<DOCUMENT>
<TYPE>N-30D/A
<SEQUENCE>1
<FILENAME>gpfob.txt
<DESCRIPTION>THE GEORGE PUTNAM FUND OF BOSTON
<TEXT>
The George
Putnam
Fund of
Boston
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
7-31-01
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III]
Dear Shareholder:
The following report, covering The George Putnam Fund of Boston's
fiscal year ended July 31, 2001, was prepared before the September 11
attacks on the World Trade Center and the Pentagon. Our thoughts are
with the families of the people who lost their lives or were injured in
those horrific events.
We want to assure you that the assets Putnam manages on your behalf are
safe and secure. Putnam's senior management team has been meeting
regularly to formulate a global economic view and industry-specific
perspectives, and to maintain focused management of your fund in the
current environment.
The important thing for investors to do right now is to remain calm
and not to allow the impact of this near-term occurrence to cloud a
long-term perspective. We believe you should avoid the temptation
to make hasty investment decisions. Given these events, we suggest
consulting your financial advisor, who can help you make decisions
that are appropriate for your long-term investment plan.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
September 19, 2001
REPORT FROM FUND MANAGEMENT
Jeanne L. Mockard
Jeffrey L. Knight
James M. Prusko and
the Core Fixed
Income Team
Within an extremely challenging and volatile market environment, the
George Putnam Fund of Boston not only survived, it thrived during the
fiscal year ended July 31, 2001. During the first months of the period,
our sector allocation decisions boosted returns, while in 2001, we
believe the fund's outperformance resulted from effective stock
selection. Overall, fiscal 2001 helped demonstrate to conservative
investors the benefits of maintaining exposure to a value-oriented
investment style within a balanced portfolio.
Total return for 12 months ended 7/31/01
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
-----------------------------------------------------------------------
12.86% 6.39% 12.02% 7.02% 12.02% 11.02% 12.31% 8.35%
-----------------------------------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 7.
* GRADUAL CHANGES MADE TO FUND POSITIONING
In the latter half of calendar 2000, investors gravitated toward
defensive sectors in an attempt to shield themselves from sharp declines
in the previously high-flying, high-growth technology, media, and
telecommunications sectors. Year to date, the market showed some signs
of recovery as the Federal Reserve Board pursued a particularly
aggressive tack by implementing a series of reductions in short-term
interest rates in an attempt to bolster economic growth.
While these moves momentarily heartened investors, the market struggled
to maintain momentum, and mixed economic data gave no clear vision about
when the current domestic economic slowdown might end. This backdrop
enabled your fund's management team to uncover significant value
opportunities that translated into satisfyingly positive returns.
[GRAPHIC OMITTED: horizontal bar chart COMPARATIVE PORTFOLIO COMPOSITION]
COMPARATIVE PORTFOLIO COMPOSITION*
7/31/2000 7/31/2001
Common stocks 62.7% 58.3%
U.S. government and
agency securities 9.5% 21.4%
Corporate bonds
and notes 18.5% 10.8%
Cash and other 3.5% 7.5%
Collateralized
mortgage
obligations 5.2% 5.0%
Convertible and
preferred securities 0.4% 0.3%
Foreign government
bonds and notes 0.3% 0.3%
Footnote reads:
*Based on percentage of net assets. The balances of the portfolio on
7/31/00 and 7/31/01 were invested in cash and short-term securities.
Portfolio allocation will vary over time.
With turmoil wracking the market in the second half of calendar 2000,
investors fled to the safety offered by more defensive industries such
as utilities, energy, consumer staples, and health care -- precisely the
sectors that predominated within your fund's value-oriented portfolio
when the market turned. In particular, the fund's overweighted position
in the utilities sector significantly boosted performance.
As we entered calendar 2001, your fund's management team started to
shift to a more neutral stance, selling off the stocks that had
performed well in late 2000. We believed it made sense to start
positioning the fund with more of a focus on those stocks that seemed
likely to benefit from improved growth sparked by the Fed's rate cuts.
Since there were no clear signs as to when that rebound might occur, and
not wanting to shift too soon, we moved gradually, looking for value
opportunities on a stock-by-stock basis instead of making any
significant sector bets. We carefully added more economically sensitive
stocks when their prices offered particular value. For example, many
technology shares fell to inexpensive levels, and we purchased such
names as Compaq and Hewlett-Packard.
* STRONG RETURNS FROM A VARIETY OF AREAS
On a sector basis, the fund's investments in paper companies --
including Boise Cascade, Weyerhaeuser, Owens Illinois, and International
Paper -- offered particularly hearty capital appreciation. Investors
favored paper stocks in anticipation of a recovery because these stocks
tend to do well in the early stages of an improving economic cycle. In
addition, the industry was able to reduce capacity, a factor that should
help pricing going forward. While these companies, as well as others
mentioned in this report were viewed favorably at the end of the
reporting period, all are subject to review in accordance with the
fund's investment strategy.
Consumer cyclical stocks, mainly from the retail sector, also added to
returns. As with the paper companies, these stocks tend to perform well
in anticipation of an uptick in economic growth. Investors perceived
that the Fed's rate cuts would improve the prospects for these firms,
even though consumer spending was softening. Strong performers from this
sector included Circuit City, Sears, Staples, Lowes, and the Gap. The
latter two were sold off after they reached our price targets.
Lipper Analytical Services ranked The George Putnam Fund of Boston's
class A shares 48 out of 467 (top 11%) of all balanced funds track for
1-year performance, as of 7/31/01 and 19 out of 67 (top 28%) of all
balanced funds track for 10-year performance, as of 7/31/01.*
*Lipper is an industry research firm whose rankings are based on total
return performance, vary over time, and do not reflect the effects of
sales charges. The fund's class A shares ranked 48 out of 467, 108 out
of 271 and 19 out of 67 for 1-, 5-, and 10-year performance, respectively,
as of 7/31/01. Performance of other share classes will vary. Past
performance is not indicative of future results.
Healthy returns also came from a wide array of investments, including
Computer Associates, American Express and Federated Department Stores.
In addition, the fund profited from the takeover of several of its
holdings, including Ralston-Purina as well as oil refining and marketing
firms Ultramar Diamond Shamrock and Tosco.
Every period also comes with its disappointments, and this 12-month
stretch was no exception. Among fund holdings that did not perform as
well as we would have liked were Constellation Energy, oil service stock
Schlumberger, and Coca-Cola Enterprises. This last company suffered from
poor domestic consumption results. All remain in the fund because of
our conviction that their prospects should improve.
* FIXED-INCOME INVESTMENTS CONTRIBUTED TO STRONG RETURNS
Your fund carries a diversified blend of bond holdings that make up
approximately 38% of assets. During this 12-month period, the
fixed-income portfolio added significantly to fund performance,
primarily because of its investments in BB-rated corporate bonds. With
the Fed aggressively attempting to fuel economic growth, corporate bond
prices recovered from the particularly depressed price levels they
reached in late 2000.
[GRAPHIC OMITTED: TOP 10 HOLDINGS]
TOP 10 HOLDINGS
Exxon Mobil Corp.
Oil and gas
Citigroup, Inc.
Financial
SBC Communications, Inc.
Regional bells
Royal Dutch Petroleum PLC ADR
Netherlands
Oil and gas
Merck & Co., Inc.
Pharmaceuticals
Philip Morris
Tobacco
Bank of America Corp.
Banking
U.S. Bancorp
Banking
Johnson & Johnson
Pharmaceuticals
Wells Fargo & Co.
Banking
Footnote reads:
These holdings represent 14.4% of the fund's net assets as of 7/31/01.
Portfolio holdings will vary over time.
Investors were heartened that improved economic conditions would help
sustain corporate issuers. However, telecom- and tech-related issues did
not join in the rally. These bonds floundered as the result of continued
concerns about the companies' solvency and access to capital needed to
fund their ambitious business plans. The BB-rated corporate bond
universe does not include many telecommunications and technology issues,
so this segment of the market performed particularly well.
Early in the period, when economic growth was on the downturn and
prospects for BB-rated issuers were more uncertain, we were able to
recognize the value offered by this segment of the market. As the bonds
recovered, the fund was well positioned to benefit from their
outperformance.
* FUND POSITIONED FOR EVENTUAL ECONOMIC IMPROVEMENT
We continue to reposition the portfolio gradually by looking for value
opportunities within a market that we expect will remain volatile.
Earlier in the year, many investors anticipated an economic rebound in
the second half of 2000, and believed that corporations would ramp up
capital spending, especially for technology and telecommunications
products and services, after having held back in the first half of the
year.
We did not share this view. It is becoming clearer that even if
corporations do have capital to spare, they may not start to use it
until more consistent signs of improved growth emerge. We have believed
all along that the economy would not improve before the end of 2001, a
sentiment that is now reflected in stock valuations. The question
remains: When will we witness a rekindling of sustained economic growth?
Our expectation is that this will occur sometime in 2002, although it is
impossible to predict exactly when.
With an eventual recovery in mind, we are looking to increase the
economic sensitivity of the portfolio gradually, by searching every day
for value opportunities within cyclical sectors.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 7/31/01, there is no guarantee the fund will
continue to hold these securities in the future.
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.
PERFORMANCE SUMMARY
This section provides information about your fund's performance, which
should always be considered in light of its investment strategy.The
George Putnam Fund of Boston is designed for investors seeking capital
growth and current income.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 7/31/01
Class A Class B Class C Class M
(inception dates) (11/5/37) (4/27/92) (7/26/99) (12/1/94)
NAV POP NAV CDSC NAV CDSC NAV POP
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 12.86% 6.39% 12.02% 7.02% 12.02% 11.02% 12.31% 8.35%
----------------------------------------------------------------------------------------
5 years 67.17 57.51 60.93 58.93 60.96 60.96 63.09 57.39
Annual average 10.82 9.51 9.98 9.71 9.99 9.99 10.28 9.50
----------------------------------------------------------------------------------------
10 years 188.56 172.06 167.94 167.94 167.53 167.53 174.38 164.75
Annual average 11.18 10.53 10.36 10.36 10.34 10.34 10.62 10.23
----------------------------------------------------------------------------------------
Annual average
(life of fund) 9.75 9.65 8.70 8.70 8.93 8.93 8.98 8.92
----------------------------------------------------------------------------------------
</TABLE>
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 7/31/01
Standard & Lehman Bros.
Poor's 500 Govt./Credit Consumer
Index Bond Index** price index
---------------------------------------------------------------------------
1 year -14.33% 12.71% 2.66%
---------------------------------------------------------------------------
5 years 103.66 45.94 12.85
Annual average 15.29 7.86 2.45
---------------------------------------------------------------------------
10 years 286.09 117.03 30.25
Annual average 14.46 8.06 2.68
---------------------------------------------------------------------------
Annual average
(life of fund) --* --** 4.00
---------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns may be
more or less than those shown. Returns for class A and class M shares reflect
the current maximum initial sales charges of 5.75% and 3.50%, respectively.
Class B share returns for the 1-year, 5- and 10-year, if available, and
life-of-fund periods reflect the applicable contingent deferred sales charge
(CDSC), which is 5% in the first year, declines to 1% in the sixth year, and
is eliminated thereafter. Returns shown for class B and class M shares for
periods prior to their inception are derived from the historical performance
of class A shares, adjusted to reflect both the initial sales charge or CDSC,
if any, currently applicable to each class and in the case of class B and
class M shares the higher operating expenses applicable to such shares. For
class C shares, returns for periods prior to their inception are derived
from the historical performance of class A shares, adjusted to reflect both
the CDSC currently applicable to class C shares, which is 1% for the first
year and is eliminated thereafter, and the higher operating expenses
applicable to class C shares. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will fluctuate
so that an investor's shares when redeemed may be worth more or less than
their original cost.
*Inception date of the index was 12/31/69, after the fund's inception.
**Inception date of the index was 12/31/72, after the fund's inception.
<TABLE>
<CAPTION>
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 7/31/91
Lehman Bros.
Fund's class A Standard & Poor's Govt./Credit Consumer price
Date shares at POP 500 Index Bond Index Index
<S> <C> <C> <C> <C>
7/31/91 9,425 10,000 10,000 10,000
7/31/92 10,718 11,279 11,564 10,316
7/31/93 11,644 12,264 12,839 10,602
7/31/94 12,047 12,896 12,896 10,896
7/31/95 14,182 16,263 14,121 11,211
7/31/96 16,274 18,958 14,870 11,542
7/31/97 21,404 28,842 16,475 11,791
7/31/98 23,445 34,405 17,804 11,990
7/31/99 25,398 41,356 18,217 12,239
7/31/00 24,104 45,067 19,255 12,687
7/31/01 $27,206 $38,609 $21,703 $13,025
</TABLE>
Past performance is no assurance of 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 $26,794 and $26,753, 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 $27,438 ($26,475
at public offering price). See first page of performance section for
performance calculation method.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 7/31/01
Class A Class B Class C Class M
-----------------------------------------------------------------------------
Distributions (number) 4 4 4 4
-----------------------------------------------------------------------------
Income $0.534 $0.410 $0.420 $0.453
-----------------------------------------------------------------------------
Capital gains -- -- -- --
Long-term $0.006 $0.006 $0.006 $0.006
-----------------------------------------------------------------------------
Short-term -- -- -- --
-----------------------------------------------------------------------------
Total $0.540 $0.416 $0.426 $0.459
-----------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
-----------------------------------------------------------------------------
7/31/00 $15.77 $16.73 $15.62 $15.71 $15.63 $16.20
-----------------------------------------------------------------------------
7/31/01 17.24 18.29 17.07 17.16 17.08 17.70
-----------------------------------------------------------------------------
Current return (end of period)
-----------------------------------------------------------------------------
Current dividend
rate 1 3.13% 2.95% 2.44% 2.47% 2.69% 2.60%
-----------------------------------------------------------------------------
Current 30-day
SEC yield 2 2.83 2.67 2.09 2.09 2.34 2.20
-----------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 6/30/01 (most recent calendar quarter)
Class A Class B Class C Class M
(inception dates) (11/5/37) (4/27/92) (7/26/99) (12/1/94)
NAV POP NAV CDSC NAV CDSC NAV POP
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 year 11.97% 5.51% 11.13% 6.13% 11.13% 10.13% 11.41% 7.51%
-------------------------------------------------------------------------------------
5 years 63.28 53.93 57.26 55.26 57.23 57.23 59.28 53.73
Annual average 10.30 9.01 9.48 9.20 9.47 9.47 9.76 8.98
------------------------------------------------------------------------------------
10 years 194.75 177.90 173.80 173.80 173.25 173.25 180.01 170.14
Annual average 11.42 10.76 10.60 10.60 10.57 10.57 10.85 10.45
------------------------------------------------------------------------------------
Annual average
(Life of fund) 9.76 9.66 8.71 8.71 8.94 8.94 8.98 8.92
------------------------------------------------------------------------------------
</TABLE>
Past performance is no assurance of future results. More recent returns may
be more or less than those shown. They do not take into account any adjustment
for taxes payable on reinvested distributions. Investment returns and principal
value will fluctuate so that an investor's shares when sold may be worth more
or less than their original cost. See first page of performance section for
performance calculation method.
TERMS AND DEFINITIONS
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested all
distributions in the fund.
Class A shares are generally subject to 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.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including any
initial or contingent deferred sales charge.
Public offering price (POP) is the price of a mutual fund share plus the
maximum sales charge levied at the time of purchase. POP performance figures
shown here assume the 5.75% maximum sales charge for class A shares and 3.50%
for class M shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time of
the redemption of class B or C shares and assumes redemption at the end of
the period. Your fund's class B CDSC declines from a 5% maximum during the
first year to 1% during the sixth year. After the sixth year, the CDSC no
longer applies. The CDSC for class C shares is 1% for one year after purchase.
COMPARATIVE BENCHMARKS
The Lehman Brothers Government/Credit Bond Index* (formerly named the Lehman
Brothers Government/Corporate Bond Index) is an index of publicly issued U.S.
Treasury obligations, debt obligations of U.S. government agencies (excluding
mortgage-backed securities), fixed-rate, non-convertible, investment-grade
corporate debt securities and U.S. dollar-denominated, SEC-registered
non-convertible debt issued by foreign governmental entities or international
agencies used as a general measure of the performance of fixed-income
securities.
Standard & Poor's 500 Composite Stock Price Index* is an index of common
stocks frequently used as a general measure of stock market performance.
Consumer price index (CPI) is a commonly used measure of inflation; it does
not represent an investment return.
*Securities indexes assume reinvestment of all distributions and interest
payments and do not take into account brokerage fees or taxes. Securities in
the fund do not match those in the indexes and performance of the fund will
differ. It is not possible to invest directly in an index.
A GUIDE TO THE FINANCIAL STATEMENTS
These sections of the report, preceded by the Report of independent
accountants, 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
for the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that
remain in the portfolio -- any change in unrealized gains or losses over
the period.
Statement of changes in net assets shows how the fund's net assets were
affected 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 ACCOUNTANTS
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, 2001 and the results of
its operations, the changes in its net assets and the financial
highlights for 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 auditing standards generally
accepted in the United States of America, which 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,
2001 by correspondence with the custodian, provide a reasonable basis
for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 7, 2001
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
July 31, 2001
COMMON STOCKS (58.3%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
Advertising and Marketing Services (0.2%)
-------------------------------------------------------------------------------------------------------------------
271,900 Interpublic Group of Cos., Inc. $ 7,441,903
67,900 Valassis Communications, Inc. (NON) 2,271,255
-------------
9,713,158
Aerospace and Defense (0.7%)
-------------------------------------------------------------------------------------------------------------------
109,400 Boeing Co. 6,403,182
35,100 General Dynamics Corp. 2,839,239
97,000 Goodrich Corp. 3,389,180
377,700 Lockheed Martin Corp. 14,964,474
133,700 Northrop Grumman Corp. 10,726,751
-------------
38,322,826
Agriculture (--%)
-------------------------------------------------------------------------------------------------------------------
220 PSF Holdings LLC Class A (NON) 357,906
Airlines (0.4%)
-------------------------------------------------------------------------------------------------------------------
273,000 Delta Air Lines, Inc. 12,115,740
446,200 Southwest Airlines Co. 8,928,462
-------------
21,044,202
Automotive (0.1%)
-------------------------------------------------------------------------------------------------------------------
268,800 Ford Motor Co. 6,846,336
Banking (7.6%)
-------------------------------------------------------------------------------------------------------------------
1,112,000 Bank of America Corp. 70,745,440
513,500 Bank of New York Co., Inc. (The) 23,035,610
255,700 BB&T Corp. 9,437,887
1,155,825 Charter One Financial, Inc. 37,113,541
749,700 Comerica, Inc. 46,174,023
220,100 First Union Corp. 7,791,540
1,125,960 FleetBoston Financial Corp. 42,246,019
132,200 M & T Bank Corp. 10,642,100
76,900 Mellon Financial Corp. 2,923,738
122,700 Mercantile Bankshares Corp. 5,169,351
73,300 North Fork Bancorporation, Inc. 2,377,852
247,000 Synovus Financial Corp. 8,435,050
2,206,598 U.S. Bancorp 52,384,637
885,750 Washington Mutual, Inc. 35,890,590
1,086,800 Wells Fargo & Co. 50,058,008
151,100 Zions Bancorp 8,831,795
-------------
413,257,181
Beverage (2.2%)
-------------------------------------------------------------------------------------------------------------------
453,700 Anheuser-Busch Cos., Inc. 19,649,747
76,150 Brown-Forman Corp. Class B 5,203,330
640,700 Coca-Cola Co. (The) 28,575,220
857,300 Coca-Cola Enterprises, Inc. 12,533,726
430,100 Fortune Brands, Inc. 15,750,262
448,500 Pepsi Bottling Group, Inc. (The) 19,545,630
371,500 PepsiCo, Inc. 17,323,045
-------------
118,580,960
Broadcasting (0.2%)
-------------------------------------------------------------------------------------------------------------------
226,800 Clear Channel Communications, Inc. (NON) 13,290,480
Cable Television (0.6%)
-------------------------------------------------------------------------------------------------------------------
39,900 Adelphia Communications Corp. Class A (NON) 1,472,310
1,367,000 AT&T Corp.-Liberty Media Group Class A (NON) 21,502,910
293,400 USA Networks, Inc. (NON) 8,218,134
-------------
31,193,354
Capital Goods (0.2%)
-------------------------------------------------------------------------------------------------------------------
139,500 Eaton Corp. 10,244,880
Chemicals (1.3%)
-------------------------------------------------------------------------------------------------------------------
256,400 Avery Dennison Corp. 13,143,064
417,200 Dow Chemical Co. (The) 15,186,080
305,700 du Pont (E.I.) de Nemours & Co., Ltd. 13,090,074
360,900 Engelhard Corp. 9,401,445
309,000 PPG Industries, Inc. 16,979,550
50,800 Rohm & Haas Co. 1,744,472
-------------
69,544,685
Coal (0.1%)
-------------------------------------------------------------------------------------------------------------------
128,000 Arch Coal, Inc. 2,394,880
170,200 Peabody Energy Corp. 4,251,596
-------------
6,646,476
Commercial and Consumer Services (0.2%)
-------------------------------------------------------------------------------------------------------------------
487,700 Cendant Corp. (NON) 9,924,695
Computers (2.4%)
-------------------------------------------------------------------------------------------------------------------
1,963,600 Compaq Computer Corp. 29,336,184
731,200 Dell Computer Corp. (NON) 19,691,216
1,310,300 Hewlett-Packard Co. 32,311,998
408,400 IBM Corp. 42,967,764
128,000 Lexmark International, Inc. (NON) 5,852,160
30,000 NCR Corp. (NON) 1,180,800
-------------
131,340,122
Conglomerates (1.9%)
-------------------------------------------------------------------------------------------------------------------
7,510 Berkshire Hathaway, Inc. Class B (NON) 17,242,960
247,100 Cooper Industries, Inc. 10,257,121
866,700 General Electric Co. 37,701,450
345,310 Honeywell International, Inc. 12,731,580
457,800 Tyco International, Ltd. (Bermuda) 24,354,960
-------------
102,288,071
Consumer Finance (0.3%)
-------------------------------------------------------------------------------------------------------------------
114,700 Household International, Inc. 7,603,463
167,500 Providian Financial Corp. 8,269,475
-------------
15,872,938
Consumer Goods (0.2%)
-------------------------------------------------------------------------------------------------------------------
216,500 Kimberly-Clark Corp. 13,165,365
Distribution (--%)
-------------------------------------------------------------------------------------------------------------------
54,800 SYSCO Corp. 1,470,832
Electric Utilities (2.8%)
-------------------------------------------------------------------------------------------------------------------
609,820 Cinergy Corp. 18,843,438
319,500 CMS Energy Corp. 8,521,065
223,400 Constellation Energy Group, Inc. 6,576,896
63,100 Dominion Resources, Inc. 3,816,919
448,892 DPL, Inc. 10,935,009
26,800 DTE Energy Co. 1,132,300
164,100 Duke Energy Corp. 6,335,901
94,800 Edison International 1,330,992
653,700 Entergy Corp. 24,513,750
424,500 FirstEnergy Corp. 12,879,330
43,100 FPL Group, Inc. 2,327,400
260,700 Northeast Utilities 5,214,000
620,050 Progress Energy, Inc. 26,519,539
568,700 Reliant Energy, Inc. 17,914,050
67,800 TXU Corp. 3,152,700
-------------
150,013,289
Electronics (1.3%)
-------------------------------------------------------------------------------------------------------------------
37,800 Avnet, Inc. 903,042
1,074,800 Intel Corp. 32,039,788
1,177,800 Motorola, Inc. 22,013,082
462,900 Solectron Corp. (NON) 8,091,492
125,580 W.W. Grainger, Inc. 5,286,918
-------------
68,334,322
Energy (0.3%)
-------------------------------------------------------------------------------------------------------------------
174,400 Schlumberger, Ltd. 9,374,000
178,700 Transocean Sedco Forex, Inc. 5,770,223
-------------
15,144,223
Financial (3.6%)
-------------------------------------------------------------------------------------------------------------------
365,200 American Express Co. 14,728,516
2,349,900 Citigroup, Inc. 117,988,479
507,500 Fannie Mae 42,249,375
265,600 Freddie Mac 18,177,664
-------------
193,144,034
Food (0.6%)
-------------------------------------------------------------------------------------------------------------------
317,350 Heinz (H.J.) Co. 13,712,694
399,600 Kraft Foods, Inc. Class A (NON) 12,367,620
309,660 Sara Lee Corp. 6,245,842
-------------
32,326,156
Gaming & Lottery (--%)
-------------------------------------------------------------------------------------------------------------------
1,733 Fitzgeralds Gaming Corp. (NON) 17
Health Care Services (1.0%)
-------------------------------------------------------------------------------------------------------------------
332,200 CIGNA Corp. 33,322,982
241,220 HCA, Inc. 11,084,059
293,200 Mckesson HBOC, Inc. 12,153,140
-------------
56,560,181
Insurance (2.8%)
-------------------------------------------------------------------------------------------------------------------
706,200 ACE, Ltd. 24,653,442
27,100 Allmerica Financial Corp. 1,453,915
118,100 AMBAC Financial Group, Inc. 6,795,474
876,720 American General Corp. 40,548,300
123,600 American International Group, Inc. 10,289,700
90,700 Chubb Corp. (The) 6,364,419
140,000 Hartford Financial Services Group, Inc. (The) 9,269,400
49,700 MBIA, Inc. 2,791,152
85,500 PMI Group, Inc. (The) 5,899,500
294,800 Radian Group, Inc. 11,797,896
116,900 St. Paul Cos., Inc. 5,126,065
181,000 UnumProvident Corp. 5,163,930
305,500 XL Capital, Ltd. Class A (Bermuda) 23,447,125
-------------
153,600,318
Investment Banking/Brokerage (2.3%)
-------------------------------------------------------------------------------------------------------------------
278,800 Bear Stearns Cos., Inc. (The) 16,212,220
143,200 Goldman Sachs Group, Inc. (The) 11,908,512
1,008,500 J.P. Morgan Chase & Co. 43,668,050
89,600 Lehman Brothers Holdings, Inc. 6,451,200
212,800 Merrill Lynch & Co., Inc. 11,542,272
599,600 Morgan Stanley, Dean Witter & Co. 35,868,072
-------------
125,650,326
Lodging/Tourism (0.3%)
-------------------------------------------------------------------------------------------------------------------
364,500 Marriott International, Inc. Class A 17,404,875
Machinery (0.1%)
-------------------------------------------------------------------------------------------------------------------
168,700 Parker-Hannifin Corp. 7,540,890
Manufacturing (0.1%)
-------------------------------------------------------------------------------------------------------------------
67,500 Illinois Tool Works, Inc. 4,252,500
Media (0.7%)
-------------------------------------------------------------------------------------------------------------------
1,365,800 Disney (Walt) Productions, Inc. 35,988,830
Medical Technology (0.2%)
-------------------------------------------------------------------------------------------------------------------
173,500 Pall Corp. 4,146,650
98,500 St. Jude Medical, Inc. (NON) 6,895,000
-------------
11,041,650
Metals (0.1%)
-------------------------------------------------------------------------------------------------------------------
125,630 Alcoa, Inc. 4,928,465
Natural Gas Utilities (0.5%)
-------------------------------------------------------------------------------------------------------------------
321,000 Enron Corp. 14,557,350
50,000 National Fuel Gas Co. 2,400,000
285,200 NiSource, Inc. 7,517,872
115,500 Williams Companies., Inc. (The) 3,869,250
-------------
28,344,472
Oil & Gas (5.4%)
-------------------------------------------------------------------------------------------------------------------
159,800 Chevron, Inc. 14,604,122
211,600 Conoco, Inc. Class A 6,525,744
207,320 Conoco, Inc. Class B 6,426,920
3,081,139 Exxon Mobil Corp. 128,668,345
1,340,150 Royal Dutch Petroleum Co. ADR (Netherlands) 77,728,700
470,460 Tosco Corp. 21,029,562
203,800 TotalFinaElf SA ADR (France) 14,445,344
519,600 Unocal Corp. 18,591,288
205,600 USX-Marathon Group 6,100,152
-------------
294,120,177
Paper & Forest Products (1.2%)
-------------------------------------------------------------------------------------------------------------------
1,458,600 Abitibi-Consolidated, Inc. (Canada) 11,012,430
847,500 Abitibi-Consolidated, Inc. (Toronto Exchange) (Canada) 6,471,879
155,400 Boise Cascade Corp. 5,625,480
415,700 International Paper Co. 16,985,502
294,500 Owens-Illinois, Inc. (NON) 1,890,690
597,200 Smurfit-Stone Container Corp. (NON) 10,397,252
286,300 Sonoco Products Co. 7,395,129
86,100 Weyerhaeuser Co. 5,142,753
-------------
64,921,115
Pharmaceuticals (4.5%)
-------------------------------------------------------------------------------------------------------------------
162,400 Abbott Laboratories 8,703,016
277,800 American Home Products Corp. 16,754,118
650,900 Bristol-Myers Squibb Co. 38,494,226
956,700 Johnson & Johnson 51,757,470
1,105,300 Merck & Co., Inc. 75,138,294
720,100 Pharmacia Corp. 32,130,862
486,200 Schering-Plough Corp. 18,986,110
-------------
241,964,096
Photography/Imaging (0.1%)
-------------------------------------------------------------------------------------------------------------------
793,200 Xerox Corp. 6,329,736
Publishing (0.1%)
-------------------------------------------------------------------------------------------------------------------
144,360 Tribune Co. 5,956,294
Railroads (0.3%)
-------------------------------------------------------------------------------------------------------------------
351,990 Union Pacific Corp. 18,898,343
Real Estate (1.0%)
-------------------------------------------------------------------------------------------------------------------
406,800 Boston Properties, Inc. (R) 15,682,140
415,220 Equity Office Properties Trust (R) 12,464,904
427,050 Equity Residential Properties Trust (R) 24,213,735
-------------
52,360,779
Regional Bells (3.0%)
-------------------------------------------------------------------------------------------------------------------
839,500 BellSouth Corp. 34,167,650
1,913,500 SBC Communications, Inc. 86,164,905
778,900 Verizon Communications, Inc. 42,177,435
-------------
162,509,990
Restaurants (0.6%)
-------------------------------------------------------------------------------------------------------------------
100 AmeriKing, Inc. (NON) 1
247,100 Darden Restaurants, Inc. 7,388,290
872,900 McDonald's Corp. 25,436,306
44,200 Tricon Global Restaurants, Inc. (NON) 2,022,150
-------------
34,846,747
Retail (1.8%)
-------------------------------------------------------------------------------------------------------------------
139,600 Albertsons, Inc. 4,569,108
219,700 Circuit City Stores-Circuit City Group 4,119,375
55,000 CVS Corp. 1,980,550
48,200 Federated Department Stores (NON) 1,860,520
355,600 Kroger Co. (NON) 9,373,616
1,134,400 Limited, Inc. (The) 19,250,768
75,300 May Department Stores Co. 2,499,960
295,900 Rite Aid Corp. (NON) 2,491,478
313,700 Sears, Roebuck & Co. 14,737,626
944,400 Staples, Inc. (NON) 14,156,556
595,900 TJX Companies, Inc. (The) 20,266,559
-------------
95,306,116
Software (0.6%)
-------------------------------------------------------------------------------------------------------------------
514,000 BMC Software, Inc. (NON) 10,280,000
307,500 Computer Associates International, Inc. 10,602,600
1,233,600 Parametric Technology Corp. (NON) 11,682,192
-------------
32,564,792
Technology Services (1.0%)
-------------------------------------------------------------------------------------------------------------------
244,500 Automatic Data Processing, Inc. 12,457,275
47,400 Computer Sciences Corp. (NON) 1,711,614
619,600 Convergys Corp. (NON) 19,300,540
1,145,200 KPMG Consulting, Inc. (NON) 15,986,992
17,700 Symbol Technologies, Inc. 219,657
318,400 Unisys Corp. (NON) 3,645,680
-------------
53,321,758
Telecommunications (1.3%)
-------------------------------------------------------------------------------------------------------------------
109,100 ALLTEL Corp. 6,726,015
344,600 AT&T Corp. 6,964,366
138,245 AT&T Wireless Services, Inc. (NON) 2,583,799
133,600 Broadwing, Inc. (NON) 3,247,816
258,800 Citizens Communications Co. (NON) 3,175,476
142,000 Qwest Communications International, Inc. 3,692,000
1,265,900 Sprint Corp. (FON Group) 29,546,106
977,200 Worldcom, Inc.-WorldCom Group (NON) 13,680,800
-------------
69,616,378
Tobacco (1.3%)
-------------------------------------------------------------------------------------------------------------------
1,610,900 Philip Morris Cos., Inc. 73,295,950
Waste Management (0.8%)
-------------------------------------------------------------------------------------------------------------------
770,900 Republic Services, Inc. (NON) 15,340,910
939,200 Waste Management, Inc. 29,115,200
--------------
44,456,110
--------------
Total Common Stocks (cost $2,964,088,534) $3,167,847,396
<CAPTION>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS (21.4%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
U.S. Government Agency Mortgage Obligations (14.2%)
-------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corporation
$ 868,395 8 3/4s, with due dates from May 1, 2009 to June 1, 2009 $ 915,375
181,313 6s, June 1, 2029 178,394
Federal National Mortgage Association
Pass-Through Certificates
80,677 11s, with due dates from October 1, 2015
to March 1, 2016 89,394
53,944 8 3/4s, July 1, 2009 57,031
11,827,385 8s, with due dates from August 1, 2026
to June 1, 2028 12,387,431
218,046,568 7 1/2s, with due dates from September 1, 2028
to August 25, 2031 224,573,961
26,830,000 7 1/4s, May 15, 2030 30,221,580
43,069,710 7s, with due dates from August 1, 2022
to November 1, 2029 43,893,677
45,000 6 5/8s, November 15, 2030 47,060
1,711,139 6 1/2s, with due dates from July 1, 2010 to May 1, 2011 1,750,632
320,757,218 6s, with due dates from May 1, 2029 to July 1, 2031 313,999,735
920,076 5 1/2s, August 15, 2014 904,333
Government National Mortgage Association
Pass-Through Certificates
683 15s, September 15, 2011 812
72,288,861 8s, with due dates from January 15, 2022
to December 15, 2027 75,881,689
8,135,888 7 1/2s, with due dates from September 15, 2005
to January 15, 2030 8,429,565
43,988,749 7s, with due dates from January 15, 2023
to December 15, 2028 45,236,954
12,118,056 6 1/2s, with due dates from March 15, 2002
to August 15, 2027 12,299,079
-------------
770,866,702
U.S. Treasury Obligations (7.2%)
-------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds
25,845,000 6 1/4s, May 15, 2030 28,324,569
33,495,000 6 1/8s, August 15, 2029 (SEG) 35,944,154
195,000 5 1/4s, February 15, 2029 184,975
U.S. Treasury Notes
32,710,000 7s, July 15, 2006 36,129,176
29,490,000 6 5/8s, May 15, 2007 32,319,271
4,990,000 6 1/2s, February 15, 2010 5,503,022
131,015,000 5 3/4s, November 15, 2005 137,319,442
117,300,000 4 5/8s, May 15, 2006 117,850,137
109,000 3 7/8s, June 30, 2003 109,187
--------------
393,683,933
--------------
Total U.S. Government and Agency Obligations
(cost $1,151,453,806) $1,164,550,635
<CAPTION>
CORPORATE BONDS AND NOTES (10.8%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
Aerospace and Defense (0.3%)
-------------------------------------------------------------------------------------------------------------------
$ 7,230,000 Boeing Co. deb. 6 5/8s, 2038 $ 7,063,638
5,720,000 Lockheed Martin Corp. bonds 8 1/2s, 2029 6,647,841
2,250,000 Sequa Corp. sr. notes 9s, 2009 2,238,750
-------------
15,950,229
Airlines (0.4%)
-------------------------------------------------------------------------------------------------------------------
2,668,457 Continental Airlines, Inc. pass-through certificates
Ser. 974C, 6.8s, 2009 2,698,958
6,073,679 Continental Airlines, Inc. pass-through certificates
Ser. 981C, 6.541s, 2009 6,112,612
11,885,000 Continental Airlines, Inc. pass-through certificates
Ser. 98-2, 6.32s, 2008 11,820,108
1,690,000 Northwest Airlines, Inc. company guaranty 8.7s, 2007 1,664,735
1,310,000 Northwest Airlines, Inc. company guaranty 8.52s, 2004 1,314,140
385,000 US Air, Inc. pass through certificates Ser. 93-A2, 9 5/8s, 2003 387,017
-------------
23,997,570
Automotive (0.5%)
-------------------------------------------------------------------------------------------------------------------
5,070,000 DaimlerChrysler Corp. company guaranty 8 1/2s, 2031 5,664,508
10,375,000 Ford Motor Co. bonds 6 5/8s, 2028 9,462,623
4,310,000 Ford Motor Co. notes 7.45s, 2031 4,348,057
180,000 Hayes Wheels International, Inc. company guaranty
Ser. B, 9 1/8s, 2007 126,000
1,430,000 Lear Corp. sub. notes 9 1/2s, 2006 1,498,211
3,070,000 Visteon Corp. sr. notes 8 1/4s, 2010 3,304,057
-------------
24,403,456
Banking (1.9%)
-------------------------------------------------------------------------------------------------------------------
17,020,000 Bank of America Corp. sub. notes 7.4s, 2011 18,188,593
6,285,000 Bank One Corp. sub. notes 7 7/8s, 2010 6,918,294
10,470,000 Bank United Corp. notes Ser. A, 8s, 2009 11,407,798
4,250,000 BankAmerica Corp. sr. notes 5 7/8s, 2009 4,172,990
11,255,000 Citicorp sub. notes 6 3/8s, 2008 11,388,034
5,505,000 Colonial Bank sub. notes 8s, 2009 5,340,401
4,050,000 Dime Capital Trust I bank guaranty Ser. A, 9.33s, 2027 4,410,329
2,320,000 First Citizens Bank Capital Trust I company guaranty 8.05s, 2028 2,115,051
4,205,000 First Union Corp. notes 6.95s, 2004 4,430,262
2,035,000 Firstar Bank Milwaukee sr. bank notes 6 1/4s, 2002 2,082,578
3,655,000 GS Escrow Corp. sr. notes 7 1/8s, 2005 3,616,623
185,000 Imperial Bank sub. notes 8 1/2s, 2009 204,966
1,455,000 Merita Bank, Ltd. sub. notes 6 1/2s, 2006 (Finland) 1,502,200
3,130,000 National City Corp. sub. notes 7.2s, 2005 3,307,628
4,975,000 NB Capital Trust IV company guaranty 8 1/4s, 2027 5,206,089
3,240,000 Norwest Corp. med. term sr. notes 6 3/4s, 2027 3,159,486
11,290,000 Peoples Bank- Bridgeport sub. notes 7.2s, 2006 11,110,828
2,590,000 Sovereign Bancorp, Inc. sr. notes 10 1/2s, 2006 2,810,150
2,910,000 Webster Capital Trust I 144A bonds 9.36s, 2027 2,546,512
-------------
103,918,812
Beverage (0.1%)
-------------------------------------------------------------------------------------------------------------------
7,300,000 Pepsi Bottling Group, Inc. (The) sr. notes Ser. B, 7s, 2029 7,502,356
Broadcasting (--%)
-------------------------------------------------------------------------------------------------------------------
33,700 AMFM Operating, Inc. deb. 12 5/8s, 2006 36,902
335,000 News America Holdings, Inc. deb. 7.7s, 2025 323,108
-------------
360,010
Cable Television (0.1%)
-------------------------------------------------------------------------------------------------------------------
4,250,000 CSC Holdings, Inc. sr. sub. deb. 9 7/8s, 2013 4,494,375
720,000 NTL Communications Corp. sr. notes Ser. B, 11 7/8s, 2010 468,000
-------------
4,962,375
Chemicals (0.1%)
-------------------------------------------------------------------------------------------------------------------
1,920,000 Lyondell Petrochemical Co. sec. notes Ser. B, 9 7/8s, 2007 1,929,600
4,195,000 Rohm & Haas Co. notes 7.4s, 2009 4,477,491
-------------
6,407,091
Commercial and Consumer Services (--%)
-------------------------------------------------------------------------------------------------------------------
711,000 Unicco Service Co. company guaranty Ser. B, 9 7/8s, 2007 675,450
Computers (0.1%)
-------------------------------------------------------------------------------------------------------------------
5,505,000 IBM Corp. deb. 7 1/8s, 2096 5,465,144
Conglomerates (0.2%)
-------------------------------------------------------------------------------------------------------------------
12,095,000 Tyco International, Ltd. company guaranty 6 1/4s, 2003
(Luxembourg) 12,374,636
Consumer Finance (0.6%)
-------------------------------------------------------------------------------------------------------------------
1,150,000 Conseco Financial Corp. sr. sub. notes 10 1/4s, 2002 1,138,500
3,385,000 Ford Motor Credit Corp. bonds 7 3/8s, 2011 3,565,421
10,000,000 Ford Motor Credit Corp. notes 7 3/8s, 2009 10,505,000
1,160,000 Ford Motor Credit Corp. notes 6.55s, 2002 1,183,374
2,195,000 Ford Motor Credit Corp. sr. notes 5.8s, 2009 2,096,774
5,075,000 General Motors Acceptance Corp. notes 5.36s, 2004 5,070,813
2,920,000 Household Finance Corp. notes 6 1/2s, 2008 2,960,325
3,300,000 Household Finance Corp. sr. unsub. 5 7/8s, 2009 3,218,610
-------------
29,738,817
Containers (--%)
-------------------------------------------------------------------------------------------------------------------
140,000 Owens-Illinois, Inc. sr. notes 8.1s, 2007 118,300
Electric Utilities (0.8%)
-------------------------------------------------------------------------------------------------------------------
5,110,000 American Electric Power Co., Inc. notes Ser. A, 6 1/8s, 2006 5,162,173
3,840,000 Arizona Public Service Co. sr. notes 6 3/4s, 2006 3,960,845
6,405,000 CILCORP, Inc. sr. notes 8.7s, 2009 6,915,013
5,000 CMS Energy Corp. pass-through certificates 7s, 2005 4,899
2,200,000 CMS Energy Corp. sr. notes 8 1/8s, 2002 2,226,026
100,000 CMS Energy Corp. sr. notes Ser. B, 6 3/4s, 2004 96,750
1,340,000 Mission Energy Holding 144A sec. notes 13 1/2s, 2008 1,346,700
639,128 Northeast Utilities notes Ser. A, 8.58s, 2006 668,650
1,509,821 Northeast Utilities notes Ser. B, 8.38s, 2005 1,583,500
2,060,000 Progress Energy, Inc. sr. notes 6.55s, 2004 2,126,270
6,435,000 PSI Energy, Inc. 144A 1st mtge. 6.65s, 2006 6,469,732
9,490,000 TXU Electrical Capital company guaranty 8.175s, 2037 9,655,316
-------------
40,215,874
Electrical Equipment (--%)
-------------------------------------------------------------------------------------------------------------------
2,050,000 Avista Corp. 144A sr. notes 9 3/4s, 2008 2,208,732
Energy (0.2%)
-------------------------------------------------------------------------------------------------------------------
2,000,000 Pride Petroleum Services, Inc. sr. notes 9 3/8s, 2007 2,070,000
7,270,000 Transocean Sedco Forex, Inc. notes 6 5/8s, 2011 7,289,495
-------------
9,359,495
Entertainment (--%)
-------------------------------------------------------------------------------------------------------------------
1,000,000 United Artists Theatre sr. sub. notes Ser. B, 9 3/4s, 2008
(In default) (NON) 10,000
Financial (1.2%)
-------------------------------------------------------------------------------------------------------------------
7,810,000 AFLAC, Inc. sr. notes 6 1/2s, 2009 7,837,569
2,640,000 American General Institute 144A company guaranty
8 1/8s, 2046 2,974,937
3,770,000 Associates Corp. sr. notes 6 1/4s, 2008 3,820,103
3,165,000 Associates First Capital Corp. deb. 6.95s, 2018 3,255,867
3,500,000 Associates First Capital Corp. sub. deb. 8.15s, 2009 3,904,285
8,235,000 Conseco Financing Trust II company guaranty 8.7s, 2026 5,558,625
6,905,000 Liberty Mutual Insurance 144A notes 7.697s, 2097 5,609,140
3,280,000 Markel Capital Trust I company guaranty Ser. B, 8.71s, 2046 2,566,764
7,610,000 Nisource Finance Corp. company guaranty 7 7/8s, 2010 8,308,065
9,580,000 Principal Financial Group 144A notes 7.95s, 2004 (Australia) 10,106,900
10,345,000 Sun Life Canada Capital Trust 144A company guaranty
8.526s, 2049 10,589,970
4,920,000 TIG Capital Trust I 144A bonds 8.597s, 2027 3,066,833
-------------
67,599,058
Gaming & Lottery (0.2%)
-------------------------------------------------------------------------------------------------------------------
2,145,000 International Game Technology sr. notes 8 3/8s, 2009 2,220,075
1,160,000 International Game Technology sr. notes 7 7/8s, 2004 1,183,200
910,000 Mohegan Tribal Gaming sr. notes 8 1/8s, 2006 923,650
120,000 Mohegan Tribal Gaming sr. sub. notes 8 3/4s, 2009 123,600
3,740,000 Park Place Entertainment Corp. sr. sub. notes 9 3/8s, 2007 3,964,400
-------------
8,414,925
Health Care (0.1%)
-------------------------------------------------------------------------------------------------------------------
930,000 HCA, Inc. deb. 7.19s, 2015 868,388
60,000 HCA, Inc. notes 7 1/4s, 2008 58,200
75,000 HCA, Inc. med. term notes 8.85s, 2007 80,625
1,220,000 HCA, Inc. med. term notes 8.7s, 2010 1,299,300
530,000 Integrated Health Services, Inc. sr. sub. notes Ser. A,
9 1/2s, 2007 (In default) (NON) 2,650
280,000 Integrated Health Services, Inc. sr. sub. notes Ser. A,
9 1/4s, 2008 (In default) (NON) 1,400
1,280,000 Mariner Post-Acute Network, Inc. sr. sub. notes Ser. B,
9 1/2s, 2007 (In default) (NON) 8,947
260,000 Mariner Post-Acute Network, Inc. sr. sub. notes
stepped-coupon Ser. B, zero % (10 1/2s, 11/1/02), 2007
(In default) (NON) (STP) 1,817
1,388,000 Multicare Cos., Inc. sr. sub. notes 9s, 2007 (In default) (NON) 55,520
140,000 Tenet Healthcare Corp. sr. notes Ser. B, 8 1/8s, 2008 147,700
2,340,000 Tenet Healthcare Corp. sr. sub. notes 8 5/8s, 2007 2,468,700
-------------
4,993,247
Homebuilding (--%)
-------------------------------------------------------------------------------------------------------------------
2,710,000 D.R. Horton, Inc. company guaranty 8s, 2009 2,696,450
Investment Banking/Brokerage (0.4%)
-------------------------------------------------------------------------------------------------------------------
5,120,000 Goldman Sachs Group, Inc. (The) notes Ser. B, 7.35s, 2009 5,395,251
5,100,000 Merrill Lynch & Co., Inc. med. term notes 6.13s, 2003 5,244,687
9,895,000 Morgan Stanley, Dean Witter & Co. sr. notes 6 3/4s, 2011 10,066,184
-------------
20,706,122
Lodging/Tourism (0.1%)
-------------------------------------------------------------------------------------------------------------------
4,670,000 HMH Properties, Inc. company guaranty Ser. B, 7 7/8s, 2008 4,471,525
Manufacturing (0.2%)
-------------------------------------------------------------------------------------------------------------------
9,915,000 Norsk Hydro ASA notes 6.36s, 2009 (Norway) 9,970,127
Media (0.2%)
-------------------------------------------------------------------------------------------------------------------
10,200,000 AOL Time Warner, Inc. bonds 7 5/8s, 2031 10,502,736
Metals (0.1%)
-------------------------------------------------------------------------------------------------------------------
2,835,000 AK Steel Corp. company guaranty 7 7/8s, 2009 2,774,756
90,550 Anker Coal Group, Inc. company guaranty Ser. B,
14 1/4s, 2007 (PIK) 43,464
-------------
2,818,220
Natural Gas Utilities (0.1%)
-------------------------------------------------------------------------------------------------------------------
5,550,000 Osprey Trust 144A sec. notes 8.31s, 2003 5,739,977
Oil & Gas (0.9%)
-------------------------------------------------------------------------------------------------------------------
1,520,000 El Paso Energy Partners L.P. 144A company guaranty
8 1/2s, 2011 1,520,000
3,260,000 Leviathan Gas Corp. company guaranty Ser. B, 10 3/8s, 2009 3,488,200
9,320,000 Louis Dreyfus Natural Gas Corp. notes 6 7/8s, 2007 9,435,754
9,590,000 Occidental Petroleum Corp., structured notes,
(issued by STEERS Credit Linked Trust 2001)
6.019%, 2004 9,592,877
630,000 Ocean Energy, Inc. company guaranty Ser. B, 8 3/8s, 2008 668,380
6,155,000 Phillips Petroleum Co. notes 8 3/4s, 2010 7,157,773
640,000 Pioneer Natural Resources Co. company guaranty 9 5/8s, 2010 700,800
1,680,000 Port Arthur Finance Corp. company guaranty 12 1/2s, 2009 1,730,400
415,000 Seagull Energy sr. sub. notes 8 5/8s, 2005 422,752
6,020,000 Union Oil Company of California company guaranty
7 1/2s, 2029 6,245,148
2,425,000 Union Pacific Resources Group, Inc. notes 7.3s, 2009 2,552,870
4,180,000 Yosemite Sec Trust I 144A bonds 8 1/4s, 2004 4,437,948
-------------
47,952,902
Paper & Forest Products (0.2%)
-------------------------------------------------------------------------------------------------------------------
1,480,000 Abitibi-Consolidated, Inc. deb. 8.85s, 2030 (Canada) 1,576,274
4,150,000 Abitibi-Consolidated, Inc. deb. 8 1/2s, 2029 (Canada) 4,250,679
2,385,000 Georgia-Pacific Group notes 8 7/8s, 2031 2,479,236
790,000 Norampac, Inc. sr. notes 9 1/2s, 2008 (Canada) 817,650
-------------
9,123,839
Pharmaceuticals (--%)
-------------------------------------------------------------------------------------------------------------------
1,040,000 ICN Pharmaceuticals, Inc. sr. notes Ser. B, 9 1/4s, 2005 1,084,200
Power Producers (--%)
-------------------------------------------------------------------------------------------------------------------
1,300,000 Calpine Corp. sr. notes 8 3/4s, 2007 1,330,758
460,000 Calpine Corp. sr. notes 7 7/8s, 2008 440,558
737,000 York Power Funding 144A notes 12s, 2007 (Cayman Islands) 751,740
-------------
2,523,056
Railroads (0.1%)
-------------------------------------------------------------------------------------------------------------------
6,705,000 Burlington Northern Santa Fe Corp. notes 7 1/8s, 2010 6,976,217
Real Estate (0.1%)
-------------------------------------------------------------------------------------------------------------------
3,375,000 EOP Operating LP notes 6 3/8s, 2002 3,396,026
2,575,000 Tanger Properties, Ltd. company guaranty 7 7/8s, 2004 2,563,876
-------------
5,959,902
Regional Bells (0.2%)
-------------------------------------------------------------------------------------------------------------------
9,515,000 Verizon Global Funding Corp. 144A notes 7 1/4s, 2010 10,049,838
Restaurants (--%)
-------------------------------------------------------------------------------------------------------------------
2,240,000 Tricon Global Restaurants, Inc. sr. notes 7.65s, 2008 2,189,600
Retail (0.2%)
-------------------------------------------------------------------------------------------------------------------
680,000 K mart Corp. deb. 7.95s, 2023 544,000
310,000 K mart Corp. med. term notes Ser. D, 7.55s, 2004 301,596
4,230,000 K mart Corp. notes 8 3/8s, 2004 4,230,000
320,000 K mart Corp. notes 8 1/8s, 2006 310,400
695,000 Southland Corp. deb. Ser. A, 4 1/2s, 2004 628,975
1,710,000 Southland Corp. sr. sub. deb. 5s, 2003 1,620,635
-------------
7,635,606
Shipping (--%)
-------------------------------------------------------------------------------------------------------------------
588,226 Pegasus Shipping company guaranty Ser. A, 11 7/8s, 2004
(In default) (NON) 176,468
Software (--%)
-------------------------------------------------------------------------------------------------------------------
280,000 Telehub Communications Corp. company guaranty,
13 7/8s, 2005 (In default) (NON) 28
Technology (--%)
-------------------------------------------------------------------------------------------------------------------
2,415,000 Amkor Technologies, Inc. sr. notes 9 1/4s, 2006 2,209,725
490,000 Flextronics International, Ltd. sr. sub. notes Ser. B, 8 3/4s, 2007
(Singapore) 470,400
-------------
2,680,125
Telecommunications (0.8%)
-------------------------------------------------------------------------------------------------------------------
9,690,000 France Telecom 144A notes 7 3/4s, 2011 (France) 10,199,210
1,460,000 Global Crossing Holdings, Ltd. company guaranty
9 5/8s, 2008 (Bermuda) 1,124,200
1,000,000 Global Crossing Holdings, Ltd. company guaranty
9 1/2s, 2009 (Bermuda) 755,000
1,075,000 Global Crossing Holdings, Ltd. company guaranty
8.7s, 2007 (Bermuda) 811,625
4,400,000 Qwest Capital Funding, Inc. 144A notes 7 1/4s, 2011 4,479,332
8,910,000 Qwest Capital Funding, Inc. 144A notes 5 7/8s, 2004 8,975,221
6,505,000 Sprint Capital Corp. company guaranty 7 5/8s, 2011 6,742,888
890,000 Sprint Capital Corp. company guaranty 6 1/8s, 2008 846,568
9,780,000 Worldcom, Inc.-WorldCom Group notes 7 1/2s, 2011 9,921,028
-------------
43,855,072
Textiles (--%)
-------------------------------------------------------------------------------------------------------------------
255,000 Kasper A.S.L., Ltd. sr. notes 12 3/4s, 2004 (In default) (NON) 56,100
Tobacco (0.2%)
-------------------------------------------------------------------------------------------------------------------
4,360,000 Philip Morris Cos., Inc. notes 7 1/4s, 2003 4,511,946
2,925,000 Philip Morris Cos., Inc. notes 7 1/8s, 2004 3,067,974
-------------
7,579,920
Waste Management (0.1%)
-------------------------------------------------------------------------------------------------------------------
6,294,000 Browning-Ferris deb. 7.4s, 2035 5,035,200
2,250,000 Waste Management, Inc. notes 6 5/8s, 2002 2,283,008
-------------
7,318,208
Water Utilities (0.1%)
-------------------------------------------------------------------------------------------------------------------
3,960,000 Azurix Corp. sr. notes Ser. B, 10 3/8s, 2007 3,979,800
--------------
Total Corporate Bonds and Notes (cost $579,276,033) $ 584,721,615
<CAPTION>
COLLATERALIZED MORTGAGE OBLIGATIONS (5.0%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
Commercial Mortgage Asset Trust
$ 17,259,000 Ser. 99-C1, Class A3, 6.64s, 2010 $ 17,859,694
105,762,159 Ser. 99-C1, Class X, IO, 7.65s, 2020 6,349,861
Countrywide Home Loan
5,768,800 Ser. 98-A12, Class A14, 8s, 2028 6,051,832
4,920,000 Ser. 98-3, Class A5, 6 3/4s, 2028 4,938,450
6,795,000 Countrywide Mortgage Backed Securities, Inc. Ser. 93-C,
Class A8, 6 1/2s, 2024 6,745,464
13,975,000 Criimi Mae Commercial Mortgage Trust Ser. 98-C1,
Class A2, 7s, 2011 13,919,100
4,850,000 Criimi Mae Commercial Mortgage Trust 144A Ser. 98-C1,
Class B, 7s, 2011 4,368,395
CS First Boston Mortgage Securities Corp.
3,114,000 Ser. 1999-C1, Class E, 7.923s, 2009 3,325,655
31,214,500 Ser. 00-C1, Class A2, 7.545s, 2010 33,906,751
12,920,000 Ser. 99-C1, Class A2, 7.29s, 2009 13,820,369
Federal National Mortgage Association
5,841 Ser. 92-15, Class L, IO, 8s, 2022 153,337
16,090,000 Ser. 01-T8, Class A1, 7 1/2s, 2031 16,763,769
23,282,475 Ser. 01-T4, Class A1, 7 1/2s, 2028 24,257,429
8,306,792 Ser. 00-4, Class SX, 6 1/2s, 2023 8,234,108
11,720,000 FFCA Secured Lending Corp. Ser. 00-1, Class A2, 7.77s, 2027 12,555,050
Federal Home Loan Mortgage Corporation
1,728,000 Ser. 2028, Class SG, IO, 10.114s, 2023 738,591
13,198,133 Ser. 183, IO, 7s, 2027 2,623,129
856,124 Ser. 180, PO, zero %, 2026 719,680
1,048,624 G-Force CDO Ltd., FRB Ser. 01-1, Class A, 4.43s, 2033 1,048,624
5,000,000 GE Capital Mortgage Services, Inc. Ser. 98-11,
Class 2A4, 6 3/4s, 2028 5,042,600
General Growth Properties-Homart 144A
1,520,000 FRB Ser. 99-C1, Class F, 6.43s, 2003 1,520,000
1,325,000 FRB Ser. 99-C1, Class G, 6.68s, 2003 1,325,000
6,085,841 General Growth Properties-Ivanhoe FRB Ser. 99-C1,
Class F, 6.35s, 2004 6,085,841
12,093,587 Government National Mortgage Association Ser. 99-46,
Class SQ, IO, 8s, 2027 770,966
GS Mortgage Securities Corp. II
7,500,000 Ser. 98-C1, Class A2, 6.62s, 2030 7,732,324
6,685,000 Ser. 01-LIB, Class A2, 6.615s, 2016 6,803,032
Housing Securities Inc.
1,018,307 Ser. 93-F, Class F9M2, 7s, 2023 1,017,353
152,705 Ser. 94-1, Class AB1, 6 1/2s, 2009 141,672
3,495,000 LB Commercial Conduit Mortgage Trust Ser. 1999-C2,
Class B, 7.425s, 2009 3,723,104
Merrill Lynch Mortgage Investors, Inc.
51,276,466 Ser. 98-C2, IO, 7.86s, 2030 3,240,673
3,465,000 Ser. 96-C2, Class E, 6.96s, 2028 3,274,772
Morgan Stanley Dean Witter Capital I
1,535,000 Ser. 00, Class B, 7.638s, 2010 1,669,313
4,800,000 Ser. 00-LIF2, Class A2, 7.2s, 2010 5,107,500
12,094,000 PNC Mortgage Acceptance Corp. Ser. 01-C1,
Class A2, 6.36s, 2011 12,233,837
1,361,022 Prudential Home Mortgage Securities Ser. 92-25,
Class B3, 8s, 2022 1,404,192
Prudential Home Mortgage Securities 144A
218,578 Ser. 94-31, Class B3, 8s, 2009 223,939
999,080 Ser. 95-D, Class 5B, 7.54s, 2024 986,748
3,950,000 Residential Funding Mortgage Ser. 98-S13,
Class A21, 6 3/4s, 2028 3,979,072
Ryland Mortgage Securities Corp.
1,113,760 Ser. 94-7C, Class B1, 7.359s, 2025 1,126,899
1,576,874 Ser. 94-7C, Class B1, 7.359s, 2025 1,595,353
7,020,000 Salomon Brothers Mortgage Securities VII Ser. 00-C3,
Class A2, 6.592s, 2010 7,202,081
830,281 Sears Mortgage Securities Ser. 93-7, Class T7, 7s, 2007 838,302
18,689,802 Structured Asset Security Corp. Ser. 98-RF3, IO, 6.10s, 2028 3,483,312
10,417,118 TIAA Retail Commercial Mortgage Trust Ser. 1999-1,
Class A, 7.17s, 2032 10,981,726
--------------
Total Collateralized Mortgage Obligations
(cost $259,989,490) $ 269,888,899
<CAPTION>
ASSET-BACKED SECURITIES (0.9%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 3,082,000 Advanta Mortgage Loan Trust Ser. 00-1, Class A4, 8.61s, 2028 $ 3,349,333
12,760,000 Conseco Finance Securitization Corp. Ser. 00-4,
Class A6, 8.31s, 2032 13,836,944
9,840,000 Conseco Finance Securitization Corp. Ser. 00-5,
Class A6, 7.96s, 2032 10,455,000
3,501,900 First Plus 144A Ser. 98-A, Class A, 8 1/2s, 2023 2,311,254
6,171,830 Ford Credit Auto Owner Trust Ser. 00-C3,
Class A3, 7.13s, 2002 6,206,515
39,219,148 Lehman Manufactured Housing Ser. 98-1,
Class 1, IO, 0.82s, 2028 940,647
11,420,000 Xerox Equipment Lease Owner Trust 144A FRB Ser. 01-1,
Class A, 5.83s, 2008 11,420,000
--------------
Total Asset-Backed Securities (cost $49,442,230) $ 48,519,693
<CAPTION>
FOREIGN GOVERNMENT BONDS AND NOTES (0.3%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 1,605,000 Ontario (Province of) sr. unsub. 5 1/2s, 2008 (Canada) $ 1,593,267
16,135,000 Quebec (Province of) sr. unsub. 5 3/4s, 2009 (Canada) 15,874,742
--------------
Total Foreign Government Bonds and Notes
(cost $17,578,376) $ 17,468,009
<CAPTION>
PREFERRED STOCKS (0.2%) (a)
NUMBER OF SHARES VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
7,093 AmeriKing, Inc. $3.25 Cumulative preferred (cum. pfd.) (PIK) $ 71
27,755 California Federal Bancorp, Inc. Ser. A, $2.281 pfd. 718,855
6,155 Chevy Chase Capital Corp. Ser. A, $5.19 pfd. (PIK) 336,986
3,799 CSC Holdings, Inc. Ser. M, $11.125 cum. pfd. (PIK) 405,543
6,381,000 First Union Capital II Ser. A, 7.95% pfd. 6,656,404
1,605 Fresenius Medical Capital Trust II 7.875% company
guaranty, pfd (Germany) 1,588,950
1 Paxson Communications Corp. 13.25% cum. pfd. (PIK) 9,200
--------------
Total Preferred Stocks (cost $9,209,721) $ 9,716,009
<CAPTION>
CONVERTIBLE BONDS AND NOTES (0.2%) (a) (cost $7,865,700)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 7,795,000 Service Corp. International cv. sub. notes 6 3/4s, 2008 $ 10,360,335
<CAPTION>
UNITS (0.1%) (a)
NUMBER OF UNITS VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
1,684,270 Contifinancial Corp. Liquidating Trust units $ 143,163
187,400 Compaq Computer Corp., Capped Warrants,
expiration date 8/15/01 (issued by Salomon
Smith Barney Holdings, Inc.) (NON) 2,746,103
--------------
Total Units (cost $3,983,800) $ 2,889,266
<CAPTION>
WARRANTS (--%) (a) (NON) EXPIRATION
NUMBER OF WARRANTS DATE VALUE
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
3 Anker Coal Group, Inc. 144A 10/28/09 $ 1
16,000 CGA Group, Ltd. 144A 2/11/07 160
180 McCaw International, Ltd. 4/15/07 2,700
685 Raintree Resort 144A 12/1/04 7
280 Telehub Communications Corp. 144A 7/31/05 3
625 UIH Australia/Pacific, Inc. 144A 5/15/06 6
--------------
Total Warrants (cost $112,487) $ 2,877
<CAPTION>
CONVERTIBLE PREFERRED STOCKS (--%)
NUMBER OF SHARES VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
38 Anker Coal Group, Inc. $14.25 cv. pfd. $ 190
94 World Access, Inc. 144A Ser. D, zero % cv. pfd. 1,083
--------------
Total Convertible Preferred Stocks (cost $161,290) $ 1,273
<CAPTION>
SHORT-TERM INVESTMENTS (6.5%) (a)
PRINCIPAL AMOUNT VALUE
<S> <C> <C>
-------------------------------------------------------------------------------------------------------------------
$ 100,000,000 BP Amoco Capital PLC effective yield 3.93%, August 1, 2001 $ 99,989,083
5,400,000 Household Finance Corp effective yield 3.94%, August 1, 2001 5,399,409
34,851,000 Old Line Funding Corp. effective yield 3.78%, August 10, 2001 34,817,892
50,000,000 Thunder Bay Funding, Inc. effective yield 3.75%, August 14, 2001 49,932,292
57,999,763 Short-term investments held as collateral for loaned securities
with yields ranging from 3.62% to 4.05% and due dates
from August 1, 2001 to September 28, 2001 (d) 57,914,300
75,087,000 Interest in $745,000,000 joint repurchase agreement
dated July 31, 2001 with Goldman Sachs & Co. due
August 1, 2001 with respect to various U.S. Government
obligations -- maturity value of $75,095,134 for an effective
yield of 3.90% 75,087,000
32,187,000 Interest in $500,000,000 joint tri-party repurchase agreement
dated July 31, 2001 with Credit Suisse First Boston due
August 1, 2001 with respect to various U.S. Government
obligations -- maturity value of $32,190,486 for an effective
yield of 3.90% 32,187,000
--------------
Total Short-Term Investments (cost $355,326,976) $ 355,326,976
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $5,398,488,443) (b) $5,631,292,983
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $5,434,292,273.
(b) The aggregate identified cost on a tax basis is $5,435,735,102
resulting in gross unrealized appreciation and depreciation of
$402,219,214 and $206,661,333, respectively, or net unrealized
appreciation of $195,557,881.
(NON) Non-income-producing security.
(STP) The interest or dividend rate and date shown parenthetically
represent the new interest or dividend rate to be paid and the date the
fund will begin receiving interest or dividend income at this rate.
(PIK) Income may be received in cash or additional securities at the
discretion of the issuer.
(SEG) A portion of these securities were pledged and segregated with the
custodian to cover margin requirements for futures contracts at July 31,
2001.
(R) Real Estate Investment Trust.
144A after the name of a security represents those exempt from
registration under Rule 144A of the Securities Act of 1933. These
securities may be resold in transactions exempt from registration,
normally to qualified institutional buyers.
ADR after the name of a foreign holding stands for American
Depository Receipts, representing ownership of foreign securities on
deposit with a domestic custodian bank.
TBA after the name of a security represents to be announced
securities (Note 1).
The rates shown on Floating Rate Bonds (FRB) are the current
interest rates shown at July 31, 2001, which are subject to change based
on the terms of the security.
(d) See footnote 1 to financial statements.
------------------------------------------------------------------------------
Futures Contracts Outstanding at July 31, 2001
Unrealized
Aggregate Face Expiration Appreciation/
Total Value Value Date (Depreciation)
------------------------------------------------------------------------------
US Treasury 10
year Notes
(short) $138,366,625 $133,513,386 Sep-01 $(4,853,239)
S&P 500 (long) 106,338,750 111,147,139 Sep-01 (4,808,389)
US Treasury 5 year
Notes (long) 83,177,859 81,224,808 Sep-01 1,953,051
US Treasury Bonds
(short) 26,527,969 25,162,237 Sep-01 (1,365,732)
------------------------------------------------------------------------------
$(9,074,309)
------------------------------------------------------------------------------
TBA Sales Commitments at July 31, 2001
(premium received $21,347,480)
Principal Expiration
Agency Amount Date Value
------------------------------------------------------------------------------
FNMA 30 YR CONV.
TBA, 7 1/2s,
August 2031 $11,418,000 08/13/01 $11,749,807
FNMA 30 YR CONV.
TBA, 6s, August
2031 9,963,000 08/13/01 9,745,109
------------------------------------------------------------------------------
$21,494,916
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
July 31, 2001
<S> <C>
Assets
-------------------------------------------------------------------------------------------
Investments in securities, at value including $56,358,697 of securities on
loan (identified cost $5,398,488,443) (Note 1) $5,631,292,983
-------------------------------------------------------------------------------------------
Dividends, interest and other receivables 25,860,990
-------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 5,929,975
-------------------------------------------------------------------------------------------
Receivable for securities sold 208,472,292
-------------------------------------------------------------------------------------------
Receivable for variation margin (Note 1) 122,328
-------------------------------------------------------------------------------------------
Total assets 5,871,678,568
Liabilities
-------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 10,045,109
-------------------------------------------------------------------------------------------
Payable for securities purchased 329,637,161
-------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 8,026,873
-------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 6,596,903
-------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 1,360,349
-------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 187,982
-------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 3,711
-------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,865,613
-------------------------------------------------------------------------------------------
TBA sales commitments, at value (proceeds receivable $21,347,480) (Note 1) 21,494,916
-------------------------------------------------------------------------------------------
Collateral on securities loaned, at value (Note 1) 57,914,300
-------------------------------------------------------------------------------------------
Other accrued expenses 253,378
-------------------------------------------------------------------------------------------
Total liabilities 437,386,295
-------------------------------------------------------------------------------------------
Net assets $5,434,292,273
Represented by
-------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $5,170,077,820
-------------------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (223,657)
-------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions (Note 1) 40,855,315
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
assets and liabilities in foreign currencies 223,582,795
-------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $5,434,292,273
Computation of net asset value and offering price
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($3,176,286,589 divided by 184,235,350 shares) $17.24
-------------------------------------------------------------------------------------------
Offering price per class A share (100/94.25 of $17.24)* $18.29
-------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($1,199,676,062 divided by 70,272,694 shares)** $17.07
-------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($37,452,757 divided by 2,182,262 shares)** $17.16
-------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($252,801,949 divided by 14,801,128 shares) $17.08
-------------------------------------------------------------------------------------------
Offering price per class M share (100/96.50 of $17.08)* $17.70
-------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share
($768,074,916 divided by 44,448,630 shares) $17.28
-------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000
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.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Year ended July 31, 2001
<S> <C>
Investment income:
-------------------------------------------------------------------------------------------
Interest $150,980,285
-------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $365,120) 61,964,917
-------------------------------------------------------------------------------------------
Security lending 12,712
-------------------------------------------------------------------------------------------
Total investment income 212,957,914
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 25,688,344
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 7,960,741
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 63,774
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 39,042
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 7,863,921
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 11,958,102
-------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 283,239
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 1,794,937
-------------------------------------------------------------------------------------------
Other 1,709,735
-------------------------------------------------------------------------------------------
Total expenses 57,361,835
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (1,090,562)
-------------------------------------------------------------------------------------------
Net expenses 56,271,273
-------------------------------------------------------------------------------------------
Net investment income 156,686,641
-------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 139,500,876
-------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Notes 1) 23,189,770
-------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 492,061
-------------------------------------------------------------------------------------------
Net realized loss on swap contracts (1,922,011)
-------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities
in foreign currencies during the year 309
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments, TBA sale
commitments and futures contracts during the year 312,597,591
-------------------------------------------------------------------------------------------
Net gain on investments 473,858,596
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $630,545,237
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended July 31
---------------------------------
2001 2000
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 156,686,641 $ 184,740,088
--------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions 161,260,696 (115,233,196)
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments
and assets and liabilities in foreign currencies 312,597,900 (421,232,052)
--------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 630,545,237 (351,725,160)
--------------------------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
--------------------------------------------------------------------------------------------------
From net investment income
Class A (99,576,511) (119,663,388)
--------------------------------------------------------------------------------------------------
Class B (29,391,469) (38,122,667)
--------------------------------------------------------------------------------------------------
Class C (673,390) (340,503)
--------------------------------------------------------------------------------------------------
Class M (6,471,915) (7,594,187)
--------------------------------------------------------------------------------------------------
Class Y (23,787,314) (26,741,220)
--------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (1,110,037) (260,498,942)
--------------------------------------------------------------------------------------------------
Class B (428,151) (111,069,452)
--------------------------------------------------------------------------------------------------
Class C (11,764) (705,260)
--------------------------------------------------------------------------------------------------
Class M (89,049) (19,910,206)
--------------------------------------------------------------------------------------------------
Class Y (263,181) (55,204,857)
--------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (105,930,074) (554,176,297)
--------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 362,812,382 (1,545,752,139)
Net assets
--------------------------------------------------------------------------------------------------
Beginning of year 5,071,479,891 6,617,232,030
--------------------------------------------------------------------------------------------------
End of year (including distribution in excess
of and undistributed net investment income
of $223,657 and $2,979,175, respectively) $5,434,292,273 $5,071,479,891
--------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS A
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended July 31
-----------------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $15.77 $18.49 $18.82 $18.95 $15.82
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income .52(a) .55(a) .57(a) .60 .60(a)
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.49 (1.44) .90 1.08 4.11
-----------------------------------------------------------------------------------------------------
Total from
investment operations 2.01 (.89) 1.47 1.68 4.71
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.53) (.58) (.55) (.60) (.67)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (.01) (1.25) (1.25) (1.21) (.91)
-----------------------------------------------------------------------------------------------------
Total distributions (.54) (1.83) (1.80) (1.81) (1.58)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.24 $15.77 $18.49 $18.82 $18.95
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 12.86 (5.09) 8.33 9.53 31.52
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,176,287 $3,030,281 $3,937,264 $3,387,620 $2,607,562
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .92 .93 .93 1.00 1.06
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.11 3.32 3.10 3.11 3.51
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 333.46 140.92 127.68 126.19 134.80
-----------------------------------------------------------------------------------------------------
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during the
period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through brokerage service and expense offset
arrangements (Note 2).
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS B
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended July 31
-----------------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $15.62 $18.33 $18.67 $18.82 $15.74
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income .39(a) .42(a) .43(a) .46 .46(a)
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.48 (1.43) .90 1.07 4.08
-----------------------------------------------------------------------------------------------------
Total from
investment operations 1.87 (1.01) 1.33 1.53 4.54
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.41) (.45) (.42) (.47) (.55)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (.01) (1.25) (1.25) (1.21) (.91)
-----------------------------------------------------------------------------------------------------
Total distributions (.42) (1.70) (1.67) (1.68) (1.46)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.07 $15.62 $18.33 $18.67 $18.82
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 12.02 (5.82) 7.55 8.72 30.46
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1,199,676 $1,175,947 $1,641,515 $1,305,897 $888,666
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.67 1.68 1.68 1.75 1.81
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.36 2.57 2.35 2.37 2.74
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 333.46 140.92 127.68 126.19 134.80
-----------------------------------------------------------------------------------------------------
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during the
period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through brokerage service and expense offset
arrangements (Note 2).
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS C
---------------------------------------------------------------------------
For the period
Per-share July 26, 1999+
operating performance Year ended July 31 to July 31
---------------------------------------------------------------------------
2001 2000 1999
---------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $15.71 $18.49 $18.76
---------------------------------------------------------------------------
Investment operations
---------------------------------------------------------------------------
Net investment income (loss)(a) .39 .42 --(b)
---------------------------------------------------------------------------
Net realized and unrealized
loss on investments 1.49 (1.44) (.27)
---------------------------------------------------------------------------
Total from
investment operations 1.88 (1.02) (.27)
---------------------------------------------------------------------------
Less distributions:
---------------------------------------------------------------------------
From net
investment income (.42) (.51) --
---------------------------------------------------------------------------
From net realized gain
on investments (.01) (1.25) --
---------------------------------------------------------------------------
Total distributions (.43) (1.76) --
---------------------------------------------------------------------------
Net asset value,
end of period $17.16 $15.71 $18.49
---------------------------------------------------------------------------
Total return at
net asset value (%)(c) 12.02 (5.82) (1.44)*
---------------------------------------------------------------------------
Ratios and supplemental data
---------------------------------------------------------------------------
Net assets, end of period
(in thousands) $37,453 $20,642 $565
---------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(d) 1.67 1.68 .03*
---------------------------------------------------------------------------
Ratio of net investment income (loss)
to average net assets (%) 2.32 2.60 (.03)*
---------------------------------------------------------------------------
Portfolio turnover (%) 333.46 140.92 127.68
---------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during the
period.
(b) Net investment income (loss) was less than $0.01 per share.
(c) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(d) Includes amounts paid through brokerage service and expense offset
arrangements (Note 2).
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS M
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended July 31
-----------------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $15.63 $18.33 $18.67 $18.82 $15.74
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income .43(a) .46(a) .47(a) .51 .53(a)
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.48 (1.42) .90 1.06 4.06
-----------------------------------------------------------------------------------------------------
Total from
investment operations 1.91 (.96) 1.37 1.57 4.59
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.45) (.49) (.46) (.51) (.60)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (.01) (1.25) (1.25) (1.21) (.91)
-----------------------------------------------------------------------------------------------------
Total distributions (.46) (1.74) (1.71) (1.72) (1.51)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.08 $15.63 $18.33 $18.67 $18.82
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 12.31 (5.52) 7.80 8.98 30.83
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $252,802 $223,246 $293,336 $276,962 $187,475
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) 1.42 1.43 1.43 1.50 1.56
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.60 2.82 2.61 2.62 3.05
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 333.46 140.92 127.68 126.19 134.80
-----------------------------------------------------------------------------------------------------
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during the
period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through brokerage service and expense offset
arrangements (Note 2).
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a common share outstanding throughout the period)
CLASS Y
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended July 31
-----------------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $15.80 $18.53 $18.85 $18.98 $15.85
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income .56(a) .60(a) .62(a) .64 .64(a)
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments 1.50 (1.46) .91 1.09 4.11
-----------------------------------------------------------------------------------------------------
Total from
investment operations 2.06 (.86) 1.53 1.73 4.75
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.57) (.62) (.60) (.65) (.71)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments (.01) (1.25) (1.25) (1.21) (.91)
-----------------------------------------------------------------------------------------------------
Total distributions (.58) (1.87) (1.85) (1.86) (1.62)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $17.28 $15.80 $18.53 $18.85 $18.98
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(b) 13.18 4.89 8.63 9.79 31.78
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $768,075 $621,363 $744,552 $471,176 $356,251
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .67 .68 .68 .75 .81
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 3.35 3.57 3.33 3.37 3.74
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 333.46 140.92 127.68 126.19 134.80
-----------------------------------------------------------------------------------------------------
(a) Per share net investment income (loss) has been determined on the
basis of the weighted average number of shares outstanding during the
period.
(b) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c) Includes amounts paid through brokerage service and expense offset
arrangements (Note 2).
</TABLE>
NOTES TO FINANCIAL STATEMENTS
July 31, 2001
Note 1
Significant accounting policies
The George Putnam Fund of Boston (the "fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The fund seeks to provide a balanced
investment 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 and class Y shares.
Class A shares are sold with a maximum front-end sales charge of 5.75%.
Class B shares, which convert to class A shares after approximately
eight years, do not pay a front-end sales charge but pay a higher
ongoing distribution fee than class A shares, and are subject to a
contingent deferred sales charge, if those shares are redeemed within
six years of purchase. Class C shares are subject to the same fees and
expenses as class B shares, except that class C shares have a one-year
1.00% contingent deferred sales charge and do not convert to class A
shares. Class M shares are sold with a maximum front end sales charge of
3.50% and pay an ongoing distribution fee that is higher than class A
shares but lower than class B and class C shares. Class Y shares, which
are sold at net asset value, are generally subject to the same expenses
as class A, class B, class C and class M shares, but do not bear a
distribution fee. Class Y shares are sold to defined contribution plans
that invest at least $150 million in a combination of Putnam funds and
other accounts managed by affiliates of Putnam Investment Management,
LLC ("Putnam Management"), the fund's manager, a wholly-owned subsidiary
of Putnam Investments, LLC.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own 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 that fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with accounting principles generally accepted in the United States of
America and requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities in the financial
statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results could
differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sales price on its principal exchange, or if no sales
are reported -- as in the case of some securities traded
over-the-counter -- the last reported bid price. Securities quoted in
foreign currencies are translated into U.S. dollars at the current
exchange rate. Short-term investments having remaining maturities of 60
days or less are stated at amortized cost, which approximates market
value. Other investments, including restricted securities, are stated at
fair value following procedures approved by the Trustees. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by an independent pricing service or dealers,
approved by the Trustees, which determine valuations for normal
institutional-size trading units of such securities using methods based
on market transactions for comparable securities and variable
relationships between securities that are generally recognized by
institutional traders.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Management. These balances may be invested in one or more
repurchase agreements and/or short-term money market instruments.
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 accounted for 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 is
recorded on the ex-dividend date except that certain dividends from
foreign securities are recorded as soon as the fund is informed of the
ex-dividend date. Discounts on zero coupon bonds, original issue
discount bonds, stepped-coupon bonds and payment in kind bonds are
accreted according to the yield-to-maturity basis. Any premium resulting
from the purchase of corporate bonds is amortized on a yield-to-maturity
basis. Securities purchased or sold on a forward commitment or delayed
delivery basis may be settled a month or more after the trade date;
interest income is accrued based on the terms of the security. Losses
may arise due to changes in the market value of the underlying
securities or if the counterparty does not perform under the contract.
Non-cash dividends, if any, are recorded at the fair market value of the
securities received.
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 accrued 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 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 engage in 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.
G) Futures and options contracts The fund may use futures and options
contracts to hedge against changes in the values of securities the fund
owns or expects to purchase. The fund may also write options on
securities it owns or in which it may invest to increase its current
returns. The potential risk to the fund is that the change in value of
futures and options contracts may not correspond to the change in value
of the hedged instruments. In addition, losses may arise from changes in
the value of the underlying instruments, if there is an illiquid
secondary market for the contracts, or if the counterparty to the
contract is unable to perform. 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.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. 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.
H) Equity swap contracts The fund may engage in equity swap agreements,
which are arrangements to exchange the return generated by one
instrument for the return generated by another instrument. To manage its
exposure to equity markets the fund may enter into equity swap
agreements, which involve a commitment by one party to pay interest in
exchange for a market-linked return 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, respectively. Equity swaps 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
at the end of the measurement period are recorded as realized gains or
losses. 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.
I) TBA purchase commitments The fund may enter into "TBA" (to be
announced) purchase commitments to purchase securities for a fixed unit
price at a future date beyond customary settlement time. Although the
unit price has been established, the principal value has not been
finalized. However, the amount of the commitments will not fluctuate
more than .01% 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 in themselves, and
involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date, which risk is in addition to the
risk of decline in the value of the fund's other assets. Unsettled TBA
purchase commitments are valued at the current market value of the
underlying securities, according to the procedures described under
"Security valuation" above. Although the fund will generally enter into
TBA purchase commitments with the intention of acquiring securities for
their 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.
J) 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 the current market 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.
K) Security lending The fund may lend securities, through its agent
Citibank N.A., 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 Citibank N.A., 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, 2001, the value of
securities loaned amounted to $56,358,697. The fund received cash
collateral of $57,914,300 which is pooled with collateral of other
Putnam funds into 48 issuers of high grade short-term investments.
L) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintains an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the year ended
July 31, 2001, the fund had no borrowing against the line of credit.
M) 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 applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986, 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.
N) 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, post October loss deferrals, nontaxable dividends, defaulted
bond interest, realized and unrealized gains and losses on certain
futures contracts, paydown gains and losses on mortgage-backed
securities, market discount, interest on payment-in-kind securities,
straddle loss deferrals and income on swap securities. Reclassifications
are made to the fund's capital accounts to reflect income and gains
available for distribution (or available capital loss carryovers) under
income tax regulations. For the year ended July 31, 2001, the fund
reclassified $11,126 to decrease distributions in excess of net
investment income and $393,641 to decrease paid-in-capital, with an
increase to accumulated net realized gains of $382,515. The calculation
of net investment income per share in the financial highlights table
excludes these adjustments.
Note 2
Management fee, administrative
services, and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid 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, 0.38% thereafter.
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 Investments, LLC.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
Under the subcustodian contract between the subcustodian bank and PFTC,
the subcustodian bank has a lien on the securities of the fund to the
extent permitted by the fund's investment restrictions to cover any
advances made by the subcustodian bank for the settlement of securities
purchased by the fund. At July 31, 2001, the payable to the subcustodian
bank represents the amount due for cash advance for the settlement of a
security purchased.
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. For the year ended July 31, 2001, the
fund's expenses were reduced by $1,090,562 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $3,274 has been allocated to the fund, and an additional fee for
each Trustees meeting attended. Trustees receive additional fees for
attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan")
which allows the Trustees to defer the receipt of all or a portion of
Trustees Fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with
the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have
served as a Trustee for at least five years. Benefits under the Pension
Plan are equal to 50% of the Trustee's average total retainer and
meeting fees for the three years preceding retirement. Pension expense
for the fund is included in Compensation of Trustees in the Statement of
operations. Accrued pension liability is included in Payable for
compensation of Trustees in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to
its class A, class B, class C and class M 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
Investments LLC and Putnam Retail Management GP, Inc., for services
provided and expenses incurred by it in distributing shares of the fund.
The Plans provide for payments by the fund to Putnam Retail Management
at an annual rate up to 0.35%, 1.00%, 1.00% and 1.00% of the average net
assets attributable to class A, class B, class C and class M shares,
respectively. The Trustees have approved payment by the fund at an
annual rate of 0.25%, 1.00%, 1.00% and 0.75% of the average net assets
attributable to class A, class B, class C and class M shares,
respectively.
For the year ended July 31, 2001, Putnam Retail Management, acting as
underwriter received net commissions of $867,247 and $12,701 from the
sale of class A and class M shares, respectively, and received
$2,055,738 and $7,076 in contingent deferred sales charges from
redemptions of class B and class C shares, respectively. A deferred
sales charge of up to 1% is assessed on certain redemptions of class A
shares. For the year ended July 31, 2001, Putnam Retail Management,
acting as underwriter received $21,761 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended July 31, 2001, cost of purchases and proceeds from
sales of investment securities other than U.S. government obligations
and short-term investments aggregated $8,252,206,363 and $8,523,156,333
respectively. Purchases and sales of U.S. government obligations
aggregated $8,813,186,511 and $8,676,909,432, respectively.
Note 4
Capital shares
At July 31, 2001, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Year ended July 31, 2001
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 40,741,462 $ 687,242,385
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,902,524 99,705,341
---------------------------------------------------------------------------
46,643,986 786,947,726
Shares
repurchased (54,554,286) (920,648,179)
---------------------------------------------------------------------------
Net decrease (7,910,300) $(133,700,453)
---------------------------------------------------------------------------
Year ended July 31, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 48,396,764 $ 803,147,003
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 21,399,667 354,500,796
---------------------------------------------------------------------------
69,796,431 1,157,647,799
Shares
repurchased (90,615,063) (1,484,068,506)
---------------------------------------------------------------------------
Net decrease (20,818,632) $ (326,420,707)
---------------------------------------------------------------------------
Year ended July 31, 2001
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 11,797,739 $ 197,620,503
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,670,131 27,938,692
---------------------------------------------------------------------------
13,467,870 225,559,195
Shares
repurchased (18,472,064) (307,492,091)
---------------------------------------------------------------------------
Net decrease (5,004,194) $ (81,932,896)
---------------------------------------------------------------------------
Year ended July 31, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 15,255,730 $ 254,308,810
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,560,716 140,755,068
---------------------------------------------------------------------------
23,816,446 395,063,878
Shares
repurchased (38,117,467) (614,767,009)
---------------------------------------------------------------------------
Net decrease (14,301,021) $(219,703,131)
---------------------------------------------------------------------------
Year ended July 31, 2001
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 1,218,314 $20,514,563
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 38,991 658,541
---------------------------------------------------------------------------
1,257,305 21,173,104
Shares
repurchased (388,740) (6,502,776)
---------------------------------------------------------------------------
Net increase 868,565 $14,670,328
---------------------------------------------------------------------------
Year ended July 31, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 1,466,937 $24,475,924
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 62,168 1,016,777
---------------------------------------------------------------------------
1,529,105 25,492,701
Shares
repurchased (245,991) (3,958,787)
---------------------------------------------------------------------------
Net increase 1,283,114 $21,533,914
---------------------------------------------------------------------------
Year ended July 31, 2001
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 3,702,786 $ 62,108,571
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 386,039 6,462,872
---------------------------------------------------------------------------
4,088,825 68,571,443
Shares
repurchased (3,571,223) (59,738,719)
---------------------------------------------------------------------------
Net increase 517,602 $ 8,832,724
---------------------------------------------------------------------------
Year ended July 31, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 3,284,577 $ 54,757,342
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,656,440 27,222,018
---------------------------------------------------------------------------
4,941,017 81,979,360
Shares
repurchased (6,659,619) (107,991,397)
---------------------------------------------------------------------------
Net decrease (1,718,602) $ (26,012,037)
---------------------------------------------------------------------------
Year ended July 31, 2001
---------------------------------------------------------------------------
Class Y Shares Amount
---------------------------------------------------------------------------
Shares sold 15,602,604 $ 263,525,503
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,422,240 24,050,495
---------------------------------------------------------------------------
17,024,844 287,575,998
Shares
repurchased (11,892,032) (201,375,775)
---------------------------------------------------------------------------
Net increase 5,132,812 $ 86,200,223
---------------------------------------------------------------------------
Year ended July 31, 2000
---------------------------------------------------------------------------
Class Y Shares Amount
---------------------------------------------------------------------------
Shares sold 17,786,628 $ 299,853,993
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 4,984,958 81,946,077
---------------------------------------------------------------------------
22,771,586 381,800,070
Shares
repurchased (23,642,911) (385,374,406)
---------------------------------------------------------------------------
Net decrease (871,325) $ (3,574,336)
---------------------------------------------------------------------------
Note 5
New accounting pronouncement
In November 2000, the AICPA issued a revised Audit and Accounting Guide,
Audits of Investment Companies, which is effective for fiscal years
beginning after December 15, 2000. The revised Guide will require the
fund to amortize premium and accrete discount on all fixed-income
securities, and classify as interest income gains and losses realized on
paydowns on mortgage-backed securities which are presently included in
realized gain/loss. Adopting these accounting principles will not affect
the fund's net asset value, but will change the classification of
certain amounts between interest income and realized and unrealized
gain/loss in the Statement of operations. The adoption of this principle
will not be material to the financial statements.
FEDERAL TAX INFORMATION
(Unaudited)
The fund has designated 38.03% of the distributions from net investment
income as qualifying for the dividends received deduction for
corporations.
Pursuant to Section 852 of the Internal Revenue Code, as amended, the
Fund hereby designates $71,356,623 as long term capital gain, for its
taxable year ended July 31, 2001.
The Form 1099 you receive in January 2002 will show the tax status of
all distributions paid to your account in calendar 2001.
FUND INFORMATION
WEB SITE
www.putnaminvestments.com
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
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRUSTEES
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
President
Charles E. Porter
Executive Vice President and Treasurer
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
Thomas V. Reilly
Vice President
Deborah F. Kuenster
Vice President
Jeanne L. Mockard
Vice President and Fund Manager
Jeffrey L. Knight
Vice President and Fund Manager
James M. Prusko
Vice President and Fund Manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
This report is for the information of shareholders of The George Putnam
Fund of Boston. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary and
Putnam's Quarterly Ranking Summary. For more information or to request a
prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' Web site:
www.putnaminvestments.com.
NOT FDIC INSURED, MAY LOSE VALUE, NO BANK GUARANTEE
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
---------------------
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
AN021-74757 001/880/242/505/ 9/01
PUTNAM INVESTMENTS [SCALE LOGO OMITTED]
----------------------------------------------------------------------------
George Putnam Fund of Boston
Supplement to annual Report dated 7/31/01
The following information has been prepared to provide class Y shareholders
with a performance overview specific to their holdings. Class Y shares are
offered exclusively to defined contribution plans investing $150 million or
more in one or more of Putnam's funds or private accounts. Performance of
class Y shares, which incur neither a front-end load, distribution fee, nor
contingent deferred sales charge, will differ from performance of class A,
B, C, and M shares, which are discussed more extensively in the annual
report.
ANNUAL RESULTS AT A GLANCE
----------------------------------------------------------------------------
Total return for periods ended 7/31/01
NAV
1 year 13.18%
5 years 69.19%
Annual average 11.09%
10 years 194.18%
Annual average 11.39%
Life of fund (since class A inception, 11/15/37)
Annual average 9.79%
Share value: NAV
7/31/00 $15.77
7/31/01 $17.28
----------------------------------------------------------------------------
Distributions: No. Income Capital gains Total
4 $0.572 $0.010 $0.582
----------------------------------------------------------------------------
Please note that past performance is not indicative of future results. More
recent returns may be more or less than those shown. Returns shown for
class Y shares for periods prior to their inception 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. These
returns have not been adjusted to reflect differences in operating expenses
which, for class Y shares, typically are lower than the operating
expenses applicable to class A shares. All returns assume reinvestment of
distributions at net asset value. Investment return and principal value
will fluctuate so your shares, when redeemed, may be worth more or less
than their original cost. See full report for information on comparative
benchmarks. If you have questions, please consult your fund prospectus or
call Putnam toll free at 1-800-752-9894.
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