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:
The George
Putnam Fund
of Boston
7 | 31 | 05
Annual Report
[SCALE LOGO OMITTED]
PUTNAM INVESTMENTS
[GRAPHIC OMITTED: STAMPS]
VALUE FUNDS
look for stocks that have
been overlooked by
other investors and that
may be selling for less
than their true worth.
What makes Putnam different?
[GRAPHIC OMITTED: FOUNDER]
In 1830, Massachusetts Supreme Judicial Court Justice Samuel Putnam
established The Prudent Man Rule, a legal foundation for responsible money
management.
THE PRUDENT MAN RULE
All that can be required of a trustee to invest is
that he shall conduct himself faithfully and exercise a sound discretion.
He is to observe how men of prudence, discretion, and intelligence manage
their own affairs, not in regard to speculation, but in regard to the
permanent disposition of their funds, considering the probable income, as
well as the probable safety of the capital to be invested.
[GRAPHIC OMITTED: SIGNATURE, JUSTICE SAMUEL PUTNAM 1830]
A time-honored tradition
in money management
Since 1937, our values have been rooted in a profound sense of
responsibility for the money entrusted to us.
A prudent approach to investing
We use a research-driven team approach to seek consistent, dependable,
superior investment results over time, although there is no guarantee a
fund will meet its objectives.
Funds for every investment goal
We offer a broad range of mutual funds and other financial products so
investors and their advisors can build diversified portfolios.
A commitment to doing
what's right for investors
We have below-average expenses and stringent investor protections, and
provide a wealth of information about the Putnam funds.
Industry-leading service
We help investors, along with their financial advisors, make informed
investment decisions with confidence.
The George
Putnam Fund
of Boston
7 | 31 | 05
Annual Report
Message from the Trustees 2
About the fund 4
Report from the fund managers 7
Performance 13
Expenses 16
Portfolio turnover 18
Risk 19
Your fund's management 20
Terms and definitions 23
Trustee approval of management contract 25
Other information for shareholders 30
Financial statements 31
Federal tax information 99
Brokerage commissions 100
About the Trustees 101
Officers 107
Cover photograph: Postage stamps, private collection [c] White-Packert
Photography
Message from the Trustees
Dear Fellow Shareholder
During the period ended July 31, 2005, the stock market has continued to
show confidence in the strength of the economy and corporate profits, even
as the Federal Reserve Board's more restrictive monetary policy, along
with high energy prices, has begun to influence the performance of bonds
and the pace of expansion. Abroad, stocks have performed even better than
in the United States, despite weaker economic growth in most developed
markets. However, the recent strength of the U.S. dollar against foreign
currencies partially offset the effects of these gains. And in the last
three weeks, investors have just begun to assess the magnitude of
Hurricane Katrina's impact and how it will affect the U.S. economy. Amid
the uncertainties of this environment, the in-depth, professional research
and active management that mutual funds can provide make them an
intelligent choice for today's investors.
We want you to know that Putnam Investments' management team, under the
leadership of Chief Executive Officer Ed Haldeman, continues to focus on
investment performance and remains committed to putting the interests of
shareholders first. In keeping with these goals, we have redesigned and
expanded our shareholder reports to make it easier for you to learn more
about your fund. Furthermore, on page 25 we provide information about the
2005 approval by the Trustees of your fund's management contract with
Putnam.
We would also like to take this opportunity to announce the retirement of
one of your fund's Trustees, Ronald J. Jackson, who has been an
independent Trustee of the Putnam funds since 1996. We thank him for his
service.
In the following pages, members of your fund's management team discuss the
fund's performance, strategies, and their outlook for the months ahead. As
always, we thank you for your support of the Putnam funds.
Respectfully yours,
/S/GEORGE PUTNAM, III
George Putnam, III
President of the Funds
/S/JOHN A. HILL
John A. Hill
Chairman of the Trustees
September 21, 2005
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM, III AND JOHN A. HILL]
The George Putnam Fund of Boston: providing the
benefits of balanced investing for nearly 70 years
Your fund launched in 1937 when George Putnam, a Boston investment
manager, decided to start a fund with an innovative approach -- a balance
of stocks to seek capital appreciation and bonds to help provide current
income. The original portfolio featured industrial stocks, such as U.S.
Smelting, Refining, & Mining Co., and railroad bonds.
This balanced approach made sense then, and continues to make sense now.
In the late 1930s, the stock market experienced dramatic swings as
businesses struggled to recover from the Great Depression and as the
shadow of war began to spread across Europe and Asia. Today, global
political and economic uncertainties also challenge investors.
Although the fund has experienced volatility at times, its balance has
kept it on course. When stocks were weak, the fund's bonds helped results.
Similarly, stocks have often provided leadership when bonds were hurt by
rising interest rates or inflation.
In a letter to shareholders dated July 12, 1938, George Putnam articulated
the balanced strategy: "Successful investing calls not so much for some
clairvoyant ability to read the future as for the courage to stick to
tested, common sense policies in the face of the unreliable emotional
stresses and strains that constantly sweep the market place." Putnam remains
committed to this prudent approach to investing today.
The fund may have a significant portion of its holdings in bonds, which
are subject to certain risks including interest-rate, credit, and
inflation risks. As interest rates rise, the prices of bonds fall.
Long-term bonds are more exposed to interest-rate risk than short-term
bonds.
The fund may invest some or all of its assets in small and/or midsize
companies. Such investments increase the risk of greater price
fluctuations.
Over seven eventful decades, the fund's balance of stocks and bonds has
served shareholders by providing income and building wealth.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
Growth of a $10,000 investment ($9,475 after sales charge) since fund
inception, 11/5/37, through 6/30/05
Plotted on a logarithmic scale so that comparable percentage changes
appear similar
$9,475 $4,151,653
9.32%
annualized return
at POP
[GRAPHICS OMITTED: WWII STATUE, TV, HAWAIIAN LADY, MAN ON MOON, GAS PUMP,
SPACE SHUTTLE, BERLIN WALL, ARMY TANK]
1941
U.S. enters WWII
1951
Color TV introduced in the U.S.
1955
First polio vaccine developed
1959
Hawaii becomes 50th U.S. state
1969
Astronauts land on the moon
1973
Oil embargo leads to record high oil prices and gas rationing
1981
First space shuttle launched
1989
Collapse of Berlin Wall
1993
First Web browser introduced
2000
Nasdaq peaks over 5000
2003
Iraq War begins
- ---------------------------------------------------------------
ANNUALIZED TOTAL RETURN PERFORMANCE
Class A shares POP
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Life of fund
(inception 11/5/37) 9.32%
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10 years 7.95
- ---------------------------------------------------------------
5 years 4.35
- ---------------------------------------------------------------
1 year 1.97
Data is historical. Past performance is not a guarantee of 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,
visit www.putnam.com.
Performance assumes reinvestment of distributions and does not account for
taxes. Returns at public offering price (POP) for class A shares reflect a
sales charge of 5.25%. Returns for other classes of shares may vary. A
short-term trading fee of up to 2% may apply. The period illustrated is
longer than the investment horizon of many investors.
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 the
management team believes are poised to experience positive change and
improved financial performance. The bond portion is a diversified mix of
mainly investment-grade securities. The fund may be appropriate for
investors seeking current income and long-term growth from a balanced
investment.
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Highlights
* For the 12 months ended July 31, 2005, The George Putnam Fund of
Boston's class A shares returned 10.89% without sales charges.
* Over the same period, the fund's equity benchmark, the S&P 500/Barra
Value Index, returned 16.90%. The fund's bond benchmark, the Lehman
Aggregate Bond Index, returned 4.79% 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 12.07% for
the period.
* The average return for the fund's Lipper category, Balanced Funds, was
11.18%.
* Additional fund performance, comparative performance, and Lipper data
can be found in the performance section beginning on page 13.
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Performance
Total return for class A shares for periods ended 7/31/05
Since the fund's inception (11/5/37), its average annual return is 9.42%
at NAV and 9.33% at POP. The period since the fund's inception is longer
than the investment horizon of many investors.
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Annualized average return Cumulative return
NAV POP NAV POP
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10 years 8.52% 7.94% 126.55% 114.60%
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5 years 5.92 4.78 33.29 26.33
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1 year 10.89 5.05 10.89 5.05
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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.putnam.com. A short-term trading fee of up to 2%
may apply.
Report from the fund managers
The year in review
Both the U.S. stock and bond markets posted gains for the year ended July
31, 2005. The environment was favorable for value-oriented investments,
which are a focus of your fund. However, the market also favored
lower-yielding, smaller-capitalization stocks, which typically are not a
key element of your fund's conservative strategy. Your fund's
custom-blended benchmark includes some smaller-cap stocks, which explains
the fund's slight underperformance (based on results at net asset value)
relative to this benchmark. The fund's results at NAV were also slightly
behind the average return for its peer group, Lipper Balanced Funds. We
believe this reflects the fund's greater exposure to bonds and its higher
interest-rate sensitivity. These factors were not helpful when bond
markets had negative returns in July. As might be expected from a balanced
portfolio, the fund underperformed its all-stock benchmark and
outperformed its all-bond benchmark (again, based on results at net asset
value).
Market overview
During the period, investor concerns focused on the high costs of energy and
other commodities, the direction of short- and long-term interest-rates, and
the emergence of China as a major force influencing world markets. As of the
end of the reporting period, the federal funds rate, which is the rate at
which banks borrow from each other overnight, had increased a full 2.25%
from its level on June 30, 2004, when the Federal Reserve Board began its
tightening policy. The yield on the 2-year Treasury note increased from 2.7%
to 4.0% over the period. Businesses enjoyed strong revenue growth, healthier
balance sheets, and abundant free cash flows, yet remained conservative in
their capital spending. Consumers, on the other hand, continued to take on
more debt, encouraged, perhaps, by persistently low long-term interest
rates. The yield on 10-year Treasury bonds actually declined from 4.5% to
4.3% in the year ended July 31, 2005.
In the United States, the best-performing sectors included energy and
utilities. Utilities stocks offered attractive yields and a less expensive
way to gain exposure to the energy companies. The transportation sector
benefited from strong demand from businesses. Strength in the consumer
staples sector reflected ongoing consumer confidence and robust spending.
Weaker sectors included telecommunications and basic materials,
particularly steel, aluminum, chemicals, and paper, which had enjoyed
strong performance earlier in the fiscal year.
Both the stock and bond markets experienced a fair amount of volatility.
Value stocks continued to outpace growth stocks. Large-cap stocks lagged for
most of the period, but edged ahead of small caps in March and April.
Corporate bonds fared well, despite recent volatility, primarily in the auto
sector. In general, mortgage-backed securities steadily outperformed
Treasuries, with even greater strength in commercial mortgage-backed
securities and certain asset-backed securities.
Strategy overview
Our views regarding the capital markets and the economy did not change in
the second half of the fiscal year, so we saw no need to adjust the fund's
strategy. Asset allocation remained at 60% stocks, 35% bonds, and 5% cash.
The portfolio remained positioned to benefit from an increase in corporate
spending, because we believe that businesses have sufficient cash flows to
invest in upgrades and improvements. Though we expected consumer spending to
wane, that did not occur during the last six months. However, we believe the
point at which consumers will begin to tighten their belts is now
significantly closer.
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Market sector performance
These indexes provide an overview of performance in different market
sectors for the 12 months ended 7/31/05.
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Equities
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S&P 500/Barra Value Index (large-company value stocks) 16.90%
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Russell 2000 Growth Index (small-company growth stocks) 22.58%
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Russell 2000 Value Index (small-company value stocks) 26.72%
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Russell 1000 Index (large-company stocks) 16.20%
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Bonds
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Lehman Aggregate Bond Index (broad bond market) 4.79%
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JP Morgan Global High Yield Index (global high-yield corporate
bonds) 10.37%
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Lehman Government Bond Index (U.S. Treasury and agency
securities) 4.39%
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Relative to the benchmark, the portfolio had greater weightings in the
technology sector and in media, specifically cable. We believe that cable
companies, now offering voice-over-internet services, are poised to win
customers away from traditional telephone service providers. Utilities
stocks had been strong performers and became a bit overpriced in our
opinion. We consequently have maintained an underweight in that sector.
The bond portfolio emphasized asset-backed securities, commercial
mortgage-backed securities, and Treasuries to a greater degree than its
benchmark. It was also largely underweighted in government agency bonds and
corporate bonds. By significantly underweighing bonds from the auto sector,
we were able to benefit, in relative terms, from the downgrading of Ford and
GM debt. However, our underweighted position in corporate bonds detracted
from returns, as this sector had strong performance overall.
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Portfolio composition comparison
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.
as of 1/31/05 as of 7/31/05
Common stocks 58.6% 59.7%
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U.S. government and
agency securities 17.8% 12.6%
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Collateralized
mortgage obligations 6.2% 10.4%
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Asset-backed
securities 8.9% 10.1%
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Short-term
investments 16.2% 8.4%
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Corporate bonds 6.6% 5.5%
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Convertible
preferred stocks 0.7% 0.7%
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Other 0.2% 0.2%
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U.S. Treasury
obligations 0.4% 0.1%
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Your fund's holdings
For the annual period, the greatest positive contributor to relative results
was the fund's limited exposure to Merck, the pharmaceutical manufacturer
whose arthritis medication, Vioxx, was found to be linked to heart disease.
We had a relatively small position for a short period of time before
eliminating it altogether. This worked to our advantage since the stock
price fell precipitously after the negative news. Likewise, not owning
shares of Ford helped, as the company struggled with lackluster auto sales
and a credit-rating downgrade. In fact, we had limited exposure to the auto
industry overall because the fundamentals did not appear to be attractive.
The fund's position in Office Depot, the office supplies store, contributed
positively to results during the period. We established the position when
shares were out of favor due to a lack of confidence in management's
competitive strategies and its ability to execute a turnaround. A new CEO
with proven talent and experience in merchandising was installed. The market
eagerly embraced the management change and the stock price rebounded
significantly. Marathon Oil is an integrated oil company, which means it is
involved in exploration and production as well as marketing and distribution
of energy. In a period of rising commodity prices, stocks of such companies
have generally rewarded investors. We selected Marathon because we believe
its management is very focused on becoming more efficient and profitable,
and its portfolio of "upstream" assets, i.e., wells and oil fields, seems to
have good prospects. We expect the company will enhance its rate of
production in coming years. For many of the same reasons, we also own shares
of another integrated oil company, Amerada Hess. Both of these stocks
performed well during the period.
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Top equity holdings
This table shows the fund's top holdings, and the percentage of the fund's
net assets that each comprised, as of 7/31/05. The fund's holdings will
change over time.
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Holding (percent of fund's
net assets) Industry
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ExxonMobil Corp. (3.2%) Oil and gas
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Citigroup, Inc. (2.3%) Banking
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ChevronTexaco Corp. (2.1%) Oil and gas
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Bank of America Corp. (2.0%) Banking
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Pfizer, Inc. (1.9%) Pharmaceuticals
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Altria Group, Inc. (1.5%) Tobacco
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Tyco International, Ltd. (Bermuda) (1.2%) Conglomerates
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U.S. Bancorp (1.2%) Banking
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Hewlett-Packard Co. (1.1%) Computers
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IBM Corp. (1.1%) Computers
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In any diversified portfolio, there will be stocks that disappoint, and
stock selection decisions that are regrettable. Our decision not to own
shares of Conoco Phillips hurt relative returns, as the stock performed very
well during the period. Our analysis had led us to other stocks within the
energy sector that we felt were better suited for the portfolio. Our
relatively large position in Tyco International has been a positive
contributor for several quarters. However, the company's Fire and Safety
Division missed its earnings target for the second quarter of 2005, and this
caused the stock price to tumble. A certain amount of volatility is to be
expected as a company executes a turnaround, and our view of the company's
long-term prospects remains very favorable. Our position in mortgage
reseller Fannie Mae dampened results during the period. The changing
regulatory environment for this company and its cohort, Freddie Mac, is
causing a lot of uncertainty. The share price is now extremely low in our
opinion, and we believe there is an attractive opportunity for gain in the
long run.
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.
Of special interest
The fund's Trustees voted to increase the dividend rate on class A shares
of The George Putnam Fund of Boston by 28.2%, or $0.022 per share,
effective May 19, 2005. The new dividend on class A shares is $0.10.
Dividends on other share classes increased by the same dollar amount. As a
balanced fund investing in large-cap value stocks and investment-grade
bonds, the fund has benefitted from improving corporate earnings as well
as an increasing interest-rate environment.
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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 believe that the Fed may be nearing the end of its tightening policy,
but think that more increases may be on the horizon for the remainder of
this year. The bond portfolio is positioned defensively and emphasizes
asset-backed securities and Treasuries, with relatively less exposure to
corporate bonds. Though it appears we acted prematurely in positioning the
portfolio for a fall-off in consumer discretionary spending, we continue
to believe there will be a slowing in this area, and a concurrent rise in
corporate spending. Corporate coffers are full and we anticipate a general
rise in dividend payouts and share repurchasing programs, as well as in
merger and acquisitions activity. The stock portfolio is positioned
accordingly. The market's preference for riskier stocks has resulted in
some very high-quality stocks being left on the table. As a result, we are
seeing compelling opportunities, particularly among consumer staples
stocks, to improve portfolio quality while also reducing risk. We are
committed to our conservative strategy and to providing you with a
consistent, dependable, and superior investment vehicle to help you pursue
your goals.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. The 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 performance
This section shows your fund's performance during its fiscal year, which
ended July 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.putnam.com.
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Fund performance
Total return for periods ended 7/31/05
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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
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Annual average
(life of fund) 9.42% 9.33% 8.39% 8.39% 8.60% 8.60% 8.66% 8.60% 9.15%
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10 years 126.55 114.60 110.35 110.35 110.22 110.22 115.79 108.21 121.02
Annual average 8.52 7.94 7.72 7.72 7.71 7.71 7.99 7.61 8.25
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5 years 33.29 26.33 28.47 26.47 28.44 28.44 30.05 25.48 31.68
Annual average 5.92 4.78 5.14 4.81 5.13 5.13 5.40 4.64 5.66
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1 year 10.89 5.05 10.17 5.16 10.14 9.14 10.39 6.51 10.63
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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 (which for class M
shares does not reflect a reduction in sales charges that went into effect
on April 1, 2005; if this reduction had been in place for all periods
indicated, returns would have been higher). 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.
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Change in the value of a $10,00 investment ($9,475 after sales charge)
Cumulative total return from 7/31/95 to 7/31/05
The George
Putnam Fund George
of Boston S&P 500/ Lehman Putnam
class A shares Barra Value Aggregate Blended
at POP Index Bond Index Index
7/31/95 9,475 10,000 10,000 10,000
7/31/96 10,870 11,555 10,554 11,155
7/31/97 14,296 17,053 11,690 14,696
7/31/98 15,659 19,328 12,610 16,386
7/31/99 16,964 22,317 12,917 18,133
7/31/00 16,100 22,286 13,694 18,630
7/31/01 18,171 23,172 15,433 20,092
7/31/02 16,317 17,226 16,595 17,436
7/31/03 17,631 19,380 17,494 19,293
7/31/04 19,353 22,739 18,341 21,683
7/31/05 $21,460 $26,581 $19,219 $24,300
Past performance does not indicate future results. At the end of the same
time period, a $10,000 investment in the fund's class B and class C shares
would have been valued at $21,035 and $21,022, respectively, and no
contingent deferred sales charges would apply. A $10,000 investment in the
fund's class M shares would have been valued at $21,579 ($20,821 at public
offering price). A $10,000 investment in the fund's class R shares would
have been valued at $22,102. See first page of performance section for
performance calculation method.
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Comparative index returns
For periods ended 7/31/05
- -------------------------------------------------------------------------
Lehman George
S&P 500/ Aggregate Putnam Lipper
Barra Value Bond Blended Balanced Funds
Index Index Index category average*
- -------------------------------------------------------------------------
Annual average
(life of fund) --+ --+ --+ --+
- -------------------------------------------------------------------------
10 years 165.81% 92.19% 143.00% 112.37%
Annual average 10.27 6.75 9.28 7.68
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5 years 19.28 40.35 30.43 13.99
Annual average 3.59 7.01 5.46 2.47
- -------------------------------------------------------------------------
1 year 16.90 4.79 12.07 11.18
- -------------------------------------------------------------------------
Index and Lipper results should be compared to fund performance at net asset
value.
* Over the 1-, 5-, and 10-year periods ended 7/31/05, there were 606, 360,
and 160 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.
- ---------------------------------------------------------------------------------------
Fund price and distribution information
For the 12-month period ended 7/31/05
- ---------------------------------------------------------------------------------------
Class A Class B Class C Class M Class R
- ---------------------------------------------------------------------------------------
Distributions
(number) 4 4 4 4 4
- ---------------------------------------------------------------------------------------
Income $0.3340 $0.2010 $0.2040 $0.2480 $0.3090
- ---------------------------------------------------------------------------------------
Capital gains -- -- -- -- --
- ---------------------------------------------------------------------------------------
Total $0.3340 $0.2010 $0.2040 $0.2480 $0.3090
- ---------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------
7/31/05 18.40 19.42 18.22 18.30 18.22 8.83* 18.36
- ---------------------------------------------------------------------------------------
Current return
(end of period)
- ---------------------------------------------------------------------------------------
Current dividend
rate 1 2.17% 2.06% 1.45% 1.46% 1.71% 1.66% 1.96%
- ---------------------------------------------------------------------------------------
Current 30-day
SEC yield 2 2.34 2.22 1.60 1.60 1.84 1.75 2.09
- ---------------------------------------------------------------------------------------
* Reflects a reduction in sales charges that took effect on April 1, 2005.
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.
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Fund performance for most recent calendar quarter
Total return for periods ended 6/30/05
- ----------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------
Annual average
(life of fund) 9.41% 9.32% 8.37% 8.37% 8.59% 8.59% 8.65% 8.59% 9.14%
- ----------------------------------------------------------------------------------------------------------
10 years 126.79 114.91 110.51 110.51 110.38 110.38 115.82 108.26 121.44
Annual average 8.53 7.95 7.73 7.73 7.72 7.72 8.00 7.61 8.27
- ----------------------------------------------------------------------------------------------------------
5 years 30.61 23.74 25.85 23.85 25.83 25.83 27.48 23.02 29.11
Annual average 5.49 4.35 4.71 4.37 4.70 4.70 4.98 4.23 5.24
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1 year 7.61 1.97 6.88 1.88 6.86 5.86 7.10 3.33 7.41
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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.
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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 February 1, 2005, to
July 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.
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Class A Class B Class C Class M Class R
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Expenses paid per
$1,000* $4.70 $8.48 $8.48 $7.22 $5.96
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Ending value
(after expenses) $1,037.60 $1,034.60 $1,034.60 $1,035.40 $1,036.70
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* 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 7/31/05. 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.
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Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended July
31, 2005, use the calculation method below. To find the value of your
investment on February 1, 2005, go to www.putnam.com and log on to your
account. Click on the "Transaction History" tab in your Daily Statement
and enter 02/01/2005 in both the "from" and "to" fields. Alternatively,
call Putnam at 1-800-225-1581.
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How to calculate the expenses you paid
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Total
Value of your Expenses paid = expenses
investment on 2/1/05 [DIV] $1,000 x per $1,000 paid
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Example Based on a $10,000 investment in class A shares of your fund.
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$10,000 [DIV] $1,000 x $4.70 (see table above) = $47.00
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Compare expenses using the SEC's method
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.
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Class A Class B Class C Class M Class R
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Expenses paid per
$1,000* $4.66 $8.40 $8.40 $7.15 $5.91
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Ending value (after
expenses) $1,020.18 $1,016.46 $1,016.46 $1,017.70 $1,018.94
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* 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 7/31/05.
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.
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Compare expenses using industry averages
You can also compare your fund's expenses with the average of its peer
group, as defined 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.
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Class A Class B Class C Class M Class R
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Your fund's annualized
expense ratio+ 0.93% 1.68% 1.68% 1.43% 1.18%
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Average annualized expense
ratio for Lipper peer group++ 1.27% 2.02% 2.02% 1.77% 1.52%
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+ For the fund's most recent fiscal half year; may differ from expense
ratios based on one-year data in the financial highlights.
++ Simple average of the expenses of all front-end load funds in the fund's
Lipper peer group, calculated in accordance with Lipper's standard method
for comparing fund expenses (excluding 12b-1 fees and without giving effect
to any expense offset and brokerage service arrangements that may reduce
fund expenses). This average reflects each fund's expenses for its most
recent fiscal year available to Lipper as of 6/30/05. 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 smaller or larger than the fund, which may limit the
comparability of the fund's expenses to the simple average, which typically
is higher than the asset-weighted average.
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 or other fixed-income instruments 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.
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Turnover comparisons
Percentage of holdings that change every year
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2005 2004 2003 2002 2001
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The George Putnam Fund
of Boston 169%* 166% 121%+ ++ 132%+ 333%
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Lipper Balanced Funds
category average 71% 71% 76% 78% 78%
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* Portfolio turnover excludes dollar roll transactions.
+ Portfolio turnover excludes certain treasury note transactions executed
in connection with a short-term trading strategy.
++ Portfolio turnover excludes the impact of assets received from the
acquisition of Putnam Balanced Fund and Putnam Balanced Retirement Fund.
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 2005 is based on information available as of
6/30/05.
Your fund's risk
This risk comparison is designed 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.
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Your fund's Overall Morningstar Risk
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 June 30, 2005. A higher Overall
Morningstar Risk generally indicates that a fund's monthly returns have
varied more widely.
[GRAPHIC OMITTED: chart MORNINGSTAR RISK]
Fund's Overall
Morningstar Risk 0.80
U.S. stock
fund average 3.10
0% INCREASING RISK 100%
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.
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. Michael Abata, 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.putnam.com.
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Fund ownership by the Portfolio Leader and Portfolio Members
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 as of July 31, 2005, and July 31, 2004.
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$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 *
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Portfolio Leader 2004 *
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Michael Abata 2005 *
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Portfolio Member N/A
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Kevin Cronin 2005 *
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Portfolio Member 2004 *
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Jeffrey Knight 2005 *
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Portfolio Member 2004 *
- -------------------------------------------------------------------------------------------
Raman Srivastava 2005 *
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Portfolio Member N/A
- -------------------------------------------------------------------------------------------
N/A indicates the individual was not a Portfolio Leader or Portfolio Member as of 7/31/04.
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Fund manager compensation
The total 2004 fund manager compensation that is attributable to your fund
is approximately $1,800,000. 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 taken 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 of 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. This amount does not include compensation of other personnel
involved in research, trading, administration, systems, compliance, or
fund operations; nor does it include non-compensation costs. 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.
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Other Putnam funds managed by the Portfolio Leader and Portfolio Members
Jeanne Mockard is also a Portfolio Member of Putnam Equity Income Fund.
Michael Abata is also a Portfolio Leader of Putnam Classic Equity Fund and
a Portfolio Member of Putnam New Value 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, Putnam Income Strategies Fund, and Putnam RetirementReady[r] Funds.
Raman Srivastava is also a Portfolio Member of Putnam Income Fund.
Jeanne Mockard, Michael Abata, Kevin Cronin, Jeffrey Knight, and Raman
Srivastava may also manage other accounts and variable trust funds advised
by Putnam Management or an affiliate.
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Changes in your fund's Portfolio Leader and Portfolio Members
During the year ended July 31, 2005, Portfolio Members Michael Abata and
Raman Srivastava joined your fund's management team.
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Fund ownership by Putnam's Executive Board
The table below shows how much the members of Putnam's Executive Board
have invested in the fund (in dollar ranges). Information shown is as of
July 31, 2005, and July 31, 2004.
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$1 - $10,001 - $50,001 - $100,001
Year $0 $10,000 $50,000 $100,000 and over
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Philippe Bibi 2005 *
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Chief Technology
Officer 2004 *
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Joshua Brooks 2005 *
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Deputy Head of
Investments N/A
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William Connolly N/A
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Head of Retail
Management N/A
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Kevin Cronin 2005 *
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Head of Investments 2004 *
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Charles Haldeman, Jr. 2005 *
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President and CEO 2004 *
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Amrit Kanwal 2005 *
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Chief Financial Officer 2004 *
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Steven Krichmar 2005 *
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Chief of Operations 2004 *
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Francis McNamara, III 2005 *
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General Counsel 2004 *
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Richard Robie, III 2005 *
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Chief Administrative
Officer 2004 *
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Edward Shadek 2005 *
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Deputy Head of
Investments N/A
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Sandra Whiston N/A
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Head of Institutional
Management N/A
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N/A indicates the individual became a member of Putnam's Executive Board
after the reporting date.
Terms and definitions
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Important terms
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 (since reduced to 3.25%).
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.
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Share classes
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.
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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 total return at net asset
value.
Trustee approval of management contract
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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 your fund's management contract with Putnam Management. In
this regard, the Board of Trustees, with the assistance of its Contract
Committee consisting solely of Trustees who are not "interested persons"
(as such term is defined in the Investment Company Act of 1940, as
amended) of the Putnam funds (the "Independent Trustees"), requests and
evaluates all information it deems reasonably necessary under the
circumstances. Over the course of several months beginning in March and
ending in June 2005, the Contract Committee met five times to consider 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 management contract, effective
July 1, 2005.
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 services, 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 and how the Trustees considered these factors are described
below, although individual Trustees may have evaluated the information
presented differently, giving different weights to various factors. It is
also important to recognize that the fee arrangements for your fund and
the other Putnam funds are the result of many years of review and
discussion between the Independent Trustees and Putnam Management, that
certain aspects of such arrangements may receive greater scrutiny in some
years than others, and that the Trustees' conclusions may be based, in
part, on their consideration of these same arrangements in prior years.
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Model fee schedules and categories; total expenses
The Trustees' review of the management fees and total expenses of the
Putnam funds focused on three major themes:
* Consistency. 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 family of funds and
compares favorably with fees paid by competitive funds sponsored by other
investment advisers. Under this approach, each Putnam fund is assigned to
one of several fee categories based on a combination of factors, including
competitive fees and perceived difficulty of management, and a common fee
schedule is implemented for all funds in a given fee category. The Trustees
reviewed the model fee schedule currently in effect for your fund, including
fee levels and breakpoints, and the assignment of the fund to a particular
fee category under this structure. ("Breakpoints" refer to reductions in fee
rates that apply to additional assets once specified asset levels are
reached.) The Trustees concluded that no changes should be made in the
fund's current fee schedule at this time.
* Competitiveness. The Trustees also reviewed comparative fee and expense
information for competitive funds, which indicated that, in a custom peer
group of competitive funds selected by Lipper Inc., your fund ranked in
the 21st percentile in management fees and in the 17th percentile in total
expenses (less any applicable 12b-1 fees) as of December 31, 2004 (the
first percentile being the least expensive funds and the 100th percentile
being the most expensive funds). (Because the fund's custom peer group is
smaller than the fund's broad Lipper Inc. peer group, this expense
comparison may differ from the Lipper peer expense information found
elsewhere in this report.) The Trustees noted that expense ratios for a
number of Putnam funds, which show the percentage of fund assets used to
pay for management and administrative services, distribution (12b-1) fees
and other expenses, 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 and which Putnam Management, in
consultation with the Contract Committee, has committed to maintain at
least through 2006. The Trustees expressed their intention to monitor this
information closely to ensure that fees and expenses of the Putnam funds
continue to meet evolving competitive standards.
* Economies of scale. 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. Your fund currently has the benefit of
breakpoints in its management fee that provide shareholders with significant
economies of scale, which means that the effective management fee rate of a
fund (as a percentage of fund assets) declines as a fund grows in size and
crosses specified asset thresholds. The Trustees examined the existing
breakpoint structure of the Putnam funds' management fees in light of
competitive industry practices. The Trustees considered various possible
modifications to the Putnam Funds' current breakpoint structure, but
ultimately concluded that the current breakpoint structure continues to
serve the interests of fund shareholders. Accordingly, the Trustees continue
to believe that the fee schedules currently in effect for the funds
represent an appropriate sharing of economies of scale at current asset
levels. The Trustees noted that significant redemptions 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. In view of these changes, the Trustees intend to consider
whether a greater sharing of the economies of scale by fund shareholders
would be appropriate if and when aggregate assets in the Putnam funds begin
to experience meaningful growth.
In connection with their review of the management fees and total expenses
of the Putnam funds, the Trustees also reviewed the costs of the services
to be provided and profits to be realized by Putnam Management and its
affiliates from the relationship with the funds. This information included
trends in revenues, expenses and profitability of Putnam Management and
its affiliates relating to the investment management and distribution
services provided to the funds. In this regard, the Trustees also reviewed
an analysis of Putnam Management's revenues, expenses and profitability
with respect to the funds' management contracts, allocated on a
fund-by-fund basis.
- ------------------------------------------------------------------------------
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 your fund's management
contract. The Trustees were assisted in their review of the funds'
investment process and performance by the work of the Investment Oversight
Committees of the Trustees, which meet on a regular monthly basis with the
funds' portfolio teams throughout the year. The Trustees concluded that
Putnam Management generally provides 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 -- but also recognize that this 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 underperformance 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 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.
In the case of your fund, the Trustees considered that your fund's class A
share performance at net asset value was in the following percentiles of
its Lipper Inc. peer group for the one-, three- and five-year periods
ended December 31, 2004 (the first percentile being the best-performing
funds and the 100th percentile being the worst-performing funds):
One-year period Three-year period Five-year period
- -----------------------------------------------------------------------------
46th 34th 15th
(Because of the passage of time, these performance results may differ from
the performance results for more recent periods shown elsewhere in this
report.)
As a general matter, the Trustees believe that cooperative efforts between
the Trustees and Putnam Management represent the most effective way to
address investment performance problems. The Trustees believe that
investors in the Putnam funds have, in effect, placed their trust in the
Putnam organization, under the oversight of the funds' Trustees, to make
appropriate decisions regarding the management of the funds. Based on the
responsiveness of Putnam Management in the recent past to Trustee concerns
about investment performance, the Trustees believe that it is preferable
to seek change within Putnam Management to address performance
shortcomings. In the Trustees' view, the alternative of terminating a
management contract and engaging a new investment adviser for an
underperforming fund would entail significant disruptions and would not
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, whereby a portion of the
commissions paid by a fund for brokerage is earmarked to pay for research
services that may be utilized by a fund's investment adviser. The Trustees
believe that soft-dollar credits and other potential benefits associated
with the allocation of fund brokerage, which pertains mainly to funds
investing in equity securities, represent assets of the funds that should
be used for the benefit of fund shareholders. This area has been marked by
significant change in recent years. In July 2003, acting upon the Contract
Committee's recommendation, the Trustees directed that allocations of
brokerage to reward firms that sell fund shares be discontinued no later
than December 31, 2003. In addition, commencing in 2004, the allocation of
brokerage commissions by Putnam Management to acquire research services
from third-party service providers has been significantly reduced, and
continues at a modest level only to acquire research that is customarily
not available for cash. The Trustees will 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.
The Trustees' annual review of your fund's management contract also
included the review of its distributor's contract and distribution plan
with Putnam Retail Management Limited Partnership and the custodian
agreement and investor servicing agreement with Putnam Fiduciary Trust
Company, all of which provide benefits to affiliates of Putnam Management.
- -----------------------------------------------------------------------------
Comparison of retail and institutional fee schedules
The information examined by the Trustees as part of their annual contract
review has included for many years information regarding fees charged by
Putnam Management and its affiliates to institutional clients such as
defined benefit pension plans, college endowments, etc. This information
included comparison of such fees with fees charged to the funds, as well
as a detailed assessment of the differences in the services provided to
these two types of clients. The Trustees observed, in this regard, that
the differences in fee rates between institutional clients and the 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 reflect to a substantial degree
historical competitive forces operating in separate market places. The
Trustees considered the fact that fee rates across all asset sectors are
higher on average for mutual funds than for institutional clients, as well
as the differences between the services that Putnam Management provides to
the Putnam funds and those that it provides to institutional clients of
the firm, but have not relied on such comparisons to any significant
extent in concluding that the management fees paid by your fund are
reasonable.
Other information for shareholders
- -----------------------------------------------------------------------------
Putnam's policy on confidentiality
In order to conduct business with our shareholders, we must obtain certain
personal information such as account holders' addresses, telephone
numbers, Social Security numbers, and the names of their financial
advisors. We use this information to assign an account number and to help
us maintain accurate records of transactions and account balances. It is
our policy to protect the confidentiality of your information, whether or
not you currently own shares of our funds, and in particular, not to sell
information about you or your accounts to outside marketing firms. We have
safeguards in place designed to prevent unauthorized access to our
computer systems and procedures to protect personal information from
unauthorized use. Under certain circumstances, we share this information
with outside vendors who provide services to us, such as mailing and proxy
solicitation. In those cases, the service providers enter into
confidentiality agreements with us, and we provide only the information
necessary to process transactions and perform other services related to
your account. We may also share this information with our Putnam
affiliates to service your account or provide you with information about
other Putnam products or services. It is also our policy to share account
information with your financial advisor, if you've listed one on your
Putnam account. If you would like clarification about our confidentiality
policies or have any questions or concerns, please don't hesitate to
contact us at 1-800-225-1581, Monday through Friday, 8:30 a.m. to 7:00
p.m., or Saturdays from 9:00 a.m. to 5:00 p.m. Eastern Time.
- -----------------------------------------------------------------------------
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,
2005, are available on the Putnam Individual Investor Web site,
www.putnam.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
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.
Financial statements
- -----------------------------------------------------------------------------
A guide to financial statements
These sections of the report, as well as the accompanying Notes, preceded
by the Report of Independent Registered Public Accounting Firm, 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 year.
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.
- -----------------------------------------------------------------------------
Report of Independent Registered Public Accounting Firm
To the Trustees and Shareholders of The George Putnam Fund of Boston:
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly,
in all material respects, the financial position of The George Putnam Fund
of Boston (the "fund") at July 31, 2005, and the results of its
operations, the changes in its net assets and the financial highlights for
each of the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the fund's management; our
responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these financial statements
in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of investments owned at July 31,
2005, by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 14, 2005
The fund's portfolio 7/31/05
- ------------------------------------------------------------------------------------------------
COMMON STOCKS (59.7%) *
- ------------------------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------------------------
Aerospace and Defense (1.4%)
Boeing Co. (The) 345,500 $22,806,455
Lockheed Martin Corp. 677,300 42,263,520
Northrop Grumman Corp. 148,200 8,217,690
73,287,665
- ------------------------------------------------------------------------------------------------
Automotive (0.1%)
Lear Corp. (S) 132,200 5,654,194
- ------------------------------------------------------------------------------------------------
Banking (6.8%)
Bank of America Corp. 2,481,900 108,210,840
Bank of New York Co., Inc. (The) 164,000 5,047,920
Citigroup, Inc. # 2,826,100 122,935,350
State Street Corp. 328,500 16,339,590
U.S. Bancorp 2,181,200 65,566,872
Wachovia Corp. 464,500 23,401,510
Wells Fargo & Co. (S) 327,500 20,088,850
361,590,932
- ------------------------------------------------------------------------------------------------
Beverage (0.4%)
Coca-Cola Co. (The) 192,000 8,401,920
Coca-Cola Enterprises, Inc. 616,100 14,478,350
22,880,270
- ------------------------------------------------------------------------------------------------
Biotechnology (0.2%)
Amgen, Inc. + 134,600 10,734,350
- ------------------------------------------------------------------------------------------------
Broadcasting (0.1%)
Discovery Holding Co. Class A + 124,150 1,771,621
Viacom, Inc. Class B 150,400 5,036,896
6,808,517
- ------------------------------------------------------------------------------------------------
Building Materials (1.4%)
Masco Corp. 1,582,800 53,672,748
Sherwin Williams Co. 275,900 13,135,599
Vulcan Materials Co. 123,700 8,688,688
75,497,035
- ------------------------------------------------------------------------------------------------
Cable Television (0.4%)
Comcast Corp. Class A + (S) 654,700 20,118,931
- ------------------------------------------------------------------------------------------------
Chemicals (0.6%)
Dow Chemical Co. (The) 299,900 14,380,205
Huntsman Corp. + 164,200 3,824,218
PPG Industries, Inc. 226,500 14,729,295
32,933,718
- ------------------------------------------------------------------------------------------------
Communications Equipment (0.3%)
Cisco Systems, Inc. + 990,800 18,973,820
- ------------------------------------------------------------------------------------------------
Computers (2.4%)
Dell, Inc. + 300,800 12,173,376
Hewlett-Packard Co. 2,396,300 58,996,906
IBM Corp. 675,500 56,377,230
127,547,512
- ------------------------------------------------------------------------------------------------
Conglomerates (2.3%)
General Electric Co. 1,175,700 40,561,650
Honeywell International, Inc. 450,800 17,707,424
Tyco International, Ltd. 2,065,650 62,940,356
121,209,430
- ------------------------------------------------------------------------------------------------
Consumer Finance (1.5%)
Capital One Financial Corp. (S) 347,000 28,627,500
Countrywide Financial Corp. 723,800 26,056,800
Providian Financial Corp. + 1,327,400 25,087,860
79,772,160
- ------------------------------------------------------------------------------------------------
Consumer Goods (0.8%)
Energizer Holdings, Inc. + (S) 76,000 4,856,400
Estee Lauder Cos., Inc. (The) Class A 288,600 11,295,804
Procter & Gamble Co. (The) (S) 469,700 26,129,411
42,281,615
- ------------------------------------------------------------------------------------------------
Consumer Services (0.2%)
Service Corporation International 1,164,800 10,098,816
- ------------------------------------------------------------------------------------------------
Containers (0.3%)
Ball Corp. 290,900 11,039,655
Owens-Illinois, Inc. + 126,600 3,247,290
14,286,945
- ------------------------------------------------------------------------------------------------
Electric Utilities (2.5%)
Alliant Energy Corp. 255,600 7,437,960
American Electric Power Co., Inc. 137,400 5,317,380
Constellation Energy Group, Inc. 150,900 9,085,689
Dominion Resources, Inc. 188,850 13,948,461
DPL, Inc. 219,000 6,044,400
Entergy Corp. 218,500 17,029,890
Exelon Corp. 502,700 26,904,504
PG&E Corp. (S) 1,017,850 38,301,696
Public Service Enterprise Group, Inc. 113,600 7,304,480
Wisconsin Energy Corp. 128,800 5,171,320
36,545,780
- ------------------------------------------------------------------------------------------------
Electronics (1.7%)
Avnet, Inc. + 161,300 4,222,834
Freescale Semiconductor, Inc. Class B + 12,900 332,175
Intel Corp. 2,034,300 55,210,902
Motorola, Inc. 1,294,200 27,411,156
PerkinElmer, Inc. 290,500 6,094,690
93,271,757
- ------------------------------------------------------------------------------------------------
Energy (0.1%)
Cooper Cameron Corp. + 73,300 5,202,834
- ------------------------------------------------------------------------------------------------
Financial (2.7%)
Fannie Mae 818,090 45,698,507
Freddie Mac 876,740 55,480,107
Hartford Financial Services Group, Inc. (The) 203,100 16,363,767
MetLife, Inc. 409,400 20,117,916
PMI Group, Inc. (The) 164,500 6,736,275
144,396,572
- ------------------------------------------------------------------------------------------------
Food (0.4%)
General Mills, Inc. (S) 439,900 20,851,260
- ------------------------------------------------------------------------------------------------
Forest Products and Packaging (0.5%)
Smurfit-Stone Container Corp. + 710,100 8,613,513
Weyerhaeuser Co. (S) 288,400 19,893,832
28,507,345
- ------------------------------------------------------------------------------------------------
Health Care Services (1.6%)
AmerisourceBergen Corp. (S) 215,800 15,492,282
Cardinal Health, Inc. 488,800 29,122,704
CIGNA Corp. 276,175 29,481,681
Medco Health Solutions, Inc. + 208,900 10,119,116
84,215,783
- ------------------------------------------------------------------------------------------------
Homebuilding (0.4%)
Lennar Corp. (S) 234,600 15,781,542
NVR, Inc. + 9,500 8,911,000
24,692,542
- ------------------------------------------------------------------------------------------------
Household Furniture and Appliances (0.5%)
Whirlpool Corp. (S) 306,900 24,545,862
- ------------------------------------------------------------------------------------------------
Insurance (3.5%)
ACE, Ltd. (Bermuda) 1,099,000 50,784,790
American International Group, Inc. 379,150 22,824,830
Axis Capital Holdings, Ltd. (Bermuda) 306,754 8,834,515
Berkshire Hathaway, Inc. Class B + 1,140 3,171,480
Chubb Corp. (The) (S) 306,100 27,187,802
Endurance Specialty Holdings, Ltd. (Bermuda) 65,000 2,535,000
Everest Re Group, Ltd. (Barbados) 110,600 10,772,440
Montpelier Re Holdings, Ltd. (Bermuda) 84,800 3,046,016
St. Paul Travelers Cos., Inc. (The) 285,400 12,563,308
W.R. Berkley Corp. (S) 495,250 18,537,208
XL Capital, Ltd. Class A (Bermuda) 345,850 24,838,947
185,096,336
- ------------------------------------------------------------------------------------------------
Investment Banking/Brokerage (1.7%)
Goldman Sachs Group, Inc. (The) 84,400 9,071,312
Lehman Brothers Holdings, Inc. 481,870 50,658,993
Merrill Lynch & Co., Inc. 219,700 12,913,966
Morgan Stanley 362,700 19,241,235
91,885,506
- ------------------------------------------------------------------------------------------------
Leisure (0.3%)
Brunswick Corp. 407,200 18,959,232
- ------------------------------------------------------------------------------------------------
Lodging/Tourism (0.8%)
Cendant Corp. 1,529,400 32,667,984
Royal Caribbean Cruises, Ltd. 205,400 9,335,430
42,003,414
- ------------------------------------------------------------------------------------------------
Machinery (0.5%)
Cummins, Inc. (S) 77,700 6,638,688
Parker-Hannifin Corp. 285,100 18,736,772
25,375,460
- ------------------------------------------------------------------------------------------------
Manufacturing (0.7%)
Dover Corp. 213,500 8,809,010
Ingersoll-Rand Co., Ltd. Class A (Bermuda) 368,450 28,801,737
37,610,747
- ------------------------------------------------------------------------------------------------
Media (0.6%)
Liberty Media Corp. Class A + 1,241,500 10,912,785
News Corp., Ltd. (The) Class A 244,012 3,996,917
Time Warner, Inc. 270,500 4,603,910
Walt Disney Co. (The) 528,800 13,558,432
33,072,044
- ------------------------------------------------------------------------------------------------
Medical Technology (0.8%)
Baxter International, Inc. 44,600 1,751,442
Becton, Dickinson and Co. 238,100 13,183,597
Boston Scientific Corp. + (S) 585,000 16,935,750
Medtronic, Inc. 183,200 9,881,808
41,752,597
- ------------------------------------------------------------------------------------------------
Metals (0.5%)
Alcoa, Inc. 671,800 18,843,990
United States Steel Corp. (S) 193,100 8,235,715
27,079,705
- ------------------------------------------------------------------------------------------------
Natural Gas Utilities (0.3%)
Sempra Energy 333,500 14,173,750
- ------------------------------------------------------------------------------------------------
Oil & Gas (7.7%)
Amerada Hess Corp. (S) 303,200 35,735,152
Chevron Corp. 1,899,300 110,178,393
ExxonMobil Corp. 2,886,200 169,564,250
Marathon Oil Corp. 716,500 41,814,940
Occidental Petroleum Corp. 131,000 10,778,680
Sunoco, Inc. 58,400 7,342,632
Unocal Corp. 388,900 25,220,165
Valero Energy Corp. 139,500 11,547,810
412,182,022
- ------------------------------------------------------------------------------------------------
Pharmaceuticals (3.7%)
Abbott Laboratories 146,400 6,826,632
Barr Pharmaceuticals, Inc. + 112,400 5,330,008
Eli Lilly Co. 91,700 5,164,544
Johnson & Johnson 798,000 51,040,080
Pfizer, Inc. 3,877,800 102,761,700
Wyeth 603,200 27,596,400
198,719,364
- ------------------------------------------------------------------------------------------------
Photography/Imaging (0.3%)
Xerox Corp. + (S) 995,648 13,152,510
- ------------------------------------------------------------------------------------------------
Publishing (0.4%)
McGraw-Hill Companies, Inc. (The) 193,000 8,879,930
R. R. Donnelley & Sons Co. (S) 293,500 10,580,675
19,460,605
- ------------------------------------------------------------------------------------------------
Railroads (0.8%)
Canadian National Railway Co. (Canada) 97,300 6,465,585
Norfolk Southern Corp. 958,600 35,669,506
42,135,091
- ------------------------------------------------------------------------------------------------
Regional Bells (0.8%)
Verizon Communications, Inc. 1,235,400 42,287,742
- ------------------------------------------------------------------------------------------------
Restaurants (0.9%)
McDonald's Corp. 1,525,700 47,556,069
- ------------------------------------------------------------------------------------------------
Retail (2.1%)
AutoZone, Inc. + (S) 105,100 10,240,944
Best Buy Co., Inc. (S) 129,000 9,881,400
Lowe's Cos., Inc. 262,400 17,376,128
Office Depot, Inc. + 1,206,900 34,251,822
Rite Aid Corp. + 3,120,700 14,011,943
Sears Holdings Corp. + 36,737 5,665,948
Supervalu, Inc. 556,100 19,685,940
111,114,125
- ------------------------------------------------------------------------------------------------
Shipping (0.2%)
Yellow Roadway Corp. + (S) 160,900 8,513,219
- ------------------------------------------------------------------------------------------------
Software (1.2%)
Microsoft Corp. 907,800 23,248,758
Oracle Corp. + 2,459,800 33,404,084
Siebel Systems, Inc. 559,800 4,702,320
61,355,162
- ------------------------------------------------------------------------------------------------
Technology Services (0.2%)
Fiserv, Inc. + 189,600 8,412,552
- ------------------------------------------------------------------------------------------------
Telecommunications (0.5%)
Nextel Communications, Inc. Class A + (S) 802,800 27,937,440
- ------------------------------------------------------------------------------------------------
Tobacco (1.5%)
Altria Group, Inc. 1,206,400 80,780,544
- ------------------------------------------------------------------------------------------------
Toys (0.1%)
Mattel, Inc. (S) 374,500 6,984,425
- ------------------------------------------------------------------------------------------------
Total common stocks (cost $2,490,333,442) $3,183,505,306
- ------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY MORTGAGE OBLIGATIONS (12.6%)*
- ------------------------------------------------------------------------------------------------
Principal amount Value
- ------------------------------------------------------------------------------------------------
U.S. Government Guaranteed Mortgage Obligations (--%)
Government National Mortgage Association Pass-Through
Certificates 7s, with due dates from August 15, 2029
to October 15, 2031 $483,759 $514,298
- ------------------------------------------------------------------------------------------------
U.S. Government Agency Mortgage Obligations (12.6%)
Federal Home Loan Mortgage Corporation
8 3/4s, with due dates from May 1, 2009 to June 1, 2009 258,463 271,114
6 1/2s, with due dates from January 1, 2024 to
December 1, 2034 37,955,436 39,302,556
6s, with due dates from October 1, 2031 to March 1, 2035 79,019 80,760
5 1/2s, June 1, 2035 3,100,308 3,121,229
5 1/2s, July 1, 2016 653,989 668,601
5 1/2s, TBA, August 1, 2020 5,100,000 5,201,203
Federal National Mortgage Association Pass-Through Certificates
11s, with due dates from October 1, 2015 to March 1, 2016 15,198 16,929
9s, with due dates from January 1, 2027 to July 1, 2032 328,864 363,228
8 3/4s, July 1, 2009 5,688 5,994
8s, with due dates from August 1, 2026 to July 1, 2033 1,582,962 1,702,115
7 1/2s, with due dates from October 1, 2025 to July 1, 2033 1,268,094 1,353,282
7s, with due dates from June 1, 2024 to June 1, 2035 4,395,328 4,643,177
7s, with due dates from November 1, 2007 to February 1, 2017 1,832,077 1,918,797
7s, TBA, August 1, 2035 3,700,000 3,892,515
7s, TBA, July 1, 2035 1,000,000 1,053,008
6 1/2s, with due dates from June 1, 2023 to March 1, 2035 90,200,388 93,381,561
6 1/2s, with due dates from July 1, 2010 to May 1, 2011 371,957 387,390
Federal National Mortgage Association Pass-Through Certificates
6s, May 1, 2035 264,962 272,320
6s, with due dates from December 1, 2013 to May 1, 2017 261,958 270,859
5 1/2s, with due dates from January 1, 2032 to February 1,
2035 210,238,005 211,483,842
5 1/2s, with due dates from January 1, 2009 to August 1, 2019 1,041,598 1,064,883
5 1/2s, TBA, August 1, 2035 96,290,000 96,763,930
5s, July 1, 2035 20,150 19,851
5s, with due dates from December 1, 2018 to June 1, 2020 2,654,796 2,664,598
5s, TBA, August 1, 2035 100,000 98,469
4 1/2s, with due dates from January 1, 2019 to August 1, 2020 43,270,988 42,589,205
4 1/2s, TBA, August 1, 2020 160,300,000 157,645,031
4s, June 1, 2019 37,466 36,166
670,272,613
- ------------------------------------------------------------------------------------------------
Total U.S. government and agency mortgage obligations (cost
$670,128,508) $670,786,911
- ------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (0.1%)*
- ------------------------------------------------------------------------------------------------
Principal amount Value
- ------------------------------------------------------------------------------------------------
U.S. Treasury Notes
4 1/4s, November 15, 2013 $1,450,000 $1,450,453
3 1/4s, August 15, 2008 3,005,000 2,935,744
- ------------------------------------------------------------------------------------------------
Total U.S. treasury obligations (cost $4,530,290) $4,386,197
- ------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (10.4%)*
- ------------------------------------------------------------------------------------------------
Principal amount Value
- ------------------------------------------------------------------------------------------------
Amresco Commercial Mortgage Funding I 144A Ser. 97-C1, Class H,
7s, 2029 $664,000 $678,920
Banc of America Commercial Mortgage, Inc. Ser. 01-1, Class G,
7.324s, 2036 950,000 1,044,897
Banc of America Commercial Mortgage, Inc. 144A
Ser. 01-PB1, Class K, 6.15s, 2035 715,000 738,296
Ser. 05-1, Class XW, Interest Only (IO), 0.106s, 2042 255,043,280 1,457,827
Banc of America Large Loan
FRB Ser. 04-BBA4, Class H, 4.338s, 2018 142,000 142,381
FRB Ser. 04-BBA4, Class G, 4.088s, 2018 227,000 227,672
Banc of America Large Loan 144A
FRB Ser. 02-FL2A, Class L1, 6.34s, 2014 427,000 427,131
FRN Ser. 02-FL2A, Class K1, 5.84s, 2014 148,000 148,347
FRB Ser. 05-BOCA, Class M, 5.488s, 2016 956,000 960,317
FRB Ser. 05-BOCA, Class L, 5.088s, 2016 456,000 457,454
FRB Ser. 05-BOCA, Class K, 4.738s, 2016 370,000 371,184
FRB Ser. 05-BOCA, Class J, 4.488s, 2016 200,000 200,372
FRB Ser. 05-BOCA, Class H, 4.338s, 2016 200,000 200,373
Ser. 03-BBA2, Class X1A, IO, 0.727s, 2015 70,488,806 243,623
Banc of America Structured Security Trust 144A Ser. 02-X1, Class
A3, 5.436s, 2033 1,930,000 1,966,103
Bayview Commercial Asset Trust 144A
FRB Ser. 05-1A, Class A1, 3.76s, 2035 2,138,261 2,135,695
Ser. 05-1A, IO, 0.775s, 2035 8,683,008 690,571
Ser. 04-3, IO, 0.775s, 2035 7,199,509 553,187
Ser. 04-2, IO, 0.72s, 2034 1,146,962 888,274
Bear Stearns Commercial Mortgage Securitization Corp. Ser.
00-WF2, Class F, 8.197s, 2032 456,000 532,755
Chase Commercial Mortgage Securities Corp. Ser. 00-3, Class A2,
7.319s, 2032 553,000 611,441
Chase Commercial Mortgage Securities Corp. 144A
Ser. 98-1, Class F, 6.56s, 2030 4,600,000 4,880,636
Ser. 98-1, Class G, 6.56s, 2030 1,171,000 1,247,667
Ser. 98-1, Class H, 6.34s, 2030 1,761,000 1,522,440
Citigroup Commercial Mortgage Trust 144A Ser. 05-C3, Class XC,
IO, 0.551s, 2043 9,508,000 1,265,104
Commercial Mortgage Acceptance Corp. Ser. 97-ML1, Class A3,
6.57s, 2030 4,937,500 5,075,186
Commercial Mortgage Acceptance Corp. 144A
Ser. 98-C1, Class F, 6.23s, 2031 2,013,000 2,110,487
Ser. 98-C2, Class F, 5.44s, 2030 705,000 708,843
Commercial Mortgage Pass-Through Certificates 144A
FRB Ser. 01-J2A, Class A2F, 3.909s, 2034 1,590,000 1,611,147
Ser. 05-LP5, Class XC, IO, 0.044s, 2043 4,280,000 765,084
Criimi Mae Commercial Mortgage Trust Ser. 98-C1, Class A2, 7s,
2033 9,485,000 9,816,975
Criimi Mae Commercial Mortgage Trust 144A Ser. 98-C1, Class B,
7s, 2033 3,385,000 3,534,252
Crown Castle Towers, LLC 144A Ser. 05-1A, Class D, 5.612s, 2035 2,903,000 2,865,465
CS First Boston Mortgage Securities Corp. Ser. 97-C2, Class F,
7.46s, 2035 1,239,000 1,331,323
CS First Boston Mortgage Securities Corp. 144A
FRB Ser. 03-TF2A, Class L, 7.388s, 2014 1,124,000 1,120,948
FRB Ser. 04-TF2A, Class J, 4.338s, 2016 313,000 312,999
FRB Ser. 05-TFLA, Class J, 4.338s, 2020 319,000 318,999
FRB Ser. 04-TF2A, Class H, 4.088s, 2019 627,000 626,998
FRB Ser. 05-TFLA, Class H, 4.138s, 2020 319,000 318,999
Ser. 01-CK1, Class AY, IO, 0.784s, 2035 7,907,000 2,426,603
Ser. 03-C3, Class AX, IO, 0.37s, 2038 9,705,642 1,265,971
Ser. 05-C2, Class AX, IO, 0.067s, 2037 7,220,619 1,204,951
DLJ Commercial Mortgage Corp.
Ser. 00-CF1, Class A1B, 7.62s, 2033 2,212,000 2,464,556
Ser. 99-CG2, Class B4, 6.1s, 2032 2,785,000 2,848,247
Ser. 98-CF2, Class B3, 6.04s, 2031 444,188 455,956
DLJ Commercial Mortgage Corp. 144A Ser. 99-CG2, Class B3, 6.1s,
2032 1,752,000 1,796,242
DLJ Mortgage Acceptance Corp. 144A Ser. 97-CF1, Class A3, 7.76s,
2030 1,000,000 1,038,359
Fannie Mae
IFB Ser. 05-37, Class SU, 15.36s, 2035 3,707,408 4,362,353
IFB Ser. 04-10, Class QC, 14.76s, 2031 2,582,855 2,863,789
IFB Ser. 05-57, Class CD, 12.15s, 2035 1,694,653 1,867,822
Ser. 05-74, Class DM, 11.807s, 2035 4,417,000 4,779,110
IFB Ser. 05-45, Class DA, 11.733s, 2035 3,660,164 4,026,225
IFB Ser. 05-45, Class DC, 11.623s, 2035 2,854,889 3,127,530
IFB Ser. 02-36, Class SJ, 11.475s, 2029 815,635 838,896
IFB Ser. 05-57, Class DC, 10.53s, 2034 3,115,584 3,388,544
Ser. 92-15, Class L, IO, 10.376s, 2022 423 4,494
IFB Ser. 04-79, Class SA, 10.313s, 2032 5,127,750 5,343,996
Ser. 04-T3, Class PT1, 9.92s, 2044 1,010,795 1,108,001
IFB Ser. 05-45, Class PC, 9.87s, 2034 1,728,156 1,847,030
Ser. 02-T12, Class A4, 9 1/2s, 2042 374,070 403,734
Ser. 02-T4, Class A4, 9 1/2s, 2041 2,161,116 2,328,109
Ser. 02-T6, Class A3, 9 1/2s, 2041 773,190 831,619
Ser. 03-W6, Class PT1, 9.391s, 2042 438,587 473,892
IFB Ser. 03-87, Class SP, 9.185s, 2032 2,292,881 2,197,942
IFB Ser. 05-73, Class SA, 8.762s, 2035 2,009,000 2,019,045
IFB Ser. 05-59, Class DQ, 8.35s, 2035 1,964,649 1,976,852
Ser. 05-W1, Class 1A4, 7 1/2s, 2044 4,326,287 4,600,892
Ser. 04-W12, Class 1A4, 7 1/2s, 2044 1,046,880 1,113,431
Ser. 04-W14, Class 2A, 7 1/2s, 2044 479,677 508,907
Ser. 04-W8, Class 3A, 7 1/2s, 2044 4,844,806 5,156,161
Ser. 04-W11, Class 1A4, 7 1/2s, 2044 2,884,863 3,069,057
Ser. 04-T3, Class 1A4, 7 1/2s, 2044 103,890 110,497
Ser. 04-W9, Class 2A3, 7 1/2s, 2044 3,566,151 3,790,565
Ser. 04-T2, Class 1A4, 7 1/2s, 2043 1,462,425 1,555,663
Ser. 03-W4, Class 4A, 7 1/2s, 2042 488,401 517,137
Ser. 02-T18, Class A4, 7 1/2s, 2042 367,954 390,534
Ser. 03-W3, Class 1A3, 7 1/2s, 2042 1,851,422 1,965,090
Ser. 02-T16, Class A3, 7 1/2s, 2042 3,538,277 3,754,878
Ser. 02-T19, Class A3, 7 1/2s, 2042 2,092,644 2,221,056
Ser. 03-W2, Class 1A3, 7 1/2s, 2042 4,013,243 4,261,393
Ser. 02-W6, Class 2A, 7 1/2s, 2042 3,474,926 3,682,804
Ser. 02-T12, Class A3, 7 1/2s, 2042 621,971 659,191
Ser. 02-W4, Class A5, 7 1/2s, 2042 7,596,992 8,056,053
Ser. 02-W1, Class 2A, 7 1/2s, 2042 411,671 434,317
Ser. 02-14, Class A2, 7 1/2s, 2042 1,198,118 1,269,919
Ser. 01-T10, Class A2, 7 1/2s, 2041 3,603,638 3,812,267
Ser. 02-T4, Class A3, 7 1/2s, 2041 686,585 726,533
Ser. 02-T6, Class A2, 7 1/2s, 2041 6,152,961 6,504,400
Ser. 01-T12, Class A2, 7 1/2s, 2041 3,437,662 3,638,288
Ser. 01-T8, Class A1, 7 1/2s, 2041 3,169,787 3,348,725
Ser. 01-T7, Class A1, 7 1/2s, 2041 8,820,948 9,311,434
Ser. 01-T3, Class A1, 7 1/2s, 2040 527,254 556,845
Ser. 01-T1, Class A1, 7 1/2s, 2040 1,151,145 1,218,328
Ser. 99-T2, Class A1, 7 1/2s, 2039 331,590 351,746
Ser. 03-W10, Class 1A1, 7 1/2s, 2032 863,718 914,865
Ser. 02-T1, Class A3, 7 1/2s, 2031 918,740 972,867
Ser. 00-T6, Class A1, 7 1/2s, 2030 2,897,752 3,058,881
Ser. 01-T5, Class A3, 7 1/2s, 2030 65,441 69,079
Ser. 02-W7, Class A5, 7 1/2s, 2029 2,175,162 2,307,603
Ser. 01-T4, Class A1, 7 1/2s, 2028 6,702,226 7,137,021
Ser. 02-W3, Class A5, 7 1/2s, 2028 2,044,225 2,166,732
Ser. 05-45, Class OX, IO, 7s, 2035 3,162,636 553,377
Ser. 04-W1, Class 2A2, 7s, 2033 0,668,495 11,191,918
Ser. 03-14, Class AI, IO, 7s, 2033 1,248,454 226,614
IFB Ser. 02-97, Class TW, IO, 6 1/2s, 2031 1,784,369 305,719
Ser. 03-58, Class ID, IO, 6s, 2033 4,769,603 909,206
Ser. 03-22, IO, 6s, 2033 6,370,785 3,113,577
Ser. 318, Class 2, IO, 6s, 2032 730,301 144,186
Ser. 03-31, Class IM, IO, 5 3/4s, 2032 6,130,250 720,304
Ser. 350, Class 2, IO, 5 1/2s, 2034 8,977,746 6,020,795
Ser. 338, Class 2, IO, 5 1/2s, 2033 7,045,590 9,838,291
Ser. 333, Class 2, IO, 5 1/2s, 2033 3,083,371 4,832,066
Ser. 331, Class 1, IO, 5 1/2s, 2033 6,569,576 1,217,342
Ser. 329, Class 2, IO, 5 1/2s, 2033 3,046,454 6,863,473
Ser. 03-26, Class OI, IO, 5 1/2s, 2032 7,278,589 1,120,654
Ser. 03-8, Class IP, IO, 5 1/2s, 2028 4,264,337 242,077
Ser. 03-6, Class IB, IO, 5 1/2s, 2022 1,495,654 9,080
Ser. 03-14, Class XI, IO, 5 1/4s, 2033 3,531,688 473,851
IFB Ser. 02-89, Class S, IO, 4.74s, 2033 5,348,006 471,159
Ser. 03-14, Class TI, IO, 5s, 2033 3,336,144 416,835
Ser. 03-24, Class UI, IO, 5s, 2031 2,981,386 421,249
IFB Ser. 02-36, Class QH, IO, 4.59s, 2029 1,767,204 53,793
Ser. 343, Class 25, IO, 4 1/2s, 2018 5,852,016 861,431
IFB Ser. 02-92, Class SB, IO, 4.26s, 2030 1,858,773 123,036
IFB Ser. 03-122, Class SA, IO, 4.01s, 2028 9,113,579 594,198
IFB Ser. 03-122, Class SJ, IO, 4.01s, 2028 9,679,872 630,000
IFB Ser. 97-44, Class SN, IO, 4s, 2023 1,733,835 153,108
IFB Ser. 04-64, Class SW, IO, 3.96s, 2034 6,111,058 986,802
IFB Ser. 04-65, Class ST, IO, 3.96s, 2034 8,046,524 492,850
IFB Ser. 04-60, Class SW, IO, 3.96s, 2034 1,607,421 1,028,417
FRB Ser. 3012, Class SK, 3.84s, 2011 3,596,000 3,877,121
IFB Ser. 05-65, Class KI, IO, 3.76s, 2035 0,071,000 1,898,957
IFB Ser. 05-52, Class DC, IO, 3.74s, 2035 4,035,059 319,274
IFB Ser. 05-42, Class PQ, IO, 3.71s, 2035 2,209,764 184,073
IFB Ser. 05-42, Class SA, IO, 3.71s, 2035 9,841,868 703,481
IFB Ser. 04-24, Class CS, IO, 3.69s, 2034 6,112,873 553,979
IFB Ser. 05-29, Class SD, IO, 3.66s, 2035 5,955,865 419,703
IFB Ser. 05-17, Class ES, IO, 3.66s, 2035 4,414,527 404,205
IFB Ser. 05-17, Class SY, IO, 3.66s, 2035 2,057,051 181,920
IFB Ser. 05-23, Class SG, IO, 3.61s, 2035 7,487,453 575,598
IFB Ser. 05-29, Class SX, IO, 3.61s, 2035 9,467,987 627,254
IFB Ser. 05-17, Class SA, IO, 3.61s, 2035 6,680,106 522,927
IFB Ser. 05-17, Class SE, IO, 3.61s, 2035 7,278,805 547,048
IFB Ser. 04-38, Class SI, IO, 3.48s, 2033 2,425,001 663,284
IFB Ser. 04-72, Class SB, IO, 3.41s, 2034 6,008,434 291,034
IFB Ser. 05-73, Class SI, IO, 3.37s, 2035 2,316,000 177,319
IFB Ser. 05-73, Class SD, IO, 3.3s, 2035 5,737,000 432,964
IFB Ser. 05-62, Class FS, IO, 3.29s, 2034 5,587,017 403,313
IFB Ser. 05-45, Class EW, IO, 3.26s, 2035 3,448,821 1,325,440
IFB Ser. 05-45, Class SR, IO, 3.26s, 2035 8,534,452 1,018,246
IFB Ser. 05-54, Class SA, IO, 3.24s, 2035 2,892,530 688,945
IFB Ser. 05-57, Class CI, IO, 3.24s, 2035 6,662,255 429,557
IFB Ser. 05-57, Class DI, IO, 3.24s, 2035 4,875,418 1,099,650
IFB Ser. 05-58, Class IK, IO, 2.54s, 2035 4,695,374 242,839
Ser. 03-W12, Class 2, IO, 2.216s, 2043 4,221,341 687,499
Ser. 03-W10, Class 1, IO, 1.98s, 2043 3,921,412 1,962,738
Ser. 03-W10, Class 3, IO, 1.947s, 2043 1,044,950 507,377
Ser. 03-W8, Class 12, IO, 1.64s, 2042 5,898,868 1,749,294
Ser. 03-W3, Class 2IO2, IO, 1.512s, 2042 2,717,214 16,256
Ser. 03-W6, Class 11, IO, 1.461s, 2042 5,162,904 95,404
Ser. 03-W17, Class 12, IO, 1.158s, 2033 3,327,703 377,840
Ser. 03-49, Class SV, IO, 1s, 2033 3,258,401 770,642
Ser. 03-T2, Class 2, IO, 0.936s, 2042 6,296,100 1,191,788
Ser. 03-W8, Class 11, IO, 0.763s, 2042 2,511,900 11,827
Ser. 03-W6, Class 51, IO, 0.681s, 2042 8,451,456 265,294
Ser. 03-W3, Class 2IO1, IO, 0.672s, 2042 5,672,929 81,246
Ser. 01-T12, Class IO, 0.569s, 2041 1,646,539 468,143
Ser. 03-W6, Class 21, IO, 0.562s, 2042 3,891,513 455
Ser. 03-W2, Class 1, IO, 0.47s, 2042 6,756,350 340,175
Ser. 02-T4, IO, 0.45s, 2041 4,322,553 122,054
Ser. 03-W3, Class 1, IO, 0.433s, 2042 6,707,655 443,698
Ser. 02-T1, Class IO, IO, 0.421s, 2031 4,915,697 303,223
Ser. 03-W6, Class 3, IO, 0.365s, 2042 5,942,422 204,363
Ser. 03-W6, Class 23, IO, 0.352s, 2042 7,420,955 200,711
Ser. 01-79, Class BI, IO, 0.342s, 2045 7,323,722 55,013
Ser. 03-W4, Class 3A, IO, 0.289s, 2042 4,885,933 202,198
Ser. 05-65, Class KO, Principal Only
(PO), zero %, 2035 1,077,000 931,036
Ser. 354, Class 1, PO, zero %, 2034 2,526,530 17,831,514
Ser. 352, Class 1, PO, zero %, 2034 2,538,493 17,851,026
Ser. 353, Class 1, PO, zero %, 2034 3,382,040 17,731,870
FRB Ser. 05-65, Class ER, zero %, 2035 3,926,000 4,025,630
FRB Ser. 05-57, Class UL, zero %, 2035 4,435,355 4,547,454
Federal Home Loan Mortgage Corp. Structured Pass-Through Securities
Ser. T-42, Class A6, 9 1/2s, 2042 394,075 425,040
Ser. T-60, Class 1A3, 7 1/2s, 2044 7,372,405 7,808,095
Ser. T-59, Class 1A3, 7 1/2s, 2043 5,434,558 5,787,264
Ser. T-58, Class 4A, 7 1/2s, 2043 978,421 1,036,584
Ser. T-57, Class 1A3, 7 1/2s, 2043 5,656,685 5,992,550
Ser. T-51, Class 2A, 7 1/2s, 2042 1,117,478 1,181,274
Ser. T-42, Class A5, 7 1/2s, 2042 1,649,513 1,747,449
Ser. T-41, Class 3A, 7 1/2s, 2032 759,621 802,965
Ser. 212, IO, 6s, 2031 799,078 147,861
Ser. T-56, Class A, IO, 1.076s, 2043 7,128,439 224,811
Ser. T-56, Class 3, IO, 0.518s, 2043 1,024,593 190,535
Ser. T-56, Class 1, IO, 0.283s, 2043 5,244,779 181,447
Ser. T-56, Class 2, IO, 0.038s, 2043 3,810,162 52,085
FFCA Secured Lending Corp. 144A Ser. 00-1, Class A2, 7.77s, 2027 2,159,831 13,553,205
First Union National Bank-Bank of America Commercial Mortgage
144A Ser. 01-C1, Class 3, IO, 1.734s, 2033 3,470,525 2,489,772
First Union-Lehman Brothers Commercial Mortgage Trust II
Ser. 97-C2, Class F, 7 1/2s, 2029 2,726,000 3,139,342
Ser. 97-C1, Class A3, 7.38s, 2029 3,607,579 3,689,624
First Union-Lehman Brothers-Bank of America 144A Ser. 98-C2,
Class G, 7s, 2035 1,364,000 1,515,373
Freddie Mac
IFB Ser. 2763, Class SC, 15.047s, 2032 5,072,714 5,607,541
IFB Ser. 2990, Class SL, 12.07s, 2034 2,783,379 3,042,676
IFB Ser. 2976, Class LC, 11.997s, 2035 1,317,028 1,429,814
IFB Ser. 2976, Class KL, 11.96s, 2035 3,104,895 3,361,383
IFB Ser. 2990, Class DP, 11.85s, 2034 2,758,730 2,954,712
IFB Ser. 2967, Class DS, 9.936s, 2035 780,781 775,505
IFB Ser. 2990, Class LB, 8.29s, 2035 3,299,965 3,229,363
IFB Ser. 2990, Class ND, 8.29s, 2035 849,919 843,664
IFB Ser. 2990, Class WP, 8.287s, 2035 2,198,793 2,205,654
IFB Ser. 2945, Class SA, 6.195s, 2020 2,686,000 2,616,076
Ser. 2778, Class TI, IO, 6s, 2033 6,288,008 1,033,749
Ser. 224, IO, 6s, 2033 2,162,763 426,470
Ser. 226, IO, 5 1/2s, 2034 5,044,291 3,222,809
Ser. 223, IO, 5 1/2s, 2032 5,987,364 1,197,691
Ser. 2581, Class IH, IO, 5 1/2s, 2031 2,111,245 549,029
Ser. 2600, Class CI, IO, 5 1/2s, 2029 666,122 153,624
Ser. 2664, Class UD, IO, 5 1/2s, 2028 1,061,555 197,580
Ser. 2553, Class IJ, IO, 5 1/2s, 2020 1,644,937 16,773
IFB Ser. 2927, Class SI, IO, 5.41s, 2035 5,504,483 747,330
Ser. 2437, Class SB, IO, 4.91s, 2032 4,186,821 395,131
IFB Ser. 2538, Class SH, IO, 4.46s, 2032 1,091,816 78,149
Ser. 2469, Class SH, IO, 4.41s, 2032 3,756,976 309,951
IFB Ser. 2828, Class GI, IO, 4.41s, 2034 5,983,201 701,565
IFB Ser. 2802, Class SM, IO, 4.26s, 2032 2,252,709 150,437
IFB Ser. 2869, Class SH, IO, 4.21s, 2034 3,281,090 264,543
IFB Ser. 2869, Class JS, IO, 4.16s, 2034 5,643,666 1,238,640
IFB Ser. 2882, Class SL, IO, 4.11s, 2034 3,127,485 290,690
IFB Ser. 2682, Class TQ, IO, 3.96s, 2033 2,994,850 186,242
IFB Ser. 2815, Class PT, IO, 3.96s, 2032 5,703,923 490,380
IFB Ser. 2594, Class OS, IO, 3.96s, 2032 8,299,234 484,987
IFB Ser. 2922, Class SE, IO, 3.66s, 2035 0,135,338 545,281
IFB Ser. 2924, Class SA, IO, 3.61s, 2035 4,540,383 763,370
IFB Ser. 2927, Class ES, IO, 3.61s, 2035 4,419,957 320,337
IFB Ser. 2950, Class SM, IO, 3.61s, 2016 6,049,716 487,758
IFB Ser. 2962, Class BS, IO, 3.56s, 2035 7,527,020 1,093,867
IFB Ser. 2863, Class SX, IO, 3.41s, 2031 2,005,214 101,514
IFB Ser. 2986, Class WS, IO, 3.262s, 2035 3,657,885 154,317
IFB Ser. 2990, Class LI, IO, 3.242s, 2035 5,134,436 389,478
IFB Ser. 2988, Class AS, IO, 2.812s, 2035 1,975,104 81,473
Ser. 228, PO, zero %, 2035 5,224,471 28,817,980
Ser. 2696, PO, zero %, 2033 1,587,377 1,188,722
FRB Ser. 3003, Class XF, zero %, 2035 3,268,000 3,366,694
FRB Ser. 2992, Class WM, zero %, 2035 1,351,666 1,424,386
GE Capital Commercial Mortgage Corp. 144A Ser. 05-C2, Class XC,
IO, 0.044s, 2043 89,045,641 770,067
General Growth Properties-Mall Properties Trust FRB Ser. 01-C1A,
Class D3, 5.638s, 2014 1,742,379 1,744,012
GMAC Commercial Mortgage Securities, Inc.
Ser. 99-C3, Class F, 7.787s, 2036 592,000 616,496
Ser. 04-C2, Class A4, 5.301s, 2038 1,483,000 1,521,439
Ser. 03-C2, Class A2, 5.28s, 2040 6,249,000 6,474,864
Ser. 05-C1, Class X1, IO, 0.001s, 2043 99,281,000 1,826,612
GMAC Commercial Mortgage Securities, Inc. 144A
Ser. 99-C3, Class G, 6.974s, 2036 1,614,303 1,294,889
FRN Ser. 02-FL1A, Class D, 6.1s, 2014 379,421 379,421
Government National Mortgage Association
IFB Ser. 05-7, Class JM, 9.221s, 2034 3,671,336 3,842,848
Ser. 05-13, Class PI, IO, 5 1/2s, 2033 4,392,331 702,993
Ser. 05-13, Class MI, IO, 5 1/2s, 2032 3,937,833 594,450
IFB Ser. 04-86, Class SW, IO, 3.66s, 2034 7,385,262 461,583
IFB Ser. 05-28, Class SA, IO, 3.11s, 2035 17,658,651 772,566
IFB Ser. 04-11, Class SA, IO, 2.41s, 2034 6,932,825 238,346
Ser. 98-2, Class EA, PO, zero %, 2028 195,991 164,020
GS Mortgage Securities Corp. II 144A
FRB Ser. 03-FL6A, Class L, 6.638s, 2015 565,000 568,178
Ser. 05-GG4, Class XC, IO, 0.107s, 2039 108,705,000 2,160,476
JP Morgan Chase Commercial Mortgage Securities Corp. 144A
Ser. 04-FL1A, Class X1A, IO, 0.917s, 2019 23,220,591 165,563
Ser. 05-CB12, Class X1, IO, 0.053s, 2037 56,493,000 635,546
Ser. 05-LDP2, Class X1, IO, 0.048s, 2042 170,597,000 2,833,295
Ser. 05-LDP1, Class X1, IO, 0.035s, 2046 38,121,585 360,700
LB Commercial Conduit Mortgage Trust 144A
Ser. 99-C1, Class F, 6.41s, 2031 715,303 738,178
Ser. 99-C1, Class G, 6.41s, 2031 765,731 731,556
Ser. 98-C4, Class G, 5.6s, 2035 634,000 621,249
Ser. 98-C4, Class H, 5.6s, 2035 1,074,000 1,015,769
LB-UBS Commercial Mortgage Trust 144A
Ser. 05-C3, Class XCL, IO, 0.133s, 2040 69,149,000 1,513,592
Ser. 05-C2, Class XCL, IO, 0.102s, 2040 135,807,000 1,531,678
Lehman Brothers Floating Rate Commercial Mortgage Trust 144A
FRB Ser. 03-LLFA, Class L, 7.13s, 2014 1,704,000 1,658,379
FRB Ser. 04-LLFA, Class H, 4.338s, 2017 733,000 735,785
FRB Ser. 05-LLFA, 4.21s, 2018 423,000 423,000
FRB Ser. 03-C4, Class A, 4.171s, 2015 695,513 695,730
Merrill Lynch Mortgage Investors, Inc.
Ser. 96-C2, Class A3, 6.96s, 2028 120,160 121,855
Ser. 98-C3, Class E, 6.939s, 2030 644,000 706,205
Merrill Lynch Mortgage Trust Ser. 05-MCP1, Class XC, IO, 0.133s,
2043 72,321,000 978,691
Mezz Cap Commercial Mortgage Trust 144A
Ser. 04-C2, Class X, IO, 7.851s, 2040 2,523,270 953,323
Ser. 04-C1, Class X, IO, 7.851s, 2037 3,210,055 1,342,204
Morgan Stanley Capital 144A Ser. 05-HQ6, Class X1, IO, 7.851s,
2042 77,418,000 789,664
Morgan Stanley Capital I 144A
Ser. 05-HQ5, Class X1, IO, 7.851s, 2042 52,836,969 439,620
Ser. 96-C1, Class E, 7.376s, 2028 1,007,000 1,019,614
Ser. 98-HF1, Class F, 7.18s, 2030 482,000 506,584
Ser. 04-RR, Class F5, 6s, 2039 1,000,000 858,338
Ser. 04-RR, Class F6, 6s, 2039 1,700,000 1,407,887
Morgan Stanley Dean Witter Capital I Ser. 00-LIF2, Class A1,
6.96s, 2033 801,910 833,820
Mortgage Capital Funding, Inc. FRB Ser. 98-MC2, Class E, 7.103s,
2030 1,020,000 1,079,830
Permanent Financing PLC FRB Ser. 8, Class 2C, 3.818s, 2042
(United Kingdom) 2,054,000 2,053,316
PNC Mortgage Acceptance Corp. 144A
Ser. 99-CM1, Class B3, 7.1s, 2032 3,870,000 4,113,671
Ser. 00-C1, Class J, 6 5/8s, 2010 456,000 436,894
Ser. 00-C2, Class J, 6.22s, 2033 998,000 1,007,230
Pure Mortgages 144A
FRB Ser. 04-1A, Class F, 6.82s, 2034 (Ireland) 2,645,000 2,649,133
Ser. 04-1A, Class E, 4.57s, 2034 (Ireland) 1,041,000 1,042,627
QFA Royalties LLC 144A Ser. 05-1, 7.3s, 2025 1,966,876 1,951,003
Salomon Brothers Mortgage Securities VII Ser. 96-C1, Class E,
8.301s, 2028 962,719 965,765
Salomon Brothers Mortgage Securities VII 144A Ser. 03-CDCA, Class
X3CD, IO, 1.06s, 2015 7,904,163 126,577
Starwood Asset Receivables Trust FRN Ser. 02-1A, Class F, 4.816s,
2020 1,767,000 1,768,060
Starwood Asset Receivables Trust 144A
FRB Ser. 03-1A, Class F, 4.56s, 2022 589,822 590,176
FRB Ser. 03-1A, Class E, 4.51s, 2022 748,620 749,070
STRIPS 144A
Ser. 03-1A, Class L, 5s, 2018 (Cayman Islands) 757,000 653,267
Ser. 03-1A, Class M, 5s, 2018 (Cayman Islands) 513,000 427,694
Ser. 04-1A, Class L, 5s, 2018 (Cayman Islands) 337,000 291,071
TIAA Real Estate CDO, Ltd. Ser. 01-C1A, Class A1, 5.77s, 2016 76,212 76,264
Wachovia Bank Commercial Mortgage Trust Ser. 05-C17, Class A4,
5.083s, 2042 7,065,000 7,126,748
Wachovia Bank Commercial Mortgage Trust 144A FRB Ser. 05-WL5A,
Class L, 6.688s, 2018 771,000 771,000
Washington Mutual Asset Securities Corp. 144A Ser. 05-C1A, Class
G, 5.72s, 2036 222,000 220,274
- ------------------------------------------------------------------------------------------------
Total collateralized mortgage obligations (cost $567,659,498) $551,946,072
- ------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES (10.1%)*
- ------------------------------------------------------------------------------------------------
Principal amount Value
- ------------------------------------------------------------------------------------------------
Aames Mortgage Investment Trust FRN Ser. 04-1, Class 2A1, 3.8s,
2034 $2,566,320 $2,571,934
Aames Mortgage Trust Ser. 03-1, Class A, IO, 6s, 2005 4,296,750 61,289
ABFS Mortgage Loan Trust Ser. 03-1, Class A, IO, 4s, 2005 1,952,943 16,405
ABSC NIMS Trust 144A Ser. 05-HE2, Class A1, 4 1/2s, 2035 (Cayman
Islands) 2,700,420 2,683,542
Ace Securities Corp. Ser. 03-FM1, Class A, IO, 3 1/2s, 2005 6,157,000 52,335
Adjustable Rate Mortgage Trust Ser. 05-7, Class 1A1, 4.981s, 2035 2,347,086 2,358,481
Advanta Business Card Master Trust FRN Ser. 04-C1, Class C,
4.48s, 2013 210,000 212,877
Advanta Mortgage Loan Trust Ser. 00-1, Class A4, 8.61s, 2028 832,871 842,761
Aegis Asset Backed Securities Trust 144A
Ser. 04-1N, Class Note, 5s, 2034 110,996 110,996
Ser. 04-2N, Class N1, 4 1/2s, 2034 287,978 287,393
Ser. 04-4N, Class Note, 5s, 2034 474,665 474,071
Ser. 04-5N, Class Note, 5s, 2034 437,112 436,703
Ser. 04-6N, Class Note, 4 3/4s, 2035 631,459 628,006
AFC Home Equity Loan Trust Ser. 99-2, Class 1A, 3.87s, 2029 4,220,071 4,235,897
American Express Credit Account Master Trust 144A Ser. 04-C,
Class C, 3.888s, 2012 9,302,730 9,304,181
American Home Mortgage Investment Trust
FRN Ser. 04-3, Class 2A, 3.59s, 2034 6,178,136 6,100,092
FRN Ser. 04-3, Class 3A, 3.71s, 2034 2,467,471 2,438,654
FRN Ser. 05-1, Class 5A1, 5.00s, 2045 4,061,112 4,067,457
Americredit Automobile Receivables Trust 144A Ser. 05-1, Class E,
5.82s, 2012 1,520,000 1,524,104
Ameriquest Finance NIM Trust 144A
Ser. 04-IAN, Class 1A, 5.437s, 2034 (Cayman Islands) 182,261 182,261
Ser. 04-RN9, Class N1, 4.8s, 2034 (Cayman Islands) 756,355 756,355
Ameriquest Mortgage Securities, Inc.
Ser. 03-12, Class S, IO, 5s, 2006 3,542,003 111,794
Ser. 03-6, Class S, IO, 5s, 2033 3,379,094 53,722
Ser. 03-8, Class S, IO, 5s, 2006 3,934,338 95,604
AQ Finance NIM Trust 144A Ser. 03-N9A, Class Note, 7.385s, 2033
(Cayman Islands) 29,746 29,746
Arcap REIT, Inc. 144A
Ser. 03-1A, Class E, 7.11s, 2038 1,283,000 1,339,532
Ser. 04-1A, Class E, 6.42s, 2039 1,112,000 1,131,113
Argent NIM Trust 144A
Ser. 04-WN2, Class A, 4.55s, 2034 (Cayman Islands) 94,850 95,828
Ser. 04-WN9, Class A, 5.19s, 2034 (Cayman Islands) 281,182 281,050
Asset Backed Funding Corp. NIM Trust 144A
Ser. 03-WMC1, Class Note, 6.9s, 2033 180,789 181,249
Ser. 04-0PT1, Class N1, 4.55s, 2033 (Cayman Islands) 254,029 253,558
Ser. 04-0PT5, Class N1, 4.45s, 2034 (Cayman Islands) 244,537 244,083
Ser. 04-AHL1, Class Note, 5.6s, 2033 632,790 633,729
Ser. 04-FF1, Class N1, 5s, 2034 (Cayman Islands) 691,249 691,372
Ser. 04-FF1, Class N2, 5s, 2034 (Cayman Islands) 58,000 53,458
Asset Backed Securities Corp. Home Equity Loan Trust
Ser. 03-HE5, Class A, IO, 4s, 2033 5,196,873 98,262
FRB Ser. 04-HE9, Class A2, 3.83s, 2034 1,058,924 1,061,159
FRB Ser. 05-HE1, Class A3, 3 3/4s, 2035 1,373,133 1,373,133
FRN Ser. 04-HE1, Class A3, 3.788s, 2034 198,056 198,203
Aviation Capital Group Trust 144A FRN Ser. 03-2A, Class G1,
4.13s, 2033 981,787 983,244
Banc of America Funding Corp. 144A Ser. 04-NIM1, Class Note, 6s,
2034 273,466 273,466
Bank One Issuance Trust FRN Ser. 03-C4, Class C4, 4.418s, 2011 210,000 213,918
Bay View Auto Trust Ser. 05-LJ2, Class D, 5.27s, 2014 420,000 420,000
Bayview Financial Acquisition Trust
Ser. 03-DA, Class A, IO, 4s, 2006 7,179,821 76,433
Ser. 03-E, Class A, IO, 4s, 2006 5,815,209 69,783
Ser. 04-B, Class A1, 3.82s, 2039 4,211,489 4,211,489
Ser. 04-D, Class A, IO, 3 1/2s, 2007 21,429,918 880,071
Ser. 05-B, Class A, IO, 2.702s, 2039 17,764,363 634,188
FRB Ser. 04-D, Class A, 3.871s, 2044 4,034,557 4,039,600
FRN Ser. 03-F, Class A, 3.981s, 2043 3,000,499 3,008,601
FRN Ser. 03-G, Class A1, 4.081s, 2039 4,813,000 4,822,024
Bayview Financial Acquisition Trust 144A
Ser. 03-CA, Class A, IO, 4s, 2005 4,440,800 43,681
FRN Ser. 04-B, Class M2, 5.381s, 2039 200,000 203,500
Bayview Financial Asset Trust Ser. 03-X, Class A, IO, 0.9s, 2006 30,687,661 514,181
Bayview Financial Asset Trust 144A
Ser. 03-Z, Class AIO1, IO, 0.426s, 2005 62,614,474 59,072
FRN Ser. 03-SSRA, Class A, 4.16s, 2038 1,309,144 1,316,868
FRN Ser. 03-SSRA, Class M, 4.81s, 2038 1,552,170 1,569,088
FRN Ser. 04-SSRA, Class A1, 4.06s, 2039 1,790,104 1,797,801
Bear Stearns Alternate Trust
Ser. 04-11, Class 2A2, 4.955s, 2034 4,420,385 4,425,238
Ser. 04-12, Class 2A2, 5.069s, 2035 8,646,316 8,669,541
Ser. 04-9, Class 1A1, 5.061s, 2034 1,256,011 1,258,921
Ser. 05-2, Class 2A2A, 4.878s, 2035 1,641,732 1,642,232
Bear Stearns Alternate Trust
Ser. 05-3, Class 2A1, 5.065s, 2035 6,568,392 6,584,334
Ser. 05-4, Class 22A2, 5.287s, 2035 9,793,551 9,852,860
Ser. 05-5, Class 21A1, 4.695s, 2035 5,256,055 5,265,910
Bear Stearns Asset Backed Securities NIM Trust 144A
Ser. 04-FR1, Class A1, 5s, 2034 (Cayman Islands) 583,646 583,646
Ser. 04-HE10, Class A1, 4 1/4s, 2034 (Cayman Islands) 419,563 417,400
Ser. 04-HE10, Class A2, 5s, 2034 (Cayman Islands) 245,000 244,388
Ser. 04-HE5N, Class A1, 5s, 2034 (Cayman Islands) 267,059 267,059
Ser. 04-HE5N, Class A2, 5s, 2034 (Cayman Islands) 243,000 242,620
Ser. 04-HE6, Class A1, 5 1/4s, 2034 (Cayman Islands) 371,259 371,259
Ser. 04-HE7N, Class A1, 5 1/4s, 2034 423,381 423,381
Ser. 04-HE8N, Class A1, 5s, 2034 184,580 184,407
Bear Stearns Asset Backed Securities, Inc.
Ser. 03-AC1, Class A, IO, 5s, 2005 6,804,600 28,143
Ser. 03-AC4, Class A, IO, 5s, 2006 8,992,800 220,605
FRN Ser. 03-1, Class A1, 3.96s, 2042 908,143 909,562
FRN Ser. 03-3, Class A2, 4.05s, 2043 2,229,000 2,233,876
Capital Auto Receivables Asset Trust Ser. 05-1, Class D, 6 1/2s,
2011 1,442,000 1,419,469
Capital One Multi-Asset Execution Trust FRN Ser. 02-C1, Class C1,
6.138s, 2010 570,000 597,788
CARMAX Auto Owner Trust Ser. 04-2, Class D, 3.67s, 2011 461,108 456,165
CARSSX Finance, Ltd. 144A
FRN Ser. 04-AA, Class B3, 6.738s, 2011 (Cayman Islands) 377,962 381,210
FRN Ser. 04-AA, Class B4, 8.888s, 2011 (Cayman Islands) 1,784,385 1,809,617
CDO Repackaging Trust Series 144A FRN Ser. 03-2, Class A, 7.541s,
2008 3,105,000 3,361,163
Centex Home Equity Ser. 04-C, Class A, IO, 3 1/2s, 2006 1,614,500 242,439
Chase Credit Card Master Trust FRN Ser. 03-3, Class C, 4.468s,
2010 1,730,000 1,766,606
Chase Funding Net Interest Margin 144A Ser. 04-OPT1, Class Note,
4.458s, 2034 808,116 804,075
CHEC NIM Ltd., 144A
Ser. 04-2, Class N1, 4.45s, 2034 (Cayman Islands) 443,355 443,330
Ser. 04-2, Class N2, 8s, 2034 (Cayman Islands) 421,000 418,596
Ser. 04-2, Class N3, 8s, 2034 (Cayman Islands) 169,000 145,340
Citibank Credit Card Issuance Trust FRN Ser. 01-C1, Class C1,
4.679s, 2010 1,060,000 1,077,970
Conseco Finance Securitizations Corp.
Ser. 00-4, Class A6, 8.31s, 2032 8,597,000 7,429,527
Ser. 00-5, Class A4, 7.47s, 2032 3,170,550 3,232,553
Ser. 00-5, Class A6, 7.96s, 2032 3,727,000 3,240,358
Ser. 01-1, Class A4, 6.21s, 2032 5,250,682 5,321,130
Ser. 01-1, Class A5, 6.99s, 2032 2,692,000 2,512,428
Conseco Finance Securitizations Corp.
Ser. 01-3, Class A4, 6.91s, 2033 7,162,000 7,004,336
Ser. 01-4, Class A4, 7.36s, 2033 6,025,000 6,059,035
Ser. 01-4, Class B1, 9.4s, 2033 1,697,287 246,107
Ser. 02-1, Class A, 6.681s, 2033 0,407,385 10,717,471
Ser. 02-1, Class M2, 9.546s, 2033 4,582,000 2,199,360
Ser. 02-2, Class A, IO, 8 1/2s, 2033 8,174,061 2,084,198
Consumer Credit Reference IDX Securities 144A FRN Ser. 02-1A,
Class A, 5.444s, 2007 3,061,000 3,098,506
Countrywide Alternative Loan Trust
Ser. 05-24, Class 1AX, IO, 0.702s, 2035 0,147,755 866,748
Ser. 05-24, Class IIAX, IO, 1.126s, 2035 4,484,187 948,762
Countrywide Asset Backed Certificates 144A
Ser. 04-11N, Class N, 5 1/4s, 2036 328,638 329,049
Ser. 04-14N, 5s, 2036 591,592 591,777
Ser. 04-1NIM, Class Note, 6s, 2034 1,402,115 1,406,182
Ser. 04-6N, Class N1, 6 1/4s, 2035 2,101,501 2,108,725
Ser. 04-BC1N, Class Note, 5 1/2s, 2035 446,822 447,102
Countrywide Home Loans
Ser. 05-2, Class 2X, IO, 1.247s, 2035 1,103,566 869,929
Ser. 05-9, Class 1X, IO, 0.655s, 2035 8,092,247 790,094
Countrywide Partnership Trust 144A Ser. 04-EC1N, Class N, 5s,
2035 224,277 224,347
Crest, Ltd. 144A Ser. 03-2A, Class D2, 6.723s, 2038 (Cayman
Islands) 1,617,000 1,662,599
CS First Boston Mortgage Securities Corp. 144A Ser. 04-FR1N,
Class A, 5s, 2034 1,442,598 1,440,795
Fieldstone Mortgage Investment Corp. FRN Ser. 05-1, Class M3, 4s,
2035 700,000 700,000
Finance America NIM Trust 144A Ser. 04-1, Class A, 5 1/4s, 2034 394,860 395,373
First Chicago Lennar Trust 144A Ser. 97-CHL1, Class D, 7.695s,
2039 4,880,001 4,958,538
First Consumers Master Trust FRN Ser. 01-A, Class A, 3.698s, 2008 855,050 848,103
First Franklin Mortgage Loan NIM Trust 144A
Ser. 04-FF1, Class N1, 4 1/2s, 2034 33,315 33,222
Ser. 04-FF10, Class N1, 4.45s, 2034 (Cayman Islands) 417,439 416,865
Ser. 04-FF7A, Class A, 5s, 2034 505,676 505,676
First Horizon Mortgage Pass-Through Trust Ser. 05-AR2, Class 1A1,
4.843s, 2035 3,328,508 3,329,585
First Plus Home Loan Trust Ser. 97-3, Class B1, 7.79s, 2023 921,446 922,022
Ford Credit Auto Owner Trust Ser. 04-A, Class C, 4.19s, 2009 650,000 639,641
Fort Point CDO, Ltd. FRN Ser. 03-2A, Class A2, 4.388s, 2038 616,000 622,345
Foxe Basin, Ltd. FRN Ser. 03-1A, Class A1, 3.91s, 2015 (Cayman
Islands) 2,000,000 2,006,600
Fremont NIM Trust 144A
Ser. 04-3, Class A, 4 1/2s, 2034 944,023 941,568
Ser. 04-3, Class B, 7 1/2s, 2034 265,070 239,915
Ser. 04-A, Class Note, 4 3/4s, 2034 175,908 175,380
Ser. 04-B, Class Note, 4.703s, 2034 150,309 150,497
Ser. 04-D, Class N1, 4 1/2s, 2034 (Cayman Islands) 734,738 733,913
Ser. 04-D, Class N2, 7 1/2s, 2034 (Cayman Islands) 99,235 98,936
G-Force CDO, Ltd. 144A
Ser. 02-1A, Class D, 7.61s, 2037 (Cayman Islands) 315,000 336,712
Ser. 02-1A, Class E, 8 1/4s, 2037 (Cayman Islands) 715,000 787,505
Ser. 03-1A, Class E, 6.58s, 2038 (Cayman Islands) 939,000 963,795
G-Star, Ltd. 144A FRN Ser. 02-2A, Class BFL, 5.46s, 2037 (Cayman
Islands) 308,000 322,224
GE Capital Credit Card Master Note Trust FRN Ser. 04-2, Class C,
3.868s, 2010 1,903,750 1,903,750
GE Corporate Aircraft Financing, LLC 144A Ser. 04-1A, Class B,
4.164s, 2018 345,190 344,983
GEBL 144A
Ser. 04-2, Class C, 4.07s, 2032 299,758 299,945
Ser. 04-2, Class D, 5.97s, 2032 800,004 800,004
GMAC Mortgage Corp. Loan Trust
Ser. 04-HE5, Class A, IO, 6s, 2007 8,871,000 614,040
Ser. 05-AR1, Class 1A2, 4.43s, 2035 2,664,096 2,649,318
Goldentree Loan Opportunities II, Ltd. 144A FRN Ser. 2A, Class 4,
6.979s, 2015 (Cayman Islands) 470,000 476,909
Granite Mortgages PLC
FRN Ser. 01-1, Class 1C, 5.02s, 2041 (United Kingdom) 2,794,001 2,832,418
FRN Ser. 02-1, Class 1C, 4.92s, 2042 (United Kingdom) 1,300,000 1,320,410
FRN Ser. 02-2, Class 1C, 4.87s, 2043 (United Kingdom) 650,000 660,400
FRN Ser. 04-1, Class 1C, 4.33s, 2044 (United Kingdom) 1,619,000 1,625,577
Green Tree Financial Corp.
Ser. 95-8, Class B1, 7.3s, 2026 362,579 283,171
Ser. 97-4, Class A7, 7.36s, 2029 826,230 869,607
Ser. 97-7, Class A8, 6.86s, 2029 644,472 667,532
Ser. 99-3, Class A5, 6.16s, 2031 249,331 250,422
Ser. 99-3, Class A6, 6 1/2s, 2031 1,137,000 1,154,862
Ser. 99-5, Class A5, 7.86s, 2030 16,750,000 14,890,549
Greenpoint Manufactured Housing Ser. 00-3, Class IA, 8.45s, 2031 4,300,555 4,147,537
Greenpoint Mortgage Funding Trust Ser. 05-AR1, Class X1, IO,
1.654s, 2045 23,053,585 806,875
GS Auto Loan Trust 144A Ser. 04-1, Class D, 5s, 2011 2,782,929 2,739,535
GSAMP Trust 144A
Ser. 04-FM1N, Class Note, 5 1/4s, 2033 123,546 123,546
Ser. 04-HE1N, Class N1, 5s, 2034 303,768 303,313
Ser. 04-NIM1, Class N1, 5 1/2s, 2034 2,058,035 2,057,212
Ser. 04-NIM1, Class N2, zero %, 2034 1,553,000 1,143,785
Ser. 04-NIM2, Class N, 4 7/8s, 2034 2,267,405 2,257,655
Ser. 04-SE2N, Class Note, 5 1/2s, 2034 247,853 247,605
Ser. 05-NC1, Class N, 5s, 2035 853,507 851,373
GSMPS Mortgage Loan Trust 144A
Ser. 05-RP1, Class 1A3, 8s, 2035 219,924 236,248
Ser. 05-RP2, Class 1A2, 7 1/2s, 2035 2,257,183 2,389,529
Ser. 05-RP2, Class 1A3, 8s, 2035 1,811,397 1,941,610
Guggenheim Structured Real Estate Funding, Ltd. FRB Ser. 05-1A,
Class D, 4.99s, 2030 (Cayman Islands) 1,975,000 1,973,138
High Income Trust Securities 144A FRB Ser. 03-1A, Class A, 3.73s,
2036 (Cayman Islands) 2,601,716 2,556,186
Holmes Financing PLC
FRB Ser. 1, Class 2C, 4.749s, 2040 (United Kingdom) 13,365,000 13,394,403
FRB Ser. 4, Class 3C, 4.899s, 2040 (United Kingdom) 870,000 881,136
FRB Ser. 8, Class 2C, 4.319s, 2040 (United Kingdom) 746,000 749,497
Home Equity Asset Trust 144A
Ser. 03-7N, Class A, 5 1/4s, 2034 82,829 82,001
Ser. 04-1N, Class A, 5s, 2034 153,398 152,631
Ser. 04-3N, Class A, 5s, 2034 304,194 303,205
Ser. 04-4N, Class A, 5s, 2034 291,909 290,449
Ser. 04-5N, Class A, 5 1/4s, 2034 1,371,366 1,367,938
Ser. 04-7N, Class A, 4 1/2s, 2035 2,935,709 2,913,691
Ser. 05-6N, Class A, 5 1/4s, 2035 3,383,379 3,374,921
Hyundai Auto Receivables Trust Ser. 04-A, Class D, 4.1s, 2011 429,000 421,637
IMPAC Secured Assets Corp. Ser. 03-1, Class A, IO, 5s, 2005 1,013,666 272
Lehman Manufactured Housing Ser. 98-1, Class 1, IO, 0.811s, 2028 26,663,962 542,193
LNR CDO, Ltd. 144A
FRB Ser. 02-1A, Class FFL, 6.21s, 2037 (Cayman Islands) 5,220,000 5,220,000
FRB Ser. 03-1A, Class EFL, 6.46s, 2036 (Cayman Islands) 2,585,000 2,763,624
Long Beach Asset Holdings Corp. NIM Trust 144A
Ser. 04-2, Class N1, 4.94s, 2034 196,443 196,443
Ser. 04-5, Class Note, 5s, 2034 775,927 776,082
Ser. 05-1, Class N1, 4.115s, 2035 2,391,940 2,391,940
Long Beach Mortgage Loan Trust
Ser. 04-3, Class S1, IO, 4 1/2s, 2006 21,233,114 865,249
Ser. 04-3, Class S2, IO, 4 1/2s, 2006 10,616,494 432,622
Madison Avenue Manufactured Housing Contract
Ser. 02-A IO, 0.3s, 2032 189,694,122 2,134,059
FRB Ser. 02-A, Class B1, 6.71s, 2032 4,059,503 1,989,156
Marriott Vacation Club Owner Trust 144A
Ser. 04-2A, Class C, 4.741s, 2026 161,630 157,252
Ser. 04-2A, Class D, 5.389s, 2026 175,684 171,021
FRB Ser. 02-1A, Class A1, 4.13s, 2024 1,862,153 1,877,700
Master Asset Backed Securities NIM Trust 144A
Ser. 04-CI3, Class N1, 4.45s, 2034 71,643 71,564
Ser. 04-CI5, Class N1, 4.946s, 2034 629,673 630,933
Ser. 04-CI5, Class N2, 9s, 2034 400,000 395,000
Ser. 04-HE1A, Class Note, 5.191s, 2034 339,071 340,088
Master Reperforming Loan Trust 144A Ser. 05-1, Class 1A4, 7 1/2s,
2034 2,888,669 3,057,476
MBNA Credit Card Master Note Trust FRN Ser. 03-C5, Class C5,
4.568s, 2010 1,730,000 1,774,289
Merit Securities Corp. FRB Ser. 11PA, Class 3A1, 4.101s, 2027 6,542,384 6,280,688
Merrill Lynch Mortgage Investors, Inc.
Ser. 03-WM3N, Class N1, 8s, 2034 16,065 16,065
Ser. 04-OP1N, Class N1, 4 3/4s, 2035 (Cayman Islands) 285,892 284,820
Merrill Lynch Mortgage Investors, Inc. 144A
Ser. 03-OP1N, Class N1, 7 1/4s, 2034 62,101 62,131
Ser. 03-WM1N, Class N1, 7s, 2033 184,007 184,467
Ser. 04-FM1N, Class N1, 5s, 2035 (Cayman Islands) 143,374 143,441
Ser. 04-HE1N, Class N1, 5s, 2006 243,653 242,664
Ser. 04-HE2N, Class N1, 5s, 2035 (Cayman Islands) 552,492 549,902
Ser. 04-WM1N, Class N1, 4 1/2s, 2034 19,962 19,984
Ser. 04-WM2N, Class N1, 4 1/2s, 2005 119,792 119,268
Ser. 04-WM3N, Class N1, 4 1/2s, 2005 487,498 485,593
Ser. 05-WM1N, Class N1, 5s, 2035 1,410,180 1,410,841
Metris Master Trust FRN Ser. 04-2, Class C, 4.78s, 2010 1,050,000 1,055,320
Metris Master Trust 144A
FRB Ser. 04-2, Class D, 6.688s, 2010 668,000 678,020
FRN Ser. 01-2, Class C, 5.33s, 2009 1,670,000 1,670,716
Mid-State Trust
Ser. 10, Class B, 7.54s, 2036 874,098 778,195
Ser. 11, Class B, 8.221s, 2038 460,281 468,617
MMCA Automobile Trust Ser. 02-1, Class B, 5.37s, 2010 2,884,648 2,873,686
Morgan Stanley ABS Capital I FRB Ser. 04-WMC3, Class A2PT, 3
3/4s, 2035 2,609,892 2,610,858
Morgan Stanley Auto Loan Trust Ser. 04-HB2, Class D, 3.82s, 2012 129,737 129,283
Morgan Stanley Auto Loan Trust 144A
Ser. 04-HB1, Class D, 5 1/2s, 2011 1,090,000 1,082,962
Ser. 04-HB2, Class E, 5s, 2012 513,000 494,069
Morgan Stanley Dean Witter Capital I
FRB Ser. 01-NC3, Class B1, 5.91s, 2031 320,297 320,489
FRB Ser. 01-NC4, Class B1, 5.96s, 2032 312,879 313,297
Morgan Stanley Mortgage Loan Trust Ser. 05-3AR, Class 2A2, 5.29s,
2035 5,084,749 5,116,528
Navigator CDO, Ltd. 144A FRB Ser. 03-1A, Class A1, 3.758s, 2015
(Cayman Islands) 1,168,000 1,171,504
Navistar Financial Corp. Owner Trust Ser. 05-A, Class C, 4.84s,
2014 873,000 869,537
New Century Home Equity Loan Trust Ser. 03-5, Class AI7, 5.15s,
2033 1,734,000 1,701,759
New Century Mortgage Corp. NIM Trust 144A Ser. 03-B, Class Note,
6 1/2s, 2033 67,293 67,378
Newcastle CDO, Ltd. 144A FRB Ser. 3A, Class 4FL, 6.66s, 2038
(Cayman Islands) 624,000 638,040
Nomura Asset Acceptance Corp. Ser. 04-R3, Class PT, 9.304s, 2035 735,606 793,765
Nomura Asset Acceptance Corp. 144A Ser. 04-R2, Class PT, 10.118s,
2034 700,325 756,132
Novastar NIM Trust 144A
Ser. 04-N1, Class Note, 4.458s, 2034 63,000 63,000
Ser. 04-N2, Class Note, 4.458s, 2034 322,224 322,224
Oakwood Mortgage Investors, Inc. Ser. 02-C, Class A1, 5.41s, 2032 5,518,703 4,833,826
Oakwood Mortgage Investors, Inc. 144A Ser. 01-B, Class A4, 7.21s,
2030 818,050 761,180
Ocean Star PLC 144A FRB Ser. 04, Class D, 5.55s, 2018 (Ireland) 623,000 623,000
Option One Mortgage Securities Corp. NIM Trust 144A Ser. 04-2A,
Class N1, 4.213s, 2034 (Cayman Islands) 1,114,374 1,114,374
Option One Woodbridge Loan Trust 144A Ser. 03-1, Class S, IO,
3.7s, 2005 1,446,213 287
Origen Manufactured Housing Ser. 04-B, Class A2, 3.79s, 2017 431,000 421,505
Park Place Securities NIM Trust 144A
Ser. 04-MCWN1, Class A, 4.458s, 2034 209,140 209,140
Ser. 04-WCW2, Class D, 7.387s, 2034 (Cayman Islands) 770,000 772,926
Ser. 04-WHQ2, Class A, 4s, 2035 1,186,434 1,177,536
Park Place Securities, Inc. FRB Ser. 04-WHQ2, Class A3A, 3.81s,
2035 1,987,279 1,990,477
People's Choice Net Interest Margin Note 144A
Ser. 04-2, Class A, 5s, 2034 1,430,680 1,433,896
Ser. 04-2, Class B, 5s, 2034 313,000 283,578
Permanent Financing PLC
FRB Ser. 1, Class 3C, 4.579s, 2042 (United Kingdom) 870,000 878,352
FRB Ser. 3, Class 3C, 4.529s, 2042 (United Kingdom) 1,300,000 1,324,223
Pillar Funding PLC 144A
FRB Ser. 04-1A, Class C1, 4.41s, 2011 (United Kingdom) 657,000 660,274
FRB Ser. 04-2A, Class C, 4.29s, 2011 (United Kingdom) 912,000 917,892
Providian Gateway Master Trust 144A
Ser. 04-DA, Class D, 4.4s, 2011 944,000 921,580
Ser. 04-FA, Class E, 5s, 2011 500,000 500,000
FRB Ser. 04-AA, Class D, 5.238s, 2011 1,204,000 1,228,682
FRN Ser. 04-BA, Class D, 4.788s, 2010 1,900,000 1,913,490
FRN Ser. 04-EA, Class D, 4.318s, 2011 701,000 707,189
Renaissance Home Equity Loan Trust
Ser. 03-2, Class A, IO, 3s, 2005 1,193,720 11,268
Ser. 03-4, Class S, IO, 3s, 2006 1,408,637 16,177
Renaissance NIM Trust 144A
Ser. 04-A, Class Note, 4.45s, 2034 316,642 316,262
Ser. 05-1, Class N, 4.7s, 2035 769,643 769,643
Residential Accredit Loans, Inc.
Ser. 04-QA5, Class A2, 4.994s, 2034 836,503 837,893
Ser. 04-QA6, Class NB1, 4.978s, 2034 5,013,857 5,020,525
Ser. 05-QA4, Class A21, 5.281s, 2035 4,773,599 4,803,781
Residential Asset Mortgage Products, Inc. Ser. 04-RZ2, Class A,
IO, 3 1/2s, 2006 4,766,667 96,782
Residential Asset Securities Corp. Ser. 03-KS4, Class AI, IO, 3
1/2s, 2005 472,500 3,645
Residential Asset Securities Corp. 144A
Ser. 04-N10B, Class A1, 5s, 2034 1,116,082 1,111,723
Ser. 04-NT, Class Note, 5s, 2034 985,790 979,628
Ser. 04-NT12, Class Note, 4.7s, 2035 446,580 446,569
Residential Asset Securities Corp. NIM Trust 144A Ser. 05-NTR1,
Class Note, 4 1/4s, 2035 2,401,242 2,394,864
Residential Funding Mortgage Securities II
Ser. 03-HS1, Class AI, IO, 5 1/2s, 2033 7,532,475 32,390
Ser. 03-HS2, Class AI, IO, 5 1/2s, 2005 2,685,242 45,313
Ser. 03-HS3, Class AI, IO, 5s, 2006 3,623,749 64,140
SAIL Net Interest Margin Notes 144A
Ser. 03-12A, Class A, 7.35s, 2033 (Cayman Islands) 74,166 74,582
Ser. 03-13A, Class A, 6 3/4s, 2033 (Cayman Islands) 74,016 74,253
Ser. 03-3, Class A, 7 3/4s, 2033 (Cayman Islands) 33,548 33,447
Ser. 03-4, Class A, 7 1/2s, 2033 (Cayman Islands) 78,700 78,393
Ser. 03-5, Class A, 7.35s, 2033 (Cayman Islands) 33,898 33,752
Ser. 03-6A, Class A, 7s, 2033 (Cayman Islands) 36,211 36,330
Ser. 03-7A, Class A, 7s, 2033 (Cayman Islands) 42,320 41,952
Ser. 03-8A, Class A, 7s, 2033 (Cayman Islands) 83,445 80,666
Ser. 03-9A, Class A, 7s, 2033 (Cayman Islands) 242,709 242,855
Ser. 03-BC2A, Class A, 7 3/4s, 2033 (Cayman Islands) 153,583 149,252
Ser. 04-10A, Class A, 5s, 2034 (Cayman Islands) 1,677,625 1,678,128
Ser. 04-11A, Class A2, 4 3/4s, 2035 (Cayman Islands) 2,181,924 2,182,495
Ser. 04-2A, Class A, 5 1/2s, 2034 (Cayman Islands) 868,177 868,350
Ser. 04-4A, Class A, 5s, 2034 (Cayman Islands) 1,065,315 1,065,528
Ser. 04-4A, Class B, 7 1/2s, 2034 (Cayman Islands) 350,000 330,645
Ser. 04-5A, Class A, 4 1/2s, 2034 (Cayman Islands) 340,551 340,347
Ser. 04-7A, Class A, 4 3/4s, 2034 (Cayman Islands) 509,781 509,425
Ser. 04-7A, Class B, 6 3/4s, 2034 (Cayman Islands) 128,749 126,097
Ser. 04-8A, Class A, 5s, 2034 (Cayman Islands) 567,271 567,384
Ser. 04-8A, Class B, 6 3/4s, 2034 (Cayman Islands) 531,248 520,782
Ser. 04-AA, Class A, 4 1/2s, 2034 (Cayman Islands) 1,549,011 1,545,448
Ser. 04-BN2A, Class A, 5s, 2034 (Cayman Islands) 329,330 329,428
Ser. 04-BNCA, Class A, 5s, 2034 (Cayman Islands) 139,021 139,048
Ser. 05-1A, Class A, 4 1/4s, 2035 2,126,864 2,121,439
Ser. 05-2A, Class A, 4 3/4s, 2035 (Cayman Islands) 2,650,199 2,650,907
Sasco Net Interest Margin Trust 144A
Ser. 05-NC1A, Class A, 4 3/4s, 2035 2,274,880 2,275,455
Ser. 05-WF1A, Class A, 4 3/4s, 2035 2,222,467 2,227,579
Saxon Net Interest Margin Trust 144A Ser. 03-A, Class A, 6.656s,
2033 421 421
Sharps SP I, LLC Net Interest Margin Trust 144A
Ser. 03-0P1N, Class NA, 4.45s, 2033 292,314 292,314
Ser. 03-HE1N, Class N, 6.9s, 2033 52,978 53,111
Ser. 03-TC1N, Class N, 7.45s, 2033 9,355 9,355
Ser. 04-4N, Class Note, 6.65s, 2034 231,592 231,592
Ser. 04-HE1N, Class Note, 4.94s, 2034 250,078 250,078
Ser. 04-HE2N, Class NA, 5.43s, 2034 184,267 183,806
Ser. 04-HE4N, Class NA, 3 3/4s, 2034 2,196,598 2,185,615
Ser. 04-HS1N, Class Note, 5.92s, 2034 151,597 151,597
Ser. 04-RM2N, Class NA, 4s, 2035 1,075,092 1,071,115
South Coast Funding 144A FRB Ser. 3A, Class A2, 4.96s, 2038
(Cayman Islands) 470,000 472,350
Structured Asset Receivables Trust FRB 144A Ser. 05-1A, 4.334s,
2015 5,352,000 5,275,065
Structured Adjustable Rate Mortgage Loan Trust
Ser. 04-10, Class 1A1, 4.922s, 2034 1,934,818 1,941,930
Ser. 04-12, Class 1A2, 5.017s, 2034 2,703,547 2,715,154
Ser. 04-14, Class 1A, 5.106s, 2034 2,393,801 2,405,336
Ser. 04-16, Class 1A2, 5.02s, 2034 3,749,269 3,763,236
Ser. 04-18, Class 1A1, 5.053s, 2034 2,406,300 2,414,718
Ser. 04-20, Class 1A2, 5.081s, 2035 6,234,625 6,259,079
Ser. 04-6, Class 1A, 4.382s, 2034 7,956,319 7,946,400
Ser. 04-8, Class 1A3, 4.697s, 2034 79,613 79,564
Ser. 05-1, Class 1A1, 5.148s, 2035 10,339,428 10,384,078
Ser. 05-4, Class 1A1, 5.393s, 2035 10,138,278 10,212,440
Ser. 05-7, Class 1A1, 5.407s, 2035 2,659,806 2,679,536
Ser. 05-7, Class 1A3, 5.405s, 2035 10,560,238 10,640,310
Ser. 05-9, Class AX, IO, 0.492s, 2035 55,975,071 1,673,655
Structured Adjustable Rate Mortgage Loan Trust 144A Ser. 04-NP2,
Class A, 3.664s, 2034 2,115,943 2,116,154
Structured Asset Investment Loan Trust
Ser. 03-BC1A, Class A, 7 3/4s, 2033 (Cayman Islands) 8,236 8,302
Ser. 04-3, Class A, IO, 6s, 2005 21,163,230 196,866
Structured Asset Securities Corp.
Ser. 03-26A, Class 2A, 4.563s, 2033 2,382,930 2,397,286
Ser. 03-40A, Class 1A, 4.898s, 2034 1,404,455 1,416,262
Ser. 04-8, Class 1A1, 4.697s, 2034 1,534,356 1,536,478
Ser. 05-10, Class 3A3, 10.685s, 2034 3,638,955 3,644,232
Ser. 98-RF3, Class A, IO, 6.1s, 2028 5,401,093 661,634
IFB Ser. 05-6, Class 5A8, 6.98s, 2035 4,834,667 4,549,261
Structured Asset Securities Corp. 144A
FRB Ser. 03-NP2, Class A2, 4.01s, 2032 1,425,616 1,425,616
FRB Ser. 03-NP3, Class A1, 3.96s, 2033 239,988 240,012
Terwin Mortgage Trust FRB Ser. 04-5HE, Class A1B, 3.88s, 2035 3,199,000 3,204,289
TIAA Real Estate CDO, Ltd. Ser. 03-1A, Class E, 8s, 2038 (Cayman
Islands) 1,698,000 1,630,027
Wells Fargo Home Equity Trust 144A
Ser. 04-1N, Class A, 5s, 2034 572,517 572,632
Ser. 04-2, Class N1, 4.45s, 2034 (Cayman Islands) 1,298,598 1,298,521
Ser. 04-2, Class N2, 8s, 2034 (Cayman Islands) 862,000 836,140
Wells Fargo Mortgage Backed Securities Trust Ser. 05-AR12, Class
2A5, 4.322s, 2035 21,311,205 20,872,273
WFS Financial Owner Trust
Ser. 04-1, Class D, 3.17s, 2011 363,800 358,968
Ser. 04-3, Class D, 4.07s, 2012 825,940 817,763
Ser. 04-4, Class D, 3.58s, 2012 360,144 355,150
Ser. 05-1, Class D, 4 1/4s, 2012 891,000 880,085
Whole Auto Loan Trust Ser. 03-1, Class C, 3.13s, 2010 279,973 277,405
Whole Auto Loan Trust 144A
Ser. 03-1, Class D, 6s, 2010 1,097,746 1,097,978
Ser. 04-1, Class D, 5.6s, 2011 1,414,748 1,408,117
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Total asset-backed securities (cost $548,813,234) $538,072,122
- ------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES (5.5%)*
- ------------------------------------------------------------------------------------------------
Principal amount Value
- ------------------------------------------------------------------------------------------------
Aerospace and Defense (0.1%)
Boeing Capital Corp. sr. notes 6.1s, 2011 $145,000 $154,281
Boeing Co. (The) debs. 6 7/8s, 2043 685,000 836,506
L-3 Communications Corp. 144A sr. sub. notes 6 3/8s, 2015 595,000 602,438
Lockheed Martin Corp. bonds 8 1/2s, 2029 (S) 1,270,000 1,788,439
Raytheon Co. debs. 7s, 2028 625,000 744,792
Raytheon Co. debs. 6 3/4s, 2018 185,000 209,414
Raytheon Co. debs. 6s, 2010 581,000 609,471
Raytheon Co. notes 8.3s, 2010 1,145,000 1,303,672
Raytheon Co. notes 4.85s, 2011 830,000 827,840
7,076,853
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Airlines (0.1%)
Continental Airlines, Inc. pass-through certificates Ser. 98-2,
6.32s, 2008 4,215,000 4,260,237
- ------------------------------------------------------------------------------------------------
Automotive (0.3%)
DaimlerChrysler NA Holding Corp. company guaranty 7.2s, 2009 3,720,000 4,001,310
DaimlerChrysler NA Holding Corp. company guaranty 6 1/2s, 2013 1,130,000 1,224,502
Ford Motor Co. debs. 9.98s, 2047 910,000 872,068
Ford Motor Credit Corp. notes 7 7/8s, 2010 260,000 262,420
Ford Motor Credit Corp. notes 7 3/4s, 2007 190,000 194,106
Ford Motor Credit Corp. notes 7 3/8s, 2009 3,835,000 3,826,467
General Motors Acceptance Corp. FRN 4.559s, 2007 (S) 1,870,000 1,828,413
General Motors Acceptance Corp. FRN Ser. MTN, 4.509s, 2007 1,170,000 1,157,213
General Motors Acceptance Corp. FRN Ser. MTN, 4.13s, 2007 1,815,000 1,785,365
15,151,864
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Banking (1.0%)
Allfirst Financial Inc. sub. notes 7.2s, 2007 1,055,000 1,105,071
Bank of America Corp. notes 4 3/4s, 2015 375,000 369,687
Bank of America Corp. sub. notes 7.4s, 2011 705,000 800,670
Bank of New York Co., Inc. (The) sr. sub. notes FRN 3.4s, 2013 405,000 390,658
Bank One Corp. sub. notes 5 1/4s, 2013 100,000 101,466
Bank United Corp. notes Ser. A, 8s, 2009 4,000,000 4,423,276
Barclays Bank PLC FRB 6.278s, 2049 (United Kingdom) 1,110,000 1,133,332
Capital One Bank notes 6 1/2s, 2013 545,000 590,839
Capital One Bank notes Ser. BKNT, 4 7/8s, 2008 385,000 387,129
Capital One Bank sr. notes Ser. BKNT, 6.7s, 2008 470,000 494,738
Citigroup, Inc. debs. 6 5/8s, 2028 1,925,000 2,209,494
Citigroup, Inc. sub. notes 5s, 2014 3,382,000 3,386,288
Countrywide Capital III company guaranty Ser. B, 8.05s, 2027 1,035,000 1,265,972
Credit Suisse First Boston USA, Inc. notes 4 7/8s, 2015 780,000 774,298
First Chicago NBD Corp. sub. notes 6 3/8s, 2009 285,000 301,622
Fleet Capital Trust V bank guaranty FRN 4.43s, 2028 935,000 929,419
Greenpoint Capital Trust I company guaranty 9.1s, 2027 600,000 661,756
HSBC Capital Funding LP 144A bank guaranty FRB 9.547s, 2049
(Jersey) 2,300,000 2,753,795
HSBC Capital Funding LP 144A bank guaranty FRB 4.61s, 2013
(Jersey) 2,505,000 2,402,290
JPMorgan Chase & Co. sub. notes 5 1/8s, 2014 3,050,000 3,068,300
JPMorgan Chase Capital XV notes 5 7/8s, 2035 (S) 3,380,000 3,380,213
National City Bank bonds 4 5/8s, 2013 1,095,000 1,073,916
National City Bank sub. notes Ser. BKNT, 6 1/4s, 2011 1,165,000 1,257,472
NB Capital Trust IV company guaranty 8 1/4s, 2027 5,540,000 6,032,888
PNC Funding Corp. bonds 5 1/4s, 2015 (S) 1,280,000 1,297,464
Popular North America, Inc. sub. notes 3 7/8s, 2008 (Puerto Rico) 1,200,000 1,175,134
Rabobank Capital Funding II 144A bonds 5.26s, 2049 80,000 80,414
Rabobank Capital Funding Trust 144A sub. notes FRN 5.254s, 2049 985,000 985,821
Royal Bank of Scotland Group PLC bonds Ser. 1, 9.118s, 2049
(United Kingdom) 1,900,000 2,226,004
Royal Bank of Scotland Group PLC FRB 7.648s, 2049 (United
Kingdom) 400,000 500,504
Suncorp-Metway, Ltd. 144A notes FRN 3 1/2s, 2013 (Australia) 1,270,000 1,232,780
UBS AG/Jersey Branch FRN 6.43s, 2008 (Jersey) 3,020,000 3,110,600
UBS Preferred Funding Trust I company guaranty 8.622s, 2049 1,345,000 1,568,979
Wachovia Bank NA sub. notes 4 7/8s, 2015 1,465,000 1,455,097
Wachovia Corp. sub. notes 5 1/2s, 2035 660,000 659,034
Wachovia Corp. sub. notes 5 1/4s, 2014 90,000 91,678
Westpac Capital Trust III 144A sub. notes FRN 5.819s, 2049
(Australia) 1,010,000 1,049,016
54,727,114
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Beverage (--%)
Diageo PLC company guaranty 8s, 2022 760,000 985,999
Miller Brewing Co. 144A notes 5 1/2s, 2013 1,380,000 1,404,520
2,390,519
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Broadcasting (0.1%)
Chancellor Media Corp. company guaranty 8s, 2008 1,355,000 1,453,026
News America Holdings, Inc. debs. 7 3/4s, 2045 1,065,000 1,289,883
2,742,909
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Cable Television (0.2%)
Comcast Corp. company guaranty 4.95s, 2016 815,000 794,633
Cox Communications, Inc. notes 7 3/4s, 2010 730,000 814,219
Cox Communications, Inc. notes 6 3/4s, 2011 745,000 798,601
Cox Enterprises, Inc. 144A notes 7 7/8s, 2010 1,045,000 1,173,938
Jones Intercable, Inc. sr. notes 7 5/8s, 2008 3,585,000 3,833,648
TCI Communications, Inc. debs. 8 3/4s, 2015 1,115,000 1,402,569
TCI Communications, Inc. debs. 7 7/8s, 2013 1,175,000 1,370,916
10,188,524
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Chemicals (0.1%)
Dow Chemical Co. (The) debs. 8.55s, 2009 1,315,000 1,481,772
Dow Chemical Co. (The) notes 6s, 2012 115,000 123,263
Dow Chemical Co. (The) Pass Through Trust 144A company guaranty
4.027s, 2009 1,510,000 1,458,028
ICI Wilmington, Inc. company guaranty 5 5/8s, 2013 1,235,000 1,255,821
Lubrizol Corp. (The) sr. notes 5 1/2s, 2014 470,000 477,057
Potash Corp. of Saskatchewan notes 7 3/4s, 2011 (Canada) 510,000 583,277
Praxair, Inc. notes 6 3/8s, 2012 465,000 506,836
5,886,054
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Conglomerates (--%)
Tyco International Group SA company guaranty 7s, 2028
(Luxembourg) 785,000 932,508
Tyco International Group SA company guaranty 6 3/4s, 2011
(Luxembourg) 1,185,000 1,297,244
2,229,752
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Consumer Finance (0.1%)
Block Financial Corp. notes 5 1/8s, 2014 760,000 737,614
Household Finance Corp. notes 8s, 2010 740,000 839,020
Household Finance Corp. notes 7s, 2012 1,310,000 1,459,185
Household Finance Corp. notes 6 3/8s, 2011 205,000 219,713
HSBC Finance Corp. notes 6 3/4s, 2011 860,000 939,184
HSBC Finance Corp. notes 5 1/4s, 2015 970,000 976,853
5,171,569
- ------------------------------------------------------------------------------------------------
Containers (--%)
Sealed Air Corp. 144A notes 5 5/8s, 2013 800,000 808,631
- ------------------------------------------------------------------------------------------------
Electric Utilities (0.6%)
AEP Texas Central Co. sr. notes Ser. D, 5 1/2s, 2013 485,000 499,015
AEP Texas North Co. sr. notes Ser. B, 5 1/2s, 2013 905,000 928,392
Appalachian Power Co. sr. notes Ser. K, 5s, 2017 560,000 547,546
Beaver Valley II Funding debs. 9s, 2017 935,000 1,089,453
Carolina Power & Light Co. 1st mtge. 6 1/8s, 2033 480,000 524,544
Carolina Power & Light Co. 1st mtge. 5.7s, 2035 655,000 678,500
Cleveland Electric Illuminating Co. (The) 144A sr. notes Ser. D,
7.88s, 2017 550,000 683,117
Consumers Energy Co. 1st mtge. 5.65s, 2020 420,000 429,066
Consumers Energy Co. 1st mtge. Ser. B, 5 3/8s, 2013 2,410,000 2,454,033
Dayton Power & Light Co. (The) 1st mtge. 5 1/8s, 2013 975,000 986,667
Detroit Edison Co. 144A 1st mtge. 5.45s, 2035 520,000 516,664
FirstEnergy Corp. notes Ser. B, 6.45s, 2011 55,000 59,145
FirstEnergy Corp. notes Ser. C, 7 3/8s, 2031 773,000 929,663
Florida Power & Light Co. 1st mtge. 5.95s, 2033 1,055,000 1,158,919
Indianapolis Power & Light 144A 1st mtge. 6.3s, 2013 515,000 548,446
Kansas Gas & Electric 144A bonds 5.647s, 2021 320,000 316,122
MidAmerican Energy Holdings Co. sr. notes 4 5/8s, 2007 1,140,000 1,138,522
MidAmerican Energy Holdings Co. sr. notes 3 1/2s, 2008 245,000 236,414
Monongahela Power Co. 1st mtge. 5s, 2006 2,185,000 2,194,146
Nevada Power Co. 2nd mtge. 9s, 2013 463,000 519,718
Nevada Power Co. 144A general ref. mtge. 5 7/8s, 2015 425,000 435,625
NiSource Finance Corp. company guaranty 7 7/8s, 2010 1,355,000 1,530,776
Oncor Electric Delivery Co. sec. notes 7 1/4s, 2033 820,000 997,376
Oncor Electric Delivery Co. sec. notes 6 3/8s, 2012 1,365,000 1,475,744
Pacific Gas & Electric Co. 1st mtge. 6.05s, 2034 1,180,000 1,277,335
Pacific Gas & Electric Co. 1st mtge. 4.8s, 2014 550,000 542,910
PacifiCorp Sinking Fund 1st mtge. 5.45s, 2013 1,020,000 1,054,793
Pepco Holdings, Inc. notes 5 1/2s, 2007 825,000 838,121
Power Receivable Finance, LLC 144A sr. notes 6.29s, 2012 (S) 1,288,685 1,322,616
PP&L Capital Funding, Inc. company guaranty Ser. D, 8 3/8s, 2007 605,000 644,964
Public Service Co. of Colorado sr. notes Ser. A, 6 7/8s, 2009 375,000 403,018
Public Service Co. of New Mexico sr. notes 4.4s, 2008 570,000 563,293
Public Service Electric & Gas Co. 1st mtge. FRN 6 3/8s, 2008 915,000 953,734
Rochester Gas & Electric notes 6 3/8s, 2033 765,000 875,145
Southern California Edison Co. 1st mtge. 6s, 2034 770,000 836,266
Southern California Edison Co. 1st mtge. 5s, 2016 280,000 279,676
Southern California Edison Co. 1st mtge. 5s, 2014 985,000 991,451
Tampa Electric Co. notes 6 7/8s, 2012 660,000 733,798
Westar Energy, Inc. 1st mtge. 5.1s, 2020 800,000 778,447
32,973,180
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Electronics (--%)
Motorola, Inc. notes 7 5/8s, 2010 390,000 438,439
Motorola, Inc. notes 4.608s, 2007 745,000 744,801
- ------------------------------------------------------------------------------------------------
Financial (0.9%)
Associates First Capital Corp. debs. 6.95s, 2018 3,165,000 3,695,903
Associates First Capital Corp. sub. debs. 8.15s, 2009 4,065,000 4,577,275
AXA Financial, Inc. sr. notes 7 3/4s, 2010 1,250,000 1,411,420
Bosphorus Financial Services, Ltd. 144A sec. FRN 5.59s, 2012
(Cayman Islands) 2,989,000 2,988,423
CIT Group, Inc. sr. notes 7 3/4s, 2012 (S) 1,015,000 1,172,935
CIT Group, Inc. sr. notes 5s, 2015 835,000 823,998
CIT Group, Inc. sr. notes 5s, 2014 (S) 2,575,000 2,554,001
Executive Risk Capital Trust company guaranty Ser. B, 8.675s,
2027 1,545,000 1,687,210
Fund American Cos. Inc. notes 5 7/8s, 2013 1,370,000 1,395,448
General Electric Capital Corp. notes Ser. A, 6 3/4s, 2032 565,000 677,450
General Electric Capital Corp. notes Ser. A, 6s, 2012 830,000 887,924
General Electric Capital Corp. notes Ser. MTNA, 6 1/8s, 2011 955,000 1,017,941
Hartford Financial Services Group, Inc. (The) sr. notes 7.9s,
2010 890,000 1,005,845
International Lease Finance Corp. FRN Ser. MTNP, 3.999s, 2010 2,080,000 2,075,938
International Lease Finance Corp. notes 4 3/4s, 2012 2,630,000 2,570,783
International Lease Finance Corp. unsub. 4 3/4s, 2009 1,060,000 1,050,164
John Hancock Global Funding II 144A notes 7.9s, 2010 765,000 873,566
Liberty Mutual Insurance 144A notes 7.697s, 2097 4,620,000 4,924,028
Loews Corp. notes 5 1/4s, 2016 510,000 499,817
MetLife, Inc. notes 5.7s, 2035 725,000 733,696
MetLife, Inc. notes 5s, 2015 490,000 489,225
MetLife, Inc. sr. notes 6 1/8s, 2011 680,000 725,967
Nationwide Financial Services, Inc. notes 5 5/8s, 2015 465,000 475,295
Nationwide Mutual Insurance Co. 144A notes 8 1/4s, 2031 375,000 475,839
OneAmerica Financial Partners, Inc. 144A bonds 7s, 2033 710,000 809,091
Principal Life Global Funding I 144A sec. notes 5 1/4s, 2013 1,515,000 1,551,907
Protective Life Corp. notes 4.3s, 2013 865,000 825,993
Prudential Holdings LLC 144A bonds 8.695s, 2023 1,260,000 1,615,232
Prudential Insurance Co. 144A notes 8.3s, 2025 870,000 1,137,913
State Street Capital Trust II notes FRN 3.768s, 2008 935,000 935,211
Steers Delaware Business Trust 144A notes 5.565s, 2005 1,100,000 1,103,762
Sun Life Canada Capital Trust 144A company guaranty 8.526s, 2049 2,115,000 2,315,914
49,085,114
- ------------------------------------------------------------------------------------------------
Food (0.1%)
Kraft Foods, Inc. notes 6 1/4s, 2012 3,460,000 3,734,911
- ------------------------------------------------------------------------------------------------
Forest Products and Packaging (0.1%)
Georgia-Pacific Corp. sr. notes 8s, 2014 745,000 819,500
International Paper Co. notes 6 3/4s, 2011 705,000 763,883
Weyerhaeuser Co. debs. 7.95s, 2025 975,000 1,167,020
Weyerhaeuser Co. debs. 7 1/8s, 2023 945,000 1,030,199
Weyerhaeuser Co. notes 6 3/4s, 2012 380,000 413,497
4,194,099
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Gaming & Lottery (0.1%)
GTECH Holdings Corp. notes 4 3/4s, 2010 810,000 793,365
Harrah's Operating Co., Inc. 144A bonds 5 5/8s, 2015 510,000 516,673
Park Place Entertainment Corp. sr. notes 7 1/2s, 2009 535,000 583,819
Park Place Entertainment Corp. sr. notes 7s, 2013 255,000 278,796
2,172,653
- ------------------------------------------------------------------------------------------------
Health Care (--%)
HCA, Inc. sr. notes 6.95s, 2012 455,000 478,785
- ------------------------------------------------------------------------------------------------
Homebuilding (--%)
D.R. Horton, Inc. company guaranty 8s, 2009 545,000 592,844
D.R. Horton, Inc. sr. notes 5 7/8s, 2013 840,000 833,982
1,426,826
- ------------------------------------------------------------------------------------------------
Investment Banking/Brokerage (0.1%)
Goldman Sachs Group, Inc. (The) notes 5 1/8s, 2015 1,625,000 1,627,748
Goldman Sachs Group, Inc. (The) notes 4 3/4s, 2013 1,570,000 1,541,849
Lehman Brothers Holdings, Inc. notes 6 5/8s, 2012 65,000 71,022
Lehman Brothers Holdings, Inc. notes Ser. G, 4.8s, 2014 1,060,000 1,050,314
Merrill Lynch & Co., Inc. notes Ser. B, 4 3/4s, 2009 540,000 542,295
Morgan Stanley Dean Witter & Co. sr. notes 6 3/4s, 2011 820,000 892,656
5,725,884
- ------------------------------------------------------------------------------------------------
Lodging/Tourism (0.1%)
Cendant Corp. notes 6 1/4s, 2010 2,225,000 2,340,122
Cendant Corp. sr. notes 7 3/8s, 2013 1,015,000 1,141,484
Hilton Hotels Corp. notes 8 1/4s, 2011 1,355,000 1,556,425
5,038,031
- ------------------------------------------------------------------------------------------------
Manufacturing (--%)
Bunge Ltd. Finance Corp. notes 5.35s, 2014 925,000 935,465
- ------------------------------------------------------------------------------------------------
Media (0.1%)
AOL Time Warner, Inc. bonds 7 5/8s, 2031 320,000 394,298
Time Warner Entertainment Co., LP debs. 8 3/8s, 2023 795,000 996,121
Time Warner, Inc. debs. 9.15s, 2023 545,000 734,178
Time Warner, Inc. debs. 9 1/8s, 2013 3,950,000 4,912,832
7,037,429
- ------------------------------------------------------------------------------------------------
Medical Services (--%)
WellPoint, Inc. notes 5s, 2014 515,000 514,969
WellPoint, Inc. notes 4 1/4s, 2009 515,000 505,325
1,020,294
- ------------------------------------------------------------------------------------------------
Metals (--%)
Alcan, Inc. notes 5s, 2015 (Canada) 540,000 532,957
Newmont Mining Corp. notes 5 7/8s, 2035 675,000 678,534
1,211,491
- ------------------------------------------------------------------------------------------------
Natural Gas Utilities (0.1%)
Atmos Energy Corp. notes 4.95s, 2014 860,000 845,357
CenterPoint Energy Resources Corp. notes 7 3/4s, 2011 1,060,000 1,199,041
Consolidated Natural Gas Co. sr. notes 5s, 2014 530,000 526,300
Kinder Morgan, Inc. notes 5.15s, 2015 635,000 630,716
Kinder Morgan, Inc. sr. notes 6 1/2s, 2012 1,860,000 2,020,354
National Fuel Gas Co. notes 5 1/4s, 2013 545,000 548,475
TGT Pipeline Co. 144A notes 5 1/2s, 2017 360,000 360,302
6,130,545
- ------------------------------------------------------------------------------------------------
Oil & Gas (0.1%)
Buckeye Partners LP notes 5.3s, 2014 570,000 569,542
Enbridge Energy Partners LP sr. notes 5.35s, 2014 555,000 553,588
Forest Oil Corp. sr. notes 8s, 2011 610,000 671,000
Motiva Enterprises, LLC 144A sr. notes 5.2s, 2012 1,070,000 1,086,079
Sunoco, Inc. notes 4 7/8s, 2014 590,000 578,608
3,458,817
- ------------------------------------------------------------------------------------------------
Pharmaceuticals (0.1%)
American Home Products Corp. notes 6.95s, 2011 2,610,000 2,861,380
Bayer Corp. 144A FRB 6.2s, 2008 845,000 873,696
Hospira, Inc. notes 5.9s, 2014 430,000 449,891
Wyeth notes 5 1/2s, 2013 35,000 36,218
4,221,185
- ------------------------------------------------------------------------------------------------
Power Producers (--%)
York Power Funding 144A notes 12s, 2007 (Cayman Islands) (In
default) + (F) 157,726 13,154
- ------------------------------------------------------------------------------------------------
Railroads (0.1%)
CSX Corp. notes 6 3/4s, 2011 955,000 1,038,692
Norfolk Southern Corp. notes 7.05s, 2037 2,310,000 2,806,629
Norfolk Southern Corp. sr. notes 6 3/4s, 2011 115,000 126,080
Union Pacific Corp. 144A pass-through certificates 5.214s, 2014 590,000 593,115
4,564,516
- ------------------------------------------------------------------------------------------------
Real Estate (0.3%)
CenterPoint Properties Trust notes Ser. MTN, 4 3/4s, 2010 (R) 650,000 639,594
Colonial Properties Trust notes 6 1/4s, 2014 (R) 660,000 683,178
Developers Diversified Realty Corp. notes 4 5/8s, 2010 (R) 465,000 455,206
Equity One, Inc. company guaranty 3 7/8s, 2009 (R) 1,835,000 1,755,309
ERP Operating LP notes 6.584s, 2015 600,000 658,999
Franchise Finance Corp. of America sr. notes 8 3/4s, 2010 (R) 1,850,000 2,193,845
Heritage Property Investment Trust company guaranty 5 1/8s, 2014
(R) 795,000 778,079
Hospitality Properties Trust notes 6 3/4s, 2013 (R) 1,690,000 1,818,423
HRPT Properties Trust bonds 5 3/4s, 2014 (R) 530,000 541,231
HRPT Properties Trust notes 6 1/4s, 2016 (R) 525,000 553,681
iStar Financial, Inc. sr. notes 8 3/4s, 2008 (R) 200,000 220,569
iStar Financial, Inc. sr. notes 6s, 2010 (R) 1,180,000 1,214,282
Kimco Realty Corp. notes Ser. MTNC, 5.19s, 2013 (R) 520,000 520,407
Rouse Co. (The) notes 7.2s, 2012 (R) 1,065,000 1,125,067
Simon Property Group LP notes 5 5/8s, 2014 (R) (S) 675,000 691,344
13,849,214
- ------------------------------------------------------------------------------------------------
Regional Bells (0.1%)
Ameritech Capital Funding company guaranty 6 1/4s, 2009 200,000 209,440
Bellsouth Capital Funding notes 7 3/4s, 2010 305,000 342,763
Bellsouth Telecommunications debs. 6 3/8s, 2028 25,000 27,057
Citizens Communications Co. sr. notes 6 1/4s, 2013 685,000 666,163
SBC Communications, Inc. notes 5 7/8s, 2012 440,000 464,292
Verizon Global Funding Corp. notes 7 3/4s, 2030 (S) 235,000 297,486
Verizon New England, Inc. sr. notes 6 1/2s, 2011 1,815,000 1,946,562
Verizon New Jersey, Inc. debs. 8s, 2022 770,000 928,518
Verizon Virginia Inc. debs. Ser. A, 4 5/8s, 2013 960,000 935,246
5,817,527
- ------------------------------------------------------------------------------------------------
Retail (0.1%)
CVS Corp. 144A pass-through certificates 6.117s, 2013 1,692,970 1,776,112
Delhaize America, Inc. company guaranty 8 1/8s, 2011 1,585,000 1,767,665
JC Penney Co., Inc. debs. 7 1/8s, 2023 805,000 888,847
Kroger Co. company guaranty 6 3/4s, 2012 275,000 299,569
May Department Stores Co. (The) notes 5 3/4s, 2014 360,000 371,923
Supervalu, Inc. notes 7 7/8s, 2009 755,000 833,861
5,937,977
- ------------------------------------------------------------------------------------------------
Software (--%)
Computer Associates International, Inc. 144A sr. notes 5 5/8s,
2014 980,000 987,339
- ------------------------------------------------------------------------------------------------
Telecommunications (0.5%)
AT&T Corp. sr. notes 9 3/4s, 2031 670,000 867,650
AT&T Wireless Services, Inc. notes 8 1/8s, 2012 45,000 53,148
AT&T Wireless Services, Inc. sr. notes 8 3/4s, 2031 1,355,000 1,871,983
AT&T Wireless Services, Inc. sr. notes 7 7/8s, 2011 1,900,000 2,176,441
Deutsche Telekom International Finance BV bonds 8 1/2s, 2010
(Germany) 1,405,000 1,603,348
Deutsche Telekom International Finance BV company guaranty 8
3/4s, 2030 (Germany) 560,000 749,087
Deutsche Telekom International Finance BV notes 5 1/4s, 2013
(Germany) 1,540,000 1,574,775
France Telecom notes 9 1/4s, 2031 (France) 180,000 247,888
France Telecom notes 7 3/4s, 2011 (France) 1,430,000 1,637,630
Sprint Capital Corp. company guaranty 7 5/8s, 2011 1,045,000 1,179,372
Sprint Capital Corp. company guaranty 6.9s, 2019 1,315,000 1,488,876
Sprint Capital Corp. company guaranty 6 7/8s, 2028 4,420,000 4,995,298
Telecom Italia Capital SA company guaranty 6 3/8s, 2033
(Luxembourg) 290,000 308,640
Telecom Italia Capital SA company guaranty 5 1/4s, 2013
(Luxembourg) 1,335,000 1,342,549
Telecom Italia Capital SA 144A company guaranty 4s, 2010
(Luxembourg) 1,270,000 1,216,228
Vodafone Group PLC notes 7 7/8s, 2030 (United Kingdom) 650,000 853,951
22,166,864
- ------------------------------------------------------------------------------------------------
Telephone (--%)
Telefonica Europe BV company guaranty 8 1/4s, 2030 (Netherlands) 595,000 813,849
Total corporate bonds and notes (cost $287,055,656) $294,812,415
- ------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS (0.7%)*
- ------------------------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) $3.50 cv. pfd. 106,000 $7,751,250
Hartford Financial Services Group, Inc. (The) $3.00 cv. pfd. 99,400 7,144,375
Huntsman Corp. $2.50 cv. pfd. 111,300 5,537,175
Xerox Corp. 6.25% cv. pfd. 163,548 18,808,020
- ------------------------------------------------------------------------------------------------
Total convertible preferred stocks (cost $33,422,687) $39,240,820
- ------------------------------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES (--%)*
- ------------------------------------------------------------------------------------------------
Rating ** Principal amount Value
- ------------------------------------------------------------------------------------------------
NJ State Tpk. Auth. Rev. Bonds, Ser. B, AMBAC
4.252s, 1/1/16 Aaa $1,065,000 $1,056,970
4.252s, 1/1/16 (Prerefunded) Aaa 55,000 52,777
OR State G.O. Bonds (Taxable Pension),
5.892s, 6/1/27 Aaa 1,320,000 1,475,074
- ------------------------------------------------------------------------------------------------
Total municipal bonds and notes (cost $2,402,588) $2,584,821
- ------------------------------------------------------------------------------------------------
UNITS (--%) * (cost $541,929)
- ------------------------------------------------------------------------------------------------
Units Value
- ------------------------------------------------------------------------------------------------
Cendant Corp. unit 4.89s, 2006 10,100 $504,742
- ------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (8.4%) *
- ------------------------------------------------------------------------------------------------
Principal amount Value
- ------------------------------------------------------------------------------------------------
ING Funding, LLC. for an effective yield of 3.34s, August 11,
2005 $24,000,000 $23,978,067
Park Granada, LLC for an effective yield of 3.37s, August 11,
2005 27,095,000 27,070,012
UBS Finance, LLC for an effective yield of 3.38s, August 15, 2005 49,999,999 49,935,249
Windmill Funding Corp. for an effective yield of 3.41s, August
16, 2005 25,000,000 24,965,104
Short-term investments held as collateral for loaned securities
with yields ranging from 2.30% to 3.46% and due dates ranging
from August 1, 2005 to August 17, 2005 (d) 138,541,829 138,499,005
Putnam Prime Money Market Fund (e) 185,596,995 185,596,995
- ------------------------------------------------------------------------------------------------
Total short-term investments (cost $450,044,432) $450,044,432
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
- ------------------------------------------------------------------------------------------------
Total investments (cost $5,054,932,264) $5,735,883,838
* Percentages indicated are based on net assets of $5,330,453,116.
** The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at July 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 July 31, 2005. Securities
rated by Putnam are indicated by "/P" . Ratings are not covered by the
Report of Independent Registered Public Accounting Firm. Security ratings
are defined in the Statement of Additional Information.
+ Non-income-producing security.
# A portion of this security was pledged and segregated with the custodian
to cover margin requirements for futures contracts at July 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 July 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.
At July 31, 2005, liquid assets totaling $467,308,910 have been designated
as collateral for open forward commitments, swap contracts, forward
committments, swap contracts, forward contracts, credit default contracts
and future contracts.
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 form registration, normally to qualified
institutional buyers.
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 July 31, 2005.
The rates shown on IFB, which are securities paying interest rates that vary
inversely to changes in the market interest rates, are the current
- -----------------------------------------------------------------------------------------------------------------------
FORWARD CURRENCY CONTRACTS TO BUY at 7/31/05
(aggregate face value $1,449,935)
- -----------------------------------------------------------------------------------------------------------------------
Aggregate Delivery Unrealized
Value face value date depreciation
- -----------------------------------------------------------------------------------------------------------------------
Canadian Dollar $765,233 $768,877 10/19/05 $(3,644)
Euro 673,748 681,058 9/21/05 (7,310)
- -----------------------------------------------------------------------------------------------------------------------
Total $(10,954)
- -----------------------------------------------------------------------------------------------------------------------
FUTURES CONTRACTS OUTSTANDING at 7/31/05
- -----------------------------------------------------------------------------------------------------------------------
Unrealized
Number of Expiration appreciation/
contracts Value date (depreciation)
- -----------------------------------------------------------------------------------------------------------------------
Euro 90 day (Long) 14 $3,360,875 Sep-05 $(12,779)
Euro 90 day (Long) 7 1,675,363 Dec-05 (9,490)
Euro 90 day (Long) 3 717,225 Mar-06 (1,811)
Interest Rate Swap 10 yr (Long) 22 2,417,938 Sep-05 (62,445)
S&P 500 Index (Long) 30 9,276,000 Sep-05 37,015
U.S. Treasury Bond 20 yr (Long) 1621 186,921,563 Sep-05 (1,765,715)
U.S. Treasury Note 2 yr (Short) 529 109,230,234 Sep-05 528,749
U.S. Treasury Note 5 yr (Long) 895 95,946,797 Sep-05 (1,124,316)
U.S. Treasury Note 5 yr (Short) 1628 174,526,688 Sep-05 2,108,748
- -----------------------------------------------------------------------------------------------------------------------
Total $(302,044)
- -----------------------------------------------------------------------------------------------------------------------
TBA SALE COMMITMENTS OUTSTANDING at 7/31/05
(proceeds receivable $47,958,995)
- -----------------------------------------------------------------------------------------------------------------------
Principal Settlement
amount date Value
- -----------------------------------------------------------------------------------------------------------------------
FHLMC, 5 1/2s, August 1, 2020 $5,100,000 8/16/05 $5,201,203
FNMA, 4 1/2s, August 1, 2020 43,271,000 8/16/05 42,554,325
- -----------------------------------------------------------------------------------------------------------------------
Total $47,755,528
- -----------------------------------------------------------------------------------------------------------------------
WRITTEN OPTIONS OUTSTANDING at 7/31/05
(premiums received $5,942,027)
- -----------------------------------------------------------------------------------------------------------------------
Contract Expiration date/
amount strike price Value
- -----------------------------------------------------------------------------------------------------------------------
Option on an interest rate swap with JPMorgan Chase
Bank N.A. for the right to pay a fixed rate of 4.55%
versus 3 month LIBOR maturing on July 5, 2017. $76,820,000 Jul 07 / 4.55 $3,932,953
Option on an interest rate swap with JPMorgan Chase Bank N.A. for
the right to receive a fixed rate of 4.55% versus 3 month LIBOR
maturing on July 5, 2017. 76,820,000 Jul 07 / 4.55 1,960,930
- -----------------------------------------------------------------------------------------------------------------------
$5,893,883
- -----------------------------------------------------------------------------------------------------------------------
INTEREST RATE SWAP CONTRACTS OUTSTANDING at 7/31/05
- -----------------------------------------------------------------------------------------------------------------------
Unrealized
Notional Termination appreciation/
amount date (depreciation)
- -----------------------------------------------------------------------------------------------------------------------
Agreement with Lehman Brothers Special Financing, Inc.
dated July 13, 2005 to pay semi-annually the notional
amount multiplied by 4.38% and receive quarterly the
notional amount multiplied by the three month
USD-LIBOR-BBA. $63,000,000 7/15/10 $480,214
Agreement with JPMorgan Chase Bank, N.A. dated
July 29, 2005 to pay semi-annually the notional
amount multiplied by 4.6757% and receive
quarterly the notional amount multiplied by
the three month USD-LIBOR. 10,430,000 8/2/15 --
Agreement with Bank of America, N.A. dated May 18,
2005 to pay semi-annually the notional amount multiplied
by 3.95% and receive quarterly the notional
amount multiplied by the three month USD-LIBOR. 248,000,000 5/21/07 1,442,272
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 2,245,290
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 3,123,475
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 (1,495,547)
Agreement with Bank of America, N.A. dated March 31,
2005 to pay semi-annually the notional amount multiplied
by 4.6375% and receive quarterly the notional amount
multiplied by the three month USD-LIBOR. 84,900,000 4/6/10 (1,361,653)
Agreement with Bank of America, N.A. dated June 15,
2005 to pay semi-annually the notional amount multiplied
by 4.555% and receive quarterly the notional amount
multiplied by the three month USD-LIBOR. 20,610,000 6/17/15 231,557
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 (79,263)
Agreement with Bank of America, N.A. dated June 21,
2005 to pay semi-annually the notional amount multiplied
by 4.466% and receive quarterly the notional amount
multiplied by the three month USD-LIBOR. 7,440,000 6/23/15 138,387
Agreement with Bank of America, N.A. dated June 22, 2005
to pay semi-annually the notional amount multiplied by
4.39% and receive quarterly the notional amount
multiplied by the three month USD-LIBOR. 3,720,000 6/24/15 91,828
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 the three month USD-LIBOR. 3,280,000 12/16/05 26,670
Agreement with Bank of America, N.A. dated June 21,
2005 to pay semi-annually the notional amount multiplied
by 4.45% and receive quarterly the notional amount
multiplied by the three month USD-LIBOR. 3,070,000 6/23/15 61,021
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 (301,907)
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 11/17/09 142,160
Agreement with JPMorgan Chase Bank, N.A. dated March 3,
2005 to receive semi-annually the notional amount
multiplied by 4.798% and pay quarterly the notional
amount multiplied by the three month USD-LIBOR. 126,500,000 3/7/15 2,627,084
Agreement with JPMorgan Chase Bank, N.A. dated June 27,
2005 to receive semi-annually the notional amount multiplied
by 4.296% and pay quarterly the notional amount
multiplied by the three month USD-LIBOR. 63,370,000 6/29/15 (2,074,127)
Agreement with JPMorgan Chase Bank, N.A. dated June 14,
2005 to pay semi-annually the notional amount multiplied
by 4.538% and receive quarterly the notional amount
multiplied by the three month USD-LIBOR. 17,930,000 6/16/15 234,247
Agreement with JPMorgan Chase Bank, N.A. dated June 22,
2005 to receive semi-annually the notional amount multiplied
by 4.387% and pay quarterly the notional amount multiplied
by the three month USD-LIBOR. 4,470,000 6/24/15 112,652
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 the three month USD-LIBOR-BBA. 54,516,000 12/9/05 (397,148)
Agreement with Lehman Brothers Special Financing, Inc. dated
June 14, 2005 to pay semi-annually the notional amount
multiplied by 4.0525% and receive quarterly the notional
amount multiplied by the three month USD-LIBOR-BBA. 30,200,000 6/16/07 (129,676)
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 1/26/06 282,590
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 1/23/06 270,349
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 1/23/06 267,566
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 1/26/06 147,613
Agreement with Lehman Brothers Special Financing, Inc. dated
December 11, 2003 to pay semi-annually the notional amount
multiplied by 4.710% and receive quarterly the notional amount
multiplied by the three month USD-LIBOR-BBA. 10,708,000 12/15/13 (43,229)
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 the three month USD-LIBOR-BBA. 10,192,000 12/16/13 52,164
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 1/23/14 174,215
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 1/23/14 167,724
Agreement with Lehman Brothers Special Financing, Inc. dated
June 14, 2005 to pay semi-annually the notional amount
multiplied by 4.5475% and receive quarterly the notional
amount multiplied by the three month USD-LIBOR-BBA. 8,300,000 6/16/15 (100,764)
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 (2,736)
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 the three month USD-LIBOR-BBA. 2,559,000 12/15/05 19,152
- ------------------------------------------------------------------------------------------------------------------------
Total $6,352,180
- ------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 7/31/05
- ------------------------------------------------------------------------------------------------------------------------
Unrealized
Notional Termination appreciation/
amount date (depreciation)
- ------------------------------------------------------------------------------------------------------------------------
Agreement with Citibank, N.A. dated July 7, 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 50 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. $23,000,000 1/1/06 $37,421
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 8/1/05 58,937
Agreement with Goldman Sachs Capital Markets, L.P. dated July 7, 2005 to
pay monthly the notional amount multiplied by the spread depreciation of
the Lehman Brothers 8.5+ AAA Commercial Mortgage Backed Securities Index
adjusted by a modified duration factor and receive monthly the notional
amount multiplied by the appreciation of the Lehman Brothers 8.5+ AAA
Commercial Mortgage Backed Securities Index plus 27.2 basis points. 23,078,000 12/1/05 (26,655)
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 8/1/05 68,783
Agreement with Citigroup Financial Products, Inc. dated April 22, 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
40 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. 24,423,000 11/1/05 96,143
Agreement with Citigroup Financial Products, Inc. dated May 5, 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
35 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. 23,765,000 11/1/05 79,719
Agreement with Deutsche Bank AG dated May 3, 2005 to pay 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 35 basis points
plus the beginning of the period nominal spread of the Lehman Brothers AAA
8.5+ Commercial Mortgage Backed Securities Index and receive 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. $12,211,500 11/1/05 $(40,750)
- -----------------------------------------------------------------------------------------------------------------------
Total $273,598
- -----------------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT CONTRACTS OUTSTANDING at 7/31/05
- -----------------------------------------------------------------------------------------------------------------------
Unrealized
Notional appreciation/
amount (depreciation)
- -----------------------------------------------------------------------------------------------------------------------
Agreement with Bank of America, N.A. effective June 20, 2005, maturing on
June 20, 2010, to receive/(pay) a premium based on the difference between
the original spread on issue and the market spread on day of execution and
pay quarterly 40 basis points times the notional amount. Upon a credit
default event of a reference entity within the DJ IG CDX 5 year Series 4
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 5 year Series 4 Index. $3,085,375 $(10,841)
Agreement with Deutsche Bank AG effective June 23, 2005, maturing on June
20, 2010, to receive/(pay) a premium based on the difference between the
original spread on issue and the market spread on day of execution and pay
quarterly 40 basis points times the notional amount. Upon a credit default
event of a reference entity within the DJ IG CDX 5 year Series 4 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 5 year Series 4 Index. 2,947,250 (11,855)
Agreement with Goldman Sachs International 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. 2,542,815 134,101
Agreement with Goldman Sachs International 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 39,290
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 18,904
Agreement with Goldman Sachs International 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 59,390
Agreement with Goldman Sachs International 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. 1,271,406 55,990
Agreement with Goldman Sachs International 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 19,623
Agreement with Goldman Sachs International 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 3,143
Agreement with Lehman Brothers Special Financing, Inc. effective June 30,
2005, maturing on June 20, 2015, to receive/(pay) a premium based on the
difference between the original spread on issue and the market spread on
day of execution and pay quarterly 35 basis points times the notional
amount. Upon a credit default event of a reference entity within the DJ IG
CDX Series 4 Index 15-30% tranche, 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 4 Index 15-30% tranche. 11,789,000 3,324
Agreement with Lehman Brothers Special Financing, Inc. effective June 20,
2005, maturing on June 20, 2010, to receive/(pay) a premium based on the
difference between the original spread on issue and the market spread on
day of execution and pay quarterly 40 basis points times the notional
amount. Upon a credit default event of a reference entity within the DJ HY
CDX 5 year Series 4 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 HY CDX 5 year
Series 4 Index. 3,085,375 (10,510)
Agreement with Morgan Stanley Capital Services, Inc. effective June 20,
2005, maturing on June 20, 2015, to receive/(pay) a premium based on the
difference between the original spread on issue and the market spread on
day of execution and receive quarterly 35 basis points times the notional
amount. Upon a credit default event of a reference entity within the DJ IG
CDX 5 year Series 4 Index 15-30% tranche, 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 DJ IG CDX
5 year Series 4 Index 15-30% tranche. 24,683,000 24,019
Agreement with Lehman Brothers Special Financing, Inc. effective July 25,
2005, maturing on June 20, 2012, to receive/(pay) a premium based on the
difference between the original spread on issue and the market spread on
day of execution and to receive quarterly 21.5 basis points times the
notional amount. Upon a credit default event of any reference entity
within the DJ IG CDX Series 4 Index, 15-30% tranche, 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 DJ IG CDX Series 4 Index, 15-30% tranche. 12,780,000 (15,274)
Agreement with Lehman Brothers Special Financing, Inc. effective July 25,
2005, maturing on June 20, 2012, to receive/(pay) a premium based on the
difference between the original spread on issue and the market spread on
day of execution and to pay quarterly 55 basis points times the notional
amount. Upon a credit default event of any reference entity within the DJ
IG CDX Series 4 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 4 Index. 8,946,000 (21,527)
Agreement with Lehman Brothers Special Financing, Inc. effective July 29,
2005, maturing on June 20, 2012, to receive/(pay) a premium based on the
difference between the original spread on issue and the market spread on
day of execution and to receive quarterly 33.75 basis points times the
notional amount. Upon a credit default event of any reference entity
within the DJ IG CDX Series 4 Index, 10-15% tranche, 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 DJ IG CDX Series 4 Index, 10-15% tranche. 6,663,000 --
Agreement with Lehman Brothers Special Financing, Inc. effective July 29,
2005, maturing on June 20, 2012, to receive/(pay) a premium based on the
difference between the original spread on issue and the market spread on
day of execution and to receive quarterly 21.5 basis points times the
notional amount. Upon a credit default event of any reference entity
within the DJ IG CDX Series 4 Index, 15-30% tranche, 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 DJ IG CDX Series 4 Index, 15-30% tranche. 6,663,000 --
Agreement with Deutsche Bank AG effective July 14, 2005, maturing on June
20, 2012, to receive/(pay) a premium based on the difference between the
original spread on issue and the market spread on day of execution and pay
quarterly 55 basis points times the notional amount. Upon a credit default
event of a reference entity within the DJ IG CDX Series 4 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 4 Index. 4,992,000 (23,645)
Agreement with Deutsche Bank AG effective July 14, 2005, maturing on June
20, 2012, to receive/(pay) a premium based on the difference between the
original spread on issue and the market spread on day of execution and
receive quarterly 35.5 basis points times the notional amount. Upon a
credit default event of a reference entity within the DJ IG CDX Series 4
Index, 10-15% tranche, 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 DJ IG CDX Series 4
Index, 10-15% tranche. 3,328,000 6,736
Agreement with Goldman Sachs Capital Markets, L.P. effective July 8, 2005,
maturing on June 20, 2010, to receive/(pay) a premium based on the
difference between the original spread on issue and the market spread on
day of execution and pays quarterly 40 basis points times the notional
amount. Upon a credit default event of a reference entity within the DJ IG
CDX Series 4 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 4 Index. 3,191,000 (13,706)
Agreement with Lehman Brothers Special Financing, Inc. effective July 14,
2005, maturing on June 20, 2012, to receive/(pay) a premium based on the
difference between the original spread on issue and the market spread on
day of execution and to receive quarterly 25 basis points times the
notional amount. Upon a credit default event of any reference entity
within the DJ IG CDX Series 4 Index, 15-30% tranche, 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 DJ IG CDX Series 4 Index, 15-30% tranche. 3,195,000 694
Agreement with Lehman Brothers Special Financing, Inc. effective July 14,
2005, maturing on June 20, 2012, to receive/(pay) a premium based on the
difference between the original spread on issue and the market spread on
day of execution and to receive quarterly 36 basis points times the
notional amount. Upon a credit default event of any reference entity
within the DJ IG CDX Series 4 Index,10-15% tranche, 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 DJ IG CDX Series 4 Index, 10-15% tranche. 3,062,000 (7,123)
Agreement with Deutsche Bank AG effective July 22, 2005, maturing on
September 20, 2010, to receive/(pay) a premium based on the difference
between the original spread on issue and the market spread on day of
execution and receive quarterly 41 basis points times the notional amount.
Upon a credit default event of France Telecomm, 7.75%, 3/1/2011, the fund
makes a payment of the proportional notional amount times the difference
between the par value and the then-market value of
France Telecomm, 7.75%, 3/1/2011. 1,905,000 953
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 (192)
Agreement with Bank of America, N.A. effective July 26, 2005, maturing on
September 20, 2012, to receive/(pay) a premium based on the difference
between the original spread on issue and the market spread on day of
execution and receive quarterly 64 basis points times the notional amount.
Upon a credit default event of Waste Management, 7.375%, 8/1/2010, the
fund makes a payment of the proportional notional amount times the
difference between the par value and the then-market
value of Waste Management, 7.375%, 8/1/2010. 1,140,000 3,548
- -----------------------------------------------------------------------------------------------------------------------
Total $255,042
The accompanying notes are an integral part of these financial statements.
Statement of assets and liabilities 7/31/05
- -----------------------------------------------------------------------------
ASSETS
- -----------------------------------------------------------------------------
Investment in securities, at value, including $134,419,014 of securities
on loan (Note 1):
Unaffiliated issuers (identified cost $4,869,335,269) $5,550,286,843
Affiliated issuers (identified cost $185,596,995) (Note 5) 185,596,995
- -----------------------------------------------------------------------------
Cash 2,007,016
- -----------------------------------------------------------------------------
Dividends, interest and other receivables 19,336,060
- -----------------------------------------------------------------------------
Receivable for shares of the fund sold 4,861,892
- -----------------------------------------------------------------------------
Receivable for securities sold 26,633,269
- -----------------------------------------------------------------------------
Receivable for sales of delayed delivery securities (Note 1) 56,290,643
- -----------------------------------------------------------------------------
Receivable for open swap contracts (Note 1) 12,679,233
- -----------------------------------------------------------------------------
Receivable for open credit default contracts (Note 1) 369,715
- -----------------------------------------------------------------------------
Total assets $5,858,061,666
- -----------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------
Payable for variation margin (Note 1) 1,407,809
- -----------------------------------------------------------------------------
Payable for securities purchased 32,451,898
- -----------------------------------------------------------------------------
Payable for purchases of delayed delivery securities (Note 1) 274,511,551
- -----------------------------------------------------------------------------
Payable for shares of the fund repurchased 10,679,824
- -----------------------------------------------------------------------------
Payable for compensation of Manager (Notes 2 and 5) 6,423,446
- -----------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 1,213,268
- -----------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 405,091
- -----------------------------------------------------------------------------
Payable for administrative services (Note 2) 5,985
- -----------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,723,084
- -----------------------------------------------------------------------------
Credit default contracts outstanding, at value (premiums
received $14,982) (Note 1) 14,790
- -----------------------------------------------------------------------------
Written options outstanding, at value (premiums received
$5,942,027) (Note 1) 5,893,883
- -----------------------------------------------------------------------------
Payable for open forward contracts (Note 1) 10,954
- -----------------------------------------------------------------------------
Payable for open credit default contracts (Note 1) 114,481
- -----------------------------------------------------------------------------
Payable for open swap contracts (Note 1) 6,053,455
- -----------------------------------------------------------------------------
TBA sales commitments, at value (proceeds receivable
$47,958,995) (Note 1) 47,755,528
- -----------------------------------------------------------------------------
Collateral on securities loaned, at value (Note 1) 138,499,005
- -----------------------------------------------------------------------------
Other accrued expenses 444,498
- -----------------------------------------------------------------------------
Total liabilities 527,608,550
- -----------------------------------------------------------------------------
Net assets $5,330,453,116
- -----------------------------------------------------------------------------
REPRESENTED BY
- -----------------------------------------------------------------------------
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) $4,684,177,575
- -----------------------------------------------------------------------------
Undistributed net investment income (Note 1) 26,861,482
- -----------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (Note 1) (68,327,336)
- -----------------------------------------------------------------------------
Net unrealized appreciation of investments 687,741,395
- -----------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $5,330,453,116
- -----------------------------------------------------------------------------
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- -----------------------------------------------------------------------------
Net asset value and redemption price per class A share
($3,458,404,718 divided by 187,911,280 shares) $18.40
- -----------------------------------------------------------------------------
Offering price per class A share
(100/94.75 of $18.40)* $19.42
- -----------------------------------------------------------------------------
Net asset value and offering price per class B share
($917,950,539 divided by 50,392,612 shares)** $18.22
- -----------------------------------------------------------------------------
Net asset value and offering price per class C share
($77,023,939 divided by 4,210,083 shares)** $18.30
- -----------------------------------------------------------------------------
Net asset value and redemption price per class M share
($215,815,982 divided by 11,842,239 shares) $18.22
- -----------------------------------------------------------------------------
Offering price per class M share
(100/96.75 of $18.22)* $18.83
- -----------------------------------------------------------------------------
Net asset value, offering price and redemption price per class R share
($725,547 divided by 39,509 shares) $18.36
- -----------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($660,532,391 divided by 35,790,812 shares) $18.46
* 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 Year ended 7/31/05
- -----------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------
Interest (including interest income of $8,908,252 from
investments in affiliated issuers) (Note 5) $82,557,428
- -----------------------------------------------------------------------------
Dividends (net of foreign tax of $30,169) 76,691,994
- -----------------------------------------------------------------------------
Securities lending 165,498
- -----------------------------------------------------------------------------
Other income (Note 6) 919,245
- -----------------------------------------------------------------------------
Total investment income 160,334,165
- -----------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------
Compensation of Manager (Note 2) 26,400,193
- -----------------------------------------------------------------------------
Investor servicing fees (Note 2) 12,204,952
- -----------------------------------------------------------------------------
Custodian fees (Note 2) 698,866
- -----------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 163,307
- -----------------------------------------------------------------------------
Administrative services (Note 2) 101,423
- -----------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 8,453,465
- -----------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 10,178,241
- -----------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 758,933
- -----------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 1,634,265
- -----------------------------------------------------------------------------
Distribution fees -- Class R (Note 2) 2,270
- -----------------------------------------------------------------------------
Other 1,066,672
- -----------------------------------------------------------------------------
Non-recurring costs (Notes 2 and 6) 174,691
- -----------------------------------------------------------------------------
Costs assumed by Manager (Notes 2 and 6) (174,691)
- -----------------------------------------------------------------------------
Fees waived and reimbursed by Manager (Note 5) (585,732)
- -----------------------------------------------------------------------------
Total expenses 61,076,855
- -----------------------------------------------------------------------------
Expense reduction (Note 2) (1,414,860)
- -----------------------------------------------------------------------------
Net expenses 59,661,995
- -----------------------------------------------------------------------------
Net investment income 100,672,170
- -----------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 344,882,177
- -----------------------------------------------------------------------------
Net realized gain on swap contracts (Note 1) 13,322,807
- -----------------------------------------------------------------------------
Net realized gain on written options (Note 1 and 3) 169,859
- -----------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 29,914,325
- -----------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 88,252
- -----------------------------------------------------------------------------
Net unrealized depreciation of assets and liabilities in
foreign currencies during the year (Note 1) (73,482)
- -----------------------------------------------------------------------------
Net unrealized appreciation of investments, futures
contracts, written options, swap contracts, and TBA sale
commitments during the year 73,281,004
- -----------------------------------------------------------------------------
Net gain on investments 461,584,942
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $562,257,112
The accompanying notes are an integral part of these financial statements.
Statement of changes in net assets
- -----------------------------------------------------------------------------
DECREASE IN NET ASSETS
- -----------------------------------------------------------------------------
Year ended Year ended
7/31/05 7/31/04
- -----------------------------------------------------------------------------
Operations:
Net investment income $100,672,170 $106,369,812
- -----------------------------------------------------------------------------
Net realized gain on investments and
foreign currency transactions 388,377,420 226,073,390
- -----------------------------------------------------------------------------
Net unrealized appreciation of investments
and assets and liabilities in foreign
currencies 73,207,522 238,880,235
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 562,257,112 571,323,437
- -----------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- -----------------------------------------------------------------------------
From net investment income
- -----------------------------------------------------------------------------
Class A (63,734,158) (71,321,677)
- -----------------------------------------------------------------------------
Class B (11,829,280) (15,606,522)
- -----------------------------------------------------------------------------
Class C (879,740) (1,081,609)
- -----------------------------------------------------------------------------
Class M (3,086,878) (3,563,743)
- -----------------------------------------------------------------------------
Class R (7,354) (455)
- -----------------------------------------------------------------------------
Class Y (16,948,666) (21,369,832)
- -----------------------------------------------------------------------------
Redemption fees (Note 1) 18,029 2,271
- -----------------------------------------------------------------------------
Decrease from capital share transactions
(Note 4) (694,050,829) (1,204,253,202)
- -----------------------------------------------------------------------------
Total decrease in net assets (228,261,764) (745,871,332)
- -----------------------------------------------------------------------------
NET ASSETS
- -----------------------------------------------------------------------------
Beginning of year 5,558,714,880 6,304,586,212
- -----------------------------------------------------------------------------
End of year (including undistributed net
investment income of $26,861,482 and
$12,056,047, respectively) $5,330,453,116 $5,558,714,880
The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period)
CLASS A
- -------------------------------------------------------------------------------------------------
PER-SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------
Year ended
7/31/05 7/31/04 7/31/03 7/31/02 7/31/01
- -------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.91 $15.72 $15.02 $17.24 $15.77
- -------------------------------------------------------------------------------------------------
Investment operations:
Net investment income (a) .35 (d,e) .32 (d) .37 .45 .52
- -------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.47 1.20 .81 (2.17) 1.49
- -------------------------------------------------------------------------------------------------
Total from
investment operations 1.82 1.52 1.18 (1.72) 2.01
- -------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (.33) (.33) (.48) (.48) (.53)
- -------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.02) (.01)
- -------------------------------------------------------------------------------------------------
Total distributions (.33) (.33) (.48) (.50) (.54)
- -------------------------------------------------------------------------------------------------
Redemption fees -- (f) -- (f) -- -- --
- -------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.40 $16.91 $15.72 $15.02 $17.24
- -------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 10.89 9.77 8.06 (10.20) 12.86
- -------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,458,405 $3,322,532 $3,784,601 $2,990,984 $3,176,287
- -------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .98 (d) 1.00 (d) .99 .96 .92
- -------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.97 (d,e) 1.90 (d) 2.50 2.75 3.11
- -------------------------------------------------------------------------------------------------
Portfolio turnover (%) 169.29 (g) 165.66 121.38 (h,i) 131.89 (h) 333.46
(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 July 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) Reflects a non-recurring accrual related to Putnam Management's
settlement with the SEC regarding brokerage allocation practices,
which amounted to less than $0.01 per share and 0.02% of average net
assets for class A shares (Note 6).
(f) Amount represents less than $0.01 per share.
(g) Portfolio turnover excludes dollar roll transactions.
(h) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
(i) 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
- -------------------------------------------------------------------------------------------------
PER-SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------
Year ended
7/31/05 7/31/04 7/31/03 7/31/02 7/31/01
- -------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.73 $15.56 $14.87 $17.07 $15.62
- -------------------------------------------------------------------------------------------------
Investment operations:
Net investment income (a) .21 (d,e) .19 (d) .26 .33 .39
- -------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.48 1.19 .80 (2.15) 1.48
- -------------------------------------------------------------------------------------------------
Total from
investment operations 1.69 1.38 1.06 (1.82) 1.87
- -------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (.20) (.21) (.37) (.36) (.41)
- -------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.02) (.01)
- -------------------------------------------------------------------------------------------------
Total distributions (.20) (.21) (.37) (.38) (.42)
- -------------------------------------------------------------------------------------------------
Redemption fees -- (f) -- (f) -- -- --
- -------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.22 $16.73 $15.56 $14.87 $17.07
- -------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 10.17 8.88 7.25 (10.86) 12.02
- -------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $917,951 $1,095,665 $1,308,605 $1,068,667 $1,199,676
- -------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.73 (d) 1.75 (d) 1.74 1.71 1.67
- -------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.22 (d,e) 1.16 (d) 1.75 2.00 2.36
- -------------------------------------------------------------------------------------------------
Portfolio turnover (%) 169.29 (g) 165.66 121.38 (h,i) 131.89 (h) 333.46
(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 July 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) Reflects a non-recurring accrual related to Putnam Management's
settlement with the SEC regarding brokerage allocation practices,
which amounted to less than $0.01 per share and 0.02% of average net
assets for class B shares (Note 6).
(f) Amount represents less than $0.01 per share.
(g) Portfolio turnover excludes dollar roll transactions.
(h) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
(i) 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
- -------------------------------------------------------------------------------------------------
PER-SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------
Year ended
7/31/05 7/31/04 7/31/03 7/31/02 7/31/01
- -------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.81 $15.63 $14.94 $17.16 $15.71
- -------------------------------------------------------------------------------------------------
Investment operations:
Net investment income (a) .21 (d,e) .19 (d) .26 .33 .39
- -------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.48 1.20 .80 (2.16) 1.49
- -------------------------------------------------------------------------------------------------
Total from
investment operations 1.69 1.39 1.06 (1.83) 1.88
- -------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (.20) (.21) (.37) (.37) (.42)
- -------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.02) (.01)
- -------------------------------------------------------------------------------------------------
Total distributions (.20) (.21) (.37) (.39) (.43)
Redemption fees -- (f) -- (f) -- -- --
- -------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.30 $16.81 $15.63 $14.94 $17.16
- -------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 10.14 8.92 7.25 (10.88) 12.02
- -------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $77,024 $75,185 $91,282 $53,186 $37,453
- -------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.73 (d) 1.75 (d) 1.74 1.71 1.67
- -------------------------------------------------------------------------------------------------
Ratio of net investment
income (loss) to average
net assets (%) 1.22 (d,e) 1.16 (d) 1.73 1.99 2.32
- -------------------------------------------------------------------------------------------------
Portfolio turnover (%) 169.29 (g) 165.66 121.38 (h,i) 131.89 (h) 333.46
(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 July 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) Reflects a non-recurring accrual related to Putnam Management's
settlement with the SEC regarding brokerage allocation practices,
which amounted to less than $0.01 per share and 0.02% of average net
assets for class C shares (Note 6).
(f) Amount represents less than $0.01 per share.
(g) Portfolio turnover excludes dollar roll transactions.
(h) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
(i) 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
- -------------------------------------------------------------------------------------------------
PER-SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------
Year ended
7/31/05 7/31/04 7/31/03 7/31/02 7/31/01
- -------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.74 $15.57 $14.87 $17.08 $15.63
- -------------------------------------------------------------------------------------------------
Investment operations:
Net investment income (a) .26 (d,e) .23 (d) .30 .37 .43
- -------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.47 1.19 .80 (2.16) 1.48
- -------------------------------------------------------------------------------------------------
Total from
investment operations 1.73 1.42 1.10 (1.79) 1.91
- -------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (.25) (.25) (.40) (.40) (.45)
- -------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.02) (.01)
- -------------------------------------------------------------------------------------------------
Total distributions (.25) (.25) (.40) (.42) (.46)
- -------------------------------------------------------------------------------------------------
Redemption fees -- (f) -- (f) -- -- --
- -------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.22 $16.74 $15.57 $14.87 $17.08
- -------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 10.39 9.18 7.58 (10.69) 12.31
- -------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $215,816 $217,046 $239,662 $222,176 $252,802
- -------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.48 (d) 1.50 (d) 1.49 1.46 1.42
- -------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.47 (d,e) 1.40 (d) 2.02 2.25 2.60
- -------------------------------------------------------------------------------------------------
Portfolio turnover (%) 169.29 (g) 165.66 121.38 (h,i) 131.89 (h) 333.46
(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 July 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) Reflects a non-recurring accrual related to Putnam Management's
settlement with the SEC regarding brokerage allocation practices,
which amounted to less than $0.01 per share and 0.02% of average net
assets for class M shares (Note 6).
(f) Amount represents less than $0.01 per share.
(g) Portfolio turnover excludes dollar roll transactions.
(h) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
(i) 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
- -------------------------------------------------------------------------------------------------
PER-SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------
Year ended Year ended Period
7/31/05 7/31/04 1/21/03+-7/31/03
- -------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.89 $15.70 $15.05
- -------------------------------------------------------------------------------------------------
Investment operations:
Net investment income (a) .30 (d,e) .21 (d) .17
- -------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments 1.48 1.29 .65
- -------------------------------------------------------------------------------------------------
Total from
investment operations 1.78 1.50 .82
- -------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (.31) (.31) (.17)
- -------------------------------------------------------------------------------------------------
Total distributions (.31) (.31) (.17)
- -------------------------------------------------------------------------------------------------
Redemption fees -- (f) -- (f) --
- -------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.36 $16.89 $15.70
- -------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 10.63 9.60 5.52*
- -------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $726 $127 $1
- -------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.23 (d) 1.25 (d) .65 *
- -------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.67 (d,e) 1.33 (d) 1.18 *
- -------------------------------------------------------------------------------------------------
Portfolio turnover (%) 169.29 (g) 165.66 121.38 (h,i)
+ 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 July 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) Reflects a non-recurring accrual related to Putnam Management's
settlement with the SEC regarding brokerage allocation practices,
which amounted to less than $0.01 per share and 0.02% of average net
assets for class R shares (Note 6).
(f) Amount represents less than $0.01 per share.
(g) Portfolio turnover excludes dollar roll transactions.
(h) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
(i) 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
- -------------------------------------------------------------------------------------------------
PER-SHARE OPERATING PERFORMANCE
- -------------------------------------------------------------------------------------------------
Year ended
7/31/05 7/31/04 7/31/03 7/31/02 7/31/01
- -------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $16.95 $15.76 $15.05 $17.28 $15.80
- -------------------------------------------------------------------------------------------------
Investment operations:
Net investment income (a) .40 (d,e) .36 (d) .41 .49 .56
- -------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.49 1.21 .82 (2.17) 1.50
- -------------------------------------------------------------------------------------------------
Total from
investment operations 1.89 1.57 1.23 (1.68) 2.06
- -------------------------------------------------------------------------------------------------
Less distributions:
From net investment income (.38) (.38) (.52) (.53) (.57)
- -------------------------------------------------------------------------------------------------
From net realized gain
on investments -- -- -- (.02) (.01)
- -------------------------------------------------------------------------------------------------
Total distributions (.38) (.38) (.52) (.55) (.58)
- -------------------------------------------------------------------------------------------------
Redemption fees -- (f) -- (f) -- -- --
- -------------------------------------------------------------------------------------------------
Net asset value,
end of period $18.46 $16.95 $15.76 $15.05 $17.28
- -------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 11.26 10.03 8.38 (10.01) 13.18
- -------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $660,532 $848,161 $880,435 $731,900 $768,075
- -------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .73 (d) .75 (d) .74 .71 .67
- -------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.23 (d,e) 2.16 (d) 2.76 3.00 3.35
- -------------------------------------------------------------------------------------------------
Portfolio turnover (%) 169.29 (g) 165.66 121.38 (h,i) 131.89 (h) 333.46
(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 July 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) Reflects a non-recurring accrual related to Putnam Management's
settlement with the SEC regarding brokerage allocation practices,
which amounted to less than $0.01 per share and 0.02% of average net
assets for class Y shares (Note 6).
(f) Amount represents less than $0.01 per share.
(g) Portfolio turnover excludes dollar roll transactions.
(h) Portfolio turnover excludes certain treasury note transactions
executed in connection with a short-term trading strategy.
(i) 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 7/31/05
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 and class M shares are sold with a maximum front-end sales
charge of 5.25% and 3.25%, respectively, and do not pay a contingent
deferred sales charge. Prior to April 1, 2005, the maximum front-end sales
charge for class M shares was 3.50%. Class B shares, which convert to
class A shares after approximately eight years, do not pay a front-end
sales charge 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 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 R shares, which are offered to qualified
employee-benefit plans, are sold without a front-end sales charge or a
contingent deferred sales charge. The expenses for class A, class B, class
C, class M and class R shares may differ based on each class' distribution
fee, which is identified in Note 2. 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.
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.
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.
In the normal course of business, the fund enters into contracts that may
include agreements to indemnify another party under given circumstances.
The fund's maximum exposure under these arrangements is unknown as this
would involve future claims that may be, but have not yet been, made
against the fund. However, the fund expects the risk of material loss to
be remote.
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 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. 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, 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.
Securities purchased or sold on a forward commitment basis may be settled
a month or more after the trade date; interest income is accrued based on
the terms of the securities. Losses may arise due to changes in the market
value of the underlying securities or if the counterparty does not perform
under the contract.
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 or swaps, 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) Dollar rolls To enhance returns, the fund may enter into dollar rolls
(principally using TBAs) in which the fund sells securities for delivery
in the current month and simultaneously contracts to purchase similar
securities on a specified future date. During the period between the sale
and subsequent purchase, the fund will not be entitled to receive income
and principal payments on the securities sold. The fund will, however,
retain the difference between the initial sales price and the forward
price for the future purchase. The fund will also be able to earn interest
on the cash proceeds that are received from the initial sale. The fund may
be exposed to market or credit risk if the price of the security changes
unfavorably or the counterparty fails to perform under the terms of the
agreement.
N) 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 July 31, 2005, the value of securities loaned amounted to
$134,419,014. The fund received cash collateral of $138,499,005 which is
pooled with collateral of other Putnam funds into 26 issues of high grade
short-term investments.
O) 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, 2005, the fund had a capital loss carryover of $35,701,820
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
- ----------------------------------------------------------------------
$29,751,500 July 31, 2010
- ----------------------------------------------------------------------
5,950,320 July 31, 2011
- ----------------------------------------------------------------------
P) 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. These differences include temporary and permanent differences
of losses on wash sale transactions, foreign currency gains and losses,
nontaxable dividends, defaulted bond interest, unrealized and realized
gains and losses on certain futures contracts, market discount, realized
built-in losses and income on swap contracts. Reclassifications are made
to the fund's capital accounts to reflect income and gains available for
distribution (or available capital loss carryovers) under income tax
regulations. For the year ended July 31, 2005, the fund reclassified
$10,619,341 to increase undistributed net investment income with an
increase to accumulated net realized losses of $10,619,341.
The tax basis components of distributable earnings and the federal tax
cost as of period end were as follows:
Unrealized appreciation $1,219,293,041
Unrealized depreciation (594,049,772)
--------------
Net unrealized appreciation 625,243,269
Undistributed ordinary income 26,967,236
Undistributed long-term gains 23,151,158
Capital loss carryforward (35,701,820)
Cost for federal income tax
purposes $5,110,640,569
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.
Putnam Management has agreed to waive fees and reimburse expenses of the
fund through July 31, 2006 to the extent necessary to ensure that the
fund's expenses do not exceed the simple average of the expenses of all
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 year ended July 31,
2005, Putnam Management did not waive any of its management fee from the
fund.
For the period ended July 31, 2005, Putnam Management has assumed
$174,691 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. PFTC receives fees
for custody services based on the fund's asset level, the number of its
security holdings and transaction volumes. Putnam Investor Services, a
division of PFTC, provides investor servicing agent functions to the fund.
Putnam Investor Services receives fees for investor servicing based on the
number of shareholder accounts in the fund and the level of defined
contribution plan assets in the fund. During the year ended July 31, 2005,
the fund paid PFTC $12,798,085 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 year ended, July 31, 2005, the
fund's expenses were reduced by $1,414,860 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $1,092 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. George
Putnam III, who is not an independent Trustee, also receives the foregoing
fees for his services as Trustee.
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 year ended July 31, 2005, Putnam Retail Management, acting as
underwriter, received net commissions of $228,229 and $5,309 from the sale
of class A and class M shares, respectively, and received $1,080,096 and
$7,340 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 year
ended July 31, 2005, Putnam Retail Management, acting as underwriter,
received $3,343 and no monies on class A and class M redemptions,
respectively.
Note 3: Purchases and sales of securities
During the year ended July 31, 2005, cost of purchases and proceeds from
sales of investment securities other than U.S. government securities and
short-term investments aggregated $8,354,742,454 and $8,877,254,597,
respectively. Purchases and sales of U.S. government securities aggregated
$26,677,866 and $26,677,866, respectively.
Written option transactions during the year are summarized as follows:
- ---------------------------------------------------------------------
Contract Premiums
Amounts Received
- ---------------------------------------------------------------------
Written options outstanding
at beginning of year -- $--
- ---------------------------------------------------------------------
Options opened 291,712,134 11,323,651
Options expired (12,134) (11,090)
Options closed (138,060,000) (5,370,534)
- ---------------------------------------------------------------------
Written options outstanding
at end of year 153,640,000 $5,942,027
Note 4: Capital shares
At July 31, 2005 there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
- ---------------------------------------------------------------------
Class A Shares Amount
- ---------------------------------------------------------------------
Year ended 7/31/05:
Shares sold 32,384,442 $574,245,635
- ---------------------------------------------------------------------
Shares issued in connection
with reinvestment of
distributions 3,333,997 58,742,671
- ---------------------------------------------------------------------
35,718,439 632,988,306
- ---------------------------------------------------------------------
Shares repurchased (44,333,728) (784,605,393)
- ---------------------------------------------------------------------
Net decrease (8,615,289) $(151,617,087)
Year ended 7/31/04:
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)
- ---------------------------------------------------------------------
Class B Shares Amount
- ---------------------------------------------------------------------
Year ended 7/31/05:
Shares sold 5,236,764 $91,543,092
- ---------------------------------------------------------------------
Shares issued in connection
with reinvestment of
distributions 630,414 10,998,211
- ---------------------------------------------------------------------
5,867,178 102,541,303
Shares repurchased (20,958,534) (367,671,388)
- ---------------------------------------------------------------------
Net decrease (15,091,356) $(265,130,085)
Year ended 7/31/04:
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)
- ---------------------------------------------------------------------
Class C Shares Amount
- ---------------------------------------------------------------------
Year ended 7/31/05:
Shares sold 800,334 $14,156,023
- ---------------------------------------------------------------------
Shares issued in connection
with reinvestment of
distributions 44,540 781,476
- ---------------------------------------------------------------------
844,874 14,937,499
Shares repurchased (1,108,465) (19,549,142)
- ---------------------------------------------------------------------
Net decrease (263,591) $(4,611,643)
Year ended 7/31/04:
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)
- ---------------------------------------------------------------------
Class M Shares Amount
- ---------------------------------------------------------------------
Year ended 7/31/05:
Shares sold 2,152,981 $37,764,959
- ---------------------------------------------------------------------
Shares issued in connection
with reinvestment of
distributions 174,045 3,038,978
- ---------------------------------------------------------------------
2,327,026 40,803,937
Shares repurchased (3,448,793) (60,632,306)
- ---------------------------------------------------------------------
Net decrease (1,121,767) $(19,828,369)
Year ended 7/31/04:
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)
- ---------------------------------------------------------------------
Class R Shares Amount
- ---------------------------------------------------------------------
Year ended 7/31/05:
Shares sold 34,944 $617,759
- ---------------------------------------------------------------------
Shares issued in connection
with reinvestment of
distributions 414 7,354
- ---------------------------------------------------------------------
35,358 625,113
Shares repurchased (3,357) (59,966)
- ---------------------------------------------------------------------
Net increase 32,001 $565,147
Year ended 7/31/04:
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
- ---------------------------------------------------------------------
Class Y Shares Amount
- ---------------------------------------------------------------------
Year ended 7/31/05:
Shares sold 8,972,215 $159,374,817
- ---------------------------------------------------------------------
Shares issued in connection
with reinvestment of
distributions 961,528 16,948,666
- ---------------------------------------------------------------------
9,933,743 176,323,483
Shares repurchased (24,182,974) (429,752,275)
- ---------------------------------------------------------------------
Net decrease (14,249,231) $(253,428,792)
Year ended 7/31/04:
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 and administrative services fees paid by Putnam Prime Money
Market Fund with respect to assets invested by the fund in Putnam Prime
Money Market Fund. For the year ended July 31, 2005, management fees paid
were reduced by $585,732 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 $8,908,252 for the year
ended July 31, 2005. During the year ended July 31, 2005, cost of
purchases and cost of sales of investments in Putnam Prime Money Market
Fund aggregated $1,902,204,228 and $1,946,213,852, respectively.
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 following approval of the plan
by the SEC and the Massachusetts Securities Division.
The Securities and Exchange Commission'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.
On March 23, 2005, Putnam Management entered into a settlement with the
Securities and Exchange Commission resolving its inquiry into Putnam
Management's alleged failure to fully and effectively disclose a former
brokerage allocation practice to the Board of Trustees and shareholders of
the Putnam Funds. This practice, which Putnam Management ceased as of
January 1, 2004, involved allocating a portion of the brokerage on mutual
fund portfolio transactions to certain broker-dealers who sold shares of
Putnam mutual funds. Under the settlement order, Putnam Management has
paid a civil penalty of $40 million and disgorgement of $1 to the
Securities and Exchange Commission. Of these amounts, $919,245 has been
allocated for distribution to the fund pursuant to a plan approved by the
Securities and Exchange Commission and is included in Other income on the
Statement of operations. As part of the settlement, Putnam Management
neither admitted nor denied any wrongdoing.
Putnam Investments has recorded a charge of $30 million for the estimated
cost, excluding interest, that it believes will be necessary to address
issues relating to the calculation of certain amounts paid by the Putnam
mutual funds in previous years. The previous payments were cost
reimbursements by the Putnam funds to Putnam for transfer agent services
relating to defined contribution operations. Putnam currently anticipates
that any payments made by Putnam related to this issue will be paid to the
Putnam funds. Review of this issue is ongoing.
Putnam Management and Putnam Retail Management are named as defendants in
a civil suit in which the plaintiffs allege that the management and
distribution fees paid by certain Putnam funds were excessive and seek
recovery under the Investment Company Act of 1940. Putnam Management and
Putnam Retail Management have contested the plaintiffs' claims and the
matter is currently pending in the U.S. District Court for the District of
Massachusetts. Based on currently available information, Putnam Management
believes that this action is without merit and that it is unlikely to have
a material effect on Putnam Management's and Putnam Retail Management's
ability to provide services to their clients, including the fund.
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.
Federal tax information (Unaudited)
The fund has designated 64.73% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
For its tax year ended July 31, 2005, the fund hereby designates 67.74% or
the maximum amount allowable, of its net taxable income as qualified
dividends taxed at individual net capital gain rates.
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Fund
hereby designates $23,774,072 as long term capital gain, for its taxable
year ended July 31, 2005.
The Form 1099 you receive in January 2006 will show the tax status of all
distributions paid to your account in calendar 2005.
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 July 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) Goldman Sachs,
Citigroup Global Markets, Deutsche Bank Securities, Lehman Brothers, and
Merrill Lynch. Commissions paid to these firms together represented
approximately 50% of the total brokerage commissions paid for the year
ended July 31, 2005.
Commissions paid to the next 10 firms together represented approximately
31% of the total brokerage commissions paid during the period. These firms
are (in alphabetical order) Bank of America, Bear Stearns & Company,
Credit Suisse First Boston, Investment Technology Group, JP Morgan
Clearing, Lazard Freres & Co., Morgan Stanley Dean Witter, RBC Capital
Markets, 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.
About the Trustees
- ---------------------------------------------------------------------
Jameson A. Baxter (9/6/43), Trustee since 1994
Ms. Baxter is the President of Baxter Associates, Inc., a private
investment firm that she founded in 1986.
Ms. Baxter serves as a Director of ASHTA Chemicals, Inc., Banta
Corporation (a printing and digital imaging firm), Ryerson Tull, Inc. (a
steel service corporation), the Mutual Fund Directors Forum, Advocate
Health Care and BoardSource, formerly the National Center for Nonprofit
Boards. She is Chairman Emeritus of the Board of Trustees, Mount Holyoke
College, having served as Chairman for five years and as a board member
for thirteen years. Until 2002, Ms. Baxter was a Director of Intermatic
Corporation (a manufacturer of energy control products).
Ms. Baxter has held various positions in investment banking and corporate
finance, including Vice President and Principal of the Regency Group, and
Vice President of and Consultant to First Boston Corporation. She is a
graduate of Mount Holyoke College.
- ---------------------------------------------------------------------
Charles B. Curtis (4/27/40), Trustee since 2001
Mr. Curtis is President and Chief Operating Officer of the Nuclear Threat
Initiative (a private foundation dealing with national security issues)
and serves as Senior Advisor to the United Nations Foundation.
Mr. Curtis is a member of the Council on Foreign Relations and the Trustee
Advisory Council of the Applied Physics Laboratory, Johns Hopkins
University. Until 2003, Mr. Curtis was a member of the Electric Power
Research Institute Advisory Council and the University of Chicago Board of
Governors for Argonne National Laboratory. Prior to 2002, Mr. Curtis was a
Member of the Board of Directors of the Gas Technology Institute and the
Board of Directors of the Environment and Natural Resources Program
Steering Committee, John F. Kennedy School of Government, Harvard
University. Until 2001, Mr. Curtis was a member of the Department of
Defense Policy Board and Director of EG&G Technical Services, Inc. (a
fossil energy research and development support company).
From August 1997 to December 1999, Mr. Curtis was a Partner at Hogan &
Hartson L.L.P., a Washington, D.C. law firm. Prior to May 1997, Mr. Curtis
was Deputy Secretary of Energy. He served as Chairman of the Federal
Energy Regulatory Commission from 1977 to 1981 and has held positions on
the staff of the U.S. House of Representatives, the U.S. Treasury
Department, and the SEC.
- ---------------------------------------------------------------------
Myra R. Drucker (1/16/48), Trustee since 2004
Ms. Drucker is a Vice Chair of the Board of Trustees of Sarah Lawrence
College, a Trustee of Commonfund (a not-for-profit firm specializing in
asset management for educational endowments and foundations) and a member
of the Investment Committee of the Kresge Foundation (a charitable trust).
Ms. Drucker is an ex-officio member of the New York Stock Exchange (NYSE)
Pension Managers Advisory Committee, having served as Chair for seven
years and a member of the Executive Committee of the Committee on
Investment of Employee Benefit Assets. She is Chair of the Advisory Board
of Hamilton Lane Advisors (an investment management firm) and a member of
the Advisory Board of RCM (an investment management firm). Until August
31, 2004, Ms. Drucker was Managing Director and a member of the Board of
Directors of General Motors Asset Management and Chief Investment Officer
of General Motors Trust Bank. Ms. Drucker also served as a member of the
NYSE Corporate Accountability and Listing Standards Committee and the
NYSE/NASD IPO Advisory Committee.
Prior to joining General Motors Asset Management in 2001, Ms. Drucker held
various executive positions in the investment management industry. Ms.
Drucker served as Chief Investment Officer of Xerox Corporation (a
technology and service company in the document industry), where she was
responsible for the investment of the company's pension assets. Ms.
Drucker was also Staff Vice President and Director of Trust Investments
for International Paper (a paper, paper distribution, packaging and forest
products company) and previously served as Manager of Trust Investments
for Xerox Corporation. Ms. Drucker received a B.A. degree in Literature
and Psychology from Sarah Lawrence College and pursued graduate studies in
economics, statistics and portfolio theory at Temple University.
- ---------------------------------------------------------------------
John A. Hill (1/31/42), Trustee since 1985 and Chairman since 2000
Mr. Hill is Vice Chairman of First Reserve Corporation, a private equity
buyout firm that specializes in energy investments in the diversified
worldwide energy industry.
Mr. Hill is a Director of Devon Energy Corporation, TransMontaigne Oil
Company and various private companies controlled by First Reserve
Corporation, as well as Chairman of TH Lee, Putnam Investment Trust (a
closed-end investment company advised by an affiliate of Putnam
Management). He is also a Trustee of Sarah Lawrence College. Until 2005,
he was a Director of Continuum Health Partners of New York.
Prior to acquiring First Reserve Corporation in 1983, Mr. Hill held
executive positions in investment banking and investment management with
several firms and with the federal government, including Deputy Associate
Director of the Office of Management and Budget and Deputy
Director of the Federal Energy Administration. He is active in various
business associations, including the Economic Club of New York, and
lectures on energy issues in the United States and Europe. Mr. Hill holds
a B.A. degree in Economics from Southern Methodist University and pursued
graduate studies there as a Woodrow Wilson Fellow.
- ---------------------------------------------------------------------
Paul L. Joskow (6/30/47), Trustee since 1997
Dr. Joskow is the Elizabeth and James Killian Professor of Economics and
Management, and Director of the Center for Energy and Environmental Policy
Research at the Massachusetts Institute of Technology.
Dr. Joskow serves as a Director of National Grid plc (a UK-based holding
company with interests in electric and gas transmission and distribution
and telecommunications infrastructure) and TransCanada Corporation (an
energy company focused on natural gas transmission and power services). He
also serves on the Board of Overseers of the Boston Symphony Orchestra.
Prior to February 2005, he served on the board of the Whitehead Institute
for Biomedical Research (a non-profit research institution) and has been
President of the Yale University Council since 1993. Prior to February
2002, he was a Director of State Farm Indemnity Company (an automobile
insurance company), and, prior to March 2000, he was a Director of New
England Electric System (a public utility holding company).
Dr. Joskow has published five books and numerous articles on topics in
industrial organization, government regulation of industry, and
competition policy. He is active in industry restructuring, environmental,
energy, competition and privatization policies -- serving as an advisor to
governments and corporations worldwide. Dr. Joskow holds a Ph.D. and M.
Phil from Yale University and a B.A. from Cornell University.
- ---------------------------------------------------------------------
Elizabeth T. Kennan (2/25/38), Trustee since 1992
Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse and
cattle breeding). She is President Emeritus of Mount Holyoke College.
Dr. Kennan served as Chairman and is now Lead Director of Northeast
Utilities. Until 2005, she was a Director of Talbots, Inc. She has served
as Director on a number of other boards, including Bell Atlantic, Chastain
Real Estate, Shawmut Bank, Berkshire Life Insurance and Kentucky Home Life
Insurance. She is a Trustee of the National Trust for Historic
Preservation, of Centre College and of Midway College in Midway, Kentucky.
She is also a member of The Trustees of Reservations. Dr. Kennan has
served on the oversight committee of the Folger Shakespeare Library, as
President of Five Colleges Incorporated, as a Trustee of Notre Dame
University and is active in various educational and civic associations.
As a member of the faculty of Catholic University for twelve years, until
1978, Dr. Kennan directed the post-doctoral program in Patristic and
Medieval Studies, taught history and published numerous articles. Dr.
Kennan holds a Ph.D. from the University of Washington in Seattle, an M.S.
from St. Hilda's College at Oxford University and an A.B. from Mount
Holyoke College. She holds several honorary doctorates.
- ---------------------------------------------------------------------
John H. Mullin, III (6/15/41), Trustee since 1997
Mr. Mullin is the Chairman and CEO of Ridgeway Farm (a limited liability
company engaged in timber and farming).
Mr. Mullin serves as a Director of The Liberty Corporation (a broadcasting
company), Progress Energy, Inc. (a utility company, formerly known as
Carolina Power & Light) and Sonoco Products, Inc. (a packaging company).
Mr. Mullin is Trustee Emeritus of The National Humanities Center and
Washington & Lee University, where he served as Chairman of the Investment
Committee. Prior to May 2001, he was a Director of Graphic Packaging
International Corp. Prior to February 2004, he was a Director of Alex
Brown Realty, Inc.
Mr. Mullin is also a past Director of Adolph Coors Company; ACX
Technologies, Inc.; Crystal Brands, Inc.; Dillon, Read & Co., Inc.;
Fisher-Price, Inc.; and The Ryland Group, Inc. Mr. Mullin is a graduate of
Washington & Lee University and The Wharton Graduate School, University of
Pennsylvania.
- ---------------------------------------------------------------------
Robert E. Patterson (3/15/45), Trustee since 1984
Mr. Patterson is Senior Partner of Cabot Properties, L.P. and Chairman of
Cabot Properties, Inc. (a private equity firm investing in commercial real
estate).
Mr. Patterson serves as Chairman Emeritus and Trustee of the Joslin
Diabetes Center and as a Director of Brandywine Trust Group, LLC. Prior to
June 2003, he was a Trustee of Sea Education Association. Prior to
December 2001, he was President and Trustee of Cabot Industrial Trust
(a publicly traded real estate investment trust). Prior to February 1998,
he was Executive Vice President and Director of Acquisitions of Cabot
Partners Limited Partnership (a registered investment adviser involved in
institutional real estate investments). Prior to 1990, he served as
Executive Vice President of Cabot, Cabot & Forbes Realty Advisors, Inc.
(the predecessor company of Cabot Partners).
Mr. Patterson practiced law and held various positions in state government
and was the founding Executive Director of the Massachusetts Industrial
Finance Agency. Mr. Patterson is a graduate of Harvard College and Harvard
Law School.
- ---------------------------------------------------------------------
W. Thomas Stephens (9/2/42), Trustee since 1997
Mr. Stephens is Chairman and Chief Executive Officer of Boise Cascade,
L.L.C. (a paper, forest products and timberland assets company).
Mr. Stephens serves as a Director of TransCanada Pipelines Limited. Until
2004, Mr. Stephens was a Director of Xcel Energy Incorporated (a public
utility company), Qwest Communications, and Norske Canada, Inc. (a paper
manufacturer). Until 2003, Mr. Stephens was a Director of Mail-Well, Inc.
(a diversified printing company). He served as Chairman of Mail-Well until
2001 and as CEO of MacMillan-Bloedel, Ltd. (a forest products company)
until 1999.
Prior to 1996, Mr. Stephens was Chairman and Chief Executive Officer of
Johns Manville Corporation. He holds B.S. and M.S. degrees from the
University of Arkansas.
- ---------------------------------------------------------------------
Richard B. Worley (11/15/45), Trustee since 2004
Mr. Worley is Managing Partner of Permit Capital LLC, an investment
management firm.
Mr. Worley serves on the Executive Committee of the University of
Pennsylvania Medical Center, is a Trustee of The Robert Wood Johnson
Foundation (a philanthropic organization devoted to health care issues)
and is a Director of The Colonial Williamsburg Foundation (a historical
preservation organization). Mr. Worley also serves on the investment
committees of Mount Holyoke College and World Wildlife Fund (a wildlife
conservation organization).
Prior to joining Permit Capital LLC in 2002, Mr. Worley served as Chief
Strategic Officer of Morgan Stanley Investment Management. He previously
served as President, Chief Executive Officer and Chief Investment Officer
of Morgan Stanley Dean Witter Investment Management and as a Managing
Director of Morgan Stanley, a financial services firm. Mr. Worley also was
the Chairman of Miller Anderson & Sherrerd, an investment management firm.
Mr. Worley holds a B.S. degree from University of Tennessee and pursued
graduate studies in economics at the University of Texas.
- ---------------------------------------------------------------------
Charles E. Haldeman, Jr.* (10/29/48), Trustee since 2004
Mr. Haldeman is President and Chief Executive Officer of Putnam, LLC
("Putnam Investments"). He is a member of Putnam Investments' Executive
Board of Directors and Advisory Council. Prior to November 2003, Mr.
Haldeman served as Co-Head of Putnam Investments' Investment Division.
Prior to joining Putnam Investments in 2002, Mr. Haldeman held executive
positions in the investment management industry. He previously served as
Chief Executive Officer of Delaware Investments and President & Chief
Operating Officer of United Asset Management. Mr. Haldeman was also a
partner and director of Cooke & Bieler, Inc. (an investment management
firm).
Mr. Haldeman currently serves as a Trustee of Dartmouth College and as
Emeritus Trustee of Abington Memorial Hospital. He is a graduate of
Dartmouth College, Harvard Law School and Harvard Business School. Mr.
Haldeman is also a Chartered Financial Analyst (CFA) charterholder.
- ---------------------------------------------------------------------
George Putnam, III* (8/10/51), Trustee since 1984 and President since 2000
Mr. Putnam is President of New Generation Research, Inc. (a publisher of
financial advisory and other research services), and of New Generation
Advisers, Inc. (a registered investment advisor to private funds). Mr.
Putnam founded the New Generation companies in 1986.
Mr. Putnam is a Director of The Boston Family Office, LLC (a registered
investment adviser). He is a Trustee of St. Mark's School and Shore
Country Day School, and until 2002 was a Trustee of the Sea Education
Association.
Mr. Putnam previously worked as an attorney with the law firm of Dechert
LLP (formerly known as Dechert Price & Rhoads) in Philadelphia. He is a
graduate of Harvard College, Harvard Business School and Harvard Law
School.
The address of each Trustee is One Post Office Square, Boston, MA 02109.
As of July 31, 2005, there were 108 Putnam Funds. All Trustees serve as
Trustees of all Putnam funds.
Each Trustee serves for an indefinite term, until his or her resignation,
retirement at age 72, death, or removal.
* Trustees who are or may be deemed to be "interested persons" (as
defined in the Investment Company Act of 1940) of the fund, Putnam
Management, Putnam Retail Management, or Marsh & McLennan Companies,
Inc., the parent company of Putnam, LLC and its affiliated companies.
Messrs. Haldeman and Putnam, III are deemed "interested persons" by
virtue of their positions as officers of the fund, Putnam Management
or Putnam Retail Management and as shareholders of Marsh & McLennan
Companies, Inc. Mr. Putnam, III is the President of your fund and each
of the other Putnam funds. Mr. Haldeman is President and Chief
Executive Officer of Putnam Investments.
Officers
In addition to George Putnam, III, the other officers of the fund are
shown below:
Charles E. Porter (7/26/38)
Executive Vice President, Associate Treasurer and Principal Executive
Officer
Since 1989
Jonathan S. Horwitz (6/4/55)
Senior Vice President and Treasurer
Since 2004
Prior to 2004, Managing Director, Putnam Investments
Steven D. Krichmar (6/27/58)
Vice President and Principal Financial Officer
Since 2002
Senior Managing Director, Putnam Investments. Prior to July 2001, Partner,
PricewaterhouseCoopers LLP
Michael T. Healy (1/24/58)
Assistant Treasurer and Principal Accounting Officer
Since 2000
Managing Director, Putnam Investments
Beth S. Mazor (4/6/58)
Vice President
Since 2002
Senior Vice President, Putnam Investments
Daniel T. Gallagher (2/27/62)
Senior Vice President, Staff Counsel and Compliance Liaison
Since 2004
Prior to 2004, Associate, Ropes & Gray LLP; prior to 2000, Law Clerk,
Massachusetts Supreme Judicial Court
Francis J. McNamara, III (8/19/55)
Vice President and Chief Legal Officer
Since 2004
Senior Managing Director, Putnam Investments, Putnam Management and Putnam
Retail Management. Prior to 2004, General Counsel, State Street Research &
Management Company
James P. Pappas (2/24/53)
Vice President
Since 2004
Managing Director, Putnam Investments and Putnam Management. During 2002,
Chief Operating Officer, Atalanta/Sosnoff Management Corporation; prior to
2001, President and Chief Executive Officer, UAM Investment Services, Inc.
Richard S. Robie, III (3/30/60)
Vice President
Since 2004
Senior Managing Director, Putnam Investments, Putnam Management and Putnam
Retail Management. Prior to 2003, Senior Vice President, United Asset
Management Corporation
Charles A. Ruys de Perez (10/17/57)
Vice President and Chief Compliance Officer
Since 2004
Managing Director, Putnam Investments
Mark C. Trenchard (6/5/62)
Vice President and BSA Compliance Officer
Since 2002
Senior Vice President, Putnam Investments
Judith Cohen (6/7/45)
Vice President, Clerk and Assistant Treasurer
Since 1993
Wanda M. McManus (1/4/47)
Vice President, Senior Associate Treasurer and Assistant Clerk
Since 2005
Nancy T. Florek (6/13/57)
Vice President, Assistant Clerk, Assistant Treasurer and Proxy Manager
Since 2005
The address of each Officer is One Post Office Square, Boston, MA 02109.
Fund information
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 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
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Myra R. Drucker
Charles E. Haldeman, Jr.
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
Beth S. Mazor
Vice President
Daniel T. Gallagher
Senior Vice President, Staff Counsel and Compliance Liaison
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
Vice President, Clerk and Assistant Treasurer
Wanda M. McManus
Vice President, Senior Associate Treasurer and Assistant Clerk
Nancy T. Florek
Vice President, Assistant Clerk, Assistant Treasurer and Proxy Manager
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.putnam.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.
[blank page]
[LOGO OMITTED]
PUTNAM INVESTMENTS
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
[GRAPHIC OMITTED: SCALE]
One Post Office Square
Boston, Massachusetts 02109
www.putnam.com
1-800-225-1581
Founded in 1937, Putnam Investments began with the principle
that a balance between risk and reward is the mark of
a well-rounded financial program. Today, we manage money
with a focus on seeking consistent results over time. This
balanced approach continues to underscore everything we do.
Not FDIC Insured | May Lose Value | No Bank Guarantee
AN021 226698 9/05
[PUTNAM INVESTMENTS]
- -----------------------------------------------------------------------
The George Putnam Fund of Boston
Supplement to Annual Report dated 7/31/05
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 annual report.
RESULTS AT A GLANCE
- -----------------------------------------------------------------------
Total return for periods ended 7/31/05
NAV
Life of fund (since class A inception, 11/5/37)
Annual average 9.47%
10 years 132.45
Annual average 8.80
5 years 35.12
Annual average 6.21
1 year 11.26
Share value: NAV
7/31/04 $16.95
7/31/05 $18.46
- -----------------------------------------------------------------------
Distributions: No. Income Capital gains Total
4 $0.378 -- $0.378
- -----------------------------------------------------------------------
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 pages 16-19 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 7/31/05
Class Y
Expenses paid per $1,000* $3.44
Ending value (after expenses) $1,039.90
- -----------------------------------------------------------------------
EXPENSES AND VALUE OF A $1,000 INVESTMENT
assuming a hypothetical 5% annualized return for the 6 months ended
7/31/05
Class Y
Expenses paid per $1,000* $3.41
Ending value (after expenses) $1,021.42
- -----------------------------------------------------------------------
EXPENSE RATIO COMPARISON USING ANNUALIZED DATA
Your fund's annualized expense ratio + 0.68%
Average annualized expense ratio for Lipper peer group ++ 1.02%
+ For the fund's most recent fiscal half year; may differ from expense
ratios based on one-year data in financial highlights.
++ 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:
- -----------------------
(a) All officers of the Fund, including its principal executive, financial and
accounting officers, are employees of Putnam Investment Management, LLC,
the Fund's investment manager. As such they are subject to a comprehensive
Code of Ethics adopted and administered by Putnam Investments which is
designed to protect the interests of the firm and its clients. The Fund
has adopted a Code of Ethics which incorporates the Code of Ethics of
Putnam Investments with respect to all of its officers and Trustees who are
employees of Putnam Investment Management, LLC. For this reason, the Fund
has not adopted a separate code of ethics governing its principal
executive, financial and accounting officers.
(c) In July 2004, Putnam Investment Management, LLC, the Fund's investment
manager, Putnam Retail Management Limited Partnership, the Fund's principal
underwriter, and Putnam Investments Limited, the sub-manager for a portion
of the assets of certain funds as determined by Putnam Management from time
to time, adopted several amendments to their Code of Ethics. Some of these
amendments were adopted as a result of Putnam Investment Management's
partial settlement order with the SEC on November 13, 2003. Insofar as such
Code of Ethics applies to the Fund's principal executive officer, principal
financial officer and principal accounting officer, the amendments provided
for the following: (i) a 90-day blackout period for all shares of Putnam
open-end funds (except for money market funds) purchased or sold (including
exchanges into or out of a fund) by Putnam employees and certain family
members; (ii) a one-year holding period for all access persons that operates
in the same manner as the 90-day rule; (iii) delivery by Putnam employees to
the Code of Ethics Administrator of both quarterly account statements for
all brokerage accounts (irrespective of activity in the accounts) and
account statements for any Putnam funds not held at Putnam or for any funds
sub-advised by Putnam; (iv) a prohibition of Putnam employees from making
more than 25 trades in individual securities in their personal accounts in
any given quarter; (v) the extension of the existing prohibition of access
persons from a purchase and sale or sale and purchase of an individual
security within 60 days to include trading based on tax-lot election; (vi)
the inclusion of trades in Marsh & McLennan Companies, Inc. (ultimate parent
company of Putnam Investment Management) securities in pre-clearance and
reporting requirements; (vii) a prohibition of limit and good-until-canceled
orders as inconsistent with the requirements of daily pre-clearance; (viii)
new limits and procedures for accounts managed by outside managers and
brokers, in order for trading in such accounts to be exempt from
pre-clearance requirements; (ix) a new gift and entertainment policy that
imposes a reporting obligation on all meals and entertainment and new limits
on non-meal entertainment; (x) a number of alternatives for the reporting of
irregular activity.
In December 2004, additional amendments to the Code of Ethics were adopted.
Insofar as such Code of Ethics applies to the Fund's principal executive
officer, principal financial officer and principal accounting officer, the
amendments provided for the following: (i) implementation of minimum
monetary sanctions for violations of the Code; (ii) expansion of the
definition of "access person" under the Code include all Putnam employees
with access to non-public information regarding Putnam-managed mutual fund
portfolio holdings; (iii) lengthening the period during which access persons
are required to complete quarterly reports; (iv) reducing the maximum number
of trades than can be made by Putnam employees in their personal accounts in
any calendar quarter from 25 trades to 10 trades; and (v) lengthening the
required holding period for securities by access persons from 60 days to 90
days.
In March 2005, additional amendments to the Code of Ethics were adopted,
that went into effect on April 1, 2005. Insofar as such Code of Ethics
applies to the Fund's principal executive officer, principal financial
officer and principal accounting officer, the amendments (i) prohibit Putnam
employees and their immediate family members from having any direct or
indirect personal financial interest in companies that do business with
Putnam (excluding investment holdings in public companies that are not
material to the employee), unless such interest is disclosed and approved by
the Code of Ethics Officer; (ii) prohibit Putnam employees from using Putnam
assets, letterhead or other resources in making political or campaign
contributions, solicitations or endorsements;(iii) require Putnam employees
to obtain pre-clearance of personal political or campaign contributions or
other gifts to government officials or political candidates in certain
jurisdictions and to officials or candidates with whom Putnam has or is
seeking to establish a business relationship and (iv) require Putnam
employees to obtain pre-approval from Putnam's Director of Government
Relations prior to engaging in lobbying activities.
In July 2005, additional amendments to the Code of Ethics were adopted.
Insofar as such Code of Ethics applies to the Fund's principal executive
officer, principal financial officer and principal accounting officer, the
amendments provided for an exception to the standard 90-day holding period
(one year, in the case of employees deemed to be "access persons" under the
Code) for shares of Putnam mutual funds in the case of redemptions from an
employee's account in a college savings plan qualified under Section 529 of
the Internal Revenue Code. Under this exception, an employee may, without
penalty under the Code, make "qualified redemptions" of shares from such an
account less than 90 days (or one year, as applicable) after purchase.
"Qualified redemptions" include redemptions for higher education purposes
for the account beneficiary and redemptions made upon death or disability.
The July 2005 amendments also provide that an employee may, for purposes of
the rule limiting the number of trades per calendar quarter in an employee's
personal account to a maximum of 10, count all trades of the same security
in the same direction (all buys or all sells) over a period of five
consecutive business days as a single trade.
Item 3. Audit Committee Financial Expert:
- -----------------------------------------
The Funds' Audit and Pricing Committee is comprised solely of Trustees
who are "independent" (as such term has been defined by the Securities
and Exchange Commission ("SEC") in regulations implementing Section 407
of the Sarbanes-Oxley Act (the "Regulations")). The Trustees believe
that each of the members of the Audit and Pricing Committee also possess
a combination of knowledge and experience with respect to financial
accounting matters, as well as other attributes, that qualify them for
service on the Committee. In addition, the Trustees have determined
that all members of the Funds' Audit and Pricing Committee meet the
financial literacy requirements of the New York Stock Exchange's rules
and that Mr. Patterson, Mr. Stephens and Mr. Worley qualify as "audit
committee financial experts" (as such term has been defined by the
Regulations) based on their review of their pertinent experience and
education. Certain other Trustees, although not on the Audit and Pricing
Committee, would also qualify as "audit committee financial experts."
The SEC has stated that the designation or identification of a person as
an audit committee financial expert pursuant to this Item 3 of Form N-CSR
does not impose on such person any duties, obligations or liability that
are greater than the duties, obligations and liability imposed on such
person as a member of the Audit and Pricing Committee and the Board of
Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services:
- -----------------------------------------------
The following table presents fees billed in each of the last two fiscal
years for services rendered to the fund by the fund's independent auditors:
Audit Audit-Related Tax All Other
Fiscal year ended Fees Fees Fees Fees
- ----------------- ---------- ------------- ------- ---------
July 31, 2005 $129,981* $-- $8,471 $3,605
July 31, 2004 $119,248* $-- $9,028 $1,151
* Includes fees of $ 3,086 and $ 4,953 billed by the fund's independent
auditor to the fund for audit procedures necessitated by regulatory and
litigation matters for the fiscal years ended July 31, 2005 and July 31,
2004, respectively. These fees were reimbursed to the fund by Putnam.
For the fiscal years ended July 31, 2005 and July 31, 2004, the fund's
independent auditors billed aggregate non-audit fees in the amounts of $
207,406 and $143,807 respectively, to the fund, Putnam Management and any
entity controlling, controlled by or under common control with Putnam
Management that provides ongoing services to the fund.
Audit Fees represents fees billed for the fund's last two fiscal years.
Audit-Related Fees represents fees billed in the fund's last two fiscal
years for services traditionally performed by the fund's auditor, including
accounting consultation for proposed transactions or concerning financial
accounting and reporting standards and other audit or attest services not
required by statute or regulation.
Tax Fees represent fees billed in the fund's last two fiscal years for tax
compliance, tax planning and tax advice services. Tax planning and tax
advice services include assistance with tax audits, employee benefit plans
and requests for rulings or technical advice from taxing authorities.
All Other Fees Fees represent fees billed for services relating to an
analysis of recordkeeping fees and fund expense processing.
Pre-Approval Policies of the Audit and Pricing Committee. The Audit and
Pricing Committee of the Putnam funds has determined that, as a matter of
policy, all work performed for the funds by the funds' independent auditors
will be pre-approved by the Committee and will generally not be subject to
pre-approval procedures.
Under certain circumstances, the Audit and Pricing Committee believes that
it may be appropriate for Putnam Investment Management, LLC ("Putnam
Management") and certain of its affiliates to engage the services of the
funds' independent auditors, but only after prior approval by the Committee.
Such requests are required to be submitted in writing to the Committee and
explain, among other things, the nature of the proposed engagement, the
estimated fees, and why this work must be performed by that particular audit
firm. The Committee will review the proposed engagement at its next
meeting.
Since May 6, 2003, all work performed by the independent auditors for the
funds, Putnam Management and any entity controlling, controlled by or under
common control with Putnam Management that provides ongoing services to the
fund was pre-approved by the Committee or a member of the Committee pursuant
to the pre-approval policies discussed above. Prior to that date, the
Committee had a general policy to pre-approve the independent auditor's
engagements for non-audit services with the funds, Putnam Management and any
entity controlling, controlled by or under common control with Putnam
Management that provides ongoing services to the fund.
The following table presents fees billed by the fund's principal auditor for
services required to be approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X.
Audit-Related Tax All Other Total Non-
Fiscal year ended Fees Fees Fees Audit Fees
- ----------------- ------------- ---- --------- ----------
July 31, 2005 $-- $-- $-- $--
July 31, 2004 $-- $-- $-- $--
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) The Code of Ethics of The Putnam Funds, which incorporates the
Code of Ethics of Putnam Investments, is filed herewith.
(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: September 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: September 28, 2005
By (Signature and Title): /s/Steven D. Krichmar
---------------------------
Steven D. Krichmar
Principal Financial Officer
Date: September 28, 2005