The George
Putnam
Fund of
Boston
Item 1. Report to Stockholders:
- -------------------------------
The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
1-31-05
[GRAPHIC OMITTED: SCALES]
[SCALE LOGO OMITTED]
From the Trustees
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III]
John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
During the past several months, Putnam has introduced a number of reforms
for the benefit of shareholders, including increasing the amount of
disclosure for our funds. We are now including additional disclosure about
your fund's management team. Following the Outlook for Your Fund, we provide
manager compensation information that pertains to your fund and list any
changes in your fund's Portfolio Leader and Portfolio Members during the
prior year period, as well as these individuals' other fund management
responsibilities at Putnam. We also show how much these individuals have
invested in the fund (in dollar ranges), and fund ownership (in dollar
ranges) is also shown for the members of Putnam's Executive Board. In equity
fund reports, we now list the largest brokerage relationships of your fund
following the Notes to the Financial Statements. Finally, on page 19, we
provide certain information about the most recent approval of your fund's
management contract with Putnam by the Trustees.
We are also pleased to announce that three new Trustees have joined your
fund's Board of Trustees. Nominated by your fund's independent Trustees,
these individuals have had outstanding careers as leaders in the investment
management industry. Myra R. Drucker is a Vice Chair of the Board of
Trustees of Sarah Lawrence College and serves as ex-officio member and past
Chair of the New York Stock Exchange (NYSE) Pension Managers Advisory
Committee and as a Trustee of Commonfund, a not-for-profit asset management
firm. Richard B. Worley is Managing Partner of Permit Capital LLC, an
investment management firm. Both Ms. Drucker and Mr. Worley are independent
Trustees (i.e., Trustees who are not "interested persons" of your fund or
its investment advisor). Charles E. Haldeman, Jr., the third new Trustee, is
President and Chief Executive Officer of Putnam Investments. We also
announce the departure of one of your fund's Trustees, A.J.C. Smith,
formerly Chairman of Putnam Investments and Consultant to Marsh & McLennan
Companies, Inc.
In the following pages, your fund's management team discusses
performance, strategy, and its outlook for the remainder of fiscal 2005.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
March 16, 2005
Report from Fund Management
Fund highlights
* For the semiannual period ended January 31, 2005, The George Putnam
Fund of Boston's class A shares returned 6.87% without sales charges and
1.24% with maximum sales charges reflected.
* Over the same period, the fund's equity benchmark, the S&P 500/Barra
Value Index, returned 10.47%.
* The fund's bond benchmark, the Lehman Aggregate Bond Index, returned
3.81% over the same period.
* The fund's custom blended benchmark, intended to provide a suitable
performance target for a balanced fund, is made up of 60% S&P 500/Barra
Value Index and 40% Lehman Aggregate Bond Index. It returned 7.85%.
* The average return of the fund's peer group, Lipper Balanced Funds,
was 6.88%.
* See the Performance Summary beginning on page 10 for additional fund
performance, comparative performance, and Lipper data.
Performance commentary
During your fund's semiannual period, a number of factors tugged the
financial markets in opposite directions. The George Putnam Fund of
Boston navigated the changing markets fairly well. Its balanced
portfolio of stocks and bonds performed in line with the average of its
peer group, Lipper Balanced Funds. However, the portfolio's emphasis on
large-capitalization stocks held back performance, relative to its
equity benchmark, as the market continued to favor small- and mid-cap
stocks. Your fund's emphasis on solid companies with mid-range yields
produced some underperformance relative to its equity benchmark, as the
market favored stocks offering low or no yields. The fund did outperform
its fixed-income benchmark (based on results at NAV).
- --------------------------------------------------
TOTAL RETURN FOR
PERIODS ENDED 1/31/05
- --------------------------------------------------
Class A
(inception 11/5/37) NAV POP
- --------------------------------------------------
6 months 6.87% 1.24%
- --------------------------------------------------
1 year 6.17 0.60
- --------------------------------------------------
5 years 29.81 23.00
Annual average 5.36 4.23
- --------------------------------------------------
10 years 151.31 138.15
Annual average 9.65 9.06
- --------------------------------------------------
Annual average
(life of fund) 9.43 9.35
- --------------------------------------------------
Data is historical. Past performance does not guarantee future results.
More recent returns may be less or more than those shown. Investment
return and principal value will fluctuate and you may have a gain or a
loss when you sell your shares. Performance assumes reinvestment of
distributions and does not account for taxes. Returns at NAV do not
reflect a sales charge of 5.25%. For the most recent month-end
performance, visit www.putnaminvestments.com. A short-term trading fee
of up to 2% may apply.
FUND PROFILE
The George Putnam Fund of Boston seeks to provide a balanced investment
composed of a well-diversified portfolio of stocks and bonds that
produce both capital growth and current income. The fund targets
attractively priced stocks of large, established, dividend-paying
companies that are poised to experience positive change and improved
financial performance. The bond portion is a diversified mix of
investment-grade securities. The fund may be appropriate for investors
seeking current income and long-term growth from a balanced investment.
Market overview
Between August 2004 and January 2005, the first half of your fund's fiscal
year, the investing environment exhibited three distinctly different
climates. From August 1 through November's U.S. presidential election, the
market reflected a great deal of investor uncertainty. In fact, despite
rising interest rates, bonds outperformed stocks in August, signaling
investors' high level of risk aversion. The possibility of a terrorist
incident caused concern in the weeks before Election Day, as did concerns
that voting systems and polling equipment would be sub-par, or the
election's outcome indecisive. Sustained high oil prices and rising interest
rates deepened investor worries about the health of the stock market. As a
result, investors focused on defensive stocks during this period. After
voters handed Bush a decisive victory, relieved investors soon switched to
more aggressive and speculative opportunities. The stock market rallied and
posted strong gains through the end of the calendar year. In January, amid
slower economic growth and stubbornly high energy prices, investor
enthusiasm waned and the stock market produced negative returns.
Large-capitalization stocks fared better than small caps and reversed a
long-standing trend of small-cap outperformance. Value stocks once again
outpaced growth stocks in January. The U.S. dollar continued to be weak
relative to foreign currencies, but inflation appeared to be under control.
- -------------------------------------------------------------------------------
MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 1/31/05
- -------------------------------------------------------------------------------
Equities
- -------------------------------------------------------------------------------
S&P 500/Barra Value Index (large-company value stocks) 10.47%
- -------------------------------------------------------------------------------
Russell 2000 Growth Index (small-company growth stocks) 13.48%
- -------------------------------------------------------------------------------
Russell 2000 Value Index (small-company value stocks) 14.24%
- -------------------------------------------------------------------------------
Russell 1000 Index (large-company stocks) 8.92%
- -------------------------------------------------------------------------------
Bonds
- -------------------------------------------------------------------------------
Lehman Aggregate Bond Index (broad bond market) 3.81%
- -------------------------------------------------------------------------------
JP Morgan Global High Yield Index (global high-yield
corporate bonds) 7.72%
- -------------------------------------------------------------------------------
Lehman Government Bond Index (U.S. Treasury and agency
securities) 3.30%
- -------------------------------------------------------------------------------
These indexes provide an overview of performance in different market
sectors for the six months ended 1/31/05.
- -------------------------------------------------------------------------------
Strategy overview
The overarching themes that had influenced our decisions in the prior
fiscal year retained their importance. One such theme was our belief
that consumer spending would weaken as the beneficial effects of last
year's tax relief began to trail off and as rising interest rates slowed
the pace of mortgage refinancing. Accordingly, we deemphasized
consumer-oriented stocks and focused on stocks and sectors we thought
could benefit from an increase in corporate capital spending. We
targeted stocks offering attractive dividend yields, and generally
avoided riskier, high-yielding stocks and stocks with little or no
yield.
As the semiannual period began, the fund's asset allocation stood at 60%
stocks, 35% bonds, and 5% cash. This bond weighting, somewhat lighter
than our neutral 40% bond weighting, seemed prudent to us, given the
rising-rate environment. After the November presidential election,
stocks rallied so strongly that they pushed the portfolio's equity
allocation up to about 63%. In early January, we rebalanced the
portfolio to bring the equity exposure back to about 60% of assets.
With regard to the fund's bond holdings, we positioned overall duration
to be shorter than that of the index, which means the portfolio was less
sensitive to changes in interest rates. (Bond prices move in the
opposite direction of interest rates.) This helped protect portfolio
value through the ongoing series of Fed rate hikes.
[GRAPHIC OMITTED: horizontal bar chart PORTFOLIO COMPOSITION COMPARED]
PORTFOLIO COMPOSITION COMPARED
as of 7/31/04 as of 1/31/05
Common stocks 60.5% 58.6%
U.S. government
and agency securities 26.1% 17.8%
Short-term
investments 8.1% 16.2%
Asset-backed
securities 5.4% 8.9%
Corporate bonds 7.5% 6.6%
Collateralized
mortgage obligations 5.6% 6.2%
Convertible
preferred stocks 0.6% 0.7%
U.S. Treasury
obligations 0.1% 0.4%
Other 0.3% 0.2%
Footnote reads:
This chart shows how the fund's top weightings have changed over the
last six months. Weightings are shown as a percentage of net assets.
Holdings will vary over time.
How fund holdings affected performance
Individual stock selection proved to be an important contributor to
results during the period. The phrase "stock selection" also encompasses
the team's decisions about which stocks not to purchase. And in fact,
over this period the best contributors to performance, relative to the
fund's benchmark, were stocks that the fund did not own, or those in
which it held underweighted positions. For example, for a short period
of time we had a relatively small position in Merck, which manufactures
the arthritis drug Vioxx. Merck shares fell precipitously after it was
learned that people using the drug were more likely to suffer heart
disease. The portfolio also had an underweighted position in Ford, which
suffered along with other U.S. auto makers from weak demand and stiff
competition from foreign auto manufacturers. An underweight position in
SBC was beneficial as the prospects for Regional Bell operating
companies looked increasingly bleak. Competition from wireless and
Internet phone service providers continues to threaten the profitability
of the Regional Bells, whose infrastructure emphasizes traditional land
lines. The Bells' comeback strategy has not yet been successful at
turning the tide in their favor.
The fund not only owned, but had an overweighted position, relative to
the benchmark, in Altria. As the litigation environment for tobacco
companies improved during the period, shares of Altria appreciated,
which helped the fund's return. Masco, which manufactures a variety of
home improvement products such as cabinetry, plumbing, paints, and
stains, focused its efforts on returning value to its shareholders. This
strategy was very successful and Masco's stock performed well. The fund
maintained an overweighted position relative to the benchmark. Shares of
Tyco continued to perform well, as the company's multiple business units
have benefited from new management and effective strategies.
[GRAPHIC OMITTED: TOP EQUITY HOLDINGS]
TOP EQUITY HOLDINGS
(Percent of fund's net assets as of 1/31/05)
1 ExxonMobil Corp. (3.0%)
Oil and gas
2 Citigroup, Inc. (2.7%)
Banking
3 Altria Group, Inc. (1.7%)
Tobacco
4 ChevronTexaco Corp. (1.7%)
Oil and gas
5 Bank of America Corp. (1.6%)
Banking
6 Hewlett-Packard Co. (1.3%)
Computers
7 Tyco International, Ltd. (Bermuda) (1.3%)
Conglomerates
8 U.S. Bancorp (1.2%)
Banking
9 JPMorgan Chase & Co. (1.2%)
Investment banking/brokerage
10 General Electric Co. (1.2%)
Conglomerates
Footnote reads:
The fund's holdings will change over time.
Hewlett-Packard was among the portfolio's weakest performers. The stock has
underperformed our expectations for some time, but we maintained a position
because we believe the share price has been well below the company's
intrinsic value, and the fund's position offered a lot of appreciation
potential. Also, we believed that the market would react favorably to a
management change. Shortly after the semiannual period closed, HP replaced
its CEO, Carly Fiorina, and the market signaled its approval by driving up
the stock price.
Pfizer shares were also weak and dampened the fund's returns. Pfizer's
arthritis drug, Celebrex, was thrown under the same harsh spotlight as
Merck's Vioxx, although Pfizer chose to leave its drug on the shelves,
claiming that patients incapacitated by crippling arthritis might well
choose to accept the risk associated with the drug. We believe the stock
is quite undervalued at this point, and have maintained a position.
Fannie Mae, the mortgage reseller, underperformed amid an accounting
controversy. We believe that the stock will recover in time. We also
view it as an exceptional value.
Please note that all holdings discussed in this report are subject to
review in accordance with the fund's investment strategy and may vary in
the future.
The outlook for your fund
The following commentary reflects anticipated developments that could
affect your fund over the next six months, as well as your management
teams' plans for responding to them.
We anticipate that the economy will continue to grow at a moderate pace
with only mild inflation in the coming six months. Though high oil
prices and rising interest rates may cloud the horizon, we believe that
interest rates on short-term debt will increase more than those for
longer-maturity debt, causing the yield curve -- a graphical
representation of bond yields of all maturities -- to flatten. Should
this occur, it is likely to dampen consumer borrowing and spending, but
would be more manageable for large companies embarking on long-term
capital improvements. In our view, the environment will favor large-cap
companies, the stocks of which appear attractively valued relative to
small and mid caps that have enjoyed substantial gains. If we are right,
this would be beneficial for your fund, which emphasizes large-cap
stocks.
In recent months, the market has been choppy and strong performers have
included both defensive and aggressive stocks. Sectors that typically
move in tandem, such as basic materials and commodities, traced separate
paths and, in our view, seem likely to continue to do so. For example,
as this report is being written, we see market dynamics that are
favorable for chemicals, but not for metals. Going forward, we think
that generating positive results in the portfolio will depend more on
understanding companies' individual strengths than on broad market
trends. We believe that performance results will be tied to research
quality, effective security selection, and asset allocation. We remain
committed to the finding the best opportunities in the marketplace,
among stocks and bonds.
The market is not predictable, nor does it always exhibit common sense.
For this reason we believe that maintaining a well-diversified portfolio
of stocks and bonds is important for risk reduction. Having said that,
we believe that economic and market factors are currently quite
conducive to investing in a balanced fund. In a slower-growth
environment, yields from a combination of stock dividends and bond
interest income may account for a large portion of investors' total
returns. You can be assured that we are focused on helping you pursue
your long-term financial goals through disciplined investment
management.
- --------------------------------------------------------------------------
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. This fund may
invest a portion of its assets in small and/or midsize companies. Such
investments increase the risk of greater price fluctuations. This fund
may have a significant portion of its holdings in bonds. Mutual funds
that invest in bonds are subject to certain risks, including
interest-rate risk, credit risk, and inflation risk. As interest rates
rise, the prices of bonds fall. Long-term bonds are more exposed to
interest-rate risk than short-term bonds. Unlike bonds, bond funds have
ongoing fees and expenses.
Your fund's management
Your fund is managed by the members of the Putnam Large-Cap Value, Core
Fixed-Income, and Global Asset Allocation teams. Jeanne Mockard is the
Portfolio Leader of the fund. Kevin Cronin, Jeffrey Knight, and Raman
Srivastava are Portfolio Members. The Portfolio Leader and Portfolio
Members coordinate the teams' management of the fund.
For a complete listing of the members of the Putnam Large-Cap Value,
Core Fixed-Income, and Global Asset Allocation teams, including those
who are not Portfolio Leaders or Portfolio Members of your fund, visit
Putnam's Individual Investor Web site at www.putnaminvestments.com.
Fund ownership
The table below shows how much the fund's current Portfolio Leader and
Portfolio Members have invested in the fund (in dollar ranges).
Information shown is for the current and prior year ended January 31.
- --------------------------------------------------------------------------------------------------------------
FUND PORTFOLIO LEADER AND PORTFOLIO MEMBERS
- --------------------------------------------------------------------------------------------------------------
$1 - $10,001 - $50,001 - $100,001 - $500,001 - $1,000,001
Year $0 $10,000 $50,000 $100,000 $500,000 $1,000,000 and over
- --------------------------------------------------------------------------------------------------------------
Jeanne Mockard 2005 *
- --------------------------------------------------------------------------------------------------------------
Portfolio Leader 2004 *
- --------------------------------------------------------------------------------------------------------------
Kevin Cronin 2005 *
- --------------------------------------------------------------------------------------------------------------
Portfolio Member 2004 *
- --------------------------------------------------------------------------------------------------------------
Jeffrey Knight 2005 *
- --------------------------------------------------------------------------------------------------------------
Portfolio Member 2004 *
- --------------------------------------------------------------------------------------------------------------
Raman Srivastava 2005 *
- --------------------------------------------------------------------------------------------------------------
Portfolio Member N/A
- --------------------------------------------------------------------------------------------------------------
N/A indicates the individual was not a Portfolio Leader or Portfolio
Member as of 1/31/04.
Fund manager compensation
The total 2004 fund manager compensation that is attributable to your
fund is approximately $1,900,000. This amount includes a portion of 2004
compensation paid by Putnam Management to the fund managers listed in
this section for their portfolio management responsibilities, calculated
based on the fund assets they manage as a percentage of the total assets
they manage. The compensation amount also includes a portion of the 2004
compensation paid to the Chief Investment Officers of the teams and the
Group Chief Investment Officers responsible for the fund's broader
investment categories for their oversight responsibilities, calculated
based on the fund assets they oversee taken as a percentage of the total
assets they oversee. These percentages are determined as of the fund's
fiscal period-end. For personnel who joined Putnam Management during or
after 2004, the calculation reflects annualized 2004 compensation or an
estimate of 2005 compensation, as applicable.
Other Putnam funds managed by
the Portfolio Leader and Portfolio Members
Jeanne Mockard is also a Portfolio Member of Putnam Equity Income Fund.
Kevin Cronin is also a Portfolio Leader of Putnam American Government
Income Fund, Putnam Global Income Trust, Putnam Income Fund, Putnam
Limited Duration Government Income Fund, and Putnam U.S. Government
Income Trust. He is also a Portfolio Member of Putnam Equity Income
Fund.
Jeffrey Knight is also a Portfolio Leader of Putnam Asset Allocation
Funds and Putnam RetirementReady Funds.
Raman Srivastava is also a Portfolio Member of Putnam Income Fund.
Jeanne Mockard, Kevin Cronin, Jeffrey Knight, and Raman Srivastava may
also manage other accounts and variable trust funds advised by Putnam
Management or an affiliate.
Changes in your fund's Portfolio Leader and Portfolio Members
During the year ended January 31, 2005, Portfolio Member Raman
Srivastava joined your fund's management team.
Fund ownership
The table below shows how much the members of Putnam's Executive Board
have invested in the fund (in dollar ranges). Information shown is for
the current and prior year ended January 31.
- -------------------------------------------------------------------------------------------------------------
PUTNAM EXECUTIVE BOARD
- -------------------------------------------------------------------------------------------------------------
$1 - $10,001 - $50,001- $100,001
Year $0 $10,000 $50,000 $100,000 and over
- -------------------------------------------------------------------------------------------------------------
Philippe Bibi 2005 *
- -------------------------------------------------------------------------------------------------------------
Chief Technology Officer 2004 *
- -------------------------------------------------------------------------------------------------------------
John Boneparth 2005 *
- -------------------------------------------------------------------------------------------------------------
Head of Global Institutional Mgmt 2004 *
- -------------------------------------------------------------------------------------------------------------
Joshua Brooks N/A
- -------------------------------------------------------------------------------------------------------------
Deputy Head of Investments N/A
- -------------------------------------------------------------------------------------------------------------
Kevin Cronin 2005 *
- -------------------------------------------------------------------------------------------------------------
Head of Investments N/A
- -------------------------------------------------------------------------------------------------------------
Charles Haldeman, Jr. 2005 *
- -------------------------------------------------------------------------------------------------------------
President and CEO 2004 *
- -------------------------------------------------------------------------------------------------------------
Amrit Kanwal 2005 *
- -------------------------------------------------------------------------------------------------------------
Chief Financial Officer N/A
- -------------------------------------------------------------------------------------------------------------
Steven Krichmar 2005 *
- -------------------------------------------------------------------------------------------------------------
Chief of Operations N/A
- -------------------------------------------------------------------------------------------------------------
Francis McNamara, III 2005 *
- -------------------------------------------------------------------------------------------------------------
General Counsel N/A
- -------------------------------------------------------------------------------------------------------------
Richard Monaghan 2005 *
- -------------------------------------------------------------------------------------------------------------
Head of Retail Management 2004 *
- -------------------------------------------------------------------------------------------------------------
Richard Robie, III 2005 *
- -------------------------------------------------------------------------------------------------------------
Chief Administrative Officer N/A
- -------------------------------------------------------------------------------------------------------------
Edward Shadek N/A
- -------------------------------------------------------------------------------------------------------------
Deputy Head of Investments N/A
- -------------------------------------------------------------------------------------------------------------
N/A indicates the individual joined Putnam's Executive Board after the
reporting date.
Performance summary
This section shows your fund's performance during the first half of its
fiscal year, which ended January 31, 2005. In accordance with regulatory
requirements, we also include performance for the most current calendar
quarter-end. Performance should always be considered in light of a
fund's investment strategy. Data represents past performance. Past
performance does not guarantee future results. More recent returns may
be less or more than those shown. Investment return and principal value
will fluctuate and you may have a gain or a loss when you sell your
shares. For the most recent month-end performance, please visit
www.putnaminvestments.com.
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 1/31/05
- -----------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C Class M Class R
(inception dates) (11/5/37) (4/27/92) (7/26/99) (12/1/94) (1/21/03)
- -----------------------------------------------------------------------------------------------------------------------------
NAV POP NAV CDSC NAV CDSC NAV POP NAV
- -----------------------------------------------------------------------------------------------------------------------------
6 months 6.87% 1.24% 6.48% 1.48% 6.46% 5.46% 6.62% 2.87% 6.71%
- -----------------------------------------------------------------------------------------------------------------------------
1 year 6.17 0.60 5.30 0.30 5.34 4.34 5.58 1.87 5.81
- -----------------------------------------------------------------------------------------------------------------------------
5 years 29.81 23.00 24.98 22.98 24.90 24.90 26.59 22.17 28.18
Annual average 5.36 4.23 4.56 4.22 4.55 4.55 4.83 4.09 5.09
- -----------------------------------------------------------------------------------------------------------------------------
10 years 151.31 138.15 132.99 132.99 132.94 132.94 138.96 130.58 145.15
Annual average 9.65 9.06 8.83 8.83 8.82 8.82 9.10 8.71 9.38
- -----------------------------------------------------------------------------------------------------------------------------
Annual average
(life of fund) 9.43 9.35 8.40 8.40 8.61 8.61 8.67 8.61 9.16
- -----------------------------------------------------------------------------------------------------------------------------
Performance assumes reinvestment of distributions and does not account for
taxes. Returns at public offering price (POP) for class A and M shares
reflect a sales charge of 5.25% and 3.50%, respectively. Class B share
returns reflect the applicable contingent deferred sales charge (CDSC),
which is 5% in the first year, declining to 1% in the sixth year, and is
eliminated thereafter. Class C shares reflect a 1% CDSC the first year that
is eliminated thereafter. Class R shares have no initial sales charge or
CDSC. Performance for class B, C, M, and R shares before their inception is
derived from the historical performance of class A shares, adjusted for the
applicable sales charge (or CDSC) and higher operating expenses for such
shares.
A 2% short-term trading fee may be applied to shares exchanged or sold
within 5 days of purchase.
- -------------------------------------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 1/31/05
- -------------------------------------------------------------------------------------------------------------
S&P 500/ Lehman George Lipper
Barra Value Aggregate Putnam Balanced Funds
Index Bond Index Blended Index category average*
- -------------------------------------------------------------------------------------------------------------
6 months 10.47% 3.81% 7.85% 6.88%
- -------------------------------------------------------------------------------------------------------------
1 year 10.93 4.16 8.35 5.12
- -------------------------------------------------------------------------------------------------------------
5 years 13.92 46.36 29.28 13.39
Annual average 2.64 7.92 5.27 2.36
- -------------------------------------------------------------------------------------------------------------
10 years 201.55 107.60 170.20 134.78
Annual average 11.67 7.58 10.45 8.77
- -------------------------------------------------------------------------------------------------------------
Annual average
(life of fund) --+ --+ --+ --+
- -------------------------------------------------------------------------------------------------------------
Index and Lipper results should be compared to fund performance at net
asset value.
* Over the 6-month and 1-, 5-, and 10-year periods ended 1/31/05, there
were 626, 578, 363, and 165 funds, respectively, in this Lipper
category.
+ The benchmarks were not in existence at the time of the fund's
inception. The S&P 500/Barra Value Index commenced 12/31/74. The Lehman
Aggregate Bond Index commenced 12/31/75. The George Putnam Blended Index
commenced 12/31/86. The Lipper average commenced 12/31/59.
- ----------------------------------------------------------------------------------------------------------
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 1/31/05
- ----------------------------------------------------------------------------------------------------------
Class A Class B Class C Class M Class R
- ----------------------------------------------------------------------------------------------------------
Distributions (number) 2 2 2 2 2
- ----------------------------------------------------------------------------------------------------------
Income $0.156 $0.091 $0.092 $0.114 $0.147
- ----------------------------------------------------------------------------------------------------------
Capital gains -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------
Total $0.156 $0.091 $0.092 $0.114 $0.147
- ----------------------------------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP NAV
- ----------------------------------------------------------------------------------------------------------
7/31/04 $16.91 $17.85 $16.73 $16.81 $16.74 $17.35 $16.89
- ----------------------------------------------------------------------------------------------------------
1/31/05 17.91 18.90 17.72 17.80 17.73 18.37 17.87
- ----------------------------------------------------------------------------------------------------------
Current return
- ----------------------------------------------------------------------------------------------------------
Current dividend rate 1 1.74% 1.65% 1.02% 1.03% 1.29% 1.24% 1.68%
- ----------------------------------------------------------------------------------------------------------
Current 30-day
SEC yield 2 1.91 1.81 1.17 1.17 1.41 1.34 1.66
- ----------------------------------------------------------------------------------------------------------
1 Most recent distribution, excluding capital gains, annualized and
divided by NAV or POP at end of period.
2 Based only on investment income, calculated using SEC guidelines.
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN FOR PERIODS ENDED 12/31/04 (MOST RECENT CALENDAR QUARTER)
- -----------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C Class M Class R
(inception dates) (11/5/37) (4/27/92) (7/26/99) (12/1/94) (1/21/03)
- -----------------------------------------------------------------------------------------------------------------------------
NAV POP NAV CDSC NAV CDSC NAV POP NAV
- -----------------------------------------------------------------------------------------------------------------------------
6 months 6.26% 0.69% 5.92% 0.92% 5.90% 4.90% 6.00% 2.27% 6.15%
- -----------------------------------------------------------------------------------------------------------------------------
1 year 8.32 2.64 7.51 2.51 7.54 6.54 7.74 3.97 8.07
- -----------------------------------------------------------------------------------------------------------------------------
5 years 27.92 21.22 23.28 21.28 23.22 23.22 24.89 20.48 26.41
Annual average 5.05 3.92 4.27 3.93 4.26 4.26 4.55 3.80 4.80
- -----------------------------------------------------------------------------------------------------------------------------
10 years 159.30 145.60 140.53 140.53 140.47 140.47 146.54 137.88 152.97
Annual average 10.00 9.40 9.17 9.17 9.17 9.17 9.44 9.05 9.73
- -----------------------------------------------------------------------------------------------------------------------------
Annual average
(life of fund) 9.46 9.37 8.42 8.42 8.64 8.64 8.70 8.64 9.19
- -----------------------------------------------------------------------------------------------------------------------------
Understanding your
fund's expenses
As a mutual fund investor, you pay ongoing expenses, such as management
fees, distribution fees (12b-1 fees), and other expenses. Using the
information below, you can estimate how these expenses affect your
investment and compare them with the expenses of other funds. You may also
pay one-time transaction expenses, including sales charges (loads) and
redemption fees, which are not shown in this section and would have resulted
in higher total expenses. For more information, see your fund's prospectus
or talk to your financial advisor.
Review your fund's expenses
The table below shows the expenses you would have paid on a $1,000
investment in The George Putnam Fund of Boston from August 1, 2004, to
January 31, 2005. It also shows how much a $1,000 investment would be worth
at the close of the period, assuming actual returns and expenses.
- --------------------------------------------------------------------------------------
EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming actual returns for the 6 months ended 1/31/05
- --------------------------------------------------------------------------------------
Class A Class B Class C Class M Class R
- --------------------------------------------------------------------------------------
Expenses paid per $1,000* $5.37 $9.26 $9.26 $7.97 $6.67
- --------------------------------------------------------------------------------------
Ending value (after expenses) $1,068.70 $1,064.80 $1,064.60 $1,066.20 $1,067.10
- --------------------------------------------------------------------------------------
* Expenses for each share class are calculated using the fund's annualized
expense ratio for each class, which represents the ongoing expenses as a
percentage of net assets for the six months ended 1/31/05. The expense ratio
may differ for each share class (see the table at the bottom of the next
page). Expenses are calculated by multiplying the expense ratio by the
average account value for the period; then multiplying the result by the
number of days in the period; and then dividing that result by the number of
days in the year.
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended January
31, 2005, use the calculation method below. To find the value of your
investment on August 1, 2004, go to www.putnaminvestments.com and log on to
your account. Click on the "Transaction History" tab in your Daily Statement
and enter 08/01/2004 in both the "from" and "to" fields. Alternatively, call
Putnam at 1-800-225-1581.
- -----------------------------------------------------------------------------
HOW TO CALCULATE THE EXPENSES YOU PAID
- -----------------------------------------------------------------------------
Total
Value of your Expenses paid expenses
investment on 8/1/04 [DIV] $1,000 X per $1,000 = paid
- -----------------------------------------------------------------------------
Example Based on a $10,000 investment in class A shares of your fund.
- -----------------------------------------------------------------------------
$10,000 [DIV] $1,000 X $5.37 (see table above) = $53.70
- -----------------------------------------------------------------------------
Comparing your fund's expenses with those of other funds
Using the SEC's method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to
help investors assess fund expenses. Per these guidelines, the table below
shows your fund's expenses based on a $1,000 investment, assuming a
hypothetical 5% annualized return. You can use this information to compare
the ongoing expenses (but not transaction expenses or total costs) of
investing in the fund with those of other funds. All mutual fund shareholder
reports will provide this information to help you make this comparison.
Please note that you cannot use this information to estimate your actual
ending account balance and expenses paid during the period.
- --------------------------------------------------------------------------------------
EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming a hypothetical 5% annualized return for the 6 months ended 1/31/05
- --------------------------------------------------------------------------------------
Class A Class B Class C Class M Class R
- --------------------------------------------------------------------------------------
Expenses paid per $1,000* $5.24 $9.05 $9.05 $7.78 $6.51
- --------------------------------------------------------------------------------------
Ending value (after expenses) $1,020.01 $1,016.23 $1,016.23 $1,017.49 $1,018.75
- --------------------------------------------------------------------------------------
* Expenses for each share class are calculated using the fund's
annualized expense ratio for each class, which represents the ongoing
expenses as a percentage of net assets for the six months ended 1/31/05.
The expense ratio may differ for each share class (see the table at the
bottom of this page). Expenses are calculated by multiplying the expense
ratio by the average account value for the period; then multiplying the
result by the number of days in the period; and then dividing that
result by the number of days in the year.
Using industry averages to compare expenses
You can also compare your fund's expenses with industry averages, as
determined by Lipper, an independent fund-rating agency that ranks funds
relative to others that Lipper considers to have similar investment styles
or objectives. The expense ratio for each share class shown below indicates
how much of your fund's net assets have been used to pay ongoing expenses
during the period.
- --------------------------------------------------------------------------------------
EXPENSE RATIO COMPARISONS USING ANNUALIZED DATA
- --------------------------------------------------------------------------------------
Class A Class B Class C Class M Class R
- --------------------------------------------------------------------------------------
Your fund's annualized
expense ratio 1.03% 1.78% 1.78% 1.53% 1.28%
- --------------------------------------------------------------------------------------
Average annualized expense
ratio for Lipper peer group+ 1.31% 2.06% 2.06% 1.81% 1.56%
- --------------------------------------------------------------------------------------
+ Average of the expenses of front-end load funds viewed by Lipper as having
the same investment classification or objective as the fund, as of 12/31/04,
calculated in accordance with Lipper's standard reporting methodology for
comparing expenses within a given universe (excluding 12b-1 fees and without
giving effect to any expense offset and brokerage service arrangements that
may reduce fund expenses). To facilitate comparison, Putnam has adjusted
this average to reflect the 12b-1 fees carried by each class of shares. The
peer group may include funds that are significantly larger or smaller than
the fund, which may limit the comparability of the fund's expenses to the
Lipper average.
Understanding your fund's
portfolio turnover
Putnam funds are actively managed by teams of experts who buy and sell
securities based on intensive analysis of companies, industries, economies,
and markets. Portfolio turnover is a measure of how often a fund's managers
buy and sell securities for your fund. A portfolio turnover of 100%, for
example, means that the managers sold and replaced securities valued at 100%
of a fund's assets within a one-year period. Funds with high turnover may be
more likely to generate capital gains and dividends that must be distributed
to shareholders as taxable income. High turnover may also cause a fund to
pay more brokerage commissions and other transaction costs, which may
detract from performance.
Funds that invest in bonds may have higher turnover than funds that invest
only in stocks. Short-term bond funds tend to have higher turnover than
longer-term bond funds, because shorter-term bonds will mature or be sold
more frequently than longer-term bonds. You can use the table below to
compare your fund's turnover with the average turnover for funds in its
Lipper category.
- -----------------------------------------------------------------------------
TURNOVER COMPARISONS
percentage of holdings that change every year
- -----------------------------------------------------------------------------
2004 2003 2002 2001 2000
- -----------------------------------------------------------------------------
The George Putnam
Fund of Boston 166% 121% 132% 333% 141%
- -----------------------------------------------------------------------------
Lipper Balanced Funds
category average 77% 82% 83% 85% 83%
- -----------------------------------------------------------------------------
Turnover data for the fund is calculated based on the fund's fiscal-year
period, which ends on July 31. Turnover data for the fund's Lipper category
is calculated based on the average of the turnover of each fund in the
category for its fiscal year ended during the indicated year. Fiscal years
vary across funds in the Lipper category, which may limit the comparability
of the fund's portfolio turnover rate to the Lipper average. Comparative
data for 2004 is based on information available as of 12/31/04.
Risk comparison
As part of new initiatives to enhance disclosure, we are including a risk
comparison to help you understand how your fund compares with other funds.
The comparison utilizes a risk measure developed by Morningstar, an
independent fund-rating agency. This risk measure is referred to as the
fund's Overall Morningstar Risk.
[GRAPHIC OMITTED: chart MORNINGSTAR [REGISTRATION MARK] RISK]
MORNINGSTAR [REGISTRATION MARK] RISK
Fund's Overall
Morningstar Risk 0.86
U.S. stock
fund average 3.36
0% INCREASING RISK 100%
Your fund's Overall Morningstar Risk is shown alongside that of the average
fund in its broad asset class, as determined by Morningstar. The risk bar
broadens the comparison by translating the fund's Overall Morningstar Risk
into a percentile, which is based on the fund's ranking among all funds
rated by Morningstar as of December 31, 2004. A higher Overall Morningstar
Risk generally indicates that a fund's monthly returns have varied more
widely.
Morningstar determines a fund's Overall Morningstar Risk by assessing
variations in the fund's monthly returns -- with an emphasis on downside
variations -- over 3-, 5-, and 10-year periods, if available. Those measures
are weighted and averaged to produce the fund's Overall Morningstar Risk.
The information shown is provided for the fund's class A shares only;
information for other classes may vary. Overall Morningstar Risk is based on
historical data and does not indicate future results. Morningstar does not
purport to measure the risk associated with a current investment in a fund,
either on an absolute basis or on a relative basis. Low Overall Morningstar
Risk does not mean that you cannot lose money on an investment in a fund.
Copyright 2004 Morningstar, Inc. All Rights Reserved. The information
contained herein (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted to
be accurate, complete, or timely. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from any use of
this information.
Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested
all distributions in the fund.
Net asset value (NAV) is the price, or value, of one share of a mutual
fund, without a sales charge. NAVs fluctuate with market conditions. NAV
is calculated by dividing the net assets of each class of shares by the
number of outstanding shares in the class.
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 5.25% maximum sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B or C shares and assumes redemption at the
end of the period. Your fund's class B 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. The CDSC for class C shares is 1% for one
year after purchase.
Class A shares are generally subject to an initial sales charge and no
sales charge on redemption (except on certain redemptions of shares
bought without an initial sales charge).
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge only if the shares are
redeemed during the first year.
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 (except on certain
redemptions of shares bought without an initial sales charge).
Class R shares are not subject to an initial sales charge or CDSC and
are available only to certain defined contribution plans.
Comparative indexes
George Putnam Blended Index is an unmanaged index administered by Putnam
Management, 60% of which is the Standard and Poor's 500/Barra Value
Index and 40% of which is the Lehman Aggregate Bond Index.
JP Morgan Global High Yield Index is an unmanaged index of global
high-yield fixed-income securities.
Lehman Aggregate Bond Index is an unmanaged index of U.S.
investment-grade fixed-income securities.
Lehman Government Bond Index is an unmanaged index of U.S. Treasury and
agency securities.
Russell 1000 Index is an unmanaged index of the 1,000 largest companies
in the Russell 3000 Index.
Russell 2000 Growth Index is an unmanaged index of those companies in
the small-cap Russell 2000 Index chosen for their growth orientation.
Russell 2000 Value Index is an unmanaged index of those companies in the
small-cap Russell 2000 Index chosen for their value orientation.
S&P 500/Barra Value Index is an unmanaged capitalization-weighted index
of large-cap stocks chosen for their value orientation.
Indexes assume reinvestment of all distributions and do not account for
fees. Securities and performance of a fund and an index will differ. You
cannot invest directly in an index.
Lipper is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper. Lipper category averages reflect
performance trends for funds within a category and are based on results
at net asset value.
Trustee approval of management contract
General conclusions
The Board of Trustees of the Putnam funds oversees the management of
each fund and, as required by law, determines annually whether to
approve the continuance of each fund's management contract with Putnam
Management. In this regard the Board of Trustees, with the assistance of
its Contract Committee consisting solely of Independent Trustees,
requests and evaluates all information it deems reasonably necessary in
the circumstances. Over the course of several months beginning in March
and ending in June of 2004, the Contract Committee reviewed the
information provided by Putnam Management and other information
developed with the assistance of the Board's independent counsel and
independent staff. The Contract Committee reviewed and discussed key
aspects of this information with all of the Independent Trustees. Upon
completion of this review, the Contract Committee recommended and the
Independent Trustees approved the continuance of your fund's contract,
effective July 1, 2004.
This approval was based on the following conclusions:
* That the fee schedule currently in effect for your fund represents
reasonable compensation in light of the nature and quality of the
services being provided to the fund, the fees paid by competitive funds
and the costs incurred by Putnam Management in providing such service,
and
* That such fee schedule represents an appropriate sharing between fund
shareholders and Putnam Management of such economies of scale as may
exist in the management of the fund at current asset levels.
These conclusions were based on a comprehensive consideration of all
information provided to the Trustees and were not the result of any
single factor. Some of the factors that figured particularly in the
Trustees' deliberations are described below.
Model fee schedules and categories; total expenses
The Trustees, working in cooperation with Putnam Management, have developed
and implemented a series of model fee schedules for the Putnam funds
designed to ensure that each fund's management fee is consistent with the
fees for similar funds in the Putnam complex and compares favorably with
fees paid by competitive funds sponsored by other advisors. The Trustees
reviewed the model fee schedule currently in effect for the fund, including
fee levels and breakpoints, and the assignment of the fund to a particular
fee category under this structure. The Trustees also reviewed comparative
fee and expense information for competitive funds. The Trustees concluded
that no changes should be made in the fund's current fee schedule at this
time. The Trustees noted that expense ratios for a number of Putnam funds
had been increasing recently as a result of declining net assets and the
natural operation of fee breakpoints. They noted that such expense ratio
increases were currently being controlled by expense limitations implemented
in January 2004. They also noted that the competitive landscape regarding
mutual fund fees may be changing as a result of fee reductions accepted by
various other fund groups in connection with recent regulatory settlements
and greater focus on fees and expenses in the mutual fund industry
generally. The Trustees indicated an intention to monitor these developments
closely.
Economies of scale
As noted above, the Trustees concluded that the fee schedule currently
in effect for your fund represents an appropriate sharing of economies
of scale at current asset levels. The Trustees indicated their intention
to continue their ongoing consideration of economies of scale and in
particular to consider further the possible operation of such economies
in the event that a significant recovery in the equity markets or net
fund sales were to raise asset levels substantially above current
levels. In this regard, the Trustees noted that they had reviewed data
relating to the substantial increase in asset levels of the Putnam funds
that occurred during the years leading up to the market peak in 2000,
the subsequent decline in assets and the resulting impact on revenues
and expenses of Putnam Management. The Trustees also noted that recent
declines in net assets in many Putnam funds, together with significant
changes in the cost structure of Putnam Management have altered the
economics of Putnam Management's business in significant ways. The
Trustees concluded that they would monitor these changes carefully and
evaluate the resulting impact on Putnam Management's economics and the
sharing of economies of scale between the parties.
Investment performance
The quality of the investment process provided by Putnam Management
represented a major factor in the Trustees' evaluation of the quality of
services provided by Putnam Management under the Management Contracts.
The Trustees recognized that a high quality investment process -- as
measured by the experience and skills of the individuals assigned to the
management of fund portfolios, the resources made available to such
personnel, and in general the ability of Putnam Management to attract
and retain high-quality personnel -- does not guarantee favorable
investment results for every fund in every time period. The Trustees
considered the investment performance of each fund over multiple time
periods and considered information comparing the fund's performance with
various benchmarks and with the performance of competitive funds. The
Trustees noted the satisfactory investment performance of many Putnam
funds.
They also noted the disappointing investment performance of certain
funds in recent years and continued to discuss with senior management of
Putnam Management the factors contributing to such under-performance and
actions being taken to improve performance. The Trustees recognized
that, in recent years, Putnam Management has made significant changes in
its investment personnel and processes and in the fund product line in
an effort to address areas of underperformance. The Trustees indicated
their intention to continue to monitor performance trends to assess the
effectiveness of these changes and to evaluate whether additional
remedial changes are warranted. As a general matter, the Trustees
concluded that consultation between the Trustees and Putnam Management
represents the most effective way to address investment performance
problems. The Trustees believe that investors in the Putnam funds and
their financial advisors have, as a general matter, effectively placed
their trust in the Putnam organization, under the supervision of the
funds' Trustees, to make appropriate decisions regarding the management
of the funds. The Trustees believe that the termination of the
Management Contract and engagement of a new investment adviser for
under-performing funds, with all the attendant disruptions, would not
serve the interests of fund shareholders at this time and would not
necessarily provide any greater assurance of improved investment
performance.
Brokerage and soft-dollar allocations; other benefits
The Trustees considered various potential benefits that Putnam
Management may receive in connection with the services it provides under
the Management Contract with your fund. These include principally
benefits related to brokerage and soft-dollar allocations, which pertain
mainly to funds investing in equity securities. The Trustees believe
that soft-dollar credits and other potential benefits associated with
the allocation of fund brokerage represent assets of the funds that
should be used for the benefit of fund shareholders. The Trustees noted
recent trends in the allocation of fund brokerage, including commission
costs, the allocation of brokerage to firms that provide research
services to Putnam Management, and the sources and application of
available soft-dollar credits. Effective December 31, 2003, reflecting a
decision made by the Trustees earlier that year, Putnam Management
ceased allocating brokerage in connection with the sale of fund shares.
In addition, in preparing its budget for commission allocations in 2004,
Putnam Management voluntarily reduced substantially the allocation of
brokerage commissions to acquire research services from third-party
service providers. In light of evolving best practices in the mutual
fund industry, the Trustees concluded that this practice should be
further curtailed and possibly eliminated in the near future. The
Trustees indicated that they would continue to monitor the allocation of
the funds' brokerage to ensure that the principle of "best price and
execution" remains paramount in the portfolio trading process.
Comparison of retail and institutional fee schedules
The information examined by the Trustees as part of the annual contract
reviews included information regarding fees charged by Putnam Management
and its affiliates to institutional clients such as defined benefit
pension plans and college endowments. This information included
comparison of such fees with fees charged to the Putnam funds, as well
as a detailed assessment of the differences in the services provided to
these two types of clients. The Trustees devoted special attention to
these issues and reviewed recent articles by critics of mutual fund
fees, articles by the ICI defending such fee differences, and relevant
guidance provided by decisions of the courts. The Trustees observed, in
this regard, that the differences in fee rates between institutional
clients and mutual funds are by no means uniform when examined by
individual asset sectors, suggesting that differences in the pricing of
investment management services to these types of clients reflects to a
substantial degree historical competitive forces operating in separate
market places. In reaching their conclusions, the Trustees considered
the fact that fee rates across all asset sectors are higher on average
for mutual funds than for institutional clients, and also considered the
differences between the services that Putnam provides to the Putnam
funds and those that it provides to institutional clients of the firm.
Settlement of regulatory charges related to market timing
Finally, in reaching their conclusions, the Trustees considered all
matters pertinent to the administrative charges filed against Putnam
Management by the SEC and the Commonwealth of Massachusetts in October
2003 relating to market timing, the firm's settlement of those charges,
and the conclusions and recommendations of the Trustees' Audit and
Pricing Committee based on its review of these matters. The Trustees
considered the actions taken by the owner of Putnam Management and its
new senior management to terminate or discipline the individuals
involved, to implement new compliance systems, to indemnify the funds
against all costs and liabilities related to these matters, and
otherwise to ensure that the interests of the funds and their
shareholders are fully protected. The Trustees noted that, in addition
to the settlements of the regulatory charges which will provide
comprehensive restitution for any losses suffered by shareholders, the
new senior management of Putnam Management has moved aggressively to
control expense ratios of funds affected by market timing, to reduce
charges to new investors, to improve disclosure of fees and expenses,
and to emphasize the paramount role of investment performance in
achieving shareholders' investment goals.
Other information for shareholders
A note about duplicate mailings
In response to investors' requests, the SEC has modified mailing
regulations for proxy statements, semiannual and annual reports, and
prospectuses. Putnam is now able to send a single copy of these
materials to customers who share the same address. This change will
automatically apply to all shareholders except those who notify us. If
you would prefer to receive your own copy, please call Putnam at
1-800-225-1581.
Proxy voting
Putnam is committed to managing our mutual funds in the best interests
of our shareholders. The Putnam funds' proxy voting guidelines and
procedures, as well as information regarding how your fund voted proxies
relating to portfolio securities during the 12-month period ended June
30, 2004, are available on the Putnam Individual Investor Web site,
www.putnaminvestments.com/individual, and on the SEC's Web site,
www.sec.gov. If you have questions about finding forms on the SEC's Web
site, you may call the SEC at 1-800-SEC-0330. You may also obtain the
Putnam funds' proxy voting guidelines and procedures at no charge by
calling Putnam's Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
For periods ending on or after July 9, 2004, the fund will file a
complete schedule of its portfolio holdings with the SEC for the first
and third quarters of each fiscal year on Form N-Q. Shareholders may
obtain the fund's Forms N-Q on the SEC's Web site at www.sec.gov. In
addition, the fund's Forms N-Q may be reviewed and copied at the SEC's
public reference room in Washington, D.C. You may call the SEC at
1-800-SEC-0330 for information about the SEC's Web site or the operation
of the public reference room.
A guide to the financial statements
These sections of the report, as well as the accompanying Notes,
constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares. (For funds with preferred shares, the amount
subtracted from total assets includes the net assets allocated to
remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or loss
the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal period.
Statement of changes in net assets shows how the fund's net assets were
affected by the fund's net investment gain or loss, by distributions to
shareholders, and by changes in the number of the fund's shares. It
lists distributions and their sources (net investment income or realized
capital gains) over the current reporting period and the most recent
fiscal year-end. The distributions listed here may not match the sources
listed in the Statement of operations because the distributions are
determined on a tax basis and may be paid in a different period from the
one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment
income ratios, and portfolio turnover in one summary table, reflecting
the five most recent reporting periods. In a semiannual report, the
highlight table also includes the current reporting period. For open-end
funds, a separate table is provided for each share class.
The fund's portfolio
January 31, 2005 (Unaudited)
Common stocks (58.6%) (a)
Number of shares Value
Aerospace and Defense (1.3%)
- -------------------------------------------------------------------------------
455,800 Boeing Co. (The) $23,063,480
685,800 Lockheed Martin Corp. 39,646,098
198,600 Northrop Grumman Corp. 10,303,368
--------------
73,012,946
Automotive (0.2%)
- -------------------------------------------------------------------------------
236,300 Lear Corp. (S) 12,760,200
Banking (7.6%)
- -------------------------------------------------------------------------------
1,887,000 Bank of America Corp. 87,500,190
292,500 Bank of New York Co., Inc. (The) (S) 8,690,175
2,980,400 Citigroup, Inc. (SEG) 146,188,620
545,900 State Street Corp. 24,461,779
2,214,500 U.S. Bancorp 66,545,725
887,900 Wachovia Corp. 48,701,315
565,730 Wells Fargo & Co. 34,679,249
--------------
416,767,053
Basic Materials (0.1%)
- -------------------------------------------------------------------------------
123,700 Vulcan Materials Co. (S) 6,986,576
Beverage (0.5%)
- -------------------------------------------------------------------------------
261,600 Coca-Cola Co. (The) 10,853,784
632,400 Coca-Cola Enterprises, Inc. 13,881,180
--------------
24,734,964
Biotechnology (0.1%)
- -------------------------------------------------------------------------------
106,100 Amgen, Inc. (NON) 6,603,664
Broadcasting (0.3%)
- -------------------------------------------------------------------------------
388,700 Viacom, Inc. Class B 14,514,058
Building Materials (0.8%)
- -------------------------------------------------------------------------------
1,230,400 Masco Corp. 45,278,720
Cable Television (0.3%)
- -------------------------------------------------------------------------------
436,100 Comcast Corp. Class A (NON) 14,038,059
102,400 Liberty Media International, Inc.
Class A (NON) 4,636,672
--------------
18,674,731
Capital Goods (0.1%)
- -------------------------------------------------------------------------------
89,200 Eaton Corp. 6,064,708
Chemicals (0.6%)
- -------------------------------------------------------------------------------
381,700 Dow Chemical Co. (The) 18,970,490
229,900 PPG Industries, Inc. 15,812,522
--------------
34,783,012
Commercial and Consumer Services (0.1%)
- -------------------------------------------------------------------------------
193,400 ARAMARK Corp. Class B 5,026,466
Communications Equipment (0.3%)
- -------------------------------------------------------------------------------
902,300 Cisco Systems, Inc. (NON) 16,277,492
Computers (2.6%)
- -------------------------------------------------------------------------------
170,200 Dell, Inc. (NON) 7,107,552
3,635,081 Hewlett-Packard Co. 71,211,237
695,300 IBM Corp. 64,954,926
--------------
143,273,715
Conglomerates (3.0%)
- -------------------------------------------------------------------------------
3,300 Berkshire Hathaway, Inc. Class B
(NON) 9,880,563
1,825,600 General Electric Co. 65,958,928
462,800 Honeywell International, Inc. 16,651,544
1,959,650 Tyco International, Ltd. (Bermuda) (S) 70,821,751
--------------
163,312,786
Consumer Finance (1.1%)
- -------------------------------------------------------------------------------
257,400 Capital One Financial Corp. (S) 20,149,272
635,500 Countrywide Financial Corp. 23,513,500
113,000 MBNA Corp. 3,003,540
826,000 Providian Financial Corp. (NON) 13,777,680
--------------
60,443,992
Consumer Goods (0.8%)
- -------------------------------------------------------------------------------
194,400 Colgate-Palmolive Co. 10,213,776
139,400 Energizer Holdings, Inc. (NON) 7,891,434
230,900 Estee Lauder Cos., Inc. (The) Class A 10,422,826
287,900 Procter & Gamble Co. (The) 15,324,917
--------------
43,852,953
Consumer Services (0.3%)
- -------------------------------------------------------------------------------
2,200,181 Service Corporation Intl. (NON) 15,181,249
Containers (0.2%)
- -------------------------------------------------------------------------------
252,300 Ball Corp. (S) 10,778,256
Electric Utilities (2.1%)
- -------------------------------------------------------------------------------
328,800 Alliant Energy Corp. 9,042,000
154,650 Dominion Resources, Inc. (S) 10,729,617
16,200 Edison International 526,014
171,100 Entergy Corp. 11,894,872
434,500 Exelon Corp. 19,226,625
941,750 PG&E Corp. (NON) (S) 32,961,250
214,700 PPL Corp. 11,593,800
122,680 Progress Energy, Inc. 5,428,590
116,600 Public Service Enterprise Group, Inc. 6,150,650
132,200 Wisconsin Energy Corp. 4,518,596
--------------
112,072,014
Electrical Equipment (0.2%)
- -------------------------------------------------------------------------------
138,600 Emerson Electric Co. 9,319,464
Electronics (1.7%)
- -------------------------------------------------------------------------------
245,600 Freescale Semiconductor, Inc. Class
B (NON) 4,290,632
2,187,200 Intel Corp. 49,102,640
1,535,400 Motorola, Inc. 24,167,196
351,100 Storage Technology Corp. (NON) 11,056,139
259,400 Vishay Intertechnology, Inc. (NON) (S) 3,390,358
--------------
92,006,965
Financial (2.6%)
- -------------------------------------------------------------------------------
717,890 Fannie Mae 46,361,336
885,740 Freddie Mac 57,829,965
221,600 Hartford Financial Services Group,
Inc. (The) (S) 14,911,464
412,200 MetLife, Inc. (S) 16,384,950
110,500 PMI Group, Inc. (The) (S) 4,394,585
--------------
139,882,300
Food (0.7%)
- -------------------------------------------------------------------------------
366,500 General Mills, Inc. 19,420,835
277,100 H.J. Heinz Co. 10,477,151
330 PSF Group Holdings, Inc. 144A Class
A (NON) (F) 495,570
537,300 Tyson Foods, Inc. Class A 9,225,441
--------------
39,618,997
Forest Products and Packaging (0.5%)
- -------------------------------------------------------------------------------
580,800 Smurfit-Stone Container Corp. (NON) (S) 8,735,232
220,500 Sonoco Products Co. 5,724,180
218,400 Weyerhaeuser Co. 13,628,160
--------------
28,087,572
Gaming & Lottery (0.3%)
- -------------------------------------------------------------------------------
140,500 GTECH Holdings Corp. (S) 3,284,890
204,090 Harrah's Entertainment, Inc. (S) 12,906,652
--------------
16,191,542
Health Care Services (1.4%)
- -------------------------------------------------------------------------------
234,900 AmerisourceBergen Corp. (S) 13,689,972
291,700 Cardinal Health, Inc. 16,428,544
234,275 CIGNA Corp. (S) 18,800,569
99,700 Express Scripts, Inc. (NON) 7,396,743
232,100 Medco Health Solutions, Inc. (NON) 9,880,497
14,100 PacifiCare Health Systems, Inc.
(NON) 867,573
75,100 Quest Diagnostics, Inc. 7,157,030
--------------
74,220,928
Homebuilding (0.3%)
- -------------------------------------------------------------------------------
131,400 Lennar Corp. (S) 7,420,158
8,200 NVR, Inc. (NON) 6,488,250
--------------
13,908,408
Household Furniture and Appliances (0.6%)
- -------------------------------------------------------------------------------
444,000 Whirlpool Corp. (S) 30,307,440
Insurance (3.2%)
- -------------------------------------------------------------------------------
1,035,200 ACE, Ltd. (Cayman Islands) 44,927,680
131,000 Allstate Corp. 6,607,640
317,650 American International Group, Inc. 21,057,019
137,500 AON Corp. 3,126,750
288,800 Axis Capital Holdings, Ltd.
(Bermuda) 7,901,568
235,500 Chubb Corp. (The) 17,540,040
45,200 Endurance Specialty Holdings, Ltd.
(Bermuda) 1,554,880
219,400 Lincoln National Corp. 10,123,116
85,400 MBIA, Inc. 5,101,796
87,000 Montpelier Re Holdings, Ltd.
(Bermuda) 3,258,150
468,586 St. Paul Travelers Cos., Inc. (The) 17,590,718
288,700 W.R. Berkley Corp. 13,770,990
85,900 Willis Group Holdings, Ltd.
(Bermuda) 3,322,612
235,350 XL Capital, Ltd. Class A (Cayman
Islands) (S) 17,599,473
--------------
173,482,432
Investment Banking/Brokerage (2.8%)
- -------------------------------------------------------------------------------
1,778,400 JPMorgan Chase & Co. 66,387,672
405,170 Lehman Brothers Holdings, Inc. (S) 36,947,452
356,600 Merrill Lynch & Co., Inc. 21,420,962
511,700 Morgan Stanley 28,634,732
--------------
153,390,818
Leisure (0.2%)
- -------------------------------------------------------------------------------
231,900 Brunswick Corp. 10,695,228
Lodging/Tourism (0.6%)
- -------------------------------------------------------------------------------
1,290,600 Cendant Corp. 30,393,630
4,700 Las Vegas Sands Corp. (NON) 203,980
--------------
30,597,610
Machinery (0.5%)
- -------------------------------------------------------------------------------
140,100 Deere (John) & Co. 9,727,143
234,000 Parker-Hannifin Corp. 15,247,440
--------------
24,974,583
Manufacturing (0.7%)
- -------------------------------------------------------------------------------
207,400 Dover Corp. 7,943,420
384,850 Ingersoll-Rand Co. Class A (Bermuda) 28,625,143
--------------
36,568,563
Media (0.7%)
- -------------------------------------------------------------------------------
122,800 Fox Entertainment Group, Inc. Class
A (NON) 4,132,220
1,274,400 Liberty Media Corp. Class A (NON) 13,304,736
313,600 Time Warner, Inc. (NON) 5,644,800
614,100 Walt Disney Co. (The) (S) 17,581,683
--------------
40,663,439
Medical Technology (0.5%)
- -------------------------------------------------------------------------------
45,800 Baxter International, Inc. 1,546,208
283,300 Boston Scientific Corp. (NON) 9,365,898
292,200 Medtronic, Inc. (S) 15,337,578
--------------
26,249,684
Metals (0.5%)
- -------------------------------------------------------------------------------
409,200 Alcoa, Inc. 12,075,492
253,200 United States Steel Corp. (S) 13,115,760
--------------
25,191,252
Natural Gas Utilities (0.2%)
- -------------------------------------------------------------------------------
259,700 Sempra Energy (S) 9,666,034
Other (0.1%)
- -------------------------------------------------------------------------------
69,455 S&P 500 Index Depositary Receipts
(SPDR Trust Series 1) 8,206,803
Oil & Gas (6.5%)
- -------------------------------------------------------------------------------
291,300 Amerada Hess Corp. (S) 25,241,145
269,200 BP PLC ADR (United Kingdom) 16,049,704
1,733,700 ChevronTexaco Corp. 94,313,280
3,142,700 ExxonMobil Corp. 162,163,320
784,700 Marathon Oil Corp. 30,391,431
399,200 Unocal Corp. 18,989,944
143,200 Valero Energy Corp. 7,450,696
--------------
354,599,520
Pharmaceuticals (2.8%)
- -------------------------------------------------------------------------------
708,000 Abbott Laboratories 31,874,160
112,400 Barr Pharmaceuticals, Inc. (NON) 5,344,620
25,500 Eli Lilly Co. 1,383,120
890,400 Johnson & Johnson 57,608,880
2,327,040 Pfizer, Inc. 56,221,286
88,500 Wyeth 3,507,255
--------------
155,939,321
Photography/Imaging (0.4%)
- -------------------------------------------------------------------------------
1,365,548 Xerox Corp. (NON) (S) 21,684,902
Railroads (0.7%)
- -------------------------------------------------------------------------------
192,900 Canadian National Railway Co.
(Toronto Exchange) (Canada) 11,467,905
197,400 Norfolk Southern Corp. 6,893,208
354,000 Union Pacific Corp. 21,098,400
--------------
39,459,513
Regional Bells (1.3%)
- -------------------------------------------------------------------------------
275,300 BellSouth Corp. 7,223,872
1,768,700 Verizon Communications, Inc. 62,948,033
--------------
70,171,905
Restaurants (0.7%)
- -------------------------------------------------------------------------------
1,267,900 McDonald's Corp. 41,067,281
Retail (2.1%)
- -------------------------------------------------------------------------------
99,200 AutoZone, Inc. (NON) (S) 8,853,600
323,300 Gap, Inc. (The) (S) 7,115,833
275,890 Limited Brands, Inc. (S) 6,538,593
329,100 Lowe's Cos., Inc. (S) 18,755,409
1,803,800 Office Depot, Inc. (NON) 31,187,702
77,100 OfficeMax, Inc. 2,275,221
4,379,000 Rite Aid Corp. (NON) 15,501,660
374,100 Supervalu, Inc. (S) 11,825,301
210,000 Wal-Mart Stores, Inc. (S) 11,004,000
--------------
113,057,319
Software (1.2%)
- -------------------------------------------------------------------------------
469,700 BMC Software, Inc. (NON) 7,905,051
2,750 Computer Associates International, Inc. 74,773
1,270,000 Microsoft Corp. (S) 33,375,600
1,740,200 Oracle Corp. (NON) 23,962,554
338,600 Siebel Systems, Inc. (NON) 2,949,206
--------------
68,267,184
Technology Services (0.1%)
- -------------------------------------------------------------------------------
189,600 Fiserv, Inc. (NON) 7,252,200
Textiles (0.1%)
- -------------------------------------------------------------------------------
123,300 VF Corp. (S) 6,553,395
Tobacco (1.7%)
- -------------------------------------------------------------------------------
1,486,433 Altria Group, Inc. (S) 94,879,018
Toys (0.1%)
- -------------------------------------------------------------------------------
424,300 Mattel, Inc. (S) 8,252,635
Waste Management (0.2%)
- -------------------------------------------------------------------------------
286,200 Republic Services, Inc. 9,436,014
--------------
Total Common stocks
(cost $2,526,700,449) $3,204,249,824
U.S. government and agency mortgage obligations (17.5%) (a)
Principal amount Value
U.S. Government Guaranteed Mortgage Obligations (--%)
- -------------------------------------------------------------------------------
Government National Mortgage Association
Pass-Through Certificates
$613,708 7s, with due dates from August 15,
2029 to October 15, 2031 $655,815
U.S. Government Agency Mortgage Obligations (17.5%)
- -------------------------------------------------------------------------------
Federal Home Loan Mortgage
Corporation
$306,827 8 3/4s, with due dates from May 1,
2009 to June 1, 2009 $325,405
24,500,000 6 1/2s, TBA, March 1, 2035 25,610,156
20,600,000 6 1/2s, TBA, February 1, 2035 21,568,843
108,603,221 6 1/2s, with due dates from January
1, 2024 to November 1, 2034 113,853,519
Federal National Mortgage
Association Pass-Through
Certificates
17,923 11s, with due dates from October 1,
2015 to March 1, 2016 20,081
403,097 9s, with due dates from January 1,
2027 to July 1, 2032 438,624
6,311 8 3/4s, July 1, 2009 6,720
2,017,247 8s, with due dates from August 1,
2026 to July 1, 2033 2,180,736
1,953,857 7 1/2s, with due dates from October
1, 2025 to July 1, 2033 2,094,149
121,410,520 7s, with due dates from April 1,
2023 to December 1, 2034 128,675,335
2,294,751 7s, with due dates from November 1,
2007 to February 1, 2017 2,431,198
20,796,801 6 1/2s, with due dates from June 1,
2023 to October 1, 2034 21,798,332
457,187 6 1/2s, with due dates from July 1,
2010 to May 1, 2011 484,178
158,600,000 6 1/2s, TBA, February 1, 2035 165,960,023
49,464 6s, August 1, 2034 51,137
310,996 6s, with due dates from December 1,
2013 to May 1, 2017 325,885
40,800,000 5 1/2s, TBA, February 1, 2035 41,539,500
565,903 5s, with due dates from March 1,
2019 to August 1, 2019 575,740
353,600,000 5s, TBA, February 1, 2035 352,716,000
75,200,000 5s, TBA, February 1, 2020 76,386,746
39,925 4s, June 1, 2019 39,089
--------------
957,081,396
--------------
Total U.S. government and agency
mortgage obligations (cost $953,465,548) $957,737,211
U.S. government agency obligations (0.3%) (a) (cost $15,874,999)
Principal amount Value
- -------------------------------------------------------------------------------
$14,389,000 Fannie Mae 7 1/4s, January 15, 2010 $16,445,500
U.S. treasury obligations (0.4%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
U.S. Treasury Notes
$16,200,000 4 1/4s, August 15, 2014 $16,354,405
1,450,000 4 1/4s, November 15, 2013 1,466,313
3,005,000 3 1/4s, August 15, 2008 2,979,411
--------------
Total U.S. treasury obligations
(cost $20,845,370) $20,800,129
Asset-backed securities (8.9%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$3,549,251 Aames Mortgage Investment Trust FRN
Ser. 04-1, Class 2A1, 2.87s, 2034 $3,549,251
8,593,500 Aames Mortgage Trust Ser. 03-1,
Class A, Interest Only (IO), 6s,
2005 246,618
2,886,764 ABFS Mortgage Loan Trust Ser. 03-1,
Class A, IO, 4s, 2005 60,890
6,157,000 Ace Securities Corp. Ser. 03-FM1,
Class A, IO, 3 1/2s, 2005 157,619
210,000 Advanta Business Card Master Trust
FRN Ser. 04-C1, Class C, 3.55s,
2013 210,000
1,517,242 Advanta Mortgage Loan Trust Ser.
00-1, Class A4, 8.61s, 2028 1,555,647
Aegis Asset Backed Securities Trust
144A
700,670 Ser. 04-5N, Class Note, 5s, 2034 700,670
303,130 Ser. 04-1N, Class Note, 5s, 2034 303,130
564,206 Ser. 04-2N, Class N1, 4 1/2s, 2034 562,884
781,465 Ser. 04-4N, Class Note, 5s, 2034 781,954
954,748 Ser. 04-6N, Class Note, 4 3/4s, 2034 954,748
4,891,282 AFC Home Equity Loan Trust Ser.
99-2, Class 1A, 2.828s, 2029 4,891,282
10,740,000 American Express Credit Account
Master Trust 144A Ser. 04-C, Class
C, 2.903s, 2012 10,741,675
11,006,057 American Home Mortgage Investment
Trust FRN Ser. 04-3, Class
2A, 3.59s, 2034 10,965,891
4,918,670 American Home Mortgage Investment
Trust FRB Ser. 04-3, Class
3A, 3.71s, 2034 4,910,647
345,543 Ameriquest Finance NIM Trust 144A
Ser. 04-IAN, Class 1A, 5.437s, 2034 345,111
Ameriquest Mortgage Securities, Inc.
12,268,500 Ser. 02-3, Class S, IO, 6s, 2032 70,900
5,013,680 Ser. 03-12, Class S, IO, 5s, 2006 222,056
5,435,934 Ser. 03-6, Class S, IO, 5s, 2033 153,098
5,561,215 Ser. 03-8, Class S, IO, 5s, 2006 219,112
1,346,824 Ameriquest Mortgage Securities, Inc.
144A Ser. 04-RN9, 4.8s, 2034 1,346,824
Amortizing Residential Collateral Trust
3,024,545 Ser. 02-BC1, Class A, IO, 6s, 2005 12,067
4,765,909 Ser. 02-BC3, Class A, IO, 6s, 2005 90,002
AQ Finance NIM Trust 144A
23,000 Ser. 03-N7A, Class Note, 9.07s, 2033 23,004
131,087 Ser. 03-N9A, Class Note, 7.385s, 2033 131,336
63,754 Arc Net Interest Margin Trust Ser.
02-2, Class A, 7 3/4s, 2032 63,648
Arcap REIT, Inc. 144A
1,283,000 Ser. 03-1A, Class E, 7.11s, 2038 1,367,197
1,112,000 Ser. 04-1A, Class E, 6.42s, 2039 1,134,066
Argent NIM Trust 144A
80,440 Ser. 03-N6, Class A, 6.4s, 2034
(Cayman Islands) 80,641
116,037 Ser. 03-N8, Class A, 5.56s, 2034
(Cayman Islands) 116,037
521,865 Ser. 04-WN2, Class A, 4.55s, 2034
(Cayman Islands) 521,865
393,301 Ser. 04-WN4, Class A, 4.459s, 2034
(Cayman Islands) 392,195
523,495 Ser. 04-WN9, Class A, 5 3/4s, 2034
(Cayman Islands) 523,495
Asset Backed Funding Corp. NIM Trust 144A
173,686 Ser. 03-OPT1, Class Note, 6.9s, 2033 173,686
41,569 Ser. 03-WF1, Class N1, 8.35s, 2032 41,569
760,090 Ser. 03-WMC1, Class Note, 6.9s, 2033 761,184
690,431 Ser. 04-0PT1, Class N1, 4.55s, 2033
(Cayman Islands) 685,253
437,255 Ser. 04-0PT5, Class N1, 4 1/2s, 2034
(Cayman Islands) 437,255
1,183,444 Ser. 04-AHL1, Class Note, 5.6s, 2033 1,183,400
1,352,989 Ser. 04-FF1, Class N1, 5s, 2034
(Cayman Islands) 1,348,539
58,000 Ser. 04-FF1, Class N2, 5s, 2034
(Cayman Islands) 53,458
Asset Backed Securities Corp. Home
Equity Loan Trust
7,211,463 Ser. 03-HE5, Class A, IO, 4s, 2033 225,495
416,920 FRB Ser. 04-HE1, Class A3, 2.88s,
2034 417,315
Asset Backed Securities Corp. Home
Equity Loan Trust FRB
1,380,603 Ser. 04-HE9, Class A2, 2.9s, 2034 1,382,381
1,635,000 Ser. 05-HE1, Class A3, 2.88s, 2035 1,634,554
1,017,631 Aviation Capital Group Trust 144A
FRB Ser. 03-2A, Class G1, 3.2s, 2033 1,019,141
210,000 Bank One Issuance Trust FRB Ser.
03-C4, Class C4, 3.51s, 2011 214,184
Bayview Financial Acquisition Trust
10,769,731 Ser. 03-DA, Class A, IO, 4s, 2006 210,346
11,630,558 Ser. 03-E, Class A, IO, 4s, 2006 290,609
40,179,151 Ser. 03-X, Class A, IO, 0.9s, 2006 698,936
4,211,489 Ser. 04-B, Class A1, 2 1/2s, 2039 4,211,489
29,252,071 Ser. 04-D, Class A, IO, 3 1/2s, 2007 1,301,571
4,813,000 FRB Ser. 03-G, Class A1, 3.159s, 2039 4,813,000
3,573,495 FRN Ser. 03-F, Class A, 3.059s, 2043 3,579,424
Bayview Financial Acquisition Trust 144A
5,651,927 Ser. 03-CA, Class A, IO, 4s, 2005 141,637
200,000 FRB Ser. 04-B, Class M2, 3.9s, 2039 200,000
4,831,540 Bayview Financial Acquisition Trust
FRN Ser. 04-D, Class A, 2.949s, 2044 4,831,540
Bayview Financial Asset Trust 144A
78,270,274 Ser. 03-Z, Class AIO1, IO, 0.459s, 2005 213,777
1,548,683 FRB Ser. 03-SSRA, Class A, 3.23s, 2038 1,552,554
1,836,175 FRB Ser. 03-SSRA, Class M, 3.88s, 2038 1,840,766
2,262,838 FRN Ser. 04-SSR1, Class A, 3.13 2039 2,262,838
Bear Stearns Alternate Trust
3,667,432 Ser. 04-11, Class 2A2, 4.968s, 2034 3,724,695
10,485,729 Ser. 04-12, Class 2A2, 5.171s, 2035 10,679,965
1,766,858 Ser. 04-9, Class 1A1, 5.124s, 2007 1,799,007
Bear Stearns Asset Backed Securities
NIM Trust 144A
1,098,323 Ser. 04-FR1, Class A1, 5s, 2034
(Cayman Islands) 1,098,323
708,151 Ser. 04-HE10, Class A1, 4 1/4s, 2034
(Cayman Islands) 708,151
245,000 Ser. 04-HE10, Class A2, 5s, 2034
(Cayman Islands) 245,000
605,229 Ser. 04-HE5N, Class A1, 5s, 2034
(Cayman Islands) 605,229
243,000 Ser. 04-HE5N, Class A2, 5s, 2034
(Cayman Islands) 243,000
692,765 Ser. 04-HE6, Class A1, 5 1/4s, 2034
(Cayman Islands) 693,956
763,978 Ser. 04-HE7N, Class A1, 5 1/4s, 2034
(Cayman Islands) 765,411
319,561 Ser. 04-HE8N, Class A1, 5s, 2034
(Cayman Islands) 319,561
Bear Stearns Asset Backed Securities, Inc.
9,072,800 Ser. 03-AC1, Class A, IO, 5s, 2005 204,748
11,241,000 Ser. 03-AC4, Class A, IO, 5s, 2006 480,797
2,229,000 FRB Ser. 03-3, Class A2, 3.12s, 2043 2,229,000
1,258,017 FRN Ser. 03-1, Class A1, 3.03s, 2042 1,258,015
570,000 Capital One Multi-Asset Execution
Trust FRB Ser. 02-C1, Class
C1, 5.23s, 2010 603,577
646,000 CARMAX Auto Owner Trust Ser. 04-2,
Class D, 3.67s, 2011 641,086
CARSSX Finance, Ltd. 144A
502,970 FRB Ser. 04-AA, Class B3, 5.83s,
2011 (Cayman Islands) 513,992
2,374,557 FRB Ser. 04-AA, Class B4, 7.98s,
2011 (Cayman Islands) 2,437,538
3,105,000 CDO Repackaging Trust Series 144A
FRB Ser. 03-2, Class A, 6.621s,
2008 3,306,825
18,139,500 Centex Home Equity Ser. 04-C, Class
A, IO, 3 1/2s, 2006 493,871
1,730,000 Chase Credit Card Master Trust FRB
Ser. 03-3, Class C, 3.56s, 2010 1,771,890
Chase Funding Net Interest Margin 144A
1,174 Ser. 03-3A, Class Note, 6 7/8s, 2036 1,175
51,761 Ser. 03-5A, Class Note, 5 3/4s, 2034 51,761
36,388 Ser. 03-6A, Class Note, 5s, 2035 36,343
198,111 Ser. 03-C1A, Class Note, 6 3/4s, 2036 198,854
1,359,099 Ser. 04-OPT1, Class Note, 4.458s, 2034 1,357,401
CHEC NIM Ltd., 144A
843,958 Ser. 04-2, Class N1, 4.45s, 2034
(Cayman Islands) 843,909
421,000 Ser. 04-2, Class N2, 8s, 2034
(Cayman Islands) 418,596
169,000 Ser. 04-2, Class N3, 8s, 2034
(Cayman Islands) 145,340
1,060,000 Citibank Credit Card Issuance Trust
FRN Ser. 01-C1, Class C1, 3.74s, 2010 1,079,875
Conseco Finance Securitizations Corp.
8,597,000 Ser. 00-4, Class A6, 8.31s, 2032 7,611,231
4,743,560 Ser. 00-5, Class A4, 7.47s, 2032 4,864,046
3,727,000 Ser. 00-5, Class A6, 7.96s, 2032 3,303,240
6,025,000 Ser. 01-04, Class A4, 7.36s, 2033 6,186,470
7,144,947 Ser. 01-1, Class A4, 6.21s, 2032 7,259,266
2,692,000 Ser. 01-1, Class A5, 6.99s, 2032 2,574,269
6,235,000 Ser. 01-3, Class A4, 6.91s, 2033 6,231,259
2,825,208 Ser. 01-4, Class B1, 9.4s, 2033 381,403
8,387,348 Ser. 02-1, Class A, 6.681s, 2033 8,735,701
4,582,000 Ser. 02-1, Class M2, 9.546s, 2033 2,061,900
8,730,255 Ser. 02-2, Class A, IO, 8 1/2s, 2033 2,353,677
3,061,000 Consumer Credit Reference IDX
Securities 144A FRB Ser. 02-1A,
Class A, 4.521s, 2007 3,109,058
Countrywide Asset Backed
Certificates 144A
130,223 Ser. 03-5NF, Class NF, 6 3/4s, 2034 130,874
567,758 Ser. 04-1NIM, Class Note, 6s, 2034 570,483
3,510,344 Ser. 04-6N, Class N1, 6 1/4s, 2035 3,510,344
795,258 Ser. 04-BC1N, Class Note, 5 1/2s, 2035 793,763
534,523 Countrywide Asset-Backed
Certificates 144A Ser. 04-11N, Class
N, 5 1/4s, 2036 535,525
Countrywide Partnership Trust 144A
876,375 Ser. 04-14N, 5s, 2036 876,638
366,591 Ser. 04-EC1N, Class N, 5 1/4s, 2035 366,408
1,617,000 Crest, Ltd. 144A Ser. 03-2A, Class
D2, 6.723s, 2038 1,699,952
CS First Boston Mortgage Securities
Corp. 144A
18,048,998 Ser. 04-C4, Class AX, IO, 0.08s,
2039 422,509
2,026,832 Ser. 04-FR1N, Class A, 5s, 2034 2,026,832
4,234,000 Ser. 05-6N, Class A, 5 1/4s, 2035 4,219,774
1,469,500 Fieldstone Mortgage Investment Corp.
Ser. 03-1, Class A, IO, 6s, 2005 13,173
649,328 Finance America NIM Trust 144A Ser.
04-1, Class A, 5 1/4s, 2034 649,611
4,880,001 First Chicago Lennar Trust 144A Ser.
97-CHL1, Class D, 7.863s, 2039 5,060,535
1,747,209 First Consumers Master Trust FRN
Ser. 01-A, Class A, 2.79s, 2008 1,738,473
8,305,091 First Franklin Mortgage Loan Asset
Backed Certificates Ser.
03-FFB, Class A, IO, 6s, 2005 156,838
First Franklin NIM Trust 144A
171,626 Ser. 03-FF3A, Class A, 6 3/4s, 2033 170,960
303,730 Ser. 04-FF1, Class N1, 4 1/2s, 2034 302,880
710,833 Ser. 04-FF10, Class N1, 4.45s, 2034
(Cayman Islands) 710,786
907,335 Ser. 04-FF7A, Class A, 5s, 2034 909,331
1,174,324 First Plus Home Loan Trust Ser.
97-3, Class B1, 7.79s, 2023 1,175,058
650,000 Ford Credit Auto Owner Trust Ser.
04-A, Class C, 4.19s, 2009 648,781
616,000 Fort Point CDO, Ltd. FRN Ser. 03-2A,
Class A2, 3.46s, 2038 622,160
2,000,000 Foxe Basin, Ltd. FRB Ser. 03-1A,
Class A1, 2.99s, 2015 2,007,600
Fremont NIM Trust 144A
296,826 Ser. 04-3, Class B, 7 1/2s, 2034 290,979
742,838 Ser. 04-A, Class Note, 4 3/4s, 2034 740,981
524,973 Ser. 04-B, Class Note, 4.703s, 2034 524,973
1,247,105 Ser. 04-D, Class N1, 4 1/2s, 2034 1,251,719
138,274 Ser. 04-D, Class N2, 7 1/2s, 2034 138,412
1,412,745 Fremont Trust 144A Ser. 04-3, Class
A, 4 1/2s, 2034 1,410,344
308,000 G-Star, Ltd. 144A FRN Ser. 02-2A,
Class BFL, 4.53s, 2037 321,798
1,903,750 GE Capital Credit Card Master Note
Trust FRB Ser. 04-2, Class C, 2.96s, 2010 1,903,750
413,481 GE Corporate Aircraft Financing, LLC
144A Ser. 04-1A, Class B, 3.38s, 2018 413,481
8,871,000 GMAC Mortgage Corp. Ser. 04-HE5,
Class A, IO, 6s, 2007 862,428
470,000 Goldentree Loan Opportunities II,
Ltd. 144A FRN Ser. 2A, Class
4, 6.09s, 2015 (Cayman Islands) 478,813
Granite Mortgages PLC
1,619,000 FRB Ser. 04-1, Class 1C, 3.41s, 2044
(United Kingdom) 1,625,071
2,970,000 FRN Ser. 01-1, Class 1C, 4.07s, 2041
(United Kingdom) 2,977,889
Granite Mortgages PLC FRB
1,300,000 Ser. 02-1, Class 1C, 3.97s, 2042
(United Kingdom) 1,320,410
650,000 Ser. 02-2, Class 1C, 3.92s, 2043
(United Kingdom) 660,400
Green Tree Financial Corp.
362,579 Ser. 95-8, Class B1, 7.3s, 2026 273,240
908,502 Ser. 97-4, Class A7, 7.36s, 2029 983,454
722,619 Ser. 97-7, Class A8, 6.86s, 2029 768,686
327,351 Ser. 99-3, Class A5, 6.16s, 2031 330,567
1,137,000 Ser. 99-3, Class A6, 6 1/2s, 2031 1,189,586
16,750,000 Ser. 99-5, Class A5, 7.86s, 2030 15,028,716
4,620,432 Greenpoint Manufactured Housing Ser.
00-3, Class IA, 8.45s, 2031 4,495,680
3,732,000 GS Auto Loan Trust 144A Ser. 04-1,
Class D, 5s, 2011 3,676,393
GSAMP Trust 144A
130,150 Ser. 03-HE1N, Class Note, 7 1/4s,
2033 130,228
395,688 Ser. 04-FM1N, Class Note, 5 1/4s,
2033 395,411
538,877 Ser. 04-HE1N, Class N1, 5s, 2034 537,907
3,956,857 Ser. 04-NIM1, Class N1, 5 1/2s, 2034 3,954,878
1,553,000 Ser. 04-NIM1, Class N2, zero %, 2034 1,148,909
3,683,258 Ser. 04-NIM2, Class N, 4 7/8s, 2034 3,667,420
222,784 Ser. 04-RENM, Class Note, 5 1/2s,
2032 222,784
573,657 Ser. 04-SE2N, Class Note, 5 1/2s,
2034 573,370
2,857,911 High Income Trust Securities 144A
FRB Ser. 03-1A, Class A, 2.76s, 2036 2,772,174
746,000 Holmes Financing PLC FRB Ser. 8,
Class 2C, 3.38s, 2040 (United
Kingdom) 749,357
Holmes Financing PLC FRB
13,365,000 Ser. 1, Class 2C, 3.81s, 2040
(United Kingdom) 13,365,000
870,000 Ser. 4, Class 3C, 3.96s, 2040
(United Kingdom) 881,136
Home Equity Asset Trust 144A
7,842 Ser. 03-4N, Class A, 8s, 2033 7,842
178,183 Ser. 03-5N, Class A, 7 1/2s, 2034 178,628
376,188 Ser. 03-7N, Class A, 5 1/4s, 2034 376,423
526,460 Ser. 04-1N, Class A, 5s, 2034 526,460
636,610 Ser. 04-3N, Class A, 5s, 2034 636,610
471,366 Ser. 04-4N, Class A, 5s, 2034 471,366
1,983,648 Ser. 04-5N, Class A, 5 1/4s, 2034 1,986,127
429,000 Hyundai Auto Receivables Trust Ser.
04-A, Class D, 4.1s, 2011 424,448
1,352,339 IMPAC Secured Assets Corp. Ser.
03-1, Class A, IO, 5s, 2005 25,036
29,383,028 Lehman Manufactured Housing Ser.
98-1, Class 1, IO, 0.811s, 2028 618,689
LNR CDO, Ltd. 144A
5,220,000 FRB Ser. 02-1A, Class FFL, 5.27s,
2037 (Cayman Islands) 5,220,000
2,585,000 FRB Ser. 03-1A, Class EFL, 5.52s,
2036 (Cayman Islands) 2,805,242
Long Beach Asset Holdings Corp. NIM
Trust 144A
12,791 Ser. 03-4, Class N1, 6.535s, 2033 12,791
545,592 Ser. 04-2, Class N1, 4.94s, 2034 545,592
1,471,962 Ser. 04-5, Class Note, 5s, 2034 1,475,200
3,745,000 Ser. 05-1, Class N1, 4.115s, 2035 3,745,000
Long Beach Mortgage Loan Trust
469,908 Ser. 03-2, Class S1, IO, 4 1/4s,
2005 7,697
9,839,200 Ser. 03-2, Class S2, IO, 4 1/4s,
2005 162,610
25,951,509 Ser. 04-3, Class S1, IO, 4 1/2s,
2006 1,346,235
12,975,805 Ser. 04-3, Class S2, IO, 4 1/2s,
2006 673,120
Madison Avenue Manufactured Housing
Contract
205,904,963 Ser. 02-A IO, 0.3s, 2032 2,348,593
4,059,503 FRB Ser. 02-A, Class B1, 5.78s, 2032 2,232,727
Marriott Vacation Club Owner Trust
144A
203,694 Ser. 04-2A, Class C, 4.741s, 2026 201,846
221,406 Ser. 04-2A, Class D, 5.389s, 2026 219,442
2,156,687 FRB Ser. 02-1A, Class A1, 3.2s, 2024 2,176,352
Master Asset Backed Securities NIM
Trust 144A
375,818 Ser. 04-CI3, Class N1, 4.45s, 2034 375,818
1,290,065 Ser. 04-CI5, Class N1, 4.946s, 2034 1,290,065
400,000 Ser. 04-CI5, Class N2, 10s, 2034 399,600
654,782 Ser. 04-HE1, Class A, 5 1/4s, 2034 654,716
1,730,000 MBNA Credit Card Master Note Trust
FRN Ser. 03-C5, Class C5, 3.66s,
2010 1,768,067
6,962,261 Merit Securities Corp. FRB Ser.
11PA, Class 3A1, 3.179s, 2027 6,683,770
Merrill Lynch Mortgage Investors, Inc.
118,679 Ser. 03-WM3N, Class N1, 8s, 2005 118,987
508,069 Ser. 04-OP1N, Class N1, 4 3/4s, 2035
(Cayman Islands) 506,595
Merrill Lynch Mortgage Investors,
Inc. 144A
320,411 Ser. 03-OP1N, Class N1, 7 1/4s, 2034 321,276
240,166 Ser. 03-WM1N, Class N1, 7s, 2033 240,767
285,185 Ser. 04-FM1N, Class N1, 5s, 2035 283,931
423,282 Ser. 04-HE1N, Class N1, 5s, 2006 420,319
912,356 Ser. 04-HE2N, Class N1, 5s, 2035 908,126
77,007 Ser. 04-WM1N, Class N1, 4 1/2s, 2034 76,722
401,357 Ser. 04-WM2N, Class N1, 4 1/2s, 2005 399,832
1,092,422 Ser. 04-WM3N, Class N1, 4 1/2s, 2005 1,088,052
1,050,000 Metris Master Trust FRN Ser. 04-2,
Class C, 3.85s, 2010 1,052,625
1,670,000 Metris Master Trust 144A FRN Ser.
01-2, Class C, 4.42s, 2009 1,667,742
668,000 Metris Master Trust 144A FRB Ser.
04-2, Class D, 5.77s, 2010 672,609
Mid-State Trust
930,444 Ser. 10, Class B, 7.54s, 2036 811,201
491,498 Ser. 11, Class B, 8.221s, 2038 478,368
2,884,648 MMCA Automobile Trust Ser. 02-1,
Class B, 5.37s, 2010 2,902,533
207,327 Morgan Stanley ABS Capital I 144A
Ser. 04-NC2N, Class Note, 6 1/4s,
2033 208,570
3,371,874 Morgan Stanley ABS Capital I FRB
Ser. 04-WMC3, Class A2PT, 2.82s,
2035 3,380,303
215,000 Morgan Stanley Auto Loan Trust Ser.
04-HB2, Class D, 3.59s, 2012 214,437
Morgan Stanley Auto Loan Trust 144A
1,090,000 Ser. 04-HB1, Class D, 5 1/2s, 2011 1,070,925
513,000 Ser. 04-HB2, Class E, 5s, 2012 497,129
Morgan Stanley Dean Witter Capital I
421,079 FRN Ser. 01-NC3, Class B1, 4.98s,
2031 417,090
1,004,714 FRN Ser. 01-NC4, Class B1, 5.03s,
2032 996,593
1,168,000 Navigator CDO, Ltd. 144A FRB Ser.
03-1A, Class A1, 2.766s, 2015 1,175,358
1,734,000 New Century Home Equity Loan Trust
Ser. 03-5, Class AI7, 5.15s, 2033 1,725,856
New Century Mortgage Corp. NIM Trust
144A
169,550 Ser. 03-5, Class Note, 8s, 2033 170,371
229,073 Ser. 03-B, Class Note, 6 1/2s, 2033 229,718
624,000 Newcastle CDO, Ltd. 144A FRB Ser.
3A, Class 4FL, 5.72s, 2038 633,360
16,013 NNIMS 144A Ser. 03-N1, Class Note,
7.385s, 2033 16,049
816,918 Nomura Asset Acceptance Corp. Ser.
04-R3, Class PT, 10.002s, 2035 907,289
802,732 Nomura Asset Acceptance Corp. 144A
Ser. 04-R2, Class PT, IO, 10.118s,
2034 885,012
Novastar NIM Trust 144A
835,826 Ser. 04-N1, Class Note, 4.458s, 2034 835,826
800,251 Ser. 04-N2, Class Note, 4.458s, 2034 800,251
6,041,488 Oakwood Mortgage Investors, Inc.
Ser. 02-C, Class A1, 5.41s, 2032 5,369,070
857,272 Oakwood Mortgage Investors, Inc.
144A Ser. 01-B, Class A4, 7.21s,
2030 817,066
623,000 Oceanstar 144A FRB Ser. 04, Class D,
4.406s, 2034 623,000
Option One Mortgage Securities Corp.
NIM Trust 144A
188,896 Ser. 03-5, Class Note, 6.9s, 2033 189,841
2,268,818 Ser. 04-2A, Class N1, 4.213s, 2034
(Cayman Islands) 2,268,818
3,013,192 Option One Woodbridge Loan Trust
144A Ser. 03-1, Class S, IO, 3.7s,
2005 35,277
431,000 Origen Manufactured Housing Ser.
04-B, Class A2, 3.79s, 2017 422,649
Park Place Securities NIM Trust 144A
410,442 Ser. 04-MCWN1, Class A, 4.458s, 2034 410,955
770,000 Ser. 04-WCW2, Class D, 7.387s, 2034 770,000
2,368,000 Ser. 04-WHQ2, Class A, 4 1/2s, 2035 2,364,448
2,506,114 Park Place Securities, Inc. FRB Ser.
04-WHQ2, Class A3A, 2.88s, 2035 2,508,984
Pass-Through Amortizing Credit Card
Trust
311,411 Ser. 02-1A, Class A3FL, 5.48s, 2012 311,926
523,193 Ser. 02-1A, Class A4FL, 7.98s, 2012 524,030
People's Choice Net Interest Margin
Note 144A
2,517,549 Ser. 04-2, Class A, 5s, 2034 2,523,208
313,000 Ser. 04-2, Class B, 5s, 2034 283,578
Permanent Financing PLC FRB
870,000 Ser. 1, Class 3C, 3.66s, 2042
(United Kingdom) 878,352
1,300,000 Ser. 3, Class 3C, 3.61s, 2042
(United Kingdom) 1,317,680
Pillar Funding PLC 144A
657,000 FRB Ser. 04-1A, Class C1, 3.49s,
2011 (United Kingdom) 660,813
912,000 FRB Ser. 04-2A, Class C, 3.37s, 2011
(United Kingdom) 912,895
Providian Gateway Master Trust 144A
944,000 Ser. 04-DA, Class D, 4.4s, 2011 930,873
1,204,000 FRB Ser. 04-AA, Class D, 4.33s, 2011 1,206,528
1,900,000 FRN Ser. 04-BA, Class D, 3.88s, 2010 1,914,949
701,000 FRN Ser. 04-EA, Class D, 3.41s, 2011 701,187
Renaissance Home Equity Loan Trust
2,369,562 Ser. 03-2, Class A, IO, 3s, 2005 39,394
2,261,414 Ser. 03-4, Class S, IO, 3s, 2006 45,228
790,152 Renaissance NIM Trust 144A Ser.
04-A, Class Note, 4.45s, 2034 790,152
1,092,069 Residential Accredit Loans, Inc.
Ser. 04-QA5, Class A2, 5.004s, 2034 1,108,802
7,577,778 Residential Asset Mortgage Products,
Inc. Ser. 04-RZ2, Class A,
IO, 3 1/2s, 2006 203,653
Residential Asset Securities Corp.
3,271,613 Ser. 02-KS6, Class AIO, IO, 4 1/2s,
2005 11,388
843,750 Ser. 03-KS4, Class AI, IO, 3 1/2s,
2005 14,551
Residential Asset Securities Corp.
144A
1,769,910 Ser. 04-N10B, Class A1, 5s, 2034 1,769,910
1,639,198 Ser. 04-NT, Class Note, 5s, 2034 1,631,002
716,801 Ser. 04-NT12, Class Note, 4.7s, 2035 716,783
Residential Funding Mortgage
Securities II
12,130,648 Ser. 03-HS1, Class AI, IO, 5 1/2s,
2033 319,036
3,446,060 Ser. 03-HS2, Class AI, IO, 5 1/2s,
2005 115,228
5,415,265 Ser. 03-HS3, Class AI, IO, 5s, 2006 159,209
SAIL Net Interest Margin Notes 144A
171,788 Ser. 03-12A, Class A, 7.35s, 2033
(Cayman Islands) 173,505
215,323 Ser. 03-13A, Class A, 6 3/4s, 2033
(Cayman Islands) 216,399
96,977 Ser. 03-3, Class A, 7 3/4s, 2033
(Cayman Islands) 97,705
324,487 Ser. 03-4, Class A, 7 1/2s, 2033
(Cayman Islands) 324,130
112,272 Ser. 03-5, Class A, 7.35s, 2033
(Cayman Islands) 112,240
209,460 Ser. 03-6A, Class A, 7s, 2033
(Cayman Islands) 209,460
127,992 Ser. 03-7A, Class A, 7s, 2033
(Cayman Islands) 127,043
208,287 Ser. 03-8A, Class A, 7s, 2033
(Cayman Islands) 207,238
552,494 Ser. 03-9A, Class A, 7s, 2033
(Cayman Islands) 549,620
274,437 Ser. 03-BC2A, Class A, 7 3/4s, 2033
(Cayman Islands) 273,639
2,719,653 Ser. 04-10A, Class A, 5s, 2034
(Cayman Islands) 2,720,741
3,380,788 Ser. 04-11A, Class A2, 4 3/4s, 2035
(Cayman Islands) 3,381,633
1,737,303 Ser. 04-2A, Class A, 5 1/2s, 2034
(Cayman Islands) 1,737,303
2,249,519 Ser. 04-4A, Class A, 5s, 2034
(Cayman Islands) 2,246,145
350,000 Ser. 04-4A, Class B, 7 1/2s, 2034
(Cayman Islands) 322,665
660,637 Ser. 04-5A, Class A, 4 1/2s, 2034
(Cayman Islands) 659,665
898,813 Ser. 04-7A, Class A, 4 3/4s, 2034
(Cayman Islands) 897,563
139,042 Ser. 04-7A, Class B, 6 3/4s, 2034
(Cayman Islands) 136,733
1,055,022 Ser. 04-8A, Class A, 5s, 2034
(Cayman Islands) 1,055,022
600,668 Ser. 04-8A, Class B, 6 3/4s, 2034
(Cayman Islands) 587,183
2,666,631 Ser. 04-AA, Class A, 4 1/2s, 2034
(Cayman Islands) 2,657,298
535,930 Ser. 04-BN2A, Class A, 5s, 2034
(Cayman Islands) 536,144
271,359 Ser. 04-BNCA, Class A, 5s, 2034
(Cayman Islands) 270,960
36,667 Sasco Net Interest Margin Trust 144A
Ser. 03-AM1, Class A, 7 3/4s, 2033 36,488
165,436 Saxon Net Interest Margin Trust 144A
Ser. 03-A, Class A, 6.656s, 2033 165,436
Sharps SP I, LLC Net Interest Margin
Trust 144A
823,666 Ser. 03-0P1N, Class NA, 4.45s, 2033 822,677
170,426 Ser. 03-HE1N, 6.9s, 2033 171,125
112,459 Ser. 03-NC1N, Class N, 7 1/4s, 2033 112,920
89,772 Ser. 03-TC1N, Class N, 7.45s, 2033 89,772
497,676 Ser. 04-4N, Class Note, 6.65s, 2034 497,079
419,185 Ser. 04-HE1N, Class Note, 4.94s,
2034 419,185
326,995 Ser. 04-HE2N, Class NA, 5.43s, 2034 326,177
290,109 Ser. 04-HS1N, Class Note, 5.92s,
2034 290,109
470,000 South Coast Funding 144A FRB Ser.
3A, Class A2, 3.46s, 2038 476,157
Structured Adjustable Rate Mortgage
Loan Trust
1,363,061 Ser. 04-10, Class 1A1, 4.956s, 2034 1,383,170
3,380,419 Ser. 04-12, Class 1A2, 5.059s, 2034 3,433,487
2,875,665 Ser. 04-14, Class 1A, 5 1/8s, 2034 2,923,886
3,069,215 Ser. 04-16, Class 1A2, 5.041s, 2034 3,117,500
2,804,139 Ser. 04-18, Class 1A1, 5.089s, 2034 2,850,164
7,086,674 Ser. 04-20, Class 1A2, 5.093s, 2034 7,209,520
9,726,100 Ser. 04-6, Class 1A, 4.416s, 2034 9,802,394
93,844 Ser. 04-8, Class 1A3, 4.715s, 2034 94,496
11,483,000 Ser. 05-1, Class 1A1, 5.16s, 2035 11,692,005
3,047,059 Structured Adjustable Rate Mortgage
Loan Trust 144A Ser. 04-NP2, Class
A, 2.88s, 2034 3,047,059
Structured Asset Investment Loan Trust
5,539,614 Ser. 03-BC1, Class A, IO, 6s, 2005 22,097
11,248,961 Ser. 03-BC10, Class A, IO, 6s, 2005 100,869
39,803,174 Ser. 03-BC11, Class A, IO, 6s, 2005 554,536
5,379,865 Ser. 03-BC12, Class A, IO, 6s, 2005 101,597
16,364,571 Ser. 03-BC13, Class A, IO, 6s, 2005 309,039
22,088 Ser. 03-BC1A, Class A, 7 3/4s, 2033 22,157
20,057,494 Ser. 03-BC2, Class A, IO, 6s, 2005 179,855
13,350,701 Ser. 03-BC8, Class A, IO, 6s, 2005 251,384
14,879,333 Ser. 03-BC9, Class A, IO, 6s, 2005 59,364
34,614,710 Ser. 04-1, Class A, IO, 6s, 2005 995,282
25,395,901 Ser. 04-3, Class A, IO, 6s, 2005 855,035
Structured Asset Securities Corp.
3,199,321 Ser. 03-26A, Class 2A, 4.564s, 2033 3,227,942
1,995,783 Ser. 03-40A, Class 1A, 4.955s, 2034 2,022,740
1,808,630 Ser. 04-8, Class 1A1, 4.715s, 2034 1,829,799
6,112,345 Ser. 98-RF3, Class A, IO, 6.1s, 2028 748,762
Structured Asset Securities Corp. 144A
2,800,000 FRB Ser. 03-NP2, Class A2, 3.08s, 2032 2,796,063
573,709 FRN Ser. 03-NP3, Class A1, 3.03s, 2033 573,709
3,199,000 Terwin Mortgage Trust FRB Ser.
04-5HE, Class A1B, 2.95s, 2035 3,196,155
1,698,000 TIAA Real Estate CD0, Ltd. Ser.
03-1A, Class E, 8s, 2038 (Cayman
Islands) 1,644,762
13,388,856 Wells Fargo Home Equity Trust Ser.
04-1, Class A, IO, 6s, 2005 467,731
Wells Fargo Home Equity Trust 144A
935,691 Ser. 04-1N, Class A, 5s, 2034 932,346
2,431,604 Ser. 04-2, Class N1, 4.45s, 2034 2,431,460
862,000 Ser. 04-2, Class N2, 8s, 2034 818,900
5,071,092 Wells Fargo Mortgage Backed
Securities Trust FRB Ser. 04-U,
Class A1, 3.89s, 2034 5,096,447
7,937,599 Wells Fargo Mortgage Backed
Securities Trust Ser. 04-I, Class
1A1, 3.393s, 2034 7,962,404
1,060,000 Westo Ser. 04-3, Class D, 4.07s, 2012 1,055,124
WFS Financial Owner Trust
479,027 Ser. 04-1, Class D, 3.17s, 2011 473,319
421,000 Ser. 04-4, Class D, 3.58s, 2012 416,706
891,000 Ser. 05-1, Class D, 4 1/4s, 2012 889,524
386,038 Whole Auto Loan Trust Ser. 03-1,
Class C, 3.13s, 2010 380,066
Whole Auto Loan Trust 144A
2,020,055 Ser. 03-1, Class D, 6s, 2010 2,012,795
1,471,000 Ser. 04-1, Class D, 5.6s, 2011 1,466,633
--------------
Total Asset-backed securities
(cost $500,483,837) $489,081,343
Corporate bonds and notes (6.6%) (a)
Principal amount Value
Aerospace and Defense (0.2%)
- -------------------------------------------------------------------------------
$145,000 Boeing Capital Corp. sr. notes 6.1s, 2011 $158,559
685,000 Boeing Co. (The) debs. 6 7/8s, 2043 829,875
625,000 Litton Industries, Inc. sr. notes
8s, 2009 719,628
1,270,000 Lockheed Martin Corp. bonds 8 1/2s, 2029 1,771,477
1,115,000 Northrop Grumman Corp. company
guaranty 7 1/8s, 2011 1,277,522
305,000 Raytheon Co. bonds 5 3/8s, 2013 319,147
625,000 Raytheon Co. debs. 7s, 2028 741,637
581,000 Raytheon Co. debs. 6s, 2010 627,568
1,145,000 Raytheon Co. notes 8.3s, 2010 1,348,747
830,000 Raytheon Co. notes 4.85s, 2011 846,581
--------------
8,640,741
Airlines (0.1%)
- -------------------------------------------------------------------------------
4,215,000 Continental Airlines, Inc.
pass-through certificates Ser. 98-2,
6.32s, 2008 4,201,149
Automotive (0.3%)
- -------------------------------------------------------------------------------
2,525,000 DaimlerChrysler NA Holding Corp.
company guaranty 7.2s, 2009 2,797,490
1,080,000 DaimlerChrysler NA Holding Corp.
company guaranty 6 1/2s, 2013 1,174,133
2,120,000 Ford Motor Co. debs. 9.98s, 2047 2,606,650
190,000 Ford Motor Credit Corp. notes
7 3/4s, 2007 200,479
3,835,000 Ford Motor Credit Corp. notes
7 3/8s, 2009 4,083,665
1,295,000 General Motors Acceptance Corp.
bonds 8s, 2031 1,310,524
665,000 General Motors Acceptance Corp.
notes 6 7/8s, 2011 667,771
430,000 General Motors Corp. notes 7.2s,
2011 431,471
520,000 Lear Corp. company guaranty Ser. B,
8.11s, 2009 586,297
--------------
13,858,480
Banking (0.9%)
- -------------------------------------------------------------------------------
1,055,000 Allfirst Financial Inc. sub. notes
7.2s, 2007 1,134,769
320,000 Bank of America Corp. sr. notes
5 3/8s, 2014 337,002
705,000 Bank of America Corp. sub. notes
7.4s, 2011 816,708
405,000 Bank of New York Co., Inc. (The) sr.
sub. notes FRN 3.4s, 2013 393,586
100,000 Bank One Corp. sub. notes 5 1/4s, 2013 103,356
5,449,000 Bank United Corp. notes Ser. A, 8s, 2009 6,209,522
790,000 Barclays Bank PLC 144A FRN 6.86s,
2049 (United Kingdom) 919,965
545,000 Capital One Bank notes 6 1/2s, 2013 598,771
385,000 Capital One Bank notes Ser. BKNT,
4 7/8s, 2008 393,885
470,000 Capital One Bank sr. notes
Ser. BKNT, 6.7s, 2008 506,481
1,925,000 Citigroup, Inc. debs. 6 5/8s, 2028 2,228,111
3,382,000 Citigroup, Inc. sub. notes 5s, 2014 3,433,613
1,035,000 Countrywide Capital III company
guaranty Ser. B, 8.05s, 2027 1,250,354
780,000 Credit Suisse First Boston USA, Inc.
notes 4 7/8s, 2015 776,761
1,620,000 First Chicago NBD Corp. sub. notes
6 3/8s, 2009 1,749,508
935,000 Fleet Capital Trust V bank guaranty
FRN 3.51s, 2028 936,843
2,300,000 HSBC Capital Funding LP 144A bank
guaranty FRB 9.547s, 2049 (Jersey) 2,849,608
1,095,000 National City Bank bonds 4 5/8s,
2013 1,091,756
1,165,000 National City Bank sub. notes
Ser. BKNT, 6 1/4s, 2011 1,277,496
5,540,000 NB Capital Trust IV company guaranty
8 1/4s, 2027 6,232,921
815,000 Nordea Bank Finland PLC sub. notes
6 1/2s, 2009 (Finland) 885,879
2,345,000 PNC Funding Corp. bonds 5 1/4s, 2015 (S) 2,393,225
1,200,000 Popular North America, Inc. sub.
notes 3 7/8s, 2008 1,196,119
80,000 Rabobank Capital Funding II 144A
bonds 5.26s, 2049 82,039
985,000 Rabobank Capital Funding Trust 144A
sub. notes FRN 5.254s, 2049 986,701
400,000 Royal Bank of Scotland Group PLC FRB
7.648s, 2049 (United Kingdom) 503,599
680,000 Royal Bank of Scotland Group PLC FRN
7 3/8s, 2049 (United Kingdom) 707,529
1,270,000 Suncorp-Metway, Ltd. 144A notes FRB
3 1/2s, 2013 (Australia) 1,244,755
3,020,000 UBS AG/Jersey Branch FRN 5.51s, 2008
(United Kingdom) 3,186,100
1,345,000 UBS Preferred Funding Trust I
company guaranty 8.622s, 2049 (S) 1,606,911
2,465,000 Wachovia Bank NA/Old bonds 4 7/8s,
2015 2,477,589
1,835,000 Wachovia Corp. sub. notes 5 1/4s,
2014 (S) 1,895,957
1,010,000 Westpac Capital Trust III 144A sub.
notes FRN 5.819s, 2049 1,066,752
--------------
51,474,171
Beverage (0.1%)
- -------------------------------------------------------------------------------
760,000 Diageo PLC company guaranty 8s, 2022
(United Kingdom) 1,007,366
225,000 Grand Metro Investment Corp. company
guaranty 9s, 2011 282,346
1,380,000 Miller Brewing Co. 144A notes
5 1/2s, 2013 1,450,144
--------------
2,739,856
Broadcasting (0.1%)
- -------------------------------------------------------------------------------
1,355,000 Chancellor Media Corp. company
guaranty 8s, 2008 1,505,958
1,330,000 News America, Inc. 144A bonds 6.2s,
2034 (S) 1,371,975
--------------
2,877,933
Cable Television (0.3%)
- -------------------------------------------------------------------------------
145,000 AT&T Broadband Corp. company
guaranty 8 3/8s, 2013 179,122
730,000 Cox Communications, Inc. notes
7 3/4s, 2010 835,152
2,060,000 Cox Communications, Inc. 144A notes
5.45s, 2014 2,078,635
575,000 Cox Communications, Inc. 144A notes
4 5/8s, 2010 572,553
945,000 Cox Enterprises, Inc. 144A notes 8s,
2007 1,008,675
3,585,000 Jones Intercable, Inc. sr. notes
7 5/8s, 2008 3,941,317
535,000 TCI Communications, Inc. debs. 9.8s,
2012 693,078
1,115,000 TCI Communications, Inc. debs.
8 3/4s, 2015 1,432,046
2,175,000 TCI Communications, Inc. debs.
7 7/8s, 2013 2,620,216
575,000 USA Interactive Corp. notes 7s, 2013 (S) 640,902
--------------
14,001,696
Chemicals (0.2%)
- -------------------------------------------------------------------------------
1,315,000 Dow Chemical Co. (The) debs. 8.55s,
2009 1,529,142
115,000 Dow Chemical Co. (The) notes 6s,
2012 125,989
1,510,000 Dow Chemical Co. (The) Pass Through
Trust 144A company guaranty 4.027s,
2009 1,446,952
685,000 Eastman Chemical Co. notes 3 1/4s,
2008 666,850
450,000 ICI Wilmington, Inc. company
guaranty 5 5/8s, 2013 468,863
1,150,000 ICI Wilmington, Inc. company
guaranty 4 3/8s, 2008 1,154,918
945,000 Lubrizol Corp. (The) sr. notes
5 1/2s, 2014 969,852
365,000 Millennium America, Inc. company
guaranty 9 1/4s, 2008 405,150
730,000 Monsanto Co. notes 4s, 2008 729,491
240,000 Monsanto Co. sr. notes 7 3/8s, 2012 282,512
510,000 Potash Corp. of Saskatchewan notes
7 3/4s, 2011 (Canada) 602,343
465,000 Praxair, Inc. notes 6 3/8s, 2012 (S) 520,416
--------------
8,902,478
Computers (--%)
- -------------------------------------------------------------------------------
695,000 SunGard Data Systems, Inc. bonds
4 7/8s, 2014 679,951
Conglomerates (0.1%)
- -------------------------------------------------------------------------------
1,375,000 Tyco International Group SA company
guaranty 7s, 2028 (Luxembourg) 1,616,036
1,770,000 Tyco International Group SA company
guaranty 6 3/4s, 2011 (Luxembourg) 1,982,793
--------------
3,598,829
Consumer Finance (0.2%)
- -------------------------------------------------------------------------------
760,000 Block Financial Corp. notes 5 1/8s,
2014 754,634
1,710,000 Countrywide Home Loans, Inc. company
guaranty Ser. MTNL, 4s, 2011 1,658,855
1,505,000 Household Finance Corp. notes 8s,
2010 1,764,027
4,025,000 Household Finance Corp. notes 7s,
2012 4,606,769
110,000 Household Finance Corp. notes
4 1/8s, 2009 109,269
1,820,000 HSBC Finance Corp. notes 6 3/4s,
2011 2,042,491
--------------
10,936,045
Consumer Goods (--%)
- -------------------------------------------------------------------------------
1,385,000 Johnson (SC) & Son, Inc. 144A bonds
5 3/4s, 2033 1,444,320
Containers (--%)
- -------------------------------------------------------------------------------
845,000 Sealed Air Corp. 144A bonds 6 7/8s,
2033 936,578
800,000 Sealed Air Corp. 144A notes 5 5/8s,
2013 830,742
--------------
1,767,320
Electric Utilities (0.6%)
- -------------------------------------------------------------------------------
485,000 AEP Texas Central Co. sr. notes
Ser. D, 5 1/2s, 2013 506,284
785,000 AEP Texas North Co. sr. notes
Ser. B, 5 1/2s, 2013 819,588
480,000 Carolina Power & Light Co. 1st mtge.
6 1/8s, 2033 528,215
1,290,000 Cleveland Electric Illuminating Co.
(The) sr. notes 5.65s, 2013 1,336,849
2,410,000 Consumers Energy Co. 1st mtge.
Ser. B, 5 3/8s, 2013 2,507,152
230,000 Consumers Energy Co. 1st. mtge. 5s,
2015 230,458
975,000 Dayton Power & Light Co. (The) 144A
1st mtge. 5 1/8s, 2013 998,723
1,155,000 Duke Capital Corp. sr. notes Ser. A,
6 1/4s, 2005 1,171,051
1,945,000 Exelon Generation Co., LLC sr. notes
6.95s, 2011 (S) 2,193,050
55,000 FirstEnergy Corp. notes Ser. B,
6.45s, 2011 59,686
1,055,000 Florida Power & Light Co. 1st mtge.
5.95s, 2033 1,168,929
490,000 Florida Power & Light Co. 1st mtge.
5 5/8s, 2034 519,595
515,000 Indianapolis Power & Light 144A 1st
mtge. 6.3s, 2013 555,572
2,185,000 Monongahela Power Co. 1st mtge. 5s,
2006 2,216,042
713,000 Nevada Power Co. 2nd mtge. 9s, 2013 823,515
425,000 Nevada Power Co. 144A general ref.
mtge. 5 7/8s, 2015 426,063
1,355,000 NiSource Finance Corp. company
guaranty 7 7/8s, 2010 1,589,243
1,880,000 Northern States Power Co. mtge.
Ser. B, 8s, 2012 2,298,919
820,000 Oncor Electric Delivery Co. sec.
notes 7 1/4s, 2033 1,004,718
1,365,000 Oncor Electric Delivery Co. sec.
notes 6 3/8s, 2012 1,510,596
1,180,000 Pacific Gas & Electric Co. 1st mtge.
6.05s, 2034 1,275,098
550,000 Pacific Gas & Electric Co. 1st mtge.
4.8s, 2014 552,483
370,000 Pacific Gas & Electric Co. 1st.
mtge. 4.2s, 2011 365,817
1,020,000 PacifiCorp Sinking Fund 1st mtge.
5.45s, 2013 1,078,523
825,000 Pepco Holdings, Inc. notes 5 1/2s,
2007 855,749
1,358,438 Power Receivable Finance, LLC 144A
sr. notes 6.29s, 2012 1,422,298
605,000 PP&L Capital Funding, Inc. company
guaranty Ser. D, 8 3/8s, 2007 661,692
570,000 Public Service Company of New Mexico
sr. notes 4.4s, 2008 575,633
915,000 Public Service Electric & Gas Co.
1st mtge. FRN 6 3/8s, 2008 977,680
375,000 Public Services Co. of Colorado sr.
notes Ser. A, 6 7/8s, 2009 413,800
765,000 Rochester Gas & Electric notes
6 3/8s, 2033 852,331
660,000 Tampa Electric Co. notes 6 7/8s,
2012 747,851
445,000 Westar Energy, Inc. 1st mtge. 5.15s,
2017 448,371
560,000 Western Resources, Inc. 1st mtge.
7 7/8s, 2007 605,161
921,000 Western Resources, Inc. sr. notes
9 3/4s, 2007 1,029,218
--------------
34,325,953
Electronics (--%)
- -------------------------------------------------------------------------------
390,000 Motorola, Inc. notes 7 5/8s, 2010 451,932
1,000,000 Motorola, Inc. notes 4.608s, 2007 1,014,651
--------------
1,466,583
Energy (--%)
- -------------------------------------------------------------------------------
548,000 BRL Universal Equipment sec. notes
8 7/8s, 2008 572,660
1,180,000 Schlumberger Technology Corp. 144A
notes 6 1/2s, 2012 1,322,996
--------------
1,895,656
Financial (0.9%)
- -------------------------------------------------------------------------------
3,165,000 Associates First Capital Corp. debs.
6.95s, 2018 3,709,785
4,065,000 Associates First Capital Corp. sub.
debs. 8.15s, 2009 4,720,762
1,250,000 AXA Financial, Inc. sr. notes
7 3/4s, 2010 1,453,459
1,015,000 CIT Group, Inc. sr. notes 7 3/4s,
2012 (S) 1,202,875
465,000 CIT Group, Inc. sr. notes 5s, 2015 465,719
2,575,000 CIT Group, Inc. sr. notes 5s, 2014 2,595,999
1,545,000 Executive Risk Capital Trust company
guaranty Class B, 8.675s, 2027 1,746,083
1,300,000 Fund American Cos. Inc. notes
5 7/8s, 2013 1,334,768
565,000 General Electric Capital Corp. notes
Ser. A, 6 3/4s, 2032 (S) 677,482
830,000 General Electric Capital Corp. notes
Ser. A, 6s, 2012 907,157
955,000 General Electric Capital Corp. notes
Ser. MTNA, 6 1/8s, 2011 1,044,924
600,000 Greenpoint Capital Trust I company
guaranty 9.1s, 2027 686,035
890,000 Hartford Financial Services Group,
Inc. (The) sr. notes 7.9s, 2010 1,025,881
760,000 Heller Financial, Inc. notes 7 3/8s,
2009 860,832
2,630,000 International Lease Finance Corp.
notes 4 3/4s, 2012 2,640,538
1,585,000 International Lease Finance Corp.
notes 4.35s, 2008 1,597,623
765,000 John Hancock Global Funding II 144A
notes 7.9s, 2010 893,251
8,205,000 Liberty Mutual Insurance 144A notes
7.697s, 2097 8,867,587
510,000 Loews Corp. notes 5 1/4s, 2016 507,001
680,000 MetLife, Inc. sr. notes 6 1/8s, 2011 743,360
465,000 Nationwide Financial Services, Inc.
notes 5 5/8s, 2015 476,919
375,000 Nationwide Mutual Insurance Co. 144A
notes 8 1/4s, 2031 478,375
710,000 OneAmerica Financial Partners, Inc.
144A bonds 7s, 2033 781,557
1,515,000 Principal Life Global Funding I 144A
sec. notes 5 1/4s, 2013 1,577,916
865,000 Protective Life Corp. notes 4.3s,
2013 (S) 834,405
795,000 Prudential Financial, Inc. notes
Ser. MTNB, 4 1/2s, 2013 777,077
870,000 Prudential Insurance Co. 144A notes
8.3s, 2025 1,139,617
1,585,000 St. Paul Co., Inc. (The) sr. notes
5 3/4s, 2007 1,644,533
935,000 State Street Capital Trust II notes
FRN 2.79s, 2008 939,016
1,100,000 Steers Delaware Business Trust 144A
notes 5.565s, 2005 1,117,732
2,115,000 Sun Life Canada Capital Trust 144A
company guaranty 8.526s, 2049 2,413,611
565,000 Travelers Property Casualty Corp.
sr. notes 3 3/4s, 2008 557,770
--------------
50,419,649
Food (0.1%)
- -------------------------------------------------------------------------------
1,130,000 ConAgra Foods, Inc. notes 7 7/8s,
2010 1,323,012
690,000 ConAgra Foods, Inc. notes 6 3/4s,
2011 779,185
3,300,000 Kraft Foods, Inc. notes 6 1/4s, 2012 3,630,977
390,000 Tyson Foods, Inc. notes 8 1/4s, 2011 461,843
150,000 Tyson Foods, Inc. notes 7 1/4s, 2006 158,221
--------------
6,353,238
Forest Products and Packaging (0.1%)
- -------------------------------------------------------------------------------
745,000 Georgia-Pacific Corp. sr. notes 8s,
2014 838,125
695,000 International Paper Co. notes 5.3s,
2015 715,311
975,000 Weyerhaeuser Co. debs. 7.95s, 2025 1,231,252
675,000 Weyerhaeuser Co. debs. 7 1/8s, 2023 782,663
1,005,000 Weyerhaeuser Co. notes 6 3/4s, 2012 1,139,332
--------------
4,706,683
Gaming & Lottery (--%)
- -------------------------------------------------------------------------------
810,000 GTECH Holdings Corp. notes 4 3/4s,
2010 814,278
535,000 Park Place Entertainment Corp. sr.
notes 7 1/2s, 2009 595,188
255,000 Park Place Entertainment Corp. sr.
notes 7s, 2013 283,050
--------------
1,692,516
Health Care (--%)
- -------------------------------------------------------------------------------
915,000 HCA, Inc. sr. notes 6.95s, 2012 963,488
Homebuilding (0.1%)
- -------------------------------------------------------------------------------
545,000 D.R. Horton, Inc. company guaranty
8s, 2009 609,156
840,000 D.R. Horton, Inc. sr. notes 5 7/8s,
2013 861,278
20,000 Lennar Corp. company guaranty
Ser. B, 9.95s, 2010 21,325
973,000 Lennar Corp. sr. notes 7 5/8s, 2009 1,086,949
540,000 Pulte Homes, Inc. company guaranty
7 7/8s, 2011 (S) 626,347
575,000 Ryland Group, Inc. (The) notes
5 3/8s, 2015 578,991
--------------
3,784,046
Investment Banking/Brokerage (0.2%)
- -------------------------------------------------------------------------------
1,625,000 Goldman Sachs Group, Inc. (The)
notes 5 1/8s, 2015 1,645,041
1,570,000 Goldman Sachs Group, Inc. (The)
notes 4 3/4s, 2013 (S) 1,560,500
3,050,000 JPMorgan Chase & Co. sub. notes
5 1/8s, 2014 3,107,044
850,000 Lehman Brothers Holdings, Inc. notes
6 5/8s, 2012 952,464
540,000 Merrill Lynch & Co., Inc. notes
Ser. B, 4 3/4s, 2009 548,731
820,000 Morgan Stanley Dean Witter & Co. sr.
notes 6 3/4s, 2011 920,835
--------------
8,734,615
Lodging/Tourism (0.1%)
- -------------------------------------------------------------------------------
2,015,000 Cendant Corp. notes 6 1/4s, 2010 2,166,159
1,015,000 Cendant Corp. sr. notes 7 3/8s, 2013 (S) 1,177,451
1,355,000 Hilton Hotels Corp. notes 8 1/4s,
2011 1,592,193
--------------
4,935,803
Manufacturing (--%)
- -------------------------------------------------------------------------------
265,000 Bunge Ltd. Finance Corp. company
guaranty 7.8s, 2012 315,911
905,000 Bunge Ltd. Finance Corp. company
guaranty 4 3/8s, 2008 907,993
420,000 Bunge Ltd. Finance Corp. notes
5 7/8s, 2013 449,891
--------------
1,673,795
Media (0.2%)
- -------------------------------------------------------------------------------
960,000 AOL Time Warner, Inc. bonds 7 5/8s,
2031 1,182,507
1,330,000 Liberty Media Corp. sr. notes 5.7s,
2013 1,302,081
4,090,000 Time Warner, Inc. debs. 9 1/8s, 2013 5,240,018
--------------
7,724,606
Medical Services (--%)
- -------------------------------------------------------------------------------
515,000 WellPoint, Inc. 144A notes 5s, 2014 518,152
515,000 WellPoint, Inc. 144A notes 4 1/4s,
2009 512,735
--------------
1,030,887
Metals (0.1%)
- -------------------------------------------------------------------------------
685,000 Barrick Gold Corp. bonds 5.8s, 2034
(Canada) 708,829
350,000 Barrick Gold Finance, Inc. notes
4 7/8s, 2014 (Canada) 351,321
1,205,000 Falconbridge, Ltd. bonds 5 3/8s,
2015 (Canada) 1,192,779
595,000 Inco, Ltd. bonds 5.7s, 2015 (Canada) 621,115
575,000 WMC Finance USA company guaranty
6 1/4s, 2033 (Australia) 605,815
995,000 WMC Finance USA company guaranty
5 1/8s, 2013 (Australia) 1,000,994
--------------
4,480,853
Natural Gas Utilities (0.1%)
- -------------------------------------------------------------------------------
860,000 Atmos Energy Corp. notes 4.95s, 2014 856,403
1,060,000 CenterPoint Energy Resources Corp.
notes 7 3/4s, 2011 1,229,073
2,440,000 Duke Energy Field Services, LLC
notes 7 7/8s, 2010 2,840,050
1,860,000 Kinder Morgan, Inc. sr. notes
6 1/2s, 2012 2,051,636
545,000 National Fuel Gas Co. notes 5 1/4s,
2013 557,241
360,000 TGT Pipeline Co. 144A notes 5 1/2s,
2017 364,397
--------------
7,898,800
Oil & Gas (0.2%)
- -------------------------------------------------------------------------------
935,000 Anadarko Finance Co. company
guaranty Ser. B, 6 3/4s, 2011 1,054,740
570,000 Buckeye Partners LP notes 5.3s, 2014 585,175
610,000 Chesapeake Energy Corp. 144A sr.
notes 6 3/8s, 2015 622,200
555,000 Enbridge Energy Partners LP sr.
notes 5.35s, 2014 566,307
1,230,000 Kerr-McGee Corp. company guaranty
6 7/8s, 2011 1,384,960
1,140,000 MidAmerican Energy Holdings Co. sr.
notes 4 5/8s, 2007 1,151,940
245,000 MidAmerican Energy Holdings Co. sr.
notes 3 1/2s, 2008 239,771
1,780,000 Motiva Enterprises, LLC 144A sr.
notes 5.2s, 2012 1,827,425
1,140,000 Ocean Energy, Inc. company guaranty
7 1/4s, 2011 1,305,633
820,000 Petro-Canada, Ltd. bonds 5.35s, 2033
(Canada) 786,299
590,000 Sunoco, Inc. notes 4 7/8s, 2014 587,467
320,000 XTO Energy, Inc. sr. notes 7 1/2s,
2012 375,684
--------------
10,487,601
Pharmaceuticals (0.1%)
- -------------------------------------------------------------------------------
2,935,000 American Home Products Corp. notes
6.95s, 2011 3,293,073
845,000 Bayer Corp. 144A bonds FRB 6.2s,
2008 895,117
860,000 Hospira, Inc. notes 4.95s, 2009 876,850
--------------
5,065,040
Power Producers (--%)
- -------------------------------------------------------------------------------
770,000 Southern California Edison Co. 1st
mtge. 6s, 2034 843,356
985,000 Southern California Edison Co. 1st
mtge. 5s, 2014 1,006,073
280,000 Southern California Edison Co. 1st.
mtge. 5s, 2016 282,485
175,300 York Power Funding 144A notes 12s,
2007 (Cayman Islands) (In default)
(NON) (F) 18
--------------
2,131,932
Railroads (0.1%)
- -------------------------------------------------------------------------------
955,000 CSX Corp. notes 6 3/4s, 2011 1,066,824
385,000 CSX Corp. notes 6 1/4s, 2008 413,396
2,310,000 Norfolk Southern Corp. notes 7.05s,
2037 2,831,647
115,000 Norfolk Southern Corp. sr. notes
6 3/4s, 2011 129,146
870,000 Union Pacific Corp. notes 7 3/8s,
2009 976,963
655,000 Union Pacific Corp. notes 6 5/8s,
2008 706,334
590,000 Union Pacific Corp. 144A
pass-through certificates 5.214s,
2014 598,183
--------------
6,722,493
Real Estate (0.3%)
- -------------------------------------------------------------------------------
650,000 CenterPoint Properties Trust notes
Ser. MTN, 4 3/4s, 2010 654,998
660,000 Colonial Properties Trust notes
6 1/4s, 2014 (R) 706,935
465,000 Developers Diversified Realty Corp.
notes 4 5/8s, 2010 (R) 460,888
1,835,000 Equity One, Inc. company guaranty
3 7/8s, 2009 1,779,758
2,850,000 Franchise Finance Corp. of America
sr. notes 8 3/4s, 2010 (R) 3,512,579
670,000 Heritage Property Investment Trust
company guaranty 5 1/8s, 2014 (R) 649,449
1,690,000 Hospitality Properties Trust notes
6 3/4s, 2013 (R) 1,876,196
530,000 HRPT Properties Trust bonds 5 3/4s,
2014 (R) 548,945
525,000 HRPT Properties Trust notes 6 1/4s,
2016 (R) 561,861
200,000 iStar Financial, Inc. sr. notes
8 3/4s, 2008 (R) 227,468
1,150,000 iStar Financial, Inc. sr. notes 6s,
2010 (R) 1,207,769
520,000 Kimco Realty Corp. notes Ser. MTNC,
5.19s, 2013 (R) 525,506
675,000 Simon Property Group LP notes
5 5/8s, 2014 703,399
1,045,000 Vornado Realty Trust notes 4 3/4s,
2010 1,042,304
--------------
14,458,055
Regional Bells (0.2%)
- -------------------------------------------------------------------------------
200,000 Ameritech Capital Funding company
guaranty 6 1/4s, 2009 212,714
1,020,000 Bellsouth Capital Funding notes
7 3/4s, 2010 1,176,431
685,000 Citizens Communications Co. sr.
notes 6 1/4s, 2013 683,288
440,000 SBC Communications, Inc. notes
5 7/8s, 2012 471,386
740,000 SBC Communications, Inc. notes 5.1s,
2014 745,329
740,000 SBC Communications, Inc. notes
4 1/8s, 2009 734,722
235,000 Verizon Global Funding Corp. notes
7 3/4s, 2030 (S) 297,093
3,970,000 Verizon New England Inc. sr. notes
6 1/2s, 2011 4,371,137
670,000 Verizon Virginia Inc. debs. Ser. A,
4 5/8s, 2013 652,599
770,000 Verzon New Jersey, Inc. debs. 8s,
2022 953,618
--------------
10,298,317
Restaurants (--%)
- -------------------------------------------------------------------------------
580,000 Yum! Brands, Inc. sr. notes 8 7/8s,
2011 712,856
Retail (0.1%)
- -------------------------------------------------------------------------------
1,732,087 CVS Corp. 144A pass-through
certificates 6.117s, 2013 1,831,994
805,000 Federated Department Stores, Inc.
sr. notes 6 5/8s, 2011 (S) 894,668
1,385,000 Fred Meyer, Inc. Holding Co. company
guaranty 7.45s, 2008 1,516,942
275,000 Kroger Co. company guaranty 6 3/4s,
2012 309,990
725,000 Nordstrom, Inc. debs. 6.95s, 2028 836,456
1,190,000 RadioShack Corp. notes 7 3/8s, 2011 1,350,480
--------------
6,740,530
Software (--%)
- -------------------------------------------------------------------------------
980,000 Computer Associates International,
Inc. 144A sr. notes 5 5/8s, 2014 997,276
Technology Services (--%)
- -------------------------------------------------------------------------------
645,000 Fiserv, Inc. notes 4s, 2008 644,530
Telecommunications (0.6%)
- -------------------------------------------------------------------------------
45,000 AT&T Wireless Services, Inc. notes
8 1/8s, 2012 54,354
1,355,000 AT&T Wireless Services, Inc. sr.
notes 8 3/4s, 2031 1,863,676
3,125,000 AT&T Wireless Services, Inc. sr.
notes 7 7/8s, 2011 3,674,066
1,405,000 Deutsche Telekom International
Finance BV bonds 8 1/2s, 2010
(Netherlands) 1,667,541
1,235,000 Deutsche Telekom International
Finance BV company guaranty
8 3/4s, 2030 (Netherlands) 1,665,533
1,540,000 Deutsche Telekom International
Finance BV notes 5 1/4s,
2013 (Netherlands) 1,588,387
535,000 France Telecom notes 9 1/4s, 2031
(France) 743,786
3,335,000 France Telecom notes 7 3/4s, 2011
(France) 3,979,792
1,085,000 Koninklijke (Royal) KPN NV sr.
unsub. notes 8 3/8s, 2030
(Netherlands) 1,441,363
2,105,000 Nextel Communications, Inc. sr.
notes 5.95s, 2014 2,183,938
2,455,000 Sprint Capital Corp. company
guaranty 7 5/8s, 2011 2,836,728
4,420,000 Sprint Capital Corp. company
guaranty 6 7/8s, 2028 4,942,886
1,410,000 Telecom Italia Capital SA company
guaranty 6 3/8s, 2033 (Luxembourg) 1,496,171
1,165,000 Telecom Italia Capital SA company
guaranty 5 1/4s, 2013 (Luxembourg) 1,186,734
1,270,000 Telecom Italia Capital SA 144A
company guaranty 4s, 2010
(Luxembourg) 1,238,301
775,000 United States Cellular Corp. notes
6.7s, 2033 840,040
725,000 Vodafone Group PLC notes 7 7/8s,
2030 (United Kingdom) 960,088
1,005,000 Vodafone Group PLC notes 7 3/4s,
2010 (United Kingdom) 1,159,621
--------------
33,523,005
Telephone (--%)
- -------------------------------------------------------------------------------
270,000 New England Telephone & Telegraph
Co. debs. 7 7/8s, 2029 334,069
845,000 Telefonica Europe BV company
guaranty 8 1/4s, 2030 (Netherlands) 1,163,786
--------------
1,497,855
Waste Management (--%)
- -------------------------------------------------------------------------------
1,245,000 Waste Management, Inc. sr. notes
7 3/8s, 2010 1,422,089
--------------
Total Corporate bonds and notes
(cost $345,511,988) $361,911,719
Collateralized mortgage obligations (6.2%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$664,000 Amresco Commercial Mortgage Funding
I 144A Ser. 97-C1, Class H, 7s,
2029 $693,216
Banc of America Commercial Mortgage,
Inc. 144A
715,000 Ser. 01-PB1, Class K, 6.15s, 2035 754,222
28,852,890 Ser. 04-4, IO, 0.047s, 2042 437,303
612,915 Banc of America Funding Corp. 144A
Ser. 04-NIM1, Class Note, 6s, 2034 612,915
Banc of America Large Loan 144A
427,000 FRN Ser. 02-FL2A, Class L1, 5.4s,
2014 428,252
226,999 FRN Ser. 04-BBA4, Class G, 3.18s,
2018 226,999
142,000 FRN Ser. 04-BBA4, Class H, 3.43s,
2018 142,000
101,540,664 Ser. 03-BBA2, Class X1A, IO, 0.826s,
2015 581,178
1,930,000 Banc of America Structured Security
Trust 144A Ser. 02-X1, Class
A3, 5.436s, 2033 2,005,486
Bayview Commercial Asset Trust 144A
7,304,753 Ser. 04-3, IO, 0.775s, 2035 577,532
11,830,069 Ser. 04-2, IO, 0.72s, 2034 959,807
456,000 Bear Stearns Commercial Mortgage
Securitization Corp. Ser.
00-WF2, Class F, 8.195s, 2032 546,009
Bear Stearns Commercial
Mortgage Securitization Corp. 144A
1,070,000 Ser. 04-ESA, Class K, 4.95s, 2016 1,069,996
793,000 Ser. 04-HS2A, Class G, 3.85s, 2016 792,998
27,833,807 Ser. 04-PWRA, Class X, IO, 0.161s,
2041 260,942
10,867,147 Ser. 04-T16, Class X1, IO, 0.116s,
2046 202,062
41,516,289 Ser. 04-PWR5, Class X1, IO, 0.068s,
2042 819,864
15,671,309 Ser. 04-PWR6, Class X1, IO, 0.067s,
2041 265,315
Chase Commercial Mortgage Securities Corp.
1,821,804 Ser. 00-1, Class A1, 7.656s, 2032 1,853,601
553,000 Ser. 00-3, Class A2, 7.319s, 2032 629,235
Chase Commercial Mortgage Securities
Corp. 144A
4,600,000 Ser. 98-1, Class F, 6.56s, 2030 4,991,339
1,171,000 Ser. 98-1, Class G, 6.56s, 2030 1,267,857
1,761,000 Ser. 98-1, Class H, 6.34s, 2030 1,528,844
34,076,000 Citigroup Commercial Mortgage Trust
144A Ser. 04-C2, Class XC,
IO, 0.082s, 2041 829,271
4,937,500 Commercial Mortgage Acceptance Corp.
Ser. 97-ML1, Class A3, 6.57s, 2030 5,194,076
Commercial Mortgage Acceptance Corp.
144A
2,013,000 Ser. 98-C1, Class F, 6.23s, 2031 2,157,092
705,000 Ser. 98-C2, Class F, 5.44s, 2030 721,397
1,991,000 Commercial Mortgage Pass-Through
Certificates 144A Ser.
01-FL4A, Class D, 3.253s, 2013 1,944,608
9,485,000 Criimi Mae Commercial Mortgage Trust
Ser. 98-C1, Class A2, 7s, 2033 10,089,669
3,385,000 Criimi Mae Commercial Mortgage Trust
144A Ser. 98-C1, Class B, 7s, 2033 3,610,675
CS First Boston Mortgage Securities Corp.
836,000 Ser. 97-C2, Class F, 7.46s, 2035 910,651
40,000,000 Ser. 04-C5, Class A-X, 0.075s, 2037 820,880
CS First Boston Mortgage Securities
Corp. 144A
1,124,000 FRB Ser. 03-TF2A, Class L, 6.48s,
2014 1,117,923
313,000 FRN Ser. 04-TF2A, Class J, 3.43s,
2016 312,999
627,000 FRN Ser. 04-TF2A, Class H, 3.18s,
2019 626,999
63,898,275 Ser. 04-C3, Class AX, IO, 0.07s,
2036 1,086,335
DLJ Commercial Mortgage Corp.
2,212,000 Ser. 00-CF1, Class A1B, 7.62s, 2033 2,535,764
444,188 Ser. 98-CF2, Class B3, 6.04s, 2031 466,020
4,537,000 DLJ Commercial Mortgage Corp. 144A
Ser. 99-CG2, Class B3, 6.1s, 2032 4,755,866
1,000,000 DLJ Mortgage Acceptance Corp. 144A
Ser. 97-CF1, Class A3, 7.76s, 2030 1,066,604
Fannie Mae
552 Ser. 92-15, Class L, IO, 1037.606s,
2022 5,819
2,901,747 Ser. 04-10, Class QC, 18.93s, 2031 3,345,592
1,204,292 Ser. 02-36, Class SJ, 14.081s, 2029 1,271,325
2,292,881 Ser. 03-87, Class SP, 12.052s, 2032 2,360,796
1,203,430 Ser. 04-T3, Class PT1, 9.95s, 2044 1,375,334
456,180 Ser. 02-T12, Class A4, 9 1/2s, 2042 501,810
938,697 Ser. 02-T6, Class A3, 9 1/2s, 2041 1,029,856
527,153 Ser. 03-W6, Class PT1, 9.282s, 2042 593,240
1,207,096 Ser. 04-W12, Class 1A4, 7 1/2s, 2044 1,294,493
3,611,468 Ser. 04-W8, Class 3A, 7 1/2s, 2044 3,875,362
126,632 Ser. 04-T3, Class 1A4, 7 1/2s, 2044 135,829
4,501,896 Ser. 04-W9, Class 2A3, 7 1/2s, 2044 4,825,736
438,654 Ser. 02-T18, Class A4, 7 1/2s, 2042 469,762
2,295,254 Ser. 03-W3, Class 1A3, 7 1/2s, 2042 2,458,055
4,226,197 Ser. 02-T16, Class A3, 7 1/2s, 2042 4,525,366
2,520,387 Ser. 02-T19, Class A3, 7 1/2s, 2042 2,698,449
4,856,506 Ser. 03-W2, Class 1A3, 7 1/2s, 2042 5,202,831
4,196,853 Ser. 02-W6, Class 2A, 7 1/2s, 2042 4,488,970
761,428 Ser. 02-T12, Class A3, 7 1/2s, 2042 814,487
9,367,336 Ser. 02-W4, Class A5, 7 1/2s, 2042 10,024,876
494,504 Ser. 02-W1, Class 2A, 7 1/2s, 2042 526,683
1,418,778 Ser. 02-14, Class A2, 7 1/2s, 2042 1,517,783
4,320,463 Ser. 01-T10, Class A2, 7 1/2s, 2041 4,614,545
833,286 Ser. 02-T4, Class A3, 7 1/2s, 2041 890,234
Fannie Mae
7,491,727 Ser. 02-T6, Class A2, 7 1/2s, 2041 7,998,097
2,698,212 Ser. 01-T12, Class A2, 7 1/2s, 2041 2,883,318
3,065,763 Ser. 01-T8, Class A1, 7 1/2s, 2041 3,270,892
5,484,994 Ser. 01-T7, Class A1, 7 1/2s, 2041 5,846,286
617,003 Ser. 01-T3, Class A1, 7 1/2s, 2040 658,122
1,333,757 Ser. 01-T1, Class A1, 7 1/2s, 2040 1,425,257
385,725 Ser. 99-T2, Class A1, 7 1/2s, 2039 412,425
1,114,804 Ser. 02-T1, Class A3, 7 1/2s, 2031 1,191,687
3,466,579 Ser. 00-T6, Class A1, 7 1/2s, 2030 3,694,920
80,315 Ser. 01-T5, Class A3, 7 1/2s, 2030 85,589
1,652,092 Ser. 02-W7, Class A5, 7 1/2s, 2029 1,768,966
7,928,604 Ser. 01-T4, Class A1, 7 1/2s, 2028 8,511,064
2,480,768 Ser. 02-W3, Class A5, 7 1/2s, 2028 2,653,881
5,657,544 Ser. 03-58, Class ID, IO, 6s, 2033 982,998
19,591,503 Ser. 03-22, Class IO, IO, 6s, 2033 3,368,836
9,403,597 Ser. 03-31, Class IM, IO, 5 3/4s,
2032 799,306
14,749,089 Ser. 03-118, Class SF, IO, 5.57s,
2033 1,737,627
2,609,292 Ser. 02-36, Class QH, IO, 5.52s,
2029 88,660
3,654,367 Ser. 346, Class 2, IO, 5 1/2s, 2033 717,170
25,343,089 Ser. 338, Class 2, IO, 5 1/2s, 2033 5,007,240
4,457,639 Ser. 333, Class 2, IO, 5 1/2s, 2033 880,035
28,229,277 Ser. 329, Class 2, IO, 5 1/2s, 2033 5,533,379
7,508,912 Ser. 331, Class 1, IO, 5 1/2s, 2032 1,276,515
48,300 Ser. 03-29, Class IG, IO, 5 1/2s,
2031 11,965
6,196,889 Ser. 03-8, Class IP, IO, 5 1/2s,
2028 311,803
3,319,592 Ser. 03-42, Class JI, IO, 5 1/2s,
2028 136,933
18,668,947 Ser. 03-15, Class PK, IO, 5 1/2s,
2026 782,229
3,911,425 Ser. 03-6, Class IB, IO, 5 1/2s,
2022 64,513
3,388,855 Ser. 03-24, Class UI, IO, 5s, 2031 534,539
6,421,342 Ser. 343, Class 25, IO, 4 1/2s, 2018 945,141
3,696,431 Ser. 343, Class 26, IO, 4 1/2s, 2018 564,861
17,187,369 Ser. 03-W12, Class 2, IO, 2.217s,
2043 1,071,782
52,859,433 Ser. 03-W10, Class 1, IO, 1.988s,
2043 2,576,897
13,075,110 Ser. 03-W10, Class 3, IO, 1.962s,
2043 653,756
316,461 Ser. 03-W10, Class 1A1, 1.701s, 2032 315,765
54,622,876 Ser. 03-W8, Class 12, IO, 1.641s,
2042 2,602,353
4,259,287 Ser. 03-W3, Class 2IO2, IO, 1.6s,
2042 46,463
22,819,965 Ser. 03-W6, Class 11, IO, 1.599s,
2042 242,536
15,708,518 Ser. 03-W17, Class 12, IO, 1.158s,
2033 512,102
32,454,347 Ser. 03-W8, Class 11, IO, 1.065s,
2042 130,495
26,319,358 Ser. 03-49, Class SV, IO, 1s, 2033 753,692
80,182,964 Ser. 03-T2, Class 2, IO, 0.997s,
2042 1,919,132
21,051,587 Ser. 03-W6, Class 21, IO, 0.898s,
2042 52,542
21,701,593 Ser. 03-W6, Class 51, IO, 0.678s,
2042 397,981
6,670,000 Ser. 03-W3, Class 2IO1, IO, 0.673s,
2042 134,772
50,436,456 Ser. 01-T12, Class IO, 0.569s, 2041 742,706
45,079,642 Ser. 03-W2, Class 1, IO, 0.469s,
2042 582,004
17,271,489 Ser. 02-T4, IO, 0.45s, 2041 191,556
56,744,747 Ser. 03-W3, Class 1, IO, 0.436s,
2042 675,530
41,927,600 Ser. 02-T1, Class IO, IO, 0.425s,
2031 442,814
Fannie Mae
31,380,750 Ser. 03-W6, Class 3, IO, 0.366s,
2042 319,328
33,015,413 Ser. 03-W6, Class 23, IO, 0.352s,
2042 322,965
8,577,432 Ser. 01-79, Class BI, IO, 0.348s,
2045 75,616
30,768,011 Ser. 03-W4, Class 3A, IO, 0.273s,
2042 258,451
16,290,902 Ser. 352, Class 1, PO, zero %, 2034 13,206,449
527,782 Fannie Mae Whole Loan Ser. 04-W14,
Class 2A, 7 1/2s, 2044 564,892
980,795 Federal Home Loan Mortgage Corp.
Structured Pass-Through
Securities Ser. 212, IO, 6s, 2031 168,229
Federal Home Loan Mortgage Corp.
Structured Pass-Through Securities
469,687 Ser. T-42, Class A6, 9 1/2s, 2042 516,466
8,602,879 Ser. T-60, Class 1A3, 7 1/2s, 2044 9,197,338
1,161,315 Ser. T-58, Class 4A, 7 1/2s, 2043 1,241,161
6,698,857 Ser. T-57, Class 1A3, 7 1/2s, 2043 7,167,777
1,358,809 Ser. T-51, Class 2A, 7 1/2s, 2042 1,449,718
815,467 Ser. T-42, Class A5, 7 1/2s, 2042 871,998
20,706,943 Ser. T-56, Class A, IO, 1.285s, 2043 310,604
25,393,662 Ser. T-56, Class 3, IO, 0.346s, 2043 269,173
29,941,070 Ser. T-56, Class 1, IO, 0.286s, 2043 233,840
29,226,819 Ser. T-56, Class 2, IO, 0.038s, 2043 82,127
15,802,000 FFCA Secured Lending Corp. 144A Ser.
00-1, Class A2, 7.77s, 2027 18,089,652
34,506,766 First Union National Bank-Bank of
America Commercial Mortgage
144A Ser. 01-C1, Class 3, IO,
1.746s, 2033 2,875,114
First Union-Lehman Brothers
Commercial Mortgage Trust II
2,726,000 Ser. 97-C2, Class F, 7 1/2s, 2029 3,194,542
4,770,600 Ser. 97-C1, Class A3, 7.38s, 2029 4,995,596
1,364,000 First Union-Lehman Brothers-Bank of
America 144A Ser. 98-C2, Class G,
7s, 2035 1,536,955
Freddie Mac
5,606,076 IFB Ser. 2763, Class SC, 18.68s,
2032 6,492,169
5,128,028 Ser. 2437, Class SB, IO, 5.52s, 2032 506,393
7,242,381 Ser. 2581, Class IE, IO, 5 1/2s,
2025 731,028
3,878,353 Ser. 2553, Class IJ, IO, 5 1/2s,
2020 75,749
6,327,412 Ser. 2828, Class GI, IO, 5.02s, 2034 854,389
4,323,050 Ser. 2469, Class SH, IO, 5.02s, 2032 389,075
16,734,148 Ser. 2869, Class JS, IO, 4.77s, 2034 1,737,917
3,249,111 Ser. 2882, Class SL, IO, 4.72s, 2034 383,565
1,997,902 Ser. 2696, PO, zero %, 2033 1,493,332
927,282 G-Force CDO, Ltd. FRB Ser. 01-1A,
Class A, 3.1s, 2033 (Cayman
Islands) 928,262
G-Force CDO, Ltd. 144A
715,000 Ser. 02-1A, Class E, 8 1/4s, 2037
(Cayman Islands) 742,818
315,000 Ser. 02-1A, Class D, 7.61s, 2037
(Cayman Islands) 343,682
939,000 Ser. 03-1A, Class E, 6.58s, 2038
(Cayman Islands) 948,243
GEBL 144A
818,729 Ser. 04-2, Class D, 5 1/2s, 2034 818,729
306,774 Ser. 04-2, Class C, 5s, 2034 306,774
2,403,721 General Growth Properties-Mall
Properties Trust FRB Ser.
01-C1A, Class D3, 4.73s, 2014 2,406,725
GMAC Commercial Mortgage Securities, Inc.
592,000 Ser. 99-C3, Class F, 7.782s, 2036 640,515
4,072,000 Ser. 04-C2, Class A4, 5.301s, 2038 4,251,168
6,249,000 Ser. 03-C2, Class A2, 5.28s, 2040 6,613,942
GMAC Commercial Mortgage Securities,
Inc. 144A
1,614,303 Ser. 99-C3, Class G, 6.974s, 2036 1,286,630
379,421 FRN Ser. 02-FL1A, Class D, 3.7s,
2014 378,348
Government National Mortgage
Association
3,884,852 Ser. 03-114, Class SP, 12.51s, 2027 4,104,589
7,805,849 Ser. 04-86, Class SW, IO, 4 1/4s,
2034 636,824
241,128 Ser. 98-2, Class EA, PO, zero %,
2028 205,147
32,556,000 Greenwich Capital Commercial Funding
Corp. 144A Ser. 05-GG3, Class XC,
IO, 0.082s, 2042 523,598
GS Mortgage Securities Corp. II 144A
565,000 FRB Ser. 03-FL6A, Class L, 5.73s,
2015 565,706
25,371,759 Ser. 04-GG2, Class XC, IO, 0.088s,
2038 281,468
JP Morgan Chase Commercial Mortgage
Securities Corp. 144A
28,936,710 Ser. 04-FL1A, Class X1A, IO, 0.896s,
2019 300,942
22,075,034 Ser. 04-CBX, Class X1, 0.073s, 2039 426,710
15,933,000 Ser. 04-C3, Class X1, IO, 0.047s,
2042 273,410
LB Commercial Conduit Mortgage Trust
144A
715,303 Ser. 99-C1, Class F, 6.41s, 2031 711,904
765,731 Ser. 99-C1, Class G, 6.41s, 2031 739,725
LB-UBS Commercial Mortgage Trust
144A
23,173,395 Ser. 04-C7, Class XCL, IO, 0.136s,
2036 512,943
23,040,279 Ser. 04-C2, Class XCL, IO, 0.133s,
2036 663,560
59,160,000 Ser. 05, Class C1, IO, 0.124s, 2050 1,296,610
Lehman Brothers Floating Rate
Commercial Mortgage Trust 144A
1,704,000 FRN Ser. 03-LLFA, Class L, 6.2s,
2014 1,681,851
733,000 FRB Ser. 04-LLFA, Class H, 3.43s,
2017 735,785
1,073,050 FRB Ser. 03-C4, Class A, 3.03s, 2015 1,075,733
Merrill Lynch Mortgage Investors, Inc.
644,000 Ser. 98-C3, Class E, 7.143s, 2030 720,628
168,987 Ser. 96-C2, Class A3, 6.96s, 2028 175,283
Merrill Lynch Mortgage Trust 144A
22,251,000 Ser. 04-BPC1, Class XC,IO,, 0.059s,
2041 431,113
32,011,447 Ser. 04-KEY2, Class X-C, IO, 0.05s,
2039 665,238
Mezz Cap Commercial Mortgage Trust
144A
3,212,666 Ser. 04-C1, Class X, IO, 6.18s, 2037 1,428,256
2,525,000 Ser. 04-C2, Class X, IO, 2.594s,
2034 1,007,238
Morgan Stanley Capital I 144A
1,007,000 Ser. 96-C1, Class E, 7.443s, 2028 1,040,517
482,000 Ser. 98-HF1, Class F, 7.18s, 2030 522,828
1,000,000 Ser. 04-RR, Class F5, 6s, 2039 865,262
1,700,000 Ser. 04-RR, Class F6, 6s, 2039 1,415,597
1,117,795 Morgan Stanley Dean Witter Capital I
Ser. 00-LIF2, Class A1, 6.96s, 2033 1,189,603
Morgan Stanley Dean Witter Capital I
144A
450,746 FRB Ser. 01-XLF, Class D, 3.92s,
2013 450,746
637,004 FRB Ser. 01-XLF, Class E, 3.87s,
2013 637,003
1,020,000 Mortgage Capital Funding, Inc. FRB
Ser. 98-MC2, Class E, 7.146s, 2030 1,103,840
PNC Mortgage Acceptance Corp. 144A
3,870,000 Ser. 99-CM1, Class B3, 7.1s, 2032 4,233,575
456,000 Ser. 00-C1, Class J, 6 5/8s, 2010 403,957
998,000 Ser. 00-C2, Class J, 6.22s, 2033 1,039,107
Pure Mortgages 144A
2,645,000 FRB Ser. 04-1A, Class F, 6.132s,
2034 (Ireland) 2,645,000
1,041,000 Ser. 04-1A, Class E, 3.882s, 2034
(Ireland) 1,041,000
1,390,113 Salomon Brothers Mortgage Securities
VII Ser. 96-C1, Class E, 8.384s,
2028 1,438,767
8,934,253 Salomon Brothers Mortgage Securities
VII 144A Ser. 03-CDCA, Class X3CD,
IO, 0.994s, 2015 79,586
1,767,000 Starwood Asset Receivables Trust FRN
Ser. 02-1A, Class F, 3.894s, 2020 1,768,590
Starwood Asset Receivables Trust
144A
589,822 FRB Ser. 03-1A, Class F, 3.63s, 2022 590,589
748,620 FRB Ser. 03-1A, Class E, 3.58s, 2022 749,594
STRIPS 144A
757,000 Ser. 03-1A, Class L, 5s, 2018
(Cayman Islands) 660,861
513,000 Ser. 03-1A, Class M, 5s, 2018
(Cayman Islands) 425,021
337,000 Ser. 04-1A, Class L, 5s, 2018
(Cayman Islands) 296,594
363,210 TIAA Real Estate CDO, Ltd. Ser.
01-C1A, Class A1, 5.77s,
2016 (Cayman Islands) 368,077
22,836,000 Wachovia Bank Commercial Mortgage
Trust 144A Ser. 05-C16, Class XC,
IO, 0.174s, 2041 463,856
--------------
Total Collateralized mortgage
obligations (cost $353,107,641) $338,801,441
Convertible preferred stocks (0.7%) (a)
Number of shares Value
- -------------------------------------------------------------------------------
108,800 Hartford Financial Services Group,
Inc. (The) $3.50 cv. pfd. $6,854,400
102,100 Hartford Financial Services Group,
Inc. (The) $3.00 cv. pfd. 6,330,200
167,548 Xerox Corp. 6.25% cv. pfd. 23,037,850
--------------
Total Convertible preferred stocks
(cost $28,761,250) $36,222,450
Municipal bonds and notes (0.1%) (a)
Principal amount Rating(RAT) Value
- -------------------------------------------------------------------------------
$1,110,000 IL State G.O. Bonds, 5.1s, 6/1/33 Aa3 $1,103,762
1,120,000 NJ State Tpk. Auth. Rev. Bonds,
Ser. B, AMBAC, 4.252s, 1/1/16 Aaa 1,094,330
1,320,000 OR State G.O. Bonds (Taxable
Pension), 5.892s, 6/1/27 Aa3 1,460,791
--------------
Total Municipal bonds and notes
(cost $3,550,000) $3,658,883
Convertible bonds and notes (0.1%) (a) (cost $2,539,477)
Principal amount Value
- -------------------------------------------------------------------------------
$95,600 CenterPoint Energy, Inc. cv. sub
notes FRN 2s, 2029 $3,498,673
Short-term investments (16.2%) (a)
Principal amount Value
- -------------------------------------------------------------------------------
$24,446,999 Barton Capital, LLC 4.92s, February
9, 2005 $24,434,341
20,000,001 Falcon Asset Securitization Corp.
3.36s, February 14, 2005 19,982,523
25,000,000 Ranger Funding Co. 5.14s, February
14, 2005 24,978,063
587,748,901 Putnam Prime Money Market Fund (e) 587,748,901
205,364,694 Short-term investments held as
collateral for loaned
securities with yields ranging from
2.29% to 2.65% and due dates ranging
from February 1, 2005 to March 22,
2005 (d) 205,261,728
--------------
Total Short-term investments
(cost $862,405,556) $862,405,556
- -------------------------------------------------------------------------------
Total Investments
(cost $5,613,246,115) $6,294,812,729
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $5,472,400,375.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to
be the most recent ratings available at January 31, 2005 for the
securities listed. Ratings are generally ascribed to securities at the
time of issuance. While the agencies may from time to time revise such
ratings, they undertake no obligation to do so, and the ratings do not
necessarily represent what the agencies would ascribe to these
securities at January 31, 2005. Securities rated by Putnam are indicated
by "/P". Security ratings are defined in the Statement of Additional
Information.
(NON) Non-income-producing security.
(STP) 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 accruing interest or dividend income at this rate.
(SEG) A portion of this security was pledged and segregated with the
custodian to cover margin requirements for futures contracts at January
31, 2005.
(F) Security is valued at fair value following procedures approved by
the Trustees.
(R) Real Estate Investment Trust.
(S) Securities on loan, in part or in entirety, at January 31, 2005.
(d) See Note 1 to the financial statements.
(e) See Note 5 to the financial statements regarding investments in
Putnam Prime Money Market Fund.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR after the name of a foreign holding stands for American Depositary
Receipts representing ownership of foreign securities on deposit with a
custodian bank.
TBA after the name of a security represents to be announced securities
(Note 1).
AMBAC represents AMBAC Indemnity Corporation.
G.O. Bonds represent General Obligation Bonds.
The rates shown on Floating Rate Bonds (FRB) and Floating Rate Notes
(FRN) are the current interest rates at January 31, 2005.
Forward currency contracts to buy at January 31, 2005 (Unaudited)
(aggregate face value $1,522,185)
Aggregate Delivery Unrealized
Value face value date depreciation
- ------------------------------------------------------------------------------------------------------
Canadian Dollar $754,623 $788,116 4/20/05 $(33,493)
Euro 721,965 734,069 3/16/05 (12,104)
- ------------------------------------------------------------------------------------------------------
$(45,597)
- ------------------------------------------------------------------------------------------------------
Futures contracts outstanding at January 31, 2005 (Unaudited)
Unrealized
Aggregate Expiration appreciation/
Value face value date (depreciation)
- ------------------------------------------------------------------------------------------------------
CBT Interest Rate Swap
10 yr (Long) $1,003,781 $989,465 Mar-05 $14,316
Euro 90 day (Long) 3,638,250 3,647,983 Mar-05 (9,733)
Euro 90 day (Long) 725,475 729,838 Jun-05 (4,363)
Euro 90 day (Long) 723,675 727,175 Sep-05 (3,500)
Euro 90 day (Long) 722,288 724,888 Dec-05 (2,600)
U.S. Treasury Note
5 yr (Short) 676,913,000 676,973,724 Mar-05 60,724
U.S. Treasury Note
30 yr (Long) 152,857,031 150,648,501 Mar-05 2,208,530
U.S. Treasury Note
10 yr (Long) 569,411,250 565,962,779 Mar-05 3,448,471
- ------------------------------------------------------------------------------------------------------
$5,711,845
- ------------------------------------------------------------------------------------------------------
TBA sale commitments outstanding at January 31, 2005 (Unaudited)
(proceeds receivable $152,427,282)
Principal Settlement
Agency amount date Value
- ------------------------------------------------------------------------------------------------------
FNMA 6 1/2s, February 1, 2035 $36,300,000 2/10/05 $37,984,545
FHLMC 6 1/2s, February 1, 2035 24,500,000 2/10/05 25,684,805
FNMA 5 1/2s, February 1, 2035 40,800,000 2/10/05 41,539,500
FNMA 5s, February 1, 2035 47,600,000 2/10/05 47,481,000
- ------------------------------------------------------------------------------------------------------
$152,689,850
- ------------------------------------------------------------------------------------------------------
Interest rate swap contracts outstanding at January 31, 2005 (Unaudited)
Unrealized
Notional Termination appreciation/
amount date (depreciation)
- ------------------------------------------------------------------------------------------------------
Agreement with Bank of America, N.A. dated
January 12, 2005 to receive semi-annually the
notional amount multiplied by 4.106% and pay
quarterly the notional amount multiplied by the
three month USD-LIBOR. $87,100,000 1/14/10 $198,601
Agreement with Bank of America, N.A. dated
December 20, 2004 to pay semi-annually the
notional amount multiplied by 3.965% and receive
quarterly the notional amount multiplied by the
three month USD-LIBOR. 102,075,000 12/22/09 282,381
Agreement with Bank of America, N.A. dated
January 26, 2004 to receive semi-annually the
notional amount multiplied by 5.2125% and pay
quarterly the notional amount multiplied by the
three month USD-LIBOR. 82,772,000 1/28/24 3,481,206
Agreement with Bank of America, N.A. dated
December 2, 2003 to receive semi-annually the
notional amount multiplied by 2.444% and pay
quarterly the notional amount multiplied by the
three month USD LIBOR. 12,822,000 12/5/05 (78,599)
Agreement with Bank of America N.A. dated
December 12, 2003 to pay semi-annually the
notional amount multiplied by 2.1125% and
receive quarterly the notional amount multiplied
by three month USD-LIBOR. 3,280,000 12/16/05 32,245
Agreement with Credit Suisse First Boston
International dated July 7, 2004 to receive
semi-annually the notional amount multiplied
by 2.931% and pay quarterly the notional amount
multiplied by the three month USD-LIBOR. 25,631,800 7/9/06 (176,143)
Agreement with Credit Suisse First Boston
International dated November 15, 2004 to pay
semi-annually the notional amount multiplied by
3.947% and receive quarterly the notional amount
multiplied by the three month USD-LIBOR. 6,600,000 11/17/09 8,301
Agreement with Lehman Brothers Special
Financing, Inc. dated December 5, 2003 to
receive semi-annually the notional amount
multiplied by 2.23762% and pay quarterly the
notional amount multiplied by three month
USD-LIBOR-BBA. 54,516,000 12/9/05 (450,928)
Agreement with Lehman Brothers Special
Financing, Inc. dated January 22, 2004 to pay
semi-annually the notional amount multiplied by
1.999% and receive quarterly the notional amount
multiplied by the three month USD-LIBOR-BBA. 28,852,000 1/26/06 353,026
Agreement with Lehman Brothers Special
Financing, Inc. dated January 21, 2004 to pay
semi-annually the notional amount multiplied by
2.009% and receive quarterly the notional amount
multiplied by the three month USD-LIBOR-BBA. 28,154,000 1/23/06 338,869
Agreement with Lehman Brothers Special
Financing, Inc. dated January 21, 2004 to pay
semi-annually the notional amount multiplied by
2.008% and receive quarterly the notional amount
multiplied by the three month USD-LIBOR-BBA. 28,154,000 1/23/06 338,870
Agreement with Lehman Brothers Special
Financing, Inc. dated January 22, 2004 to pay
semi-annually the notional amount multiplied by
2.007% and receive quarterly the notional amount
multiplied by the three month USD-LIBOR-BBA. 15,124,000 1/26/06 184,019
Agreement with Lehman Brothers Special
Financing, Inc. dated December 11, 2003 to pay s
emi-annually the notional amount multiplied by
4.71% and receive quarterly the notional amount
multiplied by three month USD-LIBOR-BBA. 10,708,000 12/15/13 (248,253)
Agreement with Lehman Brothers Special
Financing, Inc. dated December 12, 2003 to pay
semi-annually the notional amount multiplied by
4.579% and receive quarterly the notional amount
multiplied by three month USD-LIBOR-BBA. 10,192,000 12/16/13 (136,339)
Agreement with Lehman Brothers Special
Financing, Inc. dated January 21, 2004 to pay
semi-annually the notional amount multiplied by
4.408% and receive quarterly the notional amount
multiplied by the three month USD-LIBOR-BBA. 9,307,000 1/23/14 18,069
Agreement with Lehman Brothers Special
Financing, Inc. dated January 21, 2004 to pay
semi-annually the notional amount multiplied by
4.419% and receive quarterly the notional amount
multiplied by the three month USD-LIBOR-BBA. 9,307,000 1/23/14 11,142
Agreement with Lehman Brothers Special
Financing, Inc. dated December 9, 2003 to receive
semi-annually the notional amount multiplied by
4.641% and pay quarterly the notional amount
multiplied by the three month USD-LIBOR-BBA. 3,658,000 12/15/13 66,367
Agreement with Lehman Brothers Special
Financing, Inc. dated December 11, 2003 to pay
semi-annually the notional amount multiplied by
2.235% and receive quarterly the notional amount
multiplied by three month USD-LIBOR-BBA. 2,559,000 12/15/05 21,955
- ------------------------------------------------------------------------------------------------------
$4,244,789
- ------------------------------------------------------------------------------------------------------
Total return swap contracts outstanding at January 31, 2005 (Unaudited)
Unrealized
Notional Termination appreciation/
amount date (depreciation)
- ------------------------------------------------------------------------------------------------------
Agreement with Citigroup Financial Products, Inc.
dated January 25, 2005 to receive at maturity the
notional amount multiplied by the nominal spread
appreciation of the Lehman Brothers AAA 8.5+
Commercial Mortgage Backed Securities Index
adjusted by a modified duration factor and an
accrual of 25 basis points plus the beginning of the
period nominal spread of the Lehman Brothers
AAA 8.5+ Commercial Mortgage Backed Securities
Index and pay at maturity the notional amount
multiplied by the nominal spread depreciation of
the Lehman Brothers AAA 8.5+ Commercial
Mortgage Backed Securities Index adjusted
by a modified duration factor. $24,250,000 7/31/05 $39,110
Agreement with Citigroup Financial Products, Inc.
dated January 25, 2005 to receive at maturity the
notional amount multiplied by the nominal spread
appreciation of the Lehman Brothers AAA
Commercial Mortgage Backed Securities Index
adjusted by a modified duration factor and an
accrual of -5 basis points plus the beginning of the
period nominal spread of the Lehman Brothers
AAA Commercial Mortgage Backed Securities
Index and pay at maturity the notional amount
multiplied by the nominal spread depreciation of
the Lehman Brothers AAA Commercial Mortgage
Backed Securities Index adjusted by a modified
duration factor. 24,250,000 7/31/05 21,847
Agreement with Goldman Sachs Capital Markets,
L.P. dated December 31, 2004 to pay at maturity
the notional amount multiplied by the spread
depreciation of the Lehman Brothers AAA
Commercial Mortgage Backed Securities Index
adjusted by a modified duration factor and receive
at maturity the notional amount multiplied by the
appreciation of the Lehman Brothers AAA
Commercial Mortgage Backed Securities Index
plus 43 basis points. 23,889,179 6/1/05 70,539
Agreement with Goldman Sachs Capital Markets,
L.P. dated October 29, 2004 to receive at maturity
the notional amount multiplied by the nominal spread
appreciation of the Lehman Brothers AAA 8.5+
Commercial Mortgage Backed Securities Index
adjusted by a modified duration factor and an accrual
of 25 basis points plus the beginning of the period
nominal spread of the Lehman Brothers AAA 8.5+
Commercial Mortgage Backed Securities Index and
pay at maturity the notional amount multiplied by
the nominal spread depreciation of the Lehman
Brothers AAA 8.5+ Commercial Mortgage Backed
Securities Index adjusted by a modified
duration factor. 35,307,366 5/1/05 137,503
Agreement with Deutsche Bank AG dated
December 29, 2004 to receive at maturity the
notional amount multiplied by the nominal spread
appreciation of the Lehman Brothers AAA
Commercial Mortgage Backed Securities Index
adjusted by a modified duration factor and an
accrual of 7 basis points plus the beginning of the
period nominal spread of the Lehman Brothers
AAA Commercial Mortgage Backed Securities
Index and pay at maturity the notional amount
multiplied by the nominal spread depreciation of
the Lehman Brothers AAA Commercial Mortgage
Backed Securities Index and an accrual of 7 basis
points plus the beginning of the period nominal
spread of the Lehman Brothers AAA Commercial
Mortgage Backed Securities Index. 18,122,400 4/1/05 49,235
Agreement with Deutsche Bank AG dated
August 10, 2004 to receive at maturity the
notional amount multiplied by the nominal spread
appreciation of the Lehman Brothers AAA
Commercial Mortgage Backed Securities Index
adjusted by a modified duration factor and pay
at maturity notional amount multiplied by the nominal
spread depreciation of the Lehman Brothers AAA
Commercial Mortgage Backed Securities Index
and an accrual of 25 basis points plus the beginning
of the period nominal spread of the Lehman
Brothers AAA Commercial Mortgage Backed
Securities Index. 7,974,900 3/1/05 76,663
Agreement with Goldman Sachs Capital Markets,
L.P. dated December 29, 2004 to pay at maturity
the notional amount multiplied by the spread
depreciation of the Lehman Brothers AAA
Commercial Mortgage Backed Securities Index
adjusted by a modified duration factor and receive
at maturity the notional amount multiplied by the
appreciation of the Lehman Brothers AAA
Commercial Mortgage Backed Securities Index
plus 8 basis points. 174,481,000 7/1/05 468,307
Agreement with Lehman Brothers Special
Financing, Inc. dated August 12, 2004 to
receive/(pay) monthly the notional amount
multiplied by the return of Lehman Brothers
CMBS ERISA-Eligible Index and pay monthly the
one month USD-LIBOR-BBA less 25 basis points. 23,687,125 3/1/05 136,194
- ------------------------------------------------------------------------------------------------------
$999,398
- ------------------------------------------------------------------------------------------------------
Credit default contracts outstanding at January 31, 2005 (Unaudited)
Notional Unrealized
amount appreciation
- ------------------------------------------------------------------------------------------------------
Agreement with Goldman Sachs effective September 2, 2004,
terminating on the date on which the notional amount is reduced
to zero or the date on which the assets securing the reference
obligation are liquidated, the fund receives a payment of the
outstanding notional amount times 2.35% and the fund pays in the
event of a credit default in one of the underlying securities in the
basket of BB CMBS securities. $2,542,815 $125,892
Agreement with Goldman Sachs effective September 2, 2004,
terminating on the date on which the notional amount is reduced
to zero or the date on which the assets securing the reference
obligation are liquidated, the fund receives a payment of the
outstanding notional amount times 2.55625% and the fund pays
in the event of a credit default in one of the underlying securities
in the basket of BB CMBS securities. 2,542,815 74,331
Agreement with Goldman Sachs effective September 2, 2004,
terminating on the date on which the notional amount is reduced
to zero or the date on which the assets securing the reference
obligation are liquidated, the fund receives a payment of the
outstanding notional amount times 2.4625% and the fund pays
in the event of a credit default in one of the underlying securities
in the basket of BB CMBS securities. 1,271,407 58,236
Agreement with Goldman Sachs effective September 2, 2004,
terminating on the date on which the notional amount is reduced
to zero or the date on which the assets securing the reference
obligation are liquidated, the fund receives a payment of the
outstanding notional amount times 2.433% and the fund pays
in the event of a credit default in one of the underlying securities
in the basket of BB CMBS securities. 953,556 41,885
Agreement with Goldman Sachs effective September 2, 2004,
terminating on the date on which the notional amount is reduced
to zero or the date on which the assets securing the reference
obligation are liquidated, the fund receives a payment of the
outstanding notional amount times 2.475% and the fund pays
in the event of a credit default in one of the underlying securities
in the basket of BB CMBS securities. 635,704 25,445
Agreement with Goldman Sachs effective September 2, 2004,
terminating on the date on which the notional amount is reduced
to zero or the date on which the assets securing the reference
obligation are liquidated, the fund receives a payment of the
outstanding notional amount times 2.5% and the fund pays in the
event of a credit default in one of the underlying securities in the
basket of BB CMBS securities. 317,852 20,221
Agreement with Goldman Sachs effective September 2, 2004,
terminating on the date on which the notional amount is reduced
to zero or the date on which the assets securing the reference
obligation are liquidated, the fund receives a payment of the
outstanding notional amount times 2.6% and the fund pays in the
event of a credit default in one of the underlying securities in the
basket of BB CMBS securities. 317,852 2,571
Agreement with Bank of America effective January 31, 2005,
maturing on March 20, 2010, to receive a premium based on the
difference between the original spread on issue and the market
spread on day of execution and receive quarterly 18.5 basis points
time the notional amount. Upon a credit default event of a reference
entity (FNMA 5.375, 11/15/11), the fund makes a payment of the
proportional notional amount times the difference between the
par value and the then-market value of the reference entity. 32,000,000 --
Agreement with Lehman Brothers effective January 05, 2005
maturing on March 20, 2010, to pay a premium based on the
difference between the original spread on issue and the market
spread on day of execution and receive quarterly 105 basis points
times the notional amount. Upon a credit default event of a reference
entity within IG CDX HVOL Series 3 Index, the fund makes a
payment of the proportional notional amount times the difference
between the par value and the then-market value of the reference
entity within the IG CDX HVOL Series 3 Index. 17,000,000 78,346
Agreement with Lehman Brothers effective January 05, 2005
maturing on March 20, 2015, to pay a premium based on the
difference between the original spread on issue and the market
spread on day of execution and receive quarterly 70 basis points
time the notional amount. Upon a credit default event of a reference
entity within CDX BB HY Series 3 Index, the fund makes a payment
of the proportional notional amount times the difference between
the par value and the then-market value of the reference entity
within the CDX BB HY Series 3 Index. 13,000,000 (7,672)
Agreement with Lehman Brothers effective January 20, 2005,
maturing on March 20, 2015, to pay quarterly 224 basis points times
the notional amount. Upon a credit default event of any reference
entity within DJ IG CDX Series 3 Index that the counterparties
agree encroaches the 7-10 Loss Basket of the Index, the fund receives
a payment of the proportional notional amount times the difference
between the par value and the then-market value of the reference
entity within the DJ IG CDX Series 3 Index. 2,227,000 (48,806)
Agreement with Bank of America, N.A. effective November 24,
2004, maturing on April 15, 2010, to receive a premium equal to
2.583% times the notional amount. Upon a credit default event of
any News Corp. senior note or bond the fund makes a payment of
the proportional notional amount times the difference between the
par value and the then-market value of the defaulted News Corp.
senior note or bond. 580,000 (76)
Agreement with Bank of America, N.A. effective August 11, 2004,
maturing on April 15, 2010, to receive a premium equal to 4.418%
times the notional amount. Upon a credit default event of News
Corp. the fund makes a payment of the proportional notional
amount times the difference between the par value and the
then-market value of News Corp. 2,120,000 (37,261)
Agreement with Merrill Lynch International effective July 1, 2004,
maturing on July 1, 2007, to receive a premium equal to 1.441%
times the notional amount. Upon a credit default event of
Consolidated Natural Gas, 6.625%, December 12, 2008, the
fund makes a payment of the proportional notional amount times
the difference between the par value and the then-market value of
Consolidated Natural Gas, 6.625%, December 12, 2008. 4,410,000 (40,849)
- ------------------------------------------------------------------------------------------------------
$292,263
- ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of assets and liabilities
January 31, 2005 (Unaudited)
Assets
- -------------------------------------------------------------------------------
Investment in securities, at value, including $199,255,937 of securities
on loan (Note 1):
- -------------------------------------------------------------------------------
Unaffiliated issuers (identified cost $5,025,497,214) $5,707,063,828
- -------------------------------------------------------------------------------
Affiliated issuers (identified cost $587,748,901) (Note 5) 587,748,901
- -------------------------------------------------------------------------------
Cash 22,437,624
- -------------------------------------------------------------------------------
Dividends, interest and other receivables 18,110,117
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 12,094,497
- -------------------------------------------------------------------------------
Receivable for securities sold 717,214,422
- -------------------------------------------------------------------------------
Receivable for open swap contracts (Note 1) 6,334,449
- -------------------------------------------------------------------------------
Receivable for open credit default contracts (Note 1) 364,286
- -------------------------------------------------------------------------------
Receivable for variation margin (Note 1) 821,948
- -------------------------------------------------------------------------------
Total assets 7,072,190,072
Liabilities
- -------------------------------------------------------------------------------
Payable for securities purchased 1,200,703,086
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 29,644,665
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Notes 2 and 5) 6,547,811
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 707,273
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 365,715
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 10,159
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,805,698
- -------------------------------------------------------------------------------
Payable for open swap contracts (Note 1) 1,090,262
- -------------------------------------------------------------------------------
Payable for closed swap contracts (Note 1) 8,600
- -------------------------------------------------------------------------------
Payable for open forward contracts (Note 1) 45,597
- -------------------------------------------------------------------------------
TBA sales commitments, at value (proceeds receivable
$152,427,282) (Note 1) 152,689,850
- -------------------------------------------------------------------------------
Credit default contracts outstanding, at value (proceeds
receivable $172,197) (Note 1) 94,010
- -------------------------------------------------------------------------------
Collateral on securities loaned, at value (Note 1) 205,261,728
- -------------------------------------------------------------------------------
Other accrued expenses 815,243
- -------------------------------------------------------------------------------
Total liabilities 1,599,789,697
- -------------------------------------------------------------------------------
Net assets $5,472,400,375
Represented by
- -------------------------------------------------------------------------------
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) $4,973,120,272
- -------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 11,515,229
- -------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (Note 1) (204,992,757)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments and foreign
currency transactions 692,757,631
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $5,472,400,375
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($3,384,416,069 divided by 189,012,743 shares) $17.91
- -------------------------------------------------------------------------------
Offering price per class A share (100/94.75 of $17.91)* $18.90
- -------------------------------------------------------------------------------
Net asset value and offering price per class B share
($1,027,872,569 divided by 57,997,601 shares)** $17.72
- -------------------------------------------------------------------------------
Net asset value and offering price per class C share
($75,812,318 divided by 4,258,908 shares)** $17.80
- -------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($216,153,589 divided by 12,189,698 shares) $17.73
- -------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $17.73)* $18.37
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class R share ($508,911 divided by 28,475 shares) $17.87
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class Y share ($767,636,919 divided by 42,753,935 shares) $17.95
- -------------------------------------------------------------------------------
* 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.
Statement of operations
Six months ended January 31, 2005 (Unaudited)
Investment income:
- -------------------------------------------------------------------------------
Dividends (net of foreign tax of $50,530) $42,521,238
- -------------------------------------------------------------------------------
Interest (including interest income of $3,796,631 from
investments in affiliated issuers) (Notes 2 and 5) 35,009,383
- -------------------------------------------------------------------------------
Securities lending 69,396
- -------------------------------------------------------------------------------
Total investment income 77,600,017
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 13,464,139
- -------------------------------------------------------------------------------
Investor servicing fees (Note 2) 7,172,700
- -------------------------------------------------------------------------------
Custodian fees (Note 2) 341,135
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 57,526
- -------------------------------------------------------------------------------
Administrative services (Note 2) 44,827
- -------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 4,235,315
- -------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 5,377,454
- -------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 381,770
- -------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 828,698
- -------------------------------------------------------------------------------
Distribution fees -- Class R (Note 2) 703
- -------------------------------------------------------------------------------
Other 964,577
- -------------------------------------------------------------------------------
Non-recurring costs (Notes 2 and 6) 164,275
- -------------------------------------------------------------------------------
Costs assumed by manager (Notes 2 and 6) (164,275)
- -------------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 5) (290,709)
- -------------------------------------------------------------------------------
Total expenses 32,578,135
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (857,439)
- -------------------------------------------------------------------------------
Net expenses 31,720,696
- -------------------------------------------------------------------------------
Net investment income 45,879,321
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 209,647,034
- -------------------------------------------------------------------------------
Net realized gain on swap contracts (Note 1) 7,886,566
- -------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 23,225,063
- -------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 167,141
- -------------------------------------------------------------------------------
Net realized gain on credit default contracts (Note 1) 166,854
- -------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in
foreign currencies during the period 175,265
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments, futures
contracts, swap contracts, credit default contracts, and TBA
sale commitments during the period 78,048,493
- -------------------------------------------------------------------------------
Net gain on investments 319,316,416
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $365,195,737
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of changes in net assets
Six months ended Year ended
January 31 July 31
Decrease in net assets 2005* 2004
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $45,879,321 $106,369,812
- -------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions 241,092,658 226,073,390
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments 78,223,758 238,880,235
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 365,195,737 571,323,437
- -------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- -------------------------------------------------------------------------------
From net investment income
Class A (30,251,572) (71,321,677)
- -------------------------------------------------------------------------------
Class B (5,758,205) (15,606,522)
- -------------------------------------------------------------------------------
Class C (405,080) (1,081,609)
- -------------------------------------------------------------------------------
Class M (1,462,034) (3,563,743)
- -------------------------------------------------------------------------------
Class R (2,031) (455)
- -------------------------------------------------------------------------------
Class Y (8,541,217) (21,369,832)
- -------------------------------------------------------------------------------
Redemption fees (Note 1) 5,062 2,271
- -------------------------------------------------------------------------------
Decrease from capital share transactions
(Notes 4 and 7) (405,095,165) (1,204,253,202)
- -------------------------------------------------------------------------------
Total decrease in net assets (86,314,505) (745,871,332)
Net assets
- -------------------------------------------------------------------------------
Beginning of period 5,558,714,880 6,304,586,212
- -------------------------------------------------------------------------------
End of period (including undistributed net
investment income of $11,515,229 and
$12,056,047, respectively) $5,472,400,375 $5,558,714,880
- -------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
January 31
Per-share (Unaudited) Year ended July 31
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.91 $15.72 $15.02 $17.24 $15.77 $18.49
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .16 (d) .32 (d) .37 .45 .52 .55
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.00 1.20 .81 (2.17) 1.49 (1.44)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.16 1.52 1.18 (1.72) 2.01 (.89)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.16) (.33) (.48) (.48) (.53) (.58)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.02) (.01) (1.25)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.16) (.33) (.48) (.50) (.54) (1.83)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.91 $16.91 $15.72 $15.02 $17.24 $15.77
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 6.87* 9.77 8.06 (10.20) 12.86 (5.09)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,384,416 $3,322,532 $3,784,601 $2,990,984 $3,176,287 $3,030,281
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .52*(d) 1.00 (d) .99 .96 .92 .93
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .89*(d) 1.90 (d) 2.50 2.75 3.11 3.32
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 84.65* 165.66 121.38 (f)(g) 131.89 (f) 333.46 140.92
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of
the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(c) Includes amounts paid through brokerage service and expense offset
arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
January 31, 2005 and July 31, 2004 reflect a reduction of 0.01% and less
than 0.01%, respectively, of the average net assets of class A shares
(Note 5).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
(g) Portfolio turnover excludes the impact of assets received from the
acquisition of Putnam Balanced Fund and Putnam Balanced Retirement Fund.
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
January 31
Per-share (Unaudited) Year ended July 31
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.73 $15.56 $14.87 $17.07 $15.62 $18.33
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .09 (d) .19 (d) .26 .33 .39 .42
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .99 1.19 .80 (2.15) 1.48 (1.43)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.08 1.38 1.06 (1.82) 1.87 (1.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.09) (.21) (.37) (.36) (.41) (.45)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.02) (.01) (1.25)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.21) (.37) (.38) (.42) (1.70)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.72 $16.73 $15.56 $14.87 $17.07 $15.62
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 6.48* 8.88 7.25 (10.86) 12.02 (5.82)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,027,873 $1,095,665 $1,308,605 $1,068,667 $1,199,676 $1,175,947
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .90*(d) 1.75 (d) 1.74 1.71 1.67 1.68
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .52*(d) 1.16 (d) 1.75 2.00 2.36 2.57
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 84.65* 165.66 121.38 (f)(g) 131.89 (f) 333.46 140.92
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of
the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(c) Includes amounts paid through brokerage service and expense offset
arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
January 31, 2005 and July 31, 2004 reflect a reduction of 0.01% and less
than 0.01%, respectively, of the average net assets of class B shares
(Note 5).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
(g) Portfolio turnover excludes the impact of assets received from the
acquisition of Putnam Balanced Fund and Putnam Balanced Retirement Fund.
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
January 31
Per-share (Unaudited) Year ended July 31
- ---------------------------------------------------------------------------------------------------------------------------------
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.81 $15.63 $14.94 $17.16 $15.71 $18.49
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (a) .09 (d) .19 (d) .26 .33 .39 .42
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .99 1.20 .80 (2.16) 1.49 (1.44)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.08 1.39 1.06 (1.83) 1.88 (1.02)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.09) (.21) (.37) (.37) (.42) (.51)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.02) (.01) (1.25)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.09) (.21) (.37) (.39) (.43) (1.76)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.80 $16.81 $15.63 $14.94 $17.16 $15.71
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 6.46* 8.92 7.25 (10.88) 12.02 (5.82)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $75,812 $75,185 $91,282 $53,186 $37,453 $20,642
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .90*(d) 1.75 (d) 1.74 1.71 1.67 1.68
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) .52*(d) 1.16 (d) 1.73 1.99 2.32 2.60
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 84.65* 165.66 121.38 (f)(g) 131.89 (f) 333.46 140.92
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during the
period.
(b) Total return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(c) Includes amounts paid through brokerage service and expense offset
arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
January 31, 2005 and July 31, 2004 reflect a reduction of 0.01% and less
than 0.01%, respectively, of the average net assets of class C shares
(Note 5).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
(g) Portfolio turnover excludes the impact of assets received from the
acquisition of Putnam Balanced Fund and Putnam Balanced Retirement Fund.
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS M
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
January 31
Per-share (Unaudited) Year ended July 31
- ---------------------------------------------------------------------------------------------------------------------------------
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.74 $15.57 $14.87 $17.08 $15.63 $18.33
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .11 (d) .23 (d) .30 .37 .43 .46
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .99 1.19 .80 (2.16) 1.48 (1.42)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.10 1.42 1.10 (1.79) 1.91 (.96)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.11) (.25) (.40) (.40) (.45) (.49)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.02) (.01) (1.25)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.11) (.25) (.40) (.42) (.46) (1.74)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.73 $16.74 $15.57 $14.87 $17.08 $15.63
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 6.62* 9.18 7.58 (10.69) 12.31 (5.52)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $216,154 $217,046 $239,662 $222,176 $252,802 $223,246
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .77*(d) 1.50 (d) 1.49 1.46 1.42 1.43
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .65*(d) 1.40 (d) 2.02 2.25 2.60 2.82
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 84.65* 165.66 121.38 (f)(g) 131.89 (f) 333.46 140.92
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of
the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(c) Includes amounts paid through brokerage service and expense offset
arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
January 31, 2005 and July 31, 2004 reflect a reduction of 0.01% and less
than 0.01%, respectively, of the average net assets of class M shares
(Note 5).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
(g) Portfolio turnover excludes the impact of assets received from the
acquisition of Putnam Balanced Fund and Putnam Balanced Retirement Fund.
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS R
- ---------------------------------------------------------------------------------------------
For the
Six months period
ended Year January 21,
January 31 ended to 2003+
Per-share (Unaudited) July 31 July 31
operating performance 2005 2004 2003
- ---------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.89 $15.70 $15.05
- ---------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------
Net investment income (a) .12 (d) .21 (d) .17
- ---------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.01 1.29 .65
- ---------------------------------------------------------------------------------------------
Total from investment operations 1.13 1.50 .82
- ---------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------
From net investment income (.15) (.31) (.17)
- ---------------------------------------------------------------------------------------------
Total distributions (.15) (.31) (.17)
- ---------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) --
- ---------------------------------------------------------------------------------------------
Net asset value, end of period $17.87 $16.89 $15.70
- ---------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 6.71* 9.60 5.52*
- ---------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $509 $127 $1
- ---------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .64*(d) 1.25 (d) .65*
- ---------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .66*(d) 1.33 (d) 1.18*
- ---------------------------------------------------------------------------------------------
Portfolio turnover (%) 84.65* 165.66 121.38 (f)(g)
- ---------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income has been determined on the basis of the weighted average
number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through brokerage service and expense offset arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with investments in Putnam
Prime Money Market Fund during the period. As a result of such waivers, the expenses
of the fund for the periods ended January 31, 2005 and July 31, 2004 reflect a reduction
of 0.01% and less than 0.01%, respectively, of the average net assets of class R
shares (Note 5).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes certain treasury note transactions executed in connection
with a short-term trading strategy.
(g) Portfolio turnover excludes the impact of assets received from the acquisition of
Putnam Balanced Fund and Putnam Balanced Retirement Fund.
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS Y
- ---------------------------------------------------------------------------------------------------------------------------------
Six months
ended
January 31
Per-share (Unaudited) Year ended July 31
operating performance 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.95 $15.76 $15.05 $17.28 $15.80 $18.53
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income (a) .18 (d) .36 (d) .41 .49 .56 .60
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.00 1.21 .82 (2.17) 1.50 (1.46)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.18 1.57 1.23 (1.68) 2.06 (.86)
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.18) (.38) (.52) (.53) (.57) (.62)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.02) (.01) (1.25)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.18) (.38) (.52) (.55) (.58) (1.87)
- ---------------------------------------------------------------------------------------------------------------------------------
Redemption fees -- (e) -- (e) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.95 $16.95 $15.76 $15.05 $17.28 $15.80
- ---------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 6.99* 10.03 8.38 (10.01) 13.18 (4.89)
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $767,637 $848,161 $880,435 $731,900 $768,075 $621,363
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .39*(d) .75 (d) .74 .71 .67 .68
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.03*(d) 2.16 (d) 2.76 3.00 3.35 3.57
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 84.65* 165.66 121.38 (f)(g) 131.89 (f) 333.46 140.92
- ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Per share net investment income has been determined on the basis of
the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(c) Includes amounts paid through brokerage service and expense offset
arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with
investments in Putnam Prime Money Market Fund during the period. As a
result of such waivers, the expenses of the fund for the periods ended
January 31, 2005 and July 31, 2004 reflect a reduction of 0.01% and less
than 0.01%, respectively, of the average net assets of class Y shares
(Note 5).
(e) Amount represents less than $0.01 per share.
(f) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
(g) Portfolio turnover excludes the impact of assets received from the
acquisition of Putnam Balanced Fund and Putnam Balanced Retirement Fund.
The accompanying notes are an integral part of these financial
statements.
Notes to financial statements
January 31, 2005 (Unaudited)
Note 1
Significant accounting policies
The George Putnam Fund of Boston ("the fund"), a Massachusetts business
trust, 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 comprised 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 C, class M, class R and class Y
shares. Class A shares are sold with a maximum front-end sales charge of
5.25%. Class B shares, which convert to class A shares after
approximately eight years, do not pay a front-end sales charge but pay a
higher ongoing distribution fee than class A, class M and class R
shares, and are subject to a contingent deferred sales charge, if those
shares are redeemed within six years of purchase. Class C shares are
subject to the same fees and expenses as class B shares, except that
class C shares have a one-year 1.00% contingent deferred sales charge
and do not convert to class A shares. Class M shares are sold with a
maximum front-end sales charge of 3.50% and pay an ongoing distribution
fee that is higher than class A and class R shares but lower than class
B and class C shares. Class R shares are sold without a front-end sales
charge and pay an ongoing distribution fee that is higher than class A
shares, but lower than class B, class C and class M shares. Class R
shares are offered to qualified employee-benefit plans. Class Y shares,
which are sold at net asset value, are generally subject to the same
expenses as class A, class B, class C, class M and class R shares, but
do not bear a distribution fee. Class Y shares are sold to certain
eligible purchasers including certain defined contribution plans
(including corporate IRAs), bank trust departments, trust companies and
certain college savings plans.
Effective April 19, 2004 (May 3, 2004 for defined contribution plans
administered by Putnam), a 2.00% redemption fee may apply to any shares
that are redeemed (either by selling or exchanging into another fund)
within 5 days of purchase. The redemption fee is accounted for as an
addition to paid-in-capital. Prior year redemption fee balances have
been reclassified to conform with current year financial statement
presentation.
Investment income, realized and unrealized gains and losses and expenses
of the fund are borne pro-rata based on the relative net assets of each
class to the total net assets of the fund, except that each class bears
expenses unique to that class (including the distribution fees
applicable to such classes). Each class votes as a class only with
respect to its own distribution plan or other matters on which a class
vote is required by law or determined by the Trustees. Shares of each
class would receive their pro-rata share of the net assets of the fund,
if the fund were liquidated. In addition, the Trustees declare separate
dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with accounting principles generally accepted in the United States of
America and requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities in the financial
statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results could
differ from those estimates.
A) Security valuation Investments for which market quotations are readily
available are valued at the last reported sales price on their principal
exchange, or official closing price for certain markets. If no sales are
reported -- as in the case of some securities traded over-the-counter -- a
security is valued at its last reported bid price. Market quotations are not
considered to be readily available for certain debt obligations; such
investments are valued at fair value on the basis of valuations furnished by
an independent pricing service or dealers, approved by the Trustees. Such
services or dealers determine valuations for normal institutional-size
trading units of such securities using methods based on market transactions
for comparable securities and various relationships, generally recognized by
institutional traders, between securities. Many securities markets and
exchanges outside the U.S. close prior to the close of the New York Stock
Exchange and therefore the closing prices for securities in such markets or
on such exchanges may not fully reflect events that occur after such close
but before the close of the New York Stock Exchange. Accordingly, on certain
days, the fund will fair value foreign securities taking into account
multiple factors, including movements in the U.S. securities markets. The
number of days on which fair value prices will be used will depend on market
activity and it is possible that fair value prices will be used by the fund
to a significant extent. Securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate. Short-term
investments having remaining maturities of 60 days or less are valued at
amortized cost, which approximates fair value. Other investments, including
certain restricted securities, are valued at fair value following procedures
approved by the Trustees. Such valuations and procedures are reviewed
periodically by the Trustees.
B) Joint trading account Pursuant to an exemptive order from the
Securities and Exchange Commission ("SEC"), the fund may transfer
uninvested cash balances, including cash collateral received under
security lending arrangements, into a joint trading account along with
the cash of other registered investment companies and certain other
accounts managed by Putnam Investment Management, LLC ("Putnam
Management"), the fund's manager, an indirect wholly-owned subsidiary of
Putnam, LLC. These balances may be invested in issues of high-grade
short-term investments having maturities of up to 397 days for
collateral received under security lending arrangements and up to 90
days for other cash investments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. Putnam Management is responsible for
determining that the value of these underlying securities is at all
times at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are recorded on the trade date (date the order to buy or
sell is executed). Gains or losses on securities sold are determined on
the identified cost basis.
Interest income is recorded on the accrual basis. Dividend income, net
of applicable withholding taxes, is recognized on the ex-dividend date
except that certain dividends from foreign securities are recognized as
soon as the fund is informed of the ex-dividend date. Non-cash
dividends, if any, are recorded at the fair market value of the
securities received. All premiums/discounts are amortized/ accreted on a
yield-to-maturity basis.
E) Foreign currency translation The accounting records of the fund are
maintained in U.S. dollars. The market value of foreign securities, currency
holdings, and other assets and liabilities are recorded in the books and
records of the fund after translation to U.S. dollars based on the exchange
rates on that day. The cost of each security is determined using historical
exchange rates. Income and withholding taxes are translated at prevailing
exchange rates when earned or incurred. The fund does not isolate that
portion of realized or unrealized gains or losses resulting from changes in
the foreign exchange rate on investments from fluctuations arising from
changes in the market prices of the securities. Such gains and losses are
included with the net realized and unrealized gain or loss on investments.
Net realized gains and losses on foreign currency transactions represent net
realized exchange gains or losses on closed forward currency contracts,
disposition of foreign currencies, currency gains and losses realized
between the trade and settlement dates on securities transactions and the
difference between the amount of investment income and foreign withholding
taxes recorded on the fund's books and the U.S. dollar equivalent amounts
actually received or paid. Net unrealized appreciation and depreciation of
assets and liabilities in foreign currencies arise from changes in the value
of open forward currency contracts and assets and liabilities other than
investments at the period end, resulting from changes in the exchange rate.
Investments in foreign securities involve certain risks, including those
related to economic instability, unfavorable political developments, and
currency fluctuations, not present with domestic investments.
F) Forward currency contracts The fund may buy and sell forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date. These contracts are used to
protect against a decline in value relative to the U.S. dollar of the
currencies in which its portfolio securities are denominated or quoted
(or an increase in the value of a currency in which securities a fund
intends to buy are denominated, when a fund holds cash reserves and
short term investments). The U.S. dollar value of forward currency
contracts is determined using current forward currency exchange rates
supplied by a quotation service. The market value of the contract will
fluctuate with changes in currency exchange rates. The contract is
marked to market daily and the change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was
closed. The fund could be exposed to risk if the value of the currency
changes unfavorably, if the counterparties to the contracts are unable
to meet the terms of their contracts or if the fund is unable to enter
into a closing position. Risks may exceed amounts recognized on the
statement of assets and liabilities. Forward currency contracts
outstanding at period end, if any, are listed after the fund's
portfolio.
G) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns.
The potential risk to the fund is that the change in value of futures
and options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract is
unable to perform. Risks may exceed amounts recognized on the statement
of assets and liabilities. When the contract is closed, the fund records
a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was
closed. Realized gains and losses on purchased options are included in
realized gains and losses on investment securities. If a written call
option is exercised, the premium originally received is recorded as an
addition to sales proceeds. If a written put option is exercised, the
premium originally received is recorded as a reduction to the cost of
investments.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. The fund and the broker
agree to exchange an amount of cash equal to the daily fluctuation in
the value of the futures contract. Such receipts or payments are known
as "variation margin." Exchange traded options are valued at the last
sale price, or if no sales are reported, the last bid price for
purchased options and the last ask price for written options. Options
traded over-the-counter are valued using prices supplied by dealers.
Futures and written option contracts outstanding at period end, if any,
are listed after the fund's portfolio.
H) Total return swap contracts The fund may enter into total return swap
contracts, which are arrangements to exchange a market linked return for
a periodic payment, both based on a notional principal amount. To the
extent that the total return of the security or index underlying the
transaction exceeds or falls short of the offsetting interest rate
obligation, the fund will receive a payment from or make a payment to
the counterparty. Total return swap contracts are marked to market daily
based upon quotations from market makers and the change, if any, is
recorded as unrealized gain or loss. Payments received or made are
recorded as realized gains or loss. The fund could be exposed to credit
or market risk due to unfavorable changes in the fluctuation of interest
rates or in the price of the underlying security or index, the
possibility that there is no liquid market for these agreements or that
the counterparty may default on its obligation to perform. Risk of loss
may exceed amounts recognized on the statement of assets and
liabilities. Total return swap contracts outstanding at period end, if
any, are listed after the fund's portfolio.
I) Interest rate swap contracts The fund may enter into interest rate
swap contracts, which are arrangements between two parties to exchange
cash flows based on a notional principal amount, to manage the fund's
exposure to interest rates. Interest rate swap contracts are marked to
market daily based upon quotations from market makers and the change, if
any, is recorded as unrealized gain or loss. Payments received or made
are recorded as realized gains or loss. The fund could be exposed to
credit or market risk due to unfavorable changes in the fluctuation of
interest rates or if the counterparty defaults on its obligation to
perform. Risk of loss may exceed amounts recognized on the statement of
assets and liabilities. Interest rate swap contracts outstanding at
period end, if any, are listed after the fund's portfolio.
J) Credit default contracts The fund may enter into credit default
contracts where one party, the protection buyer, makes an upfront or
periodic payment to a counter party, the protection seller, in exchange
for the right to receive a contingent payment. The maximum amount of the
payment may equal the notional amount, at par, of the underlying index
or security as a result of a related credit event. An upfront payment
received by the fund, as the protection seller, is recorded as a
liability on the fund's books. An upfront payment made by the fund, as
the protection buyer, is recorded as an asset on the fund's books.
Periodic payments received or paid by the fund are recorded as realized
gains or losses. The credit default contracts are marked to market daily
based upon quotations from market makers and the change, if any, is
recorded as unrealized gain or loss. Payments received or made as a
result of a credit event or termination of the contract are recognized,
net of a proportional amount of the upfront payment, as realized gains
or losses. In addition to bearing the risk that the credit event will
occur, the fund could be exposed to market risk due to unfavorable
changes in interest rates or in the price of the underlying security or
index, the possibility that the fund may be unable to close out its
position at the same time or at the same price as if it had purchased
comparable publicly traded securities or that the counterparty may
default on its obligation to perform. Risks of loss may exceed amounts
recognized on the statement of assets and liabilities. Credit default
contracts outstanding at period end, if any, are listed after the fund's
portfolio.
K) TBA purchase commitments The fund may enter into "TBA" (to be
announced) commitments to purchase securities for a fixed unit price at
a future date beyond customary settlement time. Although the unit price
has been established, the principal value has not been finalized.
However, the amount of the commitments will not significantly differ
from the principal amount. The fund holds, and maintains until
settlement date, cash or high-grade debt obligations in an amount
sufficient to meet the purchase price, or the fund may enter into
offsetting contracts for the forward sale of other securities it owns.
Income on the securities will not be earned until settlement date. TBA
purchase commitments may be considered securities themselves, and
involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date, which risk is in addition to the
risk of decline in the value of the fund's other assets. Unsettled TBA
purchase commitments are valued at fair value of the underlying
securities, according to the procedures described under "Security
valuation" above. The contract is "marked-to-market" daily and the
change in market value is recorded by the fund as an unrealized gain or
loss.
Although the fund will generally enter into TBA purchase commitments
with the intention of acquiring securities for its portfolio or for
delivery pursuant to options contracts it has entered into, the fund may
dispose of a commitment prior to settlement if Putnam Management deems
it appropriate to do so.
L) TBA sale commitments The fund may enter into TBA sale commitments to
hedge its portfolio positions or to sell mortgage-backed securities it
owns under delayed delivery arrangements. Proceeds of TBA sale
commitments are not received until the contractual settlement date.
During the time a TBA sale commitment is outstanding, equivalent
deliverable securities or an offsetting TBA purchase commitment
deliverable on or before the sale commitment date, are held as "cover"
for the transaction.
Unsettled TBA sale commitments are valued at fair value of the
underlying securities, generally according to the procedures described
under "Security valuation" above. The contract is "marked-to-market"
daily and the change in market value is recorded by the fund as an
unrealized gain or loss. If the TBA sale commitment is closed through
the acquisition of an offsetting purchase commitment, the fund realizes
a gain or loss. If the fund delivers securities under the commitment,
the fund realizes a gain or a loss from the sale of the securities based
upon the unit price established at the date the commitment was entered
into. TBA sale commitments outstanding at period end, if any, are listed
after the fund's portfolio.
M) Security lending The fund may lend securities, through its agents, to
qualified borrowers in order to earn additional income. The loans are
collateralized by cash and/or securities in an amount at least equal to
the market value of the securities loaned. The market value of
securities loaned is determined daily and any additional required
collateral is allocated to the fund on the next business day. The risk
of borrower default will be borne by the fund's agents; the fund will
bear the risk of loss with respect to the investment of the cash
collateral. Income from securities lending is included in investment
income on the statement of operations. At January 31, 2005, the value of
securities loaned amounted to $199,255,937. The fund received cash
collateral of $205,261,728 which is pooled with collateral of other
Putnam funds into 25 issuers of high grade short-term investments.
N) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code of 1986 (the "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 Code, as amended. Therefore, no provision has
been made for federal taxes on income, capital gains or unrealized
appreciation on securities held nor for excise tax on income and capital
gains.
At July 31, 2004, the fund had a capital loss carryover of $322,771,264
available to the extent allowed by the Code to offset future net capital
gain, if any. The amount of the carryover and the expiration dates are:
Loss Carryover Expiration
- ---------------------------------
$35,701,820 July 31, 2010
287,069,444 July 31, 2011
The aggregate identified cost on a tax basis is $5,719,974,485,
resulting in gross unrealized appreciation and depreciation of
$653,347,999 and $78,509,755, respectively, or net unrealized
appreciation of $574,838,244.
O) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the fund on the ex-dividend date.
Distributions from capital gains, if any, are recorded on the
ex-dividend date and paid at least annually. The amount and character of
income and gains to be distributed are determined in accordance with
income tax regulations, which may differ from generally accepted
accounting principles. 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.
Note 2
Management fee, administrative
services and other transactions
Putnam Management is paid for management and investment advisory
services quarterly based on the average net assets of the fund. Such fee
is based on the following annual rates: 0.65% of the first $500 million of
average net assets, 0.55% of the next $500 million, 0.50% of the next
$500 million, 0.45% of the next $5 billion, 0.425% of the next $5
billion, 0.405% of the next $5 billion, 0.39% of the next $5 billion and
0.38% thereafter.
Effective January 28, 2004, Putnam Management has agreed to waive fees
and reimburse expenses of the fund through July 31, 2005 to the extent
necessary to ensure that the fund's expenses do not exceed the average
expenses of the front-end load funds viewed by Lipper Inc. as having the
same investment classification or objective as the fund. The expense
reimbursement is based on a comparison of the fund's expenses with the
average annualized operating expenses of the funds in its Lipper peer
group for each calendar quarter during the fund's last fiscal year,
excluding 12b-1 fees and without giving effect to any expense offset and
brokerage service arrangements that may reduce fund expenses.
For the period ended January 31, 2005, Putnam Management did not waive
any of its management fee.
For the period ended January 31, 2005, Putnam Management has assumed
$164,275 of legal, shareholder servicing and communication, audit and
Trustee fees incurred by the fund in connection with certain legal and
regulatory matters (including those described in Note 6).
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company ("PFTC"), a subsidiary of Putnam, LLC. Putnam
Investor Services, a division of PFTC, provides investor servicing agent
functions to the fund. During the six months ended January 31, 2005, the
fund paid PFTC $7,436,625 for these services.
The fund has entered into an arrangement with PFTC whereby credits
realized as a result of uninvested cash balances are used to reduce a
portion of the fund's expenses. The fund also reduced expenses through
brokerage service arrangements. For the six months ended January 31,
2005, the fund's expenses were reduced by $857,439 under these
arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $4,450, as a quarterly retainer, has been allocated to the fund,
and an additional fee for each Trustees meeting attended. Trustees
receive additional fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with
the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Trustee compensation and expenses in the
statement of operations. Accrued pension liability is included in
Payable for Trustee compensation and expenses in the statement of assets
and liabilities. The Trustees have terminated the Pension Plan with
respect to any Trustee first elected after 2003.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B, class C, class M and class R shares pursuant to
Rule 12b-1 under the Investment Company Act of 1940. The purpose of the
Plans is to compensate Putnam Retail Management, a wholly-owned
subsidiary of Putnam, LLC and Putnam Retail Management GP, Inc., for
services provided and expenses incurred in distributing shares of the
fund. The Plans provide for payments by the fund to Putnam Retail
Management at an annual rate of up to 0.35%, 1.00%, 1.00% , 1.00% and
1.00% of the average net assets attributable to class A, class B, class
C, class M and class R shares, respectively. The Trustees have approved
payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and
0.50% of the average net assets attributable to class A, class B, class
C, class M and class R shares, respectively.
For the six months ended January 31, 2005, Putnam Retail Management,
acting as underwriter, received net commissions of $107,810 and $2,605
from the sale of class A and class M shares, respectively, and received
$604,334 and $4,091 in contingent deferred sales charges from
redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% and 0.65% is assessed on certain
redemptions of class A and class M shares, respectively. For the six
months ended January 31, 2005, Putnam Retail Management, acting as
underwriter, received $3,037 and no monies on class A and class M
redemptions, respectively.
Note 3
Purchases and sales of securities
During the six months ended January 31, 2005, cost of purchases and
proceeds from sales of investment securities other than U.S. government
securities and short-term investments aggregated $4,182,148,759 and
$4,860,106,806, respectively. Purchases and sales of U.S. government
securities aggregated $20,773,538 and $4,484,936 respectively.
Note 4
Capital shares
At January 31, 2005, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Six months ended January 31, 2005
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 16,276,447 $284,056,344
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 1,615,925 27,866,998
- ----------------------------------------------------------------
17,892,372 311,923,342
Shares repurchased (25,406,198) (443,614,949)
- ----------------------------------------------------------------
Net decrease (7,513,826) $(131,691,607)
- ----------------------------------------------------------------
Year ended July 31, 2004
- ----------------------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------------------
Shares sold 38,177,152 $636,173,891
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 4,010,048 65,565,354
- ----------------------------------------------------------------
42,187,200 701,739,245
Shares repurchased (86,369,385) (1,432,155,679)
- ----------------------------------------------------------------
Net decrease (44,182,185) $(730,416,434)
- ----------------------------------------------------------------
Six months ended January 31, 2005
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 2,917,089 $50,210,682
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 313,417 5,353,073
- ----------------------------------------------------------------
3,230,506 55,563,755
Shares repurchased (10,716,873) (184,840,662)
- ----------------------------------------------------------------
Net decrease (7,486,367) $(129,276,907)
- ----------------------------------------------------------------
Year ended July 31, 2004
- ----------------------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------------------
Shares sold 10,048,720 $165,010,566
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 894,212 14,468,542
- ----------------------------------------------------------------
10,942,932 179,479,108
Shares repurchased (29,561,948) (487,125,663)
- ----------------------------------------------------------------
Net decrease (18,619,016) $(307,646,555)
- ----------------------------------------------------------------
Six months ended January 31, 2005
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 350,639 $6,101,199
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 21,072 361,701
- ----------------------------------------------------------------
371,711 6,462,900
Shares repurchased (586,477) (10,200,502)
- ----------------------------------------------------------------
Net decrease (214,766) $(3,737,602)
- ----------------------------------------------------------------
Year ended July 31, 2004
- ----------------------------------------------------------------
Class C Shares Amount
- ----------------------------------------------------------------
Shares sold 1,298,282 $21,315,780
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 60,062 973,315
- ----------------------------------------------------------------
1,358,344 22,289,095
Shares repurchased (2,725,476) (45,065,348)
- ----------------------------------------------------------------
Net decrease (1,367,132) $(22,776,253)
- ----------------------------------------------------------------
Six months ended January 31, 2005
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 1,101,264 $19,012,836
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 84,158 1,438,232
- ----------------------------------------------------------------
1,185,422 20,451,068
Shares repurchased (1,959,730) (34,051,928)
- ----------------------------------------------------------------
Net decrease (774,308) $(13,600,860)
- ----------------------------------------------------------------
Year ended July 31, 2004
- ----------------------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------------------
Shares sold 1,968,774 $32,462,800
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 215,887 3,497,386
- ----------------------------------------------------------------
2,184,661 35,960,186
Shares repurchased (4,611,033) (76,071,129)
- ----------------------------------------------------------------
Net decrease (2,426,372) $(40,110,943)
- ----------------------------------------------------------------
Six months ended January 31, 2005
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
Shares sold 21,616 $378,085
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 117 2,031
- ----------------------------------------------------------------
21,733 380,116
Shares repurchased (766) (13,551)
- ----------------------------------------------------------------
Net increase 20,967 $366,565
- ----------------------------------------------------------------
Year ended July 31, 2004
- ----------------------------------------------------------------
Class R Shares Amount
- ----------------------------------------------------------------
Shares sold 8,000 $136,550
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 27 455
- ----------------------------------------------------------------
8,027 137,005
Shares repurchased (586) (9,998)
- ----------------------------------------------------------------
Net increase 7,441 $127,007
- ----------------------------------------------------------------
Six months ended January 31, 2005
- ----------------------------------------------------------------
Class Y Shares Amount
- ----------------------------------------------------------------
Shares sold 4,988,143 $86,275,974
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 431,222 8,541,217
- ----------------------------------------------------------------
5,419,365 94,817,191
Shares repurchased (12,705,473) (221,971,945)
- ----------------------------------------------------------------
Net decrease (7,286,108) $(127,154,754)
- ----------------------------------------------------------------
Year ended July 31, 2004
- ----------------------------------------------------------------
Class Y Shares Amount
- ----------------------------------------------------------------
Shares sold 13,234,706 $218,756,844
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 1,301,572 21,369,832
- ----------------------------------------------------------------
14,536,278 240,126,676
Shares repurchased (20,348,272) (343,556,700)
- ----------------------------------------------------------------
Net decrease (5,811,994) $(103,430,024)
- ----------------------------------------------------------------
Note 5
Investment in Putnam
Prime Money Market Fund
Pursuant to an exemptive order from the Securities and Exchange Commission,
the fund invests in Putnam Prime Money Market Fund, an open-end management
investment company managed by Putnam Management. Management fees paid by the
fund are reduced by an amount equal to the management fees paid by Putnam
Prime Money Market Fund with respect to assets invested by the fund in
Putnam Prime Money Market Fund. For the period ended January 31, 2005,
management fees paid were reduced by $290,709 relating to the fund's
investment in Putnam Prime Money Market Fund. Income distributions earned by
the fund are recorded as income in the statement of operations and totaled
$3,796,631 for the period ended January 31, 2005.
Note 6
Regulatory matters and litigation
Putnam Management has entered into agreements with the Securities and
Exchange Commission and the Massachusetts Securities Division settling
charges connected with excessive short-term trading by Putnam employees
and, in the case of the charges brought by the Massachusetts Securities
Division, by participants in some Putnam-administered 401(k) plans.
Pursuant to these settlement agreements, Putnam Management will pay a
total of $193.5 million in penalties and restitution, with $153.5
million being paid to shareholders and the funds. The restitution amount
will be allocated to shareholders pursuant to a plan developed by an
independent consultant, with payments to shareholders currently expected
by the end of the summer.
The SEC's and Massachusetts Securities Division's allegations and
related matters also serve as the general basis for numerous lawsuits,
including purported class action lawsuits filed against Putnam
Management and certain related parties, including certain Putnam funds.
Putnam Management will bear any costs incurred by Putnam funds in
connection with these lawsuits. Putnam Management believes that the
likelihood that the pending private lawsuits and purported class action
lawsuits will have a material adverse financial impact on the fund is
remote, and the pending actions are not likely to materially affect its
ability to provide investment management services to its clients,
including the Putnam funds.
In connection with its investigation of certain brokerage matters, the staff
of the Philadelphia district office of the SEC has raised the question
whether, in years prior to 2004, Putnam Management fully and effectively
disclosed its practices relating to the allocation of brokerage on mutual
fund portfolio transactions to broker-dealers who sold shares of the funds.
Putnam Management ceased directing brokerage to broker-dealers in connection
with the sale of fund shares as of January 1, 2004. Putnam Management and
the Philadelphia office negotiated an offer of settlement under which Putnam
Management would pay a civil penalty in the amount of $40 million and
disgorgement in the amount of $1, and the total amount would be distributed
to certain Putnam funds. The offer of settlement is subject to final
documentation and approval by the Commissioners and the staff of the SEC.
Discussions with the staff with respect to the offer of settlement are
ongoing.
Note 7
Other matters
In connection with a review of compliance procedures and controls,
Putnam Management discovered that in early January 2001, certain Putnam
employees had willfully circumvented controls in connection with the
correction of operational errors with respect to a 401(k) client's
investment in certain Putnam Funds, which led to losses in the fund.
Putnam made restitution of approximately $169,000 to the fund on
February 27, 2004. Putnam has also made a number of personnel changes,
including senior managers, and has implemented changes in procedures.
Putnam has informed the SEC, the funds' Trustees and independent
auditors. The SEC is investigating this matter.
Results of November 11, 2004
and January 10, 2005
shareholder meetings
(Unaudited)
A special meeting of shareholders of the Fund was held on November 11,
2004. At that meeting consideration of certain proposals was adjourned
to a final meeting held on January 10, 2005.
November 11, 2004 meeting
At the meeting, each of the nominees for Trustees was elected as
follows:
Votes Votes
For Withheld
- -------------------------------------------------------------------------------
Jameson A. Baxter 167,648,483 5,194,591
Charles B. Curtis 167,565,947 5,277,127
Myra R. Drucker 167,552,017 5,291,057
Charles E. Haldeman, Jr. 167,628,992 5,214,082
John A. Hill 167,560,974 5,282,100
Ronald J. Jackson 167,674,184 5,168,890
Paul L. Joskow 167,635,292 5,207,782
Elizabeth T. Kennan 167,508,917 5,334,157
John H. Mullin, III 167,652,677 5,190,397
Robert E. Patterson 167,607,452 5,235,622
George Putnam, III 167,569,364 5,273,710
A.J.C. Smith * 167,447,392 5,395,682
W. Thomas Stephens 167,570,392 5,272,682
Richard B. Worley 167,569,029 5,274,045
A proposal to amend fund's fundamental investment restriction with respect
to borrowing to allow the fund the investments flexibility permitted by the
Investment Company Act was approved as follows:
Votes Votes
For Against Abstentions
- -------------------------------------------------------------------------------
119,526,421 11,237,709 42,078,944
A proposal to amend the fund's fundamental investment restriction with
respect to making loans to enhance the fund's ability to participate in an
interfund borrowing and lending program was approved as follows:
Votes Votes
For Against Abstentions
- -------------------------------------------------------------------------------
120,429,963 10,822,448 41,590,663
A proposal to amend the fund's fundamental investment restriction with
respect to diversification of investments to enhance the fund's ability to
invest in registered investment companies such as Putnam Prime Money Market
was approved as follows:
Votes Votes
For Against Abstentions
- -------------------------------------------------------------------------------
126,786,328 5,490,050 40,566,696
January 10, 2005 meeting
A proposal to amend the Trust's Agreement and Declaration of Trust to permit
the fund to satisfy redemption requests other than in cash was defeated as
follows:
Votes Votes
For Against Abstentions
- -------------------------------------------------------------------------------
124,838,521 8,861,881 41,095,582
* Mr. Smith resigned from the Board of Trustees on January 14, 2005.
All tabulations are rounded to the nearest whole number.
Brokerage commissions
(Unaudited)
Brokerage commissions are paid to firms that execute trades on behalf of
your fund. When choosing these firms, Putnam is required by law to seek the
best execution of the trades, taking all relevant factors into
consideration, including expected quality of execution and commission rate.
Listed below are the largest relationships based upon brokerage commissions
for your fund and the other funds in Putnam's Large-Cap Value group for the
year ended January 31, 2005. The other Putnam mutual funds in this group are
Putnam Classic Equity Fund, Putnam Convertible Income-Growth Trust, Putnam
Equity Income Fund, The Putnam Fund for Growth and Income, Putnam New Value
Fund, Putnam VT Equity Income Fund, Putnam VT The George Putnam Fund of
Boston, Putnam VT Growth and Income Fund, and Putnam VT New Value Fund.
The top five firms that received brokerage commissions for trades executed
for the Large-Cap Value group are (in descending order) Citigroup Global
Markets, Goldman Sachs, Deutsche Bank Securities, Merrill Lynch, and Lehman
Brothers. Commissions paid to these firms together represented approximately
48% of the total brokerage commissions paid for the year ended January 31,
2005.
Commissions paid to the next 10 firms together represented approximately 34%
of the total brokerage commissions paid during the period. These firms are
(in alphabetical order) Bank of America, Bear Stearns & Co., Credit Suisse
First Boston, Investment Technology Group, JP Morgan Clearing, Morgan
Stanley Dean Witter, Sanford Bernstein, Standard & Poor's, UBS Warburg, and
Wachovia Securities.
Commission amounts do not include "mark-ups" paid on bond or derivative
trades made directly with a dealer. Additional information about brokerage
commissions is available on the Securities and Exchange Commission (SEC) Web
site at www.sec.gov. Putnam funds disclose commissions by firm to the SEC in
semiannual filings on form N-SAR.
Fund information
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded over 65 years ago, Putnam Investments
was built around the concept that a balance between risk and reward is
the hallmark of a well-rounded financial program. We presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment Management, LLC
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary
Trust Company
Legal Counsel
Ropes & Gray LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Myra R. Drucker
Charles E. Haldeman, Jr.
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
John H. Mullin, III
Robert E. Patterson
George Putnam, III
W. Thomas Stephens
Richard B. Worley
Officers
George Putnam, III
President
Charles E. Porter
Executive Vice President, Associate
Treasurer and Principal Executive
Officer
Jonathan S. Horwitz
Senior Vice President
and Treasurer
Steven D. Krichmar
Vice President and
Principal Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Daniel T. Gallagher
Vice President and Legal and
Compliance Liaison Officer
Beth S. Mazor
Vice President
James P. Pappas
Vice President
Richard S. Robie, III
Vice President
Mark C. Trenchard
Vice President and
BSA Compliance Officer
Francis J. McNamara, III
Vice President and
Chief Legal Officer
Charles A. Ruys de Perez
Vice President and
Chief Compliance Officer
Judith Cohen
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, the most recent copy of Putnam's
Quarterly Performance Summary, and Putnam's Quarterly Ranking Summary.
For more recent performance, please visit www.putnaminvestments.com.
Investors should carefully consider the investment objective, risks,
charges, and expenses of a fund, which are described in its prospectus.
For this and other information or to request a prospectus, call
1-800-225-1581 toll free. Please read the prospectus carefully before
investing. The fund's Statement of Additional Information contains
additional information about the fund's Trustees and is available
without charge upon request by calling 1-800-225-1581.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
Call 1-800-225-1581 or visit our Web site
www.putnaminvestments.com.
SA021-220217 3/05
Not FDIC Insured May Lose Value No Bank Guarantee
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
- ----------------------------------------------------------------------------
The George Putnam Fund of Boston
Supplement to Semiannual Report dated 1/31/05
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 clients that meet the eligibility requirements
specified in the fund's prospectus for such shares. Performance of class Y
shares, which do not incur a front-end load, a distribution fee, or a
contingent deferred sales charge, will differ from the performance of class
A, B, C, M, and R shares, which are discussed more extensively in the
semiannual report.
RESULTS AT A GLANCE
- ----------------------------------------------------------------------------
Total return for periods ended 1/31/05
NAV
6 months 6.99%
1 year 6.36
5 years 31.38
Annual average 5.61
10 years 157.55
Annual average 9.92
Life of fund (since class A inception, 11/5/37)
Annual average 9.48
Share value: NAV
7/31/04 $16.95
1/31/05 $17.95
- ----------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
2 $0.178 -- $0.178
- ----------------------------------------------------------------------------
Data represents past performance. Past performance does not guarantee
future results. More recent returns may be less or more than those shown.
Investment return and principal value will fluctuate and you may have a
gain or a loss when you sell your shares. For the most recent month-end
performance, please visit www.putnaminvestments.com.
Performance assumes reinvestment of distributions and does not account for
taxes. Returns shown for class Y shares for periods prior to their
inception (3/31/94) are derived from the historical performance of class A
shares, and are not adjusted to reflect the initial sales charge currently
applicable to class A shares. Returns have not been adjusted to reflect
differences in operating expenses which, for class Y shares, are lower than
the operating expenses applicable to class A shares. See full report for
information on comparative benchmarks. If you have questions, please
consult your fund prospectus or call Putnam toll free at 1-800-752-9894.
A short-term trading fee of up to 2% may apply.
Please see page 13 of the accompanying shareholder report for a discussion
of the information appearing in the tables below:
- ----------------------------------------------------------------------------
EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming actual returns for the 6 months ended 1/31/05
Class Y
Expenses paid per $1,000* $4.07
Ending value (after expenses) $1,069.90
- ----------------------------------------------------------------------------
EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming a hypothetical 5% annualized return for the 6 months ended 1/31/05
Class Y
Expenses paid per $1,000* $3.97
Ending value (after expenses) $1,021.27
- ----------------------------------------------------------------------------
EXPENSE RATIO COMPARISON USING ANNUALIZED DATA
Your fund's annualized expense ratio 0.78%
Average annualized expense ratio for Lipper peer group + 1.06%
+ For class Y shares, Putnam has adjusted the Lipper total expense average
to reflect that class Y shares do not incur 12b-1 fees.
- ----------------------------------------------------------------------------
Item 2. Code of Ethics:
- -----------------------
Not applicable
Item 3. Audit Committee Financial Expert:
- -----------------------------------------
Not applicable
Item 4. Principal Accountant Fees and Services:
- -----------------------------------------------
Not applicable
Item 5. Audit Committee: Not applicable
- -------------------------
Item 6. Schedule of Investments: Not applicable
- --------------------------------
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End
- -------------------------------------------------------------------------
Management Investment Companies: Not applicable
--------------------------------
Item 8. Purchases of Equity Securities by Closed-End Management Investment
- --------------------------------------------------------------------------
Companies and Affiliated Purchasers: Not applicable
------------------------------------
Item 9. Submission of Matters to a Vote of Security Holders:
- ------------------------------------------------------------
Not applicable
Item 10. Controls and Procedures:
- ---------------------------------
(a) The registrant's principal executive officer and principal
financial officer have concluded, based on their evaluation of the
effectiveness of the design and operation of the registrant's
disclosure controls and procedures as of a date within 90 days of
the filing date of this report, that the design and operation of
such procedures are generally effective to provide reasonable
assurance that information required to be disclosed by the registrant
in this report is recorded, processed, summarized and reported within
the time periods specified in the Commission's rules and forms.
(b) Changes in internal control over financial reporting:
Not applicable
Item 11. Exhibits:
- ------------------
(a) Not applicable
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act
of 2002 are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
--------------------------
Michael T. Healy
Principal Accounting Officer
Date: March 28, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By (Signature and Title): /s/Charles E. Porter
---------------------------
Charles E. Porter
Principal Executive Officer
Date: March 28, 2005
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: March 28, 2005