N-CSR 1 gpf1.txt THE GEORGE PUTNAM FUND OF BOSTON The George Putnam Fund of Boston Item 1. Report to Stockholders: ------------------------------- The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940: SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK 1-31-05 [GRAPHIC OMITTED: SCALES] [SCALE LOGO OMITTED] From the Trustees [GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM, III] John A. Hill and George Putnam, III Dear Fellow Shareholder: During the past several months, Putnam has introduced a number of reforms for the benefit of shareholders, including increasing the amount of disclosure for our funds. We are now including additional disclosure about your fund's management team. Following the Outlook for Your Fund, we provide manager compensation information that pertains to your fund and list any changes in your fund's Portfolio Leader and Portfolio Members during the prior year period, as well as these individuals' other fund management responsibilities at Putnam. We also show how much these individuals have invested in the fund (in dollar ranges), and fund ownership (in dollar ranges) is also shown for the members of Putnam's Executive Board. In equity fund reports, we now list the largest brokerage relationships of your fund following the Notes to the Financial Statements. Finally, on page 19, we provide certain information about the most recent approval of your fund's management contract with Putnam by the Trustees. We are also pleased to announce that three new Trustees have joined your fund's Board of Trustees. Nominated by your fund's independent Trustees, these individuals have had outstanding careers as leaders in the investment management industry. Myra R. Drucker is a Vice Chair of the Board of Trustees of Sarah Lawrence College and serves as ex-officio member and past Chair of the New York Stock Exchange (NYSE) Pension Managers Advisory Committee and as a Trustee of Commonfund, a not-for-profit asset management firm. Richard B. Worley is Managing Partner of Permit Capital LLC, an investment management firm. Both Ms. Drucker and Mr. Worley are independent Trustees (i.e., Trustees who are not "interested persons" of your fund or its investment advisor). Charles E. Haldeman, Jr., the third new Trustee, is President and Chief Executive Officer of Putnam Investments. We also announce the departure of one of your fund's Trustees, A.J.C. Smith, formerly Chairman of Putnam Investments and Consultant to Marsh & McLennan Companies, Inc. In the following pages, your fund's management team discusses performance, strategy, and its outlook for the remainder of fiscal 2005. Respectfully yours, /S/ JOHN A. HILL /S/ GEORGE PUTNAM, III John A. Hill George Putnam, III Chairman of the Trustees President of the Funds March 16, 2005 Report from Fund Management Fund highlights * For the semiannual period ended January 31, 2005, The George Putnam Fund of Boston's class A shares returned 6.87% without sales charges and 1.24% with maximum sales charges reflected. * Over the same period, the fund's equity benchmark, the S&P 500/Barra Value Index, returned 10.47%. * The fund's bond benchmark, the Lehman Aggregate Bond Index, returned 3.81% over the same period. * The fund's custom blended benchmark, intended to provide a suitable performance target for a balanced fund, is made up of 60% S&P 500/Barra Value Index and 40% Lehman Aggregate Bond Index. It returned 7.85%. * The average return of the fund's peer group, Lipper Balanced Funds, was 6.88%. * See the Performance Summary beginning on page 10 for additional fund performance, comparative performance, and Lipper data. Performance commentary During your fund's semiannual period, a number of factors tugged the financial markets in opposite directions. The George Putnam Fund of Boston navigated the changing markets fairly well. Its balanced portfolio of stocks and bonds performed in line with the average of its peer group, Lipper Balanced Funds. However, the portfolio's emphasis on large-capitalization stocks held back performance, relative to its equity benchmark, as the market continued to favor small- and mid-cap stocks. Your fund's emphasis on solid companies with mid-range yields produced some underperformance relative to its equity benchmark, as the market favored stocks offering low or no yields. The fund did outperform its fixed-income benchmark (based on results at NAV). -------------------------------------------------- TOTAL RETURN FOR PERIODS ENDED 1/31/05 -------------------------------------------------- Class A (inception 11/5/37) NAV POP -------------------------------------------------- 6 months 6.87% 1.24% -------------------------------------------------- 1 year 6.17 0.60 -------------------------------------------------- 5 years 29.81 23.00 Annual average 5.36 4.23 -------------------------------------------------- 10 years 151.31 138.15 Annual average 9.65 9.06 -------------------------------------------------- Annual average (life of fund) 9.43 9.35 -------------------------------------------------- Data is historical. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate and you may have a gain or a loss when you sell your shares. Performance assumes reinvestment of distributions and does not account for taxes. Returns at NAV do not reflect a sales charge of 5.25%. For the most recent month-end performance, visit www.putnaminvestments.com. A short-term trading fee of up to 2% may apply. FUND PROFILE The George Putnam Fund of Boston seeks to provide a balanced investment composed of a well-diversified portfolio of stocks and bonds that produce both capital growth and current income. The fund targets attractively priced stocks of large, established, dividend-paying companies that are poised to experience positive change and improved financial performance. The bond portion is a diversified mix of investment-grade securities. The fund may be appropriate for investors seeking current income and long-term growth from a balanced investment. Market overview Between August 2004 and January 2005, the first half of your fund's fiscal year, the investing environment exhibited three distinctly different climates. From August 1 through November's U.S. presidential election, the market reflected a great deal of investor uncertainty. In fact, despite rising interest rates, bonds outperformed stocks in August, signaling investors' high level of risk aversion. The possibility of a terrorist incident caused concern in the weeks before Election Day, as did concerns that voting systems and polling equipment would be sub-par, or the election's outcome indecisive. Sustained high oil prices and rising interest rates deepened investor worries about the health of the stock market. As a result, investors focused on defensive stocks during this period. After voters handed Bush a decisive victory, relieved investors soon switched to more aggressive and speculative opportunities. The stock market rallied and posted strong gains through the end of the calendar year. In January, amid slower economic growth and stubbornly high energy prices, investor enthusiasm waned and the stock market produced negative returns. Large-capitalization stocks fared better than small caps and reversed a long-standing trend of small-cap outperformance. Value stocks once again outpaced growth stocks in January. The U.S. dollar continued to be weak relative to foreign currencies, but inflation appeared to be under control. ------------------------------------------------------------------------------- MARKET SECTOR PERFORMANCE 6 MONTHS ENDED 1/31/05 ------------------------------------------------------------------------------- Equities ------------------------------------------------------------------------------- S&P 500/Barra Value Index (large-company value stocks) 10.47% ------------------------------------------------------------------------------- Russell 2000 Growth Index (small-company growth stocks) 13.48% ------------------------------------------------------------------------------- Russell 2000 Value Index (small-company value stocks) 14.24% ------------------------------------------------------------------------------- Russell 1000 Index (large-company stocks) 8.92% ------------------------------------------------------------------------------- Bonds ------------------------------------------------------------------------------- Lehman Aggregate Bond Index (broad bond market) 3.81% ------------------------------------------------------------------------------- JP Morgan Global High Yield Index (global high-yield corporate bonds) 7.72% ------------------------------------------------------------------------------- Lehman Government Bond Index (U.S. Treasury and agency securities) 3.30% ------------------------------------------------------------------------------- These indexes provide an overview of performance in different market sectors for the six months ended 1/31/05. ------------------------------------------------------------------------------- Strategy overview The overarching themes that had influenced our decisions in the prior fiscal year retained their importance. One such theme was our belief that consumer spending would weaken as the beneficial effects of last year's tax relief began to trail off and as rising interest rates slowed the pace of mortgage refinancing. Accordingly, we deemphasized consumer-oriented stocks and focused on stocks and sectors we thought could benefit from an increase in corporate capital spending. We targeted stocks offering attractive dividend yields, and generally avoided riskier, high-yielding stocks and stocks with little or no yield. As the semiannual period began, the fund's asset allocation stood at 60% stocks, 35% bonds, and 5% cash. This bond weighting, somewhat lighter than our neutral 40% bond weighting, seemed prudent to us, given the rising-rate environment. After the November presidential election, stocks rallied so strongly that they pushed the portfolio's equity allocation up to about 63%. In early January, we rebalanced the portfolio to bring the equity exposure back to about 60% of assets. With regard to the fund's bond holdings, we positioned overall duration to be shorter than that of the index, which means the portfolio was less sensitive to changes in interest rates. (Bond prices move in the opposite direction of interest rates.) This helped protect portfolio value through the ongoing series of Fed rate hikes. [GRAPHIC OMITTED: horizontal bar chart PORTFOLIO COMPOSITION COMPARED] PORTFOLIO COMPOSITION COMPARED as of 7/31/04 as of 1/31/05 Common stocks 60.5% 58.6% U.S. government and agency securities 26.1% 17.8% Short-term investments 8.1% 16.2% Asset-backed securities 5.4% 8.9% Corporate bonds 7.5% 6.6% Collateralized mortgage obligations 5.6% 6.2% Convertible preferred stocks 0.6% 0.7% U.S. Treasury obligations 0.1% 0.4% Other 0.3% 0.2% Footnote reads: This chart shows how the fund's top weightings have changed over the last six months. Weightings are shown as a percentage of net assets. Holdings will vary over time. How fund holdings affected performance Individual stock selection proved to be an important contributor to results during the period. The phrase "stock selection" also encompasses the team's decisions about which stocks not to purchase. And in fact, over this period the best contributors to performance, relative to the fund's benchmark, were stocks that the fund did not own, or those in which it held underweighted positions. For example, for a short period of time we had a relatively small position in Merck, which manufactures the arthritis drug Vioxx. Merck shares fell precipitously after it was learned that people using the drug were more likely to suffer heart disease. The portfolio also had an underweighted position in Ford, which suffered along with other U.S. auto makers from weak demand and stiff competition from foreign auto manufacturers. An underweight position in SBC was beneficial as the prospects for Regional Bell operating companies looked increasingly bleak. Competition from wireless and Internet phone service providers continues to threaten the profitability of the Regional Bells, whose infrastructure emphasizes traditional land lines. The Bells' comeback strategy has not yet been successful at turning the tide in their favor. The fund not only owned, but had an overweighted position, relative to the benchmark, in Altria. As the litigation environment for tobacco companies improved during the period, shares of Altria appreciated, which helped the fund's return. Masco, which manufactures a variety of home improvement products such as cabinetry, plumbing, paints, and stains, focused its efforts on returning value to its shareholders. This strategy was very successful and Masco's stock performed well. The fund maintained an overweighted position relative to the benchmark. Shares of Tyco continued to perform well, as the company's multiple business units have benefited from new management and effective strategies. [GRAPHIC OMITTED: TOP EQUITY HOLDINGS] TOP EQUITY HOLDINGS (Percent of fund's net assets as of 1/31/05) 1 ExxonMobil Corp. (3.0%) Oil and gas 2 Citigroup, Inc. (2.7%) Banking 3 Altria Group, Inc. (1.7%) Tobacco 4 ChevronTexaco Corp. (1.7%) Oil and gas 5 Bank of America Corp. (1.6%) Banking 6 Hewlett-Packard Co. (1.3%) Computers 7 Tyco International, Ltd. (Bermuda) (1.3%) Conglomerates 8 U.S. Bancorp (1.2%) Banking 9 JPMorgan Chase & Co. (1.2%) Investment banking/brokerage 10 General Electric Co. (1.2%) Conglomerates Footnote reads: The fund's holdings will change over time. Hewlett-Packard was among the portfolio's weakest performers. The stock has underperformed our expectations for some time, but we maintained a position because we believe the share price has been well below the company's intrinsic value, and the fund's position offered a lot of appreciation potential. Also, we believed that the market would react favorably to a management change. Shortly after the semiannual period closed, HP replaced its CEO, Carly Fiorina, and the market signaled its approval by driving up the stock price. Pfizer shares were also weak and dampened the fund's returns. Pfizer's arthritis drug, Celebrex, was thrown under the same harsh spotlight as Merck's Vioxx, although Pfizer chose to leave its drug on the shelves, claiming that patients incapacitated by crippling arthritis might well choose to accept the risk associated with the drug. We believe the stock is quite undervalued at this point, and have maintained a position. Fannie Mae, the mortgage reseller, underperformed amid an accounting controversy. We believe that the stock will recover in time. We also view it as an exceptional value. Please note that all holdings discussed in this report are subject to review in accordance with the fund's investment strategy and may vary in the future. The outlook for your fund The following commentary reflects anticipated developments that could affect your fund over the next six months, as well as your management teams' plans for responding to them. We anticipate that the economy will continue to grow at a moderate pace with only mild inflation in the coming six months. Though high oil prices and rising interest rates may cloud the horizon, we believe that interest rates on short-term debt will increase more than those for longer-maturity debt, causing the yield curve -- a graphical representation of bond yields of all maturities -- to flatten. Should this occur, it is likely to dampen consumer borrowing and spending, but would be more manageable for large companies embarking on long-term capital improvements. In our view, the environment will favor large-cap companies, the stocks of which appear attractively valued relative to small and mid caps that have enjoyed substantial gains. If we are right, this would be beneficial for your fund, which emphasizes large-cap stocks. In recent months, the market has been choppy and strong performers have included both defensive and aggressive stocks. Sectors that typically move in tandem, such as basic materials and commodities, traced separate paths and, in our view, seem likely to continue to do so. For example, as this report is being written, we see market dynamics that are favorable for chemicals, but not for metals. Going forward, we think that generating positive results in the portfolio will depend more on understanding companies' individual strengths than on broad market trends. We believe that performance results will be tied to research quality, effective security selection, and asset allocation. We remain committed to the finding the best opportunities in the marketplace, among stocks and bonds. The market is not predictable, nor does it always exhibit common sense. For this reason we believe that maintaining a well-diversified portfolio of stocks and bonds is important for risk reduction. Having said that, we believe that economic and market factors are currently quite conducive to investing in a balanced fund. In a slower-growth environment, yields from a combination of stock dividends and bond interest income may account for a large portion of investors' total returns. You can be assured that we are focused on helping you pursue your long-term financial goals through disciplined investment management. -------------------------------------------------------------------------- The views expressed in this report are exclusively those of Putnam Management. They are not meant as investment advice. This fund may invest a portion of its assets in small and/or midsize companies. Such investments increase the risk of greater price fluctuations. This fund may have a significant portion of its holdings in bonds. Mutual funds that invest in bonds are subject to certain risks, including interest-rate risk, credit risk, and inflation risk. As interest rates rise, the prices of bonds fall. Long-term bonds are more exposed to interest-rate risk than short-term bonds. Unlike bonds, bond funds have ongoing fees and expenses. Your fund's management Your fund is managed by the members of the Putnam Large-Cap Value, Core Fixed-Income, and Global Asset Allocation teams. Jeanne Mockard is the Portfolio Leader of the fund. Kevin Cronin, Jeffrey Knight, and Raman Srivastava are Portfolio Members. The Portfolio Leader and Portfolio Members coordinate the teams' management of the fund. For a complete listing of the members of the Putnam Large-Cap Value, Core Fixed-Income, and Global Asset Allocation teams, including those who are not Portfolio Leaders or Portfolio Members of your fund, visit Putnam's Individual Investor Web site at www.putnaminvestments.com. Fund ownership The table below shows how much the fund's current Portfolio Leader and Portfolio Members have invested in the fund (in dollar ranges). Information shown is for the current and prior year ended January 31.
-------------------------------------------------------------------------------------------------------------- FUND PORTFOLIO LEADER AND PORTFOLIO MEMBERS -------------------------------------------------------------------------------------------------------------- $1 - $10,001 - $50,001 - $100,001 - $500,001 - $1,000,001 Year $0 $10,000 $50,000 $100,000 $500,000 $1,000,000 and over -------------------------------------------------------------------------------------------------------------- Jeanne Mockard 2005 * -------------------------------------------------------------------------------------------------------------- Portfolio Leader 2004 * -------------------------------------------------------------------------------------------------------------- Kevin Cronin 2005 * -------------------------------------------------------------------------------------------------------------- Portfolio Member 2004 * -------------------------------------------------------------------------------------------------------------- Jeffrey Knight 2005 * -------------------------------------------------------------------------------------------------------------- Portfolio Member 2004 * -------------------------------------------------------------------------------------------------------------- Raman Srivastava 2005 * -------------------------------------------------------------------------------------------------------------- Portfolio Member N/A --------------------------------------------------------------------------------------------------------------
N/A indicates the individual was not a Portfolio Leader or Portfolio Member as of 1/31/04. Fund manager compensation The total 2004 fund manager compensation that is attributable to your fund is approximately $1,900,000. This amount includes a portion of 2004 compensation paid by Putnam Management to the fund managers listed in this section for their portfolio management responsibilities, calculated based on the fund assets they manage as a percentage of the total assets they manage. The compensation amount also includes a portion of the 2004 compensation paid to the Chief Investment Officers of the teams and the Group Chief Investment Officers responsible for the fund's broader investment categories for their oversight responsibilities, calculated based on the fund assets they oversee taken as a percentage of the total assets they oversee. These percentages are determined as of the fund's fiscal period-end. For personnel who joined Putnam Management during or after 2004, the calculation reflects annualized 2004 compensation or an estimate of 2005 compensation, as applicable. Other Putnam funds managed by the Portfolio Leader and Portfolio Members Jeanne Mockard is also a Portfolio Member of Putnam Equity Income Fund. Kevin Cronin is also a Portfolio Leader of Putnam American Government Income Fund, Putnam Global Income Trust, Putnam Income Fund, Putnam Limited Duration Government Income Fund, and Putnam U.S. Government Income Trust. He is also a Portfolio Member of Putnam Equity Income Fund. Jeffrey Knight is also a Portfolio Leader of Putnam Asset Allocation Funds and Putnam RetirementReady Funds. Raman Srivastava is also a Portfolio Member of Putnam Income Fund. Jeanne Mockard, Kevin Cronin, Jeffrey Knight, and Raman Srivastava may also manage other accounts and variable trust funds advised by Putnam Management or an affiliate. Changes in your fund's Portfolio Leader and Portfolio Members During the year ended January 31, 2005, Portfolio Member Raman Srivastava joined your fund's management team. Fund ownership The table below shows how much the members of Putnam's Executive Board have invested in the fund (in dollar ranges). Information shown is for the current and prior year ended January 31.
------------------------------------------------------------------------------------------------------------- PUTNAM EXECUTIVE BOARD ------------------------------------------------------------------------------------------------------------- $1 - $10,001 - $50,001- $100,001 Year $0 $10,000 $50,000 $100,000 and over ------------------------------------------------------------------------------------------------------------- Philippe Bibi 2005 * ------------------------------------------------------------------------------------------------------------- Chief Technology Officer 2004 * ------------------------------------------------------------------------------------------------------------- John Boneparth 2005 * ------------------------------------------------------------------------------------------------------------- Head of Global Institutional Mgmt 2004 * ------------------------------------------------------------------------------------------------------------- Joshua Brooks N/A ------------------------------------------------------------------------------------------------------------- Deputy Head of Investments N/A ------------------------------------------------------------------------------------------------------------- Kevin Cronin 2005 * ------------------------------------------------------------------------------------------------------------- Head of Investments N/A ------------------------------------------------------------------------------------------------------------- Charles Haldeman, Jr. 2005 * ------------------------------------------------------------------------------------------------------------- President and CEO 2004 * ------------------------------------------------------------------------------------------------------------- Amrit Kanwal 2005 * ------------------------------------------------------------------------------------------------------------- Chief Financial Officer N/A ------------------------------------------------------------------------------------------------------------- Steven Krichmar 2005 * ------------------------------------------------------------------------------------------------------------- Chief of Operations N/A ------------------------------------------------------------------------------------------------------------- Francis McNamara, III 2005 * ------------------------------------------------------------------------------------------------------------- General Counsel N/A ------------------------------------------------------------------------------------------------------------- Richard Monaghan 2005 * ------------------------------------------------------------------------------------------------------------- Head of Retail Management 2004 * ------------------------------------------------------------------------------------------------------------- Richard Robie, III 2005 * ------------------------------------------------------------------------------------------------------------- Chief Administrative Officer N/A ------------------------------------------------------------------------------------------------------------- Edward Shadek N/A ------------------------------------------------------------------------------------------------------------- Deputy Head of Investments N/A -------------------------------------------------------------------------------------------------------------
N/A indicates the individual joined Putnam's Executive Board after the reporting date. Performance summary This section shows your fund's performance during the first half of its fiscal year, which ended January 31, 2005. In accordance with regulatory requirements, we also include performance for the most current calendar quarter-end. Performance should always be considered in light of a fund's investment strategy. Data represents past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate and you may have a gain or a loss when you sell your shares. For the most recent month-end performance, please visit www.putnaminvestments.com.
----------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN FOR PERIODS ENDED 1/31/05 ----------------------------------------------------------------------------------------------------------------------------- Class A Class B Class C Class M Class R (inception dates) (11/5/37) (4/27/92) (7/26/99) (12/1/94) (1/21/03) ----------------------------------------------------------------------------------------------------------------------------- NAV POP NAV CDSC NAV CDSC NAV POP NAV ----------------------------------------------------------------------------------------------------------------------------- 6 months 6.87% 1.24% 6.48% 1.48% 6.46% 5.46% 6.62% 2.87% 6.71% ----------------------------------------------------------------------------------------------------------------------------- 1 year 6.17 0.60 5.30 0.30 5.34 4.34 5.58 1.87 5.81 ----------------------------------------------------------------------------------------------------------------------------- 5 years 29.81 23.00 24.98 22.98 24.90 24.90 26.59 22.17 28.18 Annual average 5.36 4.23 4.56 4.22 4.55 4.55 4.83 4.09 5.09 ----------------------------------------------------------------------------------------------------------------------------- 10 years 151.31 138.15 132.99 132.99 132.94 132.94 138.96 130.58 145.15 Annual average 9.65 9.06 8.83 8.83 8.82 8.82 9.10 8.71 9.38 ----------------------------------------------------------------------------------------------------------------------------- Annual average (life of fund) 9.43 9.35 8.40 8.40 8.61 8.61 8.67 8.61 9.16 -----------------------------------------------------------------------------------------------------------------------------
Performance assumes reinvestment of distributions and does not account for taxes. Returns at public offering price (POP) for class A and M shares reflect a sales charge of 5.25% and 3.50%, respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter. Class C shares reflect a 1% CDSC the first year that is eliminated thereafter. Class R shares have no initial sales charge or CDSC. Performance for class B, C, M, and R shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and higher operating expenses for such shares. A 2% short-term trading fee may be applied to shares exchanged or sold within 5 days of purchase.
------------------------------------------------------------------------------------------------------------- COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 1/31/05 ------------------------------------------------------------------------------------------------------------- S&P 500/ Lehman George Lipper Barra Value Aggregate Putnam Balanced Funds Index Bond Index Blended Index category average* ------------------------------------------------------------------------------------------------------------- 6 months 10.47% 3.81% 7.85% 6.88% ------------------------------------------------------------------------------------------------------------- 1 year 10.93 4.16 8.35 5.12 ------------------------------------------------------------------------------------------------------------- 5 years 13.92 46.36 29.28 13.39 Annual average 2.64 7.92 5.27 2.36 ------------------------------------------------------------------------------------------------------------- 10 years 201.55 107.60 170.20 134.78 Annual average 11.67 7.58 10.45 8.77 ------------------------------------------------------------------------------------------------------------- Annual average (life of fund) --+ --+ --+ --+ -------------------------------------------------------------------------------------------------------------
Index and Lipper results should be compared to fund performance at net asset value. * Over the 6-month and 1-, 5-, and 10-year periods ended 1/31/05, there were 626, 578, 363, and 165 funds, respectively, in this Lipper category. + The benchmarks were not in existence at the time of the fund's inception. The S&P 500/Barra Value Index commenced 12/31/74. The Lehman Aggregate Bond Index commenced 12/31/75. The George Putnam Blended Index commenced 12/31/86. The Lipper average commenced 12/31/59.
---------------------------------------------------------------------------------------------------------- PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 1/31/05 ---------------------------------------------------------------------------------------------------------- Class A Class B Class C Class M Class R ---------------------------------------------------------------------------------------------------------- Distributions (number) 2 2 2 2 2 ---------------------------------------------------------------------------------------------------------- Income $0.156 $0.091 $0.092 $0.114 $0.147 ---------------------------------------------------------------------------------------------------------- Capital gains -- -- -- -- -- ---------------------------------------------------------------------------------------------------------- Total $0.156 $0.091 $0.092 $0.114 $0.147 ---------------------------------------------------------------------------------------------------------- Share value: NAV POP NAV NAV NAV POP NAV ---------------------------------------------------------------------------------------------------------- 7/31/04 $16.91 $17.85 $16.73 $16.81 $16.74 $17.35 $16.89 ---------------------------------------------------------------------------------------------------------- 1/31/05 17.91 18.90 17.72 17.80 17.73 18.37 17.87 ---------------------------------------------------------------------------------------------------------- Current return ---------------------------------------------------------------------------------------------------------- Current dividend rate 1 1.74% 1.65% 1.02% 1.03% 1.29% 1.24% 1.68% ---------------------------------------------------------------------------------------------------------- Current 30-day SEC yield 2 1.91 1.81 1.17 1.17 1.41 1.34 1.66 ----------------------------------------------------------------------------------------------------------
1 Most recent distribution, excluding capital gains, annualized and divided by NAV or POP at end of period. 2 Based only on investment income, calculated using SEC guidelines.
----------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN FOR PERIODS ENDED 12/31/04 (MOST RECENT CALENDAR QUARTER) ----------------------------------------------------------------------------------------------------------------------------- Class A Class B Class C Class M Class R (inception dates) (11/5/37) (4/27/92) (7/26/99) (12/1/94) (1/21/03) ----------------------------------------------------------------------------------------------------------------------------- NAV POP NAV CDSC NAV CDSC NAV POP NAV ----------------------------------------------------------------------------------------------------------------------------- 6 months 6.26% 0.69% 5.92% 0.92% 5.90% 4.90% 6.00% 2.27% 6.15% ----------------------------------------------------------------------------------------------------------------------------- 1 year 8.32 2.64 7.51 2.51 7.54 6.54 7.74 3.97 8.07 ----------------------------------------------------------------------------------------------------------------------------- 5 years 27.92 21.22 23.28 21.28 23.22 23.22 24.89 20.48 26.41 Annual average 5.05 3.92 4.27 3.93 4.26 4.26 4.55 3.80 4.80 ----------------------------------------------------------------------------------------------------------------------------- 10 years 159.30 145.60 140.53 140.53 140.47 140.47 146.54 137.88 152.97 Annual average 10.00 9.40 9.17 9.17 9.17 9.17 9.44 9.05 9.73 ----------------------------------------------------------------------------------------------------------------------------- Annual average (life of fund) 9.46 9.37 8.42 8.42 8.64 8.64 8.70 8.64 9.19 -----------------------------------------------------------------------------------------------------------------------------
Understanding your fund's expenses As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund's prospectus or talk to your financial advisor. Review your fund's expenses The table below shows the expenses you would have paid on a $1,000 investment in The George Putnam Fund of Boston from August 1, 2004, to January 31, 2005. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
-------------------------------------------------------------------------------------- EXPENSES AND VALUE OF A $1,000 INVESTMENT assuming actual returns for the 6 months ended 1/31/05 -------------------------------------------------------------------------------------- Class A Class B Class C Class M Class R -------------------------------------------------------------------------------------- Expenses paid per $1,000* $5.37 $9.26 $9.26 $7.97 $6.67 -------------------------------------------------------------------------------------- Ending value (after expenses) $1,068.70 $1,064.80 $1,064.60 $1,066.20 $1,067.10 --------------------------------------------------------------------------------------
* Expenses for each share class are calculated using the fund's annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended 1/31/05. The expense ratio may differ for each share class (see the table at the bottom of the next page). Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year. Estimate the expenses you paid To estimate the ongoing expenses you paid for the six months ended January 31, 2005, use the calculation method below. To find the value of your investment on August 1, 2004, go to www.putnaminvestments.com and log on to your account. Click on the "Transaction History" tab in your Daily Statement and enter 08/01/2004 in both the "from" and "to" fields. Alternatively, call Putnam at 1-800-225-1581. ----------------------------------------------------------------------------- HOW TO CALCULATE THE EXPENSES YOU PAID ----------------------------------------------------------------------------- Total Value of your Expenses paid expenses investment on 8/1/04 [DIV] $1,000 X per $1,000 = paid ----------------------------------------------------------------------------- Example Based on a $10,000 investment in class A shares of your fund. ----------------------------------------------------------------------------- $10,000 [DIV] $1,000 X $5.37 (see table above) = $53.70 ----------------------------------------------------------------------------- Comparing your fund's expenses with those of other funds Using the SEC's method to compare expenses The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund's expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
-------------------------------------------------------------------------------------- EXPENSES AND VALUE OF A $1,000 INVESTMENT assuming a hypothetical 5% annualized return for the 6 months ended 1/31/05 -------------------------------------------------------------------------------------- Class A Class B Class C Class M Class R -------------------------------------------------------------------------------------- Expenses paid per $1,000* $5.24 $9.05 $9.05 $7.78 $6.51 -------------------------------------------------------------------------------------- Ending value (after expenses) $1,020.01 $1,016.23 $1,016.23 $1,017.49 $1,018.75 -------------------------------------------------------------------------------------- * Expenses for each share class are calculated using the fund's annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended 1/31/05. The expense ratio may differ for each share class (see the table at the bottom of this page). Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.
Using industry averages to compare expenses You can also compare your fund's expenses with industry averages, as determined by Lipper, an independent fund-rating agency that ranks funds relative to others that Lipper considers to have similar investment styles or objectives. The expense ratio for each share class shown below indicates how much of your fund's net assets have been used to pay ongoing expenses during the period.
-------------------------------------------------------------------------------------- EXPENSE RATIO COMPARISONS USING ANNUALIZED DATA -------------------------------------------------------------------------------------- Class A Class B Class C Class M Class R -------------------------------------------------------------------------------------- Your fund's annualized expense ratio 1.03% 1.78% 1.78% 1.53% 1.28% -------------------------------------------------------------------------------------- Average annualized expense ratio for Lipper peer group+ 1.31% 2.06% 2.06% 1.81% 1.56% --------------------------------------------------------------------------------------
+ Average of the expenses of front-end load funds viewed by Lipper as having the same investment classification or objective as the fund, as of 12/31/04, calculated in accordance with Lipper's standard reporting methodology for comparing expenses within a given universe (excluding 12b-1 fees and without giving effect to any expense offset and brokerage service arrangements that may reduce fund expenses). To facilitate comparison, Putnam has adjusted this average to reflect the 12b-1 fees carried by each class of shares. The peer group may include funds that are significantly larger or smaller than the fund, which may limit the comparability of the fund's expenses to the Lipper average. Understanding your fund's portfolio turnover Putnam funds are actively managed by teams of experts who buy and sell securities based on intensive analysis of companies, industries, economies, and markets. Portfolio turnover is a measure of how often a fund's managers buy and sell securities for your fund. A portfolio turnover of 100%, for example, means that the managers sold and replaced securities valued at 100% of a fund's assets within a one-year period. Funds with high turnover may be more likely to generate capital gains and dividends that must be distributed to shareholders as taxable income. High turnover may also cause a fund to pay more brokerage commissions and other transaction costs, which may detract from performance. Funds that invest in bonds may have higher turnover than funds that invest only in stocks. Short-term bond funds tend to have higher turnover than longer-term bond funds, because shorter-term bonds will mature or be sold more frequently than longer-term bonds. You can use the table below to compare your fund's turnover with the average turnover for funds in its Lipper category. ----------------------------------------------------------------------------- TURNOVER COMPARISONS percentage of holdings that change every year ----------------------------------------------------------------------------- 2004 2003 2002 2001 2000 ----------------------------------------------------------------------------- The George Putnam Fund of Boston 166% 121% 132% 333% 141% ----------------------------------------------------------------------------- Lipper Balanced Funds category average 77% 82% 83% 85% 83% ----------------------------------------------------------------------------- Turnover data for the fund is calculated based on the fund's fiscal-year period, which ends on July 31. Turnover data for the fund's Lipper category is calculated based on the average of the turnover of each fund in the category for its fiscal year ended during the indicated year. Fiscal years vary across funds in the Lipper category, which may limit the comparability of the fund's portfolio turnover rate to the Lipper average. Comparative data for 2004 is based on information available as of 12/31/04. Risk comparison As part of new initiatives to enhance disclosure, we are including a risk comparison to help you understand how your fund compares with other funds. The comparison utilizes a risk measure developed by Morningstar, an independent fund-rating agency. This risk measure is referred to as the fund's Overall Morningstar Risk. [GRAPHIC OMITTED: chart MORNINGSTAR [REGISTRATION MARK] RISK] MORNINGSTAR [REGISTRATION MARK] RISK Fund's Overall Morningstar Risk 0.86 U.S. stock fund average 3.36 0% INCREASING RISK 100% Your fund's Overall Morningstar Risk is shown alongside that of the average fund in its broad asset class, as determined by Morningstar. The risk bar broadens the comparison by translating the fund's Overall Morningstar Risk into a percentile, which is based on the fund's ranking among all funds rated by Morningstar as of December 31, 2004. A higher Overall Morningstar Risk generally indicates that a fund's monthly returns have varied more widely. Morningstar determines a fund's Overall Morningstar Risk by assessing variations in the fund's monthly returns -- with an emphasis on downside variations -- over 3-, 5-, and 10-year periods, if available. Those measures are weighted and averaged to produce the fund's Overall Morningstar Risk. The information shown is provided for the fund's class A shares only; information for other classes may vary. Overall Morningstar Risk is based on historical data and does not indicate future results. Morningstar does not purport to measure the risk associated with a current investment in a fund, either on an absolute basis or on a relative basis. Low Overall Morningstar Risk does not mean that you cannot lose money on an investment in a fund. Copyright 2004 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Terms and definitions Total return shows how the value of the fund's shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund. Net asset value (NAV) is the price, or value, of one share of a mutual fund, without a sales charge. NAVs fluctuate with market conditions. NAV is calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class. Public offering price (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume the 5.25% maximum sales charge for class A shares and 3.50% for class M shares. Contingent deferred sales charge (CDSC) is a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund's class B CDSC declines from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase. Class A shares are generally subject to an initial sales charge and no sales charge on redemption (except on certain redemptions of shares bought without an initial sales charge). Class B shares may be subject to a sales charge upon redemption. Class C shares are not subject to an initial sales charge and are subject to a contingent deferred sales charge only if the shares are redeemed during the first year. Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no sales charge on redemption (except on certain redemptions of shares bought without an initial sales charge). Class R shares are not subject to an initial sales charge or CDSC and are available only to certain defined contribution plans. Comparative indexes George Putnam Blended Index is an unmanaged index administered by Putnam Management, 60% of which is the Standard and Poor's 500/Barra Value Index and 40% of which is the Lehman Aggregate Bond Index. JP Morgan Global High Yield Index is an unmanaged index of global high-yield fixed-income securities. Lehman Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities. Lehman Government Bond Index is an unmanaged index of U.S. Treasury and agency securities. Russell 1000 Index is an unmanaged index of the 1,000 largest companies in the Russell 3000 Index. Russell 2000 Growth Index is an unmanaged index of those companies in the small-cap Russell 2000 Index chosen for their growth orientation. Russell 2000 Value Index is an unmanaged index of those companies in the small-cap Russell 2000 Index chosen for their value orientation. S&P 500/Barra Value Index is an unmanaged capitalization-weighted index of large-cap stocks chosen for their value orientation. Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index. Lipper is a third-party industry ranking entity that ranks funds (without sales charges) with similar current investment styles or objectives as determined by Lipper. Lipper category averages reflect performance trends for funds within a category and are based on results at net asset value. Trustee approval of management contract General conclusions The Board of Trustees of the Putnam funds oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of each fund's management contract with Putnam Management. In this regard the Board of Trustees, with the assistance of its Contract Committee consisting solely of Independent Trustees, requests and evaluates all information it deems reasonably necessary in the circumstances. Over the course of several months beginning in March and ending in June of 2004, the Contract Committee reviewed the information provided by Putnam Management and other information developed with the assistance of the Board's independent counsel and independent staff. The Contract Committee reviewed and discussed key aspects of this information with all of the Independent Trustees. Upon completion of this review, the Contract Committee recommended and the Independent Trustees approved the continuance of your fund's contract, effective July 1, 2004. This approval was based on the following conclusions: * That the fee schedule currently in effect for your fund represents reasonable compensation in light of the nature and quality of the services being provided to the fund, the fees paid by competitive funds and the costs incurred by Putnam Management in providing such service, and * That such fee schedule represents an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the fund at current asset levels. These conclusions were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees' deliberations are described below. Model fee schedules and categories; total expenses The Trustees, working in cooperation with Putnam Management, have developed and implemented a series of model fee schedules for the Putnam funds designed to ensure that each fund's management fee is consistent with the fees for similar funds in the Putnam complex and compares favorably with fees paid by competitive funds sponsored by other advisors. The Trustees reviewed the model fee schedule currently in effect for the fund, including fee levels and breakpoints, and the assignment of the fund to a particular fee category under this structure. The Trustees also reviewed comparative fee and expense information for competitive funds. The Trustees concluded that no changes should be made in the fund's current fee schedule at this time. The Trustees noted that expense ratios for a number of Putnam funds had been increasing recently as a result of declining net assets and the natural operation of fee breakpoints. They noted that such expense ratio increases were currently being controlled by expense limitations implemented in January 2004. They also noted that the competitive landscape regarding mutual fund fees may be changing as a result of fee reductions accepted by various other fund groups in connection with recent regulatory settlements and greater focus on fees and expenses in the mutual fund industry generally. The Trustees indicated an intention to monitor these developments closely. Economies of scale As noted above, the Trustees concluded that the fee schedule currently in effect for your fund represents an appropriate sharing of economies of scale at current asset levels. The Trustees indicated their intention to continue their ongoing consideration of economies of scale and in particular to consider further the possible operation of such economies in the event that a significant recovery in the equity markets or net fund sales were to raise asset levels substantially above current levels. In this regard, the Trustees noted that they had reviewed data relating to the substantial increase in asset levels of the Putnam funds that occurred during the years leading up to the market peak in 2000, the subsequent decline in assets and the resulting impact on revenues and expenses of Putnam Management. The Trustees also noted that recent declines in net assets in many Putnam funds, together with significant changes in the cost structure of Putnam Management have altered the economics of Putnam Management's business in significant ways. The Trustees concluded that they would monitor these changes carefully and evaluate the resulting impact on Putnam Management's economics and the sharing of economies of scale between the parties. Investment performance The quality of the investment process provided by Putnam Management represented a major factor in the Trustees' evaluation of the quality of services provided by Putnam Management under the Management Contracts. The Trustees recognized that a high quality investment process -- as measured by the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to such personnel, and in general the ability of Putnam Management to attract and retain high-quality personnel -- does not guarantee favorable investment results for every fund in every time period. The Trustees considered the investment performance of each fund over multiple time periods and considered information comparing the fund's performance with various benchmarks and with the performance of competitive funds. The Trustees noted the satisfactory investment performance of many Putnam funds. They also noted the disappointing investment performance of certain funds in recent years and continued to discuss with senior management of Putnam Management the factors contributing to such under-performance and actions being taken to improve performance. The Trustees recognized that, in recent years, Putnam Management has made significant changes in its investment personnel and processes and in the fund product line in an effort to address areas of underperformance. The Trustees indicated their intention to continue to monitor performance trends to assess the effectiveness of these changes and to evaluate whether additional remedial changes are warranted. As a general matter, the Trustees concluded that consultation between the Trustees and Putnam Management represents the most effective way to address investment performance problems. The Trustees believe that investors in the Putnam funds and their financial advisors have, as a general matter, effectively placed their trust in the Putnam organization, under the supervision of the funds' Trustees, to make appropriate decisions regarding the management of the funds. The Trustees believe that the termination of the Management Contract and engagement of a new investment adviser for under-performing funds, with all the attendant disruptions, would not serve the interests of fund shareholders at this time and would not necessarily provide any greater assurance of improved investment performance. Brokerage and soft-dollar allocations; other benefits The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under the Management Contract with your fund. These include principally benefits related to brokerage and soft-dollar allocations, which pertain mainly to funds investing in equity securities. The Trustees believe that soft-dollar credits and other potential benefits associated with the allocation of fund brokerage represent assets of the funds that should be used for the benefit of fund shareholders. The Trustees noted recent trends in the allocation of fund brokerage, including commission costs, the allocation of brokerage to firms that provide research services to Putnam Management, and the sources and application of available soft-dollar credits. Effective December 31, 2003, reflecting a decision made by the Trustees earlier that year, Putnam Management ceased allocating brokerage in connection with the sale of fund shares. In addition, in preparing its budget for commission allocations in 2004, Putnam Management voluntarily reduced substantially the allocation of brokerage commissions to acquire research services from third-party service providers. In light of evolving best practices in the mutual fund industry, the Trustees concluded that this practice should be further curtailed and possibly eliminated in the near future. The Trustees indicated that they would continue to monitor the allocation of the funds' brokerage to ensure that the principle of "best price and execution" remains paramount in the portfolio trading process. Comparison of retail and institutional fee schedules The information examined by the Trustees as part of the annual contract reviews included information regarding fees charged by Putnam Management and its affiliates to institutional clients such as defined benefit pension plans and college endowments. This information included comparison of such fees with fees charged to the Putnam funds, as well as a detailed assessment of the differences in the services provided to these two types of clients. The Trustees devoted special attention to these issues and reviewed recent articles by critics of mutual fund fees, articles by the ICI defending such fee differences, and relevant guidance provided by decisions of the courts. The Trustees observed, in this regard, that the differences in fee rates between institutional clients and mutual funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investment management services to these types of clients reflects to a substantial degree historical competitive forces operating in separate market places. In reaching their conclusions, the Trustees considered the fact that fee rates across all asset sectors are higher on average for mutual funds than for institutional clients, and also considered the differences between the services that Putnam provides to the Putnam funds and those that it provides to institutional clients of the firm. Settlement of regulatory charges related to market timing Finally, in reaching their conclusions, the Trustees considered all matters pertinent to the administrative charges filed against Putnam Management by the SEC and the Commonwealth of Massachusetts in October 2003 relating to market timing, the firm's settlement of those charges, and the conclusions and recommendations of the Trustees' Audit and Pricing Committee based on its review of these matters. The Trustees considered the actions taken by the owner of Putnam Management and its new senior management to terminate or discipline the individuals involved, to implement new compliance systems, to indemnify the funds against all costs and liabilities related to these matters, and otherwise to ensure that the interests of the funds and their shareholders are fully protected. The Trustees noted that, in addition to the settlements of the regulatory charges which will provide comprehensive restitution for any losses suffered by shareholders, the new senior management of Putnam Management has moved aggressively to control expense ratios of funds affected by market timing, to reduce charges to new investors, to improve disclosure of fees and expenses, and to emphasize the paramount role of investment performance in achieving shareholders' investment goals. Other information for shareholders A note about duplicate mailings In response to investors' requests, the SEC has modified mailing regulations for proxy statements, semiannual and annual reports, and prospectuses. Putnam is now able to send a single copy of these materials to customers who share the same address. This change will automatically apply to all shareholders except those who notify us. If you would prefer to receive your own copy, please call Putnam at 1-800-225-1581. Proxy voting Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds' proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2004, are available on the Putnam Individual Investor Web site, www.putnaminvestments.com/individual, and on the SEC's Web site, www.sec.gov. If you have questions about finding forms on the SEC's Web site, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds' proxy voting guidelines and procedures at no charge by calling Putnam's Shareholder Services at 1-800-225-1581. Fund portfolio holdings For periods ending on or after July 9, 2004, the fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain the fund's Forms N-Q on the SEC's Web site at www.sec.gov. In addition, the fund's Forms N-Q may be reviewed and copied at the SEC's public reference room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC's Web site or the operation of the public reference room. A guide to the financial statements These sections of the report, as well as the accompanying Notes, constitute the fund's financial statements. The fund's portfolio lists all the fund's investments and their values as of the last day of the reporting period. Holdings are organized by asset type and industry sector, country, or state to show areas of concentration and diversification. Statement of assets and liabilities shows how the fund's net assets and share price are determined. All investment and noninvestment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the net assets allocated to remarketed preferred shares.) Statement of operations shows the fund's net investment gain or loss. This is done by first adding up all the fund's earnings -- from dividends and interest income -- and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings -- as well as any unrealized gains or losses over the period -- is added to or subtracted from the net investment result to determine the fund's net gain or loss for the fiscal period. Statement of changes in net assets shows how the fund's net assets were affected by the fund's net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund's shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Financial highlights provide an overview of the fund's investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlight table also includes the current reporting period. For open-end funds, a separate table is provided for each share class. The fund's portfolio January 31, 2005 (Unaudited) Common stocks (58.6%) (a) Number of shares Value Aerospace and Defense (1.3%) ------------------------------------------------------------------------------- 455,800 Boeing Co. (The) $23,063,480 685,800 Lockheed Martin Corp. 39,646,098 198,600 Northrop Grumman Corp. 10,303,368 -------------- 73,012,946 Automotive (0.2%) ------------------------------------------------------------------------------- 236,300 Lear Corp. (S) 12,760,200 Banking (7.6%) ------------------------------------------------------------------------------- 1,887,000 Bank of America Corp. 87,500,190 292,500 Bank of New York Co., Inc. (The) (S) 8,690,175 2,980,400 Citigroup, Inc. (SEG) 146,188,620 545,900 State Street Corp. 24,461,779 2,214,500 U.S. Bancorp 66,545,725 887,900 Wachovia Corp. 48,701,315 565,730 Wells Fargo & Co. 34,679,249 -------------- 416,767,053 Basic Materials (0.1%) ------------------------------------------------------------------------------- 123,700 Vulcan Materials Co. (S) 6,986,576 Beverage (0.5%) ------------------------------------------------------------------------------- 261,600 Coca-Cola Co. (The) 10,853,784 632,400 Coca-Cola Enterprises, Inc. 13,881,180 -------------- 24,734,964 Biotechnology (0.1%) ------------------------------------------------------------------------------- 106,100 Amgen, Inc. (NON) 6,603,664 Broadcasting (0.3%) ------------------------------------------------------------------------------- 388,700 Viacom, Inc. Class B 14,514,058 Building Materials (0.8%) ------------------------------------------------------------------------------- 1,230,400 Masco Corp. 45,278,720 Cable Television (0.3%) ------------------------------------------------------------------------------- 436,100 Comcast Corp. Class A (NON) 14,038,059 102,400 Liberty Media International, Inc. Class A (NON) 4,636,672 -------------- 18,674,731 Capital Goods (0.1%) ------------------------------------------------------------------------------- 89,200 Eaton Corp. 6,064,708 Chemicals (0.6%) ------------------------------------------------------------------------------- 381,700 Dow Chemical Co. (The) 18,970,490 229,900 PPG Industries, Inc. 15,812,522 -------------- 34,783,012 Commercial and Consumer Services (0.1%) ------------------------------------------------------------------------------- 193,400 ARAMARK Corp. Class B 5,026,466 Communications Equipment (0.3%) ------------------------------------------------------------------------------- 902,300 Cisco Systems, Inc. (NON) 16,277,492 Computers (2.6%) ------------------------------------------------------------------------------- 170,200 Dell, Inc. (NON) 7,107,552 3,635,081 Hewlett-Packard Co. 71,211,237 695,300 IBM Corp. 64,954,926 -------------- 143,273,715 Conglomerates (3.0%) ------------------------------------------------------------------------------- 3,300 Berkshire Hathaway, Inc. Class B (NON) 9,880,563 1,825,600 General Electric Co. 65,958,928 462,800 Honeywell International, Inc. 16,651,544 1,959,650 Tyco International, Ltd. (Bermuda) (S) 70,821,751 -------------- 163,312,786 Consumer Finance (1.1%) ------------------------------------------------------------------------------- 257,400 Capital One Financial Corp. (S) 20,149,272 635,500 Countrywide Financial Corp. 23,513,500 113,000 MBNA Corp. 3,003,540 826,000 Providian Financial Corp. (NON) 13,777,680 -------------- 60,443,992 Consumer Goods (0.8%) ------------------------------------------------------------------------------- 194,400 Colgate-Palmolive Co. 10,213,776 139,400 Energizer Holdings, Inc. (NON) 7,891,434 230,900 Estee Lauder Cos., Inc. (The) Class A 10,422,826 287,900 Procter & Gamble Co. (The) 15,324,917 -------------- 43,852,953 Consumer Services (0.3%) ------------------------------------------------------------------------------- 2,200,181 Service Corporation Intl. (NON) 15,181,249 Containers (0.2%) ------------------------------------------------------------------------------- 252,300 Ball Corp. (S) 10,778,256 Electric Utilities (2.1%) ------------------------------------------------------------------------------- 328,800 Alliant Energy Corp. 9,042,000 154,650 Dominion Resources, Inc. (S) 10,729,617 16,200 Edison International 526,014 171,100 Entergy Corp. 11,894,872 434,500 Exelon Corp. 19,226,625 941,750 PG&E Corp. (NON) (S) 32,961,250 214,700 PPL Corp. 11,593,800 122,680 Progress Energy, Inc. 5,428,590 116,600 Public Service Enterprise Group, Inc. 6,150,650 132,200 Wisconsin Energy Corp. 4,518,596 -------------- 112,072,014 Electrical Equipment (0.2%) ------------------------------------------------------------------------------- 138,600 Emerson Electric Co. 9,319,464 Electronics (1.7%) ------------------------------------------------------------------------------- 245,600 Freescale Semiconductor, Inc. Class B (NON) 4,290,632 2,187,200 Intel Corp. 49,102,640 1,535,400 Motorola, Inc. 24,167,196 351,100 Storage Technology Corp. (NON) 11,056,139 259,400 Vishay Intertechnology, Inc. (NON) (S) 3,390,358 -------------- 92,006,965 Financial (2.6%) ------------------------------------------------------------------------------- 717,890 Fannie Mae 46,361,336 885,740 Freddie Mac 57,829,965 221,600 Hartford Financial Services Group, Inc. (The) (S) 14,911,464 412,200 MetLife, Inc. (S) 16,384,950 110,500 PMI Group, Inc. (The) (S) 4,394,585 -------------- 139,882,300 Food (0.7%) ------------------------------------------------------------------------------- 366,500 General Mills, Inc. 19,420,835 277,100 H.J. Heinz Co. 10,477,151 330 PSF Group Holdings, Inc. 144A Class A (NON) (F) 495,570 537,300 Tyson Foods, Inc. Class A 9,225,441 -------------- 39,618,997 Forest Products and Packaging (0.5%) ------------------------------------------------------------------------------- 580,800 Smurfit-Stone Container Corp. (NON) (S) 8,735,232 220,500 Sonoco Products Co. 5,724,180 218,400 Weyerhaeuser Co. 13,628,160 -------------- 28,087,572 Gaming & Lottery (0.3%) ------------------------------------------------------------------------------- 140,500 GTECH Holdings Corp. (S) 3,284,890 204,090 Harrah's Entertainment, Inc. (S) 12,906,652 -------------- 16,191,542 Health Care Services (1.4%) ------------------------------------------------------------------------------- 234,900 AmerisourceBergen Corp. (S) 13,689,972 291,700 Cardinal Health, Inc. 16,428,544 234,275 CIGNA Corp. (S) 18,800,569 99,700 Express Scripts, Inc. (NON) 7,396,743 232,100 Medco Health Solutions, Inc. (NON) 9,880,497 14,100 PacifiCare Health Systems, Inc. (NON) 867,573 75,100 Quest Diagnostics, Inc. 7,157,030 -------------- 74,220,928 Homebuilding (0.3%) ------------------------------------------------------------------------------- 131,400 Lennar Corp. (S) 7,420,158 8,200 NVR, Inc. (NON) 6,488,250 -------------- 13,908,408 Household Furniture and Appliances (0.6%) ------------------------------------------------------------------------------- 444,000 Whirlpool Corp. (S) 30,307,440 Insurance (3.2%) ------------------------------------------------------------------------------- 1,035,200 ACE, Ltd. (Cayman Islands) 44,927,680 131,000 Allstate Corp. 6,607,640 317,650 American International Group, Inc. 21,057,019 137,500 AON Corp. 3,126,750 288,800 Axis Capital Holdings, Ltd. (Bermuda) 7,901,568 235,500 Chubb Corp. (The) 17,540,040 45,200 Endurance Specialty Holdings, Ltd. (Bermuda) 1,554,880 219,400 Lincoln National Corp. 10,123,116 85,400 MBIA, Inc. 5,101,796 87,000 Montpelier Re Holdings, Ltd. (Bermuda) 3,258,150 468,586 St. Paul Travelers Cos., Inc. (The) 17,590,718 288,700 W.R. Berkley Corp. 13,770,990 85,900 Willis Group Holdings, Ltd. (Bermuda) 3,322,612 235,350 XL Capital, Ltd. Class A (Cayman Islands) (S) 17,599,473 -------------- 173,482,432 Investment Banking/Brokerage (2.8%) ------------------------------------------------------------------------------- 1,778,400 JPMorgan Chase & Co. 66,387,672 405,170 Lehman Brothers Holdings, Inc. (S) 36,947,452 356,600 Merrill Lynch & Co., Inc. 21,420,962 511,700 Morgan Stanley 28,634,732 -------------- 153,390,818 Leisure (0.2%) ------------------------------------------------------------------------------- 231,900 Brunswick Corp. 10,695,228 Lodging/Tourism (0.6%) ------------------------------------------------------------------------------- 1,290,600 Cendant Corp. 30,393,630 4,700 Las Vegas Sands Corp. (NON) 203,980 -------------- 30,597,610 Machinery (0.5%) ------------------------------------------------------------------------------- 140,100 Deere (John) & Co. 9,727,143 234,000 Parker-Hannifin Corp. 15,247,440 -------------- 24,974,583 Manufacturing (0.7%) ------------------------------------------------------------------------------- 207,400 Dover Corp. 7,943,420 384,850 Ingersoll-Rand Co. Class A (Bermuda) 28,625,143 -------------- 36,568,563 Media (0.7%) ------------------------------------------------------------------------------- 122,800 Fox Entertainment Group, Inc. Class A (NON) 4,132,220 1,274,400 Liberty Media Corp. Class A (NON) 13,304,736 313,600 Time Warner, Inc. (NON) 5,644,800 614,100 Walt Disney Co. (The) (S) 17,581,683 -------------- 40,663,439 Medical Technology (0.5%) ------------------------------------------------------------------------------- 45,800 Baxter International, Inc. 1,546,208 283,300 Boston Scientific Corp. (NON) 9,365,898 292,200 Medtronic, Inc. (S) 15,337,578 -------------- 26,249,684 Metals (0.5%) ------------------------------------------------------------------------------- 409,200 Alcoa, Inc. 12,075,492 253,200 United States Steel Corp. (S) 13,115,760 -------------- 25,191,252 Natural Gas Utilities (0.2%) ------------------------------------------------------------------------------- 259,700 Sempra Energy (S) 9,666,034 Other (0.1%) ------------------------------------------------------------------------------- 69,455 S&P 500 Index Depositary Receipts (SPDR Trust Series 1) 8,206,803 Oil & Gas (6.5%) ------------------------------------------------------------------------------- 291,300 Amerada Hess Corp. (S) 25,241,145 269,200 BP PLC ADR (United Kingdom) 16,049,704 1,733,700 ChevronTexaco Corp. 94,313,280 3,142,700 ExxonMobil Corp. 162,163,320 784,700 Marathon Oil Corp. 30,391,431 399,200 Unocal Corp. 18,989,944 143,200 Valero Energy Corp. 7,450,696 -------------- 354,599,520 Pharmaceuticals (2.8%) ------------------------------------------------------------------------------- 708,000 Abbott Laboratories 31,874,160 112,400 Barr Pharmaceuticals, Inc. (NON) 5,344,620 25,500 Eli Lilly Co. 1,383,120 890,400 Johnson & Johnson 57,608,880 2,327,040 Pfizer, Inc. 56,221,286 88,500 Wyeth 3,507,255 -------------- 155,939,321 Photography/Imaging (0.4%) ------------------------------------------------------------------------------- 1,365,548 Xerox Corp. (NON) (S) 21,684,902 Railroads (0.7%) ------------------------------------------------------------------------------- 192,900 Canadian National Railway Co. (Toronto Exchange) (Canada) 11,467,905 197,400 Norfolk Southern Corp. 6,893,208 354,000 Union Pacific Corp. 21,098,400 -------------- 39,459,513 Regional Bells (1.3%) ------------------------------------------------------------------------------- 275,300 BellSouth Corp. 7,223,872 1,768,700 Verizon Communications, Inc. 62,948,033 -------------- 70,171,905 Restaurants (0.7%) ------------------------------------------------------------------------------- 1,267,900 McDonald's Corp. 41,067,281 Retail (2.1%) ------------------------------------------------------------------------------- 99,200 AutoZone, Inc. (NON) (S) 8,853,600 323,300 Gap, Inc. (The) (S) 7,115,833 275,890 Limited Brands, Inc. (S) 6,538,593 329,100 Lowe's Cos., Inc. (S) 18,755,409 1,803,800 Office Depot, Inc. (NON) 31,187,702 77,100 OfficeMax, Inc. 2,275,221 4,379,000 Rite Aid Corp. (NON) 15,501,660 374,100 Supervalu, Inc. (S) 11,825,301 210,000 Wal-Mart Stores, Inc. (S) 11,004,000 -------------- 113,057,319 Software (1.2%) ------------------------------------------------------------------------------- 469,700 BMC Software, Inc. (NON) 7,905,051 2,750 Computer Associates International, Inc. 74,773 1,270,000 Microsoft Corp. (S) 33,375,600 1,740,200 Oracle Corp. (NON) 23,962,554 338,600 Siebel Systems, Inc. (NON) 2,949,206 -------------- 68,267,184 Technology Services (0.1%) ------------------------------------------------------------------------------- 189,600 Fiserv, Inc. (NON) 7,252,200 Textiles (0.1%) ------------------------------------------------------------------------------- 123,300 VF Corp. (S) 6,553,395 Tobacco (1.7%) ------------------------------------------------------------------------------- 1,486,433 Altria Group, Inc. (S) 94,879,018 Toys (0.1%) ------------------------------------------------------------------------------- 424,300 Mattel, Inc. (S) 8,252,635 Waste Management (0.2%) ------------------------------------------------------------------------------- 286,200 Republic Services, Inc. 9,436,014 -------------- Total Common stocks (cost $2,526,700,449) $3,204,249,824 U.S. government and agency mortgage obligations (17.5%) (a) Principal amount Value U.S. Government Guaranteed Mortgage Obligations (--%) ------------------------------------------------------------------------------- Government National Mortgage Association Pass-Through Certificates $613,708 7s, with due dates from August 15, 2029 to October 15, 2031 $655,815 U.S. Government Agency Mortgage Obligations (17.5%) ------------------------------------------------------------------------------- Federal Home Loan Mortgage Corporation $306,827 8 3/4s, with due dates from May 1, 2009 to June 1, 2009 $325,405 24,500,000 6 1/2s, TBA, March 1, 2035 25,610,156 20,600,000 6 1/2s, TBA, February 1, 2035 21,568,843 108,603,221 6 1/2s, with due dates from January 1, 2024 to November 1, 2034 113,853,519 Federal National Mortgage Association Pass-Through Certificates 17,923 11s, with due dates from October 1, 2015 to March 1, 2016 20,081 403,097 9s, with due dates from January 1, 2027 to July 1, 2032 438,624 6,311 8 3/4s, July 1, 2009 6,720 2,017,247 8s, with due dates from August 1, 2026 to July 1, 2033 2,180,736 1,953,857 7 1/2s, with due dates from October 1, 2025 to July 1, 2033 2,094,149 121,410,520 7s, with due dates from April 1, 2023 to December 1, 2034 128,675,335 2,294,751 7s, with due dates from November 1, 2007 to February 1, 2017 2,431,198 20,796,801 6 1/2s, with due dates from June 1, 2023 to October 1, 2034 21,798,332 457,187 6 1/2s, with due dates from July 1, 2010 to May 1, 2011 484,178 158,600,000 6 1/2s, TBA, February 1, 2035 165,960,023 49,464 6s, August 1, 2034 51,137 310,996 6s, with due dates from December 1, 2013 to May 1, 2017 325,885 40,800,000 5 1/2s, TBA, February 1, 2035 41,539,500 565,903 5s, with due dates from March 1, 2019 to August 1, 2019 575,740 353,600,000 5s, TBA, February 1, 2035 352,716,000 75,200,000 5s, TBA, February 1, 2020 76,386,746 39,925 4s, June 1, 2019 39,089 -------------- 957,081,396 -------------- Total U.S. government and agency mortgage obligations (cost $953,465,548) $957,737,211 U.S. government agency obligations (0.3%) (a) (cost $15,874,999) Principal amount Value ------------------------------------------------------------------------------- $14,389,000 Fannie Mae 7 1/4s, January 15, 2010 $16,445,500 U.S. treasury obligations (0.4%) (a) Principal amount Value ------------------------------------------------------------------------------- U.S. Treasury Notes $16,200,000 4 1/4s, August 15, 2014 $16,354,405 1,450,000 4 1/4s, November 15, 2013 1,466,313 3,005,000 3 1/4s, August 15, 2008 2,979,411 -------------- Total U.S. treasury obligations (cost $20,845,370) $20,800,129 Asset-backed securities (8.9%) (a) Principal amount Value ------------------------------------------------------------------------------- $3,549,251 Aames Mortgage Investment Trust FRN Ser. 04-1, Class 2A1, 2.87s, 2034 $3,549,251 8,593,500 Aames Mortgage Trust Ser. 03-1, Class A, Interest Only (IO), 6s, 2005 246,618 2,886,764 ABFS Mortgage Loan Trust Ser. 03-1, Class A, IO, 4s, 2005 60,890 6,157,000 Ace Securities Corp. Ser. 03-FM1, Class A, IO, 3 1/2s, 2005 157,619 210,000 Advanta Business Card Master Trust FRN Ser. 04-C1, Class C, 3.55s, 2013 210,000 1,517,242 Advanta Mortgage Loan Trust Ser. 00-1, Class A4, 8.61s, 2028 1,555,647 Aegis Asset Backed Securities Trust 144A 700,670 Ser. 04-5N, Class Note, 5s, 2034 700,670 303,130 Ser. 04-1N, Class Note, 5s, 2034 303,130 564,206 Ser. 04-2N, Class N1, 4 1/2s, 2034 562,884 781,465 Ser. 04-4N, Class Note, 5s, 2034 781,954 954,748 Ser. 04-6N, Class Note, 4 3/4s, 2034 954,748 4,891,282 AFC Home Equity Loan Trust Ser. 99-2, Class 1A, 2.828s, 2029 4,891,282 10,740,000 American Express Credit Account Master Trust 144A Ser. 04-C, Class C, 2.903s, 2012 10,741,675 11,006,057 American Home Mortgage Investment Trust FRN Ser. 04-3, Class 2A, 3.59s, 2034 10,965,891 4,918,670 American Home Mortgage Investment Trust FRB Ser. 04-3, Class 3A, 3.71s, 2034 4,910,647 345,543 Ameriquest Finance NIM Trust 144A Ser. 04-IAN, Class 1A, 5.437s, 2034 345,111 Ameriquest Mortgage Securities, Inc. 12,268,500 Ser. 02-3, Class S, IO, 6s, 2032 70,900 5,013,680 Ser. 03-12, Class S, IO, 5s, 2006 222,056 5,435,934 Ser. 03-6, Class S, IO, 5s, 2033 153,098 5,561,215 Ser. 03-8, Class S, IO, 5s, 2006 219,112 1,346,824 Ameriquest Mortgage Securities, Inc. 144A Ser. 04-RN9, 4.8s, 2034 1,346,824 Amortizing Residential Collateral Trust 3,024,545 Ser. 02-BC1, Class A, IO, 6s, 2005 12,067 4,765,909 Ser. 02-BC3, Class A, IO, 6s, 2005 90,002 AQ Finance NIM Trust 144A 23,000 Ser. 03-N7A, Class Note, 9.07s, 2033 23,004 131,087 Ser. 03-N9A, Class Note, 7.385s, 2033 131,336 63,754 Arc Net Interest Margin Trust Ser. 02-2, Class A, 7 3/4s, 2032 63,648 Arcap REIT, Inc. 144A 1,283,000 Ser. 03-1A, Class E, 7.11s, 2038 1,367,197 1,112,000 Ser. 04-1A, Class E, 6.42s, 2039 1,134,066 Argent NIM Trust 144A 80,440 Ser. 03-N6, Class A, 6.4s, 2034 (Cayman Islands) 80,641 116,037 Ser. 03-N8, Class A, 5.56s, 2034 (Cayman Islands) 116,037 521,865 Ser. 04-WN2, Class A, 4.55s, 2034 (Cayman Islands) 521,865 393,301 Ser. 04-WN4, Class A, 4.459s, 2034 (Cayman Islands) 392,195 523,495 Ser. 04-WN9, Class A, 5 3/4s, 2034 (Cayman Islands) 523,495 Asset Backed Funding Corp. NIM Trust 144A 173,686 Ser. 03-OPT1, Class Note, 6.9s, 2033 173,686 41,569 Ser. 03-WF1, Class N1, 8.35s, 2032 41,569 760,090 Ser. 03-WMC1, Class Note, 6.9s, 2033 761,184 690,431 Ser. 04-0PT1, Class N1, 4.55s, 2033 (Cayman Islands) 685,253 437,255 Ser. 04-0PT5, Class N1, 4 1/2s, 2034 (Cayman Islands) 437,255 1,183,444 Ser. 04-AHL1, Class Note, 5.6s, 2033 1,183,400 1,352,989 Ser. 04-FF1, Class N1, 5s, 2034 (Cayman Islands) 1,348,539 58,000 Ser. 04-FF1, Class N2, 5s, 2034 (Cayman Islands) 53,458 Asset Backed Securities Corp. Home Equity Loan Trust 7,211,463 Ser. 03-HE5, Class A, IO, 4s, 2033 225,495 416,920 FRB Ser. 04-HE1, Class A3, 2.88s, 2034 417,315 Asset Backed Securities Corp. Home Equity Loan Trust FRB 1,380,603 Ser. 04-HE9, Class A2, 2.9s, 2034 1,382,381 1,635,000 Ser. 05-HE1, Class A3, 2.88s, 2035 1,634,554 1,017,631 Aviation Capital Group Trust 144A FRB Ser. 03-2A, Class G1, 3.2s, 2033 1,019,141 210,000 Bank One Issuance Trust FRB Ser. 03-C4, Class C4, 3.51s, 2011 214,184 Bayview Financial Acquisition Trust 10,769,731 Ser. 03-DA, Class A, IO, 4s, 2006 210,346 11,630,558 Ser. 03-E, Class A, IO, 4s, 2006 290,609 40,179,151 Ser. 03-X, Class A, IO, 0.9s, 2006 698,936 4,211,489 Ser. 04-B, Class A1, 2 1/2s, 2039 4,211,489 29,252,071 Ser. 04-D, Class A, IO, 3 1/2s, 2007 1,301,571 4,813,000 FRB Ser. 03-G, Class A1, 3.159s, 2039 4,813,000 3,573,495 FRN Ser. 03-F, Class A, 3.059s, 2043 3,579,424 Bayview Financial Acquisition Trust 144A 5,651,927 Ser. 03-CA, Class A, IO, 4s, 2005 141,637 200,000 FRB Ser. 04-B, Class M2, 3.9s, 2039 200,000 4,831,540 Bayview Financial Acquisition Trust FRN Ser. 04-D, Class A, 2.949s, 2044 4,831,540 Bayview Financial Asset Trust 144A 78,270,274 Ser. 03-Z, Class AIO1, IO, 0.459s, 2005 213,777 1,548,683 FRB Ser. 03-SSRA, Class A, 3.23s, 2038 1,552,554 1,836,175 FRB Ser. 03-SSRA, Class M, 3.88s, 2038 1,840,766 2,262,838 FRN Ser. 04-SSR1, Class A, 3.13 2039 2,262,838 Bear Stearns Alternate Trust 3,667,432 Ser. 04-11, Class 2A2, 4.968s, 2034 3,724,695 10,485,729 Ser. 04-12, Class 2A2, 5.171s, 2035 10,679,965 1,766,858 Ser. 04-9, Class 1A1, 5.124s, 2007 1,799,007 Bear Stearns Asset Backed Securities NIM Trust 144A 1,098,323 Ser. 04-FR1, Class A1, 5s, 2034 (Cayman Islands) 1,098,323 708,151 Ser. 04-HE10, Class A1, 4 1/4s, 2034 (Cayman Islands) 708,151 245,000 Ser. 04-HE10, Class A2, 5s, 2034 (Cayman Islands) 245,000 605,229 Ser. 04-HE5N, Class A1, 5s, 2034 (Cayman Islands) 605,229 243,000 Ser. 04-HE5N, Class A2, 5s, 2034 (Cayman Islands) 243,000 692,765 Ser. 04-HE6, Class A1, 5 1/4s, 2034 (Cayman Islands) 693,956 763,978 Ser. 04-HE7N, Class A1, 5 1/4s, 2034 (Cayman Islands) 765,411 319,561 Ser. 04-HE8N, Class A1, 5s, 2034 (Cayman Islands) 319,561 Bear Stearns Asset Backed Securities, Inc. 9,072,800 Ser. 03-AC1, Class A, IO, 5s, 2005 204,748 11,241,000 Ser. 03-AC4, Class A, IO, 5s, 2006 480,797 2,229,000 FRB Ser. 03-3, Class A2, 3.12s, 2043 2,229,000 1,258,017 FRN Ser. 03-1, Class A1, 3.03s, 2042 1,258,015 570,000 Capital One Multi-Asset Execution Trust FRB Ser. 02-C1, Class C1, 5.23s, 2010 603,577 646,000 CARMAX Auto Owner Trust Ser. 04-2, Class D, 3.67s, 2011 641,086 CARSSX Finance, Ltd. 144A 502,970 FRB Ser. 04-AA, Class B3, 5.83s, 2011 (Cayman Islands) 513,992 2,374,557 FRB Ser. 04-AA, Class B4, 7.98s, 2011 (Cayman Islands) 2,437,538 3,105,000 CDO Repackaging Trust Series 144A FRB Ser. 03-2, Class A, 6.621s, 2008 3,306,825 18,139,500 Centex Home Equity Ser. 04-C, Class A, IO, 3 1/2s, 2006 493,871 1,730,000 Chase Credit Card Master Trust FRB Ser. 03-3, Class C, 3.56s, 2010 1,771,890 Chase Funding Net Interest Margin 144A 1,174 Ser. 03-3A, Class Note, 6 7/8s, 2036 1,175 51,761 Ser. 03-5A, Class Note, 5 3/4s, 2034 51,761 36,388 Ser. 03-6A, Class Note, 5s, 2035 36,343 198,111 Ser. 03-C1A, Class Note, 6 3/4s, 2036 198,854 1,359,099 Ser. 04-OPT1, Class Note, 4.458s, 2034 1,357,401 CHEC NIM Ltd., 144A 843,958 Ser. 04-2, Class N1, 4.45s, 2034 (Cayman Islands) 843,909 421,000 Ser. 04-2, Class N2, 8s, 2034 (Cayman Islands) 418,596 169,000 Ser. 04-2, Class N3, 8s, 2034 (Cayman Islands) 145,340 1,060,000 Citibank Credit Card Issuance Trust FRN Ser. 01-C1, Class C1, 3.74s, 2010 1,079,875 Conseco Finance Securitizations Corp. 8,597,000 Ser. 00-4, Class A6, 8.31s, 2032 7,611,231 4,743,560 Ser. 00-5, Class A4, 7.47s, 2032 4,864,046 3,727,000 Ser. 00-5, Class A6, 7.96s, 2032 3,303,240 6,025,000 Ser. 01-04, Class A4, 7.36s, 2033 6,186,470 7,144,947 Ser. 01-1, Class A4, 6.21s, 2032 7,259,266 2,692,000 Ser. 01-1, Class A5, 6.99s, 2032 2,574,269 6,235,000 Ser. 01-3, Class A4, 6.91s, 2033 6,231,259 2,825,208 Ser. 01-4, Class B1, 9.4s, 2033 381,403 8,387,348 Ser. 02-1, Class A, 6.681s, 2033 8,735,701 4,582,000 Ser. 02-1, Class M2, 9.546s, 2033 2,061,900 8,730,255 Ser. 02-2, Class A, IO, 8 1/2s, 2033 2,353,677 3,061,000 Consumer Credit Reference IDX Securities 144A FRB Ser. 02-1A, Class A, 4.521s, 2007 3,109,058 Countrywide Asset Backed Certificates 144A 130,223 Ser. 03-5NF, Class NF, 6 3/4s, 2034 130,874 567,758 Ser. 04-1NIM, Class Note, 6s, 2034 570,483 3,510,344 Ser. 04-6N, Class N1, 6 1/4s, 2035 3,510,344 795,258 Ser. 04-BC1N, Class Note, 5 1/2s, 2035 793,763 534,523 Countrywide Asset-Backed Certificates 144A Ser. 04-11N, Class N, 5 1/4s, 2036 535,525 Countrywide Partnership Trust 144A 876,375 Ser. 04-14N, 5s, 2036 876,638 366,591 Ser. 04-EC1N, Class N, 5 1/4s, 2035 366,408 1,617,000 Crest, Ltd. 144A Ser. 03-2A, Class D2, 6.723s, 2038 1,699,952 CS First Boston Mortgage Securities Corp. 144A 18,048,998 Ser. 04-C4, Class AX, IO, 0.08s, 2039 422,509 2,026,832 Ser. 04-FR1N, Class A, 5s, 2034 2,026,832 4,234,000 Ser. 05-6N, Class A, 5 1/4s, 2035 4,219,774 1,469,500 Fieldstone Mortgage Investment Corp. Ser. 03-1, Class A, IO, 6s, 2005 13,173 649,328 Finance America NIM Trust 144A Ser. 04-1, Class A, 5 1/4s, 2034 649,611 4,880,001 First Chicago Lennar Trust 144A Ser. 97-CHL1, Class D, 7.863s, 2039 5,060,535 1,747,209 First Consumers Master Trust FRN Ser. 01-A, Class A, 2.79s, 2008 1,738,473 8,305,091 First Franklin Mortgage Loan Asset Backed Certificates Ser. 03-FFB, Class A, IO, 6s, 2005 156,838 First Franklin NIM Trust 144A 171,626 Ser. 03-FF3A, Class A, 6 3/4s, 2033 170,960 303,730 Ser. 04-FF1, Class N1, 4 1/2s, 2034 302,880 710,833 Ser. 04-FF10, Class N1, 4.45s, 2034 (Cayman Islands) 710,786 907,335 Ser. 04-FF7A, Class A, 5s, 2034 909,331 1,174,324 First Plus Home Loan Trust Ser. 97-3, Class B1, 7.79s, 2023 1,175,058 650,000 Ford Credit Auto Owner Trust Ser. 04-A, Class C, 4.19s, 2009 648,781 616,000 Fort Point CDO, Ltd. FRN Ser. 03-2A, Class A2, 3.46s, 2038 622,160 2,000,000 Foxe Basin, Ltd. FRB Ser. 03-1A, Class A1, 2.99s, 2015 2,007,600 Fremont NIM Trust 144A 296,826 Ser. 04-3, Class B, 7 1/2s, 2034 290,979 742,838 Ser. 04-A, Class Note, 4 3/4s, 2034 740,981 524,973 Ser. 04-B, Class Note, 4.703s, 2034 524,973 1,247,105 Ser. 04-D, Class N1, 4 1/2s, 2034 1,251,719 138,274 Ser. 04-D, Class N2, 7 1/2s, 2034 138,412 1,412,745 Fremont Trust 144A Ser. 04-3, Class A, 4 1/2s, 2034 1,410,344 308,000 G-Star, Ltd. 144A FRN Ser. 02-2A, Class BFL, 4.53s, 2037 321,798 1,903,750 GE Capital Credit Card Master Note Trust FRB Ser. 04-2, Class C, 2.96s, 2010 1,903,750 413,481 GE Corporate Aircraft Financing, LLC 144A Ser. 04-1A, Class B, 3.38s, 2018 413,481 8,871,000 GMAC Mortgage Corp. Ser. 04-HE5, Class A, IO, 6s, 2007 862,428 470,000 Goldentree Loan Opportunities II, Ltd. 144A FRN Ser. 2A, Class 4, 6.09s, 2015 (Cayman Islands) 478,813 Granite Mortgages PLC 1,619,000 FRB Ser. 04-1, Class 1C, 3.41s, 2044 (United Kingdom) 1,625,071 2,970,000 FRN Ser. 01-1, Class 1C, 4.07s, 2041 (United Kingdom) 2,977,889 Granite Mortgages PLC FRB 1,300,000 Ser. 02-1, Class 1C, 3.97s, 2042 (United Kingdom) 1,320,410 650,000 Ser. 02-2, Class 1C, 3.92s, 2043 (United Kingdom) 660,400 Green Tree Financial Corp. 362,579 Ser. 95-8, Class B1, 7.3s, 2026 273,240 908,502 Ser. 97-4, Class A7, 7.36s, 2029 983,454 722,619 Ser. 97-7, Class A8, 6.86s, 2029 768,686 327,351 Ser. 99-3, Class A5, 6.16s, 2031 330,567 1,137,000 Ser. 99-3, Class A6, 6 1/2s, 2031 1,189,586 16,750,000 Ser. 99-5, Class A5, 7.86s, 2030 15,028,716 4,620,432 Greenpoint Manufactured Housing Ser. 00-3, Class IA, 8.45s, 2031 4,495,680 3,732,000 GS Auto Loan Trust 144A Ser. 04-1, Class D, 5s, 2011 3,676,393 GSAMP Trust 144A 130,150 Ser. 03-HE1N, Class Note, 7 1/4s, 2033 130,228 395,688 Ser. 04-FM1N, Class Note, 5 1/4s, 2033 395,411 538,877 Ser. 04-HE1N, Class N1, 5s, 2034 537,907 3,956,857 Ser. 04-NIM1, Class N1, 5 1/2s, 2034 3,954,878 1,553,000 Ser. 04-NIM1, Class N2, zero %, 2034 1,148,909 3,683,258 Ser. 04-NIM2, Class N, 4 7/8s, 2034 3,667,420 222,784 Ser. 04-RENM, Class Note, 5 1/2s, 2032 222,784 573,657 Ser. 04-SE2N, Class Note, 5 1/2s, 2034 573,370 2,857,911 High Income Trust Securities 144A FRB Ser. 03-1A, Class A, 2.76s, 2036 2,772,174 746,000 Holmes Financing PLC FRB Ser. 8, Class 2C, 3.38s, 2040 (United Kingdom) 749,357 Holmes Financing PLC FRB 13,365,000 Ser. 1, Class 2C, 3.81s, 2040 (United Kingdom) 13,365,000 870,000 Ser. 4, Class 3C, 3.96s, 2040 (United Kingdom) 881,136 Home Equity Asset Trust 144A 7,842 Ser. 03-4N, Class A, 8s, 2033 7,842 178,183 Ser. 03-5N, Class A, 7 1/2s, 2034 178,628 376,188 Ser. 03-7N, Class A, 5 1/4s, 2034 376,423 526,460 Ser. 04-1N, Class A, 5s, 2034 526,460 636,610 Ser. 04-3N, Class A, 5s, 2034 636,610 471,366 Ser. 04-4N, Class A, 5s, 2034 471,366 1,983,648 Ser. 04-5N, Class A, 5 1/4s, 2034 1,986,127 429,000 Hyundai Auto Receivables Trust Ser. 04-A, Class D, 4.1s, 2011 424,448 1,352,339 IMPAC Secured Assets Corp. Ser. 03-1, Class A, IO, 5s, 2005 25,036 29,383,028 Lehman Manufactured Housing Ser. 98-1, Class 1, IO, 0.811s, 2028 618,689 LNR CDO, Ltd. 144A 5,220,000 FRB Ser. 02-1A, Class FFL, 5.27s, 2037 (Cayman Islands) 5,220,000 2,585,000 FRB Ser. 03-1A, Class EFL, 5.52s, 2036 (Cayman Islands) 2,805,242 Long Beach Asset Holdings Corp. NIM Trust 144A 12,791 Ser. 03-4, Class N1, 6.535s, 2033 12,791 545,592 Ser. 04-2, Class N1, 4.94s, 2034 545,592 1,471,962 Ser. 04-5, Class Note, 5s, 2034 1,475,200 3,745,000 Ser. 05-1, Class N1, 4.115s, 2035 3,745,000 Long Beach Mortgage Loan Trust 469,908 Ser. 03-2, Class S1, IO, 4 1/4s, 2005 7,697 9,839,200 Ser. 03-2, Class S2, IO, 4 1/4s, 2005 162,610 25,951,509 Ser. 04-3, Class S1, IO, 4 1/2s, 2006 1,346,235 12,975,805 Ser. 04-3, Class S2, IO, 4 1/2s, 2006 673,120 Madison Avenue Manufactured Housing Contract 205,904,963 Ser. 02-A IO, 0.3s, 2032 2,348,593 4,059,503 FRB Ser. 02-A, Class B1, 5.78s, 2032 2,232,727 Marriott Vacation Club Owner Trust 144A 203,694 Ser. 04-2A, Class C, 4.741s, 2026 201,846 221,406 Ser. 04-2A, Class D, 5.389s, 2026 219,442 2,156,687 FRB Ser. 02-1A, Class A1, 3.2s, 2024 2,176,352 Master Asset Backed Securities NIM Trust 144A 375,818 Ser. 04-CI3, Class N1, 4.45s, 2034 375,818 1,290,065 Ser. 04-CI5, Class N1, 4.946s, 2034 1,290,065 400,000 Ser. 04-CI5, Class N2, 10s, 2034 399,600 654,782 Ser. 04-HE1, Class A, 5 1/4s, 2034 654,716 1,730,000 MBNA Credit Card Master Note Trust FRN Ser. 03-C5, Class C5, 3.66s, 2010 1,768,067 6,962,261 Merit Securities Corp. FRB Ser. 11PA, Class 3A1, 3.179s, 2027 6,683,770 Merrill Lynch Mortgage Investors, Inc. 118,679 Ser. 03-WM3N, Class N1, 8s, 2005 118,987 508,069 Ser. 04-OP1N, Class N1, 4 3/4s, 2035 (Cayman Islands) 506,595 Merrill Lynch Mortgage Investors, Inc. 144A 320,411 Ser. 03-OP1N, Class N1, 7 1/4s, 2034 321,276 240,166 Ser. 03-WM1N, Class N1, 7s, 2033 240,767 285,185 Ser. 04-FM1N, Class N1, 5s, 2035 283,931 423,282 Ser. 04-HE1N, Class N1, 5s, 2006 420,319 912,356 Ser. 04-HE2N, Class N1, 5s, 2035 908,126 77,007 Ser. 04-WM1N, Class N1, 4 1/2s, 2034 76,722 401,357 Ser. 04-WM2N, Class N1, 4 1/2s, 2005 399,832 1,092,422 Ser. 04-WM3N, Class N1, 4 1/2s, 2005 1,088,052 1,050,000 Metris Master Trust FRN Ser. 04-2, Class C, 3.85s, 2010 1,052,625 1,670,000 Metris Master Trust 144A FRN Ser. 01-2, Class C, 4.42s, 2009 1,667,742 668,000 Metris Master Trust 144A FRB Ser. 04-2, Class D, 5.77s, 2010 672,609 Mid-State Trust 930,444 Ser. 10, Class B, 7.54s, 2036 811,201 491,498 Ser. 11, Class B, 8.221s, 2038 478,368 2,884,648 MMCA Automobile Trust Ser. 02-1, Class B, 5.37s, 2010 2,902,533 207,327 Morgan Stanley ABS Capital I 144A Ser. 04-NC2N, Class Note, 6 1/4s, 2033 208,570 3,371,874 Morgan Stanley ABS Capital I FRB Ser. 04-WMC3, Class A2PT, 2.82s, 2035 3,380,303 215,000 Morgan Stanley Auto Loan Trust Ser. 04-HB2, Class D, 3.59s, 2012 214,437 Morgan Stanley Auto Loan Trust 144A 1,090,000 Ser. 04-HB1, Class D, 5 1/2s, 2011 1,070,925 513,000 Ser. 04-HB2, Class E, 5s, 2012 497,129 Morgan Stanley Dean Witter Capital I 421,079 FRN Ser. 01-NC3, Class B1, 4.98s, 2031 417,090 1,004,714 FRN Ser. 01-NC4, Class B1, 5.03s, 2032 996,593 1,168,000 Navigator CDO, Ltd. 144A FRB Ser. 03-1A, Class A1, 2.766s, 2015 1,175,358 1,734,000 New Century Home Equity Loan Trust Ser. 03-5, Class AI7, 5.15s, 2033 1,725,856 New Century Mortgage Corp. NIM Trust 144A 169,550 Ser. 03-5, Class Note, 8s, 2033 170,371 229,073 Ser. 03-B, Class Note, 6 1/2s, 2033 229,718 624,000 Newcastle CDO, Ltd. 144A FRB Ser. 3A, Class 4FL, 5.72s, 2038 633,360 16,013 NNIMS 144A Ser. 03-N1, Class Note, 7.385s, 2033 16,049 816,918 Nomura Asset Acceptance Corp. Ser. 04-R3, Class PT, 10.002s, 2035 907,289 802,732 Nomura Asset Acceptance Corp. 144A Ser. 04-R2, Class PT, IO, 10.118s, 2034 885,012 Novastar NIM Trust 144A 835,826 Ser. 04-N1, Class Note, 4.458s, 2034 835,826 800,251 Ser. 04-N2, Class Note, 4.458s, 2034 800,251 6,041,488 Oakwood Mortgage Investors, Inc. Ser. 02-C, Class A1, 5.41s, 2032 5,369,070 857,272 Oakwood Mortgage Investors, Inc. 144A Ser. 01-B, Class A4, 7.21s, 2030 817,066 623,000 Oceanstar 144A FRB Ser. 04, Class D, 4.406s, 2034 623,000 Option One Mortgage Securities Corp. NIM Trust 144A 188,896 Ser. 03-5, Class Note, 6.9s, 2033 189,841 2,268,818 Ser. 04-2A, Class N1, 4.213s, 2034 (Cayman Islands) 2,268,818 3,013,192 Option One Woodbridge Loan Trust 144A Ser. 03-1, Class S, IO, 3.7s, 2005 35,277 431,000 Origen Manufactured Housing Ser. 04-B, Class A2, 3.79s, 2017 422,649 Park Place Securities NIM Trust 144A 410,442 Ser. 04-MCWN1, Class A, 4.458s, 2034 410,955 770,000 Ser. 04-WCW2, Class D, 7.387s, 2034 770,000 2,368,000 Ser. 04-WHQ2, Class A, 4 1/2s, 2035 2,364,448 2,506,114 Park Place Securities, Inc. FRB Ser. 04-WHQ2, Class A3A, 2.88s, 2035 2,508,984 Pass-Through Amortizing Credit Card Trust 311,411 Ser. 02-1A, Class A3FL, 5.48s, 2012 311,926 523,193 Ser. 02-1A, Class A4FL, 7.98s, 2012 524,030 People's Choice Net Interest Margin Note 144A 2,517,549 Ser. 04-2, Class A, 5s, 2034 2,523,208 313,000 Ser. 04-2, Class B, 5s, 2034 283,578 Permanent Financing PLC FRB 870,000 Ser. 1, Class 3C, 3.66s, 2042 (United Kingdom) 878,352 1,300,000 Ser. 3, Class 3C, 3.61s, 2042 (United Kingdom) 1,317,680 Pillar Funding PLC 144A 657,000 FRB Ser. 04-1A, Class C1, 3.49s, 2011 (United Kingdom) 660,813 912,000 FRB Ser. 04-2A, Class C, 3.37s, 2011 (United Kingdom) 912,895 Providian Gateway Master Trust 144A 944,000 Ser. 04-DA, Class D, 4.4s, 2011 930,873 1,204,000 FRB Ser. 04-AA, Class D, 4.33s, 2011 1,206,528 1,900,000 FRN Ser. 04-BA, Class D, 3.88s, 2010 1,914,949 701,000 FRN Ser. 04-EA, Class D, 3.41s, 2011 701,187 Renaissance Home Equity Loan Trust 2,369,562 Ser. 03-2, Class A, IO, 3s, 2005 39,394 2,261,414 Ser. 03-4, Class S, IO, 3s, 2006 45,228 790,152 Renaissance NIM Trust 144A Ser. 04-A, Class Note, 4.45s, 2034 790,152 1,092,069 Residential Accredit Loans, Inc. Ser. 04-QA5, Class A2, 5.004s, 2034 1,108,802 7,577,778 Residential Asset Mortgage Products, Inc. Ser. 04-RZ2, Class A, IO, 3 1/2s, 2006 203,653 Residential Asset Securities Corp. 3,271,613 Ser. 02-KS6, Class AIO, IO, 4 1/2s, 2005 11,388 843,750 Ser. 03-KS4, Class AI, IO, 3 1/2s, 2005 14,551 Residential Asset Securities Corp. 144A 1,769,910 Ser. 04-N10B, Class A1, 5s, 2034 1,769,910 1,639,198 Ser. 04-NT, Class Note, 5s, 2034 1,631,002 716,801 Ser. 04-NT12, Class Note, 4.7s, 2035 716,783 Residential Funding Mortgage Securities II 12,130,648 Ser. 03-HS1, Class AI, IO, 5 1/2s, 2033 319,036 3,446,060 Ser. 03-HS2, Class AI, IO, 5 1/2s, 2005 115,228 5,415,265 Ser. 03-HS3, Class AI, IO, 5s, 2006 159,209 SAIL Net Interest Margin Notes 144A 171,788 Ser. 03-12A, Class A, 7.35s, 2033 (Cayman Islands) 173,505 215,323 Ser. 03-13A, Class A, 6 3/4s, 2033 (Cayman Islands) 216,399 96,977 Ser. 03-3, Class A, 7 3/4s, 2033 (Cayman Islands) 97,705 324,487 Ser. 03-4, Class A, 7 1/2s, 2033 (Cayman Islands) 324,130 112,272 Ser. 03-5, Class A, 7.35s, 2033 (Cayman Islands) 112,240 209,460 Ser. 03-6A, Class A, 7s, 2033 (Cayman Islands) 209,460 127,992 Ser. 03-7A, Class A, 7s, 2033 (Cayman Islands) 127,043 208,287 Ser. 03-8A, Class A, 7s, 2033 (Cayman Islands) 207,238 552,494 Ser. 03-9A, Class A, 7s, 2033 (Cayman Islands) 549,620 274,437 Ser. 03-BC2A, Class A, 7 3/4s, 2033 (Cayman Islands) 273,639 2,719,653 Ser. 04-10A, Class A, 5s, 2034 (Cayman Islands) 2,720,741 3,380,788 Ser. 04-11A, Class A2, 4 3/4s, 2035 (Cayman Islands) 3,381,633 1,737,303 Ser. 04-2A, Class A, 5 1/2s, 2034 (Cayman Islands) 1,737,303 2,249,519 Ser. 04-4A, Class A, 5s, 2034 (Cayman Islands) 2,246,145 350,000 Ser. 04-4A, Class B, 7 1/2s, 2034 (Cayman Islands) 322,665 660,637 Ser. 04-5A, Class A, 4 1/2s, 2034 (Cayman Islands) 659,665 898,813 Ser. 04-7A, Class A, 4 3/4s, 2034 (Cayman Islands) 897,563 139,042 Ser. 04-7A, Class B, 6 3/4s, 2034 (Cayman Islands) 136,733 1,055,022 Ser. 04-8A, Class A, 5s, 2034 (Cayman Islands) 1,055,022 600,668 Ser. 04-8A, Class B, 6 3/4s, 2034 (Cayman Islands) 587,183 2,666,631 Ser. 04-AA, Class A, 4 1/2s, 2034 (Cayman Islands) 2,657,298 535,930 Ser. 04-BN2A, Class A, 5s, 2034 (Cayman Islands) 536,144 271,359 Ser. 04-BNCA, Class A, 5s, 2034 (Cayman Islands) 270,960 36,667 Sasco Net Interest Margin Trust 144A Ser. 03-AM1, Class A, 7 3/4s, 2033 36,488 165,436 Saxon Net Interest Margin Trust 144A Ser. 03-A, Class A, 6.656s, 2033 165,436 Sharps SP I, LLC Net Interest Margin Trust 144A 823,666 Ser. 03-0P1N, Class NA, 4.45s, 2033 822,677 170,426 Ser. 03-HE1N, 6.9s, 2033 171,125 112,459 Ser. 03-NC1N, Class N, 7 1/4s, 2033 112,920 89,772 Ser. 03-TC1N, Class N, 7.45s, 2033 89,772 497,676 Ser. 04-4N, Class Note, 6.65s, 2034 497,079 419,185 Ser. 04-HE1N, Class Note, 4.94s, 2034 419,185 326,995 Ser. 04-HE2N, Class NA, 5.43s, 2034 326,177 290,109 Ser. 04-HS1N, Class Note, 5.92s, 2034 290,109 470,000 South Coast Funding 144A FRB Ser. 3A, Class A2, 3.46s, 2038 476,157 Structured Adjustable Rate Mortgage Loan Trust 1,363,061 Ser. 04-10, Class 1A1, 4.956s, 2034 1,383,170 3,380,419 Ser. 04-12, Class 1A2, 5.059s, 2034 3,433,487 2,875,665 Ser. 04-14, Class 1A, 5 1/8s, 2034 2,923,886 3,069,215 Ser. 04-16, Class 1A2, 5.041s, 2034 3,117,500 2,804,139 Ser. 04-18, Class 1A1, 5.089s, 2034 2,850,164 7,086,674 Ser. 04-20, Class 1A2, 5.093s, 2034 7,209,520 9,726,100 Ser. 04-6, Class 1A, 4.416s, 2034 9,802,394 93,844 Ser. 04-8, Class 1A3, 4.715s, 2034 94,496 11,483,000 Ser. 05-1, Class 1A1, 5.16s, 2035 11,692,005 3,047,059 Structured Adjustable Rate Mortgage Loan Trust 144A Ser. 04-NP2, Class A, 2.88s, 2034 3,047,059 Structured Asset Investment Loan Trust 5,539,614 Ser. 03-BC1, Class A, IO, 6s, 2005 22,097 11,248,961 Ser. 03-BC10, Class A, IO, 6s, 2005 100,869 39,803,174 Ser. 03-BC11, Class A, IO, 6s, 2005 554,536 5,379,865 Ser. 03-BC12, Class A, IO, 6s, 2005 101,597 16,364,571 Ser. 03-BC13, Class A, IO, 6s, 2005 309,039 22,088 Ser. 03-BC1A, Class A, 7 3/4s, 2033 22,157 20,057,494 Ser. 03-BC2, Class A, IO, 6s, 2005 179,855 13,350,701 Ser. 03-BC8, Class A, IO, 6s, 2005 251,384 14,879,333 Ser. 03-BC9, Class A, IO, 6s, 2005 59,364 34,614,710 Ser. 04-1, Class A, IO, 6s, 2005 995,282 25,395,901 Ser. 04-3, Class A, IO, 6s, 2005 855,035 Structured Asset Securities Corp. 3,199,321 Ser. 03-26A, Class 2A, 4.564s, 2033 3,227,942 1,995,783 Ser. 03-40A, Class 1A, 4.955s, 2034 2,022,740 1,808,630 Ser. 04-8, Class 1A1, 4.715s, 2034 1,829,799 6,112,345 Ser. 98-RF3, Class A, IO, 6.1s, 2028 748,762 Structured Asset Securities Corp. 144A 2,800,000 FRB Ser. 03-NP2, Class A2, 3.08s, 2032 2,796,063 573,709 FRN Ser. 03-NP3, Class A1, 3.03s, 2033 573,709 3,199,000 Terwin Mortgage Trust FRB Ser. 04-5HE, Class A1B, 2.95s, 2035 3,196,155 1,698,000 TIAA Real Estate CD0, Ltd. Ser. 03-1A, Class E, 8s, 2038 (Cayman Islands) 1,644,762 13,388,856 Wells Fargo Home Equity Trust Ser. 04-1, Class A, IO, 6s, 2005 467,731 Wells Fargo Home Equity Trust 144A 935,691 Ser. 04-1N, Class A, 5s, 2034 932,346 2,431,604 Ser. 04-2, Class N1, 4.45s, 2034 2,431,460 862,000 Ser. 04-2, Class N2, 8s, 2034 818,900 5,071,092 Wells Fargo Mortgage Backed Securities Trust FRB Ser. 04-U, Class A1, 3.89s, 2034 5,096,447 7,937,599 Wells Fargo Mortgage Backed Securities Trust Ser. 04-I, Class 1A1, 3.393s, 2034 7,962,404 1,060,000 Westo Ser. 04-3, Class D, 4.07s, 2012 1,055,124 WFS Financial Owner Trust 479,027 Ser. 04-1, Class D, 3.17s, 2011 473,319 421,000 Ser. 04-4, Class D, 3.58s, 2012 416,706 891,000 Ser. 05-1, Class D, 4 1/4s, 2012 889,524 386,038 Whole Auto Loan Trust Ser. 03-1, Class C, 3.13s, 2010 380,066 Whole Auto Loan Trust 144A 2,020,055 Ser. 03-1, Class D, 6s, 2010 2,012,795 1,471,000 Ser. 04-1, Class D, 5.6s, 2011 1,466,633 -------------- Total Asset-backed securities (cost $500,483,837) $489,081,343 Corporate bonds and notes (6.6%) (a) Principal amount Value Aerospace and Defense (0.2%) ------------------------------------------------------------------------------- $145,000 Boeing Capital Corp. sr. notes 6.1s, 2011 $158,559 685,000 Boeing Co. (The) debs. 6 7/8s, 2043 829,875 625,000 Litton Industries, Inc. sr. notes 8s, 2009 719,628 1,270,000 Lockheed Martin Corp. bonds 8 1/2s, 2029 1,771,477 1,115,000 Northrop Grumman Corp. company guaranty 7 1/8s, 2011 1,277,522 305,000 Raytheon Co. bonds 5 3/8s, 2013 319,147 625,000 Raytheon Co. debs. 7s, 2028 741,637 581,000 Raytheon Co. debs. 6s, 2010 627,568 1,145,000 Raytheon Co. notes 8.3s, 2010 1,348,747 830,000 Raytheon Co. notes 4.85s, 2011 846,581 -------------- 8,640,741 Airlines (0.1%) ------------------------------------------------------------------------------- 4,215,000 Continental Airlines, Inc. pass-through certificates Ser. 98-2, 6.32s, 2008 4,201,149 Automotive (0.3%) ------------------------------------------------------------------------------- 2,525,000 DaimlerChrysler NA Holding Corp. company guaranty 7.2s, 2009 2,797,490 1,080,000 DaimlerChrysler NA Holding Corp. company guaranty 6 1/2s, 2013 1,174,133 2,120,000 Ford Motor Co. debs. 9.98s, 2047 2,606,650 190,000 Ford Motor Credit Corp. notes 7 3/4s, 2007 200,479 3,835,000 Ford Motor Credit Corp. notes 7 3/8s, 2009 4,083,665 1,295,000 General Motors Acceptance Corp. bonds 8s, 2031 1,310,524 665,000 General Motors Acceptance Corp. notes 6 7/8s, 2011 667,771 430,000 General Motors Corp. notes 7.2s, 2011 431,471 520,000 Lear Corp. company guaranty Ser. B, 8.11s, 2009 586,297 -------------- 13,858,480 Banking (0.9%) ------------------------------------------------------------------------------- 1,055,000 Allfirst Financial Inc. sub. notes 7.2s, 2007 1,134,769 320,000 Bank of America Corp. sr. notes 5 3/8s, 2014 337,002 705,000 Bank of America Corp. sub. notes 7.4s, 2011 816,708 405,000 Bank of New York Co., Inc. (The) sr. sub. notes FRN 3.4s, 2013 393,586 100,000 Bank One Corp. sub. notes 5 1/4s, 2013 103,356 5,449,000 Bank United Corp. notes Ser. A, 8s, 2009 6,209,522 790,000 Barclays Bank PLC 144A FRN 6.86s, 2049 (United Kingdom) 919,965 545,000 Capital One Bank notes 6 1/2s, 2013 598,771 385,000 Capital One Bank notes Ser. BKNT, 4 7/8s, 2008 393,885 470,000 Capital One Bank sr. notes Ser. BKNT, 6.7s, 2008 506,481 1,925,000 Citigroup, Inc. debs. 6 5/8s, 2028 2,228,111 3,382,000 Citigroup, Inc. sub. notes 5s, 2014 3,433,613 1,035,000 Countrywide Capital III company guaranty Ser. B, 8.05s, 2027 1,250,354 780,000 Credit Suisse First Boston USA, Inc. notes 4 7/8s, 2015 776,761 1,620,000 First Chicago NBD Corp. sub. notes 6 3/8s, 2009 1,749,508 935,000 Fleet Capital Trust V bank guaranty FRN 3.51s, 2028 936,843 2,300,000 HSBC Capital Funding LP 144A bank guaranty FRB 9.547s, 2049 (Jersey) 2,849,608 1,095,000 National City Bank bonds 4 5/8s, 2013 1,091,756 1,165,000 National City Bank sub. notes Ser. BKNT, 6 1/4s, 2011 1,277,496 5,540,000 NB Capital Trust IV company guaranty 8 1/4s, 2027 6,232,921 815,000 Nordea Bank Finland PLC sub. notes 6 1/2s, 2009 (Finland) 885,879 2,345,000 PNC Funding Corp. bonds 5 1/4s, 2015 (S) 2,393,225 1,200,000 Popular North America, Inc. sub. notes 3 7/8s, 2008 1,196,119 80,000 Rabobank Capital Funding II 144A bonds 5.26s, 2049 82,039 985,000 Rabobank Capital Funding Trust 144A sub. notes FRN 5.254s, 2049 986,701 400,000 Royal Bank of Scotland Group PLC FRB 7.648s, 2049 (United Kingdom) 503,599 680,000 Royal Bank of Scotland Group PLC FRN 7 3/8s, 2049 (United Kingdom) 707,529 1,270,000 Suncorp-Metway, Ltd. 144A notes FRB 3 1/2s, 2013 (Australia) 1,244,755 3,020,000 UBS AG/Jersey Branch FRN 5.51s, 2008 (United Kingdom) 3,186,100 1,345,000 UBS Preferred Funding Trust I company guaranty 8.622s, 2049 (S) 1,606,911 2,465,000 Wachovia Bank NA/Old bonds 4 7/8s, 2015 2,477,589 1,835,000 Wachovia Corp. sub. notes 5 1/4s, 2014 (S) 1,895,957 1,010,000 Westpac Capital Trust III 144A sub. notes FRN 5.819s, 2049 1,066,752 -------------- 51,474,171 Beverage (0.1%) ------------------------------------------------------------------------------- 760,000 Diageo PLC company guaranty 8s, 2022 (United Kingdom) 1,007,366 225,000 Grand Metro Investment Corp. company guaranty 9s, 2011 282,346 1,380,000 Miller Brewing Co. 144A notes 5 1/2s, 2013 1,450,144 -------------- 2,739,856 Broadcasting (0.1%) ------------------------------------------------------------------------------- 1,355,000 Chancellor Media Corp. company guaranty 8s, 2008 1,505,958 1,330,000 News America, Inc. 144A bonds 6.2s, 2034 (S) 1,371,975 -------------- 2,877,933 Cable Television (0.3%) ------------------------------------------------------------------------------- 145,000 AT&T Broadband Corp. company guaranty 8 3/8s, 2013 179,122 730,000 Cox Communications, Inc. notes 7 3/4s, 2010 835,152 2,060,000 Cox Communications, Inc. 144A notes 5.45s, 2014 2,078,635 575,000 Cox Communications, Inc. 144A notes 4 5/8s, 2010 572,553 945,000 Cox Enterprises, Inc. 144A notes 8s, 2007 1,008,675 3,585,000 Jones Intercable, Inc. sr. notes 7 5/8s, 2008 3,941,317 535,000 TCI Communications, Inc. debs. 9.8s, 2012 693,078 1,115,000 TCI Communications, Inc. debs. 8 3/4s, 2015 1,432,046 2,175,000 TCI Communications, Inc. debs. 7 7/8s, 2013 2,620,216 575,000 USA Interactive Corp. notes 7s, 2013 (S) 640,902 -------------- 14,001,696 Chemicals (0.2%) ------------------------------------------------------------------------------- 1,315,000 Dow Chemical Co. (The) debs. 8.55s, 2009 1,529,142 115,000 Dow Chemical Co. (The) notes 6s, 2012 125,989 1,510,000 Dow Chemical Co. (The) Pass Through Trust 144A company guaranty 4.027s, 2009 1,446,952 685,000 Eastman Chemical Co. notes 3 1/4s, 2008 666,850 450,000 ICI Wilmington, Inc. company guaranty 5 5/8s, 2013 468,863 1,150,000 ICI Wilmington, Inc. company guaranty 4 3/8s, 2008 1,154,918 945,000 Lubrizol Corp. (The) sr. notes 5 1/2s, 2014 969,852 365,000 Millennium America, Inc. company guaranty 9 1/4s, 2008 405,150 730,000 Monsanto Co. notes 4s, 2008 729,491 240,000 Monsanto Co. sr. notes 7 3/8s, 2012 282,512 510,000 Potash Corp. of Saskatchewan notes 7 3/4s, 2011 (Canada) 602,343 465,000 Praxair, Inc. notes 6 3/8s, 2012 (S) 520,416 -------------- 8,902,478 Computers (--%) ------------------------------------------------------------------------------- 695,000 SunGard Data Systems, Inc. bonds 4 7/8s, 2014 679,951 Conglomerates (0.1%) ------------------------------------------------------------------------------- 1,375,000 Tyco International Group SA company guaranty 7s, 2028 (Luxembourg) 1,616,036 1,770,000 Tyco International Group SA company guaranty 6 3/4s, 2011 (Luxembourg) 1,982,793 -------------- 3,598,829 Consumer Finance (0.2%) ------------------------------------------------------------------------------- 760,000 Block Financial Corp. notes 5 1/8s, 2014 754,634 1,710,000 Countrywide Home Loans, Inc. company guaranty Ser. MTNL, 4s, 2011 1,658,855 1,505,000 Household Finance Corp. notes 8s, 2010 1,764,027 4,025,000 Household Finance Corp. notes 7s, 2012 4,606,769 110,000 Household Finance Corp. notes 4 1/8s, 2009 109,269 1,820,000 HSBC Finance Corp. notes 6 3/4s, 2011 2,042,491 -------------- 10,936,045 Consumer Goods (--%) ------------------------------------------------------------------------------- 1,385,000 Johnson (SC) & Son, Inc. 144A bonds 5 3/4s, 2033 1,444,320 Containers (--%) ------------------------------------------------------------------------------- 845,000 Sealed Air Corp. 144A bonds 6 7/8s, 2033 936,578 800,000 Sealed Air Corp. 144A notes 5 5/8s, 2013 830,742 -------------- 1,767,320 Electric Utilities (0.6%) ------------------------------------------------------------------------------- 485,000 AEP Texas Central Co. sr. notes Ser. D, 5 1/2s, 2013 506,284 785,000 AEP Texas North Co. sr. notes Ser. B, 5 1/2s, 2013 819,588 480,000 Carolina Power & Light Co. 1st mtge. 6 1/8s, 2033 528,215 1,290,000 Cleveland Electric Illuminating Co. (The) sr. notes 5.65s, 2013 1,336,849 2,410,000 Consumers Energy Co. 1st mtge. Ser. B, 5 3/8s, 2013 2,507,152 230,000 Consumers Energy Co. 1st. mtge. 5s, 2015 230,458 975,000 Dayton Power & Light Co. (The) 144A 1st mtge. 5 1/8s, 2013 998,723 1,155,000 Duke Capital Corp. sr. notes Ser. A, 6 1/4s, 2005 1,171,051 1,945,000 Exelon Generation Co., LLC sr. notes 6.95s, 2011 (S) 2,193,050 55,000 FirstEnergy Corp. notes Ser. B, 6.45s, 2011 59,686 1,055,000 Florida Power & Light Co. 1st mtge. 5.95s, 2033 1,168,929 490,000 Florida Power & Light Co. 1st mtge. 5 5/8s, 2034 519,595 515,000 Indianapolis Power & Light 144A 1st mtge. 6.3s, 2013 555,572 2,185,000 Monongahela Power Co. 1st mtge. 5s, 2006 2,216,042 713,000 Nevada Power Co. 2nd mtge. 9s, 2013 823,515 425,000 Nevada Power Co. 144A general ref. mtge. 5 7/8s, 2015 426,063 1,355,000 NiSource Finance Corp. company guaranty 7 7/8s, 2010 1,589,243 1,880,000 Northern States Power Co. mtge. Ser. B, 8s, 2012 2,298,919 820,000 Oncor Electric Delivery Co. sec. notes 7 1/4s, 2033 1,004,718 1,365,000 Oncor Electric Delivery Co. sec. notes 6 3/8s, 2012 1,510,596 1,180,000 Pacific Gas & Electric Co. 1st mtge. 6.05s, 2034 1,275,098 550,000 Pacific Gas & Electric Co. 1st mtge. 4.8s, 2014 552,483 370,000 Pacific Gas & Electric Co. 1st. mtge. 4.2s, 2011 365,817 1,020,000 PacifiCorp Sinking Fund 1st mtge. 5.45s, 2013 1,078,523 825,000 Pepco Holdings, Inc. notes 5 1/2s, 2007 855,749 1,358,438 Power Receivable Finance, LLC 144A sr. notes 6.29s, 2012 1,422,298 605,000 PP&L Capital Funding, Inc. company guaranty Ser. D, 8 3/8s, 2007 661,692 570,000 Public Service Company of New Mexico sr. notes 4.4s, 2008 575,633 915,000 Public Service Electric & Gas Co. 1st mtge. FRN 6 3/8s, 2008 977,680 375,000 Public Services Co. of Colorado sr. notes Ser. A, 6 7/8s, 2009 413,800 765,000 Rochester Gas & Electric notes 6 3/8s, 2033 852,331 660,000 Tampa Electric Co. notes 6 7/8s, 2012 747,851 445,000 Westar Energy, Inc. 1st mtge. 5.15s, 2017 448,371 560,000 Western Resources, Inc. 1st mtge. 7 7/8s, 2007 605,161 921,000 Western Resources, Inc. sr. notes 9 3/4s, 2007 1,029,218 -------------- 34,325,953 Electronics (--%) ------------------------------------------------------------------------------- 390,000 Motorola, Inc. notes 7 5/8s, 2010 451,932 1,000,000 Motorola, Inc. notes 4.608s, 2007 1,014,651 -------------- 1,466,583 Energy (--%) ------------------------------------------------------------------------------- 548,000 BRL Universal Equipment sec. notes 8 7/8s, 2008 572,660 1,180,000 Schlumberger Technology Corp. 144A notes 6 1/2s, 2012 1,322,996 -------------- 1,895,656 Financial (0.9%) ------------------------------------------------------------------------------- 3,165,000 Associates First Capital Corp. debs. 6.95s, 2018 3,709,785 4,065,000 Associates First Capital Corp. sub. debs. 8.15s, 2009 4,720,762 1,250,000 AXA Financial, Inc. sr. notes 7 3/4s, 2010 1,453,459 1,015,000 CIT Group, Inc. sr. notes 7 3/4s, 2012 (S) 1,202,875 465,000 CIT Group, Inc. sr. notes 5s, 2015 465,719 2,575,000 CIT Group, Inc. sr. notes 5s, 2014 2,595,999 1,545,000 Executive Risk Capital Trust company guaranty Class B, 8.675s, 2027 1,746,083 1,300,000 Fund American Cos. Inc. notes 5 7/8s, 2013 1,334,768 565,000 General Electric Capital Corp. notes Ser. A, 6 3/4s, 2032 (S) 677,482 830,000 General Electric Capital Corp. notes Ser. A, 6s, 2012 907,157 955,000 General Electric Capital Corp. notes Ser. MTNA, 6 1/8s, 2011 1,044,924 600,000 Greenpoint Capital Trust I company guaranty 9.1s, 2027 686,035 890,000 Hartford Financial Services Group, Inc. (The) sr. notes 7.9s, 2010 1,025,881 760,000 Heller Financial, Inc. notes 7 3/8s, 2009 860,832 2,630,000 International Lease Finance Corp. notes 4 3/4s, 2012 2,640,538 1,585,000 International Lease Finance Corp. notes 4.35s, 2008 1,597,623 765,000 John Hancock Global Funding II 144A notes 7.9s, 2010 893,251 8,205,000 Liberty Mutual Insurance 144A notes 7.697s, 2097 8,867,587 510,000 Loews Corp. notes 5 1/4s, 2016 507,001 680,000 MetLife, Inc. sr. notes 6 1/8s, 2011 743,360 465,000 Nationwide Financial Services, Inc. notes 5 5/8s, 2015 476,919 375,000 Nationwide Mutual Insurance Co. 144A notes 8 1/4s, 2031 478,375 710,000 OneAmerica Financial Partners, Inc. 144A bonds 7s, 2033 781,557 1,515,000 Principal Life Global Funding I 144A sec. notes 5 1/4s, 2013 1,577,916 865,000 Protective Life Corp. notes 4.3s, 2013 (S) 834,405 795,000 Prudential Financial, Inc. notes Ser. MTNB, 4 1/2s, 2013 777,077 870,000 Prudential Insurance Co. 144A notes 8.3s, 2025 1,139,617 1,585,000 St. Paul Co., Inc. (The) sr. notes 5 3/4s, 2007 1,644,533 935,000 State Street Capital Trust II notes FRN 2.79s, 2008 939,016 1,100,000 Steers Delaware Business Trust 144A notes 5.565s, 2005 1,117,732 2,115,000 Sun Life Canada Capital Trust 144A company guaranty 8.526s, 2049 2,413,611 565,000 Travelers Property Casualty Corp. sr. notes 3 3/4s, 2008 557,770 -------------- 50,419,649 Food (0.1%) ------------------------------------------------------------------------------- 1,130,000 ConAgra Foods, Inc. notes 7 7/8s, 2010 1,323,012 690,000 ConAgra Foods, Inc. notes 6 3/4s, 2011 779,185 3,300,000 Kraft Foods, Inc. notes 6 1/4s, 2012 3,630,977 390,000 Tyson Foods, Inc. notes 8 1/4s, 2011 461,843 150,000 Tyson Foods, Inc. notes 7 1/4s, 2006 158,221 -------------- 6,353,238 Forest Products and Packaging (0.1%) ------------------------------------------------------------------------------- 745,000 Georgia-Pacific Corp. sr. notes 8s, 2014 838,125 695,000 International Paper Co. notes 5.3s, 2015 715,311 975,000 Weyerhaeuser Co. debs. 7.95s, 2025 1,231,252 675,000 Weyerhaeuser Co. debs. 7 1/8s, 2023 782,663 1,005,000 Weyerhaeuser Co. notes 6 3/4s, 2012 1,139,332 -------------- 4,706,683 Gaming & Lottery (--%) ------------------------------------------------------------------------------- 810,000 GTECH Holdings Corp. notes 4 3/4s, 2010 814,278 535,000 Park Place Entertainment Corp. sr. notes 7 1/2s, 2009 595,188 255,000 Park Place Entertainment Corp. sr. notes 7s, 2013 283,050 -------------- 1,692,516 Health Care (--%) ------------------------------------------------------------------------------- 915,000 HCA, Inc. sr. notes 6.95s, 2012 963,488 Homebuilding (0.1%) ------------------------------------------------------------------------------- 545,000 D.R. Horton, Inc. company guaranty 8s, 2009 609,156 840,000 D.R. Horton, Inc. sr. notes 5 7/8s, 2013 861,278 20,000 Lennar Corp. company guaranty Ser. B, 9.95s, 2010 21,325 973,000 Lennar Corp. sr. notes 7 5/8s, 2009 1,086,949 540,000 Pulte Homes, Inc. company guaranty 7 7/8s, 2011 (S) 626,347 575,000 Ryland Group, Inc. (The) notes 5 3/8s, 2015 578,991 -------------- 3,784,046 Investment Banking/Brokerage (0.2%) ------------------------------------------------------------------------------- 1,625,000 Goldman Sachs Group, Inc. (The) notes 5 1/8s, 2015 1,645,041 1,570,000 Goldman Sachs Group, Inc. (The) notes 4 3/4s, 2013 (S) 1,560,500 3,050,000 JPMorgan Chase & Co. sub. notes 5 1/8s, 2014 3,107,044 850,000 Lehman Brothers Holdings, Inc. notes 6 5/8s, 2012 952,464 540,000 Merrill Lynch & Co., Inc. notes Ser. B, 4 3/4s, 2009 548,731 820,000 Morgan Stanley Dean Witter & Co. sr. notes 6 3/4s, 2011 920,835 -------------- 8,734,615 Lodging/Tourism (0.1%) ------------------------------------------------------------------------------- 2,015,000 Cendant Corp. notes 6 1/4s, 2010 2,166,159 1,015,000 Cendant Corp. sr. notes 7 3/8s, 2013 (S) 1,177,451 1,355,000 Hilton Hotels Corp. notes 8 1/4s, 2011 1,592,193 -------------- 4,935,803 Manufacturing (--%) ------------------------------------------------------------------------------- 265,000 Bunge Ltd. Finance Corp. company guaranty 7.8s, 2012 315,911 905,000 Bunge Ltd. Finance Corp. company guaranty 4 3/8s, 2008 907,993 420,000 Bunge Ltd. Finance Corp. notes 5 7/8s, 2013 449,891 -------------- 1,673,795 Media (0.2%) ------------------------------------------------------------------------------- 960,000 AOL Time Warner, Inc. bonds 7 5/8s, 2031 1,182,507 1,330,000 Liberty Media Corp. sr. notes 5.7s, 2013 1,302,081 4,090,000 Time Warner, Inc. debs. 9 1/8s, 2013 5,240,018 -------------- 7,724,606 Medical Services (--%) ------------------------------------------------------------------------------- 515,000 WellPoint, Inc. 144A notes 5s, 2014 518,152 515,000 WellPoint, Inc. 144A notes 4 1/4s, 2009 512,735 -------------- 1,030,887 Metals (0.1%) ------------------------------------------------------------------------------- 685,000 Barrick Gold Corp. bonds 5.8s, 2034 (Canada) 708,829 350,000 Barrick Gold Finance, Inc. notes 4 7/8s, 2014 (Canada) 351,321 1,205,000 Falconbridge, Ltd. bonds 5 3/8s, 2015 (Canada) 1,192,779 595,000 Inco, Ltd. bonds 5.7s, 2015 (Canada) 621,115 575,000 WMC Finance USA company guaranty 6 1/4s, 2033 (Australia) 605,815 995,000 WMC Finance USA company guaranty 5 1/8s, 2013 (Australia) 1,000,994 -------------- 4,480,853 Natural Gas Utilities (0.1%) ------------------------------------------------------------------------------- 860,000 Atmos Energy Corp. notes 4.95s, 2014 856,403 1,060,000 CenterPoint Energy Resources Corp. notes 7 3/4s, 2011 1,229,073 2,440,000 Duke Energy Field Services, LLC notes 7 7/8s, 2010 2,840,050 1,860,000 Kinder Morgan, Inc. sr. notes 6 1/2s, 2012 2,051,636 545,000 National Fuel Gas Co. notes 5 1/4s, 2013 557,241 360,000 TGT Pipeline Co. 144A notes 5 1/2s, 2017 364,397 -------------- 7,898,800 Oil & Gas (0.2%) ------------------------------------------------------------------------------- 935,000 Anadarko Finance Co. company guaranty Ser. B, 6 3/4s, 2011 1,054,740 570,000 Buckeye Partners LP notes 5.3s, 2014 585,175 610,000 Chesapeake Energy Corp. 144A sr. notes 6 3/8s, 2015 622,200 555,000 Enbridge Energy Partners LP sr. notes 5.35s, 2014 566,307 1,230,000 Kerr-McGee Corp. company guaranty 6 7/8s, 2011 1,384,960 1,140,000 MidAmerican Energy Holdings Co. sr. notes 4 5/8s, 2007 1,151,940 245,000 MidAmerican Energy Holdings Co. sr. notes 3 1/2s, 2008 239,771 1,780,000 Motiva Enterprises, LLC 144A sr. notes 5.2s, 2012 1,827,425 1,140,000 Ocean Energy, Inc. company guaranty 7 1/4s, 2011 1,305,633 820,000 Petro-Canada, Ltd. bonds 5.35s, 2033 (Canada) 786,299 590,000 Sunoco, Inc. notes 4 7/8s, 2014 587,467 320,000 XTO Energy, Inc. sr. notes 7 1/2s, 2012 375,684 -------------- 10,487,601 Pharmaceuticals (0.1%) ------------------------------------------------------------------------------- 2,935,000 American Home Products Corp. notes 6.95s, 2011 3,293,073 845,000 Bayer Corp. 144A bonds FRB 6.2s, 2008 895,117 860,000 Hospira, Inc. notes 4.95s, 2009 876,850 -------------- 5,065,040 Power Producers (--%) ------------------------------------------------------------------------------- 770,000 Southern California Edison Co. 1st mtge. 6s, 2034 843,356 985,000 Southern California Edison Co. 1st mtge. 5s, 2014 1,006,073 280,000 Southern California Edison Co. 1st. mtge. 5s, 2016 282,485 175,300 York Power Funding 144A notes 12s, 2007 (Cayman Islands) (In default) (NON) (F) 18 -------------- 2,131,932 Railroads (0.1%) ------------------------------------------------------------------------------- 955,000 CSX Corp. notes 6 3/4s, 2011 1,066,824 385,000 CSX Corp. notes 6 1/4s, 2008 413,396 2,310,000 Norfolk Southern Corp. notes 7.05s, 2037 2,831,647 115,000 Norfolk Southern Corp. sr. notes 6 3/4s, 2011 129,146 870,000 Union Pacific Corp. notes 7 3/8s, 2009 976,963 655,000 Union Pacific Corp. notes 6 5/8s, 2008 706,334 590,000 Union Pacific Corp. 144A pass-through certificates 5.214s, 2014 598,183 -------------- 6,722,493 Real Estate (0.3%) ------------------------------------------------------------------------------- 650,000 CenterPoint Properties Trust notes Ser. MTN, 4 3/4s, 2010 654,998 660,000 Colonial Properties Trust notes 6 1/4s, 2014 (R) 706,935 465,000 Developers Diversified Realty Corp. notes 4 5/8s, 2010 (R) 460,888 1,835,000 Equity One, Inc. company guaranty 3 7/8s, 2009 1,779,758 2,850,000 Franchise Finance Corp. of America sr. notes 8 3/4s, 2010 (R) 3,512,579 670,000 Heritage Property Investment Trust company guaranty 5 1/8s, 2014 (R) 649,449 1,690,000 Hospitality Properties Trust notes 6 3/4s, 2013 (R) 1,876,196 530,000 HRPT Properties Trust bonds 5 3/4s, 2014 (R) 548,945 525,000 HRPT Properties Trust notes 6 1/4s, 2016 (R) 561,861 200,000 iStar Financial, Inc. sr. notes 8 3/4s, 2008 (R) 227,468 1,150,000 iStar Financial, Inc. sr. notes 6s, 2010 (R) 1,207,769 520,000 Kimco Realty Corp. notes Ser. MTNC, 5.19s, 2013 (R) 525,506 675,000 Simon Property Group LP notes 5 5/8s, 2014 703,399 1,045,000 Vornado Realty Trust notes 4 3/4s, 2010 1,042,304 -------------- 14,458,055 Regional Bells (0.2%) ------------------------------------------------------------------------------- 200,000 Ameritech Capital Funding company guaranty 6 1/4s, 2009 212,714 1,020,000 Bellsouth Capital Funding notes 7 3/4s, 2010 1,176,431 685,000 Citizens Communications Co. sr. notes 6 1/4s, 2013 683,288 440,000 SBC Communications, Inc. notes 5 7/8s, 2012 471,386 740,000 SBC Communications, Inc. notes 5.1s, 2014 745,329 740,000 SBC Communications, Inc. notes 4 1/8s, 2009 734,722 235,000 Verizon Global Funding Corp. notes 7 3/4s, 2030 (S) 297,093 3,970,000 Verizon New England Inc. sr. notes 6 1/2s, 2011 4,371,137 670,000 Verizon Virginia Inc. debs. Ser. A, 4 5/8s, 2013 652,599 770,000 Verzon New Jersey, Inc. debs. 8s, 2022 953,618 -------------- 10,298,317 Restaurants (--%) ------------------------------------------------------------------------------- 580,000 Yum! Brands, Inc. sr. notes 8 7/8s, 2011 712,856 Retail (0.1%) ------------------------------------------------------------------------------- 1,732,087 CVS Corp. 144A pass-through certificates 6.117s, 2013 1,831,994 805,000 Federated Department Stores, Inc. sr. notes 6 5/8s, 2011 (S) 894,668 1,385,000 Fred Meyer, Inc. Holding Co. company guaranty 7.45s, 2008 1,516,942 275,000 Kroger Co. company guaranty 6 3/4s, 2012 309,990 725,000 Nordstrom, Inc. debs. 6.95s, 2028 836,456 1,190,000 RadioShack Corp. notes 7 3/8s, 2011 1,350,480 -------------- 6,740,530 Software (--%) ------------------------------------------------------------------------------- 980,000 Computer Associates International, Inc. 144A sr. notes 5 5/8s, 2014 997,276 Technology Services (--%) ------------------------------------------------------------------------------- 645,000 Fiserv, Inc. notes 4s, 2008 644,530 Telecommunications (0.6%) ------------------------------------------------------------------------------- 45,000 AT&T Wireless Services, Inc. notes 8 1/8s, 2012 54,354 1,355,000 AT&T Wireless Services, Inc. sr. notes 8 3/4s, 2031 1,863,676 3,125,000 AT&T Wireless Services, Inc. sr. notes 7 7/8s, 2011 3,674,066 1,405,000 Deutsche Telekom International Finance BV bonds 8 1/2s, 2010 (Netherlands) 1,667,541 1,235,000 Deutsche Telekom International Finance BV company guaranty 8 3/4s, 2030 (Netherlands) 1,665,533 1,540,000 Deutsche Telekom International Finance BV notes 5 1/4s, 2013 (Netherlands) 1,588,387 535,000 France Telecom notes 9 1/4s, 2031 (France) 743,786 3,335,000 France Telecom notes 7 3/4s, 2011 (France) 3,979,792 1,085,000 Koninklijke (Royal) KPN NV sr. unsub. notes 8 3/8s, 2030 (Netherlands) 1,441,363 2,105,000 Nextel Communications, Inc. sr. notes 5.95s, 2014 2,183,938 2,455,000 Sprint Capital Corp. company guaranty 7 5/8s, 2011 2,836,728 4,420,000 Sprint Capital Corp. company guaranty 6 7/8s, 2028 4,942,886 1,410,000 Telecom Italia Capital SA company guaranty 6 3/8s, 2033 (Luxembourg) 1,496,171 1,165,000 Telecom Italia Capital SA company guaranty 5 1/4s, 2013 (Luxembourg) 1,186,734 1,270,000 Telecom Italia Capital SA 144A company guaranty 4s, 2010 (Luxembourg) 1,238,301 775,000 United States Cellular Corp. notes 6.7s, 2033 840,040 725,000 Vodafone Group PLC notes 7 7/8s, 2030 (United Kingdom) 960,088 1,005,000 Vodafone Group PLC notes 7 3/4s, 2010 (United Kingdom) 1,159,621 -------------- 33,523,005 Telephone (--%) ------------------------------------------------------------------------------- 270,000 New England Telephone & Telegraph Co. debs. 7 7/8s, 2029 334,069 845,000 Telefonica Europe BV company guaranty 8 1/4s, 2030 (Netherlands) 1,163,786 -------------- 1,497,855 Waste Management (--%) ------------------------------------------------------------------------------- 1,245,000 Waste Management, Inc. sr. notes 7 3/8s, 2010 1,422,089 -------------- Total Corporate bonds and notes (cost $345,511,988) $361,911,719 Collateralized mortgage obligations (6.2%) (a) Principal amount Value ------------------------------------------------------------------------------- $664,000 Amresco Commercial Mortgage Funding I 144A Ser. 97-C1, Class H, 7s, 2029 $693,216 Banc of America Commercial Mortgage, Inc. 144A 715,000 Ser. 01-PB1, Class K, 6.15s, 2035 754,222 28,852,890 Ser. 04-4, IO, 0.047s, 2042 437,303 612,915 Banc of America Funding Corp. 144A Ser. 04-NIM1, Class Note, 6s, 2034 612,915 Banc of America Large Loan 144A 427,000 FRN Ser. 02-FL2A, Class L1, 5.4s, 2014 428,252 226,999 FRN Ser. 04-BBA4, Class G, 3.18s, 2018 226,999 142,000 FRN Ser. 04-BBA4, Class H, 3.43s, 2018 142,000 101,540,664 Ser. 03-BBA2, Class X1A, IO, 0.826s, 2015 581,178 1,930,000 Banc of America Structured Security Trust 144A Ser. 02-X1, Class A3, 5.436s, 2033 2,005,486 Bayview Commercial Asset Trust 144A 7,304,753 Ser. 04-3, IO, 0.775s, 2035 577,532 11,830,069 Ser. 04-2, IO, 0.72s, 2034 959,807 456,000 Bear Stearns Commercial Mortgage Securitization Corp. Ser. 00-WF2, Class F, 8.195s, 2032 546,009 Bear Stearns Commercial Mortgage Securitization Corp. 144A 1,070,000 Ser. 04-ESA, Class K, 4.95s, 2016 1,069,996 793,000 Ser. 04-HS2A, Class G, 3.85s, 2016 792,998 27,833,807 Ser. 04-PWRA, Class X, IO, 0.161s, 2041 260,942 10,867,147 Ser. 04-T16, Class X1, IO, 0.116s, 2046 202,062 41,516,289 Ser. 04-PWR5, Class X1, IO, 0.068s, 2042 819,864 15,671,309 Ser. 04-PWR6, Class X1, IO, 0.067s, 2041 265,315 Chase Commercial Mortgage Securities Corp. 1,821,804 Ser. 00-1, Class A1, 7.656s, 2032 1,853,601 553,000 Ser. 00-3, Class A2, 7.319s, 2032 629,235 Chase Commercial Mortgage Securities Corp. 144A 4,600,000 Ser. 98-1, Class F, 6.56s, 2030 4,991,339 1,171,000 Ser. 98-1, Class G, 6.56s, 2030 1,267,857 1,761,000 Ser. 98-1, Class H, 6.34s, 2030 1,528,844 34,076,000 Citigroup Commercial Mortgage Trust 144A Ser. 04-C2, Class XC, IO, 0.082s, 2041 829,271 4,937,500 Commercial Mortgage Acceptance Corp. Ser. 97-ML1, Class A3, 6.57s, 2030 5,194,076 Commercial Mortgage Acceptance Corp. 144A 2,013,000 Ser. 98-C1, Class F, 6.23s, 2031 2,157,092 705,000 Ser. 98-C2, Class F, 5.44s, 2030 721,397 1,991,000 Commercial Mortgage Pass-Through Certificates 144A Ser. 01-FL4A, Class D, 3.253s, 2013 1,944,608 9,485,000 Criimi Mae Commercial Mortgage Trust Ser. 98-C1, Class A2, 7s, 2033 10,089,669 3,385,000 Criimi Mae Commercial Mortgage Trust 144A Ser. 98-C1, Class B, 7s, 2033 3,610,675 CS First Boston Mortgage Securities Corp. 836,000 Ser. 97-C2, Class F, 7.46s, 2035 910,651 40,000,000 Ser. 04-C5, Class A-X, 0.075s, 2037 820,880 CS First Boston Mortgage Securities Corp. 144A 1,124,000 FRB Ser. 03-TF2A, Class L, 6.48s, 2014 1,117,923 313,000 FRN Ser. 04-TF2A, Class J, 3.43s, 2016 312,999 627,000 FRN Ser. 04-TF2A, Class H, 3.18s, 2019 626,999 63,898,275 Ser. 04-C3, Class AX, IO, 0.07s, 2036 1,086,335 DLJ Commercial Mortgage Corp. 2,212,000 Ser. 00-CF1, Class A1B, 7.62s, 2033 2,535,764 444,188 Ser. 98-CF2, Class B3, 6.04s, 2031 466,020 4,537,000 DLJ Commercial Mortgage Corp. 144A Ser. 99-CG2, Class B3, 6.1s, 2032 4,755,866 1,000,000 DLJ Mortgage Acceptance Corp. 144A Ser. 97-CF1, Class A3, 7.76s, 2030 1,066,604 Fannie Mae 552 Ser. 92-15, Class L, IO, 1037.606s, 2022 5,819 2,901,747 Ser. 04-10, Class QC, 18.93s, 2031 3,345,592 1,204,292 Ser. 02-36, Class SJ, 14.081s, 2029 1,271,325 2,292,881 Ser. 03-87, Class SP, 12.052s, 2032 2,360,796 1,203,430 Ser. 04-T3, Class PT1, 9.95s, 2044 1,375,334 456,180 Ser. 02-T12, Class A4, 9 1/2s, 2042 501,810 938,697 Ser. 02-T6, Class A3, 9 1/2s, 2041 1,029,856 527,153 Ser. 03-W6, Class PT1, 9.282s, 2042 593,240 1,207,096 Ser. 04-W12, Class 1A4, 7 1/2s, 2044 1,294,493 3,611,468 Ser. 04-W8, Class 3A, 7 1/2s, 2044 3,875,362 126,632 Ser. 04-T3, Class 1A4, 7 1/2s, 2044 135,829 4,501,896 Ser. 04-W9, Class 2A3, 7 1/2s, 2044 4,825,736 438,654 Ser. 02-T18, Class A4, 7 1/2s, 2042 469,762 2,295,254 Ser. 03-W3, Class 1A3, 7 1/2s, 2042 2,458,055 4,226,197 Ser. 02-T16, Class A3, 7 1/2s, 2042 4,525,366 2,520,387 Ser. 02-T19, Class A3, 7 1/2s, 2042 2,698,449 4,856,506 Ser. 03-W2, Class 1A3, 7 1/2s, 2042 5,202,831 4,196,853 Ser. 02-W6, Class 2A, 7 1/2s, 2042 4,488,970 761,428 Ser. 02-T12, Class A3, 7 1/2s, 2042 814,487 9,367,336 Ser. 02-W4, Class A5, 7 1/2s, 2042 10,024,876 494,504 Ser. 02-W1, Class 2A, 7 1/2s, 2042 526,683 1,418,778 Ser. 02-14, Class A2, 7 1/2s, 2042 1,517,783 4,320,463 Ser. 01-T10, Class A2, 7 1/2s, 2041 4,614,545 833,286 Ser. 02-T4, Class A3, 7 1/2s, 2041 890,234 Fannie Mae 7,491,727 Ser. 02-T6, Class A2, 7 1/2s, 2041 7,998,097 2,698,212 Ser. 01-T12, Class A2, 7 1/2s, 2041 2,883,318 3,065,763 Ser. 01-T8, Class A1, 7 1/2s, 2041 3,270,892 5,484,994 Ser. 01-T7, Class A1, 7 1/2s, 2041 5,846,286 617,003 Ser. 01-T3, Class A1, 7 1/2s, 2040 658,122 1,333,757 Ser. 01-T1, Class A1, 7 1/2s, 2040 1,425,257 385,725 Ser. 99-T2, Class A1, 7 1/2s, 2039 412,425 1,114,804 Ser. 02-T1, Class A3, 7 1/2s, 2031 1,191,687 3,466,579 Ser. 00-T6, Class A1, 7 1/2s, 2030 3,694,920 80,315 Ser. 01-T5, Class A3, 7 1/2s, 2030 85,589 1,652,092 Ser. 02-W7, Class A5, 7 1/2s, 2029 1,768,966 7,928,604 Ser. 01-T4, Class A1, 7 1/2s, 2028 8,511,064 2,480,768 Ser. 02-W3, Class A5, 7 1/2s, 2028 2,653,881 5,657,544 Ser. 03-58, Class ID, IO, 6s, 2033 982,998 19,591,503 Ser. 03-22, Class IO, IO, 6s, 2033 3,368,836 9,403,597 Ser. 03-31, Class IM, IO, 5 3/4s, 2032 799,306 14,749,089 Ser. 03-118, Class SF, IO, 5.57s, 2033 1,737,627 2,609,292 Ser. 02-36, Class QH, IO, 5.52s, 2029 88,660 3,654,367 Ser. 346, Class 2, IO, 5 1/2s, 2033 717,170 25,343,089 Ser. 338, Class 2, IO, 5 1/2s, 2033 5,007,240 4,457,639 Ser. 333, Class 2, IO, 5 1/2s, 2033 880,035 28,229,277 Ser. 329, Class 2, IO, 5 1/2s, 2033 5,533,379 7,508,912 Ser. 331, Class 1, IO, 5 1/2s, 2032 1,276,515 48,300 Ser. 03-29, Class IG, IO, 5 1/2s, 2031 11,965 6,196,889 Ser. 03-8, Class IP, IO, 5 1/2s, 2028 311,803 3,319,592 Ser. 03-42, Class JI, IO, 5 1/2s, 2028 136,933 18,668,947 Ser. 03-15, Class PK, IO, 5 1/2s, 2026 782,229 3,911,425 Ser. 03-6, Class IB, IO, 5 1/2s, 2022 64,513 3,388,855 Ser. 03-24, Class UI, IO, 5s, 2031 534,539 6,421,342 Ser. 343, Class 25, IO, 4 1/2s, 2018 945,141 3,696,431 Ser. 343, Class 26, IO, 4 1/2s, 2018 564,861 17,187,369 Ser. 03-W12, Class 2, IO, 2.217s, 2043 1,071,782 52,859,433 Ser. 03-W10, Class 1, IO, 1.988s, 2043 2,576,897 13,075,110 Ser. 03-W10, Class 3, IO, 1.962s, 2043 653,756 316,461 Ser. 03-W10, Class 1A1, 1.701s, 2032 315,765 54,622,876 Ser. 03-W8, Class 12, IO, 1.641s, 2042 2,602,353 4,259,287 Ser. 03-W3, Class 2IO2, IO, 1.6s, 2042 46,463 22,819,965 Ser. 03-W6, Class 11, IO, 1.599s, 2042 242,536 15,708,518 Ser. 03-W17, Class 12, IO, 1.158s, 2033 512,102 32,454,347 Ser. 03-W8, Class 11, IO, 1.065s, 2042 130,495 26,319,358 Ser. 03-49, Class SV, IO, 1s, 2033 753,692 80,182,964 Ser. 03-T2, Class 2, IO, 0.997s, 2042 1,919,132 21,051,587 Ser. 03-W6, Class 21, IO, 0.898s, 2042 52,542 21,701,593 Ser. 03-W6, Class 51, IO, 0.678s, 2042 397,981 6,670,000 Ser. 03-W3, Class 2IO1, IO, 0.673s, 2042 134,772 50,436,456 Ser. 01-T12, Class IO, 0.569s, 2041 742,706 45,079,642 Ser. 03-W2, Class 1, IO, 0.469s, 2042 582,004 17,271,489 Ser. 02-T4, IO, 0.45s, 2041 191,556 56,744,747 Ser. 03-W3, Class 1, IO, 0.436s, 2042 675,530 41,927,600 Ser. 02-T1, Class IO, IO, 0.425s, 2031 442,814 Fannie Mae 31,380,750 Ser. 03-W6, Class 3, IO, 0.366s, 2042 319,328 33,015,413 Ser. 03-W6, Class 23, IO, 0.352s, 2042 322,965 8,577,432 Ser. 01-79, Class BI, IO, 0.348s, 2045 75,616 30,768,011 Ser. 03-W4, Class 3A, IO, 0.273s, 2042 258,451 16,290,902 Ser. 352, Class 1, PO, zero %, 2034 13,206,449 527,782 Fannie Mae Whole Loan Ser. 04-W14, Class 2A, 7 1/2s, 2044 564,892 980,795 Federal Home Loan Mortgage Corp. Structured Pass-Through Securities Ser. 212, IO, 6s, 2031 168,229 Federal Home Loan Mortgage Corp. Structured Pass-Through Securities 469,687 Ser. T-42, Class A6, 9 1/2s, 2042 516,466 8,602,879 Ser. T-60, Class 1A3, 7 1/2s, 2044 9,197,338 1,161,315 Ser. T-58, Class 4A, 7 1/2s, 2043 1,241,161 6,698,857 Ser. T-57, Class 1A3, 7 1/2s, 2043 7,167,777 1,358,809 Ser. T-51, Class 2A, 7 1/2s, 2042 1,449,718 815,467 Ser. T-42, Class A5, 7 1/2s, 2042 871,998 20,706,943 Ser. T-56, Class A, IO, 1.285s, 2043 310,604 25,393,662 Ser. T-56, Class 3, IO, 0.346s, 2043 269,173 29,941,070 Ser. T-56, Class 1, IO, 0.286s, 2043 233,840 29,226,819 Ser. T-56, Class 2, IO, 0.038s, 2043 82,127 15,802,000 FFCA Secured Lending Corp. 144A Ser. 00-1, Class A2, 7.77s, 2027 18,089,652 34,506,766 First Union National Bank-Bank of America Commercial Mortgage 144A Ser. 01-C1, Class 3, IO, 1.746s, 2033 2,875,114 First Union-Lehman Brothers Commercial Mortgage Trust II 2,726,000 Ser. 97-C2, Class F, 7 1/2s, 2029 3,194,542 4,770,600 Ser. 97-C1, Class A3, 7.38s, 2029 4,995,596 1,364,000 First Union-Lehman Brothers-Bank of America 144A Ser. 98-C2, Class G, 7s, 2035 1,536,955 Freddie Mac 5,606,076 IFB Ser. 2763, Class SC, 18.68s, 2032 6,492,169 5,128,028 Ser. 2437, Class SB, IO, 5.52s, 2032 506,393 7,242,381 Ser. 2581, Class IE, IO, 5 1/2s, 2025 731,028 3,878,353 Ser. 2553, Class IJ, IO, 5 1/2s, 2020 75,749 6,327,412 Ser. 2828, Class GI, IO, 5.02s, 2034 854,389 4,323,050 Ser. 2469, Class SH, IO, 5.02s, 2032 389,075 16,734,148 Ser. 2869, Class JS, IO, 4.77s, 2034 1,737,917 3,249,111 Ser. 2882, Class SL, IO, 4.72s, 2034 383,565 1,997,902 Ser. 2696, PO, zero %, 2033 1,493,332 927,282 G-Force CDO, Ltd. FRB Ser. 01-1A, Class A, 3.1s, 2033 (Cayman Islands) 928,262 G-Force CDO, Ltd. 144A 715,000 Ser. 02-1A, Class E, 8 1/4s, 2037 (Cayman Islands) 742,818 315,000 Ser. 02-1A, Class D, 7.61s, 2037 (Cayman Islands) 343,682 939,000 Ser. 03-1A, Class E, 6.58s, 2038 (Cayman Islands) 948,243 GEBL 144A 818,729 Ser. 04-2, Class D, 5 1/2s, 2034 818,729 306,774 Ser. 04-2, Class C, 5s, 2034 306,774 2,403,721 General Growth Properties-Mall Properties Trust FRB Ser. 01-C1A, Class D3, 4.73s, 2014 2,406,725 GMAC Commercial Mortgage Securities, Inc. 592,000 Ser. 99-C3, Class F, 7.782s, 2036 640,515 4,072,000 Ser. 04-C2, Class A4, 5.301s, 2038 4,251,168 6,249,000 Ser. 03-C2, Class A2, 5.28s, 2040 6,613,942 GMAC Commercial Mortgage Securities, Inc. 144A 1,614,303 Ser. 99-C3, Class G, 6.974s, 2036 1,286,630 379,421 FRN Ser. 02-FL1A, Class D, 3.7s, 2014 378,348 Government National Mortgage Association 3,884,852 Ser. 03-114, Class SP, 12.51s, 2027 4,104,589 7,805,849 Ser. 04-86, Class SW, IO, 4 1/4s, 2034 636,824 241,128 Ser. 98-2, Class EA, PO, zero %, 2028 205,147 32,556,000 Greenwich Capital Commercial Funding Corp. 144A Ser. 05-GG3, Class XC, IO, 0.082s, 2042 523,598 GS Mortgage Securities Corp. II 144A 565,000 FRB Ser. 03-FL6A, Class L, 5.73s, 2015 565,706 25,371,759 Ser. 04-GG2, Class XC, IO, 0.088s, 2038 281,468 JP Morgan Chase Commercial Mortgage Securities Corp. 144A 28,936,710 Ser. 04-FL1A, Class X1A, IO, 0.896s, 2019 300,942 22,075,034 Ser. 04-CBX, Class X1, 0.073s, 2039 426,710 15,933,000 Ser. 04-C3, Class X1, IO, 0.047s, 2042 273,410 LB Commercial Conduit Mortgage Trust 144A 715,303 Ser. 99-C1, Class F, 6.41s, 2031 711,904 765,731 Ser. 99-C1, Class G, 6.41s, 2031 739,725 LB-UBS Commercial Mortgage Trust 144A 23,173,395 Ser. 04-C7, Class XCL, IO, 0.136s, 2036 512,943 23,040,279 Ser. 04-C2, Class XCL, IO, 0.133s, 2036 663,560 59,160,000 Ser. 05, Class C1, IO, 0.124s, 2050 1,296,610 Lehman Brothers Floating Rate Commercial Mortgage Trust 144A 1,704,000 FRN Ser. 03-LLFA, Class L, 6.2s, 2014 1,681,851 733,000 FRB Ser. 04-LLFA, Class H, 3.43s, 2017 735,785 1,073,050 FRB Ser. 03-C4, Class A, 3.03s, 2015 1,075,733 Merrill Lynch Mortgage Investors, Inc. 644,000 Ser. 98-C3, Class E, 7.143s, 2030 720,628 168,987 Ser. 96-C2, Class A3, 6.96s, 2028 175,283 Merrill Lynch Mortgage Trust 144A 22,251,000 Ser. 04-BPC1, Class XC,IO,, 0.059s, 2041 431,113 32,011,447 Ser. 04-KEY2, Class X-C, IO, 0.05s, 2039 665,238 Mezz Cap Commercial Mortgage Trust 144A 3,212,666 Ser. 04-C1, Class X, IO, 6.18s, 2037 1,428,256 2,525,000 Ser. 04-C2, Class X, IO, 2.594s, 2034 1,007,238 Morgan Stanley Capital I 144A 1,007,000 Ser. 96-C1, Class E, 7.443s, 2028 1,040,517 482,000 Ser. 98-HF1, Class F, 7.18s, 2030 522,828 1,000,000 Ser. 04-RR, Class F5, 6s, 2039 865,262 1,700,000 Ser. 04-RR, Class F6, 6s, 2039 1,415,597 1,117,795 Morgan Stanley Dean Witter Capital I Ser. 00-LIF2, Class A1, 6.96s, 2033 1,189,603 Morgan Stanley Dean Witter Capital I 144A 450,746 FRB Ser. 01-XLF, Class D, 3.92s, 2013 450,746 637,004 FRB Ser. 01-XLF, Class E, 3.87s, 2013 637,003 1,020,000 Mortgage Capital Funding, Inc. FRB Ser. 98-MC2, Class E, 7.146s, 2030 1,103,840 PNC Mortgage Acceptance Corp. 144A 3,870,000 Ser. 99-CM1, Class B3, 7.1s, 2032 4,233,575 456,000 Ser. 00-C1, Class J, 6 5/8s, 2010 403,957 998,000 Ser. 00-C2, Class J, 6.22s, 2033 1,039,107 Pure Mortgages 144A 2,645,000 FRB Ser. 04-1A, Class F, 6.132s, 2034 (Ireland) 2,645,000 1,041,000 Ser. 04-1A, Class E, 3.882s, 2034 (Ireland) 1,041,000 1,390,113 Salomon Brothers Mortgage Securities VII Ser. 96-C1, Class E, 8.384s, 2028 1,438,767 8,934,253 Salomon Brothers Mortgage Securities VII 144A Ser. 03-CDCA, Class X3CD, IO, 0.994s, 2015 79,586 1,767,000 Starwood Asset Receivables Trust FRN Ser. 02-1A, Class F, 3.894s, 2020 1,768,590 Starwood Asset Receivables Trust 144A 589,822 FRB Ser. 03-1A, Class F, 3.63s, 2022 590,589 748,620 FRB Ser. 03-1A, Class E, 3.58s, 2022 749,594 STRIPS 144A 757,000 Ser. 03-1A, Class L, 5s, 2018 (Cayman Islands) 660,861 513,000 Ser. 03-1A, Class M, 5s, 2018 (Cayman Islands) 425,021 337,000 Ser. 04-1A, Class L, 5s, 2018 (Cayman Islands) 296,594 363,210 TIAA Real Estate CDO, Ltd. Ser. 01-C1A, Class A1, 5.77s, 2016 (Cayman Islands) 368,077 22,836,000 Wachovia Bank Commercial Mortgage Trust 144A Ser. 05-C16, Class XC, IO, 0.174s, 2041 463,856 -------------- Total Collateralized mortgage obligations (cost $353,107,641) $338,801,441 Convertible preferred stocks (0.7%) (a) Number of shares Value ------------------------------------------------------------------------------- 108,800 Hartford Financial Services Group, Inc. (The) $3.50 cv. pfd. $6,854,400 102,100 Hartford Financial Services Group, Inc. (The) $3.00 cv. pfd. 6,330,200 167,548 Xerox Corp. 6.25% cv. pfd. 23,037,850 -------------- Total Convertible preferred stocks (cost $28,761,250) $36,222,450 Municipal bonds and notes (0.1%) (a) Principal amount Rating(RAT) Value ------------------------------------------------------------------------------- $1,110,000 IL State G.O. Bonds, 5.1s, 6/1/33 Aa3 $1,103,762 1,120,000 NJ State Tpk. Auth. Rev. Bonds, Ser. B, AMBAC, 4.252s, 1/1/16 Aaa 1,094,330 1,320,000 OR State G.O. Bonds (Taxable Pension), 5.892s, 6/1/27 Aa3 1,460,791 -------------- Total Municipal bonds and notes (cost $3,550,000) $3,658,883 Convertible bonds and notes (0.1%) (a) (cost $2,539,477) Principal amount Value ------------------------------------------------------------------------------- $95,600 CenterPoint Energy, Inc. cv. sub notes FRN 2s, 2029 $3,498,673 Short-term investments (16.2%) (a) Principal amount Value ------------------------------------------------------------------------------- $24,446,999 Barton Capital, LLC 4.92s, February 9, 2005 $24,434,341 20,000,001 Falcon Asset Securitization Corp. 3.36s, February 14, 2005 19,982,523 25,000,000 Ranger Funding Co. 5.14s, February 14, 2005 24,978,063 587,748,901 Putnam Prime Money Market Fund (e) 587,748,901 205,364,694 Short-term investments held as collateral for loaned securities with yields ranging from 2.29% to 2.65% and due dates ranging from February 1, 2005 to March 22, 2005 (d) 205,261,728 -------------- Total Short-term investments (cost $862,405,556) $862,405,556 ------------------------------------------------------------------------------- Total Investments (cost $5,613,246,115) $6,294,812,729 ------------------------------------------------------------------------------- (a) Percentages indicated are based on net assets of $5,472,400,375. (RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at January 31, 2005 for the securities listed. Ratings are generally ascribed to securities at the time of issuance. While the agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings do not necessarily represent what the agencies would ascribe to these securities at January 31, 2005. Securities rated by Putnam are indicated by "/P". Security ratings are defined in the Statement of Additional Information. (NON) Non-income-producing security. (STP) The interest or dividend rate and date shown parenthetically represent the new interest or dividend rate to be paid and the date the fund will begin accruing interest or dividend income at this rate. (SEG) A portion of this security was pledged and segregated with the custodian to cover margin requirements for futures contracts at January 31, 2005. (F) Security is valued at fair value following procedures approved by the Trustees. (R) Real Estate Investment Trust. (S) Securities on loan, in part or in entirety, at January 31, 2005. (d) See Note 1 to the financial statements. (e) See Note 5 to the financial statements regarding investments in Putnam Prime Money Market Fund. 144A after the name of a security represents those exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. ADR after the name of a foreign holding stands for American Depositary Receipts representing ownership of foreign securities on deposit with a custodian bank. TBA after the name of a security represents to be announced securities (Note 1). AMBAC represents AMBAC Indemnity Corporation. G.O. Bonds represent General Obligation Bonds. The rates shown on Floating Rate Bonds (FRB) and Floating Rate Notes (FRN) are the current interest rates at January 31, 2005.
Forward currency contracts to buy at January 31, 2005 (Unaudited) (aggregate face value $1,522,185) Aggregate Delivery Unrealized Value face value date depreciation ------------------------------------------------------------------------------------------------------ Canadian Dollar $754,623 $788,116 4/20/05 $(33,493) Euro 721,965 734,069 3/16/05 (12,104) ------------------------------------------------------------------------------------------------------ $(45,597) ------------------------------------------------------------------------------------------------------ Futures contracts outstanding at January 31, 2005 (Unaudited) Unrealized Aggregate Expiration appreciation/ Value face value date (depreciation) ------------------------------------------------------------------------------------------------------ CBT Interest Rate Swap 10 yr (Long) $1,003,781 $989,465 Mar-05 $14,316 Euro 90 day (Long) 3,638,250 3,647,983 Mar-05 (9,733) Euro 90 day (Long) 725,475 729,838 Jun-05 (4,363) Euro 90 day (Long) 723,675 727,175 Sep-05 (3,500) Euro 90 day (Long) 722,288 724,888 Dec-05 (2,600) U.S. Treasury Note 5 yr (Short) 676,913,000 676,973,724 Mar-05 60,724 U.S. Treasury Note 30 yr (Long) 152,857,031 150,648,501 Mar-05 2,208,530 U.S. Treasury Note 10 yr (Long) 569,411,250 565,962,779 Mar-05 3,448,471 ------------------------------------------------------------------------------------------------------ $5,711,845 ------------------------------------------------------------------------------------------------------ TBA sale commitments outstanding at January 31, 2005 (Unaudited) (proceeds receivable $152,427,282) Principal Settlement Agency amount date Value ------------------------------------------------------------------------------------------------------ FNMA 6 1/2s, February 1, 2035 $36,300,000 2/10/05 $37,984,545 FHLMC 6 1/2s, February 1, 2035 24,500,000 2/10/05 25,684,805 FNMA 5 1/2s, February 1, 2035 40,800,000 2/10/05 41,539,500 FNMA 5s, February 1, 2035 47,600,000 2/10/05 47,481,000 ------------------------------------------------------------------------------------------------------ $152,689,850 ------------------------------------------------------------------------------------------------------ Interest rate swap contracts outstanding at January 31, 2005 (Unaudited) Unrealized Notional Termination appreciation/ amount date (depreciation) ------------------------------------------------------------------------------------------------------ Agreement with Bank of America, N.A. dated January 12, 2005 to receive semi-annually the notional amount multiplied by 4.106% and pay quarterly the notional amount multiplied by the three month USD-LIBOR. $87,100,000 1/14/10 $198,601 Agreement with Bank of America, N.A. dated December 20, 2004 to pay semi-annually the notional amount multiplied by 3.965% and receive quarterly the notional amount multiplied by the three month USD-LIBOR. 102,075,000 12/22/09 282,381 Agreement with Bank of America, N.A. dated January 26, 2004 to receive semi-annually the notional amount multiplied by 5.2125% and pay quarterly the notional amount multiplied by the three month USD-LIBOR. 82,772,000 1/28/24 3,481,206 Agreement with Bank of America, N.A. dated December 2, 2003 to receive semi-annually the notional amount multiplied by 2.444% and pay quarterly the notional amount multiplied by the three month USD LIBOR. 12,822,000 12/5/05 (78,599) Agreement with Bank of America N.A. dated December 12, 2003 to pay semi-annually the notional amount multiplied by 2.1125% and receive quarterly the notional amount multiplied by three month USD-LIBOR. 3,280,000 12/16/05 32,245 Agreement with Credit Suisse First Boston International dated July 7, 2004 to receive semi-annually the notional amount multiplied by 2.931% and pay quarterly the notional amount multiplied by the three month USD-LIBOR. 25,631,800 7/9/06 (176,143) Agreement with Credit Suisse First Boston International dated November 15, 2004 to pay semi-annually the notional amount multiplied by 3.947% and receive quarterly the notional amount multiplied by the three month USD-LIBOR. 6,600,000 11/17/09 8,301 Agreement with Lehman Brothers Special Financing, Inc. dated December 5, 2003 to receive semi-annually the notional amount multiplied by 2.23762% and pay quarterly the notional amount multiplied by three month USD-LIBOR-BBA. 54,516,000 12/9/05 (450,928) Agreement with Lehman Brothers Special Financing, Inc. dated January 22, 2004 to pay semi-annually the notional amount multiplied by 1.999% and receive quarterly the notional amount multiplied by the three month USD-LIBOR-BBA. 28,852,000 1/26/06 353,026 Agreement with Lehman Brothers Special Financing, Inc. dated January 21, 2004 to pay semi-annually the notional amount multiplied by 2.009% and receive quarterly the notional amount multiplied by the three month USD-LIBOR-BBA. 28,154,000 1/23/06 338,869 Agreement with Lehman Brothers Special Financing, Inc. dated January 21, 2004 to pay semi-annually the notional amount multiplied by 2.008% and receive quarterly the notional amount multiplied by the three month USD-LIBOR-BBA. 28,154,000 1/23/06 338,870 Agreement with Lehman Brothers Special Financing, Inc. dated January 22, 2004 to pay semi-annually the notional amount multiplied by 2.007% and receive quarterly the notional amount multiplied by the three month USD-LIBOR-BBA. 15,124,000 1/26/06 184,019 Agreement with Lehman Brothers Special Financing, Inc. dated December 11, 2003 to pay s emi-annually the notional amount multiplied by 4.71% and receive quarterly the notional amount multiplied by three month USD-LIBOR-BBA. 10,708,000 12/15/13 (248,253) Agreement with Lehman Brothers Special Financing, Inc. dated December 12, 2003 to pay semi-annually the notional amount multiplied by 4.579% and receive quarterly the notional amount multiplied by three month USD-LIBOR-BBA. 10,192,000 12/16/13 (136,339) Agreement with Lehman Brothers Special Financing, Inc. dated January 21, 2004 to pay semi-annually the notional amount multiplied by 4.408% and receive quarterly the notional amount multiplied by the three month USD-LIBOR-BBA. 9,307,000 1/23/14 18,069 Agreement with Lehman Brothers Special Financing, Inc. dated January 21, 2004 to pay semi-annually the notional amount multiplied by 4.419% and receive quarterly the notional amount multiplied by the three month USD-LIBOR-BBA. 9,307,000 1/23/14 11,142 Agreement with Lehman Brothers Special Financing, Inc. dated December 9, 2003 to receive semi-annually the notional amount multiplied by 4.641% and pay quarterly the notional amount multiplied by the three month USD-LIBOR-BBA. 3,658,000 12/15/13 66,367 Agreement with Lehman Brothers Special Financing, Inc. dated December 11, 2003 to pay semi-annually the notional amount multiplied by 2.235% and receive quarterly the notional amount multiplied by three month USD-LIBOR-BBA. 2,559,000 12/15/05 21,955 ------------------------------------------------------------------------------------------------------ $4,244,789 ------------------------------------------------------------------------------------------------------ Total return swap contracts outstanding at January 31, 2005 (Unaudited) Unrealized Notional Termination appreciation/ amount date (depreciation) ------------------------------------------------------------------------------------------------------ Agreement with Citigroup Financial Products, Inc. dated January 25, 2005 to receive at maturity the notional amount multiplied by the nominal spread appreciation of the Lehman Brothers AAA 8.5+ Commercial Mortgage Backed Securities Index adjusted by a modified duration factor and an accrual of 25 basis points plus the beginning of the period nominal spread of the Lehman Brothers AAA 8.5+ Commercial Mortgage Backed Securities Index and pay at maturity the notional amount multiplied by the nominal spread depreciation of the Lehman Brothers AAA 8.5+ Commercial Mortgage Backed Securities Index adjusted by a modified duration factor. $24,250,000 7/31/05 $39,110 Agreement with Citigroup Financial Products, Inc. dated January 25, 2005 to receive at maturity the notional amount multiplied by the nominal spread appreciation of the Lehman Brothers AAA Commercial Mortgage Backed Securities Index adjusted by a modified duration factor and an accrual of -5 basis points plus the beginning of the period nominal spread of the Lehman Brothers AAA Commercial Mortgage Backed Securities Index and pay at maturity the notional amount multiplied by the nominal spread depreciation of the Lehman Brothers AAA Commercial Mortgage Backed Securities Index adjusted by a modified duration factor. 24,250,000 7/31/05 21,847 Agreement with Goldman Sachs Capital Markets, L.P. dated December 31, 2004 to pay at maturity the notional amount multiplied by the spread depreciation of the Lehman Brothers AAA Commercial Mortgage Backed Securities Index adjusted by a modified duration factor and receive at maturity the notional amount multiplied by the appreciation of the Lehman Brothers AAA Commercial Mortgage Backed Securities Index plus 43 basis points. 23,889,179 6/1/05 70,539 Agreement with Goldman Sachs Capital Markets, L.P. dated October 29, 2004 to receive at maturity the notional amount multiplied by the nominal spread appreciation of the Lehman Brothers AAA 8.5+ Commercial Mortgage Backed Securities Index adjusted by a modified duration factor and an accrual of 25 basis points plus the beginning of the period nominal spread of the Lehman Brothers AAA 8.5+ Commercial Mortgage Backed Securities Index and pay at maturity the notional amount multiplied by the nominal spread depreciation of the Lehman Brothers AAA 8.5+ Commercial Mortgage Backed Securities Index adjusted by a modified duration factor. 35,307,366 5/1/05 137,503 Agreement with Deutsche Bank AG dated December 29, 2004 to receive at maturity the notional amount multiplied by the nominal spread appreciation of the Lehman Brothers AAA Commercial Mortgage Backed Securities Index adjusted by a modified duration factor and an accrual of 7 basis points plus the beginning of the period nominal spread of the Lehman Brothers AAA Commercial Mortgage Backed Securities Index and pay at maturity the notional amount multiplied by the nominal spread depreciation of the Lehman Brothers AAA Commercial Mortgage Backed Securities Index and an accrual of 7 basis points plus the beginning of the period nominal spread of the Lehman Brothers AAA Commercial Mortgage Backed Securities Index. 18,122,400 4/1/05 49,235 Agreement with Deutsche Bank AG dated August 10, 2004 to receive at maturity the notional amount multiplied by the nominal spread appreciation of the Lehman Brothers AAA Commercial Mortgage Backed Securities Index adjusted by a modified duration factor and pay at maturity notional amount multiplied by the nominal spread depreciation of the Lehman Brothers AAA Commercial Mortgage Backed Securities Index and an accrual of 25 basis points plus the beginning of the period nominal spread of the Lehman Brothers AAA Commercial Mortgage Backed Securities Index. 7,974,900 3/1/05 76,663 Agreement with Goldman Sachs Capital Markets, L.P. dated December 29, 2004 to pay at maturity the notional amount multiplied by the spread depreciation of the Lehman Brothers AAA Commercial Mortgage Backed Securities Index adjusted by a modified duration factor and receive at maturity the notional amount multiplied by the appreciation of the Lehman Brothers AAA Commercial Mortgage Backed Securities Index plus 8 basis points. 174,481,000 7/1/05 468,307 Agreement with Lehman Brothers Special Financing, Inc. dated August 12, 2004 to receive/(pay) monthly the notional amount multiplied by the return of Lehman Brothers CMBS ERISA-Eligible Index and pay monthly the one month USD-LIBOR-BBA less 25 basis points. 23,687,125 3/1/05 136,194 ------------------------------------------------------------------------------------------------------ $999,398 ------------------------------------------------------------------------------------------------------ Credit default contracts outstanding at January 31, 2005 (Unaudited) Notional Unrealized amount appreciation ------------------------------------------------------------------------------------------------------ Agreement with Goldman Sachs effective September 2, 2004, terminating on the date on which the notional amount is reduced to zero or the date on which the assets securing the reference obligation are liquidated, the fund receives a payment of the outstanding notional amount times 2.35% and the fund pays in the event of a credit default in one of the underlying securities in the basket of BB CMBS securities. $2,542,815 $125,892 Agreement with Goldman Sachs effective September 2, 2004, terminating on the date on which the notional amount is reduced to zero or the date on which the assets securing the reference obligation are liquidated, the fund receives a payment of the outstanding notional amount times 2.55625% and the fund pays in the event of a credit default in one of the underlying securities in the basket of BB CMBS securities. 2,542,815 74,331 Agreement with Goldman Sachs effective September 2, 2004, terminating on the date on which the notional amount is reduced to zero or the date on which the assets securing the reference obligation are liquidated, the fund receives a payment of the outstanding notional amount times 2.4625% and the fund pays in the event of a credit default in one of the underlying securities in the basket of BB CMBS securities. 1,271,407 58,236 Agreement with Goldman Sachs effective September 2, 2004, terminating on the date on which the notional amount is reduced to zero or the date on which the assets securing the reference obligation are liquidated, the fund receives a payment of the outstanding notional amount times 2.433% and the fund pays in the event of a credit default in one of the underlying securities in the basket of BB CMBS securities. 953,556 41,885 Agreement with Goldman Sachs effective September 2, 2004, terminating on the date on which the notional amount is reduced to zero or the date on which the assets securing the reference obligation are liquidated, the fund receives a payment of the outstanding notional amount times 2.475% and the fund pays in the event of a credit default in one of the underlying securities in the basket of BB CMBS securities. 635,704 25,445 Agreement with Goldman Sachs effective September 2, 2004, terminating on the date on which the notional amount is reduced to zero or the date on which the assets securing the reference obligation are liquidated, the fund receives a payment of the outstanding notional amount times 2.5% and the fund pays in the event of a credit default in one of the underlying securities in the basket of BB CMBS securities. 317,852 20,221 Agreement with Goldman Sachs effective September 2, 2004, terminating on the date on which the notional amount is reduced to zero or the date on which the assets securing the reference obligation are liquidated, the fund receives a payment of the outstanding notional amount times 2.6% and the fund pays in the event of a credit default in one of the underlying securities in the basket of BB CMBS securities. 317,852 2,571 Agreement with Bank of America effective January 31, 2005, maturing on March 20, 2010, to receive a premium based on the difference between the original spread on issue and the market spread on day of execution and receive quarterly 18.5 basis points time the notional amount. Upon a credit default event of a reference entity (FNMA 5.375, 11/15/11), the fund makes a payment of the proportional notional amount times the difference between the par value and the then-market value of the reference entity. 32,000,000 -- Agreement with Lehman Brothers effective January 05, 2005 maturing on March 20, 2010, to pay a premium based on the difference between the original spread on issue and the market spread on day of execution and receive quarterly 105 basis points times the notional amount. Upon a credit default event of a reference entity within IG CDX HVOL Series 3 Index, the fund makes a payment of the proportional notional amount times the difference between the par value and the then-market value of the reference entity within the IG CDX HVOL Series 3 Index. 17,000,000 78,346 Agreement with Lehman Brothers effective January 05, 2005 maturing on March 20, 2015, to pay a premium based on the difference between the original spread on issue and the market spread on day of execution and receive quarterly 70 basis points time the notional amount. Upon a credit default event of a reference entity within CDX BB HY Series 3 Index, the fund makes a payment of the proportional notional amount times the difference between the par value and the then-market value of the reference entity within the CDX BB HY Series 3 Index. 13,000,000 (7,672) Agreement with Lehman Brothers effective January 20, 2005, maturing on March 20, 2015, to pay quarterly 224 basis points times the notional amount. Upon a credit default event of any reference entity within DJ IG CDX Series 3 Index that the counterparties agree encroaches the 7-10 Loss Basket of the Index, the fund receives a payment of the proportional notional amount times the difference between the par value and the then-market value of the reference entity within the DJ IG CDX Series 3 Index. 2,227,000 (48,806) Agreement with Bank of America, N.A. effective November 24, 2004, maturing on April 15, 2010, to receive a premium equal to 2.583% times the notional amount. Upon a credit default event of any News Corp. senior note or bond the fund makes a payment of the proportional notional amount times the difference between the par value and the then-market value of the defaulted News Corp. senior note or bond. 580,000 (76) Agreement with Bank of America, N.A. effective August 11, 2004, maturing on April 15, 2010, to receive a premium equal to 4.418% times the notional amount. Upon a credit default event of News Corp. the fund makes a payment of the proportional notional amount times the difference between the par value and the then-market value of News Corp. 2,120,000 (37,261) Agreement with Merrill Lynch International effective July 1, 2004, maturing on July 1, 2007, to receive a premium equal to 1.441% times the notional amount. Upon a credit default event of Consolidated Natural Gas, 6.625%, December 12, 2008, the fund makes a payment of the proportional notional amount times the difference between the par value and the then-market value of Consolidated Natural Gas, 6.625%, December 12, 2008. 4,410,000 (40,849) ------------------------------------------------------------------------------------------------------ $292,263 ------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements. Statement of assets and liabilities January 31, 2005 (Unaudited) Assets ------------------------------------------------------------------------------- Investment in securities, at value, including $199,255,937 of securities on loan (Note 1): ------------------------------------------------------------------------------- Unaffiliated issuers (identified cost $5,025,497,214) $5,707,063,828 ------------------------------------------------------------------------------- Affiliated issuers (identified cost $587,748,901) (Note 5) 587,748,901 ------------------------------------------------------------------------------- Cash 22,437,624 ------------------------------------------------------------------------------- Dividends, interest and other receivables 18,110,117 ------------------------------------------------------------------------------- Receivable for shares of the fund sold 12,094,497 ------------------------------------------------------------------------------- Receivable for securities sold 717,214,422 ------------------------------------------------------------------------------- Receivable for open swap contracts (Note 1) 6,334,449 ------------------------------------------------------------------------------- Receivable for open credit default contracts (Note 1) 364,286 ------------------------------------------------------------------------------- Receivable for variation margin (Note 1) 821,948 ------------------------------------------------------------------------------- Total assets 7,072,190,072 Liabilities ------------------------------------------------------------------------------- Payable for securities purchased 1,200,703,086 ------------------------------------------------------------------------------- Payable for shares of the fund repurchased 29,644,665 ------------------------------------------------------------------------------- Payable for compensation of Manager (Notes 2 and 5) 6,547,811 ------------------------------------------------------------------------------- Payable for investor servicing and custodian fees (Note 2) 707,273 ------------------------------------------------------------------------------- Payable for Trustee compensation and expenses (Note 2) 365,715 ------------------------------------------------------------------------------- Payable for administrative services (Note 2) 10,159 ------------------------------------------------------------------------------- Payable for distribution fees (Note 2) 1,805,698 ------------------------------------------------------------------------------- Payable for open swap contracts (Note 1) 1,090,262 ------------------------------------------------------------------------------- Payable for closed swap contracts (Note 1) 8,600 ------------------------------------------------------------------------------- Payable for open forward contracts (Note 1) 45,597 ------------------------------------------------------------------------------- TBA sales commitments, at value (proceeds receivable $152,427,282) (Note 1) 152,689,850 ------------------------------------------------------------------------------- Credit default contracts outstanding, at value (proceeds receivable $172,197) (Note 1) 94,010 ------------------------------------------------------------------------------- Collateral on securities loaned, at value (Note 1) 205,261,728 ------------------------------------------------------------------------------- Other accrued expenses 815,243 ------------------------------------------------------------------------------- Total liabilities 1,599,789,697 ------------------------------------------------------------------------------- Net assets $5,472,400,375 Represented by ------------------------------------------------------------------------------- Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) $4,973,120,272 ------------------------------------------------------------------------------- Undistributed net investment income (Note 1) 11,515,229 ------------------------------------------------------------------------------- Accumulated net realized loss on investments and foreign currency transactions (Note 1) (204,992,757) ------------------------------------------------------------------------------- Net unrealized appreciation of investments and foreign currency transactions 692,757,631 ------------------------------------------------------------------------------- Total -- Representing net assets applicable to capital shares outstanding $5,472,400,375 Computation of net asset value and offering price ------------------------------------------------------------------------------- Net asset value and redemption price per class A share ($3,384,416,069 divided by 189,012,743 shares) $17.91 ------------------------------------------------------------------------------- Offering price per class A share (100/94.75 of $17.91)* $18.90 ------------------------------------------------------------------------------- Net asset value and offering price per class B share ($1,027,872,569 divided by 57,997,601 shares)** $17.72 ------------------------------------------------------------------------------- Net asset value and offering price per class C share ($75,812,318 divided by 4,258,908 shares)** $17.80 ------------------------------------------------------------------------------- Net asset value and redemption price per class M share ($216,153,589 divided by 12,189,698 shares) $17.73 ------------------------------------------------------------------------------- Offering price per class M share (100/96.50 of $17.73)* $18.37 ------------------------------------------------------------------------------- Net asset value, offering price and redemption price per class R share ($508,911 divided by 28,475 shares) $17.87 ------------------------------------------------------------------------------- Net asset value, offering price and redemption price per class Y share ($767,636,919 divided by 42,753,935 shares) $17.95 ------------------------------------------------------------------------------- * On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales, the offering price is reduced. ** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge. The accompanying notes are an integral part of these financial statements. Statement of operations Six months ended January 31, 2005 (Unaudited) Investment income: ------------------------------------------------------------------------------- Dividends (net of foreign tax of $50,530) $42,521,238 ------------------------------------------------------------------------------- Interest (including interest income of $3,796,631 from investments in affiliated issuers) (Notes 2 and 5) 35,009,383 ------------------------------------------------------------------------------- Securities lending 69,396 ------------------------------------------------------------------------------- Total investment income 77,600,017 Expenses: ------------------------------------------------------------------------------- Compensation of Manager (Note 2) 13,464,139 ------------------------------------------------------------------------------- Investor servicing fees (Note 2) 7,172,700 ------------------------------------------------------------------------------- Custodian fees (Note 2) 341,135 ------------------------------------------------------------------------------- Trustee compensation and expenses (Note 2) 57,526 ------------------------------------------------------------------------------- Administrative services (Note 2) 44,827 ------------------------------------------------------------------------------- Distribution fees -- Class A (Note 2) 4,235,315 ------------------------------------------------------------------------------- Distribution fees -- Class B (Note 2) 5,377,454 ------------------------------------------------------------------------------- Distribution fees -- Class C (Note 2) 381,770 ------------------------------------------------------------------------------- Distribution fees -- Class M (Note 2) 828,698 ------------------------------------------------------------------------------- Distribution fees -- Class R (Note 2) 703 ------------------------------------------------------------------------------- Other 964,577 ------------------------------------------------------------------------------- Non-recurring costs (Notes 2 and 6) 164,275 ------------------------------------------------------------------------------- Costs assumed by manager (Notes 2 and 6) (164,275) ------------------------------------------------------------------------------- Fees waived and reimbursed by Manager (Note 5) (290,709) ------------------------------------------------------------------------------- Total expenses 32,578,135 ------------------------------------------------------------------------------- Expense reduction (Note 2) (857,439) ------------------------------------------------------------------------------- Net expenses 31,720,696 ------------------------------------------------------------------------------- Net investment income 45,879,321 ------------------------------------------------------------------------------- Net realized gain on investments (Notes 1 and 3) 209,647,034 ------------------------------------------------------------------------------- Net realized gain on swap contracts (Note 1) 7,886,566 ------------------------------------------------------------------------------- Net realized gain on futures contracts (Note 1) 23,225,063 ------------------------------------------------------------------------------- Net realized gain on foreign currency transactions (Note 1) 167,141 ------------------------------------------------------------------------------- Net realized gain on credit default contracts (Note 1) 166,854 ------------------------------------------------------------------------------- Net unrealized appreciation of assets and liabilities in foreign currencies during the period 175,265 ------------------------------------------------------------------------------- Net unrealized appreciation of investments, futures contracts, swap contracts, credit default contracts, and TBA sale commitments during the period 78,048,493 ------------------------------------------------------------------------------- Net gain on investments 319,316,416 ------------------------------------------------------------------------------- Net increase in net assets resulting from operations $365,195,737 ------------------------------------------------------------------------------- The accompanying notes are an integral part of these financial statements. Statement of changes in net assets Six months ended Year ended January 31 July 31 Decrease in net assets 2005* 2004 ------------------------------------------------------------------------------- Operations: ------------------------------------------------------------------------------- Net investment income $45,879,321 $106,369,812 ------------------------------------------------------------------------------- Net realized gain on investments and foreign currency transactions 241,092,658 226,073,390 ------------------------------------------------------------------------------- Net unrealized appreciation of investments 78,223,758 238,880,235 ------------------------------------------------------------------------------- Net increase in net assets resulting from operations 365,195,737 571,323,437 ------------------------------------------------------------------------------- Distributions to shareholders: (Note 1) ------------------------------------------------------------------------------- From net investment income Class A (30,251,572) (71,321,677) ------------------------------------------------------------------------------- Class B (5,758,205) (15,606,522) ------------------------------------------------------------------------------- Class C (405,080) (1,081,609) ------------------------------------------------------------------------------- Class M (1,462,034) (3,563,743) ------------------------------------------------------------------------------- Class R (2,031) (455) ------------------------------------------------------------------------------- Class Y (8,541,217) (21,369,832) ------------------------------------------------------------------------------- Redemption fees (Note 1) 5,062 2,271 ------------------------------------------------------------------------------- Decrease from capital share transactions (Notes 4 and 7) (405,095,165) (1,204,253,202) ------------------------------------------------------------------------------- Total decrease in net assets (86,314,505) (745,871,332) Net assets ------------------------------------------------------------------------------- Beginning of period 5,558,714,880 6,304,586,212 ------------------------------------------------------------------------------- End of period (including undistributed net investment income of $11,515,229 and $12,056,047, respectively) $5,472,400,375 $5,558,714,880 ------------------------------------------------------------------------------- * Unaudited The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period) CLASS A --------------------------------------------------------------------------------------------------------------------------------- Six months ended January 31 Per-share (Unaudited) Year ended July 31 operating performance 2005 2004 2003 2002 2001 2000 --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $16.91 $15.72 $15.02 $17.24 $15.77 $18.49 --------------------------------------------------------------------------------------------------------------------------------- Investment operations: --------------------------------------------------------------------------------------------------------------------------------- Net investment income (a) .16 (d) .32 (d) .37 .45 .52 .55 --------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments 1.00 1.20 .81 (2.17) 1.49 (1.44) --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.16 1.52 1.18 (1.72) 2.01 (.89) --------------------------------------------------------------------------------------------------------------------------------- Less distributions: --------------------------------------------------------------------------------------------------------------------------------- From net investment income (.16) (.33) (.48) (.48) (.53) (.58) --------------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments -- -- -- (.02) (.01) (1.25) --------------------------------------------------------------------------------------------------------------------------------- Total distributions (.16) (.33) (.48) (.50) (.54) (1.83) --------------------------------------------------------------------------------------------------------------------------------- Redemption fees -- (e) -- (e) -- -- -- -- --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $17.91 $16.91 $15.72 $15.02 $17.24 $15.77 --------------------------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(b) 6.87* 9.77 8.06 (10.20) 12.86 (5.09) --------------------------------------------------------------------------------------------------------------------------------- Ratios and supplemental data --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $3,384,416 $3,322,532 $3,784,601 $2,990,984 $3,176,287 $3,030,281 --------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .52*(d) 1.00 (d) .99 .96 .92 .93 --------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) .89*(d) 1.90 (d) 2.50 2.75 3.11 3.32 --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 84.65* 165.66 121.38 (f)(g) 131.89 (f) 333.46 140.92 ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through brokerage service and expense offset arrangements (Note 2). (d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such waivers, the expenses of the fund for the periods ended January 31, 2005 and July 31, 2004 reflect a reduction of 0.01% and less than 0.01%, respectively, of the average net assets of class A shares (Note 5). (e) Amount represents less than $0.01 per share. (f) Portfolio turnover excludes certain treasury note transactions executed in connection with a short-term trading strategy. (g) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam Balanced Fund and Putnam Balanced Retirement Fund. The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period) CLASS B --------------------------------------------------------------------------------------------------------------------------------- Six months ended January 31 Per-share (Unaudited) Year ended July 31 operating performance 2005 2004 2003 2002 2001 2000 --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $16.73 $15.56 $14.87 $17.07 $15.62 $18.33 --------------------------------------------------------------------------------------------------------------------------------- Investment operations: --------------------------------------------------------------------------------------------------------------------------------- Net investment income (a) .09 (d) .19 (d) .26 .33 .39 .42 --------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments .99 1.19 .80 (2.15) 1.48 (1.43) --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.08 1.38 1.06 (1.82) 1.87 (1.01) --------------------------------------------------------------------------------------------------------------------------------- Less distributions: --------------------------------------------------------------------------------------------------------------------------------- From net investment income (.09) (.21) (.37) (.36) (.41) (.45) --------------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments -- -- -- (.02) (.01) (1.25) --------------------------------------------------------------------------------------------------------------------------------- Total distributions (.09) (.21) (.37) (.38) (.42) (1.70) --------------------------------------------------------------------------------------------------------------------------------- Redemption fees -- (e) -- (e) -- -- -- -- --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $17.72 $16.73 $15.56 $14.87 $17.07 $15.62 --------------------------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(b) 6.48* 8.88 7.25 (10.86) 12.02 (5.82) --------------------------------------------------------------------------------------------------------------------------------- Ratios and supplemental data --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $1,027,873 $1,095,665 $1,308,605 $1,068,667 $1,199,676 $1,175,947 --------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .90*(d) 1.75 (d) 1.74 1.71 1.67 1.68 --------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) .52*(d) 1.16 (d) 1.75 2.00 2.36 2.57 --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 84.65* 165.66 121.38 (f)(g) 131.89 (f) 333.46 140.92 ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through brokerage service and expense offset arrangements (Note 2). (d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such waivers, the expenses of the fund for the periods ended January 31, 2005 and July 31, 2004 reflect a reduction of 0.01% and less than 0.01%, respectively, of the average net assets of class B shares (Note 5). (e) Amount represents less than $0.01 per share. (f) Portfolio turnover excludes certain treasury note transactions executed in connection with a short-term trading strategy. (g) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam Balanced Fund and Putnam Balanced Retirement Fund. The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period) CLASS C --------------------------------------------------------------------------------------------------------------------------------- Six months ended January 31 Per-share (Unaudited) Year ended July 31 --------------------------------------------------------------------------------------------------------------------------------- operating performance 2005 2004 2003 2002 2001 2000 --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $16.81 $15.63 $14.94 $17.16 $15.71 $18.49 --------------------------------------------------------------------------------------------------------------------------------- Investment operations: --------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (a) .09 (d) .19 (d) .26 .33 .39 .42 --------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments .99 1.20 .80 (2.16) 1.49 (1.44) --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.08 1.39 1.06 (1.83) 1.88 (1.02) --------------------------------------------------------------------------------------------------------------------------------- Less distributions: --------------------------------------------------------------------------------------------------------------------------------- From net investment income (.09) (.21) (.37) (.37) (.42) (.51) --------------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments -- -- -- (.02) (.01) (1.25) --------------------------------------------------------------------------------------------------------------------------------- Total distributions (.09) (.21) (.37) (.39) (.43) (1.76) --------------------------------------------------------------------------------------------------------------------------------- Redemption fees -- (e) -- (e) -- -- -- -- --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $17.80 $16.81 $15.63 $14.94 $17.16 $15.71 --------------------------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(b) 6.46* 8.92 7.25 (10.88) 12.02 (5.82) --------------------------------------------------------------------------------------------------------------------------------- Ratios and supplemental data --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $75,812 $75,185 $91,282 $53,186 $37,453 $20,642 --------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .90*(d) 1.75 (d) 1.74 1.71 1.67 1.68 --------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets (%) .52*(d) 1.16 (d) 1.73 1.99 2.32 2.60 --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 84.65* 165.66 121.38 (f)(g) 131.89 (f) 333.46 140.92 --------------------------------------------------------------------------------------------------------------------------------- * Not annualized. (a) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through brokerage service and expense offset arrangements (Note 2). (d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such waivers, the expenses of the fund for the periods ended January 31, 2005 and July 31, 2004 reflect a reduction of 0.01% and less than 0.01%, respectively, of the average net assets of class C shares (Note 5). (e) Amount represents less than $0.01 per share. (f) Portfolio turnover excludes certain treasury note transactions executed in connection with a short-term trading strategy. (g) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam Balanced Fund and Putnam Balanced Retirement Fund. The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period) CLASS M --------------------------------------------------------------------------------------------------------------------------------- Six months ended January 31 Per-share (Unaudited) Year ended July 31 --------------------------------------------------------------------------------------------------------------------------------- operating performance 2005 2004 2003 2002 2001 2000 --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $16.74 $15.57 $14.87 $17.08 $15.63 $18.33 --------------------------------------------------------------------------------------------------------------------------------- Investment operations: --------------------------------------------------------------------------------------------------------------------------------- Net investment income (a) .11 (d) .23 (d) .30 .37 .43 .46 --------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments .99 1.19 .80 (2.16) 1.48 (1.42) --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.10 1.42 1.10 (1.79) 1.91 (.96) --------------------------------------------------------------------------------------------------------------------------------- Less distributions: --------------------------------------------------------------------------------------------------------------------------------- From net investment income (.11) (.25) (.40) (.40) (.45) (.49) --------------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments -- -- -- (.02) (.01) (1.25) --------------------------------------------------------------------------------------------------------------------------------- Total distributions (.11) (.25) (.40) (.42) (.46) (1.74) --------------------------------------------------------------------------------------------------------------------------------- Redemption fees -- (e) -- (e) -- -- -- -- --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $17.73 $16.74 $15.57 $14.87 $17.08 $15.63 --------------------------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(b) 6.62* 9.18 7.58 (10.69) 12.31 (5.52) --------------------------------------------------------------------------------------------------------------------------------- Ratios and supplemental data --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $216,154 $217,046 $239,662 $222,176 $252,802 $223,246 --------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .77*(d) 1.50 (d) 1.49 1.46 1.42 1.43 --------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) .65*(d) 1.40 (d) 2.02 2.25 2.60 2.82 --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 84.65* 165.66 121.38 (f)(g) 131.89 (f) 333.46 140.92 ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through brokerage service and expense offset arrangements (Note 2). (d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such waivers, the expenses of the fund for the periods ended January 31, 2005 and July 31, 2004 reflect a reduction of 0.01% and less than 0.01%, respectively, of the average net assets of class M shares (Note 5). (e) Amount represents less than $0.01 per share. (f) Portfolio turnover excludes certain treasury note transactions executed in connection with a short-term trading strategy. (g) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam Balanced Fund and Putnam Balanced Retirement Fund. The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period) CLASS R --------------------------------------------------------------------------------------------- For the Six months period ended Year January 21, January 31 ended to 2003+ Per-share (Unaudited) July 31 July 31 operating performance 2005 2004 2003 --------------------------------------------------------------------------------------------- Net asset value, beginning of period $16.89 $15.70 $15.05 --------------------------------------------------------------------------------------------- Investment operations: --------------------------------------------------------------------------------------------- Net investment income (a) .12 (d) .21 (d) .17 --------------------------------------------------------------------------------------------- Net realized and unrealized gain on investments 1.01 1.29 .65 --------------------------------------------------------------------------------------------- Total from investment operations 1.13 1.50 .82 --------------------------------------------------------------------------------------------- Less distributions: --------------------------------------------------------------------------------------------- From net investment income (.15) (.31) (.17) --------------------------------------------------------------------------------------------- Total distributions (.15) (.31) (.17) --------------------------------------------------------------------------------------------- Redemption fees -- (e) -- (e) -- --------------------------------------------------------------------------------------------- Net asset value, end of period $17.87 $16.89 $15.70 --------------------------------------------------------------------------------------------- Total return at net asset value (%)(b) 6.71* 9.60 5.52* --------------------------------------------------------------------------------------------- Ratios and supplemental data --------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $509 $127 $1 --------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .64*(d) 1.25 (d) .65* --------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) .66*(d) 1.33 (d) 1.18* --------------------------------------------------------------------------------------------- Portfolio turnover (%) 84.65* 165.66 121.38 (f)(g) --------------------------------------------------------------------------------------------- + Commencement of operations. * Not annualized. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through brokerage service and expense offset arrangements (Note 2). (d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such waivers, the expenses of the fund for the periods ended January 31, 2005 and July 31, 2004 reflect a reduction of 0.01% and less than 0.01%, respectively, of the average net assets of class R shares (Note 5). (e) Amount represents less than $0.01 per share. (f) Portfolio turnover excludes certain treasury note transactions executed in connection with a short-term trading strategy. (g) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam Balanced Fund and Putnam Balanced Retirement Fund. The accompanying notes are an integral part of these financial statements.
Financial highlights (For a common share outstanding throughout the period) CLASS Y --------------------------------------------------------------------------------------------------------------------------------- Six months ended January 31 Per-share (Unaudited) Year ended July 31 operating performance 2005 2004 2003 2002 2001 2000 --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $16.95 $15.76 $15.05 $17.28 $15.80 $18.53 --------------------------------------------------------------------------------------------------------------------------------- Investment operations: --------------------------------------------------------------------------------------------------------------------------------- Net investment income (a) .18 (d) .36 (d) .41 .49 .56 .60 --------------------------------------------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments 1.00 1.21 .82 (2.17) 1.50 (1.46) --------------------------------------------------------------------------------------------------------------------------------- Total from investment operations 1.18 1.57 1.23 (1.68) 2.06 (.86) --------------------------------------------------------------------------------------------------------------------------------- Less distributions: --------------------------------------------------------------------------------------------------------------------------------- From net investment income (.18) (.38) (.52) (.53) (.57) (.62) --------------------------------------------------------------------------------------------------------------------------------- From net realized gain on investments -- -- -- (.02) (.01) (1.25) --------------------------------------------------------------------------------------------------------------------------------- Total distributions (.18) (.38) (.52) (.55) (.58) (1.87) --------------------------------------------------------------------------------------------------------------------------------- Redemption fees -- (e) -- (e) -- -- -- -- --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $17.95 $16.95 $15.76 $15.05 $17.28 $15.80 --------------------------------------------------------------------------------------------------------------------------------- Total return at net asset value (%)(b) 6.99* 10.03 8.38 (10.01) 13.18 (4.89) --------------------------------------------------------------------------------------------------------------------------------- Ratios and supplemental data --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $767,637 $848,161 $880,435 $731,900 $768,075 $621,363 --------------------------------------------------------------------------------------------------------------------------------- Ratio of expenses to average net assets (%)(c) .39*(d) .75 (d) .74 .71 .67 .68 --------------------------------------------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets (%) 1.03*(d) 2.16 (d) 2.76 3.00 3.35 3.57 --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover (%) 84.65* 165.66 121.38 (f)(g) 131.89 (f) 333.46 140.92 ---------------------------------------------------------------------------------------------------------------------------------
* Not annualized. (a) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the period. (b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges. (c) Includes amounts paid through brokerage service and expense offset arrangements (Note 2). (d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund during the period. As a result of such waivers, the expenses of the fund for the periods ended January 31, 2005 and July 31, 2004 reflect a reduction of 0.01% and less than 0.01%, respectively, of the average net assets of class Y shares (Note 5). (e) Amount represents less than $0.01 per share. (f) Portfolio turnover excludes certain treasury note transactions executed in connection with a short-term trading strategy. (g) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam Balanced Fund and Putnam Balanced Retirement Fund. The accompanying notes are an integral part of these financial statements. Notes to financial statements January 31, 2005 (Unaudited) Note 1 Significant accounting policies The George Putnam Fund of Boston ("the fund"), a Massachusetts business trust, is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The fund seeks to provide a balanced investment comprised of a well-diversified portfolio of stocks and bonds, which will produce both capital growth and current income. The fund offers class A, class B, class C, class M, class R and class Y shares. Class A shares are sold with a maximum front-end sales charge of 5.25%. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge but pay a higher ongoing distribution fee than class A, class M and class R shares, and are subject to a contingent deferred sales charge, if those shares are redeemed within six years of purchase. Class C shares are subject to the same fees and expenses as class B shares, except that class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class M shares are sold with a maximum front-end sales charge of 3.50% and pay an ongoing distribution fee that is higher than class A and class R shares but lower than class B and class C shares. Class R shares are sold without a front-end sales charge and pay an ongoing distribution fee that is higher than class A shares, but lower than class B, class C and class M shares. Class R shares are offered to qualified employee-benefit plans. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee. Class Y shares are sold to certain eligible purchasers including certain defined contribution plans (including corporate IRAs), bank trust departments, trust companies and certain college savings plans. Effective April 19, 2004 (May 3, 2004 for defined contribution plans administered by Putnam), a 2.00% redemption fee may apply to any shares that are redeemed (either by selling or exchanging into another fund) within 5 days of purchase. The redemption fee is accounted for as an addition to paid-in-capital. Prior year redemption fee balances have been reclassified to conform with current year financial statement presentation. Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. Shares of each class would receive their pro-rata share of the net assets of the fund, if the fund were liquidated. In addition, the Trustees declare separate dividends on each class of shares. The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. A) Security valuation Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets. If no sales are reported -- as in the case of some securities traded over-the-counter -- a security is valued at its last reported bid price. Market quotations are not considered to be readily available for certain debt obligations; such investments are valued at fair value on the basis of valuations furnished by an independent pricing service or dealers, approved by the Trustees. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value foreign securities taking into account multiple factors, including movements in the U.S. securities markets. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. Securities quoted in foreign currencies are translated into U.S. dollars at the current exchange rate. Short-term investments having remaining maturities of 60 days or less are valued at amortized cost, which approximates fair value. Other investments, including certain restricted securities, are valued at fair value following procedures approved by the Trustees. Such valuations and procedures are reviewed periodically by the Trustees. B) Joint trading account Pursuant to an exemptive order from the Securities and Exchange Commission ("SEC"), the fund may transfer uninvested cash balances, including cash collateral received under security lending arrangements, into a joint trading account along with the cash of other registered investment companies and certain other accounts managed by Putnam Investment Management, LLC ("Putnam Management"), the fund's manager, an indirect wholly-owned subsidiary of Putnam, LLC. These balances may be invested in issues of high-grade short-term investments having maturities of up to 397 days for collateral received under security lending arrangements and up to 90 days for other cash investments. C) Repurchase agreements The fund, or any joint trading account, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. Collateral for certain tri-party repurchase agreements is held at the counterparty's custodian in a segregated account for the benefit of the fund and the counterparty. Putnam Management is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest. D) Security transactions and related investment income Security transactions are recorded on the trade date (date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis. Interest income is recorded on the accrual basis. Dividend income, net of applicable withholding taxes, is recognized on the ex-dividend date except that certain dividends from foreign securities are recognized as soon as the fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair market value of the securities received. All premiums/discounts are amortized/ accreted on a yield-to-maturity basis. E) Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The market value of foreign securities, currency holdings, and other assets and liabilities are recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when earned or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on closed forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions and the difference between the amount of investment income and foreign withholding taxes recorded on the fund's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of open forward currency contracts and assets and liabilities other than investments at the period end, resulting from changes in the exchange rate. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments. F) Forward currency contracts The fund may buy and sell forward currency contracts, which are agreements between two parties to buy and sell currencies at a set price on a future date. These contracts are used to protect against a decline in value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in the value of a currency in which securities a fund intends to buy are denominated, when a fund holds cash reserves and short term investments). The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is marked to market daily and the change in market value is recorded as an unrealized gain or loss. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position. Risks may exceed amounts recognized on the statement of assets and liabilities. Forward currency contracts outstanding at period end, if any, are listed after the fund's portfolio. G) Futures and options contracts The fund may use futures and options contracts to hedge against changes in the values of securities the fund owns or expects to purchase. The fund may also write options on securities it owns or in which it may invest to increase its current returns. The potential risk to the fund is that the change in value of futures and options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparty to the contract is unable to perform. Risks may exceed amounts recognized on the statement of assets and liabilities. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as a reduction to the cost of investments. Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as "variation margin." Exchange traded options are valued at the last sale price, or if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by dealers. Futures and written option contracts outstanding at period end, if any, are listed after the fund's portfolio. H) Total return swap contracts The fund may enter into total return swap contracts, which are arrangements to exchange a market linked return for a periodic payment, both based on a notional principal amount. To the extent that the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the fund will receive a payment from or make a payment to the counterparty. Total return swap contracts are marked to market daily based upon quotations from market makers and the change, if any, is recorded as unrealized gain or loss. Payments received or made are recorded as realized gains or loss. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or in the price of the underlying security or index, the possibility that there is no liquid market for these agreements or that the counterparty may default on its obligation to perform. Risk of loss may exceed amounts recognized on the statement of assets and liabilities. Total return swap contracts outstanding at period end, if any, are listed after the fund's portfolio. I) Interest rate swap contracts The fund may enter into interest rate swap contracts, which are arrangements between two parties to exchange cash flows based on a notional principal amount, to manage the fund's exposure to interest rates. Interest rate swap contracts are marked to market daily based upon quotations from market makers and the change, if any, is recorded as unrealized gain or loss. Payments received or made are recorded as realized gains or loss. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or if the counterparty defaults on its obligation to perform. Risk of loss may exceed amounts recognized on the statement of assets and liabilities. Interest rate swap contracts outstanding at period end, if any, are listed after the fund's portfolio. J) Credit default contracts The fund may enter into credit default contracts where one party, the protection buyer, makes an upfront or periodic payment to a counter party, the protection seller, in exchange for the right to receive a contingent payment. The maximum amount of the payment may equal the notional amount, at par, of the underlying index or security as a result of a related credit event. An upfront payment received by the fund, as the protection seller, is recorded as a liability on the fund's books. An upfront payment made by the fund, as the protection buyer, is recorded as an asset on the fund's books. Periodic payments received or paid by the fund are recorded as realized gains or losses. The credit default contracts are marked to market daily based upon quotations from market makers and the change, if any, is recorded as unrealized gain or loss. Payments received or made as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as realized gains or losses. In addition to bearing the risk that the credit event will occur, the fund could be exposed to market risk due to unfavorable changes in interest rates or in the price of the underlying security or index, the possibility that the fund may be unable to close out its position at the same time or at the same price as if it had purchased comparable publicly traded securities or that the counterparty may default on its obligation to perform. Risks of loss may exceed amounts recognized on the statement of assets and liabilities. Credit default contracts outstanding at period end, if any, are listed after the fund's portfolio. K) TBA purchase commitments The fund may enter into "TBA" (to be announced) commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established, the principal value has not been finalized. However, the amount of the commitments will not significantly differ from the principal amount. The fund holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the fund may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date. TBA purchase commitments may be considered securities themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the fund's other assets. Unsettled TBA purchase commitments are valued at fair value of the underlying securities, according to the procedures described under "Security valuation" above. The contract is "marked-to-market" daily and the change in market value is recorded by the fund as an unrealized gain or loss. Although the fund will generally enter into TBA purchase commitments with the intention of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, the fund may dispose of a commitment prior to settlement if Putnam Management deems it appropriate to do so. L) TBA sale commitments The fund may enter into TBA sale commitments to hedge its portfolio positions or to sell mortgage-backed securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, equivalent deliverable securities or an offsetting TBA purchase commitment deliverable on or before the sale commitment date, are held as "cover" for the transaction. Unsettled TBA sale commitments are valued at fair value of the underlying securities, generally according to the procedures described under "Security valuation" above. The contract is "marked-to-market" daily and the change in market value is recorded by the fund as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the fund realizes a gain or loss. If the fund delivers securities under the commitment, the fund realizes a gain or a loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. TBA sale commitments outstanding at period end, if any, are listed after the fund's portfolio. M) Security lending The fund may lend securities, through its agents, to qualified borrowers in order to earn additional income. The loans are collateralized by cash and/or securities in an amount at least equal to the market value of the securities loaned. The market value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The risk of borrower default will be borne by the fund's agents; the fund will bear the risk of loss with respect to the investment of the cash collateral. Income from securities lending is included in investment income on the statement of operations. At January 31, 2005, the value of securities loaned amounted to $199,255,937. The fund received cash collateral of $205,261,728 which is pooled with collateral of other Putnam funds into 25 issuers of high grade short-term investments. N) Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code of 1986 (the "Code") applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code, as amended. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains. At July 31, 2004, the fund had a capital loss carryover of $322,771,264 available to the extent allowed by the Code to offset future net capital gain, if any. The amount of the carryover and the expiration dates are: Loss Carryover Expiration --------------------------------- $35,701,820 July 31, 2010 287,069,444 July 31, 2011 The aggregate identified cost on a tax basis is $5,719,974,485, resulting in gross unrealized appreciation and depreciation of $653,347,999 and $78,509,755, respectively, or net unrealized appreciation of $574,838,244. O) Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. Reclassifications are made to the fund's capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. Note 2 Management fee, administrative services and other transactions Putnam Management is paid for management and investment advisory services quarterly based on the average net assets of the fund. Such fee is based on the following annual rates: 0.65% of the first $500 million of average net assets, 0.55% of the next $500 million, 0.50% of the next $500 million, 0.45% of the next $5 billion, 0.425% of the next $5 billion, 0.405% of the next $5 billion, 0.39% of the next $5 billion and 0.38% thereafter. Effective January 28, 2004, Putnam Management has agreed to waive fees and reimburse expenses of the fund through July 31, 2005 to the extent necessary to ensure that the fund's expenses do not exceed the average expenses of the front-end load funds viewed by Lipper Inc. as having the same investment classification or objective as the fund. The expense reimbursement is based on a comparison of the fund's expenses with the average annualized operating expenses of the funds in its Lipper peer group for each calendar quarter during the fund's last fiscal year, excluding 12b-1 fees and without giving effect to any expense offset and brokerage service arrangements that may reduce fund expenses. For the period ended January 31, 2005, Putnam Management did not waive any of its management fee. For the period ended January 31, 2005, Putnam Management has assumed $164,275 of legal, shareholder servicing and communication, audit and Trustee fees incurred by the fund in connection with certain legal and regulatory matters (including those described in Note 6). The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees. Custodial functions for the fund's assets are provided by Putnam Fiduciary Trust Company ("PFTC"), a subsidiary of Putnam, LLC. Putnam Investor Services, a division of PFTC, provides investor servicing agent functions to the fund. During the six months ended January 31, 2005, the fund paid PFTC $7,436,625 for these services. The fund has entered into an arrangement with PFTC whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the fund's expenses. The fund also reduced expenses through brokerage service arrangements. For the six months ended January 31, 2005, the fund's expenses were reduced by $857,439 under these arrangements. Each independent Trustee of the fund receives an annual Trustee fee, of which $4,450, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees receive additional fees for attendance at certain committee meetings. The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan") which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable on or after July 1, 1995. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan. The fund has adopted an unfunded noncontributory defined benefit pension plan (the "Pension Plan") covering all Trustees of the fund who have served as a Trustee for at least five years. Benefits under the Pension Plan are equal to 50% of the Trustee's average total retainer and meeting fees for the three years preceding retirement. Pension expense for the fund is included in Trustee compensation and expenses in the statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003. The fund has adopted distribution plans (the "Plans") with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management, a wholly-owned subsidiary of Putnam, LLC and Putnam Retail Management GP, Inc., for services provided and expenses incurred in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management at an annual rate of up to 0.35%, 1.00%, 1.00% , 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. For the six months ended January 31, 2005, Putnam Retail Management, acting as underwriter, received net commissions of $107,810 and $2,605 from the sale of class A and class M shares, respectively, and received $604,334 and $4,091 in contingent deferred sales charges from redemptions of class B and class C shares, respectively. A deferred sales charge of up to 1.00% and 0.65% is assessed on certain redemptions of class A and class M shares, respectively. For the six months ended January 31, 2005, Putnam Retail Management, acting as underwriter, received $3,037 and no monies on class A and class M redemptions, respectively. Note 3 Purchases and sales of securities During the six months ended January 31, 2005, cost of purchases and proceeds from sales of investment securities other than U.S. government securities and short-term investments aggregated $4,182,148,759 and $4,860,106,806, respectively. Purchases and sales of U.S. government securities aggregated $20,773,538 and $4,484,936 respectively. Note 4 Capital shares At January 31, 2005, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows: Six months ended January 31, 2005 ---------------------------------------------------------------- Class A Shares Amount ---------------------------------------------------------------- Shares sold 16,276,447 $284,056,344 ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 1,615,925 27,866,998 ---------------------------------------------------------------- 17,892,372 311,923,342 Shares repurchased (25,406,198) (443,614,949) ---------------------------------------------------------------- Net decrease (7,513,826) $(131,691,607) ---------------------------------------------------------------- Year ended July 31, 2004 ---------------------------------------------------------------- Class A Shares Amount ---------------------------------------------------------------- Shares sold 38,177,152 $636,173,891 ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 4,010,048 65,565,354 ---------------------------------------------------------------- 42,187,200 701,739,245 Shares repurchased (86,369,385) (1,432,155,679) ---------------------------------------------------------------- Net decrease (44,182,185) $(730,416,434) ---------------------------------------------------------------- Six months ended January 31, 2005 ---------------------------------------------------------------- Class B Shares Amount ---------------------------------------------------------------- Shares sold 2,917,089 $50,210,682 ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 313,417 5,353,073 ---------------------------------------------------------------- 3,230,506 55,563,755 Shares repurchased (10,716,873) (184,840,662) ---------------------------------------------------------------- Net decrease (7,486,367) $(129,276,907) ---------------------------------------------------------------- Year ended July 31, 2004 ---------------------------------------------------------------- Class B Shares Amount ---------------------------------------------------------------- Shares sold 10,048,720 $165,010,566 ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 894,212 14,468,542 ---------------------------------------------------------------- 10,942,932 179,479,108 Shares repurchased (29,561,948) (487,125,663) ---------------------------------------------------------------- Net decrease (18,619,016) $(307,646,555) ---------------------------------------------------------------- Six months ended January 31, 2005 ---------------------------------------------------------------- Class C Shares Amount ---------------------------------------------------------------- Shares sold 350,639 $6,101,199 ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 21,072 361,701 ---------------------------------------------------------------- 371,711 6,462,900 Shares repurchased (586,477) (10,200,502) ---------------------------------------------------------------- Net decrease (214,766) $(3,737,602) ---------------------------------------------------------------- Year ended July 31, 2004 ---------------------------------------------------------------- Class C Shares Amount ---------------------------------------------------------------- Shares sold 1,298,282 $21,315,780 ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 60,062 973,315 ---------------------------------------------------------------- 1,358,344 22,289,095 Shares repurchased (2,725,476) (45,065,348) ---------------------------------------------------------------- Net decrease (1,367,132) $(22,776,253) ---------------------------------------------------------------- Six months ended January 31, 2005 ---------------------------------------------------------------- Class M Shares Amount ---------------------------------------------------------------- Shares sold 1,101,264 $19,012,836 ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 84,158 1,438,232 ---------------------------------------------------------------- 1,185,422 20,451,068 Shares repurchased (1,959,730) (34,051,928) ---------------------------------------------------------------- Net decrease (774,308) $(13,600,860) ---------------------------------------------------------------- Year ended July 31, 2004 ---------------------------------------------------------------- Class M Shares Amount ---------------------------------------------------------------- Shares sold 1,968,774 $32,462,800 ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 215,887 3,497,386 ---------------------------------------------------------------- 2,184,661 35,960,186 Shares repurchased (4,611,033) (76,071,129) ---------------------------------------------------------------- Net decrease (2,426,372) $(40,110,943) ---------------------------------------------------------------- Six months ended January 31, 2005 ---------------------------------------------------------------- Class R Shares Amount ---------------------------------------------------------------- Shares sold 21,616 $378,085 ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 117 2,031 ---------------------------------------------------------------- 21,733 380,116 Shares repurchased (766) (13,551) ---------------------------------------------------------------- Net increase 20,967 $366,565 ---------------------------------------------------------------- Year ended July 31, 2004 ---------------------------------------------------------------- Class R Shares Amount ---------------------------------------------------------------- Shares sold 8,000 $136,550 ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 27 455 ---------------------------------------------------------------- 8,027 137,005 Shares repurchased (586) (9,998) ---------------------------------------------------------------- Net increase 7,441 $127,007 ---------------------------------------------------------------- Six months ended January 31, 2005 ---------------------------------------------------------------- Class Y Shares Amount ---------------------------------------------------------------- Shares sold 4,988,143 $86,275,974 ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 431,222 8,541,217 ---------------------------------------------------------------- 5,419,365 94,817,191 Shares repurchased (12,705,473) (221,971,945) ---------------------------------------------------------------- Net decrease (7,286,108) $(127,154,754) ---------------------------------------------------------------- Year ended July 31, 2004 ---------------------------------------------------------------- Class Y Shares Amount ---------------------------------------------------------------- Shares sold 13,234,706 $218,756,844 ---------------------------------------------------------------- Shares issued in connection with reinvestment of distributions 1,301,572 21,369,832 ---------------------------------------------------------------- 14,536,278 240,126,676 Shares repurchased (20,348,272) (343,556,700) ---------------------------------------------------------------- Net decrease (5,811,994) $(103,430,024) ---------------------------------------------------------------- Note 5 Investment in Putnam Prime Money Market Fund Pursuant to an exemptive order from the Securities and Exchange Commission, the fund invests in Putnam Prime Money Market Fund, an open-end management investment company managed by Putnam Management. Management fees paid by the fund are reduced by an amount equal to the management fees paid by Putnam Prime Money Market Fund with respect to assets invested by the fund in Putnam Prime Money Market Fund. For the period ended January 31, 2005, management fees paid were reduced by $290,709 relating to the fund's investment in Putnam Prime Money Market Fund. Income distributions earned by the fund are recorded as income in the statement of operations and totaled $3,796,631 for the period ended January 31, 2005. Note 6 Regulatory matters and litigation Putnam Management has entered into agreements with the Securities and Exchange Commission and the Massachusetts Securities Division settling charges connected with excessive short-term trading by Putnam employees and, in the case of the charges brought by the Massachusetts Securities Division, by participants in some Putnam-administered 401(k) plans. Pursuant to these settlement agreements, Putnam Management will pay a total of $193.5 million in penalties and restitution, with $153.5 million being paid to shareholders and the funds. The restitution amount will be allocated to shareholders pursuant to a plan developed by an independent consultant, with payments to shareholders currently expected by the end of the summer. The SEC's and Massachusetts Securities Division's allegations and related matters also serve as the general basis for numerous lawsuits, including purported class action lawsuits filed against Putnam Management and certain related parties, including certain Putnam funds. Putnam Management will bear any costs incurred by Putnam funds in connection with these lawsuits. Putnam Management believes that the likelihood that the pending private lawsuits and purported class action lawsuits will have a material adverse financial impact on the fund is remote, and the pending actions are not likely to materially affect its ability to provide investment management services to its clients, including the Putnam funds. In connection with its investigation of certain brokerage matters, the staff of the Philadelphia district office of the SEC has raised the question whether, in years prior to 2004, Putnam Management fully and effectively disclosed its practices relating to the allocation of brokerage on mutual fund portfolio transactions to broker-dealers who sold shares of the funds. Putnam Management ceased directing brokerage to broker-dealers in connection with the sale of fund shares as of January 1, 2004. Putnam Management and the Philadelphia office negotiated an offer of settlement under which Putnam Management would pay a civil penalty in the amount of $40 million and disgorgement in the amount of $1, and the total amount would be distributed to certain Putnam funds. The offer of settlement is subject to final documentation and approval by the Commissioners and the staff of the SEC. Discussions with the staff with respect to the offer of settlement are ongoing. Note 7 Other matters In connection with a review of compliance procedures and controls, Putnam Management discovered that in early January 2001, certain Putnam employees had willfully circumvented controls in connection with the correction of operational errors with respect to a 401(k) client's investment in certain Putnam Funds, which led to losses in the fund. Putnam made restitution of approximately $169,000 to the fund on February 27, 2004. Putnam has also made a number of personnel changes, including senior managers, and has implemented changes in procedures. Putnam has informed the SEC, the funds' Trustees and independent auditors. The SEC is investigating this matter. Results of November 11, 2004 and January 10, 2005 shareholder meetings (Unaudited) A special meeting of shareholders of the Fund was held on November 11, 2004. At that meeting consideration of certain proposals was adjourned to a final meeting held on January 10, 2005. November 11, 2004 meeting At the meeting, each of the nominees for Trustees was elected as follows: Votes Votes For Withheld ------------------------------------------------------------------------------- Jameson A. Baxter 167,648,483 5,194,591 Charles B. Curtis 167,565,947 5,277,127 Myra R. Drucker 167,552,017 5,291,057 Charles E. Haldeman, Jr. 167,628,992 5,214,082 John A. Hill 167,560,974 5,282,100 Ronald J. Jackson 167,674,184 5,168,890 Paul L. Joskow 167,635,292 5,207,782 Elizabeth T. Kennan 167,508,917 5,334,157 John H. Mullin, III 167,652,677 5,190,397 Robert E. Patterson 167,607,452 5,235,622 George Putnam, III 167,569,364 5,273,710 A.J.C. Smith * 167,447,392 5,395,682 W. Thomas Stephens 167,570,392 5,272,682 Richard B. Worley 167,569,029 5,274,045 A proposal to amend fund's fundamental investment restriction with respect to borrowing to allow the fund the investments flexibility permitted by the Investment Company Act was approved as follows: Votes Votes For Against Abstentions ------------------------------------------------------------------------------- 119,526,421 11,237,709 42,078,944 A proposal to amend the fund's fundamental investment restriction with respect to making loans to enhance the fund's ability to participate in an interfund borrowing and lending program was approved as follows: Votes Votes For Against Abstentions ------------------------------------------------------------------------------- 120,429,963 10,822,448 41,590,663 A proposal to amend the fund's fundamental investment restriction with respect to diversification of investments to enhance the fund's ability to invest in registered investment companies such as Putnam Prime Money Market was approved as follows: Votes Votes For Against Abstentions ------------------------------------------------------------------------------- 126,786,328 5,490,050 40,566,696 January 10, 2005 meeting A proposal to amend the Trust's Agreement and Declaration of Trust to permit the fund to satisfy redemption requests other than in cash was defeated as follows: Votes Votes For Against Abstentions ------------------------------------------------------------------------------- 124,838,521 8,861,881 41,095,582 * Mr. Smith resigned from the Board of Trustees on January 14, 2005. All tabulations are rounded to the nearest whole number. Brokerage commissions (Unaudited) Brokerage commissions are paid to firms that execute trades on behalf of your fund. When choosing these firms, Putnam is required by law to seek the best execution of the trades, taking all relevant factors into consideration, including expected quality of execution and commission rate. Listed below are the largest relationships based upon brokerage commissions for your fund and the other funds in Putnam's Large-Cap Value group for the year ended January 31, 2005. The other Putnam mutual funds in this group are Putnam Classic Equity Fund, Putnam Convertible Income-Growth Trust, Putnam Equity Income Fund, The Putnam Fund for Growth and Income, Putnam New Value Fund, Putnam VT Equity Income Fund, Putnam VT The George Putnam Fund of Boston, Putnam VT Growth and Income Fund, and Putnam VT New Value Fund. The top five firms that received brokerage commissions for trades executed for the Large-Cap Value group are (in descending order) Citigroup Global Markets, Goldman Sachs, Deutsche Bank Securities, Merrill Lynch, and Lehman Brothers. Commissions paid to these firms together represented approximately 48% of the total brokerage commissions paid for the year ended January 31, 2005. Commissions paid to the next 10 firms together represented approximately 34% of the total brokerage commissions paid during the period. These firms are (in alphabetical order) Bank of America, Bear Stearns & Co., Credit Suisse First Boston, Investment Technology Group, JP Morgan Clearing, Morgan Stanley Dean Witter, Sanford Bernstein, Standard & Poor's, UBS Warburg, and Wachovia Securities. Commission amounts do not include "mark-ups" paid on bond or derivative trades made directly with a dealer. Additional information about brokerage commissions is available on the Securities and Exchange Commission (SEC) Web site at www.sec.gov. Putnam funds disclose commissions by firm to the SEC in semiannual filings on form N-SAR. Fund information One of the largest mutual fund families in the United States, Putnam Investments has a heritage of investment leadership dating back to Judge Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition and practice since 1830. Founded over 65 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We presently manage over 100 mutual funds in growth, value, blend, fixed income, and international. Investment Manager Putnam Investment Management, LLC One Post Office Square Boston, MA 02109 Marketing Services Putnam Retail Management One Post Office Square Boston, MA 02109 Custodian Putnam Fiduciary Trust Company Legal Counsel Ropes & Gray LLP Trustees John A. Hill, Chairman Jameson Adkins Baxter Charles B. Curtis Myra R. Drucker Charles E. Haldeman, Jr. Ronald J. Jackson Paul L. Joskow Elizabeth T. Kennan John H. Mullin, III Robert E. Patterson George Putnam, III W. Thomas Stephens Richard B. Worley Officers George Putnam, III President Charles E. Porter Executive Vice President, Associate Treasurer and Principal Executive Officer Jonathan S. Horwitz Senior Vice President and Treasurer Steven D. Krichmar Vice President and Principal Financial Officer Michael T. Healy Assistant Treasurer and Principal Accounting Officer Daniel T. Gallagher Vice President and Legal and Compliance Liaison Officer Beth S. Mazor Vice President James P. Pappas Vice President Richard S. Robie, III Vice President Mark C. Trenchard Vice President and BSA Compliance Officer Francis J. McNamara, III Vice President and Chief Legal Officer Charles A. Ruys de Perez Vice President and Chief Compliance Officer Judith Cohen Clerk and Assistant Treasurer This report is for the information of shareholders of The George Putnam Fund of Boston. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam's Quarterly Performance Summary, and Putnam's Quarterly Ranking Summary. For more recent performance, please visit www.putnaminvestments.com. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund's Statement of Additional Information contains additional information about the fund's Trustees and is available without charge upon request by calling 1-800-225-1581. [LOGO OMITTED] PUTNAM INVESTMENTS The Putnam Funds One Post Office Square Boston, Massachusetts 02109 PRSRT STD U.S. POSTAGE PAID PUTNAM INVESTMENTS Call 1-800-225-1581 or visit our Web site www.putnaminvestments.com. SA021-220217 3/05 Not FDIC Insured May Lose Value No Bank Guarantee PUTNAM INVESTMENTS [SCALE LOGO OMITTED] ---------------------------------------------------------------------------- The George Putnam Fund of Boston Supplement to Semiannual Report dated 1/31/05 The following information has been prepared to provide class Y shareholders with a performance overview specific to their holdings. Class Y shares are offered exclusively to clients that meet the eligibility requirements specified in the fund's prospectus for such shares. Performance of class Y shares, which do not incur a front-end load, a distribution fee, or a contingent deferred sales charge, will differ from the performance of class A, B, C, M, and R shares, which are discussed more extensively in the semiannual report. RESULTS AT A GLANCE ---------------------------------------------------------------------------- Total return for periods ended 1/31/05 NAV 6 months 6.99% 1 year 6.36 5 years 31.38 Annual average 5.61 10 years 157.55 Annual average 9.92 Life of fund (since class A inception, 11/5/37) Annual average 9.48 Share value: NAV 7/31/04 $16.95 1/31/05 $17.95 ---------------------------------------------------------------------------- Distributions: No. Income Capital gains Total 2 $0.178 -- $0.178 ---------------------------------------------------------------------------- Data represents past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate and you may have a gain or a loss when you sell your shares. For the most recent month-end performance, please visit www.putnaminvestments.com. Performance assumes reinvestment of distributions and does not account for taxes. Returns shown for class Y shares for periods prior to their inception (3/31/94) are derived from the historical performance of class A shares, and are not adjusted to reflect the initial sales charge currently applicable to class A shares. Returns have not been adjusted to reflect differences in operating expenses which, for class Y shares, are lower than the operating expenses applicable to class A shares. See full report for information on comparative benchmarks. If you have questions, please consult your fund prospectus or call Putnam toll free at 1-800-752-9894. A short-term trading fee of up to 2% may apply. Please see page 13 of the accompanying shareholder report for a discussion of the information appearing in the tables below: ---------------------------------------------------------------------------- EXPENSES AND VALUE OF A $1,000 INVESTMENT assuming actual returns for the 6 months ended 1/31/05 Class Y Expenses paid per $1,000* $4.07 Ending value (after expenses) $1,069.90 ---------------------------------------------------------------------------- EXPENSES AND VALUE OF A $1,000 INVESTMENT assuming a hypothetical 5% annualized return for the 6 months ended 1/31/05 Class Y Expenses paid per $1,000* $3.97 Ending value (after expenses) $1,021.27 ---------------------------------------------------------------------------- EXPENSE RATIO COMPARISON USING ANNUALIZED DATA Your fund's annualized expense ratio 0.78% Average annualized expense ratio for Lipper peer group + 1.06% + For class Y shares, Putnam has adjusted the Lipper total expense average to reflect that class Y shares do not incur 12b-1 fees. ---------------------------------------------------------------------------- Item 2. Code of Ethics: ----------------------- Not applicable Item 3. Audit Committee Financial Expert: ----------------------------------------- Not applicable Item 4. Principal Accountant Fees and Services: ----------------------------------------------- Not applicable Item 5. Audit Committee: Not applicable ------------------------- Item 6. Schedule of Investments: Not applicable -------------------------------- Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End ------------------------------------------------------------------------- Management Investment Companies: Not applicable -------------------------------- Item 8. Purchases of Equity Securities by Closed-End Management Investment -------------------------------------------------------------------------- Companies and Affiliated Purchasers: Not applicable ------------------------------------ Item 9. Submission of Matters to a Vote of Security Holders: ------------------------------------------------------------ Not applicable Item 10. Controls and Procedures: --------------------------------- (a) The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. (b) Changes in internal control over financial reporting: Not applicable Item 11. Exhibits: ------------------ (a) Not applicable (b) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Investment Company Act of 1940, as amended, and the officer certifications as required by Section 906 of the Sarbanes-Oxley Act of 2002 are filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NAME OF REGISTRANT By (Signature and Title): /s/Michael T. Healy -------------------------- Michael T. Healy Principal Accounting Officer Date: March 28, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title): /s/Charles E. Porter --------------------------- Charles E. Porter Principal Executive Officer Date: March 28, 2005 By (Signature and Title): /s/Steven D. Krichmar --------------------------- Steven D. Krichmar Principal Financial Officer Date: March 28, 2005