Putnam
Managed
Income
Trust*
SEMIANNUAL REPORT
April 30, 1995
*Effective June 1, 1995, the fund's name was changed to Putnam Balanced
Retirement Fund.
[Putnam scales logo]
B O S T O N * L O N D O N * T O K Y O
<PAGE>
Performance highlights
> The fund's performance at net asset value for the six months ended April
30, 1995, outpaced that of the Lehman Brothers Government/Corporate Bond
Index.*
> Lipper Analytical Services+ ranked the fund's class A and class B shares in
the top quartile of income funds they tracked for 1-year performance as of
April 30, 1995.
SEMIANNUAL RESULTS AT A GLANCE
<TABLE>
<CAPTION>
Class A Class B
Total return NAV POP NAV CDSC
<S> <C> <C> <C> <C> <C>
(change in value during period
plus reinvested
distributions)
6 months ended 4/30/95 8.16% 1.94% 7.59% 2.59%
Class A Class B Class M(1)
Share value NAV POP NAV NAV POP
10/31/94 $8.68 $9.21 $ 8.67 -- --
3/17/95(1) -- -- -- $8.88 $9.20
4/30/95 9.13 9.69 9.10 9.12 9.45
Distributions: No. Income Capital gains Total
Class A 2 $0.240 -- $0.240
Class B 2 0.212 -- 0.212
Current return: NAV POP NAV
End of period
Current dividend rate(2) 5.26% 4.95% 4.66%
Current 30-day SEC yield(3) 4.58 4.31 3.84
</TABLE>
Performance data represent past results and will differ for each share class.
Performance for class M shares is not shown because of the brevity of the
reporting period. The first distribution for class M shares is scheduled to
be paid on 5/31/95. For performance over longer periods, see pages 8 and 9.
POP assumes 5.75% maximum sales charge for class A shares and 3.50% for class
M shares. CDSC assumes 5% maximum contingent deferred sales charge. (1)Class
M shares commenced operations on 3/17/95. (2)Income portion of most recent
distribution, annualized and divided by NAV or POP at end of period. (3)Based
only on investment income, calculated using SEC guidelines.
*Lehman Brothers Government/Corporate Bond Index is an unmanaged list of U.S.
government and corporate fixed-income securities. A more complete description
appears on page 9.
+Lipper Analytical Services is an independent research organization; rankings
vary over time and do not reflect the effects of sales charges. The fund's
class A shares ranked 3 out of 22, 5 out of 15, and 7 out of 7 income funds
tracked by Lipper for 1-year, 5-year, and 10-year performance, respectively,
as of 4/30/95. The fund's class B shares ranked 5 out of 22 income funds
tracked for 1-year performance as of 4/30/95. Rankings will vary for other
classes. Past performance is not indicative of future results.
2
<PAGE>
From the Chairman
(Photo: George Putnam)
(c) Karsh, Ottawa
Dear Shareholder:
During the six months ended April 30, 1995, a strong stock market and
continued economic growth provided a generally hospitable investment
environment for Putnam Managed Income Trust--which has recently undergone a
name change. Business continued to march at a brisk stride, though the pace
since January has slowed considerably from calendar 1994 levels.
Investors took this moderation as a sign that the economy was responding
favorably to the Federal Reserve Board's attempts to rein in growth to a
sustainable rate. The consensus in the markets seems to be that the Fed's
series of interest-rate increases may be near an end.
Before the start of the fund's semiannual period, Rosemary Thomsen joined
Edward Bousa and Kenneth Taubes as a fund manager. Rosemary has been employed
by Putnam since 1986. In the report that follows, your fund's management team
relates its strong performance during the first half of fiscal 1995 to this
market and economic setting. Then they explain the reasons for the fund's
name change, which became effective on June 1, 1995. Finally, they provide a
glimpse of what they believe may lie in store for the remaining months.
Respectfully yours,
/s/ George Putnam
George Putnam
Chairman of the Trustees
June 21, 1995
3
<PAGE>
Report from the fund managers
Edward P. Bousa
Kenneth J. Taubes
Rosemary H. Thomsen
While most investors could not escape the trials and tribulations that shook
financial markets throughout fiscal 1994, Putnam Managed Income Trust's
shareholders have been amply rewarded for their patience during the first
half of fiscal 1995. The fund's overall gain during the six months ended
April 30, 1995 -- from an emerging stock market rally, combined with a
significant recovery in the bond market -- more than offset the earlier
decline.
Your fund's total return for the semiannual period was 8.16% for class A
shares at net asset value. For class B shares, performance was 7.59%, also at
net asset value. This is well ahead of the Lehman Brothers
Government/Corporate Bond Index, which measured an average 6.95% for the same
period. The fund's class A and class B share returns at net asset value were
also better than the 6.03% average return of the 25 income funds tracked by
Lipper Analytical Services over the six-month period.
Through careful management of a well-selected portfolio of stocks and bonds,
we have successfully steered the fund through the volatility of a bear market
toward the benefits of a new, more optimistic economic environment.
Concurrently, we announce a change in the fund's name, denoting its shift
into the "balanced" subcategory of mutual funds. Balanced funds offer
investors the advantages of two compatible strategies, seeking both long-term
growth potential of stocks combined with income and protection from price
volatility of corporate and government bonds.
> NAME CHANGE BETTER REFLECTS FUND'S FOCUS
Effective June 1, 1995, Putnam Managed Income Trust was renamed Putnam
Balanced Retirement Fund. The new name does not affect your fund's investment
objectives of seeking high current return and, secondarily, relative
stability of principal, nor any of the fund's existing policies. To comply
with a SEC policy concerning "balanced funds," the fund has formally adopted
a new policy which it already follows in practice: maintaining at least 25%
of its assets in fixed-income securities. We believe the new name better
reflects the fund's balanced nature of investing in a blend of stocks and
bonds. And, we believe it more accurately reflects the type of investors who
might consider its conser-
4
<PAGE>
vative characteristic, those who are either saving longer-term for retirement
or currently living off their retirement income.
The fund becomes the most conservative balanced fund available from Putnam,
normally with a lower asset allocation in equities than The George Putnam
Fund of Boston, the other Putnam fund in this category. We believe your fund
has the potential to perform very competitively within its new universe of
balanced mutual funds.
> DIVERSIFIED STOCK-PICKING STRATEGY
ADDS TO STRONG PERFORMANCE
During the period, our pursuit of attractively priced stocks of companies
where positive change is expected was well-rewarded in several diverse
sectors. Consumer nondurables proved a positive focus, particularly stocks of
companies with improved cash flows and global growth opportunities like Avon
Products, Colgate Palmolive, and Eastman Kodak. In the pharmaceuticals
sector, investments in American Home Products, Warner-Lambert, and
Bristol-Myers Squibb enabled your fund to benefit as fears of health care
reform receded and corporate profits rose.
TRW, Inc. continued its success in, among its other products, the production
of automotive air bags. Also, the transportation sector has shown notable
gains as airlines and railroad companies rose from near-November lows,
participating in the market rally. International oil companies have benefited
from increasingly improved internal chemical operations as well as a better
environment for oil prices. Finally, banks and insurance companies have
experienced advances since November in an improved interest-rate environment.
We have also added to the fund's holdings in the retail sector, including
Kmart and J. C. Penney. This reflects our anticipation of a shift in consumer
focus from the purchase of larger capital
[Bar Chart]
TOP INDUSTRY SECTORS FOR STOCK HOLDINGS*
<TABLE>
<S> <C>
Insurance and finance 7.7%
Utilities 6.9%
Oil and gas 4.0%
Consumer nondurables 3.4%
</TABLE>
*Based on net assets on 4/30/95. Holdings will vary over time.
5
<PAGE>
goods to the apparel market as well as the fact that both companies have
successfully cut costs.
Over the past year, in order to meet the fund's objective of stability of
principal while insuring both a strong total return and an attractive yield,
we sold higher-yielding electric utility holdings in favor of lower-yielding
non-utility stocks that had less fundamental risk. The fund had already been
dramatically underweighted in electric utilities, compared to weightings in
most competing funds. As a result, we avoided one of the poorest performing
equity groups in the marketplace last year.
The lower yield on the portfolio's equity side necessitated a dividend
reduction in May, after the close of the semiannual period. Nevertheless, we
believe the low weighting in utilities contributed substantially to the
fund's positive total return during the period. Subsequently, we have begun
to add back to utilities at substantially lower valuations.
> BOND STRATEGY PROVES SUCCESSFUL
A sharp drop in interest rates began toward the end of 1994; consequently, we
continued to extend the overall maturity of the portfolio to focus on bonds
with longer durations. Duration is a measure of an investment's sensitivity
to changes in interest rates; the shorter the duration, the less susceptible
the investment will be to changes in value prompted by interest rate shifts.
Valuations were very attractive during this period, having already discounted
the market's worst fears of inflation.
We have also continued to emphasize investments in high-yield corporate bonds
as companies within the sector showed steadily improving profitability. We
kept the fund's investment-grade sleeve focused on issues that have performed
exceedingly well, such as airlines, energy, and cable credits. Time-Warner,
Inc., and Tele-Communications, Inc., two lower-rated telecommunications
credits, have also added significant value to the portfolio.
Our dual strategy of extending maturities and emphasizing corporate bonds has
helped support the fund's net asset value under current market conditions. We
also have begun to make opportunistic additions of foreign-denominated
securities that have lagged the U.S. rally, predominantly in France, Germany,
and the United Kingdom. These purchases, which raised the fund's
international holdings to nearly 10% of net assets, have helped enhance
income.
6
<PAGE>
TOP 10 STOCK HOLDINGS (4/30/95)
Exxon Corporation
Oil and gas drilling, production, refining, and marketing
Philip Morris Companies
Domestic food processing, alcohol, and tobacco
Morgan (J.P.) & Co., Inc.
Bank holding company
Cinergy Corp.
Electric utility
Sprint Corp.
Telephone services
NYNEX Corp.
Telephone services
American Home Products Corp.
Pharmaceuticals
U.S. West, Inc.
Telephone utility
Union Pacific Corp.
Railroad
Avon Products, Inc.
Cosmetics
These holdings represent 9.1% of the fund's net assets. Portfolio holdings
will vary over time.
More recently, with an eye to achieving attractive gains, we began reducing
investments in mortgage-backed securities, since close to 90% of the mortgage
market was trading at par or above.
> OUTLOOK: INCREASING SHIFT TO CONVERTIBLES AND U.S. COMPANIES EXPANDING
OVERSEAS
With the shift to a balanced-fund strategy, we anticipate moving a certain
percentage of assets from the bond portion into convertible securities.
Convertibles offer both the downside protection potential of bonds and also
the ability to participate in markets' upside, providing both income and
appreciation potential. We will also take a closer look at U.S.-based
companies that are simultaneously improving their domestic cost structures
and competitiveness as they expand overseas. Many of these companies are
currently trading at significant discounts and we will look for buying
opportunities when they show potential for adding value to the fund.
The remainder of fiscal 1995 appears to hold new economic promise and we will
continue to use a broadly diversified, balanced portfolio of bonds and stocks
to build attractive income from Putnam Balanced Retirement Fund over the long
term.
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings were viewed
favorably as of 4/30/95, there is no guarantee the fund will continue to hold
these securities in the future. Past performance is no guarantee of future
results.
7
<PAGE>
Performance summary
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares changed
over time, assuming you held the shares through the entire period and
reinvested all distributions back into the fund. We show total return in two
ways: on a cumulative long-term basis and on average how the fund might have
grown each year over varying periods.
Performance should always be considered in light of a fund's investment
strategy. This fund is designed for investors seeking high current return and
relative stability of principal from a diversified portfolio of equity and
debt securities.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 4/30/95 Lehman Bros.
Class A Class B S&P Govt./Corp.
NAV POP NAV CDSC 500 Index Bond Index
<S> <C> <C> <C> <C> <C> <C>
6 months 8.16% 1.94% 7.59% 2.59% 10.45% 6.95%
1 year 11.05 4.68 10.00 5.00 17.42 6.93
5 years 70.16 60.37 -- -- 81.11 59.18
Annual average 11.22 9.91 -- -- 12.61 9.74
10 years 153.83 139.30 -- -- 295.95 163.69
Annual average 9.76 9.12 -- -- 14.75 10.18
Life of class B -- -- 4.28 0.39 10.71 1.19
Annual average -- -- 3.41 0.31 8.48 0.95
</TABLE>
TOTAL RETURN FOR PERIODS ENDED 3/31/95
(most recent calendar quarter)
<TABLE>
<CAPTION>
Class A Class B
NAV POP NAV CDSC
<S> <C> <C> <C> <C>
6 months 5.91% -0.18% 5.46% 0.46%
1 year 8.99 2.73 8.32 3.32
5 years 63.17 53.80 -- --
Annual average 10.29 8.99 -- --
Life of class A 148.54 134.32 -- --
Annual average 9.58 8.93 -- --
Life of class B -- -- 2.22 -1.60
Annual average -- -- 1.90 -1.37
</TABLE>
Fund performance data do not take into account any adjustment for taxes
payable on reinvested distributions or for class A shares distribution fees
prior to implementation of the class A distribution plan in fiscal 1990. The
fund began offering what are now known as class A shares on 4/19/85.
Effective 2/1/94, the fund began offering class B shares, and on 3/17/95,
class M shares. Performance for class M shares is not shown because of the
brevity of the reporting period. Performance data represent past results and
will differ for each share class. Investment returns and net asset value will
fluctuate so an investor's shares, when sold, may be worth more or less than
their original cost.
8
<PAGE>
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 large-capitalization
common stocks and is frequently used as a general gauge of stock market
performance.
Lehman Brothers Government/Corporate Bond Index is an unmanaged list of
publicly issued U.S. Treasury obligations, debt obligations of U.S.
government agencies (excluding mortgage-backed securities), fixed-rate,
nonconvertible investment-grade corporate debt securities and U.S. dollar-
denominated SEC-registered nonconvertible debt issued by foreign governmental
entities or international agencies.
Both indexes assume reinvestment of all distributions and do not take into
account brokerage commissions or other costs. The fund's portfolio contains
securities that do not match those in the indexes.
9
<PAGE>
Relative risk/reward potential of Putnam funds
These illustrations provide a simplified guide to the risk/reward potential
for funds within each category of the Putnam Family of Funds and are not
intended as investment advice. Your investment advisor can help you evaluate
your risk tolerance.
These rankings are relative only to Putnam funds and should not be compared
to other investments. There is no guarantee that one Putnam fund will be less
volatile than another, since each fund has its own investment risks. That's
why it is essential to read the fund's prospectus before investing.
PUTNAM GROWTH FUNDS
[Graphic representation of funds from higher risk to lower risk]
Higher Risk Higher Reward Potential
Asia Pacific Growth (1)
OTC Emerging Growth (2)
New Opportunities (2)
Europe Growth (1)
Overseas Growth (1)
Voyager
Health Sciences
Natural Resources
Vista
Global Growth (1)
Diversified Equity (1)
Investors
Lower Risk Lower Reward Potential
PUTNAM GROWTH AND INCOME FUNDS
[Graphic representation of funds from higher risk to lower risk]
Higher Risk Higher Reward Potential
Putnam Growth and Income Fund II
Fund for Growth and Income
Equity Income
Convertible Income-Growth
George Putnam
Utilities Growth and Income
Balanced Retirement
Lower Risk Lower Reward Potential
(1)Foreign investments are subject to certain risks, such as currency
fluctuations and political developments, that are not present with domestic
investments.
(2)This fund invests all or a portion of its assets in small to medium-sized
companies, which increases the risk of price fluctuations.
(3)While U.S. government backing of individual securities does not insure
your principal, which will fluctuate, it does guarantee that the fund's
government-backed holdings will make timely payments of interest and
principal.
10
<PAGE>
PUTNAM INCOME FUNDS
[Graphic representation of funds from higher risk to lower risk]
Higher Risk Higher Reward Potential
Higher Yield Advantage(5)
High Yield(5)
Global Gov't.(1).(5)
Preferred Income
Income
Diversified Income(1),(3),(5)
Federal Income(3)
American Gov't. Income(3)
U.S. Gov't. Income(3)
Intermediate U.S. Gov't. Income(3)
Adjustable Rate U.S. Gov't.(3)
Money Market(4)
Lower Risk Lower Reward Potential
PUTNAM TAX-FREE FUNDS(6)
[Graphic representation of funds from higher risk to lower risk]
Higher Risk Higher Reward Potential
Tax-Free High Yield(5)
Municipal Income
Single-state tax-free funds*
Tax Exempt Income
Tax-Free Insured(7)
Intermediate Tax Exempt
Tax Exempt Money Market(4)
Lower Risk Lower Reward Potential
*State tax-free funds available for Arizona, California, Florida,
Massachusetts, Michigan, Minnesota, New Jersey, New York, Ohio, and
Pennsylvania. Not available in all states.
LIFESTAGE(SM) FUNDS
Putnam Asset Allocation Funds -- three investment portfolios that spread
your money across a variety of stocks, bonds, and money market investments.
The three portfolios are:
> Putnam Asset Allocation: Balanced Portfolio
> Putnam Asset Allocation: Conservative Portfolio
> Putnam Asset Allocation: Growth Portfolio
Please call your financial advisor -- or Putnam at 1-800-225-1581 -- to
obtain a prospectus for any Putnam fund. The prospectus contains more
complete information, including risk considerations, charges, and expenses.
Read it carefully before you invest or send money.
(4)The fund is managed to maintain a steady price of $1.00 per share,
although there is no assurance this price can be maintained in the future.
(5)The lower credit ratings of high-yield corporate and municipal bonds
reflect a greater possibility that adverse changes in the economy or their
issuers may affect their ability to pay principal and interest on the bonds.
(6)Income may be subject to state and local taxes. Capital gains, if any, are
taxable for federal and, in most cases, state purposes.
(7)Bond insurance does not guarantee principal or protect against changes in
market price.
11
<PAGE>
Portfolio of investments owned
April 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
COMMON STOCKS (41.3%)*
NUMBER OF SHARES VALUE
<C> <S> <C>
Aerospace and Defense (0.2%)
19,000 Boeing Co. $ 1,045,000
Automotive (0.6%)
30,000 Chrysler Corp. 1,293,750
52,300 Dana Corp. 1,346,725
------------
2,640,475
Basic Industrial Products (0.6%)
18,000 Ball Corp. 616,500
7,000 Deere (John) & Co. 574,000
20,000 Harnischfeger Industries, Inc. 590,000
18,000 Varity Corp. 760,500
------------
2,541,000
Building and Construction (0.2%)
23,000 Armstrong World Industries, Inc. 1,046,500
Business Equipment and Services (1.3%)
7,100 Deluxe Corp 219,213
10,000 IBM Corp. 947,500
180,000 Unisys Corp. 1,845,000
24,300 Xerox Corp. 2,991,938
------------
6,003,651
Chemicals (2.4%)
39,000 Dexter Corp. 892,125
31,000 du Pont (E.I.) de Nemours & Co., Ltd. 2,042,125
21,800 Eastman Chemical Co. 1,237,150
21,000 Grace (W.R.) & Co. 1,126,125
24,000 Olin Corp. 1,341,000
67,000 Union Carbide Corp. 2,144,000
76,000 Witco Chemical Corp. 2,175,500
------------
10,958,025
Computers (--%)
3,414 Computervision Corp. (acquired 8/24/92 cost
$30,726)|# 15,363
Conglomerates (1.0%)
55,000 Ogden Corp. 1,120,625
40,700 TRW, Inc. 3,027,063
8,000 United Technologies Corp. 585,000
------------
4,732,688
Consumer Durable Goods (0.2%)
62,000 Maytag Corp. 1,069,500
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<C> <S> <C>
Consumer Non Durables (3.4%)
67,500 American Brands, Inc. $ 2,733,750
55,000 Avon Products, Inc. 3,478,750
10,000 Colgate-Palmolive Co. 702,500
42,000 Kimberly-Clark Corp. 2,378,250
69,000 Philip Morris Cos., Inc. 4,674,750
27,900 RJR Nabisco Holdings Corp.+ 763,763
25,000 Universal Corp. 571,875
------------
15,303,638
Consumer Services (1.3%)
46,000 Dun & Bradstreet Cos. 2,397,750
35,000 Knight-Ridder, Inc. 1,898,750
24,000 McGraw-Hill, Inc. 1,791,000
------------
6,087,500
Electronics and Electrical Equipment (0.7%)
37,000 Eaton Corp. 2,122,875
29,000 Honeywell, Inc. 1,120,125
------------
3,243,000
Energy-Related (0.1%)
25,000 Westcoast Energy, Inc. 396,875
Environmental Control (0.2%)
33,000 WMX Technologies, Inc. 899,250
Food and Beverages (1.2%)
20,000 Anheuser-Busch Cos., Inc. 1,162,500
69,000 Flowers Industries, Inc. 1,198,875
35,000 Heinz (H.J.) Co. 1,470,000
29,000 Nestle S.A. (Registered) ADR (Switzerland) 1,399,250
------------
5,230,625
Forest Products (0.9%)
35,000 Potlatch Corp. 1,491,875
66,200 Weyerhaeuser Co. 2,780,400
------------
4,272,275
Health Care (2.5%)
50,000 American Home Products Corp. 3,856,250
53,600 Baxter International, Inc. 1,862,600
41,000 Bristol-Myers Squibb Co. 2,670,125
38,000 Warner-Lambert Co. 3,030,500
------------
11,419,475
Insurance and Finance (7.7%)
38,000 Aetna Life & Casualty Co. 2,166,000
41,000 American Express Co. 1,424,750
47,000 American General Corp. 1,551,000
43,000 AON Corp. 1,585,625
30,000 BankAmerica Corp. 1,485,000
33,354 Bankers Trust New York Corp. 1,809,455
43,000 Bear Stearns Companies, Inc. 886,875
76,000 Beneficial Corp. 3,097,000
11,000 CIGNA Corp. 798,875
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<C> <S> <C>
Insurance and Finance (continued)
23,000 Comerica, Inc. $ 661,250
54,000 CoreStates Financial Corp. 1,761,750
6,000 Federal National Mortgage Association 529,500
28,000 First Chicago Corp. 1,547,000
30,000 Fleet Financial Group, Inc. 982,500
24,000 Lincoln National Corp. 978,000
18,000 Mellon Bank Corp. 706,500
70,000 Morgan (J.P.) & Co., Inc. 4,593,750
22,000 National City Corp. 602,250
35,000 NationsBank Corp. 1,750,000
20,000 Provident Life & Accident Insurance Co. Class B 445,000
31,000 SAFECO Corp. 1,751,500
12,000 Student Loan Marketing Assn. 486,000
30,000 Synovus Financial Corp. 618,750
23,000 Torchmark Corp. 897,000
40,000 Wilmington Trust Corp. 1,010,000
------------
34,125,330
Metals and Mining (0.4%)
28,000 Carpenter Technology Corp. 1,690,500
Oil and Gas (4.0%)
40,000 Amoco Corp. 2,625,000
26,000 Chevron, Inc. 1,231,750
31,000 Enron Corp. 1,054,000
71,000 Exxon Corp. 4,943,375
24,000 Imperial Oil Ltd. 858,000
26,400 Mobil Corp. 2,504,700
22,000 Phillips Petroleum Co. 770,000
28,700 Repsol S.A. ADR (Germany) 918,400
8,000 Royal Dutch Petroleum Co. PLC ADR (Netherlands) 992,000
56,000 Total Corp. ADS (France) 1,757,000
------------
17,654,225
Photography (0.9%)
59,000 Eastman Kodak Co. 3,392,500
25,000 Polaroid Corp. 850,000
------------
4,242,500
Real Estate (1.0%)
45,000 Bradley Real Estate Trust, Inc. 680,625
22,400 Debartolo Realty Corp. 310,800
48,200 Equity Residential Properties Trust 1,289,350
29,000 Evans Withycombe Residential 543,750
40,000 Health Care Inc. 870,000
40,000 LTC Properties, Inc. 520,000
------------
4,214,525
Retail (1.6%)
91,000 Kmart Corp. 1,262,625
49,000 Melville Corporation 1,751,750
48,000 Penney (J.C.) Co., Inc. 2,100,000
38,000 Sears, Roebuck & Co. 2,061,500
------------
7,175,875
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCKS
NUMBER OF SHARES VALUE
<C> <S> <C>
Telecommunications (0.1%)
30,000 Comsat Corp. $ 600,000
Transportation (1.9%)
26,000 Conrail, Inc. 1,420,250
24,900 Consolidated Freightways, Inc. 634,950
15,000 Norfolk Southern Corp. 1,010,625
81,100 Ryder System, Inc. 1,895,713
67,000 Union Pacific Corp. 3,676,625
------------
8,638,163
Utilities (6.9%)
56,000 American Telephone & Telegraph Corp. 2,842,000
36,000 Bell Atlantic Corp. 1,975,500
168,024 Cinergy Corp. 4,221,603
36,000 Consolidated Natural Gas Co. 1,417,500
31,000 Entergy Corp. 674,250
24,000 Frontier Corp. 483,000
26,000 Houston Industries, Inc. 1,027,000
96,000 NYNEX Corp. 3,924,000
41,000 Pacific Enterprises 1,009,625
42,000 Public Service Co. of Colorado 1,265,250
46,000 Shandong Huaneng Power ADR(China) 373,750
121,000 Sprint Corp. 3,993,000
18,000 Telefonica de Espana SA ADR (Spain) 661,500
84,000 Texas Utilities Co. 2,740,500
92,000 US WEST, Inc. 3,806,500
35,000 WICOR, Inc. 962,500
------------
31,377,478
Total Common Stocks (cost $176,853,614) $186,623,436
U.S. Government and Agency Obligations (23.0%)*
PRINCIPAL AMOUNT VALUE
Federal National Mortgage Association
$8,895,000 8-1/2s, TBA, May 14, 2025+++ $ 9,033,984
6,213,227 7-1/2s, with various due dates to January 1, 2025 6,067,595
6,213,000 7-1/2s, TBA June 14, 2025+++ 6,067,383
4,570,000 7-1/2s, TBA May 14, 2025+++ 4,462,891
2,617,544 7s, with various due dates to June 1, 2024 2,489,120
Government National Mortgage Association
2,852,003 8s, Midgets, with various due dates to January 15, 2007 13,928,205
14,278,724 7-1/2s, with various due dates to July 15, 2024 1,267,146
1,338,681 7s, with various due dates to September 15, 2023 2,895,673
14,255,000 U.S. Treasury Bonds 8-7/8s, August 15, 2017 16,397,705
8,735,000 U.S. Treasury Bonds 8-1/8s, August 15, 2019 9,351,909
12,200,000 U.S. Treasury Bonds 7-1/2s, November 15, 2024 12,363,938
3,120,000 U.S. Treasury Notes 7-3/4s, January 31, 2000 3,226,275
2,650,000 U.S. Treasury Notes 7-3/8s, May 15, 1996 2,675,672
13,610,000 U.S. Treasury Notes 4-5/8s, February 29, 1996 13,427,116
Total U.S. Government and Agency Obligations
(cost $99,952,172) $103,654,612
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES (20.9%)*
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
Aerospace and Defense (0.1%)
$ 270,000 Sequa Corp. bonds 8-3/4s, 2001 $ 253,800
Automotive (1.1%)
3,775,000 Chrysler Corp. deb. 10.95s, 2017 4,161,938
225,000 Hayes Wheels International Inc. notes 9-1/4s, 2002 228,375
365,000 Key Plastics Inc. sr. notes 14s, 1999 390,550
------------
4,780,863
Basic Industrial Products (0.1%)
250,000 Ivex Packaging Corp. sr. sub. notes 12-1/2s, 2002 266,250
Broadcasting (1.2%)
50,000 Act III Broadcasting, Inc. sr. sub. notes 9-5/8s,
2003 48,250
205,000 Cablevision Systems Corp. sr. sub. reset deb.
10-3/4s, 2004 213,200
150,000 Century Communications Corp. sr. notes 9-1/2s, 2005 145,875
5,000,000 Tele-Communications, Inc. sr. deb. 9.8s, 2012 5,171,875
------------
5,579,200
Building and Construction (--%)
200,000 Scotsman Group, Inc. sr. notes 9-1/2s, 2000 191,000
Business Services (0.1%)
500,000 Corporate Express, Inc. sr. sub. notes 9-1/8s, 2004 477,500
Chemicals (0.4%)
250,000 G-I Holdings, Inc. sr. notes zero %, 1998 170,000
900,000 Lyondell Petrochemical Co. global notes 9-1/8s, 2002 952,313
750,000 OSI Specialty Corp. sr. sub. notes 9-1/4s, 2003 742,500
------------
1,864,813
Communications (0.3%)
250,000 Centennial Cellular Corp. sr. notes 8-7/8s, 2001 233,750
400,000 Comcast Cellular Corp. sr. participating notes Ser.
A, zero %, 2000 286,000
1,000,000 Panamsat (L.P.) sr. sub. notes stepped-coupon zero %
(11-3/8s, 8/1/98), 2003++ 692,500
------------
1,212,250
Conglomerates (1.4%)
250,000 ADT Ltd. sr. sub. notes 9-1/4s, 2003 250,000
500,000 MacAndrews & Forbes Holdings, Inc. sub. deb. notes
13s, 1999 501,250
4,700,000 Pennsylvania Central Corp. sub. notes 10-7/8s, 2011 5,387,375
------------
6,138,625
Consumer Non Durables (0.1%)
460,000 Playtex Family Products Corp. sr. sub. notes 9s,
2003 432,400
Consumer Services (1.5%)
250,000 Arizona Charlies Corp. 1st mtge. Ser. B, 12s, 2000 200,000
500,000 Casino America, Inc. 1st mtge. deb. 11-1/2s, 2001 496,250
500,000 General Media Corp. sr. secd. notes 10-5/8s, 2000 415,000
300,000 John Q. Hammons Hotels 1st. mtge. notes 8-7/8s, 2004 282,000
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
<C> <S> <S>
Consumer Services (continued)
$ 300,000 La Quinta Motor Inns, Inc. deb. 9-1/4s, 2003 $ 297,750
300,000 Louisiana Casino Cruises Corp. 1st mtge. notes 11-1/2s,
1998 267,000
275,000 Marvel Parent Holdings, Inc. sr. secd. disc. notes zero
%, 1998 184,250
3,885,000 News America Hldgs, Inc. sr. notes 12s, 2001 4,322,063
250,000 Time-Warner Inc. notes zero %, 2002 242,500
------------
6,706,813
Electronics and Electrical Equipment (0.1%)
500,000 Amphenol Corp. sr. notes 10.45s, 2001 523,750
Food and Beverages (0.3%)
500,000 Fresh Del Monte Produce Corp. sr. notes, Ser. B, 10s,
2003 415,000
500,000 PSF Finance (L.P.) sr. exch. notes 12-1/4s, 2004 515,938
500,000 Safeway, Inc. med. term notes 8.57s, 2003 505,625
125,000 Stater Brothers sr. notes 11s, 2001 122,188
------------
1,558,751
Forest Products (0.2%)
400,000 Gaylord Container Corp. sr. sub. disc. deb. stepped-
coupon zero % (12-3/4s, 5/15/96), 2005++ 384,500
250,000 Riverwood International Corp. sr. notes 10-3/4s, 2000 263,750
250,000 Riverwood International Corp. sr. sub. notes 10-3/8s,
2004 260,000
250,000 Stone Container Corp. sr. sub. notes 9-7/8s, 2001 248,750
------------
1,157,000
Health Care (0.5%)
1,340,000 Columbia Healthcare Corp. deb. 8.36s, 2024 1,362,613
250,000 Healthsouth Rehablitation sr. sub. notes 9-1/2s, 2001 255,000
250,000 McGaw, Inc. sr. notes 10-3/8s, 1999 257,500
150,000 Multicare Cos., Inc. sr. sub. notes 12-1/2s, 2002 169,500
250,000 Paracelsus Healthcare Corp. sr. sub. notes 9-7/8s, 2003 247,500
------------
2,292,113
Insurance and Finance (6.2%)
200,000 AIM Management Group sr. secd. notes 9s, 2003 192,000
500,000 American Annuity Group, Inc. sr. sub. notes 11-1/8s,
2003 520,000
1,160,000 BAT Capital Corp. 144A med. term notes 6.19s, 2000 1,091,125
2,000,000 Bank of Scotland med. term sub. notes 8.85s, 2006 2,125,000
500,000 Bankers Life Holding Corp. sr. sub. notes, Ser. B, 13s,
2002 578,750
270,000 Chevy Chase Savings Bank Inc. sub. deb. 9-1/4s, 2005 255,150
250,000 Comdata Network, Inc. sr. notes 12.12/s, 1999 270,000
3,500,000 Crestar Financial Corp. sub. notes 8-3/4s, 2004 3,696,875
250,000 Delaware Management Holdings, Inc. sr. notes, Ser. B,
10-1/4s, 2004 278,750
3,150,000 Den Danske Bank sub. notes 6.55s, 2003 2,860,594
1,040,000 Ford Capital BV deb. 9s, 1998 1,090,700
3,205,000 General Motors Acceptance Corp. med. term notes 6.7s,
1997 3,178,959
2,000,000 Goldman, Sachs & Co.144A deb. 8s, 2013 1,905,000
4,500,000 Great Western Financial Corp. notes 6-1/8s, 1998 4,365,000
175,000 Keystone Group, Inc. sr. secd. notes 9-3/4s, 2003 173,688
2,100,000 Midlantic Banks deb. 9-7/8s, 1999 2,265,375
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
Insurance and Finance (continued)
$ 500,000 PRT Funding Corp. sr. notes 11-5/8s, 2004 $ 420,000
250,000 Phoenix Re Corp. sr. note 9-3/4s, 2003 255,000
200,000 Reliance Group Holdings, Inc. sr. sub. deb. 9-3/4s,
2003 186,000
2,500,000 Riggs National Corp. sub. deb. 8-1/2s, 2006 2,400,000
------------
28,107,966
Metals and Mining (0.1%)
175,000 Inland Steel Co. 1st mtge. notes 12s, 1998 188,563
250,000 Kaiser Aluminum & Chemical Co. sr. notes 9-7/8s, 2002 243,125
------------
431,688
Motion Picture Distribution (0.3%)
150,000 AMC Entertainment, Inc. sr. sub. deb. 12.625s, 2002 163,500
500,000 Plitt Theatres, Inc. sr. sub. notes 10-7/8s, 2004 495,000
500,000 United Artists Inc. notes 11-1/2s, 2002 537,500
------------
1,196,000
Oil and Gas (1.9%)
4,400,000 Occidental Petroleum Corp. sr. notes 11-3/4s, 2011 4,768,500
175,000 Oryx Energy Co. deb. 9-3/4s, 1998 175,875
1,375,000 Parker & Parsley Petroleum Co. sr. notes 8-7/8s, 2005 1,391,328
2,030,000 Union Texas Petroleum sr. notes 8-3/8s, 2005 2,066,794
------------
8,402,497
Real Estate (0.1%)
710,000 Kearny State Real Estate (L.P.) secd. notes 9.56s, 2003 710,000
Retail (1.0%)
750,000 County Seat Stores Inc. sr. sub. notes 12s, 2001 746,250
175,000 Loehmanns' Holdings, Inc. sr. notes 10-1/2s, 1997 173,250
250,000 Penn Traffic Co. sr. sub. notes 9-5/8s, 2005 235,000
200,000 Revco D.S., Inc. sr. notes 9-1/8s, 2000 206,000
3,000,000 Sears, Roebuck & Co. med. term notes 5.91s, 1999 2,855,625
250,000 Service Merchandise Co., Inc. sr. sub. deb. 8-3/8s,
2001 220,000
------------
4,436,125
Textiles (0.1%)
200,000 Reeves Industries, Inc. sr. sub. notes 11s, 2002 209,500
Transportation (0.1%)
455,000 Blue Bird Body Co. sub. deb., Ser. B 11-3/4s, 2002 466,375
230,000 Viking Star Shipping sr. secd. notes 9-5/8s, 2003 220,800
------------
687,175
Utilities (3.7%)
2,500,000 Arkla, Inc. notes 8-7/8s, 1999 2,575,000
197,000 BVPS II Funding Corp. secd. lease oblig. bonds 9s, 2017 151,690
1,100,000 Gulf States Utilities Co. 1st mtge. bonds 8.7s, 2024 1,107,563
200,000 Midland Funding Corp. II deb., Ser. A, 11-3/4s, 2005 201,000
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
Utilities (continued)
$5,000,000 Old Dominion Electric Co. Ser. 93-A, 1st
mtge. Sinking Fund, 7.78s, 2023 $ 4,737,500
4,700,000 Texas Utilities Co. secd. lease fac. bonds
7.46s, 2015 4,100,750
4,350,000 Toledo Edison med. term. notes 1st mtge.,
Ser. A, 7.82s, 2003 3,928,594
------------
16,802,097
Total Corporate Bonds and Notes
(cost $98,970,312) $94,418,176
</TABLE>
<TABLE>
<CAPTION>
FOREIGN BONDS AND NOTES (4.9%)*
PRINCIPAL AMOUNT VALUE
<S> <C> <C> <C>
FRF 10,620,000 France (Government of) OAT deb. 8-1/2s,
2003 $ 6,269,600
FRF 29,504,000 France (Government of) OAT deb. 8-1/2s,
2002 2,250,113
FRF 11,270,000 France (Government of) deb. 7s, 1999 2,254,000
DEM 5,950,000 Treuhandanstalt (Government of) bonds
7-1/8s, 2003 4,321,188
GBP 4,593,000 United Kingdom Treasury notes 7s, 2001 6,883,759
Total Foreign Bonds and Notes
(cost $21,885,282) $21,978,660
</TABLE>
<TABLE>
<CAPTION>
COLLATERALIZED MORTGAGE OBLIGATIONS (3.0%)*
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
Housing Securities Inc.
$208,547 Ser. 93-J, 6.66s, 2009 $ 160,972
94,794 Ser. 93-J, Class J 5, 6.66s, 2009 62,949
167,613 Ser. 94-1, 6-1/2s, 2009 129,533
4,540,000 Nationsbank of Texas N.A. 144A secd. notes,
Ser. 1995-1, 7.7s, August 25, 1999 4,537,163
706,869 Prudential Home Loan Corp. Ser. 92-25, 8s,
2022 540,976
Prudential Home Mortgage Securities
211,755 Ser. 94-31, Class B3, sub. bond 8s, 2009 173,374
1,805,998 Ser. 93-B, Class 5B, 7.8366s, 2023 1,086,421
783,229 Ser. 92-13 7-1/2s, 2007 672,353
1,029,862 Ser. 93-E, Class-5B, 7.3935s, 2023 580,263
858,118 Ser. 93-36, Class-M, 7-1/4s, 2023 773,379
2,155,707 Ser. 93-D, Class 2B, 7.1082s, 2023 1,855,255
2,201,088 Ser. 94-A, 6.8s, 2024 1,844,787
831,911 Ser. 92-25, 6.33s, 2022 659,549
597,018 Ser. 94-D, 6.31s, 2009 522,018
Total Collateralized Mortgage Obligations
(cost $13,462,259) $13,598,992
YANKEE BONDS AND NOTES (2.6%)*
PRINCIPAL AMOUNT VALUE
$1,850,000 Noranda, Inc. deb. 8-1/8s, 2004 $ 1,870,813
3,170,000 Quebec (Province of) notes 8-5/8s, 2005 3,332,463
2,800,000 Roche Holdings, Inc. cv. unsub. liquid yield option
notes, (LYON) zero %, 2010 1,048,250
600,000 Rogers Communications cv. deb. 2s, 2005 312,750
5,200,000 Time-Warner Inc. global notes 9-1/8s, 2013 5,076,500
Total Yankee Bonds and Notes
(cost $12,095,691) $11,640,776
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCKS (1.4%)*
NUMBER OF SHARES VALUE
<C> <S> <C>
Automotive (0.4%)
23,000 Ford Motor Co. Ser. A, $4.20 cv. pfd. $ 2,026,875
Business Equipment and Services (--%)
1,900 Unisys Corp. Ser. A, $3.75 cv. pfd. 76,000
Consumer Non Durables (0.1%)
9,000 Fieldcrest Cannon, Inc. 144A $3.00 cv.
pfd. 420,750
1,000 Fieldcrest Cannon Inc. Ser. A, $3.00 cv.
pfd. 47,000
------------
467,750
Metals and Mining (0.5%)
71,000 Freeport-McMoRan Copper & Gold Co., Inc.
stepped coupon $1.25 ($1.75, 8/1/96), dep.
shs. cv. pfd.++ 1,526,500
20,000 Pittston Mineral Corp. Ser. C, $3.125 cv.
pfd. 640,000
------------
2,166,500
Oil and Gas (0.3%)
19,000 Ashland, Inc. $3.125 cv. pfd. 1,130,500
Transportation (0.1%)
6,000 Burlington Northern, Inc. Ser. A, $3.125
cum. cv. pfd. 388,500
Total Convertible Preferred Stocks
(cost $6,795,303) $ 6,256,125
CONVERTIBLE BONDS AND NOTES (1.1%)*
PRINCIPAL AMOUNT VALUE
Consumer Services (0.3%)
$2,300,000 Comcast Corp. cv. notes 1-1/8s, 2007 $ 954,500
1,800,000 Hollinger, Inc. cv. LYON, zero %, 2013 531,000
------------
1,485,500
Environmental Control (0.1%)
335,388 WMX Technologies, Inc. cv. 2s, 2005 272,503
Insurance and Finance (0.1%)
500,000 Trenwick Group, Inc. cv. deb. 6s, 1999 503,750
Metals and Mining (0.2%)
2,000,000 Freeport-McMoRan Copper & Gold Co., Inc.
cv. sub. deb. zero %, 2006 735,000
Real Estate (0.2%)
1,000,000 Liberty Property Trust cv. sub. deb. 8s,
2001 960,000
Transportation (0.2%)
1,200,000 AMR Corp. cv. sub. deb. 6-1/8s, 2024 1,158,000
Total Convertible Bonds and Notes
(cost $5,228,511) $ 5,114,753
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
ASSET-BACKED SECURITIES (0.8%)*
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
Insurance and Finance (0.5%)
$ 2,465,000 Chase Manhattan Credit Card Master Trust, Ser.
91-1, 8-3/4s, 1999 $ 2,509,678
Utilities (0.3%)
1,335,000 Long Island Lighting Co. Ser. P, 5-1/4s, 1996 1,319,981
Total Asset-Backed Securities
(cost $3,843,587) $ 3,829,659
EUROBONDS (0.2%)
PRINCIPAL AMOUNT VALUE
$ 900,000 Banamex cv. deb. 7s, 1999 $ 585,000
250,000 Ispat Mexicana, SA 144A deb. 10-3/8s, 2001 210,000
Total Eurobonds
(cost $962,478) $ 795,000
UNITS (0.2%)*
NUMBER OF UNITS VALUE
250 Echostar Communication Corp. units
stepped-coupon zero % (12-7/8s ,12/1/99),
2004++ $ 130,000
475 ICF Kaiser International, Inc. sr. sub.
units 12s, 2003 444,125
250 Total Renal Care units stepped-coupon zero
% (12s, 8/15/99), 2004++ 220,000
Total Units
(cost $802,198) $ 794,125
</TABLE>
<TABLE>
<CAPTION>
WARRANTS (--%)*+
NUMBER OF WARRANTS EXPIRATION DATE VALUE
<C> <S> <C> <C>
500 General Media Corp. 144A 12/31/00 $ 5,000
900 Louisiana Casino Cruises, Inc. 144A 12/1/98 13,500
Total Warrants (cost $11,323) $ 18,500
SHORT-TERM INVESTMENTS (3.6%)*
PRINCIPAL AMOUNT VALUE
$10,000,000 Federal National Mortgage Assn. 5.86s, May
23, 1995 $ 9,964,188
6,126,000 Interest in $485,809,000 joint repurchase
agreement dated April 28, 1995 with Morgan
(J.P.) & Co., Inc., due May 1, 1995 with
respect to various U.S. Treasury
obligations maturity value of $6,129,012
for an effective yield of 5.9% 6,129,012
Total Short-Term Investments
(cost $16,093,200) $ 16,093,200
Total Investments
(cost $456,955,930)*** $464,816,014
</TABLE>
21
<PAGE>
NOTES
*Percentages indicated are based on net assets of $451,483,210, which
correspond to a net asset value per share of class A, class B and class M
of $9.13, $9.10 and $9.12, respectively.
+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.
+++TBA's are mortgage-backed securities traded under delayed delivery
commitments, settling after April 30, 1995. Although the unit price for
the trades has been established, the principal value has not been
finalized. However, the amount of the commitments will not fluctuate more
than 2.0% from the principal amount. Income on the securities will not be
earned until settlement date. The cost of TBA purchases held at April 30,
1995 was $19,549,936.
<TABLE>
<CAPTION>
TBA Sale Commitments Outstanding at April 30, 1995 (proceeds receivable $6,084,857)
<PAGE>
Principal Delivery Coupon Market
Agency Amount Month Rate Value
<S> <C> <C> <C> <C>
GNMA $6,210,000 May/95 7-1/2% $6,067,382
</TABLE>
#Restricted, excluding 144A securities, as to public resale. At the date of
acquisition, these securities were valued at cost. There were no
outstanding unrestricted securities of the same class as that held. Total
market value of the restricted security owned at April 30, 1995 was
$15,363 or less than 1% of net assets.
##Income may be received in cash or additional securities at the discretion
of the issuer.
***The aggregate identified cost on a tax basis is $457,520,082 resulting in
gross unrealized appreciation and depreciation of $24,654,411 and
$17,358,479, respectively, or net unrealized appreciation of $7,295,932.
<TABLE>
<CAPTION>
Forward Currency Contracts Outstanding at April 30, 1995
Unrealized
Market Aggregate Delivery Appreciation/
Value Face Value Date (Depreciation)
<S> <C> <C> <C> <C>
British Pounds
(Sell) $6,801,680 $6,681,321 05/17/95 $(120,359)
Deutschemarks
(Sell) 6,738,710 6,717,684 06/13/95 (21,026)
Deutschemarks
(Buy) 4,810,320 4,853,335 06/13/95 (43,015)
Deutschemarks
(Sell) 2,250,700 2,274,474 06/14/95 23,774
French Francs
(Sell) 4,635,970 4,679,057 06/13/95 43,087
French Francs
(Sell) 6,690,370 6,832,668 06/13/95 142,298
$ 24,759
</TABLE>
ADR or ADS after the name of a holding stands for American Depository Receipt
or American Depository Shares, respectively, representing ownership of
foreign securities on deposit with a domestic custodian bank.
144A after the name of a security represents those exempt from registration
under Rule 144A of the Securities Act of 1933. These securities may be resold
in transactions exempt from registration, normally to qualified institutional
buyers.
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
Statement of assets and liabilities
April 30, 1995 (Unaudited)
<TABLE>
<S> <C>
Assets
Investments in securities, at value (identified cost $456,955,930) (Note 1) $464,816,014
Dividends, interest and other receivables 5,137,773
Receivable for shares of the fund sold 142,305
Receivable for securities sold 10,899,161
Receivable for open forward currency contracts 209,159
Total assets 481,204,412
Liabilities
Payable to subcustodian (Note 2) 1,014
Payable for securities purchased 21,412,534
Payable for shares of the fund repurchased 1,114,810
Payable for compensation of Manager (Note 2) 709,543
Payable for administrative services (Note 2) 891
Payable for compensation of Trustees (Note 2) 193
Payable for investor servicing and custodian fees (Note 2) 58,058
Payable for distribution fees (Note 2) 96,306
Other accrued expenses 76,071
Payable for open forward currency contracts 184,400
TBA sale commitments, at value (proceeds receivable $6,084,857) (Note 1) 6,067,382
Total liabilities 29,721,202
Net assets $451,483,210
Represented by
Paid-in capital (Notes 1 and 4) $451,122,607
Distributions in excess of net investment income (Note 1) (931,464)
Accumulated net realized loss on investment transactions (Note 1) (6,607,974)
Net unrealized appreciation of investments, forward currency contracts,
foreign currency translation and TBA sale commitments 7,900,041
Total--Representing net assets applicable to capital shares outstanding $451,483,210
Computation of net asset value and offering price
Net asset value and redemption price of class A shares
($445,337,922 divided by 48,773,983 shares) $9.13
Offering price per share (100/94.25 of $9.13)* $9.69
Net asset value and offering price of class B shares
($6,101,267 divided by 670,248 shares)** $9.10
Net asset value and offering price of class M shares
($44,021 divided by 4,825 shares) $9.12
Offering price per share (100/96.50 of $9.12)* $9.45
</TABLE>
*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.
23
<PAGE>
Statement of operations
Six months ended April 30, 1995 (Unaudited)
<TABLE>
<S> <C>
Investment income:
Interest $ 9,831,342
Dividends (net of foreign tax of $6,282) 3,966,572
Total investment income 13,797,914
Expenses:
Compensation of Manager (Note 2) 1,435,630
Investor servicing and custodian fees (Note 2) 209,384
Compensation of Trustees (Note 2) 8,871
Reports to shareholders 38,092
Auditing 23,869
Legal 10,500
Postage 46,151
Distribution fees--Class A (Note 2) 545,883
Distribution fees--Class B (Note 2) 25,307
Distribution fees--Class M (Note 2) 16
Registration fees 317
Administrative services (Note 2) 4,790
Other 17,534
Total expenses 2,366,344
Net investment income 11,431,570
Net realized loss on investments (Notes 1 and 3) (6,264,079)
Net realized loss on foreign currency translation (Notes 1 and 3) (4,269)
Net unrealized appreciation of investments, TBA sale commitments during the period 29,336,993
Net unrealized appreciation of forward currency contracts and foreign currency
translation during the period 22,482
Net gain on investments 23,091,127
Net increase in net assets resulting from operations $34,522,697
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
Statement of changes in net assets
<TABLE>
<CAPTION>
Six months ended Year ended
April 30 October 31
1995* 1994
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income $ 11,431,570 $ 24,396,806
Net realized gain (loss) on investments, forward
currency contracts and foreign currency
translation (6,268,348) 5,850,454
Net unrealized appreciation (depreciation) of
investments, options, TBA sale commitments,
forward currency contracts and foreign currency
translation 29,359,475 (34,072,630)
Net increase (decrease) in net assets resulting from
operations 34,522,697 (3,825,370)
Distributions to shareholders:
From net investment income:
Class A (12,243,245) (24,376,662)
Class B (119,789) (41,307)
From net realized gain on investments
Class A -- (5,806,154)
Class B -- (44,300)
In excess of net realized gain on investments
Class A -- (176,371)
Class B -- (1,346)
Decrease from capital share transactions (Note 4) (30,172,174) (57,623,727)
Total decrease in net assets (8,012,511) (91,895,237)
Net assets
Beginning of period 459,495,721 551,390,958
End of period (including distributions in excess of
net investment income of $931,464 and $0,
respectively) $451,483,210 $459,495,721
</TABLE>
*Unaudited.
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
Financial highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the period
March 17, 1995 February 1, 1994
(commencement Six months (commencement
of operations) to ended of operations) to
April 30 April 30 October 31
1995* 1995* 1994
Class M Class B
<S> <C> <C> <C>
Net asset value, beginning of period $ 8.88 $ 8.67 $ 9.31
Investment operations
Net investment income .02 .18 .34
Net realized and unrealized gain (loss) on
investments .22 .46 (.60)
Total from investment operations .24 .64 (.26)
Less distributions from:
Net investment income -- (.21) (.27)
Net realized gain on investments -- -- (.11)
In excess of net investment income -- -- --
Tax returns of capital -- -- --
Total distributions -- (.21) (.38)
Net asset value, end of period $ 9.12 $ 9.10 $ 8.67
Total investment return at net asset value (%) (a) 2.70(b) 7.59(b) (2.75)(b)
Net assets, end of period (in thousands) $ 44 $6,101 $ 4,196
Ratio of expenses to average net assets (%) .64(b) .89(b) 1.34(b)
Ratio of net investment income to average net
assets (%) 1.47(b) 2.17(b) 3.20(b)
Portfolio turnover (%) 65.03 65.03 125.69
</TABLE>
26
<PAGE>
Financial highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Six months
ended April 30 Year ended October 31
1995* 1994 1993 1992**
Class A
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.68 $ 9.28 $ 8.50 $ 8.56
Investment operations
Net investment income .22 .43 .45 .16
Net realized and unrealized gain (loss) on
investments .47 (.49) .99 .74
Total from investment operations .69 (.06) 1.44 .90
Less distributions from:
Net investment income (.24) (.43) (.45) (.16)
Net realized gain on investments -- (.11) (.21) (.80)
In excess of net investment income -- -- -- --
Tax returns of capital -- -- -- --
Total distributions (.24) (.54) (.66) (.96)
Net asset value, end of period $ 9.13 $ 8.68 $ 9.28 $ 8.50
Total investment return at net asset value (%) (a) 8.16(b) (.61) 17.68 11.15
Net assets, end of period (in thousands) $445,338 $455,299 $551,391 $633,181
Ratio of expenses to average net assets (%) .52(b) 1.08 1.02 1.11
Ratio of net investment income to average net
assets (%) 2.54(b) 4.92 5.06 1.87
Portfolio turnover (%) 118.43
65.03 125.69 224.28
</TABLE>
* Unaudited.
** During fiscal year 1992, the fund expanded its investment flexibility to
include corporate bonds, foreign securities, warrants and restricted
securities. Accordingly, results of operations prior to fiscal 1992, as
presented above, may not reflect those that would have been achieved
under the fund's current investment policies. (Note 1)
(a) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
(b) Not annualized.
27
<PAGE>
Financial highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Year ended
October 31
1991 1990 1989 1988
Class A
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.47 $ 9.34 $ 9.15 $ 9.05
Investment operations
Net investment income .21 .31 .39 .23
Net realized and unrealized gain (loss) on
investments 1.87 (1.03) 1.00 1.37
Total from investment operations 2.08 (.72) 1.39 1.60
Less distributions from:
Net investment income (.19) (.31) (.39) (.27)
Net realized gain on investments (.75) -- (.31) (.08)
In excess of net investment income -- (.01) (.01) --
Tax returns of capital (.05) (.83) (.49) (1.15)
Total distributions (.99) (1.15) (1.20) (1.50)
Net asset value, end of period $ 8.56 $ 7.47 $ 9.34 $ 9.15
Total investment return at net asset value (%)(a) 29.29 (8.64) 16.30 19.81
Net assets, end of period (in thousands) $699,858 $724,871 $1,138,983 $1,391,983
Ratio of expenses to average net assets (%) 1.09 1.03 .82 .81
Ratio of net investment income to average net
assets (%) 2.56 3.65 4.20 2.57
Portfolio turnover (%) 135.18 152.06 117.59 31.21
</TABLE>
28
<PAGE>
Financial highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the period
Three April 19, 1985
months (commencement
ended Year ended of operations) to
October 31 July 31 July 31
1987 1987 1986 1985
Class A
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 11.76 $ 11.40 $ 11.95 $ 11.71
Investment operations
Net investment income .05 .20 .27 .12
Net realized and unrealized
gain (loss) on investments (2.34) 1.90 1.03 .12
Total from investment
operations (2.29) 2.10 1.30 .24
Less distributions from:
Net investment income (.02) (.37) (.40) --
Net realized gain on
investments (.40) (1.37) (1.45) --
In excess of net investment
income -- -- -- --
Tax returns of capital -- -- -- --
Total distributions (.42) (1.74) (1.85) --
Net asset value, end of period $ 9.05 $ 11.76 $ 11.40 $ 11.95
Total investment return at net
asset value (%)(a) (20.20)(b) 20.39 11.87 2.08(b)
Net assets, end of period (in
thousands) $1,497,312 $1,868,298 $1,026,462 $171,869
Ratio of expenses to average
net assets (%) .19(b) .78 .82 .29(b)
Ratio of net investment income
to average net assets (%) .45(b) 1.78 2.24 .77(b)
Portfolio turnover (%) 49.66 214.89 197.96 23.41(b)
</TABLE>
* Unaudited.
** During fiscal year 1992, the fund expanded its investment flexibility to
include corporate bonds, foreign securities, warrants and restricted
securities. Accordingly, results of operations prior to fiscal 1992, as
presented above, may not reflect those that would have been achieved
under the fund's current investment policies. (Note 1)
(a) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
(b) Not annualized.
29
<PAGE>
Notes to financial statements
April 30, 1995 (Unaudited)
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company. The fund seeks high
current return by investing in a diversified portfolio of equity and debt
securities and secondarily, seeks stability of principal.
The fund offers class A, class B and class M shares. The fund commenced
operations of its class M shares on March 17, 1995. Class A shares are sold
with a maximum front-end sales charge of 5.75%. Class B shares do not pay a
front-end sales charge, but pay a higher ongoing distribution fee than class
A shares, and may be subject to a contingent deferred sales charge, if those
shares are redeemed within six years of purchase. Class M shares are sold
with a maximum front- end sales charge of 3.50% and pay a 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
policies are in conformity with generally accepted accounting principles.
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, except that
certain U.S. government obligations are stated at the mean between the last
reported bid and asked prices. Securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate. Short-term
investments having remaining maturities of 60 days or less are stated at
amortized cost, which approximates market value, and other investments are
stated at fair market value following procedures approved by the Trustees.
Market quotations are not considered to be readily available for long-term
corporate bonds and notes; such investments are stated at fair value on the
basis of valuations furnished by a pricing service, approved by the Trustees,
which determines valuations for normal, institutional-size trading units of
such securities using methods based on market transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders.
B) TBA purchase commitments The fund may enter into "TBA" (to be announced)
purchase commitments to purchase securities for a fixed price at a future
date beyond customary settlement time. Although the unit price has been
established, the principal value has not been finalized. However, the
30
<PAGE>
amount of the commitment will not fluctuate more than 2% from the principal
amount. The fund holds and maintains until the settlement date, cash or
high-grade debt obligations in an amount sufficient to meet the purchase
price, or the fund enters into offsetting contracts for the forward sale of
other securities it owns. TBA purchase commitments may be considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk is
in addition to the risk of decline in the value of the fund's other assets.
Unsettled TBA purchase commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Security valuation" above.
Although the fund will generally enter into TBA purchase commitments with the
intention of acquiring securities for its portfolio or for delivery pursuant
to options contracts it has entered into, the fund may dispose of a
commitment prior to settlement if Putnam Management deems it appropriate to
do so.
C) TBA sale commitments The fund may enter into TBA sale commitments to hedge
its portfolio positions or to sell mortgage-backed securities it owns under
delayed delivery arrangements. Proceeds of TBA sale commitments are not
received until the contractual settlement date. During the time a TBA sale
commitment is outstanding, equivalent deliverable securities, or an
offsetting TBA purchase commitment deliverable on or before the sale
commitment date, are held as "cover" to the transaction.
Unsettled TBA sale commitments are valued at the current market value of the
underlying securities, generally according to the procedures described under
"Security valuation" above. The contract is "marked-to-market" daily and the
change in market value is recorded by the fund as an unrealized gain or loss.
If the TBA sale commitment is closed through the acquisition of an offsetting
purchase commitment, the fund realizes a gain or loss on the commitment
without regard to any unrealized gain or loss on the underlying security. If
the fund delivers securities under the commitment, the fund realizes a gain
or a loss from the sale of securities based upon the unit price established
at the date the commitment was entered into.
D) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission the fund may transfer uninvested cash
balances into a joint trading account, along with the cash of other
registered investment companies managed by Putnam Investment Management, Inc.
("Putnam Management"), the fund's Manager, a wholly-owned subsidiary of
Putnam Investments, Inc., and certain other accounts. These balances may be
invested in one or more repurchase agreements and/or short-term money market
instruments.
E) Repurchase agreements The fund, through its custodian, receives delivery
of the underlying securities, the market value of which at the time of
purchase is required to be in an amount at least equal to the resale price,
including accrued interest. The fund's Manager is responsible for determining
that the value of these underlying securities is at all times at least equal
to the resale price, including accrued interest.
F) 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 and dividend
income is recorded on the ex-dividend date, except that certain dividends
from foreign securities are recorded as soon as the fund is informed of the
ex-dividend date.
31
<PAGE>
Discount on zero-coupon and stepped- coupon bonds is accreted according to
the effective yield method. Certain securities held by the pay interest in
the form of additional securities; interest on such securities is recorded on
the accrual basis at the lower of the coupon rate or market value of the
securities to be received and is allocated to the cost of the securities
received on the payment date.
G) Federal taxes It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
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 of securities held and excise tax on
income and capital gains.
H) Distributions to shareholders Distributions to shareholders are recorded
by the fund on the ex-dividend date. Distributions are declared from
projected net investment income and net realized short-term capital gains
that the fund is likely to earn over the longer term.
The amount and character of income and gains determined in accordance with
income tax regulations may differ from generally accepted accounting
principles. These differences include treatment of wash sales, market
discount and return of capital dividends received by the fund.
Reclassifications are made to the fund's capital accounts as necessary so
that they reflect income and gains available for distribution (or available
capital loss carryovers) under income tax regulations.
Note 2
Management fee, administrative services, and other transactions
Compensation of Putnam Management, for management and investment advisory
services, is paid quarterly based on the average net assets of the fund for
the quarter. Such fee is based on the following annual rates: 0.65% of the
first $500 million of average net assets, 0.55% of the next $500 million,
0.50% of the next $500 million, and 0.45% of any amount over $1.5 billion,
subject, under current law, to reduction in any year to the extent that
expenses (exclusive of brokerage, interest and taxes) of the fund exceed 2.5%
of the first $30 million of average net assets, 2% of the next $70 million
and 1.5% of any amount over $100 million and by the amount of certain
brokerage commissions and fees (less expenses) received by affiliates of the
Manager on the fund's portfolio transactions.
The fund also reimburses the Manager for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Trustees of the fund receive an annual Trustee's fee of $1,010, and an
additional fee for each Trustees' meeting attended. Trustees who are not
interested persons of the Manager and who serve on committees of the Trustees
receive additional fees for attendance at certain committee meetings.
Custodial functions for the fund are provided by Putnam Fiduciary Trust
Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing
agent functions are provided by Putnam Investor Services, a division of PFTC.
Investor servicing and custo-
32
<PAGE>
dian fees reported in the Statement of operations for the six months ended
April 30, 1995 have been reduced by credits allowed by PFTC.
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 payment by the fund to Putnam
Mutual Funds Corp. at an annual rate up to 0.35%, 1.00% and 1.00% of the
average net assets attributable to class A, class B and class M shares,
respectively. The Trustees have approved payment by the fund at an annual
rate of 0.25%, 1.00% and 0.75% of the average net assets attributable to
class A, class B and class M shares respectively.
For the six months ended April 30, 1995, Putnam Mutual Funds Corp., acting as
the underwriter received net commissions of $27,301 and $180 from the sale of
class A and class M shares, respectively, and $6,463 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 purchased as
part of an investment of $1 million or more. For the six months ended April
30, 1995, Putnam Mutual Funds Corp., acting as the underwriter received no
deferred sales charges on class A redemptions.
As part of the custodian contract between the subcustodian bank and PFTC, the
subcustodian bank has a lien on the securities of the fund to the extent
permitted by the fund's investment restrictions to cover any advances made by
the subcustodian bank for the settlement of securities purchased by the fund.
At April 30, 1995, the payable to subcustodian bank represents the amount due
for cash advance for the settlement of a security purchased.
Note 3
Purchases and sales of securities
During the six months ended April 30, 1995, purchases and sales of investment
securities other than U.S. government obligations and short-term investments
aggregated $107,520,896 and $140,775,521, respectively. Purchases and sales
of U.S. government obligations aggregated $157,707,411 and $165,947,726,
respectively. In determining the net gain or loss on securities sold, the
cost of securities has been determined on the identified cost basis.
Note 4
Capital shares
At April 30, 1995, there was an unlimited number of shares of beneficial
interest authorized, divided into three classes, class A, class B and class M
capital shares. Transactions in capital shares were as follows:
33
<PAGE>
<TABLE>
<CAPTION>
Six months ended April 30 Year ended October 31
1995 1994
Class A Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 821,486 $ 7,138,882 1,996,341 $ 17,703,585
Shares issued in
connection with
reinvestment of
distributions 838,322 7,155,369 1,913,722 16,905,211
1,659,808 14,294,251 3,910,063 34,608,796
Shares repurchased (5,315,136) (46,119,273) (10,870,674) (96,488,990)
Net decrease (3,655,328) $(31,825,022) (6,960,611) $(61,880,194)
</TABLE>
<TABLE>
<CAPTION>
For the period
February 1, 1994
(commencement
of operations) to
Six months ended April 30 October 31
1995 1994
Class B Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 275,160 $2,376,930 528,835 $4,648,625
Shares issued in
connection with
reinvestment of
distributions 8,157 69,672 5,566 48,364
283,317 2,446,602 534,401 4,696,989
Shares repurchased (97,063) (837,265) (50,407) (440,522)
Net increase 186,254 $1,609,337 483,994 $4,256,467
</TABLE>
<TABLE>
<CAPTION>
For the period
March 17, 1995
(commencement
of operations) to
April 30
1995
Class M Shares Amount
<S> <C> <C>
Shares sold 4,825 $43,511
Shares issued in
connection with
reinvestment of
distributions -- --
4,825 43,511
Shares repurchased -- --
Net increase 4,825 $43,511
</TABLE>
Note 5
Subsequent Event
Effective June 1, 1995, the name of the fund changed to Putnam Balanced
Retirement Fund. Additionally, the Trustees approved a non-fundamental
investment policy that under normal market conditions, the fund will invest
at least 25% of its assets in fixed- income securities.
34
<PAGE>
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Peter Carman
Vice President
Brett C. Browchuk
Vice President
Thomas V. Reilly
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
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Managed Income
Trust. It may also be used as sales literature when preceded or accompanied
by the current prospectus, which gives details of sales charges, investment
objectives and operating policies of the fund, and the most recent copy of
Putnam's Quarterly Performance Summary. For more information or to request a
prospectus, call toll free 1-800-225-1581.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution, are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other
agency, and involve risk, including the possible loss of principal amount
invested.
35
<PAGE>
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
18344-034/243
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED
AND EDGAR-FILED TEXTS:
(1) Bold and italic typefaces are displayed in normal type.
(2) Headers (e.g., the name of the fund) are omitted.
(3) Certain tabular and columnar headings and symbols are displayed
differently in this filing.
(4) Bullet points and similar graphic signals are omitted.
(5) Page numbering is omitted.
(6) Trademark symbol replaced with (TM)
