Putnam
Utilities
Growth and
Income Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
10-31-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The once staid utilities industries, caught up in the waves of
deregulation, technology, mergers, and acquisitions that continue to wash
over the worldwide economy, have generated some surprising investment
opportunities in recent years. Managing a portfolio in this fast-moving
environment has become significantly more complex. The immediate
consequence is the need to commit more resources to the research effort,
which Putnam has not hesitated to do.
I am pleased to announce that Krishna K. Memani has joined Jeanne Mockard
on your fund's management team. While Jeanne continues as lead manager and
determines the fund's sector allocations, Krishna will be responsible for
managing the bond portion of the portfolio. He is a managing director and
leader of the High-Grade Bond Team. Before joining Putnam in 1998, he was
with Morgan Stanley & Co. and Price Waterhouse (now PricewaterhouseCoopers
LLP). He has 14 years of investment experience.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
December 15, 1999
Report from the Fund Managers
Jeanne L. Mockard
Krishna K. Memani
The 12 months ended October 31, 1999, brought many rewards for Putnam
Utilities Growth and Income Fund, even as high-tech stocks dominated the
headlines -- positive and negative -- during the fiscal year. Working
mostly outside the spotlight, your fund prospered as the gradual evolution
in the utilities industry translated into profits for many of the
companies in the portfolio. Announcements of mergers and takeovers
provided substantial appreciation for the local distribution companies
(LDCs) held by your fund as well as for several prominent telephone
companies that were among the fund's largest holdings throughout fiscal
1999.
As you might expect from a professionally managed, conservative equity
portfolio, your fund withstood the squalls that beset the stock market
indexes during September and October. Perhaps more significant, however,
was its overall performance during the entire fiscal year. For the most
part, the financial media ignored the fact that 1999 was a bear market
year. If you subtract the performance of a select group of large high-tech
stocks, the major stock market indexes like the Dow Jones Industrial
Average and Standard & Poor's 500(R) would have been down for the past 12
months.
Total return for 12 months ended 10/31/99
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- --------------------------------------------------------------------------
9.49% 3.20% 8.69% 3.69% 8.70% 7.70% 8.87% 5.09%
- --------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance calculation
methods begin on page 6.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Electric utilities 40.0%
Telephone utilities 24.7%
Gas utilities 15.5%
Gas pipelines 4.2%
Combined utilities 3.3%
Footnote reads:
*Based on net assets as of 10/31/99. Holdings will vary over time.
* DEREGULATION IS FUNDAMENTAL TO UTILITIES EVOLUTION
The rate of change in the utilities industry continues to be gradual.
Although this pace has sometimes strained investors' patience, it has also
provided benefits, and the rewards are beginning to materialize. As
deregulation plans take shape in state after state, how these programs
will affect customers and companies alike is becoming clearer. Ohio,
Texas, and Virginia have plans now in place, and your fund owns Texas
Utilities and Reliant Energy in Texas, Dominion Resources in Virginia, and
several major Ohio utilities firms, including Dayton Power & Light. These
companies are now going forward with well-thought-out strategic plans that
include buying back stock, retiring debt, and making acquisitions designed
to allow them to grow. As deregulation moves forward, some will
concentrate in transportation, some in distribution, some will focus on
generation, and some will diversify operations locally and across national
and even international borders. No single strategy is emerging; there are
a number of them, each holding its own potential reward.
* TAKEOVERS ARE BONUS FOR FUND, BUT NOT ITS PRINCIPAL FOCUS
Mergers and acquisitions have proved rewarding in both the gas and
electric utilities sectors and among the fund's major telephone holdings.
But our principal goal is always to seek out modestly priced stocks of
companies with strong managements and the capacity for positive change. In
our view, buying the attractively priced stock of a strong company in the
belief that it is dynamic, well managed, and rich in potential frequently
proves to be a good investment, especially when the company is sought by
other companies. Sprint, which has been in the fund's portfolio for a long
time, is a good example. We believed in the company's potential and over
the years added to the position as opportunities appeared.
"As energy deregulation starts forcing utilities to cater to a competitive
marketplace, a small but growing number of venture capitalists have started
zeroing in on innovative companies whose new products and better services
could be hot in the coming decade."
- -- The New York Times, June 14, 1999
SBC, which recently acquired Ameritech, provides another exciting story.
Both of these companies have long been among the fund's 10 largest
holdings. As professional investors, we were able to meet with the
managements of both companies during the negotiations. At a time when the
SBC/Ameritech merger was under regulatory review, we were able to see the
synergies of programs under development at the two companies. Now that the
deal has been closed, we are optimistic about the future as these programs
are put into effect.
* DYNAMICS OF UTILITIES ARE CHANGING, BUT NOT THEIR INVESTMENT ADVANTAGES
We would like to emphasize the point that the growth potential of
utilities companies arises from changing dynamics within the industry as a
whole, not from changing characteristics of individual stocks. Utilities
are still conservative investments offering higher yields than many other
equities do and more moderate growth potential. Stock prices also tend to
be less volatile in both up and down markets, although there are some
noteworthy exceptions.
One of your fund's holdings, Calpine Corp., is up a startling 340% for the
calendar year. Your fund's position, held since late March, has returned
84%. Calpine began by concentrating on generating electric power and grew
to become an independent power distributor that buys generation assets all
over the country as well as in some foreign countries. It has a broad
infrastructure and a dynamic, competitive management team. Calpine's
success is especially remarkable when you realize that stocks of the
fund's other electric utilities are down almost 2% for the year, however,
it demonstrates the extraordinary results that can occur when a company
redesigns itself to take advantage of this fast-changing environment. (We
now classify Calpine as an energy-related company rather than an electric
utility.)
"We would like to emphasize the fact that the growth potential of utilities
companies arises from changing dynamics within the industry as a whole, not
from changing characteristics of individual stocks. Utilities are still
conservative investments offering higher yields than other equities and more
moderate growth potential."
- -- Jeanne L. Mockard, fund manager
Overall we currently like electric utilities because they are undervalued,
a situation that we expect will soon catch investors' attention. As a
group, electric utilities' price/earnings ratio is just 13.4 times year
2000 earnings estimates, and there are many small to medium-sized electric
companies that we believe offer considerable potential for long-term
investors. So as acquisitions were announced in some LDCs, we began taking
profits and redeploying assets in electric utilities.
Many utilities companies are already supplying power to institutional
customers in parts of the country far removed from their regional
headquarters. The goal is to be able to offer service at lower prices
because their volume of business will help keep their costs lower.
Eventually electric utilities will compete for individuals' business just
as telephone companies do today. This may be confusing for customers at
first, but competition should eventually lower costs and benefit
consumers. In time, a few companies will emerge as leaders. Consumers in a
few states are already noticing new names on their electric bills.
* RESEARCH HAS BECOME INCREASINGLY IMPORTANT IN SELECTING UTILITIES
It used to be easier to select utilities stocks than it is today. At one
time, investors could look for a few companies in their own state and be
reasonably certain that their utilities were about as good as any others
- -- regulated, dependable, and somewhat stodgy. Today it is far more
important to know what regulations are in place in which state and how
companies are planning to respond. Many gas and electric companies have
been divesting assets, forming strategic alliances, and using newly
acquired cash to pave the way for future growth. Some visionary companies
are finding growth prospects in developing economies such as China,
Indonesia and South Korea, as well as in South America and the
Philippines. Many of these are represented in your fund's portfolio.
Lines of service between utility providers are also beginning to blur.
Some gas companies are starting to offer electric service to their
customers, while telephone companies are expanding into the wireless and
data transmission areas. Infrastructure and access to customers will
become increasingly important, and a great deal more consolidation lies
ahead in these industries. Although utilities are still not the aggressive
risk takers that high-tech companies are, they do require more intensive
analysis and access to up-to-date information on increasingly complex
regulatory issues than in the past.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
SBC Communications, Inc.
Telephone utility
Sprint Corp.
Telephone utility
Duke Energy Corp.
Electric utility
American Telephone & Telegraph Co.
Telephone utility
Bell Atlantic Corp.
Telephone utility
BellSouth Corp.
Telephone utility
GTE Corp.
Telephone utility
Dominion Resources, Inc.
Electric utility
El Paso Energy Corp.
Oil and gas
Texas Utilities Co.
Electric utility
Footnote reads:
These holdings represent 30.3% of the fund's net assets as of 10/31/99.
Portfolio holdings will vary over time.
We remain committed to keeping your fund's volatility low relative to the
overall stock market and to keeping the yield competitive. Although our
principal focus remains on equities, as of the end of October, we sought
additional income by committing about 8% of the fund's assets to bonds and
notes issued by utilities companies. Demand for utilities stocks remains
low relative to the market, but we believe the shifting dynamics of the
industry will provide ample opportunities for a combination of growth and
income for conservative investors.
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 10/31/99, there is no guarantee the fund will
continue to hold these securities in the future. The fund concentrates its
investments in one region or industry and involves more risk than a fund
that invests more broadly.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy. Putnam
Utilities Growth and Income Fund is designed for capital growth and current
income through investments in equity and debt securities issued by public
utility companies.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 10/31/99
Class A Class B Class C Class M
(inception dates) (11/19/90) (4/27/92) (7/26/99) (3/1/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 9.49% 3.20% 8.69% 3.69% 8.70% 7.70% 8.87% 5.09%
- ----------------------------------------------------------------------------------------------
5 years 122.22 109.51 114.14 112.14 114.10 114.10 116.96 109.35
Annual average 17.32 15.94 16.45 16.23 16.45 16.45 16.75 15.92
- ----------------------------------------------------------------------------------------------
Life of fund 202.88 185.41 183.26 183.26 183.29 183.29 189.92 179.62
Annual average 13.18 12.43 12.34 12.34 12.34 12.34 12.63 12.17
- ----------------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 10/31/99
Standard & Poor's Consumer
Utilities Index price index
- ---------------------------------------------------------------------------
1 year 2.11% 2.69%
- ---------------------------------------------------------------------------
5 years 103.06 12.51
Annual average 15.23 2.39
- ---------------------------------------------------------------------------
Life of fund 167.07 25.71
Annual average 11.64 2.60
- ---------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 5.75% and
3.50% respectively. Class B share returns for the 1-, 5-, and 10-year
(where available) and life-of-fund periods reflect the applicable
contingent deferred sales charge (CDSC), which is 5% in the first year,
declines to 1% in the sixth year, and is eliminated thereafter. Returns
shown for class B and class M shares for periods prior to their inception
are derived from the historical performance of class A shares, adjusted to
reflect both the initial sales charge or CDSC, if any, currently
applicable to each class and in the case of class B and class M shares the
higher operating expenses applicable to such shares. For class C shares,
returns for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect both the
CDSC currently applicable to class C shares, which is 1% for the first
year and is eliminated thereafter, and the higher operating expenses
applicable to class C shares. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will fluctuate
so that an investor's shares when redeemed may be worth more or less than
their original cost.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 11/19/90
Fund's class A Standard & Poor's Consumer price
Date shares at POP Utilities Index index
11/19/90 9,425 10,000 10,000
10/31/91 10,432 10,877 10,269
10/31/92 11,508 12,088 10,598
10/31/93 13,855 15,037 10,889
10/31/94 12,845 13,152 11,173
10/31/95 15,503 17,062 11,487
10/31/96 18,072 18,794 11,831
10/31/97 21,534 20,655 12,078
10/31/98 26,068 26,154 12,242
10/31/99 $28,541 $26,707 $12,571
Footnote reads:
Past performance is no assurance of future results. At the end of the same
time period, a $10,000 investment in the fund's class B or class C shares
would have been valued at $28,326 and $28,329, respectively and no
contingent deferred sales charges would apply; a $10,000 investment in the
fund's class M shares would have been valued at $28,992 ($27,962 at public
offering price). See first page of performance section for performance
calculation method.
<TABLE>
<CAPTION>
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 10/31/99
Class A Class B Class C Class M
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Distributions (number) 4 4 1 4
- --------------------------------------------------------------------------------------
Income $0.3881 $0.2801 $0.1070 $0.3181
- --------------------------------------------------------------------------------------
Capital gains
Long-term 0.3791 0.3791 -- 0.3791
- --------------------------------------------------------------------------------------
Short-term 0.0508 0.0508 -- 0.0508
- --------------------------------------------------------------------------------------
Total $0.8180 $0.7100 $0.1070 $0.7480
- --------------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- --------------------------------------------------------------------------------------
10/31/98 $13.62 $14.45 $13.54 -- $13.60 $14.09
- --------------------------------------------------------------------------------------
7/26/99* -- -- -- $14.34 -- --
- --------------------------------------------------------------------------------------
10/31/99 14.06 14.92 13.98 14.04 14.03 14.54
- --------------------------------------------------------------------------------------
Current return (end of period)
- --------------------------------------------------------------------------------------
Current dividend rate1 3.27% 3.08% 2.43% 3.05% 2.77% 2.67%
- --------------------------------------------------------------------------------------
Current 30-day
SEC yield2 3.00 2.82 2.27 2.28 2.51 2.42
- --------------------------------------------------------------------------------------
*Inception of class C shares.
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.
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 9/30/99 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (11/19/90) (4/27/92) (7/26/99) (3/1/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 7.41% 1.22% 6.69% 1.69% 6.62% 5.62% 6.96% 3.18%
- ---------------------------------------------------------------------------------------------
5 years 116.23 103.78 108.40 106.40 108.19 108.19 111.39 103.93
Annual average 16.68 15.30 15.82 15.60 15.80 15.80 16.15 15.32
- ---------------------------------------------------------------------------------------------
Life of fund 192.76 175.87 174.14 174.14 174.00 174.00 180.63 170.65
Annual average 12.89 12.14 12.06 12.06 12.05 12.05 12.35 11.89
- ---------------------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns may be more or less
than those shown. They do not take into account any adjustment for taxes payable on
reinvested distributions. Investmentreturns and principal value will fluctuate so that an
investor's shares when sold may be worth more or less than their original cost. See first
page of performance section for performance calculation method.
</TABLE>
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are subject
to a contingent deferred sales charge only if the shares are redeemed
during the first year.
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 5.75% maximum 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 or C shares and assumes redemption at the end of
the period. Your fund's class B 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. The CDSC for class C shares is 1% for one year after
purchase.
Comparative benchmarks
Standard & Poor's Utilities Index is an unmanaged list of 40 utility
stocks. Its performance figures reflect changes of market prices and
reinvestment of all regular cash dividends but are not adjusted for
commissions or other costs. Because the fund is a managed portfolio
investing in common stocks and fixed-income securities, the securities it
owns will not match those in the index. It is not possible to invest
directly in an index.
Consumer price index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
A guide to the financial statements
These sections of the report, preceded by the Report of independent
accountants, constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, country, or state to show areas of concentration
and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the sources listed in the Statement of operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table, reflecting the five most recent
reporting periods. In a semiannual report, the highlight table also
includes the current reporting period. For open-end funds, a separate
table is provided for each share class.
Report of independent accountants
For the fiscal year ended October 31, 1999
To the Trustees and Shareholders of
Putnam Utilities Growth and Income Fund
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of Putnam Utilities
Growth and Income Fund (the "fund") at October 31, 1999, and the results
of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which
included confirmation of investments owned at October 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 7, 1999
<TABLE>
<CAPTION>
The fund's portfolio
October 31, 1999
COMMON STOCKS (90.5%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Business Services (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
496,000 Convergys Corp. $ 9,703,000
Cellular Communications (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
300,000 PT Indosat ADR (Indonesia) 4,781,250
12,000 Tele Celular Sul Participacoes S.A. (Brazil) 210,000
2,400 Tele Leste Celular Participacoes S.A. (Brazil) 72,900
6,000 Tele Nordeste Celular Participacoes S.A. ADR (Brazil) 152,250
2,400 Tele Norte Celular Participacoes S.A. ADR (Brazil) 65,400
24,000 Tele Sudeste Celular Participacoes S.A. ADR (Brazil) 480,000
6,000 Telemig Celular Participacoes S.A. ADR (Brazil) 164,625
48,000 Telesp Celular Participacoes S.A. ADR (Brazil) 1,182,000
--------------
7,108,425
Combined Utilities (2.8%)
- --------------------------------------------------------------------------------------------------------------------------
365,000 LG&E Energy Corp. 8,030,000
666,300 NiSource, Inc. 13,659,150
684,500 Reliant Energy, Inc. 18,652,625
65,000 Veba (Vereinigte Elektrizitaets Bergwerks) AG (Germany) 3,521,414
--------------
43,863,189
Electric Utilities (35.0%)
- --------------------------------------------------------------------------------------------------------------------------
148,500 Ameren Corp. 5,615,156
272,300 Carolina Power & Light Co. 9,394,350
100,000 Centrais Geradoras do Sul do Brasil S.A. (Brazil) (NON) 63,688
25,000 Chilectra S.A. 144A ADR (Chile) 434,375
496,700 Cinergy Corp. 14,031,775
148,283 CMS Energy Corp. Class G 5,467,953
122,377 Companhia Energetica de Minas Gerais ADR (Brazil) 1,759,169
313,500 Companhia Paranaense de Energia-Copel ADR (Brazil) 2,076,938
353,600 Conectiv, Inc. 6,895,200
297,000 Consolidated Edison, Inc. 11,341,688
416,500 Constellation Energy Group 12,781,344
549,500 Dominion Resources, Inc. 26,444,688
643,500 DPL, Inc. 13,030,875
196,000 DQE, Inc. 7,827,750
1,034,941 Duke Energy Corp. 58,474,195
733,500 Edison International 21,729,938
19,249 Eletropaulo Metropolitana S.A. (Brazil) 879,919
17,000 Empresa Bandeirante de Energia S.A. (Brazil) (NON) 82,075
17,000 Empresa Paulista de Transmissao de Energia Electrica
S.A. (Brazil) 60,247
722,700 Entergy Corp. 21,635,831
227,000 FirstEnergy Corp. 5,916,188
247,500 Florida Progress Corp. 11,338,594
341,600 FPL Group, Inc. 17,186,750
398,500 GPU, Inc. 13,524,094
99,000 Hawaiian Electric Industries, Inc. 3,341,250
620,000 Iberdola S.A. (Spain) 9,057,233
200,000 IPALCO Enterprises, Inc. 4,087,500
705,000 Korea Electric Power Corp. (South Korea) 20,638,449
10,000 Light Participacoes, S.A. (Brazil) 21,315
396,000 New Century Energies, Inc. 12,894,750
128,700 New England Electric Systems, Inc. 6,700,444
827,100 Northeast Utilities Co. 17,214,019
455,400 OGE Energy Corp. 10,331,888
396,000 P P & L Resources, Inc. 10,716,750
594,000 PacifiCorp 12,251,250
576,100 Peco Energy Co. 21,999,819
224,400 Pinnacle West Capital Corp. 8,274,750
359,000 Potomac Electric Power Co. 9,850,063
273,100 Puget Sound Energy, Inc. 6,042,338
396,000 Scana Corp. 9,850,500
661,200 Scottish Power PLC (United Kingdom) 6,135,814
712,800 Sierra Pacific Resources 16,038,000
122,900 Southern Co. 3,264,531
368,000 Teco Energy, Inc. 8,119,000
598,600 Texas Utilities Co. 23,195,750
297,000 TNP Enterprises, Inc. 11,842,875
495,000 Unicom Corp. 18,964,688
300,000 Union Electrica Fenosa S.A. (Spain) 4,398,342
99,000 UniSource Energy Corp. 1,138,500
173,300 United Illuminating Co. 8,968,275
222,800 Utilicorp United, Inc. 4,818,050
695,000 Wisconsin Energy Corp. 15,550,625
--------------
553,699,548
Energy-Related (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
299,200 Calpine Corp. 17,241,400
17,000 Empresa Metropolitana de Aguas Energia S.A. (Brazil) 28,814
594,000 Energy East Corp. 14,924,250
7,500,000 Shandong International Power Development Co.
Ltd. (China) 1,197,296
--------------
33,391,760
Environmental Control (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
579,500 Azurix Corp. 8,149,219
Gas Pipelines (4.2%)
- --------------------------------------------------------------------------------------------------------------------------
545,500 Coastal Corp. 22,979,188
624,500 Dynegy, Inc. 14,285,438
179,000 Enron Corp. 7,148,813
596,700 Williams Cos., Inc. 22,376,250
--------------
66,789,689
Gas Utilities (15.5%)
- --------------------------------------------------------------------------------------------------------------------------
376,200 AGL Resources, Inc. 6,559,988
478,800 Atmos Energy Corp. 10,862,775
217,800 Cascade Natural Gas Corp. 3,947,625
198,000 Central Hudson Gas & Electric 7,412,625
331,650 Columbia Gas System, Inc. 21,557,250
148,500 Connecticut Energy Corp. 5,605,875
396,000 Eastern Enterprises 20,245,500
583,800 Energen Corp. 10,800,300
198,100 Equitable Resources, Inc. 7,230,650
92,433 Indiana Energy, Inc. 1,865,991
485,100 Kinder Morgan, Inc. 9,762,638
144,900 Laclede Gas Co. 3,088,181
297,000 MCN Corp. 7,257,938
346,500 National Fuel Gas Co. 16,935,188
69,300 New Jersey Resources Corp. 2,819,644
297,000 NICOR, Inc. 11,508,750
499,800 Northwest Natural Gas Co. 12,932,325
228,000 NUI Corp. 5,657,250
328,000 ONEOK, Inc. 9,573,500
198,000 Peoples Energy Corp. 7,524,000
198,000 Piedmont Natural Gas Co., Inc. 6,336,000
69,300 Providence Energy Corp. 1,936,069
198,000 Questar Corp. 3,564,000
1,042,540 Sempra Energy 21,306,911
79,200 South Jersey Industries, Inc. 2,059,200
99,000 Southwest Gas Corp. 2,301,750
200,000 Transportadora de Gas del Sur ADR (Argentina) 1,675,000
198,000 Washington Gas Light Co. 5,383,125
198,000 Westcoast Energy, Inc. 3,440,250
310,300 WICOR, Inc. 9,231,425
99,000 Yankee Energy System, Inc. 4,207,500
--------------
244,589,223
Oil and Gas (2.2%)
- --------------------------------------------------------------------------------------------------------------------------
582,400 El Paso Energy Corp. 23,878,400
377,200 KeySpan Corp. 10,608,750
--------------
34,487,150
REITs (Real Estate Investment Trust) (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
309,078 Equity Office Properties Trust 6,838,351
Telecommunications (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
73,300 ALLTEL Corp. 6,102,225
100,000 Cable & Wireless PLC ADR (United Kingdom) 3,500,000
293,000 Hellenic Telecommunication Organization SA
GDR (Greece) 3,113,125
14,700 Sonera Group ADR 144A (Finland) (NON) 1,764,409
100,000 Telecom Argentina S.A. ADR (Argentina) 2,750,000
15,956 Williams Communications Group, Inc. 508,598
--------------
17,738,357
Telephone Services (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
89,100 British Telecommunications PLC ADR (United Kingdom) 16,038,000
100,000 Philippine Long Distance Telephone Co. ADR (Philippines) 2,056,250
39,800 Tele Centro Oeste Celular Participacoes ADR (Brazil) 139,300
24,000 Tele Centro Sul Participacoes S.A. (Brazil) 1,434,000
120,000 Telesp Participacoes S.A. ADR (Brazil) 1,942,500
--------------
21,610,050
Telephone Utilities (24.1%)
- --------------------------------------------------------------------------------------------------------------------------
1,188,000 American Telephone & Telegraph Co. 55,539,000
826,220 Bell Atlantic Corp. 53,652,661
916,800 BellSouth Corp. 41,256,000
496,000 Cincinnati Bell, Inc. 10,323,000
397,000 GTE Corp. 29,775,000
80,000 Portugal Telecom S.A. ADR (Portugal) 3,520,000
215,500 PT Telekomunikasi Indonesia ADR (Indonesia) 1,979,906
1,837,303 SBC Communications, Inc. 93,587,611
990,000 Sprint Corp. 73,569,375
120,000 Telebras Co. ADR (Brazil) 5,625
128,470 Telecom Corp. of New Zealand Ltd. ADR (New Zealand) 4,175,275
20,000 Telefonica de Argentina S.A. ADR (Argentina) 512,500
250,000 Telefonica del Peru S.A. ADR (Peru) 2,890,625
163,200 U S West, Inc. 9,965,400
--------------
380,751,978
Water Utilities (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
99,000 American Water Works, Inc. 2,889,563
--------------
Total Common Stocks (cost $1,027,735,413) $1,431,609,502
CORPORATE BONDS AND NOTES (8.0%) (a)
PRINCIPAL AMOUNT VALUE
Combined Utilities (0.5%)
- --------------------------------------------------------------------------------------------------------------------------
$3,000,000 Australian Gas & Light Co.144A sr. notes 6 3/8s,
2003 (Australia) $ 2,898,210
4,000,000 PG&E Gas Transmission Northwest sr. notes 7.1s, 2005 3,968,200
1,500,000 Public Service Electric & Gas Co. 1st mortgage 6 1/2s, 2000 1,501,425
--------------
8,367,835
Electric Utilities (5.0%)
- --------------------------------------------------------------------------------------------------------------------------
3,000,000 Arizona Public Service Co. notes 6 1/4s, 2005 2,843,820
2,800,000 CMS Energy Corp. pass-through certificates 7s, 2005 2,643,060
3,650,000 Connecticut Light & Power Co. 1st mtge. Ser. C,
7 3/4s, 2002 3,711,211
1,500,000 Connecticut Light & Power Co. 1st mtge. Ser. D,
7 7/8s, 2024 1,566,210
4,000,000 Consolidated Edison, Inc. deb. 6.45s, 2007 3,782,520
3,480,000 Duquesne Light Co. deb. 8.7s, 2016 3,680,831
4,000,000 Hydro Quebec local government guaranty Ser. HY, 8.4s,
2022 (Canada) 4,358,960
4,000,000 Kansas Gas & Electric deb. 8.29s, 2016 3,920,360
445,000 Midland Funding II Corp. deb. Ser. A, 11 3/4s, 2005 489,398
3,000,000 Midwest Energy Co. 144A notes 8.7s, 2009 3,024,750
1,000,000 Nevada Power Co. sr. notes Ser. B, 6.2s, 2004 955,800
5,000,000 Ohio Edison Co. 1st mtge. 8 1/4s, 2002 5,145,750
2,907,000 Otter Tail Power Co. 1st mtge. 7 1/4s, 2002 2,948,628
5,000,000 Public Service Co. of Colorado coll. trust 6 3/8s, 2005 4,827,350
3,000,000 Public Service Co. of New Mexico sr. notes Ser. A,
7.1s, 2005 2,965,080
1,560,199 Salton Sea Funding Corp. company guaranty Ser. E,
8.3s, 2011 1,563,241
3,500,000 Sierra Pacific Power Co. med. term notes Ser. C,
6.82s, 2006 3,443,545
3,350,000 Southern California Edison Co. notes 6 1/2s, 2001 3,351,106
695,000 Southern Energy 144A sr. notes 7.9s, 2009 671,071
2,725,000 Southern Investments Service Co. sr. notes 6.8s, 2006
(United Kingdom) 2,607,335
4,000,000 Teco Energy, Inc. notes 5.54s, 2001 3,904,400
5,000,000 Texas Utilities Co. secd. lease fac. bonds 7.46s, 2015 4,994,150
3,400,000 Texas Utilities Electric Capital Trust V company guaranty
8.175s, 2037 3,342,914
4,500,000 Utilicorp United, Inc. sr. notes 8.2s, 2007 4,653,810
4,000,000 Western Resources, Inc. sr. notes 6 7/8s, 2004 3,891,800
--------------
79,287,100
Energy-Related (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
2,000,000 CalEnergy, Inc. sr. notes 7.63s, 2007 2,007,460
1,200,000 Calpine Corp. sr. notes 7 3/4s, 2009 1,126,440
3,020,000 Edison Mission Energy 144A sr. notes 7.73s, 2009 3,021,721
640,000 KN Capital Trust III company guaranty 7.63s, 2028 555,136
3,000,000 Niagara Mohawk Power Corp. sr. notes Ser. G,
7 3/4s, 2008 3,033,840
--------------
9,744,597
Oil and Gas (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
3,060,000 Coastal Corp. deb. 6 1/2s, 2008 2,865,904
3,500,000 Columbia Gas System, Inc. notes Ser. E, 7.32s, 2010 3,371,130
1,540,000 El Paso Energy Corp. sr. notes 6 3/4s, 2009 1,469,314
2,500,000 Louis Dreyfus Natural Gas notes 6 7/8s, 2007 2,184,075
3,500,000 Southwest Gas Corp. deb. 7 1/2s, 2006 3,573,710
--------------
13,464,133
Telephone Services (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
4,000,000 Century Telephone Enterprises, Inc. deb. Ser. G, 6 7/8s, 2028 3,520,640
Telephone Utilities (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
5,000,000 Bell Atlantic Corp. deb. 7 7/8s, 2029 5,216,850
3,000,000 Sprint Capital Corp. company guaranty 6.9s, 2019 2,797,230
1,800,000 U S West, Inc. notes 5 5/8s, 2008 1,605,636
--------------
9,619,716
Water Utilities (0.2%)
- --------------------------------------------------------------------------------------------------------------------------
2,500,000 Pennsylvania American Water Co. 144A mtge. 7.8s, 2026 2,469,175
--------------
Total Corporate Bonds and Notes (cost $130,780,425) $ 126,473,196
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (0.4%) (a)
PRINCIPAL AMOUNT VALUE
U.S. Treasury Obligations (0.4%)
- --------------------------------------------------------------------------------------------------------------------------
$ 1,890,000 U.S. Treasury Bonds 5 1/4s, November 15, 2028 $ 1,625,057
U.S. Treasury Notes
4,628,000 5 1/2s, May 15, 2009 4,439,270
455,000 4 3/4s, November 15, 2008 411,775
--------------
Total U.S. Government and Agency Obligations
(cost $6,550,682) $ 6,476,102
PREFERRED STOCKS (0.2%) (a) (cost $2,500,000)
NUMBER OF SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------
2,500 Centaur Funding Corp 144A 9.08% pfd. (Cayman Islands) $ 2,572,050
SHORT-TERM INVESTMENTS (1.2%) (a) (cost $19,127,000)
PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------
$ 19,127,000 Interest in $462,305,000 joint repurchase agreement
dated October 29, 1999 with S.B.C. Warburg Inc. due
November 1, 1999 with respect to various U.S. Treasury
obligations -- maturity value of $19,135,320 for an
effective yield of 5.22% $ 19,127,000
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $1,186,693,520) (b) $1,586,257,850
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $1,581,746,822.
(b) The aggregate identified cost on a tax basis is $1,186,731,921, resulting in gross unrealized appreciation and
depreciation of $446,260,050 and $46,734,121, respectively, or net unrealized appreciation of $399,525,929.
(NON) Non-income-producing security.
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.
ADR or GDR after the name of a foreign holding stands for American Depositary Receipts or Global Depositary
Receipts, respectively, representing ownership of foreign securities on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
October 31, 1999
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,186,693,520) (Note 1) $1,586,257,850
- -----------------------------------------------------------------------------------------------
Cash 626
- -----------------------------------------------------------------------------------------------
Dividends, interest, and other receivables 7,524,716
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 871,011
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 6,558,920
- -----------------------------------------------------------------------------------------------
Total assets 1,601,213,123
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 13,685,958
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 2,408,396
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 2,421,675
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 137,678
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 66,203
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,644
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 690,466
- -----------------------------------------------------------------------------------------------
Other accrued expenses 54,281
- -----------------------------------------------------------------------------------------------
Total liabilities 19,466,301
- -----------------------------------------------------------------------------------------------
Net assets $1,581,746,822
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $1,085,394,322
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (21,228)
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 96,809,398
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 399,564,330
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $1,581,746,822
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($1,000,789,040 divided by 71,184,012 shares) $14.06
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $14.06)* $14.92
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($566,426,246 divided by 40,518,152 shares)** $13.98
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($486,446 divided by 34,654 shares)** $14.04
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($14,045,090 divided by 1,000,792 shares) $14.03
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $14.03)* $14.54
- -----------------------------------------------------------------------------------------------
* 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, 1999
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $115,795) $ 48,371,546
- -----------------------------------------------------------------------------------------------
Interest income 12,001,211
- -----------------------------------------------------------------------------------------------
Total investment income 60,372,757
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 9,713,669
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,744,726
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 35,927
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 19,331
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 2,286,606
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 6,637,350
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 809
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 105,007
- -----------------------------------------------------------------------------------------------
Reports to shareholders 50,605
- -----------------------------------------------------------------------------------------------
Auditing 47,472
- -----------------------------------------------------------------------------------------------
Legal 11,572
- -----------------------------------------------------------------------------------------------
Postage 157,356
- -----------------------------------------------------------------------------------------------
Other 144,971
- -----------------------------------------------------------------------------------------------
Total expenses 20,955,401
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (155,163)
- -----------------------------------------------------------------------------------------------
Net expenses 20,800,238
- -----------------------------------------------------------------------------------------------
Net investment income 39,572,519
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 100,099,494
- -----------------------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (22,961)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (116,090)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the year (1,367,866)
- -----------------------------------------------------------------------------------------------
Net gain on investments 98,592,577
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $138,165,096
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended October 31
-------------------------------
1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 39,572,519 $ 36,665,344
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 100,076,533 50,516,746
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments
and assets and liabilities in foreign currencies (1,483,956) 182,774,337
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 138,165,096 269,956,427
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (26,121,521) (21,043,615)
- ---------------------------------------------------------------------------------------------------------------
Class B (13,132,573) (15,336,819)
- ---------------------------------------------------------------------------------------------------------------
Class C (2,658) --
- ---------------------------------------------------------------------------------------------------------------
Class M (321,778) (311,479)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (26,541,014) (52,646,523)
- ---------------------------------------------------------------------------------------------------------------
Class B (22,155,372) (53,835,060)
- ---------------------------------------------------------------------------------------------------------------
Class M (451,441) (997,941)
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) (13,624,081) 95,477,710
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 35,814,658 221,262,700
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 1,545,932,164 1,324,669,464
- ---------------------------------------------------------------------------------------------------------------
End of year (including distributions in excess and
undistributed net investment income
of $21,228 and $129,030, respectively) $1,581,746,822 $1,545,932,164
- ---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.62 $12.49 $11.63 $10.40 $9.06
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .39(c) .37(c) .41 .44 .43
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .87 2.14 1.67 1.25 1.38
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.26 2.51 2.08 1.69 1.81
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.39) (.38) (.41) (.44) (.46)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.43) (1.00) (.81) (.02) (.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.82) (1.38) (1.22) (.46) (.47)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $14.06 $13.62 $12.49 $11.63 $10.40
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 9.49 21.06 19.16 16.57 20.71
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,000,789 $825,884 $653,205 $618,417 $593,226
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.00 1.05 1.05 1.11 1.12
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.80 2.87 3.41 3.97 4.53
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 17.58 23.64 53.63 64.53 67.60
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset and brokerage service arrangements. (Note 2)
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended October 31
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.54 $12.42 $11.57 $10.36 $9.02
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .28(c) .28(c) .32 .36 .36
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .87 2.12 1.66 1.23 1.39
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.15 2.40 1.98 1.59 1.75
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.28) (.28) (.32) (.36) (.39)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.43) (1.00) (.81) (.02) (.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.71) (1.28) (1.13) (.38) (.41)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.98 $13.54 $12.42 $11.57 $10.36
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 8.69 20.19 18.28 15.57 19.92
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $566,426 $706,220 $659,594 $615,309 $578,505
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.75 1.80 1.80 1.86 1.87
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.06 2.13 2.66 3.22 3.77
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 17.58 23.64 53.63 64.53 67.60
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset and brokerage service arrangements. (Note 2)
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share July 26, 1999+
operating performance to October 31
- ---------------------------------------------------------------------------------------------------------------------------------
1999
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $14.34
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .07
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.26)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations (.19)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.11)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.11)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $14.04
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (1.33)*
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $486
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .47*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .53*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 17.58
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset and brokerage service arrangements. (Note 2)
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ---------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share March 1, 1995+
operating performance Year ended October 31 to October
- ---------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.60 $12.47 $11.61 $10.38 $9.14
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .32(c) .32(c) .36 .38(c) .31
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .86 2.13 1.67 1.26 1.26
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations 1.18 2.45 2.03 1.64 1.57
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.32) (.32) (.36) (.39) (.33)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.43) (1.00) (.81) (.02) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.75) (1.32) (1.17) (.41) (.33)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $14.03 $13.60 $12.47 $11.61 $10.38
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 8.87 20.54 18.62 16.12 17.50*
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $14,045 $13,828 $11,871 $6,438 $1,917
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.50 1.55 1.55 1.63 1.13*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.30 2.40 2.89 3.37 2.36*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 17.58 23.64 53.63 64.53 67.60
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset and brokerage service arrangements. (Note 2)
(c) 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, 1999
Note 1
Significant accounting policies
Putnam Utilities Growth and Income Fund (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, class C and class M shares. The fund
began offering class C shares on July 26, 1999. 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 C shares are
subject to the same fees and expenses as class B shares, except that class
C shares have a one-year 1.00% contingent deferred sales charge and do not
convert to class A shares. Class M shares are sold with a maximum front
end sales charge of 3.50% and pay an ongoing distribution fee that is
higher than class A shares but lower than class B and class C 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 that 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
of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period.
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 sales price on its principal exchange, 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. Other investments, including restricted
securities, are stated at fair value following procedures approved by the
Trustees. Market quotations are not considered to be readily available for
certain debt obligations; such investments are stated at fair value on the
basis of valuations furnished by a pricing service or dealers, approved by
the Trustees, which determine valuations for normal institutional-size
trading units of such securities using methods based on market
transactions for comparable securities and variable relationships between
securities that 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. Collateral
for certain tri-party repurchase agreements is held at the counterparty's
custodian in a segregated account for the benefit of the fund and the
counterparty. 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). Gains or losses on securities sold are determined on
the identified cost basis. 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.
Discounts on original issue discount bonds are accreted according to the
yield-to-maturity basis.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and 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 gains and losses are included with the net realized and unrealized
gain or loss on investments. Net realized gains and losses on foreign
currency transactions represent net realized 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 appreciation
and depreciation of assets and liabilities in foreign currencies 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. Investments in foreign securities involve
certain risks, including those related to economic instability,
unfavorable political developments, and currency fluctuations, not present
with domestic investments.
F) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the year ended
October 31, 1999, the fund had no borrowings against the line of credit.
G) 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, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
H) Distributions to shareholders Distributions to shareholders are
recorded by the fund on the ex-dividend date. At certain times, the fund
may pay distributions at a level rate even though, as a result of market
conditions or investment decisions, the fund may not achieve projected
investment results for a given period. The amount and character of income
and gains to be distributed are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. These differences include temporary and permanent differences
of losses on wash sale transactions, foreign currency gains and losses,
nontaxable dividends, market discount and realized gains and losses on
passive foreign investment companies. 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, 1999, the fund reclassified
$144,247 to decrease undistributed net investment income and $185,717 to
decrease paid-in-capital, with an increase to accumulated net realized
gains of $329,964. The calculation of net investment income per share in
the financial highlights table excludes these adjustments.
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, 0.50% of the next $5 billion, 0.475% of the next $5
billion, 0.455% of the next $5 billion, 0.44% of the next $5 billion and
0.43% thereafter.
The fund reimburses Putnam Management an allocated amount 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 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, 1999, fund expenses were reduced by
$155,163 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.
Each Trustee of the fund receives an annual Trustee fee, of which $1,791
has been allocated to the fund, and an additional fee for each Trustee's
meeting attended. Trustees receive additional fees for attendance at
certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral 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
invested in certain Putnam funds until distribution in accordance with the
Deferral 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 a 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, class C 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%,
1.00% and 1.00% of the average net assets attributable to class A, class
B, class C and class M shares, respectively. The Trustees have approved
payment by the fund at an annual rate of 0.25%, 1.00%, 1.00% and 0.75% of
the average net assets attributable to class A, class B, class C and class
M shares, respectively.
For the year ended October 31, 1999, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $291,219 and $11,522 from the sale
of class A and class M shares, respectively, and received $748,099 and $19
in contingent deferred sales charges from redemptions of class B and class
C shares, respectively. A deferred sales charge of up to 1% is assessed on
certain redemptions of class A shares. For the year ended October 31,
1999, Putnam Mutual Funds Corp., acting as underwriter received $24,986 on
class A redemptions.
Note 3
Purchases and sales of securities
During the year ended October 31, 1999, cost of purchases and proceeds
from sales of investment securities other than U.S. government obligations
and short-term investments aggregated $248,848,208 and $289,256,807,
respectively. Purchases and sales of U.S. government obligations
aggregated $21,369,590 and $25,003,240, respectively.
Note 4
Capital shares
At October 31, 1999, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended October 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 21,070,668 $ 292,763,822
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 3,273,972 44,985,658
- -----------------------------------------------------------------------------
24,344,640 337,749,480
Shares
repurchased (13,803,092) (190,502,654)
- -----------------------------------------------------------------------------
Net increase 10,541,548 $ 147,246,826
- -----------------------------------------------------------------------------
Year ended October 31, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 19,343,232 $254,107,737
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,120,728 65,168,272
- -----------------------------------------------------------------------------
24,463,960 319,276,009
Shares
repurchased (16,138,623) (211,228,211)
- -----------------------------------------------------------------------------
Net increase 8,325,337 $108,047,798
- -----------------------------------------------------------------------------
Year ended October 31, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 12,150,847 $ 166,621,532
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,277,330 31,123,451
- -----------------------------------------------------------------------------
14,428,177 197,744,983
Shares
repurchased (26,058,917) (358,881,466)
- -----------------------------------------------------------------------------
Net decrease (11,630,740) $(161,136,483)
- -----------------------------------------------------------------------------
Year ended October 31, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 19,076,366 $ 249,631,486
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,857,276 61,421,181
- -----------------------------------------------------------------------------
23,933,642 311,052,667
Shares
repurchased (24,883,349) (324,526,051)
- -----------------------------------------------------------------------------
Net decrease (949,707) $ (13,473,384)
- -----------------------------------------------------------------------------
For the period July 26, 1999
(commencement of operations)
through October 31, 1999
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 35,541 $495,931
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 156 2,144
- -----------------------------------------------------------------------------
35,697 498,075
Shares repurchased (1,043) (14,414)
- -----------------------------------------------------------------------------
Net increase 34,654 $483,661
- -----------------------------------------------------------------------------
Year ended October 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 471,019 $ 6,492,394
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 48,716 668,557
- -----------------------------------------------------------------------------
519,735 7,160,951
Shares
repurchased (535,946) (7,379,036)
- -----------------------------------------------------------------------------
Net decrease (16,211) $ (218,085)
- -----------------------------------------------------------------------------
Year ended October 31, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,054,905 $ 13,939,652
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 97,401 1,236,300
- -----------------------------------------------------------------------------
1,152,306 15,175,952
Shares
repurchased (1,087,101) (14,272,656)
- -----------------------------------------------------------------------------
Net increase 65,205 $ 903,296
- -----------------------------------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund
hereby designates $93,708,824 as capital gain, for its taxable year ended
October 31, 1999.
The fund has designated 100% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
The Form 1099 you receive in January 2000 will show the tax status of all
distributions paid to your account in calendar 1999.
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investments has won the DALBAR Service Award 8 times in the past 9
years. In 1997 and 1998, Putnam was the only company to win all three
DALBAR awards: for service to investors, to financial advisors, and to
variable annuity contract holders.*
* HELP YOUR INVESTMENTS 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
Within the same class of shares, you can move money from one account to
another 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 learn more about Putnam, visit our Web site.
www.putnaminv.com
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
*DALBAR, Inc., an independent research firm, presents the awards to financial
services firms that provide consistently excellent service.
+Regular investing, of course, does not guarantee a profit or protect
against a loss in a declining market.
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds. 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.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund [DBL. DAGGER]
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Opportunities Fund [DBL. DAGGER]
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government
Income Fund
Money Market Fund **
Preferred Income Fund
Strategic Income Fund *
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK] **
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds-three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
[DBL. DAGGER] Closed to new investors. Some exceptions may apply. Contact
Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the funds seek to preserve your investment at $1.00 per share,
it is possible to lose money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
Fund information
WEB SITE
www.putnaminv.com
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
PricewaterhouseCoopers LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
Vice President
Anthony I. Kreisel
Vice President
Jeanne L. Mockard
Vice President and Fund Manager
Krishna K. Memani
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
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' Web site: 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 the
principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
AN026 56821 840/884/869 12/99
