THE GEORGE
PUTNAM FUND
OF BOSTON
[Artwork]
SEMIANNUAL REPORT
January 31, 1995
[Putnam Logo]
Boston * London * Tokyo
<PAGE>
PERFORMANCE HIGHLIGHTS
Morningstar, an independent rating agency, awarded the fund's class A shares 4
out of 5 stars for overall performance as of December 31, 1994. This placed the
fund in the top 32.5% of all stock and bond funds rated. *
Total return for the fund's class A shares has consistently surpassed that of
the average balanced fund tracked by Lipper Analytical Services, based on re-
sults for the 1-, 5-, and 10-year periods ended January 31, 1995. +
Performance should always be considered in light of a fund's investment strate-
gy. The George Putnam Fund of Boston is designed for investors seeking capital
appreciation and current income.
SEMIANNUAL RESULTS AT A GLANCE
- -------------------------------------------------------------------------------
CLASS A CLASS B
TOTAL RETURN: NAV POP NAV CDSC
- -------------------------------------------------------------------------------
(change in value during period
plus reinvested distributions)
6 months ended 1/31/95 2.29% -3.56% 1.98% -2.91%
- -------------------------------------------------------------------------------
CLASS A CLASS B CLASS M
SHARE VALUE: NAV POP NAV NAV POP
- -------------------------------------------------------------------------------
7/31/94 $13.52 $14.34 $13.46 -- --
12/1/94
(inception of class M shares) -- -- -- $12.77 $13.23
1/31/95 13.21 14.02 13.16 13.20 13.68
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CAPITAL GAINS (1)
DISTRIBUTIONS: NO. INCOME LONG-TERM SHORT-TERM TOTAL
- -------------------------------------------------------------------------------
Class A 2 $0.2800 $0.309 $0.012 $0.601
Class B 2 0.2290 0.309 0.012 0.550
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CLASS A CLASS B
CURRENT RETURN: NAV POP NAV
- -------------------------------------------------------------------------------
(End of period)
Current dividend rate (2) 4.24% 3.99% 3.43%
Current 30-day SEC yield (3) 4.85 4.57 4.08
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Performance data represent past results and will differ for each share class.
Performance for class M shares, which became effective 12/1/94, is not shown
because of the brevity of the reporting period. For performance over longer
periods, see page 8. POP assumes 5.75% maximum sales charge for class A shares
and 3.50% for class M shares. CDSC for class B shares assumes 5% maximum con-
tingent deferred sales charge. (1) Capital gains are taxable for federal and,
in most cases, state tax purposes. Investment income may be subject to state
and local taxes. (2) Income portion of the most recent distribution, annuali-
zed and divided by NAV or market price at the end of the period. (3) Based on-
ly on investment income, calculated using SEC guidelines.
* Morningstar rates a fund in relation to other funds with similar investment
objectives, based on the fund's 1-, 3-, 5-, and 10-year average annual re-
turns, adjusted for risk factors and sales charges. Ratings are updated mon-
thly. The four-star rating for the period ending 12/31/94, puts the fund's
class A shares in the top 32.5% of all 1,964 hybrid funds rated. For the 3-,
5-, and 10-year periods ended 12/31/94, there were 1,964, 1,478, and 635
funds, respectively, in the hybrid fund category; the fund's class A shares
received 3, 3, and 4 stars, respectively. Past performance is not indicative
of future results.
+ Lipper Analytical Services is an independent research organization; rankings
vary over time and do not reflect the effects of sales charges. The fund's
class A shares ranked 21 out of 157 balanced funds for 1-year performance; 30
out of 59, for 5-year performance; and 6 out of 26, for 10- year performance,
as of 1/31/95.
<PAGE>
FROM THE CHAIRMAN [Photograph of George Putnam]
* (C) Karsh, Ottawa
DEAR SHAREHOLDER:
THE GEORGE PUTNAM FUND OF BOSTON PASSED THE MIDPOINT OF FISCAL 1995 JUST AS THE
FEDERAL RESERVE BOARD PUSHED SHORT-TERM INTEREST RATES TO THEIR HIGHEST LEVEL IN
FOUR YEARS. THE FED'S SUSTAINED STRATEGY OF KEEPING INFLATION IN CHECK BY TIGH-
TENING CREDIT HAS MADE STOCK AND BOND INVESTORS UNDERSTANDABLY NERVOUS. FOR MORE
THAN A YEAR, THEIR JITTERS HAVE TRANSLATED INTO AN EXTREMELY UNSETTLED MARKET
ENVIRONMENT.
FUND MANAGERS EDWARD BOUSA, KENNETH TAUBES, AND NEWLY APPOINTED MANAGER ROSEMARY
THOMSEN, BELIEVE THE STOCK AND BOND MARKETS WILL CONTINUE TO BE VOLATILE FOR
SOME TIME. HOWEVER, THEY ARE ALSO CONFIDENT THAT YOUR FUND IS WELL POSITIONED
NOT ONLY TO WEATHER FURTHER MARKET UNREST BUT ALSO TO TAKE ADVANTAGE OF THE
OPPORTUNITIES PRESENTED BY THE ECONOMIC GROWTH THAT SEEMS TO PERSIST IN SPITE
OF THE FED'S EFFORTS TO REIN IT IN.
ROSEMARY HAS BEEN WITH PUTNAM SINCE 1986 AND HAS 11 YEARS OF INVESTMENT EXPERI-
ENCE. A SENIOR PORTFOLIO MANAGER, SHE CURRENTLY SPECIALIZES IN HIGH-YIELD FIXED-
INCOME SECURITIES.
YOUR MANAGEMENT TEAM DISCUSSES FIRST-HALF RESULTS AND PROSPECTS FOR THE REMAIN-
DER OF FISCAL 1995 IN THE REPORT THAT FOLLOWS.
RESPECTFULLY YOURS,
GEORGE PUTNAM
CHAIRMAN OF THE TRUSTEES
MARCH 13, 1995
* (C) Copyright
<PAGE>
REPORT FROM THE FUND MANAGERS
EDWARD P. BOUSA, LEAD MANAGER
KENNETH J. TAUBES
ROSEMARY H. THOMSEN
In the first half of The George Putnam Fund of Boston's fiscal year, the stock
and bond markets were profoundly affected by the Federal Reserve Board's conti-
nued efforts to keep inflation in check. Though the Fed's repeated increases in
short-term interest rates have slowed the economy somewhat, we believe the mar-
kets have begun to adjust in the past six months, laying the foundation for the
recovery of bonds and interest-sensitive stocks. Therefore, we have positioned
your fund opportunistically by selecting holdings from diverse sectors that
could demonstrate growth through a changing period.
For the six months ended January 31,1995, your fund produced a total return of
2.29% for class A shares and 1.98% for class B shares, both at net asset value.
While the fund's portfolio of stocks and bonds trailed the 4.14% return of the
Standard & Poor's 500*(R) Index for the same period, it was well ahead of the
0.79% return of the Lehman Brothers Government/Corporate Bond Index.
During this period, we maintained the ratio of stocks to bonds in the portfolio
at 60% to 40%. This conservative investment mix has proven an appropriate weigh-
ting, supporting the balanced nature of the fund in the current volatile market
environment. Your fund continues its value-oriented approach to selecting stocks
for the portfolio. Within the fixed-income portion representing 40% of portfolio
assets, we allocated 22% of assets to U.S. Treasuries, 10% to corporate bonds,
1% to collateralized mortgage obligations (CMOs) and 1% to asset-backed securi-
ties. We continue to maintain a somewhat defensive posture with respect to inte-
rest-rate risk, both on the equity and fixed-income sides of the portfolio.
DIVERSE SECTOR STOCKS PROVIDE POSITIVE RETURNS
During the period, interest-rate-sensitive stocks owned by the fund -- such as
those of utilities, banks, and insurance companies -- also outperformed the mar-
ket. We were able to take profits on selected utility stocks and we also reduced
holdings in credit-card companies, electric utilities, and telephone companies,
opting to sell on strength. Going forward, we expect to find increasing value in
early cyclical stocks in industries such as automotive, railroad, retail, and
long-distance telephone companies.
* (R) Registered mark
<PAGE>
Generally, over the last six months, we have looked for ways to reduce the port-
folio's susceptibility to rotations in the economy. We reduced the fund's in-
vestments in the stocks of chemical, metal, and energy companies, and shifted
assets into financial, consumer, and transportation companies. This strategy
proved profitable for your fund in the first half of fiscal 1995.
STRATEGIC SHIFTS IN FIXED-INCOME COMPONENT BENEFIT THE FUND
During the period, we began taking a more conservative approach to the fund's
corporate bond holdings, either upgrading the credit quality or shortening the
maturity where possible. We initiated this shift to offset the risk inherent in
the recent trend of declining corporate profitability due to a tightening busi-
ness environment. We also changed your portfolio's allocation of fixed-income
securities, decreasing holdings of high-yield corporate bonds and increasing our
emphasis on mortgage-related securities and short-term government securities. We
have thus become less defensive in our strategy, currently allowing your fund
more exposure to interest-rate-sensitive securities than we would have at this
time last year. In our opinion, because rates have already risen to a level re-
flective of a strong economy with some pressure on inflation, some additional
interest-rate risk at this juncture is justified.
[Bar Chart - Page 5]
TOP INDUSTRY SECTORS *
Insurance and finance 11.3%
Utilities 9.5%
Consumer nondurables 6.1%
Oil and gas 5.0%
Chemicals 3.3%
* Based on net assets on 1/31/95. Holdings will vary over time.
<PAGE>
Despite the widely publicized negative performance of CMOs in the market, the
mortgage-related securities in the portfolio performed well through the period.
Your fund's exposure to CMOs was minimal, and they had no adverse effect on your
portfolio's returns. Your fund benefited from investments in the securities of
cable and telecommunications companies in the past several months. Though we in-
creased the fund's investments in bank and financial company bonds last year, we
began to underweight these sectors during the semiannual period, anticipating a
cyclical peak in credit quality.
As a result of these strategic shifts, your fund's income component declined
only 1% in total return, significantly outperforming the market.
STOCK AND BOND CHOICES PERFORM WELL
Through in-depth research, we continue to identify and purchase stocks of compa-
nies that demonstrate improved operations and revenue growth. In the long-dis-
tance telephone sector, we have progressively added holdings in Sprint Corp.
This carrier has fared very well in the current environment of long-distance
price wars and is growing at an impressive pace overseas. Union Pacific, a low-
cost Western railroad company whose stock had been under pressure recently from
its failed takeover bid for Santa Fe Pacific Railroad, has shown strong funda-
mentals and has been profitable for the fund. Ryder System is experiencing tre-
mendous growth in its logistics business, handling all the distribution and
transportation needs of major Fortune 500 customers. We have added Ryder System
stocks significantly to the portfolio, as this company's assets approach $1 bil-
lion in 1995.
To offset the effects of a reined-in economy, we sought to buy shares of compa-
nies that hold recession-proof, significant leadership positions in their indus-
tries. Subsequently, we increased the number of large-capitalization stocks in
the portfolio, adding to our holdings of Exxon Corporation, Sara Lee Corp.,
Illinois Central Railroad, NYNEX, U.S. West, Inc., and Bell South. Stocks of
pharmaceutical companies, including American Home Products and Warner-Lambert
Co., continued to provide attractive gains through January.
At the start of the period, we discovered an attractive buy in Honeywell, Inc.,
whose stock we purchased at $29 per share. In a matter of months, it had risen
to $35.
On the fixed-income side, the portfolio's exposure to cable companies has proven
quite successful. Some of the fund's high-yield credits have also performed
well, such as Cablevision, which was recently purchased
<PAGE>
TOP 10 EQUITY HOLDINGS (1/31/95)
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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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PHILIP MORRIS COMPANIES
Domestic food processing, alcohol, and tobacco
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AMERICAN HOME PRODUCTS CORPORATION
Pharmaceuticals
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XEROX CORPORATION
Document processing, copiers, fax machines, digital publishing
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NYNEX CORPORATION
Telecommunications
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US WEST, INC.
Telephone utilities
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UNION PACIFIC CORPORATION
Railroad
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SPRINT CORP.
Telecommunications
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TEXAS UTILITIES
Electric utilities
- -------------------------------------------------------------------------------
These holdings represent 12.1% of the fund's net assets. Portfolio holdings
will vary over time.
by TimeWarner. Telecommunications, Inc., continued to issue equity, which has
supported its contribution to the fund's overall return.
OUR OUTLOOK: HANDS-ON RESEARCH WILL CONTINUE TO ADD VALUE
As your fund enters the second half of fiscal 1995, we will continue to use ex-
tensive research to identify those companies whose management teams have demons-
trated the ability to adapt to a changing marketplace. A fund manager in
Putnam's Basic Value Group may visit over 300 companies per year, meeting with
top management to identify companies that have exceptional value and show signs
of future growth. This hands-on approach requires considerable time and effort,
but we believe that by gaining such a thorough understanding of the companies we
purchase, we will be well equipped to position the portfolio positively, no
matter what the economic weather.
The views expressed here are exclusively those of Putnam Management. They are
not meant as investment advice. Although the described holdings were viewed fa-
vorably as of January 31, 1995, there is no guarantee the fund will continue to
hold these securities in the future.
<PAGE>
PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund's performance.
Total return shows how the value of the fund's shares changed over time, assum-
ing you held the shares through the entire period and reinvested all distribu-
tions back into the fund. We show total return in two ways: on a cumulative
long-term basis and on average how the fund might have grown each year over va-
rying periods. For comparative purposes, we show how the fund performed relati-
ve to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIODS ENDED 1/31/95
STANDARD LEHMAN BROS.
& POOR'S GOVT./CORP.
CLASS A CLASS B 500 BOND
NAV POP NAV CDSC INDEX INDEX
- -------------------------------------------------------------------------------
6 months 2.29% -3.56% 1.98% -2.91% 4.14% 0.79%
- -------------------------------------------------------------------------------
1 year -0.64 -6.37 -1.29 -5.94 0.55 -3.11
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5 years 55.41 46.53 -- -- 66.70 51.36
Annual average 9.22 7.94 -- -- 10.76 8.64
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10 years 213.25 195.29 -- -- 263.87 157.55
Annual average 12.10 11.44 -- -- 13.79 9.92
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Life of class B -- -- 18.44 15.57 22.68 19.80
Annual average -- -- 6.32 5.38 7.69 6.76
- -------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 12/31/94
(most recent calendar quarter)
CLASS A CLASS B
NAV POP NAV CDSC
- -------------------------------------------------------------------------------
1 year -0.38% -6.13% -1.02% -5.68%
- -------------------------------------------------------------------------------
5 years 45.12 36.78 -- --
Annual average 7.73 6.46 -- --
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10 years 221.79 203.23 -- --
Annual average 12.40 11.73 -- --
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Life of class B -- -- 15.83 13.02
Annual average -- -- 5.64 4.67
- -------------------------------------------------------------------------------
Fund performance data do not take into account any adjustment for taxes payable
on reinvested distributions or, for class A shares, distribution fees prior to
implementation of the class A distribution plan in 1990. Effective 4/27/92, the
fund began offering class B shares and on 12/1/94, class M shares. Performance
of share classes will differ; performance for class M shares is not shown becau-
se of the brevity of the reporting period. Performance data represent past re-
sults. Investment returns and net asset value will fluctuate so an investor's
shares, when sold, may be worth more or less than their original cost.
<PAGE>
TERMS AND DEFINITIONS
CLASS A SHARES are generally subject to an initial sales charge.
CLASS B SHARES may be subject to a sales charge upon redemption.
CLASS M SHARES have a lower initial sales charge and a higher 12b-1 fee than
class A shares and no sales charge on redemption.
NET ASSET VALUE (NAV) is the value of all your fund's assets, minus any liabili-
ties, divided by the number of outstanding shares, not including any initial or
contingent deferred sales charge.
PUBLIC OFFERING PRICE (POP) is the price of a mutual fund share plus the maximum
sales charge levied at the time of purchase. POP performance figures shown here
assume maximum sales charge of 5.75% for class A shares and 3.50% for class M
shares.
CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at the time of
the redemption of class B shares and assumes redemption at the end of the pe-
riod. Your fund's CDSC declines from a 5% maximum during the first year to 1%
during the sixth year. After the sixth year, the CDSC no longer applies.
COMPARATIVE BENCHMARKS
STANDARD & POOR'S 500 Index* is an unmanaged list of common stocks that is fre-
quently used as a general measure of stock market performance. The index assumes
reinvestment of all distributions and does not take into account brokerage com-
missions or other costs.
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX* is an unmanaged list of publi-
cly issued U.S. Treasury obligations and corporate debt securities.
* The fund's portfolio contains securities that do not match those in the
indexes.
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
January 31, 1995 (Unaudited)
COMMON STOCKS (56.6%)*
NUMBER OF SHARES VALUE
INSURANCE AND FINANCE (11.3%)
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144,000 AON Corp. $ 4,734,000
135,000 Aetna Life & Casualty Co. 6,682,500
246,000 American Express Co. 7,749,000
179,000 American General Corp. 5,302,875
108,000 BankAmerica Corp. 4,657,500
119,840 Bankers Trust New York Corp. 7,504,980
150,000 Bear Stearns Companies, Inc. 2,493,750
265,000 Beneficial Corp. 10,633,125
46,000 CIGNA Corp. 3,110,750
159,000 Comerica Inc. 3,994,875
226,000 CoreStates Financial Corp. 6,073,750
78,000 First Chicago Corp. 3,666,000
33,000 First Union Corp. 1,410,750
120,900 Household International, Inc. 4,911,563
240,000 Lincoln National Corp. 8,760,000
76,500 Mellon Bank Corp. 2,677,500
278,000 Morgan (J.P.) & Co., Inc. 17,514,000
134,000 National City Corp. 3,551,000
128,000 NationsBank Corp. 5,952,000
88,000 Old Republic International Corp. 2,013,000
55,000 Republic New York Corp. 2,619,375
135,000 SAFECO Corp. 7,121,250
48,000 Student Loan Marketing Assn. 1,794,000
110,000 Synovus Financial Corp. 2,035,000
105,000 Torchmark Corp. 4,095,000
141,000 Wilmington Trust Corp. 3,331,125
--------------
134,388,668
UTILITIES (9.5%)
- -------------------------------------------------------------------------------
204,000 American Telephone & Telegraph Co. 10,174,500
106,000 Bell Atlantic Corp. 5,750,500
49,000 Bell South Corp. 2,903,250
56,265 Cinergy Corp. 1,385,525
127,000 Consolidated Natural Gas Co. 4,381,500
100,000 Detroit Edison Co. 2,800,000
139,000 Entergy Corp. 3,388,125
67,000 GTE Corp. 2,269,625
79,000 Hawaiian Electric Industries, Inc. 2,646,500
95,000 Houston Industries Inc. 3,788,125
84,400 Northeast Utilities 2,015,050
338,000 NYNEX Corp. 13,351,000
155,000 Pacific Enterprises 3,526,250
58,000 Pacific Gas & Electric Co. 1,464,500
199,000 Public Service Co. of Colorado 6,019,750
146,000 Shandong Huaneng Power ADR 1,259,250
410,000 Sprint Corp. 11,685,000
<PAGE>
COMMON STOCKS (Continued)
NUMBER OF SHARES VALUE
UTILITIES (continued)
- -------------------------------------------------------------------------------
65,000 Telefonica de Espana SA ADR $ 2,396,875
330,000 Texas Utilities Co. 11,467,500
85,000 United Illuminating Co. 2,709,375
339,000 US WEST, Inc. 13,263,375
101,000 WICOR Inc. 2,992,125
--------------
111,637,700
CONSUMER NON DURABLES (6.1%)
- -------------------------------------------------------------------------------
289,000 American Brands, Inc. 10,982,000
187,600 Avon Products, Inc. 10,716,650
70,000 Clorox Co. (The) 4,103,750
86,000 Colgate-Palmolive Co. 5,407,250
217,000 Eastman Kodak Co. 10,633,000
205,000 Kimberly-Clark Corp. 9,865,625
210,000 Maytag Corp. 3,123,750
265,000 Philip Morris Cos., Inc. 15,800,625
86,600 Universal Corp. 1,710,350
--------------
72,343,000
OIL AND GAS (5.0%)
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140,000 Amoco Corp. 8,120,000
98,000 Chevron Corp. 4,373,250
121,000 Enron Corp. 3,524,125
275,600 Exxon Corp. 17,225,000
92,000 Imperial Oil Ltd. 3,024,500
116,600 Mobil Corp. 10,071,325
66,000 Phillips Petroleum Co. 2,103,750
62,000 Royal Dutch Petroleum Co. ADR 6,936,250
146,000 Total Corp. ADS 4,142,750
--------------
59,520,950
CHEMICALS (3.3%)
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156,000 Dexter Corp. 3,237,000
37,000 Dow Chemical Co. 2,307,875
94,000 du Pont (E.I.) de Nemours & Co., Ltd. 5,005,500
84,600 Eastman Chemical Co. 4,208,850
147,000 Grace (W.R.) & Co. 5,696,250
90,000 Olin Corp. 4,477,500
264,900 Union Carbide Corp. 6,754,950
272,000 Witco Chemical Corp. 7,140,000
--------------
38,827,925
HEALTH CARE (3.2%)
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220,000 American Home Products Corp. 15,427,500
172,900 Baxter International, Inc. 5,100,550
65,000 Bristol-Myers Squibb Co. 3,997,500
75,000 Merck & Co., Inc. 3,018,750
139,000 Warner-Lambert Co. 10,842,000
--------------
38,386,300
<PAGE>
COMMON STOCKS (Continued)
NUMBER OF SHARES VALUE
TRANSPORTATION (2.2%)
- -------------------------------------------------------------------------------
107,000 Consolidated Freightways, Inc. $ 2,233,625
130,000 Illinois Central Corp. 4,273,750
56,000 Norfolk Southern Corp. 3,472,000
136,000 Ryder System, Inc. 2,924,000
252,200 Union Pacific Corp. 12,673,050
--------------
25,576,425
CONSUMER SERVICES (1.9%)
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183,000 Dun & Bradstreet Corp. 9,150,000
142,000 Knight-Ridder, Inc. 7,384,000
100,000 McGraw-Hill, Inc. 6,500,000
--------------
23,034,000
CONGLOMERATES (2.0%)
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34,000 ITT Corp. 3,043,000
110,000 Ogden Corp. 2,117,500
136,000 TRW, Inc. 8,721,000
104,000 Tenneco Inc. 4,576,000
70,000 United Technologies Corp. 4,497,500
--------------
22,955,000
BUSINESS EQUIPMENT AND SERVICES (1.9%)
- -------------------------------------------------------------------------------
92,000 Deluxe Corp. 2,461,000
68,000 IBM Corp. 4,904,500
139,100 Xerox Corp. 15,214,062
--------------
22,579,562
FOOD AND BEVERAGES (1.8%)
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148,000 Anheuser-Busch Cos., Inc. 8,103,000
180,000 Flowers Industries, Inc. 3,217,500
128,000 Heinz (H.J.) Co. 5,072,000
165,000 Sara Lee Corp. 4,351,875
--------------
20,744,375
ELECTRONICS AND ELECTRICAL EQUIPMENT (1.6%)
- -------------------------------------------------------------------------------
94,000 Eaton Corp. 4,335,750
200,000 General Electric Co. 10,300,000
131,000 Honeywell, Inc. 4,519,500
--------------
19,155,250
AUTOMOTIVE (1.6%)
- -------------------------------------------------------------------------------
208,400 Dana Corp. 4,636,900
427,000 Ford Motor Co. 10,781,750
94,000 General Motors Corp. 3,642,500
--------------
19,061,150
RETAIL (1.3%)
- -------------------------------------------------------------------------------
180,000 K Mart Corp. 2,452,500
107,000 Melville Corporation 3,290,250
85,000 Penney (J.C.) Co., Inc. 3,527,500
135,000 Sears, Roebuck & Co. 5,956,875
--------------
15,227,125
<PAGE>
COMMON STOCKS (Continued)
NUMBER OF SHARES VALUE
FOREST PRODUCTS (0.9%)
- -------------------------------------------------------------------------------
157,100 Potlatch Corp. $ 6,146,537
117,000 Weyerhaeuser Co. 4,431,375
--------------
10,577,912
REAL ESTATE (0.8%)
- -------------------------------------------------------------------------------
111,800 Debartolo Realty Corp. 1,565,200
156,700 Equity Residential Properties Trust 4,172,137
78,500 Evans Withycombe Residential 1,570,000
120,000 LTC Properties Inc. 1,530,000
49,700 Macerich Co. 1,006,425
--------------
9,843,762
METALS AND MINING (0.5%)
- -------------------------------------------------------------------------------
20,000 Aluminum Co. of America 1,572,500
72,000 Carpenter Technology Corp. 3,969,000
--------------
5,541,500
BASIC INDUSTRIAL PRODUCTS (0.4%)
- -------------------------------------------------------------------------------
83,000 Ball Corp. 2,531,500
30,000 Deere (John) & Co. 2,137,500
--------------
4,669,000
BUILDING AND CONSTRUCTION (0.3%)
- -------------------------------------------------------------------------------
93,000 Armstrong World Industries, Inc. 4,115,250
AEROSPACE AND DEFENSE (0.3%)
- -------------------------------------------------------------------------------
78,600 GenCorp Inc. 1,002,150
68,000 Rockwell International Corp. 2,558,500
--------------
3,560,650
FOOD (0.2%)
- -------------------------------------------------------------------------------
83,700 Nabisco Holdings Corp. Class A 2,364,525
TELECOMMUNICATIONS (0.2%)
- -------------------------------------------------------------------------------
107,000 Comsat Corp. 2,113,250
ENERGY-RELATED (0.1%)
- -------------------------------------------------------------------------------
100,000 Westcoast Energy, Inc. 1,462,500
ENVIRONMENTAL CONTROL (0.1%)
- -------------------------------------------------------------------------------
51,000 WMX Technologies, Inc. 1,447,125
PHARMACEUTICALS (0.1%)
- -------------------------------------------------------------------------------
36,000 SmithKline Beecham PLC ADR 1,255,500
--------------
TOTAL COMMON STOCKS (cost $642,607,610) $670,388,404
<PAGE>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (22.8%)*
PRINCIPAL AMOUNT VALUE
Federal Home Loan Mortgage Association
$ 423,018 11s, with various maturity dates to October 1, 2016 $ 456,860
3,928,847 8 3/4s,with various maturity dates to June 1, 2009 3,900,669
9,580,000 7 1/2s, with due date of February 14, 2025 9,098,006
Government National Mortgage Association
4,555,000 8s, TBA, February 14, 2025 +++ 4,426,891
15,441 5s, with due date of September 15, 2011 1,824
9,116,946 8 1/2s, with various maturities from
December 15, 2022 to December 15, 2024 9,094,862
3,000 8 1/2s, with a due date of April 15, 2006 3,798
28,056,899 8s, with various due dates from December 15, 2016
to January 15, 2025 27,275,903
6,767,000 8s, with various due dates from December 15, 2006
to March 15, 2008 6,716,716
16,416,719 7 1/2s, with various due dates to September 15, 2023 15,493,278
2,912,921 7s, with various due dates to October 15, 2024 2,660,771
11,785,000 U.S. Treasury Bonds 11 1/8s, August 15, 2003 14,322,458
18,825,000 U.S. Treasury Bonds 8 7/8s, August 15, 2017 20,931,047
11,675,000 U.S. Treasury Notes 8 7/8s, November 15, 1997 12,101,867
26,510,000 U.S. Treasury Bonds 8 1/8s, August 8, 2019 27,421,281
25,755,000 U.S. Treasury Bonds 7 1/2s, November 15, 2024 25,135,270
22,965,000 U.S. Treasury Notes 5s, January 31, 1999 20,998,622
40,015,000 U.S. Treasury Notes 4 5/8s, February 29, 1996 39,064,644
745,000 U.S. Treasury Notes 4 1/4s, November 30, 1995 729,867
31,900,000 U.S. Treasury Notes 4s, January 31, 1996 31,022,750
--------------
TOTAL U.S. GOVERNMENT AND AGENCY OBLIGATIONS
(cost $271,069,227) $270,857,384
CORPORATE BONDS AND NOTES (10.4%)*
PRINCIPAL AMOUNT VALUE
INSURANCE AND FINANCE (3.3%)
- -------------------------------------------------------------------------------
$ 500,000 AIM Management Group sr. secd. notes 9s, 2003 $ 455,000
1,500,000 AMBAC Inc. deb. 9 3/8s, 2011 1,616,250
1,000,000 American Annuity Group, Inc. sr. sub. notes 11.125s,
2003 990,000
1,245,000 BAT Capital Corp. 144A med. term notes 6.19s, 2000 1,135,284
750,000 Chevy Chase Savings Bank Inc. sub. deb. 9 1/4s, 2005 667,500
500,000 Comdata Network, Inc. sr. notes 12 1/2s, 1999 530,000
5,200,000 Crestar Financial Corp. sub. notes 8 3/4s, 2004 5,232,500
500,000 Delaware Management Holdings, Inc. sr. notes ser. B,
10 1/4s, 2004 528,750
2,000,000 Ford Capital BV deb. 9s, 1998 2,052,500
5,865,000 General Motors Acceptance Corp. med. term notes 6.7s,
1997 5,707,355
2,000,000 Goldman, Sachs & Co. deb. 144A, 8s, 2013 1,847,500
4,815,000 Great Western Financial Corp. notes 6 1/8s, 1998 4,538,138
350,000 Keystone Group, Inc. sr. secd. notes 9 3/4s, 2003 330,750
250,000 Leucadia National sr. sub. notes 10 3/8s, 2002 260,313
2,300,000 Midlantic Banks deb., 9 7/8s, 1999 2,415,000
2,000,000 Orion Capital Corp. sr. notes 9 1/8s, 2002 2,022,500
800,000 PRT Funding Corp. sr. notes 11 5/8s, 2004 616,000
1,000,000 PSF Finance L.P. sr. notes 12 1/4s, 2004 1,028,125
570,000 Phoenix Re Corp. 9 3/4s, 2003 564,300
750,000 Reliance Group Holdings, Inc. sr. notes 9s, 2000 690,000
3,750,000 Riggs National Corp. sub. deb. 8 1/2s, 2006 3,468,750
2,000,000 Society Bank & Trust Toledo 12 1/2s, 1999 2,315,000
--------------
39,011,515
<PAGE>
CORPORATE BONDS AND NOTES (Continued)
PRINCIPAL AMOUNT VALUE
UTILITIES (2.1%)
- -------------------------------------------------------------------------------
$ 4,060,000 Arkla, Inc. notes 8 7/8s, 1999 $ 3,958,500
2,650,000 Gulf States Utility Co. 1st mtge. 8.7s, 2024 2,534,063
1,615,000 Long Island Lighting Co. ser. P, 5 1/4s, 1996 1,544,344
3,000,000 Louisiana Power & Light secd. lease oblig. bonds ser.
B, 10.67s, 2017 3,157,500
946,679 Midland Cogeneration Ventures deb. 10.33s, 2002 918,279
3,200,000 Public Service Co. of New Hampshire deb. 15.23s, 2000 3,768,000
4,100,000 Texas Utilities Electric Co. secd. lease fac. bonds
7.46s, 2015 3,577,250
2,850,000 Toledo Edison Co. med. term notes 7.82s, 2003 2,475,938
2,700,000 United Illuminating Co. secd. lease oblig. bonds
10.24s, 2020 2,588,625
--------------
24,522,499
CONSUMER SERVICES (0.9%)
- -------------------------------------------------------------------------------
400,000 AMC Entertainment, Inc. sr. sub. deb. 12 5/8s, 2002 424,000
250,000 Arizona Charlies Corp. Inc. 144A deb. ser. B, 12s, 2000 207,188
500,000 Cablevision Systems Corp. sr. sub. reset deb. 10 3/4s,
2004 505,000
1,150,000 Century Communications Corp. sr. disc. notes zero %, 2003 465,750
1,000,000 Cinemark USA, Inc. sr. notes 12s, 2002 1,040,000
500,000 Embassy Suites Inc. sr. sub. notes 10 7/8s, 2002 520,000
910,000 General Media Corp. sr. secd. notes 10 5/8s, 2000 846,300
500,000 Grand Casino Resorts, Inc. notes 12 1/2s, 2000 480,000
750,000 John Q. Hammons Hotels 1st. mtge. notes 8 7/8s, 2004 663,750
500,000 La Quinta Motor Inns Inc. deb. 9 1/4s, 2003 477,500
750,000 Marvel Parent Holdings, Inc. sr. secd. disc. notes
zero %, 1998 457,500
4,200,000 News American Holdings, Inc. sr. notes 8 1/2s, 2005 4,066,125
--------------
10,153,113
TRANSPORTATION (0.5%)
- -------------------------------------------------------------------------------
2,850,000 AMR Corp. deb. 9.73s, 2014 2,737,781
1,000,000 Blue Bird Body Co. sub. deb. ser. B, 11 3/4s, 2002 1,010,000
2,000,000 Southwest Airlines Co. deb. 7 7/8s, 2007 1,902,500
500,000 Viking Star Shipping sr. secd. notes 9 5/8s, 2003 465,000
--------------
6,115,281
OIL AND GAS (0.5%)
- -------------------------------------------------------------------------------
1,500,000 Occidental Petroleum Corp. sr. notes 11 3/4s, 2011 1,628,438
250,000 Oryx Energy Co. deb. 9 3/4s, 1998 245,469
4,025,000 USX Corp. deb. 9.8s, 2001 4,218,703
--------------
6,092,610
HEALTH CARE (0.5%)
- -------------------------------------------------------------------------------
1,000,000 American Medical International Inc. sr. sub. 13 1/2s,
2001 1,105,000
2,320,000 Columbia Healthcare deb. 8.36s, 2024 2,275,050
1,250,000 McGaw, Inc. sr. notes 10 3/8s, 1999 1,278,125
250,000 Multicare Cos., Inc. sr. sub. notes 12 1/2s, 2002 288,750
1,050,000 Paracelsus Healthcare Corp. sr. sub. notes 9 7/8s,
2003 1,000,125
--------------
5,947,050
<PAGE>
CORPORATE BONDS AND NOTES (Continued)
PRINCIPAL AMOUNT VALUE
RETAIL (0.4%)
- -------------------------------------------------------------------------------
$ 1,000,000 Caldor Corp. sr. sub. deb. 15s, 2000 $ 1,067,500
600,000 Loehmanns+ Holdings Inc. sr. sub. notes 13 3/4s, 1999 582,000
375,000 Penn Traffic Co. sr. sub. notes 9 5/8s, 2005 333,750
500,000 Revco D.S., Inc. sr. notes 9 1/8s, 2000 502,188
2,000,000 Sears, Roebuck & Co. med. term notes 9.1s, 2012 2,060,000
500,000 Service Merchandise Co., Inc. sr. sub. deb. 8 3/8s, 2001 425,000
--------------
4,970,438
AUTOMOTIVE (0.4%)
- -------------------------------------------------------------------------------
3,775,000 Chrysler Corp. deb. 10.95s, 2017 4,154,859
CONGLOMERATES (0.3%)
- -------------------------------------------------------------------------------
500,000 ADT Ltd. sr. sub. notes 9 1/4s, 2003 466,250
3,000,000 Pennsylvania Central Corp. sub. notes 10 7/8s, 2011 3,348,750
--------------
3,815,000
TELECOMMUNICATIONS (0.3%)
- -------------------------------------------------------------------------------
750,000 Comcast Cellular Corp .sr. participating notes Ser. A,
zero %, 2000 519,375
250,000 NEXTEL Communications, Inc. sr. disc. notes
stepped-coupon zero % (11 1/2, 9/1/98), 2003 ++ 92,500
1,000,000 Panamsat L.P. sr. notes 9 3/4s, 2000 960,000
2,000,000 Tele-Communications, Inc. sr. deb 9.8s, 2012 1,993,750
--------------
3,565,625
CHEMICALS (0.3%)
- -------------------------------------------------------------------------------
780,000 G-I Holdings Inc. sr. notes zero %, 1998 487,500
625,000 Harris Chemical sr. secd. disc. notes stepped-coupon
zero % (10 1/4s, 1/15/96), 2001 ++ 523,438
1,640,000 Lyondell Petrochemical Co. global notes 9 1/8s, 2002 1,657,425
800,000 OSI Specialty Corp. 144A sr. sub. notes 9 1/4s, 2003 752,000
--------------
3,420,363
FOOD (0.2%)
- -------------------------------------------------------------------------------
1,704,000 Secured Restaurants Trust deb. 10 1/4s, 2000 1,796,655
METALS AND MINING (0.1%)
- -------------------------------------------------------------------------------
750,000 Inland Steel Industries, Inc. notes 12 3/4s, 2002 804,375
1,000,000 WCI Steel Inc. sr. secd. notes 10 1/2s, 2002 950,000
--------------
1,754,375
FOREST PRODUCTS (0.1%)
- -------------------------------------------------------------------------------
1,250,000 Gaylord Container Corp. sr. sub. disc. deb.
stepped-coupon zero % (12 3/4s, 5/15/96), 2005 ++ 1,112,500
500,000 Stone Container sr. sub. notes 9 7/8s, 2001 468,750
--------------
1,581,250
AEROSPACE AND DEFENSE (0.1%)
- -------------------------------------------------------------------------------
750,000 BE Aerospace sr. notes, 9 3/4s, 2003 705,000
700,000 Coltec Industries sr. note 9 3/4s, 2000 686,000
--------------
1,391,000
<PAGE>
CORPORATE BONDS AND NOTES (Continued)
PRINCIPAL AMOUNT VALUE
FOOD AND BEVERAGES (0.1%)
- -------------------------------------------------------------------------------
$ 1,000,000 Safeway, Inc. med. term notes 8.57s, 2003 $ 1,007,500
250,000 Stater Brothers sr. notes 11s, 2001 237,500
--------------
1,245,000
COMMUNICATIONS (0.1%)
- -------------------------------------------------------------------------------
500,000 Centennial Cellular Corp. sr. notes 8 7/8s, 2001 447,500
250,000 Rogers Cantel Mobile Inc. deb. 10 3/4s, 2001 251,875
500,000 World Color Press sr. sub. notes 9 1/8s, 2003 466,250
--------------
1,165,625
ELECTRONICS AND ELECTRICAL EQUIPMENT (0.1%)
- -------------------------------------------------------------------------------
1,000,000 Amphenol Corp.144A sr. sub. notes 12 3/4s, 2002 1,110,000
CONSUMER NON DURABLES (0.1%)
- -------------------------------------------------------------------------------
525,000 Guess Jeans, Inc. sr. sub. notes 9 1/2s, 2003 488,250
500,000 Playtex Family Products Corp. sr. sub. notes 9s, 2003 438,750
--------------
927,000
BASIC INDUSTRIAL PRODUCTS (-%)
- -------------------------------------------------------------------------------
175,000 Anchor Glass Container Corp. sr. sub. deb. 9 7/8s,
2008 150,500
--------------
TOTAL CORPORATE BONDS AND NOTES (cost $128,737,904) $122,889,758
YANKEE BONDS AND NOTES (2.3%)
PRINCIPAL AMOUNT VALUE
$ 500,000 Banco Rio De La Plata notes, 8 3/4s, 2003 $ 275,312
2,700,000 British Columbia Hydro & Power Auth. deb.
15 1/2s, 2011 3,142,125
1,400,000 British Columbia Hydro & Power Auth. deb. 15s, 2011 1,582,000
3,225,000 Den Danske Bank 144A sub. notes 6.55s, 2003 2,811,797
450,000 Eletson Holdings, Inc. 1st mtge. notes 9 1/4s, 2003 400,500
1,000,000 Fresh Del Monte Produce Corp. sr. notes, ser. B,
10s, 2003 625,000
970,000 Grupo Industrial Durango sr. notes 12s, 2001 824,500
3,860,000 LASMO PLC global notes 7 1/8s, 2003 3,481,238
375,000 Methanex Corp. sr. secd. notes 8 7/8s, 2001 372,188
3,210,000 Noranda, Inc. deb. 8 1/8s, 2004 3,135,769
2,000,000 Nova Scotia (Province of) Canada deb. 9 1/4s, 2020 2,080,000
3,000,000 Petro Canada deb. 9 1/4s, 2021 3,127,500
2,300,000 Rogers Communications cv. deb. 2s, 2005 1,178,750
4,000,000 Time Warner Inc. global notes 9 1/8s, 2013 3,620,000
--------------
TOTAL YANKEE BONDS AND NOTES (cost $29,448,121) $ 26,656,679
<PAGE>
CONVERTIBLE PREFERRED STOCKS (1.5%)*
NUMBER OF SHARES VALUE
69,000 Ashland, Inc. $3.125 cv. pfd. $ 3,708,750
22,000 Burlington Northern, Inc. ser. A, $3.125, cum. cv. pfd. 1,196,250
250,000 Freeport-McMoRan Copper Co., Inc. stepped-coupon
$1.25 ($1.75, 8/1/96) ++ 5,125,000
54,000 Pittston Corp. $6.25, cv. pfd. 2,403,000
67,200 Service Corp. International $6.25 cv. pfd. 3,864,000
39,500 Storage Technology Corp. $3.25 cv. pfd. 2,044,125
--------------
TOTAL CONVERTIBLE PREFERRED STOCKS (cost $19,584,240) $ 18,341,125
COLLATERALIZED MORTGAGE OBLIGATIONS (1.0%)*
PRINCIPAL AMOUNT VALUE
$ 164,961 Housing Securities Inc. 93-J J5, 6.66s, 2009 $ 106,194
300,889 Housing Securities Inc. 93-J, 6.66s, 2009 226,314
265,597 Housing Securities Inc. 94-1, 6 1/2s, 2009 197,458
2,965,884 Prudential Home Loan Corp. Ser. 92-25, 8s, 2022 2,242,950
3,929,777 Prudential Home Mortgage Securities Ser. 1993-D,
Class 2B, 7.1082s, 2023 3,266,627
361,725 Prudential Home Mortgage Securities Ser. 1994-31,
Class B3, sub. bond 8s, 2009 297,177
1,361,243 Prudential Home Mortgage Securities Ser. 92-13
7 1/2s, 2007 1,134,896
1,330,657 Prudential Home Mortgage Securities Ser. 92-25,
6.33s, 2022 1,015,042
3,554,624 Prudential Home Mortgage Securities Ser. 94-A,
6.8s, 2024 2,889,243
--------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(cost $11,670,443) $ 11,375,901
ASSET-BACKED SECURITIES (0.9%)*
PRINCIPAL AMOUNT VALUE
$ 4,045,000 Chase Manhattan Credit Card Master Trust, Ser. 91-1,
8 3/4s, 1999 $ 4,100,619
963,400 Merrill Lynch Mortgage Investors Inc. sr. notes 9.4s,
2009 974,840
839,100 Travelers Mortgage Security Corp. coll. oblig. Ser. 84-1,
12s, 2014 914,619
1,000,000 United Air Lines, Inc. Equip. Trust Ser. C, 10.36s, 2012 971,250
750,000 United Air Lines, Inc. Equipment Trust Ser. 91A,
deb. 10 1/8s, 2015 703,125
2,675,000 United Air Lines, Inc. Equipment Trust Ser. C,
10.36s, 2012 2,598,094
--------------
TOTAL ASSET-BACKED SECURITIES (cost $10,575,242) $ 10,262,547
CONVERTIBLE BONDS AND NOTES (1.1%)*
PRINCIPAL AMOUNT VALUE
$ 3,550,000 AMR Corp. cv. sub. deb. 6 1/8s, 2024 $ 3,017,500
7,800,000 Comcast Corp. cv. notes 1 1/8s, 2007 3,012,750
7,200,000 Hollinger, Inc. liquid yield option cv. notes zero %,
2013 1,980,000
2,900,000 Liberty Property Trust cv. sub. deb. 8s, 2001 2,896,375
1,200,000 Trenwick Group, Inc. cv. deb. 6s, 1999 1,188,000
1,119,605 WMX Technologies, Inc. cv. 2s, 2005 906,880
--------------
TOTAL CONVERTIBLE BONDS AND NOTES (cost $13,771,617) $ 13,001,505
<PAGE>
EUROBONDS (0.2%) (cost $2,776,000)*
PRINCIPAL AMOUNT VALUE
$ 3,500,000 Banamex cv. bond 7s, 1999 $ 2,345,000
UNITS (0.1%) (cost $990,000)*
NUMBER OF UNITS VALUE
1,000,000 County Seat Stores sr. sub. notes units 12s, 2001 $ 990,000
WARRANTS (-%) (cost $11,600)
NUMBER OF WARRANTS VALUE
1,160 General Media Corp. 144A $ 17,400
SHORT-TERM INVESTMENTS (3.2%)*
PRINCIPAL AMOUNT VALUE
$20,000,000 Federal National Mortgage Assn. 5.6s, February 21,
1995 $ 19,916,945
18,204,000 Interest in $267,187,000 joint repurchase agreement
dated December 30, 1995 with Morgan (J.P) & Co., due
January 3, 1995 with respect to various U.S. Treasury
Obligations -- maturity value of $18,206,892 for an
effective yield of 5.3% 18,206,892
--------------
TOTAL SHORT-TERM INVESTMENTS (cost $38,123,837) $ 38,123,837
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $1,169,365,841)*** $1,185,249,540
- -------------------------------------------------------------------------------
<PAGE>
NOTES
- -------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $1,184,211,723, which co-
rrespond to a net asset value per class A, class B, class M, and class Y
shares of $13.21, $13.16, $13.20, and $13.23, respectively.
^^ Cash interest will be paid on this obligation at the stated rate beginning
on the stated date.
++ The interest or dividend rate and date shown parenthetically represent the
new interest or dividend rate to be paid and the date the fund will begin
receiving interest or dividend at this rate.
+++ TBAs are mortgage-backed securities traded under delayed delivery commit-
ments, settling after January 31, 1995. Although the unit for the trades
has been established, the principal value has not been finalized. The amount
of commitments will not fluctuate more than 2.0% from the principal amount.
In addition, income on the securities will not be earned until settlement
date. The cost of TBA purchases held at January 31, 1995 was $4,374,324.
TBA SALES COMMITMENT AT JANUARY 31, 1995
(proceeds receivable $9,085,519)
PRINCIPAL DELIVERY COUPON MARKET
AGENCY AMOUNT MONTH RATE VALUE
- -------------------------------------------------------------------------------
GNMA $9,114,000 Feb/99 8.5% $9,091,215
*** The aggregate identified cost for federal income tax purposes is
$1,172,372,302 resulting in gross unrealized appreciation and depreciation
of $59,894,173 and $47,016,935 respectively, or net unrealized appreciation
of $12,877,238.
ADR after the name of a foreign holding stands for American Depository
Receipt representing shares on deposit with a domestic custodian bank.
144A after the name of a security represents those exempt from registration
under Rule 144A of the Securities Act of 1933. These securities may be re-
sold in transactions exempt from registration, normally to qualified insti-
tutional buyers.
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1995 (Unaudited)
ASSETS
- -------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $1,169,365,841) (Note 1) $1,185,249,540
Dividends, interest and other receivables 10,589,449
Receivable for shares of the fund sold 3,302,456
Receivable for securities sold 31,047,635
Other assets 2,950
- -------------------------------------------------------------------------------
TOTAL ASSETS $1,230,192,030
LIABILITIES
- -------------------------------------------------------------------------------
Payable for securities purchased 32,031,981
Payable to subcustodian banks 110,787
Payable for shares of the fund repurchased 1,990,361
Payable for compensation of Manager (Note 2) 1,104,577
Payable for administrative services (Note 2) 15,580
Payable for investor servicing and custodian fees (Note 2) 183,851
Payable for distribution fees (Note 2) 339,030
Other accrued expenses 1,112,925
TBA sale commitment at value (proceeds receivable $9,085,519) 9,091,215
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 45,980,307
- -------------------------------------------------------------------------------
NET ASSETS $1,184,211,723
REPRESENTED BY
- -------------------------------------------------------------------------------
Paid-in capital (Note 1) $1,170,615,036
Undistributed net investment income (Note 1) 3,622,506
Distributions in excess of net realized gain on investment
transactions (Note 1) (5,909,518)
Net unrealized appreciation of investments 15,883,699
- -------------------------------------------------------------------------------
TOTAL -- REPRESENTING NET ASSETS APPLICABLE TO
CAPITAL SHARES OUTSTANDING $1,184,211,723
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- -------------------------------------------------------------------------------
Net asset value and redemption price of class A
shares ($932,727,936 divided by 70,587,909 shares) $13.21
Offering price per class A share (100/94.25 of $13.21)* $14.02
Net asset value and offering price of class B shares
($170,331,054 divided by 12,945,998 shares) + $13.16
Net asset value and redemption price of class M shares
($1,320,162 divided by 100,019 shares) $13.20
Offering price per class M shares (100/96.5 of $13.20) $13.68
Net asset and redemption price of class Y shares
($79,832,571 divided by 6,033,767 shares) + $13.23
- -------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and
on group sales the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF OPERATIONS
Six months ended January 31, 1995 (Unaudited)
INVESTMENT INCOME:
- -------------------------------------------------------------------------------
Interest $ 17,986,362
- -------------------------------------------------------------------------------
Dividends (Net of foreign tax of $35,893) 14,846,185
- -------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 32,832,547
- -------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,212,839
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,496,228
- -------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 19,479
- -------------------------------------------------------------------------------
Reports to shareholders 71,070
- -------------------------------------------------------------------------------
Auditing 27,572
- -------------------------------------------------------------------------------
Legal 11,528
- -------------------------------------------------------------------------------
Postage 26,715
- -------------------------------------------------------------------------------
Registration fees 14,879
- -------------------------------------------------------------------------------
Administrative services (Note 2) 16,678
- -------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 1,156,346
- -------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 809,515
- -------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 570
- -------------------------------------------------------------------------------
Other expenses 15,940
- -------------------------------------------------------------------------------
TOTAL EXPENSES 5,879,359
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 26,953,188
- -------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (737,064)
- -------------------------------------------------------------------------------
Net unrealized depreciation of investments during the period (346,648)
- -------------------------------------------------------------------------------
NET LOSS ON INVESTMENTS (1,083,712)
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 25,869,476
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Six months ended Year ended
January 31 July 31
1995* 1994
- -------------------------------------------------------------------------------
INCREASE IN NET ASSETS
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $ 26,953,188 $ 39,558,384
- -------------------------------------------------------------------------------
Net realized gain (loss) on investments (737,064) 44,582,928
- -------------------------------------------------------------------------------
Net unrealized depreciation of investments (346,648) (52,949,946)
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 25,869,476 31,191,366
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Class A (18,999,574) (34,643,598)
- -------------------------------------------------------------------------------
Class B (2,682,659) (3,998,103)
- -------------------------------------------------------------------------------
Class Y (1,648,449) (8,999)
- -------------------------------------------------------------------------------
From net realized gain on investments:
Class A (21,878,583) (35,593,950)
- -------------------------------------------------------------------------------
Class B (3,901,612) (4,555,816)
- -------------------------------------------------------------------------------
Class Y (1,862,529) --
- -------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 73,251,796 329,150,086
- -------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 48,147,866 281,540,986
- -------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------
Beginning of period/year 1,136,063,857 854,522,871
- -------------------------------------------------------------------------------
END OF PERIOD/YEAR (including undistributed net
investment income of $3,622,506 and $0,
respectively) $1,184,211,723 $1,136,063,857
- -------------------------------------------------------------------------------
* Unaudited.
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
December 1, April 1, April 27,
1994 1994 1992
(commence- Six (commence- Six (commence-
ment of months ment of months ment of
operations) ended operations) ended operations)
to Jan. 31 Jan. 31 to July 31 Jan. 31 to July 31
1995** 1995** 1994 1995** 1994 1993 1992*
- -----------------------------------------------------------------------------------------------------------------------------------
Class M Class Y Class B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $12.77 $13.54 $13.21 $13.46 $14.19 $14.22 $13.73
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net investment income .03 .34 .17 .27 .50 .56 .13
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments .40 (.03) .31 (.02) (.12) .48 .53
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS .43 .31 .48 .25 .38 1.04 .66
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income -- (.30) (.15) (.23) (.49) (.59) (.17)
- -----------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments -- (.32) -- (.32) (.62) (.48) --
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS -- (.62) (.15) (.55) (1.11) (1.07) (.17)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.20 $13.23 $13.54 $13.16 $13.46 $14.19 $14.22
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%) (a) 3.37(b) 2.42(b) 3.65(b) 1.98(b) 2.70 7.87 4.84(b)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(in thousands) $ 1,320 $79,833 $71,566 $170,331 $151,327 $81,983 $11,946
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) 0.68(b) .34(b) .25(b) .85(b) 1.71 1.66 .55(b)
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) 1.75(b) 2.50(b) 1.34(b) 2.00(b) 3.39 3.43 .84(b)
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 48.56(b) 48.56(b) 100.69 48.56(b) 100.69(b) 89.22 78.90
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
** Unaudited.
* Per share investment income, expenses and net investment income has been determined on the basis of the weighted average number
of shares outstanding during the period.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Not annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
Six Seven
months months
ended ended
Jan. 31 Year ended July 31 Jul. 31 Year ended December 31
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Class A
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $13.52 $14.24 $14.24 $13.52 $13.39 $14.32 $12.32 $11.91 $14.66 $13.13 $10.95
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net investment income .32 .59 .62 .64 .69 .75 .45 .73 .71 .81 .82
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments (.03) (.11) .52 1.12 .64 .02 1.88 .68 (.03) 1.63 2.32
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS .29 .48 1.14 1.76 1.33 .77 2.33 1.41 .68 2.44 3.14
- -----------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS FROM:
Net investment income (.28) (.58) (.66) (.68) (.68) (.82) (.33) (.72) (.80) (.80) (.96)
- -----------------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments (.32) (.62) (.48) (.36) (.52) (.88) -- (.28) (2.63) (.11) --
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.60) (1.20) (1.14) (1.04) (1.20) (1.70) (.33) (1.00) (3.43) (.91) (.96)
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.21 $13.52 $14.24 $14.24 $13.52 $13.39 $14.32 $12.32 $11.91 $14.66 $13.13
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%) (a) 2.29(b) 3.46 8.64 13.68 11.28 5.86 19.21(b) 12.10 3.72 18.84 29.84
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(in thousands) $932,728 $913,171 $772,540 $622,129 $479,287 $442,964 $430,568 $387,186 $384,213 $371,657 $324,140
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) .47 .95 .90 1.06 .94 .84 .48(b) .73 .71 .58 .62
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
(loss) to average net assets (%) 2.38 4.15 4.34 4.62 5.42 5.52 3.41(b) 5.82 4.86 5.66 6.84
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 48.56 100.69 89.22 78.90 64.98 70.54 52.82(b) 139.28 129.94 142.93 187.32
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
January 31, 1995 (Unaudited)
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
The fund is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company. The fund seeks to provide
a balanced investment composed of a well-diversified portfolio of stocks and
bonds which will produce both capital growth and current income.
The fund offers class A, class B, class M and class Y shares. The fund commenced
its public offering of class M shares on December 1, 1994. Class A shares are
sold with a maximum front-end sales charge of 5.75%. Class B shares do not pay
a front-end sales charge, but pay a higher ongoing distribution fee than Class
A shares, and may be subject to a contingent deferred sales charge, if those
shares are redeemed within six years of purchase. Class M shares are sold with
a maximum front end sales charge of 3.50% and pay ongoing distribution fees that
are lower than Class B shares and higher than Class A shares. Class Y shares,
which are sold at net asset value, are generally subject to the same expenses as
class A shares, class B shares and class M shares but do not bear a distribution
fee. Class Y shares are sold to defined contribution plans that initially invest
at least $250 million in a combination of Putnam funds. Expenses of the fund are
borne pro-rata by the holders of each class of shares, except that each class
bears expenses unique to that class (including the distribution fees applicable
to such class). Each class votes as a class only with respect to its own distri-
bution plan or other matters on which a class vote is required by law or deter-
mined by the Trustees. Shares of each class would receive their pro-rata share
of the net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently fo-
llowed by the fund in the preparation of its financial statements. The policies
are in conformity with generally accepted accounting principles.
A SECURITY VALUATION Investments for which market quotations are readily avail-
able are stated at market value, which is determined using the last reported sa-
le price, or, if no sales are reported -- as in the case of some securities tra-
ded over-the-counter -- the last reported bid price, except that certain U.S.
government obligations are stated at the mean between the last reported bid and
asked prices. Short-term investments having remaining maturities of 60 days or
less are stated at amortized cost, which approximates market value, and other
investments are stated at fair value following procedures approved by the Trus-
tees. Market quotations are not considered to be readily available for long-term
corporate bonds and notes; such investments are stated at fair value on the ba-
sis of valuations furnished by a pricing service, approved by the Trustees,
which determines valuations for normal, institutional size trading units of such
securities using methods based on market transactions for comparable securities
and various relationships between securities which are generally recognized by
institutional traders.
<PAGE>
B JOINT TRADING ACCOUNT Pursuant to an exemptive order issued by the Securities
and Exchange Commission, the fund may transfer uninvested cash balances into a
joint trading account, along with the cash of other registered investment compa-
nies managed by Putnam Investment Management, Inc., ("Putnam Management") the
fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc., and cer-
tain other accounts. These balances may be invested in one or more repurchase
agreements and/or short-term money market instruments.
C REPURCHASE AGREEMENTS The fund and other joint trading accounts, through its
custodian, receives delivery of the underlying securities, the market value of
which at the time of purchase is required to be in an amount at least equal to
the resale price, including accrued interest. The fund's Manager is responsible
for determining that the value of these underlying securities is at all times at
least equal to the resale price, including accrued interest.
D SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security transactions are
accounted for on the trade date (date the order to buy or sell is executed). In-
terest income is recorded on the accrual basis and dividend income is recorded
on the ex-dividend date, except that certain dividends from foreign securities
are recorded as soon as the fund is informed of the ex-dividend date.
E FEDERAL TAXES It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the In-
ternal Revenue Code applicable to regulated investment companies. It is also the
intention of the fund to distribute an amount sufficient to avoid imposition of
any excise tax under Section 4982 of the Internal Revenue Code of 1986. Therefo-
re, no provision has been made for federal taxes on income, capital gains or un-
realized appreciation of securities held and excise tax on income and capital
gains.
F DISTRIBUTIONS TO SHAREHOLDERS Distributions to shareholders are recorded by
the fund on the ex-dividend date.
The amount and character of income and gains to be distributed are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. Reclassifications are made to the fund's capital accounts
to reflect income and gains available for distribution (or available capital
loss carryovers) under income tax regulations.
G TBA PURCHASE COMMITMENTS The fund may enter into "TBA" (to be announced) pur-
chase commitments to purchase securities for a fixed price at a future date be-
yond customary settlement time. TBA purchase commitments may be considered secu-
rities in themselves, and involve a risk of loss if the value of the security to
be purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in the value of the fund's other assets. Unsettled TBA pur-
chase commitments are valued at the current market value of the underlying secu-
rities, generally according to the procedures described under "Security valua-
tion" above. Although the fund will generally enter into TBA purchase commit-
ments with the intention of acquiring securities for its portfolio or for deli-
very pursuant to options contracts it has entered into, the fund may dispose of
a commitment prior to settlement if the Fund Manager deems it appropriate to do
so.
H TBA SALE COMMITMENTS The fund may enter into TBA sale commitments to hedge its
portfolio positions or to sell mortgage-backed
<PAGE>
securities it owns under delayed delivery arrangements. Proceeds of TBA sale
commitments are not received until the contractual settlement date. During the
time a TBA sale commitment is outstanding, equivalent deliverable securities, or
an offsetting TBA purchase commitment deliverable on or before the sale commit-
ment date, are held as "cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of the un-
derlying securities, generally according to the procedures described under "Se-
curity valuation" above. The contract is marked-to-market daily and the change
in the market value is recorded by the fund as an unrealized gain or loss. If
the TBA sale commitment is closed through the acquisition of an offsetting pur-
chase commitment, the fund realizes a gain or loss on the commitment without re-
gard to any unrealized gain or loss on the underlying security. If the fund de-
livers securities under the commitment, the fund realizes a gain or loss from
the sale of securities based upon the unit price established at the date the
commitment was entered into.
NOTE 2
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Management for management and investment advisory servi-
ces is paid quarterly based on the average net assets of the fund for the quar-
ter. Such fee is based on an annual rate of 0.6% of the first $100 million of
average net assets, 0.5% of the next $100 million, 0.4% of the next $300 mil-
lion, 0.325% of the next $500 million and 0.3% of any amount over $1.0 billion,
subject to reduction in any year to the extent that expenses (exclusive of bro-
kerage, interest, taxes, and distribution fees and extraordinary expenses) of
the fund exceed 2.5% of the first $30 million of average net assets, 2.0% of the
next $70 million and 1.5% of any amount over $100 million and by the amount of
certain brokerage commissions and fees (less expenses) received by affiliates of
the Manager on the fund's portfolio transactions.
The fund also reimburses the Manager for the compensation and related expenses
of certain officers of the fund and their staff who provide administrative ser-
vices to the fund. The aggregate amount of all such reimbursements is determined
annually by the Trustees. Trustees of the fund receive an annual Trustee's fee
of $2,390 and an additional fee for each Trustees' meeting attended. Trustees
who are not interested persons of the Manager and who serve on committees of the
Trustees receive additional fees for attendance at certain committee meetings.
Custodial functions for the fund are provided by Putnam Fiduciary Trust Company
(PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing agent func-
tions are provided by Putnam Investor Services, a division of PFTC.
Investor servicing and custodian fees reported in the Statement of operations
for the six months ended January 31, 1995 have been reduced by credits allowed
by PFTC.
The fund has adopted a distribution plan with respect to its class A shares (the
"Class A Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940.
The purpose of the Class A Plan is to compensate Putnam Mutual Funds Corp., a
wholly-owned subsidiary of Putnam Investments Inc., for services provided and
expenses incurred by it in distributing class A shares. The Trustees have
approved the payment by the fund to Putnam Mutual Funds Corp. at an annual rate
of 0.25% of average net assets attributable to class A shares.
<PAGE>
During the six months ended January 31, 1995, Putnam Mutual Funds Corp., acting
as an underwriter, received net commissions of $126,335 from the sale of class
A shares of the fund.
A deferred sales charge of up to 1% is assessed on certain redemptions of class
A shares purchased as part of an investment of $1 million or more. For the six
months ended January 31, 1995, Putnam Mutual Funds Corp., acting as an underwri-
ter, received $3,259 on such redemptions.
The fund has adopted a separate distribution plan with respect to its class B
shares (the "Class B Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940. The purpose of Class B Plan is to compensate Putnam Mutual Funds
Corp. for services provided and expenses incurred by it in distributing class B
shares. The Class B Plan provides for payments by the fund to Putnam Mutual Fund
Corp. at an annual rate of up to 1.00% of the fund's average net assets attribu-
table to class B shares.
Putnam Mutual Funds Corp. also receives the proceeds on the contingent deferred
sales charges on its class B share redemptions within six years of purchase. The
charge is based on declining rates, which begin at 5.00% of the net asset value
of the redeemed shares. Putnam Mutual Funds Corp. received contingent deferred
sales charges of $209,774 from redemptions during the six months ended January
31, 1995.
The fund has adopted a separate distribution plan with respect to its class M
shares (the "Class M Plan") pursuant to Rule 12b-1 under the Investment Company
Act of 1940. The purpose of the Class M Plan is to compensate Putnam Mutual
Funds Corp. for services provided and expenses incurred by it in distributing
class M shares. The Trustees have approved payment by the fund to Putnam Mutual
Funds Corp., at an annual rate of 0.75% of the fund's average net assets attri-
butable to class M shares. For the period December 1, 1994 (commencement of ope-
rations) to January 31, 1995, Putnam Mutual Funds Corp., acting as an underwri-
ter received $1,278 from the sale of class M shares of the fund.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the six months ended January 31, 1995, purchases and sales of investment
securities other than U.S. government obligations and short-term investments
aggregated $609,236,644 and $538,860,661, respectively. Purchases and sales of
U.S. government obligations aggregated $289,517,060 and $206,695,065 respecti-
vely. In determining the net gain or loss on securities sold, the cost of secu-
rities has been determined on the identified cost basis.
NOTE 4
CAPITAL SHARES
At January 31, 1995, there was an unlimited number of shares of beneficial inte-
rest authorized divided into four classes, class A, class B, class M and class
Y capital shares. Transactions in capital shares were as follows:
SIX MONTHS ENDED
JANUARY 31, 1995
CLASS A SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 5,925,673 $78,689,418
- -------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 2,670,784 34,483,672
- -------------------------------------------------------------------------------
8,596,457 113,173,090
- -------------------------------------------------------------------------------
Shares repurchased (5,544,671) (73,674,092)
- -------------------------------------------------------------------------------
NET INCREASE 3,051,786 $39,498,998
- -------------------------------------------------------------------------------
<PAGE>
YEAR ENDED JULY 31, 1994
CLASS A SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 18,507,700 $254,803,372
- -------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 4,168,794 57,253,138
- -------------------------------------------------------------------------------
22,676,494 312,053,510
- -------------------------------------------------------------------------------
Shares repurchased (9,401,901) (129,535,680)
- -------------------------------------------------------------------------------
NET INCREASE 13,274,593 $182,520,830
- -------------------------------------------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 1995
CLASS B SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 2,326,588 $30,759,555
- -------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 475,083 6,106,564
- -------------------------------------------------------------------------------
2,801,671 36,866,119
- -------------------------------------------------------------------------------
Shares repurchased (1,095,012) (14,426,073)
- -------------------------------------------------------------------------------
NET INCREASE 1,706,659 $22,440,046
- -------------------------------------------------------------------------------
YEAR ENDED JULY 31, 1994
CLASS B SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 6,533,139 $90,371,150
- -------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 586,214 8,011,100
- -------------------------------------------------------------------------------
7,119,353 98,382,250
- -------------------------------------------------------------------------------
Shares repurchased (1,659,029) (22,728,694)
- -------------------------------------------------------------------------------
NET INCREASE 5,460,324 $75,653,556
- -------------------------------------------------------------------------------
DECEMBER 1, 1994
(COMMENCEMENT OF OPERATIONS) TO
JANUARY 31, 1995
CLASS M SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 100,019 $1,299,941
- -------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions -- --
- -------------------------------------------------------------------------------
100,019 $1,299,941
- -------------------------------------------------------------------------------
Shares repurchased -- --
- -------------------------------------------------------------------------------
NET INCREASE 100,019 $1,299,941
- -------------------------------------------------------------------------------
SIX MONTHS ENDED
JANUARY 31, 1995
CLASS Y SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 902,727 $12,148,355
- -------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 271,662 3,510,978
- -------------------------------------------------------------------------------
1,174,389 15,659,333
- -------------------------------------------------------------------------------
Shares repurchased (425,159) (5,646,522)
- -------------------------------------------------------------------------------
NET INCREASE 749,230 $10,012,811
- -------------------------------------------------------------------------------
FOR THE PERIOD APRIL 1, 1994
(COMMENCEMENT OF OPERATIONS) TO
JULY 31, 1994
CLASS Y SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 5,361,674 $72,013,488
- -------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 685 8,999
- -------------------------------------------------------------------------------
5,362,359 72,022,487
- -------------------------------------------------------------------------------
Shares repurchased (77,822) (1,046,787)
- -------------------------------------------------------------------------------
NET INCREASE 5,284,537 $70,975,700
- -------------------------------------------------------------------------------
<PAGE>
FUND INFORMATION
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman William F. Pounds, Vice Chairman
Jameson Adkins Baxter Hans H. Estin
John A. Hill Elizabeth T. Kennan
Lawrence J. Lasser Robert E. Patterson
Donald S. Perkins George Putnam, III
A.J.C. Smith W. Nicholas Thorndike
OFFICERS
George Putnam Charles E. Porter
President Executive Vice President
Patricia C. Flaherty Lawrence J. Lasser
Senior Vice President Vice President
Gordon H. Silver Peter Carman
Vice President Vice President
Brett C.Browchuk Thomas V. Reilly
Vice President Vice President
Edward P. Bousa Kenneth J. Taubes
Vice President and Fund Manager Vice President and Fund Manager
Rosemary H. Thomsen William N. Shiebler
Vice President and Fund Manager Vice President
John R. Verani Paul M. O'Neil
Vice President Vice President
John D. Hughes Beverly Marcus
Vice President and Treasurer Clerk and Assistant Treasurer
This report is for the information of shareholders of The George Putnam Fund of
Boston. It may also be used as sales literature when preceded or accompanied by
the current prospectus, which gives details of sales charges, investment objec-
tives and operating policies of the fund, and the most recent copy of Putnam's
Quarterly Performance Summary. For more information, or to request a prospectus,
call toll free: 1-800-225-1581.
SHARES OF MUTUAL FUNDS ARE NOT DEPOSITS OF, OR GUARANTEED OR ENDORSED BY, ANY
FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORA-
TION (FDIC), THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY, AND INVOLVE RISK,
INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE>
<PAGE>
---------------
PUTNAM INVESTMENTS Bulk Rate
U.S. Postage
THE PUTNAM FUNDS PAID
One Post Office Square Putnam
Boston, Massachusetts 02109 Investments
---------------
001/880/505 16919
<PAGE>
<PAGE>
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