(Putnam Logo, Balance Scales)
The
George
Putnam
Fund of
Boston
Semiannual
Report
January 31, 1994
(Artwork)
For investors seeking
a balanced investment
offering capital growth
and current income
through a well-diversified
portfolio balanced
between stocks and bonds
A member
of the Putnam
Family of Funds
Contents
2 How your fund performed
3 From the Chairman
4 Report from Putnam Management
Semiannual Report
7 Portfolio of investments owned
14 Financial statements
22 Fund performance supplement
23 Your Trustees
<PAGE>
How your
fund performed
For periods ended January 31, 1994
<TABLE>
<CAPTION>
Total return* Shearson
Lehman Lipper
Fund Govt./Corp. Balanced
Class A Class B S&P Bond Funds
NAV POP NAV CDSC 500(R) Index Average
<S> <C> <C> <C> <C> <C> <C> <C>
6 months 6.51% 0.38% 6.11% 1.12% 8.94% 4.95% 7.13%
1 year 12.86 6.37 11.95 6.95 12.79 11.46 11.91
5 years 75.87 65.75 -- -- 89.75 73.71 76.16
annualized 11.95 10.63 -- -- 13.67 11.68 11.91
10 years 228.98 210.05 -- -- 316.74 206.38 243.46
annualized 12.65 11.98 -- -- 15.34 11.85 13.01
Life-of-class
(class B shares) -- -- 20.17 16.17 21.99 23.66 22.50
annualized -- -- 11.00 8.89 11.96 12.83 12.26
</TABLE>
<TABLE>
<CAPTION>
Class A Class B
Share data NAV POP NAV
<S> <C> <C> <C>
July 31, 1993 $14.24 $15.11 $14.19
January 31, 1994 $14.22 $15.09 $14.16
</TABLE>
<TABLE>
<CAPTION>
Capital gains
Distributions Investment Short- Long-
6 months ended 1/31/94 Number Income term term Total
<S> <C> <C> <C> <C> <C>
Class A 2 $0.310 $0.272 $0.331 $0.913
Class B 2 $0.263 $0.272 $0.331 $0.866
</TABLE>
Total return at end of most recent calendar quarter
Periods ended December 31, 1993
<TABLE>
<CAPTION>
Class A Class B
NAV POP NAV CDSC
<S> <C> <C> <C> <C>
1 year 10.90% 4.54% 10.07% 5.07%
5 years 80.04 69.71 -- --
annualized 12.48 11.16 -- --
10 years 215.83 197.71 -- --
annualized 12.19 11.53 -- --
Life-of-class
(class B shares) -- -- 17.20 13.20
annualized -- -- 9.91 7.66
<FN>
* Performance data represent past results. Investment return and principal
value will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Effective April 27, 1992, the
fund began offering Class B shares. Performance for each share class will
differ.
</TABLE>
Terms you need to know
Total return is the change in value of an investment from the beginning to
the end of a period, assuming the reinvestment of all distributions. It may
be shown at net asset value or at public offering price.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not reflecting any
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.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of shares rather than the time of purchase. It generally
declines and eventually disappears over a stated period.
Class A shares are the shares of your fund offered subject to an initial
sales charge. Your fund's POP includes the maximum 5.75% sales charge.
Class B shares are the shares of your fund offered with no initial sales
charge. Within the first six years of purchase, they are subject to a CDSC
declining from 5% to 1%. After the sixth year, the CDSC no longer applies.
Current dividend rate is calculated by annualizing the net investment income
paid to shareholders in the fund's most recent distribution, then dividing by
the NAV or POP on the last day of the period.
Please see the fund performance supplement on page 22 for additional
information about performance comparisons.
<PAGE>
From the
Chairman
(George Putnam photo)
George Putnam
Chairman of the Trustees
(C) Karsh, Ottawa
Dear Shareholder:
Your fund's classic, balanced approach to investing provided shareholders
with attractive investment results for the six months ended January 31, 1994.
While market conditions affect the stock and bond markets differently, your
fund has positioned investments effectively in both markets to provide a
total return at net asset value of more than 6% for both class A and class B
shares for the period.
I am pleased to announce that in December 1993, Edward P. Bousa was appointed
manager of your fund. He replaces Thomas V. Reilly, who has taken on
additional responsibilities within Putnam, and who will continue to oversee
the fund's management in his role as the group's chief investment officer. An
equity income manager with 11 years of investment experience, Mr. Bousa
joined Putnam in 1992 as Senior Vice President and Senior Portfolio Manager
in Putnam's Basic Value Equity Group. He began his professional investment
career at Fidelity Investments in 1984.
Mr. Bousa is continuing to manage the fund in the basic value style that has
been its hallmark. He is being supported by the same research and
investment team that assisted Mr. Reilly throughout his tenure. Additionally,
Kenneth J. Taubes, Senior Vice President, who is a 13-year veteran of the
investment industry, is assisting Mr. Bousa in the management of the fund's
fixed-income investments.
In the following Report From Putnam Management, Mr. Bousa and Mr. Taubes
discuss the conditions that affected your fund during the last six months.
They also offer their outlook for the stock and bond markets and discuss how
they intend to position the fund to benefit in coming months.
Respectfully yours,
(Signature of George Putnam)
George Putnam
March 16, 1994
<PAGE>
Report from
Putnam Management
Top 10 holdings (1/31/94)
Exxon Corp.
du Pont (E.I.) de Nemours & Co., Ltd.
General Electric Co.
Xerox Corp.
Philip Morris Cos., Inc.
Ford Motor Co.
Royal Dutch Petroleum Co. ADR
American Home Products Corp.
NYNEX Corp.
Morgan (J.P.) & Co., Inc.
The George Putnam Fund of Boston's basic strategy continues to prove its
merits by providing shareholders with an attractive combination of income and
growth potential. We believe our conservative approach can provide
shareholders with some protection in down markets, since our balance between
stock and bond investments takes advantage of the fact that these markets
often move in different directions.
We continue to emphasize a basic value theme when selecting holdings for the
fund's portfolio. Basic value investing means we look for bargain-priced
stocks -- those whose prices do not reflect what we believe to be the
inherent value of a company's assets and earnings potential. This strategy
demands diligent research, and benefits from ongoing communication with a
company's management and regular on-site visits.
Thanks in part to our basic value focus, the fund posted a strong total
return of 6.51% for class A shares and 6.11% for class B shares, at net asset
value, for the six months ended January 31, 1994.
Several forces were at work in the stock and bond markets during the period,
the most important of which we will discuss here.
Cyclicals fuel performance
The fund's performance for the first half of the fiscal year has been
primarily the result of growth in the values of the fund's cyclical holdings.
These holdings, both stocks and bonds, characteristically perform best when
the economy is showing improvement.
While the U.S. economy continued to stumble early in 1993, it began to show
genuine signs of growth during the last half of the 1993 calendar year.
Industries that tend to perform well in this kind of an environment include
the chemical, automobile, paper, and aerospace industries, all of which were
represented in the fund's portfolio.
Participating in a world economy
An important trend we see occurring that affects the stock and bond markets,
and therefore your fund's portfolio, is that more and more U.S. companies are
doing increased business in foreign countries. We believe tremendous
opportunities will be available for U.S. companies that can offer unique or
value-oriented products unmatched by foreign competitors.
Examples of such current holdings are E.I. duPont de Nemours & Co., Ltd. and
Xerox Corp. DuPont, a well-known chemical producer that offers quality
<PAGE>
products at low cost, is currently expanding its operations in Asia and
Europe. Xerox is also expanding its business in these areas, as the firm
offers the most advanced digital copiers in the world, for which demand is
expected to increase. Exxon Corp. and Mobil Corp., two of the world's largest
oil companies, have the technology and the business relationships to provide
oil exploration services desperately needed in Indonesia, Russia, and China.
Hidden value in banks
Most importantly, we believe some banking organizations face very positive
prospects as they look to expand their business in foreign markets. We
particularly like the outlook for two large and respected banking firms,
Bankers Trust New York Corp. and J.P. Morgan & Co., Inc., holdings we added
to at the end of the period.
Bankers Trust owns the leading technology in derivative securities and other
sophisticated financing, which is playing an increasingly important role in
the financial services industry. J.P. Morgan has business relationships
across the globe and offers a full range of services throughout the world,
including lending, research, financing, and equity investing.
(Bar Chart)
Top industry sectors (1/31/94)
Insurance & Finance 15.2%
Utilities 13.1%
Oil & Gas 7.8%
Health Care 5.6%
Consumer Services 4.1%
*based upon a percentage of net assets
We believe the fund's stock holdings in these two companies will benefit if
these firms continue to build market share. Additionally, we are finding that
many U.S. companies are now using U.S. banks, instead of foreign banks, for
most of their banking for their business in foreign countries, a good sign
for the U.S. banking business in general.
Interest-rate effects
Stocks that tend to decrease in value as interest rates rise, such as those
issued by utility, insurance, and banking industries, experienced some price
declines at the end of the fiscal period. We feel this situation made some
banking companies--that demonstrate strong prospects for growth--a very good
value, and, to a lesser extent, made some utility and insurance holdings
attractive as well. Accordingly, we have increased the fund's holdings in
these areas.
<PAGE>
On the bond side of the portfolio, we have adopted a more defensive stance in
reference to interest rates. With the expectation that short-term interest
rates could likely rise in coming months, we have shortened the duration, or
effective maturity, of the bonds in the fund's portfolio. We have positioned
the fund so that its average maturity is shorter than that of the average in
the corporate bond indexes. This positioning, we believe, will be to the
fund's advantage if rates rise, because as they do so, the price of
short-term bonds decreases less than the price of long-term bonds.
Outlook
The U.S. economy should continue to show improvement in the coming months.
Moreover, while we don't expect interest rates to rise sharply in the near
future, we do believe the potential exists for a gradual increase in rates.
We continue to believe that the best opportunities for growth can be found in
securities whose values have not yet been recognized by the market. This
basic value philosophy should continue to serve your fund well in the months
ahead.
<PAGE>
Portfolio of
investments owned
January 31, 1994 (Unaudited)
<TABLE>
<CAPTION>
Common Stocks (63.5%)(a)
Number of Shares Value
<S> <C> <C>
Insurance and Finance (11.0%)
120,000 Aetna Life & Casualty Co. $ 7,620,000
190,000 American Express Co. 6,222,500
200,000 American General Corp. 5,725,000
157,000 Banc One Corp. 5,887,500
40,000 BankAmerica Corp. 1,860,000
91,382 Bankers Trust New York Corp. 7,664,665
122,000 Beneficial Corp. 4,834,250
90,000 CIGNA Corp. 6,221,250
130,000 Chase Manhattan Corp. 4,696,250
250,000 Comerica Inc. 7,031,250
200,000 Great Western Financial Corp. 3,875,000
150,000 Household International, Inc. 4,968,750
160,000 Lincoln National Corp. 6,800,000
135,000 Morgan (J.P.) & Co., Inc. 9,686,250
50,000 NBD Bancorp, Inc. 1,487,500
230,000 National City Corp. 5,951,250
40,000 NationsBank Corp. 2,030,000
30,000 Ohio Casualty Corp. 1,935,000
240,000 PNC Bank Corp. 7,110,000
115,000 Unitrin, Inc. 4,945,000
105,100 Wilmington Trust Co. 2,732,600
109,284,015
Utilities (10.3%)
100,000 American Electric Power Co. 3,612,500
160,000 American Telephone & Telegraph Co. 9,080,000
110,000 Ameritech Corp. 4,620,000
68,900 Bell Atlantic Corp. 3,910,075
150,000 BellSouth Corp. 9,225,000
70,000 Consolidated Edison Co. of New York, Inc. 2,178,750
100,000 Consolidated Natural Gas Co. 4,600,000
140,000 Detroit Edison Co. 4,147,500
120,000 Entergy Corp. 4,470,000
120,000 FPL Group, Inc. 4,425,000
200,000 GTE Corp. 6,875,000
100,000 Houston Industries Inc. 4,562,500
250,000 NYNEX Corp. 10,250,000
98,400 Northeast Utilities Co. 2,484,600
240,000 SCE Corp. 4,680,000
100,000 Southwestern Bell Corp. 4,187,500
210,000 Sprint Corp. 7,612,500
50,000 Texas Utilities Co. 1,931,250
122,000 US WEST, Inc. 5,337,500
70,000 United Illuminating Co. 2,607,500
55,000 WICOR Inc. 1,725,625
102,522,800
Oil and Gas (6.9%)
140,000 Amoco Corp. 7,525,000
50,000 Atlantic Richfield Co. 5,525,000
270,000 Exxon Corp. 17,955,000
90,000 Imperial Oil Ltd. 3,138,750
24,300 MCN Corp. 896,063
130,000 McDermott International, Inc. 3,071,250
100,000 Mobil Corp. 8,100,000
100,000 Royal Dutch Petroleum Co. ADR (b) 11,000,000
80,000 Tenneco Inc. 4,600,000
100,000 Texaco Inc. 6,762,500
68,573,563
Health Care (5.3%)
132,000 American Cyanamid Co. 6,649,500
170,000 American Home Products Corp. 10,795,000
200,000 Baxter International Inc. 4,750,000
90,000 Bristol-Myers Squibb Co. 5,208,750
60,000 Lilly (Eli) & Co. 3,592,500
250,000 Merck & Co., Inc. 9,125,000
150,000 Upjohn Co. 4,500,000
120,000 Warner-Lambert Co. 7,815,000
52,435,750
Consumer Non-Durables (4.7%)
200,000 American Brands, Inc. 7,150,000
161,400 Avon Products, Inc. 8,816,475
70,000 Clorox Co. (The) 3,613,750
59,600 Guilford Mills Inc. 1,326,100
110,000 Kimberly-Clark Corp. 6,256,250
210,000 Philip Morris Cos., Inc. 12,652,500
150,000 Tambrands Inc. 6,431,250
46,246,325
Retail (3.2%)
95,000 American Stores Co. 4,025,625
332,000 K mart Corp. 6,515,500
70,000 May Department Stores Co. 2,765,000
60,000 Melville Corp. 2,385,000
80,000 Penney (J.C.) Co. Inc. 4,190,000
130,000 Sears, Roebuck & Co. 7,133,750
180,000 Woolworth Corp. 4,680,000
31,694,875
Chemicals (3.1%)
18,857 Cytec Industries, Inc. (c) 304,069
125,000 Dow Chemical Co. 7,937,500
250,000 du Pont (E.I.) de Nemours & Co., Ltd. 14,000,000
61,000 Eastman Chemical Co. 2,668,750
100,000 Grace (W.R.) & Co. 4,562,500
25,000 Olin Corp. 1,228,125
30,700,944
Conglomerates (2.9%)
120,000 General Electric Co. 12,930,000
50,000 Minnesota Mining & Manufacturing Co. 5,362,500
120,000 National Service Industries, Inc. 3,240,000
90,000 Ogden Corp. 2,092,500
70,000 United Technologies Corp. 4,716,250
28,341,250
Food and Beverages (2.6%)
110,000 Anheuser-Busch Cos., Inc. 5,390,000
125,000 CPC International Inc. 6,109,375
90,000 Fleming Cos., Inc. 2,205,000
50,000 Flowers Industries, Inc. 1,000,000
80,000 Heinz (H.J.) Co. 2,780,000
50,000 Quaker Oats Co. (The) 3,300,000
150,000 Seagram Co. Ltd. 4,612,500
25,396,875
Business Equipment and Services (2.3%)
45,000 Dun & Bradstreet Corp. 2,829,375
60,000 Equity Residential Properties Trust 1,747,500
Business Equipment and Services (continued)
100,000 IBM Corp. 5,675,000
130,000 Xerox Corp. 12,756,250
23,008,125
Automotive (1.9%)
51,300 Daimler Benz AKT, ADR (b) 2,423,925
180,000 Ford Motor Co. 12,060,000
60,000 TRW, Inc. 4,485,000
18,968,925
Basic Industrial Products (1.7%)
90,000 Ball Corp. 2,373,750
65,800 CBI Industries, Inc. 2,056,250
140,000 Eastman Kodak Co. 6,177,500
50,000 Parker-Hannifin Corp. 1,912,500
60,000 Sundstrand Corp. 2,662,500
32,200 Timken Co. 1,175,300
16,357,800
Transportation (1.2%)
25,000 GATX Corp. 1,065,625
80,000 Norfolk Southern Corp. 5,890,000
70,000 Union Pacific Corp. 4,576,250
11,531,875
Consumer Services (1.2%)
80,000 McGraw-Hill, Inc. 5,540,000
163,000 Times Mirror Co. Class A 5,908,750
11,448,750
Forest Products (1.1%)
100,000 Potlatch Corp. 4,712,500
30,000 Union Camp Corp. 1,473,750
140,000 Westvaco Corp. 5,075,000
11,261,250
Electronics and Electrical Equipment (1.0%)
100,000 Emerson Electric Co. 6,125,000
40,000 Harris Corp. 1,935,000
150,000 Westinghouse Electric Corp. 2,100,000
10,160,000
Metals and Mining (0.6%)
40,000 Aluminum Co. of America 3,165,000
50,000 Freeport-McMoRan, Inc. 1,025,000
50,000 USX Corp. 2,200,000
6,390,000
Real Estate (0.6%)
150,000 Crown American Realty Trust 2,137,500
90,000 Holly Residential Properties 1,631,250
90,000 Simon Property Group, Inc. 2,205,000
5,973,750
Aerospace and Defense (0.5%)
180,000 GenCorp Inc. 2,632,500
65,000 Northrop Corp. 2,526,875
5,159,375
Business Services (0.4%)
60,000 Block (H & R), Inc. 2,632,500
50,000 Moore Corp. Ltd. 1,018,750
3,651,250
Building and Construction (0.3%)
70,000 Stanley Works (The) 3,080,000
Banks (0.3%)
80,000 First Alabama Bancshares, Inc. 2,650,000
Electronic Components and Equipment (0.3%)
80,000 Honeywell, Inc. 2,610,000
Environmental Control (0.2%)
50,000 Browning-Ferris Industries, Inc. 1,500,000
Total Common Stocks
(cost $570,674,862) $628,947,497
</TABLE>
<TABLE>
<CAPTION>
Principal Amount Value
<S> <C> <C>
Corporate Bonds and Notes (17.0%)(a)
Insurance and Finance (4.2%)
$1,500,000 AMBAC Inc. deb. 9-3/8s, 2011 $ 1,881,563
1,245,000 BAT Capital Corp. 6.19s, 2000 1,262,119
3,450,000 Comerica Inc. sub. notes 6-7/8s, 2008 3,531,938
3,225,000 Den Danske Bank sub. notes 6.55s, 2003(b)(d) 3,192,750
600,000 Ford Capital BV deb. 9s, 1998 683,250
2,000,000 Goldman, Sachs & Co. deb., 8s, 2013 2,132,500
4,815,000 Great Western Financial Corp. notes 6-1/8s, 1998 4,905,281
4,000,000 Hartford National Corp. sub. cap. notes 9.85s, 1999 4,667,500
2,720,000 Household Finance Corp. notes 7-5/8s, 2003 2,915,500
1,000,000 Keystone Group, Inc. sr. secd. notes 9-3/4s, 2003 1,050,000
3,000,000 Meridian Bancorp, Inc. sub. deb. notes 7-7/8s, 2002 3,270,000
2,000,000 Orion Capital Corp. sr. notes 9-1/8s, 2002 2,232,500
4,500,000 PaineWebber Group Inc. notes 6-1/2s, 2005 4,342,500
1,000,000 Reliance Group Holdings sr. notes 9s, 2000 1,017,500
2,000,000 Toledo Trust Co. (Ohio) deb. 12-1/2s, 1999 2,632,500
1,800,000 Westpac Banking Corp. deb. 9-1/8s, 2001 (b) 2,104,875
41,822,276
Consumer Services (3.0%)
1,000,000 AMC Entertainment, Inc. sr. sub. notes 12-5/8s, 2002 1,151,250
1,000,000 Argyle TV Operations sr. sub. notes 9-7/8s, 2003 1,015,000
1,000,000 Cablevision Systems Corp. sr. sub. deb. 10-3/4s, 2004 1,120,000
1,000,000 Centennial Cellular Corp. sr. notes 8-7/8s, 2001 1,000,000
2,000,000 Century Communications Corp. sr. disc. notes zero %, 2003 945,000
500,000 Embassy Suites Inc. sr. sub. notes 10-7/8s, 2002 570,000
2,010,000 Flagstar Corp. sr. sub. deb. 11-1/4s, 2004 2,090,400
1,000,000 Grand Casino Resorts, Inc. notes 12-1/2s, 2000 1,080,000
1,500,000 Marvel Parent Holdings, Inc. sr. secd. disc. notes zero %, 1998 1,020,000
4,200,000 News American Hldgs. Inc. sr. notes 8-1/2s, 2005 4,614,750
1,000,000 Paging Network, Inc. sr. sub. notes 8-7/8s, 2006 1,001,250
2,000,000 Rogers Cablesystems Inc. notes 9-5/8s, 2002 2,210,000
2,000,000 Rogers Cantel Mobile Inc. deb. 10-3/4s, 2001 2,220,000
2,000,000 Tele-Communications, Inc. sr. deb. 9.8s, 2012 2,526,250
2,000,000 Tenneco Credit Corp. deb. 9-5/8s, 2001 2,380,000
4,000,000 Time Warner Inc. global notes 9-1/8s, 2013 4,520,000
29,463,900
Utilities (2.8%)
1,000,000 BVPS II Funding Corp. secd. lease oblig. bonds 9s, 2017 910,000
1,250,000 CMS Energy Corp. sr. notes stepped-coupon zero %, (9-7/8s, 10/1/95),
1999 (e) 1,162,500
2,650,000 Gulf States Utilities Co. 1st mtge. 8.7s, 2024 2,941,500
3,000,000 Louisiana Pwr. & Light secd. lease oblig. bonds Ser. B, 10.67s,
2017 3,315,000
3,500,000 National Cooperative Services Corp. deb. 9-3/8s, 2011 3,701,250
1,350,000 Ohio Edison Co. 1st mtge. 8-3/4s, 2022 1,447,031
3,200,000 Public Service Co. of New Hampshire deb. 15.23s, 2000 3,990,000
4,100,000 Texas Utilities Co. secd. lease fac. bonds 7.46s, 2015 4,166,625
2,850,000 Toledo Edison Co. med. term notes 7.82s, 2003 2,793,000
2,700,000 United Illuminating Co. secd. lease oblig. bonds 10.24s, 2020 3,037,500
27,464,406
Transportation (0.9%)
2,850,000 AMR Corp. deb. 9.73s, 2014 3,202,688
2,500,000 GATX Corp. med. term notes 9-1/2s, 2002 2,915,625
2,000,000 Southwest Airlines Co. deb. 7-7/8s, 2007 2,178,750
1,000,000 Viking Star Shipping 1st pfd. mtge. notes 9-5/8s, 2003 1,047,500
9,344,563
Oil and Gas (0.9%)
3,000,000 Maxus Energy Corp. notes 9-1/2s, 2003 3,015,000
1,500,000 Occidental Petroleum Corp. sr. notes 11-3/4s, 2011 1,762,500
1,148,000 Pennzoil Co. deb. 9s, 2017 1,209,705
3,000,000 Transcontinental Gas Pipe Line Corp. sr. deb. 9-1/8s, 2017 3,150,000
9,137,205
Food and Beverages (0.8%)
1,000,000 Fresh Del Monte Produce Corp. sr. notes 10s, 2003 970,000
3,000,000 RJR Nabisco Inc. sr. notes 10-1/2s, 1998 3,401,250
1,728,000 Secured Restaurants Trust deb. 10-1/4s, 2000 2,056,320
1,500,000 Supervalu Inc., notes 7.8s, 2002 1,646,250
8,073,820
Automotive (0.8%)
3,000,000 Arvin Industries Inc. deb. 9-1/8s, 2017 3,170,625
3,775,000 Chrysler Corp. deb. 10.95s, 2017 4,600,781
7,771,406
Conglomerates (0.5%)
3,000,000 Pennsylvania Central Corp. sub. notes 10-7/8s, 2011 3,765,000
1,000,000 Westpoint Stevens, Inc. sr. notes 8-3/4s, 2001 1,032,500
4,797,500
Retail (0.5%)
1,000,000 Penn Traffic Co. sr. sub. notes 9-5/8s, 2003 1,036,250
2,000,000 Sears, Roebuck & Co. med. term notes 9.1s, 2012 2,427,500
1,000,000 Stop & Shop Cos., Inc. sr. sub. notes 9-3/4s, 2002 1,125,000
4,588,750
Environmental Control (0.4%)
3,750,000 Waste Management, Inc. deb.8-3/4s, 2018 4,399,219
Energy-Related (0.4%)
1,000,000 Envirosource, Inc. sr. notes 9-3/4s, 2003 1,000,000
2,500,000 Tosco Corp. 1st mtge. Ser. B,9-5/8s, 2002 2,771,875
3,771,875
Basic Industrial Products (0.3%)
1,000,000 Anchor Glass Container Corp. sr. sub. deb. 9-7/8s, 2008 1,065,000
2,000,000 Owens-Illinois, Inc. sr. sub. notes 10-1/2s, 2002 2,220,000
3,285,000
Banks (0.3%)
2,300,000 Midlantic Banks, deb. 9-7/8s, 1999 2,705,375
Health Care (0.3%)
1,250,000 EPIC Holdings Inc. sr. notes stepped-coupon zero % (12s, 3/15/97),
2002(e) 1,000,000
1,000,000 HealthTrust Inc. sub. notes 10-3/4s, 2002 1,112,500
500,000 Mediplex Group, Inc. sr. sub. notes 11-3/4s, 2002 547,500
2,660,000
Forest Products (0.2%)
1,000,000 Gaylord Container Corp. sr. notes 11-1/2s, 2001 1,080,000
1,000,000 Georgia-Pacific Corp. deb. 9.85s, 1997 1,131,250
2,211,250
Chemicals (0.2%)
1,580,000 G-I Holdings Inc. sr. notes zero %, 1998(d) 1,042,800
1,000,000 UCC Investors Holding, Inc. sr. notes 10-1/2s, 2002 1,095,000
2,137,800
Metals and Mining (0.1%)
500,000 Kaiser Aluminum & Chemical Corp. sr. sub. notes 12-3/4s, 2003 548,750
750,000 USX Corp. deb. 9-1/8s, 2013 827,813
1,376,563
Telecommunications (0.1%)
1,000,000 McGaw, Inc. sr. notes 10-3/8s, 1999 1,090,000
Consumer Durable Goods (0.1%)
1,000,000 Guess?, Inc. sr. sub. notes 10s, 2003(d) 1,060,000
Consumer Non-Durables (0.1%)
1,000,000 Playtex Family Products Corp. sr. sub. notes 9s, 2003 1,017,500
Total Corporate Bonds and Notes (cost $160,351,226) $168,178,408
U.S. Government and Agency Obligations (8.5%)(a)
4,467,722 Federal Home Loan Mortgage Association 8-3/4s, with various maturity
dates to June 1, 2009 $4,693,899
576,167 Federal National Mortgage Association 11s, with various due dates
to March 1, 2016 646,746
229,505 Federal National Mortgage Association 8-3/4s, July 1, 2009 243,562
2,894 Government National Mortgage Association 15s, with various due
dates to September 15, 2012 3,501
5,138 Government National Mortgage Association 8-1/2s, April 15, 2006 5,505
9,800,000 Government National Mortgage Association 7s, TBA, February 14,
2009(f) 10,250,188
8,790,000 Government National Mortgage Association 6-1/2s, TBA, February
15, 2024(f) 8,822,963
11,730,647 Government National Mortgage Association 6-1/2s, with various due
dates to January 15, 1994 11,774,649
6,741,066 Government National Mortgage Association 6s, with various due dates
to January 15, 2009 6,772,466
3,000,000 U.S. Treasury Bonds 8-1/8s, August 15, 2021 3,665,625
6,777,000 U.S. Treasury Bonds 7-1/8s, February 15, 7,463,171
11,675,000 U.S. Treasury Notes 8-7/8s, November 15, 1997 13,342,336
8,870,000 U.S. Treasury Notes 4-5/8s, November 30, 1994 8,953,156
6,260,000 U.S. Treasury Notes 4-1/4s, October 31, 1994 6,297,169
1,576,000 U.S. Treasury Notes 3-7/8s, March 31, 1995 1,579,940
Total U.S. Government and Agency Obligations
(cost $83,671,802) $84,514,876
Asset-Backed Securities (1.3%)(a)
1,000,000 Delta Air Lines Equipment Trust 10.79s, 2014 (d) $1,121,250
730,243 Delta Air Lines Equipment Trust 9-3/8s, 2007 787,293
1,951,000 Delta Air Lines Equipment Trust Ser. C, 8.54s, 2007 1,961,974
1,145,709 Merrill Lynch Mortgage Investors Inc. sr. notes 9.4s, 2009 1,265,292
1,260,315 Travelers Mortgage Security Corp. coll. oblig. Ser. 84-1, 12s,
2014 1,411,553
965,375 USAir, Inc. Ser. 90A1, 11.2s, 2005 1,005,197
2,675,000 United Air Lines Inc. Equipment Trust Ser. C, 10.36s, 2012 2,999,344
1,000,000 United Air Lines Inc. Equipment Trust Ser. E, 10.36s, 2012 1,121,250
750,000 United Air Lines Inc. Equipment Trust Ser. 91-A, 10-1/8s, 2015 814,688
Total Asset-Backed Securities (cost $11,782,608) $12,487,841
Foreign Bonds and Notes (1.2%)(a)(g)
Principal Amount Value
$2,700,000 British Columbia Hydro & Power Auth. deb. 15-1/2s, 2011 $3,520,125
1,400,000 British Columbia Hydro & Power Auth. deb. 15s, 2011 1,767,500
2,000,000 Nova Scotia (Province of) Canada deb. 9-1/4s, 2020 2,462,500
3,000,000 Petro Canada Co. deb. 9-1/4s, 2021 3,652,500
Total Foreign Bonds and Notes (cost $10,652,031) $11,402,625
Convertible Preferred Stocks (1.0%)(a)
Number of Shares Value
Transportation (0.3%)
61,000 AMR Corp. Ser. A, $3.00, cv. pfd. $3,294,000
50,000 Republic New York Corp. $3.375, cv. pfd. 3,081,250
40,500 Pittston Corp. $6.25, cv. pfd. 2,126,250
50,000 Freeport-McMoRan Copper Co., Inc. stepped-coupon $1.25 ($1.75,
1996), cv. pfd.(c) $1,293,750
Total Convertible Preferred Stocks (cost $9,418,574) $9,795,250
Convertible Bonds (0.4%)(a)
Principal Amount Value
$2,000,000 Chubb Corp. euro. cv. deb. 6s, 1998 $2,120,000
6,000,000 Hollinger, Inc. cv. liquid yield option notes zero %, 2013 2,017,500
Total Convertible Bonds (cost $4,116,880) $4,137,500
Yankee Bonds and Notes (0.6%)(a)
Principal Amount Value
$1,000,000 Banco Rio De LA Plata notes, 8-3/4s, 2003 $1,021,250
450,000 Eletson Holdings, Inc. 1st pfd. mtge. notes 9-1/4s, 2003 465,750
4,145,000 Svenska Handelsbanken global sub. notes 8.35s, 2004 4,751,206
Total Yankee Bonds and Notes (cost $6,186,498) $6,238,206
Short-Term Investments (8.1%)(a)
Principal Amount Value
$15,000,000 Ciesco, Inc. 3-1/8s, February 7, 1994 $14,992,187
10,000,000 Corporate Receivable Corp. 3.2s, February 2, 1994 9,999,111
10,000,000 General Electric Capital Corp. 3.1s, March 22, 1994 9,957,806
10,000,000 Merrill Lynch & Co. Inc. 3.08s, February 22, 1994 9,982,033
Principal Amount Value
$35,142,000 Interest in $414,661,000 repurchase agreement dated January 31,
1994 with Kidder Peabody & Co., Inc. due February 1, 1994 with
respect to various U.S. Treasury obligations-- maturity value of
$35,145,094 for an effective yield of 3.17% 35,145,094
Total Short-Term Investments (cost $80,076,231) $80,076,231
Total Investments (cost $936,930,712)(h) $1,005,778,434
</TABLE>
(a) Percentages indicated are based on net assets of $990,933,720, which
correspond to a net asset value per Class A share and Class B share of $14.22
and $14.16, respectively.
(b) Securities whose values are determined or significantly influenced by
trading on exchanges not in the United States or Canada. ADR after the name
of a foreign holding stands for American Depository Receipt representing
shares on deposit with a domestic custodian bank.
(c) Non-income-producing security.
(d) Security 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. At January 31, 1994,
these securities amounted to $5,356,800 or 0.5% of net assets.
(e) Cash interest will be paid on this obligation at the stated rate
beginning on the stated date.
(f) TBAs are mortgage-backed securities traded under delayed delivery
commitments, settling after January 31, 1994. Although the unit for the
trades has been established, the principal value has not been finalized. The
amount of commitments will not fluctuate more than 2.0% from the principal
amount. In addition, income on the securities will not be earned until
settlement date. The market value of TBA purchases at January 31, 1994 was
$19,073,151.
(h) The aggregate identified cost on a tax basis is $940,569,105 resulting in
gross unrealized appreciation and depreciation of $80,718,305 and
$15,508,976, respectively, or net unrealized appreciation of $65,209,329.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Statement of
assets and liabilities
January 31, 1994 (Unaudited)
<TABLE>
<S> <C> <C> <C>
Assets Investments in securities, at value (identified cost
$936,930,712) (Note 1) $1,005,778,434
Cash 257,239
Interest, dividends and other receivables 6,903,869
Receivable for securities sold 18,640,789
Receivable for shares of the Fund sold 4,782,829
Total assets 1,036,363,160
Liabilities Payable for securities purchased $41,805,841
Payable for shares of the Fund repurchased 1,652,084
Payable for compensation of Manager (Note 2) 946,367
Payable for administrative services (Note 2) 1,866
Payable for compensation of Trustees (Note 2) 405
Payable for investor servicing and custodian fees (Note 2) 438,702
Payable for distribution fees (Note 2) 283,918
Other accrued expenses 300,257
Total liabilities 45,429,440
Net assets $ 990,933,720
Represented by Paid-in capital (Note 1 and 4) $ 902,961,253
Undistributed net investment income 325,908
Accumulated net realized gain on investment transactions 18,798,837
Net unrealized appreciation of investments 68,847,722
Total--Representing net assets applicable to capital shares
outstanding $ 990,933,720
Computation of Net asset value and redemption price of Class A shares
net asset value ($860,278,424 divided by 60,488,370 shares) $14.22
and offering price Offering price per share (100/94.25 of $14.22)* $ 15.09
Net asset value and redemption price of Class B shares
($130,655,296 divided by 9,225,369 shares)** $ 14.16
</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 the financial statements.
<PAGE>
Statement of
operations
Six months ended January 31, 1994 (Unaudited).
<TABLE>
<S> <C> <C>
Investment income:
Interest $11,463,150
Dividends (net of foreign tax of $32,829) 11,515,503
Total investment income 22,978,653
Expenses:
Compensation of Manager (Note 2) $1,860,712
Investor servicing and custodian fees 886,210
(Note 2)
Compensation of Trustees (Note 2) 13,331
Reports to shareholders 38,754
Auditing 27,930
Legal 8,461
Postage 70,990
Registration fees
Administrative services (Note 2) 10,078
Distribution fees--Class A (Note 2) 1,030,725
Distribution fees--Class B (Note 2) 520,498
Other expenses 29,772
Total expenses 4,497,461
Net investment income 18,481,192
Net realized gain on investments
(Notes 1 and 3) 40,529,452
Net unrealized depreciation of
investments during the period (332,571)
Net gain on investments 40,196,881
Net increase in net assets resulting
from operations $58,678,073
</TABLE>
Statement of changes in net assets
<TABLE>
<CAPTION>
Six months ended Year ended
January 31 July 31
1994* 1993
<S> <C> <C>
Increase in net assets
Operations:
Net investment income $ 18,481,192 $ 30,951,215
Net realized gain on investments 40,529,452 23,305,177
Net unrealized appreciation
(depreciation) of investments (332,571) 6,869,308
Net increase in net assets
resulting from operations 58,678,073 61,125,700
Undistributed net investment income
included in price of shares sold
and repurchased, net -- 53,225
Distributions to shareholders from
net investment income:
Class A (17,508,192) (31,202,041)
Class B (1,744,978) (1,491,808)
From net realized gain on
investments:
Class A (34,484,874) (21,835,037)
Class B (4,483,451) (931,044)
Increase from capital share
transactions (Note 4) 135,954,271 214,728,489
Total increase in net assets 136,410,849 220,447,484
Net assets
Beginning of period 854,522,871 634,075,387
End of period (including
undistributed net investment
income of $325,908 and $253,401,
respectively) $990,933,720 $854,522,871
</TABLE>
*Unaudited.
The accompanying notes are an integral part of the financial statements.
<PAGE>
Financial Highlights*
(For a share outstanding
throughout the period)
<TABLE>
<CAPTION>
Six Seven
months months
ended ended
January Year ended July
31 July 31 31 Year ended December 31
1994** 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
Class A
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $14.24 $14.24 $13.52 $13.39 $14.32 $12.32 $11.91 $14.66 $13.13 $10.95 $14.63
Investment Operations
Net Investment Income .31 .62 .64 .69 .75 .45 .73 .71 .81 .82 .75
Net Realized and
Unrealized Gain (Loss)
on Investments .58 .52 1.12 .64 .02 1.88 .68 (.03) 1.63 2.32 (1.23)
Total from Investment
Operations .89 1.14 1.76 1.33 .77 2.33 1.41 .68 2.44 3.14 (.48)
Less Distribution from:
Net Investment Income (.31) (.66) (.68) (.68) (.82) (.33) (.72) (.80) (.80) (.96) (.96)
Net Realized Gain on
Investments (.60) (.48) (.36) (.52) (.88) -- (.28) (2.63) (.11) -- (2.24)
Total Distributions (.91) (1.14) (1.04) (1.20) (1.70) (.33) (1.00) (3.43) (.91) (.96) (3.20)
Net Asset Value, End of
Period $14.22 $14.24 $14.24 $13.52 $13.39 $14.32 $12.32 $11.91 $14.66 $13.13 $10.95
Total Investment Return
at Net Asset Value
(%)(a) 13.02(c) 8.64 13.68 11.28 5.86 33.12(c) 12.10 3.72 18.84 29.84 (2.22)
Net Assets, End of
Period (in thousands) $860,278 $772,540 $622,129 $479,287 $442,964 $430,568 $387,186 $384,213 $371,657 $324,140 $276,039
Ratio of Expenses to
Average Net Assets (%) .88(c) .90 1.06 .94 .84 .83(c) .73 .71 .58 .62 .63
Ratio of Net Investment
Income to Average Net
Assets (%) 4.04(c) 4.34 4.62 5.42 5.52 5.87(c) 5.82 4.86 5.66 6.84 6.61
Portfolio turnover
(%)**** 74.42 89.22 78.90 64.98 70.54 52.82(b)139.28 129.94 142.93 187.32 222.64
</TABLE>
See page 17 for notes to Financial Highlights.
<PAGE>
<TABLE>
<CAPTION>
April 27, 1992
Six months (commencement
ended Year ended of operations) to
January 31 July 31 July 31
1994 1993 1992***
Class B
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $14.19 $14.22 $13.73
Investment Operations
Net Investment Income .28 .56 .13
Net Realized and Unrealized Gain (Loss) on Investments .55 .48 .53
Total from Investment Operations .83 1.04 .66
Less Distributions from:
Net Investment Income (.26) (.59) (.17)
Net Realized Gain on Investments (.60) (.48) --
Total Distributions (.86) (1.07) (.17)
Net Asset Value, End of Period $14.16 $14.19 $14.22
Total Investment Return at Net Asset Value (%)(a) 12.22(c) 7.87 19.19(c)
Net Assets, End of Period (in thousands) $130,655 $81,983 $11,946
Ratio of Expenses to Average Net Assets (%) 1.62(c) 1.66 2.07(c)
Ratio of Net Investment Income to Average Net Assets (%) 3.24(c) 3.43 3.16(c)
Portfolio turnover (%)**** 74.42 89.22 78.90(b)
</TABLE>
*Financial Highlights for period ended through July 31, 1992 have been
restated to conform with requirements issued by the SEC in April, 1993. As of
August 31, 1993, the Fund discontinued the use of equalization accounting.
(See Note 1 of Notes to Financial Statements).
**Unaudited
***Per share investment income, expenses and net investment income have been
determined on the basis of the weighted average number of shares outstanding
during the period.
****Portfolio turnover calculations for fiscal 1985 and thereafter include
transactions in U.S. government securities with maturities greater than one
year. Prior year portfolio turnover calculations excluded all U.S. government
securities.
(a)Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges. All return numbers are annualized.
(b)Not annualized.
(c)Annualized
<PAGE>
Notes to
financial statements
January 31, 1994 (Unaudited)
Note 1 Significant accounting policies
The Fund is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company. The Fund seeks to
provide a balanced investment composed of a well-diversified portfolio of
stocks and bonds which will produce both capital growth and current income.
The Fund offers both Class A and Class B shares. The Fund commenced its
public offering of Class B shares on April 27, 1992. 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. In addition, the Trustees
declare separate dividends on each class of shares. Expenses of the Fund are
borne pro-rata by the holders of both classes of shares, except that each
class bears expenses unique to that class (including the distribution fees
applicable to such class) and 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.
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. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost, which
approximates market value, and other investments are stated at fair value
following procedures approved by the 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, or any joint trading account, may enter
into "TBA" (to be announced) purchase commitments to purchase securities for
a fixed unit 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 amount of the commitment will not fluctuate more
than 2.0% 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 the Fund Manager deems it appropriate to do
so.
C) 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., 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.
D) Repurchase agreements The Fund, or any joint trading accounts, through its
custodian, receives delivery of the underlying securities, the market value
of which at the time of purchase is required to be in an amount at least
equal to the resale price,
<PAGE>
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.
E) 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.
F) 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.
G) Distributions to shareholders Distributions to shareholders are recorded
by the Fund on the ex-dividend date.
H) Equalization Prior to August 1, 1993, the Fund used the accounting
practice known as equalization to keep a continuing shareholder's per share
interest in undistributed net investment income unaffected by sales or
repurchases of Fund shares. This was accomplished by allocating a per share
portion of proceeds from sales and the costs of repurchases of shares to
undistributed net investment income. As of August 1, 1993, the Fund
discontinued using equalization. This change has no effect on the Fund's
total net assets, net asset value per share, or its net increase (decrease)
in net assets resulting from operations. Discontinuing the use of
equalization will result in simpler financial statements. The cumulative
effect of the change was to decrease undistributed net investment income and
increase paid-in capital previously reported through July 31, 1993 by
$1,636,949.
Note 2 Management fee, administrative services, and other transactions
Compensation of Putnam Investment Management, Inc., the Fund's Manager, a
wholly-owned subsidiary of Putnam Investments, Inc., 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 an annual rate of
0.6% of the first $100 million of average net assets, 0.5% of the next $100
million, 0.4% of the next $300 million, 0.325% of the next $500 million and
0.3% of any amount over $1.0 billion, subject to reduction in any year to the
extent that expenses (exclusive of brokerage, interest, taxes, and
distribution fees) of the Fund exceed 2.5% of the first $30 million of
average net assets, 2.0% of the next $70 million and 1.5% of any amount over
$100 million and by the amount of certain brokerage commissions and fees
(less expenses) received by affiliates of the Manager on the Fund's portfolio
transactions.
The Fund also reimburses the Manager for the compensation and related
expenses of certain officers of the Fund and their staff who provide
administrative services to the Fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees. For the six months
ended January 31, 1994 the Fund paid $10,078 for these services.
Trustees of the Fund receive an annual Trustee's fee of $1,670 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.
Fees paid for these investor servicing and custodial functions for the six
months ended January 31, 1994 amounted to $886,210. Investor servicing and
custodian fees reported in the Statement of operations for the six months
ended January 31, 1994 have been reduced by credits allowed by PFTC.
The Fund has adopted a distribution plan with respect to class A shares (the
"class A Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940. The purpose of the class A Plan is to compensate Putnam Mutual Funds
Corp. a wholly-owned subsidiary of Putnam Investments, Inc., for services
provided and expenses incurred by it in distributing class A shares. The
Trustees have approved payment by the Fund to Putnam
<PAGE>
Mutual Funds Corp., at an annual rate of 0.25% of the Fund's average net
assets attributable to class A shares. For the six months ended January 31,
1994, the Fund paid $886,210 in distribution fees for class A shares.
During the six months ended January 31, 1994, Putnam Mutual Funds Corp.,
acting as an underwriter, received net commissions of $175,645 from the sale
of Class A shares of the Fund.
A deferred sales charge of up to 1% is assessed on certain redemptions of
Class A shares purchased as part of an investment of $1 million or more. For
the six months ended January 31, 1994, Putnam Mutual Funds Corp., acting as
an underwriter, received $1,820 on such redemptions.
The Fund has adopted a distribution plan with respect to its Class B shares
(the "Class B Plan") pursuant to Rule 12b-1 under the Investment Company Act
of 1940. The purpose of Class B Plan is to compensate Putnam Mutual Funds
Corp. for services provided and expenses incurred by it in distributing Class
B shares. The Class B Plan provides for payments by the Fund to Putnam Mutual
Funds Corp. at an annual rate of up to 1.00% of the Fund's average net assets
attributable to Class B shares. For the six months ended January 31, 1994,
the Fund paid Putnam Mutual Funds Corp. distribution fees of $520,498 for
Class B shares.
Putnam Mutual Funds Corp. also receives the proceeds on the contingent
deferred sales charges on its Class B share redemptions within six years of
purchase. The charge is based on declining rates, which begin at 5.00% of the
net asset value of the redeemed shares. Putnam Mutual Funds Corp. received
contingent deferred sales charges of $63,140 from redemptions during the six
months ended January 31, 1994.
Note 3 Purchases and sales of securities
During the six months ended January 31, 1994, purchases and sales of
investment securities other than U.S. government obligations and short-term
investments aggregated $524,303,901 and $487,490,905, respectively. Purchases
and sales of U.S. government obligations aggregated $187,793,810 and
$178,421,965, respectively. In determining the net gain or loss on securities
sold, the cost of securities has been determined on the identified cost
basis.
<PAGE>
Note 4 Capital shares
At January 31, 1994, there was an unlimited number of shares of beneficial
interest authorized divided into two classes, Class A and Class B capital
shares. Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Six months ended Year ended
January 31 July 31
1994 1993
Class A Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 7,583,187 $107,518,534 12,536,012 $174,746,002
Shares issued in connection with reinvestment of
distributions 3,091,788 42,761,526 2,985,836 40,422,170
10,674,975 150,280,060 15,521,848 215,168,172
Shares repurchased (4,448,135) (62,904,200) (4,952,761) (68,971,650)
Portion represented by undistributed net
investments income -- -- -- (27,957)
Net increase 6,226,840 $ 87,375,860 10,569,087 $146,168,565
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six months ended Year ended
January 31 July 31
1994 1993
Class B Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 3,707,482 $56,604,498 5,061,438 $70,355,400
Shares issued in connection with reinvestment of
distributions 422,282 1,586,140 166,200 2,252,925
4,129,764 58,190,638 5,227,638 72,608,325
Shares repurchased (683,406) (9,612,227) (288,924) (4,023,133)
Portion represented by undistributed net
investment income -- -- -- (25,268)
Net increase 3,446,358 $48,578,411 4,938,714 $68,559,924
</TABLE>
Note 5 Reclassification of Capital Accounts
The Fund has adopted the provisions of Statement of Position 93-2
"Determination, Disclosure and Financial Statement Presentation of Income,
Capital Gain and Return of Capital Distributions by Investment Companies"
(SOP). The SOP requires the Fund to report the undistributed net investment
income (accumulated loss) and accumulated net realized gain (loss) accounts
in such a manner as to approximate amounts available for future tax
distributions (or to offset future taxable realized capital gains).
In implementing the SOP, the Fund has reclassified $844,485 to increase
undistributed net investment income and $13,388,034 to increase accumulated
net realized gain with a net decrease of $14,232,519 to paid-in capital.
These adjustments represent the cumulative amounts necessary to report these
balances on a tax basis as of August 1, 1993. These reclassifications, which
have no impact on the total net asset value of the Fund, are primarily
attributable to tax equalization which is treated differently in the
computation of distributable income and capital gains under federal income
tax rules and regulations versus generally accepted accounting principles.
<PAGE>
Fund
Performance
Supplement
The George Putnam Fund of Boston is a portfolio managed for current income
and capital growth through investments in both stocks and bonds.
Standard & Poor's 500(R) Index is an unmanaged list of large-capitalization
common stocks. Shearson Lehman 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, non-convertible, investment-grade corporate debt securities, and
U.S. dollar-denominated, SEC-registered non-convertible debt issued by
foreign governmental entities or international agencies. The 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.
The Lipper Balanced Funds Average is based on funds, tracked by Lipper
Analytical Services, Inc., whose primary objective is to conserve principal
by maintaining at all times a balanced portfolio of both stocks and bonds.
Typically, the stock/bond ratio ranges around 60%/40%. At the close of the
6-month, 1-year, 5-year, and 10-year periods ended 1/31/94 and since
inception of class B shares on 4/27/92, Lipper tracked 123, 104, 56, 25 and
80 balanced funds, respectively. Lipper data vary over time and do not
reflect the effects of sales charges.
Fund performance data do not take into account any adjustment for taxes
payable on reinvested distributions or, for class A shares, distribution fees
prior to implementation of the class A distribution plan in 1990.
The fund performance supplement has been prepared by Putnam Management to
provide additional information about the fund and the indexes used for
performance comparisons. The information is not part of the portfolio of
investments owned or the financial statements.
<PAGE>
Your
Trustees
George Putnam
Chairman
Chairman and President,
The Putnam Funds
William F. Pounds
Vice Chairman
Professor of Management,
Alfred P. Sloan
School of Management,
Massachusetts Institute of
Technology
Jameson Adkins Baxter
President,
Baxter Associates, Inc.
Hans H. Estin
Vice Chairman,
North American
Management Corporation
John A. Hill
Principal and
Managing Director,
First Reserve Corp.
Elizabeth T. Kennan
President,
Mount Holyoke College
Lawrence J. Lasser
President and
Chief Executive Officer,
Putnam Investments, Inc.
Robert E. Patterson
Executive Vice President,
Cabot Partners
Limited Partnership
Donald S. Perkins
Director of various
corporations
George Putnam, III
President, New Generation
Research, Inc.
A.J.C. Smith
Chairman of the Board
and Chief Executive Officer,
Marsh & McLennan
Companies, Inc.
W. Nicholas Thorndike
Director of various
corporations
<PAGE>
The
George
Putnam
Fund of
Boston
Fund information
Investment manager
Putnam Investment
Management
One Post Office Square
Boston, MA 02109
Marketing services
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
Investor servicing agent
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
1-800-225-1581
Custodian
Putnam Fiduciary
Trust Company
Legal counsel
Ropes & Gray
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
Edward Bousa
Vice President
and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul O'Neil
Vice President
John D. Hughes
Vice President
and Treasurer
Beverly Marcus
Clerk and
Assistant Treasurer
(Dalbar Logo)
Putnam Investor
Services has
received the DALBAR award
each year since
the award's 1990 inception.
In more than 10,000 tests
of 38 shareholder
service components,
Putnam outperformed
the industry standard
in every category.
01/51-11148
This report is for the information of shareholders of The George Putnam Fund
of Boston. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales charges,
investment objectives, and operating policies of the fund.
<PAGE>
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
Paid
Boston, MA
Permit No. 53749
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED
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(1) Bold and italic typefaces are displayed in normal type.
(2) Headers (e.g., the name of the fund) and footers (e.g., page
numbers and "The accompanying notes are an integral part of these
financial statements") 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) Dagger footnote symbol replaced with plus sign (+).
(7) Registered trademark symbol replaced with (R) sign.
