Putnam
Utilities
Growth and
Income
Fund
SEMIANNUAL REPORT
April 30, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "In the long term, however, many analysts still see utilities in their
usual role as safe havens, holding up when the broader market weakens."
-- The New York Times, April 7, 1996
* "We use a balanced approach to investing in what can be a fairly
narrow sector and -- except where there's exceptional value -- we won't
make an unusually large investment in any one sector of the utilities
market."
-- Sheldon Simon, manager, Putnam Utilities
Growth and Income Fund
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
19 Financial statements
[GRAPHIC OMITTED: photo of George
Putnam]
(copyright) Karsh, Ottawa
From the Chairman
Dear Shareholder:
Investors are often attracted to the securities of utility companies
because of their potential to provide steady growth and attractive
income with moderate risk. Rare is the opportunity to participate in the
potentially substantial benefits arising from a fundamental change in an
industry; rarer still is a moment when two industries simultaneously
present such potential.
New legislation deregulating much of the telephone industry and new
rules that open the electric transmission industry to greater
competition gave a boost to Putnam Utilities Growth and Income Fund's
performance during the first half of fiscal 1996, the six months ended
April 30. Unfortunately, the positive effects of these events were
significantly dampened by concern over rising interest rates that drove
bond prices lower.
Fund managers Sheldon Simon and Christopher Ray provide greater details
and a look at prospects for the second half of fiscal 1996 in the report
that follows.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
June 19, 1996
Report from the Fund Managers
Sheldon Simon, lead manager
Christopher Ray
Although feeling the aftereffects of recent interest-rate increases,
Putnam Utilities Growth and Income Fund delivered respectable
performance for the six months ended April 30, 1996. Performance for
class A shares of the fund at net asset value substantially outperformed
the average utilities fund tracked by Lipper Analytical Services; the
average return for the 86 such funds tracked over this period was 6.21%,
versus the fund's 8.12%.* (Class A shares returned 1.94% at public
offering price for the period. Results for class B and class M shares,
which outperformed the average as well, can be found on pages 9 and 10.)
The fund's two largest sectors, electricity and telephones, have
benefited from the latest deregulatory moves as the market recognized
the more aggressive companies we had acquired in anticipation of these
changes, boosting the value of fund holdings. Your fund's small
nonutility position made substantial gains as the sector's largest
holding, an out-of-favor bank stock whose dividend income compares
favorably with that of utility stocks, increased in value bringing it
more closely in line with other bank stocks. Finally, when our valuation
assessments indicated that utility stocks held more attraction than
bonds, we reduced the bond sector to about 10% of assets. This helped
cushion the portfolio's value and sustain performance during the bond
market's decline.
* FUND'S INVESTMENT PROCESS DESIGNED TO ACCOMMODATE CHANGE
The recent passage of new legislation and adoption of new federal
mandates eliminated many long-standing barriers to competition in
telephone services. Changes are also occurring to increase competition
in the electric power industry. Changes have been going on for years in
the gas industry as it heads into a more competitive environment. Even
in a conservative investment sector such as utilities, change is a
constant consideration. Think of nuclear power's early days, AT&T's
breakup, and the birth of the "Baby Bells," and you see why change and
its aftereffects are always key factors in the selection and allocation
of portfolio securities.
Our multifaceted investment strategy calls for adjusting portfolio
allocations across the different sectors of the utility industries,
based on our perception of market conditions and valuations. Holdings
are mainly stocks of U.S. utilities, although bonds may be a significant
part of the portfolio when appropriate.
The small non-U.S. utility sector is allocated to securities sharing the
same characteristics as U.S. holdings: attractive valuations and usually
higher-than-average dividend yields. While it generally represents only
a small proportion of total holdings, this portfolio sector has always
given your fund greater potential for diversification than found in many
other funds in its category, and we believe it has made valuable
contributions to performance.
* OPEN TO COMPETITION: ELECTRIC TRANSMISSION LINES
Federal regulators handed down the order opening electric transmission
systems to outside providers in April. By then, the securities markets
had already differentiated electric companies, placing a high value on
those they deemed likely to succeed in a competitive environment and
discounting those judged vulnerable. Our assessment of a company's
potential, however, may differ from the market consensus, in part
because of the close relationships our analysts have established with
the managements of companies they have been following for years.
[GRAPHIC OF WORM CHART OMITTED: HOW UTILITIES TRACK THE TREASURY MARKET
12 MONTHS ENDED 4/30/96]
Chart information reads:
12 months ended 4/30/96
LEHMAN BROS.
LONG-TERM
CORPORATE
UTILITY LEHMAN TREASURY S&P
BOND INDEX BOND INDEX UTILITIES INDEX
------------- --------------- ---------------
5/95 5.95 4.04 3.11
6/95 7.10 4.86 3.56
7/95 5.99 4.47 6.22
8/95 8.39 5.69 8.38
10/95 9.81 6.70 15.18
11/95 11.11 8.35 17.62
12/95 13.43 10.03 18.90
1/96 15.58 11.60 27.26
2/96 15.78 12.31 28.94
3/96 11.76 10.01 23.88
4/96 9.63 8.36 22.66
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 stocks of 3
utility groups and 43 of the largest utility companies listed on the
NYSE. The Lehman Brothers Long Term Corporate Utility Bond Index is one
sector of the Lehman Brothers Corporate Bond Index and includes publicly
issued fixed-rate nonconvertible investment grade dollar-denominated
instruments. The Lehman Brothers 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.
An understanding of how a company's management is likely to respond to
new developments, coupled with an in-depth analysis of the company's
fundamental strengths and weaknesses, has helped us to identify
companies we believe will be successful over the long term, regardless
of the market's current perception. A case in point is our acquisition
last year of Public Service Company of Colorado. The stock of this low-
cost electricity provider recently increased in value as the market
began to recognize the company's strong growth prospects. (While this
portfolio holding, along with others discussed in this report, was
viewed favorably at the end of the fiscal period, all are subject to
review and adjustment in accordance with the fund's investment strategy
and may well vary in the future.) The company's potential was further
enhanced by an announced merger with Southwestern Public Service Company
of Amarillo, Texas, another low-cost provider. The development is
reflective of the consolidation under way in the electric power
industry, a trend in which your fund has participated with favorable
results.
* TELEPHONE AND GAS STOCKS REMAIN FUND'S MAJOR EMPHASIS
While the telephone sector currently makes up a smaller portion of the
portfolio than at the end of fiscal 1995, it remains one of the fund's
largest industry positions. We believe MCI, the sector's largest
holding, is still underappreciated by the market in spite of an increase
in price. In our opinion, this aggressive company, having captured a
large share of AT&T's long-distance business, should continue to grow as
it introduces new products and services to an expanding customer base.
To us, MCI looks more than ready to take on the new and highly
competitive world of communications.
Gas company stocks represent the portfolio's third largest sector and
the first utility sector to experience deregulation. One of our favorite
gas holdings is Northwest Natural Gas, based in Portland, Oregon. This
distribution company offers a dividend yield comparable with that of
electric utilities, yet it has much brighter growth prospects because of
the strong economic expansion in its dynamic service territory.
[GRAPHIC OF VERTICAL BAR CHART OMITTED: DIVERSIFICATION BY INDUSTRY AND
INVESTMENT*] Chart informatioin reads:
Electric utilities 28.9%
Oil & gas (includes gas utilities) 23.0%
Telephone utilities 15.7%
Other utilites 0.2%
Non-utility stocks 13.3%
Utility bonds 13.8%
Other bonds 1.4%
Cash & short-term investments 1.7%
*Based on net assets as of 4/30/96. Reflects
combined stock and bond portfolios. Portfolio
holdings will vary over time.
In general, gas holdings have recently benefited from earnings
increases, the result of colder (and more normal) winter temperatures.
Cost-cutting measures set in place when profits were under pressure
during the warm winters of previous years also enhanced the bottom lines
of these companies.
* THE OUTLOOK: DEREGULATION OFFERS ONGOING OPPORTUNITY
Our search is ongoing for companies that are out of favor, yet offer
substantial opportunity. We also continue to examine companies whose
higher stock prices may be justified by strong fundamentals and the
potential for substantial capital gains. Although deregulation poses
risks for the telephone sector, we are on the lookout for companies that
may benefit from mergers and appear able to compete successfully by
offering new services such as voice mail, caller ID, Internet access,
and video services.
We believe the gas industry may ultimately benefit from the deregulation
of the electric power sector, partly because gas enjoys favor as the
low-cost, environmentally friendly fuel for electricity production.
Given the attractive valuation of this sector, increasing merger
activity seems likely and should provide further opportunities for
potential appreciation. An example is the acquisition of Enserch, a gas
company, by Texas Utilities, an electric power company.
We expect further deregulation to occur primarily at the state level.
Currently these traditionally staid utilities seem far more affected by
change than in the past. In spite of this perception, we expect
utilities to retain their value as relatively conservative investments.
While there can be no guarantees, and while they may have less upside
potential than the broader market, over time they have tended to deliver
attractive returns with lower levels of risk.
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 4/30/96, there is no guarantee the fund will
continue to hold these securities in the future. Investing in a single
sector increases the possibility of greater price fluctuations and does
not provide the diversification of a multisector investment.
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 4/30/96
Class A Class B Class M
(inception date) (11/19/90) (4/27/92) (3/1/95)
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------------
6 months 8.12% 1.94% 7.65% 2.65% 7.91% 4.10%
- -----------------------------------------------------------------------
1 year 23.05 15.98 22.13 17.13 22.45 18.15
- -----------------------------------------------------------------------
5 years 73.64 63.65 -- -- -- --
Annual
average 11.67 10.35 -- -- -- --
- -----------------------------------------------------------------------
Life of
class 77.87 67.61 51.92 49.92 26.79 22.38
Annual
average 11.14 9.94 10.99 10.63 22.50 18.84
- -----------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/96
S&P Consumer
Utilities Index Price Index
- -----------------------------------------------------------------------
6 months 4.28% 1.69%
- -----------------------------------------------------------------------
1 year 22.66 2.90
- -----------------------------------------------------------------------
5 years 76.28 15.61
Annual average 12.01 2.94
- -----------------------------------------------------------------------
Life of class A 79.18 16.82
Annual average 11.37 2.89
- -----------------------------------------------------------------------
Life of class B 60.41 12.04
Annual average 12.54 2.88
- -----------------------------------------------------------------------
Life of class M 26.44 3.58
Annual average 22.27 3.05
- -----------------------------------------------------------------------
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 5% maximum
contingent deferred sales charge.
TOTAL RETURN FOR PERIODS ENDED 3/31/96
(most recent calendar quarter)
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------------
6 months 8.44% 2.22% 8.07% 3.07% 8.23% 4.49%
- -----------------------------------------------------------------------
1 year 25.79 18.52 24.97 19.97 25.31 20.93
- -----------------------------------------------------------------------
5 years 69.94 60.17 -- -- -- --
Annual average 11.19 9.88 -- -- -- --
- -----------------------------------------------------------------------
Life of class 77.55 67.31 51.79 48.79 26.56 22.15
Annual average 11.28 10.06 11.20 10.64 24.12 20.15
- -----------------------------------------------------------------------
PRICE AND DISTRIBUTION INFORMATION
6 months ended 4/30/96
Class A Class B Class M
- -----------------------------------------------------------------------
Distributions (number) 2 2 2
- -----------------------------------------------------------------------
Income $0.230 $0.189 $0.207
- -----------------------------------------------------------------------
Capital gains -- -- --
- -----------------------------------------------------------------------
Total $0.230 $0.189 $0.207
- -----------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- -----------------------------------------------------------------------
10/31/95 $10.40 $11.03 $10.36 $10.38 $10.76
- -----------------------------------------------------------------------
4/30/96 11.01 11.68 10.96 10.99 11.39
- -----------------------------------------------------------------------
Current return
- -----------------------------------------------------------------------
End of period
- -----------------------------------------------------------------------
Current dividend
rate1 4.18% 3.94% 3.43% 3.68% 3.55%
- -----------------------------------------------------------------------
Current 30-day
SEC yield2 4.11 3.87 3.36 3.56 3.44
- -----------------------------------------------------------------------
1Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
2Based on investment income, calculated using SEC guidelines.
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.
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.
Standard & Poor's Utilities Index* is an unmanaged list of common stocks
issued by utility companies.
Consumer Price Index* (CPI ) is a commonly used measure of inflation; it
does not represent an investment return.
*These 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. It is not
possible to invest directly in an index.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Health Sciences Trust
Investors Fund
Natural Resources Fund
New Opportunities Fund
OTC Emerging Growth Fund
Overseas Growth Fund
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Adjustable Rate U.S. Government Fund+
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
Intermediate U.S. Government Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds*
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments to help maximize your return and reduce your risk.
The three portfolios:
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENT++
Putnam money market funds:
California Tax Exempt Money Market Fund
Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts[Double S]
* Not available in all states.
+ Currently closed to new investments.
++ Relative to above.
[Double S] Not offered by Putnam Investments. Certificates of
deposit offer a fixed rate of return and may be insured
up to certain limits by federal/state agencies. Savings
accounts may also be insured up to certain limits.
Please call your financial advisor or Putnam at
1-800-225-1581 to obtain a prospectus for any Putnam fund
it contains more complete information, including charges
and expenses. Please read it carefully before you invest
or send money.
<TABLE>
<CAPTION>
Portfolio of investments owned
April 30, 1996 (Unaudited)
COMMON STOCKS (81.1%) *
NUMBER OF SHARES VALUE
<S> <C> <C> <C>
Automotive (0.1%)
- -----------------------------------------------------------------------------------------------------------------
30,000 General Motors Corp. $1,627,500
Banks (4.5%)
- -----------------------------------------------------------------------------------------------------------------
610,000 Bankers Trust New York Corp. 42,318,750
34,800 Keycorp 1,344,150
100,000 National City Corp. 3,687,500
250,000 PNC Bank Corp. 7,562,500
--------------
54,912,900
Conglomerates (0.2%)
- -----------------------------------------------------------------------------------------------------------------
150,000 GenCorp, Inc. 2,006,250
Electric Utilities (28.9%)
- -----------------------------------------------------------------------------------------------------------------
360,000 Atlantic Energy, Inc. 5,850,000
192,700 Boston Edison Co. 4,697,063
182,700 CMS Energy Corp. Class G 3,425,625
225,000 Carolina Power & Light Co. 8,100,000
400,000 Central & South West Corp. 10,900,000
52,500 Central Costanera 144A ADR (Argentina) 1,785,000
220,500 Central Maine Power Co. 3,142,125
80,000 Central Puerto 144A ADR (Argentina) 1,440,000
10,000 Chilectra S.A. 144A ADR (Chile)+ 545,000
140,000 Chilgener S.A. ADR (Chile) 3,132,500
21,600 CILCORP, Inc. 931,500
350,000 Cinergy Corp. 10,150,000
110,000 Compania Boliviana de Energia Electrica ADR (Bolivia) 4,070,000
200,000 Delmarva Power & Light Co. 3,925,000
100,000 Dominion Resources, Inc. 3,850,000
340,120 East Midlands Electricity PLC (United Kingdom)+ 3,210,558
108,400 Eastern Utilities Assoc. 2,208,650
500,000 Edison International 8,000,000
70,000 Empresa Nacional de Electricidad ADR (Spain) 4,383,750
142,500 Empresa Nacional de Electricidad ADR (Chile) 2,778,750
80,000 Enova Corp. 1,720,000
100,000 Entergy Corp. 2,650,000
100,000 FPL Group, Inc. 4,312,500
250,000 Florida Progress Corp. 8,250,000
350,000 General Public Utilities Corp. 11,112,500
61,700 Hawaiian Electric Industries, Inc. 2,128,650
600,000 Hong Kong Electric Holdings Ltd. (Hong Kong)+ 1,908,259
750,000 Huaneng Power International, Inc. ADR (China)+ 11,718,750
461,600 IES Industries, Inc. 12,232,400
750,000 Iberdrola S.A. (Spain) 7,338,491
30,000 Interstate Power Corp. $918,750
190,400 Kansas City Power & Light Co. 4,998,000
800,000 Long Island Lighting Co. 13,000,000
29,600 Mosenergo 144A ADS (Russia)+ 355,200
100,000 New York State Electric & Gas Corp. 2,287,500
600,000 Northeast Utilities 9,525,000
108,600 Ohio Edison Co. 2,267,025
230,000 Oklahoma Gas & Electric Co. 8,682,500
300,000 Pacific Gas & Electric Co. 6,825,000
300,000 Peco Energy Co. 7,462,500
400,000 Pinnacle West Capital Corp. 10,650,000
440,000 Portland General Corp. 12,925,000
309,200 Potomac Electric Power Co. 7,691,350
50,000 PowerGen PLC ADR (United Kingdom) 1,725,000
485,500 Public Service Co. of Colorado 16,082,184
530,000 Public Service Enterprise Group Inc. 13,846,250
150,000 Rochester Gas & Electric Corp. 3,075,000
375,000 Scana Corp. 9,609,375
600,000 Scottish Power PLC (United Kingdom) 3,364,793
421,500 Shandong Huaneng Power Co., Ltd. ADR (China) 3,898,875
500,000 Sierra Pacific Resources 12,125,000
100,000 Southern Co. 2,200,000
390,000 TNP Enterprises, Inc. 9,262,500
275,000 Texas Utilities Co. 11,068,750
2,000,000 Tucson Electric Power Co. 5,750,000
380,000 Union Electrica Fenosa S.A. (Spain) 2,272,712
113,300 Union Electric Co. 4,376,213
145,600 United Illuminating Co. 5,296,200
150,000 Utilicorp United, Inc. 4,218,750
160,000 Washington Water Power Co. 2,900,000
--------------
348,556,498
Food (0.3%)
- -----------------------------------------------------------------------------------------------------------------
100,000 Quaker Oats Co. 3,437,500
Gas Utilities (19.2%)
- -----------------------------------------------------------------------------------------------------------------
350,000 AGL Resources, Inc. 6,606,250
213,600 Atmos Energy Corp. 5,286,600
130,000 Bay State Gas Co. 3,607,500
262,200 Brooklyn Union Gas Co. 6,882,750
120,000 Cascade Natural Gas Corp. 1,830,000
400,000 Columbia Gas System, Inc. 19,450,000
150,000 Connecticut Energy Corp. 2,906,250
48,000 Consolidated Natural Gas Co. 2,244,000
250,200 Energen Corp. 5,723,325
25,100 Enron Corp. 1,010,275
100,000 Indiana Energy, Inc. 2,387,500
350,000 K N Energy, Inc. 11,200,000
135,000 Laclede Gas Co. 3,172,500
627,800 MCN Corp. 15,459,575
270,000 NICOR Inc. 7,526,250
200,000 NUI Corp. 3,725,000
280,000 National Fuel Gas Co. 9,835,000
87,600 New Jersey Resources Corp. $2,485,650
500,000 Noram Energy Corp. 5,500,000
20,955 North Carolina Natural Gas Corp. 531,733
336,000 Northwest Natural Gas Co. 10,920,000
280,000 Oneok, Inc. 7,210,000
800,000 Pacific Enterprises 20,600,000
274,900 Peoples Energy Corp. 8,659,350
150,000 Piedmont Natural Gas Co., Inc. 3,243,750
120,000 Public Service Co. of North Carolina, Inc. 1,935,000
500,000 Questar Corp. 17,500,000
30,000 South Jersey Industries, Inc. 701,250
36,666 Southern Union Co.+ 806,652
60,000 Southwest Gas Corp. 997,500
200,000 TransCanada Pipelines Ltd. (Canada) 2,825,000
300,000 Transportadora de Gas del Sur ADR (Argentina) 3,862,500
525,600 UGI Corp. 11,760,300
110,000 United Cities Gas Co. 1,705,000
156,700 WICOR, Inc. 5,386,563
30,000 Washington Energy Co. 581,250
10,000 Washington Gas Light Co. 210,000
700,000 Westcoast Energy, Inc. 10,850,000
170,000 Yankee Energy System, Inc. 3,803,750
--------------
230,928,023
Insurance (1.4%)
- -----------------------------------------------------------------------------------------------------------------
200,000 American General Corp. 7,025,000
250,000 GCR Holdings, Ltd.+ 6,375,000
250,000 USF&G Corp. 3,968,750
--------------
17,368,750
Metals and Mining (0.3%)
- -----------------------------------------------------------------------------------------------------------------
100,000 Freeport-McMoRan Copper & Gold Co., Inc. Class A 3,162,500
Oil and Gas (3.8%)
- -----------------------------------------------------------------------------------------------------------------
310,000 Coastal Corp. 12,283,750
250,000 ENSERCH Corp. 5,375,000
302,600 NGC Corporation 4,539,000
650,000 PanEnergy Corp. 21,206,250
65,800 Union Pacific Resources Group Inc. 1,809,500
--------------
45,213,500
Paper (0.2%)
- -----------------------------------------------------------------------------------------------------------------
50,000 Weyerhaeuser Co. 2,475,000
Publishing (0.2%)
- -----------------------------------------------------------------------------------------------------------------
50,000 Times Mirror Co. Class A 2,131,250
Real Estate Investment Trusts (2.3%)
- -----------------------------------------------------------------------------------------------------------------
160,600 Avalon Properties, Inc. $3,372,600
279,000 Equity Residential Properties Trust 8,997,750
100,000 Glimcher Realty Trust 1,712,500
100,000 LTC Properties, Inc. 1,537,500
84,600 Macerich Co. 1,639,125
200,000 Nationwide Health Properties, Inc. 3,975,000
120,000 Public Storage, Inc. 2,460,000
135,000 South West Property Trust, Inc. 1,839,375
100,000 Storage Trust Realty 2,187,500
--------------
27,721,350
Retail (2.3%)
- -----------------------------------------------------------------------------------------------------------------
1,800,000 K mart Corp. 18,225,000
80,400 Melville Corporation 3,125,550
120,000 Penney (J.C.) Co., Inc. 5,940,000
--------------
27,290,550
Semiconductors (0.2%)
- -----------------------------------------------------------------------------------------------------------------
50,000 Texas Instruments, Inc. 2,825,000
Telephone Utilities (15.7%)
- -----------------------------------------------------------------------------------------------------------------
200,000 Airtouch Communications+ 6,250,000
150,000 American Telephone & Telegraph Co. 9,187,500
282,500 Ameritech Corp. 16,490,938
300,000 Bell Atlantic Corp. 19,500,000
140,000 BellSouth Corp. 5,600,000
500,000 GTE Corp. 21,687,500
1,100,000 MCI Communications Corp. 32,381,250
120,000 NYNEX Corp. 5,895,000
421,000 Pacific Telesis Group 14,419,250
525,000 SBC Communications, Inc. 26,250,000
725,000 Sprint Corp. 30,540,625
20,000 Telefonica de Argentina S.A. ADR (Argentina) 585,000
--------------
188,787,063
Tobacco (0.6%)
- -----------------------------------------------------------------------------------------------------------------
65,000 American Brands, Inc. 2,705,625
50,000 Philip Morris Cos., Inc. 4,506,250
--------------
7,211,875
Trucking (0.2%)
- -----------------------------------------------------------------------------------------------------------------
100,000 Ryder System, Inc. 2,912,500
Water Utilities (0.2%)
- -----------------------------------------------------------------------------------------------------------------
163,933 Hyder PLC (United Kingdom)+ 1,813,988
Wireless Communications (0.5%)
- -----------------------------------------------------------------------------------------------------------------
20,000 Telecom Argentina S.A. ADR (Argentina)+ $905,000
241,666 360 Communications Co.+ 5,679,151
--------------
6,584,151
--------------
Total Common Stocks (cost $866,131,254) $976,966,148
CORPORATE BONDS AND NOTES (13.8%) *
PRINCIPAL AMOUNT VALUE
Electric Utilities (11.2%)
- -----------------------------------------------------------------------------------------------------------------
$4,000,000 Allegheny Generating Co. deb. 6 7/8s, 2023 $3,574,440
2,417,000 Arkansas Electric Corp. bonds 7.33s, 2008 2,441,170
3,000,000 Australian Gas & Light Co. sr. notes 6 3/8s, 2003 (Australia) 2,885,400
3,500,000 Chilgener S.A. notes 6 1/2s, 2006 (Chile) 3,254,720
4,000,000 Chugach Electric Co. 1st mtge. Ser. A, 9.14s, 2022 4,396,760
3,432,000 Citizens Utilities Co. bonds 7.68s, 2034 3,634,968
4,000,000 Commonwealth Edison Co. 1st mtge. 7s, 2005 3,843,280
5,250,000 Consumers Power Co. 1st mtge. 8 3/4s, 1998 5,415,218
4,000,000 Delmarva Power & Light Co. med. term. notes 5.69s, 1998 3,931,560
3,500,000 Duquesne Power & Light Co. deb. 8.7s, 2016 3,595,235
5,000,000 Endesa National Electric Co. company guaranty 7.2s, 2006 (Chile) 4,879,350
4,000,000 Hydro-Quebec (Government of) 8.4s, 2022 (Canada) 4,211,680
5,000,000 Iberdrola S.A. notes 7 1/2s, 2002 (Spain) 5,100,000
4,992,174 Indiana-Michigan Power Co. deb. 9.82s, 2022 5,784,532
7,000,000 Kansas City Power & Light Co. med. term. notes 5 3/4s, 1998 6,912,990
4,000,000 Kansas Gas & Electric Co. deb. 8.29s, 2016 3,945,560
4,000,000 Kentucky Utilities Co. 1st mtge. Ser. R, 7.55s, 2025 3,883,125
5,000,000 Midwest Power Systems mtge. 8 1/8s, 2023 4,915,600
2,000,000 Nova Scotia Power Corp. deb. 9.4s, 2021 (Canada) 2,292,320
5,000,000 Ohio Edison Co. 1st. mtge. 8 1/4s, 2002 5,202,100
3,000,000 Pacificorp secd. med. term. notes 9.15s, 2011 3,412,230
4,000,000 Pacific Gas & Electric Co. sr. notes 7.1s, 2005 3,931,840
5,000,000 Public Service Co. of Colorado coll. trust 6 3/8s, 2005 4,671,150
4,000,000 Public Service Electric & Gas Co. mtge. notes 9 1/4s, 2021 4,600,080
7,240,000 San Diego Gas & Electric Co. 1st mtge. Ser. JJ, 9 5/8s, 2020 8,108,945
3,500,000 Sierra Pacific Power Co. med. term notes Ser. C, 6.82s, 2006 3,382,365
5,985,000 South Carolina Electric & Gas Co. 1st. mtge. 7 5/8s, 2005 6,233,677
3,500,000 Southern California Edison 1st ref. mtge. Ser. 93-F, 6 1/4s, 2003 3,320,800
4,000,000 Tenaga Nasional Berhad 144A notes 7 7/8s, 2004 (Malaysia) 4,140,000
5,000,000 Texas Utilities Co. secd. lease fac. bonds 7.46s, 2015 4,908,150
4,500,000 Utilicorp United sr. notes 8.2s, 2007 4,596,435
--------------
135,405,680
Gas Utilities (1.5%)
- -----------------------------------------------------------------------------------------------------------------
3,500,000 Columbia Gas System notes Ser. E, 7.32s, 2010 3,322,480
4,000,000 Michigan Consolidated Gas 1st mtge. 8 1/4s, 2014 4,239,920
3,500,000 ONEOK Inc. deb. 9.7s, 2019 3,719,135
4,000,000 Southern Union Gas sr. notes 7.6s, 2024 3,729,440
3,000,000 Washington National Gas Co. 1st mtge. 8.4s, 2022 3,214,860
--------------
18,225,835
Oil and Gas (0.3%)
- -----------------------------------------------------------------------------------------------------------------
$4,000,000 Petroliam Nasional Berhad 144A notes 6 7/8s, 2003 (Malaysia) $3,914,720
Telephone Utilities (0.8%)
- -----------------------------------------------------------------------------------------------------------------
5,000,000 Bell South Telecommunication deb. 6 3/4s, 2033 4,391,450
5,000,000 Telstra Corp. Ltd. notes 6 1/2s, 2005 (Australia) 4,749,000
--------------
9,140,450
--------------
Total Corporate Bonds and Notes (cost $168,511,226) $166,686,685
PREFERRED STOCKS (1.0%)*(cost $13,746,275)
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
458,000 Public Service Co. of New Hampshire Ser. A, $2.65, pfd. $11,450,000
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (0.8%) *
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------
$2,035,000 U.S. Treasury Bonds, 7 1/2s, November 15, 2024 $2,147,881
7,380,000 U.S. Treasury Notes, 7 1/2s, February 15, 2005 7,768,631
--------------
Total U.S. Government and Agency Obligations
(cost $10,365,939) $9,916,512
CONVERTIBLE BONDS AND NOTES (0.6%) *
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------
$2,900,000 Mitsubishi Bank Ltd. cv. trust guaranteed notes 3s, 2002 (Japan) $3,349,500
4,000,000 Telekom Malaysia Berhad 144A cv. deb. 4s, 2004 (Malaysia) 4,295,000
--------------
Total Convertible Bonds and Notes (cost $6,497,000) $7,644,500
CONVERTIBLE PREFERRED STOCKS (0.4%)*(cost $5,000,788)
NUMBER OF SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
100,000 Philippine Long Distance Telephone Co. Ser. III,
$3.50 cv. pfd. (Philippines) $5,050,000
SHORT-TERM INVESTMENTS (1.7%)*(cost $19,974,946)
PRINCIPAL AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------------
$19,972,000 Interest in $648,384,000 joint repurchase agreement
dated April 30, 1996 with Morgan (J.P.) & Co., Inc.
due May 1, 1996 with respect to various U.S. Treasury
obligations--maturity value of $19,974,946 for an
effective yield of 5.31% $19,974,946
--------------
Total Investments (cost $1,090,227,428)*** $1,197,688,791
- -----------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $1,204,309,601.
+ Non-income producing security.
*** The aggregate identified cost on a tax basis is $1,090,227,428,
resulting in gross unrealized appreciation and depreciation of
$146,964,202 and $39,502,839, respectively, or net unrealized
appreciation of $107,461,363.
ADR or ADS after the name of a holding stands for American Depository Receipt or
American Depository Shares, respectively, 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
April 30, 1996 (Unaudited)
Assets
- ----------------------------------------------------------------------------
<S> <C>
Investments in securities, at value
(identified cost $1,090,227,428) (Note 1) $1,197,688,791
- ----------------------------------------------------------------------------
Dividends and interest receivable 6,816,805
- ----------------------------------------------------------------------------
Receivable for shares of the fund sold 875,410
- ----------------------------------------------------------------------------
Receivable for securities sold 17,729,665
- ----------------------------------------------------------------------------
Total assets 1,223,110,671
Liabilities
- ----------------------------------------------------------------------------
Payable to subcustodian (Note 2) 6,231
- ----------------------------------------------------------------------------
Payable for securities purchased 13,601,163
- ----------------------------------------------------------------------------
Payable for shares of the fund repurchased 2,218,837
- ----------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,912,591
- ----------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 353,253
- ----------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 2,834
- ----------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,053
- ----------------------------------------------------------------------------
Payable for distribution fees (Note 2) 615,258
- ----------------------------------------------------------------------------
Other accrued expenses 88,850
- ----------------------------------------------------------------------------
Total liabilities 18,801,070
- ----------------------------------------------------------------------------
Net assets $1,204,309,601
Represented by
- ----------------------------------------------------------------------------
Paid-in-capital (Notes 1 and 4) $1,043,902,682
- ----------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (970,398)
- ----------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 53,915,954
- ----------------------------------------------------------------------------
Net unrealized appreciation of investments 107,461,363
- ----------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,204,309,601
Computation of net asset value and offering price
- ----------------------------------------------------------------------------
Net asset value and redemption price per class A share
($600,736,698 divided by 54,556,097 shares) $11.01
- ----------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $11.01)* $11.68
- ----------------------------------------------------------------------------
Net asset value and offering price per class B share
($600,017,694 divided by 54,733,434 shares)** $10.96
- ----------------------------------------------------------------------------
Net asset value and redemption price per class M share
($3,555,209 divided by 323,525 shares) $10.99
- ----------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $10.99)* $11.39
- ----------------------------------------------------------------------------
* 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
Six months ended April 30, 1996 (Unaudited)
<S> <C>
Investment Income
- ----------------------------------------------------------------------------
Interest $6,088,273
- ----------------------------------------------------------------------------
Dividends (net of foreign tax of $256,912) 25,047,406
- ----------------------------------------------------------------------------
Total investment income 31,135,679
Expenses:
- ----------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,853,095
- ----------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 991,050
- ----------------------------------------------------------------------------
Compensation of Trustees (Note 2) 23,245
- ----------------------------------------------------------------------------
Administrative services (Note 2) 12,318
- ----------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 767,149
- ----------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 3,022,429
- ----------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 11,481
- ----------------------------------------------------------------------------
Reports to shareholders 19,880
- ----------------------------------------------------------------------------
Registration fees 1,200
- ----------------------------------------------------------------------------
Auditing 23,583
- ----------------------------------------------------------------------------
Legal 9,561
- ----------------------------------------------------------------------------
Postage 81,428
- ----------------------------------------------------------------------------
Other expenses 16,312
- ----------------------------------------------------------------------------
Total expenses 8,832,731
- ----------------------------------------------------------------------------
Expense reduction (Note 2) (179,929)
- ----------------------------------------------------------------------------
Net expenses 8,652,802
- ----------------------------------------------------------------------------
Net investment income 22,482,877
- ----------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 55,596,801
- ----------------------------------------------------------------------------
Net realized loss from foreign currency translation (Note 1 (4,284)
- ----------------------------------------------------------------------------
Net unrealized appreciation of investments during the perio 14,005,927
- ----------------------------------------------------------------------------
Net gain on investments 69,598,444
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $92,081,321
- ----------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
April 30 October 31
1996* 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------
Net investment income $22,482,877 $44,629,393
- ---------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 55,592,517 6,380,409
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 14,005,927 149,260,976
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 92,081,321 200,270,778
- ---------------------------------------------------------------------------------------------
Distributions to shareholders
- ---------------------------------------------------------------------------------------------
From net investment income:
Class A (12,918,415) (26,485,617)
- ---------------------------------------------------------------------------------------------
Class B (10,480,788) (21,510,258)
- ---------------------------------------------------------------------------------------------
Class M (54,072) (23,624)
- ---------------------------------------------------------------------------------------------
From net realized gain on investments:
Class A -- (823,988)
- ---------------------------------------------------------------------------------------------
Class B -- (763,062)
- ---------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (37,966,334) (20,073,516)
- ---------------------------------------------------------------------------------------------
Total increase in net assets 30,661,712 130,590,713
- ---------------------------------------------------------------------------------------------
Net assets
- ---------------------------------------------------------------------------------------------
Beginning of period 1,173,647,889 1,043,057,176
- ---------------------------------------------------------------------------------------------
End of period (including distributions in excess
of net investment income
of $970,398 and $0, respectively) $1,204,309,601 $1,173,647,889
- ---------------------------------------------------------------------------------------------
* Unaudited.
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
Six months (commencement Six months
ended of operations) ended Year ended
April 30 October 31 April 30 October 31
- ----------------------------------------------------------------------------------------------------------
1996* 1995 1996* 1995 1994
- ----------------------------------------------------------------------------------------------------------
Class M Class B
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.38 $9.14 $10.36 $9.02 $10.52
- ----------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------
Net investment income .21 .31 .18 .36 .39
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .61 1.26 .61 1.39 (1.22)
- ----------------------------------------------------------------------------------------------------------
Total from investment activities .82 1.57 .79 1.75 (.83)
- ----------------------------------------------------------------------------------------------------------
Distributions to shareholders
- ----------------------------------------------------------------------------------------------------------
From net investment income (.21) (.33) (.19) (.39) (.38)
- ----------------------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.02) (.29)
- ----------------------------------------------------------------------------------------------------------
Total distributions (.21) (.33) (.19) (.41) (.67)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.99 $10.38 $10.96 $10.36 $9.02
- ----------------------------------------------------------------------------------------------------------
Total investment return at
net asset value (%)(c) 7.91(b) 17.50(b) 7.65(b) 19.92 (8.04)
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,555 $1,917 $600,018 $578,505 $501,438
- ----------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(d) 1.56(b) 1.13(b) 1.81(b) 1.87 1.83
- ----------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.46(b) 2.36(b) 3.28(b) 3.77 4.10
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 36.10(b) 67.60 36.10(b) 67.60 112.32
- ----------------------------------------------------------------------------------------------------------
Average commission
rate paid (%)(e) $0.0499 -- $0.0499 -- --
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
April 27, 1992
(commencement Six months
operations) ended
October 31 April 30
- --------------------------------------------------------------------------------------------
1993 1992 1996* 1995
- --------------------------------------------------------------------------------------------
Class B
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $9.22 $8.87 $10.40 $9.06
- --------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------
Net investment income .42 .26 .22 .43
- --------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.34 .36 .62 1.38
- --------------------------------------------------------------------------------------------
Total from investment activities 1.76 .62 .84 1.81
- --------------------------------------------------------------------------------------------
Distributions to shareholders
- --------------------------------------------------------------------------------------------
From net investment income (.43) (.27) (.23) (.46)
- --------------------------------------------------------------------------------------------
In excess of net
investment income (.03) -- -- --
- --------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.01)
- --------------------------------------------------------------------------------------------
Total distributions (.46) (.27) (.23) (.47)
- --------------------------------------------------------------------------------------------
Net asset value, end of period $10.52 $9.22 $11.01 $10.40
- --------------------------------------------------------------------------------------------
Total investment return at
net asset value (%)(c) 19.54 7.06(b) 8.12(b) 20.71
- --------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $551,794 $103,075 $600,737 $593,226
- --------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(d) 1.86 .94(b) 1.06(b) 1.12
- --------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.98 2.45(b) 4.02(b) 4.53
- --------------------------------------------------------------------------------------------
Portfolio turnover (%) 123.57 21.16 36.10(b) 67.60
- --------------------------------------------------------------------------------------------
Average commission
rate paid (%)(e) -- -- $0.0499 --
- --------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
November 19, 1990
(commencement
operations)
Year ended October October 31
- --------------------------------------------------------------------------------------------
1994 1993 1992 1991
- --------------------------------------------------------------------------------------------
Class A
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $10.56 $9.24 $8.91 $8.50
- --------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------
Net investment income .46 .51 .52 .52(a)
- --------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (1.22) 1.33 .37 .36
- --------------------------------------------------------------------------------------------
Total from investment activities (.76) 1.84 .89 .88
- --------------------------------------------------------------------------------------------
Distributions to shareholders
- --------------------------------------------------------------------------------------------
From net investment income (.45) (.51) (.56) (.47)
- --------------------------------------------------------------------------------------------
In excess of net
investment income -- -- -- --
- --------------------------------------------------------------------------------------------
From net realized gain
on investments (.29) (.01) -- --
- --------------------------------------------------------------------------------------------
Total distributions (.74) (.52) (.56) (.47)
- --------------------------------------------------------------------------------------------
Net asset value, end of period $9.06 $10.56 $9.24 $8.91
- --------------------------------------------------------------------------------------------
Total investment return at
net asset value (%)(c) (7.30) 20.40 10.31 10.70(b)
- --------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $541,619 $684,484 $419,098 $158,918
- --------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(d) 1.08 1.12 1.32 1.22(a)(b)
- --------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.84 4.97 5.60 5.63(a)(b)
- --------------------------------------------------------------------------------------------
Portfolio turnover (%) 112.32 123.57 21.16 111.19(b)
- --------------------------------------------------------------------------------------------
Average commission
rate paid (%)(e) -- -- -- --
- --------------------------------------------------------------------------------------------
* Unaudited.
(a) Reflects a voluntary expense limitation during the period. As a result of such limitation,
expenses of the fund for the period ended October 31, 1991 reflect a reduction of
approximately $0.04 per share. See Note 2.
(b) Not annualized.
(c) Total investment return assumes dividend reinvestment and does not reflect the effect of
sales charges.
(d) The ratio of expenses to average net assets for the year ended October 31, 1995 and
thereafter, include amounts paid through brokerage service and expense offset arrangements.
Prior period ratios exclude these amounts. See Note 2.
(e) Average commission rate paid is presented for fiscal periods beginning September 1, 1995
in conformance with requirements issued by the SEC.
</TABLE>
Notes to financial statements
April 30, 1996 (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. 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 managed by Putnam Investment Management,
Inc. ("Putnam Management"), the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc. and certain other accounts. 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.
At October 31, 1995, the fund had a capital loss carryover of
approximately $1,500,000 available to offset future net capital gain, if
any, which will expire on October 2, 2002.
G) 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. Reclassifications are made to the fund's capital
accounts to reflect income and gains available for distribution or
available for capital loss carryovers under income tax regulations.
Note 2
Management fees, 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 to the extent that
expenses (exclusive of brokerage, interest and taxes) 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 Putnam Management on the fund's portfolio transactions.
As part of the custodian contract between the subcustodian bank and
PFTC, the subcustodian bank has a lien on the securities of the fund to
the extent permitted by the fund's investment restrictions to cover any
advances made by the subcustodian bank for the settlement of securities
purchased by the fund. At April 30, 1996, the payable to the
subcustodian bank represents the amount due for cash advance for the
settlement of a security purchased.
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.
Trustees of the fund receive an annual Trustees fee of $2,500 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 the fund or in other Putnam funds until distribution
in accordance with the Plan.
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 six months ended April 30, 1996, fund expenses were reduced by
$179,929 under expense offset arrangements with PFTC and brokerage
service arrangements. Investor servicing and custodian fees reported in
the Statement of operations exclude these credits. The fund could have
invested a portion of the assets utilized in connection with the expense
offset arrangements in an income producing asset if it had not entered
into such arrangements.
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 six months ended April 30, 1996, Putnam Mutual Funds Corp.,
acting as underwriter received net commissions of $157,945 and $3,389
from the sale of class A and class M shares, respectively and received
$497,952 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 six months ended April 30, 1996,
Putnam Mutual Funds Corp., acting as underwriter received $15 on class A
redemptions.
Note 3
Purchase and sales of securities
During the six months ended April 30, 1996, purchases and sales of
investment securities other than U.S. government obligations and short-
term investments aggregated $367,751,673 and $420,175,010, respectively.
Purchases and sales of U.S. government obligations aggregated
$64,982,659 and $56,818,708, respectively. In determining the net gain
or loss on securities sold, the cost of securities has been determined
on the identified cost basis.
Note 4
Capital shares
At April 30, 1996, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
April 30, 1996
- --------------------------------------------------------------
Class A Shares Amount
- --------------------------------------------------------------
Shares sold 7,301,705 $79,697,282
- --------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 964,046 10,478,376
- --------------------------------------------------------------
8,265,751 90,175,658
Shares
repurchased (10,744,911) (117,413,714)
- --------------------------------------------------------------
Net decrease (2,479,160) ($27,238,056)
- --------------------------------------------------------------
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)
- --------------------------------------------------------------
Six months ended
April 30, 1996
- --------------------------------------------------------------
Class B Shares Amount
- --------------------------------------------------------------
Shares sold 6,247,033 $67,947,544
- --------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 818,661 8,865,369
- --------------------------------------------------------------
7,065,694 76,812,913
Shares
repurchased (8,197,746) (89,033,537)
- --------------------------------------------------------------
Net
decrease (1,132,052) ($12,220,624)
- --------------------------------------------------------------
Year ended
October 31, 1996
- --------------------------------------------------------------
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
- --------------------------------------------------------------
Six months ended
April 30, 1996
- --------------------------------------------------------------
Class M Shares Amount
- --------------------------------------------------------------
Shares sold 288,238 $3,147,383
- --------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,420 47,935
- --------------------------------------------------------------
292,658 3,195,318
Shares
repurchased (153,896) (1,702,972)
- --------------------------------------------------------------
Net increase 138,762 $1,492,346
- --------------------------------------------------------------
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
- --------------------------------------------------------------
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
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
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.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board
or any other agency; and involve risk, including the possible loss of
the principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- -----------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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25121-840/884/869 6/96
