<PAGE>
PUTNAM
UTILITIES
GROWTH AND
INCOME FUND
SEMIANNUAL REPORT
APRIL 30, 1995
[LOGO]
BOSTON * LONDON * TOKYO
<PAGE>
PERFORMANCE HIGHLIGHTS
"The fund has not sacrificed the conservative approach that marked its
early years. Improved performances have made this fund a better total
return utilities vehicle, while income seekers can still enjoy a
strong yield."
- -- Morningstar analysis, 3/3/95(+)
SEMIANNUAL RESULTS AT A GLANCE
<TABLE><CAPATION>
<S> <C> <C> <C> <C> <C>
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- --
CLASS A CLASS B
TOTAL RETURN: NAV POP NAV CDSC
- ----------------------------------------------------------------------
- --
(change in value during
period plus reinvested
distributions)
6 months ended 4/30/95 6.06% -0.01% 5.71% 0.71%
- ----------------------------------------------------------------------
- --
CLASS A CLASS B CLASS M(1)
SHARE VALUE: NAV POP NAV NAV POP
- ----------------------------------------------------------------------
- --
10/31/94 $9.06 $9.61 $9.02
3/1/95(1) -- -- -- $9.14 $9.47
4/30/95 9.35 9.92 9.31 9.35 9.69
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- --
CAPITAL GAINS
LONG- SHORT-
DISTRIBUTIONS: NO. INCOME TERM TERM TOTAL
- ----------------------------------------------------------------------
- --
Class A 2 $0.230 -- $0.014 $0.244
Class B 2 0.198 -- 0.014 0.212
Class M 1 0.110 -- -- 0.110
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- --
CLASS A CLASS B
CURRENT RETURN: NAV POP NAV
- ----------------------------------------------------------------------
- --
End of period
Current dividend rate(2) 4.92% 4.64% 4.25%
Current 30-day SEC yield(3) 3.96 3.73 3.23
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- --
<FN>
Performance data represent past results and will differ for each share
class. For performance over longer periods, see page 9. POP assumes
5.75% maximum sales charge for class A shares and 3.50% for class M
shares. CDSC assumes 5% maximum contingent deferred sales charge. (1)
Class M shares became effective 3/1/95; total return for these shares
is not shown because of the brevity of the reporting period. (2)
Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period. (3) Based only on investment income,
calculated using SEC guidelines. (+) Morningstar is an independent
industry research and rating organization.
</TABLE>
<PAGE>
FROM THE CHAIRMAN
[PHOTO OF GEORGE PUTNAM]
(C)KARSH, OTTAWA
DEAR SHAREHOLDER:
A STRONG STOCK MARKET AND CONTINUED ECONOMIC GROWTH PROVIDED A
GENERALLY HOSPITABLE INVESTMENT ENVIRONMENT FOR PUTNAM UTILITIES
GROWTH AND INCOME FUND DURING THE SIX MONTHS ENDED APRIL 30, 1995.
BUSINESS CONTINUED TO MARCH AT A BRISK STRIDE, THOUGH THE PACE SINCE
JANUARY HAS SLOWED CONSIDERABLY FROM CALENDAR 1994 LEVELS.
INVESTORS TOOK THIS MODERATION AS A SIGN THAT THE ECONOMY WAS
RESPONDING FAVORABLY TO THE FEDERAL RESERVE BOARD'S ATTEMPTS TO REIN
IN GROWTH TO A SUSTAINABLE RATE. THE CONSENSUS IN THE MARKETS SEEMS TO
BE THAT THE FED'S SERIES OF INTEREST-RATE INCREASES MAY BE NEAR AN
END.
IN THE REPORT THAT FOLLOWS, FUND MANAGERS SHELDON SIMON AND
CHRISTOPHER RAY RELATE YOUR FUND'S PERFORMANCE DURING THE FIRST HALF
OF FISCAL 1995 TO THIS MARKET AND ECONOMIC SETTING. THEN THEY PROVIDE
A GLIMPSE OF WHAT THEY BELIEVE MAY LIE IN STORE FOR THE REMAINING
MONTHS.
RESPECTFULLY YOURS,
[SIGNATURE]
GEORGE PUTNAM
CHAIRMAN OF THE TRUSTEES
JUNE 21, 1995
<PAGE>
REPORT FROM THE FUND MANAGERS
SHELDON SIMON, LEAD MANAGER
CHRISTOPHER RAY
During the past year, the stock and bond markets left many investors
with battle scars instead of hoped-for gains. Even growth and income
funds, with their broad range of investment choices, were unable to
provide a safe haven. Although utilities -- a frequent choice of
conservative investors -- were among the hardest-hit sectors,
experience has taught us to see volatile markets not as a threat but
as an opportunity. We have focused on identifying those sectors poised
for a rebound while applying dynamic asset diversification to the
entire portfolio.
This proactive approach, which was in place well before the beginning
of the semiannual period, has served your fund well. Total return
performance for the six months ended April 30, 1995 has improved
substantially, and for the 12-month period ended April 30, the fund's
class A and B shares were in the top 11% of all 77 utilities funds
tracked by Lipper Analytical Services.* For more performance details,
see page 9. We believe our diversification strategy was invaluable in
protecting the value of the portfolio from the impact of rising
interest rates -- an important consideration since utilities,
especially electric utilities, tend to be highly sensitive to interest
rate changes.
THE DIVERSIFICATION DIFFERENCE
Allocating portfolio holdings between different sectors of the
utilities industries and some non-utility holdings is a cornerstone of
our strategy. We have recently built up holdings in telephone stocks,
and continue to believe that long distance telephone stocks, in
particular, remain attractive. Long distance companies have been
trading at a discount to regional telephone providers because of
concerns about intense competition and pricing pressures. We believe
this devaluation
* Lipper Analytical Services is an independent research firm whose
rankings vary over time and do not include the effects of sales
charges. For the periods ended 4/30/95, the fund's class A and
class B shares were ranked 5 and 8 out of 77 funds for one year,
8 and 16 out of 44 funds for two years and 10 and 16 of 28 funds
for three years. Past performance is not indicative of future
results.
<PAGE>
is unwarranted. In addition, forays into local service, like MCI
Metro, as well as partnerships such as those being created between
Sprint and cable companies, are strong evidence of significant
earnings growth potential.
It is certainly true that electric utilities have been hit hard
recently. This was particularly true through the end of 1994. With our
expectations that the economy will slow and our more constructive view
of the direction of long-term interest rates, we are once again
seeking opportunities in electric utilities companies that offer
attractive total return potential.
We have also increased our positions in natural gas and gas pipeline
stocks. This year's mild winter depressed gas prices, offering us an
opportunity to buy the stocks of solid companies at cheap valuations.
Furthermore, in the non-utility sector of the portfolio, management
has been focused on equities with low price/earnings ratios and high
dividend yields -- including financial companies like Bankers Trust,
Aetna and PNC Bank.
[MOUNTAIN CHART]
UTILITIES AND TREASURIES
- ----------------------------------------------------------------------
- --
[PLOT POINTS]
LEHMAN BROTHERS LEHMAN BROTHERS
DATE S&P UTILITIES UTILITIES BOND INDEX TREASURY BOND INDEX
4/30/94 0 0 0
5/31/94 -2.71 -1.25 -0.12
6/30/94 -2.47 -1.89 -0.35
7/31/94 0.8 1 1.47
8/31/94 0.5 0.89 1.49
9/30/94 -2.01 -1.39 0.07
10/31/94 -1.24 -1.65 0.01
11/30/94 -2.66 -1.47 -0.19
12/31/94 -2.11 -0.36 0.42
1/31/95 5.51 1.98 2.28
2/28/95 5.31 5.02 4.46
3/31/95 4.64 5.88 5.12
4/30/95 8.55 7.6 6.49
The graph compares cumulative total returns for unmanaged indexes
representing three different investment types. The S&P Utilities
Stock Index is a capitalization weighted index representing 3 utility
groups and 43 of the largest utility companies listed on the NYSE.
The Lehman Bros. Utilities Bond Index is one sector of the Lehman
Bros. corporate bond index and includes publicly issued, fixed rate
nonconvertible, investment grade, dollar-denominated instruments. The
Lehman Bros. Treasury Bond Index is composed of all U.S. Treasury
publicly issued obligations with a minimum maturity of 1 year and a
minimum outstanding principal of $50 million, and is rebalanced
monthly by market capitalization. Not intended to reflect fund
performance. Past performance does not assure future results.
<PAGE>
A MOVE TO MORE FIXED INCOME
Last fall, believing the bond market was due for a rally, we reduced
the fund's equity allocation and invested a greater portion of the
portfolio into long-term U.S. Treasuries. We chose Treasuries over
long-term utility bonds, because the latter often contain call
features which reduce the effective maturity during periods of falling
interest rates -- when bond prices can be expected to rise. This means
prices of utility bonds would not appreciate to the same extent as
those of the noncallable Treasury bonds. The fund purchased long-term
Treasuries when long-term interest rates were above 8% and has since
sold most of the position, benefiting from the subsequent
appreciation.
While the telephone industry's expansion beyond voice communication
into data, picture, and interactive communications is a point of
interest to equity investors, it is the reason we have minimized our
investment in telephone bonds. Building these new businesses requires
capital. In order to raise capital, many companies will be increasing
their debt burdens, which may negatively impact their credit standing.
Those telephone bonds we do own are of the highest quality available.
ADDRESSING THE DOLLAR DILEMMA
The fund's overseas holdings have enabled it to benefit from the
weakness of the U.S. dollar. However, we believe this trend is drawing
to a close, and have begun taking profits on these holdings,
decreasing the allocation from 10% to 7 1/2 % while reinvesting the
proceeds in U.S.-based stocks. The fund's current overseas investments
emphasize issues with strong fundamentals and long-term growth
potential. We have also continued to focus on emerging markets such as
Latin America and China, which we believe offer opportunities for both
rapid returns and long-term growth, in spite of recent volatility.
As for non-U.S. fixed-income positions, we invested in high quality,
dollar-denominated issues such as Hydro Quebec, thereby avoiding
currency risk. Although electric utilities are shifting into more
competitive enterprises in the United States, overseas, they remain
primarily monopolistic, government-
<PAGE>
[BAR CHART]
DIVERSIFICATION BY INDUSTRY*
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- --
Electric utilities 38.8%
Telephone utilities 21.4%
Nonutility holdings 19.6%
Oil and gas 16.2%
Cash and short-term investments 0.8%
Other utilities 0.8%
* Based on net assets of the fund on 4/30/95. Reflects combined
stock and bond portfolios. Holdings will vary over time.
regulated concerns. From a bond buyer's point of view, there is more
credit risk in the former scenario. When governments have a stake in a
utility's performance they may allow it to charge higher rates -- in
essence, price setting -- rationalizing it as being for the greater
social good.
TRANSFORMING PUBLIC UTILITIES INTO PRIVATE COMPETITORS
California's innovative contributions to 20th century culture -- beach
volleyball, coffee bars, and auto emissions laws, to cite a few --
seem to move gradually but insistently from west to east. Recently in
California, there has been a movement toward lowering electric utility
prices. Previously lively discussions about enacting regulations to
encourage increased competition and price pressures now seem to be
losing steam. Although it appears any industry revolution will take
longer than was thought a year ago, we still expect this trend to lead
to some changes over time.
While the compressed margins that can result from increased
competitive pressures to lower prices may frighten some, alert
investors can benefit from the opportunities that accompany change.
The lower earnings levels that have been acceptable to public utility
companies for years are no longer generally acceptable and the
companies must work much harder to justify their cost structures.
Astute companies will seek ways to
<PAGE>
improve the profitability of their assets through innovation and cost
control. Therefore, in the fixed-income portion of the fund, we are
upgrading credit quality and investing in bonds where the company's
management has an operating philosophy in tune with the emerging
competitive environment.
A FUND WITH AN ORIENTATION TO TOTAL RETURN
Income-oriented shareholders should keep in mind that the fund's
successful performance thus far reflects the fact that it is managed
with an eye to maximizing total return. Portfolio selections are not
made merely on the basis of income. They must also make sense from a
fundamental and growth potential perspective. In fact, in view of
today's volatile investment environment and imminent changes in the
utility industry, we believe there are many new opportunities for
attractive long-term return that have the potential to outperform
those that have historically provided higher income. While we are
working hard to maintain the fund's current dividend level and do not
anticipate any changes near-term, we plan to incorporate many of these
alternatives over time in order to position your fund for superior
long-term performance.
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 4/30/95, there is no guarantee
the fund will continue to hold these securities in the future.
<PAGE>
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 on
average how the fund might have grown each year over varying periods.
Performance should always be considered in light of a fund's
investment strategy. Putnam Utilities Growth and Income Fund is
designed for capital growth and current income through equity and debt
securities issued by public utility companies.
TOTAL RETURN FOR PERIODS ENDED 4/30/95
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<S> <C> <C> <C> <C> <C> <C>
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LEHMAN BROS.
CLASS A CLASS B S&P GOVT./CORP
NAV POP NAV CDSC 500 Index Bond Index
- ----------------------------------------------------------------------
- --
6 months 6.06% -0.01% 5.71% 0.71% 10.45% 6.95%
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1 year 6.12 -0.01 5.35 0.35 17.42 6.93
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- --
Life of class A 44.55 36.22 -- -- 82.49 46.14
Annual average 8.63 7.19 -- -- 14.47 8.90
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Life of class B -- -- 24.40 21.40 35.07 25.11
Annual average -- -- 7.52 6.65 10.50 7.73
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- --
</TABLE>
TOTAL RETURN FOR PERIODS ENDED 3/31/95
(most recent calendar quarter)
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
CLASS A CLASS B
NAV POP NAV CDSC
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- --
6 months 4.26% -1.75% 3.78% -1.22%
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- --
1 year 5.67 -0.44 4.78 -0.22
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Life of class A 41.15 33.01 -- --
Annual average 8.21 6.75 -- --
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Life of class B -- -- 21.46 18.46
Annual average -- -- 6.86 5.95
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<FN>
Fund performance data do not take into account any adjustment for
taxes payable on reinvested distributions. The Fund began offering
what are now known as class A shares on 11/19/90. Effective 4/27/92,
the fund began offering class B shares, and on 3/1/95, class M shares.
Performance data represent past results and will differ for each share
class. Investment returns and principal value will fluctuate so an
investor's shares, when sold, may be worth more or less than their
original cost. Class M share performance is not shown due to brevity
of period.
</TABLE>
<PAGE>
TERMS AND DEFINITIONS
CLASS A SHARES are generally subject to an initial sales charge.
CLASS B SHARES may be subject to a sales charge upon redemption.
CLASS M SHARES have a lower initial sales charge and a higher 12b-1
fee than class A shares and no sales charge on redemption.
NET ASSET VALUE (NAV) is the value of all your fund's assets, minus
any liabilities, divided by the number of outstanding shares, not
including any initial or contingent deferred sales charge.
PUBLIC OFFERING PRICE (POP) is the price of a mutual fund share plus
the maximum sales charge levied at the time of purchase. POP
performance figures shown here assume the maximum 5.75% sales charge
for class A shares and 3.50% for class M shares.
CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the
time of the redemption of class B shares and assumes redemption at the
end of the period. Your fund's CDSC declines from a 5% maximum during
the first year to 1% during the sixth year. After the sixth year, the
CDSC no longer applies.
COMPARATIVE BENCHMARKS
STANDARD & POOR'S 500 INDEX is an unmanaged list of large-
capitalization common stocks and is frequently used as a general gauge
of stock market performance.
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX is an unmanaged list
of publicly issued U.S. Treasury obligations, debt obligations of U.S.
government agencies (excluding mortgage-backed securities), fixed-
rate, nonconvertible investment-grade corporate debt securities and
U.S. dollar-denominated SEC-registered nonconvertible debt issued by
foreign governmental entities or international agencies.
Both 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.
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
April 30, 1995 (Unaudited)
<TABLE><CAPTION>
<C> <S> <C>
COMMON STOCKS (73.8)*
NUMBER OF SHARES VALUE
AEROSPACE (0.3%)
- ----------------------------------------------------------------------
- --
30,000 Boeing Co. $ 1,650,000
100,000 GenCorp, Inc. 1,262,500
-----------
2,912,500
ALCOHOLIC BEVERAGES (0.5%)
- ----------------------------------------------------------------------
- --
150,000 Brown Forman Corp. Class B 4,950,000
BANKING (2.2%)
- ----------------------------------------------------------------------
- --
220,000 Bankers Trust New York Corp. 11,935,000
200,000 National City Corp. 5,475,000
250,000 PNC Bank Corp. 6,281,250
-----------
23,691,250
ELECTRIC UTILITIES (24.8%)
- ----------------------------------------------------------------------
- --
130,000 Boston Edison Co. 3,103,750
150,000 CMS Energy Corp. 3,506,250
100,000 Carolina Power & Light Co. 2,750,000
89,800 Central Costanera 144A ADR (Argentina) 2,604,200
80,000 Central Puerto 144A ADR (Argentina) 1,560,000
40,000 Chilgener S.A., ADR (Chile) 1,120,000
400,000 China Light & Power Co. (Hong Kong) 1,886,080
450,000 Cinergy Corp. 11,306,250
150,000 Compania Boliviana Energia ADR 3,731,250
50,000 DPL, Inc. 1,043,750
100,000 Detroit Edison Co. 2,825,000
340,120 East Midlands Electricity PLC (United Kingdom) 3,610,884
170,000 Eastern Utilities Assoc. 4,058,750
76,700 Empresa Nacional De Electricidad ADR (Chile) 1,898,325
200,000 Empresa Nacional de Electricidad ADR (Spain) 9,400,000
450,000 Entergy Corp. 9,787,500
100,000 FPL Group, Inc. 3,675,000
250,000 General Public Utilities Corp. 7,125,000
111,700 Hawaiian Electric Industries, Inc. 3,867,613
600,000 Hong Kong Electric Holdings Ltd. (Hong Kong) 1,840,860
300,000 Houston Industries, Inc. 11,850,000
750,000 Huaneng Power International, Inc. ADR (China) 10,875,000
265,300 IES Industries, Inc. 5,504,975
1,500,000 Iberdrola S.A., ADR (Spain) 9,853,950
50,000 Korea Electric Power Co. ADR (Korea) 1,050,000
250,000 Long Island Lighting Co. 3,718,750
30,000 NIPSCO Industries, Inc. 967,500
100,000 New England Electric Systems Inc. 3,012,500
500,000 Northeast Utilities 10,937,500
500,000 Pacific Gas & Electric Co. 13,437,500
700,000 Pinnacle West Capital Corp. 15,050,000
200,000 Portland General Corp. 4,150,000
470,000 Public Service Co. of Colorado 14,158,750
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
ELECTRIC UTILITIES (continued)
- ----------------------------------------------------------------------
- --
500,000 Public Service Enterprise Group Inc. $ 13,750,000
100,000 Rochester Gas & Electric Corp. 2,062,500
500,000 SCE Corp. 8,375,000
600,000 Scottish Power PLC (United Kingdom) 3,267,120
421,500 Shandong Huaneng Power ADR (China) 3,424,688
220,000 Sierra Pacific Resources 4,592,500
400,000 Southern Electric PLC (United Kingdom) 4,259,480
250,000 Southwestern Public Service Co. 7,125,000
360,000 TNP Enterprises, Inc. 5,715,000
546,400 Texas Utilities Electric. Co. 17,826,300
200,000 United Illuminating Co. 6,425,000
50,000 Utilicorp United, Inc. 1,400,000
------------
263,489,475
FINANCE (0.5%)
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150,000 American Express Co. 5,212,500
FOOD (0.5%)
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- --
225,000 Fleming Companies, Inc. 5,456,250
GAS (0.5%)
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500,000 Transport adora De Gas Del Sur ADR (Argentina) 4,937,500
GAS PIPELINES (0.1%)
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- --
50,000 El Paso Natural Gas Co. 1,462,500
GAS UTILITIES (13.9%)
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- --
200,000 Coastal Corp. 5,950,000
400,000 Columbia Gas System, Inc.+ 11,800,000
280,000 Consolidated Natural Gas Co. 11,025,000
250,000 Enron Corp. 8,500,000
275,000 Equitable Resources, Inc. 7,871,875
300,000 K N Energy, Inc. 7,612,500
200,000 MCN Corp. 3,850,000
200,000 NICOR Inc. 4,950,000
302,800 National Fuel Gas Co. 8,743,350
20,000 New Jersey Resources Corp. 450,000
794,500 Pacific Enterprises 19,564,563
571,400 Panhandle Eastern Corp. 13,713,600
24,800 Peoples Energy Corp. 626,200
430,000 Questar Corp. 12,738,750
300,000 Sonat, Inc. 9,112,500
420,000 UGI Corp. (New) 8,137,500
15,000 Washington Energy Co. 223,125
390,000 Westcoast Energy, Inc. 6,191,250
200,000 Williams Cos., Inc. 6,575,000
------------
147,635,213
INSURANCE (2.1%)
- ----------------------------------------------------------------------
- --
180,000 Aetna Life & Casualty Co. 10,260,000
150,000 American General Corp. 4,950,000
80,000 Lincoln National Corp. 3,260,000
60,000 SAFECO Corp. 3,390,000
------------
21,860,000
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
METALS AND MINING (0.2%)
- ----------------------------------------------------------------------
- --
100,000 Freeport-McMoRan Copper &
Gold Co., Inc. Class A $ 2,087,500
OILS (0.3%)
- ----------------------------------------------------------------------
- --
68,200 Pennzoil Co. 3,333,275
PHARMACEUTICALS (0.6%)
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- --
97,100 Bristol-Myers Squibb Co. 6,323,638
PHOTOGRAPHY (0.6%)
- ----------------------------------------------------------------------
- --
100,000 Eastman Kodak Co. 5,750,000
PUBLISHING (0.8%)
- ----------------------------------------------------------------------
- --
100,000 Dun & Bradstreet Corp. 5,212,500
50,000 McGraw-Hill, Inc. 3,731,250
------------
8,943,750
RAILROADS (1.0%)
- ----------------------------------------------------------------------
- --
80,000 Norfolk Southern Corp. 5,390,000
100,000 Union Pacific Corp. 5,487,500
------------
10,877,500
REAL ESTATE (2.4%)
- ----------------------------------------------------------------------
- --
160,600 Avalon Properties, Inc. 3,151,768
300,000 Crown American Realty Trust 3,750,000
249,000 Equity Residential Properties Trust 6,660,750
160,000 Federal Realty Investment Trust 3,260,000
50,000 Glimcher Realty Trust 968,750
116,100 McArthur/Glen Realty Corp. 1,538,325
100,000 Paragon Group, Inc. 1,725,000
100,000 Simon Property Group, Inc. 2,375,000
135,000 South West Property Trust, Inc. 1,603,125
------------
25,032,718
RETAIL (1.5%)
- ----------------------------------------------------------------------
- --
600,000 K Mart Corp. 8,325,000
100,000 May Department Stores Co. 3,625,000
100,000 Melville Corporation 3,575,000
------------
15,525,000
TELEPHONE UTILITIES (18.9%)
- ----------------------------------------------------------------------
- --
100,000 ALLTEL Corp. 2,475,000
200,000 Airtouch Communications+ 5,375,000
100,000 Ameritech Corp. 4,500,000
150,000 Bell Atlantic Corp. 8,231,250
180,000 BellSouth Corp. 11,025,000
150,000 Comsat Corp. 3,000,000
130,000 Empresas Telex-Chile S.A., ADR (Chile) 1,023,750
330,000 Frontier Corp. 6,641,250
550,000 GTE Corp. 18,768,750
1,700,000 MCI Communications Corp. 36,975,000
450,000 NYNEX Corp. 18,393,750
97,500 Pacific Telesis Group 3,010,313
200,000 Southwestern Bell Corp. 8,825,000
1,475,000 Sprint Corp. 48,675,000
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
TELEPHONE UTILITIES (continued)
- ----------------------------------------------------------------------
- --
281,500 Tele Danmark A/S ADS (Denmark) $ 7,389,375
397,898 US WEST, Inc. 16,463,030
------------
200,771,468
TOBACCO (0.8%)
- ----------------------------------------------------------------------
- --
45,000 American Brands, Inc. 1,822,500
100,000 Philip Morris Cos., Inc. 6,775,000
------------
8,597,500
TRANSPORTATION (0.5%)
- ----------------------------------------------------------------------
- --
200,000 Consolidated Freightways, Inc. 5,100,000
WATER UTILITIES (0.8%)
- ----------------------------------------------------------------------
- --
104,500 Pennsylvania Enterprises, Inc. 3,383,188
550,000 Welsh Water PLC (United Kingdom)+ 5,484,655
------------
8,867,843
- ----------------------------------------------------------------------
- --
TOTAL COMMON STOCKS (cost $776,224,853) $782,817,380
- ----------------------------------------------------------------------
- --
CORPORATE BONDS AND NOTES (16.2%)*
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------
- --
ELECTRIC UTILITIES (14.0%)
- ----------------------------------------------------------------------
- --
$3,000,000 Alabama Power 1st mtge. 9s, 2024 $ 3,168,750
4,000,000 Allegheny Generating Co. deb. 6 7/8s, 2023 3,432,500
3,500,000 BVPS II Funding Corp. notes 8.33s, 2007 3,167,500
7,000,000 Chugach Electric Co. 1st mtge.
Ser. A, 9.14s, 2022 7,503,125
3,432,000 Citizens Utilities Co. bonds 7.68s, 2034 3,569,280
3,500,000 Commonwealth Edison 1st mtge.
Ser. 85, 7 3/8s, 2002 3,405,938
3,000,000 Commonwealth Edison Co. notes 6 1/2s, 2000 2,868,750
4,000,000 Consumers Power Co. mtge. 8 3/4s, 1998 4,110,000
4,000,000 Delmarva Power & Light Co. med. term.
notes 5.69s, 1998 3,830,000
3,000,000 Detroit Edison Co. 1st mtge. 6.34s, 2000 2,855,625
1,455,000 Georgia Power Co. 1st mtge. ARP 9.23s, 2019 1,538,663
5,000,000 Iberdrola (Spain) notes 7 1/2s, 2002 4,937,500
4,992,811 Indiana-Michigan Power Co. deb. 9.82s, 2022 5,669,961
5,000,000 Interstate Power Co. mtge. 7 5/8s, 2023 4,665,625
7,000,000 Kansas City Power & Light Co.
med. term. notes 5 3/4s, 1998 6,741,875
5,000,000 Midwest Power Systems mtge. 8 1/8s, 2023 4,834,375
3,500,000 Montana Power Co. 1st mtge. 7.7s, 1999 3,515,313
5,000,000 NY State Electric & Gas Corp.
1st mtge. 8 7/8s, 2021 5,171,875
4,000,000 Niagara Mohawk Pwr. Corp. 1st mtge. 8s, 2004 3,910,000
4,000,000 Pacific Gas & Electric Co. 1st. mtge.,
Ser. 93-B, 5 3/8s, 1998 3,780,000
3,000,000 Pacificorp secd. med. term. notes 9.15s, 2011 3,288,750
5,000,000 Pennsylvania Power & Light Co.
1st mtge. 9 1/4s, 2019 5,253,125
6,000,000 Philadelphia Electric Co.
1st Ref. mtge. 5 3/8s, 1998 5,643,750
3,500,000 Public Service Co. of Colorado med.
term. notes 9.08s, 1999 3,701,250
7,000,000 Public Service Co. of New Hampshire
1st mtge. 8 7/8s, 1996 7,105,000
6,500,000 Puget Sound Power & Light Co.
1st mtge. 7 7/8s, 1997 6,593,438
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------
- --
ELECTRIC UTILITIES (continued)
- ----------------------------------------------------------------------
- --
$4,650,000 San Diego Gas & Electric Co. Ser.
1J, 1st mtge. 9 5/8s, 2020 $ 5,022,000
4,000,000 Texas Utilities Electric Co.
1st mtge. 7 3/8s, 1999 3,967,500
5,000,000 Texas Utilities Electric Co.
secd. lease fac. bonds 7.46s, 2015 4,362,500
10,000,000 Toledo Edison med. term. notes 1st mtge.
Ser. A, 7.82s, 2003 9,031,250
7,500,000 Union Electric Co. 1st mtge. 8 3/4s, 2021 7,823,438
3,500,000 Virginia Electric Pwr. 1st ref. mtge.
Ser. B, 8 5/8s, 2024 3,615,938
-------------
148,084,594
GAS (0.3%)
- ----------------------------------------------------------------------
- --
4,000,000 Southern Union Gas Sr. notes 7.6s, 2024 3,610,000
GAS UTILITIES (1.0%)
- ----------------------------------------------------------------------
- --
4,000,000 Michigan Consolidated Gas
1st mtge. 8 1/4s, 2014 4,115,000
3,500,000 ONEOK Inc. deb. 9.7s, 2019 3,771,250
3,000,000 Washington National Gas Co.
1st mtge. 8.4s, 2022 3,071,250
-------------
10,957,500
TELEPHONE UTILITIES (0.9%)
- ----------------------------------------------------------------------
- --
3,500,000 BellSouth Telecommunication deb. 6 3/4s, 2033 2,955,313
3,000,000 GTE Corp. deb. 8 3/4s, 2021 3,148,125
3,500,000 New York Telephone Co. deb. 7 5/8s, 2023 3,285,625
-------------
9,389,063
- ----------------------------------------------------------------------
- --
TOTAL CORPORATE BONDS AND NOTES
(cost $180,839,933) $ 172,041,157
- ----------------------------------------------------------------------
- --
YANKEE BONDS AND NOTES (1.5%)*
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------
- --
$3,000,000 Australian Gas & Light Co. (Australia)
sr. notes 6 3/8s, 2003 $ 2,733,750
10,000,000 Hydro Quebec (Canada) bonds, 9.4s, 2021 11,037,500
2,000,000 Nova Scotia (Canada) Power Corp.
deb. 9.4s, 2021 2,216,250
- ----------------------------------------------------------------------
- --
TOTAL YANKEE BONDS AND NOTES
(cost $20,477,250) $ 15,987,500
- ----------------------------------------------------------------------
- --
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (1.5%) (COST $15,168,203)*
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------
- --
$15,500,000 U.S. Treasury Bonds 8s, November 15, 2021 $ 16,439,688
- ----------------------------------------------------------------------
- --
CONVERTIBLE BONDS AND NOTES (1.4%)*
PRINCIPAL AMOUNT VALUE
COMMUNICATIONS (0.4%)
- ----------------------------------------------------------------------
- --
$5,000,000 Cellular Communications, Inc.
cv. sub. deb., zero %, 1999 144A $ 3,900,000
ENVIRONMENTAL CONTROL (0.3%)
- ----------------------------------------------------------------------
- --
4,082,614 WMX Technologies, Inc. cv. 2s, 2005 3,317,124
TELEPHONE UTILITIES (0.7%)
- ----------------------------------------------------------------------
- --
9,000,000 Telekom Malaysia 144A cv. deb.4s, 2004 7,672,500
- ----------------------------------------------------------------------
- --
TOTAL CONVERTIBLE BONDS AND NOTES
(cost $14,483,021) $ 14,889,624
- ----------------------------------------------------------------------
- --
<PAGE>
CONVERTIBLE PREFERRED STOCKS (1.2%)*
NUMBER OF SHARES VALUE
BUSINESS EQUIPMENT AND SERVICES (0.4%)
- ----------------------------------------------------------------------
- --
100,000 Unisys Corp. Ser. A, $3.75 cv. pfd. $ 4,000,000
TELEPHONE UTILITIES (0.8%)
- ----------------------------------------------------------------------
- --
145,000 Philippine Long Distance Telephone Co.
$7.00 cv. pfd. (Philippines) 8,555,000
- ----------------------------------------------------------------------
- --
TOTAL CONVERTIBLE PREFERRED STOCKS
(cost $10,886,678) $ 12,555,000
- ----------------------------------------------------------------------
- --
PREFERRED STOCKS (1.1%)* (COST $13,746,276)
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------
- --
458,000 Public Service Co. of New Hampshire
1st mtge. $2.65 pfd. $ 11,793,500
- ----------------------------------------------------------------------
- --
SHORT-TERM INVESTMENTS (0.8%)*
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------
- --
$9,000,000 Federal Home Loan Banks 5.94s, May 1, 1995 $ 9,005,445
- ----------------------------------------------------------------------
- --
TOTAL INVESTMENTS (cost $1,040,831,659)***$1,035,529,294
- ----------------------------------------------------------------------
- --
<FN>
* Percentages indicated are based on net assets of $1,061,210,963,
which corresponds to a net asset value per class A, class B and
class M shares of $9.35, $9.31, and $9.35, respectively.
*** The aggregate identified cost on a tax cost basis is
$1,041,971,249 resulting in gross unrealized appreciation and
depreciation of $57,887,287 and $64,329,242, respectively, or net
unrealized depreciation of $6,441,955.
+ Non-income producing securities.
ADR after the name of a foreign holding stands for American
Depository Receipt, representing ownership of foreign securities
on deposit with a domestic custodian bank.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
Concentration in the utilities industry as a percentage of net
assets:
Common Stocks 58.4%
Corporate Bonds and Notes 15.9
Convertible Preferred Stocks 0.8
</TABLE>
<PAGE>
STATMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
<TABLE><CAPTION>
<S> <C>
ASSETS
- ----------------------------------------------------------------------
- --
Investments in securities, at value
(identified cost $1,040,831,659) (Note 1) $1,035,529,294
- ----------------------------------------------------------------------
- --
Cash 116,844
- ----------------------------------------------------------------------
- --
Interest, dividends and other receivables 8,684,640
- ----------------------------------------------------------------------
- --
Receivable for shares of the fund sold 2,230,188
- ----------------------------------------------------------------------
- --
Receivable for securities sold 21,747,994
- ----------------------------------------------------------------------
- --
TOTAL ASSETS $1,068,308,960
LIABILITIES
- ----------------------------------------------------------------------
- --
Payable for securities purchased $2,976,518
- ----------------------------------------------------------------------
- --
Payable for shares of the fund repurchased 1,573,492
- ----------------------------------------------------------------------
- --
Payable for compensation of Manager (Note 2) 1,645,649
- ----------------------------------------------------------------------
- --
Payable for administrative services (Note 2) 2,429
- ----------------------------------------------------------------------
- --
Payable for compensation of Trustees (Note 2) 386
- ----------------------------------------------------------------------
- --
Payable for distribution fees (Note 2) 535,360
- ----------------------------------------------------------------------
- --
Payable for investor servicing and custodian fees (Note 2) 274,102
- ----------------------------------------------------------------------
- --
Other accrued expenses 90,061
- ----------------------------------------------------------------------
- --
TOTAL LIABILITIES 7,097,997
- ----------------------------------------------------------------------
- --
NET ASSETS $1,061,210,963
- ----------------------------------------------------------------------
- --
REPRESENTED BY
- ----------------------------------------------------------------------
- --
Paid-in capital (Notes 1and 4) $1,088,872,935
- ----------------------------------------------------------------------
- --
Distributions in excess of net investment income (1,393,392)
- ----------------------------------------------------------------------
- --
Accumulated net realized loss on investment transactions (20,966,215)
- ----------------------------------------------------------------------
- --
Net unrealized depreciation of investments (5,302,365)
- ----------------------------------------------------------------------
- --
TOTAL -- REPRESENTING NET ASSETS APPLICABLE
TO CAPITAL SHARES OUTSTANDING $1,061,210,963
- ----------------------------------------------------------------------
- --
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- ----------------------------------------------------------------------
- --
Net asset value and redemption price of class A shares
($543,808,151 divided by 58,160,344 shares) $9.35
- ----------------------------------------------------------------------
- --
Offering price per class A share (100/94.25 of 9.35)* $9.92
- ----------------------------------------------------------------------
- --
Net asset value and offering price of class B shares
($517,124,933 divided by 55,537,660 shares)+ $9.31
- ----------------------------------------------------------------------
- --
Net asset value and redemption price of class M shares
($277,879 divided by 29,732 shares) $9.35
- ----------------------------------------------------------------------
- --
Offering price per class M share (100/96.5 of $9.35)* $9.69
- ----------------------------------------------------------------------
- --
<FN>
* 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.
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
Six months ended April 30, 1995 (Unaudited)
<TABLE><CAPTION>
<S> <C>
Investment income:
- ----------------------------------------------------------------------
- --
Dividends (net of foreign tax of $118,605) $21,796,873
- ----------------------------------------------------------------------
- --
Interest 8,684,245
- ----------------------------------------------------------------------
- --
TOTAL INVESTMENT INCOME 30,481,118
- ----------------------------------------------------------------------
- --
EXPENSES:
- ----------------------------------------------------------------------
- --
Compensation of Manager (Note 2) 3,294,016
- ----------------------------------------------------------------------
- --
Investor servicing and custodian fees (Note 2) 717,790
- ----------------------------------------------------------------------
- --
Compensation of Trustees (Note 2) 18,717
- ----------------------------------------------------------------------
- --
Reports to shareholders 120,126
- ----------------------------------------------------------------------
- --
Auditing 20,871
- ----------------------------------------------------------------------
- --
Legal 11,732
- ----------------------------------------------------------------------
- --
Postage 109,938
- ----------------------------------------------------------------------
- --
Distribution fees -- class A (Note 2) 657,703
- ----------------------------------------------------------------------
- --
Distribution fees -- class B (Note 2) 2,455,458
- ----------------------------------------------------------------------
- --
Distribution fees -- class M (Note 2) 134
- ----------------------------------------------------------------------
- --
Administrative services (Note 2) 13,649
- ----------------------------------------------------------------------
- --
Registration fees 317
- ----------------------------------------------------------------------
- --
Other 37,257
- ----------------------------------------------------------------------
- --
TOTAL EXPENSES 7,457,708
- ----------------------------------------------------------------------
- --
NET INVESTMENT INCOME 23,023,410
- ----------------------------------------------------------------------
- --
Net realized loss on investments (Notes 1 and 3) (14,591,838)
- ----------------------------------------------------------------------
- --
Net unrealized appreciation of investments during the period50,503,175
- ----------------------------------------------------------------------
- --
NET GAIN ON INVESTMENT TRANSACTIONS 35,911,337
- ----------------------------------------------------------------------
- --
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $58,934,747
- ----------------------------------------------------------------------
- --
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE><CAPTION>
<S> <C> <C>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30 OCTOBER 31
---------- ------------
1995* 1994
- ----------------------------------------------------------------------
- --
INCREASE (DECREASE) NET ASSETS
- ----------------------------------------------------------------------
- --
Operations:
- ----------------------------------------------------------------------
- --
Net investment income $23,023,410 $51,073,325
- ----------------------------------------------------------------------
- --
Net realized loss on investments (14,591,838) (8,817,934)
- ----------------------------------------------------------------------
- --
Net unrealized appreciation (depreciation)
of investments 50,503,175 (138,565,058)
- ----------------------------------------------------------------------
- --
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 58,934,747 (96,309,667)
- ----------------------------------------------------------------------
- --
Distributions to shareholders from:
- ----------------------------------------------------------------------
- --
Net investment income:
- ----------------------------------------------------------------------
- --
Class A (13,508,440) (28,496,427)
- ----------------------------------------------------------------------
- --
Class B (10,907,856) (21,635,196)
- ----------------------------------------------------------------------
- --
Class M (506) --
- ----------------------------------------------------------------------
- -- Net realized gain on investments:
- ----------------------------------------------------------------------
- --
Class A (828,432) (18,587,199)
- ----------------------------------------------------------------------
- --
Class B (765,677) (15,941,065)
- ----------------------------------------------------------------------
- --
Decrease from capital share transactions
(Note 4) (14,770,049) (12,251,877)
- ----------------------------------------------------------------------
- --
TOTAL INCREASE (DECREASE) IN NET ASSETS 18,153,787 (193,221,431)
NET ASSETS
- ----------------------------------------------------------------------
- --
Beginning of period 1,043,057,176 1,236,278,607
- ----------------------------------------------------------------------
- --
END OF PERIOD (including distributions
in excess of net investment income of
$1,393,392 and $--, respectively) $1,061,210,963 $1,043,057,176
- ----------------------------------------------------------------------
- --
<FN>
* Unaudited.
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE><CAPTION>
<S> <C> <C> <C> <C>
MARCH 1, 1995
(COMMENCEMENT SIX MONTHS
OF OPERATIONS) TO ENDED
APRIL 30 APRIL 30 YEAR ENDED OCTOBER 31
----------- -------------------------------
1995* 1995* 1994 1993
- ----------------------------------------------------------------------
- --
Class M Class B
- ----------------------------------------------------------------------
- --
NET ASSET VALUE,
BEGINNING OF PERIOD $9.14 $9.02 $10.52 $9.22
- ----------------------------------------------------------------------
- --
INVESTMENT OPERATIONS
Net investment income .12 .19 .39 .42
Net realized and unrealized
gain (loss) on investments .20 .31 (1.22) 1.34
- ----------------------------------------------------------------------
- --
TOTAL FROM INVESTMENT ACTIVITIES .32 .50 (.83) 1.76
- ----------------------------------------------------------------------
- --
DISTRIBUTIONS TO SHAREHOLDERS FROM:
- ----------------------------------------------------------------------
- --
Net investment income (.11) (.20) (.38) (.43)
- ----------------------------------------------------------------------
- --
In excess of net investment income -- -- -- (.03)
- ----------------------------------------------------------------------
- --
Net realized gain on investments -- (.01) (.29) --
- ----------------------------------------------------------------------
- --
TOTAL DISTRIBUTIONS (.11) (.21) (.67) (.46)
- ----------------------------------------------------------------------
- --
NET ASSET VALUE, END OF PERIOD $9.35 $9.31 $9.02 $10.52
- ----------------------------------------------------------------------
- --
TOTAL INVESTMENT RETURN
AT NAV (%)(C) 3.55(B) 5.71(B) (8.04) 19.54
- ----------------------------------------------------------------------
- --
NET ASSETS, END OF PERIOD
(in thousands) $278 $517,125 $501,438 $551,794
- ----------------------------------------------------------------------
- --
Ratio of expenses to average
net assets (%) .29(b) .92(b) 1.83 1.86
- ----------------------------------------------------------------------
- --
Ratio of net investment income
to average net assets (%) .78(b) 2.05(b) 4.10 3.98
- ----------------------------------------------------------------------
- --
Portfolio turnover (%) 31.77 31.77 112.32 123.57
- ----------------------------------------------------------------------
- --
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE><CAPTION>
<C> <C> <C> <C> <C> <C>
FOR THE PERIOD FOR THE PERIOD
APRIL 27, 1992 NOVEMBER 19, 1990
(COMMENCEMENT SIX MONTHS (COMMENCEMENT
OF OPERATIONS) TO ENDED OF OPERATIONS TO
OCTOBER 31 APRIL 30 YEAR ENDED OCTOBER 31 OCTOBER 31
- ---------------------------- ---------------------- -----------------
1992 1995* 1994 1993 1992 1991
- ----------------------------------------------------------------------
- --
Class A
- ----------------------------------------------------------------------
- --
$8.87 $9.06 $10.56 $9.24 $8.91 $8.50
- ----------------------------------------------------------------------
- --
.26 .22 .46 .51 .52 .52(a)
.36 .31 (1.22) 1.33 .37 .36
- ----------------------------------------------------------------------
- --
.62 .53 (.76) 1.84 .89 .88
- ----------------------------------------------------------------------
- --
- ----------------------------------------------------------------------
- --
(.27) (.23) (.45) (.51) (.56) (.47)
- ----------------------------------------------------------------------
- --
-- -- -- -- -- --
- ----------------------------------------------------------------------
- --
-- (.01) (.29) (.01) -- --
- ----------------------------------------------------------------------
- --
(.27) (.24) (.74) (.52) (.56) (.47)
- ----------------------------------------------------------------------
- --
$9.22 $9.35 $9.06 $10.56 $9.24 $8.91
- ----------------------------------------------------------------------
- --
7.06(b) 6.06(b) (7.30) 20.40 10.31 10.70(b)
- ----------------------------------------------------------------------
- --
$103,075 $543,808$541,619$684,484$419,098 $158,918
- ----------------------------------------------------------------------
- --
.94(b) .55(b) 1.08 1.12 1.32 1.22(a)(b)
- ----------------------------------------------------------------------
- --
2.45(b) 2.42(b) 4.84 4.97 5.60 5.63(a)(b)
- ----------------------------------------------------------------------
- --
21.16 31.77 112.32 123.57 21.16 111.19
- ----------------------------------------------------------------------
- --
<FN>
* Unaudited.
(a) Reflects an 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.
(b) Not annualized.
(c) Total investment return assumes dividend reinvestment and does
not reflect the effect of sales charges.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
April 30, 1995 (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 class A, class B and class M shares. The fund
commenced its public offering of class M shares on March 1, 1995.
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. Class M shares are sold with a maximum
sales charge of 3.50% and pay a distribution fee that is lower than
class B shares and higher than class A shares. Expenses of the fund
are borne pro-rata by the holders of all classes of shares, except
that each class bears expenses unique to that class (including the
distribution fees applicable to such class). Each class votes as a
class only with respect to its own distribution plan or other matters
on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of
the net assets of the fund, if the fund were liquidated. In addition,
the Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The 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 on the principal market on which
such securities are traded, 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 approximates market value, 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
various 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, along with the cash and
certain other accounts of other registered investment companies
<PAGE>
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. 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, except
that certain dividends from foreign securities are recorded as soon
thereafter as the fund is informed of the ex-dividend date.
E FEDERAL TAXES It is the policy of the fund to distribute all of
its 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. 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. The amount and
character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences include treatment of
wash sales, capital loss carryforwards, and non-taxable dividends.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations.
G UNAMORTIZED ORGANIZATION EXPENSES Expenses incurred by the fund in
connection with its organizations, aggregated $23,433. These expenses
were fully amortized during the six months ended April 30, 1995.
<PAGE>
NOTE 2
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Investment Management for management and
investment advisory services is paid quarterly based on the average
net assets of the fund for the quarter. Such fee is based on the
following annual rates: 0.70% of the first $500 million of average net
assets, 0.60% of the next $500 million, 0.55% of the next $500
million, and, 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, taxes and distribution fees) of the
fund exceed 2.5% of the first $30 million of average net assets, 2.0%
of the next $70 million and 1.5% of any excess 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.
Trustees of the fund receive an annual Trustee's fee of $2,520, 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 for the fund are being provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC. Investor servicing and custodian fees
reported in the statement of operations for the six months ended April
30, 1995 have been reduced by credits allowed by PFTC.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B shares and class M shares pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the Plans is
to compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments Inc., for services provided and expenses incurred
by it in distributing shares of the fund. The Plans provide for
payments by the fund to Putnam Mutual Funds Corp., at an annual rate
up to 0.35%, 1.00% and 1.00% of the average net assets attributable to
class A, class B and class M shares, respectively. The Trustees have
approved payment by the fund at an annual rate of 0.25%, 1.00%, and
0.75% of the average net assets attributable to class A, class B and
class M shares, respectively.
During the six months ended April 30, 1995, Putnam Mutual Funds Corp.,
acting as the underwriter, received net commissions of $111,367 and
$909 from the sale of class A shares and M shares, respectively, and
$656,190 in contingent deferred sales charges from redemptions of
class B shares. A deferred sales charge of up to 1% is assessed on
certain redemptions of class A shares purchased as part of an
investment of $1 million or more. For the six months ended April 30,
1995, Putnam Mutual Funds Corp., acting as an underwriter, received
$1,296 on class A redemptions.
<PAGE>
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the six months ended April 30, 1995, purchases and sales of
investment securities other than U.S. government obligations and short-
term investments aggregated $278,819,163 and $308,480,226,
respectively. Purchases and sales of U.S. government obligations
aggregated $44,332,031 and $29,747,672, respectively. In determining
the net gain or loss on securities sold, the cost of securities has
been determined on the identified cost basis.
<PAGE>
NOTE 4
CAPITAL SHARES
At April 30, 1995, there was an unlimited number of shares of
beneficial interest authorized divided into three classes, designated
class A, class B and class M capital stock. Transactions in capital
shares were as follows:
<TABLE><CAPTION>
<S> <C> <C>
SIX MONTHS ENDED APRIL 30
- ----------------------------------------------------------------------
- --
1995
- ----------------------------------------------------------------------
- --
CLASS A SHARES AMOUNT
- ----------------------------------------------------------------------
- --
Shares sold 7,064,462 $63,442,782
Shares issued in connection with reinvestment
of distributions 1,309,234 11,612,666
- ----------------------------------------------------------------------
- --
8,373,696 75,055,448
- ----------------------------------------------------------------------
- --
Shares repurchased (9,995,443) (89,840,886)
- ----------------------------------------------------------------------
- --
NET DECREASE (1,621,747) $(14,785,438)
- ----------------------------------------------------------------------
- --
YEAR ENDED OCTOBER 31
- ----------------------------------------------------------------------
- --
1994
- ----------------------------------------------------------------------
- --
CLASS A SHARES AMOUNT
- ----------------------------------------------------------------------
- --
Shares sold 13,601,088 $129,166,605
Shares issued in connection with
reinvestment of distributions 4,152,123 39,384,659
- ----------------------------------------------------------------------
- --
17,753,211 168,551,264
- ----------------------------------------------------------------------
- --
Shares repurchased (22,805,796) (214,474,268)
- ----------------------------------------------------------------------
- --
NET DECREASE (5,052,585) $(45,923,004)
- ----------------------------------------------------------------------
- --
SIX MONTHS ENDED APRIL 30
- ----------------------------------------------------------------------
- --
1995
- ----------------------------------------------------------------------
- --
CLASS B SHARES AMOUNT
- ----------------------------------------------------------------------
- --
Shares sold 6,024,214 $53,956,879
Shares issued in connection with
reinvestment of distributions 1,115,030 9,857,814
- ----------------------------------------------------------------------
- --
7,139,244 63,814,693
- ----------------------------------------------------------------------
- --
Shares repurchased (7,175,075) (64,073,834)
- ----------------------------------------------------------------------
- --
NET DECREASE (35,831) $(259,141)
- ----------------------------------------------------------------------
- --
Year ended October 31
- ----------------------------------------------------------------------
- --
1994
- ----------------------------------------------------------------------
- --
Class B Shares Amount
- ----------------------------------------------------------------------
- --
Shares sold 17,161,346 $164,989,889
Shares issued in connection with
reinvestment of distributions 3,428,176 32,433,804
- ----------------------------------------------------------------------
- --
20,589,522 197,423,693
- ----------------------------------------------------------------------
- --
Shares repurchased (17,486,953) (163,752,566)
- ----------------------------------------------------------------------
- --
NET INCREASE 3,102,569 $33,671,127
- ----------------------------------------------------------------------
- --
MARCH 1, 1995
(COMMENCEMENT OF OPERATIONS)
TO APRIL 30
- ----------------------------------------------------------------------
- --
1995
- ----------------------------------------------------------------------
- --
CLASS M SHARES AMOUNT
- ----------------------------------------------------------------------
- --
Shares sold 29,957 $276,586
- ----------------------------------------------------------------------
- --
Shares repurchased (225) (2,056)
- ----------------------------------------------------------------------
- --
Net increase 29,732 $274,530
- ----------------------------------------------------------------------
- --
</TABLE>
<PAGE>
FUND INFORMATION
April 30, 1995
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
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
Vice President
Sheldon Simon
Vice President and Fund Manager
Christopher A. Ray
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 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, and the most recent copy of Putnam's Quarterly Performance
Summary. For more information, or to request a prospectus, call toll
free: 1-800-225-1581.
SHARES OF MUTUAL FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC), THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
<PAGE>
PUTNAM INVESTMENTS
THE PUTNAM FUNDS
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
18301-840/884
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED
AND EDGAR-FILED TEXTS.
(1) Rule lines for tables are omitted.
(2) Italic typefaces is displayed in normal type.
(3) Boldface type is displayed in capital letters.
(4) Headers (e.g. the names of the fund) and footers (e.g. page
numbers and OThe accompanying notes are an integral part of these
financial statementsO) are omitted.
(5) Because the printed page breaks are not reflected, certain
tabular and columnar headings and symbols are displayed
differently in this filing.
(6) Bullet points and similar graphic symbols are omitted.
(7) Page numbering is different.
