-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VE3L9A6Z7lT8d7kxosgxTZBMh/SoIL0rKYHAHNZ5Ee56tYBiXP3+yn8F/1kvTqGK mT3fL7DNcrzyRtLxKS3Lmw== /in/edgar/work/20000626/0000928816-00-000286/0000928816-00-000286.txt : 20000920 0000928816-00-000286.hdr.sgml : 20000920 ACCESSION NUMBER: 0000928816-00-000286 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000430 FILED AS OF DATE: 20000626 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM FUND FOR GROWTH & INCOME CENTRAL INDEX KEY: 0000081260 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] IRS NUMBER: 046013678 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-00781 FILM NUMBER: 660566 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ STREET 2: MAIKLSTOP A 14 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921000 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM GROWTH FUND DATE OF NAME CHANGE: 19841025 N-30D 1 0001.txt PUTNAM FUND FOR GROWTH AND INCOME The Putnam Fund for Growth and Income SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK 4-30-00 [SCALE LOGO OMITTED] 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 the first half of fiscal year 2000. In the following report, the fund's managers discuss performance for the period and prospects for the months ahead. This is the last letter to you and the other shareholders of The Putnam Fund for Growth and Income 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. As of July 1, 2000, 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 Putnam 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 June 21, 2000 REPORT FROM THE FUND MANAGERS David L. King Hugh H. Mullin Sheldon N. Simon The Putnam Fund for Growth and Income struggled to defy the odds stacked against value investing during the first six months of its fiscal year 2000. Blazing performance by a narrow band of growth companies preempted investors' attention and resulted in continuing redistribution of investment dollars away from traditional companies to the stocks of what are referred to today as "new economy" companies. However, the formerly intractable bull market in growth stocks experienced a heart-stopping correction in early March and volatility continued through the end of the semiannual period. Investors watched their growth stocks stumble, while value stocks rebounded vigorously. As your fund passed its fiscal midpoint on April 30, 2000, there were encouraging signs of a change in investor sentiment and a broadening of the market. However, gains late in the period were not sufficient to correct for poor performance during the prior four months. Total return for 6 months ended 4/30/00 Class A Class B Class C Class M NAV POP NAV CDSC NAV CDSC NAV POP - ---------------------------------------------------------------------- -4.65% -10.15% -5.02% -9.37% -5.04% -5.90% -4.89% -8.22% - ---------------------------------------------------------------------- Past performance is not indicative of future results. Performance information for longer periods and explanation of performance calculation methods begin on page 6. * FUND TAKES ADVANTAGE OF TOP NAMES DURING WEAKNESS The Federal Reserve Board, concerned about signs of an increase in inflation, raised short-term interest rates three times during the semiannual period. The yield curve inverted, a phenomenon that historically has signaled a slowing economy and possible recession. As traditional old economy companies bore the weight of the rate increases, the divergence between growth and value styles widened to an unprecedented degree. As a result, we have had a veritable field day, gathering up the stocks of top-name companies that reached attractive valuations after being discarded by short-sighted momentum investors. We believe the quality of your fund's portfolio has been significantly enhanced through shrewd and opportunistic stock selection. [GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS] TOP INDUSTRY SECTORS* Banking 11.3% Pharmaceuticals 9.3% Oil and gas 8.5% Regional Bells 7.1% Computers 6.5% Footnote reads: *Based on net assets as of 4/30/00. Holdings will vary over time. * QUALITY IS KEY Superior companies trading at steeply discounted prices became a key theme that characterized the investment environment during the period. There are more than a few stories to illustrate this point; one of our favorites is Disney. Shares of the Walt Disney Company, priced well beyond the reach of value investors for more than a decade, were snapped up by your fund as they entered into value territory. This world-class entertainment company, perhaps best known for its theme parks and animated motion pictures, is also involved in resorts, consumer products, the Internet, and direct marketing. It operates the ABC television network and the ABC radio networks and produces television programming, musical recordings, and live stage plays. We believe the company's profitability will grow substantially and the success of its Media Networks business is leading the way. * FUND INCREASES EXPOSURE TO PHARMACEUTICALS Not since the mid 1990s have pharmaceutical companies represented such a large portion of the fund. Typically these companies are too pricey to be considered for inclusion in value portfolios. Share prices fell into the value range for a number of reasons, not the least of which was concern over possible governmental regulations of Medicare and Medicaid that might affect pricing of drugs. We established positions in Schering-Plough and Eli Lilly during the period. Both companies are involved in the business of discovering, developing, manufacturing, and selling drugs worldwide. Schering-Plough is enjoying strong market growth of its allergy medication, Claritin, while Eli Lilly has won approval in 35 countries to market Evista, a drug designed to prevent osteoporosis in postmenopausal women. Although pharmaceutical stocks have been out of favor, they continue to have strong fundamentals and have already begun to rebound. We believe their value will appreciate over the long term. * BARGAINS ABOUND IN FINANCIAL SECTOR Many financial companies have continued to grow earnings and dividends despite the pressure of rising interest rates. Their ability to weather such adverse conditions makes us quite confident that financials are well positioned for strong performance in the future. Bank of New York and Mellon Financial Corp. exemplify the type of high-quality, well-run, rapidly growing companies we target. We added to the fund's positions in these stocks as their valuations reached attractive levels. "Perhaps as early as the end of the fund's fiscal year there should be a slowdown evident. If that should be the case, the portfolio is well positioned to deliver relatively better performance than the overall market." - -- Sheldon N. Simon, manager, The Putnam Fund for Growth and Income Your fund has long held shares of Fannie Mae and added a position in Freddie Mac, the other major government-sponsored mortgage reseller, during the period. These shareholder-owned companies were created by Congress to ensure that a continuous flow of funds is available to mortgage lenders, thereby facilitating home ownership for low- to middle-income Americans. Fannie Mae and Freddie Mac buy mortgages from lenders, repackage them, and sell them as fixed-income securities. Freddie Mac has financed one out of every six homes in the United States; Fannie Mae can claim one of the best multiyear earnings growth records of any U.S. company: roughly 13% per year for more than 20 years. We believe these companies will continue their tradition of strong earnings growth to the benefit of the funds' shareholders. * RISING OIL PRICES CREATED OPPORTUNITIES Your fund has a reasonably large exposure to the energy sector, which has benefited from much higher prices for oil and natural gas. Extra benefits were reaped when we were able to buy stocks of leading companies weakened by the impact of higher oil prices. Procter & Gamble, a premier manufacturer of home products, including cleansers, laundry-care and health-care goods, and cosmetics, uses petroleum in several of its products. Share prices suffered a devastating blow after P&G announced it had missed an earnings target. Higher oil prices were responsible for the shortfall. Valuations for the entire consumer staples sector seemed to fall in sympathy with P&G. [GRAPHIC OMITTED: TOP 10 HOLDINGS] TOP 10 HOLDINGS ExxonMobil Oil and gas IBM Corp. Computers Citigroup, Inc. Financial SBC Communications, Inc. Regional Bells Merck & Co, Inc. Pharmaceuticals AT&T Corp. Telecommunications Hewlett-Packard Co. Computers Royal Dutch Petroleum Oil and gas Pharmacia Corp. Pharmaceuticals Bank of America Corp. Banking Footnote reads: These holdings represent 22.9% of the fund's net assets as of 4/30/00. Portfolio holdings will vary over time. Although your fund did not own Procter & Gamble at the time, we did buy shares when the price fell, along with shares of other strong brands, including Avon Products and Clorox. In our opinion, the company will soon resume its long-term record of strong earnings growth. While these stocks, as well as others mentioned in this report, were viewed favorably at the end of the period, all are subject to review in accordance with your fund's investment strategy, and may change in the future. * FUND STRATEGY FOCUSES ON LONG-TERM PERFORMANCE We have positioned the fund to perform well in an environment characterized by slower economic growth and no large increase in inflation. We believe recent inflation is primarily a short-term phenomenon that reflects the strength of the economy and increased energy prices. Inflation remains at a historically low level and appears to be under control, thanks to continuing productivity gains and Fed intervention. We believe the Fed is nearing the end of its tightening process and that an economic slowdown will be achieved in the coming months, perhaps by the end of your fund's fiscal year. A slowing economy will be a positive thing for interest rates, and financial stocks, in particular, should fare better. You have our assurances that we will continue to take advantage of rare buying opportunities while managing the fund with an eye on positive, long-term performance. Whether the market continues to exhibit extreme volatility or begins to assume a more balanced profile, your fund plays an important role in a diversified investment program and is uniquely positioned to provide favorable returns with less volatility over a market cycle. The views expressed here are exclusively those of Putnam Management. They are not meant as investment advice. Although the described holdings were viewed favorably as of 4/30/00, 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. The Putnam Fund for Growth and Income is designed for investors seeking capital growth and current income. TOTAL RETURN FOR PERIODS ENDED 4/30/00 Class A Class B Class C Class M (inception dates) (11/6/57) (4/27/92) (7/26/99) (5/1/95) NAV POP NAV CDSC NAV CDSC NAV POP - ------------------------------------------------------------------------------ 6 months -4.65% -10.15% -5.02% -9.37% -5.04% -5.90% -4.89% -8.22% - ------------------------------------------------------------------------------ 1 year -9.11 -14.33 -9.83 -13.93 -9.75 -10.57 -9.59 -12.77 - ------------------------------------------------------------------------------ 5 years 110.12 98.02 102.31 100.31 102.52 102.52 104.83 97.62 Annual average 16.01 14.64 15.13 14.91 15.16 15.16 15.42 14.59 - ------------------------------------------------------------------------------ 10 years 279.02 257.25 251.01 251.01 251.76 251.76 260.09 247.40 Annual average 14.25 13.58 13.38 13.38 13.40 13.40 13.67 13.26 - ------------------------------------------------------------------------------ Life of fund Annual average 13.46 13.31 12.39 12.39 12.61 12.61 12.67 12.58 - ------------------------------------------------------------------------------ COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/00 S&P 500 [REGISTRATION MARK] Consumer Index price index - --------------------------------------------------------- 6 months 7.19% 1.84% - --------------------------------------------------------- 1 year 10.13 3.01 - --------------------------------------------------------- 5 years 208.37 12.71 Annual average 25.25 2.42 - --------------------------------------------------------- 10 years 458.94 32.82 Annual average 18.78 2.88 - --------------------------------------------------------- Life of fund Annual average 12.56 4.33 - --------------------------------------------------------- Past performance is no assurance of future results. More recent returns may be more or less than those shown. Returns for class A and class M shares reflect the current maximum initial sales charges of 5.75% and 3.50%, respectively. Class B share returns for the 1-, 5-, and 10-year (where available) and life-of-fund periods reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declines to 1% in the sixth year, and is eliminated thereafter. Returns shown for class B and class M shares for periods prior to their inception are derived from the historical performance of class A shares, adjusted to reflect both the initial sales charge or CDSC, if any, currently applicable to each class and in the case of class B and class M shares the higher operating expenses applicable to such shares. For class C shares, returns for periods prior to their inception are derived from the historical performance of class A shares, adjusted to reflect both the CDSC currently applicable to class C shares, which is 1% for the first year and is eliminated thereafter, and the higher operating expenses applicable to class C shares. All returns assume reinvestment of distributions at NAV. Investment return and principal value will fluctuate so that an investor's shares when redeemed may be worth more or less than their original cost. PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 4/30/00 Class A Class B Class C Class M - ------------------------------------------------------------------------- Distributions (number) 2 2 2 2 - ------------------------------------------------------------------------- Income $0.180 $0.103 $0.137 $0.130 - ------------------------------------------------------------------------- Capital gains Long-term 1.318 1.318 1.318 1.318 - ------------------------------------------------------------------------- Short-term 0.319 0.319 0.319 0.319 - ------------------------------------------------------------------------- Total $1.817 $1.740 $1.774 $1.767 - ------------------------------------------------------------------------- Share value: NAV POP NAV NAV NAV POP - ------------------------------------------------------------------------- 10/31/99 $21.10 $22.39 $20.82 $21.08 $20.97 $21.73 - ------------------------------------------------------------------------- 4/30/00 18.35 19.47 18.09 18.30 18.23 18.89 - ------------------------------------------------------------------------- Current return (end of period) - ------------------------------------------------------------------------- Current dividend rate1 1.96% 1.85% 1.17% 1.51% 1.45% 1.40% - ------------------------------------------------------------------------- Current 30-day SEC yield2 1.39 1.31 0.64 0.64 0.89 0.86 - ------------------------------------------------------------------------- 1Income portion of most recent distribution, annualized and divided by NAV or POP at end of period. 2Based on investment income, calculated using SEC guidelines. TOTAL RETURN FOR PERIODS ENDED 3/31/00 (most recent calendar quarter) Class A Class B Class C Class M (inception dates) (11/6/57) (4/27/92) (7/26/99) (5/1/95) NAV POP NAV CDSC NAV CDSC NAV POP - ------------------------------------------------------------------------------ 6 months 0.33% -5.44% 0.02% -4.56% -0.06% -0.98% 0.11% -3.38% - ------------------------------------------------------------------------------ 1 year -2.97 -8.57 -3.64 -8.02 -3.60 -4.47 -3.43 -6.80 - ------------------------------------------------------------------------------ 5 years 115.84 103.49 108.09 106.09 108.06 108.06 110.38 103.04 Annual average 16.63 15.27 15.78 15.56 15.78 15.78 16.04 15.22 - ------------------------------------------------------------------------------ 10 years 268.28 247.11 241.31 241.31 241.99 241.99 249.82 237.57 Annual average 13.92 13.25 13.06 13.06 13.08 13.08 13.34 12.94 - ------------------------------------------------------------------------------ Life of fund Annual average 13.49 13.33 12.41 12.41 12.64 12.64 12.70 12.60 - ------------------------------------------------------------------------------ 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. TERMS AND DEFINITIONS Total return shows how the value of the fund's shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund. Class A shares are generally subject to an initial sales charge. Class B shares may be subject to a sales charge upon redemption. Class C shares are not subject to an initial sales charge and are subject to a contingent deferred sales charge only if the shares are redeemed during the first year. Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no sales charge on redemption. Net asset value (NAV) is the value of all your fund's assets, minus any liabilities, divided by the number of outstanding shares, not including any initial or contingent deferred sales charge. Public offering price (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume the 5.75% maximum sales charge for class A shares and 3.50% for class M shares. Contingent deferred sales charge (CDSC) is a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund's class B CDSC declines from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase. COMPARATIVE BENCHMARKS Standard & Poor's 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. WELCOME TO WWW.PUTNAMINV.COM Now you can use your PC to get up-to-date information about your funds, learn more about investing and retirement planning, and access market news and economic outlooks from Putnam. VISIT PUTNAM'S SITE ON THE WORLD WIDE WEB FOR: * the benefits of investing with Putnam * Putnam's money management philosophy * complete fund information, daily pricing and long-term performance * your current account value, portfolio value and transaction history * the latest on new funds and other Putnam news You can also read Putnam economist Dr. Robert Goodman's commentary and Putnam's Capital Markets outlook, search for a particular fund by name or objective, use our glossary to decode investment terms . . . and much more. The site can be accessed through any of the major online services (America Online, CompuServe, Prodigy) that offer web access. Of course, you can also access it via Netscape or Microsoft Internet Explorer, using an independent Internet service provider. New features will be added to the site regularly. So be sure to bookmark us at http://www.putnaminv.com A GUIDE TO THE FINANCIAL STATEMENTS These sections of the report 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.
THE FUND'S PORTFOLIO April 30, 2000 (Unaudited) COMMON STOCKS (97.8%) (a) NUMBER OF SHARES VALUE Aerospace/Defense (2.1%) - ------------------------------------------------------------------------------------------------------------------- 7,589,900 Boeing Co. $ 301,224,156 115,800 General Dynamics Corp. 6,774,300 6,531,500 Lockheed Martin Corp. 162,471,063 385,300 Raytheon Co. Class A 8,837,819 3,127,300 United Technologies Corp. 194,478,969 ---------------- 673,786,307 Airlines (0.1%) - ------------------------------------------------------------------------------------------------------------------- 162,600 AMR Corp. (NON) 5,538,563 470,319 Delta Air Lines, Inc. 24,809,327 ---------------- 30,347,890 Automotive (2.1%) - ------------------------------------------------------------------------------------------------------------------- 5,670,700 Ford Motor Co. 310,116,406 3,649,000 General Motors Corp. 341,637,625 102,200 TRW, Inc. 5,978,700 ---------------- 657,732,731 Banking (11.3%) - ------------------------------------------------------------------------------------------------------------------- 1,040,000 AmSouth Bancorporation 15,145,000 10,542,389 Bank of America Corp. 516,577,061 4,477,800 Bank of New York Company, Inc. 183,869,663 7,079,643 Bank One Corp. 215,929,112 795,300 BB&T Corp. 21,174,863 3,181,000 Charter One Financial, Inc. 64,614,063 2,815,800 Chase Manhattan Corp. 202,913,588 3,493,600 Comerica, Inc. 148,041,300 2,717,300 Freddie Mac 124,825,969 328,400 Fifth Third Bancorp 20,730,250 512,000 First Tennessee National Corp. 9,728,000 6,822,500 First Union Corp. 217,467,188 9,348,500 Firstar Corp. 232,543,938 8,326,797 FleetBoston Financial Corp. 295,080,869 1,690,000 Huntington Bancshares, Inc. 30,842,500 598,600 KeyCorp 11,074,100 4,358,600 Mellon Financial Corp. 140,020,025 462,896 Morgan (J.P.) & Co., Inc. 59,424,274 4,644,900 National City Corp. 78,963,300 4,286,600 PNC Bank Corp. 187,002,925 122,600 State Street Corp. 11,876,875 985,000 Summit Bancorp 24,994,375 683,000 SunTrust Banks, Inc. 34,662,250 2,385,000 Synovus Financial Corp. 44,271,563 6,697,600 U.S. Bancorp 136,045,000 6,170,000 Washington Mutual, Inc. 157,720,625 9,642,150 Wells Fargo Co. 395,930,784 135,400 Zions Bancorp 5,619,100 ---------------- 3,587,088,560 Beverage (1.6%) - ------------------------------------------------------------------------------------------------------------------- 3,383,465 Anheuser-Busch Cos., Inc. 238,745,749 729,800 Coca-Cola Enterprises, Inc. 15,553,863 7,386,000 PepsiCo, Inc. 270,973,875 ---------------- 525,273,487 Building Materials (--%) - ------------------------------------------------------------------------------------------------------------------- 300,600 Masco Corp. 6,744,713 Cable Television (0.5%) - ------------------------------------------------------------------------------------------------------------------- 1,705,000 Comcast Corp. Class A (NON) 68,306,563 907,300 MediaOne Group Inc. (NON) 68,614,563 275,100 USA Networks, Inc. (NON) 6,327,300 ---------------- 143,248,426 Chemicals (3.6%) - ------------------------------------------------------------------------------------------------------------------- 1,217,900 Air Products & Chemicals, Inc. 37,831,019 1,600,000 Avery Dennison Corp. 105,000,000 93,380 CK Witco Corp. 1,097,215 2,278,200 Dow Chemical Co. 257,436,600 5,658,297 du Pont (E.I.) de Nemours & Co., Ltd. 268,415,464 1,750,000 Eastman Chemical Co. 91,546,875 2,866,955 Minnesota Mining & Manufacturing Co. 247,991,608 1,921,371 PPG Industries, Inc. 104,474,548 137,400 Praxair, Inc. 6,105,713 1,156,600 Rohm & Haas Co. 41,203,875 ---------------- 1,161,102,917 Commercial and Consumer Services (0.2%) - ------------------------------------------------------------------------------------------------------------------- 1,046,300 Cendant Corp. (NON) 16,152,256 138,900 Cintas Corp. 5,503,913 229,800 H&R Block, Inc. 9,608,513 6,271,600 Service Corp. International 32,141,950 ---------------- 63,406,632 Communications Equipment (--%) - ------------------------------------------------------------------------------------------------------------------- 121,400 Scientific-Atlanta, Inc. 7,898,588 Computers (6.5%) - ------------------------------------------------------------------------------------------------------------------- 584,800 3Com Corp. (NON) 23,063,050 418,300 Apple Computer, Inc. (NON) 51,895,344 8,422,600 Compaq Computer Corp. 246,361,050 493,900 Gateway, Inc. (NON) 27,287,975 4,629,700 Hewlett-Packard Co. 625,009,500 8,039,644 IBM Corp. 897,425,262 555,000 Lexmark International Group, Inc. Class A (NON) 65,490,000 1,285,986 NCR Corp. (NON) 49,671,209 1,652,800 Seagate Technology, Inc. (NON) 83,982,900 ---------------- 2,070,186,290 Conglomerates (0.9%) - ------------------------------------------------------------------------------------------------------------------- 1,923,100 Honeywell International Inc. 107,693,600 3,998,200 Tyco International Ltd. 183,667,313 ---------------- 291,360,913 Consumer Finance (0.3%) - ------------------------------------------------------------------------------------------------------------------- 351,400 Capital One Financial Corp. 15,373,750 2,124,000 MBNA Corp. 56,418,750 277,800 Providian Financial Corp. 24,463,763 ---------------- 96,256,263 Consumer Goods (2.0%) - ------------------------------------------------------------------------------------------------------------------- 2,420,900 Avon Products, Inc. 100,467,350 1,479,500 Clorox Co. 54,371,625 629,800 Colgate-Palmolive Co. 35,977,325 971,300 Gillette Co. 35,938,100 4,866,410 Kimberly-Clark Corp. 282,555,931 1,968,000 Procter & Gamble Co. 117,342,000 496,800 Unilever NV (Netherlands) 22,635,450 ---------------- 649,287,781 Distribution (0.3%) - ------------------------------------------------------------------------------------------------------------------- 2,207,300 SYSCO Corp. 83,049,663 Electric Utilities (4.1%) - ------------------------------------------------------------------------------------------------------------------- 2,800,000 Carolina Power & Light Co. 102,375,000 3,585,000 Consolidated Edison, Inc. 126,147,188 2,176,833 Dominion Resources, Inc. 97,957,485 4,058,620 Duke Energy Corp. 233,370,650 3,319,500 Edison International 63,277,969 8,400,000 Entergy Corp. 213,675,000 3,554,800 PG&E Corp. 92,202,625 2,675,000 Public Service Enterprise Group, Inc. 95,965,625 3,303,600 Reliant Energy, Inc. 87,958,350 5,273,300 Texas Utilities Co. 177,644,294 ---------------- 1,290,574,186 Electrical Equipment (1.2%) - ------------------------------------------------------------------------------------------------------------------- 5,034,141 Emerson Electric Co. 276,248,487 2,476,000 Rockwell International Corp. 97,492,500 ---------------- 373,740,987 Electronics (1.7%) - ------------------------------------------------------------------------------------------------------------------- 194,700 Advanced Micro Devices, Inc. (NON) 17,084,925 357,600 American Power Conversion Corp. (NON) 12,627,750 366,100 Atmel Corp. (NON) 17,916,019 416,600 LSI Logic Corp. (NON) 26,037,500 398,000 Micron Technology, Inc. 55,421,500 3,088,300 Motorola, Inc. 367,700,719 189,400 National Semiconductor Corp. (NON) 11,506,050 268,600 SCI Systems, Inc. (NON) 14,302,950 ---------------- 522,597,413 Energy (1.4%) - ------------------------------------------------------------------------------------------------------------------- 265,700 Baker Hughes, Inc. 8,452,581 3,403,700 Halliburton Co. 150,400,994 3,333,200 Schlumberger Ltd. 255,198,125 588,925 Transocean Sedco Forex Inc. 27,679,475 ---------------- 441,731,175 Entertainment (0.3%) - ------------------------------------------------------------------------------------------------------------------- 1,931,258 Viacom, Inc. Class B (NON) 105,012,154 Financial (4.9%) - ------------------------------------------------------------------------------------------------------------------- 646,700 American Express Co. 97,045,419 1,250,000 Associates First Capital Corp. 27,734,375 14,616,600 Citigroup, Inc. 868,774,163 453,200 CIT Group, Inc. (The) 7,676,075 6,385,110 Fannie Mae 385,101,947 3,831,200 Household International, Inc. 159,952,600 150,400 MGIC Investment Corp. 7,191,000 157,900 SLM Holding Corp. 4,944,244 ---------------- 1,558,419,823 Food (1.8%) - ------------------------------------------------------------------------------------------------------------------- 798,900 Archer Daniels Midland Co. 7,939,069 124,800 Bestfoods 6,271,200 194,400 Campbell Soup Co. 5,054,400 2,645,000 ConAgra, Inc. 49,924,375 799,500 General Mills, Inc. 29,081,813 3,502,300 Heinz (H.J.) Co. 119,078,200 4,140,000 Kellogg Co. 101,171,250 1,718,600 Quaker Oats Co. (The) 112,031,238 869,800 Ralston-Ralston Purina Group 15,384,588 9,212,802 Sara Lee Corp. 138,192,030 ---------------- 584,128,163 Health Care Services (2.3%) - ------------------------------------------------------------------------------------------------------------------- 370,100 Aetna Inc. 21,419,538 3,615,727 Baxter International, Inc. 235,474,221 318,900 Cardinal Health, Inc. 17,559,431 3,446,322 CIGNA Corp. 274,844,180 1,654,124 Columbia/HCA Healthcare Corp. 47,039,151 4,922,900 Tenet Healthcare Corp. (NON) 125,533,950 95,800 UnitedHealth Group, Inc. 6,388,633 ---------------- 728,259,104 Household Furniture and Appliances (0.1%) - ------------------------------------------------------------------------------------------------------------------- 1,615,500 Newell Rubbermaid Inc. 40,690,406 Insurance (3.3%) - ------------------------------------------------------------------------------------------------------------------- 774,000 AFLAC Inc. 37,780,875 6,020,200 Allstate Corp. 142,227,225 4,326,574 American General Corp. 242,288,144 3,040,188 AON Corp. 82,275,088 150,900 AXA Financial, Inc. 4,923,113 2,169,600 Chubb Corp. (The) 138,040,800 98,600 Cincinnati Financial Corp. 3,974,813 3,229,600 Hartford Financial Services Group 168,544,750 106,900 Jefferson-Pilot Corp. 7,115,531 4,865,000 Lincoln National Corp. 169,362,813 257,800 Loews Corp. 14,211,225 80,300 Progressive Corp. (The) 5,254,631 76,200 St. Paul Cos., Inc. 2,714,625 717,000 Torchmark Corp. 17,969,813 ---------------- 1,036,683,446 Investment Banking/Brokerage (1.9%) - ------------------------------------------------------------------------------------------------------------------- 149,200 Franklin Resources, Inc. 4,811,700 492,100 Goldman Sachs Group, Inc. (The) 45,888,325 1,001,300 Lehman Brothers Holding, Inc. 82,169,181 2,527,300 Merrill Lynch & Co., Inc. 257,626,644 1,747,900 Morgan Stanley, Dean Witter, Discover and Co. 134,151,325 1,943,800 Paine Webber Group Inc. 85,284,225 161,100 T. Rowe Price Associates, Inc. 6,141,938 ---------------- 616,073,338 Lodging/Tourism (0.2%) - ------------------------------------------------------------------------------------------------------------------- 982,400 Carnival Corp. Class A 24,437,200 477,900 Royal Caribbean Cruises Ltd. 9,946,294 809,600 Starwood Hotels & Resorts Worldwide, Inc. 23,023,000 ---------------- 57,406,494 Machinery (0.2%) - ------------------------------------------------------------------------------------------------------------------- 896,309 Caterpillar, Inc. 35,348,186 331,100 Dover Corp. 16,824,019 128,600 Ingersoll-Rand Co. 6,036,163 ---------------- 58,208,368 Manufacturing (0.6%) - ------------------------------------------------------------------------------------------------------------------- 3,417,800 Cooper Industries, Inc. 117,273,263 112,800 Danaher Corp. 6,443,700 1,077,380 Illinois Tool Works, Inc. 69,019,656 ---------------- 192,736,619 Media (1.9%) - ------------------------------------------------------------------------------------------------------------------- 11,515,100 Disney (Walt) Productions, Inc. 498,747,769 2,204,000 Seagram Co., Ltd. 119,016,000 ---------------- 617,763,769 Medical Technology (0.1%) - ------------------------------------------------------------------------------------------------------------------- 215,700 Becton, Dickson and Co. 5,527,313 576,900 Boston Scientific Corp. (NON) 15,287,850 604,145 Edwards Lifesciences Corp. 9,062,175 95,100 Stryker Corp. 6,835,313 ---------------- 36,712,651 Metals (0.4%) - ------------------------------------------------------------------------------------------------------------------- 1,314,600 Alcoa Inc. 85,284,675 3,200,000 Freeport-McMoRan Copper & Gold Co., Inc. Class A (NON) 29,600,000 2,450,000 Freeport-McMoRan Copper & Gold Co., Inc. Class B (NON) 23,581,250 ---------------- 138,465,925 Natural Gas Utilities (1.3%) - ------------------------------------------------------------------------------------------------------------------- 2,197,300 El Paso Energy Corp. 93,385,250 974,100 Enron Corp. 67,882,594 2,305,892 Sempra Energy 42,803,120 5,985,360 Williams Cos., Inc. 223,328,745 ---------------- 427,399,709 Office Equipment & Supplies (--%) - ------------------------------------------------------------------------------------------------------------------- 127,600 Pitney Bowes, Inc. 5,215,650 Oil & Gas (8.5%) - ------------------------------------------------------------------------------------------------------------------- 122,000 Apache Corp. 5,909,375 5,825,526 BP Amoco PLC ADR (United Kingdom) 297,101,826 2,245,000 Burlington Resources Inc. 88,256,563 2,600,100 Chevron, Inc. 221,333,513 3,165,600 Conoco, Inc. 75,380,850 5,439,568 Conoco, Inc. Class B 135,309,254 13,387,657 Exxon Mobil Corp. 1,040,053,603 1,575,800 Occidental Petroleum Corp. 33,781,213 10,180,100 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 584,083,238 1,663,900 Texaco, Inc. 82,363,050 3,410,000 Tosco Corp. 109,333,125 438,700 Unocal Corp. 14,175,494 235,100 USX-Marathon Group Inc. 5,480,769 ---------------- 2,692,561,873 Paper & Forest Products (1.3%) - ------------------------------------------------------------------------------------------------------------------- 2,625,000 International Paper Co. 96,468,750 3,403,900 Owens-Illinois, Inc. (NON) 45,952,650 1,100,000 Temple Inland, Inc. 55,137,500 3,958,581 Weyerhaeuser Co. 211,536,672 ---------------- 409,095,572 Pharmaceuticals (9.3%) - ------------------------------------------------------------------------------------------------------------------- 10,292,000 Abbott Laboratories 395,598,750 8,195,724 American Home Products Corp. 460,497,242 9,624,782 Bristol-Myers Squibb Co. 504,699,506 1,406,200 Johnson & Johnson 116,011,500 1,484,400 Lilly (Eli) & Co. 114,762,675 10,497,376 Merck & Co., Inc. 729,567,632 10,533,312 Pharmacia Corp. 526,007,274 3,055,100 Schering-Plough Corp. 123,158,719 ---------------- 2,970,303,298 Photography/Imaging (1.0%) - ------------------------------------------------------------------------------------------------------------------- 3,559,404 Eastman Kodak Co. 199,104,161 4,691,800 Xerox Corp. 124,039,463 ---------------- 323,143,624 Publishing (0.6%) - ------------------------------------------------------------------------------------------------------------------- 150,000 Gannett Co., Inc. 9,581,250 177,100 Knight-Ridder, Inc. 8,688,969 2,005,000 McGraw-Hill, Inc. 105,262,500 355,200 New York Times Co. (The) Class A 14,629,800 1,105,900 Tribune Co. 42,991,863 ---------------- 181,154,382 Railroads (0.8%) - ------------------------------------------------------------------------------------------------------------------- 8,479,800 Burlington Northern Santa Fe Corp. 204,575,175 465,400 CSX Corp. 9,744,313 102,500 Kansas City Southern Industries, Inc. 7,367,188 985,800 Union Pacific Corp. 41,526,825 ---------------- 263,213,501 Real Estate (0.4%) - ------------------------------------------------------------------------------------------------------------------- 2,700,000 Equity Residential Properties Trust (R) 122,850,000 Regional Bells (7.1%) - ------------------------------------------------------------------------------------------------------------------- 8,411,099 Bell Atlantic Corp. 498,357,616 9,862,900 BellSouth Corp. 480,199,944 5,897,300 GTE Corp. 399,542,075 19,760,347 SBC Communications, Inc. 865,750,203 317,500 U S West, Inc. 22,602,031 ---------------- 2,266,451,869 Restaurants (0.1%) - ------------------------------------------------------------------------------------------------------------------- 203,200 Starbucks Corp. (NON) 6,143,625 176,500 Tricon Global Restaurants, Inc. (NON) 6,023,063 ---------------- 12,166,688 Retail (3.1%) - ------------------------------------------------------------------------------------------------------------------- 3,032,200 Albertsons, Inc. 98,736,013 238,800 Circuit City Stores, Inc. 14,044,425 394,700 Costco Wholesale Corp. (NON) 21,338,469 1,677,000 CVS Corp. 72,949,500 215,500 Dollar General Corp. 4,929,563 4,711,200 Federated Department Stores, Inc. (NON) 160,180,800 12,696,293 K mart Corp. (NON) 103,157,381 2,435,700 Kroger Co. 45,212,681 161,000 Limited, Inc. (The) 7,275,188 2,586,500 Lowe's Cos., Inc. 128,031,750 1,057,000 May Department Stores Co. 29,067,500 872,700 Penney (J.C.) Co., Inc. 12,054,169 2,969,600 Rite Aid Corp. 14,848,000 750,000 Safeway, Inc. (NON) 33,093,750 1,849,800 Sears, Roebuck & Co. 67,748,925 3,020,200 Staples, Inc. (NON) 57,572,563 1,473,500 Target Corp. 98,079,844 1,415,000 TJX Cos., Inc. (The) 27,150,313 ---------------- 995,470,834 Semiconductor (0.1%) - ------------------------------------------------------------------------------------------------------------------- 227,700 Teradyne, Inc. (NON) 25,047,000 Software (0.7%) - ------------------------------------------------------------------------------------------------------------------- 1,417,900 BMC Software, Inc. (NON) 66,375,444 2,512,800 Computer Associates International, Inc. 140,245,650 ---------------- 206,621,094 Technology Services (1.2%) - ------------------------------------------------------------------------------------------------------------------- 82,200 Computer Sciences Corp. (NON) 6,704,438 160,700 Convergys Corp. (NON) 7,070,800 4,978,400 Electronic Data Systems Corp. 342,265,000 129,100 Fiserv, Inc. (NON) 5,930,531 339,000 Unisys Corp. (NON) 7,860,563 ---------------- 369,831,332 Telecommunications (3.2%) - ------------------------------------------------------------------------------------------------------------------- 1,491,600 ALLTEL Corp. 99,377,850 13,572,796 AT&T Corp. (SEG) 633,679,913 147,000 CenturyTel, Inc. 3,601,500 4,430,064 Sprint Corp. 272,448,936 ---------------- 1,009,108,199 Textiles (--%) - ------------------------------------------------------------------------------------------------------------------- 157,400 Nike, Inc. 6,837,063 Tobacco (0.7%) - ------------------------------------------------------------------------------------------------------------------- 10,558,168 Philip Morris Cos., Inc. 230,959,925 Toys (--%) - ------------------------------------------------------------------------------------------------------------------- 741,600 Mattel, Inc. 9,084,600 Transportation Services (--%) - ------------------------------------------------------------------------------------------------------------------- 95,800 United Parcel Service, Inc. Class B 6,370,700 Trucks & Parts (--%) - ------------------------------------------------------------------------------------------------------------------- 124,200 Johnson Controls, Inc. 7,863,413 Waste Management (0.5%) - ------------------------------------------------------------------------------------------------------------------- 10,054,784 Waste Management, Inc. 159,619,696 ---------------- Total Common Stocks (cost $27,055,331,730) $ 31,146,345,204 CONVERTIBLE PREFERRED STOCKS (0.1%) (a) (cost $62,398,917) NUMBER OF SHARES VALUE - ------------------------------------------------------------------------------------------------------------------- 1,132,825 K mart Financing I $3.875 cum. cv. pfd. $ 44,746,588 U.S. GOVERNMENT AND AGENCY OBLIGATIONS (--%) (a) PRINCIPAL AMOUNT VALUE U.S. Government Agency Mortgage Obligations (--%) - ------------------------------------------------------------------------------------------------------------------- Government National Mortgage Association Pass-Through Certificates $ 1,337 11 1/2s, with due dates from March 15, 2010 to January 15, 2013 $ 1,478 957 11s, January 15, 2010 1,047 135,608 9s, with due dates from December 15, 2004 to June 15, 2011 140,818 46,688 7 1/2s, April 15, 2007 46,235 178,294 7 1/4s, with due dates from February 15, 2005 to March 15, 2005 177,007 ---------------- Total U.S. Government and Agency Obligations (cost $350,099) $ 366,585 SHORT-TERM INVESTMENTS (2.7%) (a) PRINCIPAL AMOUNT VALUE - ------------------------------------------------------------------------------------------------------------------- $ 50,000,000 American Express Credit, effective yield of 6.02%, May 5, 2000 $ 49,941,472 50,000,000 Asset Securitization Corp., effective yield of 6.03%, May 8, 2000 49,941,375 50,000,000 Corporate Asset Fdg/cafco, effective yield of 6.20%, June 8, 2000 49,672,778 50,000,000 Corporate Asset Fdg/cafco, effective yield of 6.03%, May 22, 2000 49,824,125 50,000,000 Daimlerchrysler NA Hldg., effective yield of 6.00%, May 3, 2000 49,983,333 50,358,000 Delaware Funding Corp., effective yield of 6.05%, May 17, 2000 50,222,593 73,000,000 Federal Home Loan Mortgage, effective yield of 5.90%, May 16, 2000 72,820,542 75,000,000 General Electric Capital, effective yield of 6.01%, May 3, 2000 74,974,958 50,000,000 Household Finance Corp., effective yield of 6.03%, May 1, 2000 49,974,875 50,000,000 Merrill Lynch & Co., Inc., effective yield of 6.03%, May 9, 2000 49,907,875 50,000,000 Morgan Stanley Dean Witter & Co., effective yield of 6.05%, May 25, 2000 49,798,333 100,000,000 Preferred Receivables Fund, effective yield of 6.04%, May 26, 2000 99,580,556 81,058,000 Thunder Bay Funding Inc., effective yield 6.04%, May 10, 2000 80,935,602 80,000,000 Interest in $500,000,000 joint repurchase agreement dated April 28, 2000 with Merrill Lynch due May 1, 2000 with respect to various U.S. Treasury obligations -- maturity value of $80,038,000 effective yield of 5.70% 80,000,000 ---------------- Total Short-Term Investments (cost $857,578,417) $ 857,578,417 - ------------------------------------------------------------------------------------------------------------------- Total Investments (cost $27,975,659,163) (b) $ 32,049,036,794 - ------------------------------------------------------------------------------------------------------------------- (a) Percentages indicated are based on net assets of $31,862,477,271. (b) The aggregate identified cost on a tax basis is $28,105,187,595, resulting in gross unrealized appreciation and depreciation of $5,959,626,050 and $2,015,776,851, respectively, or net unrealized appreciation of $3,943,849,199. (NON) Non-income-producing security. (SEG) This security was pledged and segregated with the custodian to cover margin requirements for future contracts at April 30, 2000. (R) Real Estate Investment Trust. 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. - ----------------------------------------------------------------------------- Futures Contracts Outstanding at April 30, 2000 (Unaudited) Aggregate Face Expiration Unrealized Total Value Value Date Appreciation - ----------------------------------------------------------------------------- S&P Index 500 (Long) $409,530,000 $406,726,888 June-00 $2,803,112 - ----------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
STATEMENT OF ASSETS AND LIABILITIES April 30, 2000 (Unaudited) Assets - ------------------------------------------------------------------------------------------- Investments in securities, at value (identified cost $27,975,659,163) (Note 1) $32,049,036,794 - ------------------------------------------------------------------------------------------- Dividends and interest receivable 40,238,603 - ------------------------------------------------------------------------------------------- Receivable for shares of the fund sold 42,380,991 - ------------------------------------------------------------------------------------------- Receivable for securities sold 1,027,552,879 - ------------------------------------------------------------------------------------------- Total assets 33,159,209,267 Liabilities - ------------------------------------------------------------------------------------------- Payable to subcustodian (Note 2) 38,171,448 - ------------------------------------------------------------------------------------------- Payable for variation margin 2,095,432 - ------------------------------------------------------------------------------------------- Payable for securities purchased 1,113,089,879 - ------------------------------------------------------------------------------------------- Payable for shares of the fund repurchased 90,916,314 - ------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 32,086,045 - ------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 6,061,245 - ------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 311,431 - ------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 4,945 - ------------------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 13,347,434 - ------------------------------------------------------------------------------------------- Other accrued expenses 647,823 - ------------------------------------------------------------------------------------------- Total liabilities 1,296,731,996 - ------------------------------------------------------------------------------------------- Net assets $31,862,477,271 Represented by - ------------------------------------------------------------------------------------------- Paid-in capital (Notes 1 and 4) $28,355,756,841 - ------------------------------------------------------------------------------------------- Distributions in excess of net investment income (Note 1) (84,517,026) - ------------------------------------------------------------------------------------------- Accumulated net realized loss on investment (Note 1) (484,943,287) - ------------------------------------------------------------------------------------------- Net unrealized appreciation of investments 4,076,180,743 - ------------------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $31,862,477,271 Computation of net asset value and offering price - ------------------------------------------------------------------------------------------- Net asset value and redemption price per class A share ($19,336,203,144 divided by 1,053,965,018 shares) $18.35 - ------------------------------------------------------------------------------------------- Offering price per class A share (100/94.25 of $18.35)* $19.47 - ------------------------------------------------------------------------------------------- Net asset value and offering price per class B share ($10,715,213,997 divided by 592,352,839 shares)** $18.09 - ------------------------------------------------------------------------------------------- Net asset value and offering price per class C share ($66,704,404 divided by 3,644,987 shares)** $18.30 - ------------------------------------------------------------------------------------------- Net asset value and redemption price per class M share ($382,170,080 divided by 20,967,073 shares) $18.23 - ------------------------------------------------------------------------------------------- Offering price per class M share (100/96.50 of $18.23)* $18.89 - ------------------------------------------------------------------------------------------- Net asset value, offering price and redemption price per class Y share ($1,362,185,646 divided by 74,127,138 shares) $18.38 - ------------------------------------------------------------------------------------------- * On single retail sales of less than $50,000. On sales of more than $50,000 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.
STATEMENT OF OPERATIONS Six months ended April 30, 2000 (Unaudited) Investment income: - ------------------------------------------------------------------------------------------- Dividends (net of foreign tax of $231,238) $ 368,568,474 - ------------------------------------------------------------------------------------------- Interest 5,798,775 - ------------------------------------------------------------------------------------------- Total investment income 374,367,249 Expenses: - ------------------------------------------------------------------------------------------- Compensation of Manager (Note 2) 69,524,242 - ------------------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 21,620,655 - ------------------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 356,972 - ------------------------------------------------------------------------------------------- Administrative services (Note 2) 29,943 - ------------------------------------------------------------------------------------------- Distribution fees -- Class A (Note 2) 24,910,734 - ------------------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 61,634,334 - ------------------------------------------------------------------------------------------- Distribution fees -- Class C (Note 2) 202,846 - ------------------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 1,563,057 - ------------------------------------------------------------------------------------------- Reports to shareholders 417,899 - ------------------------------------------------------------------------------------------- Auditing 28,600 - ------------------------------------------------------------------------------------------- Legal 113,839 - ------------------------------------------------------------------------------------------- Postage 1,774,684 - ------------------------------------------------------------------------------------------- Other 2,459,139 - ------------------------------------------------------------------------------------------- Total expenses 184,636,944 - ------------------------------------------------------------------------------------------- Expense reduction (Note 2) (3,072,706) - ------------------------------------------------------------------------------------------- Net expenses 181,564,238 - ------------------------------------------------------------------------------------------- Net investment income 192,803,011 - ------------------------------------------------------------------------------------------- Net realized loss on investments (Notes 1, 3 and 5) (including realized loss of $49,488,870 on sales of investments in affiliated issuers) (365,570,037) - ------------------------------------------------------------------------------------------- Net realized loss on futures contracts (Notes 1 and 3) (33,700,669) - ------------------------------------------------------------------------------------------- Net unrealized depreciation of investments and futures during the period (1,798,942,800) - ------------------------------------------------------------------------------------------- Net loss on investments (2,198,213,506) - ------------------------------------------------------------------------------------------- Net decrease in net assets resulting from operations $(2,005,410,495) - ------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements.
STATEMENT OF CHANGES IN NET ASSETS Six months ended Year ended April 30 October 31 2000* 1999 - -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets - -------------------------------------------------------------------------------------------------- Operations: - -------------------------------------------------------------------------------------------------- Net investment income $ 192,803,011 $ 397,679,695 - -------------------------------------------------------------------------------------------------- Net realized gain (loss) on investments (399,270,706) 3,307,455,606 - -------------------------------------------------------------------------------------------------- Net unrealized appreciation (depreciation) of investments (1,798,942,800) 827,279,618 - -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (2,005,410,495) 4,532,414,919 - -------------------------------------------------------------------------------------------------- Distributions to shareholders: - -------------------------------------------------------------------------------------------------- From net investment income Class A (189,977,480) (284,957,442) - -------------------------------------------------------------------------------------------------- Class B (68,479,755) (87,688,880) - -------------------------------------------------------------------------------------------------- Class C (276,669) (41,059) - -------------------------------------------------------------------------------------------------- Class M (2,897,354) (4,011,851) - -------------------------------------------------------------------------------------------------- Class Y (16,053,968) (20,574,618) - -------------------------------------------------------------------------------------------------- From net realized gain on investments Class A (1,703,550,813) (1,557,899,919) - -------------------------------------------------------------------------------------------------- Class B (1,131,688,831) (1,254,930,451) - -------------------------------------------------------------------------------------------------- Class C (2,123,896) -- - -------------------------------------------------------------------------------------------------- Class M (37,024,157) (34,678,233) - -------------------------------------------------------------------------------------------------- Class Y (129,437,430) (67,577,249) - -------------------------------------------------------------------------------------------------- Increase (decrease) from capital share transactions (Note 4) (1,865,474,099) 2,047,012,102 - -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (7,152,394,947) 3,267,067,319 Net assets - -------------------------------------------------------------------------------------------------- Beginning of period 39,014,872,218 35,747,804,899 - -------------------------------------------------------------------------------------------------- End of period (including distributions in excess of net investment income of $84,517,026, and undistributed net investment income of $365,189, respectively) $31,862,477,271 $39,014,872,218 - -------------------------------------------------------------------------------------------------- * Unaudited. The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) CLASS A - --------------------------------------------------------------------------------------------------------------- Six months ended Per-share April 30 operating performance (Unaudited) Year ended October 31 - --------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $21.10 $20.44 $20.87 $18.27 $15.77 $13.65 - --------------------------------------------------------------------------------------------------------------- Investment operations - --------------------------------------------------------------------------------------------------------------- Net investment income .13(c) .28(c) .26(c) .39(c) .43 .46(c) - --------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (1.06) 2.32 2.15 3.91 3.19 2.50 - --------------------------------------------------------------------------------------------------------------- Total from investment operations (.93) 2.60 2.41 4.30 3.62 2.96 - --------------------------------------------------------------------------------------------------------------- Less distributions: - --------------------------------------------------------------------------------------------------------------- From net investment income (.18) (.28) (.24) (.45) (.40) (.40) - --------------------------------------------------------------------------------------------------------------- From net realized gain on investments (1.64) (1.66) (2.60) (1.25) (.72) (.44) - --------------------------------------------------------------------------------------------------------------- Total distributions (1.82) (1.94) (2.84) (1.70) (1.12) (.84) - --------------------------------------------------------------------------------------------------------------- Net asset value, end of period $18.35 $21.10 $20.44 $20.87 $18.27 $15.77 - --------------------------------------------------------------------------------------------------------------- Ratios and supplemental data - --------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(a) (4.65)* 13.13 12.15 24.95 23.89 23.00 - --------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $19,336,203 $22,033,789 $18,814,738 $16,300,523 $11,403,813 $7,859,496 - --------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(b) .41* .79 .84 .86 .92 .89 - --------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) .69* 1.32 1.27 1.95 2.59 3.20 - --------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 28.21* 50.36 78.75 63.88 41.26 58.40 - --------------------------------------------------------------------------------------------------------------- + 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 brokerage service and expense offset 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.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) CLASS B - --------------------------------------------------------------------------------------------------------------- Six months ended Per-share April 30 operating performance (Unaudited) Year ended October 31 - --------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $20.82 $20.19 $20.65 $18.10 $15.63 $13.56 - --------------------------------------------------------------------------------------------------------------- Investment operations - --------------------------------------------------------------------------------------------------------------- Net investment income .06(c) .12(c) .11(c) .24(c) .30 .35(c) - --------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (1.05) 2.29 2.12 3.87 3.17 2.46 - --------------------------------------------------------------------------------------------------------------- Total from investment operations (.99) 2.41 2.23 4.11 3.47 2.81 - --------------------------------------------------------------------------------------------------------------- Less distributions: - --------------------------------------------------------------------------------------------------------------- From net investment income (.10) (.12) (.09) (.31) (.28) (.30) - --------------------------------------------------------------------------------------------------------------- From net realized gain on investments (1.64) (1.66) (2.60) (1.25) (.72) (.44) - --------------------------------------------------------------------------------------------------------------- Total distributions (1.74) (1.78) (2.69) (1.56) (1.00) (.74) - --------------------------------------------------------------------------------------------------------------- Net asset value, end of period $18.09 $20.82 $20.19 $20.65 $18.10 $15.63 - --------------------------------------------------------------------------------------------------------------- Ratios and supplemental data - --------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(a) (5.02)* 12.28 11.28 24.03 23.04 21.91 - --------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $10,715,214 $14,777,660 $15,671,371 $13,511,906 $8,692,163 $5,089,359 - --------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(b) .78* 1.54 1.59 1.61 1.68 1.64 - --------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) .32* .57 .52 1.19 1.84 2.42 - --------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 28.21* 50.36 78.75 63.88 41.26 58.40 - --------------------------------------------------------------------------------------------------------------- + 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 brokerage service and expense offset 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.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) CLASS C - --------------------------------------------------------------------- Six months ended For the period Per-share April 30 July 26, 1999+ operating performance (Unaudited) to October 31 - --------------------------------------------------------------------- 2000 1999 - --------------------------------------------------------------------- Net asset value, beginning of period $21.08 $22.07 - --------------------------------------------------------------------- Investment operations - --------------------------------------------------------------------- Net investment income (c) .05 .02 - --------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (1.05) (.91) - --------------------------------------------------------------------- Total from investment operations (1.00) (.89) - --------------------------------------------------------------------- Less distributions: - --------------------------------------------------------------------- From net investment income (.14) (.10) - --------------------------------------------------------------------- From net realized gain on investments (1.64) -- - --------------------------------------------------------------------- Total distributions (1.78) (.10) - --------------------------------------------------------------------- Net asset value, end of period $18.30 $21.08 - --------------------------------------------------------------------- Ratios and supplemental data - --------------------------------------------------------------------- Total return at net asset value (%)(a) (5.04)* (4.03)* - --------------------------------------------------------------------- Net assets, end of period (in thousands) $66,704 $21,555 - --------------------------------------------------------------------- Ratio of expenses to average net assets (%)(b) .78* .41* - --------------------------------------------------------------------- Ratio of net investment income to average net assets (%) .29* .12* - --------------------------------------------------------------------- Portfolio turnover (%) 28.21* 50.36 - --------------------------------------------------------------------- + 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 brokerage service and expense offset 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.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) CLASS M - ------------------------------------------------------------------------------------------------------------------- Six months ended For the period Per-share April 30 May 1, 1995+ operating performance (Unaudited) Year ended October 31 to October 31 - ------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $20.97 $20.33 $20.77 $18.21 $15.74 $14.24 - ------------------------------------------------------------------------------------------------------------------- Investment operations - ------------------------------------------------------------------------------------------------------------------- Net investment income .08(c) .17(c) .16(c) .28(c) .35 .15(c) - ------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (1.05) 2.30 2.14 3.89 3.18 1.53 - ------------------------------------------------------------------------------------------------------------------- Total from investment operations (.97) 2.47 2.30 4.17 3.53 1.68 - ------------------------------------------------------------------------------------------------------------------- Less distributions: - ------------------------------------------------------------------------------------------------------------------- From net investment income (.13) (.17) (.14) (.36) (.34) (.18) - ------------------------------------------------------------------------------------------------------------------- From net realized gain on investments (1.64) (1.66) (2.60) (1.25) (.72) -- - ------------------------------------------------------------------------------------------------------------------- Total distributions (1.77) (1.83) (2.74) (1.61) (1.06) (.18) - ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $18.23 $20.97 $20.33 $20.77 $18.21 $15.74 - ------------------------------------------------------------------------------------------------------------------- Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(a) (4.89)* 12.55 11.60 24.29 23.31 11.88* - ------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $382,170 $479,425 $421,616 $348,129 $132,453 $21,100 - ------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(b) .66* 1.29 1.34 1.36 1.44 .66* - ------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) .44* .82 .77 1.39 2.02 1.12* - ------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 28.21* 50.36 78.75 63.88 41.26 58.40 - ------------------------------------------------------------------------------------------------------------------- + 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 brokerage service and expense offset 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.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) CLASS Y - ------------------------------------------------------------------------------------------------------------------- Six months ended Per-share April 30 operating performance (Unaudited) Year ended October 31 - ------------------------------------------------------------------------------------------------------------------- 2000 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $21.14 $20.47 $20.90 $18.29 $15.78 $13.66 - ------------------------------------------------------------------------------------------------------------------- Investment operations - ------------------------------------------------------------------------------------------------------------------- Net investment income .15(c) .33(c) .32(c) .44(c) .47 .49(c) - ------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (1.06) 2.33 2.14 3.92 3.20 2.50 - ------------------------------------------------------------------------------------------------------------------- Total from investment operations (.91) 2.66 2.46 4.36 3.67 2.99 - ------------------------------------------------------------------------------------------------------------------- Less distributions: - ------------------------------------------------------------------------------------------------------------------- From net investment income (.21) (.33) (.29) (.50) (.44) (.43) - ------------------------------------------------------------------------------------------------------------------- From net realized gain on investments (1.64) (1.66) (2.60) (1.25) (.72) (.44) - ------------------------------------------------------------------------------------------------------------------- Total distributions (1.85) (1.99) (2.89) (1.75) (1.16) (.87) - ------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $18.38 $21.14 $20.47 $20.90 $18.29 $15.78 - ------------------------------------------------------------------------------------------------------------------- Ratios and supplemental data - ------------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(a) (4.56)* 13.44 12.40 25.27 24.24 23.28 - ------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $1,362,186 $1,702,442 $840,080 $700,707 $343,935 $193,292 - ------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(b) .28* .54 .59 .61 .68 .64 - ------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) .82* 1.56 1.52 2.20 2.83 3.14 - ------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 28.21* 50.36 78.75 63.88 41.26 58.40 - ------------------------------------------------------------------------------------------------------------------- + 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 brokerage service and expense offset 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.
NOTES TO FINANCIAL STATEMENTS April 30, 2000 (Unaudited) Note 1 Significant accounting policies The Putnam Fund for Growth and Income (the "fund") is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The fund seeks capital growth and current income 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. 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 sale price, or, if no sales are reported -- as in the case of some securities traded over-the-counter -- the last reported bid price. Securities quoted in foreign currencies are translated into U.S. dollars at the current exchange rate. 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 market 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) Futures and options contracts The fund may use futures and options contracts to hedge against changes in the values of securities the fund owns or expects to purchase. The fund may also write options on securities it owns or in which it may invest to increase its current returns. The potential risk to the fund is that the change in value of futures and options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparty to the contract is unable to perform. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by dealers. F) Line of credit The fund has entered into a committed line of credit with certain banks. This line of credit agreement includes restrictions that the fund maintain an asset coverage ratio of at least 300% and borrowings must not exceed prospectus limitations. For the six months ended April 30, 2000, the fund had no borrowings against the line of credit. G) Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986, as amended. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. H) Distributions to shareholders Distributions to shareholders 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. 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. 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 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, 0.38% of the next $5 billion, 0.37% of the next $5 billion, 0.36% of the next $5 billion, 0.35% of the next $5 billion and 0.34% 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 six months ended April 30, 2000, fund expenses were reduced by $3,072,706 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 $11,412 has been allocated to the fund, and an additional fee for each Trustee's meeting attended. Trustees receive additional fees for attendance at certain committee meetings. The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which allows the Trustees to defer the receipt of all or a portion of Trustees Fees payable on or after July 1, 1995. The deferred fees remain in the fund and are 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 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 to 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 six months ended April 30, 2000, Putnam Mutual Funds Corp., acting as underwriter received net commissions of $2,912,008 and $49,257 from the sale of class A and class M shares, respectively and $16,644,676 and $13,416 in contingent deferred sales charges from redemptions of class B and class C shares respectively. A deferred sales charge of up to 1% is assessed on certain redemptions of class A shares. For the six months ended April 30, 2000, Putnam Mutual Funds Corp., acting as underwriter received $58,849 on class A redemptions. Note 3 Purchase and sales of securities During the six months ended April 30, 2000, cost of purchases and proceeds from sales of investment securities other than short-term investments aggregated $9,670,382,700 and $14,906,750,902, respectively. There were no purchases and sales of U.S. government obligations. Note 4 Capital shares At April 30, 2000, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: Six months ended April 30, 2000 - --------------------------------------------------------------------------- Class A Shares Amount - --------------------------------------------------------------------------- Shares sold 147,158,223 $2,713,729,924 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 93,015,933 1,762,357,906 - --------------------------------------------------------------------------- 240,174,156 4,476,087,830 Shares repurchased (230,394,840) (4,190,027,900) - --------------------------------------------------------------------------- Net increase 9,779,316 $ 286,059,930 - --------------------------------------------------------------------------- Year ended October 31, 1999 - --------------------------------------------------------------------------- Class A Shares Amount - --------------------------------------------------------------------------- Shares sold 274,241,775 $5,835,048,352 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 83,808,178 1,715,528,501 - --------------------------------------------------------------------------- 358,049,953 7,550,576,853 Shares repurchased (234,208,186) (4,963,563,711) - --------------------------------------------------------------------------- Net increase 123,841,767 $2,587,013,142 - --------------------------------------------------------------------------- Six months ended April 30, 2000 - --------------------------------------------------------------------------- Class B Shares Amount - --------------------------------------------------------------------------- Shares sold 46,908,270 $857,098,676 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 59,309,905 1,112,126,633 - --------------------------------------------------------------------------- 106,218,175 1,969,225,309 Shares repurchased (223,640,189) (4,025,592,556) - --------------------------------------------------------------------------- Net decrease (117,422,014) $(2,056,367,247) - --------------------------------------------------------------------------- Year ended October 31, 1999 - --------------------------------------------------------------------------- Class B Shares Amount - --------------------------------------------------------------------------- Shares sold 115,563,035 $ 2,422,650,068 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 61,707,277 1,243,784,059 - --------------------------------------------------------------------------- 177,270,312 3,666,434,127 Shares repurchased (243,507,803) (5,109,609,378) - --------------------------------------------------------------------------- Net decrease (66,237,491) $(1,443,175,251) - --------------------------------------------------------------------------- Six months ended April 30, 2000 - --------------------------------------------------------------------------- Class C Shares Amount - --------------------------------------------------------------------------- Shares sold 3,010,600 $54,925,644 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 118,722 2,238,663 - --------------------------------------------------------------------------- 3,129,322 57,164,307 Shares repurchased (506,695) (9,044,524) - --------------------------------------------------------------------------- Net increase 2,622,627 $48,119,783 - --------------------------------------------------------------------------- Year ended October 31, 1999 - --------------------------------------------------------------------------- Class C Shares Amount - --------------------------------------------------------------------------- Shares sold 1,041,882 $21,608,231 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 1,718 36,452 - --------------------------------------------------------------------------- 1,043,600 21,644,683 Shares repurchased (21,240) (434,423) - --------------------------------------------------------------------------- Net increase 1,022,360 $21,210,260 - --------------------------------------------------------------------------- Six months ended April 30, 2000 - --------------------------------------------------------------------------- Class M Shares Amount - --------------------------------------------------------------------------- Shares sold 2,645,966 $ 48,536,533 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 2,052,315 38,724,314 - --------------------------------------------------------------------------- 4,698,281 87,260,847 Shares repurchased (6,592,817) (118,878,786) - --------------------------------------------------------------------------- Net decrease (1,894,536) $(31,617,939) - --------------------------------------------------------------------------- Year ended October 31, 1999 - --------------------------------------------------------------------------- Class M Shares Amount - --------------------------------------------------------------------------- Shares sold 5,770,379 $122,436,027 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 1,835,656 37,303,941 - --------------------------------------------------------------------------- 7,606,035 159,739,968 Shares repurchased (5,481,217) (115,924,230) - --------------------------------------------------------------------------- Net increase 2,124,818 $ 43,815,738 - --------------------------------------------------------------------------- Six months ended April 30, 2000 - --------------------------------------------------------------------------- Class Y Shares Amount - --------------------------------------------------------------------------- Shares sold 10,779,275 $ 197,979,708 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 7,670,746 145,475,103 - --------------------------------------------------------------------------- 18,450,021 343,454,811 Shares repurchased (24,859,875) (455,123,437) - --------------------------------------------------------------------------- Net decrease (6,409,854) $(111,668,626) - --------------------------------------------------------------------------- Year ended October 31, 1999 - --------------------------------------------------------------------------- Class Y Shares Amount - --------------------------------------------------------------------------- Shares sold 51,398,815 $1,091,200,456 - --------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 4,280,659 88,151,867 - --------------------------------------------------------------------------- 55,679,474 1,179,352,323 Shares repurchased (16,172,735) (341,204,110) - --------------------------------------------------------------------------- Net increase 39,506,739 $ 838,148,213 - --------------------------------------------------------------------------- Note 5 Transactions with Affiliated Issuers Transactions during the six months ended April 30, 2000 with companies in which the fund owned at least 5% of the voting securities were as follows: Purchase Sales Dividend Market Affiliates cost cost Income Value - --------------------------------------------------------------------------- Name of affiliate - --------------------------------------------------------------------------- Rite Aid Corp. -- $85,072,660 -- $14,848,000 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 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 Century Growth Fund New Opportunities Fund 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 Retail Management, Inc. One Post Office Square Boston, MA 02109 CUSTODIAN Putnam Fiduciary Trust Company LEGAL COUNSEL Ropes & Gray TRUSTEES George Putnam, Chairman William F. Pounds, Vice Chairman 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 Debroah F. Kuenstner Vice President David L. King Vice President and Fund Manager Hugh H. Mullin Vice President and Fund Manager Sheldon N. Simon Vice President and Fund Manager Richard A. Monaghan Vice President John R. Verani Vice President This report is for the information of shareholders of The Putnam Fund for Growth and Income. 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 SA022-61438 002/881/427/511 6/00 PUTNAM INVESTMENTS [SCALE LOGO OMITTED] - --------------------------------------------------------------------------- The Putnam Fund for Growth and Income Supplement to Semiannual Report dated 4/30/00 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 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, B, C, and M shares, which are discussed more extensively in the semiannual report. ANNUAL RESULTS AT A GLANCE - --------------------------------------------------------------------------- Total return: NAV Six months ended 4/30/00 -4.56% 1 year -8.91 5 years 112.75 Annual average 16.30 10 years 284.72 Annual average 14.42 Life of class (since 11/6/57) Annual average 13.50 - --------------------------------------------------------------------------- Share value: NAV 10/31/99 $21.14 4/30/00 $18.38 - --------------------------------------------------------------------------- Capital gains Distributions: No. Income Short-term Long-term Total 9/30/99-3/31/00 2 $0.205 $0.319 $1.318 $1.842 - --------------------------------------------------------------------------- Please note that past performance does not indicate future results. Returns shown for class Y shares for periods prior to their inception are derived from the historical performance of class A shares, adjusted to reflect the initial sales charge currently applicable to class A shares. These returns have not been adjusted to reflect differences in operating expenses which, for class Y shares, are lower than the operating expenses applicable to class A shares. All returns assume reinvestment of distributions at net asset value. Performance data reflects an expense limitation previously in effect. Without the expense limitation, total returns would have been lower. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. 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. -----END PRIVACY-ENHANCED MESSAGE-----