The George
Putnam Fund
of Boston
[Artwork]
ANNUAL REPORT
July 31, 1994
[Putnam Logo]
Boston * London * Tokyo
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PERFORMANCE HIGHLIGHTS
Total return for the fund's class A shares has consistently surpassed that of
the average balanced fund tracked by Lipper Analytical Services based on results
for the 1-, 5-, and 10-year periods ended 7/31/94. *
CDA/Wiesenberger ranked the fund in the top half of its list of balanced funds
for 1-, 5-, and 10-year periods as of 7/31/94. +
Performance should always be considered in light of a fund's investment strate-
gy. The George Putnam Fund of Boston is designed for investors seeking capital
appreciation and current income.
FISCAL 1994 RESULTS AT A GLANCE
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Class A Class B
Total return: NAV POP NAV CDSC
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12 months ended
7/31/94 (change in
value during period
plus reinvested
distributions) 3.46% -2.50% 2.70% -2.04%
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Share value: NAV POP NAV
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7/31/93 $14.24 $15.11 $14.19
7/31/94 13.52 14.34 13.46
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Capital gains
Long- Short-
Distributions: No. Income term term Total
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Class A 4 $0.58 $0.331 $0.292 $1.203
Class B 4 0.487 0.331 0.292 1.110
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Current return: NAV POP NAV
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(End of period)
Current dividend rate (1) 4.14% 3.91% 3.48%
Current 30-day SEC yield (2) 4.54 4.28 3.87
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Performance data represent past results and will differ for each share
class. For performance over longer periods, see pages 8 and 9. POP assumes
5.75% maximum sales charge. CDSC assumes 5% maximum contingent deferred sa-
les charge.
(1) Income portion of most recent distribution, annualized and divided by NAV or
POP at end of period.
(2) Based only on investment income, calculated using SEC guidelines.
* 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 45 out of 124 balanced funds for 1 year, 25 out of 57
for 5 years, and 11 out of 25 for 10 years as of 7/31/94.
+ CDA/Wiesenberger rankings are based entirely on total return and do not take
into account sales charges or fees. The fund placed 39 of 136 funds for 1
year, 21 of 55 funds for 5 years, and 8 of 25 funds for 10 years. Past per-
formance is not indicative of future results.
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FROM THE CHAIRMAN [Photograph of George Putnam]
* (C) Karsh, Ottawa
Dear Shareholder:
A brief surge of optimism lifted financial markets as The George Putnam Fund of
Boston reached the close of its fiscal year on July 31, 1994. Although the rise
was short-lived, it represented virtually the only sign in many months that the
markets at home and abroad were ready to recognize the fundamental strengths of
the world's major economies.
For most of 1994, the domestic stock and bond markets have charted volatile and
uncertain courses, reacting to higher interest rates and concerns about pros-
pects for additional rate increases. However, the uncertainty clouding the eco-
nomic environment has masked some major structural and fundamental changes in
corporate America that have produced attractive investment opportunities.
Putnam Management expects a more challenging investment environment as we go
forward. We believe careful stock selection in specific industries will continue
to be the key to successful long-term investment performance. In addition, a mo-
re subdued pace of economic growth tends to favor bonds and other fixed-income
investments and they could benefit from any further increases in interest rates
designed to keep inflation in check.
In the report that follows, fund managers Edward Bousa and Kenneth Taubes dis-
cuss the fiscal year just ended and prospects for fiscal 1995.
Respectfully yours,
George Putnam
Chairman of the Trustees
September 14, 1994
* (C) Copyright
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REPORT FROM THE FUND MANAGERS
EDWARD P. BOUSA, LEAD MANAGER
KENNETH J. TAUBES
After three years of strong performance, both the stock and bond markets decli-
ned sharply during the second half of The George Putnam Fund of Boston's fiscal
year. The declines came primarily in response to the Federal Reserve Board's in-
creases in short-term interest rates and investor uncertainty about the effects
of higher rates on a growing economy. Inevitably, the market's reaction affected
your fund's performance.
For the 12 months ended July 31, 1994, the fund produced a total return of 3.46%
for class A shares and 2.70% for class B shares at net asset value. While the
fund's portfolio of stocks and bonds trailed the 5.19% return of the Standard &
Poor's 500 *(R) Stock Index for the same period, it was significantly ahead of
the -0.13% return of the Lehman Brothers Government/ Corporate Bond Index.
As stock market volatility increased during the fiscal year, your fund continued
its conservative, value-oriented approach to selecting stocks for the portfolio.
We continued to focus on companies with attractive yields and low price/earnings
ratios (P/E's), and those introducing changes to improve prospects for growth.
Rather than take exceptional risk by emphasizing one industry, we continued to
diversify investments among several companies in many industries.
A CHANGE IN ASSET ALLOCATION
At the start of the fund's fiscal year, the ratio of stocks to bonds in the
portfolio was 65% to 35%. When the bond market fell in the autumn of 1993, we
began shifting some of the portfolio's assets out of stocks and into bonds. By
the end of the period, 58% of the fund's assets were in stocks and 42% were in
bonds. This is a more conservative investment mix, and we consider it an appro-
priate weighting for a balanced fund in the current market environment.
Within the fixed-income portion of the portfolio, we strove to soften the impact
of a volatile market by increasing the fund's investments in both short-term go-
vernment securities and high-
*(R) Registered Trademark
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yield corporate bonds. By the end of the period, we had allocated half of the
fund's fixed-income assets to corporates, almost 40% to U.S. Treasuries, and the
balance to mortgage-related securities.
The fund's investments in corporate bonds proved especially beneficial to over-
all performance. Worthy of mention are the bonds issued by Chrysler Corp. and
Sears, Roebuck & Co. Both companies have experienced strong demand for their
products and services of late, and their bonds have outperformed U.S. Treasury
bonds with similar maturities by a wide margin, contributing substantially to
the fund's overall total return.
FINANCIAL AND CHEMICAL STOCKS PROVIDE
ATTRACTIVE RETURNS
As interest rates rose, prices of financial stocks declined, presenting the fund
with attractive buying opportunities. Through in-depth research, we identified
and purchased stocks of financial institutions whose earnings we anticipated
would grow.
One such company is Beneficial Corp., a consumer lending company. Over the first
half of 1994, Beneficial experienced double-digit loan growth. Traditionally,
the company has been a
(Bar Chart)
TOP INDUSTRY SECTORS *
Insurance and finance 13.8%
Utilities 11.0
Oil and gas 7.9
Consumer nondurables 4.8
Health care 4.3
* Based on net assets on 7/31/94.
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conservative lender. Its high growth rate is due primarily to the economic reco-
very. Beneficial.s earnings have exceeded the expectations of most Wall Street
analysts. We believe its stock is still relatively inexpensive, and it has seve-
ral more years of growth ahead.
We also added to the portfolio stocks of regional banks, money center banks, and
credit card companies. As a group, financial stocks provided very attractive re-
turns for the period.
Over the past year, your fund benefited from a broad range of chemical holdings
in the portfolio. The cost-cutting undertaken over the past several years by se-
veral major chemical companies -- among them, DuPont, Dow Chemical, and Union
Carbide -- had been underestimated by many investors. Because these stocks had
been out of favor for so long, we were able to purchase them at relatively low
prices. Subsequently, the combination of low-cost products and increased demand
brought on by stronger domestic and foreign economies proved a boon for chemical
companies and helped strengthen performance. Consequently, we took profits in
some chemical stocks, such as DuPont, toward the end of the fiscal year.
PARTICIPATING IN THE GLOBAL ECONOMY
Early in the period, we recognized an important trend -- the expansion of U.S.
companies in foreign markets. This growth beyond U.S. borders has had a signifi-
cant effect on domestic stock and bond markets, and therefore on your fund's
portfolio. The emerging markets of Asia, Eastern Europe, and South America and
the recovering economies of Europe are fertile ground for growing American busi-
nesses.
After several years of cutting costs, restructuring their businesses, and in-
creasing their productivity, many American companies have become the low-cost
producers of goods and services in demand around the world. Consequently, over
the fiscal year, we focused heavily on U.S.-based companies that are increasing
their market share in foreign countries.
Most of the companies listed among the top 10 holdings on page 7 can be conside-
red global companies. For example, Xerox continues to expand its digital copier
business abroad and, in the bank sector, J. P. Morgan and Bankers Trust are po-
sitioned to
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TOP 10 HOLDINGS (as of 7/31/94)
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J.P. Morgan & Co. Inc.
Multinational banking and finance
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Exxon Corporation
Drilling, production, refining, and marketing of
oil and natural gas
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NYNEX
Telecommunications
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Xerox Corporation
Document processing, copiers, fax machines, digital publishing
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Philip Morris Companies
Domestic food processing, alcohol, and tobacco
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Ford Motor Company
Automotive
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American Home Products Corporation
Pharmaceuticals
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Mobil Corporation
Crude oil, natural gas, and chemical industries
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Bankers Trust
Multinational banking and finance
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AT&T Corporation
Telecommunications
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These holdings represent 12.01% of the fund's net assets. Portfolio holdings
are subject to change.
do well overseas. In addition to those top-10 companies, Avon Products, Inc.,
has wide distribution in many Asian countries, and Heinz is increasing its baby
food business overseas as well as its food service business domestically.
OUR OUTLOOK: U.S. COMPANIES EXPANDING
OVERSEAS ARE A POSITIVE FOCUS
As your fund begins fiscal 1995, we continue the current focus on domestic com-
panies that are increasing their market share overseas. As in the past, we will
look for value in companies that have been out of favor and now appear to have
strong prospects for growth. While rising short-term interest rates may slow the
rate of growth, we expect those U.S. companies that have cut costs, restructu-
red, and increased their market share overseas will be the beneficiaries of hi-
gher stock valuations.
The views expressed about the companies mentioned in this report are exclusively
those of Putnam Management, and are not meant as investment advice. Although the
described holdings were viewed favorably as of July 31, 1994, there is no gua-
rantee the fund will continue to hold these securities in the future.
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PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund's performance.
Total return shows how the value of the fund's shares changed over time, assum-
ing you held the shares through the entire period and reinvested all distribu-
tions in 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 pe-
riods. For comparative purposes, we show how the fund performed relative to
appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIODS ENDED 7/31/94
Standard Consumer
Class A Class B & Poor's Price
NAV POP NAV CDSC 500 Index Index
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1 year 3.46% -2.50% 2.70% -2.04% 5.19% 2.77%
5 years 50.52 41.90 -- 54.69 19.29
Annual average 8.52 7.25 -- 9.12 3.59
10 years 261.31 240.58 -- 326.18 42.56
Annual average 13.71 13.04 -- 15.60 3.61
Life of class B (4/27/92) 16.31 13.37 17.81 6.38
Annual average 6.92 5.71 7.52 2.77
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TOTAL RETURN FOR PERIODS ENDED 6/30/94
(most recent calendar quarter)
Class A Class B
NAV POP NAV CDSC
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1 year 1.45% -4.40% 0.70% -3.95%
5 years 56.70 47.71 --
Annual average 9.40 8.11 --
10 years 255.30 234.83 --
Annual average 13.52 12.84 --
Life of class B (4/27/92) -- -- 13.89 11.01
Annual average -- -- 6.15 4.91
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Fund performance data do not take into account any adjustment for taxes payable
on reinvested distributions or, for class A shares, distribution fees prior to
implementation of the class A distribution plan in 1990. Effective 4/27/92, the
fund began offering class B shares. Performance of share classes will differ.
Performance data represent past results. 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.
COMPARATIVE BENCHMARKS
STANDARD & POOR'S 500 INDEX is an unmanaged list of common stocks that is fre-
quently used as a general measure of stock market performance. The index assumes
reinvestment of all distributions and does not take into account brokerage co-
mmissions or other costs. *
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX is an unmanaged list of publicly
issued U.S. Treasury obligations and corporate debt securities. *
CONSUMER PRICE INDEX is a commonly used measure of inflation; it does not repre-
sent an investment return.
* The fund's portfolio contains securities that do not match those in the
indexes.
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(Line Chart)
GROWTH OF A $10,000 INVESTMENT
Shearson Lehman
Govt/Corp Bond
Fund at POP S & P 500 Index
7/31/84 $ 9,425 $ 10,000 $ 10,000
7/31/85 12,137 13,239 12,313
7/31/86 15,680 16,990 15,000
7/31/87 19,543 23,676 15,566
7/31/88 18,494 20,904 16,671
7/31/89 22,627 27,550 19,227
7/31/90 23,953 29,308 20,425
7/31/91 26,655 33,059 22,515
7/31/92 30,301 37,278 26,036
7/31/93 32,919 40,516 28,908
7/31/94 34,058 42,618 28,971
Past performance is no assurance of future results. A $10,000 investment in the
fund's class B shares at 4/27/92 would have been valued at $11,631 by 7/31/94
($11,337 with a redemption at the end of the period). Data are for periods ended
7/31.
TERMS AND DEFINITIONS
NET ASSET VALUE (NAV) is the value of the fund's assets, minus any liabilities,
divided by the number of outstanding shares, not including any initial or con-
tingent 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% class A share sales charge.
CLASS A shares are generally subject to an initial sales charge.
CLASS B shares may be subject to a sales charge on redemption.
CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the time of the
redemption of shares and assumes redemption at the end of the period. Your
fund's class B share 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.
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LIFE CYCLE INVESTING
As we move through life, our investment needs change. As these needs change, so
does the way we allocate our assets. Here are some basic rules for setting up
and maintaining an investment program and some examples of how assets might be
allocated.
DETERMINE YOUR INVESTMENT OBJECTIVES.
Objectives may include a new home, college education expenses, or retirement.
EVALUATE YOUR RISK TOLERANCE.
Generally, risk tolerance is higher for younger investors with longer timelines
and lower for older investors who may depend on their investment for current
income.
ALLOCATE YOUR INVESTABLE SAVINGS.
Your investment advisor will help you determine how much of your investable do-
llars should be allocated to each investment category.
CHOOSE THE APPROPRIATE PUTNAM FUNDS.
Using Putnam.s free exchange privilege, you can adjust your own Putnam portfolio
of funds as your financial needs change -- without a service fee. *
Look at the facing page for some ways you can allocate your assets, then turn
the page to see how the Putnam Fund Selector. can help you make your choices.
This is not intended as investment advice. Please see an investment advisor if
you have any questions.
* Putnam reserves the right to change or terminate the exchange privilege. In
some cases, a sales charge may apply. See prospectus for details.
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(4 Pie Charts)
FOUR WAYS TO ALLOCATE ASSETS
SEEKING MAXIMUM GROWTH
Risk tolerance:
Generally investors with a higher risk tolerance (often in their 20s and early
30s.)
30% - 40% Growth and income
40% - 50% Growth
5% - 20% Income or tax-free income
SEEKING GROWTH AND SOME INCOME
Risk tolerance:
Generally investors with a high to moderate risk tolerance (often in their late
30s and early 40s)
40% - 50% Growth and income
30% - 40% Growth
10% - 30% Income or tax-free income
SEEKING INCOME AND SOME GROWTH
WITH PROTECTION AGAINST INFLATION
Risk tolerance:
Generally investors with a moderate risk tolerance (often in their late 40s and
50s.)
30% - 40% Growth and income
10% - 20% Growth
25% - 60% Income or tax-free income
SEEKING HIGH CURRENT INCOME AND
PROTECTION AGAINST INFLATION
Risk tolerance:
Generally investors with a moderate to low risk tolerance (often over 60 and
retired)
20% - 30% Growth and income
5% - 10% Growth
40% - 70% Income or tax-free income
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THE PUTNAM FUND SELECTOR *(TM)
The Putnam Fund Selector shows the many opportunities for investors within every
investment strategy. All investors should first accumulate a base of conservati-
ve, cash-equivalent investments. Then, with the help of your investment advi-
sor, diversify your portfolio by investing in the Putnam Family of Funds.
(Pyramid Graphic)
Risk/Reward
PUTNAM GROWTH FUNDS
PUTNAM GROWTH AND INCOME FUNDS
PUTNAM INCOME OR TAX-FREE INCOME FUNDS
MOST CONSERVATIVE INVESTMENTS
* (TM) Trademark
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PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund Diversified Equity Trust
Europe Growth Fund Global Growth Fund
Health Sciences Trust Investors Fund
Natural Resources Trust * New Opportunities Fund
OTC Emerging Growth Fund Overseas Growth Fund
Vista Fund Voyager Fund
PUTNAM GROWTH AND INCOME FUNDS
Convertible Income-Growth Trust Dividend Growth Fund
Equity Income Fund The George Putnam Fund of Boston
The Putnam Fund for Growth and Income Managed Income Trust
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Adjustable Rate U.S. Government Fund American Government Income Fund
Balanced Government Fund Corporate Asset Trust
Diversified Income Trust Federal Income Trust
Global Governmental Income Trust High Yield Advantage Fund
High Yield Trust Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE INCOME FUNDS
Intermediate Tax Exempt Fund Municipal Income Fund
Tax Exempt Income Fund Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds **
Arizona, California, Florida, Massachusetts, Michigan,
Minnesota, New Jersey, New York, Ohio, and Pennsylvania
LIFESTAGE (SM) FUNDS
Putnam Asset Allocation Funds -- three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments to help
maximize your return and reduce your risk.
The three portfolios:
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
MOST CONSERVATIVE INVESTMENTS
Putnam money market funds:
Money Market Fund ++
Tax Exempt Money Market Fund
California Tax Exempt Money Market Fund
New York Tax Exempt Money Market Fund
CDs and savings accounts ***
* Formerly Energy-Resources Trust.
** Not available in all states.
+ Relative to above.
++ Formerly Daily Dividend Trust.
*** Not offered by Putnam Investments. Certificates of deposit offer a fixed ra-
te of return and may be insured, up to certain limits, by federal/state a-
gencies. Savings accounts may also be insured up to certain limits.
Please call your financial advisor or Putnam to obtain a prospectus for any
Putnam fund. It contains more complete information, including charges and
expenses. Please read it carefully before you invest or send money.
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REPORT OF INDEPENDENT ACCOUNTANTS
Annual Report
For the Fiscal Year Ended July 31, 1994
To the Trustees and Shareholders of
The George Putnam Fund of Boston
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments owned, and the related statements of operations and
of changes in net assets and the financial highlights present fairly, in all ma-
terial respects, the financial position of The George Putnam Fund of Boston (the
"fund") at July 31, 1994, and the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted audi-
ting standards, which require that we plan and perform the audit to obtain rea-
sonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the account-
ing principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits, which
included confirmation of investments owned at July 31, 1994 by correspondence
with the custodians and brokers and the application of alternative auditing pro-
cedures where confirmations from brokers were not received, provide a reasonable
basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
September 13, 1994
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PORTFOLIO OF INVESTMENTS OWNED
July 31, 1994
COMMON STOCKS (57.0%)(a)
NUMBER OF SHARES VALUE
Insurance and Finance (10.3%)
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140,000 Aetna Life & Casualty Co. $ 7,210,000
222,000 American Express Co. 5,883,000
162,000 American General Corp. 4,637,250
167,867 Bankers Trust New York Corp. 11,247,089
232,000 Beneficial Corp. 9,222,000
68,000 CIGNA Corp. 4,658,000
250,000 Comerica Inc. 7,437,500
161,000 CoreStates Financial Corp. 4,387,250
212,900 Household International, Inc. 7,291,825
40,000 Lehman Brothers Holding, Inc. 630,000
180,000 Lincoln National Corp. 6,772,500
75,000 Mellon Bank Corp. 4,293,750
268,000 Morgan (J.P.) & Co., Inc. 16,884,000
240,000 National City Corp. 6,450,000
35,000 NationsBank Corp. 1,951,250
222,800 PNC Bank Corp. 6,405,500
80,000 Paine Webber Group, Inc. 1,290,000
110,000 Synovus Financial Corp. 1,897,500
79,000 Torchmark Corp. 3,071,125
38,000 Unitrin, Inc. 1,567,500
164,000 Wilmington Trust Co. 4,387,000
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117,574,039
Utilities (8.8%)
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205,000 American Telephone & Telegraph Co. 11,198,125
100,900 Bell Atlantic Corp. 5,713,462
25,000 Bell South Corp. 1,562,500
175,000 Comsat Corp. 4,571,875
127,000 Consolidated Natural Gas Co. 4,921,250
140,000 Detroit Edison Co. 3,692,500
120,000 Entergy Corp. 3,060,000
225,000 GTE Corp. 7,143,750
59,000 Hawaiian Electric Industries, Inc. 1,902,750
105,000 Houston Industries Inc. 3,688,125
402,000 NYNEX Corp. 15,477,000
88,400 Northeast Utilities 2,066,350
55,000 PSI Resources, Inc. 1,216,875
161,000 Public Service Co. of Colorado 4,347,000
110,000 SCE Corp. 1,485,000
83,000 Sprint Corp. 3,039,875
336,000 Texas Utilities Co. 11,046,000
164,000 US WEST, Inc. 6,601,000
48,000 Union Electric Co. 1,656,000
85,000 United Illuminating Co. 2,868,750
101,000 WICOR Inc. 3,004,750
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100,262,937
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COMMON STOCKS
NUMBER OF SHARES VALUE
Oil and Gas (6.8%)
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140,000 Amoco Corp. $ 8,382,500
40,000 Atlantic Richfield Co. 4,315,000
172,000 Chevron Corp. 7,632,500
280,600 Exxon Corp. 16,695,700
110,000 Imperial Oil Ltd. 3,300,000
130,000 McDermott International, Inc. 3,266,250
4,000 McMoRan Oil & Gas Co. (b) 15,500
136,600 Mobil Corp. 11,457,325
100,000 Panhandle Eastern Corp. 2,050,000
91,000 Pennzoil Co. 4,584,125
68,000 Royal Dutch Petroleum Co. ADR (c) 7,684,000
130,000 Texaco Inc. 8,255,000
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77,637,900
Consumer Non Durables (4.4%)
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311,000 American Brands, Inc. 10,612,875
186,600 Avon Products, Inc. 10,566,225
70,000 Clorox Co. (The) 3,482,500
53,000 Colgate-Palmolive Co. 2,828,875
145,000 Kimberly-Clark Corp. 8,228,750
255,000 Philip Morris Cos., Inc. 14,025,000
7,700 Springs Industries, Inc. Class A 270,463
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50,014,688
Health Care (3.9%)
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107,000 American Cyanamid Co. 6,486,875
220,000 American Home Products Corp. 12,622,500
120,000 Baxter International, Inc. 3,165,000
65,000 Bristol-Myers Squibb Co. 3,420,625
129,200 Lilly (Eli) & Co. 6,282,350
140,000 Merck & Co., Inc. 4,147,500
120,000 Warner-Lambert Co. 7,800,000
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43,924,850
Chemicals (3.2%)
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93,000 Dow Chemical Co. 6,428,625
81,000 du Pont (E.I.) de Nemours & Co., Ltd. 4,809,375
142,000 Eastman Chemical Co. 7,330,750
127,000 Grace (W.R.) & Co. 5,270,500
55,000 Olin Corp. 3,038,750
143,900 Union Carbide Corp. 4,065,175
185,000 Witco Chemical Corp. 5,388,125
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36,331,300
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COMMON STOCKS
NUMBER OF SHARES VALUE
Conglomerates (2.3%)
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100,000 Minnesota Mining & Manufacturing Co. $ 5,312,500
110,000 Ogden Corp. 2,447,500
104,000 TRW, Inc. 7,254,000
152,000 Tenneco Inc. 7,296,000
70,000 United Technologies Corp. 4,217,500
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26,527,500
Consumer Services (2.0%)
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160,000 Dun & Bradstreet Corp. 9,260,000
46,000 Knight-Ridder, Inc. 2,484,000
90,000 McGraw-Hill, Inc. 6,255,000
175,800 Times Mirror Co. Class A 5,252,025
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23,251,025
Business Equipment and Services (2.0%)
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90,000 IBM Corp. 5,557,500
142,000 Moore Corp. Ltd. 2,520,500
138,100 Xerox Corp. 14,120,725
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22,198,725
Automotive (1.7%)
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67,000 Daimler Benz AKT ADR (c) 3,417,000
400,000 Ford Motor Co. 12,700,000
65,000 General Motors Corp. 3,339,375
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19,456,375
Electronics and Electrical Equipment (1.7%)
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92,300 Emerson Electric Co. 5,607,225
220,000 General Electric Co. 11,082,500
80,000 Honeywell, Inc. 2,520,000
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19,209,725
Food and Beverages (1.6%)
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125,000 Anheuser-Busch Cos., Inc. 6,531,250
180,000 Flowers Industries, Inc. 2,970,000
151,000 Heinz (H.J.) Co. 4,983,000
110,000 Seagram Co. Ltd. 3,382,500
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17,866,750
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COMMON STOCKS
NUMBER OF SHARES VALUE
Transportation (1.5%)
- -----------------------------------------------------------------------------
65,000 Consolidated Freightways, Inc. $ 1,486,875
82,900 Illinois Central Corp. 2,642,437
123,000 Norfolk Southern Corp. 7,749,000
85,000 Union Pacific Corp. 5,015,000
--------------
16,893,312
Retail (1.4%)
- -----------------------------------------------------------------------------
87,900 Fleming Cos., Inc. 2,593,050
257,000 Kmart Corp. 4,208,375
50,000 Penney (J.C.) Co., Inc. 2,475,000
130,000 Sears, Roebuck & Co. 6,142,500
--------------
15,418,925
Forest Products (1.3%)
- -----------------------------------------------------------------------------
81,000 Champion International Corp. 2,774,250
179,600 Potlatch Corp. 7,206,450
140,000 Westvaco Corp. 4,812,500
--------------
14,793,200
Real Estate (1.1%)
- -----------------------------------------------------------------------------
60,600 Alexander Haagen Properties 1,060,500
150,000 Crown American Realty Trust 2,137,500
162,400 Debartolo Realty Corp. 2,314,200
118,700 Equity Residential Properties Trust 3,887,425
120,000 LTC Properties Inc. 1,710,000
59,900 Macerich Co. 1,183,025
--------------
12,292,650
Aerospace and Defense (0.8%)
- -----------------------------------------------------------------------------
216,000 GenCorp Inc. 2,727,000
72,300 Northrop Corp. 3,036,600
108,100 Rockwell International Corp. 3,878,087
--------------
9,641,687
Photography (0.8%)
- -----------------------------------------------------------------------------
177,000 Eastman Kodak Co. 8,562,375
<PAGE>
<PAGE>
COMMON STOCKS
NUMBER OF SHARES VALUE
Metals and Mining (0.4%)
- -----------------------------------------------------------------------------
50,000 Aluminum Co. of America $ 3,912,500
40,000 Freeport-McMoRan, Inc. 675,000
500 Freeport-McMoRan, Inc. Class A 11,562
--------------
4,599,062
Business Services (0.3%)
- -----------------------------------------------------------------------------
75,000 Block (H & R), Inc. 2,925,000
Basic Industrial Products (0.2%)
- -----------------------------------------------------------------------------
90,000 Ball Corp. 2,373,750
Food (0.2%)
- -----------------------------------------------------------------------------
110,000 Sara Lee Corp. 2,268,750
Environmental Control (0.1%)
- -----------------------------------------------------------------------------
51,000 WMX Technologies, Inc. 1,485,375
Energy-Related (0.1%)
- -----------------------------------------------------------------------------
79,400 Westcoast Energy, Inc. 1,290,250
Building and Construction (0.1%)
- -----------------------------------------------------------------------------
30,000 Stanley Works (The) 1,226,250
--------------
TOTAL COMMON STOCKS (COST $618,371,490) $648,026,400
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (17.1%)(a)
PRINCIPAL AMOUNT VALUE
$ 3,820,077 Federal Home Loan Mortgage Association 8 3/4s,
with various maturity dates to June 1, 2009 $ 3,935,385
Federal National Mortgage Association
472,516 11s, with various due dates to March 1, 2016 525,084
221,886 8 3/4s, July 1, 2009 227,017
Government National Mortgage Association
1,846 15s, September 15, 2011 2,187
4,368 8 1/2s, April 15, 2006 4,490
16,229,288 7 1/2s, with various maturity dates to September
15, 2023 15,762,696
20,272,721 6 1/2s, with various maturity dates to February
15, 2024 18,365,819
<PAGE>
<PAGE>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS
PRINCIPAL AMOUNT VALUE
$12,435,000 U.S. Treasury Bonds 11 1/8s, August 15, 2003 $ 15,726,389
3,220,000 U.S. Treasury Bonds 8 7/8s, August 15, 2017 3,704,006
13,580,000 U.S. Treasury Bonds 8 1/8s, August 15, 2019 14,539,088
6,777,000 U.S. Treasury Bonds 7 1/8s, February 15, 2023 6,541,923
11,675,000 U.S. Treasury Notes 8 7/8s, November 15, 1997 12,510,492
8,000,000 U.S. Treasury Notes 5 1/8s April 30, 1998 7,637,500
18,650,000 U.S. Treasury Notes 5 1/8s, December 31, 1998 17,583,453
8,000,000 U.S. Treasury Notes 5 1/8s, March 31, 1998 7,647,500
44,705,000 U.S. Treasury Notes 5s, January 31, 1999 41,855,056
14,835,000 U.S. Treasury Notes 4 1/4s, November 30, 1995 14,580,023
13,885,000 U.S. Treasury Notes 3 7/8s, October 31, 1995 13,602,963
--------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(COST $197,749,516) $194,751,071
CORPORATE BONDS AND NOTES (13.7%)(a)
PRINCIPAL AMOUNT VALUE
Insurance and Finance (3.2%)
- -----------------------------------------------------------------------------
$ 750,000 AIM Management Group sr. secd. notes 9s, 2003 $ 708,750
1,500,000 AMBAC Inc. deb. 9 3/8s, 2011 1,675,312
1,245,000 BAT Capital Corp. med. term notes 6.19s, 2000 (d) 1,170,300
750,000 Chevy Chase Savings Bank Inc. sub. deb. 9 1/4s, 2005 697,500
2,000,000 Ford Capital BV deb. 9s, 1998 2,125,000
2,000,000 Goldman, Sachs & Co. deb. 8s, 2013 (d) 1,900,000
4,815,000 Great Western Financial Corp. notes 6 1/8s, 1998 4,652,493
1,000,000 Keystone Group, Inc. sr. secd. notes 9 3/4s, 2003 965,000
250,000 Leucadia National sr. sub. notes 10 3/8s, 2002 266,250
3,000,000 Meridian Bancorp, Inc. sub. deb. notes 7 7/8s, 2002 3,001,875
2,300,000 Midlantic Banks, deb. 9 7/8s, 1999 2,508,437
2,000,000 Orion Capital Corp. sr. notes 9 1/8s, 2002 2,045,000
800,000 PRT Funding Corp. sr. notes 11 5/8s, 2004 592,000
1,000,000 Reliance Group Holdings sr. notes 9s, 2000 905,000
3,750,000 Riggs National Corp. sub. deb. 8 1/2s, 2006 3,562,500
2,000,000 Society Bank & Trust Toledo 12 1/2s, 1999 2,402,500
3,000,000 Star Bank N.A. sub. notes 6 3/8s, 2004 2,731,875
3,065,000 Suntrust Banks sub. notes 6 1/8s, 2004 2,741,259
1,800,000 Westpac Banking Corp. sub. deb. 9 1/8s, 2001 1,938,375
--------------
36,589,426
Utilities (2.2%)
- -----------------------------------------------------------------------------
2,650,000 Gulf States Utilities Co. 1st mtge. 8.7s, 2024 2,578,781
750,000 Louis Dreyfus Natural Gas sr. sub. notes
9 1/4s, 2004 725,625
3,000,000 Louisiana Power & Light secd. lease oblig. bonds
Ser. B, 10.67s, 2017 3,129,375
<PAGE>
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
Utilities (continued)
- -----------------------------------------------------------------------------
$ 1,350,000 Ohio Edison Co. 1st mtge. 8 3/4s, 2022 $ 1,282,500
3,200,000 Public Service Co. of New Hampshire deb. 15.23s,
2000 3,712,000
4,725,000 System Energy Resources Inc. 1st mtge. 14s, 1994 4,837,218
4,100,000 Texas Utilities Electric Co. secd. lease fac. bonds
7.46s, 2015 3,731,000
2,850,000 Toledo Edison Co. med. term notes 7.82s, 2003 2,550,750
2,700,000 United Illuminating Co. secd. lease oblig. bonds
10.24s, 2020 2,703,375
--------------
25,250,624
Consumer Services (1.5%)
- -----------------------------------------------------------------------------
250,000 Arizona Charlies Inc. sub. deb. Ser. B 12s, 2000 (d) 248,750
1,000,000 Cablevision Systems Corp. sr. sub. reset deb.
10 3/4s, 2004 1,010,000
2,000,000 Century Communications Corp. sr. disc. notes
zero %, 2003 770,000
1,650,000 Comcast Cellular Corp. sr. participating notes Ser.
A, zero %, 2000 973,500
500,000 Embassy Suites Inc. sr. sub. notes 10 7/8s, 2002 530,000
1,325,000 Enquirer/Star sr. sub. notes zero %, 1997 993,750
1,000,000 Envirosource, Inc. sr. notes 9 3/4s, 2003 910,000
2,010,000 Flagstar Corp. sr. sub. deb. 11 1/4s, 2004 1,718,550
1,500,000 Grand Casino Resorts, Inc. notes 12 1/2s, 2000 1,507,500
1,500,000 Marvel Parent Holdings, Inc. sr. secd. disc. notes
zero %, 1998 900,000
4,200,000 News American Holdings. Inc. sr. notes 8 1/2s, 2005 4,168,500
2,000,000 Rogers Cablesystems, Inc. notes 9 5/8s, 2002 1,970,000
2,000,000 Tele-Communications, Inc. sr. deb. 9.8s, 2012 2,113,750
--------------
17,814,300
Oil and Gas (1.1%)
- -----------------------------------------------------------------------------
1,500,000 Occidental Petroleum Corp. sr. notes 11 3/4s, 2011 1,670,625
2,500,000 Tosco Corp. 1st mtge. Ser. B, 9 5/8s, 2002 2,635,938
750,000 TransTexas Gas Corp. sr. secd. notes 10 1/2s, 2000 750,000
3,000,000 Transcontinental Gas Pipe Line Corp. sr. deb.
9 1/8s, 2017 2,940,000
4,025,000 USX Corp. deb. 9.8s, 2001 4,311,781
--------------
12,308,344
--------------
<PAGE>
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
Retail (0.7%)
- -----------------------------------------------------------------------------
$ 1,000,000 Caldor Corp. sr. sub. deb. 15s, 2000 $ 1 ,110,000
600,000 Loehmanns. Holdings Inc. sr. sub. notes
13 3/4s, 1999 576,000
1,000,000 Penn Traffic Co. sr. sub. notes 9 5/8s, 2005 920,000
1,000,000 Revco D.S., Inc. sr. notes 9 1/8s, 2000 1,026,250
2,000,000 Sears, Roebuck & Co. med. term notes 9.1s, 2012 2,143,750
1,000,000 Stop & Shop Companies., Inc. sr. sub. notes
9 3/4s, 2002 1,055,000
1,500,000 Supervalu Inc., notes 7.8s, 2002 1,507,500
--------------
8,338,500
Transportation (0.5%)
- -----------------------------------------------------------------------------
2,850,000 AMR Corp. deb. 9.73s, 2014 2,789,438
2,000,000 Southwest Airlines Co. deb. 7 7/8s, 2007 1,955,000
1,100,000 Viking Star Shipping sr. secd. notes 9 5/8s, 2003 1,064,250
--------------
5,808,688
Food (0.4%)
- -----------------------------------------------------------------------------
1,000,000 Fresh Delmonte Produce Corp. sr. notes
Ser. B 10s, 2003 (d) 910,000
1,000,000 Safeway, Inc. med. term notes 8.57s, 2003 953,750
1,716,000 Secured Restaurants Trust deb. 10 1/4s, 2000 1,892,963
1,000,000 Stater Brothers sr. notes 11s, 2001 (d) 982,500
--------------
4,739,213
Health Care (0.4%)
- -----------------------------------------------------------------------------
725,000 Kendall Co. (The) deb. 8 1/4s, 2003 710,500
1,500,000 McGaw, Inc. sr. notes 10 3/8s, 1999 1,537,500
945,000 Mediplex Group, Inc. sr. sub. notes 11 3/4s, 2002 1,001,700
1,250,000 Paracelsus Healthcare Corp. sr. sub. notes
9 7/8s, 2003 1,206,250
--------------
4,455,950
Conglomerates (0.4%)
- -----------------------------------------------------------------------------
1,000,000 ADT Ltd. sr. sub. notes 9 1/4s, 2003 945,000
3,000,000 Pennsylvania Central Corp. sub. notes 10 7/8s, 2011 3,416,250
--------------
4,361,250
Automotive (0.4%)
- -----------------------------------------------------------------------------
3,775,000 Chrysler Corp. deb. 10.95s, 2017 4,317,656
<PAGE>
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
Chemicals (0.3%)
- -----------------------------------------------------------------------------
$ 1,580,000 G-I Holdings Inc. sr. notes zero %, 1998 $ 955,900
1,250,000 Harris Chemical sr. secd. disc. notes stepped
coupon zero % (10 1/4s, 1/15/96), 2001 (e) 981,250
1,000,000 OSI Specialty Inc. sr. sub. notes 9 1/4s, 2003 (d) 950,000
1,000,000 UCC Investors Holding, Inc. sr. notes 10 1/2s, 2002 1,015,000
--------------
3,902,150
Environmental Control (0.3%)
- -----------------------------------------------------------------------------
3,750,000 Waste Management, Inc. deb. 8 3/4s, 2018 3,871,875
Forest Products (0.3%)
- -----------------------------------------------------------------------------
750,000 Container Corp. of America sr. notes Ser. A,
11 1/4s, 2004 776,250
1,000,000 Gaylord Container Corp. sr. notes 11 1/2s, 2001 1,010,000
1,000,000 Georgia-Pacific Corp. deb. 9.85s, 1997 1,066,250
1,000,000 Stone Container sr. sub. notes 9 7/8s, 2001 932,500
--------------
3,785,000
Metals and Mining (0.3%)
- -----------------------------------------------------------------------------
250,000 Inland Steel Co. 1st mtge. 12s, 1998 273,750
750,000 Inland Steel Industries, Inc. notes 12 3/4s, 2002 840,000
500,000 Kaiser Aluminum & Chemical Corp. sr. sub. notes
12 3/4s, 2003 510,000
1,000,000 WCI Steel Inc. sr. secd. notes 10 1/2s, 2002 1,025,000
500,000 Wheeling-Pittsburgh Corp. sr. notes 9 3/8s, 2003 460,000
--------------
3,108,750
Communications (0.3%)
- -----------------------------------------------------------------------------
1,000,000 Centennial Cellular Corp. sr. notes 8 7/8s, 2001 905,000
2,000,000 Rogers Cantel Mobile Inc. deb. 10 3/4s, 2001 2,085,000
--------------
2,990,000
Basic Industrial Products (0.3%)
- -----------------------------------------------------------------------------
1,000,000 Anchor Glass Container Corp. sr. sub. deb. 9 7/8s,
2008 930,000
2,000,000 Owens-Illinois, Inc. sr. sub. notes 10 1/2s, 2002 2,035,000
--------------
2,965,000
<PAGE>
<PAGE>
CORPORATE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
Consumer Non Durables (0.2%)
- -----------------------------------------------------------------------------
$ 1,000,000 Guess Jeans, Inc. sr. sub. notes 9 1/2s, 2003 $ 940,000
1,000,000 Playtex Family Products Corp. sr. sub. notes 9s,
2003 890,000
--------------
1,830,000
Entertainment (0.1%)
- -----------------------------------------------------------------------------
1,640,000 Viacom International sub. deb. 8s, 2006 1,148,000
Electronics and Electrical Equipment (0.1%)
- -----------------------------------------------------------------------------
1,000,000 Amphenol Corp. sr. sub. notes 12 3/4s, 2002 (d) 1,135,000
Motion Picture Distribution (0.1%)
- -----------------------------------------------------------------------------
1,000,000 AMC Entertainment, Inc. sr. sub. deb. 12 5/8s, 2002 1,115,000
Finance (0.1%)
- -----------------------------------------------------------------------------
1,000,000 PSF Finance L.P. sr. notes 12 1/4s, 2004 (d) 1,025,000
Telecommunications (0.1%)
- -----------------------------------------------------------------------------
1,000,000 Panamsat L.P. sr. notes 9 3/4s, 2000 995,000
Building and Construction (0.1%)
- -----------------------------------------------------------------------------
900,000 American Standard, Inc. sr. notes 10 7/8s, 1999 936,000
Food and Beverages (0.1%)
- -----------------------------------------------------------------------------
1,000,000 Chiquita Brands sr. notes 9 1/8s, 2004 920,000
Consumer Services (0.1%)
- -----------------------------------------------------------------------------
1,000,000 John Q. Hammons Hotels 1st mtge. 8 7/8s, 2004 892,500
Aerospace and Defense (0.1%)
- -----------------------------------------------------------------------------
700,000 Coltec Industries sr. note 9 3/4s, 2000 703,500
--------------
TOTAL CORPORATE BONDS AND NOTES (COST $161,309,890) $155,306,726
YANKEE BONDS AND NOTES (2.4%) (a)(c)
PRINCIPAL AMOUNT VALUE
$ 3,000,000 Australia New Zealand Bank sub. notes 6 1/4s,
2004 $ 2,683,125
1,000,000 Banco Rio De La Plata notes, 8 3/4s, 2003 831,250
2,700,000 British Columbia Hydro & Power Auth. deb. 15 1/2s,
2011 3,314,250
1,400,000 British Columbia Hydro & Power Auth. deb. 15s, 2011 1,666,000
<PAGE>
<PAGE>
YANKEE BONDS AND NOTES
PRINCIPAL AMOUNT VALUE
$ 3,225,000 Den Danske Bank sub. notes 6.55s, 2003 (d) $ 2,902,500
450,000 Eletson Holdings, Inc. 1st mtge. notes 9 1/4s,
2003 423,000
3,860,000 LASMO PLC global notes 7 1/8s, 2003 3,577,738
2,000,000 Maxus Energy Corp. global notes 9 1/2s, 2003 1,840,000
1,000,000 Methanex Corp. sr. secd. notes 8 7/8s, 2001 980,000
2,000,000 Nova Scotia (Province of) Canada deb. 9 1/4s, 2020 2,122,500
3,000,000 Petro Canada deb. 9 1/4s, 2021 3,251,250
4,000,000 Time Warner Inc. global notes 9 1/8s, 2013 3,785,000
--------------
TOTAL YANKEE BONDS AND NOTES (COST $29,104,065) $ 27,376,613
CONVERTIBLE PREFERRED STOCKS (1.3%)(a)
NUMBER OF SHARES VALUE
66,000 AMR Corp. Ser. A, $3.00, cv. pfd. (d) $ 2,821,500
156,000 Freeport-McMoRan Copper Co., Inc. stepped-coupon
$1.25, cv. pfd. ($1.75, 8/1/96) (e) 3,549,000
54,000 Pittston Corp. $6.25, cv. pfd. 2,254,500
70,000 Republic New York Corp. $3.375, cv. pfd. 3,692,500
184,300 Westinghouse Electric Ser. C, $1.30 cv. pfd. (d) 2,418,938
--------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $16,515,601) $ 14,736,438
ASSET-BACKED SECURITIES (1.3%)(a)
PRINCIPAL AMOUNT VALUE
$ 1,000,000 Delta Air Lines Equipment Trust 10.79s, 2014 $ 1,031,875
723,224 Delta Air Lines Equipment Trust 9 3/8s, 2007 704,691
1,893,805 Delta Air Lines Equipment Trust Ser. C, 8.54s, 2007 1,732,832
1,615,000 Long Island Lighting mtg. 5 1/4s, 1996 1,575,634
1,037,699 Merrill Lynch Mortgage Investors Inc. sr. notes
9.4s, 2009 1,083,747
2,965,884 Prudential Home Loan Corp. Ser. 92-25-B3, 8s, 2022 2,437,586
1,032,013 Travelers Mortgage Security Corp. coll. oblig. Ser.
84-1, 12s, 2014 1,133,279
1,000,000 United Air Lines Inc. Equipment Trust Ser. E,
10.36s, 2012 950,000
750,000 United Air Lines Inc. Equipment Trust Ser.
91A, deb. 10 1/8s, 2015 695,156
2,675,000 United Air Lines Inc. Equipment Trust Ser. C,
10.36s, 2012 2,541,250
--------------
TOTAL ASSET-BACKED SECURITIES (COST $14,480,557) $ 13,886,050
CONVERTIBLE BONDS (1.1%)(a)
PRINCIPAL AMOUNT VALUE
$ 7,800,000 Comcast Corp. cv. deb. 1 1/8s, 2007 $ 3,237,000
3,500,000 EMC Corp. cv. deb. 4 1/4s, 2001 3,500,000
6,000,000 Hollinger, Inc. liquid yield option cv. notes
zero %, 2013 1,747,500
1,600,000 Interface Inc. sinking fund cv. deb. 8s, 2013 1,520,000
2,700,000 Liberty Property cv. sub. deb. 8s, 2001 2,686,500
--------------
TOTAL CONVERTIBLE BONDS (COST $13,025,935) $ 12,691,000
<PAGE>
<PAGE>
PREFERRED STOCKS (0.1%)(a) (cost $750,000)
NUMBER OF SHARES VALUE
7,500 First Madison Bank Ltd. $11.50 pfd. $ 755,625
COLLATERALIZED MORTGAGE OBLIGATIONS (.%)(a)(cost $251,065)
PRINCIPAL AMOUNT VALUE
$ 307,561 HSI 93-J 6.66s, 2009 $ 258,543
SHORT-TERM INVESTMENTS (5.8%)(a)
PRINCIPAL AMOUNT VALUE
$17,750,000 Corporate Asset Funding Co. Inc. 4.25s, August 2,
1994 $ 17,747,905
23,000,000 Federal Home Loan Mortgage Corp. 4.37s,
September 12, 1994 22,882,740
10,000,000 Federal National Mortgage Assn. 4.36s,
September 1, 1994 9,962,455
10,000,000 MerLynch & Co. Inc. 4.4s, August 24, 1994 9,971,889
5,637,000 Interest in $530,000,000 joint repurchase agreement
dated July 29, 1994 with Bankers Trust Co., Inc. due
August 1, 1994 with respect to various U.S. Treasury
obligations -- maturity value of $5,638,974 for an
effective yield of 4.2% 5,638,974
--------------
TOTAL SHORT-TERM INVESTMENTS (COST $66,203,963) $ 66,203,963
--------------
TOTAL INVESTMENTS (COST $1,117,762,082)(F) $1,133,992,429
(a) Percentages indicated are based on net assets of $1,136,063,857, which co-
rrespond to a net asset value per class A share, class B share and class Y
share of $13.52, $13.46 and $13.54, respectively.
(b) Non-income-producing security.
(c) Securities whose values are determined or significantly influenced by trad-
ing on exchanges not in the United States or Canada. ADR after the name of
a foreign holding stands for American Depository Receipts, representing sha-
res on deposit with a domestic custodian bank.
(d) Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from registra-
tion normally to qualified institutional buyers. At July 31, 1994, these se-
curities amounted to $15,514,488 or 1.4% of net assets.
(e) The interest or dividend rate and date shown parenthetically represent the
new interest or dividend rate to be paid and the date the fund will begin
receiving interest or dividends at this rate.
(f) The aggregate identified cost for federal income tax purposes is
$1,120,377,808 resulting in gross unrealized appreciation and depreciation
of $56,475,936 and $42,861,315 respectively, or net unrealized appreciation
of $13,614,621.
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1994
ASSETS
- -------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,117,762,082) (Note 1) $1,133,992,429
Cash 598
Dividends, interest and other receivables 10,425,568
Receivable for shares of the fund sold 2,410,378
Receivable for securities sold 9,615,383
- -------------------------------------------------------------------------------
TOTAL ASSETS 1,156,444,356
LIABILITIES
- -------------------------------------------------------------------------------
Payable for securities purchased 16,560,533
Payable for shares of the fund repurchased 1,022,941
Payable for compensation of Manager (Note 2) 1,027,465
Payable for administrative services (Note 2) 5,580
Payable for investor servicing and custodian fees (Note 2) 916,179
Payable for distribution fees (Note 2) 317,205
Other accrued expenses 530,596
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 20,380,499
- -------------------------------------------------------------------------------
NET ASSETS $1,136,063,857
REPRESENTED BY
- -------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $1,097,363,240
Undistributed net investment income (Notes 1 and 5) 0
Accumulated net realized gain on investment
transactions (Notes 1 and 5) 22,470,270
Net unrealized appreciation of investments 16,230,347
- -------------------------------------------------------------------------------
TOTAL -- REPRESENTING NET ASSETS APPLICABLE TO
CAPITAL SHARES OUTSTANDING $1,136,063,857
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- -------------------------------------------------------------------------------
Net asset value and redemption price of class A
shares ($913,171,167 divided by 67,536,123 shares) $13.52
Offering price per share (100/94.25 of $13.52)* $14.34
- -------------------------------------------------------------------------------
Net asset value and redemption price of class B shares
($151,326,905 divided by 11,239,335 shares) + $13.46
Net asset value and redemption price of class Y shares
($71,565,785 divided by 5,284,537 shares) $13.54
- -------------------------------------------------------------------------------
* 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.
<PAGE>
<PAGE>
STATEMENT OF OPERATIONS
Year ended July 31, 1994
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
- -------------------------------------------------------------------------------
Interest $25,290,267
- -------------------------------------------------------------------------------
Dividends (Net of foreign tax of $136,902) 24,453,816
- -------------------------------------------------------------------------------
Total investment income $49,744,083
- -------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,839,981
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,410,611
- -------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 28,214
- -------------------------------------------------------------------------------
Reports to shareholders 142,002
- -------------------------------------------------------------------------------
Auditing 54,136
- -------------------------------------------------------------------------------
Legal 24,339
- -------------------------------------------------------------------------------
Postage 220,278
- -------------------------------------------------------------------------------
Registration fees 60,246
- -------------------------------------------------------------------------------
Administrative services (Note 2) 17,978
- -------------------------------------------------------------------------------
Distribution fees -- class A (Note 2) 2,120,390
- -------------------------------------------------------------------------------
Distribution fees -- class B (Note 2) 1,209,381
- -------------------------------------------------------------------------------
Other expenses 58,143
- -------------------------------------------------------------------------------
Total expenses 10,185,699
- -------------------------------------------------------------------------------
Net investment income 39,558,384
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 44,582,928
- -------------------------------------------------------------------------------
Net unrealized depreciation of investments
during the year (52,949,946)
- -------------------------------------------------------------------------------
Net loss on investments (8,367,018)
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $31,191,366
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Year ended July 31
1994 1993
- -------------------------------------------------------------------------------
INCREASE IN NET ASSETS
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $ 39,558,384 $ 30,951,215
- -------------------------------------------------------------------------------
Net realized gain on investments 44,582,928 23,305,177
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investments (52,949,946) 6,869,308
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 31,191,366 61,125,700
- -------------------------------------------------------------------------------
Undistributed net investment income
included in price of shares sold and
repurchased, net (Note 1) -- 53,225
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- -------------------------------------------------------------------------------
From net investment income:
Class A (34,643,598) (31,202,041)
- -------------------------------------------------------------------------------
Class B (3,998,103) (1,491,808)
- -------------------------------------------------------------------------------
Class Y (8,999) --
- -------------------------------------------------------------------------------
From net realized gain on investments:
Class A (35,593,950) (21,835,037)
- -------------------------------------------------------------------------------
Class B (4,555,816) (931,044)
- -------------------------------------------------------------------------------
Increase from capital share transactions
(Note 4) 329,150,086 214,728,489
- -------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 281,540,986 220,447,484
- -------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------
Beginning of year 854,522,871 634,075,387
- -------------------------------------------------------------------------------
End of year (including undistributed
and distributions in excess of net
investment income of $0
and $253,401, respectively) $1,136,063,857 $854,522,871
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
April 1, 1994 April 27, 1992
(commencement of Year (commencement of
operations) to ended operations) to
July 31 July 31 July 31
1994 1994 1993 1992* 1994 1993
- --------------------------------------------- ---------------------------------------------------------
Class Y Class B
- --------------------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.21 $14.19 $14.22 $13.73 $14.24 $14.24
- --------------------------------------------- ---------------------------------------------------------
Investment operation:
- --------------------------------------------- ---------------------------------------------------------
Net investment income .17 .50 .56 .13 .59 .62
- --------------------------------------------- ---------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .31 (.12) .48 .53 (.11) .52
- --------------------------------------------- ---------------------------------------------------------
Total from investment operations .48 .38 1.04 .66 .48 1.14
- --------------------------------------------- ---------------------------------------------------------
Less distributions from:
Net investment income (.15) (.49) (.59) (.17) (.58) (.66)
- --------------------------------------------- ---------------------------------------------------------
Net realized gain on investments -- (.62) (.48) -- (.62) (.48)
- --------------------------------------------- ---------------------------------------------------------
Total distributions (.15) (1.11) (1.07) (.17) (1.20) (1.14)
- --------------------------------------------- ---------------------------------------------------------
Net asset value, end of period $13.54 $13.46 $14.19 $14.22 $13.52 $14.24
- --------------------------------------------- ---------------------------------------------------------
Total investment return at
net asset value (%) (a) 3.65(b) 2.70 7.87 4.99(b) 3.46 8.64
- --------------------------------------------- ---------------------------------------------------------
Net assets, end of period
(in thousands) $71,566 $151,327 $81,983 $11,946 $913,171 $772,540
- --------------------------------------------- ---------------------------------------------------------
Ratio of expenses to
average net assets (%) .25(b) 1.71 1.66 .55(b) .95 .90
- --------------------------------------------- ---------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.34(b) 3.39 3.43 .84(b) 4.15 4.34
- --------------------------------------------- ---------------------------------------------------------
Portfolio turnover (%) 100.69 100.69 89.22 78.90 100.69 89.22
- --------------------------------------------- ---------------------------------------------------------
<FN>
* Per share investment income has been determined on the basis of the weighted
average number of shares outstanding during the period.
(a) Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Not annualized.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
(For a share outstanding throughout the period)
Year ended Seven months
July 31 ended July 31 Year ended December 31
1992 1991 1990 1989 1988 1987 1986 1985
- -----------------------------------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $13.52 $13.39 $14.32 $12.32 $11.91 $14.66 $13.13 $10.95
- -----------------------------------------------------------------------------------------------------------------------------------
Investment operation:
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income .64 .69 .75 .45 .73 .71 .81 .82
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.12 .64 .02 1.88 .68 (.03) 1.63 2.32
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.76 1.33 .77 2.33 1.41 .68 2.44 3.14
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions from:
Net investment income (.68) (.68) (.82) (.33) (.72) (.80) (.80) (.96)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments (.36) (.52) (.88) -- (.28) (2.63) (.11) --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (1.04) (1.20) (1.70) (.33) (1.00) (3.43) (.91) (.96)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.24 $13.52 $13.39 $14.32 $12.32 $11.91 $14.66 $13.13
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return at
net asset value (%) (a) 13.68 11.28 5.86 19.21(b) 12.10 3.72 18.84 29.84
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $622,129 $479,287 $442,964 $430,568 $387,186 $384,213 $371,657 $324,140
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) 1.06 .94 .84 .48(b) .73 .71 .58 .62
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.62 5.42 5.52 3.41(b) 5.82 4.86 5.66 6.84
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 78.90 64.98 70.54 52.82(b) 139.28 129.94 142.93 187.32
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
July 31, 1994
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
The fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The fund seeks to provide
a balanced investment composed of a well-diversified portfolio of stocks and
bonds which will produce both capital growth and current income.
The fund offers class A, class B and class Y shares. The fund commenced its pu-
blic offering of class Y shares on April 1, 1994. Class A shares are sold with
a maximum front-end sales charge of 5.75%. Class B shares do not pay a front-
end sales charge, but pay a higher ongoing distribution fee than class A shares,
and may be subject to a contingent deferred sales charge if those shares are
redeemed within six years of purchase. Class Y shares, which are sold at net
asset value, are generally subject to the same expenses as class A shares and
class B shares, but do not bear a distribution fee. Class Y shares are sold to
defined contribution plans that initially invest at least $250 million in a com-
bination of Putnam funds. Expenses of the fund are borne pro-rata by the hol-
ders 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 with respect to its own distribution plan or other ma-
tters 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 di-
vidends on each class of shares.
The following is a summary of significant accounting policies consistently fo-
llowed by the fund in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles.
A) SECURITY VALUATION Investments for which market quotations are readily avail-
able are stated at market value, which is determined using the last reported sa-
le price, or, if no sales are reported -- as in the case of some securities tra-
ded over-the-counter -- the last reported bid price, except that certain U.S.
government obligations are stated at the mean between the last reported bid and
asked prices. Short-term investments having remaining maturities of 60 days or
less are stated at amortized cost, which approximates market value, and other
investments are stated at fair value following procedures approved by the Trus-
tees. Market quotations are not considered to be readily available for long-term
corporate bonds and notes; such investments are stated at fair value on the ba-
sis of valuations furnished by a pricing service, approved by the Trustees,
which determines valuations for normal, institutional-size trading units of such
securities using methods based on market transactions for comparable securities
and various relationships between securities which are generally recognized by
institutional traders.
B) JOINT TRADING ACCOUNT Pursuant to an exemptive order issued by the Securities
and Exchange Commission, the fund may transfer uninvested cash balances into a
joint trading account, along with the cash of other registered investment compa-
nies managed by Putnam Investment Management, Inc., ("Putnam Management") the
fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc., and cer-
tain other accounts. These balances may be invested in one or more repurchase
<PAGE>
<PAGE>
agreements and/or short-term money market instruments.
C) REPURCHASE AGREEMENTS The fund and other joint trading accounts, through its
custodian, receives delivery of the underlying securities, the market value of
which at the time of purchase is required to be in an amount at least equal to
the resale price, including accrued interest. The fund's Manager is responsible
for determining that the value of these underlying securities is at all times at
least equal to the resale price, including accrued interest.
D) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security transactions are
accounted for on the trade date (date the order to buy or sell is executed). In-
terest income is recorded on the accrual basis and dividend income is recorded
on the ex-dividend date, except that certain dividends from foreign securities
are recorded as soon as the fund is informed of the ex-dividend date.
E) FEDERAL TAXES It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the In-
ternal Revenue Code applicable to regulated investment companies. It is also the
intention of the fund to distribute an amount sufficient to avoid imposition of
any excise tax under Section 4982 of the Internal Revenue Code of 1986. There-
fore, 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.
F) DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded by
the fund on the ex-dividend date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. The differences include treatment of market discount,
bond premium, dividend income, and gains and losses on paydowns on mortgage
backed securities. Reclassifications are made to the fund's capital accounts to
reflect income and gains available for distribution (or available capital loss
carryovers) under income tax regulations. For the year ended July 31, 1994, the
fund reclassified $2,005,570 to decrease undistributed net investment income,
$799,398 to increase accumulated net realized gain, and $1,206,172 to increase
paid-in capital.
G) 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 the proceeds
from sales and the cost of repurchases of shares to undistributed net investment
income.
As of August 1, 1993, the fund discontinued using equalization. This change had
no effect on the fund's total net assets, net asset value per share, or its net
increase (decrease) in net assets from operations and did not have a material
effect on the per share amounts shown in the financial highlights. In manage-
ment's opinion, discontinuation of the use of equalization results in less dis-
tortion of undistributed net investment income as compared to income available
for distribution for federal income tax purposes. 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.
<PAGE>
<PAGE>
NOTE 2
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Management for management and investment advisory servi-
ces is paid quarterly based on the average net assets of the fund for the quar-
ter. Such fee is based on an annual rate of 0.6% of the first $100 million of
average net assets, 0.5% of the next $100 million, 0.4% of the next $300 mi-
llion, 0.325% of the next $500 million and 0.3% of any amount over $1.0 billion,
subject to reduction in any year to the extent that expenses (exclusive of bro-
kerage, interest, taxes, distribution fees and extraordinary expenses) of the
fund exceed 2.5% of the first $30 million of average net assets, 2.0% of the
next $70 million and 1.5% of any amount over $100 million and by the amount of
certain brokerage commissions and fees (less expenses) received by affiliates of
the Manager on the fund's portfolio transactions.
The fund also reimburses the Manager for the compensation and related expenses
of certain officers of the fund and their staff who provide administrative ser-
vices to the fund. The aggregate amount of all such reimbursements is determined
annually by the Trustees. For the year ended July 31, 1994 the fund paid $17,978
for these services.
Trustees of the fund receive an annual Trustee.s fee of $2,390 and an additional
fee for each Trustees' meeting attended. Trustees who are not interested persons
of the Manager and who serve on committees of the Trustees receive additional
fees for attendance at certain committee meetings.
Custodial functions for the fund are provided by Putnam Fiduciary Trust Company
(PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing agent func-
tions are provided by Putnam Investor Services, a division of PFTC. Fees paid
for these investor servicing and custodial functions for the year ended July 31,
1994 amounted to $2,410,611.
Investor servicing and custodian fees reported in the Statement of operations
for the year ended July 31, 1994 have been reduced by credits allowed by PFTC.
The fund has adopted a distribution plan with respect to its class A shares
(the "Class A Plan") pursuant to Rule 12b-1 under the Investment Company Act
of 1940. The purpose of the Class A Plan is to compensate Putnam Mutual Funds
Corp., a wholly-owned subsidiary of Putnam Investments, Inc., for services pro-
vided and expenses incurred by it in distributing class A shares. The Trustees
have approved the payment by the fund to Putnam Mutual Funds Corp. at annual ra-
te of 0.25% of average net assets attributable to class A shares. For the year
ended July 31, 1994, the fund paid Putnam Mutual Funds Corp. distribution fees
of $2,120,390 for class A shares.
During the year ended July 31, 1994, Putnam Mutual Funds Corp., acting as an un-
derwriter, received net commissions of $313,559 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 year
ended July 31, 1994, Putnam Mutual Funds Corp., acting as an underwriter, re-
ceived $7,258 on such redemptions.
<PAGE>
<PAGE>
The fund has adopted a separate distribution plan with respect to its class B
shares (the .Class B Plan.) pursuant to Rule 12b-1 under the Investment Company
Act of 1940. The purpose of the 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 1.00% of the fund's average net assets
attributable to class B shares. For the year ended July 31, 1994 the fund paid
Putnam Mutual Funds Corp. distribution fees of $1,209,381 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 $190,181 from redemptions during the year ended July 31, 1994.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the year ended July 31, 1994, purchases and sales of investment securi-
ties other than U.S. government obligations and short-term investments aggrega-
ted $808,511,704 and $695,745,303, respectively. Purchases and sales of U.S. go-
vernment obligations aggregated $365,984,911 and $242,049,659 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 July 31, 1994, there was an unlimited number of shares of beneficial interest
authorized divided into three classes, class A, class B and class Y capital sha-
res. Transactions in capital shares were as follows:
Year ended July 31
1994
Class A Shares Amount
- -----------------------------------------------------------------------
Shares sold 18,507,700 $254,803,372
- -----------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 4,168,794 57,253,138
- -----------------------------------------------------------------------
22,676,494 312,056,510
- -----------------------------------------------------------------------
Shares repurchased (9,401,901) (129,535,680)
- -----------------------------------------------------------------------
NET INCREASE 13,274,593 $182,520,830
Year ended July 31
1993
Class A Shares Amount
- -----------------------------------------------------------------------
Shares sold 12,536,012 $174,746,002
- -----------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 2,985,836 40,422,170
- -----------------------------------------------------------------------
15,521,848 215,168,172
- -----------------------------------------------------------------------
Shares repurchased (4,952,761) (68,971,650)
- -----------------------------------------------------------------------
Portion represented by
undistributed net investment income -- (27,957)
- -----------------------------------------------------------------------
NET INCREASE 10,569,087 $146,168,565
<PAGE>
<PAGE>
Year ended July 31
1994
Class B Shares Amount
- -----------------------------------------------------------------------
Shares sold 6,533,139 $90,371,150
- -----------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 586,214 8,011,100
- -----------------------------------------------------------------------
7,119,353 98,382,250
- -----------------------------------------------------------------------
Shares repurchased (1,659,029) (22,728,694)
- -----------------------------------------------------------------------
NET INCREASE 5,460,324 $75,653,556
Year ended July 31
1993
Class B Shares Amount
- -----------------------------------------------------------------------
Shares sold 5,061,438 $70,355,400
- -----------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 166,200 2,252,925
- -----------------------------------------------------------------------
5,227,638 72,608,325
- -----------------------------------------------------------------------
Shares repurchased (288,924) (4,023,133)
- -----------------------------------------------------------------------
Portion represented by
undistributed net investment income -- (25,268)
- -----------------------------------------------------------------------
NET INCREASE 4,938,714 $68,559,924
April 1, 1994
(commencement of
operations) to
July 31, 1994
Class Y Shares Amount
- -----------------------------------------------------------------------
Shares sold 5,361,674 $72,013,488
- -----------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 685 8,999
- -----------------------------------------------------------------------
5,362,359 72,022,487
- -----------------------------------------------------------------------
Shares repurchased (77,822) (1,046,787)
- -----------------------------------------------------------------------
NET INCREASE 5,284,537 $70,975,700
NOTE 5
RECLASSIFICATION OF CAPITAL ACCOUNT
Effective August 1, 1993, The George Putnam Fund of Boston adopted the provi-
sions of Statement of Position 93-2 .Determination, Disclosure and Financial
Statement Presentation of Income, Capital Gain and Return of Capital Distribu-
tions by Investment Companies. (SOP). The purpose of this SOP is to report the
undistributed net investment income (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), and to
achieve uniformity in the presentation of distributions by investment companies.
As a result of the SOP, the fund has reclassified $2,481,434 to increase undis-
tributed net investment income, $13,388,034 to increase accumulated net realized
gain and $15,869,468 to decrease paid-in capital.
These reclassifications represent the cumulative amounts necessary to report
these balances through July 31, 1993. These reclassifications, which have no im-
pact on the total net asset value of the fund, are primarily attributable to
market discount, bond premium, dividend income, and gains and losses on paydowns
on mortgage backed securities which are treated differently in the computation
of distributable income and capital gains under federal income tax rules and re-
gulations versus generally accepted accounting principles.
<PAGE>
<PAGE>
FEDERAL TAX INFORMATION
CLASS A SHARES:
The distributions shown in the table below from investment income and short-term
capital gains totaling $0.872 per class A share constitute "dividend income" for
federal income tax purposes. The fund has designated 49.09% of the distributions
as qualifying for the dividends-received deduction for corporations.
Investment Short-term Long-term
Date paid income capital gain capital gain Total paid
- -----------------------------------------------------------------------------
August 22, 1993 $0.160 -- -- $0.160
- -----------------------------------------------------------------------------
November 23, 1993 0.130 .292 0.331 0.753
- -----------------------------------------------------------------------------
February 22, 1994 0.150 -- -- 0.150
- -----------------------------------------------------------------------------
May 23, 1994 0.140 -- -- 0.140
- -----------------------------------------------------------------------------
Total class A
distributions $0.58 $0.292 $0.331 $1.203
- -----------------------------------------------------------------------------
In addition, the fund paid $0.331 per class A share classified as "long-term
capital gain," whether received in cash or additional fund shares, and regard-
less of how long you had owned your shares before the distribution was made.
CLASS B SHARES:
For the period ended July 31, 1994, the fund paid $0.507 per class B share from
net investment income, constituting "dividend income" for federal income tax
purposes. The fund has designated 49.09% of the distributions as qualifying for
the dividends.received deduction for corporations.
The Form 1099 you receive in January 1995 will show you the tax status of all
distributions paid to your account in calendar 1994.
The distributions shown in the table below from investment income
and short-term capital gains totaling $0.779 per class B share
constitute .dividend income. for federal inco
me tax purposes. The
fund has designated 49.09% of the distributions as qualifying for the
dividends-received deduction for corporations.
Investment Short-term Long-term
Date paid income capital gain capital gain Total paid
- -----------------------------------------------------------------------------
August 20, 1993 $0.136 -- -- $0.136
- -----------------------------------------------------------------------------
November 22, 1993 0.107 $0.292 $0.331 0.730
- -----------------------------------------------------------------------------
February 22, 1994 0.127 -- -- 0.127
- -----------------------------------------------------------------------------
May 23, 1994 0.117 -- -- 0.117
- -----------------------------------------------------------------------------
Total class B
distributions $0.487 $0.292 $0.331 $1.11
- -----------------------------------------------------------------------------
<PAGE>
<PAGE>
CLASS Y SHARES:
The distributions shown in the table below from investment income totaling
$0.148 per class Y share constitute "dividend income" for federal income tax
purposes. The fund has designated 49.09% of the distributions as qualifying for
the dividends-received deduction for corporations.
Investment Short-term Long-term
Date paid income capital gain capital gain Total paid
- -----------------------------------------------------------------------------
May 23, 1994 $0.148 -- -- $0.148
- -----------------------------------------------------------------------------
Total class Y
distributions $0.148 -- -- $0.148
- -----------------------------------------------------------------------------
If you are a shareholder in an IRA or other tax-sheltered retirement plan, this
statement is for information only and will serve as a record of distributions
reinvested in your account during the fiscal year. Money invested in these plans
generally is not subject to federal income tax until you withdraw it.
<PAGE>
<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
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
TRUSTEES
George Putnam, Chairman William F. Pounds, Vice Chairman
Jameson Adkins Baxter Hans H. Estin
John A. Hill Elizabeth T. Kennan
Lawrence J. Lasser Robert E. Patterson
Donald S. Perkins George Putnam, III
A.J.C. Smith W. Nicholas Thorndike
OFFICERS
George Putnam Charles E. Porter
President Executive Vice President
Patricia C. Flaherty Lawrence J. Lasser
Senior Vice President Vice President
Gordon H. Silver Peter Carman
Vice President Vice President
Brett C. Browchuk Thomas V. Reilly
Vice President Vice President
Edward P. Bousa Kenneth J. Taubes
Vice President and Fund Manager Vice President and Fund Manager
William N. Shiebler John R. Verani
Vice President Vice President
Paul M. O.Neil John D. Hughes
Vice President Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of The George Putnam Fund of
Boston. It may also be used as sales literature when preceded or accompanied by
the current prospectus, which gives details of sales charges, investment objec-
tives and operating policies of the fund, and the most recent Putnam Quarterly
Performance Summary.
<PAGE>
<PAGE>
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
Paid
Providence, RI
Permit No. 2720
852/358-13749
<PAGE>
<PAGE>
PUTNAM INVESTMENTS [Putnam Logo]
- -------------------------------------------------------------------------------
THE GEORGE PUTNAM FUND OF BOSTON
Supplement to Annual Report dated July 31, 1994.
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to defined contribution plans investing $250 million or
more in one or more of Putnam's funds or private accounts. Performance of
class Y shares, which incur neither a front-end load, distribution fee, nor
contingent deferred sales charge, will differ from performance of class A and
B shares, which are discussed more extensively in the annual report.
FISCAL 1994 RESULTS AT A GLANCE
- -------------------------------------------------------------------------------
Standard & Poor's
Total Return Class Y 500*(R) Index
4/4/94 (commencement of offering
of Y shares) to 7/31/94 (change in value
during period plus reinvested distributions) +3.65% +5.21%
4/4/94 to 6/30/94
most current calendar quarter +1.36% +2.00%
- -------------------------------------------------------------------------------
Share value NAV
4/4/94 $13.21
7/31/94 $13.54
- -------------------------------------------------------------------------------
Distributions No. Income Capital gains Total
1 $0.148 -- $0.148
- -------------------------------------------------------------------------------
Current return (end of period) Total
Current dividend rate (1) 4.37%
Current 30-day SEC yield (2) 4.64%
- -------------------------------------------------------------------------------
(1) Income portion of most recent distribution, annualized and divided by NAV
at end of period.
(2) Based only on investment income, calculated using SEC guidelines.
Please note that past performance does not indicate future results. Invest-
ment return and principal value will fluctuate so your shares, when redeemed,
may be worth more or less than their original cost. See full Report for in-
formation on comparative benchmarks. If you have any questions please con-
sult your fund prospectus or call Putnam toll free at 1-800-7520-9894.
* (R) Regitered Mark
<PAGE>
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN PRINTED AND
EDGAR-FILED TEXTS:
(1) Boldface typeface is displayed with capital letters, italic typeface is
displayed in normal type.
(2) Because the printed page breaks are not reflected, certain tabular and
columnar headings and symbols are displayed differently in this filing.
(3) Bullet points and similar graphic signals are omitted.
(4) Page numbering has been omitted.
(5) The trademark symbol has been replaced by (TM).
(6) The copyright symbol has been replaced by (C).
(7) The dagger symbol has been replaced by (+).
(8) The registered mark symbol has been replaced by (R).
