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0000928816-06-001197.txt : 200609280000928816-06-001197.hdr.sgml : 2006092820060928105919ACCESSION NUMBER:0000928816-06-001197CONFORMED SUBMISSION TYPE:N-CSRPUBLIC DOCUMENT COUNT:19CONFORMED PERIOD OF REPORT:20060731FILED AS OF DATE:20060928DATE AS OF CHANGE:20060928EFFECTIVENESS DATE:20060928

FILER:

COMPANY DATA:COMPANY CONFORMED NAME:PUTNAM INVESTORS FUNDCENTRAL INDEX KEY:0000081269IRS NUMBER:042713095STATE OF INCORPORATION:MAFISCAL YEAR END:0731

FILING VALUES:FORM TYPE:N-CSRSEC ACT:1940 ActSEC FILE NUMBER:811-00159FILM NUMBER:061112771

BUSINESS ADDRESS:STREET 1:ONE POST OFFICE SQCITY:BOSTONSTATE:MAZIP:02109BUSINESS PHONE:6172921000

FORMER COMPANY:FORMER CONFORMED NAME:PUTNAM INVESTORS FUND INC /PRED/DATE OF NAME CHANGE:19821109

FORMER COMPANY:FORMER CONFORMED NAME:INCORPORATED INVESTORSDATE OF NAME CHANGE:19670327

0000081269S000006190PUTNAM INVESTORS FUND

C000017038Class A SharesPINVX

C000017039Class B SharesPNVBX

C000017040Class C SharesPCINX

C000017041Class M SharesPNVMX

C000017042Class R SharesPIVRX

C000017043Class Y SharesPNVYX

N-CSR1a_investorsfund.htmPUTNAM INVESTORS FUND

a_investorsfund.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OFREGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: (811- 00159)

Exact name of registrant as specified in charter: Putnam Investors Fund

Address of principal executive offices: One Post Office Square, Boston, Massachusetts 02109

Name and address of agent for service: Beth S. Mazor, Vice President One Post Office Square Boston, Massachusetts 02109 Copy to: John W. Gerstmayr, Esq. Ropes & Gray LLP One International Place Boston, Massachusetts 02110 Registrants telephone number, including area code: (617) 292-1000

Date of fiscal year end: July 31, 2006

Date of reporting period: August 1, 2005July 31, 2006

Item 1. Report toStockholders:

The following is a copy of the reporttransmitted to stockholders pursuant
to Rule 30e-1 under the InvestmentCompany Act of 1940:

What makes Putnam different?

In 1830, Massachusetts Supreme Judicial Court Justice Samuel Putnam established The Prudent Man Rule, a legal foundation for responsible money management.

THE PRUDENT MAN RULE

All that can be required of a trustee to invest is that he shall conduct himself faithfully and exercise a sound discretion. He is to observe how men of prudence, discretion, and intelligence manage their own affairs,not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested.

A time-honored tradition in money management

Since 1937, our values have been rooted in a profound sense of responsibility for the money entrusted to us.

A prudent approach to investing

We use a research-driven team approach to seek consistent, dependable, superior investment results over time, although there is no guarantee a fund will meet its objectives.

Funds for every investment goal

We offer a broad range of mutual funds and other financial products so investors and their financial representatives can build diversified portfolios.

A commitment to doing whats right for investors

We have below-average expenses and stringent investor protections, and provide a wealth of information about the Putnam funds.

Industry-leading service

We help investors, along with their financial representatives, make informed investment decisions with confidence.

Putnam
Investors
Fund

7| 31| 06
Annual Report

Message from the Trustees 2 About the fund 4 Report from the fund managers 7 Performance 13 Expenses 16 Portfolio turnover 18 Risk 19 Your funds management 20 Terms and definitions 23 Trustee approval of management contract 25 Other information for shareholders 30 Financial statements 31 Federal tax information 55 Brokerage commissions 56 About the Trustees 57 Officers 63

Cover photograph: MarcoCristofori

Message from the Trustees

Dear Fellow Shareholder

Over the last three months of your funds reporting period, investors were particularly preoccupied with the course of the economy. Beginning in May, a more pessimistic outlook pervaded the markets as leading economicindicators began to warn of slower growth and the Federal Reserve (the Fed) continued its series of interest-rate increases. The resulting correction undercut much of the progress that markets had achieved in the previous three months of theperiod.

However, we believe that todays higher interest rates, far from being a threat to global economic fundamentals, are in fact an integral part of them. Economic growth may, indeed, be slowing somewhat as a result of the higherrates, but we consider this a typical development for the middle of an economic cycle, and one that could help provide the basis for a longer and more durable business expansion and a continued healthy investment environment. The recent correctionbrought valuations back to attractive levels, creating opportunities in a wide array of markets and sectors. Furthermore, since the Fed paused in its tightening cycle shortly after the close of the reporting period, the market atmosphere hasgradually become more optimistic. Putnam Investments management team, under the leadership of Chief Executive Officer Ed Haldeman, continues to focus on investment performance, and the investment professionals managing your fund have beenworking to take advantage of the opportunities presented by this environment.

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We would like to take this opportunity to announce the retirement of one of your funds Trustees, John Mullin, an independent Trustee of the Putnam funds since 1997. We thank him for his service.

In the following pages, members of your funds management team discuss the funds performance and strategies for the fiscal period ended July 31, 2006, and provide their outlook for the months ahead. As always, we thankyou for your support of the Putnam funds.

Putnam Investors Fund:
seeking great companies forinvestors

PutnamInvestors Fund was founded in 1925 the age of Model-T Fords, jazz, and theboundless optimism of one of the great American bull markets. Today, more than80 years later, the fund continues to target leading American businesses, armedwith the flexibility to invest across the large-company universe. In its earlyyears, the fund benefited from rising interest in stock investing, and morerecently, from the rallies that dominated the 1980s and 1990s. But there werealso bumps in the road, such as the recession of the early 1990s and the bearmarket of 20002003.

In thetradition of successful American stockpickers, the funds managersseekopportunities others may haveoverlooked. With its go anywhere approach, the fund can invest in valuestocks, growth stocks, and everything in between. The funds managers may seepotential in value stocks, where investors have temporarily pushed prices toolow, or in fast-rising growth stocks, where investors have misjudged a companysfuture growth.

Thefunds portfolio managers and analysts conduct thorough research, visitingcompanies and talking to their management, suppliers, and competitors to findout what each business is really worth. They also analyze the past and get abetter understanding of how great companies grow. This research helps theteam

Putnam Investors Fundseeks long-term growth of capital andany increased income that results from this growth by investing primarily inlarge-cap stocks of well-established U.S. companies. The fund targets companieswhose business worth is believed to be more than their current stock pricesindicate, whether the stock is considered growth or value. The fund may beappropriate for investors seeking long-term growth of capital.

Highlights

*For the 12 months ended July 31, 2006, Putnam Investors Funds class Ashares returned 3.17% without sales charges.

*The funds benchmark, the S&P 500 Index, returned 5.38% .

*The average return for the funds Lipper category, Large-Cap Core Funds,was 3.77% .

*Additional fund performance, comparative performance, and Lipper data canbe found in the performance section beginning on page 13.

Performance

Total return for class A shares forperiods ended 7/31/06

Since the fund's inception (12/1/25),average annual return is 9.59% at NAV and 9.52% at POP.

Average annual return Cumulative return NAV POP NAV POP 10 years 7.11% 6.54% 98.82% 88.43% 5 years 1.83 0.74 9.48 3.76 3 years 11.53 9.54 38.74 31.42 1 year 3.17 -2.24 3.17 -2.24

Data is historical. Pastperformance does not guarantee future results. More recent returns may be lessor 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 assumesreinvestment of distributions and does not account for taxes. Returns at NAV donot reflect a sales charge of 5.25% . For the most recent month-end performance,visit www.putnam.com. For a portion of the period, this fund limited expenses,without which returns would have been lower. A short-term trading fee of up to2% may apply.

6

Report from the fundmanagers
The year in review

While your fund delivered a positive return atnet asset value (NAV, or without sales charges) for the period, it did notperform as well as its benchmark, the S&P 500 Index, or the average returnfor its Lipper category, Large-Cap Core Funds. We attribute this disappointingrelative performance to weak-performing fund holdings in the consumer,technology, and health-care sectors. Throughout the year, we continued toutilize our bottom-up, research-intensive investment process, and our stockselection in other sectors, particularly basic materials, energy, capital goods,and conglomerates, contributed positively to performance. The fund alsocontinued to benefit from its flexibility to invest in both growth- andvalue-style stocks.

Market overview

During the funds fiscal year, stocksdelivered gains overall, despite signifi-cant challenges such as rising interestrates, soaring energy prices, and late in the period growing concerns aboutinflation and slowing economic growth. In the final three months of the period,stocks declined as investors grew increasingly worried that economic growthmight weaken if the Fed were to go too far in raising rates. Toward the close ofthe period, in late June, the Fed raised short-term interest rates for the 17thconsecutive time.

Despite the challenges of those finalmonths, the fiscal year was marked by severalhighlights. For example, in the first calendar quarter of 2006, the S&P 500Index delivered its strongest first-quarter gain since 1999. In fact, by April,several major market indexes had begun to approach multi-year highs. Whileenergy prices and interest rates remained a concern, investors were also cheeredby many positive economic trends. Job creation improved, the economy continuedto expand, inflation remained contained, and corporate profits were generallysolid. For the period, within the large-company universe, value-style stockssignificantly outperformed growth-style stocks.

7

Strategy overview

In managing your funds portfolio, wecontinued to take a bottom-up approach to stock selection. Regardless of how theeconomy or markets are behaving, we look for companies whose stocks we believeare mispriced by the market in other words, companies that we believe areworth more than their current stock prices indicate. Your fund is managed in ablend investment style, which means it has the flexibility to invest in a widerange of companies without a bias toward either growth or value stocks. Forexample, we may target companies that are growing rapidly and seem to have thepotential to continue growing, as well as out-of-favor companies undergoingchanges that may improve their earnings and growth potential. In eithercase, we look for stocks whose prices arecurrently low relative to our assessment of the issuing companys earnings andgrowth potential.

We find that, typically, stocks becomeattractively valued when the market underestimates the ability of fundamentallyhealthy companies to maintain their returns and growth rates, or when the marketoverreacts to short-term events. We believe that if we focus on cash flows andvaluations, maintain a diversified portfolio, and remain willing to buy and holdcontroversial stocks that we believe are out of favor only temporarily, the fundwill be able to profit from opportunities that arise from overreactions ormisperceptions in the market.

Market sector performance

These indexes provide an overview ofperformance in different market sectors for the 12 months ended7/31/06.

Equities S&P 500 Index (broad stock market) 5.38% Russell 1000 Growth Index (large-company growth stocks) -0.76% Russell 2000 Index (small-company stocks) 4.24% MSCI EAFE Index (international stocks) 24.01% Bonds Lehman Aggregate Bond Index (broad bond market) 1.46% Lehman Government Bond Index (U.S. Treasury and agency securities) 1.24% Citigroup World Government Bond Index (global government bonds) 1.43%

8

Your funds holdings

One of the greatest detractors from fundperformance for the fiscal year was the stock of Dell, a global producer of computersystems and services. Dells stock declined as investors became concerned aboutits slowing growth rate. The weakness was due in part to the companys strategicmissteps as well as increased competition, particularly from Hewlett-Packard.Although we have reduced our estimates for the companys longer-term growthrate, we still believe the stock is attractively priced and that Dell canresolve its issues and take advantage of growth opportunities in its industry.Dell remained in the portfolio at the close of the period. Another company thatsuffered from strategic missteps and slowinggrowth during the period was Internet services company eBay. It has lost marketshare in some overseas markets, and investors have begun to reconsider thestrength of its brand and competitive edge. eBay also remained in the portfolioat the close of the period, as we believe the stock has become overly discountedand continues to represent an attractive long-term opportunity.

Also delivering weak performance duringthe period was homebuilding company NVR. This stock declined in responseto investor concerns about the slowdown in the housing market, which has beenmore severe than anticipated. In our view, NVR offers operational effi-ciencyand competitive strength that may enable it to offset the effects ofa

9

softening housing market. We havemaintained a position in NVR, as we believe its declines were the result ofshort-term challenges rather than fundamental weakness.

There were some detractors that we decidedto eliminate from the portfolio during the period, including XM Satellite Radio Holdings. The company has struggled with a number of challenges, includingregulatory issues, a hardware recall, and lower subscription growth. Given theimmatu rity of the satellite radio industry, it is more difficult to forecastthe possible range of outcomes for this stock. Therefore, we chose to eliminatethe position in favor of companies in which we have a greater level ofconfidence. This was also the case withpharmaceutical giant Johnson &Johnson, whose growth rate has beendisappointing. We sold this position in order to focus on health-care stocksthat we believe offer more attractive opportunities.

Among the holdings that made a positivecontribution to performance was Las VegasSands, a hotel and gaming company. While thecompanys U.S. operations have been particularly successful, we believe much ofits future growth potential lies in its international land and propertydevelopment opportunities, particularly in Macao. The fund also continued tobenefit from its position in AppleComputer, one of the best performers in theportfolio for the fiscal year.

Top holdings

This table shows the funds topholdings, and the percentage of the funds net assets that each comprised, as of7/31/06. The fund's holdings will change over time.

Holding (percent of fund's net assets) Industry Capital One Financial Corp. (3.9%) Consumer finance Citigroup, Inc. (3.5%) Financial Bank of America Corp. (3.5%) Banking Countrywide Financial Corp. (2.9%) Consumer finance Home Depot, Inc. (The) (2.7%) Retail American International Group, Inc. (2.7%) Insurance Microsoft Corp. (2.7%) Software U.S. Bancorp (2.6%) Banking Dell, Inc. (2.5%) Computers Goldman Sachs Group, Inc. (The) (2.4%) Investment banking/brokerage

10

Despite this stocks significant advances,we believed that the market was still underestimating the long-term growthpotential of Apple, maker of Macintosh computers and the extremely popular iPoddigital music player. While investors are focusing primarily on iPods, webelieve some of Apples most promising growth potential lies in the personalcomputer area. We believe the company can gain market share, thanks to itscontinued innovations, such as the recent addition of Intel chips to its PCs andsoftware that enables Microsoft Windows software to run on Applecomputers.

Another strong-performing fund holding wasU.S. Steel, producer of integrated steel products in the United States and centralEurope. The company has benefited from consolidation in the global steelindustry, which has helped improve profitability. Strong demand and globalindustrial growth boosted the stock of Caterpillar, a maker of constructionand mining equipment and another of the funds top performers. Our stockselection in the energy sector also contributed positively to performance,particularly with regard to the funds positions in Suncor Energy, an integrated energycompany focused on developing Canadas Athabasca oil sands, one of the worldslargest petroleum resource basins, and ValeroEnergy, a petroleum refining company that hasbenefited from strong refining margins.

Please note that the holdingsdiscussed in this report may not have been held by the fund for the entireperiod. Portfolio composition is subject to review in accordance with the fundsinvestment strategy and may vary in the future.

11

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 teams plans for responding to them.

As the funds fiscal year came to a close, investors continued to pay close attention to energy prices, and had grown increasingly concerned about the possibility of rising inflation and slowing economic growth.Uncertainty in the financial markets centered on the intentions of the new Fed Chairman Benjamin Bernanke, and whether, in seeking to contain inflation, the Fed might go too far with its rate increases and harm the economy. Despite these worries,however, there was also cause for optimism, including continued economic expansion, low unemployment, relatively low inflation, and generally strong corporate profits. It is also worth noting that, shortly after the close of the period, the Feddecided not to raise interest rates for the first time in more than two years. In choosing to take this pause, the Fed noted that economic growth had moderated.

Regardless of the direction the markets take in the months ahead, we remain focused on the long-term potential of individual companies rather than short-term developments in the economy. General themes at work in themarket have some influence on our portfolio construction process and the timing of our buy and sell decisions. However, we believe investors long-term goals are best served by our bottom-up approach to stock selection, which relies heavily onfundamental research and analysis.

The views expressed in this report are exclusively those of Putnam Management. They are not meant as investment advice.

The fund involves the risk that the stock prices of the companies in the portfolio will fall or will fail to rise. Many factors can adversely affect a stocks performance, including both general financialmarket conditions and factors related to a specific company or industry.

12

Your fundsperformance

This section shows your fundsperformance for periods ended July 31, 2006, the end of its fiscal year. Inaccordance with regulatory requirements for mutual funds, we also includeperformance as of the most recent calendar quarter-end. Performance shouldalways be considered in light of a funds investment strategy. Data representspast performance. Past performance does not guarantee future results. Morerecent returns may be less or more than those shown. Investment return andprincipal value will fluctuate, and you may have a gain or a loss when you sellyour shares. For the most recent month-end performance, please visitwww.putnam.com or call Putnam at 1-800-225-1581. Class Y shares are generallyonly available to corporate and institutional clients. See the Terms andDefinitions section in this report for definitions of the share classes offeredby your fund.

Fund performance

Total return for periods ended7/31/06

Class A Class B Class C Class M Class R Class Y (inception dates) (12/1/25) (3/1/93) (7/26/99) (12/2/94) (1/21/03) (1/7/97) NAV POP NAV CDSC NAV CDSC NAV POP NAV NAV Annual average (life of fund) 9.59% 9.52% 8.54% 8.54% 8.76% 8.76% 8.82% 8.77% 9.32% 9.62% 10 years 98.82 88.43 84.50 84.50 85.47 85.47 89.13 83.03 94.17 103.39 Annual average 7.11 6.54 6.32 6.32 6.37 6.37 6.58 6.23 6.86 7.36 5 years 9.48 3.76 5.44 3.44 5.43 5.43 6.68 3.19 8.26 10.80 Annual average 1.83 0.74 1.07 0.68 1.06 1.06 1.30 0.63 1.60 2.07 3 years 38.74 31.42 35.66 32.66 35.61 35.61 36.61 32.15 37.88 39.66 Annual average 11.53 9.54 10.70 9.88 10.69 10.69 10.96 9.74 11.30 11.78 1 year 3.17 -2.24 2.39 -2.61 2.38 1.37 2.62 -0.68 2.87 3.38

Performance assumes reinvestmentof distributions and does not account for taxes. Returns at public offeringprice (POP) for class A and M shares reflect a sales charge of 5.25% and 3.25%,respectively. Class B share returns reflect the applicable contingent deferredsales charge (CDSC), which is 5% in the first year, declining to 1% in the sixthyear, and is eliminated thereafter. Class C shares reflect a 1% CDSC the firstyear that is eliminated thereafter. Class R and Y shares have no initial salescharge or CDSC. Performance for class B, C, M, R, and Y shares before theirinception is derived from the historical performance of class A shares, adjustedfor the applicable sales charge (or CDSC) and, except for class Y shares, thehigher operating expenses for such shares.

For a portion of the period, thisfund limited expenses, without which returns would have been lower.

A 2% short-term trading fee may beapplied to shares exchanged or sold within 5 days of purchase.

13

Change in the value of a $10,000investment ($9,475 after salescharge)

Cumulative total return from 7/31/96to 7/31/06

Past performance does not indicatefuture results. At the end of the same time period, a $10,000 investment in thefunds class B and class C shares would have been valued at $18,450 and $18,547,respectively, and no contingent deferred sales charges would apply. A $10,000investment in the funds class M shares would have been valued at $18,303 atpublic offering price. A $10,000 investment in the funds class R and class Yshares would have been valued at $19,417 and $20,339, respectively. See firstpage of performance section for performance calculation method.

Comparative index returns

For periods ended 7/31/06

Lipper Large-Cap S&P 500 Core Funds Index category average* Annual average (life of fund) 10 years 134.08% 104.82% Annual average 8.88 7.18 5 years 14.94 7.71 Annual average 2.82 1.40 3 years 36.02 29.43 Annual average 10.80 8.91 1 year 5.38 3.77

Index and Lipper results should becompared to fund performance at net asset value.

* Over the 1-, 3-, 5-, and 10-yearperiods ended 7/31/06, there were 868, 734, 614, and 254 funds, respectively, inthis Lipper category.

The Standard and Poor's 500Index began operations on 12/31/69. The Lipper Large-Cap Core Funds categorybegan operations on 12/31/59.

14

Fund price and distributioninformation

For the 12-month period ended7/31/06

Distributions Class A Class B Class C Class M Class R Class Y Number 1 1 1 1 1 1 Income $0.140 $0.040 $0.044 $0.072 $0.149 $0.174 Capital gains Total $0.140 $0.040 $0.044 $0.072 $0.149 $0.174 Share value: NAV POP NAV NAV NAV POP NAV NAV 7/31/05 $13.21 $13.94 $12.11 $12.77 $12.62 $13.04 $13.16 $13.39 7/31/06 13.49 14.24 12.36 13.03 12.88 13.31 13.39 13.67

Fund performance for most recent calendarquarter

Total return for periods ended6/30/06

Class A Class B Class C Class M Class R Class Y (inception dates) (12/1/25) (3/1/93) (7/26/99) (12/2/94) (1/21/03) (1/7/97) NAV POP NAV CDSC NAV CDSC NAV POP NAV NAV Annual average (life of fund) 9.62% 9.55% 8.57% 8.57% 8.79% 8.79% 8.85% 8.80% 9.35% 9.65% 10 years 92.09 81.96 78.13 78.13 79.16 79.16 82.78 76.79 87.71 96.47 Annual average 6.75 6.17 5.94 5.94 6.00 6.00 6.22 5.86 6.50 6.99 5 years 6.76 1.17 2.86 0.86 2.82 2.82 4.14 0.78 5.60 8.07 Annual average 1.32 0.23 0.57 0.17 0.56 0.56 0.81 0.16 1.10 1.56 3 years 42.57 35.09 39.47 36.47 39.33 39.33 40.56 36.04 41.55 43.61 Annual average 12.55 10.55 11.73 10.92 11.69 11.69 12.02 10.80 12.28 12.82 1 year 8.48 2.75 7.70 2.70 7.57 6.57 7.90 4.38 8.19 8.71

15

Your funds expenses

As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. In the most recent six-month period, your fund limited these expenses; had it not doneso, expenses would have been higher. 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 funds prospectus or talk to your financial advisor.

Review your funds expenses

The table below shows the expenses you would have paid on a $1,000 investment in Putnam Investors Fund from February 1, 2006, to July 31, 2006. It also shows how much a $1,000 investment would be worth at theclose of the period, assuming actual returns and expenses.

Class AClass BClass CClass MClass RClass Y

Expenses paid per $1,000*$ 5.26$ 8.90$ 8.90$ 7.69$ 6.48$ 4.05

Ending value (after expenses)$965.60$961.90$961.60$962.60$964.70$966.80

* Expenses for each share class are calculated using the funds annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended 7/31/06. Theexpense 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 inthe period; and then dividing that result by the number of days in the year. Does not reflect the effect of a non-recurring reimbursement by Putnam. If this amount had been reflected in the table above, expenses for each share class would have beenlower.

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended July 31, 2006, use the calculation method below. To find the value of your investment on February 1, 2006, go to www.putnam.com and log on to youraccount. Click on the Transaction History tab in your Daily Statement and enter 02/01/2006 in both the from and to fields. Alternatively, call Putnam at 1-800-225-1581.

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Compare expenses using the SECsmethod

The Securities and ExchangeCommission (SEC) has established guidelines to help investors assess fundexpenses. Per these guidelines, the table below shows your funds expenses basedon a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but nottransaction expenses or total costs) of investing in the fund with those ofother funds. All mutual fund shareholder reports will provide this informationto help you make this comparison. Please note that you cannot use thisinformation to estimate your actual ending account balance and expenses paidduring the period.

Class A Class B Class C Class M Class R Class Y Expenses paid per $1,000* $ 5.41 $ 9.15 $ 9.15 $ 7.90 $ 6.66 $ 4.16 Ending value (after expenses) $1,019.44 $1,015.72 $1,015.72 $1,016.96 $1,018.20 $1,020.68

* Expenses for each share classare calculated using the funds annualized expense ratio for each class, whichrepresents the ongoing expenses as a percentage of net assets for the six monthsended 7/31/06. The expense ratio may differ for each share class (see the tableat the bottom of this page). Expenses are calculated by multiplying the expenseratio by the average account value for the period; then multiplying the resultby the number of days in the period; and then dividing that result by the numberof days in the year. Does not reflect the effect of a non-recurringreimbursement by Putnam. If this amount had been reflected in the table above,expenses for each share class would have been lower.

Compare expenses using industryaverages

You can also compare your fundsexpenses with the average of its peer group, as defined by Lipper, anindependent fund-rating agency that ranks funds relative to others that Lipperconsiders to have similar investment styles or objectives. The expense ratio foreach share class shown below indicates how much of your funds net assets havebeen used to pay ongoing expenses during the period.

Class A Class B Class C Class M Class R Class Y Your fund's annualized expense ratio* 1.08% 1.83% 1.83% 1.58% 1.33% 0.83% Average annualized expense ratio for Lipper peer group 1.27% 2.02% 2.02% 1.77% 1.52% 1.02%

* For the funds most recentfiscal half year; may differ from expense ratios based on one-year data in thefinancial highlights. Does not reflect the effect of a non-recurringreimbursement by Putnam. If this amount had been reflected in the table above,the expense ratio for each share class would have been lower.

Simple average of the expensesof all front-end load funds in the funds Lipper peer group, calculated inaccordance with Lippers standard method for comparing fund expenses (excluding12b-1 fees and without giving effect to any expense offset and brokerage servicearrangements that may reduce fund expenses). This average reflects each fundsexpenses for its most recent fiscal year available to Lipper as of 6/30/06. Tofacilitate comparison, Putnam has adjusted this average to reflect the 12b-1fees carried by each class of shares other than class Y shares, which do notincur 12b-1 fees. The peer group may include funds that are significantlysmaller or larger than the fund, which may limit the comparability of the fundsexpenses to the simple average, which typically is higher than theasset-weighted average.

17

Your funds
portfolioturnover

Putnam funds are actively managed byteams of experts who buy and sell securities based on intensive analysis ofcompanies, industries, economies, and markets. Portfolio turnover is a measureof how often a funds managers buy and sell securities for your fund. Aportfolio turnover of 100%, for example, means that the managers sold andreplaced securities valued at 100% of a funds assets within a one-year period.Funds with high turnover may be more likely to generate capital gains anddividends that must be distributed to shareholders as taxable income. Highturnover may also cause a fund to pay more brokerage commissions and othertransaction costs, which may detract from performance.

Turnover comparisons Percentage of holdings that change every year 2006 2005 2004 2003 2002 Putnam Investors Fund 111% 112% 66% 82% 130% Lipper Large-Cap Core Funds category average

78% 81% 78% 77% 86%

Turnover data for the fund iscalculated based on the fund's fiscal-year period, which ends on July 31.Turnover data for the fund's Lipper category is calculated based on the averageof the turnover of each fund in the category for its fiscal year ended duringthe indicated year. Fiscal years vary across funds in the Lipper category, whichmay limit the comparability of the fund's portfolio turnover rate to the Lipperaverage. Comparative data for 2006 is based on information available as of7/31/06.

18

Your funds risk

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 isreferred to as the funds Overall Morningstar Risk.

Your funds Overall MorningstarRisk

Your funds 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 funds OverallMorningstar Risk into a percentile, which is based on the funds ranking among all funds rated by Morningstar as of June 30, 2006. A higher Overall Morningstar Risk generally indicates that a funds monthly returns have varied more widely.

Morningstar determines a funds Overall Morningstar Risk by assessing variations in the funds monthly returns with an emphasis on downside variations over 3-, 5-, and 10-year periods, ifavailable. Those measures are weighted and averaged to produce the funds Overall Morningstar Risk. The information shown is provided for the funds class A shares only; information for other classes may vary. Overall Morningstar Risk isbased 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 notmean that you cannot lose money on an investment in a fund. Copyright 2006 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.

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Your fundsmanagement

Your fund is managed by the membersof the Putnam U.S. Core Team. James Wiess is the Portfolio Leader and RichardCervone is a Portfolio Member of your fund. The Portfolio Leader and PortfolioMember coordinate the teams management of the fund.

For a complete listing of the membersof the Putnam U.S. Core Team, including those who are not Portfolio Leaders orPortfolio Members of your fund, visit Putnams Individual Investor Web site atwww.putnam.com.

Investment team fundownership

The table below shows how much thefunds current Portfolio Leader and Portfolio Member have invested in the fundand in all Putnam mutual funds (in dollar ranges). Information shown is as ofJuly 31, 2006, and July 31, 2005.

Trustee and Putnam employee fundownership

As of July 31, 2006, all of theTrustees then on the Board of the Putnam funds owned fund shares. The tablebelow shows the approximate value of investments in the fund and all Putnamfunds as of that date by the Trustees and Putnam employees. These amountsinclude investments by the Trustees and employees immediate family members andamounts invested through retirement and deferred compensation plans.

Total assets in Assets in the fund all Putnam funds Trustees $ 900,000 $ 87,000,000 Putnam employees

$16,220,000 $409,000,000

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Fund manager compensation

The total 2005 fund manager compensation that is attributable to your fund is approximately $4,900,000. This amount includes a portion of 2005 compensation paid by Putnam Management to the fund managers listed inthis 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 2005 compensation paid to theChief Investment Officer of the team and the Group Chief Investment Officer of the funds broader investment category for their oversight responsibilities, calculated based on the fund assets they oversee taken as a percentage of the totalassets they oversee. This amount does not include compensation of other personnel involved in research, trading, administration, systems, compliance, or fund operations; nor does it include non-compensation costs. These percentages are determined asof the funds fiscal period-end. For personnel who joined Putnam Management during or after 2005, the calculation reflects annualized 2005 compensation or an estimate of 2006 compensation, as applicable.

Other Putnam funds managed by the Portfolio Leader and Portfolio Member

James Wiess is also a Portfolio Leader of Putnam Capital Appreciation Fund and Putnam Tax Smart Equity Fund.

Richard Cervone is also a Portfolio Member of Putnam Capital Appreciation Fund and Putnam Tax Smart Equity Fund.

James Wiess and Richard Cervone may also manage other accounts and variable trust funds advised by Putnam Management or an affiliate.

Changes in your funds Portfolio Leader and Portfolio Members

During the year ended July 31, 2006, Portfolio Member Joshua Brooks took on other fund management responsibilities at Putnam, and Portfolio Member James Yu left your funds management team.

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Putnam fund ownership by PutnamsExecutive Board

The table below shows how much themembers of Putnams Executive Board have invested in all Putnam mutual funds (indollar ranges). Information shown is as of July 31, 2006, and July 31,2005.

$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 Philippe Bibi 2006 * Chief Technology Officer 2005 * Joshua Brooks 2006 * Deputy Head of Investments 2005 * William Connolly 2006 * Head of Retail Management N/A Kevin Cronin 2006 * Head of Investments 2005 * Charles Haldeman, Jr. 2006 * President and CEO 2005 * Amrit Kanwal 2006 * Chief Financial Officer 2005 * Steven Krichmar 2006 * Chief of Operations 2005 * Francis McNamara, III 2006 * General Counsel 2005 * Richard Robie, III 2006 * Chief Administrative Officer 2005 * Edward Shadek 2006 * Deputy Head of Investments 2005 * Sandra Whiston 2006 * Head of Institutional Management N/A N/A indicates the individual was not a member of Putnams Executive Board as of 7/31/05.

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Terms anddefinitions

Important terms

Total return shows how the value of the funds shares changed overtime, assuming you held the shares through the entire period and reinvested alldistributions 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 calculatedby dividing the net assets of each class of shares by the number of outstandingshares in the class.

Public offering price (POP)is the price of a mutual fund share plus themaximum sales charge levied at the time of purchase. POP performance figuresshown here assume the 5.25% maximum sales charge for class A shares and 3.25%for class M shares.

Contingent deferred sales charge(CDSC) is generally a charge applied at thetime of the redemption of class B or C shares and assumes redemption at the endof the period. Your funds class B CDSC declines from a 5% maximum during thefirst year to 1% during the sixth year. After the sixth year, the CDSC no longerapplies. The CDSC for class C shares is 1% for one year afterpurchase.

Share classes

Class A shares are generally subject to an initial sales charge and noCDSC (except on certain redemptions of shares bought without an initial salescharge).

Class B shares are not subject to an initial sales charge. They may besubject to a CDSC.

Class C shares are not subject to an initial sales charge and aresubject to a CDSC only if the shares are redeemed during the firstyear.

Class M shares have a lower initial sales charge and a higher 12b-1 feethan class A shares and no CDSC (except on certain redemptions of shares boughtwithout an initial sales charge).

Class R shares are not subject to an initial sales charge or CDSC andare available only to certain defined contribution plans.

Class Y shares are not subject to an initial sales charge or CDSC, andcarry no 12b-1 fee. They are only available to eligible purchasers, includingeligible defined contribution plans or corporate IRAs.

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Comparative indexes

Citigroup World Government Bond Indexis an unmanaged index of globalinvestment-grade fixed-income securities.

Lehman Aggregate Bond Indexis an unmanaged index of U.S.investment-grade fixed-income securities.

Lehman Government Bond Indexis an unmanaged index of U.S. Treasury andagency securities.

Morgan Stanley Capital International(MSCI) EAFE Index is an unmanaged index ofequity securities from developed countries in Western Europe, the Far East, andAustralasia.

Russell 1000 Growth Indexis an unmanaged index of those companies inthe large-cap Russell 1000 Index chosen for their growth orientation.

Russell 2000 Index is an unmanaged index of the 2,000 smallest companies inthe Russell 3000 Index.

S&P 500 Index is an unmanaged index of common stockperformance.

Indexes assume reinvestment of alldistributions and do not account for fees. Securities and performance of a fundand an index will differ. You cannot invest directly in an index.

Lipper is a third-party industry-ranking entity that ranks mutual funds. Itsrankings do not reflect sales charges. Lipper rankings are based on total returnat net asset value relative to other funds that have similar current investmentstyles or objectives as determined by Lipper. Lipper may change a fundscategory assignment at its discretion. Lipper category averages reflectperformance trends for funds within a category.

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Trustee approval of
managementcontract

General conclusions

The Board of Trustees of the Putnamfunds oversees the management of each fund and, as required by law, determinesannually whether to approve the continuance of your funds management contractwith Putnam Management. In this regard, the Board of Trustees, with theassistance of its Contract Committee consisting solely of Trustees who are notinterested persons (as such term is defined in the Investment Company Act of1940, as amended) of the Putnam funds (the Independent Trustees), requests andevaluates all information it deems reasonably necessary under the circumstances.Over the course of several months ending in June 2006, the Contract Committeemet four times to consider the information provided by Putnam Management andother information developed with the assistance of the Boards independentcounsel and independent staff. The Contract Committee reviewed and discussed keyaspects of this information with all of the Independent Trustees. Uponcompletion of this review, the Contract Committee recommended, and theIndependent Trustees approved, the continuance of your funds managementcontract, effective July 1, 2006.

This approval was based on thefollowing conclusions:

*That the fee schedule in effect for your fund represents reasonablecompensation in light of the nature and quality of the services being providedto the fund, the fees paid by competitive funds and the costs incurred by PutnamManagement in providing such services, and

*That such fee schedule represents an appropriate sharing between fundshareholders and Putnam Management of such economies of scale as may exist inthe management of the fund at current asset levels.

These conclusions were based on acomprehensive consideration of all information provided to the Trustees and werenot the result of any single factor. Some of the factors that figuredparticularly in the Trustees deliberations and how the Trustees consideredthese factors are described below, although individual Trustees may haveevaluated the information presented differently, giving different weights tovarious factors. It is also important to recognize that the fee arrangements foryour fund and the other Putnam funds are the result of many years of review anddiscussion between the Independent Trustees and Putnam Management, that certainaspects of such arrangements may receive greater scrutiny in some years thanothers, and that the Trustees conclusions may be based, in part, on theirconsideration of these same arrangements in prior years.

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Management fee schedules and categories;total expenses

The Trustees reviewed the managementfee schedules in effect for all Putnam funds, including fee levels andbreakpoints, and the assignment of funds to particular fee categories. Inreviewing fees and expenses, the Trustees generally focused their attention onmaterial changes in circumstances for example, changes in a funds size orinvestment style, changes in Putnam Managements operating costs, or changes incompetitive practices in the mutual fund industry that suggest thatconsideration of fee changes might be warranted. The Trustees concluded that thecircumstances did not warrant changes to the management fee structure of yourfund, which had been carefully developed over the years, re-examined on manyoccasions and adjusted where appropriate. The Trustees focused on two areas ofparticular interest, as discussed further below:

*Competitiveness. The Trusteesreviewed comparative fee and expense information for competitive funds, whichindicated that, in a custom peer group of competitive funds selected by LipperInc., your fund ranked in the 17th percentile in management fees and in the 34thpercentile in total expenses (less any applicable 12b-1 fees) as of December 31,2005 (the first percentile being the least expensive funds and the 100thpercentile being the most expensive funds). The Trustees noted that expenseratios for a number of Putnam funds, which show the percentage of fund assetsused to pay for management and administrative services, distribution (12b-1)fees and other expenses, had been increasing recently as a result of decliningnet assets and the natural operation of fee breakpoints.

The Trustees noted that the expenseratio increases described above were currently being controlled by expenselimitations implemented in January 2004 and which Putnam Management, inconsultation with the Contract Committee, has committed to maintain at leastthrough 2007. These expense limitations give effect to a commitment by PutnamManagement that the expense ratio of each open-end fund would be no higher thanthe average expense ratio of the competitive funds included in the fundsrelevant Lipper universe (exclusive of any applicable 12b-1 charges in eachcase). The Trustees observed that this commitment to limit fund expenses hasserved shareholders well since its inception. In order to ensure that theexpenses of the Putnam funds continue to meet evolving competitive standards,the Trustees requested, and Putnam Management agreed, to implement an additionalexpense limitation for certain funds for the twelve months beginning January 1,2007 equal to the average expense ratio (exclusive of 12b-1 charges) of a custompeer group of competitive funds selected by Lipper based on the size of thefund. This additional expense limitation will be applied to those open-end fundsthat had above-average expense ratios (exclusive of 12b-1 charges) based on theLipper custom peer group data for the period ended December 31, 2005. Thisadditional expense limitation will not be applied to your fund.

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*Economies of scale. Your fundcurrently has the benefit of breakpoints in its management fee that provideshareholders with significant economies of scale, which means that the effectivemanagement fee rate of a fund (as a percentage of fund assets) declines as afund grows in size and crosses specified asset thresholds. Conversely, as a fundshrinks in size as has been the case for many Putnam funds in recent years these breakpoints result in increasing fee levels. In recent years, the Trusteeshave examined the operation of the existing breakpoint structure during periodsof both growth and decline in asset levels. The Trustees concluded that the feeschedules in effect for the funds represented an appropriate sharing ofeconomies of scale at current asset levels. In reaching this conclusion, theTrustees considered the Contract Committees stated intent to continue to workwith Putnam Management to plan for an eventual resumption in the growth ofassets, including a study of potential economies that might be produced undervarious growth assumptions.

In connection with their review ofthe management fees and total expenses of the Putnam funds, the Trustees alsoreviewed the costs of the services to be provided and profits to be realized byPutnam Management and its affiliates from the relationship with the funds. Thisinformation included trends in revenues, expenses and profitability of PutnamManagement and its affiliates relating to the investment management anddistribution services provided to the funds. In this regard, the Trustees alsoreviewed an analysis of Putnam Managements revenues, expenses and profitabilitywith respect to the funds management contracts, allocated on a fund-by-fundbasis. Because many of the costs incurred by Putnam Management in managing thefunds are not readily identifiable to particular funds, the Trustees observedthat the methodology for allocating costs is an important factor in evaluatingPutnam Managements costs and profitability, both as to the Putnam funds in theaggregate and as to individual funds. The Trustees reviewed Putnam Managementscost allocation methodology with the assistance of independent consultants andconcluded that this methodology was reasonable and well-considered.

Investment performance

The quality of the investment processprovided by Putnam Management represented a major factor in the Trusteesevaluation of the quality of services provided by Putnam Management under yourfunds management contract. The Trustees were assisted in their review of thePutnam funds investment process and performance by the work of the InvestmentProcess Committee of the Trustees and the Investment Oversight Committee of theTrustees, which meet on a regular monthly basis with the funds portfolio teamsthroughout the year. The Trustees concluded that Putnam Management generallyprovides a high-quality investment process as measured by the experience andskills of the individuals assigned to the management of fund portfolios, theresources made available to such personnel, and in general the ability of PutnamManagement to

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attract and retain high-qualitypersonnel but also recognize that this does not guarantee favorable investmentresults for every fund in every time period. The Trustees considered theinvestment performance of each fund over multiple time periods and consideredinformation comparing each funds performance with various benchmarks and withthe performance of competitive funds.

The Trustees noted the satisfactoryinvestment performance of many Putnam funds. They also noted the disappointinginvestment performance of certain funds in recent years and discussed withsenior management of Putnam Management the factors contributing to suchunderperfor-mance and actions being taken to improve performance. The Trusteesrecognized that, in recent years, Putnam Management has made significant changesin its investment personnel and processes and in the fund product line toaddress areas of underperformance. In particular, they noted the importantcontributions of Putnam Managements leadership in attracting, retaining andsupporting high-quality investment professionals and in systematicallyimplementing an investment process that seeks to merge the best features offundamental and quantitative analysis. The Trustees indicated their intention tocontinue to monitor performance trends to assess the effectiveness of thesechanges and to evaluate whether additional changes to address areas ofunderperformance are warranted.

In the case of your fund, theTrustees considered that your funds class A share cumulative total returnperformance at net asset value was in the following percentiles of its LipperInc. peer group (Lipper Large-Cap Core Funds) for the one-, three- and five-yearperiods ended March 31, 2006 (the first percentile being the best performingfunds and the 100th percentile being the worst performing funds):

One-year period Three-year period Five-year period 15th 8th 40th

(Because of the passage of time,these performance results may differ from the performance results for morerecent periods shown elsewhere in this report. Over the one-, three- andfive-year periods ended March 31, 2006, there were 884, 751, and 619 funds,respectively, in your funds Lipper peer group.* Past performance is noguarantee of future performance.)

As a general matter, the Trusteesconcluded that cooperative efforts between the Trustees and Putnam Managementrepresent the most effective way to address investment performance problems. TheTrustees noted that investors in the Putnam funds have, in effect, placed theirtrust in the Putnam organization, under the oversight of the funds Trustees, tomake appropriate decisions regarding the management of the funds. Based on theresponsiveness of Putnam

* The percentile rankings for yourfunds class A share annualized total return performance in the Lipper Large-CapCore Funds category for the one-, five-, and ten-year periods ended June 30,2006, were 36th, 48th, and 55th, respectively. Over the one-, five-, andten-year periods ended June 30, 2006, the fund ranked 304th out of 848, 290thout of 609, and 131st out of 241 funds, respectively. Note that this more recentinformation was not available when the Trustees approved the continuance of yourfunds management contract.

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Management in the recent past to Trustee concerns about investment performance, the Trustees concluded that it is preferable to seek change within Putnam Management to address performance shortcomings. In theTrustees view, the alternative of terminating a management contract and engaging a new investment adviser for an underperforming fund would entail significant disruptions and would not provide any greater assurance of improved investmentperformance.

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 benefits related tobrokerage and soft-dollar allocations, whereby a portion of the commissions paid by a fund for brokerage may be used to acquire research services that may be useful to Putnam Management in managing the assets of the fund and of other clients. TheTrustees indicated their continued intent to monitor the potential benefits associated with the allocation of fund brokerage to ensure that the principle of seeking best price and execution remains paramount in the portfolio tradingprocess.

The Trustees annual review of your funds management contract also included the review of its distributors contract and distribution plan with Putnam Retail Management Limited Partnership and thecustodian agreement and investor servicing agreement with Putnam Fiduciary Trust Company, all of which provide benefits to affiliates of Putnam Management.

Comparison of retail and institutional fee schedules

The information examined by the Trustees as part of their annual contract review has included for many years information regarding fees charged by Putnam Management and its affiliates to institutional clients such asdefined benefit pension plans, college endowments, etc. This information included comparison of such fees with fees charged to the funds, as well as a detailed assessment of the differences in the services provided to these two types of clients. TheTrustees observed, in this regard, that the differences in fee rates between institutional clients and the mutual funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investmentmanagement services to these types of clients reflect to a substantial degree historical competitive forces operating in separate market places. The Trustees considered the fact that fee rates across all asset sectors are higher on average formutual funds than for institutional clients, as well as the differences between the services that Putnam Management provides to the Putnam funds and those that it provides to institutional clients of the firm, but did not rely on such comparisons toany significant extent in concluding that the management fees paid by your fund are reasonable.

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Other information
for shareholders

Putnams policy on confidentiality

In order to conduct business with our shareholders, we must obtain certain personal information such as account holders addresses, telephone numbers, Social Security numbers, and the names of their financialadvisors. We use this information to assign an account number and to help us maintain accurate records of transactions and account balances. It is our policy to protect the confidentiality of your information, whether or not you currently own sharesof our funds, and in particular, not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personalinformation from unauthorized use. Under certain circumstances, we share this information with outside vendors who provide services to us, such as mailing and proxy solicitation. In those cases, the service providers enter into confidentialityagreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. We may also share this information with our Putnam affiliates to service your account or provide you withinformation about other Putnam products or services. It is also our policy to share account information with your financial advisor, if youve listed one on your Putnam account. If you would like clarification about our confidentiality policiesor have any questions or concerns, please dont hesitate to contact us at 1-800-225-1581, Monday through Friday, 8:30 a.m. to 7:00 p.m., or Saturdays from 9:00 a.m. to 5:00 p.m. Eastern Time.

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 proxiesrelating to portfolio securities during the 12-month period ended June 30, 2006, are available on the Putnam Individual Investor Web site, www.putnam.com/individual, and on the SECs Web site, www.sec.gov. If you have questions about findingforms on the SECs 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 Putnams Shareholder Services at 1-800-225-1581.

Fund portfolio holdings

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 funds Forms N-Q on the SECs Website at www.sec.gov. In addition, the funds Forms N-Q may be reviewed and copied at the SECs Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SECs Web site or the operationof the Public Reference Room.

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Financial statements

A guide to financial statements

These sections of the report, as well as the accompanying Notes, preceded by the Report of Independent Registered Public Accounting Firm, constitute the funds financial statements.

The funds portfolio lists all the funds investments and their values as of the last day of the reporting period. Holdings are organized by asset type and industrysector, country, or state to show areas of concentration and diversification.

Statement of assets and liabilities shows how the funds net assets and share price are determined. All investment and noninvestment assets are added together. Any unpaidexpenses 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, theamount subtracted from total assets includes the liquidation preference of preferred shares.)

Statement of operations shows the funds net investment gain or loss. This is done by first adding up all the funds 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 toor subtracted from the net investment result to determine the funds net gain or loss for the fiscal year.

Statement of changes in net assets shows how the funds net assets were affected by the funds net investment gain or loss, by distributions to shareholders, and bychanges in the number of the funds 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 notmatch 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 funds investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover in onesummary table, reflecting the five most recent reporting periods. In a semiannual report, the highlight table also includes the current reporting period.

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Report of Independent Registered
Public Accounting Firm

The Board of Trustees and Shareholders
Putnam Investors Fund:

We have audited the accompanying statement of assets and liabilities of Putnam Investors Fund, including the funds portfolio, as of July 31, 2006, and the related statement of operations for the year then ended,the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years or periods in the period then ended. These financial statements and financial highlights are theresponsibility of the funds management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform our audit to obtain reasonable assurance aboutwhether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures includedconfirmation of securities owned as of July 31, 2006 by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Putnam Investors Fund as of July 31, 2006, the results of itsoperations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years or periods in the period then ended, in conformity with U.S. generallyaccepted accounting principles.

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The funds portfolio7/31/06

COMMON STOCKS (100.1%)* Shares Value Advertising and Marketing Services (0.6%) Omnicom Group, Inc. 248,200 $ 21,968,182 Aerospace and Defense (0.2%) L-3 Communications Holdings, Inc. 102,600 7,556,490 Airlines (2.0%) AMR Corp. (S) 869,500 19,129,000 JetBlue Airways Corp. (S) 2,948,700 31,521,603 Southwest Airlines Co. (S) 1,448,700 26,062,113 76,712,716 Banking (8.1%) Bank of America Corp. 2,522,901 130,005,089 Commerce Bancorp, Inc. (S) 2,251,800 76,493,646 U.S. Bancorp 3,050,300 97,609,600 304,108,335 Biotechnology (0.3%) Biogen Idec, Inc. 264,900 11,157,588 Building Materials (0.7%) Sherwin-Williams Co. (The) 547,200 27,688,320 Commercial and Consumer Services (0.1%) Equifax, Inc. 173,500 5,600,580 Communications Equipment (2.3%) Cisco Systems, Inc. 2,564,000 45,767,400 Qualcomm, Inc. 1,127,200 39,745,072 85,512,472 Computers (6.6%)

Apple Computer, Inc. (S) 1,185,400 80,559,784 Dell, Inc. (S)

4,310,700 93,455,976 EMC Corp. 1,937,200 19,662,580 Hewlett-Packard Co. 1,650,900 52,680,219 246,358,559 Conglomerates (0.7%) Danaher Corp. (S) 378,000 24,645,600 Consumer Finance (6.8%) Capital One Financial Corp. (S) 1,911,400 147,846,790 Countrywide Financial Corp. 3,029,971 108,563,861 256,410,651

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COMMON STOCKS (100.1%)* continued Shares Value Energy (0.4%) BJ Services Co. 129,500 $ 4,696,965 Halliburton Co. 270,043 9,008,634 13,705,599 Financial (5.9%)

Chicago Mercantile Exchange Holdings, Inc. (The) (S) 27,180 12,535,416 Citigroup, Inc. 2,747,000 132,707,570 Freddie Mac 951,200 55,036,432 Moodys Corp. 374,100 20,530,608 220,810,026 Health Care Services (7.5%) Aetna, Inc. 1,368,300 43,087,767 Cardinal Health, Inc. 452,200 30,297,400 CIGNA Corp. 247,800 22,611,750 Community Health Systems, Inc. 439,900 15,950,774 Coventry Health Care, Inc. 297,000 15,651,900 Express Scripts, Inc. 531,200 40,918,336 HCA, Inc. (S) 18,034 886,550 Health Management Associates, Inc. Class A (S) 582,900 11,850,357 Lincare Holdings, Inc. 567,300 19,747,713 UnitedHealth Group, Inc. 1,648,500 78,847,755 279,850,302 Homebuilding (1.7%) Lennar Corp. (S)

453,700 20,294,001 NVR, Inc. (S) 85,420 42,282,900 62,576,901 Household Furniture and Appliances (0.5%) Whirlpool Corp. (S) 265,000 20,455,350 Insurance (6.2%)

ACE, Ltd. (Bermuda) 1,152,300 59,378,019 American International Group, Inc. 1,659,000 100,651,530 Everest Re Group, Ltd. (Barbados) 748,600 70,825,046 230,854,595 Investment Banking/Brokerage (9.0%) Bear Stearns Cos., Inc. (The) 476,500 67,601,055 E*Trade Financial Corp. (S) 861,700 20,086,227 Franklin Resources, Inc. 619,100 56,616,695 Goldman Sachs Group, Inc. (The) 583,700 89,160,175 Janus Capital Group, Inc. (S) 1,012,100 16,385,899 Legg Mason, Inc. (S) 98,900 8,255,183 Morgan Stanley (S) 865,246 57,538,859 State Street Corp. 355,200 21,333,312 336,977,405

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COMMON STOCKS (100.1%)* continued Shares Value Leisure (1.5%) Harley-Davidson, Inc. (S) 969,400 $ 55,255,800 Lodging/Tourism (0.9%) Las Vegas Sands Corp. (S) 385,900 23,937,377 Royal Caribbean Cruises, Ltd. 311,471 10,558,867 34,496,244 Machinery (2.6%)

Caterpillar, Inc. 741,200 52,528,844 Cummins, Inc. (S) 169,700 19,854,900 Deere (John) & Co. (S) 340,450 24,706,457 97,090,201 Medical Technology (2.0%) Boston Scientific Corp. 1,695,700 28,843,857 Medtronic, Inc. (S) 498,300 25,174,116 St. Jude Medical, Inc. 562,300 20,748,870 74,766,843 Metals (0.5%) United States Steel Corp. (S) 317,900 20,049,953 Oil & Gas (7.8%) Apache Corp. 469,100 33,057,477 ConocoPhillips 627,300 43,057,872 Devon Energy Corp. 516,500 33,386,560 EOG Resources, Inc. 422,600 31,335,790 Marathon Oil Corp. 306,800 27,808,352 Occidental Petroleum Corp. (S) 363,400 39,156,350 Petro-Canada (Canada) (S) 223,761 10,013,305 Suncor Energy, Inc. (Canada) 152,400 12,352,020 Valero Energy Corp. 475,700 32,076,451 XTO Energy, Inc.

618,200 29,049,218 291,293,395 Other (0.4%) KKR Private Equity Investors LP 144A 699,209 16,431,412 Pharmaceuticals (1.0%) Pfizer, Inc. 675,400 17,553,646 Teva Pharmaceutical Industries, Ltd. ADR (Israel) 623,100 20,612,148 38,165,794 Power Producers (0.4%) AES Corp. (The) 671,100 13,328,046 Publishing (2.0%) McGraw-Hill Cos., Inc. (The) 676,180 38,068,934 R. H. Donnelley Corp. (S) 356,200 18,597,202 Wiley (John) & Sons, Inc. Class A (S) 551,900 18,256,852 74,922,988

35

COMMON STOCKS (100.1%)* continued Shares Value Railroads (0.2%)

Norfolk Southern Corp. 154,500 $ 6,708,390 Real Estate (0.8%) CB Richard Ellis Group, Inc. Class A 1,201,258 28,265,601 Restaurants (0.5%) Darden Restaurants, Inc. 210,800 7,125,040 Red Robin Gourmet Burgers, Inc. (S) 263,400 10,233,090 17,358,130 Retail (7.0%) Abercrombie & Fitch Co. Class A (S) 44,771 2,371,072 Barnes & Noble, Inc. (S) 590,500 19,793,560 Bed Bath & Beyond, Inc. (S) 1,401,700 46,928,916 Best Buy Co., Inc. 379,500 17,206,530 Home Depot, Inc. (The) 2,949,000 102,359,790 Kohls Corp. 190,500 10,788,015 Nordstrom, Inc. 297,400 10,200,820 Staples, Inc. 1,209,400 26,147,228 Whole Foods Market, Inc. (S) 425,200 24,453,252 260,249,183 Schools (0.2%) Apollo Group, Inc. Class A (S) 189,000 8,943,480 Semiconductor (0.6%) Applied Materials, Inc. 1,517,900 23,891,746 Shipping (0.3%) FedEx Corp. 92,700 9,706,617 Software (6.2%) Adobe Systems, Inc. 1,266,300 36,102,213 Autodesk, Inc.

1,014,800 34,614,828 Fair Isaac Corp.

279,736 9,449,482 McAfee, Inc. 431,200 9,292,360 Microsoft Corp. 4,145,600 99,618,768 Oracle Corp. 2,235,700 33,468,429 Symantec Corp.

493,500 8,572,095 231,118,175 Technology Services (4.4%) Accenture, Ltd. Class A (Bermuda) 770,690 22,550,389 eBay, Inc. 1,929,500 46,443,065 Global Payments, Inc. 452,800 19,262,112 Google, Inc. Class A 106,771 41,277,669 VeriSign, Inc.

463,100 8,303,383 Yahoo!, Inc. 1,039,000 28,198,460 166,035,078

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COMMON STOCKS (100.1%)* continued Shares Value Telecommunications (1.2%) Sprint Nextel Corp. (S) 2,356,500 $ 46,658,700 Total common stocks (cost $3,732,506,167) $ 3,747,685,447

SHORT-TERM INVESTMENTS (11.7%)* (cost $436,262,019) Principal amount

Value Short-term investments held as collateral for loaned securities with yields ranging from 5.27% to 5.44% and due dates ranging from August 1, 2006 to August 23, 2006 (d) $ 436,412,118 $ 436,262,019 TOTAL INVESTMENTS Total investments (cost $4,168,768,186) $ 4,183,947,466

* Percentages indicated arebased on net assets of $3,744,577,511.

Non-income-producingsecurity.

(S) Securities on loan, in part orin entirety, at July 31, 2006.

(d) See Note 1 to the financialstatements.

144A after the name of an issuerrepresents securities exempt from registration under Rule 144A of the SecuritiesAct of 1933. These securities may be resold in transactions exempt fromregistration, normally to qualified institutional buyers.

ADR after the name of a foreignholding stands for American Depository Receipts representing ownership offoreign securities on deposit with a custodian bank.

The accompanying notes are anintegral part of these financial statements.

37

Statement of assets andliabilities 7/31/06

ASSETS Investments in securities, at value, including $425,119,654 of securities on loan (Note 1): Unaffiliated issuers (identified cost $4,168,768,186) $ 4,183,947,466 Foreign currency (cost $5) (Note 1) 5 Dividends and other receivables 1,318,342 Receivable for shares of the fund sold 3,338,284 Receivable for securities sold 121,617,851 Total assets 4,310,221,948

LIABILITIES Payable to subcustodian (Note 2) 7,524,642 Payable for securities purchased 107,655,218 Payable for shares of the fund repurchased 6,292,976 Payable for compensation of Manager (Notes 2 and 5) 4,783,390 Payable for investor servicing and custodian fees (Note 2) 818,049 Payable for Trustee compensation and expenses (Note 2) 400,674 Payable for administrative services (Note 2) 4,753 Payable for distribution fees (Note 2) 1,267,387 Collateral on securities loaned, at value (Note 1) 436,262,019 Other accrued expenses 635,329 Total liabilities 565,644,437 Net assets $ 3,744,577,511 REPRESENTED BY Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) $ 5,435,761,598 Undistributed net investment income (Note 1) 7,997,714 Accumulated net realized loss on investments and foreign currency transactions (Note 1) (1,714,361,081) Net unrealized appreciation of investments 15,179,280 Total Representing net assets applicable to capital shares outstanding $ 3,744,577,511

(Continued on next page)

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Statement of assets andliabilities (Continued)

COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE Net asset value and redemption price per class A share ($2,163,353,327 divided by 160,364,566 shares) $13.49 Offering price per class A share (100/94.75 of $13.49)* $14.24 Net asset value and offering price per class B share ($852,123,009 divided by 68,950,383 shares)** $12.36 Net asset value and offering price per class C share ($55,484,000 divided by 4,256,734 shares)** $13.03 Net asset value and redemption price per class M share ($41,164,953 divided by 3,194,918 shares) $12.88 Offering price per class M share (100/96.75 of $12.88)* $13.31 Net asset value, offering price and redemption price per class R share ($540,547 divided by 40,372 shares) $13.39 Net asset value, offering price and redemption price per class Y share ($631,911,675 divided by 46,212,648 shares) $13.67

* On single retail sales of lessthan $50,000. On sales of $50,000 or more the offering price isreduced.

** Redemption price per share isequal to net asset value less any applicable contingent deferred salescharge.

The accompanying notes are anintegral part of these financial statements.

39

Statement of operationsYear ended 7/31/06

INVESTMENT INCOME Dividends (net of foreign tax of $52,399) $ 52,731,050 Interest (including interest income of $283,420 from investments in affiliated issuers) (Note 5) 693,409 Securities lending 1,334,342 Total investment income 54,758,801 EXPENSES Compensation of Manager (Note 2) 19,521,584 Investor servicing fees (Note 2) 11,541,559 Custodian fees (Note 2) 295,418 Trustee compensation and expenses (Note 2) 149,466 Administrative services (Note 2) 70,436 Distribution fees Class A (Note 2) 5,476,913 Distribution fees Class B (Note 2) 10,370,996 Distribution fees Class C (Note 2) 537,991 Distribution fees Class M (Note 2) 338,180 Distribution fees Class R (Note 2) 1,532 Other 1,249,485 Non-recurring costs (Notes 2 and 6)