Putnam
Growth and
Income
Fund II
SEMIANNUAL REPORT
May 31, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* For the 12 months ended June 30, 1996, Putnam Growth and Income Fund
II's class A shares were ranked 140 out of 483 growth and income funds
for total return performance -- placing them in the top 29% of these
funds -- according to Lipper Analytical Services. Over the same period,
the fund's class B and class M shares were ranked 181 and 168,
respectively, out of 483 funds, placing both classes within the top 38%
of growth and income funds tracked.*
CONTENTS
4 Report from Putnam Management
9 Fund performance summary
13 Portfolio holdings
17 Financial statements
*Lipper rankings are based on total return performance, vary over time,
and do not reflect the effects of sales charges. Since the fund
commenced operations on 1/5/95, its share classes were not ranked over
periods exceeding one year. Past performance is not indicative of
future results.
From the Chairman
[GRAPHIIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
With a short but impressive history of steady growth and unquestionably
fine performance, Putnam Growth and Income Fund II shows no sign of
losing momentum. While this is a tribute to the efforts of the
management team, the sustained rise of the stock market since the fund's
introduction in January 1995 cannot be overlooked.
Such markets do not last indefinitely without an occasional pause, a
point we are moved to make as the fund enters a period when some market
volatility is a reasonable expectation. Seasoned investors with a long-
term perspective should take any such fluctuations in stride.
In the report that follows, Fund Manager Anthony I. Kreisel reviews your
fund's performance thus far in fiscal 1996 and comments on the outlook
for the remainder of the year.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
July 17, 1996
Report from the Fund Manager
Anthony I. Kreisel
Our careful, value-oriented approach to individual stock selection
clearly played the definitive role in the solid performance of Putnam
Growth and Income Fund II during the first half of fiscal 1996,
encompassing the six months ended May 31, 1996. Over this period,
results for all three classes of shares at net asset value (12.27% for
class A shares, 11.78% for class B shares, and 11.97% for class M
shares) outpaced the Standard & Poor's 500(registered trademark) Index,
which gained 11.76%. Results at public offering price were 5.83%, 6.78%,
and 8.03% for class A, class B, and class M shares, respectively. Please
see pages 9 and 10 for complete performance details.
* BASIC VALUE STRATEGY ON TARGET
Our proactive, bottom-up strategy is built on a combination of
thoughtful security selection and expert teamwork between Putnam
analysts and portfolio managers, and meetings with the senior
managements of companies we research. This characteristic Putnam
approach to identifying positive internal change fosters consistent
results and was especially beneficial during a time when the markets,
the economy, and fiscal policymakers were sending out a mix of signals.
Over the period, prolonged economic strength helped drive the domestic
stock market to new heights. Yet, simultaneously, investor fears about
inflation contributed to an eventual slowing in earnings growth. In this
environment, we believe it was the fund's basic-value approach to equity
investing that continued to drive its success.
We invest for long-term growth potential and seek out undervalued
companies that perform well through market ups and downs. Thus day-to-
day projections and market shifts do not overly concern us. Rather, we
focus on locating a combination of inexpensive stock price and potential
for change in the companies selected for the portfolio. This combination
proved particularly profitable for your fund in the first half of fiscal
1996.
* STRONGEST PERFORMANCE FROM AUTOMOTIVE AND RETAIL STOCKS
Early in the period, we increased the fund's position in consumer
durables, most notably in automotive and retail sector stocks, that were
benefiting from the strength of the economy. Our slight shift in
emphasis proved a worthwhile decision. The top three performing
portfolio stocks since January 1, 1996, were all large retailers: Kmart,
Dayton Hudson, and Sears, Roebuck. Following these, among the strongest
performers were Chrysler, TRW, General Motors, and Ford in the
automotive sector. While these stocks, along with others discussed in
this report, were viewed favorably at the end of the period, all
portfolio holdings are subject to review and adjustment in accordance
with the fund's investment strategy and may well vary in the future.
Ford, a relatively new holding in the portfolio, is an example of
remarkable success from our close scrutiny during securities selection.
We began aggressively purchasing Ford stock for the fund in February. At
the time, it was selling for a very attractive $29 per share while
yielding nearly 5%. We discovered that the underlying value of Ford's
non-auto assets was essentially worth the full price of the stock and,
therefore, investors who took advantage of this opportunity
theoretically received Ford's auto business for free. While overlooked
by Wall Street because of cost overruns and sales problems with its
flagship Taurus model, Ford nevertheless seemed to us to exhibit
desirable characteristics of inexpensive price and internal change
including a clear management mandate to tackle the company's cost
problem aggressively. We decided that on a dividend-yield basis the
stock could go nowhere but up and, in fact, that is what has happened.
At the fund's midyear mark, the price of Ford stock had risen to $35 per
share. At a 21% year-to-date total return, Ford stock has been one of
the major contributors to fund performance this year.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS*]
Insurance and finance 12.9%
Utilities 10.7%
Automotive 8.7%
Consumer nondurables 6.6%
Oil and gas 6.5%
Footnote reads:
*Based on net assets as of 5/31/96. Holdings will vary over time.
Retail stocks were even more powerful performers for the fund during the
period. By the close of fiscal 1995, these securities had been long out
of favor as consumers had turned thrifty. However, regardless of the
tough retail environment at the time, we identified several change-
minded large-capitalization companies with aggressive managements and
excellent potential to perform over the long term. As the economy heated
up, our stock picks from established leaders in the retail industry
participated in an impressive comeback and added much to overall fund
performance.
In addition to automotive and retail sector stocks, the fund's
investments in the chemicals sector -- an area in which we chose to
remain overweighted throughout the period -- have proved beneficial.
* SOME WEAKNESS FROM INTEREST-RATE-SENSITIVE STOCKS, PARTICULARLY
UTILITIES
Following a period of one of the strongest advances in recent memory,
bond markets turned abruptly downward beginning in March. The domestic
bond market had reacted to concern over a pickup in inflation resulting
from economic overheating. As interest rates rose sharply, losses
resulted in several sectors of the market and the effects spread to
interest-rate-sensitive stocks. Electric and telephone utilities,
higher-yielding securities often negatively impacted by sudden increases
in interest rates, proved weak performers for the fund in the second
fiscal quarter. Portfolio companies Northeast Utilities, Public Service
Co. of Colorado, SBC Communications, and Bell Atlantic all seemed
shaken.
Despite the interest-rate backup, however, portfolio companies in the
insurance and financial sector were not as directly affected. Some
stocks in this sector underperformed the market average; nevertheless,
strong earnings continued to characterize the banking industry. Indeed,
one sizable portfolio holding, Bankers Trust New York, significantly
outperformed the market in the first quarter of 1996. A special
situation stock in the portfolio, Bankers Trust has rebounded nicely
from its recent problems with derivatives and from litigation with
Procter & Gamble.
[GRAPHIC OMITTED: TOP 10 HOLDINGS (5/31/96)]
Bankers Trust New York Corp.
Insurance and finance
Eastman Kodak Company
Photographic equipment
Kimberly-Clark Corporation
Consumer nondurables
Warner-Lambert Company
Pharmaceuticals
Polaroid Corp.
Photographic equipment
Ford Motor Company
Automotive
TRW, Inc.
Auto parts and accessories, space, and defense
Fleet Financial Group, Inc.
Insurance and finance
International Business Machines Corp.
Multinational computers and information systems
J. P. Morgan & Company, Inc.
Multinational banking and finance
Footnote reads:
These holdings represent 20.3% of the fund's net assets. Portfolio
holdings will vary over time.
The fund also experienced underperformance from its third-largest
holding in the consumer nondurables sector, Kimberly-Clark. The stock is
down 11% year to date as of May 31 in contrast to a 9% rise in the S&P
500 for the same period. This was due in large part to a price cut for
diapers announced by P&G, a move that temporarily put a halt to the
progress of Kimberly-Clark's stock. As the price of the stock fell,
however, we reexamined the company's internal dynamics, meeting directly
with the chairman of Kimberly-Clark to obtain an accurate gauge of the
company's excellent potential for long-term earnings growth. We decided
that the decline represented a buying opportunity and purchased
additional shares at what we consider a very attractive price, given our
assessment of the stock's potential.
* OUTLOOK FOR INVESTORS: THE IMPORTANCE OF DIVERSIFICATION
Over the next few months, we plan to increase the portfolio's holdings
in regional Bell operating companies because, in our opinion, their
underlying fundamentals appear especially strong and the valuations
particularly attractive. We also expect to maintain an overweighting in
the financial sector in which stocks are currently inexpensive, yields
are high, and dividends continue to increase. We will avoid any bank
with credit card debt exposure, however, and we have eliminated a few
such names from the portfolio. Examples are American Express and
Citicorp, both of which we sold. Our focus in the financial sector
remains with strong regional banks -- those selling at 9 or 10 times
earnings or yielding 3 1/2% to 4% -- and with strong, multinational
financial institutions. We also expect to maintain a heavy weighting in
automotive and auto parts companies currently benefiting from
consolidations and from Detroit's increased outsourcing.
Basic value, or looking for bargains, remains at the heart of your
fund's strategy. In this current market environment of hypergrowth that
sometimes seems tentative and even speculative, investors are well
advised to consider balancing the asset allocation of their portfolios
with strong performing value-oriented mutual funds such as yours, in
addition to their growth-oriented funds.
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 5/31/96, there is no guarantee the fund will
continue to hold these securities in the future.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Growth and Income Fund II is designed for investors
seeking primarily capital growth, but also current income potential
through common stocks.
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares
changed over time, assuming you held the shares through the entire
period and reinvested all distributions in the fund.
TOTAL RETURN FOR PERIODS ENDED 5/31/96
Class A Class B Class M
(inception date) (1/5/95) (1/5/95) (1/5/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
6 months 12.27% 5.83% 11.78% 6.78% 11.97% 8.03%
- ------------------------------------------------------------------------
1 year 27.64 20.28 26.60 21.60 27.00 22.61
- ------------------------------------------------------------------------
Life of class 46.64 38.22 45.00 41.00 45.61 40.50
Annual average 31.31 25.90 30.26 27.69 30.65 27.37
- ------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 5/31/96
S&P 500 Consumer
Index Price Index
- ------------------------------------------------------------------------
6 months 11.76% 1.95%
- ------------------------------------------------------------------------
1 year 28.45 2.89
- ------------------------------------------------------------------------
Life of fund 50.11 4.61
Annual average 33.66 3.27
- ------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustment for taxes payable on reinvested distributions.
Investment returns and net asset value will fluctuate so that an
investor's shares, when sold, may be worth more or less than their
original cost. POP assumes 5.75% maximum sales charge for class A shares
and 3.50% for class M shares. CDSC for class B shares assumes the
applicable sales charge, with the maximum being 5%.
TOTAL RETURN FOR PERIODS ENDED 6/30/96
(most recent calendar quarter)
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
6 months 9.67% 3.40% 9.27% 4.27% 9.37% 5.58%
- ------------------------------------------------------------------------
1 year 25.62 18.43 24.74 19.74 25.04 20.63
- ------------------------------------------------------------------------
Life of class 46.39 37.98 44.77 40.77 45.32 40.22
Annual average 29.20 24.16 28.23 25.84 28.56 25.51
- ------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns
and net asset value will fluctuate so that an investor's shares, when
sold, may be worth more or less than their original cost.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 5/31/96
Class A Class B Class M
- ------------------------------------------------------------------------
Distributions (number) 2 2 2
- ------------------------------------------------------------------------
Income $0.120 $0.085 $0.096
- ------------------------------------------------------------------------
Capital gains
- ------------------------------------------------------------------------
Long-term 0.023 0.023 0.023
- ------------------------------------------------------------------------
Short-term 0.278 0.278 0.278
- ------------------------------------------------------------------------
Total $0.421 $0.386 $0.397
- ------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------
11/30/95 $11.01 $11.68 $10.96 $10.98 $11.38
- ------------------------------------------------------------------------
5/31/96 11.90 12.63 11.83 11.86 12.29
- ------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------
Current dividend rate1 2.02% 1.90% 1.45% 1.65% 1.59%
- ------------------------------------------------------------------------
Current 30-day SEC yield2 1.78 1.68 1.04 1.29 1.24
- ------------------------------------------------------------------------
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.
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 5.75% sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B shares and assumes redemption at the end of
the period. Your fund's CDSC declines from a 5% maximum during the first
year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies.
COMPARATIVE BENCHMARKS
Standard & Poor's 500 Index is an unmanaged list of common stocks that
is frequently used as a general measure of stock market performance. The
index assumes reinvestment of all distributions and interest payments
and does not take into account brokerage fees or taxes. Securities in
the fund do not match those in the index and performance of the fund
will differ. 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.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Health Sciences Trust
International New Opportunities Fund
Investors Fund
Natural Resources Fund
New Opportunities Fund
OTC Emerging Growth Fund
Overseas Growth Fund
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
Intermediate U.S. Government Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds*
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments to help maximize your return and reduce your risk.
The three portfolios:
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENTS+
Putnam money market funds:
California Tax Exempt Money Market Fund
Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts++
* Not available in all states.
+ Relative to above.
++ Not offered by Putnam Investments. Certificates of deposit offer a
fixed rate of return and may be insured up to certain limits by
federal/state agencies. Savings accounts may also be insured up to
certain limits. Please call your financial advisor or Putnam at 1-800-
225-1581 to obtain a prospectus for any Putnam fund. It contains more
complete information, including charges and expenses. Please read it
carefully before you invest or send money.
<TABLE>
<CAPTION>
Portfolio of investments owned
May 31,1996 (Unaudited)
<S> <C> <C>
COMMON STOCKS (94.4%) *
NUMBER OF SHARES VALUE
Aerospace and Defense (1.2%)
- ---------------------------------------------------------------------------------------------------------
139,660 Lockheed Martin Corp. $11,713,983
Automotive (8.7%)
- ---------------------------------------------------------------------------------------------------------
105,956 Chrysler Corp. 7,059,319
372,150 Echlin, Inc. 12,792,656
534,280 Ford Motor Co. 19,501,220
257,050 General Motors Corp. 14,169,881
55,860 Magna International, Inc. Class A 2,695,245
198,040 TRW, Inc. 18,665,270
215,230 Varity Corp. + 10,573,174
-------------
85,456,765
Basic Industrial Products (4.9%)
- ---------------------------------------------------------------------------------------------------------
150,100 Caterpillar, Inc. 9,850,313
19,650 Cooper Industries, Inc. 837,581
241,960 Eaton Corp. 14,003,435
206,750 Minnesota Mining & Manufacturing Co. 14,110,688
260,424 Sundstrand Corp. 9,179,946
-------------
47,981,963
Business Equipment and Services (0.9%)
- ---------------------------------------------------------------------------------------------------------
55,360 Xerox Corp. 8,712,280
Chemicals (4.9%)
- ---------------------------------------------------------------------------------------------------------
193,220 du Pont (E.I.) de Nemours & Co., Ltd. 15,409,295
209,599 Eastman Chemical Co. 14,043,133
217,080 Union Carbide Corp. 9,361,575
309,170 Witco Chemical Corp. 9,854,794
-------------
48,668,797
Computer Services and Software (1.7%)
- ---------------------------------------------------------------------------------------------------------
156,110 IBM Corp. 16,664,743
Conglomerates (4.7%)
- ---------------------------------------------------------------------------------------------------------
256,580 Corning, Inc. 9,814,185
244,145 General Motors Corp. Class H 14,831,809
340,885 ITT Industries, Inc. 9,331,727
144,132 Tenneco Inc. 7,747,095
46,961 United Technologies Corp. 5,136,359
-------------
46,861,175
Consumer Durable Goods (1.0%)
- ---------------------------------------------------------------------------------------------------------
174,350 Whirlpool Corp. 9,916,156
Consumer Non Durables (6.6%)
- ---------------------------------------------------------------------------------------------------------
350,950 American Brands, Inc. 15,354,063
123,700 Avon Products, Inc. 11,442,250
300,810 Kimberly-Clark Corp. 21,921,529
162,000 Philip Morris Cos., Inc. 16,098,750
-------------
64,816,592
Electronics and Electrical Equipment (3.9%)
- ---------------------------------------------------------------------------------------------------------
188,355 Honeywell, Inc. 9,559,016
176,050 Intel Corp. 13,291,775
272,115 Texas Instruments, Inc. 15,306,469
-------------
38,157,260
Food and Beverages (1.0%)
- ---------------------------------------------------------------------------------------------------------
170,420 General Mills, Inc. 9,777,848
Forest Products (3.6%)
- ---------------------------------------------------------------------------------------------------------
290,650 Rayonier, Inc. 10,899,375
201,750 Temple Inland, Inc. 9,936,188
340,900 Weyerhaeuser Co. 15,468,338
-------------
36,303,901
Insurance and Finance (12.9%)
- ---------------------------------------------------------------------------------------------------------
402,900 American General Corp. 14,302,950
126,300 BankAmerica Corp. 9,504,075
354,535 Bankers Trust New York Corp. 26,634,442
381,222 Fleet Financial Group, Inc. 16,821,421
242,500 Keycorp 9,396,875
189,800 Morgan (J.P.) & Co., Inc. 16,488,875
167,650 NationsBank Corp. 13,600,606
397,850 PNC Bank Corp. 12,084,694
558,250 USF&G Corp. 8,932,000
-------------
127,765,938
Medical Supplies and Devices (1.2%)
- ---------------------------------------------------------------------------------------------------------
278,813 Baxter International, Inc. 12,337,475
Metals and Mining (0.6%)
- ---------------------------------------------------------------------------------------------------------
167,650 Freeport-McMoRan Copper & Gold Co., Inc. Class A 5,448,625
Oil and Gas (6.5%)
- ---------------------------------------------------------------------------------------------------------
150,315 Amoco Corp. 10,897,838
63,685 Atlantic Richfield Co. 7,618,318
99,270 British Petroleum PLC ADR (United Kingdom) 10,460,576
241,400 Coastal Corp. 9,897,400
626,392 Occidental Petroleum Corp. 16,207,893
265,010 Total Corp. ADR (France) 9,540,360
-------------
64,622,385
Pharmaceuticals (5.2%)
- ---------------------------------------------------------------------------------------------------------
176,612 American Home Products Corp. 9,448,742
102,250 Bristol-Myers Squibb Co. 8,729,594
285,096 Pharmacia & Upjohn, Inc. 11,653,285
384,550 Warner-Lambert Co. 21,534,800
-------------
51,366,421
Photography (4.3%)
- ---------------------------------------------------------------------------------------------------------
296,062 Eastman Kodak Co. 22,019,611
451,535 Polaroid Corp. 20,319,075
-------------
42,338,686
Publishing (0.7%)
- ---------------------------------------------------------------------------------------------------------
157,550 Times Mirror Co. Class A 6,873,119
Retail (5.8%)
- ---------------------------------------------------------------------------------------------------------
97,000 Dayton Hudson Corporation 9,894,000
846,885 K mart Corp. 9,845,038
200,050 May Department Stores Co. 9,477,369
260,983 Penney (J.C.) Co., Inc. 13,538,493
290,600 Rite Aid Corp. 8,536,375
121,272 Sears, Roebuck & Co. 6,169,713
-------------
57,460,988
Transportation (3.4%)
- ---------------------------------------------------------------------------------------------------------
560,450 Canadian National Railway Co. (Canada) 10,368,325
367,400 Ryder System, Inc. 10,746,450
170,425 Union Pacific Corp. 11,951,053
-------------
33,065,828
Utilities (10.7%)
- ---------------------------------------------------------------------------------------------------------
103,900 American Telephone & Telegraph Co. 6,480,763
215,170 Bell Atlantic Corp. 13,421,229
357,720 Entergy Corp. 9,390,150
319,650 GTE Corp. 13,665,038
238,960 Northeast Utilities Co. 3,464,920
282,750 SBC Communications, Inc. 13,960,781
423,890 Southern Co. 9,802,456
215,150 Sprint Corp. 9,116,981
235,100 Texas Utilities Co. 9,609,713
238,030 Union Electric Co. 9,372,431
219,390 US West, Inc. 7,157,599
-------------
105,442,061
-------------
Total Common Stocks (cost $857,463,189) $931,752,989
CONVERTIBLE BONDS AND NOTES (1.4%) *
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
$4,085,000 Magna International cv. sub. deb. 5s, 2002 $4,289,250
11,150,000 Motorola, Inc. cv. sub. deb. Liquid Yield Option Note (LYON) zero %, 2013 9,156,938
-------------
Total Convertible Bonds and Notes (cost $12,951,743) $13,446,188
CONVERTIBLE PREFERRED STOCKS (0.9%) *(cost $7,689,924)
NUMBER OF SHARES VALUE
- ---------------------------------------------------------------------------------------------------------
70,930 Case Corp. cv. pfd. $8,813,046
SHORT-TERM INVESTMENTS (3.8%) *(cost $37,595,524)
PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
$37,590,000 Interest in $530,273,000 joint repurchase agreement dated May 31, 1996
with Morgan Stanley due June 3, 1996 with respect to various
U.S. Treasury obligations -- maturity value of $37,60 $37,595,524
- ---------------------------------------------------------------------------------------------------------
Total Investments (cost $915,700,380)*** $991,607,747
- ---------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $986,691,289.
+ Non-income producing security.
*** The aggregate identified cost on a tax basis is $916,604,565, resulting in gross
unrealized appreciation and depreciation of $87,213,324 and $12,210,142,
respectively, or net unrealized ap(de)preciation of $75,003,182.
ADR after the name of a foreign holding stands for American
Depository Receipt representing ownership of foreign
securities on deposit with a domestic custodian bank.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
May 31, 1996 (Unaudited)
<S> <C>
Assets
- -------------------------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $915,700,380) (Note 1) $991,607,747
- -------------------------------------------------------------------------------------------------------------------
Cash 180
- -------------------------------------------------------------------------------------------------------------------
Dividends and interest receivable 3,122,641
- -------------------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 9,011,911
- -------------------------------------------------------------------------------------------------------------------
Receivable for securities sold 2,016,288
- -------------------------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 70,376
- -------------------------------------------------------------------------------------------------------------------
Total assets 1,005,829,143
Liabilities
- -------------------------------------------------------------------------------------------------------------------
Payable for securities purchased 16,049,926
- -------------------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 391,765
- -------------------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,325,478
- -------------------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 406,455
- -------------------------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 1,284
- -------------------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,352
- -------------------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 635,388
- -------------------------------------------------------------------------------------------------------------------
Payable for organizational expenses (Note 1) 74,298
- -------------------------------------------------------------------------------------------------------------------
Other accrued expenses 250,908
- -------------------------------------------------------------------------------------------------------------------
Total liabilities 19,137,854
- -------------------------------------------------------------------------------------------------------------------
Net assets $986,691,289
Represented by
- -------------------------------------------------------------------------------------------------------------------
Paid-in-capital (Notes 1 and 4) $866,996,262
- -------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 790,510
- -------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 42,997,150
- -------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and liabilities in foreign currencies 75,907,367
- -------------------------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $986,691,289
- -------------------------------------------------------------------------------------------------------------------
Computation of net asset value and offering price
- -------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price of class A shares ($430,720,859 divided by 36,193,776 shares) $11.90
- -------------------------------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $11.90)* $12.63
- -------------------------------------------------------------------------------------------------------------------
Net asset value and offering price of class B shares ($494,584,015 divided by 41,791,794 shares)** $11.83
- -------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price of class M shares ($61,386,415 divided by 5,175,851 shares) $11.86
- -------------------------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $11.86)* $12.29
- -------------------------------------------------------------------------------------------------------------------
*On single retail sales of less than $50,000. On sales of $50,000
or more and on group sales the offering price is reduced.
**Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended May 31, 1996 (Unaudited)
<S> <C>
Investment Income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $38,168) $10,579,822
- -----------------------------------------------------------------------------------------------
Interest 874,176
- -----------------------------------------------------------------------------------------------
Total investment income 11,453,998
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,332,487
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 813,357
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 9,210
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 7,704
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 418,798
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,869,862
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 174,460
- -----------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 1,946
- -----------------------------------------------------------------------------------------------
Reports to shareholders 54,626
- -----------------------------------------------------------------------------------------------
Auditing 19,694
- -----------------------------------------------------------------------------------------------
Legal 5,144
- -----------------------------------------------------------------------------------------------
Postage 64,706
- -----------------------------------------------------------------------------------------------
Other 79,815
- -----------------------------------------------------------------------------------------------
Total expenses 5,851,809
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (172,486)
- -----------------------------------------------------------------------------------------------
Net expenses 5,679,323
- -----------------------------------------------------------------------------------------------
Net investment income 5,774,675
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3 ) 42,213,342
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation on investments during the period 36,470,788
- -----------------------------------------------------------------------------------------------
Net gain on investments 78,684,130
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $84,458,805
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
For the period
January 5,
1995 (commencement
Six months ended of operations) to
May 31 May 31
1996* 1995
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Increase in net assets
- ------------------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------------------
Net investment income $5,774,675 $3,516,987
- ------------------------------------------------------------------------------------------------------------
Net realized gain on investments 42,213,342 16,232,259
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 36,470,788 31,872,124
- ------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 84,458,805 51,621,370
- ------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------------
From net investment income:
Class A (3,196,316) (1,223,270)
- ------------------------------------------------------------------------------------------------------------
Class B (2,479,708) (1,065,275)
- ------------------------------------------------------------------------------------------------------------
Class M (355,886) (174,105)
- ------------------------------------------------------------------------------------------------------------
From net realized gain on investments:
Class A (7,025,628) --
- ------------------------------------------------------------------------------------------------------------
Class B (7,477,612) --
- ------------------------------------------------------------------------------------------------------------
Class M (945,211) --
- ------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 380,190,056 492,264,069
- ------------------------------------------------------------------------------------------------------------
Total increase in net assets 443,168,500 541,422,789
- ------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------
Beginning of period 543,522,789 2,100,000
- ------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment income
of $790,510 and $1,047,745, respectively) $986,691,289 $543,522,789
- ------------------------------------------------------------------------------------------------------------
*Unaudited
The accompanying notes are an integral part of these financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
(For a share outstanding throughout the period)
For the Period
January 5, 1995
Six months (commencement Six months
ended of operations) ended
May 31 to November 30 May 31
- --------------------------------------------------------------------------------------------------------------------------
1996* 1995 1996*
- --------------------------------------------------------------------------------------------------------------------------
Class M Class B
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $10.98 $8.53 $10.96
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income .08 .12 .07
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1.20 2.43 1.19
- --------------------------------------------------------------------------------------------------------------------------
Total from investment activities 1.28 2.55 1.26
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------
From net investment income (.10) (.10) (.09)
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments (.30) -- (.30)
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.40) (.10) (.39)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.86 $10.98 $11.83
- --------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 11.97 (b) 30.04 (b) 11.78 (b)
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $61,386 $33,406 $494,584
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) .82 (b) 1.80 (b) .95 (b)
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) .71 (b) 1.58 (b) .59 (b)
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 43.08 (b) 64.18 (b) 43.08 (b)
- --------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (d) $.0487 (b) $.0487 (b)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (continued)
(For a share outstanding throughout the period)
For the Period For the Period
January 5, 1995 January 5, 1995
(commencement Six months (commencement
of operations) ended of operations)
to November 30 May 31 to November 30
- --------------------------------------------------------------------------------------------------------------------------
1995 1996* 1995
- --------------------------------------------------------------------------------------------------------------------------
Class B Class A
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $8.53 $11.01 $8.53
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income .11 .11 .15
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 2.42 1.20 2.45
- --------------------------------------------------------------------------------------------------------------------------
Total from investment activities 2.53 1.31 2.60
- --------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------
From net investment income (.10) (.12) (.12)
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments -- (.30) --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions (.10) (.42) (.12)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.96 $11.90 $11.01
- --------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 29.72 (b) 12.27 (b) 30.62 (b)
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $259,789 $430,721 $250,328
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 2.03 (b) .57 (b) 1.35 (b)
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 1.36 (b) .96 (b) 2.03 (b)
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 64.18 (b) 43.08 (b) 64.18 (b)
- --------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (d) $.0487 (b)
- --------------------------------------------------------------------------------------------------------------------------
* Unaudited
(a) Total investment return assumes dividend reinvestment
and does not reflect the effect of sales charges.
(b) Not annualized.
(c) The ratio of expenses to average net assets for the period ended November 30,
1995 and thereafter includes amounts paid through expense offset arrangements.
(Note 2).
(d) Average commission rate paid is presented for fiscal periods beginning September
1, 1995 in conformance with requirements issued by the SEC.
</TABLE>
Notes to financial statements
May 31, 1996 (Unaudited)
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
fund seeks capital growth as a primary objective and current income as a
secondary objective by investing primarily in a portfolio of common
stocks that offer the potential for capital growth, current income or
both.
The fund offers class A, class B and class M shares. Class A shares are
sold with a maximum front-end sales charge of 5.75%. Class B shares,
which convert to class A shares after approximately eight years, do not
pay a front-end sales charge, but pay a higher ongoing distribution fee
than class A shares, and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class
M shares are sold with a maximum front-end sales charge of 3.50% and pay
an ongoing distribution fee that is lower than class B shares and higher
than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities. Actual results could differ from those
estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sale price, 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, and other
investments are stated at fair value following procedures approved by
the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account, along with the cash of other
registered investment companies managed by Putnam Investment Management,
Inc., ("Putnam Management" ) the fund's Manager, a wholly-owned
subsidiary of Putnam Investments, Inc and certain other accounts. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Putnam Management is responsible for determining that the value of these
underlying securities is at all times at least equal to the resale
price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed). Interest income is recorded on the accrual basis
and dividend income is recorded on the ex-dividend date, except that
certain dividends from foreign securities are recorded as soon as the
fund is informed of the ex-dividend date.
E) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held and for excise tax on income and capital
gains.
F) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid annually. The amount and character of income and gains to be
distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations.
G) Unamortized organization expenses Expenses incurred by the fund in
connection with its organization, its registration with the Securities
and Exchange Commission and with various states and the initial public
offering of its shares were $74,298. These expenses are being amortized
on projected net asset levels over a five-year period.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.65% of the
first $500 million of average net assets, 0.55% of the next $500
million, 0.50% of the next $500 million, 0.45% of the next $5 billion,
0.425% of the next $5 billion, 0.405% of the next $5 billion, 0.39% of
the next $5 billion and 0.38% of any excess thereafter subject, under
current law, to reduction in any year by the amount of certain brokerage
commissions and fees (less expenses) received by affiliates of Putnam
Management on the fund's portfolio transactions.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Trustees of the fund receive an annual Trustees fee of $1,360 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
The fund adopted a Trustee Fee Deferral Plan (the "Plan") which allows
the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain invested in
certain Putnam funds until distribution in accordance with the Plan.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the six months ended May 31, 1996, fund expenses were reduced by
$172,486 under expense offset arrangements with PFTC. Investor servicing
and custodian fees reported in the Statement of operations exclude these
credits. The fund could have invested a portion of the assets utilized
in connection with the expense offset arrangements in an income
producing asset if it had not entered into such arrangements.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plans provide for payments by
the fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%,
1.00% and 1.00% of the average net assets attributable to class A, class
B and class M shares, respectively. The Trustees have approved payment
by the fund at an annual rate of 0.25%, 1.00% and 0.75% of the average
net assets attributable to class A, class B and class M shares
respectively.
For the six months ended May 31, 1996, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $810,324 and $64,656 from the
sale of class A and class M shares, respectively and $283,822 in
contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares. For the six months ended May 31, 1996, Putnam Mutual
Funds Corp., acting as underwriter received $1,609 on class A
redemptions.
Note 3
Purchase and sales of securities
During the six months ended May 31, 1996, purchases and sales of
investment securities other than short-term investments aggregated
$665,069,117 and $313,760,801, respectively. There were no purchases and
sales of U.S. government obligations. In determining the net gain or
loss on securities sold, the cost of securities has been determined on
the identified cost basis.
Note 4
Capital shares
At May 31, 1996, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
May 31, 1996
- ----------------------------------------
Class A Shares Amount
- ----------------------------------------
Shares sold 15,052,475 $170,930,768
- ----------------------------------------
Shares issued in
connection with
reinvestment of
distributions 886,912 9,690,434
- ----------------------------------------
15,939,387 180,621,202
Shares
repurchased (2,487,851) (28,314,246)
- ----------------------------------------
Net increase 13,451,536 $152,306,956
- ----------------------------------------
For the period
January 5, 1995
(commencement of
operations) to
November 30, 1995
- ----------------------------------------
Class A Shares Amount
- ----------------------------------------
Shares sold 19,356,148 $191,344,508
- ----------------------------------------
Shares issued in
connection with
reinvestment of
distributions 114,421 1,163,096
- ----------------------------------------
Shares issued in
connection with
the merger of
Putnam Dividend
Growth Fund 4,765,630 50,372,714
- ----------------------------------------
24,236,199 242,880,318
Shares
repurchased (1,576,312) (16,055,983)
- ----------------------------------------
Net increase 22,659,887 $226,824,335
- ----------------------------------------
Six months ended
May 31, 1996
- ----------------------------------------
Class B Shares Amount
- ----------------------------------------
Shares sold 19,229,611 $217,100,503
- ----------------------------------------
Shares issued in
connection with
reinvestment of
distributions 867,436 9,436,358
- ----------------------------------------
20,097,047 226,536,861
Shares
repurchased (2,015,559) (22,755,489)
- ----------------------------------------
Net increase 18,081,488 $203,781,372
- ----------------------------------------
For the period
January 5, 1995
(commencement of
operations) to
November 30, 1995
- ----------------------------------------
Class B Shares Amount
- ----------------------------------------
Shares sold 23,950,321 $238,931,212
- ----------------------------------------
Shares issued in
connection with
reinvestment of
distributions 99,507 1,010,371
- ----------------------------------------
Shares issued in
connection with
the merger of
Putnam Dividend
Growth Fund 1,116,576 11,768,715
- ----------------------------------------
25,166,404 251,710,298
Shares
repurchased (1,538,451) (15,606,751)
- ----------------------------------------
Net increase 23,627,953 $236,103,547
- ----------------------------------------
Six months ended
May 31, 1996
- ----------------------------------------
Class M Shares Amount
- ----------------------------------------
Shares sold 2,329,975 $26,413,227
- ----------------------------------------
Shares issued in
connection with
reinvestments of
distributions 114,549 1,248,512
- ----------------------------------------
2,444,524 27,661,739
Shares
repurchased (312,136) (3,560,011)
- ----------------------------------------
Net increase 2,132,388 $24,101,728
- ----------------------------------------
For the period
January 5, 1995
(commencement of
operations) to
November 30, 1995
- ----------------------------------------
Class M Shares Amount
- ----------------------------------------
Shares sold 3,172,893 $31,479,095
- ----------------------------------------
Shares issued in
connection with
reinvestments of
distributions 6,569 64,181
- ----------------------------------------
3,179,462 31,543,276
Shares
repurchased (218,352) (2,207,089)
- ----------------------------------------
Net increase 2,961,110 $29,336,187
- ----------------------------------------
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investor Services has won the DALBAR Quality Tested Service Seal
for the past six years. In 1995, over 146,000 tests of 56 shareholder
service components demonstrated that Putnam outperformed the industry
standard in every category.
* HELP YOUR INVESTMENT GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings
account.*
* SWITCH FUNDS EASILY
You can move money from one account to another with the same class of
shares without a service charge. (This privilege is subject to change or
termination.)
* ACCESS YOUR MONEY QUICKLY)
You can get checks sent regularly or redeem shares any business day at
the then-current net asset value, which may be more or less than the
original cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a
helpful Putnam representative.
To make an additional investment in this or any other Putnam fund,
contact your financial advisor or call our toll-free number: 1-800-225-
1581.
* Regular investing of course, does not guarantee a profit or protect
against a loss in a declining market.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Thomas V. Reilly
Vice President
Anthony I. Kreisel
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Growth and
Income Fund II. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information, or to request a prospectus, call toll free: 1-800-225-1581.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board
or any other agency; and involve risk, including the possible loss of
the principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------
25855-949/990/096 7/96
