Putnam
Utilities
Growth and
Income Fund
ANNUAL REPORT
October 31, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Sheldon Simon, portfolio manager for the Putnam Utilities Growth and
Income Fund, says he spends a lot more time looking at utility
companies' management and their business strategies than he used to. 'In
a sense, the analytical effort for utilities is becoming more in line
with other industrial companies,' he says."
-- USA Today, August 16, 1996
* According to Lipper Analytical Services, Putnam Utilities Growth and
Income Fund's class A share total return ranked 4 out of 22 (18%) in
utility funds for the five-year period ended October 31, 1996.*
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
14 Portfolio holdings
23 Financial statements
*Lipper Analytical Services, an independent research organization, ranks
funds according to total return performance. Their rankings vary over
time and do not reflect the effects of sales charges. For periods ended
10/31/96, class A shares ranked 12 out of 90 and 5 out of 57, for 1- and
3-year performance respectively; class B shares ranked 19 out of 90 for
1-year performance; and class M shares ranked 17 out of 90 for 1-year
performance. Past performance is not indicative of future results.
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
In our report at the midpoint of Putnam Utilities Growth and Income
Fund's fiscal year, we noted passage of landmark legislation that was
destined to change the face of the utility industry in the United
States. The impact of that legislation was not long in being felt.
As frequently happens, implementation of the new rules -- which
deregulate the telecommunications industry and open the electric
transmission industry to greater competition -- was preceded by a period
of uncertainty. Then, as the various players grasped the implications
of the change, they began seeking ways to survive and even thrive in the
new environment.
These changes have already had a favorable effect on your fund's
performance, since Fund Managers Sheldon Simon and Christopher Ray
quickly identified and acted upon several investment opportunities. In
the report that follows, Sheldon and Chris discuss performance for the
fiscal year ended October 31, 1996, and review prospects for the fiscal
year just started.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
December 18, 1996
Report from the Fund Managers
Sheldon N. Simon, lead manager
Christopher A. Ray
Capitalizing upon changes in the utility sector while drawing on the
strength of its diversified strategy, Putnam Utilities Growth and Income
Fund celebrated its five-year anniversary with superior competitive
performance. Cumulative returns for class A shares at net asset value
and public offering price of 73.24% and 63.34% respectively not only
surpassed the Lipper category average of 62.81% but placed the fund at 4
of the 22 utility funds tracked by Lipper Analytical Services for the
five years ended October 31, 1996. Complete performance information can
be found on pages 9 and 11. See page 2 for ranking information.
* FIVE-YEAR SYNOPSIS SHOWS STRONG BOND MARKET TIES
Utility stocks tend to be slow-growing, high-yielding investments
typically favored by income-oriented investors. Thus their performance
generally tracks that of the bond market. During your fund's first three
years of operation, 1990 through 1992, receding interest rates and a
rallying bond market boosted the fund's performance. In fiscal 1993 and
1994, a more conservative portfolio structure paid off when higher
interest rates resulted in falling utility stock prices. Our
diversification into non-utility holdings and foreign utility stocks
helped cushion the value of the portfolio, but the 1995 fiscal year was
primarily one of recovery from this downturn. Utility stocks and bonds
performed well as the market rallied, and this positive performance
continued into fiscal 1996.
* GAS AND ELECTRIC HOLDINGS BENEFIT FROM CONSOLIDATION WAVE
The winds of change often herald opportunity. In the utility sector, in
which the status quo has reigned for decades, this axiom is an apt
description of recent developments. The Telecommunications Act of 1996
and ongoing changes in the energy sector, while creating initial
turbulence for investors, have presented your fund with the potential to
benefit from a new trend of mergers and acquisitions within three
sectors of the industry: gas, electric, and telephone.
While benefits in the telephone industry remain unclear, investments in
gas and electric utility stocks have found more potential for value in
this newly competitive environment. Electric companies merging with
electric companies, gas companies merging with gas companies, and gas
companies merging with electric companies have created opportunities
from which your fund has benefited in the last six months.
TOP 10 HOLDINGS*
Bankers Trust New York Corp.
Banking
Pacific Telesis Group
Telephone utility
Pacific Enterprises
Gas utility
Columbia Gas System, Inc.
Gas utility
PanEnergy Corp.
Gas pipeline
Sprint Corp.
Telephone utility
SBC Communications, Inc.
Telephone utility
MCI Communications Corp.
Telephone utility
K mart Corp.
Major retailer
Questar Corp.
Gas utility
*These holdings represent 19.9% of the fund's assets as of 10/31/96.
Portfolio holdings will vary over time.
Since the beginning of industry deregulation, your fund has focused on
those utility companies whose attractive valuation and strong
fundamentals have created a greater potential for positive results in
the event of consolidation. Recent deals involving Texas Utilities'
pending acquisition of Enserch, and Houston Industries' pending purchase
of Noram, for instance, have made positive contributions to the fund's
performance. While these stocks, along with others discussed in this
report, were viewed favorably at the end of the fiscal period, all
portfolio holdings are subject to review and adjustment in accordance
with the fund's investment strategy and may vary in the future.
At the end of the fiscal year, your fund's portfolio was heavily
weighted in the stocks of smaller gas companies. While it is unusual for
a utility fund to focus on gas rather than on electric companies, we
believe there are clear advantages to this strategy. One is the recent
boom in consolidation of gas and electric companies to form energy
companies whose customers buy both gas and electricity, and may buy
additional products and services down the road. This, when combined with
the continued increase in gas usage and with the progress of the gas
industry in finding new ways to improve profitability, provides a strong
rationale for present portfolio allocations.
* NON-UTILITY HOLDINGS STRENGTHEN FUND PERFORMANCE
During much of the past fiscal year, the utility sector has struggled
with the newfound consequences of industry deregulation. While the
ultimate outcome is likely to be positive, we believe that it would not
be wise to put all of our bets on one table. Therefore, we have
continued to rely heavily upon opportunities outside the utility sector
to bolster fund performance and create a sense of equilibrium in the
portfolio. With approximately 15.0% of the fund's holdings in non-
utility stocks, this flexibility proved of great value to the fund.
Bankers Trust, the fund's largest non-utility holding, as well as its
largest single position, has a dividend yield well above that of the
average electric utility. Its valuation on earnings and its book value
are also attractive relative to the average utility. The entrance of a
new management team and multiple meetings with Bankers Trust staff have
further confirmed our belief in the value of the company's stock, and it
has been one of the fund's best performers this year. Given its strong
performance, there is a good chance that we will lock in at least some
of our gains in this winning investment.
* BOND MARKET TURBULENCE DISCOURAGES HEAVY ALLOCATION
Worries over possible fluctuations in interest rates, coupled with a
shrinking of corporate balance sheets in the newly competitive utility
sector, brought about a reduction in new-issue utility bonds over the
course of fiscal 1996. This less favorable environment prompted us to
keep the fund's bond allocation relatively low while looking harder --
and farther afield -- for securities that met our standards. We sought
bonds issued by companies that had the potential to thrive in this new
competitive environment and whose securities seemed likely to provide
some cushioning effect from an unfriendly U.S. bond market. Bonds issued
by utility companies outside the United States proved an excellent
choice on both counts.
We especially favored bonds from foreign markets that offered the
relative stability of a monopolistic industry structure. Examples
include Iberdrola, a Spanish utility, and Telstra, the Austrian
telephone monopoly. However, we also took positions in markets in which
a more competitive utility environment has been in place for several
years, concentrating on those companies with seasoned management teams
accustomed to the demands of competition. Empresa National Electric and
Chilgener, two Chilean companies, operate successfully in the
competitive environment of Chile's economy. Both parts of this
international focus were effected by means of dollar-based Yankee bonds
in order to minimize the fund's exposure to currency risk.
Keeping an eye toward those utility bond structures that demonstrate a
low level of call risk remains the cornerstone of our fixed-income
strategy, since the possibility of an interest-rate decline could
increase the likelihood that attractive investments may be redeemed and
reissued at lower rates. Our research seeks to identify issuers that
offer both superior relative value and a security structure that will
enable the fund to benefit from that value for as long as possible.
* LOOKING AHEAD TO FISCAL 1997
The recent legislative changes and the resulting reshaping of the
utilties industries offer investors an unprecedented array of
opportunities -- along with the challenge of identifying the companies
best equipped to take advantage of the new landscape. This is the type
of environment in which the value of in-depth research and professional
management becomes more important than ever.
In considering the year ahead, we anticipate continued participation in
these opportunities via industry consolidation trends. Our concentration
on the gas sector, where commodity prices are expected to remain high in
response to a continued depletion in gas reserves, is also likely to
continue through fiscal 1997.
On the fixed-income side of the portfolio, we expect to continue the
low-profile course that we have maintained over fiscal 1996. Until the
dust settles from industry deregulation or until bond issuance
increases, we look forward to what should be a quiet time for bond
investments within the fund. Naturally we will continue to seek what we
believe to be superior values for both the fixed-income and equity
portions of your fund during the year to come.
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 10/31/96, there is no guarantee the fund
will continue to hold these securities in the future. Funds investing in
a single sector may be subject to more volatility than funds investing
in a diverse group of sectors.
Performance summary
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.
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares
changed over time, assuming you held the shares through the entire
period and reinvested all distributions in the fund.
TOTAL RETURN FOR PERIODS ENDED 10/31/96
Class A Class B Class M
(inception date) (11/19/90) (4/27/92) (3/1/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
1 year 16.57% 9.92% 15.57% 10.57% 16.12% 12.02%
- ------------------------------------------------------------------------
5 years 73.24 63.34 -- -- -- --
Annual average 11.62 10.31 -- -- -- --
- ------------------------------------------------------------------------
Life of class 91.78 80.72 63.11 61.11 36.44 31.68
Annual average 11.57 10.46 11.46 11.15 20.45 17.92
- ------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/96
S&P Consumer
Utilities Index Price Index
- ------------------------------------------------------------------------
1 year 9.80% 2.99%
- ------------------------------------------------------------------------
5 years 73.45 15.21
Annual average 11.64 2.87
- ------------------------------------------------------------------------
Life of class A 88.65 18.31
Annual average 11.32 2.87
- ------------------------------------------------------------------------
Life of class B 68.90 13.48
Annual average 12.35 2.84
- ------------------------------------------------------------------------
Life of class M 33.13 4.90
Annual average 18.73 2.91
- ------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustment for taxes payable on reinvested distributions.
Investment returns and net asset value will fluctuate so that an
investor's shares, when sold, may be worth more or less than their
original cost. POP assumes 5.75% maximum sales charge for class A shares
and 3.50% for class M shares. CDSC for class B shares assumes the
applicable sales charge, with the maximum being 5%.
[GRAPHIC WORM CHART OMITTED: GROWTH OF A $10,000 INVESTMENT]
Cumulative total return of a $10,000 investment since 11/19/90
Starting value (Insert ending Total)
9,425 Fund's class A shares at POP $18,072
$10,000 S&P Utilities Index $18,865
$10,000 Consumer Price Index $11,831
(plot points for 10-year total return mountain chart)
S&P Utilities
Date/year Fund at POP Index CPI
11/19/90 9,425 10,000 10,000
10/31/91 10,432 10,877 10,269
10/31/92 11,508 12,087 10,598
10/31/93 13,855 15,148 10,889
10/31/94 12,844 13,280 11,173
10/31/95 15,503 17,182 11,487
10/31/96 18,072 18,865 11,831
Footnote reads:
Past performance is no assurance of future results. A $10,000 investment
in the fund's class B shares at inception on 4/27/92 would have been
valued at $16,311 on 10/31/96 ($16,111 with a redemption at the end of
the period). A $10,000 investment in the fund's class M shares at
inception on 3/1/95 would have been valued at $13,644 at net asset value
on 10/31/96 ($13,168 at public offering price).
PRICE AND DISTRIBUTION INFORMATION
12 months ended 10/31/96
Class A Class B Class M
- ------------------------------------------------------------------------
Distributions (number) 4 4 4
- ------------------------------------------------------------------------
Income $0.440 $0.357 $0.393
- ------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------
Short-term 0.020 0.020 0.020
- ------------------------------------------------------------------------
Total $0.460 $0.377 $0.413
- ------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------
10/31/95 $10.40 $11.03 $10.36 $10.38 $10.76
- ------------------------------------------------------------------------
10/31/96 11.63 12.34 11.57 11.61 12.03
- ------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------
Current dividend rate1 3.96% 3.73% 3.25% 3.55% 3.42%
- ------------------------------------------------------------------------
Current 30-day SEC yield2 3.38 3.19 2.65 2.87 2.77
- ------------------------------------------------------------------------
1 Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
2 Based on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 9/30/96
(most recent calendar quarter)
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
1 year 13.61% 7.09% 12.82% 7.82% 13.16% 9.25%
- ------------------------------------------------------------------------
5 years 69.75 59.96 -- -- -- --
Annual average 11.16 9.85 -- -- -- --
- ------------------------------------------------------------------------
Life of class 86.01 75.28 58.46 56.46 32.33 27.72
Annual average 11.15 10.03 10.95 10.63 19.26 16.63
- ------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns
and net asset value will fluctuate so that an investor's shares, when
sold, may be worth more or less than their original cost.
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 5.75% sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B shares and assumes redemption at the end of
the period. Your fund's CDSC declines from a 5% maximum during the first
year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies.
COMPARATIVE BENCHMARKS
Standard & Poor's Utilities Index is an unmanaged list of common stocks
issued by utility companies. Index assumes reinvestment of all
distributions and does not take into account brokerage commissions or
other costs. The fund's portfolio contains securities that do not match
those in the index, and it is not possible to invest directly in an
index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Report of independent accountants
For the fiscal year ended October 31, 1996
To the Trustees and Shareholders of
Putnam Utilities Growth and Income Fund
We have audited the accompanying statement of assets and liabilities of
Putnam Utilities Growth and Income Fund, including the portfolio of
investments owned, as of October 31, 1996, and the related statement of
operations for the year then ended, the statements of changes in net
assets for each of the two years in the period then ended, and the
financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of
the fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of October 31, 1996, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Putnam Utilities Growth and Income Fund as of October 31, 1996,
the results of its operations for the year then ended, and the changes in its
net assets for each of the two years in the period then ended, and the
financial highlights for each of the periods indicated therein, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
December 10, 1996
Portfolio of investments owned
October 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMMON STOCKS (82.2%) *
NUMBER OF SHARES VALUE
Aerospace and Defense (0.2%)
- ----------------------------------------------------------------------------------------------
10,000 Coltec Industries Inc. + $ 172,500
48,500 Gulfstream Aerospace Corp. + 1,145,810
20,000 Northrop Grumman Corp. 1,615,000
-------------
2,933,310
Apparel (0.1%)
- ----------------------------------------------------------------------------------------------
4,318 Footstar, Inc. + 94,996
24,000 Warnaco Group, Inc. 597,000
-------------
691,996
Appliances (0.1%)
- ----------------------------------------------------------------------------------------------
31,000 Leggett & Platt, Inc. 926,125
Automotive (0.1%)
- ----------------------------------------------------------------------------------------------
19,000 Magna International, Inc. Class A, (Canada) 952,375
Automotive Parts (--%)
- ----------------------------------------------------------------------------------------------
25,100 Mark IV Industries, Inc. 542,788
Banks (3.8%)
- ----------------------------------------------------------------------------------------------
500,000 Bankers Trust New York Corp. 42,250,000
50,000 Dime Bancorp, Inc. + 743,750
19,500 FirstMerit Corp. 633,750
18,000 Great Western Financial Corp. 504,000
22,000 Marshall & Ilsley Corp. 706,750
41,500 Washington Mutual, Inc. 1,753,375
-------------
46,591,625
Basic Industrial Products (0.2%)
- ----------------------------------------------------------------------------------------------
40,000 AGCO Corp. 1,015,000
6,700 Briggs & Stratton Corp. 268,000
37,000 Cincinnati Milacron, Inc. 707,625
12,500 Millipore Corp. 437,500
-------------
2,428,125
Building and Construction (0.4%)
- ----------------------------------------------------------------------------------------------
9,000 Armstrong World Industries, Inc. 600,750
440,000 Willbros Group, Inc. + 4,125,000
-------------
4,725,750
Business Services (0.1%)
- ----------------------------------------------------------------------------------------------
42,000 PHH Corp. 1,249,500
20,000 Wallace Computer Services, Inc. 587,500
-------------
1,837,000
Chemicals (0.3%)
- ----------------------------------------------------------------------------------------------
34,000 Crompton & Knowles Corp. 612,000
16,000 Georgia Gulf Corp. 432,000
25,500 Hanna (M.A.) Co. 541,875
30,000 Rohm & Haas Co. 2,141,250
-------------
3,727,125
Computer Equipment (0.1%)
- ----------------------------------------------------------------------------------------------
40,000 Comdisco, Inc. 1,195,000
Conglomerates (0.6%)
- ----------------------------------------------------------------------------------------------
31,000 General Signal Corp. 1,263,250
17,000 Lancaster Colony Corp. 637,500
16,000 National Service Industries, Inc. 552,000
50,000 Ogden Corp. 906,250
200,000 Southwest Gas Corp. 3,825,000
-------------
7,184,000
Consumer Non Durables (0.1%)
- ----------------------------------------------------------------------------------------------
80,000 Dial Corp. 1,100,000
Containers (0.1%)
- ----------------------------------------------------------------------------------------------
19,000 Bemis Inc. 665,000
10,000 Temple Inland, Inc. 512,500
-------------
1,177,500
Electric Utilities (25.5%)
- ----------------------------------------------------------------------------------------------
120,000 Boston Edison Co. 2,880,000
225,000 Carolina Power & Light Co. 8,128,125
400,000 Central & South West Corp. 10,600,000
220,500 Central Maine Power Co. 2,590,875
10,000 Chilectra S.A. 144A ADR (Chile) 535,000
21,600 CILCORP, Inc. 788,400
300,000 Cinergy Corp. 9,937,500
182,700 CMS Energy Corp. Class G 3,425,625
280,000 Delmarva Power & Light Co. 5,565,000
100,000 DPL, Inc. 2,387,500
200,000 DQE, Inc. 5,750,000
340,120 East Midlands Electricity PLC (United Kingdom) + 3,001,138
650,000 Edison International 12,837,500
100,000 Enova Corp. 2,250,000
250,000 Florida Progress Corp. 8,343,750
230,000 FPL Group, Inc. 10,580,000
600,000 Hong Kong Electric Holdings Ltd. (Hong Kong) 1,920,639
150,000 Huaneng Power International, Inc. ADR (China) + 2,287,500
750,000 Iberdola S.A. (Spain) 7,964,341
210,000 IES Industries, Inc. 6,457,500
865,000 Long Island Lighting Co. 15,678,125
200,000 National Grid Group PLC (United Kingdom) + 588,793
250,000 New England Electric Systems Inc. 8,437,500
450,000 New York State Electric & Gas Corp. 9,393,750
300,000 Niagara Mohawk Power Corp. + 2,550,000
286,500 NIPSCO Industries, Inc. 10,851,188
215,200 Northeast Utilities 2,313,400
200,000 Ohio Edison Co. 4,175,000
230,000 Oklahoma Gas & Electric Co. 8,998,750
100,000 P P & L Resources, Inc. 2,337,500
200,000 Pacific Gas & Electric Co. 4,700,000
300,000 Peco Energy Co. 7,575,000
400,000 Pinnacle West Capital Corp. 12,350,000
309,200 Potomac Electric Power Co. 7,923,250
250,000 PowerGen PLC ADR (United Kingdom) 8,375,000
485,500 Public Service Co. of Colorado 17,963,500
150,000 Public Service Enterprise Group, Inc. 4,031,250
400,000 Scana Corp. 10,700,000
661,200 Scottish Power PLC (United Kingdom) 3,382,264
500,000 Sierra Pacific Resources 13,937,500
250,000 Texas Utilities Electric Co. 10,125,000
475,000 TNP Enterprises, Inc. 12,290,625
450,000 Tuscon Electric Power Co. + 8,887,500
230,000 Union Electrica Fenosa S.A. (Spain) 1,492,476
175,000 United Illuminating Co. 5,818,750
150,000 Utilicorp United, Inc. 4,068,750
160,000 Washington Water Power Co. 3,060,000
200,000 Wisconsin Energy Corp. 5,425,000
-------------
315,660,264
Electrical Equipment (0.1%)
- ----------------------------------------------------------------------------------------------
75,000 Vishay Intertechnology, Inc. 1,350,000
Electronics (0.1%)
- ----------------------------------------------------------------------------------------------
12,000 Pittway Corp. Class A 585,000
10,000 UCAR International, Inc. + 391,250
-------------
976,250
Finance (0.1%)
- ----------------------------------------------------------------------------------------------
23,000 Beneficial Corp. 1,345,500
Food and Beverages (0.3%)
- ----------------------------------------------------------------------------------------------
40,000 Whitman Corporation 970,000
30,000 Dole Food Co. 1,170,000
20,000 Flowers Industries, Inc. 467,500
27,000 Hormel Foods Corp. 637,875
-------------
3,245,375
Gas Pipelines (4.1%)
- ----------------------------------------------------------------------------------------------
260,000 Coastal Corp. 11,180,000
568,500 PanEnergy Corp. 21,887,250
360,000 Tejas Gas Corp. + 14,625,000
200,000 TransCanada Pipelines Ltd. (Canada) 3,375,000
-------------
51,067,250
Gas Utilities (23.5%)
- ----------------------------------------------------------------------------------------------
380,000 AGL Resources, Inc. 7,980,000
213,600 Atmos Energy Corp. 5,073,000
200,000 Bay State Gas Co. 5,650,000
302,000 Brooklyn Union Gas Co. 8,758,000
220,000 Cascade Natural Gas Corp. 3,547,500
400,000 Columbia Gas System, Inc. 24,300,000
150,000 Connecticut Energy Corp. 3,131,250
180,000 Eastern Enterprises 6,930,000
176,500 El Paso Natural Gas Co. 8,560,250
250,200 Energen Corp. 6,255,000
35,100 Equitable Resources, Inc. 1,009,125
70,000 Indiana Energy, Inc. 1,715,000
350,000 K N Energy, Inc. 13,081,250
135,000 Laclede Gas Co. 3,155,625
570,000 MCN Corp. 15,675,000
350,000 National Fuel Gas Co. 13,037,500
100,000 New Jersey Resources Corp. 2,762,500
300,000 NICOR Inc. 10,462,500
739,200 Noram Energy Corp. 11,365,200
30,955 North Carolina Natural Gas Corp. 909,303
504,000 Northwest Natural Gas Co. 12,789,000
230,000 NUI Corp. 4,571,250
280,000 Oneok, Inc. 7,525,000
800,000 Pacific Enterprises 24,600,000
274,900 Peoples Energy Corp. 9,690,225
200,000 Piedmont Natural Gas Co., Inc. 4,900,000
200,000 Public Service Co. of North Carolina, Inc. 3,600,000
500,000 Questar Corp. 18,000,000
60,000 South Jersey Industries, Inc. 1,410,000
130,366 Southern Union Co. 3,242,854
400,000 Transportadora de Gas del Sur ADR (Argentina) 4,650,000
450,000 UGI Corp. 10,631,250
236,800 United Cities Gas Co. 4,972,800
30,000 Washington Energy Co. 577,500
137,900 Washington Gas Light Co. 3,085,513
797,500 Westcoast Energy, Inc. 13,158,750
156,700 WICOR, Inc. 5,582,438
200,000 Yankee Energy System, Inc. 4,550,000
-------------
290,894,583
Hospital Management (0.1%)
- ----------------------------------------------------------------------------------------------
30,000 Quorum Health Group, Inc. + 810,000
Household Products (0.2%)
- ----------------------------------------------------------------------------------------------
27,500 First Brands Corp. 780,313
54,000 Premark International, Inc. 1,127,250
-------------
1,907,563
Insurance (1.0%)
- ----------------------------------------------------------------------------------------------
22,000 Allmerica Financial Corp. 668,250
24,000 Everest Re Holdings, Inc. 612,000
232,400 GCR Holdings, Ltd. 5,403,300
10,500 Jefferson Pilot Corp. 597,188
287,000 USF&G Corp. 5,453,000
-------------
12,733,738
Leisure (--%)
- ----------------------------------------------------------------------------------------------
15,500 Hasbro, Inc. 602,563
Machinery (0.1%)
- ----------------------------------------------------------------------------------------------
53,000 Keystone International, Inc. 954,000
Medical Supplies and Devices (0.2%)
- ----------------------------------------------------------------------------------------------
35,000 Bausch & Lomb, Inc. 1,181,250
14,500 Dentsply International, Inc. 610,813
24,000 Nellcor Puritan Bennett, Inc. + 468,000
-------------
2,260,063
Metals and Mining (0.1%)
- ----------------------------------------------------------------------------------------------
31,500 Alumax, Inc. + 1,011,938
20,000 RWE AG (Germany) 821,344
-------------
1,833,282
Oil and Gas (0.6%)
- ----------------------------------------------------------------------------------------------
13,000 Diamond Offshore Drilling, Inc. + 791,375
30,000 Mitchell Energy & Development Corp. Class B 622,500
240,000 NGC Corporation 4,320,000
35,500 Reading & Bates Corp. + 1,020,625
29,000 Weatherford Enterra, Inc. + 841,000
-------------
7,595,500
Paper and Forest Products (0.1%)
- ----------------------------------------------------------------------------------------------
13,500 Boise Cascade Corp. 418,500
15,500 Rayonier, Inc. 614,188
50,000 Stone Container Corp. 762,500
-------------
1,795,188
Pharmaceuticals and Biotechnology (0.6%)
- ----------------------------------------------------------------------------------------------
17,500 Block Drug, Inc. Class A 786,406
200,000 Pharmacia & Upjohn, Inc. 7,200,000
-------------
7,986,406
Photography (0.1%)
- ----------------------------------------------------------------------------------------------
25,000 Polaroid Corp. 1,015,625
Publishing (0.4%)
- ----------------------------------------------------------------------------------------------
14,000 Belo (A.H.) Corp. Ser. A 546,000
20,000 Central Newspapers, Inc. Class A 805,000
26,000 Deluxe Corp. 848,250
50,000 Times Mirror Co. Class A 2,312,500
-------------
4,511,750
REIT's (Real Estate Investment Trust) (2.1%)
- ----------------------------------------------------------------------------------------------
160,600 Avalon Properties, Inc. 3,713,875
194,000 Equity Residential Properties Trust 7,129,500
100,000 LTC Properties, Inc. 1,700,000
84,600 Macerich Co. 1,861,200
200,000 Nationwide Health Properties, Inc. 4,500,000
170,000 Public Storage, Inc. 3,910,000
49,912 Simon DeBartolo Group, Inc. 1,316,429
100,000 Storage Trust Realty 2,312,500
-------------
26,443,504
Retail (1.8%)
- ----------------------------------------------------------------------------------------------
38,500 Family Dollar Stores, Inc. 654,500
1,900,000 K mart Corp. 18,525,000
15,000 Melville Corporation 558,750
23,100 Payless Shoesource, Inc. + 782,513
18,000 Rite Aid Corp. 612,000
40,000 Thrifty PayLess Holdings, Inc. Class B + 855,000
-------------
21,987,763
Savings and Loans (0.1%)
- ----------------------------------------------------------------------------------------------
17,000 Ahmanson (H.F.) & Co. 533,375
17,850 Charter One Financial, Inc. 775,359
-------------
1,308,734
Semiconductors (0.1%)
- ----------------------------------------------------------------------------------------------
42,900 National Semiconductor Corp. + 825,825
Supermarkets (--%)
- ----------------------------------------------------------------------------------------------
16,000 Weis Markets, Inc. 490,000
Telephone Utilities (14.2%)
- ----------------------------------------------------------------------------------------------
50,000 Airtouch Communications, Inc. + 1,306,250
235,000 Ameritech Corp. 12,866,250
200,000 Bell Atlantic Corp. 12,050,000
300,000 BellSouth Corp. 12,225,000
400,000 GTE Corp. 16,850,000
802,000 MCI Communications Corp. 20,150,250
320,000 NYNEX Corp. 14,240,000
1,001,000 Pacific Telesis Group 34,034,000
60,000 Portugal Telecom S.A. ADR (Portugal) 1,552,500
60,000 Royal PTT Nederland N.V. ADR (Netherlands) 2,167,500
440,000 SBC Communications, Inc. 21,395,000
550,000 Sprint Corp. 21,587,500
2,000,000 Telecom Italia S.P.A. (Italy) 4,450,311
20,000 Telecom Argentina S.A. ADR (Argentina) 755,000
20,000 Telefonica de Argentina S.A. ADR (Argentina) 465,000
-------------
176,094,561
Textiles (--%)
- ----------------------------------------------------------------------------------------------
12,000 Springs Industries, Inc. Class A 541,500
Tobacco (0.1%)
- ----------------------------------------------------------------------------------------------
63,000 Dimon Inc. 1,197,000
22,000 Universal Corp. 599,500
-------------
1,796,500
Wireless Communications (0.4%)
- ----------------------------------------------------------------------------------------------
241,666 360 Communications Co. + 5,467,693
-------------
Total Common Stocks (cost $875,877,950) 1,019,513,699
CORPORATE BONDS AND NOTES (15.1%) *
PRINCIPAL AMOUNT VALUE
Combined Utilities (2.6%)
- ----------------------------------------------------------------------------------------------
$3,000,000 Australian Gas & Light Co. 144A sr. notes
6 3/8s, 2003 (Australia) $ 2,881,170
4,000,000 Kansas Gas & Electric deb. 8.29s, 2016 4,047,960
4,000,000 Pacific Gas & Electric Co.
sr. notes 7.1s, 2005 4,039,400
4,000,000 Public Service Electric & Gas
mtge. note 9 1/4s, 2021 4,744,800
7,240,000 San Diego Gas & Electric Co. 1st mtge.
Ser. JJ, 9 5/8s, 2020 8,116,330
7,985,000 South Carolina Electric & Gas Co.
1st mtge. 7 5/8s, 2025 8,468,331
-------------
32,297,991
Electric Utilities (9.1%)
- ----------------------------------------------------------------------------------------------
4,000,000 Allegheny Generating Co. deb. 6 7/8s, 2023 3,679,840
2,417,000 Arkansas Electric Corp. bonds 7.33s, 2008 2,462,730
3,500,000 Chilgener S.A. notes 6 1/2s, 2006 (Chile) 3,353,455
4,000,000 Chugach Electric Co. 1st mtge.
Ser. A, 9.14s, 2022 4,491,840
3,432,000 Citizens Utilities Co. bonds 7.68s, 2034 3,825,204
4,000,000 Commonwealth Edison Co. 1st mtge.
Ser. 83, 8s, 2008 4,175,000
2,000,000 Connecticut Light & Power Co. 1st mtge.
Ser. A, 5 1/2s, 1999 1,934,280
1,500,000 Connecticut Light & Power Co. 1st mtge.
Ser. D, 7 7/8s, 2024 1,552,440
5,250,000 Consumers Power Co. 1st mtge. 8 3/4s, 1998 5,395,530
4,000,000 Delmarva Power & Light Co. med.
term notes 5.69s, 1998 3,972,560
3,500,000 Duquesne Power & Light Co. deb. 8.7s, 2016 3,730,510
5,000,000 Empresa National Electric company guaranty
7.2s, 2006 (Chile) 5,018,350
4,000,000 Hydro Quebec government guaranty 8.4s,
2022 (Canada) 4,394,960
5,000,000 Iberdrola S.A. notes 7 1/2s, 2002 (Spain) 5,213,050
4,991,832 Indiana-Michigan Power Co. deb. 9.82s, 2022 5,911,377
7,000,000 Kansas City Power & Light Co. med.
term notes 5 3/4s, 1998 6,974,170
4,000,000 Kentucky Utilities Co. 1st mtge.
Ser. R, 7.55s, 2025 3,713,750
5,000,000 Midwest Power Systems mtge. 8 1/8s, 2023 5,101,000
2,000,000 Nova Scotia Power Corp. deb.
9.4s, 2021 (Canada) 2,351,780
5,000,000 Ohio Edison Co. 1st mtge. 8 1/4s, 2002 5,294,150
3,000,000 Otter Tail Power Co. 1st mtge. 7 1/4s, 2002 3,032,160
3,000,000 Pacificorp secd. med. term notes 9.15s, 2011 3,533,130
5,000,000 Public Service Co. of Colorado
coll. trust 6 3/8s, 2005 4,824,150
1,720,000 Salton Sea Funding Corp. company guaranty
Ser. E, 8.3s, 2011 1,791,363
3,500,000 Sierra Pacific Power Co. med. term notes
Ser. C, 6.82s, 2006 3,458,630
3,500,000 Southern California Edison 1st. ref. mtge.
Ser. 93-F, 6 1/4s, 2003 3,411,555
5,000,000 Texas Utilities Co. secd. lease fac.
bonds 7.46s, 2015 5,026,950
4,500,000 Utilicorp United sr. notes 8.2s, 2007 4,798,080
-------------
112,421,994
Gas Utilities (1.2%)
- ----------------------------------------------------------------------------------------------
3,500,000 Columbia Gas System, Inc. notes
Ser. E, 7.32s, 2010 3,477,215
4,000,000 Michigan Consolidated Gas 1st mtge.
8 1/4s, 2014 4,338,920
4,000,000 Southern Union Gas sr. notes 7.6s, 2024 3,923,200
3,000,000 Washington National Gas Co.
1st mtge. 8.4s, 2022 3,293,430
-------------
15,032,765
Natural Gas (0.3%)
- ----------------------------------------------------------------------------------------------
3,500,000 ONEOK Inc. deb. 9.7s, 2019 3,859,975
Oil and Gas (0.6%)
- ----------------------------------------------------------------------------------------------
4,000,000 Petroliam Nasional Berhad 144A
notes 6 7/8s, 2003 (Malaysia) 4,022,120
3,500,000 Southwest Gas Corp. deb. 7 1/2s, 2006 3,609,935
-------------
7,632,055
Telephone Utilities (1.1%)
- ----------------------------------------------------------------------------------------------
5,000,000 BellSouth Telecommunication deb.
6 3/4s, 2033 4,565,600
3,500,000 GTE Northwest, Inc. deb. 7 7/8s, 2026 3,595,480
5,000,000 Telstra Corp. notes 6 1/2s,
2005 (Australia) 4,892,500
-------------
13,053,580
Water Utility (0.2%)
- ----------------------------------------------------------------------------------------------
2,500,000 Pennsylvania American Water Co.
144A mtge. notes 7.8s, 2026 2,550,000
-------------
Total Corporate Bonds and Notes (cost $183,983,793) 186,848,360
CONVERTIBLE PREFERRED STOCKS (0.5%) * (cost $5,000,788)
NUMBER OF SHARES VALUE
- ----------------------------------------------------------------------------------------------
100,000 Philippine Long Distance Telephone Co. Ser. III,
$3.50 cv. pfd. (Philippines) 5,650,000
CONVERTIBLE BONDS AND NOTES (0.3%) * (cost $3,597,000)
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------
$4,000,000 Telekom Malaysia Berhad 144A cv. deb.
4s, 2004 (Malaysia) 4,140,000
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (0.1%) * (cost $1,828,088)
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------
$1,740,000 U.S. Treasury Notes 7 1/4s, August 15, 2004 1,841,407
SHORT-TERM INVESTMENTS (1.8%) * (cost $22,003,373)
PRINCIPAL AMOUNT VALUE
- ----------------------------------------------------------------------------------------------
$22,000,000 Interest in $ 644,842,000 joint repurchase agreement
dated October 31, 1996 with Morgan Stanley & Co. Inc. due
November 1, 1996 with respect to various U.S. Treasury
obligations - maturity value of $ 22,003,373 for an
effective yield of 5.52%. 22,003,373
- ----------------------------------------------------------------------------------------------
Total Investments (cost $1,092,290,992) *** 1,239,996,839
- ----------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $1,240,164,380.
+ Non-income-producing security.
*** The aggregate identified cost on a tax basis is
$1,091,945,613, resulting in gross unrealized appreciation and
depreciation of $169,969,398 and $21,918,712, respectively,
or net unrealized appreciation of $148,051,226.
ADR after the name of a foreign holding
stands for American Depository Receipts
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.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
October 31, 1996
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,092,290,992) (Note 1) $1,239,996,839
- -----------------------------------------------------------------------------------------------------
Cash 692,374
- -----------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 7,046,256
- -----------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 1,857,284
- -----------------------------------------------------------------------------------------------------
Receivable for securities sold 5,458,165
- -----------------------------------------------------------------------------------------------------
Total assets 1,255,050,918
Liabilities
- -----------------------------------------------------------------------------------------------------
Payable for securities purchased 7,840,212
- -----------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 3,741,390
- -----------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,945,354
- -----------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 223,890
- -----------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 5,068
- -----------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 7,817
- -----------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 654,498
- -----------------------------------------------------------------------------------------------------
Other accrued expenses 468,309
- -----------------------------------------------------------------------------------------------------
Total liabilities 14,886,538
- -----------------------------------------------------------------------------------------------------
Net Assets $1,240,164,380
Represented by
- -----------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,013,302,533
- -----------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (3,930)
- -----------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment and
foreign currency transactions (Note 1) 79,158,968
- -----------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets
and liabilities in foreign currencies 147,706,809
- -----------------------------------------------------------------------------------------------------
Total - Representing net assets applicable
to capital shares outstanding $1,240,164,380
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($618,417,495 divided by 53,185,641 shares)* $11.63
- -----------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $11.63) $12.34
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($615,309,298 divided by 53,160,943 shares)** $11.57
- -----------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($6,437,587 divided by 554,664 shares) $11.61
- -----------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $11.61)* $12.03
- -----------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales the offering price is reduced.
** Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended October 31, 1996
<S> <C>
Investment income:
- ----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $507,378) $48,061,029
- ----------------------------------------------------------------------------------------------
Interest income 13,503,606
- ----------------------------------------------------------------------------------------------
Total investment income 61,564,635
Expenses:
- ----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 7,706,433
- ----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,910,711
- ----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 45,848
- ----------------------------------------------------------------------------------------------
Administrative services (Note 2) 23,946
- ----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,526,421
- ----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 6,052,632
- ----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 29,340
- ----------------------------------------------------------------------------------------------
Reports to shareholders 78,701
- ----------------------------------------------------------------------------------------------
Registration fees 1,750
- ----------------------------------------------------------------------------------------------
Auditing 84,681
- ----------------------------------------------------------------------------------------------
Legal 22,865
- ----------------------------------------------------------------------------------------------
Postage 577,259
- ----------------------------------------------------------------------------------------------
Other 55,614
- ----------------------------------------------------------------------------------------------
Total expenses 18,116,201
- ----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (378,432)
- ----------------------------------------------------------------------------------------------
Net expenses 17,737,769
- ----------------------------------------------------------------------------------------------
Net investment income 43,826,866
- ----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 82,883,294
- ----------------------------------------------------------------------------------------------
Net realized loss on
foreign currency transactions (Note 1) (3,429)
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of
foreign currency transactions during the year 962
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 54,250,411
- ----------------------------------------------------------------------------------------------
Net gain on investments 137,131,238
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $180,958,104
- ----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended October 31
-----------------------------
1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- -------------------------------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------------------------------
Net investment income $43,826,866 $44,629,393
- -------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions 82,879,865 6,380,409
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets
and liabilities in foreign currencies 54,251,373 149,260,976
- -------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 180,958,104 200,270,778
- -------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- -------------------------------------------------------------------------------------------------------
From net investment income
Class A (23,901,842) (26,485,617)
- -------------------------------------------------------------------------------------------------------
Class B (19,535,724) (21,510,258)
- -------------------------------------------------------------------------------------------------------
Class M (121,291) (23,624)
- -------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (1,273,262) (823,988)
- -------------------------------------------------------------------------------------------------------
Class B (1,040,677) (763,062)
- -------------------------------------------------------------------------------------------------------
Class M (6,461) --
- -------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (68,562,356) (20,073,516)
- -------------------------------------------------------------------------------------------------------
Total increase in net assets 66,516,491 130,590,713
- -------------------------------------------------------------------------------------------------------
Net Assets
- -------------------------------------------------------------------------------------------------------
Beginning of year 1,173,647,889 1,043,057,176
- -------------------------------------------------------------------------------------------------------
End of year (including distributions in excess of net
investment income of $3,930 and $0, respectively) $1,240,164,380 $1,173,647,889
- -------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
March 1, 1995
(commencement of
Year ended operations) to Year ended
October 31 October 31 October 31
----------------------------------------------------
1996 1995 1996
----------------------------------------------------
Class M
----------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.38 $9.14 $10.36
- -----------------------------------------------------------------------------------------------------------
Investment operations
- -----------------------------------------------------------------------------------------------------------
Net investment income .38(d) .31 .36
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 1.26 1.26 1.23
- -----------------------------------------------------------------------------------------------------------
Total from investment operations 1.64 1.57 1.59
- -----------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- -----------------------------------------------------------------------------------------------------------
From net investment income (.39) (.33) (.36)
- -----------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- --
- -----------------------------------------------------------------------------------------------------------
From net realized gain on investments (.02) -- (.02)
- -----------------------------------------------------------------------------------------------------------
Total distributions (.41) (.33) (.38)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.61 $10.38 $11.57
- -----------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 16.12 17.50* 15.57
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $6,438 $1,917 $615,309
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%)(b) 1.63 1.13* 1.86
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.37 2.36* 3.22
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 64.53 67.60 64.53
- -----------------------------------------------------------------------------------------------------------
Average commission rate paid (c) $0.0488 $0.0488
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Year ended October 31
-----------------------------------------------------
1995 1994 1993
-----------------------------------------------------
Class B
-----------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $9.02 $10.52 $9.22
- ------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------
Net investment income .36 .39 .42
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 1.39 (1.22) 1.34
- ------------------------------------------------------------------------------------------------------------
Total from investment operations 1.75 (.83) 1.76
- ------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------
From net investment income (.39) (.38) (.43)
- ------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- (.03)
- ------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.02) (.29) --
- ------------------------------------------------------------------------------------------------------------
Total distributions (.41) (.67) (.46)
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.36 $9.02 $10.52
- ------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 19.92 (8.04) 19.54
- ------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $578,505 $501,438 $551,794
- ------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%)(b) 1.87 1.83 1.86
- ------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.77 4.10 3.98
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 67.60 112.32 123.57
- ------------------------------------------------------------------------------------------------------------
Average commission rate paid (c)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
April 27, 1992
(commencement of
operations) to
October 31 Year ended October 31
----------------------------------------------------
1992 1996 1995
----------------------------------------------------
Class B Class A
----------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.87 $10.40 $9.06
- ------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------
Net investment income .26 .44 .43
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments .36 1.25 1.38
- ------------------------------------------------------------------------------------------------------------
Total from investment operations .62 1.69 1.81
- ------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------
From net investment income (.27) (.44) (.46)
- ------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- --
- ------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (.02) (.01)
- ------------------------------------------------------------------------------------------------------------
Total distributions (.27) (.46) (.47)
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.22 $11.63 $10.40
- ------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 7.06* 16.57 20.71
- ------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $103,075 $618,417 $593,226
- ------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%)(b) .94* 1.11 1.12
- ------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.45* 3.97 4.53
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 21.16 64.53 67.60
- ------------------------------------------------------------------------------------------------------------
Average commission rate paid (c) $0.0488
- ------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
1994 1993 1992
--------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.56 $9.24 $8.91
- ---------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------
Net investment income .46 .51 .52
- ---------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (1.22) 1.33 .37
- ---------------------------------------------------------------------------------------------------------
Total from investment operations (.76) 1.84 .89
- ---------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------
From net investment income (.45) (.51) (.56)
- ---------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- --
- ---------------------------------------------------------------------------------------------------------
From net realized gain on investments (.29) (.01) --
- ---------------------------------------------------------------------------------------------------------
Total distributions (.74) (.52) (.56)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.06 $10.56 $9.24
- ---------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) (7.30) 20.40 10.31
- ---------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $541,619 $684,484 $419,098
- ---------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%)(b) 1.08 1.12 1.32
- ---------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.84 4.97 5.60
- ---------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 112.32 123.57 21.16
- ---------------------------------------------------------------------------------------------------------
Average commission rate paid (c)
- ---------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does
not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the year ended October
31, 1995 and thereafter, include amounts paid through
expense offset arrangements. Prior period ratios exclude these
amounts. (Note 2)
(c) Average commission rate paid on security trades is required for
fiscal periods beginning on or after September 1, 1995.
(d) Per share net investment income has been determined on the basis of the
weighted average number of shares outstanding during the period.
</TABLE>
Notes to financial statements
October 31, 1996
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
fund seeks 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. Class A shares are
sold with a maximum front-end sales charge of 5.75%. Class B shares,
which convert to class A shares after approximately eight years, do not
pay a front-end sales charge, but pay a higher ongoing distribution fee
than class A shares, and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class
M shares are sold with a maximum front-end sales charge of 3.50% and pay
an ongoing distribution fee that is lower than class B shares and higher
than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities. Actual results could differ from those
estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sale price 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.
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 of other
registered investment companies and certain other accounts managed by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
Manager, a wholly-owned subsidiary of Putnam Investments, Inc. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Putnam Management is responsible for determining that the value of these
underlying securities is at all times at least equal to the resale
price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed).
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such fluctuations are included with the net realized
and unrealized gain or loss on investments. Net realized gains and
losses on foreign currency transactions represent net exchange gains or
losses on closed forward currency contracts, disposition of foreign
currencies and the difference between the amount of investment income
and foreign withholding taxes recorded on the fund's books and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized
gains and losses on foreign currency transactions arise from changes in
the value of open forward currency contracts and assets and liabilities
other than investments at the period end, resulting from changes in the
exchange rate.
F) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held and for excise tax on income and capital
gains.
G) Distribution 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. 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. These
differences include treatment of losses on wash sale transactions, non-
taxable dividends and market discount. Reclassifications are made to the
fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryovers) under income tax
regulations. For the year ended October 31, 1996, the fund reclassified
$271,939 to increase distributions in excess of net investment income
and $4,127 to decrease paid-in-capital, with an increase to accumulated
net realized gain on investments of $276,066. The calculation of net
investment income per share in the financial highlights table excludes
these adjustments.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Management for management and investment advisory
services is paid quarterly based on the average net assets of the fund.
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, under current law, to reduction in any year 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 reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the year ended October 31, 1996, fund expenses were reduced by
$378,432 under expense offset arrangements with PFTC. Investor servicing
and custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized
in connection with the expense offset arrangements in an income
producing asset if it had not entered into such arrangements.
Trustees of the fund receive an annual Trustees fee of $2,400 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
The fund adopted a Trustee Fee Deferral Plan (the "Plan") which allows
the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund
and are invested in certain Putnam funds until distribution in
accordance with the Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plans provide for payments by
the fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%,
1.00% and 1.00% of the average net assets attributable to class A, class
B and class M shares, respectively. The Trustees have approved payment
by the fund at an annual rate of 0.25%, 1.00% and 0.75% of the average
net assets attributable to class A, class B and class M shares
respectively.
For the year ended October 31, 1996, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $261,597 and $7,902 from the
sale of class A and class M shares, respectively and $967,558 in
contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares. For the year ended October 31, 1996, Putnam Mutual Funds
Corp., acting as underwriter received $15 on class A redemptions.
Note 3
Purchase and sales of securities
During the year ended October 31, 1996, purchases and sales of
investment securities other than U.S. government obligations and short-
term investments aggregated $700,523,453 and $772,232,378, respectively.
Purchases and sales of U.S. government obligations aggregated
$69,085,349 and $68,884,410, 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 October 31, 1996, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were
as follows:
Year ended
October 31, 1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 16,125,423 $178,578,287
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,855,388 20,413,519
- ----------------------------------------------------
17,980,811 198,991,806
Shares
repurchased (21,830,427) (241,787,581)
- ----------------------------------------------------
Net decrease (3,849,616) $(42,795,775)
- ----------------------------------------------------
Year ended
October 31, 1995
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 15,018,174 $143,352,344
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,368,270 22,164,731
- ----------------------------------------------------
17,386,444 165,517,075
Shares
repurchased (20,133,278) (190,733,474)
- ----------------------------------------------------
Net decrease (2,746,834) $(25,216,399)
- ----------------------------------------------------
Year ended
October 31, 1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 13,138,831 $145,085,592
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,588,809 17,415,455
- ----------------------------------------------------
14,727,640 162,501,047
Shares
repurchased (17,432,183) (192,345,546)
- ----------------------------------------------------
Net decrease (2,704,543) $(29,844,499)
- ----------------------------------------------------
Year ended
October 31, 1995
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 12,359,206 $116,862,599
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,022,574 18,869,451
- ----------------------------------------------------
14,381,780 135,732,050
Shares
repurchased (14,089,785) (132,406,110)
- ----------------------------------------------------
Net increase 291,995 $3,325,940
- ----------------------------------------------------
Year ended
October 31, 1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 735,351 $8,172,430
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 10,643 117,240
- ----------------------------------------------------
745,994 8,289,670
Shares
repurchased (376,093) (4,211,752)
- -----------------------------------------------------
Net increase 369,901 $4,077,918
- -----------------------------------------------------
March 1, 1995
(commencement of
operations) to
October 31, 1995
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 205,946 $2,029,745
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,071 10,956
- ----------------------------------------------------
207,017 2,040,701
Shares
repurchased (22,254) (223,758)
- ----------------------------------------------------
Net increase 184,763 $1,816,943
- ----------------------------------------------------
Federal tax information
(Unaudited)
The fund has designated 59.28% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The Form 1099 you receive in January 1997 will show the tax status of
all distributions paid to your account in calendar 1996.
Results of October 3, 1996 shareholder meeting
(Unaudited)
An annual meeting of shareholders of the fund was held on October 3,
1996. At the meeting, each of the nominees for Trustees was elected, as
follows:
Votes
Votes for withheld
Jameson Adkins Baxter 65,987,296 1,011,230
Hans H. Estin 65,987,178 1,011,349
John A. Hill 65,987,297 1,011,230
R.J. Jackson 65,987,297 1,011,230
Elizabeth T. Kennan 65,987,297 1,011,230
Lawrence J. Lasser 65,987,297 1,011,230
Robert E. Patterson 65,987,178 1,011,349
Donald S. Perkins 65,987,297 1,011,230
William F. Pounds 65,987,297 1,011,230
George Putnam 65,984,180 1,014,347
George Putnam, III 65,983,738 1,014,789
Eli Shapiro 65,987,297 1,011,230
A.J.C. Smith 65,984,180 1,014,347
W. Nicholas Thorndike 65,982,135 1,016,392
A proposal to ratify the selection of Coopers & Lybrand L.L.P. as
auditors for the fund was approved as follows: 64,778,235 votes for, and
470,590 votes against, with 1,749,702 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in the securities of a single issuer was approved
as follows: 61,598,611 votes for, and 2,665,322 votes against, with
2,734,594 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to making loans through purchases of debt obligations,
repurchase agreements and securities loans was approved as follows:
60,381,467 votes for, and 3,808,007 votes against, with 2,809,054
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to senior securities was approved as follows: 61,700,505 votes
for, and 2,447,036 votes against, with 2,850,986 abstentions and broker
non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in commodities or commodity contracts was
approved as follows: 60,598,276 votes for, and 3,656,065 votes against,
with 2,744,186 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to concentration of its assets was approved as follows:
61,832,483 votes for, and 2,420,651 votes against, with 2,745,393
abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in securities of issuers in which management
of the fund or Putnam Investment Management, Inc. owns securities was
approved as follows: 60,767,493 votes for, and 3,412,445 votes against,
with 2,818,589 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to margin transactions was approved as follows: 59,614,913
votes for, and 4,435,192 votes against, with 2,948,423 abstentions and
broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to short sales was approved as follows: 60,152,591 votes
for, and 3,887,734 votes against, with 2,958,201 abstentions and broker
non-votes.
A proposal to eliminate the fund's fundamental investment restriction
which limits the fund's ability to pledge assets was approved as
follows: 59,981,117 votes for, and 4,056,272 votes against, with
2,961,138 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in certain oil, gas an mineral interests was
approved as follows: 61,426,046 votes for, and 2,909,894 votes against,
with 2,662,587 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in other investment companies was approved
as follows: 60,975,814 votes for, and 3,223,615 votes against, with
2,799,098 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to invest to gain control of a company's management was
approved as follows: 60,629,469 votes for, and 3,525,177 votes against,
with 2,843,881 abstentions and broker non-votes.
All tabulations are rounded to nearest whole number.
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investor Services has won the DALBAR Quality Tested Service Seal
for the past six years. In 1995, over 146,000 tests of 56 shareholder
service components demonstrated that Putnam outperformed the industry
standard in every category.
* HELP YOUR INVESTMENT GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings
account.*
* SWITCH FUNDS EASILY
You can move money from one account to another with the same class of
shares without a service charge. (This privilege is subject to change or
termination.)
* ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at
the then-current net asset value, which may be more or less than the
original cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a
helpful Putnam representative.
To make an additional investment in this or any other Putnam fund,
contact your financial advisor or call our toll-free number: 1-800-225-
1581.
*Regular investing of course, does not guarantee a profit or protect
against a loss in a declining market.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
Vice President
Sheldon N. 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
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. You can also learn more at Putnam Investments'
website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution, are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board
or any other agency, and involve risk, including the possible loss of
principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- ---------------------
29194-840/884/869 12/96
