-----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, AB4d756MBlqCemlDBxsAyH1wrdppgOxJvuLozcktRZ1QWuPCIRDlzSQE/yULZbNB /TJYLEgL/LyMRdSE4uFipw== 0000928816-96-000170.txt : 19960627 0000928816-96-000170.hdr.sgml : 19960627 ACCESSION NUMBER: 0000928816-96-000170 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960626 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUTNAM FUND FOR GROWTH & INCOME CENTRAL INDEX KEY: 0000081260 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046013678 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-00781 FILM NUMBER: 96586112 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ STREET 2: MAIKLSTOP A 14 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 8002551581 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM GROWTH FUND DATE OF NAME CHANGE: 19841025 N-30D 1 FUND FOR GROWTH AND INCOME The Putnam Fund for Growth and Income SEMIANNUAL REPORT April 30, 1996 [LOGO: BOSTON * LONDON * TOKYO] Fund highlights * Morningstar, Inc. once again awarded The Putnam Fund for Growth and Income four out of a possible five stars for the overall risk- adjusted performance of its class A shares as of April 30, 1996. The four-star rating puts the fund's class A shares in the top 32.5% among the 1,505 equity funds rated.* * Total return for the fund's class A shares has consistently surpassed that of the average growth and income fund tracked by Lipper Analytical Services, based on results for the 1-, 5-, and 10-year periods. For 1 year, the fund's total return for class A shares was 29.91% versus 26.93% for the Lipper category average; for 5 years, 15.00% versus 13.92%; and for 10 years, 13.96% versus 12.23%.+ CONTENTS 4 Report from Putnam Management 9 Fund performance summary 12 Portfolio holdings 20 Financial statements *Morningstar is an independent research firm that rates a fund in relation to other funds with similar investment objectives, based on the fund's class A shares' 3-, 5-, and 10-year average annual returns, adjusted for risk factors and sales charges. For each of these periods ended 4/30/96, there were 1,505, 978, and 520 funds in the equity category, and the fund's class A shares received 3, 4, and 4 stars respectively. Ratings are subject to change monthly. +Lipper Analytical Services is an independent research organization; rankings are based on total return performance, vary over time, and do not reflect the effects of sales charges. The fund's class A shares ranked 108 out of 479 growth and income funds for 1-year performance, 58 out of 198 for 5-year performance and 20 out of 117 for 10-year performance, through 4/30/96. Class B shares ranked 158 out of 479 for 1-year performance and were not ranked for the 5- and 10-year periods. Class M shares, added to the fund on 5/1/95, were not ranked. Past performance is not indicative of future results. See pages 9 and 10 for more performance information. [GRAPHIC OMITTED: photo of George Putnam] (copyright) Karsh, Ottawa From the Chairman Dear Shareholder: It is always a pleasure to report yet another period of positive performance for one of our oldest funds, The Putnam Fund for Growth and Income. During the first half of fiscal 1996, the six months ended April 30, fund managers Anthony Kreisel and David King once again demonstrated the positive effect that careful security selection, backed by meticulous fundamental analysis, can have on a portfolio. Such attributes are especially beneficial when the markets, the economy, and fiscal policymakers are sending out a confusing mix of signals. As they explain in the report that follows, Tony and Dave made some strategic shifts in portfolio focus during the period by selling some holdings they believed had delivered near-maximum potential and ventured into others in which they saw fresh opportunities. The result is a portfolio they feel confident about as your fund moves into the second half of fiscal 1996. Respectfully yours, /s/George Putnam Chairman of the Trustees June 19, 1996 Report from the Fund Managers Anthony I. Kreisel David L. King The best word to describe The Putnam Fund for Growth and Income's most recent semiannual period would be continuity. As the stock market began to show some turbulence after an incredible, sustained rally, we continued to pursue the time-tested value-oriented strategy that has served the fund so well for the past 38 years. In November 1995, when your fund began its fiscal year, investors were basking in an extremely favorable financial environment, as strong corporate earnings and falling interest rates fueled ongoing rallies in both fixed-income and equity markets. Your fund reaped the rewards of these rallies, benefiting from holdings in the pharmaceutical, chemical, and automotive sectors as well as from interest-rate-sensitive stocks and government bonds. During the last six months, however, many of the holdings that strengthened the fund in fiscal 1995 had to be re-examined in light of the fund's value strategy. As the prices of these stocks continued to rise, we believed that they no longer fit our definition of a value stock: an out-of-favor stock whose price does not reflect what we believe to be its true worth. As a result, we made a number of portfolio shifts, many of which proved quite beneficial. In fact, for the six months ended April 30, 1996, the fund's class A shares rose 15.78%, class B shares gained 15.38%, and class M shares rose 15.50%, all at net asset value. The returns taking maximum sales charges into account were 9.13%, 10.38%, and 11.46%, respectively. * RETAIL SECTOR GAINS SIGNIFICANCE IN PORTFOLIO Perhaps the most significant portfolio shift during the period was our increased emphasis on stocks in the retail sector. For the past two years, this sector had weakened significantly, reaching what we believed to be a low point at the beginning of the fiscal year. The sustained weakness in the industry was combined with anticipation of a poor holiday season for retailers. We believed that this was an overly negative reaction to some short-term developments and that the retail sector was poised for a recovery. Accordingly, early in the period, we significantly increased the allocation to a number of retail stocks. Among the standouts were Dayton Hudson Corp., May Department Stores Co., and Melville Corp. Of course, while these stocks, along with others discussed in this report, were viewed favorably at the end of the fiscal period, all portfolio holdings are subject to review and adjustment in accordance with the fund's investment strategy and may well vary in the future. Dayton Hudson, which operates general merchandise and discount stores across the country, showed particularly strong performance. The stock of May Department Stores, another portfolio position, also appreciated significantly during the period. This company, which operates approximately 347 stores in 37 states, completed a spin-off of its Payless ShoeSource subsidiary, which is expected to strengthen the company's financial position and allow it to focus more on its department store business. In addition, the company's aggressive expansion plan includes adding 115 new stores by 2000. Another notable retail holding was Melville, owner of such retail chains as CVS, Linens 'n Things, and Bob's Stores. Melville's performance has been impressive during the period, and the company's restructuring initiative is expected to bring further improvements. Marshall's, a subsidiary, was recently sold, and Melville is expected to sell other units, including KayBee, Wilson's, and This End Up. When completed, the restructuring should result in a significant reduction in costs, the closing of about 330 underperforming stores, and the formation of two publicly traded independent businesses under Melville -- CVS Corp. and Footstar, Inc. [GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS*; showing: Insurance and finance 16.3% Utilities 10.7% Oil and gas 9.1% Retail 6.7% Consumer nondurables 6.7% Footnote reads: *Based on net assets as of 4/30/96. Holdings will vary over time. Our shift into the retail sector inevitably meant reducing the fund's positions in some other areas. Holdings such as Eli Lilly, Avon Products, Inc. and SmithKline Beecham were reduced. While we believe these are still fundamentally strong companies, we felt that their prices had risen to a point at which they were no longer greatly undervalued. At the same time, other portfolio positions continued to outperform into the new fiscal year. Examples include Union Carbide Corp., a chemical company, and Chrysler Corp. in the automotive sector. These stocks exemplify value investing success stories; they are U.S. companies that we believe have successfully dealt with internal issues such as cost cutting, restructuring, and product improvements and are now highly competitive with businesses in other parts of the world. Both Union Carbide and Chrysler have made such operational improvements and are looking to expand further into foreign markets. * BEYOND BLUE CHIPS AND INTO COMPUTER CHIPS In an unusual move for this fund's portfolio, we have recently added a small allocation to technology stocks. The technology sector typically consists of growth-oriented investments, those that emphasize earnings momentum and continuing expectations of higher-than-average earnings increases. During the period, however, we found a few exceptions -- including Intel Corp., a designer and manufacturer of computer components, and Texas Instruments, which manufactures and sells a wide range of electronic and computer products. At the beginning of the period, these and other semiconductor stocks were experiencing dampened performance, and investor confidence had waned somewhat from the highs of the previous months. At this point, we sought to take advantage of what we considered to be bargain prices for these stocks. Intel, indeed, has already proved to be a successful choice, as its price increased significantly during the last six months. And we remain optimistic about Texas Instruments, although its stock price has not yet rebounded. TOP 10 EQUITY HOLDINGS Warner Lambert Co. Pharmaceuticals - ---------------------------------------------------------------------- Philip Morris Companies Inc. Tobacco products, food, brewing - ---------------------------------------------------------------------- General Motors Corporation Automotive - ---------------------------------------------------------------------- J.P. Morgan & Company, Inc. Multinational banking and finance - ---------------------------------------------------------------------- TRW, Inc. Products for space, defense, and automotive markets - ---------------------------------------------------------------------- Kimberly Clark Corporation Consumer products - ---------------------------------------------------------------------- Bankers Trust New York Corporation Banking and finance - ---------------------------------------------------------------------- Eastman Kodak Company Photographic equipment - ---------------------------------------------------------------------- Weyerhauser Company Forest products and paper - ---------------------------------------------------------------------- Fleet Financial Group Insurance and finance Footnote reads: These holdings represent 18.7% of the fund's net assets as of 4/30/96. Portfolio holdings will vary over time. * KEEPING A CAREFUL WATCH ON INTEREST RATES In the fund's fiscal 1995 semiannual report a year ago, we highlighted our successful investments in intermediate- and long-term government bonds. At that time, we had recognized that these bonds offered a return potential that was competitive with the long-term potential of many stocks. The portfolio was also overweighted in such interest-rate- sensitive securities as financial and utility stocks, which had declined dramatically in price as interest rates had risen. This strategy is worth noting simply because we find that the relationship between government bonds and stocks is beginning to look similar to that of late 1994. At the end of the current semiannual period, long-term government bonds represented one of the worst- performing asset classes, while stock prices in general remained relatively high. In recognition of the relative value in the government bond sector, we have allocated a small portion of the portfolio to long- term government bonds. While we've only recently ventured into this sector -- and only to a limited extent -- we will carefully watch for further opportunities. * SOUND VALUE INVESTING SHOULD WEATHER MARKET TURBULENCE The first half of the fiscal year witnessed some signs of turbulence in the U.S. financial markets and, indeed, more turbulence may lie ahead. However, we remain cautiously optimistic and believe that our time- tested strategy will continue to allow us to look beyond the market's ups and downs in our search for undervalued investments. Footnote reads: The views expressed here are exclusively those of Putnam Management. They are not meant as investment advice. Although the described holdings were viewed favorably as of 4/30/96, there is no guarantee the fund will continue to hold these securities in the future. Performance summary Performance should always be considered in light of a fund's investment strategy. The Putnam Fund for Growth and Income is designed for investors seeking capital growth and current income. This section provides, at a glance, information about your fund's performance. Total return shows how the value of the fund's shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund. TOTAL RETURN FOR PERIODS ENDED 4/30/96 Class A Class B Class M (inception date) (11/16/57) (4/27/92) (5/1/95) NAV POP NAV CDSC NAV POP - ------------------------------------------------------------------------ 6 months 15.78% 9.13% 15.38% 10.38% 15.50% 11.46% - ------------------------------------------------------------------------ 1 year 29.91 22.43 28.88 23.88 -- -- - ------------------------------------------------------------------------ 5 years 101.16 89.56 -- -- -- -- Annual average 15.00 13.64 -- -- -- -- - ------------------------------------------------------------------------ 10 years 269.35 248.10 -- -- -- -- Annual average 13.96 13.28 -- -- -- -- - ------------------------------------------------------------------------ Life of class -- -- 74.97 72.97 29.22 24.67 Annual average -- -- 14.97 14.64 -- -- - ------------------------------------------------------------------------ Footnote reads: Performance data represent past results, do not reflect future performance, and will differ for each share class. They do not take into account any adjustment for taxes payable on reinvested distributions or, for class A shares, distribution fees prior to implementation of the class distribution plan in 1990. Investment returns and net asset value will fluctuate so that an investor's shares when sold may be worth more or less than their original cost. POP assumes 5.75% maximum sales charge for class A shares and 3.50% for class M shares. CDSC for class B shares assumes the applicable sales charge, with the maximum being 5%. COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/96 S&P 500 Consumer Index Price Index - ------------------------------------------------------------------------ 6 months 13.75% 1.69% - ------------------------------------------------------------------------ 1 year 30.13 2.90 - ------------------------------------------------------------------------ 5 years 100.47 15.61 Annual average 14.92 2.94 - ------------------------------------------------------------------------ 10 years 278.35 43.92 Annual average 14.23 3.71 - ------------------------------------------------------------------------ Life of class B 75.77 12.04 Annual average 15.10 2.88 - ------------------------------------------------------------------------ Life of class M 30.13 2.90 - ------------------------------------------------------------------------ TOTAL RETURN FOR PERIODS ENDED 3/31/96 (most recent calendar quarter) Class A Class B Class M (inception date) (11/16/57) (4/27/92) (5/1/95) NAV POP NAV CDSC NAV POP - ------------------------------------------------------------------------ 6 months 12.73% 6.22% 12.30% 7.30% 12.45% 8.51% - ------------------------------------------------------------------------ 1 year 31.96 24.41 31.08 26.08 -- -- - ------------------------------------------------------------------------ 5 years 99.89 88.43 -- -- -- -- Annual average 14.86 13.51 -- -- -- -- - ------------------------------------------------------------------------ 10 years 260.52 239.76 -- -- -- -- Annual average 13.68 13.01 -- -- -- -- - ------------------------------------------------------------------------ Life of class -- -- 72.92 69.92 27.65 23.15 Annual average -- -- 14.95 14.44 -- -- - ------------------------------------------------------------------------ Footnote reads: Performance data represent past results, do not reflect future performance, and will differ for each share class. They do not take into account any adjustment for taxes payable on reinvested distributions or, for class A shares, distribution fees prior to implementation of the class distribution plan in 1990. Investment returns and net asset value will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. POP assumes 5.75% maximum sales charge for class A shares and 3.50% for class M shares. CDSC for class B shares assumes the applicable sales charge, with the maximum being 5%. PRICE AND DISTRIBUTION INFORMATION 6 months ended 4/30/96 Class A Class B Class M - ------------------------------------------------------------------------ Distributions (number) 2 2 2 - ------------------------------------------------------------------------ Income $0.200 $0.141 $0.175 - ------------------------------------------------------------------------ Capital gains - ------------------------------------------------------------------------ Long-term 0.334 0.334 0.334 - ------------------------------------------------------------------------ Short-term 0.386 0.386 0.386 - ------------------------------------------------------------------------ Total $0.920 $0.861 $0.895 - ------------------------------------------------------------------------ Share value: NAV POP NAV NAV POP - ------------------------------------------------------------------------ 10/31/95 $15.77 $16.73 $15.63 $15.74 $16.31 - ------------------------------------------------------------------------ 4/30/96 17.27 18.32 17.11 17.22 17.84 - ------------------------------------------------------------------------ Current return - ------------------------------------------------------------------------ End of period - ------------------------------------------------------------------------ Current dividend rate1 2.32% 2.18% 1.66% 2.00% 1.93% - ------------------------------------------------------------------------ Current 30-day SEC yield2 2.50 2.36 1.79 2.03 1.97 - ------------------------------------------------------------------------ Footnote reads: 1 Income portion of most recent distribution, annualized and divided by NAV or POP at end of period. 2 Based on investment income, calculated using SEC guidelines. TERMS AND DEFINITIONS Class A shares are generally subject to an initial sales charge. Class B shares may be subject to a sales charge upon redemption. Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no sales charge on redemption. Net asset value (NAV) is the value of all your fund's assets, minus any liabilities, divided by the number of outstanding shares, not including any initial or contingent deferred sales charge. Public offering price (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume the maximum 5.75% sales charge for class A shares and 3.50% for class M shares. Contingent deferred sales charge (CDSC) is a charge applied at the time of the redemption of class B shares and assumes redemption at the end of the period. Your fund's CDSC declines from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. COMPARATIVE BENCHMARKS Standard & Poor's 500 Composite Stock Price Index is an index of common stocks frequently used as a general measure of stock market performance. This index assumes reinvestment of all distributions and interest payments and does not take in account brokerage commissions or other costs. Securities in the fund do not match those in the index and performance of the fund will differ. It is not possible to invest directly in an index. Consumer Price Index (CPI) is a commonly used measure of inflation; it does not represent an investment return.
Portfolio of investments owned April 30, 1996 (Unaudited) COMMON STOCKS (93.5%) * NUMBER OF SHARES VALUE Aerospace and Defense (1.7%) - --------------------------------------------------------------------------------------------------------------------- 3,322,800 Lockheed Martin Corp. $ 267,900,750 536,500 Sundstrand Corp. 19,716,375 ---------------- 287,617,125 Automotive (4.2%) - --------------------------------------------------------------------------------------------------------------------- 2,250,518 Chrysler Corp. 141,220,005 4,350,100 Ford Motor Co. 156,059,838 6,312,700 General Motors Corp. 342,463,975 1,650,000 Goodyear Tire & Rubber Co. 86,006,250 28,800 Magna International, Inc. Class A (Canada) 1,335,600 41,160 Mark IV Industries, Inc. 854,070 42,600 Varity Corp. + 1,815,825 ---------------- 729,755,563 Basic Industrial Products (3.0%) - --------------------------------------------------------------------------------------------------------------------- 955,800 Ball Corp. 29,749,275 16,600 Bandag Inc. 832,075 20,200 Briggs & Stratton Corp. 916,575 337,700 Case Corp. 17,053,850 956,150 Caterpillar, Inc. 61,193,600 56,600 Cincinnati Milicron, Inc. 1,492,825 4,137,687 Deere (John) & Co. 160,852,582 1,926,250 General Signal Corp. 73,197,500 80,200 Keystone International, Inc. 1,754,375 2,698,800 Minnesota Mining & Manufacturing Co. 177,446,100 ---------------- 524,488,757 Building and Construction (0.4%) - --------------------------------------------------------------------------------------------------------------------- 1,132,855 Armstrong World Industries, Inc. 64,572,735 Business Equipment and Services (3.4%) - --------------------------------------------------------------------------------------------------------------------- 41,800 Comdisco Inc. 1,029,325 39,400 Deluxe Corp. 1,379,000 2,437,100 Dun & Bradstreet Corp. 148,358,463 2,327,850 IBM Corp. 250,243,875 32,400 PHH Group Inc. 1,842,750 15,300 Wallace Computer Services, Inc. 904,613 1,181,200 Xerox Corp. 173,045,800 ---------------- 576,803,826 Chemicals (2.7%) - --------------------------------------------------------------------------------------------------------------------- 249,350 Dow Chemical Co. 22,160,981 2,395,614 du Pont (E.I.) de Nemours & Co. 192,547,475 897,100 Eastman Chemical Co. 60,329,975 24,000 Georgia Gulf Corp. 882,000 25,700 Hanna (M.A.) Co. 886,650 23,100 Mallinckrodt Group, Inc. 909,563 1,625,700 Union Carbide Corp. 73,969,350 38,600 Wellman, Inc. 926,400 3,037,800 Witco Chemical Corp. 103,664,925 ---------------- 456,277,319 Conglomerates (4.7%) - --------------------------------------------------------------------------------------------------------------------- 32,600 AGCO Corp. 823,150 1,871,200 General Motors Corp. Class H 114,377,100 2,110,250 ITT Industries Inc. 58,031,875 308,650 Johnson Controls Inc. 22,068,475 24,700 National Service Industries, Inc. 913,900 1,342,800 Ogden Corp. 27,191,700 2,717,950 Tenneco Inc. 149,147,506 3,309,550 TRW, Inc. 310,684,006 1,135,650 United Technologies Corp. 125,489,325 ---------------- 808,727,037 Consumer Durable Goods (1.0%) - --------------------------------------------------------------------------------------------------------------------- 23,300 Hasbro Inc. 856,275 26,000 Lancaster Colony Corp. 877,500 47,200 Leggett & Platt Inc. 1,215,400 512,650 Maytag Corp. 11,021,975 29,000 Polaris Industries, Inc. 1,011,375 2,629,250 Whirlpool Corp. 158,083,656 ---------------- 173,066,181 Consumer Non Durables (6.7%) - --------------------------------------------------------------------------------------------------------------------- 4,596,350 American Brands, Inc. 191,323,069 2,350,150 Avon Products, Inc. 208,869,581 28,300 Bemis Inc. 916,213 26,600 Block Drug Inc. Class A 1,004,150 1,020,050 Colgate-Palmolive Co. 78,161,331 95,000 Dimon Inc. 1,615,000 41,800 First Brands Corp. 1,107,700 19,300 Jones Apparel Group Inc. 991,538 38,400 Jostens Inc. 864,000 4,252,600 Kimberly-Clark Corp. 308,845,075 3,912,285 Philip Morris Cos., Inc. 352,594,686 18,800 Springs Industries, Inc. Class A 864,800 34,400 Universal Corp. 825,600 36,500 Warnaco Group, Inc. 958,125 ---------------- 1,148,940,868 Consumer Services ( - %) - --------------------------------------------------------------------------------------------------------------------- 31,200 La Quinta Inns, Inc. 912,600 Electronics and Electrical Equipment (4.3%) - --------------------------------------------------------------------------------------------------------------------- 2,159,600 Eaton Corp. 130,655,800 2,048,600 General Electric Co. 158,766,500 805,350 Honeywell, Inc. 42,381,544 2,765,850 Intel Corp. 187,386,338 18,600 Pittway Corp. Class A 888,150 3,726,150 Texas Instruments, Inc. 210,527,475 ---------------- 730,605,807 Environmental Control (0.5%) - --------------------------------------------------------------------------------------------------------------------- 2,400,000 WMX Technologies, Inc. 83,400,000 Food and Beverages (1.8%) - --------------------------------------------------------------------------------------------------------------------- 1,275,000 Anheuser-Busch Cos., Inc. 85,584,375 62,300 Flowers Industries, Inc. 833,263 1,665,900 General Mills, Inc. 92,457,450 28,700 Great Atlantic & Pacific Tea, Inc. 1,000,913 30,600 Hannaford Brothers Co. 856,800 3,570,100 Heinz (H.J.) Co. 120,937,138 33,200 Hormel Geo A. & Co. 883,950 23,200 Universal Foods Corp. 794,600 35,400 Whitman Corp. 893,850 ---------------- 304,242,339 Forest Products (1.9%) - --------------------------------------------------------------------------------------------------------------------- 20,800 Boise Cascade Corp. 967,200 583,625 Rayonier, Inc. 20,937,547 211,800 Union Camp Corp. 11,516,625 37,500 Wausau Paper Mills Co. 862,500 5,948,650 Weyerhaeuser Co. 294,458,175 ---------------- 328,742,047 Insurance and Finance (15.9%) - --------------------------------------------------------------------------------------------------------------------- 33,400 Allmerica Financial Corp. 868,400 5,466,518 American General Corp. 192,011,445 2,646,200 AON Corp. 141,902,475 2,191,200 BankAmerica Corp. 165,983,400 4,418,860 Bankers Trust New York Corp. 306,558,413 2,690,900 Beneficial Corp. 148,672,225 29,100 Berkley (W.R.) Corp. 1,251,300 51,000 California Federal Bancorp 911,625 25,700 Charter One Financial, Inc. 896,288 1,499,450 CIGNA Corp. 170,000,144 1,026,700 CoreStates Financial Corp. 40,041,300 3,323,400 Federal National Mortgage Association 101,779,125 29,300 Firstmerit Corp. 886,325 6,842,300 Fleet Financial Group, Inc. 294,218,900 15,900 Jefferson Pilot Corp. 838,725 4,138,850 Keycorp 159,863,081 33,200 Marshall & Isley Corp. 896,400 3,889,609 Morgan (J.P.) & Co., Inc. 327,213,357 498,300 National City Corp. 18,374,813 3,150,250 NationsBank Corp. 251,232,438 5,861,500 PNC Bank Corp. 177,310,375 36,400 Prudential Insurance Holdings 828,100 1,500,000 St. Paul Cos., Inc. 79,687,500 26,800 TIG Holdings Inc. 814,050 63,800 United Insurance Cos. 1,347,775 4,412,600 USF&G Corp. 70,050,025 64,000 Washington Mutual Insurance Inc. 1,776,000 325,000 Wells Fargo & Co. 78,853,125 ---------------- 2,735,067,129 Medical Supplies and Devices (1.3%) - --------------------------------------------------------------------------------------------------------------------- 5,016,450 Baxter International, Inc. 221,977,913 21,900 Dentsply International Inc. 914,325 ---------------- 222,892,238 Metals and Mining (1.1%) - --------------------------------------------------------------------------------------------------------------------- 48,100 Alumax, Inc. + 1,611,350 21,100 Freeport-McMoRan Copper & Gold Co., Inc. 770,150 3,910,210 Freeport-McMoRan Copper & Gold Co., Inc. Class A 123,660,391 2,151,734 Freeport-McMoRan Copper & Gold Co., Inc. Class B 70,738,255 ---------------- 196,780,146 Oil and Gas (9.0%) - --------------------------------------------------------------------------------------------------------------------- 2,379,300 Amoco Corp. 173,688,900 228,700 Atlantic Richfield Co. 26,929,425 1,759,295 British Petroleum PLC ADR (United Kingdom) 192,202,979 2,879,850 Chevron, Inc. 167,031,300 17,200 Diamond Offshore Drilling, Inc. + 855,700 1,600,000 Enron Corp. 64,400,000 1,988,900 Exxon Corp. 169,056,500 1,404,150 Mobil Corp. 161,477,250 6,930,127 Occidental Petroleum Corp. 178,450,770 2,321,850 PanEnergy Corp. 75,750,356 1,758,684 Phillips Petroleum Co. 72,985,386 55,100 Reading & Bates Corp. 1,349,950 1,100,000 Repsol S.A. ADS (Spain) 40,700,000 213,000 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 30,512,250 5,383,726 Total Corp. ADR (France) 184,392,616 44,800 Weatherford Enterra, Inc. + 1,579,200 ---------------- 1,541,362,582 Pharmaceuticals (5.6%) - --------------------------------------------------------------------------------------------------------------------- 1,486,650 American Home Products Corp. 156,841,575 1,792,100 Bristol-Myers Squibb Co. 147,400,225 7,025,112 Pharmacia & Upjohn, Inc. 268,710,534 3,415,150 Warner-Lambert Co. 381,643,013 ---------------- 954,595,347 Photography (1.7%) - --------------------------------------------------------------------------------------------------------------------- 3,889,850 Eastman Kodak Co. 297,573,525 39,500 Polaroid Corp. 1,777,500 ---------------- 299,351,025 Publishing (1.1%) - --------------------------------------------------------------------------------------------------------------------- 497,500 Dow Jones & Co., Inc. 18,594,063 600,000 Gannett Co., Inc. 41,025,000 1,420,000 McGraw-Hill, Inc. 62,657,500 1,600,000 Times Mirror Co. Class A 68,200,000 ---------------- 190,476,563 Real Estate (1.1%) - --------------------------------------------------------------------------------------------------------------------- 500,000 Avalon Properties, Inc. (R) 10,500,000 610,129 Beacon Properties Corp. (R) 15,634,556 349,900 Bradley Real Estate Trust, Inc. (R) 5,161,025 1,113,500 Debartolo Realty Corp. (R) 17,259,250 500,000 FelCor Suite Hotels, Inc. (R) 14,562,500 336,000 LTC Properties, Inc. (R) 5,166,000 397,600 Macerich Co. (R) 7,703,500 1,749,400 Meditrust Corp. (R) 59,260,925 750,000 Nationwide Health Properties, Inc. (R) 14,906,250 352,200 Smith (Charles E.) Residential Realty, Inc. (R) 8,188,650 500,000 Storage USA, Inc. (R) 16,562,500 228,000 Tanger Factory Outlet Center (R) 5,586,000 225,000 Wellsford Residential Property Trust (R) 4,893,750 ---------------- 185,384,906 Retail (6.7%) - --------------------------------------------------------------------------------------------------------------------- 2,567,150 Dayton Hudson Corp. 245,162,825 58,700 Family Dollar Stores, Inc. 895,175 15,317,900 Kmart Corp. 155,093,738 44,200 Kroger Co. + 1,817,725 3,948,800 May Department Stores Co. 201,388,800 3,019,400 Melville Corp. 117,379,175 4,477,689 Penney (J.C.) Co., Inc. 221,645,606 2,778,000 Rite Aid Corp. 82,298,250 2,599,900 Sears Roebuck & Co. 129,670,013 60,000 Thrifty Payless Holdings Class B 810,000 ---------------- 1,156,161,307 Transportation (3.0%) - --------------------------------------------------------------------------------------------------------------------- 1,752,650 Conrail, Inc. 122,247,338 516,800 CSX Corp. 26,486,000 1,339,150 Norfolk Southern Corp. 112,488,600 3,705,200 Ryder System, Inc. 107,913,950 2,254,100 Union Pacific Corp. 153,560,563 ---------------- 522,696,451 Utilities (10.7%) - --------------------------------------------------------------------------------------------------------------------- 2,431,650 American Telephone & Telegraph Co. 148,938,563 3,861,200 Bell Atlantic Corp. 250,978,000 32,900 Brooklyn Union Gas Co. 863,625 154,000 Central & South West Corp. 4,196,500 3,746,507 Cinergy Corp. 108,648,703 1,614,900 Consolidated Edison Co. of New York, Inc. 47,437,688 1,831,100 Entergy Corp. 48,524,150 3,271,350 GTE Corp. 141,894,806 961,600 Houston Industries, Inc. 20,554,200 2,300,000 Long Island Lighting Co. 37,375,000 4,650,350 Northeast Utilities Co. 73,824,306 3,131,832 NYNEX Corp. 153,851,247 3,653,350 Pacific Telesis Group 125,127,238 2,469,450 Peco Energy Co. 61,427,569 28,800 Portland General Corp. 846,000 2,750,000 Potomac Electric Power Co. 68,406,250 519,150 Public Service Co. of Colorado 17,196,844 5,150,850 Public Service Enterprise Group, Inc. 134,565,956 2,465,100 SBC Communications, Inc. 123,255,000 4,522,700 Sprint Corp. 190,518,738 615,309 Union Electric Co. 23,766,310 1,574,000 US West Communicatiions, Inc. 51,548,500 ---------------- 1,833,745,193 ---------------- Total Common Stocks (cost $13,188,244,518) $16,056,665,091 U.S. GOVERNMENT AND AGENCY OBLIGATIONS (3.0%) * PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------- Government National Mortgage Association pass-through certificates $ 3,020 11 1/2s, with various due dates from March 15, 2010 to March 15, 2013 $ 3,420 4,456 11s, January 15, 2010 4,971 309,906 9s, with various due dates from December 15, 2004 to June 15, 2011 330,128 170,332 7 1/2s, with various due dates from February 15, 2007 to April 15, 2007 170,335 525,837 7 1/4s, with various due dates from February 15, 2005 to March 15, 2005 527,137 U.S. Treasury Bonds 40,000,000 8 1/8s, August 15, 2019 44,581,240 286,300,000 8s, November 15, 2021 316,673,554 172,495,000 6 1/4s, August 15, 2023 155,568,066 ---------------- Total U.S. Government and Agency Obligations (cost $524,981,472) $ 517,858,851 CONVERTIBLE BONDS AND NOTES (0.9%) * PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------- $21,000,000 Banco Nacional de Mexico SA cv. bonds 7s, 1999 (Mexico) $ 18,690,000 GBP 25,000,000 British Airport Authority 144A cv. bonds 5 3/4s, 2006 (United Kingdom) 40,742,594 $32,000,000 Mitsubishi Bank Ltd. International Finance Bermuda, cv. trust guaranteed notes 3s, 2002 (Japan) 36,960,000 131,125,000 Roche Holdings, Inc. 144A cv. unsub. Liquid Yield Option Note zero %, 2010 (Switzerland) 57,695,000 ---------------- Total Convertible Bonds and Notes (cost $143,473,689) $ 154,087,594 CONVERTIBLE PREFERRED STOCKS (0.4%) * NUMBER OF SHARES VALUE - --------------------------------------------------------------------------------------------------------------------- 800,000 Atlantic Ritchfield Co. $2.23 cv. pfd. $ 22,600,000 450,000 Freeport-McMoRan Copper Co., Inc. stepped-coupon $1.25 ($1.75, 8/1/96) cv. pfd. ++ 12,768,750 952,200 Unisys Corp. Ser. A, $3.75 cv. pfd. 27,970,875 ---------------- Total Convertible Preferred Stocks (cost $71,266,284) $ 63,339,625 CORPORATE BONDS AND NOTES (0.2%) * (COST $24,521,875) PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------- $19,000,000 Siemens Capital Corp. Co. guaranty 8s, 2002 (Germany) $ 26,220,000 Short-Term Investments (1.9%) * PRINCIPAL AMOUNT VALUE - --------------------------------------------------------------------------------------------------------------------- $40,000,000 Ciesco L.P., effective yields of 5.15% to 5.27%, with various due dates from May 10, 1996 to July 19, 1996 $ 39,792,695 25,000,000 Corporate Asset Funding Corp., effective yield of 5.27%, June 14, 1996 24,838,972 35,000,000 Federal National Mortgage Assoc., effective yield of 5.22%, August 19, 1996 34,448,167 30,000,000 Fleet National Bank, effective yield of 5.34%, July 12, 1996 29,680,800 25,000,000 General Motors Acceptance Corp., effective yield of 5.35%, May 28, 1996 24,899,687 25,000,000 Mellon Financial Corp., effective yield of 5.30%, May 29, 1996 24,896,944 15,000,000 Metropolitan Life Funding, effective yield of 5.28%, May 20, 1996 14,958,200 50,000,000 National Rural Utilities, effective yield of 5.27%, with various maturities from May 13, 1996 to June 13, 1996 49,798,715 25,000,000 Nationsbank Corp. 5.26%, July 17, 1996 24,715,529 35,000,000 USAA Capital Corp., effective yields of 5.27% to 5.28%, with various due dates from May 24, 1996 to June 6, 1996 34,834,517 25,000,000 Walt Disney Corp., effective yield of 5.2%, September 4, 1996 24,534,500 3,837,000 Interest in $500,000,000 joint repurchase agreement dated April 30, 1996 with Lehman Brothers Inc. due May 1, 1996 with respect to various U. S. Treasury obligations-maturity value of $3,837,570 for an effective yield of 5.35% 3,837,570 ---------------- Total Short-Term Investments (cost $331,236,296) $ 331,236,296 ---------------- Total Investments (cost $14,283,724,134) *** $17,149,407,457 - --------------------------------------------------------------------------------------------------------------------- * Percentages indicated are based on net assets of $17,168,517,813. + Non-income-producing security. ++ The dividend rate and date shown parenthetically represent the new dividend rate to be paid and the date the fund will begin receiving dividends at this rate. *** The aggregate identified cost on a tax cost basis is $14,324,750,851 resulting in gross unrealized appreciation and depreciation of $3,048,990,345 and $224,333,739 respectively, or net unrealized appreciation of $2,824,656,606. ADR or ADS after the name of a foreign holding, stands for American Depository Receipts or American Depository Shares, respectively, representing ownership of foreign securities on deposit with a domestic custodian bank. (R) Real Estate Investment Trust. 144A after the name of a security represents those exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities April 30, 1996 (Unaudited) Assets - -------------------------------------------------------------------------------------------------------- Investments in securities, at value (identified cost $ 14,283,724,134) (Note 1) $17,149,407,457 - -------------------------------------------------------------------------------------------------------- Cash 860 - -------------------------------------------------------------------------------------------------------- Dividends, interest and other receivables 47,523,516 - -------------------------------------------------------------------------------------------------------- Receivable for shares of the fund sold 87,576,432 - -------------------------------------------------------------------------------------------------------- Receivable for securities sold 64,559,222 - -------------------------------------------------------------------------------------------------------- Total assets 17,349,067,487 Liabilities - -------------------------------------------------------------------------------------------------------- Payable for securities purchased $ 130,788,784 - -------------------------------------------------------------------------------------------------------- Payable for shares of the fund repurchased 17,300,832 - -------------------------------------------------------------------------------------------------------- Payable for compensation of Manager (Note 2) 17,594,163 - -------------------------------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 5,549,830 - -------------------------------------------------------------------------------------------------------- Payable for compensation of Trustees (Note 2) 18,607 - -------------------------------------------------------------------------------------------------------- Payable for administrative services (Note 2) 6,360 - -------------------------------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 7,609,604 - -------------------------------------------------------------------------------------------------------- Other accrued expenses 1,681,494 - -------------------------------------------------------------------------------------------------------- Total liabilities 180,549,674 - -------------------------------------------------------------------------------------------------------- Net assets $17,168,517,813 Represented by - -------------------------------------------------------------------------------------------------------- Paid-in-capital (Notes 1 and 4) 13,538,276,891 - -------------------------------------------------------------------------------------------------------- Undistributed net investment income (Note 1) 53,294,463 - -------------------------------------------------------------------------------------------------------- Accumulated net realized gain on investments (Note 1) 711,263,137 - -------------------------------------------------------------------------------------------------------- Net unrealized appreciation of investments 2,865,683,322 - -------------------------------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $17,168,517,813 Computation of net asset value and offering price - -------------------------------------------------------------------------------------------------------- Net asset value and redemption price per class A share ($9,856,349,293 divided by 570,678,762 shares) $17.27 - -------------------------------------------------------------------------------------------------------- Offering price per class A share (100/94.25 of $17.27) * $18.32 - -------------------------------------------------------------------------------------------------------- Net asset value and offering price per class B share ($6,993,225,570 divided by 408,644,597 shares) ** $17.11 - -------------------------------------------------------------------------------------------------------- Net asset value and redemption price per class M share ($63,772,920 divided by 3,703,053 shares) $17.22 - -------------------------------------------------------------------------------------------------------- Offering price per class M share (100/96.50 of $17.22) * $17.84 - -------------------------------------------------------------------------------------------------------- Net asset value, offering and redemption price per class Y share ($255,170,030 divided by 14,761,279 shares) $17.29 - -------------------------------------------------------------------------------------------------------- * On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales the offering price is reduced. ** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. The accompanying notes are an integral part of these financial statements.
Statement of operations Six months ended April 30, 1996 (Unaudited) Investment Income: - -------------------------------------------------------------------------------------------------------- Dividends (net of foreign tax of $467,326) $ 230,760,825 - -------------------------------------------------------------------------------------------------------- Interest 24,673,000 - -------------------------------------------------------------------------------------------------------- Total investment income 255,433,825 Expenses: - -------------------------------------------------------------------------------------------------------- Compensation of Manager (Note 2) 33,487,926 - -------------------------------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 14,254,510 - -------------------------------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 109,342 - -------------------------------------------------------------------------------------------------------- Administrative services (Note 2) 37,977 - -------------------------------------------------------------------------------------------------------- Distribution fees -- Class A (Note 2) 11,086,907 - -------------------------------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 30,079,783 - -------------------------------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 149,073 - -------------------------------------------------------------------------------------------------------- Reports to shareholders 179,561 - -------------------------------------------------------------------------------------------------------- Registration fees 925,802 - -------------------------------------------------------------------------------------------------------- Auditing 169,601 - -------------------------------------------------------------------------------------------------------- Legal 139,753 - -------------------------------------------------------------------------------------------------------- Postage 752,745 - -------------------------------------------------------------------------------------------------------- Other 166,011 - -------------------------------------------------------------------------------------------------------- Total expenses 91,538,991 - -------------------------------------------------------------------------------------------------------- Expense reduction (Note 2) (1,951,530) - -------------------------------------------------------------------------------------------------------- Net expenses 89,587,461 - -------------------------------------------------------------------------------------------------------- Net investment income 165,846,364 - -------------------------------------------------------------------------------------------------------- Net realized gain on investments (Notes 1 and 3) 777,458,035 - -------------------------------------------------------------------------------------------------------- Net unrealized appreciation of investments during the period 1,194,410,543 - -------------------------------------------------------------------------------------------------------- Net gain on investments 1,971,868,578 - -------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations $2,137,714,942 - -------------------------------------------------------------------------------------------------------- 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 1996* 1995 - -------------------------------------------------------------------------------------------------------- Increase in net assets - -------------------------------------------------------------------------------------------------------- Operations: - -------------------------------------------------------------------------------------------------------- Net investment income $ 165,846,364 $ 318,107,138 - -------------------------------------------------------------------------------------------------------- Net realized gain on investments 777,458,035 567,738,792 - -------------------------------------------------------------------------------------------------------- Net unrealized appreciation of investment transactions 1,194,410,543 1,368,165,037 - -------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 2,137,714,942 2,254,010,967 - -------------------------------------------------------------------------------------------------------- Distributions to shareholders: - -------------------------------------------------------------------------------------------------------- From net investment income Class A (105,230,824) (186,528,064) - -------------------------------------------------------------------------------------------------------- Class B (50,517,679) (84,305,152) - -------------------------------------------------------------------------------------------------------- Class M (398,348) (104,438) - -------------------------------------------------------------------------------------------------------- Class Y (2,922,817) (2,521,806) - -------------------------------------------------------------------------------------------------------- From net realized gain on investments Class A (362,724,909) (193,525,619) - -------------------------------------------------------------------------------------------------------- Class B (240,134,546) (109,385,623) - -------------------------------------------------------------------------------------------------------- Class M (1,185,263) -- - -------------------------------------------------------------------------------------------------------- Class Y (8,901,789) (882,814) - -------------------------------------------------------------------------------------------------------- Increase from capital share transactions (Note 4) 2,639,572,669 2,130,825,036 - -------------------------------------------------------------------------------------------------------- Total increase in net assets 4,005,271,436 3,807,582,487 - -------------------------------------------------------------------------------------------------------- Net assets - -------------------------------------------------------------------------------------------------------- Beginning of period 13,163,246,377 9,355,663,890 - -------------------------------------------------------------------------------------------------------- End of period (including undistributed net investment income of $53,294,463 and $46,517,767, respectively) $17,168,517,813 $13,163,246,377 - -------------------------------------------------------------------------------------------------------- * Unaudited
Financial highlights (For a share outstanding throughout the period) June 15, 1994 May 1, 1995 Six months (commencement Six months (commencement ended Year ended of operations) to ended of operations) to April 30 October 31 October 31 April 30 October 31 -------------------------------------------------------------------------------------- 1996** 1995* 1994 1996** 1995* -------------------------------------------------------------------------------------- Class Y Class M -------------------------------------------------------------------------------------- Net asset value, beginning of period $15.78 $13.66 $13.46 $15.74 $14.24 - -------------------------------------------------------------------------------------------------------------------------- Investment operations - -------------------------------------------------------------------------------------------------------------------------- Net investment income .22 .49 .12 .16 .15 - -------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments 2.23 2.50 .19 2.22 1.53 - -------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.45 2.99 .31 2.38 1.68 - -------------------------------------------------------------------------------------------------------------------------- Distributions to shareholders: - -------------------------------------------------------------------------------------------------------------------------- From net investment income (.22) (.43) (.11) (.18) (.18) - -------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments (.72) (.44) -- (.72) -- - -------------------------------------------------------------------------------------------------------------------------- Total distributions (.94) (.87) (.11) (.90) (.18) - -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $17.29 $15.78 $13.66 $17.22 $15.74 - -------------------------------------------------------------------------------------------------------------------------- Total investment return at net asset value (%) (a) 15.97 (c) 23.28 2.28 (c) 15.50 (c) 11.88 (c) - -------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $255,170 $193,292 $27,632 $63,773 $21,100 - -------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%) (b) .32 (c) .64 .26 (c) .69 (c) .66 (c) - -------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 1.36 (c) 3.14 1.17 (c) .92 (c) 1.12 (c) - -------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 23.15 (c) 58.40 48.76 23.15 (c) 58.40 - -------------------------------------------------------------------------------------------------------------------------- Average commission rate paid (d) $0.0551 -- -- $0.0551 -- - -------------------------------------------------------------------------------------------------------------------------- See page 25 for notes to financial highlights.
Financial highlights (continued) (For a share outstanding throughout the period) April 27, 1992 Six months (commencement Six months ended of operations) to ended April 30 Year ended October 31 October 31 April 30 - -------------------------------------------------------------------------------------------------------------------------- 1996** 1995* 1994 1993* 1992* 1996** - -------------------------------------------------------------------------------------------------------------------------- Class B Class B - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $15.63 $13.56 $14.18 $12.88 $12.69 $15.77 - -------------------------------------------------------------------------------------------------------------------------- Investment operations - -------------------------------------------------------------------------------------------------------------------------- Net investment income .14 .35 .35 .31 .18 .20 - -------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments 2.20 2.46 (.09) 1.89 .26 2.22 - -------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.34 2.81 .26 2.20 .44 2.42 - -------------------------------------------------------------------------------------------------------------------------- Distributions to shareholders: - -------------------------------------------------------------------------------------------------------------------------- From net investment income (.14) (.30) (.34) (.44) (.25) (.20) - -------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments (.72) (.44) (.54) (.46) -- (.72) - -------------------------------------------------------------------------------------------------------------------------- Total distributions (.86) (.74) (.88) (.90) (.25) (.92) - -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $17.11 $15.63 $13.56 $14.18 $12.88 $17.27 - -------------------------------------------------------------------------------------------------------------------------- Total investment return at net asset value (%) (a) 15.38 (c) 21.91 2.01 17.86 3.47 (c) 15.78 (c) - -------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $6,993,226 $5,089,359 $3,318,858 $1,819,793 $288,121 $9,856,349 - -------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%) (b) .82 (c) 1.64 1.70 1.68 .97 (c) .45 (c) - -------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) .86 (c) 2.42 2.42 2.27 1.15 (c) 1.24 (c) - -------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 23.15 (c) 58.40 48.76 64.02 66.63 23.15 (c) - -------------------------------------------------------------------------------------------------------------------------- Average commission rate paid (d) $0.0551 -- -- -- -- $0.0551 - --------------------------------------------------------------------------------------------------------------------------
Financial highlights (continued) (For a share outstanding throughout the period) Year ended October 31 - -------------------------------------------------------------------------------------------------------------------------- 1995* 1994 1993 1992 1991 - -------------------------------------------------------------------------------------------------------------------------- Class A - -------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $13.65 $14.26 $12.92 $12.82 $10.87 - -------------------------------------------------------------------------------------------------------------------------- Investment operations - -------------------------------------------------------------------------------------------------------------------------- Net investment income .46 .44 .43 .48 .54 - -------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments 2.50 (.08) 1.88 .65 2.46 - -------------------------------------------------------------------------------------------------------------------------- Total from investment operations 2.96 .36 2.31 1.13 3.00 - -------------------------------------------------------------------------------------------------------------------------- Distributions to shareholders: - -------------------------------------------------------------------------------------------------------------------------- From net investment income (.40) (.43) (.51) (.54) (.62) - -------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments (.44) (.54) (.46) (.49) (.43) - -------------------------------------------------------------------------------------------------------------------------- Total distributions (.84) (.97) (.97) (1.03) (1.05) - -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $15.77 $13.65 $14.26 $12.92 $12.82 - -------------------------------------------------------------------------------------------------------------------------- Total investment return at net asset value (%) (a) 23.00 2.74 18.75 9.53 28.71 - -------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $7,859,496 $6,009,174 $5,214,239 $3,517,199 $2,688,047 - -------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%) (b) .89 .95 .93 1.07 .95 - -------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 3.20 3.18 3.18 3.72 4.45 - -------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 58.40 48.76 64.02 66.63 77.06 - -------------------------------------------------------------------------------------------------------------------------- Average commission rate paid (d) -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- * Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. ** Unaudited. (a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) The ratio of expenses to average net assets for the period ended October 31, 1995 and thereafter, includes amounts paid through expense offset and brokerage service arrangements. Prior period ratios exclude these amounts (Note 2). (c) Not annualized. (d) Average commission rate paid is presented for fiscal periods beginning on or after September 1, 1995 in conformance with requirements issued by the SEC.
Notes to financial statements April 30, 1996 (Unaudited) Note 1 Significant accounting policies The fund is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The fund seeks capital growth and current income 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 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 may be subject to a contingent deferred sales charge, if those shares are redeemed within six years of purchase. Class M shares are sold with a maximum front end sales charge of 3.50% and pay an ongoing distribution fee that is higher than class A shares but lower than class B shares. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A shares and class B shares, but do not bear a distribution fee. Class Y shares are sold to defined contribution plans that initially invest at least $250 million in a combination of Putnam funds. Expenses of the fund are borne pro-rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the distribution fees applicable to such class). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. Shares of each class would receive their pro-rata share of the net assets of the fund, if the fund were liquidated. In addition, the Trustees declare separate dividends on each class of shares. The following is a summary of significant accounting policies followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with generally accepted accounting principles and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. Actual results could differ from those estimates. A) Security valuation Investments for which market quotations are readily available are stated at market value which is determined using the last reported sale price, or, if no sales are reported -- as in the case of some securities traded over-the-counter -- the last reported bid price. Market quotations are not considered to be readily available for long-term corporate bonds and notes; such investments are stated at fair market value on the basis of valuations furnished by a pricing service, approved by the Trustees. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximates market value, and other investments are stated at fair 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 managed by Putnam Investment Management, Inc. ("Putnam Management"), the fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc. and certain other accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. C) Repurchase agreements The fund, or any joint trading account, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. Putnam Management is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest. D) Security transactions and related investment income Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recorded as soon as the fund is informed of the ex-dividend date. Discounts on zero coupon bonds, original issue, stepped-coupon bonds and payment in kind bonds are accreted according to the effective yield method. E) Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held and for excise tax on income and capital gains. F) Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Capital gain distributions, if any, are recorded on the ex-dividend date and paid 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, and 0.45% of the next $5 billion, 0.425% of the next $5 billion, 0.405% of the next $5 billion, 0.390% of the next $5 billion and 0.380% of any excess thereafter subject, under current law, to reduction in any year to the extent that expenses (exclusive of brokerage, interest and taxes) of the fund exceed 2.5% of the first $30 million of average net assets, 2.0% of the next $70 million and 1.5% of any excess over $100 million and by the amount of certain brokerage commissions and fees (less expenses) received by affiliates of Putnam Management on the fund's portfolio transactions. The fund reimburses Putnam Management for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc. Investor servicing agent functions are provided by Putnam Investor Services, a division of PFTC. For the six months ended April 30, 1996, fund expenses were reduced by $1,951,530 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 these assets utilized in connection with the expense offset arrangements in an income producing asset if it had not entered into such arrangements. Trustees of the fund receive an annual Trustees fee of $10,628 and an additional fee for each Trustee's meeting attended. Trustees who are not interested persons of Putnam Management and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings. The fund adopted a Trustee Fee Deferral Plan (the "Plan") which allows the Trustees to defer the receipt of all or a portion of Trustees Fees payable on or after July 1, 1995. The deferred fees remain in the fund and are invested in the fund or in other Putnam funds until distribution in accordance with the Plan. The fund has adopted distribution plans (the "Plans") with respect to its class A, class B, and class M shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments, Inc., for services provided and expenses incurred by it in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%, 1.00%, and 1.00% of the average net assets attributable to class A, class B, and class M shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, and 0.75% of the average net assets attributable to class A, class B, and class M shares, respectively. For the six months ended April 30, 1996, Putnam Mutual Funds Corp., acting as underwriter received net commissions of $4,924,002 and $92,040 from the sale of class A and class M shares, respectively and $3,399,264 in contingent deferred sales charges from redemptions of class B shares. A deferred sales charge of up to 1% is assessed on certain redemptions of class A shares. For the six months ended April 30, 1996, Putnam Mutual Funds Corp., acting as underwriter received $14,902 on class A redemptions. Note 3 During the six months ended April 30, 1996, purchases and sales of investment securities other than U.S. government obligations and short- term investments aggregated $5,151,322,243 and $3,368,053,093, respectively. Purchases and sales of U.S. government obligations aggregated $524,150,405 and $99,704, respectively. In determining the net gain or loss on securities sold, the cost of securities has been determined on the identified cost basis. Note 4 Capital shares At April 30, 1996, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: Six months ended April 30, 1996 - ---------------------------------------------------- Class A Shares Amount - ---------------------------------------------------- Shares sold 85,514,174 $1,425,478,684 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 26,641,177 430,792,538 - ---------------------------------------------------- 112,155,351 1,856,271,222 Shares repurchased (39,938,655) (662,939,259) - ---------------------------------------------------- Net increase 72,216,696 $1,193,331,963 - ---------------------------------------------------- Year ended October 31, 1995 - ---------------------------------------------------- Class A Shares Amount - ---------------------------------------------------- Shares sold 106,699,884 $1,535,276,912 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 26,155,203 345,499,774 - ---------------------------------------------------- 132,855,087 1,880,776,686 Shares repurchased (74,467,149) (1,063,380,132) - ---------------------------------------------------- Net increase 58,387,938 $817,396,554 - ---------------------------------------------------- Six months ended April 30, 1996 - ---------------------------------------------------- Class B Shares Amount - ---------------------------------------------------- Shares sold 86,833,197 $1,434,638,940 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 16,959,748 271,836,121 - ---------------------------------------------------- 103,792,945 1,706,475,061 Shares repurchased (20,694,133) (341,411,754) - ---------------------------------------------------- Net increase 83,098,812 $1,365,063,307 - ---------------------------------------------------- Year ended October 31, 1995 - ---------------------------------------------------- Class B Shares Amount - ---------------------------------------------------- Shares sold 103,563,018 $1,481,487,774 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 13,827,849 180,565,029 - ---------------------------------------------------- 117,390,867 1,662,052,803 Shares repurchased (36,574,502) (517,036,794) - ---------------------------------------------------- Net increase 80,816,365 $1,145,016,009 - ---------------------------------------------------- Six months ended April 30, 1996 - ---------------------------------------------------- Class M Shares Amount - ---------------------------------------------------- Shares sold 2,640,994 $43,994,990 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 94,471 1,526,782 - ---------------------------------------------------- 2,735,465 45,521,772 Shares repurchased (373,178) (6,255,804) - ---------------------------------------------------- Net increase 2,362,287 $39,265,968 - ---------------------------------------------------- For the period May 1, 1995 (commencement of operations) to October 31, 1995 - ---------------------------------------------------- Class M Shares Amount - ---------------------------------------------------- Shares sold 1,408,277 $21,457,349 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 6,677 102,694 - ---------------------------------------------------- 1,414,954 21,560,043 Shares repurchased (74,188) (1,150,413) - ---------------------------------------------------- Net increase 1,340,766 $20,409,630 - ---------------------------------------------------- Six months ended April 30, 1996 - ---------------------------------------------------- Class Y Shares Amount - ---------------------------------------------------- Shares sold 3,083,822 $51,688,591 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 730,457 11,824,606 - ---------------------------------------------------- 3,814,279 63,513,197 Shares repurchased (1,301,416) (21,601,766) - ---------------------------------------------------- Net increase 2,512,863 $41,911,431 - ---------------------------------------------------- Year ended October 31, 1995 - ---------------------------------------------------- Class Y Shares Amount - ---------------------------------------------------- Shares sold 11,259,867 $163,682,273 - ---------------------------------------------------- Shares issued in connection with reinvestment of distributions 240,803 3,404,620 - ---------------------------------------------------- 11,500,670 167,086,893 Shares repurchased (1,274,438) (19,084,050) - ---------------------------------------------------- Net increase 10,226,232 $148,002,843 - ---------------------------------------------------- Fund information INVESTMENT MANAGER Putnam Investment Management, Inc. One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Mutual Funds Corp. One Post Office Square Boston, MA 02109 CUSTODIAN Putnam Fiduciary Trust Company LEGAL COUNSEL Ropes & Gray TRUSTEES George Putnam, Chairman William F. Pounds, Vice Chairman Jameson Adkins Baxter Hans H. Estin John A. Hill Elizabeth T. Kennan Lawrence J. Lasser Robert E. Patterson Donald S. Perkins George Putnam, III Eli Shapiro A.J.C. Smith W. Nicholas Thorndike OFFICERS George Putnam President Charles E. Porter Executive Vice President Patricia C. Flaherty Senior Vice President John D. Hughes Senior Vice President and Treasurer Lawrence J. Lasser Vice President Gordon H. Silver Vice President Peter Carman Vice President Brett C. Browchuk Vice President Thomas V. Reilly Vice President Anthony I. Kreisel Vice President and Fund Manager David L. King Vice President and Fund Manager William N. Shiebler Vice President John R. Verani Vice President Paul M. O'Neil Vice President Beverly Marcus Clerk and Assistant Treasurer This report is for the information of shareholders of 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. Shares of mutual funds are not deposits or obligations of, or guaranteed or endorsed by, any financial institution; are not insured by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other agency, and involve risk, including the possible loss of the principal amount invested. [PUTNAM INVESTMENTS LOGO GOES HERE] The Putnam Funds One Post Office Square Boston, Massachusetts 02109 - -------------- Bulk Rate U.S. Postage PAID Putnam Investments - -------------- 25124-002/881/427 6/96 PUTNAM INVERSTMENTS [SCALE LOGO OMITTED] - -------------------------------------------------------------------------- The Putnam Fund for Growth and Income Supplement to Semiannual Report dated April 30, 1996 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 $250 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, and M shares, which are discussed more extensively in the semiannual report. SEMIANNUAL RESULTS AT A GLANCE - -------------------------------------------------------------------------- Total return: NAV Six months ended 4/30/96 15.97% One year ended 4/30/96 30.27 Life of class (since 5/16/94) 50.71 Annual average 23.28 - -------------------------------------------------------------------------- Share value: NAV 10/31/95 $15.78 04/30/96 $17.79 - -------------------------------------------------------------------------- Distributions: No. Income Capital gains Total 2 $0.2200 $0.7200 $0.9200 - -------------------------------------------------------------------------- Current return (end of period) Total Current dividend rate(1) 2.54% Current 30-day SEC yield(2) 2.74 (1)Income portion of most recent distribution, annualized and divided by NAV at end of period. (2)Based only on investment income, calculated using SEC guidelines. Please note that past performance does not indicate future results. Investment return and principal value will fluctuate so that 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-----