Putnam
Equity
Income
Fund
ANNUAL REPORT
November 30, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Putnam Equity Income Fund's strong performance isn't a fluke. . . .
The fund's admirable returns and low volatility also fit comfortably
into Putnam's style . . ."
-- Morningstar Mutual Funds, November 8, 1996
* Investing abroad "is only a small part of what [Putnam Equity Income
Fund] is doing, but it's maybe the most innovative."
-- Edward Bousa, Fund Manager,
in Bloomberg Business News
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
14 Portfolio holdings
31 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
Income-conscious shareholders seeking a relatively conservative equity
investment were well rewarded by Putnam Equity Income Fund's performance
during the fiscal year ended November 30, 1996. Your fund captured an
enviable share of the stock market's record-setting advance during the
period while undertaking less of the risk associated with more
aggressive investments.
We believe that your fund's strict adherence to a value investing
strategy -- implemented nearly four years ago -- has contributed
substantially to strong performance.
In addition, your fund is particularly well suited for riding out the
market volatility that many observers, including Putnam Investments,
believe we may experience in the months ahead. In the following report,
your fund's management team reviews fiscal 1996 performance and
discusses prospects for fiscal 1997.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
January 15, 1997
Report from the Fund Managers
Edward P. Bousa, lead manager
Kenneth J. Taubes
Rosemary H. Thomsen
Having taken advantage of a powerful market rally, Putnam Equity Income
Fund ends fiscal 1996 on a particularly high note. For the 12 months
through November 30, 1996, your fund's class A shares gained 24.96% at
net asset value (NAV) and 17.74% at public offering price (POP). Over
the same period, the average fund in Lipper Analytical Services' Equity
Income category rose 22.28%. For fund performance over longer periods
and for other class shares, please turn to page 8 of this report.
A gently growing economy, stable interest rates, low inflation,
substantial mutual fund inflows, and effective corporate restructurings
helped make equities very attractive in fiscal 1996. There is some
disagreement among analysts as to whether stocks are currently
overvalued; some argue that stocks have further room for moderate near-
term growth, while others believe that traditional measures of equity
valuation signal an overextended market. Whatever the case, we believe
your fund's conservative income-conscious strategy -- and diversified
fixed-income component -- to be particularly appropriate in an uncertain
investing environment.
* BANKS, TECHNOLOGY STOCKS EACH THRIVE OVER PERIOD
Your fund's holdings in the financial sector proved highly rewarding
over the past fiscal year. Bank stocks were particularly strong; against
the prevailing backdrop of stable interest rates, banks' cost-cutting
efforts bolstered earnings. Companies within the portfolio such as
NationsBank, Banc One, and Keycorp thrived over the period. Insurance
companies also benefited from benign economic conditions. Fund holdings
in the insurance sector such as SAFECO tend to be highly sensitive to
interest rates, performing well when rates remain generally stable as
they have in recent years.
Elsewhere in the portfolio, your fund's shares of MCI appreciated
sharply after the company's recent takeover by British Telephone. We
expect this new entity to be a fierce competitor in the lucrative global
telecommunications market. Texas Instruments, another fund holding,
performed well, as investors showed their approval of the company's
decision to spin off its defense subsidiary. TI also experienced a
substantial increase in royalty payments for its DRAM computer chip
design now that Samsung, a Korean company, is paying for the use of the
technology.
IBM has been one of the fund's most rewarding holdings over the fiscal
year. After a wrenching re-engineering process in the late 1980s, IBM
has reestablished its credentials as a premier growth company. Corporate
earnings appear sound and growing, the balance sheet is quite healthy,
and management has initiated a substantial stock buyback program that we
consider an important support for the stock price. 3M has been another
strong holding for your fund, with a diverse, innovative product line
and efficient management. While these securities, along with others
discussed in this report, were viewed favorably at the end of the
period, all portfolio holdings are subject to review and adjustment in
accordance with the fund's investment strategy and may well vary in the
future.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Insurance and finance 16.3%
Utilities 12.6%
Oil and gas 8.1%
Automotive 4.9%
Consumer non-durables 4.3%
Footnote reads:
* Based on net assets as of 11/30/96. Holdings will vary over time.
* ENERGY COMPANIES AN AREA OF FOCUS; FIXED-INCOME COMPONENT PERFORMS
WELL
The past several months have witnessed a firming in energy prices -- a
trend we believe will persist in the coming months. In turn, we think
that a number of energy companies are well positioned to extend the
gains they made over the past year. Fund holdings Exxon, Mobil, and
Amoco have all made adjustments to deal with the sluggish energy prices
that prevailed over the past several years. In a more favorable
operating environment, they may show substantially higher earnings.
Elsewhere in the energy sector, PanEnergy, a pipeline operator, was a
strong performer for your fund. Generally electric utilities were a rare
source of weakness for the portfolio, as share prices reflected unease
about the long-term effects of deregulation.
Your fund also looks abroad for attractively valued stocks; it currently
owns shares of several foreign companies, adding up to about 4.6% of the
fund's net assets. Among these holdings is Hoechst, a leading German
chemical and pharmaceutical firm. Hoechst has benefited from a cost-
cutting and restructuring process similar to those successfully
implemented by many American companies. A strengthening German stock
market helped Hoechst as well as another German fund holding, BMW. BMW
is offering, we believe, one of its strongest product lines in years,
just as worldwide demand for performance automobiles is rising.
At the end of fiscal 1996, your fund had 8.3% of its net assets invested
in fixed-income securities. As we head into 1997, moderate economic
growth and low inflation suggest an environment conducive to a stable
domestic bond market. Accordingly we are concentrating on U.S.
government securities in the 7- to 10-year maturity range and on
corporate bonds. Over the past fiscal year, high-yield bonds, supported
by strong company earnings, boosted your fund's performance. In the
months ahead, high-yield bonds may continue to do well. Finally your
fund's investment in international bonds contributed substantially to
the fixed-income segment's performance, and we believe that Australian,
Canadian, and some emerging-market countries such as Mexico and
Venezuela provide attractive opportunities for fixed-income investors.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Exxon Corp.
Oil and gas
Mobil Corp.
Oil and gas
Texas Instruments, Inc.
Electronics
Weyerhaeuser Co.
Paper
J.P. Morgan & Co., Inc.
Financial services
Banc One Corp.
Financial services
IBM Corp.
Business equipment
Amoco Corp.
Oil and gas
Kimberly-Clark Corp.
Consumer non-durables
Minnesota Mining & Manufacturing Co.
Basic industrial products
Footnote reads:
These holdings represent 15.2% of the fund's net assets as of 11/30/96.
Portfolio holdings will vary over time.
* OUTLOOK: EXPECT SOME FLUCTUATIONS AS INVESTORS EVALUATE MARKET
Our strategy is to locate companies that are changing faster than their
industries and that offer innovative products and services. We also
target companies with sound balance sheets that return substantial value
to shareholders through dividends. In the coming months, such companies
may hold their ground despite much-anticipated market retreats and
fluctuations. Over the longer term, they appear well positioned to
increase their market share, boost profits, and continue to transform
themselves when necessary. Whatever happens in the months ahead, we urge
you to maintain a long-term perspective when evaluating the progress of
your investments.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 11/30/96, there is no guarantee the fund
will continue to hold these securities in the future.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam Equity Income Fund seeks current income by investing
primarily in a diversified portfolio of income-producing equity
securities. Capital growth is a secondary objective when consistent with
seeking current income.
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares
changed over time, assuming you held the shares through the entire
period and reinvested all distributions in the fund.
TOTAL RETURN FOR PERIODS ENDED 11/30/96
Class A Class B Class M
(inception date) (6/15/77) (9/13/93) (12/2/94)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
1 year 24.96% 17.74% 24.06% 19.06% 24.35% 20.05%
- ------------------------------------------------------------------------
5 years 120.97 108.39 -- -- -- --
Annual average 17.18 15.82 -- -- -- --
- ------------------------------------------------------------------------
10 years 201.00 183.68 -- -- -- --
Annual average 11.65 10.99 -- -- -- --
- ------------------------------------------------------------------------
Life of class -- -- 65.34 62.34 65.25 59.40
Annual average -- -- 16.90 16.24 28.55 26.25
- ------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 11/30/96
Standard & Poor's Consumer
500 Index Price Index
- ------------------------------------------------------------------------
1 year 27.85% 3.26%
- ------------------------------------------------------------------------
5 years 130.70 15.09
Annual average 18.19 2.85
- ------------------------------------------------------------------------
10 years 311.57 43.66
Annual average 15.20 3.69
- ------------------------------------------------------------------------
Life of class B 78.03 9.53
Annual average 19.65 2.87
- ------------------------------------------------------------------------
Life of class M 75.06 5.94
Annual average 32.29 2.93
- ------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustment for taxes payable on reinvested distributions or
for the fund's class A distribution plan prior to its implementation on
1/1/90. Investment returns and net asset value will fluctuate so that an
investor's shares when sold may be worth more or less than their
original cost. POP assumes 5.75% maximum sales charge for class A shares
and 3.50% for class M shares. CDSC for class B shares declines from 5.0%
to 1% in the sixth year and is eliminated thereafter.
[GRAPHIC WORM CHART OMITTED: GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
S&P 500
Date/year Fund at POP Index CPI
11/30/86 9,425 10,000 10,000
11/30/87 7,980 9,523 10,453
11/30/88 10,232 11,737 10,897
11/30/89 12,048 15,363 11,404
11/30/90 10,776 14,825 12,120
11/30/91 12,838 17,840 12,482
11/30/92 14,335 21,132 12,862
11/30/93 16,779 23,267 13,207
11/30/94 17,047 23,510 13,560
11/30/95 22,701 32,192 13,913
11/30/96 28,368 41,157 14,366
Footnote reads:
Past performance is no assurance of future results. A $10,000 investment
in the fund's class B shares at inception on 9/13/93 would have been
valued at $16,534 at net asset value on 11/30/96 ($16,234 with a
redemption at the end of the period). A $10,000 investment in the fund's
class M shares at inception on 12/2/94 would have been valued at $16,525
at net asset value on 11/30/96 $15,940 at public offering price.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 11/30/96
Class A Class B Class M
- ------------------------------------------------------------------------
Distributions (number) 4 4 4
- ------------------------------------------------------------------------
Income $0.320 $0.244 $0.272
- ------------------------------------------------------------------------
Total $0.320 $0.244 $0.272
- ------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- ------------------------------------------------------------------------
11/30/95 $10.93 $11.60 $10.89 $10.89 $11.28
- ------------------------------------------------------------------------
11/30/96 13.29 14.10 13.23 13.23 13.71
- ------------------------------------------------------------------------
Current return
- ------------------------------------------------------------------------
End of period
- ------------------------------------------------------------------------
Current dividend rate1 2.41% 2.27% 1.81% 2.03% 1.95%
- ------------------------------------------------------------------------
Current 30-day SEC yield2 2.25 2.12 1.54 1.77 1.71
- ------------------------------------------------------------------------
1 Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
2 Based on investment income, calculated using SEC guidelines.
TOTAL RETURN FOR PERIODS ENDED 12/31/96
(most recent calendar quarter)
Class A Class B Class M
(inception date) (6/15/77) (9/13/93) (12/2/94)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------
1 year 21.33% 14.32% 20.31% 15.31% 20.71% 16.50%
- ------------------------------------------------------------------------
5 years 102.08 90.38 -- -- -- --
Annual average 15.11 13.74 -- -- -- --
- ------------------------------------------------------------------------
10 years 206.04 188.54 -- -- -- --
Annual average 11.84 11.18 -- -- -- --
- ------------------------------------------------------------------------
Life of class -- -- 64.09 61.09 64.09 58.28
Annual average -- -- 16.19 15.54 26.88 24.70
- ------------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. Investment returns
and principal value will fluctuate so that an investor's shares, when
sold, may be worth more or less than their original cost.
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class M shares have a lower initial sales charge and a higher 12b-1 fee
than class A shares and no sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance
figures shown here assume the maximum 5.75% sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B shares and assumes redemption at the end of
the period. Your fund's CDSC declines from a 5% maximum during the first
year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies.
COMPARATIVE BENCHMARKS
Standard & Poor's 500 Index is an unmanaged list of common stocks that
is frequently used as a general measure of stock market performance. The
index assumes reinvestment of all distributions and does not take into
account brokerage commissions or other costs. The fund's portfolio
contains securities that do not match those in the index. It is not
possible to invest directly in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
WELCOME TO
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about investing and retirement planning, and access market news and an
economic outlook from Putnam experts -- with just a few clicks of the
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VISIT PUTNAM'S NEW SITE ON THE WORLD WIDE WEB TO FIND OUT:
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* Putnam's money management philosophy
* daily fund pricing and long-term fund performance
* how to tell if your retirement savings plan is on track
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You can also read Dr. Robert Goodman's economic commentary and Putnam's
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The site can be accessed through any of the major online services
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you can also access it via Netscape and an independent Internet service
provider.
New features will be added to the site on an ongoing basis. So, visit us
at http://www.putnaminv.com -- often!
Report of independent accountants
For the fiscal year ended November 30, 1996
To the Trustees and Shareholders of
Putnam Equity Income Fund
We have audited the accompanying statement of assets and liabilities of
Putnam Equity Income Fund, including the portfolio of investments owned,
as of November 30, 1996, 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 periods indicated therein. These financial statements and
financial highlights are the responsibility of the fund's 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether 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 included
confirmation of securities owned as of November 30, 1996, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made
by management, 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 Equity Income Fund as of November 30, 1996,
the results of its operations 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 periods indicated therein, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
January 14, 1997
<TABLE>
<CAPTION>
Portfolio of investments owned
November 30, 1996
COMMON STOCKS (83.5%) *
NUMBER OF SHARES VALUE
<S> <C> <C>
Agriculture (--%)
- -------------------------------------------------------------------------------------
1,101 PSF Holdings LLC Class A $ 18,717
Automotive (3.6%)
- -------------------------------------------------------------------------------------
7,300 Bayerische Motoren Werke (BMW) AG (Germany) 4,733,724
76,000 Chrysler Corp. 2,698,000
139,000 Echlin, Inc. 4,673,875
185,000 General Motors Corp. 10,660,625
118,000 General Motors Corp. Class H 6,431,000
------------
29,197,224
Basic Industrial Products (2.4%)
- -------------------------------------------------------------------------------------
106,000 Deere (John) & Co. 4,730,250
130,000 Minnesota Mining & Manufacturing Co. 10,887,500
176,000 New Holland N.V. (Netherlands) + 3,542,000
------------
19,159,750
Building and Construction (--%)
- -------------------------------------------------------------------------------------
60 Terex Corp. Rights + 120
Business Equipment and Services (3.8%)
- -------------------------------------------------------------------------------------
78,000 Alco Standard Corp. 4,036,500
99,000 Deluxe Corp. 3,069,000
81,900 Hewlett-Packard Co. 4,412,363
75,000 IBM Corp. 11,953,125
151,000 Xerox Corp. 7,417,875
------------
30,888,863
Cable Television (0.2%)
- -------------------------------------------------------------------------------------
71,200 Cox Communications, Inc. Class A + 1,459,600
Chemicals (5.2%)
- -------------------------------------------------------------------------------------
111,300 Bayer AG ADR (Germany) 4,481,372
52,000 Dow Chemical Co. 4,355,000
73,600 du Pont (E.I.) de Nemours & Co., Ltd. 6,936,800
137,000 Eastman Chemical Co. 7,826,125
75,000 Hoechst AG (Germany) 3,282,927
93,000 Imperial Chemical Industries PLC ADR (United Kingdom) 4,768,575
118,000 PPG Industries, Inc. 7,227,500
93,200 Witco Chemical Corp. 2,830,950
------------
41,709,249
Conglomerates (2.8%)
- -------------------------------------------------------------------------------------
82,000 ITT Industries, Inc. 1,916,750
113,000 Temple Inland, Inc. 6,073,750
108,300 TRW, Inc. 10,545,713
30,000 United Technologies Corp. 4,207,500
------------
22,743,713
Consumer Durable Goods (1.0%)
- -------------------------------------------------------------------------------------
155,000 Whirlpool Corp. 7,750,000
Consumer Non Durables (4.3%)
- -------------------------------------------------------------------------------------
173,300 American Brands, Inc. 8,275,075
49,600 Avon Products, Inc. 2,765,200
113,000 Kimberly-Clark Corp. 11,045,750
75,000 Philip Morris Cos., Inc. 7,734,375
146,820 RJR Nabisco Holdings Corp. 4,698,240
------------
34,518,640
Electronics and Electrical Equipment (3.1%)
- -------------------------------------------------------------------------------------
93,600 Eaton Corp. 6,481,800
50,000 Motorola, Inc. 2,768,750
56,000 Siemens AG (Germany) 2,698,927
202,000 Texas Instruments, Inc. 12,877,500
------------
24,826,977
Entertainment (--%)
- -------------------------------------------------------------------------------------
5 Cobblestone Holdings, Inc. + 50
Environmental Control (0.4%)
- -------------------------------------------------------------------------------------
97,000 WMX Technologies, Inc. 3,492,000
Food and Beverages (3.2%)
- -------------------------------------------------------------------------------------
123,000 Anheuser-Busch Cos., Inc. 5,212,125
104,000 Dole Food Co. 4,056,000
135,000 Flowers Industries, Inc. 3,189,375
110,000 General Mills, Inc. 6,985,000
295,000 Whitman Corp. 6,785,000
------------
26,227,500
Insurance and Finance (15.2%)
- -------------------------------------------------------------------------------------
180,000 American General Corp. 7,402,500
98,000 AON Corp. 5,965,750
251,000 Banc One Corp. 11,953,875
74,800 Bankers Trust New York Corp. 6,507,600
81,400 Beneficial Corp. 5,056,975
25,460 CIGNA Corp. 3,599,408
97,000 CoreStates Financial Corp. 5,225,875
140,000 Fleet Financial Group, Inc. 7,752,500
100,000 Great Western Financial Corp. 3,112,500
169,000 Keycorp 8,851,375
14,200 Marshall & Ilsley Corp. 482,800
134,000 Morgan (J.P.) & Co., Inc. 12,646,250
92,200 NationsBank Corp. 9,554,225
104,000 Norwest Corp. 4,862,000
203,000 PNC Bank Corp. 8,018,500
73,400 SAFECO Corp. 3,055,275
75,000 Salomon, Inc. 3,421,875
105,000 St. Paul Cos., Inc. 6,181,875
101,950 Synovus Financial Corp. 3,338,863
296,000 USF&G Corp. 5,920,000
------------
122,910,021
Medical Supplies and Devices (0.8%)
- -------------------------------------------------------------------------------------
145,600 Baxter International, Inc. 6,188,000
Metals and Mining (0.3%)
- -------------------------------------------------------------------------------------
24,400 Carpenter Technology Corp. 866,200
57,000 Freeport-McMoRan Copper & Gold Co., Inc. Class A 1,702,875
------------
2,569,075
Oil and Gas (8.0%)
- -------------------------------------------------------------------------------------
145,000 Amoco Corp. 11,255,625
63,000 Chevron, Inc. 4,221,000
70,000 Elf Aquitane ADR (France) 3,071,250
153,000 Exxon Corp. 14,477,625
110,500 Mobil Corp. 13,370,500
277,000 Occidental Petroleum Corp. 6,648,000
107,000 PanEnergy Corp. 4,708,000
182,000 Total Corp. ADR (France) 7,348,250
------------
65,100,250
Packaging and Containers (0.6%)
- -------------------------------------------------------------------------------------
93,500 Crown Cork & Seal Co., Inc. 4,955,500
Paper and Forest Products (2.3%)
- -------------------------------------------------------------------------------------
78,000 Chesapeake Corp. 2,379,000
87,000 Rayonier, Inc. 3,371,250
279,000 Weyerhaeuser Co. 12,834,000
------------
18,584,250
Pharmaceuticals (3.2%)
- -------------------------------------------------------------------------------------
55,100 Bristol-Myers Squibb Co. 6,267,620
263,370 Pharmacia & Upjohn, Inc. 10,172,661
137,700 Warner-Lambert Co. 9,845,550
------------
26,285,831
Photography (1.4%)
- -------------------------------------------------------------------------------------
100,000 Eastman Kodak Co. 8,100,000
70,000 Polaroid Corp. 2,983,750
------------
11,083,750
Publishing (0.2%)
- -------------------------------------------------------------------------------------
30,100 Times Mirror Co. Class A 1,576,488
Real Estate Investment Trust (REIT's) (1.1%)
- -------------------------------------------------------------------------------------
70,000 Bradley Real Estate Trust, Inc. 1,225,000
56,000 Duke Realty Investments, Inc. 2,009,000
67,000 Equity Residential Properties Trust 2,688,375
67,000 LTC Properties, Inc. 1,147,375
100,000 Nationwide Health Properties, Inc. 2,225,000
------------
9,294,750
Retail (3.8%)
- -------------------------------------------------------------------------------------
211,800 Dayton Hudson Corp. 8,233,720
251,000 K mart Corp. 2,792,370
126,000 May Department Stores Co. 6,142,500
118,000 Penney (J.C.) Co., Inc. 6,342,500
188,000 Rite Aid Corp. 7,449,500
------------
30,960,590
Telecommunications (0.8%)
- -------------------------------------------------------------------------------------
12,200 Deutsche Telekom AG ADR (Germany) + 260,775
196,600 MCI Communications Corp. 5,996,300
------------
6,257,075
Transportation (3.6%)
- -------------------------------------------------------------------------------------
110,000 CSX Corp. 5,142,500
97,000 Delta Air Lines, Inc. 7,299,250
75,000 Norfolk Southern Corp. 6,750,000
220,400 Ryder System, Inc. 6,694,650
55,000 Union Pacific Corp. 3,203,750
------------
29,090,150
Utilities (12.2%)
- -------------------------------------------------------------------------------------
140,000 Ameritech Corp. New 8,242,500
133,100 Bell Atlantic Corp. 8,368,660
90,000 BellSouth Corp. 3,633,750
5,400 Carolina Power & Light Co. 197,775
245,463 Cinergy Corp. 8,223,011
110,000 Dominion Resources, Inc. 4,193,750
97,000 GTE Corp. 4,352,875
39,000 NIPSCO Industries, Inc. 1,511,250
166,000 NYNEX Corp. 7,698,250
78,000 Oklahoma Gas & Electric Co. 3,207,750
228,000 Pacific Enterprises 6,982,500
243,000 Pacific Gas & Electric Co. 5,862,375
122,000 Pacific Telesis Group 4,514,000
118,600 Potomac Electric Power Co. 3,083,600
66,000 Public Service Co. 2,574,000
159,000 SBC Communications, Inc. 8,367,370
157,000 Scana Corp. 4,278,250
202,000 Sprint Corp. 8,458,750
48,000 Veba (Vereinigte Elektrizitaets Bergwerks) AG (Germany) 2,808,195
68,400 WICOR, Inc. 2,488,050
------------
99,046,661
------------
Total Common Stocks (cost $549,106,351) $675,894,794
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (3.9%) *
PRINCIPAL AMOUNT VALUE
U.S. Government Agency Mortgage Pass-Through Certificates (1.0%)
- -------------------------------------------------------------------------------------
Federal National Mortgage Association
$1,782,396 7s, with due dates from July 1, 2023 to May 1, 2026 $ 1,768,459
834,447 6s, Dwarfs, with due dates from April 1, 2009 to
October 1, 2009 812,277
510,000 5.94s, December 12, 2005 497,010
Government National Mortgage Association
2,936,387 7s, with due dates from February 15, 2026 to April 15, 2026 2,918,946
868,409 6 1/2s, with due dates from March 15, 2026 to April 15, 2026 844,251
398,571 6 1/2s, Midgets, March 15, 2009 397,448
435,063 6s, Midgets, September 15, 2008 425,274
------------
7,663,665
U.S. Treasury Obligations (2.9%)
- -------------------------------------------------------------------------------------
U.S. Treasury Bonds
1,180,000 11 5/8s, November 15, 2004 1,592,811
365,000 8 7/8s, August 15, 2017 464,806
2,760,000 8 1/8s, August 15, 2019 3,292,156
U.S. Treasury Notes
385,000 11 7/8s, November 15, 2003 # 512,712
845,000 11 1/8s, August 15, 2003 1,082,918
3,710,000 7 1/2s, May 15, 2002 3,994,038
2,360,000 7 1/4s, August 15, 2004 2,540,328
3,465,000 6 1/2s, October 15, 2006 3,578,687
350,000 6 1/2s, May 31, 2001 359,244
4,730,000 6 3/8s, August 15, 2002 4,847,493
790,000 6 1/4s, April 30, 2001 803,327
555,000 6 1/4s, June 30, 1998 560,894
------------
23,629,414
------------
Total U.S. Government and Agency Obligations
(cost $30,405,305) $ 31,293,079
</TABLE>
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES (2.5%) *
PRINCIPAL AMOUNT VALUE
Advertising (--%)
- -------------------------------------------------------------------------------------
$25,000 Adams Outdoor Advertising sr. notes 10 3/4s, 2006 $ 26,313
10,000 Lamar Advertising Co. sr. sub. notes 9 5/8s, 2006 10,175
15,000 Universal Outdoor, Inc. sr. sub. notes 9 3/4s, 2006 15,338
------------
51,826
Aerospace and Defense (0.1%)
- -------------------------------------------------------------------------------------
50,000 Alliant Techsystems, Inc. sr. sub. notes 11 3/4s, 2003 54,875
25,000 BE Aerospace sr. notes 9 3/4s, 2003 26,188
50,000 Howmet Corp. sr. sub. notes 10s, 2003 53,875
320,000 Northrop-Grumman Corp. notes 7s, 2006 323,942
20,000 Sequa Corp. bonds 8 3/4s, 2001 20,100
5,000 UNC, Inc. sr. sub. notes 11s, 2006 5,338
50,000 Wyman-Gordon Co. sr. notes 10 3/4s, 2003 53,375
------------
537,693
Agriculture (--%)
- -------------------------------------------------------------------------------------
12,127 Premium Standard Farms, Inc. sr. sec. notes 11s, 2003
[2 DBL. DAGGERS] 12,370
Automotive (--%)
- -------------------------------------------------------------------------------------
50,000 A.P.S., Inc. company guaranty 11 7/8s, 2006 54,500
25,000 Aftermarket Technology Corp. sr. sub. notes 12s, 2004 27,750
10,000 CSK Auto, Inc. 144A sr. sub. notes 11s, 2006 10,300
65,000 Daimler-Benz med. term notes 7 3/8s, 2006 (Germany) 68,372
25,000 Exide Corp. deb. stepped-coupon zero %
(12 1/4s, 12/15/97), 2004 ++ 22,750
5,000 Hawk Corp. 144A sr. notes 10 1/4s, 2003 5,100
15,000 Key Plastics Corp. sr. notes 14s, 1999 15,600
20,000 Lear Corp. sub. notes 9 1/2s, 2006 21,500
5,000 Speedy Muffler King, Inc. company guaranty 10 7/8s,
2006 (Canada) 5,325
------------
231,197
Banks (0.4%)
- -------------------------------------------------------------------------------------
170,000 Abbey National PLC sub. notes 7.35s, 2049 (United Kingdom) 176,550
170,000 ABN Ambro Bank N.V. sub. notes 7.55s, 2006 (Netherlands) 180,741
400,000 Advanta National Bank sr. notes 7.02s, 2001 405,704
225,000 Bangkok Bank Public Co. 144A sub. notes 8 1/4s, 2016
(Thailand) 234,488
20,000 Chevy Chase Savings Bank Inc. sub. deb. 9 1/4s, 2005 20,900
300,000 Citicorp sub. notes 7 1/8s, 2005 309,771
300,000 Den Danske Bank 144A sub. notes 6.55s, 2003 (Denmark) 298,464
85,000 First National Bank of Omaha sub. notes 7.32s, 2010 85,547
100,000 First Nationwide Holdings 144A sr. sub. notes 10 5/8s, 2003 107,000
25,000 First Nationwide Holdings sr. sub. notes 9 1/8s, 2003 25,250
75,000 NationsBank Corp. sub. notes 10 1/4s, 2025 73,824
10,000 Ocwen Federal Bank sub. deb. 12s, 2005 10,700
5,000 Ocwen Financial Corp. notes 11 7/8s, 2003 5,350
270,000 Peoples Bank-Bridgeport sub. notes 7.2s, 2006 270,898
250,000 Riggs National Corp. sub. deb. 8 1/2s, 2006 267,188
300,000 Scotland International Finance 144A sub. notes 8.85s, 2006
(Netherlands) 345,048
120,000 Sparbanken Sverige AB (Swedbank) 144A sub. 7 1/2s, 2006
(Sweden) 123,283
325,000 Webster Financial Corp. sr. notes 8 3/4s, 2000 340,581
------------
3,281,287
Basic Industrial Products (--%)
- -------------------------------------------------------------------------------------
5,000 Astor Corp. 144A sr. sub. notes 10 1/2s, 2006 5,100
50,000 Clark-Schwebel sr. notes 10 1/2s, 2006 53,250
75,000 Inter-City Products sr. notes 9 3/4s, 2000 75,750
5,000 Mettler Toledo, Inc. company guaranty 9 3/4s, 2006 5,225
5,000 Ryder TRS, Inc. 144A sr. sub. notes 10s, 2006 5,088
------------
144,413
Broadcasting (0.1%)
- -------------------------------------------------------------------------------------
25,000 Allbritton Communications sr. sub. deb.
Ser. B, 9 3/4s, 2007 23,875
25,000 Argyle Television Corp. sr. sub. notes 9 3/4s, 2005 25,313
10,000 Cablevision Systems Corp. sr. sub. deb. 9 7/8s, 2023 9,500
25,000 Cablevision Systems Corp. sr. sub. reset deb. 10 3/4s, 2004 25,625
40,000 Commodore Media, Inc. sr. sub. notes stepped-coupon
7 1/2s, (13 1/4s, 5/1/98), 2003 ++ 41,600
305,000 Continental Cablevision, Inc. sr. deb. 9 1/2s, 2013 354,245
80,000 Diamond Cable Communication Co. sr. disc. notes
stepped-coupon zero % (11 3/4s, 12/15/00), 2005
(United Kingdom) ++ 55,800
20,000 Diamond Cable Communication Co. sr. disc. notes
stepped-coupon zero % (13 1/2s, 9/30/99), 2004
(United Kingdom) ++ 16,200
5,000 Gray Communications System Inc. sr. sub. notes 10 5/8s, 2006 5,150
25,000 Jacor Communications, Inc. sr. sub. notes 10 1/8s, 2006 25,625
25,000 Jones Intercable, Inc. sr. sub. deb. 10 1/2s, 2008 27,000
25,000 Lenfest Communications, Inc. sr. notes 8 3/8s, 2005 24,188
50,000 Marcus Cable Co. (L.P.) sr. sub. disc. notes
stepped-coupon zero % (13 1/2s, 8/1/99), 2004 ++ 39,188
15,000 Park Broadcasting, Inc. sr. notes Ser. B, 11 3/4s, 2004 17,513
25,000 Paxson Communications Corp. 144A sr. sub. notes 11 5/8s,
2002 25,625
25,000 Rogers Cablesystem Ltd. deb. 10 1/8s, 2012 (Canada) 25,813
25,000 Rogers Cablesystem Ltd. notes 9 5/8s, 2002 (Canada) 26,188
50,000 Sinclair Broadcasting Group sr. sub. notes 10s, 2005 50,500
50,000 Sullivan Broadcasting sr. sub. notes 10 1/4s, 2005 50,688
30,000 Videotron Holdings. sr. disc. notes stepped-coupon
zero % (11s, 8/15/00), 2005 (United Kingdom) ++ 23,625
------------
893,261
Building and Construction (--%)
- -------------------------------------------------------------------------------------
$10,000 Atrium Companies, Inc. 144A sr. sub. notes 10 1/2s, 2006 $ 10,175
15,000 Cemex S.A. 144A bonds 12 3/4s, 2006 (Mexico) 16,650
5,000 Clark Material Handling Co. 144A sr. notes 10 3/4s, 2006 5,113
25,000 Schuller International Corp. sr. notes 10 7/8s, 2004 27,813
50,000 Scotsman Group, Inc. sr. secd. notes 9 1/2s, 2000 51,500
15,000 Terex Corp. sr. notes Ser. B, 13 1/4s, 2002 16,200
25,000 Triangle Pacific Corp. sr. notes 10 1/2s, 2003 26,625
------------
154,076
Business Equipment and Services (--%)
- -------------------------------------------------------------------------------------
25,000 Corporate Express, Inc. sr. sub. notes Ser. B, 9 1/8s, 2004 25,250
5,000 Iron Mountain, Inc. sr. sub. notes 10 1/8s, 2006 5,275
5,000 Pierce Leahy Corp. sr. sub. notes 11 1/8s, 2006 5,450
25,000 United Stationer Supply, Inc. sr. sub. notes 12 3/4s, 2005 27,594
------------
63,569
Cellular Communications (--%)
- -------------------------------------------------------------------------------------
10,000 Orbcomm Global Capital Corp. 144A sr. notes 14s, 2004 9,925
Chemicals (0.1%)
- -------------------------------------------------------------------------------------
5,000 Freedom Chemicals, Inc. 144A sr. sub. notes 10 5/8s, 2006 5,181
25,000 Great Lakes Carbon Corp. sr. notes 10s, 2006 26,750
25,000 IMC Fertilizer Group, Inc. deb. 9.45s, 2011 30,125
125,000 Lyondell Petrochemical Co. notes 9 1/8s, 2002 138,355
105,000 Sociedad Quimica Y Minera de Chile S.A. 144A bonds 7.7s,
2006 (Chile) 109,988
10,000 Sterling Chemicals Holdings sr. disc. notes stepped-coupon
zero % (13 1/2s, 8/15/01), 2008 ++ 5,600
5,000 Texas Petrochemical 144A sr. sub. notes 11 1/8s, 2006 5,350
50,000 Union Carbide Global Enterprises sr. sub. Ser. B, 12s, 2005 57,688
------------
379,037
Computer Services and Software (--%)
- -------------------------------------------------------------------------------------
15,000 Unisys Corp. sr. notes 11 3/4s, 2004 15,675
Conglomerates (--%)
- -------------------------------------------------------------------------------------
25,000 ADT Ltd. sr. sub. notes 9 1/4s, 2003 26,500
50,000 Congoleum Corp. sr. notes 9s, 2001 50,000
25,000 MacAndrews & Forbes Holdings, Inc. sub. deb. notes 13s,
1999 25,000
------------
101,500
Consumer Durable Goods (--%)
- -------------------------------------------------------------------------------------
15,000 Icon Fitness Corp. 144A sr. disc. notes stepped-coupon zero %
(14s, 11/15/01), 2006 ++ 7,800
5,000 Rayovac Corp. 144A sr. sub. notes 10 1/4s, 2006 5,125
95,000 RJR Nabisco, Inc. notes 8 3/4s, 2005 96,734
15,000 Selmer Co., Inc. sr. sub. notes 11s, 2005 16,350
------------
126,009
Consumer Non Durables (--%)
- -------------------------------------------------------------------------------------
$50,000 Guess Jeans, Inc. sr. sub. notes 9 1/2s, 2003 $ 51,500
Consumer Services (--%)
- -------------------------------------------------------------------------------------
50,000 Act III Theatres, Inc. sr. sub. notes 11 7/8s, 2003 55,000
5,000 AmeriKing. Inc. sr. notes 10 3/4s, 2006 5,100
50,000 Coinmach Corp. sr. notes Ser. B, 11 3/4s, 2005 54,000
15,000 FRD Acquisition Co. sr. notes Ser. B, 12 1/2s, 2004 15,225
50,000 Host Marriott Corp. sr. notes Ser. B, 9 1/2s, 2005 51,500
25,000 John Q Hammons Hotels, Inc. 1st mtge. 9 3/4s, 2005 25,313
5,000 Rose Hills Acquisition Corp. 144A sr. sub. notes 9 1/2s,
2004 5,063
------------
211,201
Electronics and Electrical Equipment (--%)
- -------------------------------------------------------------------------------------
30,000 Amphenol Corp. sr. sub. notes 12 3/4s, 2002 33,000
5,000 Celestica International Ltd. 144A sr. sub. notes 10 1/2s, 2006
(India) 5,163
7,397 Cirent Semiconductor, Inc. sr. sub. notes 10.22s, 2002 7,397
7,427 Cirent Semiconductor, Inc. 144A sr. sub. notes 10.14s, 2004 7,427
40,000 International Semi-Tech. Corp. sr. secd. disc. notes
stepped-coupon zero % (11 1/2s, 8/15/00), 2003
(Canada) ++ 24,800
10,000 Motors and Gears Inc. 144A sr. notes Ser. A, 10 3/4s, 2006 10,225
------------
88,012
Entertainment (0.2%)
- -------------------------------------------------------------------------------------
15,000 Cinemark USA, Inc. sr. sub. notes notes Ser. B, 9 5/8s, 2008 15,000
5,000 Cobblestone Holdings Inc. sr. notes Ser. B, zero %, 2004 2,075
390,000 News America Holdings, Inc. sr. notes 12s, 2001 414,094
50,000 Premier Parks, Inc. sr. notes Ser. A, 12s, 2003 54,500
40,000 Six Flags Corp. sr. sub. notes stepped-coupon zero %
(12 1/4s, 6/15/98), 2005 ++ 36,800
715,000 Time Warner Entertainment Co. deb. 7 1/4s, 2008 714,550
135,000 Time Warner Entertainment Co. notes 8 7/8s, 2012 150,521
50,000 Viacom International, Inc. sub. deb. 8s, 2006 48,500
------------
1,436,040
Environmental Control (--%)
- -------------------------------------------------------------------------------------
10,000 Allied Waste Industries, Inc. 144A sr. sub.
notes 10 1/4s, 2006 10,238
Food and Beverages (--%)
- -------------------------------------------------------------------------------------
15,000 Canandaigua Wine Co. 144A sr. sub. notes 8 3/4s, 2003 14,494
225,000 Kroger Co. sr. notes 8.15s, 2006 238,883
25,000 Mafco, Inc. sr. sub. notes 11 7/8s, 2002 26,250
50,000 Stater Brothers sr. notes 11s, 2001 53,500
------------
333,127
Health Care (--%)
- -------------------------------------------------------------------------------------
$180,000 Columbia Healthcare Corp. deb. 8.36s, 2024 206,579
15,000 IMED Corp. sr. sub. notes 9 3/4s, 2006 15,150
50,000 Merit Behavioral Care sr. sub. notes 11 1/2s, 2005 53,000
15,000 Paracelsus Healthcare sr. sub. notes 10s, 2006 12,975
25,000 Tenet Healthcare Corp. sr. notes 8 5/8s, 2003 26,625
25,000 Twin Labs, Inc. company guaranty 10 1/4s, 2006 26,000
------------
340,329
Insurance and Finance (0.4%)
- -------------------------------------------------------------------------------------
10,000 Aames Financial Corp. sr. notes 9 1/8s, 2003 10,200
50,000 American Life Holding Co. sr. sub. notes 11 1/4s, 2004 57,500
185,000 Conseco, Inc. sr. notes 10 1/2s, 2004 222,413
50,000 Contifinacial Corp. sr. notes 8 3/8s, 2003 51,500
295,000 Discover Credit Corp. med. term notes 9.07s, 2012 355,059
5,000 Dollar Financial Group, Inc. 144A sr. notes 10 7/8s, 2006 5,081
300,000 Finova Capital Corp. notes 9 1/8s, 2002 334,872
120,000 First Financial Caribbean Corp. sr. notes 7.84s, 2006 123,664
420,000 Ford Motor Credit Corp. notes 8.2s, 2002 453,566
10,000 Intertek Finance PLC 144A sr. sub. notes 10 1/4s, 2006
(United Kingdom) 10,225
35,000 Keystone Group, Inc. sr. secd. notes 9 3/4s, 2003 37,800
5,000 Olympic Financial Ltd. sr. notes 13s, 2000 5,500
5,000 Outsourcing Solutions, Inc. 144A sr. sub. notes 11s, 2006 5,213
320,000 Phoenix Home Life Mutual Insurance Co. 144A notes 6.95s,
2006 321,357
50,000 Primark Corp. sr. notes 8 3/4s, 2000 50,313
15,000 Provident Capital Trust 144A jr. sub. notes 8.6s, 2026 15,421
25,000 Reliance Group Holdings, Inc. sr. notes 9s, 2000 25,625
25,000 Reliance Group Holdings, Inc. sr. sub. deb. 9 3/4s, 2003 25,875
220,000 Salton Sea Funding Corp. company guaranty Ser. E, 8.3s, 2011 233,704
335,000 Sampoerna International Finance Co. 144A company guaranty
8 3/8s, 2006 (Indonesia) 349,003
215,000 Southern Investments Service Co. sr. notes 6.8s, 2006
(United Kingdom) 216,387
50,000 Van Kampen Merrit sr. notes 9 3/4s, 2003 53,563
------------
2,963,841
Medical Supplies and Devices (--%)
- -------------------------------------------------------------------------------------
25,000 Dade International, Inc. 144A sr. sub. notes 11 1/8s, 2006 27,000
50,000 Graphic Controls Corp. sr. sub. notes Ser. A, 12s, 2005 54,750
20,000 Wright Medical Technology, Inc. sr. secd. notes Ser. B,
10 3/4s, 2000 20,300
------------
102,050
Metals and Mining (0.1%)
- -------------------------------------------------------------------------------------
190,000 Noranda, Inc. notes 7s, 2005 (Canada) 192,601
221,000 PT Alatief Freeport sr. notes 9 3/4s, 2001 (Netherlands) 243,169
5,000 Renco Metals, Inc. sr. notes 11 1/2s, 2003 5,200
10,000 Royal Oak Mines, Inc. company guaranty Ser. B, 11s, 2006
(Canada) 10,300
15,000 WCI Steel, Inc. 144A sr. notes 10s, 2004 15,150
------------
466,420
Oil and Gas (0.2%)
- -------------------------------------------------------------------------------------
10,000 Abraxas Petroleum Corp. 144A sr. notes 11 1/2s, 2004 10,375
25,000 Benton Oil & Gas Co. sr. notes 11 5/8s, 2003 27,500
5,000 Costilla Energy, Inc. sr. notes 10 1/4s, 2006 5,050
155,000 El Paso Natural Gas Co. deb. 7 1/2s, 2026 160,262
5,000 Flores & Rucks Corp. sr. sub. notes 9 3/4s, 2006 5,263
10,000 Forcenergy, Inc. sr. sub. notes 9 1/2s, 2006 10,463
17,000 Gerrity Oil & Gas Corp. sr. sub. notes 11 3/4s, 2004 18,360
205,000 Gulf Canada Resources Ltd. sr. notes 8.35s, 2006 (Canada) 215,763
25,000 HS Resources, Inc. 144A sr. sub. notes 9 1/4s, 2006 25,375
250,000 Husky Oil Ltd. deb. 7.55s, 2016 (Canada) 256,993
5,000 Kelley Oil & Gas Corp. 144A sr. sub. notes 10 3/8s, 2006 5,100
25,000 Maxus Energy Corp. global notes 9 7/8s, 2002 25,750
25,000 Maxus Energy Corp. notes 9 1/2s, 2003 24,875
10,000 Parker Drilling Co. 144A company guaranty 9 3/4s, 2006 10,350
100,000 Petroliam Nasional Berhad 144A notes 7 5/8s, 2026
(Malaysia) 104,130
295,000 Petroliam Nasional Berhad 144A notes 7 1/8s, 2005
(Malaysia) 303,396
------------
1,209,005
Packaging and Containers (--%)
- -------------------------------------------------------------------------------------
5,000 Amtrol, Inc. 144A sr. sub. notes 10 5/8s, 2006 5,038
52,000 Ivex Packaging Corp. sr. sub. notes 12 1/2s, 2002 55,640
5,000 Printpack, Inc. 144A sr. sub. notes 10 5/8s, 2006 5,200
5,000 Printpack, Inc. 144A sr. notes 9 7/8s, 2004 5,175
5,000 US Can Corp. 144A sr. sub. notes 10 1/8s, 2006 5,225
------------
76,278
Paper and Forest Products (--%)
- -------------------------------------------------------------------------------------
15,000 Domtar, Inc. deb. 9 1/2s, 2016 (Canada) 16,388
25,000 Florida Coast Paper LLC 1st mtge. Ser. B, 12 3/4s, 2003 26,500
50,000 Doman Industries Ltd. sr. notes 8 3/4s, 2004 (Canada) 46,625
50,000 Repap New Brunswick sr. notes 10 5/8s, 2005 (Canada) 48,500
50,000 Riverwood International company guaranty 10 7/8s, 2008 45,000
25,000 Stone Consolidated Corp. sr. notes 10 1/4s, 2000 26,563
------------
209,576
Publishing (0.1%)
- -------------------------------------------------------------------------------------
50,000 American Media Operation, Inc. sr. sub. notes 11 5/8s, 2004 53,375
50,000 K-III Communications Corp. sr. notes 10 1/4s, 2004 52,250
420,000 News America Holdings, Inc. deb. 7.7s, 2025 408,551
------------
514,176
REITs (0.1%)
- -------------------------------------------------------------------------------------
120,000 Health Care Property Investors, Inc. sr. notes 6 1/2s, 2006 116,788
305,000 Meditrust med. term notes 7.3s, 2006 309,541
205,000 Sun Communities, Inc. sr. notes 7 5/8s, 2003 213,038
50,000 Tanger Properties Ltd. partnership gtd. notes 8 3/4s, 2001 50,767
------------
690,134
Recreation (--%)
- -------------------------------------------------------------------------------------
15,000 Alliance Gaming Corp. 12 7/8s, 2003 15,638
10,000 Argosy Gaming Co. 1st mtge. 13 1/4s, 2004 9,300
25,000 Bally Park Place Funding 1st mtge. 9 1/4s, 2004 27,553
25,000 Casino America, Inc. sr. notes 12 1/2s, 2003 24,250
10,000 Casino Magic Corp. 144A 1st mtge. 13s, 2003 9,900
25,000 Coast Hotels & Casino company guaranty Ser. B, 13s, 2002 26,875
25,000 Empress River Casino sr. notes 10 3/4s, 2002 26,625
25,000 Grand Casinos, Inc. 1st mtge. 10 1/8s, 2003 25,188
25,000 Hollywood Casino Corp. sr. notes 12 3/4s, 2003 23,000
50,000 Players International Inc. sr. notes 10 7/8s, 2005 49,500
25,000 Trump A.C. 1st mtge. 11 1/4s, 2006 23,625
50,000 Trump Holdings & Funding Corp. sr. notes 15 1/2s, 2005 57,000
------------
318,454
Retail (0.1%)
- -------------------------------------------------------------------------------------
25,000 Brylane (L.P.) sr. sub. notes 10s, 2003 25,688
195,000 Federated Department Stores sr. notes 8 1/2s, 2003 206,179
25,000 Finlay Enterprises, Inc. sr. notes 10 5/8s, 2003 25,375
15,000 Loehmanns, Inc. sr. notes 11 7/8s, 2003 15,900
25,000 Mothers Work, Inc. sr. notes 12 5/8s, 2005 25,500
40,000 Southland Corp. 1st priority sr. sub. deb. 5s, 2003 32,900
10,000 Southland Corp. deb. Ser. C, 12s, 2009 9,950
25,000 Specialty Retailers, Inc. notes 10s, 2000 24,938
50,000 Waban, Inc. sr. sub. notes 11s, 2004 56,000
5,000 William Carter Co. 144A sr. sub. notes 10 3/8s, 2006 5,100
------------
427,530
Specialty Consumer Products (--%)
- -------------------------------------------------------------------------------------
25,000 Coty Inc. gtd. sr. sub. notes 10 1/4s, 2005 26,500
5,000 E&S Holdings Corp. 144A sr. sub. notes 10 3/8s, 2006 5,181
5,000 Genesco, Inc. sr. notes 10 3/8s, 2003 4,950
25,000 Herff Jones, Inc. sr. sub. notes 11s, 2005 26,875
------------
63,506
Telecommunications (0.1%)
- -------------------------------------------------------------------------------------
330,000 360 Communications Co. sr. notes 7 1/2s, 2006 333,973
100,000 American Communication Services, Inc. sr. disc. notes
stepped-coupon zero % (12 3/4s, 4/1/01), 2006 ++ 54,000
75,000 Call-Net Enterprises sr. disc. notes stepped-coupon zero %
(13 1/4s, 12/1/99), 2004 ++ 60,375
100,000 Cencall Communications Corp. sr. disc. notes stepped-coupon
zero % (10 1/8s, 1/15/99), 2004 ++ 66,500
25,000 Fonorola, Inc. sr. notes 12 1/2s, 2002 (Canada) 27,188
5,000 Frontiervision Operating Partners L.P. sr. sub. notes 11s, 2006 4,975
45,000 Hyperion Telecommunication sr. disc. notes stepped-coupon
Ser. B, zero % (13s, 4/15/01), 2003 ++ 26,100
135,000 ICG Holding, Inc. company guaranty stepped-coupon zero %
(12 1/2s, 5/1/01), 2006 ++ 86,400
45,000 Intercel, Inc. sr. disc. notes stepped-coupon zero %
(12s, 5/1/01), 2006 ++ 27,338
25,000 Intermedia Communications of Florida sr. notes Ser. B, 13 1/2s,
2005 28,625
85,000 International Cabletel, Inc. sr. notes stepped-coupon Ser. B,
zero % (11 1/2s, 2/01/01), 2006 ++ 54,400
75,000 MFS Communications sr. disc. notes stepped-coupon zero %
(8 7/8s, 1/1/01), 2006 ++ 54,375
70,000 MFS Communications sr. disc. notes stepped-coupon zero %
(9 3/8s, 1/15/99), 2004 ++ 60,550
30,000 Millicom International Cellular S.A. sr. disc. notes
stepped-coupon zero % (13 1/2s, 6/1/01), 2006
(Luxembourg) ++ 17,850
25,000 Mobile Telecommunications Tech. sr. notes 13 1/2s, 2002 25,875
100,000 NEXTEL Communications, Inc. sr. disc. notes stepped-coupon
zero % (9 3/4s, 2/15/99), 2004 ++ 66,125
50,000 Nextlink Communications sr. notes 12 1/2s, 2006 52,625
35,000 Omnipoint Corp. 144A sr. notes 11 5/8s, 2006 36,838
20,000 Paging Network, Inc. 144A sr. sub. notes 10s, 2008 20,000
50,000 Pricellular Wireless sr. disc. notes stepped-coupon Ser. B,
zero % (14s, 11/15/97), 2001 ++ 49,250
5,000 Sygnet Wireless, Inc. sr. notes 11 1/2s, 2006 5,150
40,000 Teleport Communications Group Inc. sr. disc. notes
stepped-coupon zero % (11 1/8s, 7/1/01), 2007 ++ 27,100
------------
1,185,612
Textiles (--%)
- -------------------------------------------------------------------------------------
15,000 Polysindo International Finance company guaranty 11 3/8s,
2006 (Indonesia) 16,125
25,000 Tultex Corp. sr. notes 10 5/8s, 2005 27,000
------------
43,125
Transportation (0.1%)
- -------------------------------------------------------------------------------------
5,000 Blue Bird Body Co. 144A sr. sub. notes 10 3/4s, 2006 5,181
325,000 Burlington Northern Santa Fe notes 6 3/8s, 2005 319,296
25,000 Eletson Holdings, Inc. 1st pfd. mtge. notes 9 1/4s, 2003
(Greece) 25,125
15,000 Greenwich Air Services, Inc. sr. notes 10 1/2s, 2006 15,975
25,000 International Shipholding Corp. sr. notes 9s, 2003 25,000
35,000 MCII Holding (USA), Inc. bonds stepped-coupon zero %
(12s, 12/1/98), 2002 ++ 28,700
5,000 Newport News Shipbuilding 144A sr. notes 8 5/8s, 2006 5,090
5,000 Newport News Shipbuilding 144A sr. sub. notes 9 1/4s, 2006 5,123
------------
429,490
Utilities (0.4%)
- -------------------------------------------------------------------------------------
180,000 Arizona Public Service Co. sr. notes 6 3/4s, 2006 180,900
260,000 California Energy Corp. disc. notes stepped-coupon zero %
(10 1/4s, 1/15/97), 2005 ++ 269,100
195,000 Citizens Utilities Co. bonds 7.68s, 2034 224,484
240,000 Connecticut Yankee Atomic Power Co. mtge. Ser. A, 12s, 2000 246,538
150,000 Connecticut Light & Power 1st mtge. 7 7/8s, 2001 154,887
310,000 EIP Funding-Public Service Co. of New Mexico deb. 10 1/4s,
2012 349,457
25,000 El Paso Electric Co. 1st mtge. Ser. D, 8.9s, 2006 26,443
385,000 El Paso Electric Co. 1st mtge. Ser. B, 7 3/4s, 2001 390,386
10,000 Empresa Distribuidora Norte 144A notes 9 3/4s, 2001
(Argentina) 10,263
190,000 Enersis S.A. ADR notes 7.4s, 2016 (Chile) 189,050
190,000 Enersis S.A. ADR notes 6.6s, 2026 (Chile) 191,781
24,000 First PV Funding deb. 10.15s, 2016 25,440
5,000 Hidro Pierda Aguila 144A bonds 10 5/8s, 2001 (Argentina) 5,075
50,000 Long Island Lighting Co. refunding mtge. notes 9 5/8s, 2024 51,313
116,372 Midland Cogeneration Ventures deb. 10.33s, 2002 123,645
85,000 Midland Funding Corp. deb. Ser. A, 11 3/4s, 2005 94,463
25,000 Niagara Mohawk Power Corp. 1st mtge. 7 3/4s, 2006 23,618
25,000 Niagara Mohawk Power Corp. med. term notes 9.95s, 2000 23,125
5,000 Northeast Utilities System notes Ser. A, 8.58s, 2006 4,992
250,000 Texas New-Mexico Power Utilities 1st mtge. 9 1/4s, 2000 263,595
400,000 Texas Utilities Co. secd. lease fac. bonds 7.46s, 2015 411,976
------------
3,260,531
------------
Total Corporate Bonds and Notes (cost $18,944,298) $ 20,432,013
CONVERTIBLE PREFERRED STOCKS (1.7%) *
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------
73,000 Ford Motor Co. Ser. A, $4.20 dep. shs. cv. pfd. $ 7,801,875
169,000 Freeport-McMoRan Copper Co., Inc. $1.75 cv. pfd. 4,732,000
900 Granite Broadcasting $1.938 cv. pfd. 52,875
31,000 K mart Financing I $3.875 cv. pfd. 1,561,625
------------
Total Convertible Preferred Stocks (cost $12,111,133) $ 14,148,375
CONVERTIBLE BONDS AND NOTES (1.0%) *
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------
$ 25,000 Exide Corp. 144A cv. sr. sub. notes 2.9s, 2005 $ 15,000
4,000,000 Mitsubishi Bank Ltd. International Finance
cv. trust guaranteed notes 3s, 2002 (Bermuda) 4,475,000
JPY 150,000,000 Toyota Motor Corp. cv. deb. 1.2s, 1998 (Japan) 2,121,957
$ 25,000 Winstar Communications. Inc. cv sr. disc. notes zero %
(14s, 10/15/05), 2005 ++ 16,500
1,368,000 WMX Technologies, Inc. cv. sub. notes 2s, 2005 1,325,250
------------
Total Convertible Bonds and Notes (cost $6,962,140) $ 7,953,707
FOREIGN GOVERNMENT BONDS AND NOTES (0.4%) *
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------
AUD 960,000 Australia (Government of) bonds 10s, 2006 $ 928,856
CAD 832,000 Canada (Government of) deb. Ser. A-76, 9s, 2025 793,274
DEM 1,155,000 Germany (Federal Republic of) bonds Ser. 96, 6 1/4s,
2006 784,273
USD 510,000 Quebec (Province of) deb. Ser. NN, 7 1/8s, 2024 499,387
USD 985,000 Bank of Foreign Economic Affairs of Russia
(Vnesheconombank) principal loan 144A
8s, 2020 +## [2 DBL. DAGGERS] 572,531
------------
Total Foreign Government Bonds and Notes
(cost $3,292,422) $ 3,578,321
COLLATERALIZED MORTGAGE OBLIGATIONS (0.3%) *
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------
$137,530 Chase Mortgage Finance Corp. Ser. 93-3, Class B13, 7.46s,
2024 $ 88,019
221,589 GE Capital Mortgage Services, Inc. Ser. 94-12, Class B3, 6s,
2009 188,350
Housing Securities Inc.
121,030 Ser. 91-B, Class B6, 9s, 2006 121,030
318,611 Ser. 93-F, Class F9M2, 7s, 2023 301,785
19,844 Ser. 93-J, Class J4, 6.66s, 2009 17,363
21,838 Ser. 93-J, Class J5, 6.66s, 2009 15,880
22,230 Ser. 94-1, Class AB1, 6 1/2s, 2009 19,193
Prudential Home Mortgage Securities
92,677 Ser. 94-31, Class B3, 8s, 2009 85,249
79,090 Ser. 92-25, Class B3, 8s, 2022 + 71,181
459,682 Ser. 95-D, Class 5B, 7.54s, 2024 351,082
93,878 Ser. 92-13, Class B3, 7 1/2s, 2007 87,014
121,038 Ser. 93-36, Class M, 7 1/4s, 2023 119,147
52,461 Ser. 93-31, Class B2, 6s, 2000 42,330
Prudential Home Mortgage Securities 144A
363,282 Ser. 95-C, Class 1B1, 7.66s, 2001 365,950
296,572 Ser. 94-A, Class 4B, 6.80s, 2024 274,699
99,519 Ser. 94-D, Class 4B, 6.31s, 2009 84,622
213,589 Ser. 94-D, Class 3B, 6.31s, 2009 204,178
204,124 Ryland Mortgage Securities Corp. Ser. 94-7C, Class B2, 7.36s,
2025 193,981
------------
Total Collateralized Mortgage Obligations (cost $2,468,583) $ 2,631,053
BRADY BONDS (0.2%)*
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------
$790,000 Argentina (Republic of) bonds stepped-coupon Ser. L 5 1/4s,
(5 1/2s, 3/31/97), 2023++ $ 505,600
505,000 Poland (Government of) 144A FRB 6 1/2s, 2024 492,375
520,000 United Mexican States FRB Ser. D, 6.453s, 2019 440,700
------------
Total Brady Bonds (cost $1,368,303) $ 1,438,675
PREFERRED STOCKS (--%)*
NUMBER OF SHARES VALUE
- -------------------------------------------------------------------------------------
320 Cablevision Systems Ser. M, $11.125 dep. shs. pfd. $ 28,160
355 Chevy Chase Capital Corp. Ser. A, $5. 188 pfd. 18,194
271 El Paso Electric Co. $11.40 pfd. [2 DBL. DAGGERS] 29,810
15 Fresenius Medical Care Ser. D, $9.00 pfd. 15,263
543 K-III Communications $11.625 pfd. [2 DBL. DAGGERS] 54,029
20 Paxson Communications Corp. $12.50 pfd. [2 DBL. DAGGERS] 19,000
400 SD Warren Co. Holdings Corp. 144A $3.50 pfd. 11,600
330 SD Warren Co. Ser. B, $3.50 pfd. 11,550
51 Time Warner, Inc. Ser. M, $10.25 pfd. [2 DBL. DAGGERS] 54,889
------------
Total Preferred Stocks (cost $237,935) $ 242,495
UNITS (--%)*
NUMBER OF UNITS VALUE
- -------------------------------------------------------------------------------------
25 Fitzgerald Gaming Co. units 13s, 2002 $ 19,000
20 Interact Systems, Inc. 144A units stepped-coupon zero %
(14s, 8/1/99), 2003 ++ 13,600
30 Wireless One, Inc. units stepped-coupon zero %
(13 1/2s, 8/1/01), 2006 ++ 14,700
------------
Total Units (cost $52,384) $ 47,300
WARRANTS (--%)*+
NUMBER OF WARRANTS EXPIRATION VALUE
- -------------------------------------------------------------------------------------
45 Hyperion Telecommunications 144A 4/15/01 $ 900
25 Intermedia Communications 144A 6/1/00 1,250
40 SDW Holdings Corp. Ser. B 144A 12/15/06 520
10 Sterling Chemicals Holdings 8/15/08 350
------------
Total Warrants (cost $1,516) $ 3,020
SHORT-TERM INVESTMENTS (cost $42,439,258)(5.2%)*
PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------
$42,426,000 Interest in $42,426,000 joint repurchase agreement dated
November 29, 1996 with UBS Securities, Inc. due
December 2, 1996 with respect to various U.S. Treasury
obligations -- maturity value of $42,445,887 for an
effective yield of 5.625% $ 42,439,258
- -------------------------------------------------------------------------------------
Total Investments (cost $667,389,628)*** $800,102,090
- -------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $809,645,169.
*** The aggregate identified cost on a tax basis is $667,816,420, resulting in gross
unrealized appreciation and depreciation of $136,585,200 and $4,299,530,
respectively, or net unrealized appreciation of $132,285,670.
+ Non-income-producing security.
++ The interest rate and date shown parenthetically represent the new interest rate to
be paid and the date the fund will begin receiving interest at this rate.
[2 DBL. DAGGERS] Income may be received in cash or additional securities at the discretion of the issuer.
# A portion of this security was pledged and segregated with the custodian to cover
margin requirements for futures contracts at November 30, 1996.
## When-issued securities (See Note 1).
144A after the name of a security represents those exempt from registration under Rule 144A
of the Securities Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
ADR after the name of a foreign holding stands for American Depository Receipts representing
ownership of foreign securities on deposit with a domestic custodian bank.
The rates shown on FRB (Floating Rate Bonds) are the current interest rates shown at
November 30, 1996, which are subject to change based on the terms of the security.
<CAPTION>
Forward Currency Contracts to Sell at November 30, 1996
(aggregate face value $3,595,181)
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars $ 936,088 $ 905,465 12/18/96 $ (30,623)
Canadian Dollars 771,426 780,305 12/18/96 8,879
Deutschemarks 351,558 358,685 12/18/96 7,127
Japanese Yen 1,412,619 1,515,879 1/28/98 103,260
Japanese Yen 16,352 17,611 7/28/97 1,259
Japanese Yen 15,947 17,236 1/28/97 1,289
- ----------------------------------------------------------------------------------------
$ 91,191
- ----------------------------------------------------------------------------------------
<CAPTION>
Futures Contracts Outstanding at November 30, 1996
Total Aggregate Face Delivery Unrealized
Value Value Date Appreciation/
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Bond
Futures (Long) $3,360,375 $3,344,219 Mar 96 $16,156
- ----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
November 30, 1996
<S> <C>
Assets
- -------------------------------------------------------------------------------
Investments in securities, at value (identified
cost $667,389,628) (Note 1) $800,102,090
- -------------------------------------------------------------------------------
Cash 299,538
- -------------------------------------------------------------------------------
Dividends, interest and other receivables 2,904,717
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 7,734,552
- -------------------------------------------------------------------------------
Receivable for securities sold 1,567,316
- -------------------------------------------------------------------------------
Receivable for variation margin 26,281
- -------------------------------------------------------------------------------
Receivable for open forward currency contracts 121,814
- -------------------------------------------------------------------------------
Receivable for closed forward currency contracts 912
- -------------------------------------------------------------------------------
Total assets 812,757,220
Liabilities
- -------------------------------------------------------------------------------
Payable for securities purchased 852,212
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 379,286
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,092,095
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 116,623
- -------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 6,901
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,039
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 408,234
- -------------------------------------------------------------------------------
Payable for open forward currency contracts 30,623
- -------------------------------------------------------------------------------
Payable for closed forward currency contracts 18,043
- -------------------------------------------------------------------------------
Other accrued expenses 205,995
- -------------------------------------------------------------------------------
Total liabilities 3,112,051
- -------------------------------------------------------------------------------
Net assets $809,645,169
Represented by
- -------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $726,333,022
- -------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 813,615
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (Note 1) (50,320,581)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 132,819,113
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable
to capital shares outstanding $809,645,169
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($566,132,530 divided by 42,595,854 shares) $13.29
- -------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $13.29)* $14.10
- -------------------------------------------------------------------------------
Net asset value and offering price per class B share
($221,258,616 divided by 16,727,804 shares)** $13.23
- -------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($22,254,023 divided by 1,681,615 shares) $13.23
- -------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $13.23)* $13.71
- -------------------------------------------------------------------------------
* 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.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended November 30, 1996
<S> <C>
Investment income:
- --------------------------------------------------------------------------
Dividends (net of foreign tax of $106,216) $ 16,616,455
- --------------------------------------------------------------------------
Interest 5,461,740
- --------------------------------------------------------------------------
Total investment income 22,078,195
- --------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,671,766
- --------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 994,412
- --------------------------------------------------------------------------
Compensation of Trustees (Note 2) 25,978
- --------------------------------------------------------------------------
Administrative services (Note 2) 13,241
- --------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,135,561
- --------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,346,975
- --------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 96,125
- --------------------------------------------------------------------------
Reports to shareholders 85,627
- --------------------------------------------------------------------------
Registration fees 46,140
- --------------------------------------------------------------------------
Auditing 34,732
- --------------------------------------------------------------------------
Legal 12,800
- --------------------------------------------------------------------------
Postage 133,902
- --------------------------------------------------------------------------
Other 52,702
- --------------------------------------------------------------------------
Total expenses 7,649,961
- --------------------------------------------------------------------------
Expense reduction (Note 2) (215,826)
- --------------------------------------------------------------------------
Net expenses 7,434,135
- --------------------------------------------------------------------------
Net investment income 14,644,060
- --------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 59,774,308
- --------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 204,753
- --------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 10,943
- --------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the year 57,911
- --------------------------------------------------------------------------
Net unrealized appreciation of investments
and futures during the year 65,178,914
- --------------------------------------------------------------------------
Net gain on investments 125,226,829
- --------------------------------------------------------------------------
Net increase in net assets resulting from operations $139,870,889
- --------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended November 30
----------------------------------
1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ---------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------
Net investment income $ 14,644,060 $ 12,853,448
- ---------------------------------------------------------------------------------------
Net realized gain on investments 59,990,004 28,109,020
- ---------------------------------------------------------------------------------------
Net unrealized appreciation of investments 65,236,825 72,483,167
- ---------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 139,870,889 113,445,635
- ---------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------
From net investment income
Class A (12,084,890) (11,368,798)
- ---------------------------------------------------------------------------------------
Class B (2,607,143) (1,283,160)
- ---------------------------------------------------------------------------------------
Class M (271,912) (81,818)
- ---------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 202,489,950 45,298,097
- ---------------------------------------------------------------------------------------
Total increase in net assets 327,396,894 146,009,956
- ---------------------------------------------------------------------------------------
Net assets
- ---------------------------------------------------------------------------------------
Beginning of year 482,248,275 336,238,319
- ---------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $813,615 and $1,204,782, respectively) $809,645,169 $482,248,275
- ---------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
For the period
December 2, 1994
(commencement
Year ended of operations) to Year ended
November 30 November 30 November 30
----------------------------------------------------------------------------------------
1996 1995 1996 1995
----------------------------------------------------------------------------------------
Class M Class B
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.89 $ 8.45 $ 10.89 $ 8.46
- -------------------------------------------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income .25 .28(c) .21 .23
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments 2.36 2.45 2.37 2.46
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.61 2.73 2.58 2.69
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income (.27) (.29) (.24) (.26)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.27) (.29) (.24) (.26)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 13.23 $10.89 $ 13.23 $ 10.89
- -------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 24.35 32.89* 24.06 32.30
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $22,254 $7,051 $221,259 $83,646
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%)(b) 1.59 1.60* 1.84 1.87
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) 2.11 2.99* 1.86 2.63
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 67.56 70.39 67.56 70.39
- -------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $ .0509 $ .0509
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
For the period
September 13
(commencement
Year ended of operations) to Year ended
November 30 November 30 November 30
----------------------------------------------------------------------------------------------
1994 1993 1996 1995
----------------------------------------------------------------------------------------------
Class B Class A
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.65 $ 8.66 $ 10.93 $ 8.49
- -------------------------------------------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income .26 .06(c) .31 .32
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (.18) (.07) 2.37 2.44
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .08 (.01) 2.68 2.76
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income (.27) -- (.32) (.32)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.27) -- (.32) (.32)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.46 $ 8.65 $ 13.29 $ 10.93
- -------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) .86 (.12)* 24.96 33.17
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $32,114 $14,800 $566,133 $391,551
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%)(b) 1.78 .44* 1.09 1.13
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) 3.02 .55* 2.61 3.32
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 82.49 125.85(d) 67.56 70.39
- -------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $ .0509
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended November 30
--------------------------------------------------
1994 1993 1992
--------------------------------------------------
Class A
--------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 8.67 $ 7.72 $ 7.29
- -------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------
Net investment income .32 .28 .42
- -------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments (.18) 1.01 .41
- -------------------------------------------------------------------------------------------
Total from investment operations .14 1.29 .83
- -------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------
From net investment income (.32) (.31) (.40)
- -------------------------------------------------------------------------------------------
In excess of net investment income -- (.03) --
- -------------------------------------------------------------------------------------------
Total distributions (.32) (.34) (.40)
- -------------------------------------------------------------------------------------------
Net asset value, end of period $ 8.49 $ 8.67 $ 7.72
- -------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 1.59 17.06 11.66
- -------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $304.124 $328,251 $334,127
- -------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%)(b) 1.04 1.16 1.23
- -------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) 3.67 3.40 5.57
- -------------------------------------------------------------------------------------------
Portfolio turnover 82.49 125.85(d) 340.99
- -------------------------------------------------------------------------------------------
Average commission rate paid (e)
- -------------------------------------------------------------------------------------------
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect
of sales charges.
(b) The ratio of expenses to average net assets for the year ended November 30, 1995
and thereafter, includes amounts paid through expense offset and brokerage service
arrangements. Prior period ratios exclude these amounts. (Note 2).
(c) Per share net investment has been determined on the basis of the weighted average
number of shares outstanding during the period.
(d) Portfolio turnover excludes the impact of assets received from the Putnam Equity
Income Fund, formerly known as Putnam Total Return Fund.
(e) Average commission rate paid is required for fiscal periods beginning on or
after September 1, 1995.
</TABLE>
Notes to financial statements
November 30, 1996
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
objective of the fund is to seek current income by investing primarily
in a diversified portfolio of income-producing equity securities.
Capital growth is a secondary objective when consistent with seeking
current income.
The fund offers class A, class B and class M shares. Class A shares are
sold with a maximum front-end sales charge of 5.75%. Class B shares,
which convert to class A shares after approximately eight years, do not
pay a front-end sales charge, but pay a higher ongoing distribution fee
than class A shares, and are subject to a contingent deferred sales
charge, if those shares are redeemed within six years of purchase. Class
M shares are sold with a maximum front-end sales charge of 3.50% and pay
an ongoing distribution fee that is lower than class B shares and higher
than class A shares.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities. Actual results could differ from those
estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sale price, or, if no sales are reported -- as in the
case of some securities traded over-the-counter -- the last reported bid
price. Market quotations are not considered to be readily available for
long-term corporate bonds and notes; such investments are stated at fair
market value on the basis of valuations furnished by a pricing service
approved by the Trustees. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost, which
approximates market value, and other investments are stated at fair
market value following procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
Manager, a wholly-owned subsidiary of Putnam Investments, Inc.. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Putnam Management is responsible for determining that the value of these
underlying securities is at all times at least equal to the resale
price, including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to buy
or sell is executed).
Interest income is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date. Discounts on zero coupon bonds, original issue,
stepped-coupon bonds and payment in kind bonds are accreted according to
the effective yield method.
Securites purchased or sold on a when-issued or delayed delivery basis
may be settled a month or more after the trade date; interest income is
accrued based on the terms of the security. Losses may arise due to
changes in the market value of the underlying securites or if the
counterparty does not perform under the contract.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such fluctuations are included with the net realized
and unrealized gain or loss on investments. Net realized gains and
losses on foreign currency transactions represent net exchange gains or
losses on closed forward currency contracts, disposition of foreign
currencies and the difference between the amount of investment income
and foreign withholding taxes recorded on the fund's books and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized
gains and losses on foreign currency transactions arise from changes in
the value of open forward currency contracts and assets and liabilities
other than investments at the period end, resulting from changes in the
exchange rate.
F) Forward currency contracts The fund may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, to protect against a decline
in value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the
value of a currency in which securities a fund intends to buy are
denominated, when a fund holds cash reserves and short-term
investments). The U.S. dollar value of forward currency contracts is
determined using forward currency exchange rates supplied by a quotation
service. The market value of the contract will fluctuate with changes in
currency exchange rates. The contract is "marked to market" daily and
the change in market value is recorded as an unrealized gain or loss.
When the contract is closed, the fund records a realized gain or loss
equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed. The fund could be
exposed to risk if the value of the currency changes unfavorably, if the
counterparties to the contracts are unable to meet the terms of their
contracts or if the fund is unable to enter into a closing position.
G) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the fund is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract is
unable to perform.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. Exchange traded options
are valued at the last sale price, or if no sales are reported, the last
bid price for purchased options and the last ask price for written
options. Options traded over-the-counter are valued using prices
supplied by dealers.
H) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
At November 30, 1996, the fund had a capital loss carryover of
approximately $49,814,000 available to offset future net capital gain,
if any, which will expire on November 30, 1998.
I) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid annually. The amount and character of income and gains to be
distributed are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles.
These differences include treatment of losses on wash sale transactions,
market discount, paydown gains and losses on mortgage backed securities,
realized and unrealized gains and losses on forward foreign currency
contracts and currency gains and losses on foreign bonds.
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. For the year ended November
30, 1996, the fund reclassified $71,282 to decrease undistributed net
investment income and $18,513 to increase paid-in-capital, with a
decrease to accumulated net realized loss on investments of $52,769. The
calculation of net investment income per share in the financial
highlights table excludes these adjustments.
Note 2
Management fees, administrative services, and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.65% of the
first $500 million, 0.55% of the next $500 million, 0.50% of the next
$500 million, 0.45% of the next $5 billion, 0.425% of the next $5
billion, 0.405% of the next $5 billion, 0.395% of the next $5 billion,
and 0.38% of any amount thereafter.
Prior to July 11, 1996, management fees were paid at the annual rate of
0.75% of the first $100 million of average net assets, 0.65% of the next
$100 million, 0.55% of the next $300 million, 0.50% of the next $1.0
billion, 0.45% of the next $1 billion, and 0.40% of any amount over $2.5
billion.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the year ended November 30, 1996, fund expenses were reduced by
$215,826 under expense offset and brokerage service arrangements with
PFTC. Investor servicing and custodian fees reported in the Statement of
operations exclude these credits. The fund could have invested a portion
of the assets utilized in connection with the expense offset
arrangements in an income producing asset if it had not entered into
such arrangements.
Trustees of the fund receive an annual Trustees fee of $1,310 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
The fund adopted a Trustee Fee Deferral Plan (the "Plan") which allows
the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund
and are invested in certain Putnam funds until distribution in
accordance with the Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total compensation for
the three years preceding retirement. Pension expense for the fund is
included in Compensation of trustees in the Statement of operations.
Accrued pension liability is included in Payable for compensation of
Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B and class M shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments Inc., for services provided and expenses incurred by
it in distributing shares of the fund. The Plans provide for payments by
the fund to Putnam Mutual Funds Corp. at an annual rate up to 0.35%,
1.00% and 1.00% of the average net assets attributable to class A, class
B and class M shares, respectively. The Trustees have approved payment
by the fund at an annual rate of 0.25%, 1.00% and 0.75% of the average
net assets attributable to class A, class B and class M shares,
respectively.
For the year ended November 30, 1996, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $481,926 and $28,535 from the
sale of class A and class M shares, respectively and $139,819 in
contingent deferred sales charges from redemptions of class B shares. A
deferred sales charge of up to 1% is assessed on certain redemptions of
class A shares. For the year ended November 30, 1996, Putnam Mutual
Funds Corp., acting as underwriter received $2,691 on class A
redemptions.
Note 3
Purchase and sales of securities
During the year ended November 30, 1996, purchases and sales of
investment securities other than U.S. government obligations and short-
term investments aggregated $500,224,053 and $331,451,660, respectively.
Purchases and sales of U.S. government obligations aggregated
$70,998,455 and $64,868,913, respectively. In determining the net gain
or loss on securities sold, the cost of securities has been determined
on the identified cost basis.
Note 4
Capital shares
At November 30, 1996 there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended
November 30, 1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 11,955,031 $143,244,258
- ----------------------------------------------------
Reinvestment of
distributions 781,164 9,134,877
- ----------------------------------------------------
12,736,195 152,379,135
Shares
repurchased (5,970,798) (70,796,533)
- ----------------------------------------------------
Net increase 6,765,397 $81,582,602
- ----------------------------------------------------
Year ended
November 30, 1995
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 4,980,350 $48,265,674
- ----------------------------------------------------
Reinvestment of
distributions 857,411 8,075,743
- ----------------------------------------------------
5,837,761 56,341,417
Shares
repurchased (5,848,286) (55,855,242)
- ----------------------------------------------------
Net increase
(decrease) (10,525) $486,175
- ----------------------------------------------------
Year ended
November 30, 1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 12,982,383 $155,817,526
- ----------------------------------------------------
Reinvestment of
distributions 186,237 2,182,469
- ----------------------------------------------------
13,168,620 157,999,995
Shares
repurchased (4,120,485) (49,459,134)
- ----------------------------------------------------
Net increase 9,048,135 $108,540,861
- ----------------------------------------------------
Year ended
November 30, 1995
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 4,955,494 $49,153,948
- ----------------------------------------------------
Reinvestment of
distributions 111,600 1,063,257
- ----------------------------------------------------
5,067,094 50,217,205
Shares
repurchased (1,181,646) (11,615,462)
- ----------------------------------------------------
Net increase 3,885,448 $38,601,743
- ----------------------------------------------------
Year ended
November 30, 1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 1,124,338 $13,449,727
- ----------------------------------------------------
Reinvestment of
distributions 21,224 249,407
- ----------------------------------------------------
1,145,562 13,699,134
Shares
repurchased (111,291) (1,332,647)
- ----------------------------------------------------
Net increase 1,034,271 $12,366,487
- ----------------------------------------------------
For the period
December 2, 1994
(commencement of
operations) to
November 30, 1995
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 684,912 $6,588,604
- ----------------------------------------------------
Reinvestment of
distributions 7,885 78,058
- ----------------------------------------------------
692,797 6,666,662
Shares
repurchased (45,453) (456,483)
- ----------------------------------------------------
Net increase 647,344 $6,210,179
- ----------------------------------------------------
Federal tax information
(Unaudited)
The fund has designated 100% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investor Services has won the DALBAR Quality Tested Service Seal
for the past six years. In 1995, over 146,000 tests of 56 shareholder
service components demonstrated that Putnam outperformed the industry
standard in every category.
* HELP YOUR INVESTMENT GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings
account.*
* SWITCH FUNDS EASILY
You can move money from one account to another with the same class of
shares without a service charge. (This privilege is subject to change or
termination.)
* ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at
the then-current net asset value, which may be more or less than the
original cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a
helpful Putnam representative.
To make an additional investment in this or any other Putnam fund,
contact your financial advisor or call our toll-free number: 1-800-225-
1581.
* Regular investing of course, does not guarantee a profit or protect
against a loss in a declining market.
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
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
Edward P. Bousa
Vice President and Fund Manager
Kenneth J. Taubes
Vice President and Fund Manager
Rosemary H. Thomsen
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Equity
Income Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information, or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' website:
http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution, are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board
or any other agency, and involve risk, including the possible loss of
principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ---------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- ---------------------
29934-012/192/626 1/97
