These adjustments represent the cumulative amounts
necessary to report these balances on a tax basis through October 31, 1993.
These reclassifications which have no impact on the total net asset value of
the Fund are primarily attributable to tax equalization which is treated
differently in the computation of distributable income and capital gains under
federal income tax rules and regulations versus generally accepted accounting
principles.
26
<PAGE> 27
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
TRUSTEES
George Putnam, Chairman
William Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Donald S. Perkins
Robert E. Patterson
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
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Thomas V. Reilly
Vice President
Sheldon N. Simon
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of The Putnam Utilities
Growth and Income 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.
27
<PAGE> 28
PUTMAN INVESTMENTS Bulk Rate
The Putnam Funds U.S. Postage
One Post Office Square PAID
Boston, Massachusetts 02109 Boston, MA
Permit No. 53749
840/884-12455
