-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, NYo6jPvWTL0UQaKNDiIjcFPkf61lHayWmb9TkcGjAdZgvwln+8LnfUOVymqGj1FD HW9HfUewS3peqEezroyCyg== 0000914120-95-000007.txt : 19950414 0000914120-95-000007.hdr.sgml : 19950411 ACCESSION NUMBER: 0000914120-95-000007 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950131 FILED AS OF DATE: 19950403 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEORGE PUTNAM FUND OF BOSTON CENTRAL INDEX KEY: 0000081259 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 046407893 STATE OF INCORPORATION: MA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-00058 FILM NUMBER: 95526381 BUSINESS ADDRESS: STREET 1: ONE POST OFFICE SQ CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6172921000 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM EQUITY INCOME FUND/NEW DATE OF NAME CHANGE: 19940302 FORMER COMPANY: FORMER CONFORMED NAME: PUTNAM GEORGE FUND OF BOSTON DATE OF NAME CHANGE: 19920703 N-30D 1 GEORGE PUTNAM FUND THE GEORGE PUTNAM FUND OF BOSTON [Artwork] SEMIANNUAL REPORT January 31, 1995 [Putnam Logo] Boston * London * Tokyo PERFORMANCE HIGHLIGHTS Morningstar, an independent rating agency, awarded the fund's class A shares 4 out of 5 stars for overall performance as of December 31, 1994. This placed the fund in the top 32.5% of all stock and bond funds rated. * Total return for the fund's class A shares has consistently surpassed that of the average balanced fund tracked by Lipper Analytical Services, based on re- sults for the 1-, 5-, and 10-year periods ended January 31, 1995. + Performance should always be considered in light of a fund's investment strate- gy. The George Putnam Fund of Boston is designed for investors seeking capital appreciation and current income. SEMIANNUAL RESULTS AT A GLANCE - ------------------------------------------------------------------------------- CLASS A CLASS B TOTAL RETURN: NAV POP NAV CDSC - ------------------------------------------------------------------------------- (change in value during period plus reinvested distributions) 6 months ended 1/31/95 2.29% -3.56% 1.98% -2.91% - ------------------------------------------------------------------------------- CLASS A CLASS B CLASS M SHARE VALUE: NAV POP NAV NAV POP - ------------------------------------------------------------------------------- 7/31/94 $13.52 $14.34 $13.46 -- -- 12/1/94 (inception of class M shares) -- -- -- $12.77 $13.23 1/31/95 13.21 14.02 13.16 13.20 13.68 - ------------------------------------------------------------------------------- CAPITAL GAINS (1) DISTRIBUTIONS: NO. INCOME LONG-TERM SHORT-TERM TOTAL - ------------------------------------------------------------------------------- Class A 2 $0.2800 $0.309 $0.012 $0.601 Class B 2 0.2290 0.309 0.012 0.550 - ------------------------------------------------------------------------------- CLASS A CLASS B CURRENT RETURN: NAV POP NAV - ------------------------------------------------------------------------------- (End of period) Current dividend rate (2) 4.24% 3.99% 3.43% Current 30-day SEC yield (3) 4.85 4.57 4.08 - ------------------------------------------------------------------------------- Performance data represent past results and will differ for each share class. Performance for class M shares, which became effective 12/1/94, is not shown because of the brevity of the reporting period. For performance over longer periods, see page 8. POP assumes 5.75% maximum sales charge for class A shares and 3.50% for class M shares. CDSC for class B shares assumes 5% maximum con- tingent deferred sales charge. (1) Capital gains are taxable for federal and, in most cases, state tax purposes. Investment income may be subject to state and local taxes. (2) Income portion of the most recent distribution, annuali- zed and divided by NAV or market price at the end of the period. (3) Based on- ly on investment income, calculated using SEC guidelines. * Morningstar rates a fund in relation to other funds with similar investment objectives, based on the fund's 1-, 3-, 5-, and 10-year average annual re- turns, adjusted for risk factors and sales charges. Ratings are updated mon- thly. The four-star rating for the period ending 12/31/94, puts the fund's class A shares in the top 32.5% of all 1,964 hybrid funds rated. For the 3-, 5-, and 10-year periods ended 12/31/94, there were 1,964, 1,478, and 635 funds, respectively, in the hybrid fund category; the fund's class A shares received 3, 3, and 4 stars, respectively. Past performance is not indicative of future results. + Lipper Analytical Services is an independent research organization; rankings vary over time and do not reflect the effects of sales charges. The fund's class A shares ranked 21 out of 157 balanced funds for 1-year performance; 30 out of 59, for 5-year performance; and 6 out of 26, for 10- year performance, as of 1/31/95. FROM THE CHAIRMAN [Photograph of George Putnam] * (C) Karsh, Ottawa DEAR SHAREHOLDER: THE GEORGE PUTNAM FUND OF BOSTON PASSED THE MIDPOINT OF FISCAL 1995 JUST AS THE FEDERAL RESERVE BOARD PUSHED SHORT-TERM INTEREST RATES TO THEIR HIGHEST LEVEL IN FOUR YEARS. THE FED'S SUSTAINED STRATEGY OF KEEPING INFLATION IN CHECK BY TIGH- TENING CREDIT HAS MADE STOCK AND BOND INVESTORS UNDERSTANDABLY NERVOUS. FOR MORE THAN A YEAR, THEIR JITTERS HAVE TRANSLATED INTO AN EXTREMELY UNSETTLED MARKET ENVIRONMENT. FUND MANAGERS EDWARD BOUSA, KENNETH TAUBES, AND NEWLY APPOINTED MANAGER ROSEMARY THOMSEN, BELIEVE THE STOCK AND BOND MARKETS WILL CONTINUE TO BE VOLATILE FOR SOME TIME. HOWEVER, THEY ARE ALSO CONFIDENT THAT YOUR FUND IS WELL POSITIONED NOT ONLY TO WEATHER FURTHER MARKET UNREST BUT ALSO TO TAKE ADVANTAGE OF THE OPPORTUNITIES PRESENTED BY THE ECONOMIC GROWTH THAT SEEMS TO PERSIST IN SPITE OF THE FED'S EFFORTS TO REIN IT IN. ROSEMARY HAS BEEN WITH PUTNAM SINCE 1986 AND HAS 11 YEARS OF INVESTMENT EXPERI- ENCE. A SENIOR PORTFOLIO MANAGER, SHE CURRENTLY SPECIALIZES IN HIGH-YIELD FIXED- INCOME SECURITIES. YOUR MANAGEMENT TEAM DISCUSSES FIRST-HALF RESULTS AND PROSPECTS FOR THE REMAIN- DER OF FISCAL 1995 IN THE REPORT THAT FOLLOWS. RESPECTFULLY YOURS, GEORGE PUTNAM CHAIRMAN OF THE TRUSTEES MARCH 13, 1995 * (C) Copyright REPORT FROM THE FUND MANAGERS EDWARD P. BOUSA, LEAD MANAGER KENNETH J. TAUBES ROSEMARY H. THOMSEN In the first half of The George Putnam Fund of Boston's fiscal year, the stock and bond markets were profoundly affected by the Federal Reserve Board's conti- nued efforts to keep inflation in check. Though the Fed's repeated increases in short-term interest rates have slowed the economy somewhat, we believe the mar- kets have begun to adjust in the past six months, laying the foundation for the recovery of bonds and interest-sensitive stocks. Therefore, we have positioned your fund opportunistically by selecting holdings from diverse sectors that could demonstrate growth through a changing period. For the six months ended January 31,1995, your fund produced a total return of 2.29% for class A shares and 1.98% for class B shares, both at net asset value. While the fund's portfolio of stocks and bonds trailed the 4.14% return of the Standard & Poor's 500*(R) Index for the same period, it was well ahead of the 0.79% return of the Lehman Brothers Government/Corporate Bond Index. During this period, we maintained the ratio of stocks to bonds in the portfolio at 60% to 40%. This conservative investment mix has proven an appropriate weigh- ting, supporting the balanced nature of the fund in the current volatile market environment. Your fund continues its value-oriented approach to selecting stocks for the portfolio. Within the fixed-income portion representing 40% of portfolio assets, we allocated 22% of assets to U.S. Treasuries, 10% to corporate bonds, 1% to collateralized mortgage obligations (CMOs) and 1% to asset-backed securi- ties. We continue to maintain a somewhat defensive posture with respect to inte- rest-rate risk, both on the equity and fixed-income sides of the portfolio. DIVERSE SECTOR STOCKS PROVIDE POSITIVE RETURNS During the period, interest-rate-sensitive stocks owned by the fund -- such as those of utilities, banks, and insurance companies -- also outperformed the mar- ket. We were able to take profits on selected utility stocks and we also reduced holdings in credit-card companies, electric utilities, and telephone companies, opting to sell on strength. Going forward, we expect to find increasing value in early cyclical stocks in industries such as automotive, railroad, retail, and long-distance telephone companies. * (R) Registered mark Generally, over the last six months, we have looked for ways to reduce the port- folio's susceptibility to rotations in the economy. We reduced the fund's in- vestments in the stocks of chemical, metal, and energy companies, and shifted assets into financial, consumer, and transportation companies. This strategy proved profitable for your fund in the first half of fiscal 1995. STRATEGIC SHIFTS IN FIXED-INCOME COMPONENT BENEFIT THE FUND During the period, we began taking a more conservative approach to the fund's corporate bond holdings, either upgrading the credit quality or shortening the maturity where possible. We initiated this shift to offset the risk inherent in the recent trend of declining corporate profitability due to a tightening busi- ness environment. We also changed your portfolio's allocation of fixed-income securities, decreasing holdings of high-yield corporate bonds and increasing our emphasis on mortgage-related securities and short-term government securities. We have thus become less defensive in our strategy, currently allowing your fund more exposure to interest-rate-sensitive securities than we would have at this time last year. In our opinion, because rates have already risen to a level re- flective of a strong economy with some pressure on inflation, some additional interest-rate risk at this juncture is justified. [Bar Chart - Page 5] TOP INDUSTRY SECTORS * Insurance and finance 11.3% Utilities 9.5% Consumer nondurables 6.1% Oil and gas 5.0% Chemicals 3.3% * Based on net assets on 1/31/95. Holdings will vary over time. Despite the widely publicized negative performance of CMOs in the market, the mortgage-related securities in the portfolio performed well through the period. Your fund's exposure to CMOs was minimal, and they had no adverse effect on your portfolio's returns. Your fund benefited from investments in the securities of cable and telecommunications companies in the past several months. Though we in- creased the fund's investments in bank and financial company bonds last year, we began to underweight these sectors during the semiannual period, anticipating a cyclical peak in credit quality. As a result of these strategic shifts, your fund's income component declined only 1% in total return, significantly outperforming the market. STOCK AND BOND CHOICES PERFORM WELL Through in-depth research, we continue to identify and purchase stocks of compa- nies that demonstrate improved operations and revenue growth. In the long-dis- tance telephone sector, we have progressively added holdings in Sprint Corp. This carrier has fared very well in the current environment of long-distance price wars and is growing at an impressive pace overseas. Union Pacific, a low- cost Western railroad company whose stock had been under pressure recently from its failed takeover bid for Santa Fe Pacific Railroad, has shown strong funda- mentals and has been profitable for the fund. Ryder System is experiencing tre- mendous growth in its logistics business, handling all the distribution and transportation needs of major Fortune 500 customers. We have added Ryder System stocks significantly to the portfolio, as this company's assets approach $1 bil- lion in 1995. To offset the effects of a reined-in economy, we sought to buy shares of compa- nies that hold recession-proof, significant leadership positions in their indus- tries. Subsequently, we increased the number of large-capitalization stocks in the portfolio, adding to our holdings of Exxon Corporation, Sara Lee Corp., Illinois Central Railroad, NYNEX, U.S. West, Inc., and Bell South. Stocks of pharmaceutical companies, including American Home Products and Warner-Lambert Co., continued to provide attractive gains through January. At the start of the period, we discovered an attractive buy in Honeywell, Inc., whose stock we purchased at $29 per share. In a matter of months, it had risen to $35. On the fixed-income side, the portfolio's exposure to cable companies has proven quite successful. Some of the fund's high-yield credits have also performed well, such as Cablevision, which was recently purchased TOP 10 EQUITY HOLDINGS (1/31/95) - ------------------------------------------------------------------------------- J.P. MORGAN &CO. INC. Multinational banking and finance - ------------------------------------------------------------------------------- EXXON CORPORATION Drilling, production, refining, and marketing of oil and natural gas - ------------------------------------------------------------------------------- PHILIP MORRIS COMPANIES Domestic food processing, alcohol, and tobacco - ------------------------------------------------------------------------------- AMERICAN HOME PRODUCTS CORPORATION Pharmaceuticals - ------------------------------------------------------------------------------- XEROX CORPORATION Document processing, copiers, fax machines, digital publishing - ------------------------------------------------------------------------------- NYNEX CORPORATION Telecommunications - ------------------------------------------------------------------------------- US WEST, INC. Telephone utilities - ------------------------------------------------------------------------------- UNION PACIFIC CORPORATION Railroad - ------------------------------------------------------------------------------- SPRINT CORP. Telecommunications - ------------------------------------------------------------------------------- TEXAS UTILITIES Electric utilities - ------------------------------------------------------------------------------- These holdings represent 12.1% of the fund's net assets. Portfolio holdings will vary over time. by TimeWarner. Telecommunications, Inc., continued to issue equity, which has supported its contribution to the fund's overall return. OUR OUTLOOK: HANDS-ON RESEARCH WILL CONTINUE TO ADD VALUE As your fund enters the second half of fiscal 1995, we will continue to use ex- tensive research to identify those companies whose management teams have demons- trated the ability to adapt to a changing marketplace. A fund manager in Putnam's Basic Value Group may visit over 300 companies per year, meeting with top management to identify companies that have exceptional value and show signs of future growth. This hands-on approach requires considerable time and effort, but we believe that by gaining such a thorough understanding of the companies we purchase, we will be well equipped to position the portfolio positively, no matter what the economic weather. The views expressed here are exclusively those of Putnam Management. They are not meant as investment advice. Although the described holdings were viewed fa- vorably as of January 31, 1995, there is no guarantee the fund will continue to hold these securities in the future. PERFORMANCE SUMMARY This section provides, at a glance, information about your fund's performance. Total return shows how the value of the fund's shares changed over time, assum- ing you held the shares through the entire period and reinvested all distribu- tions back into the fund. We show total return in two ways: on a cumulative long-term basis and on average how the fund might have grown each year over va- rying periods. For comparative purposes, we show how the fund performed relati- ve to appropriate indexes and benchmarks. TOTAL RETURN FOR PERIODS ENDED 1/31/95 STANDARD LEHMAN BROS. & POOR'S GOVT./CORP. CLASS A CLASS B 500 BOND NAV POP NAV CDSC INDEX INDEX - ------------------------------------------------------------------------------- 6 months 2.29% -3.56% 1.98% -2.91% 4.14% 0.79% - ------------------------------------------------------------------------------- 1 year -0.64 -6.37 -1.29 -5.94 0.55 -3.11 - ------------------------------------------------------------------------------- 5 years 55.41 46.53 -- -- 66.70 51.36 Annual average 9.22 7.94 -- -- 10.76 8.64 - ------------------------------------------------------------------------------- 10 years 213.25 195.29 -- -- 263.87 157.55 Annual average 12.10 11.44 -- -- 13.79 9.92 - ------------------------------------------------------------------------------- Life of class B -- -- 18.44 15.57 22.68 19.80 Annual average -- -- 6.32 5.38 7.69 6.76 - ------------------------------------------------------------------------------- TOTAL RETURN FOR PERIODS ENDED 12/31/94 (most recent calendar quarter) CLASS A CLASS B NAV POP NAV CDSC - ------------------------------------------------------------------------------- 1 year -0.38% -6.13% -1.02% -5.68% - ------------------------------------------------------------------------------- 5 years 45.12 36.78 -- -- Annual average 7.73 6.46 -- -- - ------------------------------------------------------------------------------- 10 years 221.79 203.23 -- -- Annual average 12.40 11.73 -- -- - ------------------------------------------------------------------------------- Life of class B -- -- 15.83 13.02 Annual average -- -- 5.64 4.67 - ------------------------------------------------------------------------------- Fund performance data do not take into account any adjustment for taxes payable on reinvested distributions or, for class A shares, distribution fees prior to implementation of the class A distribution plan in 1990. Effective 4/27/92, the fund began offering class B shares and on 12/1/94, class M shares. Performance of share classes will differ; performance for class M shares is not shown becau- se of the brevity of the reporting period. Performance data represent past re- sults. Investment returns and net asset value will fluctuate so an investor's shares, when sold, may be worth more or less than their original cost. TERMS AND DEFINITIONS CLASS A SHARES are generally subject to an initial sales charge. CLASS B SHARES may be subject to a sales charge upon redemption. CLASS M SHARES have a lower initial sales charge and a higher 12b-1 fee than class A shares and no sales charge on redemption. NET ASSET VALUE (NAV) is the value of all your fund's assets, minus any liabili- ties, divided by the number of outstanding shares, not including any initial or contingent deferred sales charge. PUBLIC OFFERING PRICE (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume maximum sales charge of 5.75% for class A shares and 3.50% for class M shares. CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the time of the redemption of class B shares and assumes redemption at the end of the pe- riod. Your fund's CDSC declines from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. COMPARATIVE BENCHMARKS STANDARD & POOR'S 500 Index* is an unmanaged list of common stocks that is fre- quently used as a general measure of stock market performance. The index assumes reinvestment of all distributions and does not take into account brokerage com- missions or other costs. LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX* is an unmanaged list of publi- cly issued U.S. Treasury obligations and corporate debt securities. * The fund's portfolio contains securities that do not match those in the indexes. PORTFOLIO OF INVESTMENTS OWNED January 31, 1995 (Unaudited) COMMON STOCKS (56.6%)* NUMBER OF SHARES VALUE INSURANCE AND FINANCE (11.3%) - ------------------------------------------------------------------------------- 144,000 AON Corp. $ 4,734,000 135,000 Aetna Life & Casualty Co. 6,682,500 246,000 American Express Co. 7,749,000 179,000 American General Corp. 5,302,875 108,000 BankAmerica Corp. 4,657,500 119,840 Bankers Trust New York Corp. 7,504,980 150,000 Bear Stearns Companies, Inc. 2,493,750 265,000 Beneficial Corp. 10,633,125 46,000 CIGNA Corp. 3,110,750 159,000 Comerica Inc. 3,994,875 226,000 CoreStates Financial Corp. 6,073,750 78,000 First Chicago Corp. 3,666,000 33,000 First Union Corp. 1,410,750 120,900 Household International, Inc. 4,911,563 240,000 Lincoln National Corp. 8,760,000 76,500 Mellon Bank Corp. 2,677,500 278,000 Morgan (J.P.) & Co., Inc. 17,514,000 134,000 National City Corp. 3,551,000 128,000 NationsBank Corp. 5,952,000 88,000 Old Republic International Corp. 2,013,000 55,000 Republic New York Corp. 2,619,375 135,000 SAFECO Corp. 7,121,250 48,000 Student Loan Marketing Assn. 1,794,000 110,000 Synovus Financial Corp. 2,035,000 105,000 Torchmark Corp. 4,095,000 141,000 Wilmington Trust Corp. 3,331,125 -------------- 134,388,668 UTILITIES (9.5%) - ------------------------------------------------------------------------------- 204,000 American Telephone & Telegraph Co. 10,174,500 106,000 Bell Atlantic Corp. 5,750,500 49,000 Bell South Corp. 2,903,250 56,265 Cinergy Corp. 1,385,525 127,000 Consolidated Natural Gas Co. 4,381,500 100,000 Detroit Edison Co. 2,800,000 139,000 Entergy Corp. 3,388,125 67,000 GTE Corp. 2,269,625 79,000 Hawaiian Electric Industries, Inc. 2,646,500 95,000 Houston Industries Inc. 3,788,125 84,400 Northeast Utilities 2,015,050 338,000 NYNEX Corp. 13,351,000 155,000 Pacific Enterprises 3,526,250 58,000 Pacific Gas & Electric Co. 1,464,500 199,000 Public Service Co. of Colorado 6,019,750 146,000 Shandong Huaneng Power ADR 1,259,250 410,000 Sprint Corp. 11,685,000 COMMON STOCKS (Continued) NUMBER OF SHARES VALUE UTILITIES (continued) - ------------------------------------------------------------------------------- 65,000 Telefonica de Espana SA ADR $ 2,396,875 330,000 Texas Utilities Co. 11,467,500 85,000 United Illuminating Co. 2,709,375 339,000 US WEST, Inc. 13,263,375 101,000 WICOR Inc. 2,992,125 -------------- 111,637,700 CONSUMER NON DURABLES (6.1%) - ------------------------------------------------------------------------------- 289,000 American Brands, Inc. 10,982,000 187,600 Avon Products, Inc. 10,716,650 70,000 Clorox Co. (The) 4,103,750 86,000 Colgate-Palmolive Co. 5,407,250 217,000 Eastman Kodak Co. 10,633,000 205,000 Kimberly-Clark Corp. 9,865,625 210,000 Maytag Corp. 3,123,750 265,000 Philip Morris Cos., Inc. 15,800,625 86,600 Universal Corp. 1,710,350 -------------- 72,343,000 OIL AND GAS (5.0%) - ------------------------------------------------------------------------------- 140,000 Amoco Corp. 8,120,000 98,000 Chevron Corp. 4,373,250 121,000 Enron Corp. 3,524,125 275,600 Exxon Corp. 17,225,000 92,000 Imperial Oil Ltd. 3,024,500 116,600 Mobil Corp. 10,071,325 66,000 Phillips Petroleum Co. 2,103,750 62,000 Royal Dutch Petroleum Co. ADR 6,936,250 146,000 Total Corp. ADS 4,142,750 -------------- 59,520,950 CHEMICALS (3.3%) - ------------------------------------------------------------------------------- 156,000 Dexter Corp. 3,237,000 37,000 Dow Chemical Co. 2,307,875 94,000 du Pont (E.I.) de Nemours & Co., Ltd. 5,005,500 84,600 Eastman Chemical Co. 4,208,850 147,000 Grace (W.R.) & Co. 5,696,250 90,000 Olin Corp. 4,477,500 264,900 Union Carbide Corp. 6,754,950 272,000 Witco Chemical Corp. 7,140,000 -------------- 38,827,925 HEALTH CARE (3.2%) - ------------------------------------------------------------------------------- 220,000 American Home Products Corp. 15,427,500 172,900 Baxter International, Inc. 5,100,550 65,000 Bristol-Myers Squibb Co. 3,997,500 75,000 Merck & Co., Inc. 3,018,750 139,000 Warner-Lambert Co. 10,842,000 -------------- 38,386,300 COMMON STOCKS (Continued) NUMBER OF SHARES VALUE TRANSPORTATION (2.2%) - ------------------------------------------------------------------------------- 107,000 Consolidated Freightways, Inc. $ 2,233,625 130,000 Illinois Central Corp. 4,273,750 56,000 Norfolk Southern Corp. 3,472,000 136,000 Ryder System, Inc. 2,924,000 252,200 Union Pacific Corp. 12,673,050 -------------- 25,576,425 CONSUMER SERVICES (1.9%) - ------------------------------------------------------------------------------- 183,000 Dun & Bradstreet Corp. 9,150,000 142,000 Knight-Ridder, Inc. 7,384,000 100,000 McGraw-Hill, Inc. 6,500,000 -------------- 23,034,000 CONGLOMERATES (2.0%) - ------------------------------------------------------------------------------- 34,000 ITT Corp. 3,043,000 110,000 Ogden Corp. 2,117,500 136,000 TRW, Inc. 8,721,000 104,000 Tenneco Inc. 4,576,000 70,000 United Technologies Corp. 4,497,500 -------------- 22,955,000 BUSINESS EQUIPMENT AND SERVICES (1.9%) - ------------------------------------------------------------------------------- 92,000 Deluxe Corp. 2,461,000 68,000 IBM Corp. 4,904,500 139,100 Xerox Corp. 15,214,062 -------------- 22,579,562 FOOD AND BEVERAGES (1.8%) - ------------------------------------------------------------------------------- 148,000 Anheuser-Busch Cos., Inc. 8,103,000 180,000 Flowers Industries, Inc. 3,217,500 128,000 Heinz (H.J.) Co. 5,072,000 165,000 Sara Lee Corp. 4,351,875 -------------- 20,744,375 ELECTRONICS AND ELECTRICAL EQUIPMENT (1.6%) - ------------------------------------------------------------------------------- 94,000 Eaton Corp. 4,335,750 200,000 General Electric Co. 10,300,000 131,000 Honeywell, Inc. 4,519,500 -------------- 19,155,250 AUTOMOTIVE (1.6%) - ------------------------------------------------------------------------------- 208,400 Dana Corp. 4,636,900 427,000 Ford Motor Co. 10,781,750 94,000 General Motors Corp. 3,642,500 -------------- 19,061,150 RETAIL (1.3%) - ------------------------------------------------------------------------------- 180,000 K Mart Corp. 2,452,500 107,000 Melville Corporation 3,290,250 85,000 Penney (J.C.) Co., Inc. 3,527,500 135,000 Sears, Roebuck & Co. 5,956,875 -------------- 15,227,125 COMMON STOCKS (Continued) NUMBER OF SHARES VALUE FOREST PRODUCTS (0.9%) - ------------------------------------------------------------------------------- 157,100 Potlatch Corp. $ 6,146,537 117,000 Weyerhaeuser Co. 4,431,375 -------------- 10,577,912 REAL ESTATE (0.8%) - ------------------------------------------------------------------------------- 111,800 Debartolo Realty Corp. 1,565,200 156,700 Equity Residential Properties Trust 4,172,137 78,500 Evans Withycombe Residential 1,570,000 120,000 LTC Properties Inc. 1,530,000 49,700 Macerich Co. 1,006,425 -------------- 9,843,762 METALS AND MINING (0.5%) - ------------------------------------------------------------------------------- 20,000 Aluminum Co. of America 1,572,500 72,000 Carpenter Technology Corp. 3,969,000 -------------- 5,541,500 BASIC INDUSTRIAL PRODUCTS (0.4%) - ------------------------------------------------------------------------------- 83,000 Ball Corp. 2,531,500 30,000 Deere (John) & Co. 2,137,500 -------------- 4,669,000 BUILDING AND CONSTRUCTION (0.3%) - ------------------------------------------------------------------------------- 93,000 Armstrong World Industries, Inc. 4,115,250 AEROSPACE AND DEFENSE (0.3%) - ------------------------------------------------------------------------------- 78,600 GenCorp Inc. 1,002,150 68,000 Rockwell International Corp. 2,558,500 -------------- 3,560,650 FOOD (0.2%) - ------------------------------------------------------------------------------- 83,700 Nabisco Holdings Corp. Class A 2,364,525 TELECOMMUNICATIONS (0.2%) - ------------------------------------------------------------------------------- 107,000 Comsat Corp. 2,113,250 ENERGY-RELATED (0.1%) - ------------------------------------------------------------------------------- 100,000 Westcoast Energy, Inc. 1,462,500 ENVIRONMENTAL CONTROL (0.1%) - ------------------------------------------------------------------------------- 51,000 WMX Technologies, Inc. 1,447,125 PHARMACEUTICALS (0.1%) - ------------------------------------------------------------------------------- 36,000 SmithKline Beecham PLC ADR 1,255,500 -------------- TOTAL COMMON STOCKS (cost $642,607,610) $670,388,404 U.S. GOVERNMENT AND AGENCY OBLIGATIONS (22.8%)* PRINCIPAL AMOUNT VALUE Federal Home Loan Mortgage Association $ 423,018 11s, with various maturity dates to October 1, 2016 $ 456,860 3,928,847 8 3/4s,with various maturity dates to June 1, 2009 3,900,669 9,580,000 7 1/2s, with due date of February 14, 2025 9,098,006 Government National Mortgage Association 4,555,000 8s, TBA, February 14, 2025 +++ 4,426,891 15,441 5s, with due date of September 15, 2011 1,824 9,116,946 8 1/2s, with various maturities from December 15, 2022 to December 15, 2024 9,094,862 3,000 8 1/2s, with a due date of April 15, 2006 3,798 28,056,899 8s, with various due dates from December 15, 2016 to January 15, 2025 27,275,903 6,767,000 8s, with various due dates from December 15, 2006 to March 15, 2008 6,716,716 16,416,719 7 1/2s, with various due dates to September 15, 2023 15,493,278 2,912,921 7s, with various due dates to October 15, 2024 2,660,771 11,785,000 U.S. Treasury Bonds 11 1/8s, August 15, 2003 14,322,458 18,825,000 U.S. Treasury Bonds 8 7/8s, August 15, 2017 20,931,047 11,675,000 U.S. Treasury Notes 8 7/8s, November 15, 1997 12,101,867 26,510,000 U.S. Treasury Bonds 8 1/8s, August 8, 2019 27,421,281 25,755,000 U.S. Treasury Bonds 7 1/2s, November 15, 2024 25,135,270 22,965,000 U.S. Treasury Notes 5s, January 31, 1999 20,998,622 40,015,000 U.S. Treasury Notes 4 5/8s, February 29, 1996 39,064,644 745,000 U.S. Treasury Notes 4 1/4s, November 30, 1995 729,867 31,900,000 U.S. Treasury Notes 4s, January 31, 1996 31,022,750 -------------- TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS (cost $271,069,227) $270,857,384 CORPORATE BONDS AND NOTES (10.4%)* PRINCIPAL AMOUNT VALUE INSURANCE AND FINANCE (3.3%) - ------------------------------------------------------------------------------- $ 500,000 AIM Management Group sr. secd. notes 9s, 2003 $ 455,000 1,500,000 AMBAC Inc. deb. 9 3/8s, 2011 1,616,250 1,000,000 American Annuity Group, Inc. sr. sub. notes 11.125s, 2003 990,000 1,245,000 BAT Capital Corp. 144A med. term notes 6.19s, 2000 1,135,284 750,000 Chevy Chase Savings Bank Inc. sub. deb. 9 1/4s, 2005 667,500 500,000 Comdata Network, Inc. sr. notes 12 1/2s, 1999 530,000 5,200,000 Crestar Financial Corp. sub. notes 8 3/4s, 2004 5,232,500 500,000 Delaware Management Holdings, Inc. sr. notes ser. B, 10 1/4s, 2004 528,750 2,000,000 Ford Capital BV deb. 9s, 1998 2,052,500 5,865,000 General Motors Acceptance Corp. med. term notes 6.7s, 1997 5,707,355 2,000,000 Goldman, Sachs & Co. deb. 144A, 8s, 2013 1,847,500 4,815,000 Great Western Financial Corp. notes 6 1/8s, 1998 4,538,138 350,000 Keystone Group, Inc. sr. secd. notes 9 3/4s, 2003 330,750 250,000 Leucadia National sr. sub. notes 10 3/8s, 2002 260,313 2,300,000 Midlantic Banks deb., 9 7/8s, 1999 2,415,000 2,000,000 Orion Capital Corp. sr. notes 9 1/8s, 2002 2,022,500 800,000 PRT Funding Corp. sr. notes 11 5/8s, 2004 616,000 1,000,000 PSF Finance L.P. sr. notes 12 1/4s, 2004 1,028,125 570,000 Phoenix Re Corp. 9 3/4s, 2003 564,300 750,000 Reliance Group Holdings, Inc. sr. notes 9s, 2000 690,000 3,750,000 Riggs National Corp. sub. deb. 8 1/2s, 2006 3,468,750 2,000,000 Society Bank & Trust Toledo 12 1/2s, 1999 2,315,000 -------------- 39,011,515 CORPORATE BONDS AND NOTES (Continued) PRINCIPAL AMOUNT VALUE UTILITIES (2.1%) - ------------------------------------------------------------------------------- $ 4,060,000 Arkla, Inc. notes 8 7/8s, 1999 $ 3,958,500 2,650,000 Gulf States Utility Co. 1st mtge. 8.7s, 2024 2,534,063 1,615,000 Long Island Lighting Co. ser. P, 5 1/4s, 1996 1,544,344 3,000,000 Louisiana Power & Light secd. lease oblig. bonds ser. B, 10.67s, 2017 3,157,500 946,679 Midland Cogeneration Ventures deb. 10.33s, 2002 918,279 3,200,000 Public Service Co. of New Hampshire deb. 15.23s, 2000 3,768,000 4,100,000 Texas Utilities Electric Co. secd. lease fac. bonds 7.46s, 2015 3,577,250 2,850,000 Toledo Edison Co. med. term notes 7.82s, 2003 2,475,938 2,700,000 United Illuminating Co. secd. lease oblig. bonds 10.24s, 2020 2,588,625 -------------- 24,522,499 CONSUMER SERVICES (0.9%) - ------------------------------------------------------------------------------- 400,000 AMC Entertainment, Inc. sr. sub. deb. 12 5/8s, 2002 424,000 250,000 Arizona Charlies Corp. Inc. 144A deb. ser. B, 12s, 2000 207,188 500,000 Cablevision Systems Corp. sr. sub. reset deb. 10 3/4s, 2004 505,000 1,150,000 Century Communications Corp. sr. disc. notes zero %, 2003 465,750 1,000,000 Cinemark USA, Inc. sr. notes 12s, 2002 1,040,000 500,000 Embassy Suites Inc. sr. sub. notes 10 7/8s, 2002 520,000 910,000 General Media Corp. sr. secd. notes 10 5/8s, 2000 846,300 500,000 Grand Casino Resorts, Inc. notes 12 1/2s, 2000 480,000 750,000 John Q. Hammons Hotels 1st. mtge. notes 8 7/8s, 2004 663,750 500,000 La Quinta Motor Inns Inc. deb. 9 1/4s, 2003 477,500 750,000 Marvel Parent Holdings, Inc. sr. secd. disc. notes zero %, 1998 457,500 4,200,000 News American Holdings, Inc. sr. notes 8 1/2s, 2005 4,066,125 -------------- 10,153,113 TRANSPORTATION (0.5%) - ------------------------------------------------------------------------------- 2,850,000 AMR Corp. deb. 9.73s, 2014 2,737,781 1,000,000 Blue Bird Body Co. sub. deb. ser. B, 11 3/4s, 2002 1,010,000 2,000,000 Southwest Airlines Co. deb. 7 7/8s, 2007 1,902,500 500,000 Viking Star Shipping sr. secd. notes 9 5/8s, 2003 465,000 -------------- 6,115,281 OIL AND GAS (0.5%) - ------------------------------------------------------------------------------- 1,500,000 Occidental Petroleum Corp. sr. notes 11 3/4s, 2011 1,628,438 250,000 Oryx Energy Co. deb. 9 3/4s, 1998 245,469 4,025,000 USX Corp. deb. 9.8s, 2001 4,218,703 -------------- 6,092,610 HEALTH CARE (0.5%) - ------------------------------------------------------------------------------- 1,000,000 American Medical International Inc. sr. sub. 13 1/2s, 2001 1,105,000 2,320,000 Columbia Healthcare deb. 8.36s, 2024 2,275,050 1,250,000 McGaw, Inc. sr. notes 10 3/8s, 1999 1,278,125 250,000 Multicare Cos., Inc. sr. sub. notes 12 1/2s, 2002 288,750 1,050,000 Paracelsus Healthcare Corp. sr. sub. notes 9 7/8s, 2003 1,000,125 -------------- 5,947,050 CORPORATE BONDS AND NOTES (Continued) PRINCIPAL AMOUNT VALUE RETAIL (0.4%) - ------------------------------------------------------------------------------- $ 1,000,000 Caldor Corp. sr. sub. deb. 15s, 2000 $ 1,067,500 600,000 Loehmanns+ Holdings Inc. sr. sub. notes 13 3/4s, 1999 582,000 375,000 Penn Traffic Co. sr. sub. notes 9 5/8s, 2005 333,750 500,000 Revco D.S., Inc. sr. notes 9 1/8s, 2000 502,188 2,000,000 Sears, Roebuck & Co. med. term notes 9.1s, 2012 2,060,000 500,000 Service Merchandise Co., Inc. sr. sub. deb. 8 3/8s, 2001 425,000 -------------- 4,970,438 AUTOMOTIVE (0.4%) - ------------------------------------------------------------------------------- 3,775,000 Chrysler Corp. deb. 10.95s, 2017 4,154,859 CONGLOMERATES (0.3%) - ------------------------------------------------------------------------------- 500,000 ADT Ltd. sr. sub. notes 9 1/4s, 2003 466,250 3,000,000 Pennsylvania Central Corp. sub. notes 10 7/8s, 2011 3,348,750 -------------- 3,815,000 TELECOMMUNICATIONS (0.3%) - ------------------------------------------------------------------------------- 750,000 Comcast Cellular Corp .sr. participating notes Ser. A, zero %, 2000 519,375 250,000 NEXTEL Communications, Inc. sr. disc. notes stepped-coupon zero % (11 1/2, 9/1/98), 2003 ++ 92,500 1,000,000 Panamsat L.P. sr. notes 9 3/4s, 2000 960,000 2,000,000 Tele-Communications, Inc. sr. deb 9.8s, 2012 1,993,750 -------------- 3,565,625 CHEMICALS (0.3%) - ------------------------------------------------------------------------------- 780,000 G-I Holdings Inc. sr. notes zero %, 1998 487,500 625,000 Harris Chemical sr. secd. disc. notes stepped-coupon zero % (10 1/4s, 1/15/96), 2001 ++ 523,438 1,640,000 Lyondell Petrochemical Co. global notes 9 1/8s, 2002 1,657,425 800,000 OSI Specialty Corp. 144A sr. sub. notes 9 1/4s, 2003 752,000 -------------- 3,420,363 FOOD (0.2%) - ------------------------------------------------------------------------------- 1,704,000 Secured Restaurants Trust deb. 10 1/4s, 2000 1,796,655 METALS AND MINING (0.1%) - ------------------------------------------------------------------------------- 750,000 Inland Steel Industries, Inc. notes 12 3/4s, 2002 804,375 1,000,000 WCI Steel Inc. sr. secd. notes 10 1/2s, 2002 950,000 -------------- 1,754,375 FOREST PRODUCTS (0.1%) - ------------------------------------------------------------------------------- 1,250,000 Gaylord Container Corp. sr. sub. disc. deb. stepped-coupon zero % (12 3/4s, 5/15/96), 2005 ++ 1,112,500 500,000 Stone Container sr. sub. notes 9 7/8s, 2001 468,750 -------------- 1,581,250 AEROSPACE AND DEFENSE (0.1%) - ------------------------------------------------------------------------------- 750,000 BE Aerospace sr. notes, 9 3/4s, 2003 705,000 700,000 Coltec Industries sr. note 9 3/4s, 2000 686,000 -------------- 1,391,000 CORPORATE BONDS AND NOTES (Continued) PRINCIPAL AMOUNT VALUE FOOD AND BEVERAGES (0.1%) - ------------------------------------------------------------------------------- $ 1,000,000 Safeway, Inc. med. term notes 8.57s, 2003 $ 1,007,500 250,000 Stater Brothers sr. notes 11s, 2001 237,500 -------------- 1,245,000 COMMUNICATIONS (0.1%) - ------------------------------------------------------------------------------- 500,000 Centennial Cellular Corp. sr. notes 8 7/8s, 2001 447,500 250,000 Rogers Cantel Mobile Inc. deb. 10 3/4s, 2001 251,875 500,000 World Color Press sr. sub. notes 9 1/8s, 2003 466,250 -------------- 1,165,625 ELECTRONICS AND ELECTRICAL EQUIPMENT (0.1%) - ------------------------------------------------------------------------------- 1,000,000 Amphenol Corp.144A sr. sub. notes 12 3/4s, 2002 1,110,000 CONSUMER NON DURABLES (0.1%) - ------------------------------------------------------------------------------- 525,000 Guess Jeans, Inc. sr. sub. notes 9 1/2s, 2003 488,250 500,000 Playtex Family Products Corp. sr. sub. notes 9s, 2003 438,750 -------------- 927,000 BASIC INDUSTRIAL PRODUCTS (-%) - ------------------------------------------------------------------------------- 175,000 Anchor Glass Container Corp. sr. sub. deb. 9 7/8s, 2008 150,500 -------------- TOTAL CORPORATE BONDS AND NOTES (cost $128,737,904) $122,889,758 YANKEE BONDS AND NOTES (2.3%) PRINCIPAL AMOUNT VALUE $ 500,000 Banco Rio De La Plata notes, 8 3/4s, 2003 $ 275,312 2,700,000 British Columbia Hydro & Power Auth. deb. 15 1/2s, 2011 3,142,125 1,400,000 British Columbia Hydro & Power Auth. deb. 15s, 2011 1,582,000 3,225,000 Den Danske Bank 144A sub. notes 6.55s, 2003 2,811,797 450,000 Eletson Holdings, Inc. 1st mtge. notes 9 1/4s, 2003 400,500 1,000,000 Fresh Del Monte Produce Corp. sr. notes, ser. B, 10s, 2003 625,000 970,000 Grupo Industrial Durango sr. notes 12s, 2001 824,500 3,860,000 LASMO PLC global notes 7 1/8s, 2003 3,481,238 375,000 Methanex Corp. sr. secd. notes 8 7/8s, 2001 372,188 3,210,000 Noranda, Inc. deb. 8 1/8s, 2004 3,135,769 2,000,000 Nova Scotia (Province of) Canada deb. 9 1/4s, 2020 2,080,000 3,000,000 Petro Canada deb. 9 1/4s, 2021 3,127,500 2,300,000 Rogers Communications cv. deb. 2s, 2005 1,178,750 4,000,000 Time Warner Inc. global notes 9 1/8s, 2013 3,620,000 -------------- TOTAL YANKEE BONDS AND NOTES (cost $29,448,121) $ 26,656,679 CONVERTIBLE PREFERRED STOCKS (1.5%)* NUMBER OF SHARES VALUE 69,000 Ashland, Inc. $3.125 cv. pfd. $ 3,708,750 22,000 Burlington Northern, Inc. ser. A, $3.125, cum. cv. pfd. 1,196,250 250,000 Freeport-McMoRan Copper Co., Inc. stepped-coupon $1.25 ($1.75, 8/1/96) ++ 5,125,000 54,000 Pittston Corp. $6.25, cv. pfd. 2,403,000 67,200 Service Corp. International $6.25 cv. pfd. 3,864,000 39,500 Storage Technology Corp. $3.25 cv. pfd. 2,044,125 -------------- TOTAL CONVERTIBLE PREFERRED STOCKS (cost $19,584,240) $ 18,341,125 COLLATERALIZED MORTGAGE OBLIGATIONS (1.0%)* PRINCIPAL AMOUNT VALUE $ 164,961 Housing Securities Inc. 93-J J5, 6.66s, 2009 $ 106,194 300,889 Housing Securities Inc. 93-J, 6.66s, 2009 226,314 265,597 Housing Securities Inc. 94-1, 6 1/2s, 2009 197,458 2,965,884 Prudential Home Loan Corp. Ser. 92-25, 8s, 2022 2,242,950 3,929,777 Prudential Home Mortgage Securities Ser. 1993-D, Class 2B, 7.1082s, 2023 3,266,627 361,725 Prudential Home Mortgage Securities Ser. 1994-31, Class B3, sub. bond 8s, 2009 297,177 1,361,243 Prudential Home Mortgage Securities Ser. 92-13 7 1/2s, 2007 1,134,896 1,330,657 Prudential Home Mortgage Securities Ser. 92-25, 6.33s, 2022 1,015,042 3,554,624 Prudential Home Mortgage Securities Ser. 94-A, 6.8s, 2024 2,889,243 -------------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (cost $11,670,443) $ 11,375,901 ASSET-BACKED SECURITIES (0.9%)* PRINCIPAL AMOUNT VALUE $ 4,045,000 Chase Manhattan Credit Card Master Trust, Ser. 91-1, 8 3/4s, 1999 $ 4,100,619 963,400 Merrill Lynch Mortgage Investors Inc. sr. notes 9.4s, 2009 974,840 839,100 Travelers Mortgage Security Corp. coll. oblig. Ser. 84-1, 12s, 2014 914,619 1,000,000 United Air Lines, Inc. Equip. Trust Ser. C, 10.36s, 2012 971,250 750,000 United Air Lines, Inc. Equipment Trust Ser. 91A, deb. 10 1/8s, 2015 703,125 2,675,000 United Air Lines, Inc. Equipment Trust Ser. C, 10.36s, 2012 2,598,094 -------------- TOTAL ASSET-BACKED SECURITIES (cost $10,575,242) $ 10,262,547 CONVERTIBLE BONDS AND NOTES (1.1%)* PRINCIPAL AMOUNT VALUE $ 3,550,000 AMR Corp. cv. sub. deb. 6 1/8s, 2024 $ 3,017,500 7,800,000 Comcast Corp. cv. notes 1 1/8s, 2007 3,012,750 7,200,000 Hollinger, Inc. liquid yield option cv. notes zero %, 2013 1,980,000 2,900,000 Liberty Property Trust cv. sub. deb. 8s, 2001 2,896,375 1,200,000 Trenwick Group, Inc. cv. deb. 6s, 1999 1,188,000 1,119,605 WMX Technologies, Inc. cv. 2s, 2005 906,880 -------------- TOTAL CONVERTIBLE BONDS AND NOTES (cost $13,771,617) $ 13,001,505 EUROBONDS (0.2%) (cost $2,776,000)* PRINCIPAL AMOUNT VALUE $ 3,500,000 Banamex cv. bond 7s, 1999 $ 2,345,000 UNITS (0.1%) (cost $990,000)* NUMBER OF UNITS VALUE 1,000,000 County Seat Stores sr. sub. notes units 12s, 2001 $ 990,000 WARRANTS (-%) (cost $11,600) NUMBER OF WARRANTS VALUE 1,160 General Media Corp. 144A $ 17,400 SHORT-TERM INVESTMENTS (3.2%)* PRINCIPAL AMOUNT VALUE $20,000,000 Federal National Mortgage Assn. 5.6s, February 21, 1995 $ 19,916,945 18,204,000 Interest in $267,187,000 joint repurchase agreement dated December 30, 1995 with Morgan (J.P) & Co., due January 3, 1995 with respect to various U.S. Treasury Obligations -- maturity value of $18,206,892 for an effective yield of 5.3% 18,206,892 -------------- TOTAL SHORT-TERM INVESTMENTS (cost $38,123,837) $ 38,123,837 - ------------------------------------------------------------------------------- TOTAL INVESTMENTS (cost $1,169,365,841)*** $1,185,249,540 - ------------------------------------------------------------------------------- NOTES - ------------------------------------------------------------------------------- * Percentages indicated are based on net assets of $1,184,211,723, which co- rrespond to a net asset value per class A, class B, class M, and class Y shares of $13.21, $13.16, $13.20, and $13.23, respectively. ^^ Cash interest will be paid on this obligation at the stated rate beginning on the stated date. ++ The interest or dividend rate and date shown parenthetically represent the new interest or dividend rate to be paid and the date the fund will begin receiving interest or dividend at this rate. +++ TBAs are mortgage-backed securities traded under delayed delivery commit- ments, settling after January 31, 1995. Although the unit for the trades has been established, the principal value has not been finalized. The amount of commitments will not fluctuate more than 2.0% from the principal amount. In addition, income on the securities will not be earned until settlement date. The cost of TBA purchases held at January 31, 1995 was $4,374,324. TBA SALES COMMITMENT AT JANUARY 31, 1995 (proceeds receivable $9,085,519) PRINCIPAL DELIVERY COUPON MARKET AGENCY AMOUNT MONTH RATE VALUE - ------------------------------------------------------------------------------- GNMA $9,114,000 Feb/99 8.5% $9,091,215 *** The aggregate identified cost for federal income tax purposes is $1,172,372,302 resulting in gross unrealized appreciation and depreciation of $59,894,173 and $47,016,935 respectively, or net unrealized appreciation of $12,877,238. ADR after the name of a foreign holding stands for American Depository Receipt representing shares on deposit with a domestic custodian bank. 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 re- sold in transactions exempt from registration, normally to qualified insti- tutional buyers. The accompanying notes are an integral part of these financial statements. STATEMENT OF ASSETS AND LIABILITIES January 31, 1995 (Unaudited) ASSETS - ------------------------------------------------------------------------------- Investments in securities, at value (identified cost $1,169,365,841) (Note 1) $1,185,249,540 Dividends, interest and other receivables 10,589,449 Receivable for shares of the fund sold 3,302,456 Receivable for securities sold 31,047,635 Other assets 2,950 - ------------------------------------------------------------------------------- TOTAL ASSETS $1,230,192,030 LIABILITIES - ------------------------------------------------------------------------------- Payable for securities purchased 32,031,981 Payable to subcustodian banks 110,787 Payable for shares of the fund repurchased 1,990,361 Payable for compensation of Manager (Note 2) 1,104,577 Payable for administrative services (Note 2) 15,580 Payable for investor servicing and custodian fees (Note 2) 183,851 Payable for distribution fees (Note 2) 339,030 Other accrued expenses 1,112,925 TBA sale commitment at value (proceeds receivable $9,085,519) 9,091,215 - ------------------------------------------------------------------------------- TOTAL LIABILITIES 45,980,307 - ------------------------------------------------------------------------------- NET ASSETS $1,184,211,723 REPRESENTED BY - ------------------------------------------------------------------------------- Paid-in capital (Note 1) $1,170,615,036 Undistributed net investment income (Note 1) 3,622,506 Distributions in excess of net realized gain on investment transactions (Note 1) (5,909,518) Net unrealized appreciation of investments 15,883,699 - ------------------------------------------------------------------------------- TOTAL -- REPRESENTING NET ASSETS APPLICABLE TO CAPITAL SHARES OUTSTANDING $1,184,211,723 COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE - ------------------------------------------------------------------------------- Net asset value and redemption price of class A shares ($932,727,936 divided by 70,587,909 shares) $13.21 Offering price per class A share (100/94.25 of $13.21)* $14.02 Net asset value and offering price of class B shares ($170,331,054 divided by 12,945,998 shares) + $13.16 Net asset value and redemption price of class M shares ($1,320,162 divided by 100,019 shares) $13.20 Offering price per class M shares (100/96.5 of $13.20) $13.68 Net asset and redemption price of class Y shares ($79,832,571 divided by 6,033,767 shares) + $13.23 - ------------------------------------------------------------------------------- * 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 January 31, 1995 (Unaudited) INVESTMENT INCOME: - ------------------------------------------------------------------------------- Interest $ 17,986,362 - ------------------------------------------------------------------------------- Dividends (Net of foreign tax of $35,893) 14,846,185 - ------------------------------------------------------------------------------- TOTAL INVESTMENT INCOME 32,832,547 - ------------------------------------------------------------------------------- EXPENSES: - ------------------------------------------------------------------------------- Compensation of Manager (Note 2) 2,212,839 - ------------------------------------------------------------------------------- Investor servicing and custodian fees (Note 2) 1,496,228 - ------------------------------------------------------------------------------- Compensation of Trustees (Note 2) 19,479 - ------------------------------------------------------------------------------- Reports to shareholders 71,070 - ------------------------------------------------------------------------------- Auditing 27,572 - ------------------------------------------------------------------------------- Legal 11,528 - ------------------------------------------------------------------------------- Postage 26,715 - ------------------------------------------------------------------------------- Registration fees 14,879 - ------------------------------------------------------------------------------- Administrative services (Note 2) 16,678 - ------------------------------------------------------------------------------- Distribution fees -- Class A (Note 2) 1,156,346 - ------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 809,515 - ------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 570 - ------------------------------------------------------------------------------- Other expenses 15,940 - ------------------------------------------------------------------------------- TOTAL EXPENSES 5,879,359 - ------------------------------------------------------------------------------- NET INVESTMENT INCOME 26,953,188 - ------------------------------------------------------------------------------- Net realized loss on investments (Notes 1 and 3) (737,064) - ------------------------------------------------------------------------------- Net unrealized depreciation of investments during the period (346,648) - ------------------------------------------------------------------------------- NET LOSS ON INVESTMENTS (1,083,712) - ------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 25,869,476 - ------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. STATEMENT OF CHANGES IN NET ASSETS Six months ended Year ended January 31 July 31 1995* 1994 - ------------------------------------------------------------------------------- INCREASE IN NET ASSETS - ------------------------------------------------------------------------------- Operations: - ------------------------------------------------------------------------------- Net investment income $ 26,953,188 $ 39,558,384 - ------------------------------------------------------------------------------- Net realized gain (loss) on investments (737,064) 44,582,928 - ------------------------------------------------------------------------------- Net unrealized depreciation of investments (346,648) (52,949,946) - ------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 25,869,476 31,191,366 - ------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income: Class A (18,999,574) (34,643,598) - ------------------------------------------------------------------------------- Class B (2,682,659) (3,998,103) - ------------------------------------------------------------------------------- Class Y (1,648,449) (8,999) - ------------------------------------------------------------------------------- From net realized gain on investments: Class A (21,878,583) (35,593,950) - ------------------------------------------------------------------------------- Class B (3,901,612) (4,555,816) - ------------------------------------------------------------------------------- Class Y (1,862,529) -- - ------------------------------------------------------------------------------- Increase from capital share transactions (Note 4) 73,251,796 329,150,086 - ------------------------------------------------------------------------------- TOTAL INCREASE IN NET ASSETS 48,147,866 281,540,986 - ------------------------------------------------------------------------------- NET ASSETS - ------------------------------------------------------------------------------- Beginning of period/year 1,136,063,857 854,522,871 - ------------------------------------------------------------------------------- END OF PERIOD/YEAR (including undistributed net investment income of $3,622,506 and $0, respectively) $1,184,211,723 $1,136,063,857 - ------------------------------------------------------------------------------- * Unaudited. The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) December 1, April 1, April 27, 1994 1994 1992 (commence- Six (commence- Six (commence- ment of months ment of months ment of operations) ended operations) ended operations) to Jan. 31 Jan. 31 to July 31 Jan. 31 to July 31 1995** 1995** 1994 1995** 1994 1993 1992* - ----------------------------------------------------------------------------------------------------------------------------------- Class M Class Y Class B - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $12.77 $13.54 $13.21 $13.46 $14.19 $14.22 $13.73 - ----------------------------------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net investment income .03 .34 .17 .27 .50 .56 .13 - ----------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments .40 (.03) .31 (.02) (.12) .48 .53 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL FROM INVESTMENT OPERATIONS .43 .31 .48 .25 .38 1.04 .66 - ----------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM: Net investment income -- (.30) (.15) (.23) (.49) (.59) (.17) - ----------------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments -- (.32) -- (.32) (.62) (.48) -- - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS -- (.62) (.15) (.55) (1.11) (1.07) (.17) - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $13.20 $13.23 $13.54 $13.16 $13.46 $14.19 $14.22 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%) (a) 3.37(b) 2.42(b) 3.65(b) 1.98(b) 2.70 7.87 4.84(b) - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (in thousands) $ 1,320 $79,833 $71,566 $170,331 $151,327 $81,983 $11,946 - ----------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%) 0.68(b) .34(b) .25(b) .85(b) 1.71 1.66 .55(b) - ----------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (%) 1.75(b) 2.50(b) 1.34(b) 2.00(b) 3.39 3.43 .84(b) - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 48.56(b) 48.56(b) 100.69 48.56(b) 100.69(b) 89.22 78.90 - ----------------------------------------------------------------------------------------------------------------------------------- ** Unaudited. * Per share investment income, expenses and net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges. (b) Not annualized.
FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) Six Seven months months ended ended Jan. 31 Year ended July 31 Jul. 31 Year ended December 31 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 - ----------------------------------------------------------------------------------------------------------------------------------- Class A Class A - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF PERIOD $13.52 $14.24 $14.24 $13.52 $13.39 $14.32 $12.32 $11.91 $14.66 $13.13 $10.95 - ----------------------------------------------------------------------------------------------------------------------------------- INVESTMENT OPERATIONS Net investment income .32 .59 .62 .64 .69 .75 .45 .73 .71 .81 .82 - ----------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments (.03) (.11) .52 1.12 .64 .02 1.88 .68 (.03) 1.63 2.32 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL FROM INVESTMENT OPERATIONS .29 .48 1.14 1.76 1.33 .77 2.33 1.41 .68 2.44 3.14 - ----------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS FROM: Net investment income (.28) (.58) (.66) (.68) (.68) (.82) (.33) (.72) (.80) (.80) (.96) - ----------------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments (.32) (.62) (.48) (.36) (.52) (.88) -- (.28) (2.63) (.11) -- - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS (.60) (1.20) (1.14) (1.04) (1.20) (1.70) (.33) (1.00) (3.43) (.91) (.96) - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF PERIOD $13.21 $13.52 $14.24 $14.24 $13.52 $13.39 $14.32 $12.32 $11.91 $14.66 $13.13 - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENT RETURN AT NET ASSET VALUE (%) (a) 2.29(b) 3.46 8.64 13.68 11.28 5.86 19.21(b) 12.10 3.72 18.84 29.84 - ----------------------------------------------------------------------------------------------------------------------------------- NET ASSETS, END OF PERIOD (in thousands) $932,728 $913,171 $772,540 $622,129 $479,287 $442,964 $430,568 $387,186 $384,213 $371,657 $324,140 - ----------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%) .47 .95 .90 1.06 .94 .84 .48(b) .73 .71 .58 .62 - ----------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (%) 2.38 4.15 4.34 4.62 5.42 5.52 3.41(b) 5.82 4.86 5.66 6.84 - ----------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 48.56 100.69 89.22 78.90 64.98 70.54 52.82(b) 139.28 129.94 142.93 187.32 - -----------------------------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS January 31, 1995 (Unaudited) NOTE 1 SIGNIFICANT ACCOUNTING POLICIES The fund is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The fund seeks to provide a balanced investment composed of a well-diversified portfolio of stocks and bonds which will produce both capital growth and current income. The fund offers class A, class B, class M and class Y shares. The fund commenced its public offering of class M shares on December 1, 1994. Class A shares are sold with a maximum front-end sales charge of 5.75%. Class B shares do not pay a front-end sales charge, but pay a higher ongoing distribution fee than Class A shares, and may be subject to a contingent deferred sales charge, if those shares are redeemed within six years of purchase. Class M shares are sold with a maximum front end sales charge of 3.50% and pay ongoing distribution fees that are lower than Class B shares and higher than Class A shares. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A shares, class B shares and class M shares but do not bear a distribution fee. Class Y shares are sold to defined contribution plans that initially invest at least $250 million in a combination of Putnam funds. Expenses of the fund are borne pro-rata by the holders of each class of shares, except that each class bears expenses unique to that class (including the distribution fees applicable to such class). Each class votes as a class only with respect to its own distri- bution plan or other matters on which a class vote is required by law or deter- mined 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 fo- llowed by the fund in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles. A SECURITY VALUATION Investments for which market quotations are readily avail- able are stated at market value, which is determined using the last reported sa- le price, or, if no sales are reported -- as in the case of some securities tra- ded over-the-counter -- the last reported bid price, except that certain U.S. government obligations are stated at the mean between the last reported bid and asked prices. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximates market value, and other investments are stated at fair value following procedures approved by the Trus- tees. Market quotations are not considered to be readily available for long-term corporate bonds and notes; such investments are stated at fair value on the ba- sis of valuations furnished by a pricing service, approved by the Trustees, which determines valuations for normal, institutional size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. B JOINT TRADING ACCOUNT Pursuant to an exemptive order issued by the Securities and Exchange Commission, the fund may transfer uninvested cash balances into a joint trading account, along with the cash of other registered investment compa- nies managed by Putnam Investment Management, Inc., ("Putnam Management") the fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc., and cer- tain other accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments. C REPURCHASE AGREEMENTS The fund and other joint trading accounts, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. The fund's Manager is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest. D SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security transactions are accounted for on the trade date (date the order to buy or sell is executed). In- terest income is recorded on the accrual basis and dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as soon as the fund is informed of the ex-dividend date. E FEDERAL TAXES It is the policy of the fund to distribute all of its income within the prescribed time and otherwise comply with the provisions of the In- ternal Revenue Code applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Internal Revenue Code of 1986. Therefo- re, no provision has been made for federal taxes on income, capital gains or un- realized appreciation of securities held and excise tax on income and capital gains. F DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded by the fund on the ex-dividend date. 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. G TBA PURCHASE COMMITMENTS The fund may enter into "TBA" (to be announced) pur- chase commitments to purchase securities for a fixed price at a future date be- yond customary settlement time. TBA purchase commitments may be considered secu- rities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the fund's other assets. Unsettled TBA pur- chase commitments are valued at the current market value of the underlying secu- rities, generally according to the procedures described under "Security valua- tion" above. Although the fund will generally enter into TBA purchase commit- ments with the intention of acquiring securities for its portfolio or for deli- very pursuant to options contracts it has entered into, the fund may dispose of a commitment prior to settlement if the Fund Manager deems it appropriate to do so. H TBA SALE COMMITMENTS The fund may enter into TBA sale commitments to hedge its portfolio positions or to sell mortgage-backed securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, equivalent deliverable securities, or an offsetting TBA purchase commitment deliverable on or before the sale commit- ment date, are held as "cover" for the transaction. Unsettled TBA sale commitments are valued at the current market value of the un- derlying securities, generally according to the procedures described under "Se- curity valuation" above. The contract is marked-to-market daily and the change in the market value is recorded by the fund as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting pur- chase commitment, the fund realizes a gain or loss on the commitment without re- gard to any unrealized gain or loss on the underlying security. If the fund de- livers securities under the commitment, the fund realizes a gain or loss from the sale of securities based upon the unit price established at the date the commitment was entered into. NOTE 2 MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS Compensation of Putnam Management for management and investment advisory servi- ces is paid quarterly based on the average net assets of the fund for the quar- ter. Such fee is based on an annual rate of 0.6% of the first $100 million of average net assets, 0.5% of the next $100 million, 0.4% of the next $300 mil- lion, 0.325% of the next $500 million and 0.3% of any amount over $1.0 billion, subject to reduction in any year to the extent that expenses (exclusive of bro- kerage, interest, taxes, and distribution fees and extraordinary expenses) of the fund exceed 2.5% of the first $30 million of average net assets, 2.0% of the next $70 million and 1.5% of any amount over $100 million and by the amount of certain brokerage commissions and fees (less expenses) received by affiliates of the Manager on the fund's portfolio transactions. The fund also reimburses the Manager for the compensation and related expenses of certain officers of the fund and their staff who provide administrative ser- vices to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. Trustees of the fund receive an annual Trustee's fee of $2,390 and an additional fee for each Trustees' meeting attended. Trustees who are not interested persons of the Manager and who serve on committees of the Trustees receive additional fees for attendance at certain committee meetings. Custodial functions for the fund are provided by Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing agent func- tions are provided by Putnam Investor Services, a division of PFTC. Investor servicing and custodian fees reported in the Statement of operations for the six months ended January 31, 1995 have been reduced by credits allowed by PFTC. The fund has adopted a distribution plan with respect to its class A shares (the "Class A Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Class A Plan is to compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam Investments Inc., for services provided and expenses incurred by it in distributing class A shares. The Trustees have approved the payment by the fund to Putnam Mutual Funds Corp. at an annual rate of 0.25% of average net assets attributable to class A shares. During the six months ended January 31, 1995, Putnam Mutual Funds Corp., acting as an underwriter, received net commissions of $126,335 from the sale of class A shares of the fund. A deferred sales charge of up to 1% is assessed on certain redemptions of class A shares purchased as part of an investment of $1 million or more. For the six months ended January 31, 1995, Putnam Mutual Funds Corp., acting as an underwri- ter, received $3,259 on such redemptions. The fund has adopted a separate distribution plan with respect to its class B shares (the "Class B Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of Class B Plan is to compensate Putnam Mutual Funds Corp. for services provided and expenses incurred by it in distributing class B shares. The Class B Plan provides for payments by the fund to Putnam Mutual Fund Corp. at an annual rate of up to 1.00% of the fund's average net assets attribu- table to class B shares. Putnam Mutual Funds Corp. also receives the proceeds on the contingent deferred sales charges on its class B share redemptions within six years of purchase. The charge is based on declining rates, which begin at 5.00% of the net asset value of the redeemed shares. Putnam Mutual Funds Corp. received contingent deferred sales charges of $209,774 from redemptions during the six months ended January 31, 1995. The fund has adopted a separate distribution plan with respect to its class M shares (the "Class M Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Class M Plan is to compensate Putnam Mutual Funds Corp. for services provided and expenses incurred by it in distributing class M shares. The Trustees have approved payment by the fund to Putnam Mutual Funds Corp., at an annual rate of 0.75% of the fund's average net assets attri- butable to class M shares. For the period December 1, 1994 (commencement of ope- rations) to January 31, 1995, Putnam Mutual Funds Corp., acting as an underwri- ter received $1,278 from the sale of class M shares of the fund. NOTE 3 PURCHASES AND SALES OF SECURITIES During the six months ended January 31, 1995, purchases and sales of investment securities other than U.S. government obligations and short-term investments aggregated $609,236,644 and $538,860,661, respectively. Purchases and sales of U.S. government obligations aggregated $289,517,060 and $206,695,065 respecti- vely. In determining the net gain or loss on securities sold, the cost of secu- rities has been determined on the identified cost basis. NOTE 4 CAPITAL SHARES At January 31, 1995, there was an unlimited number of shares of beneficial inte- rest authorized divided into four classes, class A, class B, class M and class Y capital shares. Transactions in capital shares were as follows: SIX MONTHS ENDED JANUARY 31, 1995 CLASS A SHARES AMOUNT - ------------------------------------------------------------------------------- Shares sold 5,925,673 $78,689,418 - ------------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 2,670,784 34,483,672 - ------------------------------------------------------------------------------- 8,596,457 113,173,090 - ------------------------------------------------------------------------------- Shares repurchased (5,544,671) (73,674,092) - ------------------------------------------------------------------------------- NET INCREASE 3,051,786 $39,498,998 - ------------------------------------------------------------------------------- YEAR ENDED JULY 31, 1994 CLASS A SHARES AMOUNT - ------------------------------------------------------------------------------- Shares sold 18,507,700 $254,803,372 - ------------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 4,168,794 57,253,138 - ------------------------------------------------------------------------------- 22,676,494 312,053,510 - ------------------------------------------------------------------------------- Shares repurchased (9,401,901) (129,535,680) - ------------------------------------------------------------------------------- NET INCREASE 13,274,593 $182,520,830 - ------------------------------------------------------------------------------- SIX MONTHS ENDED JANUARY 31, 1995 CLASS B SHARES AMOUNT - ------------------------------------------------------------------------------- Shares sold 2,326,588 $30,759,555 - ------------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 475,083 6,106,564 - ------------------------------------------------------------------------------- 2,801,671 36,866,119 - ------------------------------------------------------------------------------- Shares repurchased (1,095,012) (14,426,073) - ------------------------------------------------------------------------------- NET INCREASE 1,706,659 $22,440,046 - ------------------------------------------------------------------------------- YEAR ENDED JULY 31, 1994 CLASS B SHARES AMOUNT - ------------------------------------------------------------------------------- Shares sold 6,533,139 $90,371,150 - ------------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 586,214 8,011,100 - ------------------------------------------------------------------------------- 7,119,353 98,382,250 - ------------------------------------------------------------------------------- Shares repurchased (1,659,029) (22,728,694) - ------------------------------------------------------------------------------- NET INCREASE 5,460,324 $75,653,556 - ------------------------------------------------------------------------------- DECEMBER 1, 1994 (COMMENCEMENT OF OPERATIONS) TO JANUARY 31, 1995 CLASS M SHARES AMOUNT - ------------------------------------------------------------------------------- Shares sold 100,019 $1,299,941 - ------------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions -- -- - ------------------------------------------------------------------------------- 100,019 $1,299,941 - ------------------------------------------------------------------------------- Shares repurchased -- -- - ------------------------------------------------------------------------------- NET INCREASE 100,019 $1,299,941 - ------------------------------------------------------------------------------- SIX MONTHS ENDED JANUARY 31, 1995 CLASS Y SHARES AMOUNT - ------------------------------------------------------------------------------- Shares sold 902,727 $12,148,355 - ------------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 271,662 3,510,978 - ------------------------------------------------------------------------------- 1,174,389 15,659,333 - ------------------------------------------------------------------------------- Shares repurchased (425,159) (5,646,522) - ------------------------------------------------------------------------------- NET INCREASE 749,230 $10,012,811 - ------------------------------------------------------------------------------- FOR THE PERIOD APRIL 1, 1994 (COMMENCEMENT OF OPERATIONS) TO JULY 31, 1994 CLASS Y SHARES AMOUNT - ------------------------------------------------------------------------------- Shares sold 5,361,674 $72,013,488 - ------------------------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 685 8,999 - ------------------------------------------------------------------------------- 5,362,359 72,022,487 - ------------------------------------------------------------------------------- Shares repurchased (77,822) (1,046,787) - ------------------------------------------------------------------------------- NET INCREASE 5,284,537 $70,975,700 - ------------------------------------------------------------------------------- FUND INFORMATION INVESTMENT MANAGER Putnam Investment Management, Inc. One Post Office Square Boston, MA 02109 MARKETING SERVICES Putnam Mutual Funds Corp. One Post Office Square Boston, MA 02109 CUSTODIAN Putnam Fiduciary Trust Company LEGAL COUNSEL Ropes & Gray TRUSTEES George Putnam, Chairman William F. Pounds, Vice Chairman Jameson Adkins Baxter Hans H. Estin John A. Hill Elizabeth T. Kennan Lawrence J. Lasser Robert E. Patterson Donald S. Perkins George Putnam, III A.J.C. Smith W. Nicholas Thorndike OFFICERS George Putnam Charles E. Porter President Executive Vice President Patricia C. Flaherty Lawrence J. Lasser Senior Vice President Vice President Gordon H. Silver Peter Carman Vice President Vice President Brett C.Browchuk Thomas V. Reilly Vice President Vice President Edward P. Bousa Kenneth J. Taubes Vice President and Fund Manager Vice President and Fund Manager Rosemary H. Thomsen William N. Shiebler Vice President and Fund Manager Vice President John R. Verani Paul M. O'Neil Vice President Vice President John D. Hughes Beverly Marcus Vice President and Treasurer Clerk and Assistant Treasurer This report is for the information of shareholders of The George Putnam Fund of Boston. It may also be used as sales literature when preceded or accompanied by the current prospectus, which gives details of sales charges, investment objec- tives and operating policies of the fund, and the most recent copy of Putnam's Quarterly Performance Summary. For more information, or to request a prospectus, call toll free: 1-800-225-1581. SHARES OF MUTUAL FUNDS ARE NOT DEPOSITS OF, OR GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORA- TION (FDIC), THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. --------------- PUTNAM INVESTMENTS Bulk Rate U.S. Postage THE PUTNAM FUNDS PAID One Post Office Square Putnam Boston, Massachusetts 02109 Investments --------------- 001/880/505 16919 APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED AND EDGAR-FILED TEXTS: (1) Boldface typeface is displayed with capital letters, italic typeface is displayed in normal type. (2) Because the printed page breaks are not reflected, certain tabular and columnar headings and symbols are displayed differently in this filing. (3) Bullet points and similar graphic signals are omitted. (4) Page numbering has been omitted. (5) The trademark symbol has been replaced by (TM). (6) The copyright symbol has been replaced by (C). (7) The dagger symbol has been replaced by (+). (8) The registered mark symbol has been replaced by (R). (9) The double dagger symbol has been replaced by (^). -----END PRIVACY-ENHANCED MESSAGE-----