Putnam
Utilities
Growth and
Income Fund
Item 1. Report to Stockholders:
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The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
4-30-05
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From the Trustees
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III]
John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
Throughout the period ended April 30, 2005, the Federal Reserve Board's
series of gradual increases in the federal funds rate occupied much of
investors' attention. However, these increases did not begin to have a
significant impact on stock and bond prices until the early months of
the 2005 calendar year. The Fed's more restrictive monetary policy,
along with stubbornly high energy prices, has caused concern about the
sustainability of corporate profits and slowed the stock market's
momentum. Shorter-term bond prices have also been under pressure due to
worries regarding inflation. In addition, credit quality issues have
become a greater concern, particularly in early May, after the end of
the reporting period, when rating agencies downgraded bonds issued by
Ford and General Motors. Given the uncertainties of this environment,
security selection takes on even greater importance and the in-depth,
professional research and active management that mutual funds can
provide makes them an even more intelligent choice for today's
investors.
We want you to know that Putnam Investments' management team, under the
leadership of Chief Executive Officer Ed Haldeman, continues to focus on
investment performance and remains committed to putting the interests of
shareholders first. In keeping with these goals, we are including
additional disclosure about your fund's management team in this report.
Following the Outlook for Your Fund, we provide manager compensation
information that pertains to your fund. Furthermore, in this report we
provide information about the 2004 approval by the Trustees of your
fund's management contract with Putnam. See page 19 for details.
In the following pages, members of your fund's management team discuss
the fund's performance, the strategies used to pursue the fund's
investment objectives during the reporting period, and the team's plan
for responding to recent changes in the market climate.
As always, we thank you for your continuing confidence in Putnam.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
June 15, 2005
Report from Fund Management
Fund highlights
* For the six months ended April 30, 2005, Putnam Utilities Growth and
Income Fund's class A shares had a total return of 9.16% without sales
charges.
* The fund's benchmark, the S&P Utilities Index, returned 16.29%.
* The average return for the fund's Lipper peer group, the Utility Funds
category, was 11.29%.
* See the Performance Summary beginning on page 10 for additional fund
performance, comparative performance, and Lipper data.
Performance commentary
Your fund delivered solid absolute performance for the first half of its
2005 fiscal year, but lagged considerably behind its benchmark, the S&P
Utilities Index. This was primarily due to differences in allocation,
combined with exceptionally favorable conditions for the electric and
gas utilities stocks that dominate this index. Prices for these
utilities rose substantially during the period, driven up by the
continuing rise in energy prices. Your fund, however, also invests in
telecommunications utilities and allocates approximately 10% of its
assets to fixed-income securities issued by utilities. Consequently, in
comparison to the index, the fund was underweighted in the
strongest-performing area of its investment universe, explaining its
relative underperformance. The fund's results also lagged the average
for its Lipper category. While other funds in this category invest in
telecommunications stocks and fixed-income securities, some also
invested directly in energy stocks during this period and thus benefited
from the rising energy prices to a greater extent. We did not consider
such a tactic consistent with your fund's objective and maintained its
focus on utilities.
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TOTAL RETURN FOR
PERIODS ENDED 4/30/05
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Class A
(inception 11/19/90) NAV POP
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6 months 9.16% 3.44%
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1 year 21.78 15.39
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5 years 2.44 -2.90
Annual average 0.48 -0.59
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10 years 114.11 102.83
Annual average 7.91 7.33
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Annual average
(life of fund) 8.13 7.73
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Data is historical. Past performance does not guarantee future results.
More recent returns may be less or more than those shown. Investment
return and principal value will fluctuate and you may have a gain or a
loss when you sell your shares. Performance assumes reinvestment of
distributions and does not account for taxes. Returns at NAV do not
reflect a sales charge of 5.25%. For the most recent month-end
performance, visit www.putnaminvestments.com. A short-term trading fee
of up to 2% may apply.
FUND PROFILE
Putnam Utilities Growth and Income Fund seeks capital growth and current
income by investing in stocks and bonds of utilities such as natural
gas, electric, and communications services companies. It may be suitable
for investors who want a long-term investment that can offer both income
and growth potential.
Market overview
Although the broad stock market struggled for much of the semiannual
period, electric utilities stocks delivered strong results, reflecting
investors' preference for more predictable investments, and strong gas
and electricity prices. The price of gas determines the cost -- and
therefore the price -- of electricity in most parts of the country
because so many electric companies use gas in their power generation
operations. Although this is the most expensive way to generate power,
it is justified in many areas because of the high demand. Companies that
sell into deregulated or loosely regulated markets and that use less
expensive fuels, such as coal and uranium (i.e., nuclear power), benefit
from an increase in their profit margins when gas prices rise. While
your fund benefited from this trend, power prices were stronger than we
had anticipated, and the portfolio was not positioned to take full
advantage of this situation. Telecommunications equities performed well
during the early months of the period but then gave back much of their
gains as growth slowed somewhat amid increasing competition.
Another favorable influence on utilities stocks was the resilient tone
in the bond market for much of the period; these stocks tend to track
the bond market to a greater extent than stocks in other industries. The
fund's fixed-income holdings benefited from this trend as well.
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MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 4/30/05
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Equities
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S&P Utilities Index (utilities stocks) 16.29%
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S&P 500 Index (broad stock market) 3.28%
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Russell 1000 Growth Index (large-company growth stocks) 1.14%
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Russell 1000 Value Index (large-company value stocks) 6.72%
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Bonds
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Lehman Aggregate Bond Index (broad bond market) 0.98%
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JP Morgan Global High Yield Index (global high-yield corporate bonds) 0.65%
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Lehman Intermediate Treasury Bond Index
(intermediate-maturity U.S. Treasury bonds) -0.02%
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These indexes provide an overview of performance in different market
sectors for the six months ended 4/30/05.
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Strategy overview
During this period, your fund continued its basic strategy of selecting
among the securities of companies that provide basic, stable-demand
services such as electricity, gas, water, and telecommunications. Our
stock selection process incorporates both quantitative and qualitative
factors. Quantitative factors suggest which securities we should
investigate further; but our final buy and sell decisions rely
principally on our assessment of economic, financial, and operating
factors likely to influence a company's prospects. The most important
measure of a security is our determination of its intrinsic value, based
on our estimate of the earnings and cash flow we believe it can
generate. Our understanding of past and future developments, risks, and
uncertainties specific to the utilities industries is also a key
element, and one where our views frequently differ from the conventional
wisdom in the investment community.
During the semiannual period, we have not significantly changed the
fund's sector allocation, which, relative to the benchmark, has a modest
overweight to telecommunication equities and a slight underweight to gas
and electric utilities. While the telecom industry worldwide faces
slowed growth and tough competition, we feel that current stock prices
are attractive enough to more than compensate for these problems.
Electric and gas utilities have performed very well, in part due to
strong gas prices and stable interest rates; but we will not increase
our weighting here until we see better buying opportunities. Bonds
issued by telecom, gas, and electric utilities continue to constitute
about 10% of your portfolio, providing additional income and
contributing to the portfolio's stability. In January, we rebalanced the
portfolio to maintain this target weighting.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY WEIGHTINGS COMPARED]
TOP INDUSTRY WEIGHTINGS COMPARED
as of 10/31/04 as of 4/30/05
Electric utilities 58.0% 56.3%
Telecommunications 23.9% 22.9%
Regional Bells 6.9% 6.9%
Natural gas utilities 6.9% 4.6%
Telephone 0.8% 3.2%
Footnote reads:
This chart shows how the fund's top weightings have changed over the
last six months. Weightings are shown as a percentage of net assets.
Holdings will vary over time.
How fund holdings affected performance
While the fund's solid absolute returns reflect the strength of the gas
and electric utilities industries during the period, our conservative
approach meant that the fund did not benefit from the strength of
several of the period's top-performing companies. For example, we did
not hold TXU Corp., AES Corp., and Duke Energy stock. (We did hold some
bonds issued by a Duke subsidiary during the period but sold them to
take advantage of their appreciation.) The fund's relative performance
was also hurt by the size of its position in PG&E, the California gas
and electric utility. PG&E has recovered from its recent bankruptcy and
resumed its dividend payments. However, because of its troubled past,
the company's stock price has taken some time to reflect its current
advantageous situation. PG&E stock did appreciate over the period, but
not to the same extent as others in its industry. We expect additional
appreciation and are maintaining the position.
Gas and electric utilities that significantly contributed to performance
over the period include Edison International, CMS Energy, Exelon, and
Dominion Resources. Edison International, like PG&E, has benefited from
the improving regulatory environment in California and the state's
recovery from its energy crisis. Investor perceptions of CMS Energy have
improved due to the efforts of new management and a successful stock
offering. We sold this position at a profit during the period. Exelon is
a beneficiary of higher power prices, since it has the largest fleet of
low-cost nuclear power generators in the country that will, in effect,
be largely deregulated in 2007. The fund also benefited from its
position in Exelon bonds. Finally, Dominion Resources has substantial
oil and gas assets that are undervalued by the market because they are
currently, and for a while longer, locked in to contracts at
below-market prices.
[GRAPHIC OMITTED: TOP HOLDINGS]
TOP HOLDINGS
(Percent of fund's net assets as of 4/30/05)
1 Dominion Resources, Inc. (5.7%)
Electric utilities
2 PG&E Corp. (5.6%)
Electric utilities
3 Exelon Corp. (5.5%)
Electric utilities
4 Vodafone Group PLC (5.4%)
United Kingdom
Telecommunications
5 Entergy Corp. (5.3%)
Electric utilities
6 Edison International (3.8%)
Electric utilities
7 FPL Group, Inc. (3.6%)
Electric utilities
8 Telefonica SA (2.5%)
Spain
Telecommunications
9 Verizon Communications, Inc. (2.5%)
Regional Bells
10 Sierra Pacific Resources (2.3%)
Electric utilities
Footnote reads:
The fund's holdings will change over time.
On the telecommunications side, the fund did not participate in the
appreciation of British Telecom company O2 PLC during the period. This
stock had been in the portfolio earlier, but since we have sought to limit
the fund's telecom exposure to mature and highly competitive markets such
as the United Kingdom and Germany, we had previously taken profits on the
position after it rose 17% in a month.
However, three other telecommunications companies made substantial
contributions to returns. We believe that Telus, a mobile telecom
company based in Western Canada, currently has the highest growth
potential of any integrated North American mobile telecom company.
Canada's telecommunications market consolidated from four key players
into three in 2004, and, with wireless penetration in this country
currently among the lowest in the developed world, we believe it offers
an exceptional opportunity. Telus' management is shareholder-friendly,
has increased the company's dividend level, and instituted a stock
repurchase program to help boost the share price. However, despite all
these attractive characteristics, the stock's potential went unnoticed
until the second half of calendar 2004. As a result, the fund's position
has now increased dramatically in value.
Another large holding, China Netcom, the incumbent fixed-line telecom
company in Northern China, operates in several underserved markets and
is positioned to benefit from growth in basic telephony as well as
broadband. The company had its initial public offering in November 2004
and has appreciated significantly since then due to its attractive
dividend and widely perceived growth potential. In addition, the fund
benefited from its position in Hellenic Telecom, the incumbent
fixed-line telecom company in Greece. Hellenic Telecom now owns majority
stakes in several telecom companies in Eastern Europe and is
restructuring its fixed-line operations in Greece. However, because of
the company's complex structure, its potential was not well recognized
in the market until recently. The fund's holdings have now appreciated
substantially.
Please note that all holdings discussed in this report are subject to
review in accordance with the fund's investment strategy and may vary in
the future.
The outlook for your fund
The following commentary reflects anticipated developments that could
affect your fund over the next six months, as well as your management
team's plans for responding to them.
Interest rates and energy prices have driven performance of utilities
stocks for the first half of the fiscal year and we believe they will
continue to do so over the second half. Both these factors are difficult
to forecast because they reflect both economic and geopolitical
influences. While a rise in interest rates would be negative (or a fall
in rates positive), we have attempted to position the portfolio so that
the impact of a rise in rates, should it occur, would be less severe
than for the utility group as a whole. Higher energy and electricity
prices would be a positive; but given current market conditions, we are
not counting on continued gains. We have consequently been positioning
the fund to benefit from this appreciation to a reasonable extent while
limiting its exposure to reduce the damage that a fall in prices would
produce.
As of the end of the period, we viewed telecommunications stocks in
Europe and Asia as very attractively priced and believed that some
combination of merger and acquisition activity, government action (in
China, for instance), or market appreciation had the potential to move
these stocks upward toward what we consider their intrinsic value. Also
as of period-end, we had underweighted telecom equities in the United
States, but overweighted those in Canada, and expect to continue this
positioning. In addition, we expect to maintain about 10% of the
portfolio in fixed-income securities to lend stability and to help
maintain an attractive dividend for the fund. While this allocation has
hurt the fund's relative performance over the short term, we believe
that if offers the best balance of long-term return potential and risk
management.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. The fund may invest
a portion of its assets in small and/or midsize companies. Such
investments increase the risk of greater price fluctuations. The fund
invests in fewer issuers or concentrates its investments by region or
sector, and involves more risk than a fund that invests more broadly.
Mutual funds that invest in bonds are subject to certain risks,
including interest-rate risk, credit risk, and inflation risk. As
interest rates rise, the prices of bonds fall. Long-term bonds are more
exposed to interest-rate risk than short-term bonds. Unlike bonds, bond
funds have ongoing fees and expenses.
Your fund's management
Your fund is managed by the members of the Putnam Global Equity Research
and Core Fixed-Income teams. Michael Yogg is the Portfolio Leader and
Kevin Murphy is a Portfolio Member of the fund. The Portfolio Leader and
Portfolio Member coordinate the teams' management of the fund.
For a complete listing of the members of the Putnam Global Equity
Research and Core Fixed-Income teams, including those who are not
Portfolio Leaders or Portfolio Members of your fund, visit Putnam's
Individual Investor Web site at www.putnaminvestments.com.
Fund ownership
The table below shows how much the fund's current Portfolio Leader and
Portfolio Member have invested in the fund (in dollar ranges).
Information shown is as of April 30, 2005, and April 30, 2004.
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FUND PORTFOLIO LEADER AND PORTFOLIO MEMBER
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$1 - $10,001 - $50,001 - $100,001 - $500,001 - $1,000,001
Year $0 $10,000 $50,000 $100,000 $500,000 $1,000,000 and over
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Michael Yogg 2005 *
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Portfolio Leader 2004 *
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Kevin Murphy 2005 *
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Portfolio Member 2004 *
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Fund manager compensation
The total 2004 fund manager compensation that is attributable to your
fund is approximately $400,000. This amount includes a portion of 2004
compensation paid by Putnam Management to the fund managers listed in
this section for their portfolio management responsibilities, calculated
based on the fund assets they manage taken as a percentage of the total
assets they manage. The compensation amount also includes a portion of
the 2004 compensation paid to the Chief Investment Officers of the teams
and the Group Chief Investment Officers of the fund's broader investment
category for their oversight responsibilities, calculated based on the
fund assets they oversee taken as a percentage of the total assets they
oversee. This amount does not include compensation of other personnel
involved in research, trading, administration, systems, compliance, or
fund operations. These percentages are determined as of the fund's
fiscal period-end. For personnel who joined Putnam Management during or
after 2004, the calculation reflects annualized 2004 compensation or an
estimate of 2005 compensation, as applicable.
Other Putnam funds managed by the Portfolio Leader and Portfolio Member
Kevin Murphy is also a Portfolio Member of Putnam Income Fund.
Michael Yogg and Kevin Murphy may also manage other accounts and
variable trust funds advised by Putnam Management or an affiliate.
Changes in your fund's Portfolio Leader and Portfolio Members
Michael Yogg has played a lead role in the management of your fund since
2000, but has done so under various designations. During the year ended
April 30, 2005, he was officially named Portfolio Leader and Kevin
Murphy was named a Portfolio Member of your fund.
Fund ownership
The table below shows how much the members of Putnam's Executive Board
have invested in the fund (in dollar ranges). Information shown is as of
April 30, 2005, and April 30, 2004.
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PUTNAM EXECUTIVE BOARD
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$1 - $10,001 - $50,001 - $100,001
Year $0 $10,000 $50,000 $100,000 and over
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Philippe Bibi 2005 *
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Chief Technology Officer 2004 *
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John Boneparth 2005 *
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Head of Global Institutional Mgmt 2004 *
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Joshua Brooks 2005 *
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Deputy Head of Investments N/A
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Kevin Cronin 2005 *
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Head of Investments 2004 *
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Charles Haldeman, Jr. 2005 *
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President and CEO 2004 *
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Amrit Kanwal 2005 *
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Chief Financial Officer 2004 *
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Steven Krichmar 2005 *
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Chief of Operations 2004 *
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Francis McNamara, III 2005 *
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General Counsel 2004 *
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Richard Monaghan 2005 *
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Head of Retail Management 2004 *
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Richard Robie, III 2005 *
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Chief Administrative Officer 2004 *
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Edward Shadek 2005 *
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Deputy Head of Investments N/A
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N/A indicates the individual was not a member of Putnam's Executive Board as of 4/30/04.
Performance summary
This section shows your fund's performance during the first half of its
fiscal year, which ended April 30, 2005. In accordance with regulatory
requirements, we also include performance for the most current calendar
quarter-end. Performance should always be considered in light of a
fund's investment strategy. Data represents past performance. Past
performance does not guarantee future results. More recent returns may
be less or more than those shown. Investment return and principal value
will fluctuate and you may have a gain or a loss when you sell your
shares. For the most recent month-end performance, please visit
www.putnaminvestments.com.
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TOTAL RETURN FOR PERIODS ENDED 4/30/05
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Class A Class B Class C Class M Class R
(inception dates) (11/19/90) (4/27/92) (7/26/99) (3/1/95) (12/1/03)
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NAV POP NAV CDSC NAV CDSC NAV POP NAV
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6 months 9.16% 3.44% 8.70% 3.70% 8.74% 7.74% 8.91% 5.07% 9.06%
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1 year 21.78 15.39 20.84 15.84 20.92 19.92 21.22 17.03 21.51
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5 years 2.44 -2.90 -1.36 -2.96 -1.31 -1.31 -0.04 -3.56 1.26
Annual average 0.48 -0.59 -0.27 -0.60 -0.26 -0.26 -0.01 -0.72 0.25
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10 years 114.11 102.83 98.61 98.61 98.59 98.59 104.12 96.95 108.93
Annual average 7.91 7.33 7.10 7.10 7.10 7.10 7.40 7.01 7.65
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Annual average
(life of fund) 8.13 7.73 7.33 7.33 7.33 7.33 7.61 7.34 7.87
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Performance assumes reinvestment of distributions and does not account
for taxes. Returns at public offering price (POP) for class A and M
shares reflect a sales charge of 5.25% and 3.50%, respectively (which
for class M shares does not reflect a reduction in sales charges that
went into effect on April 1, 2005; if this reduction had been in place
for all periods indicated, returns would have been higher). Class B
share returns reflect the applicable contingent deferred sales charge
(CDSC), which is 5% in the first year, declining to 1% in the sixth
year, and is eliminated thereafter. Class C shares reflect a 1% CDSC the
first year that is eliminated thereafter. Class R share returns have no
initial sales charge or CDSC. Performance for class B, C, M, and R
shares before their inception is derived from the historical performance
of class A shares, adjusted for the applicable sales charge (or CDSC)
and higher operating expenses for such shares.
A 2% short-term trading fee may be applied to shares exchanged or sold
within 5 days of purchase.
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 4/30/05
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Lipper Utility
S&P Utilities Funds category
Index average*
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6 months 16.29% 11.29%
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1 year 33.40 25.80
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5 years 12.73 3.13
Annual average 2.42 0.23
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10 years 118.87 150.14
Annual average 8.15 9.49
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Annual average
(life of fund) 8.51 9.52
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Index and Lipper results should be compared to fund performance at net
asset value.
* Over the 6-month and 1-, 5-, and 10-year periods ended 4/30/05, there
were 91, 89, 66, and 38 funds, respectively, in this Lipper category.
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PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 4/30/05
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Class A Class B Class C Class M Class R
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Distributions (number) 2 2 2 2 2
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Income $0.096 $0.058 $0.062 $0.072 $0.086
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Capital gains -- -- -- -- --
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Total $0.096 $0.058 $0.062 $0.072 $0.086
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Share value: NAV POP NAV NAV NAV POP NAV
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10/31/04 $9.58 $10.11 $9.53 $9.53 $9.57 $9.92 $9.57
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4/30/05 10.36 10.93 10.30 10.30 10.35 10.70* 10.35
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Current return
(end of period)
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Current dividend rate 1 1.85% 1.76% 1.09% 1.24% 1.39% 1.35% 1.70%
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Current 30-day
SEC yield 2 2.11 2.00 1.37 1.37 1.62 1.57 1.86
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* Reflects a reduction in sales charges that took effect on April 1, 2005.
1 Most recent distribution, excluding capital gains, annualized and divided by NAV or POP at end
of period.
2 Based only on investment income, calculated using SEC guidelines.
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TOTAL RETURN FOR PERIODS ENDED 3/31/05 (MOST RECENT CALENDAR QUARTER)
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Class A Class B Class C Class M Class R
(inception dates) (11/19/90) (4/27/92) (7/26/99) (3/1/95) (12/1/03)
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NAV POP NAV CDSC NAV CDSC NAV POP NAV
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6 months 12.23% 6.34% 11.76% 6.76% 11.80% 10.80% 11.86% 7.99% 12.01%
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1 year 17.13 11.03 16.32 11.32 16.26 15.26 16.58 12.54 16.87
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5 years 2.61 -2.81 -1.10 -2.71 -1.05 -1.05 0.12 -3.38 1.34
Annual average 0.52 -0.57 -0.22 -0.55 -0.21 -0.21 0.02 -0.68 0.27
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10 years 116.74 105.27 101.24 101.24 101.06 101.06 106.84 99.62 111.38
Annual average 8.04 7.46 7.24 7.24 7.23 7.23 7.54 7.16 7.77
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Annual average
(life of fund) 8.09 7.69 7.29 7.29 7.29 7.29 7.57 7.30 7.82
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Understanding your fund's expenses
As a mutual fund investor, you pay ongoing expenses, such as management
fees, distribution fees (12b-1 fees), and other expenses. Using the
information below, you can estimate how these expenses affect your
investment and compare them with the expenses of other funds. You may
also pay one-time transaction expenses, including sales charges (loads)
and redemption fees, which are not shown in this section and would have
resulted in higher total expenses. For more information, see your fund's
prospectus or talk to your financial advisor.
Review your fund's expenses
The table below shows the expenses you would have paid on a $1,000
investment in Putnam Utilities Growth and Income Fund from November 1,
2004, to April 30, 2005. It also shows how much a $1,000 investment
would be worth at the close of the period, assuming actual returns and
expenses.
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming actual returns for the 6 months ended 4/30/05
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Class A Class B Class C Class M Class R
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Expenses paid per $1,000* $6.48 $10.35 $10.35 $9.06 $7.78
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Ending value (after expenses) $1,091.60 $1,087.00 $1,087.40 $1,089.10 $1,090.60
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* Expenses for each share class are calculated using the fund's annualized expense
ratio for each class, which represents the ongoing expenses as a percentage of
net assets for the six months ended 4/30/05. The expense ratio may differ for
each share class (see the table at the bottom of the next page). Expenses are
calculated by multiplying the expense ratio by the average account value for
the period; then multiplying the result by the number of days in the period;
and then dividing that result by the number of days in the year.
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended April
30, 2005, use the calculation method below. To find the value of your
investment on November 1, 2004, go to www.putnaminvestments.com and log
on to your account. Click on the "Transaction History" tab in your Daily
Statement and enter 11/01/2004 in both the "from" and "to" fields.
Alternatively, call Putnam at 1-800-225-1581.
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HOW TO CALCULATE THE EXPENSES YOU PAID
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Total
Value of your Expenses paid expenses
investment on 11/1/04 [DIV] $1,000 x per $1,000 = paid
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Example Based on a $10,000 investment in class A shares of your fund.
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$10,000 [DIV] $1,000 x $6.48 (see table above) = $64.80
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Comparing your fund's expenses with those of other funds
Using the SEC's method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines
to help investors assess fund expenses. Per these guidelines, the table
below shows your fund's expenses based on a $1,000 investment, assuming
a hypothetical 5% annualized return. You can use this information to
compare the ongoing expenses (but not transaction expenses or total
costs) of investing in the fund with those of other funds. All mutual
fund shareholder reports will provide this information to help you make
this comparison. Please note that you cannot use this information to
estimate your actual ending account balance and expenses paid during the
period.
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EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming a hypothetical 5% annualized return for the 6 months ended 4/30/05
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Class A Class B Class C Class M Class R
- ------------------------------------------------------------------------------------
Expenses paid per $1,000* $6.26 $9.99 $9.99 $8.75 $7.50
- ------------------------------------------------------------------------------------
Ending value (after expenses) $1,018.60 $1,014.88 $1,014.88 $1,016.12 $1,017.36
- ------------------------------------------------------------------------------------
* Expenses for each share class are calculated using the fund's
annualized expense ratio for each class, which represents the ongoing
expenses as a percentage of net assets for the six months ended 4/30/05.
The expense ratio may differ for each share class (see the table at the
bottom of this page). Expenses are calculated by multiplying the expense
ratio by the average account value for the period; then multiplying the
result by the number of days in the period; and then dividing that
result by the number of days in the year.
Using industry averages to compare expenses
You can also compare your fund's expenses with the average of its peer
group, as defined by Lipper, an independent fund-rating agency that
ranks funds relative to others that Lipper considers to have similar
investment styles or objectives. The expense ratio for each share class
shown below indicates how much of your fund's net assets have been used
to pay ongoing expenses during the period.
- ------------------------------------------------------------------------------
EXPENSE RATIO COMPARISONS USING ANNUALIZED DATA
- ------------------------------------------------------------------------------
Class A Class B Class C Class M Class R
- ------------------------------------------------------------------------------
Your fund's annualized
expense ratio 1.25% 2.00% 2.00% 1.75% 1.50%
- ------------------------------------------------------------------------------
Average annualized expense
ratio for Lipper peer group+ 1.32% 2.07% 2.07% 1.82% 1.57%
- ------------------------------------------------------------------------------
+ Simple average of the expenses of all front-end load funds in the fund's
Lipper peer group, calculated in accordance with Lipper's standard method
for comparing fund expenses (excluding 12b-1 fees and without giving
effect to any expense offset and brokerage service arrangements that may
reduce fund expenses). This average reflects each fund's expenses for its
most recent fiscal year available to Lipper as of 3/31/05. To facilitate
comparison, Putnam has adjusted this average to reflect the 12b-1 fees
carried by each class of shares. The peer group may include funds that are
significantly smaller or larger than the fund, which may limit the
comparability of the fund's expenses to the simple average, which
typically is higher than the asset-weighted average.
Understanding your fund's portfolio turnover
Putnam funds are actively managed by teams of experts who buy and sell
securities based on intensive analysis of companies, industries,
economies, and markets. Portfolio turnover is a measure of how often a
fund's managers buy and sell securities for your fund. A portfolio
turnover of 100%, for example, means that the managers sold and replaced
securities valued at 100% of a fund's assets within a one-year period.
Funds with high turnover may be more likely to generate capital gains
and dividends that must be distributed to shareholders as taxable
income. High turnover may also cause a fund to pay more brokerage
commissions and other transaction costs, which may detract from
performance.
Funds that invest in bonds or other fixed-income instruments may have
higher turnover than funds that invest only in stocks. Short-term bond
funds tend to have higher turnover than longer-term bond funds, because
shorter-term bonds will mature or be sold more frequently than
longer-term bonds. You can use the table below to compare your fund's
turnover with the average turnover for funds in its Lipper category.
- ------------------------------------------------------------------------------
TURNOVER COMPARISONS
percentage of holdings that change every year
- ------------------------------------------------------------------------------
2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------
Putnam Utilities Growth
and Income Fund 30% 40% 45% 92% 29%
- ------------------------------------------------------------------------------
Lipper Utility Funds
category average 132% 252% 244% 252% 70%
- ------------------------------------------------------------------------------
Turnover data for the fund is calculated based on the fund's fiscal-year
period, which ends on October 31. Turnover data for the fund's Lipper
category is calculated based on the average of the turnover of each fund
in the category for its fiscal year ended during the indicated year.
Fiscal years vary across funds in the Lipper category, which may limit
the comparability of the fund's portfolio turnover rate to the Lipper
average. Comparative data for 2004 is based on information available as
of 3/31/05.
Risk comparison
This risk comparison is designed to help you understand how your fund
compares with other funds. The comparison utilizes a risk measure
developed by Morningstar, an independent fund-rating agency. This risk
measure is referred to as the fund's Overall Morningstar Risk.
Your fund's Overall Morningstar Risk is shown alongside that of the
average fund in its broad asset class, as determined by Morningstar. The
risk bar broadens the comparison by translating the fund's Overall
Morningstar Risk into a percentile, which is based on the fund's ranking
among all funds rated by Morningstar as of March 31, 2005. A higher
Overall Morningstar Risk generally indicates that a fund's monthly
returns have varied more widely.
[GRAPHIC OMITTED: chart MORNINGSTAR [REGISTRATION MARK] RISK]
MORNINGSTAR [REGISTRATION MARK] RISK
Fund's Overall
Morningstar Risk 1.84
U.S. stock
fund average 3.12
0% INCREASING RISK 100%
Morningstar determines a fund's Overall Morningstar Risk by assessing
variations in the fund's monthly returns -- with an emphasis on downside
variations -- over 3-, 5-, and 10-year periods, if available. Those
measures are weighted and averaged to produce the fund's Overall
Morningstar Risk. The information shown is provided for the fund's class
A shares only; information for other classes may vary. Overall
Morningstar Risk is based on historical data and does not indicate
future results. Morningstar does not purport to measure the risk
associated with a current investment in a fund, either on an absolute
basis or on a relative basis. Low Overall Morningstar Risk does not mean
that you cannot lose money on an investment in a fund. Copyright 2004
Morningstar, Inc. All Rights Reserved. The information contained herein
(1) is proprietary to Morningstar and/or its content providers; (2) may
not be copied or distributed; and (3) is not warranted to be accurate,
complete, or timely. Neither Morningstar nor its content providers are
responsible for any damages or losses arising from any use of this
information.
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.
Net asset value (NAV) is the price, or value, of one share of a mutual
fund, without a sales charge. NAVs fluctuate with market conditions. NAV
is calculated by dividing the net assets of each class of shares by the
number of outstanding shares in the class.
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 5.25% maximum sales charge for class A
shares and 3.50% for class M shares (since reduced to 3.25%).
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.
Class A shares are generally subject to an initial sales charge and no
sales charge on redemption (except on certain redemptions of shares
bought without 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 (except on certain
redemptions of shares bought without an initial sales charge).
Class R shares are not subject to an initial sales charge or CDSC and
are available only to certain defined contribution plans.
Comparative indexes
JP Morgan Global High Yield Index is an unmanaged index of global
high-yield fixed-income securities.
Lehman Aggregate Bond Index is an unmanaged index of U.S.
investment-grade fixed-income securities.
Lehman Intermediate Treasury Bond Index is an unmanaged index of U.S.
Treasury securities with maturities between 1 and 10 years.
Russell 1000 Growth Index is an unmanaged index of those companies in
the large-cap Russell 1000 Index chosen for their growth orientation.
Russell 1000 Value Index is an unmanaged index of those companies in the
large-cap Russell 1000 Index chosen for their value orientation.
S&P 500 Index is an unmanaged index of common stock performance.
S&P Utilities Index is an unmanaged index of common stock issued by
utility companies.
Indexes assume reinvestment of all distributions and do not account for
fees. Securities and performance of a fund and an index will differ. You
cannot invest directly in an index.
Lipper is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper. Lipper category averages reflect
performance trends for funds within a category and are based on results
at net asset value.
Trustee approval of management contract
General conclusions
The Board of Trustees of the Putnam funds oversees the management of
each fund and, as required by law, determines annually whether to
approve the continuance of each fund's management contract with Putnam
Management. In this regard the Board of Trustees, with the assistance of
its Contract Committee consisting solely of Independent Trustees,
requests and evaluates all information it deems reasonably necessary in
the circumstances. Over the course of several months beginning in March
and ending in June of 2004, the Contract Committee reviewed the
information provided by Putnam Management and other information
developed with the assistance of the Board's independent counsel and
independent staff. The Contract Committee reviewed and discussed key
aspects of this information with all of the Independent Trustees. Upon
completion of this review, the Contract Committee recommended and the
Independent Trustees approved the continuance of your fund's contract,
effective July 1, 2004.
This approval was based on the following conclusions:
* That the fee schedule currently in effect for your fund represents
reasonable compensation in light of the nature and quality of the
services being provided to the fund, the fees paid by competitive funds
and the costs incurred by Putnam Management in providing such service,
and
* That such fee schedule represents an appropriate sharing between fund
shareholders and Putnam Management of such economies of scale as may
exist in the management of the fund at current asset levels.
These conclusions were based on a comprehensive consideration of all
information provided to the Trustees and were not the result of any
single factor. Some of the factors that figured particularly in the
Trustees' deliberations are described below.
Model fee schedules and categories; total expenses
The Trustees, working in cooperation with Putnam Management, have
developed and implemented a series of model fee schedules for the Putnam
funds designed to ensure that each fund's management fee is consistent
with the fees for similar funds in the Putnam complex and compares
favorably with fees paid by competitive funds sponsored by other advisors.
The Trustees reviewed the model fee schedule currently in effect for the
fund, including fee levels and breakpoints, and the assignment of the fund
to a particular fee category under this structure. The Trustees also
reviewed comparative fee and expense information for competitive funds.
The Trustees concluded that no changes should be made in the fund's
current fee schedule at this time. The Trustees noted that expense ratios
for a number of Putnam funds had been increasing recently as a result of
declining net assets and the natural operation of fee breakpoints. They
noted that such expense ratio increases were currently being controlled by
expense limitations implemented in January 2004. They also noted that the
competitive landscape regarding mutual fund fees may be changing as a
result of fee reductions accepted by various other fund groups in
connection with recent regulatory settlements and greater focus on fees
and expenses in the mutual fund industry generally. The Trustees indicated
an intention to monitor these developments closely.
Economies of scale
As noted above, the Trustees concluded that the fee schedule currently
in effect for your fund represents an appropriate sharing of economies
of scale at current asset levels. The Trustees indicated their intention
to continue their ongoing consideration of economies of scale and in
particular to consider further the possible operation of such economies
in the event that a significant recovery in the equity markets or net
fund sales were to raise asset levels substantially above current
levels. In this regard, the Trustees noted that they had reviewed data
relating to the substantial increase in asset levels of the Putnam funds
that occurred during the years leading up to the market peak in 2000,
the subsequent decline in assets and the resulting impact on revenues
and expenses of Putnam Management. The Trustees also noted that recent
declines in net assets in many Putnam funds, together with significant
changes in the cost structure of Putnam Management have altered the
economics of Putnam Management's business in significant ways. The
Trustees concluded that they would monitor these changes carefully and
evaluate the resulting impact on Putnam Management's economics and the
sharing of economies of scale between the parties.
Investment performance
The quality of the investment process provided by Putnam Management
represented a major factor in the Trustees' evaluation of the quality of
services provided by Putnam Management under the Management Contracts.
The Trustees recognized that a high quality investment process -- as
measured by the experience and skills of the individuals assigned to the
management of fund portfolios, the resources made available to such
personnel, and in general the ability of Putnam Management to attract
and retain high-quality personnel -- does not guarantee favorable
investment results for every fund in every time period. The Trustees
considered the investment performance of each fund over multiple time
periods and considered information comparing the fund's performance with
various benchmarks and with the performance of competitive funds. The
Trustees noted the satisfactory investment performance of many Putnam
funds.
They also noted the disappointing investment performance of certain
funds in recent years and continued to discuss with senior management of
Putnam Management the factors contributing to such under-performance and
actions being taken to improve performance. The Trustees recognized
that, in recent years, Putnam Management has made significant changes in
its investment personnel and processes and in the fund product line in
an effort to address areas of underperformance. The Trustees indicated
their intention to continue to monitor performance trends to assess the
effectiveness of these changes and to evaluate whether additional
remedial changes are warranted. As a general matter, the Trustees
concluded that consultation between the Trustees and Putnam Management
represents the most effective way to address investment performance
problems. The Trustees believe that investors in the Putnam funds and
their financial advisors have, as a general matter, effectively placed
their trust in the Putnam organization, under the supervision of the
funds' Trustees, to make appropriate decisions regarding the management
of the funds. The Trustees believe that the termination of the
Management Contract and engagement of a new investment adviser for
under-performing funds, with all the attendant disruptions, would not
serve the interests of fund shareholders at this time and would not
necessarily provide any greater assurance of improved investment
performance.
Brokerage and soft-dollar allocations; other benefits
The Trustees considered various potential benefits that Putnam
Management may receive in connection with the services it provides under
the Management Contract with your fund. These include principally
benefits related to brokerage and soft-dollar allocations, which pertain
mainly to funds investing in equity securities. The Trustees believe
that soft-dollar credits and other potential benefits associated with
the allocation of fund brokerage represent assets of the funds that
should be used for the benefit of fund shareholders. The Trustees noted
recent trends in the allocation of fund brokerage, including commission
costs, the allocation of brokerage to firms that provide research
services to Putnam Management, and the sources and application of
available soft-dollar credits. Effective December 31, 2003, reflecting a
decision made by the Trustees earlier that year, Putnam Management
ceased allocating brokerage in connection with the sale of fund shares.
In addition, in preparing its budget for commission allocations in 2004,
Putnam Management voluntarily reduced substantially the allocation of
brokerage commissions to acquire research services from third-party
service providers. In light of evolving best practices in the mutual
fund industry, the Trustees concluded that this practice should be
further curtailed and possibly eliminated in the near future. The
Trustees indicated that they would continue to monitor the allocation of
the funds' brokerage to ensure that the principle of "best price and
execution" remains paramount in the portfolio trading process.
Comparison of retail and institutional fee schedules
The information examined by the Trustees as part of the annual contract
reviews included information regarding fees charged by Putnam Management
and its affiliates to institutional clients such as defined benefit
pension plans and college endowments. This information included
comparison of such fees with fees charged to the Putnam funds, as well
as a detailed assessment of the differences in the services provided to
these two types of clients. The Trustees devoted special attention to
these issues and reviewed recent articles by critics of mutual fund
fees, articles by the ICI defending such fee differences, and relevant
guidance provided by decisions of the courts. The Trustees observed, in
this regard, that the differences in fee rates between institutional
clients and mutual funds are by no means uniform when examined by
individual asset sectors, suggesting that differences in the pricing of
investment management services to these types of clients reflects to a
substantial degree historical competitive forces operating in separate
market places. In reaching their conclusions, the Trustees considered
the fact that fee rates across all asset sectors are higher on average
for mutual funds than for institutional clients, and also considered the
differences between the services that Putnam provides to the Putnam
funds and those that it provides to institutional clients of the firm.
Settlement of regulatory charges related to market timing
Finally, in reaching their conclusions, the Trustees considered all
matters pertinent to the administrative charges filed against Putnam
Management by the SEC and the Commonwealth of Massachusetts in October
2003 relating to market timing, the firm's settlement of those charges,
and the conclusions and recommendations of the Trustees' Audit and
Pricing Committee based on its review of these matters. The Trustees
considered the actions taken by the owner of Putnam Management and its
new senior management to terminate or discipline the individuals
involved, to implement new compliance systems, to indemnify the funds
against all costs and liabilities related to these matters, and
otherwise to ensure that the interests of the funds and their
shareholders are fully protected. The Trustees noted that, in addition
to the settlements of the regulatory charges which will provide
comprehensive restitution for any losses suffered by shareholders, the
new senior management of Putnam Management has moved aggressively to
control expense ratios of funds affected by market timing, to reduce
charges to new investors, to improve disclosure of fees and expenses,
and to emphasize the paramount role of investment performance in
achieving shareholders' investment goals.
Approval of the Sub-Management Contract between
Putnam Management and PIL
The Trustees are also required by law to have approved your fund's
sub-management contract between Putnam Management and Putnam Investments
Limited ("PIL"), an affiliate of Putnam Management. The Contract
Committee reviewed information provided by Putnam Management and PIL
and, upon completion of this review, recommended and the Independent
Trustees approved your fund's sub-management contract, effective March
11, 2005.
The Trustees considered numerous factors they believe relevant in
approving your fund's sub-management contract, including Putnam
Management's belief that the interest of shareholders would be best
served by utilizing investment professionals in Putnam's London office
to manage a portion of your fund's assets and PIL's expertise in
managing assets invested in European markets. The Trustees also
considered that United Kingdom securities laws require a sub-advisory
relationship between Putnam Management and PIL in order for Putnam's
investment professionals in London to be involved in the management of
your fund. The Trustees noted that Putnam Management, and not your fund,
would pay the sub-management fee to PIL for its services and that the
sub-management relationship with PIL will not reduce the nature, quality
or overall level of service provided to your fund.
Other information for shareholders
A note about duplicate mailings
In response to investors' requests, the SEC has modified mailing
regulations for proxy statements, semiannual and annual reports, and
prospectuses. Putnam is now able to send a single copy of these
materials to customers who share the same address. This change will
automatically apply to all shareholders except those who notify us. If
you would prefer to receive your own copy, please call Putnam at
1-800-225-1581.
Proxy voting
Putnam is committed to managing our mutual funds in the best interests
of our shareholders. The Putnam funds' proxy voting guidelines and
procedures, as well as information regarding how your fund voted proxies
relating to portfolio securities during the 12-month period ended June
30, 2004, are available on the Putnam Individual Investor Web site,
www.putnaminvestments.com/individual, and on the SEC's Web site,
www.sec.gov. If you have questions about finding forms on the SEC's Web
site, you may call the SEC at 1-800-SEC-0330. You may also obtain the
Putnam funds' proxy voting guidelines and procedures at no charge by
calling Putnam's Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
For periods ending on or after July 9, 2004, the fund will file a
complete schedule of its portfolio holdings with the SEC for the first
and third quarters of each fiscal year on Form N-Q. Shareholders may
obtain the fund's Forms N-Q on the SEC's Web site at www.sec.gov. In
addition, the fund's Forms N-Q may be reviewed and copied at the SEC's
public reference room in Washington, D.C. You may call the SEC at
1-800-SEC-0330 for information about the SEC's Web site or the operation
of the public reference room.
A guide to the financial statements
These sections of the report, as well as the accompanying Notes,
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.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or loss
the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal period.
Statement of changes in net assets shows how the fund's net assets were
affected by the fund's net investment gain or loss, 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, 2005 (Unaudited)
Common stocks (89.5%) (a)
Number of shares Value
Cable Television (0.5%)
- -------------------------------------------------------------------------------
43,000 Comcast Corp. Class A (Special)
(NON) $1,364,390
1,265 Jupiter Telecommunications Co., Ltd.
(Japan) (NON) 1,006,935
605 Jupiter Telecommunications Co., Ltd.
144A (Japan) (NON) 481,578
--------------
2,852,903
Coal (1.2%)
- -------------------------------------------------------------------------------
30,067 Arch Coal, Inc. 1,333,171
67,475 CONSOL Energy, Inc. 2,917,619
52,522 Peabody Energy Corp. 2,298,888
--------------
6,549,678
Conglomerates (0.6%)
- -------------------------------------------------------------------------------
96,140 Vivendi Universal SA (France) 2,865,022
16,988 Vivendi Universal SA 144A (France) 506,251
--------------
3,371,273
Electric Utilities (53.2%)
- -------------------------------------------------------------------------------
203,636 Alliant Energy Corp. 5,363,772
175,027 Ameren Corp. (S) 9,048,896
104,744 American Electric Power Co., Inc.
(S) 3,689,084
167,973 Consolidated Edison, Inc. (S) 7,269,871
138,932 Constellation Energy Group, Inc. 7,302,266
418,234 Dominion Resources, Inc. (S) 31,534,844
142,990 DPL, Inc. 3,637,666
152,960 DTE Energy Co. 7,028,512
586,896 Edison International 21,304,325
3,435 Electrabel SA (Belgium) 1,601,433
120,380 Energy East Corp. 3,132,288
400,957 Entergy Corp. 29,390,148
620,952 Exelon Corp. (S) 30,737,124
167,738 FirstEnergy Corp. 7,299,958
495,330 FPL Group, Inc. 20,219,371
107,267 Great Plains Energy, Inc. (S) 3,280,225
55,227 Iberdrola SA (Spain) 1,444,476
479,769 National Thermal Power Corp., Ltd.
(India) 906,806
136,733 Northeast Utilities 2,503,581
36,746 OGE Energy Corp. 1,014,190
901,072 PG&E Corp. 31,285,220
34,797 Pinnacle West Capital Corp. (S) 1,457,994
204,045 PPL Corp. 11,071,482
171,712 Progress Energy, Inc. (S) 7,210,187
173,564 Public Service Enterprise Group,
Inc. (S) 10,084,068
75,957 Puget Energy, Inc. 1,628,518
85,053 SCANA Corp. 3,303,459
47,180 Scottish Power PLC ADR (United
Kingdom) 1,530,991
1,174,816 Sierra Pacific Resources (NON) (S) 12,711,509
223,811 Southern Co. (The) (S) 7,374,572
188,000 Wisconsin Energy Corp. 6,628,880
219,353 XCEL Energy, Inc. (S) 3,768,485
--------------
295,764,201
Natural Gas Utilities (4.2%)
- -------------------------------------------------------------------------------
21,164 Energen Corp. 1,311,110
88,094 Equitable Resources, Inc. 5,077,738
153,773 MDU Resources Group, Inc. 4,156,484
130,667 NiSource, Inc. (S) 3,036,701
238,120 Sempra Energy 9,615,286
--------------
23,197,319
Oil & Gas (0.5%)
- -------------------------------------------------------------------------------
51,008 Questar Corp. 2,978,867
Power Producers (0.2%)
- -------------------------------------------------------------------------------
355,925 International Power PLC (United
Kingdom) 1,241,566
Regional Bells (6.0%)
- -------------------------------------------------------------------------------
197,068 BellSouth Corp. (S) 5,220,331
432,711 SBC Communications, Inc. (S) (SEG) 10,298,522
138,770 Telus Corp. (Canada) 4,162,989
382,869 Verizon Communications, Inc. 13,706,710
--------------
33,388,552
Telecommunications (19.7%)
- -------------------------------------------------------------------------------
18,067 ALLTEL Corp. 1,029,096
111,335 American Tower Corp. Class A (NON)
(S) 1,918,302
62,047 CenturyTel, Inc. (S) 1,904,222
842,000 China Mobile (Hong Kong), Ltd. (Hong
Kong) 2,916,298
43,042 Fastweb (Italy) (NON) (S) 1,946,032
248,832 France Telecom SA (France) 7,306,455
37,911 France Telecom SA 144A (France) 1,113,181
212,630 Hellenic Telecommunication
Organization (OTE) SA (Greece) 3,987,181
997,000 Hutchinson Telecommunications
International, Ltd. (Hong Kong)
(NON) 946,418
57,760 KT Freetel Co., Ltd. (South Korea) 1,323,787
187,512 Magyar Tavkozlesi I Rt (Matav)
(Hungary) 829,019
42,910 Maroc Telecom 144A (Casablanca Stock
Exchange) (Morocco) (NON) 420,491
60,070 Maroc Telecom 144A (Paris Stock
Exchange) (Morocco) (NON) 585,325
37,332 Mobistar SA (Belgium) 3,190,339
251,503 Nextel Communications, Inc. Class A
(NON) 7,039,569
25,900 Nextel Partners, Inc. Class A (NON)
(S) 609,168
682 Nippon Telegraph & Telephone (NTT)
Corp. (Japan) 2,873,632
2,032 NTT DoCoMo, Inc. (Japan) 3,138,074
88,100 PanAmSat Holding Corp. (S) 1,554,965
278,600 Sprint Corp. (FON Group) (S) 6,201,636
695,000 StarHub Ltd. (Singapore) (NON) 561,376
67,450 TDC A/S (Denmark) 2,890,650
687,954 Telecom Corp. of New Zealand, Ltd.
(New Zealand) 3,051,292
1,885,455 Telecom Italia SpA (Italy) 6,414,723
826,537 Telefonica SA (Spain) 14,098,279
24,142 Telefonos de Mexico SA de CV
(Telmex) ADR Ser. L (Mexico) 818,414
121,800 Telenor ASA (Norway) 1,020,902
11,465,256 Vodafone Group PLC (United Kingdom) 29,965,439
--------------
109,654,265
Telephone (2.5%)
- -------------------------------------------------------------------------------
2,498,000 China Netcom Group Corp. Hong Kong,
Ltd. (Hong Kong) 3,364,633
705,185 Koninklijke (Royal) KPN NV
(Netherlands) 5,903,891
70,000 Koninklijke (Royal) KPN NV 144A
(Netherlands) 586,048
123,367 Telekom Austria AG (Austria) 2,378,167
27,200 Telekom Austria AG 144A (Austria) 524,339
385,000 Telekom Malaysia Berhad (Malaysia) 977,697
--------------
13,734,775
Water Utilities (0.9%)
- -------------------------------------------------------------------------------
138,312 Aqua America, Inc. 3,692,930
100,380 Southwest Water Co. 1,114,720
--------------
4,807,650
--------------
Total Common stocks
(cost $392,743,336) $497,541,049
Corporate bonds and notes (8.2%) (a)
Principal amount Value
Electric Utilities (3.1%)
- -------------------------------------------------------------------------------
$810,000 AEP Texas Central Co. sr. notes
Ser. D, 5 1/2s, 2013 $836,670
165,000 AEP Texas North Co. sr. notes
Ser. B, 5 1/2s, 2013 171,326
950,000 Carolina Power & Light Co. 1st mtge.
5.7s, 2035 973,576
50,000 CenterPoint Energy Houston Electric
LLC general ref. mtge.
Ser. M2, 5 3/4s, 2014 52,604
95,000 Cleveland Electric Illuminating Co.
(The) sec. notes Ser. D, 7.43s, 2009 105,408
430,000 Connecticut Light & Power Co. 1st
mtge. Ser. D, 7 7/8s, 2024 562,002
585,000 Consumers Energy Co. 1st mtge.
Ser. B, 5 3/8s, 2013 596,802
50,000 Dayton Power & Light Co. (The) 144A
1st mtge. 5 5/8s, 2013 51,259
715,000 Detroit Edison Co. 144A 1st mtge.
5.45s, 2035 712,949
300,000 DPL, Inc. sr. notes 6 7/8s, 2011 319,500
650,000 Duke Capital Corp. sr. notes Ser. A,
6 1/4s, 2005 653,419
275,000 Duquesne Light Co. 1st mtge. Ser. O,
6.7s, 2012 304,565
525,000 Entergy Arkansas Inc. 1st mtge.
5.4s, 2018 524,138
895,000 FirstEnergy Corp. notes Ser. B,
6.45s, 2011 961,225
130,000 FirstEnergy Corp. notes Ser. C,
7 3/8s, 2031 153,210
320,000 Florida Power & Light Co. 1st mtge.
5 5/8s, 2034 339,262
645,000 Florida Power & Light Co. 1st mtge.
5.95s, 2033 714,400
465,000 Florida Power Corp. 1st mtge. 5.9s,
2033 483,906
155,000 Indianapolis Power & Light 144A 1st
mtge. 6.3s, 2013 166,174
430,000 MidAmerican Energy Holdings Co. sr.
notes 4 5/8s, 2007 431,044
195,000 Monongahela Power Co. 1st mtge. 5s,
2006 196,475
325,000 Nevada Power Co. 144A general ref.
mtge. 5 7/8s, 2015 315,250
72,000 Nevada Power Co. 2nd mtge. 9s, 2013 79,380
740,000 Niagara Mohawk Power Corp. sr. notes
Ser. G, 7 3/4s, 2008 821,086
10,000 NiSource Finance Corp. company
guaranty 7 7/8s, 2010 11,547
355,000 Oncor Electric Delivery Co. sec.
notes 6 3/8s, 2012 386,054
410,000 Oncor Electric Delivery Co. sec.
notes 6 3/8s, 2015 449,136
390,000 Oncor Electric Delivery Co. sec.
notes 7 1/4s, 2033 476,225
845,000 Pacific Gas & Electric Co. 1st mtge.
4.8s, 2014 838,500
665,000 Pacific Gas & Electric Co. 1st mtge.
6.05s, 2034 715,606
70,000 PacifiCorp Sinking Fund 1st mtge.
5.45s, 2013 73,085
470,000 Pepco Holdings, Inc. notes 5 1/2s,
2007 480,065
184,395 Power Receivable Finance, LLC 144A
sr. notes 6.29s, 2012 191,170
10,000 PP&L Capital Funding, Inc. company
guaranty Ser. D, 8 3/8s, 2007 10,818
50,000 Public Service Company of New Mexico
sr. notes 4.4s, 2008 49,978
240,000 Public Service Electric & Gas Co.
1st mtge. FRN 6 3/8s, 2008 253,426
610,000 Public Service Electric & Gas Co.
sec. notes 5s, 2014 614,324
248,000 Public Services Co. of Colorado sr.
notes Ser. A, 6 7/8s, 2009 269,902
185,000 Rochester Gas & Electric notes
6 3/8s, 2033 208,115
120,000 Southern California Edison Co. 1st
mtge. 5s, 2014 121,486
35,000 Southern California Edison Co. 1st
mtge. 5s, 2016 34,989
55,000 Southern California Edison Co. 1st
mtge. 6s, 2034 59,367
275,000 Southern Power Co. sr. notes Ser. D,
4 7/8s, 2015 270,043
260,000 Tampa Electric Co. notes 6 7/8s,
2012 291,291
815,000 TransAlta Corp. notes 6 3/4s, 2012
(Canada) 891,850
195,000 Wisconsin Electric Power notes
4 1/2s, 2013 191,098
--------------
17,413,705
Natural Gas Utilities (0.4%)
- -------------------------------------------------------------------------------
70,000 Atmos Energy Corp. notes 4.95s, 2014 69,203
120,000 CenterPoint Energy Resources Corp.
notes 7 3/4s, 2011 136,080
1,425,000 Consolidated Natural Gas Co. sr.
notes 5s, 2014 1,419,266
260,000 National Fuel Gas Co. notes 5 1/4s,
2013 265,030
240,000 Texas Eastern Transmission LP sr.
notes 7s, 2032 283,963
--------------
2,173,542
Oil & Gas (--%)
- -------------------------------------------------------------------------------
115,000 Motiva Enterprises, LLC 144A sr.
notes 5.2s, 2012 117,478
Power Producers (0.3%)
- -------------------------------------------------------------------------------
975,000 Mission Energy Holding Co. sec.
notes 13 1/2s, 2008 1,143,188
Regional Bells (0.9%)
- -------------------------------------------------------------------------------
250,000 Ameritech Capital Funding company
guaranty 6 1/4s, 2009 265,513
390,000 Bellsouth Capital Funding notes
7 3/4s, 2010 442,573
915,000 BellSouth Corp. bonds 5.2s, 2014 926,922
25,000 Michigan Bell Telephone Co. debs.
7.85s, 2022 30,133
360,000 SBC Communications, Inc. notes 5.1s,
2014 360,163
570,000 Telus Corp. notes 8s, 2011 (Canada) 658,350
105,000 Verizon Global Funding Corp. notes
7 3/4s, 2030 130,653
2,060,000 Verizon New England Inc. sr. notes
6 1/2s, 2011 2,226,153
55,000 Verizon New Jersey, Inc. debs. 8s,
2022 66,389
--------------
5,106,849
Telecommunications (2.8%)
- -------------------------------------------------------------------------------
460,000 AT&T Wireless Services, Inc. notes
8 1/8s, 2012 543,852
160,000 AT&T Wireless Services, Inc. sr.
notes 8 3/4s, 2031 218,201
1,740,000 AT&T Wireless Services, Inc. sr.
notes 7 7/8s, 2011 2,001,957
1,540,000 British Telecommunications PLC notes
8 3/8s, 2010 (United Kingdom) 1,806,503
410,000 Deutsche Telekom International
Finance BV bonds 8 1/2s, 2010
(Germany) 475,498
1,625,000 Deutsche Telekom International
Finance BV company guaranty
8 3/4s, 2030 (Germany) 2,182,428
195,000 Deutsche Telekom International
Finance BV notes 5 1/4s, 2013
(Germany) 199,119
490,000 France Telecom notes 8 3/4s, 2031
(France) 663,378
1,250,000 France Telecom notes 7 3/4s, 2011
(France) 1,440,555
1,750,000 Sprint Capital Corp. company
guaranty 7 5/8s, 2011 1,975,328
55,000 Sprint Capital Corp. company
guaranty 6.9s, 2019 61,457
1,220,000 Sprint Capital Corp. company
guaranty 6 7/8s, 2028 1,360,400
45,000 Sprint Capital Corp. notes 8 3/8s,
2012 53,289
770,000 Telecom Italia Capital SA company
guaranty 6 3/8s, 2033 (Luxembourg) 802,823
70,000 Telecom Italia Capital SA company
guaranty 5 1/4s, 2013 (Luxembourg) 70,127
245,000 Telecom Italia Capital SA 144A
company guaranty 4s, 2010
(Luxembourg) 236,170
1,000,000 Vodafone Group PLC notes 7 7/8s,
2030 (United Kingdom) 1,314,345
--------------
15,405,430
Telephone (0.7%)
- -------------------------------------------------------------------------------
2,145,000 New England Telephone & Telegraph
Co. debs. 7 7/8s, 2029 2,588,946
275,000 Telefonica Europe BV company
guaranty 8 1/4s, 2030 (Netherlands) 372,156
950,000 Telefonica Europe BV company
guaranty 7 3/4s, 2010 (Netherlands) 1,089,476
--------------
4,050,578
--------------
Total Corporate bonds and notes
(cost $43,462,933) $45,410,770
Warrants (0.4%) (a) (NON) Expiration
Number of warrants date Value
- -------------------------------------------------------------------------------
308,274 Hanaro Telecom 144A Structured
Exercise Call Warrants (issued by
UBS AG) (South Korea) 9/5/05 $779,193
43,537 KT Corp. 144A Structured Exercise
Call Warrants (issued by UBS AG)
(South Korea) 1/13/06 1,659,382
--------------
Total Warrants (cost $2,614,771) $2,438,575
Short-term investments (17.8%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$88,026,893 Short-term investments held as
collateral for loaned
securities with yields ranging from
2.80% to 3.15% and due dates ranging
from May 2, 2005 to June 24, 2005 (d) $87,995,974
10,776,373 Putnam Prime Money Market Fund (e) 10,776,373
--------------
Total Short-term investments
(cost $98,772,347) $98,772,347
- -------------------------------------------------------------------------------
Total Investments
(cost $537,593,387) $644,162,741
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $556,043,551.
(NON) Non-income-producing security.
(SEG) A portion of this security was pledged and segregated with the
custodian to cover margin requirements for futures contracts at April
30, 2005.
(S) Securities on loan, in part or in entirety, at April 30, 2005.
(d) See Note 1 to the financial statements.
(e) See Note 5 to the financial statements regarding investments in
Putnam Prime Money Market Fund.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR after the name of a foreign holding stands for American Depositary
Receipts, representing ownership of foreign securities on deposit with a
custodian bank.
The rates shown on Floating Rate Notes (FRN) are the current interest
rates at April 30, 2005.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at April 30, 2005: (as a
percentage of Portfolio Value)
Austria 0.5%
Belgium 0.9
Canada 1.0
Denmark 0.5
France 2.5
Germany 0.5
Greece 0.7
Hong Kong 1.3
Italy 1.5
Japan 1.3
Netherlands 1.4
New Zealand 0.5
South Korea 0.7
Spain 2.8
United Kingdom 6.4
United States 76.0
Other 1.5
-----
Total 100.0%
Forward currency contracts to buy at April 30, 2005 (Unaudited)
(aggregate face value $7,360,220)
Unrealized
Aggregate Delivery appreciation/
Value face value date (depreciation)
- ------------------------------------------------------------------------------------------------------
Australian Dollar $206,515 $202,410 7/20/05 $4,105
Hong Kong Dollar 1,642,148 1,641,042 5/18/05 1,106
Japanese Yen 1,522,270 1,573,896 5/18/05 (51,626)
Norwegian Krone 684,412 688,654 6/15/05 (4,242)
Swedish Krona 1,639,737 1,710,225 6/15/05 (70,488)
Swiss Franc 1,505,531 1,543,993 6/15/05 (38,462)
- ------------------------------------------------------------------------------------------------------
$(159,607)
- ------------------------------------------------------------------------------------------------------
Forward currency contracts to sell at April 30, 2005 (Unaudited)
(aggregate face value $31,381,484)
Unrealized
Aggregate Delivery appreciation/
Value face value date (depreciation)
- ------------------------------------------------------------------------------------------------------
British Pound $5,154,308 $5,130,653 6/15/05 $(23,655)
Canadian Dollar 2,525,065 2,594,755 7/20/05 69,690
Danish Krone 2,227,997 2,268,003 6/15/05 40,006
Euro 13,758,692 13,976,549 6/15/05 217,857
Hong Kong Dollar 5,240,936 5,261,546 5/18/05 20,610
Mexican Peso 26,293 25,527 7/20/05 (766)
New Zealand Dollar 2,199,780 2,124,451 7/20/05 (75,329)
- ------------------------------------------------------------------------------------------------------
$248,413
- ------------------------------------------------------------------------------------------------------
Futures contracts outstanding at April 30, 2005 (Unaudited)
Unrealized
Number of Expiration appreciation/
contracts Value date (depreciation)
- ------------------------------------------------------------------------------------------------------
U.S. Treasury Bond (Short) 4 $459,375 Jun-05 $(18,262)
U.S. Treasury Note
5 yr (Long) 55 5,964,922 Jun-05 99,524
U.S. Treasury Note
10 yr (Short) 29 3,231,234 Jun-05 (37,141)
- ------------------------------------------------------------------------------------------------------
$44,121
- ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities
April 30, 2005 (Unaudited)
Assets
- -------------------------------------------------------------------------------
Investment in securities, at value, including $86,535,310
of securities on loan (Note 1):
- -------------------------------------------------------------------------------
Unaffiliated issuers (identified cost $526,817,014) $633,386,368
- -------------------------------------------------------------------------------
Affiliated issuers (identified cost $10,776,373) (Note 5) 10,776,373
- -------------------------------------------------------------------------------
Cash 8,657
- -------------------------------------------------------------------------------
Foreign currency (cost $317,695) (Note 1) 335,145
- -------------------------------------------------------------------------------
Dividends, interest and other receivables 2,220,967
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 400,711
- -------------------------------------------------------------------------------
Receivable for securities sold 6,712,000
- -------------------------------------------------------------------------------
Receivable for open forward currency contracts (Note 1) 353,374
- -------------------------------------------------------------------------------
Receivable for closed forward currency contracts (Note 1) 57,895
- -------------------------------------------------------------------------------
Total assets $654,251,490
Liabilities
- -------------------------------------------------------------------------------
Payable for variation margin (Note 1) 5,750
- -------------------------------------------------------------------------------
Payable for securities purchased 7,622,168
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 733,644
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Notes 2 and 5) 938,112
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 96,117
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 135,776
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,375
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 171,615
- -------------------------------------------------------------------------------
Collateral on securities loaned, at value (Note 1) 87,995,974
- -------------------------------------------------------------------------------
Payable for open forward currency contracts (Note 1) 264,568
- -------------------------------------------------------------------------------
Other accrued expenses 242,840
- -------------------------------------------------------------------------------
Total liabilities 98,207,939
- -------------------------------------------------------------------------------
Net assets $556,043,551
Represented by
- -------------------------------------------------------------------------------
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) $606,632,842
- -------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 1,606,505
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (Note 1) (158,852,323)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 106,656,527
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $556,043,551
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($461,877,560 divided by 44,566,805 shares) $10.36
- -------------------------------------------------------------------------------
Offering price per class A share (100/94.75 of $10.36)* $10.93
- -------------------------------------------------------------------------------
Net asset value and offering price per class B share
($85,561,572 divided by 8,303,699 shares)** $10.30
- -------------------------------------------------------------------------------
Net asset value and offering price per class C share
($4,277,498 divided by 415,217 shares)** $10.30
- -------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($4,146,284 divided by 400,703 shares) $10.35
- -------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $10.35)* $10.70
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class R share ($180,637 divided by 17,453 shares) $10.35
- -------------------------------------------------------------------------------
* 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, 2005 (Unaudited)
Investment income:
- -------------------------------------------------------------------------------
Dividends (net of foreign tax of $173,666) $7,498,370
- -------------------------------------------------------------------------------
Interest (including interest income of $118,439 from
investments in affiliated issuers) (Note 5) 1,414,449
- -------------------------------------------------------------------------------
Securities lending 70,497
- -------------------------------------------------------------------------------
Other income (Note 6) 311,551
- -------------------------------------------------------------------------------
Total investment income 9,294,867
- -------------------------------------------------------------------------------
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 1,916,558
- -------------------------------------------------------------------------------
Investor servicing fees (Note 2) 530,558
- -------------------------------------------------------------------------------
Custodian fees (Note 2) 159,841
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 14,677
- -------------------------------------------------------------------------------
Administrative services (Note 2) 20,521
- -------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 571,339
- -------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 454,663
- -------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 19,496
- -------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 14,069
- -------------------------------------------------------------------------------
Distribution fees -- Class R (Note 2) 339
- -------------------------------------------------------------------------------
Other 152,685
- -------------------------------------------------------------------------------
Non-recurring costs (Notes 2 and 6) 3,902
- -------------------------------------------------------------------------------
Costs assumed by Manager (Notes 2 and 6) (3,902)
- -------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 5) (8,087)
- -------------------------------------------------------------------------------
Total expenses 3,846,659
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (174,090)
- -------------------------------------------------------------------------------
Net expenses 3,672,569
- -------------------------------------------------------------------------------
Net investment income 5,622,298
- -------------------------------------------------------------------------------
Net realized gain on investments (net of foreign tax of
$39,745) (Notes 1 and 3) 30,397,403
- -------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 78,746
- -------------------------------------------------------------------------------
Net realized loss on foreign currency transactions (Note 1) (1,285,338)
- -------------------------------------------------------------------------------
Net realized gain on swap contracts (Note 1) 1,388
- -------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 922,879
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments, futures
contracts and swap contracts during the period 12,895,051
- -------------------------------------------------------------------------------
Net gain on investments 43,010,129
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $48,632,427
- -------------------------------------------------------------------------------
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
Increase (decrease) in net assets 2005* 2004
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $5,622,298 $10,634,636
- -------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions 29,192,199 34,290,265
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign
currencies 13,817,930 58,483,378
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 48,632,427 103,408,279
- -------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- -------------------------------------------------------------------------------
From net investment income
Class A (4,339,579) (8,329,555)
- -------------------------------------------------------------------------------
Class B (524,553) (1,115,824)
- -------------------------------------------------------------------------------
Class C (24,346) (48,439)
- -------------------------------------------------------------------------------
Class M (26,557) (50,690)
- -------------------------------------------------------------------------------
Class R (1,153) (499)
- -------------------------------------------------------------------------------
Redemption fees (Note 1) 672 --
- -------------------------------------------------------------------------------
Decrease from capital share transactions
(Note 4) (31,925,281) (147,085,154)
- -------------------------------------------------------------------------------
Total increase (decrease) in net assets 11,791,630 (53,221,882)
Net assets
- -------------------------------------------------------------------------------
Beginning of period 544,251,921 597,473,803
- -------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $1,606,505 and
$900,395, respectively) $556,043,551 $544,251,921
- -------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
April 30
Per-share (Unaudited) Year ended October 31
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $9.58 $8.06 $6.71 $9.56 $13.86 $14.06
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .11 (d)(f) .18 (d) .19 .23 .25 .36
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .77 1.51 1.34 (2.84) (2.73) .75
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .88 1.69 1.53 (2.61) (2.48) 1.11
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.10) (.17) (.17) (.22) (.25) (.38)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- (1.53) (.93)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- (.01) (.02) (.04) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.10) (.17) (.18) (.24) (1.82) (1.31)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.36 $9.58 $8.06 $6.71 $9.56 $13.86
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 9.16* 21.18 23.17 (27.73) (20.40) 9.04
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $461,878 $444,698 $478,304 $469,497 $846,231 $1,128,437
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .62*(d) 1.28 (d) 1.23 1.12 1.05 1.01
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.07*(d)(f) 2.11 (d) 2.65 2.68 2.14 2.78
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 18.99* 29.95 40.12 44.93 91.91 29.42
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the
period. As a result of such waivers, the expenses of the fund for the periods ended April 30, 2005 and October 31, 2004
reflect a reduction of less than 0.01% of average net assets for class A shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Reflects a non-recurring accrual related to Putnam Management's settlement with the SEC regarding brokerage allocation
practices, which amounted to less than $0.01 per share and 0.06% of average net assets for class A shares (Note 6).
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
April 30
Per-share (Unaudited) Year ended October 31
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $9.53 $8.02 $6.67 $9.51 $13.78 $13.98
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .07 (d)(f) .12 (d) .14 .16 .16 .26
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .76 1.49 1.34 (2.82) (2.70) .74
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .83 1.61 1.48 (2.66) (2.54) 1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.06) (.10) (.12) (.16) (.17) (.27)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- (1.53) (.93)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- (.01) (.02) (.03) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.06) (.10) (.13) (.18) (1.73) (1.20)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.30 $9.53 $8.02 $6.67 $9.51 $13.78
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 8.70* 20.21 22.40 (28.35) (20.93) 8.19
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $85,562 $92,191 $111,163 $107,158 $213,564 $335,411
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .99*(d) 2.03 (d) 1.98 1.87 1.80 1.76
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .69*(d)(f) 1.37 (d) 1.89 1.92 1.39 2.06
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 18.99* 29.95 40.12 44.93 91.91 29.42
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the
period. As a result of such waivers, the expenses of the fund for the periods ended April 30, 2005 and October 31, 2004
reflect a reduction of less than 0.01% of average net assets for class B shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Reflects a non-recurring accrual related to Putnam Management's settlement with the SEC regarding brokerage allocation
practices, which amounted to less than $0.01 per share and 0.05% of average net assets for class B shares (Note 6).
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
April 30
Per-share (Unaudited) Year ended October 31
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $9.53 $8.02 $6.67 $9.51 $13.79 $14.04
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .07 (d)(f) .12 (d) .14 .16 .16 .25
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .76 1.50 1.34 (2.82) (2.70) .74
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .83 1.62 1.48 (2.66) (2.54) .99
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.06) (.11) (.12) (.16) (.18) (.31)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- (1.53) (.93)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- (.01) (.02) (.03) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.06) (.11) (.13) (.18) (1.74) (1.24)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.30 $9.53 $8.02 $6.67 $9.51 $13.79
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 8.74* 20.27 22.45 (28.37) (20.93) 8.12
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $4,277 $3,655 $3,699 $3,332 $6,028 $4,734
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .99*(d) 2.03 (d) 1.98 1.87 1.80 1.76
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .71*(d)(f) 1.36 (d) 1.87 1.93 1.38 1.94
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 18.99* 29.95 40.12 44.93 91.91 29.42
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the
period. As a result of such waivers, the expenses of the fund for the periods ended April 30, 2005 and October 31, 2004
reflect a reduction of less than 0.01% of average net assets for class C shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Reflects a non-recurring accrual related to Putnam Management's settlement with the SEC regarding brokerage allocation
practices, which amounted to less than $0.01 per share and 0.06% of average net assets for class C shares (Note 6).
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS M
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
April 30
Per-share (Unaudited) Year ended October 31
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $9.57 $8.05 $6.70 $9.55 $13.83 $14.03
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .08 (d)(f) .14 (d) .16 .18 .19 .29
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .77 1.51 1.34 (2.83) (2.71) .75
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .85 1.65 1.50 (2.65) (2.52) 1.04
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.07) (.13) (.14) (.18) (.20) (.31)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- -- (1.53) (.93)
- ---------------------------------------------------------------------------------------------------------------------------------
From return of capital -- -- (.01) (.02) (.03) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.07) (.13) (.15) (.20) (1.76) (1.24)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $10.35 $9.57 $8.05 $6.70 $9.55 $13.83
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 8.91* 20.58 22.61 (28.16) (20.72) 8.49
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $4,146 $3,613 $4,307 $4,358 $8,692 $13,320
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .87*(d) 1.78 (d) 1.73 1.62 1.55 1.51
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .83*(d)(f) 1.61 (d) 2.16 2.17 1.64 2.28
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 18.99* 29.95 40.12 44.93 91.91 29.42
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding
during the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the
period. As a result of such waivers, the expenses of the fund for the periods ended April 30, 2005 and October 31, 2004
reflect a reduction of less than 0.01% of average net assets for class M shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Reflects a non-recurring accrual related to Putnam Management's settlement with the SEC regarding brokerage allocation
practices, which amounted to less than $0.01 per share and 0.06% of average net assets for class M shares (Note 6).
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS R
- ------------------------------------------------------------------------------
Six months For the period
ended December 1,
April 30 2003+
Per-share (Unaudited) to October 31
operating performance 2005 2004
- ------------------------------------------------------------------------------
Net asset value,
beginning of period $9.57 $8.20
- ------------------------------------------------------------------------------
Investment operations:
- ------------------------------------------------------------------------------
Net investment income (a) (d) .10 (f) .15
- ------------------------------------------------------------------------------
Net realized and unrealized
gain on investments .77 1.38
- ------------------------------------------------------------------------------
Total from
investment operations .87 1.53
- ------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------
From net investment income (.09) (.16)
- ------------------------------------------------------------------------------
Total distributions (.09) (.16)
- ------------------------------------------------------------------------------
Redemption fees -- (e) --
- ------------------------------------------------------------------------------
Net asset value,
end of period $10.35 $9.57
- ------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 9.06* 18.86*
- ------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $181 $95
- ------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) (d) .74* 1.41*
- ------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%)(d) .98*(f) 1.71*
- ------------------------------------------------------------------------------
Portfolio turnover (%) 18.99* 29.95
- ------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis of
the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment.
(c) Includes amounts paid through expense offset and brokerage service
arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
April 30, 2005 and October 31, 2004 reflect a reduction of less than
0.01% of average net assets for class R shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Reflects a non-recurring accrual related to Putnam Management's
settlement with the SEC regarding brokerage allocation practices, which
amounted to less than $0.01 per share and 0.07% of average net assets
for class R shares (Note 6).
The accompanying notes are an integral part of these financial
statements.
Notes to financial statements
April 30, 2005 (Unaudited)
Note 1
Significant accounting policies
Putnam Utilities Growth and Income Fund (the "fund"), a Massachusetts
business trust, is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment company.
The fund seeks capital growth and current income primarily through
investments in equity and debt securities issued by public utility
companies. The fund concentrates its investments in one sector which
involves more risk than a fund that invests more broadly.
The fund offers class A, class B, class C, class M and class R shares.
Class A and class M shares are sold with a maximum front-end sales
charge of 5.25% and 3.25%, respectively, and do not pay a contingent
deferred sales charge. Prior to April 1, 2005, the maximum front-end
sales charge for class M shares was 3.50%. Class B shares, which convert
to class A shares after approximately eight years, do not pay a
front-end sales charge 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 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 R shares, which are offered
to qualified employee-benefit plans, are sold without a front-end sales
charge or a contingent deferred sales charge. The expenses for class A,
class B, class C, class M and class R shares may differ based on each
class' distribution fee, which is identified in Note 2.
Effective April 19, 2004 (May 3, 2004 for defined contribution plans
administered by Putnam), a 2.00% redemption fee may apply to any shares
that are redeemed (either by selling or exchanging into another fund)
within 5 days of purchase. The redemption fee is accounted for as an
addition to paid-in-capital.
Investment income, realized and unrealized gains and losses and expenses
of the fund are borne pro-rata based on the relative net assets of each
class to the total net assets of the fund, except that each class bears
expenses unique to that class (including the distribution fees
applicable to such classes). Each class votes as a class only with
respect to its own distribution plan or other matters on which a class
vote is required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the fund,
if the fund were liquidated. In addition, the Trustees declare separate
dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with accounting principles generally accepted in the United States of
America and requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities in 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 valued at the last reported sales price on their principal
exchange, or official closing price for certain markets. If no sales are
reported -- as in the case of some securities traded over-the-counter -- a
security is valued at its last reported bid price. Market quotations are
not considered to be readily available for certain debt obligations; such
investments are valued at fair value on the basis of valuations furnished
by an independent pricing service or dealers, approved by the Trustees.
Such services or dealers determine valuations for normal
institutional-size trading units of such securities using methods based on
market transactions for comparable securities and various relationships,
generally recognized by institutional traders, between securities. Many
securities markets and exchanges outside the U.S. close prior to the close
of the New York Stock Exchange and therefore the closing prices for
securities in such markets or on such exchanges may not fully reflect
events that occur after such close but before the close of the New York
Stock Exchange. Accordingly, on certain days, the fund will fair value
foreign securities taking into account multiple factors, including
movements in the U.S. securities markets. The number of days on which fair
value prices will be used will depend on market activity and it is
possible that fair value prices will be used by the fund to a significant
extent. At April 30, 2005 fair value pricing was used for certain foreign
securities in the portfolio. 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 valued at
amortized cost, which approximates fair value. Other investments,
including certain restricted securities, are valued at fair value
following procedures approved by the Trustees. Such valuations and
procedures are reviewed periodically by the Trustees.
B) Joint trading account Pursuant to an exemptive order from the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances, including cash collateral received under security lending
arrangements, into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Investment Management, LLC ("Putnam Management"), the fund's
manager, an indirect wholly-owned subsidiary of Putnam, LLC. These
balances may be invested in issues of high-grade short-term investments
having maturities of up to 397 days for collateral received under
security lending arrangements and up to 90 days for other cash
investments.
C) Security transactions and related investment income Security
transactions are recorded 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, net
of applicable withholding taxes, is recognized on the ex-dividend date
except that certain dividends from foreign securities are recognized as
soon as the fund is informed of the ex-dividend date. Non-cash
dividends, if any, are recorded at the fair market value of the
securities received.
All premiums/discounts are amortized/accreted on a yield-to-maturity
basis.
D) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, and other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when earned or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such gains and losses are included with the net
realized and unrealized gain or loss on investments. Net realized gains
and losses on foreign currency transactions represent net realized
exchange gains or losses on closed forward currency contracts,
disposition of foreign currencies, currency gains and losses realized
between the trade and settlement dates on securities transactions and
the difference between the amount of investment income and foreign
withholding taxes recorded on the fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized
appreciation and depreciation of assets and liabilities in foreign
currencies arise from changes in the value of open forward currency
contracts and assets and liabilities other than investments at the
period end, resulting from changes in the exchange rate. Investments in
foreign securities involve certain risks, including those related to
economic instability, unfavorable political developments, and currency
fluctuations, not present with domestic investments.
The fund may be subject to taxes imposed by governments of countries in
which it invests. Such taxes are generally based on either income or
gains earned or repatriated. The fund accrues and applies such taxes to
net investment income, net realized gains and net unrealized gains as
income and/or capital gains are earned.
E) Forward currency contracts The fund may buy and sell forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date. These contracts are used to
protect against a decline in value relative to the U.S. dollar of the
currencies in which its portfolio securities are denominated or quoted
(or an increase in the value of a currency in which securities a fund
intends to buy are denominated, when a fund holds cash reserves and
short term investments). The U.S. dollar value of forward currency
contracts is determined using current forward currency exchange rates
supplied by a quotation service. The market value of the contract will
fluctuate with changes in currency exchange rates. The contract is
marked to market daily and the change in market value is recorded as an
unrealized gain or loss. 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. The fund could be exposed to risk if the value of the currency
changes unfavorably, if the counterparties to the contracts are unable
to meet the terms of their contracts or if the fund is unable to enter
into a closing position. Risks may exceed amounts recognized on the
statement of assets and liabilities. Forward currency contracts
outstanding at period end, if any, are listed after the fund's
portfolio.
F) 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. Risks may exceed amounts recognized on the statement
of assets and liabilities. 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. If a written call
option is exercised, the premium originally received is recorded as an
addition to sales proceeds. If a written put option is exercised, the
premium originally received is recorded as a reduction to the cost of
investments.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. The fund and the broker
agree to exchange an amount of cash equal to the daily fluctuation in
the value of the futures contract. Such receipts or payments are known
as "variation margin." 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.
Futures and written option contracts outstanding at period end, if any,
are listed after the fund's portfolio.
G) Credit default contracts The fund may enter into credit default
contracts where one party, the protection buyer, makes an upfront or
periodic payment to a counter party, the protection seller, in exchange
for the right to receive a contingent payment. The maximum amount of the
payment may equal the notional amount, at par, of the underlying index
or security as a result of a related credit event. An upfront payment
received by the fund, as the protection seller, is recorded as a
liability on the fund's books. An upfront payment made by the fund, as
the protection buyer, is recorded as an asset on the fund's books.
Periodic payments received or paid by the fund are recorded as realized
gains or losses. The credit default contracts are marked to market
daily based upon quotations from market makers and the change, if any,
is recorded as unrealized gain or loss. Payments received or made as a
result of a credit event or termination of the contract are recognized,
net of a proportional amount of the upfront payment, as realized gains
or losses. In addition to bearing the risk that the credit event will
occur, the fund could be exposed to market risk due to unfavorable
changes in interest rates or in the price of the underlying security or
index, the possibility that the fund may be unable to close out its
position at the same time or at the same price as if it had purchased
comparable publicly traded securities or that the counterparty may
default on its obligation to perform. Risks of loss may exceed amounts
recognized on the statement of assets and liabilities. Credit default
contracts outstanding at period end, if any, are listed after the fund's
portfolio.
H) Security lending The fund may lend securities, through its agents, to
qualified borrowers in order to earn additional income. The loans are
collateralized by cash and/or securities in an amount at least equal to
the market value of the securities loaned. The market value of
securities loaned is determined daily and any additional required
collateral is allocated to the fund on the next business day. The risk
of borrower default will be borne by the fund's agents; the fund will
bear the risk of loss with respect to the investment of the cash
collateral. Income from securities lending is included in investment
income on the statement of operations. At April 30, 2005, the value of
securities loaned amounted to $86,535,310. The fund received cash
collateral of $87,995,974 which is pooled with collateral of other
Putnam funds into 18 issuers of high-grade short-term investments.
I) 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 of 1986 (the "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 Code, 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.
At October 31, 2004, the fund had a capital loss carryover of
$186,468,295 available to the extent allowed by the Code to offset
future net capital gain, if any. The amount of the carryover and the
expiration dates are:
Loss Carryover Expiration
- --------------------------------------
$134,826,463 October 31, 2010
51,641,832 October 31, 2011
The aggregate identified cost on a tax basis is $539,153,964, resulting
in gross unrealized appreciation and depreciation of $118,322,994 and
$13,314,217, respectively, or net unrealized appreciation of
$105,008,777.
J) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Distributions from capital gains, 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
Putnam Management is paid for management and investment advisory
services quarterly based on the average net assets of the fund. Such fee
is based on the following annual rates: 0.70% of the first $500 million
of average net assets, 0.60% of the next $500 million, 0.55% of the next
$500 million, 0.50% of the next $5 billion, 0.475% of the next $5
billion, 0.455% of the next $5 billion, 0.44% of the next $5 billion and
0.43% thereafter.
Putnam Management has agreed to waive fees and reimburse expenses of the
fund through October 31, 2005 to the extent necessary to ensure that the
fund's expenses do not exceed the average expenses of the front-end load
funds viewed by Lipper Inc. as having the same investment classification
or objective as the fund. The expense reimbursement is based on a
comparison of the fund's expenses with the average annualized operating
expenses of the funds in its Lipper peer group for each calendar quarter
during the fund's last fiscal year, excluding 12b-1 fees and without
giving effect to any expense offset and brokerage service arrangements
that may reduce fund expenses. For the period ended April 30, 2005, Putnam
Management did not waive any of its management fee from the fund.
For the period ended April 30, 2005, Putnam Management has assumed
$3,902 of legal, shareholder servicing and communication, audit and
Trustee fees incurred by the fund in connection with certain legal and
regulatory matters (including those described in Note 6).
Effective March 11, 2005, Putnam Investments Limited ("PIL"), an
affiliate of Putnam Management is authorized by the Trustees to manage a
separate portion of the assets of the fund as determined by Putnam
Management from time to time. Putnam Management pays a quarterly
sub-management fee to PIL for its services at an annual rate of 0.35% of
the average net assets of the portion of the fund managed by PIL.
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, LLC. Putnam
Investor Services, a division of PFTC, provides investor servicing agent
functions to the fund. During the six months ended April 30, 2005, the
fund paid PFTC $688,792 for these services.
The fund has entered into an arrangement with PFTC whereby credits
realized as a result of uninvested cash balances are used to reduce a
portion of the fund's expenses. The fund also reduced expenses through
brokerage service arrangements. For the six months ended April 30, 2005,
the fund's expenses were reduced by $174,090 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $1,230, as a quarterly retainer, has been allocated to the fund,
and an additional fee for each Trustees meeting attended. Trustees
receive additional fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with
the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Trustee compensation and expenses in the
statement of operations. Accrued pension liability is included in
Payable for Trustee compensation and expenses in the statement of assets
and liabilities. The Trustees have terminated the Pension Plan with
respect to any Trustee first elected after 2003.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B, class C, class M and class R shares pursuant to
Rule 12b-1 under the Investment Company Act of 1940. The purpose of the
Plans is to compensate Putnam Retail Management, a wholly-owned
subsidiary of Putnam, LLC and Putnam Retail Management GP, Inc., for
services provided and expenses incurred in distributing shares of the
fund. The Plans provide for payments by the fund to Putnam Retail
Management at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and
1.00% of the average net assets attributable to class A, class B, class
C, class M and class R shares, respectively. The Trustees have approved
payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and
0.50% of the average net assets attributable to class A, class B, class
C, class M and class R shares, respectively.
For the six months ended April 30, 2005, Putnam Retail Management,
acting as underwriter, received net commissions of $11,496 and $236 from
the sale of class A and class M shares, respectively, and received
$54,820 and $209 in contingent deferred sales charges from redemptions
of class B and class C shares, respectively. A deferred sales charge of
up to 1.00% and 0.65% is assessed on certain redemptions of class A
shares and M shares, respectively. For the six months ended April 30,
2005, Putnam Retail Management, acting as underwriter, received $20 and
no monies on class A and class M redemptions, respectively.
Note 3
Purchases and sales of securities
During the six months ended April 30, 2005, cost of purchases and
proceeds from sales of investment securities other than short-term
investments aggregated $103,775,800 and $136,453,935, respectively.
There were no purchases or sales of U.S. government securities.
Note 4
Capital shares
At April 30, 2005, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended April 30, 2005
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 2,742,317 $27,893,570
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 377,171 3,864,032
- ----------------------------------------------------------------
3,119,488 31,757,602
Shares repurchased (4,962,653) (50,382,561)
- ----------------------------------------------------------------
Net decrease (1,843,165) $(18,624,959)
- ----------------------------------------------------------------
Year ended October 31, 2004
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 4,436,675 $39,241,504
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 842,583 7,396,481
- ----------------------------------------------------------------
5,279,258 46,637,985
Shares repurchased (18,192,334) (155,899,215)
- ----------------------------------------------------------------
Net decrease (12,913,076) $(109,261,230)
- ----------------------------------------------------------------
Six months ended April 30, 2005
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 590,089 $5,943,434
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 45,246 461,191
- ----------------------------------------------------------------
635,335 6,404,625
Shares repurchased (2,007,814) (20,342,523)
- ----------------------------------------------------------------
Net decrease (1,372,479) $(13,937,898)
- ----------------------------------------------------------------
Year ended October 31, 2004
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 1,323,158 $11,647,942
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 111,883 976,625
- ----------------------------------------------------------------
1,435,041 12,624,567
Shares repurchased (5,628,173) (48,540,669)
- ----------------------------------------------------------------
Net decrease (4,193,132) $(35,916,102)
- ----------------------------------------------------------------
Six months ended April 30, 2005
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 80,116 $809,680
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 2,013 20,514
- ----------------------------------------------------------------
82,129 830,194
Shares repurchased (50,479) (507,941)
- ----------------------------------------------------------------
Net increase 31,650 $322,253
- ----------------------------------------------------------------
Year ended October 31, 2004
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 163,950 $1,440,945
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 4,619 40,438
- ----------------------------------------------------------------
168,569 1,481,383
Shares repurchased (246,251) (2,153,798)
- ----------------------------------------------------------------
Net decrease (77,682) $(672,415)
- ----------------------------------------------------------------
Six months ended April 30, 2005
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 75,996 $774,396
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 2,455 25,129
- ----------------------------------------------------------------
78,451 799,525
Shares repurchased (55,372) (560,874)
- ----------------------------------------------------------------
Net increase 23,079 $238,651
- ----------------------------------------------------------------
Year ended October 31, 2004
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 76,722 $688,262
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 5,392 47,318
- ----------------------------------------------------------------
82,114 735,580
Shares repurchased (239,526) (2,060,124)
- ----------------------------------------------------------------
Net decrease (157,412) $(1,324,544)
- ----------------------------------------------------------------
Six months ended April 30, 2005
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
Shares sold 14,081 $143,841
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 113 1,153
- ----------------------------------------------------------------
14,194 144,994
Shares repurchased (6,617) (68,322)
- ----------------------------------------------------------------
Net increase 7,577 $76,672
- ----------------------------------------------------------------
For the period December 1, 2003
(commencement of operations)
to October 31, 2004
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
Shares sold 9,823 $88,651
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 54 494
- ----------------------------------------------------------------
9,877 89,145
Shares repurchased (1) (8)
- ----------------------------------------------------------------
Net increase 9,876 $89,137
- ----------------------------------------------------------------
At April 30, 2005 Putnam, LLC owned 125 class R shares of the fund (0.7%
of class R shares outstanding), valued at $1,294.
Note 5
Investment in Putnam
Prime Money Market Fund
Pursuant to an exemptive order from the Securities and Exchange
Commission, the fund invests in Putnam Prime Money Market Fund, an
open-end management investment company managed by Putnam Management.
Management fees paid by the fund are reduced by an amount equal to the
management and administrative services fees paid by Putnam Prime Money
Market Fund with respect to assets invested by the fund in Putnam Prime
Money Market Fund. For the six months ended April 30, 2005, management
fees paid were reduced by $8,087 relating to the fund's investment in
Putnam Prime Money Market Fund. Income distributions earned by the fund
are recorded as income in the statement of operations and totaled $118,439
for the six months ended April 30, 2005. During the six months ended April
30, 2005, cost of purchases and cost of sales of investments in Putnam
Prime Money Market Fund aggregated $113,352,963 and $113,029,326,
respectively.
Note 6
Regulatory matters and litigation
Putnam Management has entered into agreements with the Securities and
Exchange Commission and the Massachusetts Securities Division settling
charges connected with excessive short-term trading by Putnam employees
and, in the case of the charges brought by the Massachusetts Securities
Division, by participants in some Putnam-administered 401(k) plans.
Pursuant to these settlement agreements, Putnam Management will pay a
total of $193.5 million in penalties and restitution, with $153.5 million
being paid to shareholders and the funds. The restitution amount will be
allocated to shareholders pursuant to a plan developed by an independent
consultant, with payments to shareholders currently expected by the end of
the summer.
The Securities and Exchange Commission's and Massachusetts Securities
Division's allegations and related matters also serve as the general basis
for numerous lawsuits, including purported class action lawsuits filed
against Putnam Management and certain related parties, including certain
Putnam funds. Putnam Management will bear any costs incurred by Putnam
funds in connection with these lawsuits. Putnam Management believes that
the likelihood that the pending private lawsuits and purported class
action lawsuits will have a material adverse financial impact on the fund
is remote, and the pending actions are not likely to materially affect its
ability to provide investment management services to its clients,
including the Putnam funds.
On March 23, 2005, Putnam Management entered into a settlement with the
Securities and Exchange Commission resolving its inquiry into Putnam
Management's alleged failure to fully and effectively disclose a former
brokerage allocation practice to the Board of Trustees and shareholders of
the Putnam Funds. This practice, which Putnam Management ceased as of
January 1, 2004, involved allocating a portion of the brokerage on mutual
fund portfolio transactions to certain broker-dealers who sold shares of
Putnam mutual funds. Under the settlement order, Putnam Management has
paid a civil penalty of $40 million and disgorgement of $1 to the
Securities and Exchange Commission. These amounts subsequently will be
distributed to certain Putnam funds pursuant to a plan to be approved by
the Securities and Exchange Commission. As part of the settlement, Putnam
Management neither admitted nor denied any wrongdoing.
Putnam Investments has recorded a charge of $30 million for the estimated
cost that it believes will be necessary to address issues relating to the
calculation of certain amounts paid by the Putnam mutual funds in previous
years. The previous payments were cost reimbursements by the Putnam funds
to Putnam for transfer agent services relating to defined contribution
operations. Putnam currently anticipates that any payments made by Putnam
related to this issue will be paid to the Putnam funds. Review of this
issue is ongoing.
Results of November 11, 2004
and January 10, 2005
shareholder meetings
(Unaudited)
A special meeting of shareholders of the fund was held on November 11,
2004. At that meeting consideration of certain proposals was adjourned to
a final meeting held on January 10, 2005.
November 11, 2004 meeting
At the meeting, each of the nominees for Trustees was elected, as follows:
Votes Votes
For Withheld
- ------------------------------------------------------------------------------
Jameson A. Baxter 34,759,539 1,387,677
Charles B. Curtis 34,800,475 1,346,741
Myra R. Drucker 34,741,882 1,405,334
Charles E. Haldeman, Jr. 34,764,353 1,382,863
John A. Hill 34,752,185 1,395,031
Ronald J. Jackson 34,804,338 1,342,878
Paul L. Joskow 34,783,592 1,363,624
Elizabeth T. Kennan 34,773,320 1,373,896
John H. Mullin, III 34,799,284 1,347,932
Robert E. Patterson 34,820,482 1,326,734
George Putnam, III 34,717,876 1,429,340
A.J.C. Smith* 34,751,112 1,396,104
W. Thomas Stephens 34,803,590 1,343,626
Richard B. Worley 34,758,961 1,388,255
A proposal to amend the fund's fundamental investment restriction with
respect to borrowing to allow the fund the investment flexibility
permitted by the Investment Company Act was approved as follows:
Votes Votes
For Against Abstentions
- ------------------------------------------------------------------------------
25,078,594 2,302,682 8,765,940
* Mr. Smith resigned from the Board of Trustees on January 14, 2005.
All tabulations are rounded to nearest whole number.
A proposal to amend the fund's fundamental investment restriction with
respect to making loans to enhance the fund's ability to participate in an
interfund borrowing and lending program was approved as follows:
Votes Votes
For Withheld Abstentions
- ------------------------------------------------------------------------------
25,371,493 2,121,982 8,653,741
A proposal to amend the fund's fundamental investment restriction with
respect to diversification of investments to enhance the fund's ability to
invest in registered investment companies such as Putnam Prime Money
Market Fund was approved as follows:
Votes Votes
For Withheld Abstentions
- ------------------------------------------------------------------------------
26,243,017 1,380,282 8,523,917
January 10, 2005 meeting
A proposal to amend the fund's Agreement and Declaration of Trust to
permit the fund to satisfy redemption requests other than in cash was
defeated:
Votes Votes
For Withheld Abstentions
- ------------------------------------------------------------------------------
25,701,651 1,782,628 8,744,539
All tabulations are rounded to nearest whole number.
Brokerage commissions
(Unaudited)
Brokerage commissions are paid to firms that execute trades on behalf of
your fund. When choosing these firms, Putnam is required by law to seek
the best execution of the trades, taking all relevant factors into
consideration, including expected quality of execution and commission
rate. Listed below are the largest relationships based upon brokerage
commissions for your fund and the other funds in Putnam's Research group
for the year ended April 30, 2005. The other Putnam mutual funds in this
group are Putnam Global Natural Resources Fund, Putnam Health Sciences
Trust, Putnam Research Fund, Putnam VT Health Sciences Fund, Putnam VT
Research Fund, and Putnam VT Utilities Growth and Income Fund.
The top five firms that received brokerage commissions for trades executed
for the Research group are (in descending order) Citigroup Global Markets,
Goldman Sachs, Lehman Brothers, Deutsche Bank Securities, and UBS Warburg.
Commissions paid to these firms together represented approximately 50% of
the total brokerage commissions paid for the year ended April 30, 2005.
Commissions paid to the next 10 firms together represented approximately
34% of the total brokerage commissions paid during the period. These firms
are (in alphabetical order) Bank of America, Bear Stearns & Company,
Credit Suisse First Boston, JP Morgan Clearing, Lazard Freres & Co.,
Merrill Lynch, Morgan Stanley Dean Witter, RBC Capital Markets, Sanford
Bernstein, and SG Cowen.
Commission amounts do not include "mark-ups" paid on bond or derivative
trades made directly with a dealer. Additional information about
brokerage commissions is available on the Securities and Exchange
Commission (SEC) Web site at www.sec.gov. Putnam funds disclose
commissions by firm to the SEC in semiannual filings on form N-SAR.
Fund information
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded over 65 years ago, Putnam Investments
was built around the concept that a balance between risk and reward is
the hallmark of a well-rounded financial program. We presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment
Management, LLC
One Post Office Square
Boston, MA 02109
Investment Sub-Manager
Putnam Investments Limited
57-59 St. James Street
London, England SW1A 1LD
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary
Trust Company
Legal Counsel
Ropes & Gray LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Myra R. Drucker
Charles E. Haldeman, Jr.
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
John H. Mullin, III
Robert E. Patterson
George Putnam, III
W. Thomas Stephens
Richard B. Worley
Officers
George Putnam, III
President
Charles E. Porter
Executive Vice President,
Associate Treasurer and
Principal Executive Officer
Jonathan S. Horwitz
Senior Vice President
and Treasurer
Steven D. Krichmar
Vice President and
Principal Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Daniel T. Gallagher
Senior Vice President,
Staff Counsel and
Compliance Liaison
Beth S. Mazor
Vice President
James P. Pappas
Vice President
Richard S. Robie, III
Vice President
Mark C. Trenchard
Vice President and
BSA Compliance Officer
Francis J. McNamara, III
Vice President and
Chief Legal Officer
Charles A. Ruys de Perez
Vice President and
Chief Compliance Officer
Judith Cohen
Vice President, Clerk and
Assistant Treasurer
This report is for the information of shareholders of Putnam Utilities
Growth and Income Fund. It may also be used as sales literature when
preceded or accompanied by the current prospectus, the most recent copy
of Putnam's Quarterly Performance Summary, and Putnam's Quarterly
Ranking Summary. For more recent performance, please visit
www.putnaminvestments.com. Investors should carefully consider the
investment objective, risks, charges, and expenses of a fund, which are
described in its prospectus. For this and other information or to
request a prospectus, call 1-800-225-1581 toll free. Please read the
prospectus carefully before investing. The fund's Statement of
Additional Information contains additional information about the fund's
Trustees and is available without charge upon request by calling
1-800-225-1581.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
Call 1-800-225-1581 or visit our Web site
www.putnaminvestments.com.
SA026-225016 6/05
Not FDIC Insured May Lose Value No Bank Guarantee
Item 2. Code of Ethics:
- -----------------------
Not applicable
Item 3. Audit Committee Financial Expert:
- -----------------------------------------
Not applicable
Item 4. Principal Accountant Fees and Services:
- -----------------------------------------------
Not applicable
Item 5. Audit Committee: Not applicable
- -------------------------
Item 6. Schedule of Investments: Not applicable
- --------------------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End
- -------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. Purchases of Equity Securities by Closed-End Management Investment
- --------------------------------------------------------------------------
Companies and Affiliated Purchasers: Not applicable
------------------------------------
Item 9. Submission of Matters to a Vote of Security Holders:
- ------------------------------------------------------------
Not applicable
Item 10. Controls and Procedures:
- ---------------------------------
(a) The registrant's principal executive officer and principal
financial officer have concluded, based on their evaluation of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures as of a date within 90 days of
the filing date of this report, that the design and operation of
such procedures are generally effective to provide reasonable
assurance that information required to be disclosed by the registrant
in this report is recorded, processed, summarized and reported within
the time periods specified in the Commission's rules and forms.
(b) Changes in internal control over financial reporting:
Not applicable
Item 11. Exhibits:
- ------------------
(a) Not applicable
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act
of 2002 are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: June 27, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By (Signature and Title): /s/Charles E. Porter
---------------------------
Charles E. Porter
Principal Executive Officer
Date: June 27, 2005
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: June 27, 2005