Putnam
Growth and
Income
Fund II
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
11-30-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
The markets continued to provide their share of challenges and
opportunities as your fund closed its books on fiscal 1999. In the
following report, the fund's manager discusses performance for the period
and prospects for the months ahead.
This is the last letter to you and the other shareholders of Putnam Growth
and Income Fund II that I will be signing. After more than 30 years as
Chairman of the Trustees and President of the Putnam Funds, the time has
come for me to step aside.
In June, John Hill will become Chairman. John is currently an independent
Trustee and has served on the board for the past 14 years. In addition, my
son, George Putnam, III, will take on the role of President. I am
confident that the leadership of the funds will be in exceptionally strong
hands.
I will become Chairman Emeritus, remain a shareholder, and stay in close
touch with the funds. It has been my privilege to serve you.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
January 19, 2000
Report from the Fund Manager
Anthony I. Kreisel
Sentiment always plays a role in the stock market, influencing performance
in a way that may not reflect underlying fundamentals. This year, we saw
an excellent example of this principle: although many corporations are
reporting solid earnings amid a strong economy, the market has fancied
growth stocks in general and technology companies in particular. For
Putnam Growth and Income Fund II, which completed its fiscal year November
30, 1999, these conditions were not ideal. Although the large, undervalued
companies we own in this fund are in strong financial shape and changing
in positive ways, the market did not recognize their performance
potential. Nonetheless, the fund achieved a gain for the 12-month period,
benefiting from the strong rebound in energy, basic materials, and
industrial stocks.
Total return for 12 months ended 11/30/99
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
- ------------------------------------------------------------------------
3.55% -2.38% 2.72% -1.98% 2.85% 1.91% 2.97% -0.60%
- ------------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance calculation
methods begin on page 6.
* UNEVEN RESULTS FOR UNDERVALUED STOCKS
Amid the technology rally, investors have largely turned away from what
traditionally have been considered conservative equities --
dividend-paying stocks with below-average price multiples -- like the kind
we own in this fund. Although several traditional value sectors that the
fund had overweighted, such as basic materials, energy, industrials, and
financials, posted noteworthy gains, few stocks in these areas could keep
pace with the market leaders, almost all of which were rapidly growing
technology companies. The technology sector of the S&P 500(R) grew from
approximately 18% at the beginning of the fund's fiscal year to more than
25% at the end of it. The enthusiasm for technology grew to a craze for
stocks of start-up Internet companies, many of which have little in the
way of revenues or profits.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Insurance
and finance 20.5%
Utilities 14.7%
Oil and gas 10.7%
Pharmaceuticals 6.8%
Food and
beverages 4.9%
Footnote reads:
*Based on net assets as of 11/30/99. Holdings will vary over time.
Value stocks led the market only in April and May of this year, when, as
we explained in the fund's semiannual report, the market recognized rising
global growth and the likelihood that many undervalued companies would
benefit from it. The upsurge petered out in the summer because the Federal
Reserve Board began to raise interest rates. This restrictive monetary
policy undercut the stocks of construction and consumer durables
companies, for example, because investors believed the Fed wanted to curb
spending in these sectors. However, we believe the brief period of value
outperformance is a harbinger of things to come. Over the long term, the
market rewards companies with earnings, no matter how exciting new,
untested companies may be in the short run.
* FINANCIAL SECTOR POISED FOR GROWTH
Financial stocks, which include banks, insurers, and brokerages, comprised
the fund's largest sector weighting during the year. We believe that this
sector is undervalued and is only now beginning to undertake needed
consolidation. This trend should accelerate thanks to the new financial
reform agreed upon by the Congress and the White House in October after
tortuous negotiations. The resulting legislation repeals many of the
restrictions on financial companies passed during the Great Depression.
Now banks, insurance companies, and asset managers can compete with each
other and focus on reducing costs and serving customers better. These
changes are likely to be positive for the industry.
We added a new holding, Reliastar Financial Corp., a life insurance
company headquartered in Minneapolis, when its price declined in September
and October at a point when the federal reform effort was in question. In
addition to being an attractive business on its own, Reliastar, a
medium-size company with a solid distribution network, could become
involved in consolidation activity. Although this holding as well as
others mentioned in this report was viewed favorably at the end of the
fiscal period, all are subject to review and adjustment in accordance with
the fund's investment strategy and may vary in the future.
"Value stocks have never been more attractively priced, relative to the
rest of the market, in my 25 years of investing. Meanwhile, many of these
companies are achieving new levels of profitability by managing capital
efficiently and implementing the latest cost-saving technologies. The
economic conditions for these companies and their industries also raises
the odds of accelerating earnings growth in the years to come."
- -- Anthony Kreisel, manager
Putnam Growth and Income Fund II
Among our top-performing financial holdings this year was Lehman Brothers
Holding, Inc. We added this position shortly before the beginning of the
fiscal period, when the Russian debt crisis had cut its price nearly in
half. In our opinion, the market had misjudged the company. Our research
at the time showed that it had several attractive businesses -- investment
banking, equity underwriting, bond underwriting, merchant banking, and
retail asset management for high-net-worth clients. The potential we saw
in those businesses paid off in 1999: Lehman has made dramatic strides as
an international investment bank, thanks to an aggressive strategy in
Europe. It has put together several successful financing ventures in
European capital markets, which have been newly unified this year by the
introduction of the euro, and has become a player in European
telecommunications merger activity. Because Lehman started from a small
base in these businesses, it is realizing impressive growth. Because of
the stock's strong appreciation this year, we have taken profits on a
portion of the holding.
* NEW HOLDINGS FEATURE INTERNAL CHANGE
During the year, we adjusted our industrial holdings by reducing the
fund's position in Caterpillar Inc. and adding Illinois Tool Works Inc.
(ITW). Caterpillar's stock price appreciated strongly in April thanks to
the outlook for worldwide construction activity. Our research suggested,
however, that Asian economies recovering from recession would not be
launching large new public construction projects in the near term.
Meanwhile, rising interest rates were slowing activity in the United
States, so we decided to reduce the Caterpillar position.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
SBC Communications, Inc.
Utilities
AT&T Corp.
Utilities
Citigroup, Inc.
Insurance and finance
American Home Products Corp.
Pharmaceuticals
Bell Atlantic Corp.
Utilities
GTE Corp.
Utilities
Merck & Co., Inc.
Pharmaceuticals
Bank of America Corp.
Insurance and finance
Mobil Corp.
Oil and gas
Federated Department Stores, Inc.
Retail
Footnote reads:
These holdings represent 13.9% of the fund's net assets as of 11/30/99.
Portfolio holding will vary over time.
To maintain our exposure to industrial companies, we bought ITW. This
stock was depressed because the company announced the acquisition of
Premark during the summer, a move many analysts believed would slow down
earnings growth. We talked directly with ITW executives, however, who
explained that they made the acquisition to gain control of a Premark
subsidiary -- Hobart, a food equipment company. They consider Hobart an
excellent business that they can manage even more profitably thanks to
ITW's ability to control manufacturing costs.
During the period, we also added Hewlett-Packard Co., which became
attractively valued in September and October after strong performance
early in the year. We have confidence in the company's new chief executive
officer, Carleton Fiorina, who was a leading executive at Lucent
Technologies. Her experience with Internet services will be crucial to
Hewlett-Packard, as it seeks to develop a more focused strategy in this
area. We also substantially added to the fund's position in Federated
Department Stores, Inc. for several reasons. It is managing its
traditional retailing business more profitably and has developed a highly
competitive Internet strategy. During the period, it acquired Fingerhut, a
catalog retailer that is migrating to the World Wide Web. It also was
chosen by Wal-Mart to handle order processing and fulfillment for the
Wal-Mart Web site.
* VALUE STOCKS IN COMPETITIVE POSITION
The new holdings we have just described reflect our confidence that new
technologies will benefit a broad range of companies. Well-managed
companies in every sector of the economy are applying technology to cut
costs and position themselves for new growth. We anticipate that the
market will gradually recognize and reward these changes. Furthermore, we
believe that this fund is better positioned than many others to take
advantage of accelerating global economic growth. Many of the companies we
hold have successfully globalized their operations. If, as seems likely,
global growth exceeds U.S. growth in 2000 for the first time in several
years, these stocks are poised to feel the effects. In the meantime, we
believe that our portfolio of undervalued stocks is less vulnerable to
volatility than the overall market.
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 11/30/99, there is no guarantee the fund will
continue to hold these securities in the future.
Performance summary
This section provides information about your fund's performance, which
Should always be considered in light of its investment strategy. Putnam
Growth and Income Fund II is designed for investors seeking primarily
capital growth but also current income potential through common stocks.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 11/30/99
Class A Class B Class C Class M
(inception dates) (1/5/95) (1/5/95) (2/1/99) (1/5/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 3.55% -2.38% 2.72% -1.98% 2.85% 1.91% 2.97% -0.60%
- ---------------------------------------------------------------------------------------------------
Life of fund 129.31 116.14 120.77 118.77 121.23 121.23 123.58 115.74
Annual average 18.46 17.03 17.54 17.32 17.59 17.59 17.85 16.99
- ---------------------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 11/30/99
S&P 500(R) Consumer
Index price index
- ------------------------------------------------------------------------------
1 year 20.90% 2.68%
- ------------------------------------------------------------------------------
Life of fund 231.59 12.49
Annual average 27.62 2.42
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Class A and class M share
performance is shown at public offering price and reflects the current
maximum sales charges of 5.75% for class A shares and 3.50% for class M
shares. Class B share performance reflects 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. 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 1/5/95
Fund's class A S&P 500 Consumer price
Date shares at POP Index index
1/5/95 9,425 10,000 10,000
11/30/95 12,310 13,498 10,261
11/30/96 15,382 17,259 10,595
11/30/97 18,811 22,180 10,788
11/30/98 20,873 27,428 10,955
11/30/99 $21,614 $33,159 $11,249
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 shares
would have been valued at $22,077 (and $21,877 with a redemption at
the end of the period); a $10,000 investment in the fund's class C
shares would have been valued at $22,123 and no CDSC would apply; a
$10,000 investment in the fund's class M shares would have been valued
at $22,358 ($21,574 at public offering price).
<TABLE>
<CAPTION>
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 11/30/99
Class A Class B Class C Class M
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Distributions (number) 4 4 3 4
- ---------------------------------------------------------------------------------------------------------
Income $0.1767 $0.0677 $0.1120 $0.1037
- ---------------------------------------------------------------------------------------------------------
Capital gains
Long-term 1.0030 1.0030 -- 1.0030
- ---------------------------------------------------------------------------------------------------------
Short-term 0.1653 0.1653 -- 0.1653
- ---------------------------------------------------------------------------------------------------------
Total $1.3450 $1.2360 $0.1120 $1.2720
- ---------------------------------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
- ---------------------------------------------------------------------------------------------------------
11/30/98 $14.82 $15.72 $14.70 $ -- $14.75 $15.28
- ---------------------------------------------------------------------------------------------------------
2/1/99* -- -- -- 14.21 -- --
- ---------------------------------------------------------------------------------------------------------
11/30/99 13.95 14.80 13.82 13.91 13.87 14.37
- ---------------------------------------------------------------------------------------------------------
Current return (end of period)
- ---------------------------------------------------------------------------------------------------------
Current dividend rate1 1.43% 1.35% 0.61% 0.78% 0.89% 0.86%
- ---------------------------------------------------------------------------------------------------------
Current 30-day
SEC yield2 1.21 1.14 0.45 0.45 0.70 0.68
- ---------------------------------------------------------------------------------------------------------
*Inception of class C shares.
1 Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
2 Based on investment income, calculated using SEC guidelines.
</TABLE>
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 12/31/99 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (1/5/95) (1/5/95) (2/1/99) (1/5/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year -0.91% -6.60% -1.58% -6.02% -1.57% -2.45% -1.40% -4.83%
- -------------------------------------------------------------------------------------------------------
Life of fund 125.08 112.15 116.72 114.72 117.04 117.04 119.48 111.78
Annual average 17.65 16.27 16.77 16.55 16.80 16.80 17.06 16.23
- -------------------------------------------------------------------------------------------------------
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.
Investment returns 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 and Poor's 500 Composite Stock Price Index is an index of common
stocks frequently used as a general measure of stock market performance.
Securities indexes assume reinvestment of all distributions and interest
payments and do not take in account brokerage fees or taxes. Securities in
the fund do not match those in the indexes 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.
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
The Board of Trustees and Shareholders
Putnam Growth and Income Fund II
We have audited the accompanying statement of assets and liabilities of
Putnam Growth and Income Fund II, including the fund's portfolio, as of
November 30, 1999, and the related statement of operations, statement of
changes in net assets and financial highlights for the year or period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audit. The statement of changes in net assets for the year ended
November 30, 1998 and the financial highlights for each of the years in
the four-year period ended November 30, 1998 were audited by other
auditors whose report dated January 12, 1999 expressed an unqualified
opinion on that financial statement and those financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1999 by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Putnam Growth and Income Fund II as of November 30, 1999, the results
of its operations, changes in its net assets and financial highlights for
the year or period then ended, in conformity with generally accepted
accounting principles.
KPMG LLP
Boston, Massachusetts
January 4, 2000
<TABLE>
<CAPTION>
The fund's portfolio
November 30, 1999
COMMON STOCKS (100.0%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Aerospace and Defense (2.2%)
- --------------------------------------------------------------------------------------------------------------------------
883,975 Boeing Co. $ 36,077,230
232,715 Lockheed Martin Corp. 4,625,211
224,080 Northrop Grumman Corp. 12,590,495
346,840 Raytheon Co. Class A 10,101,715
--------------
63,394,651
Automotive (2.5%)
- --------------------------------------------------------------------------------------------------------------------------
399,160 Ford Motor Co. 20,157,580
520,340 General Motors Corp. 37,464,480
502,935 Lear Corp. (NON) 16,628,288
--------------
74,250,348
Basic Industrial Products (4.5%)
- --------------------------------------------------------------------------------------------------------------------------
215,670 Caterpillar, Inc. 10,001,696
382,675 Cooper Industries, Inc. 16,431,108
516,760 Deere (John) & Co. 22,188,383
223,115 Eaton Corp. 17,277,468
88,965 Illinois Tool Works, Inc. 5,760,484
256,285 Minnesota Mining & Manufacturing Co. 24,491,235
600,540 Parker-Hannifin Corp. 28,262,914
153,400 W W Grainger 7,228,975
--------------
131,642,263
Business Equipment and Services (1.9%)
- --------------------------------------------------------------------------------------------------------------------------
369,575 Hewlett-Packard Co. 35,063,428
731,857 Xerox Corp. 19,805,880
--------------
54,869,308
Chemicals (3.4%)
- --------------------------------------------------------------------------------------------------------------------------
242,010 Dow Chemical Co. 28,345,421
332,415 du Pont (E.I.) de Nemours & Co., Ltd. 19,757,917
915,945 Monsanto Co. 38,641,430
208,970 PPG Industries, Inc. 12,237,806
--------------
98,982,574
Computer Equipment (0.3%)
- --------------------------------------------------------------------------------------------------------------------------
253,305 Seagate Technology, Inc. (NON) 9,372,285
Computer Services and Software (3.1%)
- --------------------------------------------------------------------------------------------------------------------------
521,030 Electronic Data Systems Corp. 33,508,742
339,009 IBM Corp. 34,939,115
653,635 NCR Corp. 21,447,398
--------------
89,895,255
Conglomerates (1.0%)
- --------------------------------------------------------------------------------------------------------------------------
145,685 Allied-Signal, Inc. 8,713,784
396,610 TRW, Inc. 20,698,084
--------------
29,411,868
Consumer Durable Goods (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
359,115 Whirlpool Corp. 21,906,015
Consumer Non Durables (2.1%)
- --------------------------------------------------------------------------------------------------------------------------
504,900 Kimberly-Clark Corp. 32,250,488
517,710 Newell Rubbermaid Inc. 16,987,359
432,610 Philip Morris Cos., Inc. 11,383,051
--------------
60,620,898
Consumer Services (0.6%)
- --------------------------------------------------------------------------------------------------------------------------
2,194,360 Service Corp. International 16,594,848
Electronics and Electrical Equipment (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
257,260 Emerson Electric Co. 14,663,820
208,790 Motorola, Inc. 23,854,258
422,430 Rockwell International Corp. 20,963,089
--------------
59,481,167
Entertainment (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
810,465 Disney (Walt) Productions, Inc. 22,591,712
Environmental Control (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,198,410 Waste Management, Inc. 19,474,163
Food and Beverages (4.9%)
- --------------------------------------------------------------------------------------------------------------------------
335,445 General Mills, Inc. 12,642,083
406,220 Heinz (H.J.) Co. 17,010,463
588,340 Kellogg Co. 19,930,018
1,078,855 Pepsi Bottling Group, Inc. (The) 18,879,963
693,515 PepsiCo, Inc. 23,969,612
115,515 The Quaker Oats Co. 7,537,354
1,012,235 Sara Lee Corp. 24,546,699
402,875 Seagram Co., Ltd. 17,550,242
--------------
142,066,434
Forest Products (2.7%)
- --------------------------------------------------------------------------------------------------------------------------
1,107,815 Boise Cascade Corp. 38,358,094
988,215 Smurfit-Stone Container Corp. (NON) 18,961,375
348,920 Weyerhaeuser Co. 21,371,350
--------------
78,690,819
Hospital Management and Medical Services (0.8%)
- --------------------------------------------------------------------------------------------------------------------------
1,004,170 Tenet Healthcare Corp. (NON) 22,405,543
Insurance and Finance (20.5%)
- --------------------------------------------------------------------------------------------------------------------------
236,255 Ace Ltd. 4,016,335
731,095 Allstate Corp. 19,145,550
296,985 American General Corp. 21,772,713
591,430 Associates First Capital Corp. 19,665,048
862,994 Bank One Corp. 30,420,539
703,320 Bank of America Corp. 41,144,220
1,221,131 Charter One Financial, Inc. 26,483,279
314,038 CIGNA Corp. 25,829,626
941,275 Citigroup, Inc. 50,711,191
267,040 Comerica, Inc. 14,153,120
384,635 Fannie Mae 25,626,307
547,515 First Union Corp. 21,181,987
789,741 FleetBoston Financial Corp. 29,862,082
227,300 Jefferson-Pilot Corp. 15,427,988
235,150 Lehman Brothers Holding, Inc. 17,959,581
464,065 Lincoln National Corp. 19,345,710
291,495 Merrill Lynch & Co., Inc. 23,501,784
189,145 Morgan (J.P.) & Co., Inc. 24,872,568
809,905 National City Corp. 20,197,006
512,365 PNC Bank Corp. 28,564,349
477,105 Reliastar Financial Corp. 20,754,068
350,050 Travelers Property Casualty Corp. 11,661,041
926,175 U.S. Bancorp 31,663,608
738,380 Washington Mutual, Inc. 21,413,020
639,270 Wells Fargo Co. 29,726,055
--------------
595,098,775
Medical Supplies and Devices (1.8%)
- --------------------------------------------------------------------------------------------------------------------------
383,315 Baxter International, Inc. 25,897,720
1,100,550 Bergen Brunswig Corp. Class A 9,079,538
487,210 Mallinckrodt Inc. 16,199,733
--------------
51,176,991
Metals and Mining (1.1%)
- --------------------------------------------------------------------------------------------------------------------------
505,885 Alcoa Inc. 33,135,468
Oil and Gas (10.7%)
- --------------------------------------------------------------------------------------------------------------------------
261,880 Atlantic Richfield Co. 25,238,685
246,150 Chevron, Inc. 21,799,659
505,395 Conoco, Inc. 13,298,206
485,300 El Paso Energy Corp. 18,684,050
460,768 Exxon Corp. 36,544,662
330,935 Halliburton Co. 12,803,048
385,985 Mobil Corp. 40,263,060
994,860 Occidental Petroleum Corp. 21,824,741
660,325 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 38,298,850
319,645 Schlumberger Ltd. 19,198,678
175,110 Texaco, Inc. 10,670,766
608,365 Tosco Corp. 16,463,878
441,095 Unocal Corp. 14,638,840
591,440 Williams Cos., Inc. 19,961,100
--------------
309,688,223
Packaging and Containers (0.9%)
- --------------------------------------------------------------------------------------------------------------------------
1,140,445 Owens-Illinois, Inc. (NON) 27,299,402
Pharmaceuticals (6.8%)
- --------------------------------------------------------------------------------------------------------------------------
833,205 Abbott Laboratories 31,661,790
951,524 American Home Products Corp. 49,479,248
502,150 Bristol-Myers Squibb Co. 36,688,334
540,020 Merck & Co., Inc. 42,391,570
680,060 Pharmacia & Upjohn, Inc. 37,190,781
--------------
197,411,723
Photography (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
338,985 Eastman Kodak Co. 20,974,697
Publishing (1.4%)
- --------------------------------------------------------------------------------------------------------------------------
265,685 McGraw-Hill, Inc. 15,061,018
379,010 Times Mirror Co. Class A 24,469,833
--------------
39,530,851
Retail (2.7%)
- --------------------------------------------------------------------------------------------------------------------------
836,675 Federated Department Stores, Inc. (NON) 39,376,017
1,393,070 Kmart Corp. (NON) 13,843,633
1,247,155 Rite Aid Corp. 9,431,610
884,585 Saks, Inc. (NON) 15,480,238
--------------
78,131,498
Specialty Consumer Products (0.7%)
- --------------------------------------------------------------------------------------------------------------------------
877,715 Hasbro, Inc. 18,925,730
Transportation (3.7%)
- --------------------------------------------------------------------------------------------------------------------------
836,297 Burlington Northern Santa Fe Corp. 24,252,613
410,320 CSX Corp. 14,592,005
456,435 Delta Air Lines, Inc. 22,479,424
345,400 FDX Corp. 14,571,563
1,900,780 Southwest Airlines Co. 31,006,474
--------------
106,902,079
Utilities (14.7%)
- --------------------------------------------------------------------------------------------------------------------------
345,245 ALLTEL Corp. 29,863,693
926,235 American Telephone & Telegraph Co. 51,753,381
706,895 Bell Atlantic Corp. 44,755,290
809,505 BellSouth Corp. 37,389,012
648,280 CiNergy Corp. 16,409,588
525,175 Consolidated Edison, Inc. 18,118,538
478,340 Dominion Resources, Inc. 21,704,678
450,360 Duke Energy Corp. 22,827,623
791,960 Edison International 20,986,940
815,705 Entergy Corp. 22,482,869
595,855 GTE Corp. 43,497,415
1,290,246 SBC Communications, Inc. 67,012,152
177,210 Sprint Corp. 12,293,944
492,390 Texas Utilities Co. 17,633,703
--------------
426,728,826
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,789,288,548) (b) $2,900,654,414
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $2,900,298,674.
(b) The aggregate identified cost on a tax basis is $2,794,712,904, resulting in gross unrealized appreciation
and depreciation of $388,988,508 and $283,046,998, respectively, or net unrealized depreciation of
$105,941,510.
(NON) Non-income-producing security.
ADR after the name of a foreign holding stands for American Depositary Receipts 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
November 30, 1999
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $2,789,288,548) (Note 1) $2,900,654,414
- -----------------------------------------------------------------------------------------------
Cash 10,434,124
- -----------------------------------------------------------------------------------------------
Dividends and other receivables 6,466,380
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 2,524,227
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 5,185,279
- -----------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 3,234
- -----------------------------------------------------------------------------------------------
Total assets 2,925,267,658
Liabilities
- -----------------------------------------------------------------------------------------------
Distributions payable to shareholders 604,809
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 13,049,269
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 5,077,998
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 3,726,978
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 271,689
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 79,046
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 5,430
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,958,821
- -----------------------------------------------------------------------------------------------
Other accrued expenses 194,944
- -----------------------------------------------------------------------------------------------
Total liabilities 24,968,984
- -----------------------------------------------------------------------------------------------
Net assets $2,900,298,674
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $2,519,720,819
- -----------------------------------------------------------------------------------------------
Distribution in excess of net investment income (604,811)
- -----------------------------------------------------------------------------------------------
Accumulated net realized gain on investment (Note 1) 269,816,800
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 111,365,866
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $2,900,298,674
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($1,285,330,135 divided by 92,165,521 shares) $13.95
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $13.95)* $14.80
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($1,406,793,243 divided by 101,787,776 shares)** $13.82
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($33,369,434 divided by 2,399,426 shares)** $13.91
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($164,524,315 divided by 11,859,863 shares) $13.87
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $13.87)* $14.37
- -----------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per class Y share
($10,281,547 divided by 736,511 shares) $13.96
- -----------------------------------------------------------------------------------------------
* 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 November 30, 1999
<S> <C>
Investment income:
- -----------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $20,137) $61,015,624
- -----------------------------------------------------------------------------------------------
Interest 2,506,315
- -----------------------------------------------------------------------------------------------
Total investment income 63,521,939
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 15,491,468
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 3,460,805
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 61,529
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 32,073
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 3,300,355
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 15,324,860
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 178,521
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 1,313,008
- -----------------------------------------------------------------------------------------------
Amortization of organization costs (Note 1) 38,802
- -----------------------------------------------------------------------------------------------
Reports to shareholders 105,727
- -----------------------------------------------------------------------------------------------
Registration fees 39,652
- -----------------------------------------------------------------------------------------------
Auditing 43,179
- -----------------------------------------------------------------------------------------------
Legal 18,627
- -----------------------------------------------------------------------------------------------
Postage 353,576
- -----------------------------------------------------------------------------------------------
Other 334,323
- -----------------------------------------------------------------------------------------------
Total expenses 40,096,505
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (548,727)
- -----------------------------------------------------------------------------------------------
Net expenses 39,547,778
- -----------------------------------------------------------------------------------------------
Net investment income 23,974,161
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 276,152,529
- -----------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Notes 1 and 3) (628,198)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments during the year (212,547,158)
- -----------------------------------------------------------------------------------------------
Net gain on investments 62,977,173
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $86,951,334
- -----------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended November 30
---------------------------------
1999 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Increase in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 23,974,161 $ 17,147,176
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments 275,524,331 238,908,465
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (212,547,158) 5,190,262
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 86,951,334 261,245,903
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (15,867,236) (11,930,300)
- ---------------------------------------------------------------------------------------------------------------
Class B (7,235,528) (4,389,527)
- ---------------------------------------------------------------------------------------------------------------
Class C (123,755) --
- ---------------------------------------------------------------------------------------------------------------
Class M (1,249,709) (840,741)
- ---------------------------------------------------------------------------------------------------------------
Class Y (140,745) --
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (97,967,221) (97,636,949)
- ---------------------------------------------------------------------------------------------------------------
Class B (117,899,429) (116,758,295)
- ---------------------------------------------------------------------------------------------------------------
Class M (13,402,187) (14,114,976)
- ---------------------------------------------------------------------------------------------------------------
Class Y (455,724) --
- ---------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 170,041,224 436,621,079
- ---------------------------------------------------------------------------------------------------------------
Total increase in net assets 2,651,024 452,196,194
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of year 2,897,647,650 2,445,451,456
- ---------------------------------------------------------------------------------------------------------------
End of year (including undistributed
net investment income of $--
and --, respectively) $2,900,298,674 $2,897,647,650
- ---------------------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Jan. 5, 1995+
operating performance Year ended November 30 to Nov. 30
- --------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $14.82 $14.87 $13.11 $11.01 $8.53
- --------------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income .17(c) .15(c) .19(c) .23 .15
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .30 1.32 2.52 2.41 2.45
- --------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .47 1.47 2.71 2.64 2.60
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.17) (.14) (.20) (.21) (.12)
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.17) (1.38) (.75) (.33) --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.34) (1.52) (.95) (.54) (.12)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.95 $14.82 $14.87 $13.11 $11.01
- --------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 3.55 10.97 22.29 24.95 30.62*
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,285,330 $1,241,384 $1,051,276 $637,204 $250,328
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .90 .96 1.00 1.09 1.35*
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.19 1.04 1.40 1.92 2.03*
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 80.27 81.62 74.51 83.97 64.18*
- --------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements 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
- --------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Jan. 5, 1995+
operating performance Year ended November 30 to Nov. 30
- --------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $14.70 $14.77 $13.03 $10.96 $8.53
- --------------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income .06(c) .04(c) .09(c) .15 .11
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .29 1.30 2.51 2.39 2.42
- --------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .35 1.34 2.60 2.54 2.53
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.06) (.03) (.11) (.14) (.10)
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.17) (1.38) (.75) (.33) --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.23) (1.41) (.86) (.47) (.10)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.82 $14.70 $14.77 $13.03 $10.96
- --------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 2.72 10.07 21.42 23.98 29.72*
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,406,793 $1,480,683 $1,242,817 $763,438 $259,789
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.65 1.71 1.75 1.84 2.03*
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .44 .29 .65 1.17 1.36*
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 80.27 81.62 74.51 83.97 64.18*
- --------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements 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 Feb. 1, 1999+
operating performance to Nov. 30
- --------------------------------------------------------------------------------------------------------------------------------
1999
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value,
beginning of period $14.21
- --------------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (c) .06
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments (.25)
- --------------------------------------------------------------------------------------------------------------------------------
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 $13.91
- --------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) (1.36)*
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $33,369
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.37*
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .42*
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 80.27
- --------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements 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 Jan. 5, 1995+
operating performance Year ended November 30 to Nov. 30
- --------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $14.75 $14.81 $13.06 $10.98 $8.53
- --------------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income .10(c) .08(c) .13(c) .18 .12
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .29 1.31 2.51 2.39 2.43
- --------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .39 1.39 2.64 2.57 2.55
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.10) (.07) (.14) (.16) (.10)
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.17) (1.38) (.75) (.33) --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.27) (1.45) (.89) (.49) (.10)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.87 $14.75 $14.81 $13.06 $10.98
- --------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 2.97 10.37 21.73 24.28 30.04*
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $164,524 $169,631 $151,359 $95,576 $33,406
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.40 1.46 1.50 1.59 1.80*
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .69 .54 .90 1.42 1.58*
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 80.27 81.62 74.51 83.97 64.18*
- --------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements 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 Y
- --------------------------------------------------------------------------------------------------------------------------------
For the period
Per-share Year ended Oct 1, 1998+
operating performance Nov. 30 to Nov. 30
- --------------------------------------------------------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value,
beginning of period $14.83 $12.69
- --------------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income .21(c) .03(c)
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .30 2.11
- --------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .51 2.14
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.21) --
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (1.17) --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.38) --
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $13.96 $14.83
- --------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 3.80 16.86*
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $10,282 $5,949
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .65 .12*
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.45 1.82*
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 80.27 81.62
- --------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets includes amounts paid through expense offset arrangements 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
November 30, 1999
Note 1
Significant accounting policies
Putnam Growth and Income Fund II, ("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, class C, class M and class Y shares.
Effective February 1, 1999, the fund began offering class C 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 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. Class Y shares, which are sold at net asset value, are generally
subject to the same expenses as class A, class B, class C and class M
shares, but do not bear a distribution fee. Class Y shares are sold to
defined contribution plans that invest at least $150 million in a
combination of Putnam funds and other accounts managed by affiliates of
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
manager, a wholly-owned subsidiary of Putnam Investments, Inc.
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.
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 Management. 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.
E) 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
November 30, 1999, the fund had no borrowings against the line of credit.
F) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies. It is also the intention of the fund to distribute an amount
sufficient to avoid imposition of any excise tax under Section 4982 of the
Internal Revenue Code of 1986, 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.
G) 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 at least 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. These
differences include temporary and permanent differences of losses on wash
sale transactions, organization costs and dividends payable.
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 November 30,
1999, the fund reclassified $38,001 to decrease distribution in excess of
net investment income and $38,001 to decrease paid-in-capital. The
calculation of net investment income per share in the financial highlights
table excludes these adjustments.
H) 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% 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 November 30, 1999, fund expenses were reduced by
$548,727 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 $2,957
has been allocated to the fund, and an additional fee for each Trustees
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 November 30, 1999, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $747,057 and $36,399 from the sale
of class A and class M shares, respectively, and received $2,689,243 and
$9,302 in contingent deferred sales charges from redemptions of class B
and class C shares. A deferred sales charge of up to 1% is assessed on
certain redemptions of class A shares. For the year ended November 30,
1999, Putnam Mutual Funds Corp., acting as underwriter received $32,919 on
class A redemptions.
Note 3
Purchase and sales of securities
During the year ended November 30, 1999, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $2,391,938,748 and $2,422,239,416 respectively. There were no
purchases and sales of U.S. government obligations.
Note 4
Capital shares
At November 30, 1999, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended November 30, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 18,669,104 $272,494,542
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,053,815 109,354,708
- -----------------------------------------------------------------------------
26,722,919 381,849,250
Shares
repurchased (18,299,678) (264,906,773)
- -----------------------------------------------------------------------------
Net increase 8,423,241 $116,942,477
- -----------------------------------------------------------------------------
Year ended November 30, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 20,442,932 $292,893,989
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 7,775,781 105,381,506
- -----------------------------------------------------------------------------
28,218,713 398,275,495
Shares
repurchased (15,156,694) (215,190,365)
- -----------------------------------------------------------------------------
Net increase 13,062,019 $183,085,130
- -----------------------------------------------------------------------------
Year ended November 30, 1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 15,688,548 $226,670,283
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,757,178 117,408,543
- -----------------------------------------------------------------------------
24,445,726 344,078,826
Shares
repurchased (23,367,215) (335,758,781)
- -----------------------------------------------------------------------------
Net increase 1,078,511 $ 8,320,045
- -----------------------------------------------------------------------------
Year ended November 30, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 23,784,618 $338,432,197
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,487,949 114,094,241
- -----------------------------------------------------------------------------
32,272,567 452,526,438
Shares
repurchased (15,729,296) (221,639,841)
- -----------------------------------------------------------------------------
Net increase 16,543,271 $230,886,597
- -----------------------------------------------------------------------------
For the period February 1, 1999
(commencement of operations)
to November 30, 1999
- -----------------------------------------------------------------------------
Class C Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,608,982 $38,655,593
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 7,297 108,005
- -----------------------------------------------------------------------------
2,616,279 38,763,598
Shares
repurchased (216,853) (3,121,646)
- -----------------------------------------------------------------------------
Net increase 2,399,426 $35,641,952
- -----------------------------------------------------------------------------
Year ended November 30, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 1,995,704 $28,793,256
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestments of
distributions 1,035,562 13,950,645
- -----------------------------------------------------------------------------
3,031,266 42,743,901
Shares
repurchased (2,670,368) (38,457,556)
- -----------------------------------------------------------------------------
Net increase 360,898 $ 4,286,345
- -----------------------------------------------------------------------------
Year ended November 30, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 2,642,075 $37,737,716
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestments of
distributions 1,052,351 14,186,957
- -----------------------------------------------------------------------------
3,694,426 51,924,673
Shares
repurchased (2,415,573) (34,283,460)
- -----------------------------------------------------------------------------
Net increase 1,278,853 $17,641,213
- -----------------------------------------------------------------------------
Year ended November 30, 1999
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 490,789 $ 7,118,518
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestments of
distributions 43,598 596,469
- -----------------------------------------------------------------------------
534,387 7,714,987
Shares
repurchased (198,923) (2,864,582)
- -----------------------------------------------------------------------------
Net increase 335,464 $ 4,850,405
- -----------------------------------------------------------------------------
For the period October 1, 1998
(commencement of operations)
to November 30, 1998
- -----------------------------------------------------------------------------
Class Y Shares Amount
- -----------------------------------------------------------------------------
Shares sold 482,326 $6,175,945
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestments of
distributions -- --
- -----------------------------------------------------------------------------
482,326 6,175,945
Shares
repurchased (81,279) (1,167,806)
- -----------------------------------------------------------------------------
Net increase 401,047 $5,008,139
- -----------------------------------------------------------------------------
Note 5
Change in independent accountants
(unaudited)
Based on the recommendation of the Audit Committee of the fund, the Board
of Trustees has determined not to retain PricewaterhouseCoopers LLP as
this fund's independent accountant and voted to appoint KPMG LLP for the
fund's fiscal year ended November 30, 1999. During the two previous fiscal
years, PricewaterhouseCoopers LLP audit reports contained no adverse
opinion or disclaimer of opinion; nor were its reports qualified or
modified as to uncertainty, audit scope, or accounting principle. Further,
in connection with its audits for the two previous fiscal years and
through July 14, 1999, there were no disagreements between the fund and
PricewaterhouseCoopers LLP on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedures,
which if not resolved to the satisfaction of PricewaterhouseCoopers LLP
would have caused it to make reference to the disagreements in its report
on the financial statements for such years.
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund
hereby designates $180,770,077 as capital gain, for its taxable year ended
November 30, 1999.
The fund has designated 51.21% 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
KPMG 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 and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
Vice President
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.
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
AN023-57652 949/990/096 1/00
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- -----------------------------------------------------------------------
Putnam Growth and Income Fund II
Supplement to Annual Report dated 11-30-99
The following information has been prepared to provide class Y
shareholders with a performance overview specific to their holdings.
Class Y shares are offered exclusively to defined contribution plans,
including corporate IRAs, investing $150 million or more in one or more
of Putnam's funds or private accounts. Performance of class Y shares,
which incur neither a front-end load, distribution fee, nor contingent
deferred sales charge, will differ from performance of class A, class
B, class C, and class M shares, which are discussed more extensively in
the annual report.
ANNUAL RESULTS AT A GLANCE
- -----------------------------------------------------------------------
Total return for periods ended 11/30/99: NAV
1 year 3.80%
Life of fund (since class A inception, 1/5/95) 131.69
Annual average 18.71
Share value:
November 30, 1998 $14.83
November 30, 1999 13.96
- -----------------------------------------------------------------------
Distributions: No. Income Capital gains Total
4 $0.245 $1.135 $1.380
- -----------------------------------------------------------------------
Past performance is not indicative of future results. Class Y shares
are offered without an initial sales charge or CDSC. The class Y share
returns shown for periods before their inception (10/1/98) are derived
from the historical performance of class A shares for such periods, but
have not been adjusted to reflect differences in expenses, which are
lower for class Y shares than for class A shares. All returns assume
reinvestment of distributions at net asset value. Investment return
will fluctuate and may involve the loss of principal. Performance of
other share classes will vary. See full report for information on
comparative benchmarks. If you have questions, please consult your fund
prospectus or call Putnam toll free at 1-800-752-9894.
