George Putnam
Balanced
Fund

Annual report
7 | 31 | 23

 

 

Message from the Trustees

September 8, 2023

Dear Fellow Shareholder:

Stocks have generally advanced through much of 2023. Innovations in technology have attracted strong investor interest, helping that sector rebound and lead the market higher. More broadly, international markets are generally performing well, even though the reopening of China’s economy lacked the dynamism many had anticipated.

Bond markets have been more uneven, with some areas gaining and others down moderately. The U.S. Federal Reserve has continued to lift interest rates, but at a more gradual pace than in 2022. U.S. inflation has eased, while the country’s economic growth has remained positive. Against this backdrop, investors are weighing the impact of high borrowing costs, stress in the banking system, and a weaker housing market.

As active managers, your investment team continues to research attractive opportunities for your fund while monitoring risks. This report offers an update on their efforts.

Thank you for investing with Putnam.

 

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 5.75%; had they, returns would have been lower. See below and pages 8–11 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.

All Bloomberg indices are provided by Bloomberg Index Services Limited.

Lipper peer group median is provided by Lipper, a Refinitiv company.

* George Putnam Blended Index is an unmanaged index administered by Putnam Management, 60% of which is the S&P 500 Index and 40% of which is the Bloomberg U.S. Aggregate Bond Index.

† The fund’s benchmarks, the George Putnam Blended Index and the S&P 500 Index, were introduced on 12/31/78 and 12/31/69, respectively, and its Lipper group, Balanced Funds, was introduced on 12/31/59; they all post-date the inception of the fund’s class A shares.

This comparison shows your fund’s performance in the context of broad market indexes for the 12 months ended 7/31/23. See above and pages 8–11 for additional fund performance information. Index descriptions can be found on page 14.

All Bloomberg indices are provided by Bloomberg Index Services Limited.

 

 

Please describe investing conditions during the reporting period.

Financial markets faced macro-driven headwinds, including persistent inflation, central bank tightening, and recessionary fears. In March 2023, a banking crisis caused by the failure of three U.S. regional banks also weighed on investor sentiment. Swift action by policy-makers helped to limit contagion across the financial system.

As inflation declined, the U.S. Federal Reserve began to reduce the size and pace of its interest-rate hikes. Even with this moderation, the federal funds rate climbed to a 22-year-high of 5.25%–5.50% at period-end.

U.S. home prices, which enjoyed rapid appreciation during the pandemic, began to soften. Consumer spending weakened but remained positive. A strong labor market helped keep the U.S. economy in expansion, which boosted investors’ risk appetite. Positive corporate earnings and a rally in the technology sector drove gains in the broader stock market. The S&P 500 Index returned 13.02% for the 12-month reporting period.

 

 

Allocations are shown as a percentage of the fund’s net assets as of 7/31/23. Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the exclusion of as-of trades, if any, the use of different classifications of securities for presentation purposes, and rounding. Holdings and allocations may vary over time. Due to rounding, percentages may not equal 100%.

This table shows the fund’s top 10 equity holdings by percentage of the fund’s net assets as of 7/31/23. Short-term investments and derivatives, if any, are excluded. Summary information may differ from the portfolio schedule included in the financial statements due the use of different classifications of securities for presentation purposes. Holdings may vary over time.

 

 

High interest rates, banking turmoil, and tighter lending conditions weighed on the investment-grade [IG] bond market. The Bloomberg U.S. Aggregate Bond Index returned –3.37% for the 12-month reporting period. Credit spreads widened early in the period and began to tighten as investor sentiment improved. [Spreads are the yield advantage credit-sensitive bonds offer over comparable-maturity U.S. Treasuries. Bond prices rise as yield spreads tighten and decline as spreads widen.] The yield on the benchmark 10-year U.S. Treasury began the period at 2.98% and reached a high of 4.25% in October 2022 before ending the period at 3.97%.

How did the fund perform for the reporting period?

The fund returned 7.66%, outperforming the primary benchmark, the George Putnam Blended Index, which returned 6.57%. This custom, blended benchmark is 60% the S&P 500 Index and 40% the Bloomberg U.S. Aggregate Bond Index.

What were some stocks that contributed to fund performance during the reporting period?

NVIDIA, a U.S.-based technology company, was one of the stock portfolio’s top contributors. NVIDIA produces graphics processing units [GPUs] that are used for gaming and entertainment as well as for artificial intelligence [AI]. We believe NVIDIA will continue to benefit from growth in generative AI, which is advancing at a remarkable pace, in our view, and leverages massive computing power. As of today, NVIDIA is one of the only suppliers of the GPUs that are needed to run generative AI. NVIDIA is already generating $15 billion — about 50% of its total revenues — from AI-related demand, and we expect NVIDIA’s revenues from AI to grow.

PulteGroup, the third-largest home-construction company in the U.S., was another top performer in the stock portfolio. During the pandemic, many homeowners locked in ultra-low mortgage rates and saw their home prices appreciate. Over the period, affordability constraints and higher interest rates prevented many homeowners from selling their homes. This created a deficit of inventory in the U.S. residential housing market. Limited supply drove up demand for new home builders like PulteGroup, which benefited its stock.

What were some stocks that detracted from fund performance for the reporting period?

Adobe, a leader in digital document management solutions, was one of the top detractors in the fund’s stock portfolio. In September 2022, Adobe announced plans to acquire competitor Figma for $20 billion. Speculation about Adobe’s poor capital allocation and potential antitrust violations put downward pressure on its stock. Later in the period, Adobe launched a new AI product that helped boost its valuation. However, we believe the use of AI in general could reduce the competitiveness of Adobe’s existing product lines. We sold the stock during the period.

Bio-Rad Laboratories, a life science tools and diagnostics equipment provider, also dampened stock portfolio performance. Demand for Bio-Rad’s products soared during the pandemic. Post-pandemic, capital funding into the biotech sector declined, which weakened demand for Bio-Rad products. We continue to own Bio-Rad based on our view of its underlying strong fundamentals. We believe the company will recover from this cyclical slowdown.

How did the fund’s bond allocations perform during the period?

The fund’s bond allocation outperformed the Bloomberg U.S. Aggregate Bond Index by 120 basis points [bps] for the period. Exposure to U.S. IG corporate credit is the primary driver of relative performance in the bond portfolio,

 

 

and it contributed positively during the period. Within corporates, the fund’s bond performance relative to the Bloomberg U.S. Aggregate Bond Index was led by our positioning in the financials sector. The bond portfolio was underweight relative to the Bloomberg U.S. Aggregate Bond Index in smaller regional banks and, to a lesser extent, in the technology and midstream energy sectors. U.S. IG corporate credit spreads, represented by the Bloomberg U.S. Corporate Bond Index, tightened 33 bps during the period. In addition, our tactical mortgage basis positioning [which seeks to capitalize on the difference between longer-term U.S. Treasury yields and the interest rates on 30-year home mortgages] boosted returns. We positioned the bond portfolio to take advantage of fluctuating mortgage rates as they tightened or widened relative to Treasuries over the reporting period.

What is your outlook for bond markets?

We believe the Fed is nearing the end of its monetary tightening cycle and will move cautiously in its efforts to tackle inflation. However, volatility may persist in bond markets, in our view. We expect high interest rates could weigh on corporate balance sheets, while financial markets digest the probability of a recession. Given these conditions, the fund’s fixed income positioning remains at the lower end of the risk spectrum, with lower spread duration across credit sectors.

We have a cautious view on the U.S. IG corporate credit bond market, although we continue to find pockets of idiosyncratic opportunities. Corporate fundamentals, in our view, have been resilient and remain at supportive levels. At the same time, we are mindful of the deterioration in interest coverage metrics, or the ability of a company to pay the interest on its outstanding debt, as the cost of debt trends higher. Market technicals [supply/demand metrics] also held up well. Year-to-date domestic inflows have been strong, and supply has been manageable. Valuations are trending toward the tighter end of the range, with IG spreads 18 bps lower year to date. While spreads are still well inside of recessionary levels, we are seeing more divergence across sectors, with banks underperforming after the sector’s turmoil early this year. Risks to our outlook include macroeconomic forces of high inflation, central bank tightening, slowing growth, and geopolitical impacts on supply chains.

Commercial real estate is facing meaningful headwinds and increased risks, in our view. We believe the risk of recession is rising as the Fed continues to combat inflation by increasing the cost of capital. Recent bank turmoil will likely result in a tighter lending channel and higher capital costs. We believe property types that can adjust rents, such as hotels and apartments, will hold their value. Property types with longer leases and greater exposure to rising capital costs or needs for capital investment will be more challenged, in our view. We believe investors have priced these risks into the commercial mortgage-backed securities market, which has experienced significant credit spread widening. The most attractive relative value opportunities will need detailed analysis and security selection.

The fund has maintained a tactical mortgage basis position. Uncertainty related to bank demand remains a focus. Despite the banking turmoil earlier this year, the FDIC’s sale of mortgage holdings has been robust, which has been encouraging. We remain tactical and will actively trade the basis as new information emerges and events occur.

What is your outlook for the economy and the fund?

Last year was very challenging for financial markets and all asset classes. While 2022 is behind us, we expect market volatility will continue until inflation is better understood and central banks become less hawkish.

On the positive side, commodity prices have moved off their highs, supply chains are easing, and inventories of goods are piling up. These conditions have helped to lower inflation, in

 

 

our view. Still, we see an elevated probability of persistent inflation in the long run.

As we continue through 2023, we remain cautiously optimistic. Many sectors and industries that were devastated during the pandemic are now better positioned for growth, in our view. At the same time, we believe valuations appear rich, especially within corporate credit.

For the fund, we continue to use deep fundamental research to evaluate businesses in the context of macroeconomic challenges. We invest in companies that we believe can weather macro-driven risks. The fund’s portfolio represents our best ideas that we believe will outperform the primary benchmark over the long run.

Thank you both for your time and insights today.

The views expressed in this report are exclusively those of Putnam Management and are subject to change. They are not meant as investment advice.

Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk.

Of special interest

The fund’s quarterly dividend rate for class A shares increased from $0.041 to $0.055 per share in November 2022 and by an additional $0.061 per share in May 2023. The increases were due to higher levels of income earned by the portfolio. Similar increases were made to the other share classes of the fund.

 

 

Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended July 31, 2023, the end of its most recent fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance information as of the most recent calendar quarter-end and expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent 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. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class R, R5, R6, and Y shares are not available to all investors.

Annualized fund performance Total return for periods ended 7/31/23

 

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 5.75% and 3.50% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R, R5, R6, and Y shares have no initial sales charge or CDSC. Performance for class B, C, M, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares, except for class Y shares, for which 12b-1 fees are not applicable. Performance for class R5 and R6 shares prior to their inception is derived from the historical performance of class Y shares and has not been adjusted for the lower investor servicing fees applicable to class R5 and R6 shares; had it, returns would have been higher.

For a portion of the periods, the fund had expense limitations, without which returns would have been lower.

Class B and C share performance reflects conversion to class A shares after eight years.

 

 

Comparative annualized index returns For periods ended 7/31/23

 

Index and Lipper results should be compared with fund performance before sales charge, before CDSC, or at net asset value.

All Bloomberg indices are provided by Bloomberg Index Services Limited.

Lipper peer group median is provided by Lipper, a Refinitiv company.

^* George Putnam Blended Index is an unmanaged index administered by Putnam Management, 60% of which is the S&P 500 Index and 40% of which is the Bloomberg U.S. Aggregate Bond Index.

^† The fund’s benchmarks, the George Putnam Blended Index and the S&P 500 Index, were introduced on 12/31/78 and 12/31/69, respectively, the Bloomberg U.S. Aggregate Bond Index was introduced on 12/31/75, and its Lipper group, Balanced Funds, was introduced on 12/31/59; they all post-date the inception of the fund’s class A shares.

^‡ Over the 1-year, 3-year, 5-year, and 10-year periods ended 7/31/23, there were 423, 393, 375, and 290 funds, respectively, in this Lipper category.

Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s class B and C shares would have been valued at $20,362 and $20,367, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,650 after sales charge) would have been valued at $19,855. A $10,000 investment in the fund’s class R, R5, R6, and Y shares would have been valued at $21,090, $22,220, $22,397, and $22,183, respectively.

 

 

Fund price and distribution information For the 12-month period ended 7/31/23

 

The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (5.75% for class A shares and 3.50% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.

¹ Most recent distribution, including any return of capital and excluding capital gains, annualized and divided by share price before or after sales charge at period-end.

² Based only on investment income and calculated using the maximum offering price for each share class, in accordance with SEC guidelines.

 

 

Annualized fund performance as of most recent calendar quarter
Total return for periods ended 6/30/23

 

See the discussion following the fund performance table on page 8 for information about the calculation of fund performance.

 

 

 

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 following information, 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 representative.

Expense ratios

 

Fiscal year expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown for the annualized expense ratio and in the financial highlights of this report.

Expenses are shown as a percentage of average net assets.

^* Expense ratios for each class are for the fund’s most recent fiscal half year. As a result of this, ratios may differ from expense ratios based on one-year data in the financial highlights.

Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in each class of the fund from 2/1/23 to 7/31/23. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

 

^* 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 average net assets for the six months ended 7/31/23. The expense ratio may differ for each share class.

^† 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 (181); and then dividing that result by the number of days in the year (365).

 

 

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 7/31/23, use the following calculation method. To find the value of your investment on 2/1/23, call Putnam at 1-800-225-1581.

Compare expenses using the SEC’s method

The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table 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 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 average net assets for the six months ended 7/31/23. The expense ratio may differ for each share class.

^† Expenses are calculated by multiplying the expense ratio by the average account value for the six-month period; then multiplying the result by the number of days in the six-month period (181); and then dividing that result by the number of days in the year (365).

 

 

Comparative index definitions

Bloomberg U.S. Corporate Bond Index measures the investment-grade, fixed rate, taxable corporate bond market. It includes U.S. dollar-denominated securities publicly issued by U.S. and non-U.S. industrial, utility, and financial issuers.

Bloomberg U.S. Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed income securities.

George Putnam Blended Index is an unmanaged index administered by Putnam Management, 60% of which is the S&P 500® Index and 40% of which is the Bloomberg U.S. Aggregate Bond Index.

ICE BofA (Intercontinental Exchange Bank of America) U.S. 3-Month Treasury Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.

S&P 500^® Index is an unmanaged index of common stock performance.

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.

BLOOMBERG^®  is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Neither Bloomberg nor Bloomberg’s licensors approve or endorse this material, or guarantee the accuracy or completeness of any information herein, or make any warranty, express or implied, as to the results to be obtained therefrom, and to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

ICE Data Indices, LLC (“ICE BofA”), used with permission. ICE BofA permits use of the ICE BofA indices and related data on an “as is” basis; makes no warranties regarding same; does not guarantee the suitability, quality, accuracy, timeliness, and/or completeness of the ICE BofA indices or any data included in, related to, or derived therefrom; assumes no liability in connection with the use of the foregoing; and does not sponsor, endorse, or recommend Putnam Investments, or any of its products or services.

Lipper, a Refinitiv company, is a third-party industry-ranking entity that ranks funds. Its rankings do not reflect sales charges. Lipper rankings are based on total return at net asset value relative to other funds that have similar current investment styles or objectives as determined by Lipper. Lipper may change a fund’s category assignment at its discretion. Lipper category medians reflect performance trends for funds within a category.

 

 

Other information for shareholders

Important notice regarding delivery of shareholder documents

In accordance with Securities and Exchange Commission (SEC) regulations, Putnam sends a single notice of internet availability, or a single printed copy, of annual and semiannual shareholder reports, prospectuses, and proxy statements to Putnam shareholders who share the same address, unless a shareholder requests otherwise. If you prefer to receive your own copy of these documents, please call Putnam at 1-800-225-1581 or, for exchange-traded funds only, 1-833-228-5577. We will begin sending individual copies within 30 days.

Proxy voting

Putnam is committed to managing our 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, 2023, are available in the Individual Investors section of putnam.com and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, 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 or, for exchange-traded funds only, 1-833-228-5577.

Fund portfolio holdings

The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT within 60 days of the end of such fiscal quarter. Shareholders may obtain the fund’s Form N-PORT on the SEC’s website at www.sec.gov.

Trustee and employee fund ownership

Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam funds. As of July 31, 2023, Putnam employees had approximately $504,000,000 and the Trustees had approximately $70,000,000 invested in Putnam funds. These amounts include investments by the Trustees’ and employees’ immediate family members as well as investments through retirement and deferred compensation plans.

Liquidity risk management program

Putnam, as the administrator of the fund’s liquidity risk management program (appointed by the Board of Trustees), presented the most recent annual report on the program to the Trustees in May 2023. The report covered the structure of the program, including the program documents and related policies and procedures adopted to comply with Rule 22e-4 under the Investment Company Act of 1940, and reviewed the operation of the program from January 2022 through December 2022. The report included a description of the annual liquidity assessment of the fund that Putnam performed in November 2022. The report noted that there were no material compliance exceptions identified under Rule 22e-4 during the period. The report included a review of the governance of the program and the methodology for classification of the fund’s investments. Putnam concluded that the program has been operating effectively and adequately to ensure compliance with Rule 22e-4.

 

 

Important notice regarding Putnam’s privacy policy

In order to conduct business with our shareholders, we must obtain certain personal information such as account holders’ names, addresses, Social Security numbers, and dates of birth. Using this information, we are able to maintain accurate records of accounts and transactions.

It is our policy to protect the confidentiality of our shareholder information, whether or not a shareholder currently owns shares of our funds. In particular, it is our policy not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personal information from unauthorized use.

Under certain circumstances, we must share account information with outside vendors who provide services to us, such as mailings and proxy solicitations. In these cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. Finally, it is our policy to share account information with your financial representative, if you’ve listed one on your Putnam account.

 

 

Trustee approval of management contracts

Consideration of your fund’s new and interim management and sub-management contracts

At their meeting on June 23, 2023, the Board of Trustees of your fund, including all of the Trustees who are not “interested persons” (as this term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of the Putnam mutual funds, closed-end funds and exchange-traded funds (collectively, the “funds”) (the “Independent Trustees”) approved, subject to approval by your fund’s shareholders, a new management contract with Putnam Investment Management (“Putnam Management”) and a new sub-management contract between Putnam Management and its affiliate, Putnam Investments Limited (“PIL”) (collectively, the “New Management Contracts”). The Trustees considered the proposed New Management Contracts in connection with the planned acquisition of Putnam U.S. Holdings I, LLC (“Putnam Holdings”) by a subsidiary of Franklin Resources, Inc. (“Franklin Templeton”). The Trustees considered that, on May 31, 2023, Franklin Templeton and Great-West Lifeco Inc., the parent company of Putnam Holdings, announced that they had entered into a definitive agreement for a subsidiary of Franklin Templeton to acquire Putnam Holdings in a stock and cash transaction (the “Transaction”). The Trustees noted that Putnam Holdings was the parent company of Putnam Management and PIL. The Trustees were advised that the Transaction would result in a “change of control” of Putnam Management and PIL and would cause your fund’s current Management Contract with Putnam Management and Sub-Management Contract with PIL (collectively, the “Current Management Contracts”) to terminate in accordance with the 1940 Act. The Trustees considered that the New Management Contracts would take effect upon the closing of the Transaction, which was expected to occur in the fourth quarter of 2023.

In addition to the New Management Contracts, the Trustees also approved interim management and sub-management contracts with Putnam Management and PIL, respectively (the “Interim Management Contracts”), which would take effect in the event that for any reason shareholder approval of a New Management Contract was not received by the time of the Transaction closing. The Trustees considered that each Interim Management Contract that became effective would remain in effect until shareholders approved the proposed New Management Contract, or until 150 days elapse after the closing of the Transaction, whichever occurred first. The considerations and conclusions discussed in connection with the Trustees’ consideration of the New Management Contracts and the continuance of your fund’s Current Management Contracts also apply to the Trustees’ consideration of the Interim Management Contracts, supplemented by consideration of the terms, nature and reason for any Interim Management Contract.

The Independent Trustees met with their independent legal counsel, as defined in Rule 0 – 1(a)(6) under the 1940 Act (their “independent legal counsel”), and representatives of Putnam Management and its parent company, Power Corporation of Canada, to discuss the potential Transaction, including the timing and structure of the Transaction and its implications for Putnam Management and the funds, during their regular meeting on November 18, 2022, and the full Board of Trustees further discussed these matters with representatives of Putnam Management at its regular meeting on December 15, 2022. At a special meeting on December 20, 2022, the full Board of Trustees met with representatives of Putnam Management, Power Corporation of Canada and Franklin Templeton to further discuss the potential Transaction, including Franklin Templeton’s strategic plans for Putnam Management’s asset management business and the funds, potential sources of synergy between Franklin Templeton and Putnam Management, potential areas of partnership between Power Corporation of Canada and Franklin Templeton, Franklin Templeton’s distribution capabilities, Franklin Templeton’s existing service provider relationships and Franklin Templeton’s recent acquisitions of other asset management firms.

In order to assist the Independent Trustees in their consideration of the New Management Contracts and other anticipated impacts of the Transaction on the funds and their shareholders, independent legal counsel for the Independent Trustees furnished an initial information request to Franklin Templeton (the “Initial Franklin Request”). At a special meeting of the full Board of Trustees held on January 25, 2023, representatives of Franklin Templeton addressed the firm’s responses to the Initial Franklin Request. At the

 

 

meeting, representatives of Franklin Templeton discussed, among other things, the business and financial condition of Franklin Templeton and its affiliates, Franklin Templeton’s U.S. registered fund operations, its recent acquisition history, Franklin Templeton’s intentions regarding the operation of Putnam Management and the funds following the completion of the potential Transaction and expected benefits to the funds and Putnam Management that might result from the Transaction.

The Board of Trustees actively monitored developments with respect to the potential Transaction throughout the period leading up to the public announcement of a final sale agreement on May 31, 2023. The Independent Trustees met to discuss these matters at their regular meetings on January 27, April 20 and May 19, 2023. The full Board of Trustees also discussed developments at their regular meeting on February 23, 2023. Following the public announcement of the Transaction on May 31, 2023, independent legal counsel for the Independent Trustees furnished a supplemental information request (the “Supplemental Franklin Request”) to Franklin Templeton. At the Board of Trustees’ regular in-person meeting held on June 22 – 23, 2023, representatives of Putnam Management and Power Corporation of Canada provided further information regarding, among other matters, the final terms of the Transaction and efforts undertaken to retain Putnam employees. The Contract Committee of the Board of Trustees also met on June 22, 2023 to discuss Franklin Templeton’s responses to the Supplemental Franklin Request. Mr. Reynolds, the only Trustee affiliated with Putnam Management, participated in portions of these meetings to provide the perspective of the Putnam organization, but did not otherwise participate in the deliberations of the Independent Trustees or the Contract Committee regarding the potential Transaction.

After the presentations and after reviewing the written materials provided, the Independent Trustees met at their in-person meeting on June 23, 2023 to consider the New Management Contracts for each fund, proposed to become effective upon the closing of the Transaction, and the filing of a preliminary proxy statement. At this meeting and throughout the process, the Independent Trustees also received advice from their independent legal counsel regarding their responsibilities in evaluating the potential Transaction and the New Management Contracts. The Independent Trustees reviewed the terms of the proposed New Management Contracts and the differences between the New Management Contracts and the Current Management Contracts. They noted that the terms of the proposed New Management Contracts were substantially identical to the Current Management Contracts, except for certain changes designed largely to address differences among various of the existing contracts, which had been developed and implemented at different times in the past.

In considering the approval of the proposed New Management Contracts, the Board of Trustees took into account a number of factors, including:¹

(i) Franklin Templeton’s and Putnam Management’s belief that the Transaction would not adversely affect the funds or their shareholders and their belief that the Transaction was likely to result in certain benefits (described below) for the funds and their shareholders;

(ii) That Franklin Templeton did not intend to make any material change in Putnam Management’s senior investment professionals (other than certain changes related to reporting structure and organization of personnel discussed below), including the portfolio managers of the funds, or to the firm’s operating locations as a result of the Transaction;

(iii) That Franklin Templeton intended for Putnam Management’s equity investment professionals to continue to operate largely independently from Franklin Templeton, reporting to Franklin Templeton’s Head of Public Markets following the Transaction;

(iv) That, while Putnam Management’s organizational structure was not expected to change immediately following the Transaction, Franklin Templeton intended to revise Putnam Management’s reporting structure in order to include Putnam Management’s fixed income investment professionals in Franklin Templeton’s fixed income group and to include Putnam Management’s Global Asset Allocation (“GAA”) investment professionals in Franklin Templeton’s investment solutions group, with both Franklin Templeton

¹All subsequent references to Putnam Management describing the Board of Trustees’ considerations should be deemed to include references to PIL as necessary or appropriate in the context.

 

 

groups reporting to Franklin Templeton’s Head of Public Markets;

(v) Franklin Templeton’s expectation that there would not be any changes in the investment objectives, strategies or portfolio holdings of the funds as a result of the Transaction;

(vi) That neither Franklin Templeton nor Putnam Management had any current plans to propose changes to the funds’ existing management fees or expense limitations, or current plans to make changes to the funds’ existing distribution arrangements;

(vii) Franklin Templeton’s and Putnam Management’s representations that, following the Transaction, there was not expected to be any diminution in the nature, quality and extent of services provided to the funds and their shareholders by Putnam Management and PIL, including compliance and other non-advisory services;

(viii) That Franklin Templeton did not currently plan to change the branding of the funds or to change the lineup of funds in connection with the Transaction but would continue to evaluate how best to position the funds in the market;

(ix) The possible benefits accruing to the funds and their shareholders as a result of the Transaction, including:

a. That the scale of Franklin Templeton’s investment operations platform would increase the investment and operational resources available to the funds;

b. That the Putnam open-end funds would benefit from Franklin Templeton’s large retail and institutional global distribution capabilities and significant network of intermediary relationships, which may provide additional opportunities for the funds to increase assets and reduce expenses by spreading expenses over a larger asset base; and

c. Potential benefits to shareholders of the Putnam open-end funds that could result from the alignment of certain fund features and shareholder benefits with those of other funds sponsored by Franklin Templeton and its affiliates and access to a broader array of investment opportunities;

(x) The financial strength, reputation, experience and resources of Franklin Templeton and its investment advisory subsidiaries;

(xi) Franklin Templeton’s expectation that the Transaction would not impact the capabilities or responsibilities of Putnam Management’s Investment Division (other than any impact related to reporting structure changes for Putnam Management’s equity, fixed income and GAA investment groups and to including Putnam Management’s fixed income and GAA investment professionals in existing Franklin Templeton investment groups, as discussed above) and that any changes to the Investment Division over the longer term would be made in order to achieve perceived operational efficiencies or improvements to the portfolio management process;

(xii) Franklin Templeton’s commitment to maintaining competitive compensation arrangements to allow Putnam Management to continue to attract and retain highly qualified personnel and Putnam Management’s and Franklin Templeton’s efforts to retain personnel, including efforts implemented since the Transaction was announced;

(xiii) That the current senior management teams at Putnam Management and Power Corporation of Canada had indicated their strong support of the Transaction and that Putnam Management had recommended that the Board of Trustees approve the New Management Contracts; and

(xiv) Putnam Management’s and Great-West Lifeco Inc.’s commitment to bear all expenses incurred by the funds in connection with the Transaction, including all costs associated with the proxy solicitation in connection with seeking shareholder approval of the New Management Contracts.

Finally, in considering the proposed New Management Contracts, the Board of Trustees also took into account their concurrent deliberations and conclusions, as described below, in connection with their annual review of the funds’ Current Management Contracts and the approval of their continuance, effective July 1, 2023, and the extensive materials that they had reviewed in connection with that review process.

Based upon the foregoing considerations, on June 23, 2023, the Board of Trustees, including all of the Independent Trustees, unanimously approved the proposed New Management Contracts and determined to recommend their approval to the shareholders of the funds.

 

 

General conclusions — Current Management Contracts

The Board of Trustees oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of your fund’s management contract with Putnam Management and the sub-management contract with respect to your fund between Putnam Management and PIL. (Because PIL is an affiliate of Putnam Management and Putnam Management remains fully responsible for all services provided by PIL, the Trustees did not attempt to evaluate PIL as a separate entity.) The Board of Trustees, with the assistance of its Contract Committee, requests and evaluates all information it deems reasonably necessary under the circumstances in connection with its annual contract review. The Contract Committee consists solely of Independent Trustees.

At the outset of the review process, members of the Board of Trustees’ independent staff and independent legal counsel considered any possible changes to the annual contract review materials furnished to the Contract Committee during the course of the previous year’s review and, as applicable, identified those changes to Putnam Management. Following these discussions and in consultation with the Contract Committee, the Independent Trustees’ independent legal counsel requested that Putnam Management and its affiliates furnish specified information, together with any additional information that Putnam Management considered relevant, to the Contract Committee. Over the course of several months ending in June 2023, the Contract Committee met on a number of occasions with representatives of Putnam Management, and separately in executive session, to consider the information that Putnam Management provided. Throughout this process, the Contract Committee was assisted by the members of the Board of Trustees’ independent staff and by independent legal counsel for the funds and the Independent Trustees.

At the Board of Trustees’ June 2023 meeting, the Contract Committee met in executive session to discuss and consider its recommendations with respect to the continuance of the contracts. At that meeting, the Contract Committee also met in executive session with the other Independent Trustees to review a summary of the key financial, performance and other data that the Contract Committee considered in the course of its review. The Contract Committee recommended, and the Independent Trustees approved, the continuance of your fund’s Current Management Contracts, effective July 1, 2023, and the approval of your fund’s New Management Contracts and Interim Management Contracts, as discussed above.

The Independent Trustees’ approvals were based on the following conclusions:

• That the fee schedule in effect for your fund represented reasonable compensation in light of the nature and quality of the services being provided to the fund, the fees paid by competitive funds, the costs incurred by Putnam Management in providing services to the fund and the application of certain reductions and waivers noted below; and

• That the fee schedule in effect for your fund represented an appropriate sharing between fund shareholders and Putnam Management of any economies of scale as may exist in the management of the fund at current asset levels.

These conclusions were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations and how the Trustees considered these factors are described below, although individual Trustees may have evaluated the information presented differently, giving different weights to various factors. It is also important to recognize that the management arrangements for your fund and the other Putnam mutual funds and closed-end funds are the result of many years of review and discussion between the Independent Trustees and Putnam Management, that some aspects of the arrangements may receive greater scrutiny in some years than others and that the Trustees’ conclusions may be based, in part, on their consideration of fee arrangements in previous years. For example, with certain exceptions primarily involving newer funds (including the exchange-traded funds) or repositioned funds, the current fee arrangements under the vast majority of the funds’ management contracts were first implemented at the beginning of 2010 following extensive review by the Contract Committee and discussions with representatives of Putnam Management, as well as approval by shareholders. The Trustees also took into account their concurrent deliberations and conclusions, and the materials that they had reviewed, in connection with their approval on June 23, 2023 of the Interim Management Contracts and the

 

 

New Management Contracts, which had been proposed in light of the Transaction (which would cause the fund’s Current Management Contracts to terminate in accordance with applicable law or the terms of each contract).

Management fee schedules and total expenses

The Trustees reviewed the management fee schedules in effect for all funds, including fee levels and any breakpoints. Under its management contract, your fund has the benefit of breakpoints in its management fee schedule that provide shareholders with reduced fee levels as assets under management in the Putnam family of funds increase. The Trustees also reviewed the total expenses of each Putnam fund, recognizing that in most cases management fees represented the major, but not the sole, determinant of total costs to fund shareholders. (Two mutual funds and each of the exchange-traded funds have implemented so-called “all-in” or unitary management fees covering substantially all routine fund operating costs.)

In reviewing fees and expenses, the Trustees generally focus their attention on material changes in circumstances — for example, changes in assets under management, changes in a fund’s investment strategy, changes in Putnam Management’s operating costs or profitability, or changes in competitive practices in the fund industry — that suggest that consideration of fee changes might be warranted. The Trustees concluded that the circumstances did not indicate that changes to the management fee schedule for your fund would be appropriate at this time.

As in the past, the Trustees also focused on the competitiveness of each fund’s total expense ratio. The Trustees, Putnam Management and the funds’ investor servicing agent, Putnam Investor Services, Inc. (“PSERV”), have implemented expense limitations that were in effect during your fund’s fiscal year ending in 2022. These expense limitations were: (i) a contractual expense limitation applicable to specified mutual funds, including your fund, of 25 basis points on investor servicing fees and expenses and (ii) a contractual expense limitation applicable to specified mutual funds, including your fund, of 20 basis points on so-called “other expenses” (i.e., all expenses exclusive of management fees, distribution fees, investor servicing fees, investment-related expenses, interest, taxes, brokerage commissions, acquired fund fees and expenses and extraordinary expenses). These expense limitations attempt to maintain competitive expense levels for the funds. Most funds, including your fund, had sufficiently low expenses that these expense limitations were not operative during their fiscal years ending in 2022. Putnam Management and PSERV have agreed to maintain these expense limitations until at least November 30, 2024. Putnam Management and PSERV’s commitment to these expense limitation arrangements, which were intended to support an effort to have the mutual fund expenses meet competitive standards, was an important factor in the Trustees’ decision to approve your fund’s New Management Contracts and Interim Management Contracts and the continuance of your fund’s Current Management Contracts.

The Trustees reviewed comparative fee and expense information for a custom group of competitive funds selected by Broadridge Financial Solutions, Inc. (“Broadridge”). This comparative information included your fund’s percentile ranking for effective management fees and total expenses (excluding any applicable 12b-1 fees), which provides a general indication of your fund’s relative standing. In the custom peer group, your fund ranked in the second quintile in effective management fees (determined for your fund and the other funds in the custom peer group based on fund asset size and the applicable contractual management fee schedule) and in the third quintile in total expenses (excluding any applicable 12b-1 fees) as of December 31, 2022. The first quintile represents the least expensive funds and the fifth quintile the most expensive funds. The fee and expense data reported by Broadridge as of December 31, 2022 reflected the most recent fiscal year-end data available in Broadridge’s database at that time.

In connection with their review of fund management fees and total expenses, the Trustees also reviewed the costs of the services provided and the profits realized by Putnam Management and its affiliates from their contractual relationships with the funds. This information included trends in revenues, expenses and profitability of Putnam Management and its affiliates relating to the investment management, investor servicing and distribution services provided to the funds, as applicable. In this regard, the Trustees also reviewed an analysis of the revenues, expenses and profitability of Putnam Management and its affiliates, allocated on a fund-by-fund basis, with respect to (as applicable) the funds’ management,

 

 

distribution and investor servicing contracts. For each fund, the analysis presented information about revenues, expenses and profitability in 2022 for each of the applicable agreements separately and for the agreements taken together on a combined basis. The Trustees concluded that, at current asset levels, the fee schedules in place for each of the funds, including the fee schedule for your fund, represented reasonable compensation for the services being provided and represented an appropriate sharing between fund shareholders and Putnam Management of any economies of scale as may exist in the management of the funds at that time.

The information examined by the Trustees in connection with their annual contract review for the funds included information regarding services provided and fees charged by Putnam Management and its affiliates to other clients, including collective investment trusts offered in the defined contribution and defined benefit retirement plan markets, sub-advised mutual funds, private funds sponsored by affiliates of Putnam Management, model-only separately managed accounts and Putnam Management’s manager-traded separately managed account programs. This information included, in cases where a product’s investment strategy corresponds with a fund’s strategy, comparisons of those fees with fees charged to the funds, as well as an assessment of the differences in the services provided to these clients as compared to the services provided to the funds. The Trustees observed that the differences in fee rates between these clients and the 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 may reflect, among other things, historical competitive forces operating in separate marketplaces. The Trustees considered the fact that in many cases fee rates across different asset classes are higher on average for 1940 Act-registered funds than for other clients, and the Trustees also considered the differences between the services that Putnam Management provides to the funds and those that it provides to its other clients. The Trustees did not rely on these comparisons to any significant extent in concluding that the management fees paid by your fund are reasonable.

Investment performance

The quality of the investment process provided by Putnam Management represented a major factor in the Trustees’ evaluation of the quality of services provided by Putnam Management under your fund’s management contract. The Trustees were assisted in their review of Putnam Management’s investment process and performance by the work of the investment oversight committees of the Trustees and the full Board of Trustees, which meet on a regular basis with individual portfolio managers and with senior management of Putnam Management’s Investment Division throughout the year. The Trustees concluded that Putnam Management generally provides a high-quality investment process — based on the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to them and in general Putnam Management’s ability to attract and retain high-quality personnel — but also recognized that this does not guarantee favorable investment results for every fund in every time period.

The Trustees considered that, in the aggregate, peer-relative and benchmark-relative Putnam fund performance was generally encouraging in 2022 against a backdrop of volatile equity and fixed income markets, driven by factors such as Russia’s invasion of Ukraine, increased tensions with China, disruptions in energy markets and broader supply chains, rising inflation and the significant tightening of monetary policy by the Board of Governors of the Federal Reserve in an effort to combat inflation. The Trustees further noted that, in the face of these numerous economic headwinds, corporate earnings and employment data had been generally robust throughout 2022. For the one-year period ended December 31, 2022, the Trustees noted that the Putnam funds, on an asset-weighted basis, ranked in the 41st percentile of their peers as determined by Lipper Inc. (“Lipper”) and, on an asset-weighted-basis, outperformed their benchmarks by 1.3% gross of fees over the one-year period. The Committee also noted that the funds’ aggregate performance over longer-term periods continued to be strong, with the funds, on an asset-weighted basis, ranking in the 34th, 27th and 22nd percentiles of their Lipper peers over the three-year, five-year and ten-year periods ended December 31, 2022, respectively. The Trustees further noted that the funds, in the aggregate, outperformed their benchmarks on a gross basis for each of the three-year, five-year and ten-year periods. The Trustees also considered the Morningstar Inc. ratings assigned to the funds and that 40 funds were rated four or five stars at

 

 

the end of 2022, which represented an increase of 15 funds year-over-year. The Trustees also considered that seven funds were five-star rated at the end of 2022, which was a year-over-year decrease of two funds, and that 83% of the funds’ aggregate assets were in four- or five-star rated funds at year end.

In addition to the performance of the individual Putnam funds, the Trustees considered, as they had in prior years, the performance of The Putnam Fund complex versus competitor fund complexes, as reported in the Barron’s/Lipper Fund Families survey (the “Survey”). The Trustees noted that the Survey ranks mutual fund companies based on their performance across a variety of asset types, and that The Putnam Fund complex had performed exceptionally well in 2022. In this regard, the Trustees considered that the funds had ranked 9th out of 49 fund companies, 3rd out of 49 fund companies and 2nd out of 47 fund companies for the one-year, five-year and ten-year periods, respectively. The Trustees also noted that The Putnam Fund complex had been the only fund family to rank in the top ten in all three time periods. They also noted, however, the disappointing investment performance of some Putnam funds for periods ended December 31, 2022 and considered information provided by Putnam Management regarding the factors contributing to the underperformance and, where relevant, actions being taken to improve the performance of these particular funds. The Trustees indicated their intention to continue to monitor the performance of those funds.

For purposes of the Trustees’ evaluation of the Putnam funds’ investment performance, the Trustees generally focus on a competitive industry ranking of each fund’s total net return over a one-year, three-year and five-year period. For a number of Putnam funds with relatively unique investment mandates for which Putnam Management informed the Trustees that meaningful competitive performance rankings are not considered to be available, the Trustees evaluated performance based on their total gross and net returns and comparisons of those returns to the returns of selected investment benchmarks. In the case of your fund, the Trustees considered that its class A share cumulative total return performance at net asset value was in the following quartiles of its Lipper peer group (Lipper Balanced Funds) for the one-year, three-year and five-year periods ended December 31, 2022 (the first quartile representing the best-performing funds and the fourth quartile the worst-performing funds):

 

For the five-year period ended December 31, 2022, your fund’s performance was in the top decile of its Lipper peer group. Over the one-year, three-year and five-year periods ended December 31, 2022, there were 411, 379 and 359 funds, respectively, in your fund’s Lipper peer group. (When considering performance information, shareholders should be mindful that past performance is not a guarantee of future results.)

The Trustees also considered Putnam Management’s continued efforts to support fund performance through certain initiatives, including structuring compensation for portfolio managers to enhance accountability for fund performance, emphasizing accountability in the portfolio management process and affirming its commitment to a fundamental-driven approach to investing.

Brokerage and soft-dollar allocations; distribution and investor servicing

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 benefits related to brokerage allocation and the use of soft dollars, whereby a portion of the commissions paid by a fund for brokerage may be used to acquire research services that are expected to be useful to Putnam Management in managing the assets of the fund and of other clients. Subject to policies established by the Trustees, soft dollars generated by these means are used predominantly to acquire brokerage and research services (including third-party research and market data) that enhance Putnam Management’s investment capabilities and supplement Putnam Management’s internal research efforts. The Trustees indicated their continued intent to monitor regulatory and industry developments in this area with the assistance of their Brokerage Committee. In addition, with the assistance of their Brokerage Committee, the Trustees indicated their continued intent to monitor the allocation of the funds’ brokerage in order to ensure that the principle of seeking best price and execution remains paramount in the portfolio trading process.

 

 

Putnam Management may also receive benefits from payments made to Putnam Management’s affiliates by the mutual funds for distribution services and investor services. In conjunction with the review of your fund’s management and sub-management contracts, the Trustees reviewed your fund’s investor servicing agreement with PSERV and its distributor’s contract and distribution plans with Putnam Retail Management Limited Partnership (“PRM”), both of which are affiliates of Putnam Management. The Trustees concluded that the fees payable by the mutual funds to PSERV and PRM for such services were fair and reasonable in relation to the nature and quality of such services, the fees paid by competitive funds and the costs incurred by PSERV and PRM in providing such services. Furthermore, the Trustees were of the view that the investor services provided by PSERV were required for the operation of the mutual funds, and that they were of a quality at least equal to those provided by other providers.

 

 

Audited financial statements

These sections of the report, as well as the accompanying Notes, preceded by the Report of Independent Registered Public Accounting Firm, constitute the fund’s audited 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 non-investment 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 liquidation preference of 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 (not required for money market funds) in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlights table also includes the current reporting period.

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of
George Putnam Balanced Fund:

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the fund’s portfolio, of George Putnam Balanced Fund (the “Fund”) as of July 31, 2023, the related statement of operations for the year ended July 31, 2023, the statement of changes in net assets for each of the two years in the period ended July 31, 2023, including the related notes, and the financial highlights for each of the five years in the period ended July 31, 2023 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of July 31, 2023, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended July 31, 2023 and the financial highlights for each of the five years in the period ended July 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of July 31, 2023 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
September 8, 2023

We have served as the auditor of one or more investment companies in the Putnam Investments family of funds since at least 1957. We have not been able to determine the specific year we began serving as auditor.

 

 

The fund’s portfolio 7/31/23

COMMON STOCKS (61.9%)*	Shares	Value
Basic materials (1.9%)
Agnico-Eagle Mines, Ltd. (Canada)	52,745	$2,765,148
Avery Dennison Corp.	13,246	2,437,396
Corteva, Inc.	62,633	3,534,380
CRH PLC ADR (Ireland) S	68,193	4,112,038
DuPont de Nemours, Inc.	60,581	4,702,903
Eastman Chemical Co.	31,941	2,733,511
Glencore PLC (United Kingdom)	420,652	2,556,429
Linde PLC	2,928	1,143,882
PPG Industries, Inc.	23,549	3,388,701
Sherwin-Williams Co. (The)	19,521	5,397,557
		32,771,945
Capital goods (3.1%)
Berry Global Group, Inc.	30,815	2,020,540
Deere & Co.	5,259	2,259,266
Emerson Electric Co.	14,794	1,351,432
Honeywell International, Inc.	36,892	7,161,844
Howmet Aerospace, Inc.	53,772	2,749,900
Ingersoll Rand, Inc.	71,572	4,671,504
Johnson Controls International PLC	170,525	11,860,014
Northrop Grumman Corp.	17,312	7,703,840
Otis Worldwide Corp.	101,085	9,194,692
Raytheon Technologies Corp.	55,735	4,900,779
		53,873,811
Communication services (1.0%)
American Tower Corp. R	21,499	4,091,475
Charter Communications, Inc. Class A †	7,751	3,140,628
T-Mobile US, Inc. †	80,813	11,133,607
		18,365,710
Computers (3.4%)
Apple, Inc.	275,817	54,184,250
CDW Corp./DE	29,139	5,451,033
		59,635,283
Conglomerates (0.1%)
General Electric Co.	18,224	2,081,910
		2,081,910
Consumer cyclicals (10.4%)
4Front Ventures Corp. †	4,101,601	574,224
Amazon.com, Inc. †	269,972	36,089,857
Aramark S	55,738	2,250,143
BJ’s Wholesale Club Holdings, Inc. †	16,906	1,121,037
Booking Holdings, Inc. †	2,905	8,630,174
CarMax, Inc. †	36,494	3,014,769
General Motors Co.	41,179	1,580,038
Hertz Global Holdings, Inc. † S	175,780	2,961,893
Hilton Worldwide Holdings, Inc.	32,203	5,007,244
Home Depot, Inc. (The)	61,562	20,551,858
Levi Strauss & Co. Class A	64,960	978,947
Lululemon Athletica, Inc. (Canada) †	4,590	1,737,453

COMMON STOCKS (61.9%)* cont.	Shares	Value
Consumer cyclicals cont.
Mastercard, Inc. Class A	52,269	$20,608,621
Netflix, Inc. †	17,836	7,829,469
Nike, Inc. Class B	42,312	4,670,822
O’Reilly Automotive, Inc. †	2,517	2,330,213
Penn Entertainment, Inc. †	50,984	1,340,369
PulteGroup, Inc.	129,730	10,947,915
S&P Global, Inc.	18,299	7,219,138
Target Corp.	43,999	6,004,544
Tesla, Inc. †	65,531	17,524,955
TJX Cos., Inc. (The)	25,632	2,217,937
United Rentals, Inc.	13,667	6,350,782
Walmart, Inc.	73,200	11,701,752
Warby Parker, Inc. Class A † S	29,717	443,972
		183,688,126
Consumer staples (3.8%)
Altria Group, Inc.	21,583	980,300
Chipotle Mexican Grill, Inc. †	2,630	5,160,796
Coca-Cola Co. (The)	176,908	10,955,912
Constellation Brands, Inc. Class A	4,481	1,222,417
Costco Wholesale Corp.	11,443	6,415,747
General Mills, Inc.	44,983	3,362,029
Kenvue, Inc. † S	52,011	1,231,620
PepsiCo, Inc.	88,398	16,571,089
Procter & Gamble Co. (The)	122,894	19,208,332
Sea, Ltd. ADR (Singapore) †	24,836	1,652,091
		66,760,333
Electronics (4.8%)
Advanced Micro Devices, Inc. †	103,488	11,839,027
Broadcom, Inc.	19,305	17,348,438
NVIDIA Corp.	73,603	34,393,946
Qualcomm, Inc.	118,785	15,699,813
Vontier Corp.	155,119	4,797,831
		84,079,055
Energy (3.1%)
BP PLC (United Kingdom)	725,794	4,498,891
Cenovus Energy, Inc. (Canada)	614,800	11,693,159
ConocoPhillips	63,680	7,496,410
Diamond Offshore Drilling, Inc. †	165,505	2,619,944
Exxon Mobil Corp.	208,161	22,323,186
Shell PLC (London Exchange) (United Kingdom)	183,417	5,569,283
		54,200,873
Financials (6.5%)
AIA Group, Ltd. (Hong Kong)	480,400	4,800,621
Apollo Global Management, Inc.	116,685	9,534,331
Assured Guaranty, Ltd.	196,976	11,775,225
AXA SA (France)	163,682	5,033,717
Bank of America Corp.	257,545	8,241,440
Capital One Financial Corp.	24,647	2,884,192
Charles Schwab Corp. (The)	147,434	9,745,387

COMMON STOCKS (61.9%)* cont.	Shares	Value
Financials cont.
Citigroup, Inc.	287,058	$13,681,184
Gaming and Leisure Properties, Inc. R	125,095	5,937,009
Goldman Sachs Group, Inc. (The)	37,893	13,484,982
KKR & Co., Inc.	138,081	8,199,250
Prudential PLC (United Kingdom)	468,268	6,505,300
Quilter PLC (United Kingdom)	1,768,808	1,772,869
Visa, Inc. Class A S	40,663	9,666,815
Vornado Realty Trust R	119,568	2,687,889
		113,950,211
Health care (8.5%)
Abbott Laboratories	26,501	2,950,356
AbbVie, Inc.	61,253	9,162,224
Alkermes PLC †	91,210	2,670,629
Ascendis Pharma A/S ADR (Denmark) † S	52,996	4,777,589
Becton, Dickinson and Co.	16,437	4,579,677
Bio-Rad Laboratories, Inc. Class A †	6,629	2,687,131
Biogen, Inc. †	10,768	2,909,406
Boston Scientific Corp. †	112,145	5,814,718
Cigna Corp.	38,654	11,406,795
Danaher Corp.	21,917	5,590,150
Dexcom, Inc. †	25,871	3,222,492
Elevance Health, Inc.	3,284	1,548,833
Eli Lilly and Co.	26,071	11,850,573
Humana, Inc.	7,215	3,296,028
ICON PLC (Ireland) †	1,474	370,578
IDEXX Laboratories, Inc. †	3,556	1,972,620
Innoviva, Inc. †	334,480	4,532,204
Intuitive Surgical, Inc. †	17,296	5,610,822
Johnson & Johnson	59,529	9,972,893
McKesson Corp.	19,989	8,043,574
Medtronic PLC	13,201	1,158,520
Merck & Co., Inc.	82,407	8,788,707
Regeneron Pharmaceuticals, Inc. †	3,705	2,748,777
Stryker Corp.	9,827	2,785,070
TerrAscend Corp. (Canada) †	266,616	378,595
Thermo Fisher Scientific, Inc.	15,093	8,280,925
UnitedHealth Group, Inc.	39,432	19,967,182
Zoetis, Inc.	11,218	2,109,994
		149,187,062
Software (7.0%)
Intuit, Inc.	22,449	11,487,153
Microsoft Corp.	242,984	81,623,185
Oracle Corp.	248,603	29,143,730
		122,254,068
Technology services (5.1%)
Alphabet, Inc. Class A †	327,482	43,463,411
Meta Platforms, Inc. Class A †	87,640	27,922,104
Salesforce, Inc. †	80,120	18,027,801
		89,413,316

COMMON STOCKS (61.9%)* cont.	Shares	Value
Transportation (1.3%)
Canadian Pacific Kansas City, Ltd. (Canada) S	49,127	$4,042,661
FedEx Corp.	24,659	6,656,697
Southwest Airlines Co.	101,506	3,467,445
Union Pacific Corp.	39,997	9,280,104
		23,446,907
Utilities and power (1.9%)
Ameren Corp.	35,166	3,012,671
Exelon Corp.	149,324	6,250,703
NextEra Energy, Inc.	78,383	5,745,474
NRG Energy, Inc.	397,711	15,109,041
PG&E Corp. †	178,351	3,140,761
Vistra Corp.	26,512	743,927
		34,002,577
Total common stocks (cost $727,849,925)		$1,087,711,187

U.S. GOVERNMENT AND AGENCY MORTGAGE OBLIGATIONS (7.1%)*	Principal amount	Value
U.S. Government Guaranteed Mortgage Obligations (1.9%)
Government National Mortgage Association Pass-Through Certificates
5.00%, with due dates from 2/20/49 to 10/20/49	$1,249,625	$1,237,063
4.50%, with due dates from 3/20/49 to 10/20/49	360,975	349,223
4.00%, 4/15/43	1,768,625	1,685,663
3.50%, with due dates from 11/15/47 to 4/20/51	9,844,522	9,094,505
3.00%, with due dates from 7/20/46 to 11/20/46	21,807,673	19,671,403
2.00%, 1/20/51	1,692,812	1,382,431
		33,420,288
U.S. Government Agency Mortgage Obligations (5.2%)
Federal Home Loan Mortgage Corporation Pass-Through Certificates
6.00%, 3/1/35	521	531
4.50%, with due dates from 8/1/52 to 2/1/53	2,292,443	2,196,559
4.00%, with due dates from 7/1/42 to 7/1/49	2,536,274	2,414,270
3.50%, with due dates from 12/1/42 to 8/1/52	821,795	751,324
3.00%, with due dates from 3/1/43 to 2/1/47	1,019,129	909,058
2.50%, with due dates from 7/1/50 to 2/1/51	1,375,194	1,174,851
Federal National Mortgage Association Pass-Through Certificates
5.50%, with due dates from 7/1/33 to 11/1/38	634,517	641,339
5.00%, with due dates from 8/1/33 to 10/1/52	1,101,340	1,082,439
4.50%, with due dates from 5/1/48 to 1/1/53	2,238,046	2,169,807
4.00%, with due dates from 9/1/45 to 4/1/49	1,964,037	1,866,722
3.50%, 5/1/56	818,420	745,757
3.50%, with due dates from 5/1/43 to 6/1/52	5,364,290	4,928,398
3.00%, with due dates from 2/1/43 to 8/1/51	22,457,435	19,955,446
3.00%, 12/1/30	773,790	739,915
2.50%, with due dates from 7/1/50 to 7/1/51	41,570,895	35,152,891
2.50%, 2/1/36	1,772,498	1,619,919
2.00%, 10/1/50	9,487,591	7,726,621
2.00%, with due dates from 10/1/27 to 8/1/28	2,041,381	1,905,718

U.S. GOVERNMENT AND AGENCY MORTGAGE OBLIGATIONS (7.1%)* cont.	Principal amount	Value
U.S. Government Agency Mortgage Obligations cont.
Uniform Mortgage-Backed Securities
4.00%, TBA, 8/1/53	$3,000,000	$2,802,070
3.50%, TBA, 8/1/53	1,000,000	906,484
3.00%, TBA, 8/1/53	1,000,000	875,625
		90,565,744
Total U.S. government and agency mortgage obligations (cost $138,316,943)		$123,986,032

U.S. TREASURY OBLIGATIONS (14.5%)*	Principal amount	Value
U.S. Treasury Bonds
3.00%, 2/15/49	$19,930,000	$16,388,532
3.00%, 2/15/47	18,620,000	15,251,031
2.75%, 8/15/42 # ∆	31,400,000	25,306,092
1.875%, 2/15/51	12,090,000	7,764,519
1.25%, 5/15/50	5,480,000	2,987,456
U.S. Treasury Notes
4.125%, 11/15/32	9,300,000	9,407,531
2.75%, 8/15/32	15,910,000	14,443,918
2.75%, 2/15/28	6,260,000	5,877,553
2.25%, 11/15/27	7,140,000	6,572,549
1.75%, 12/31/24	11,900,000	11,340,793
1.625%, 5/15/31	18,490,000	15,608,882
1.625%, 9/30/26	23,100,000	21,184,324
1.625%, 5/15/26	13,900,000	12,841,754
1.625%, 2/15/26	26,380,000	24,465,142
1.50%, 2/15/30	18,070,000	15,412,440
1.375%, 11/15/31	8,390,000	6,864,724
1.125%, 2/28/25	31,830,000	29,913,983
0.25%, 7/31/25	15,000,000	13,688,672
Total U.S. treasury obligations (cost $287,827,138)		$255,319,895

CORPORATE BONDS AND NOTES (13.5%)*		Principal amount	Value
Basic materials (1.0%)
Cabot Corp. sr. unsec. bonds 5.00%, 6/30/32		$985,000	$941,848
Celanese US Holdings, LLC company guaranty sr. unsec. notes 6.165%, 7/15/27 (Germany)		1,480,000	1,490,583
Celanese US Holdings, LLC company guaranty sr. unsec. notes 3.50%, 5/8/24 (Germany)		289,000	283,173
Celanese US Holdings, LLC company guaranty sr. unsec. notes 1.40%, 8/5/26 (Germany)		750,000	656,095
CF Industries, Inc. company guaranty sr. unsec. bonds 4.95%, 6/1/43		1,539,000	1,332,218
CF Industries, Inc. 144A company guaranty sr. notes 4.50%, 12/1/26		76,000	73,558
FMC Corp. sr. unsec. unsub. notes 5.65%, 5/18/33		990,000	955,206
Georgia-Pacific, LLC 144A sr. unsec. sub. notes 2.10%, 4/30/27		1,525,000	1,387,940
Glencore Funding, LLC 144A company guaranty sr. unsec. notes 4.125%, 3/12/24		344,000	339,488

CORPORATE BONDS AND NOTES (13.5%)* cont.		Principal amount	Value
Basic materials cont.
Glencore Funding, LLC 144A company guaranty sr. unsec. notes 2.50%, 9/1/30		$1,998,000	$1,636,865
Huntsman International, LLC sr. unsec. notes 4.50%, 5/1/29		1,600,000	1,485,656
International Flavors & Fragrances, Inc. sr. unsec. notes 4.45%, 9/26/28		625,000	589,156
International Flavors & Fragrances, Inc. 144A company guaranty sr. unsec. bonds 3.468%, 12/1/50		204,000	135,291
International Flavors & Fragrances, Inc. 144A sr. unsec. notes 2.30%, 11/1/30		356,000	283,608
Nutrien, Ltd. sr. unsec. notes 4.00%, 12/15/26 (Canada)		1,170,000	1,124,693
Sherwin-Williams Co. (The) sr. unsec. unsub. bonds 3.45%, 6/1/27		801,000	758,263
Westlake Corp. sr. unsec. bonds 3.125%, 8/15/51		1,857,000	1,163,539
Westlake Corp. sr. unsec. bonds 2.875%, 8/15/41		928,000	614,321
WestRock MWV, LLC company guaranty sr. unsec. unsub. notes 8.20%, 1/15/30		1,040,000	1,189,301
WestRock MWV, LLC company guaranty sr. unsec. unsub. notes 7.95%, 2/15/31		187,000	211,987
Weyerhaeuser Co. sr. unsec. unsub. notes 7.375%, 3/15/32 R		156,000	176,043
			16,828,832
Capital goods (0.6%)
Berry Global Escrow Corp. 144A sr. notes 4.875%, 7/15/26		63,000	60,922
Berry Global, Inc. 144A company guaranty sr. notes 1.65%, 1/15/27		1,045,000	906,906
Berry Global, Inc. 144A company guaranty sr. notes 1.57%, 1/15/26		1,167,000	1,058,080
Boeing Co. (The) sr. unsec. notes 2.196%, 2/4/26		1,405,000	1,296,629
Boeing Co. (The) sr. unsec. unsub. bonds 3.375%, 6/15/46		310,000	217,632
L3Harris Technologies, Inc. sr. unsec. notes 3.85%, 12/15/26		1,848,000	1,764,616
L3Harris Technologies, Inc. sr. unsec. unsub. bonds 5.40%, 7/31/33		755,000	760,217
Northrop Grumman Corp. sr. unsec. unsub. notes 3.25%, 1/15/28		1,619,000	1,513,518
Oshkosh Corp. sr. unsec. unsub. notes 3.10%, 3/1/30		164,000	143,914
Raytheon Technologies Corp. sr. unsec. notes 5.15%, 2/27/33		380,000	380,241
Waste Connections, Inc. sr. unsec. bonds 4.20%, 1/15/33		325,000	303,888
Waste Connections, Inc. sr. unsec. notes 4.25%, 12/1/28		1,318,000	1,272,499
Waste Management, Inc. company guaranty sr. unsec. notes 4.875%, 2/15/29		880,000	876,676
			10,555,738
Communication services (1.2%)
American Tower Corp. sr. unsec. notes 3.125%, 1/15/27 R		1,710,000	1,578,654
American Tower Corp. sr. unsec. notes 2.90%, 1/15/30 R		921,000	792,785
American Tower Corp. sr. unsec. sub. notes 2.75%, 1/15/27 R		686,000	628,064
AT&T, Inc. company guaranty sr. unsec. unsub. notes 2.30%, 6/1/27		1,227,000	1,099,024
AT&T, Inc. sr. unsec. bonds 3.55%, 9/15/55		62,000	41,722
AT&T, Inc. sr. unsec. unsub. bonds 2.55%, 12/1/33		1,634,000	1,262,628
AT&T, Inc. sr. unsec. unsub. bonds 2.25%, 2/1/32		1,107,000	869,427
AT&T, Inc. sr. unsec. unsub. notes 4.75%, 5/15/46		106,000	90,306
Charter Communications Operating, LLC/Charter Communications Operating Capital Corp. company guaranty sr. notes 2.25%, 1/15/29		274,000	227,258
Charter Communications Operating, LLC/Charter Communications Operating Capital Corp. company guaranty sr. sub. bonds 6.484%, 10/23/45		1,055,000	984,487

CORPORATE BONDS AND NOTES (13.5%)* cont.		Principal amount	Value
Communication services cont.
Charter Communications Operating, LLC/Charter Communications Operating Capital Corp. sr. bonds 3.70%, 4/1/51		$65,000	$41,252
Comcast Corp. company guaranty sr. unsec. notes 3.45%, 2/1/50		1,618,000	1,212,849
Comcast Corp. company guaranty sr. unsec. unsub. bonds 3.999%, 11/1/49		921,000	753,080
Comcast Corp. company guaranty sr. unsec. unsub. bonds 2.35%, 1/15/27		289,000	266,096
Cox Communications, Inc. 144A sr. unsec. bonds 3.50%, 8/15/27		637,000	591,993
Crown Castle, Inc. sr. unsec. bonds 3.80%, 2/15/28 R		458,000	427,988
Crown Castle, Inc. sr. unsec. bonds 3.65%, 9/1/27 R		549,000	513,789
Crown Castle, Inc. sr. unsec. notes 4.75%, 5/15/47 R		185,000	155,873
Crown Castle, Inc. sr. unsec. sub. bonds 3.30%, 7/1/30 R		890,000	783,010
Crown Castle, Inc. sr. unsec. sub. bonds 2.25%, 1/15/31 R		1,275,000	1,036,738
Equinix, Inc. sr. unsec. sub. notes 3.20%, 11/18/29 R		1,483,000	1,306,930
Rogers Communications, Inc. company guaranty sr. unsec. bonds 8.75%, 5/1/32 (Canada)		95,000	108,505
Sprint Capital Corp. company guaranty sr. unsec. unsub. notes 6.875%, 11/15/28		506,000	536,385
T-Mobile USA, Inc. company guaranty sr. notes 3.875%, 4/15/30		48,000	44,100
T-Mobile USA, Inc. company guaranty sr. notes 3.75%, 4/15/27		1,762,000	1,671,874
T-Mobile USA, Inc. company guaranty sr. unsec. bonds 5.75%, 1/15/54		35,000	35,746
T-Mobile USA, Inc. company guaranty sr. unsec. bonds 5.05%, 7/15/33		660,000	645,704
Verizon Communications, Inc. sr. unsec. bonds 3.70%, 3/22/61		960,000	680,253
Verizon Communications, Inc. sr. unsec. notes 2.55%, 3/21/31		480,000	398,437
Verizon Communications, Inc. sr. unsec. unsub. notes 4.329%, 9/21/28		1,904,000	1,828,691
Verizon Communications, Inc. sr. unsec. unsub. notes 2.355%, 3/15/32		700,000	558,966
			21,172,614
Conglomerates (—%)
General Electric Co. jr. unsec. sub. FRN (ICE LIBOR USD 3 Month + 3.33%), 8.882%, perpetual maturity		418,000	419,034
			419,034
Consumer cyclicals (1.0%)
Alimentation Couche-Tard, Inc. 144A company guaranty sr. unsec. notes 3.55%, 7/26/27 (Canada)		995,000	926,594
Alimentation Couche-Tard, Inc. 144A sr. unsec. notes 2.95%, 1/25/30 (Canada)		919,000	786,723
Amazon.com, Inc. sr. unsec. notes 3.15%, 8/22/27		654,000	617,009
Amazon.com, Inc. sr. unsec. unsub. bonds 2.70%, 6/3/60		1,542,000	974,789
Amazon.com, Inc. sr. unsec. unsub. notes 2.10%, 5/12/31		579,000	483,781
Autonation, Inc. company guaranty sr. unsec. notes 4.50%, 10/1/25		137,000	132,570
Autonation, Inc. company guaranty sr. unsec. unsub. notes 3.80%, 11/15/27		380,000	350,562
BMW US Capital, LLC 144A company guaranty sr. unsec. notes 3.45%, 4/1/27		630,000	599,547
Booking Holdings, Inc. sr. unsec. sub. notes 4.625%, 4/13/30		1,255,000	1,230,293

CORPORATE BONDS AND NOTES (13.5%)* cont.		Principal amount	Value
Consumer cyclicals cont.
Discovery Communications, LLC company guaranty sr. unsec. unsub. notes 3.625%, 5/15/30		$27,000	$23,788
Gartner, Inc. 144A company guaranty sr. unsec. bonds 3.75%, 10/1/30		609,000	530,867
Gartner, Inc. 144A company guaranty sr. unsec. notes 3.625%, 6/15/29		141,000	124,255
Interpublic Group of Cos., Inc. (The) sr. unsec. sub. bonds 4.65%, 10/1/28		1,668,000	1,604,009
Lennar Corp. company guaranty sr. unsec. unsub. notes 4.75%, 11/29/27		1,449,000	1,411,235
Netflix, Inc. sr. unsec. unsub. notes 4.375%, 11/15/26		1,660,000	1,625,835
Netflix, Inc. 144A sr. unsec. bonds 5.375%, 11/15/29		648,000	648,930
Omnicom Group, Inc. company guaranty sr. unsec. unsub. notes 3.60%, 4/15/26		416,000	399,353
Paramount Global sr. unsec. unsub. notes 4.20%, 6/1/29		360,000	321,948
Paramount Global sr. unsec. unsub. notes 4.00%, 1/15/26		198,000	189,946
Paramount Global sr. unsec. unsub. notes 2.90%, 1/15/27		457,000	409,361
S&P Global, Inc. company guaranty sr. unsec. bonds 2.50%, 12/1/29		1,550,000	1,357,505
S&P Global, Inc. company guaranty sr. unsec. notes 1.25%, 8/15/30		423,000	332,798
Stellantis Finance US, Inc. 144A company guaranty sr. unsec. notes 1.711%, 1/29/27		800,000	702,806
ViacomCBS, Inc. sr. unsec. notes 4.20%, 5/19/32		8,000	6,656
Walt Disney Co. (The) company guaranty sr. unsec. bonds 4.75%, 9/15/44		30,000	28,016
Warnermedia Holdings, Inc. company guaranty sr. unsec. notes 3.755%, 3/15/27		2,386,000	2,233,367
			18,052,543
Consumer staples (0.6%)
Ashtead Capital, Inc. 144A company guaranty sr. unsec. notes 2.45%, 8/12/31		660,000	521,034
Ashtead Capital, Inc. 144A notes 4.375%, 8/15/27		1,155,000	1,090,725
Ashtead Capital, Inc. 144A notes 4.00%, 5/1/28		1,190,000	1,106,217
ERAC USA Finance, LLC 144A company guaranty sr. unsec. notes 7.00%, 10/15/37		1,434,000	1,642,273
ERAC USA Finance, LLC 144A company guaranty sr. unsec. notes 5.625%, 3/15/42		566,000	566,186
ERAC USA Finance, LLC 144A company guaranty sr. unsec. notes 3.85%, 11/15/24		875,000	855,073
Haleon US Capital, LLC company guaranty sr. unsec. unsub. notes 3.375%, 3/24/27		740,000	696,433
JBS USA LUX SA/JBS USA Food Co./JBS USA Finance, Inc. 144A company guaranty sr. unsec. notes 5.75%, 4/1/33		325,000	312,331
JBS USA LUX SA/JBS USA Food Co./JBS USA Finance, Inc. 144A company guaranty sr. unsec. notes 3.00%, 2/2/29		1,090,000	934,640
Kenvue, Inc. 144A company guaranty sr. unsec. notes 4.90%, 3/22/33		1,662,000	1,673,077
Kenvue, Inc. 144A company guaranty sr. unsec. unsub. bonds 5.05%, 3/22/53		300,000	301,597
Kenvue, Inc. 144A company guaranty sr. unsec. unsub. notes 5.05%, 3/22/28		253,000	255,206

CORPORATE BONDS AND NOTES (13.5%)* cont.		Principal amount	Value
Consumer staples cont.
Keurig Dr Pepper, Inc. company guaranty sr. unsec. bonds 3.20%, 5/1/30		$187,000	$166,816
Keurig Dr Pepper, Inc. company guaranty sr. unsec. unsub. notes 2.55%, 9/15/26		810,000	747,563
Kraft Heinz Foods Co. company guaranty sr. unsec. sub. notes 3.875%, 5/15/27		215,000	206,138
			11,075,309
Energy (0.6%)
BP Capital Markets America, Inc. company guaranty sr. unsec. notes 3.119%, 5/4/26		770,000	733,657
BP Capital Markets America, Inc. company guaranty sr. unsec. unsub. notes 3.937%, 9/21/28		690,000	660,668
Cheniere Corpus Christi Holdings, LLC company guaranty sr. notes 5.875%, 3/31/25		463,000	462,908
Cheniere Corpus Christi Holdings, LLC company guaranty sr. notes 5.125%, 6/30/27		808,000	799,558
Cheniere Energy Partners LP company guaranty sr. unsec. unsub. notes 3.25%, 1/31/32		522,000	434,376
Diamondback Energy, Inc. company guaranty sr. unsec. notes 3.25%, 12/1/26		780,000	735,689
Kinetik Holdings LP 144A company guaranty sr. unsec. notes 5.875%, 6/15/30		890,000	855,513
Occidental Petroleum Corp. sr. unsec. sub. notes 7.50%, 5/1/31		545,000	598,410
ONEOK, Inc. company guaranty sr. unsec. unsub. notes 6.10%, 11/15/32		1,015,000	1,036,582
Ovintiv, Inc. company guaranty sr. unsec. bonds 6.25%, 7/15/33		215,000	217,085
Ovintiv, Inc. company guaranty sr. unsec. notes 5.65%, 5/15/28		278,000	276,230
Ovintiv, Inc. company guaranty sr. unsec. notes 5.65%, 5/15/25		217,000	216,543
Sabine Pass Liquefaction, LLC sr. bonds 4.20%, 3/15/28		175,000	166,457
Sabine Pass Liquefaction, LLC sr. notes 5.00%, 3/15/27		878,000	869,601
Targa Resources Partners LP/Targa Resources Partners Finance Corp. company guaranty sr. unsec. unsub. notes 4.875%, 2/1/31		835,000	775,462
			8,838,739
Financials (4.9%)
AerCap Ireland Capital DAC/AerCap Global Aviation Trust company guaranty sr. unsec. bonds 3.30%, 1/30/32 (Ireland)		2,190,000	1,796,927
AerCap Ireland Capital DAC/AerCap Global Aviation Trust company guaranty sr. unsec. notes 4.50%, 9/15/23 (Ireland)		182,000	181,611
Air Lease Corp. sr. unsec. notes Ser. MTN, 3.00%, 2/1/30		1,625,000	1,372,915
Air Lease Corp. sr. unsec. sub. bonds 4.625%, 10/1/28		328,000	311,058
Air Lease Corp. sr. unsec. sub. notes 3.25%, 10/1/29		928,000	812,153
Ally Financial, Inc. company guaranty sr. unsec. notes 8.00%, 11/1/31		725,000	769,224
American Express Co. sr. unsec. unsub. notes 3.375%, 5/3/24		1,450,000	1,425,033
Aon PLC company guaranty sr. unsec. unsub. notes 4.25%, 12/12/42		1,265,000	1,004,354
Ares Capital Corp. sr. unsec. sub. notes 7.00%, 1/15/27		325,000	326,092
Ares Capital Corp. sr. unsec. sub. notes 3.875%, 1/15/26		1,555,000	1,452,354
Australia and New Zealand Banking Group, Ltd. 144A unsec. sub. FRB 2.57%, 11/25/35 (Australia)		920,000	703,551

CORPORATE BONDS AND NOTES (13.5%)* cont.		Principal amount	Value
Financials cont.
Australia and New Zealand Banking Group, Ltd./United Kingdom 144A jr. unsec. sub. FRB 6.75%, perpetual maturity (United Kingdom)		$200,000	$199,324
Banco Santander SA sr. unsec. unsub. FRN 1.722%, 9/14/27 (Spain)		3,800,000	3,336,098
Banco Santander SA unsec. sub. notes 5.179%, 11/19/25 (Spain)		1,200,000	1,172,805
Bank of America Corp. jr. unsec. sub. FRN Ser. AA, 6.10%, perpetual maturity		314,000	311,476
Bank of America Corp. sr. unsec. FRN Ser. MTN, 2.551%, 2/4/28		655,000	593,412
Bank of America Corp. unsec. sub. FRB 3.846%, 3/8/37		3,450,000	2,973,965
Bank of America Corp. unsec. sub. FRN (ICE LIBOR USD 3 Month + 0.76%), 6.312%, 9/15/26		275,000	271,081
Bank of America Corp. unsec. sub. notes 6.11%, 1/29/37		600,000	631,757
Bank of Montreal unsec. sub. FRN 3.803%, 12/15/32 (Canada)		390,000	345,811
Berkshire Hathaway Finance Corp. company guaranty sr. unsec. bonds 2.85%, 10/15/50		5,000	3,434
Berkshire Hathaway Finance Corp. company guaranty sr. unsec. notes 4.30%, 5/15/43		808,000	735,367
BNP Paribas SA 144A jr. unsec. sub. FRN 4.625%, perpetual maturity (France)		305,000	233,242
BNP Paribas SA 144A unsec. sub. FRB 2.588%, 8/12/35 (France)		695,000	539,029
BPCE SA 144A unsec. sub. FRB 3.648%, 1/14/37 (France)		482,000	385,172
BPCE SA 144A unsec. sub. notes 5.15%, 7/21/24 (France)		810,000	796,935
BPCE SA 144A unsec. sub. notes 4.50%, 3/15/25 (France)		1,060,000	1,022,497
Capital One Financial Corp. sr. unsec. unsub. notes 3.75%, 3/9/27		1,146,000	1,072,068
Capital One Financial Corp. unsec. sub. notes 4.20%, 10/29/25		227,000	218,544
Citigroup, Inc. jr. unsec. sub. FRN 3.875%, perpetual maturity		1,055,000	918,272
Citigroup, Inc. sr. unsec. FRB 3.668%, 7/24/28		10,000	9,334
Citigroup, Inc. sr. unsec. FRN 5.61%, 9/29/26		1,755,000	1,751,280
Citigroup, Inc. sub. unsec. bonds 6.174%, 5/25/34		303,000	307,794
Citigroup, Inc. unsec. sub. bonds 4.75%, 5/18/46		1,540,000	1,324,389
Citigroup, Inc. unsec. sub. bonds 4.45%, 9/29/27		3,039,000	2,923,193
CNO Financial Group, Inc. sr. unsec. unsub. notes 5.25%, 5/30/25		241,000	236,546
Commonwealth Bank of Australia 144A unsec. sub. notes 2.688%, 3/11/31 (Australia)		535,000	421,862
Cooperatieve Rabobank UA 144A sr. unsec. FRN 1.98%, 12/15/27 (Netherlands)		285,000	250,981
Corebridge Financial, Inc. sr. unsec. notes 3.85%, 4/5/29		765,000	701,280
Credit Agricole SA 144A unsec. sub. FRN 4.00%, 1/10/33 (France)		340,000	306,557
Credit Suisse Group AG 144A sr. unsec. bonds 3.869%, 1/12/29 (Switzerland)		443,000	404,849
Credit Suisse Group AG 144A sr. unsec. FRB 9.016%, 11/15/33 (Switzerland)		1,090,000	1,325,867
Credit Suisse Group AG 144A sr. unsec. FRN 2.193%, 6/5/26 (Switzerland)		320,000	296,778
Deutsche Bank AG/New York, NY sr. unsec. unsub. FRN 2.311%, 11/16/27 (Germany)		1,035,000	909,239
Deutsche Bank AG/New York, NY sr. unsec. unsub. FRN 2.222%, 9/18/24 (Germany)		1,315,000	1,305,920
Deutsche Bank AG/New York, NY unsec. sub. FRB 3.729%, 1/14/32 (Germany)		1,730,000	1,349,299

CORPORATE BONDS AND NOTES (13.5%)* cont.		Principal amount	Value
Financials cont.
Fairfax Financial Holdings, Ltd. sr. unsec. notes 4.85%, 4/17/28 (Canada)		$1,225,000	$1,190,479
Fairfax US, Inc. 144A company guaranty sr. unsec. notes 4.875%, 8/13/24		330,000	324,647
Fidelity National Financial, Inc. sr. unsec. bonds 3.20%, 9/17/51		573,000	341,800
Fifth Third Bancorp sr. unsec. unsub. FRN 6.339%, 7/27/29		795,000	809,464
First-Citizens Bank & Trust Co. unsec. sub. notes 6.125%, 3/9/28		1,259,000	1,259,349
Five Corners Funding Trust 144A sr. unsec. bonds 4.419%, 11/15/23		425,000	421,379
General Motors Financial Co., Inc. company guaranty sr. unsec. notes 4.00%, 10/6/26		287,000	273,124
General Motors Financial Co., Inc. company guaranty sr. unsec. unsub. notes 4.00%, 1/15/25		175,000	170,442
General Motors Financial Co., Inc. sr. unsec. notes 6.40%, 1/9/33		800,000	822,946
General Motors Financial Co., Inc. sr. unsec. notes 1.25%, 1/8/26		252,000	227,092
General Motors Financial Co., Inc. sr. unsec. sub. notes 1.50%, 6/10/26		390,000	347,555
GLP Capital LP/GLP Financing II, Inc. company guaranty sr. unsec. bonds 3.25%, 1/15/32 R		505,000	412,282
Goldman Sachs Group, Inc. (The) jr. unsec. sub. FRN 3.65%, 7/28/51		207,000	168,814
Goldman Sachs Group, Inc. (The) sr. unsec. FRB 4.223%, 5/1/29		804,000	762,451
Goldman Sachs Group, Inc. (The) sr. unsec. unsub. notes 2.60%, 2/7/30		3,535,000	3,006,664
Goldman Sachs Group, Inc. (The) sr. unsec. unsub. notes 5.70%, 11/1/24		1,470,000	1,468,196
Intercontinental Exchange, Inc. sr. unsec. bonds 2.65%, 9/15/40		963,000	678,653
Intercontinental Exchange, Inc. sr. unsec. bonds 1.85%, 9/15/32		482,000	370,759
Intercontinental Exchange, Inc. sr. unsec. notes 4.35%, 6/15/29		522,000	507,391
Intesa Sanpaolo SpA 144A unsec. sub. bonds 4.198%, 6/1/32 (Italy)		1,710,000	1,316,874
JPMorgan Chase & Co. jr. unsec. bonds 6.10%, perpetual maturity		195,000	193,946
JPMorgan Chase & Co. jr. unsec. sub. FRB Ser. HH, 4.60%, perpetual maturity		1,113,000	1,051,785
JPMorgan Chase & Co. jr. unsec. sub. FRB Ser. W, (ICE LIBOR USD 3 Month + 1.00%), 6.321%, 5/15/47		664,000	557,184
JPMorgan Chase & Co. jr. unsec. sub. FRN 3.65%, perpetual maturity		195,000	175,091
JPMorgan Chase & Co. sr. unsec. unsub. FRB 3.964%, 11/15/48		1,710,000	1,406,892
JPMorgan Chase & Co. sr. unsec. unsub. FRN 3.782%, 2/1/28		2,088,000	1,979,127
KKR Group Finance Co. VI, LLC 144A company guaranty sr. unsec. bonds 3.75%, 7/1/29		105,000	95,517
Lloyds Banking Group PLC unsec. sub. FRB 3.369%, 12/14/46 (United Kingdom)		735,000	494,850
Lloyds Banking Group PLC unsec. sub. notes 4.65%, 3/24/26 (United Kingdom)		315,000	303,657
Marsh & McLennan Cos., Inc. sr. unsec. sub. notes 4.375%, 3/15/29		1,422,000	1,388,881
Massachusetts Mutual Life Insurance Co. 144A unsec. sub. bonds 3.729%, 10/15/70		1,457,000	977,247
MetLife Capital Trust IV 144A jr. unsec. sub. notes 7.875%, 12/15/37		2,564,000	2,682,011
Morgan Stanley unsec. sub. notes Ser. GMTN, 4.35%, 9/8/26		3,409,000	3,294,155
Nasdaq, Inc. sr. unsec. bonds 5.95%, 8/15/53		208,000	212,214
Nasdaq, Inc. sr. unsec. sub. bonds 5.55%, 2/15/34		187,000	188,681

CORPORATE BONDS AND NOTES (13.5%)* cont.		Principal amount	Value
Financials cont.
NatWest Group PLC sr. unsec. unsub. FRN 5.847%, 3/2/27 (United Kingdom)		$790,000	$784,546
PNC Financial Services Group, Inc. (The) unsec. sub. FRB 4.626%, 6/6/33		2,855,000	2,614,322
Prologis LP sr. unsec. unsub. notes 2.25%, 4/15/30 R		467,000	396,208
Prologis LP sr. unsec. unsub. notes 2.125%, 4/15/27 R		194,000	175,293
Royal Bank of Canada sr. unsec. notes Ser. GMTN, 5.20%, 8/1/28 (Canada)		1,950,000	1,946,995
Royal Bank of Canada unsec. sub. notes Ser. GMTN, 4.65%, 1/27/26 (Canada)		322,000	315,984
Societe Generale SA 144A jr. unsec. sub. notes 5.375%, perpetual maturity (France)		1,180,000	941,168
Sumitomo Mitsui Financial Group, Inc. 144A unsec. sub. bonds 4.436%, 4/2/24 (Japan)		412,000	407,003
Teachers Insurance & Annuity Association of America 144A unsec. sub. notes 6.85%, 12/16/39		263,000	291,732
Toronto-Dominion Bank (The) sr. unsec. notes 4.108%, 6/8/27 (Canada)		734,000	705,159
UBS AG unsec. sub. notes 5.125%, 5/15/24 (Switzerland)		2,640,000	2,605,073
US Bancorp unsec. sub. FRB 2.491%, 11/3/36		1,815,000	1,366,438
VICI Properties LP sr. unsec. unsub. notes 4.75%, 2/15/28 R		760,000	724,487
VICI Properties LP/VICI Note Co., Inc. 144A company guaranty sr. unsec. notes 3.75%, 2/15/27 R		285,000	263,111
Wells Fargo & Co. jr. unsec. sub. FRN 3.90%, perpetual maturity		610,000	548,512
Wells Fargo Bank, NA unsec. sub. notes Ser. BKNT, 6.60%, 1/15/38		1,095,000	1,193,944
Westpac Banking Corp. unsec. sub. bonds 4.421%, 7/24/39 (Australia)		670,000	553,452
Westpac Banking Corp. unsec. sub. bonds 2.963%, 11/16/40 (Australia)		597,000	396,658
			85,852,413
Health care (1.1%)
Amgen, Inc. sr. unsec. bonds 4.663%, 6/15/51		710,000	625,860
Amgen, Inc. sr. unsec. unsub. bonds 5.75%, 3/2/63		755,000	758,927
Amgen, Inc. sr. unsec. unsub. bonds 5.65%, 3/2/53		358,000	358,599
Amgen, Inc. sr. unsec. unsub. notes 5.25%, 3/2/30		726,000	727,410
Amgen, Inc. sr. unsec. unsub. notes 2.60%, 8/19/26		273,000	253,774
Becton, Dickinson and Co. sr. unsec. notes 2.823%, 5/20/30		820,000	715,943
CVS Pass-Through Trust 144A sr. mtge. notes 7.507%, 1/10/32		433,150	451,121
CVS Pass-Through Trust 144A sr. mtge. notes 4.704%, 1/10/36		482,517	447,680
DH Europe Finance II SARL company guaranty sr. unsec. notes 2.60%, 11/15/29 (Luxembourg)		600,000	531,587
Eli Lilly and Co. sr. unsec. unsub. bonds 4.875%, 2/27/53		445,000	450,143
GE Healthcare Holding, LLC company guaranty sr. unsec. notes 5.65%, 11/15/27		675,000	688,166
HCA, Inc. company guaranty sr. bonds 5.25%, 6/15/26		143,000	141,710
HCA, Inc. company guaranty sr. unsec. notes 5.375%, 9/1/26		458,000	456,751
HCA, Inc. company guaranty sr. unsec. unsub. notes 5.375%, 2/1/25		475,000	472,184
HCA, Inc. 144A company guaranty sr. unsec. sub. notes 3.625%, 3/15/32		275,000	238,968

CORPORATE BONDS AND NOTES (13.5%)* cont.		Principal amount	Value
Health care cont.
Humana, Inc. sr. unsec. unsub. bonds 5.50%, 3/15/53		$235,000	$232,369
Humana, Inc. sr. unsec. unsub. notes 5.75%, 3/1/28		1,025,000	1,046,229
Pfizer Investment Enterprises PTE, Ltd. company guaranty sr. unsec. notes 5.30%, 5/19/53 (Singapore)		703,000	722,358
Pfizer Investment Enterprises PTE, Ltd. company guaranty sr. unsec. notes 4.75%, 5/19/33 (Singapore)		687,000	682,458
Pfizer Investment Enterprises PTE, Ltd. company guaranty sr. unsec. notes 4.45%, 5/19/28 (Singapore)		985,000	968,373
Service Corp. International sr. unsec. notes 4.625%, 12/15/27		185,000	175,288
Service Corp. International sr. unsec. notes 3.375%, 8/15/30		165,000	137,575
Service Corp. International sr. unsec. sub. notes 4.00%, 5/15/31		1,335,000	1,138,088
Thermo Fisher Scientific, Inc. sr. unsec. notes 4.80%, 11/21/27		1,650,000	1,661,226
UnitedHealth Group, Inc. sr. unsec. notes 2.95%, 10/15/27		1,450,000	1,348,554
UnitedHealth Group, Inc. sr. unsec. unsub. notes 5.25%, 2/15/28		1,855,000	1,897,875
Viatris, Inc. company guaranty sr. unsec. notes 2.30%, 6/22/27		565,000	496,825
Zoetis, Inc. sr. unsec. notes 3.90%, 8/20/28		1,210,000	1,162,858
Zoetis, Inc. sr. unsec. sub. notes 2.00%, 5/15/30		306,000	254,371
			19,243,270
Technology (1.1%)
Alphabet, Inc. sr. unsec. bonds 2.25%, 8/15/60		1,200,000	725,864
Alphabet, Inc. sr. unsec. notes 1.998%, 8/15/26		748,000	692,856
Apple, Inc. sr. unsec. bonds 4.85%, 5/10/53		1,124,000	1,144,740
Apple, Inc. sr. unsec. notes 4.30%, 5/10/33		936,000	930,939
Apple, Inc. sr. unsec. notes 1.65%, 5/11/30		15,000	12,587
Apple, Inc. sr. unsec. unsub. notes 4.375%, 5/13/45		342,000	321,928
Apple, Inc. sr. unsec. unsub. notes 3.85%, 5/4/43		486,000	431,684
Broadcom, Inc. company guaranty sr. unsec. bonds 4.15%, 11/15/30		1,119,000	1,028,762
Broadcom, Inc. 144A sr. unsec. bonds 4.926%, 5/15/37		1,515,000	1,376,578
Broadcom, Inc. 144A sr. unsec. bonds 3.187%, 11/15/36		676,000	511,153
Dell International, LLC/EMC Corp. company guaranty sr. bonds 8.35%, 7/15/46		67,000	84,044
Fidelity National Information Services, Inc. sr. unsec. bonds 3.10%, 3/1/41		319,000	227,211
Fidelity National Information Services, Inc. sr. unsec. notes 2.25%, 3/1/31		163,000	133,038
Fidelity National Information Services, Inc. sr. unsec. unsub. notes 5.10%, 7/15/32		271,000	268,720
Meta Platforms, Inc. sr. unsec. bonds 5.60%, 5/15/53		1,476,000	1,519,818
Meta Platforms, Inc. sr. unsec. notes 4.95%, 5/15/33		531,000	534,716
Meta Platforms, Inc. sr. unsec. unsub. bonds 4.45%, 8/15/52		856,000	746,782
Meta Platforms, Inc. sr. unsec. unsub. notes 3.50%, 8/15/27		474,000	452,776
Microsoft Corp. sr. unsec. unsub. bonds 2.921%, 3/17/52		1,150,000	840,130
MSCI, Inc. 144A company guaranty sr. unsec. notes 3.625%, 9/1/30		328,000	287,273
Oracle Corp. sr. unsec. bonds 3.95%, 3/25/51		435,000	326,602
Oracle Corp. sr. unsec. bonds 3.65%, 3/25/41		1,750,000	1,349,456
Oracle Corp. sr. unsec. notes 1.65%, 3/25/26		1,385,000	1,263,725
salesforce.com, Inc. sr. unsec. bonds 3.05%, 7/15/61		553,000	369,361
salesforce.com, Inc. sr. unsec. bonds 2.90%, 7/15/51		1,462,000	1,009,831

CORPORATE BONDS AND NOTES (13.5%)* cont.		Principal amount	Value
Technology cont.
Sensata Technologies, Inc. 144A company guaranty sr. unsec. notes 3.75%, 2/15/31		$1,310,000	$1,106,399
ServiceNow, Inc. sr. unsec. notes 1.40%, 9/1/30		1,520,000	1,205,515
			18,902,488
Transportation (0.1%)
Penske Truck Leasing Co. LP/PTL Finance Corp. 144A sr. unsec. bonds 3.40%, 11/15/26		595,000	550,224
Penske Truck Leasing Co. LP/PTL Finance Corp. 144A sr. unsec. notes 4.40%, 7/1/27		2,165,000	2,052,269
			2,602,493
Utilities and power (1.3%)
AES Corp. (The) sr. unsec. unsub. notes 2.45%, 1/15/31		1,045,000	851,919
American Electric Power Co., Inc. sr. unsec. unsub. bonds 5.625%, 3/1/33		330,000	335,290
American Electric Power Co., Inc. sr. unsec. unsub. notes Ser. J, 4.30%, 12/1/28		528,000	506,364
American Transmission Systems, Inc. 144A sr. unsec. bonds 2.65%, 1/15/32		385,000	319,524
Appalachian Power Co. sr. unsec. unsub. notes Ser. L, 5.80%, 10/1/35		560,000	560,007
Boardwalk Pipelines LP company guaranty sr. unsec. notes 3.60%, 9/1/32		264,000	225,141
Commonwealth Edison Co. sr. mtge. bonds 5.875%, 2/1/33		610,000	635,700
Consolidated Edison Co. of New York, Inc. sr. unsec. unsub. notes 4.20%, 3/15/42		255,000	215,664
Duke Energy Carolinas, LLC sr. mtge. notes 4.25%, 12/15/41		520,000	445,375
Duke Energy Ohio, Inc. sr. bonds 3.65%, 2/1/29		280,000	263,123
El Paso Natural Gas Co., LLC company guaranty sr. unsec. unsub. notes 8.375%, 6/15/32		490,000	561,316
Enbridge, Inc. sr. unsec. unsub. bonds 4.25%, 12/1/26 (Canada)		416,000	402,566
Energy Transfer LP jr. unsec. sub. FRN 6.625%, perpetual maturity		2,076,000	1,645,230
Energy Transfer LP sr. unsec. unsub. notes 7.60%, 2/1/24		470,000	471,686
Energy Transfer LP sr. unsec. unsub. notes 6.50%, 2/1/42		137,000	139,364
Enterprise Products Operating, LLC company guaranty sr. unsec. notes 2.80%, 1/31/30		1,704,000	1,494,170
Enterprise Products Operating, LLC company guaranty sr. unsec. unsub. bonds 4.25%, 2/15/48		560,000	470,291
Eversource Energy sr. unsec. unsub. notes 5.45%, 3/1/28		465,000	471,624
Eversource Energy sr. unsec. unsub. notes 5.125%, 5/15/33		1,095,000	1,079,460
Georgia Power Co. sr. unsec. unsub. notes 4.95%, 5/17/33		920,000	906,471
IPALCO Enterprises, Inc. sr. notes 4.25%, 5/1/30		813,000	740,871
IPALCO Enterprises, Inc. sr. sub. notes 3.70%, 9/1/24		340,000	331,126
Kinder Morgan Energy Partners LP company guaranty sr. unsec. notes 5.40%, 9/1/44		199,000	177,292
Kinder Morgan, Inc. company guaranty sr. unsec. unsub. bonds 5.20%, 6/1/33		215,000	209,965
NextEra Energy Capital Holdings, Inc. company guaranty sr. unsec. unsub. notes 6.051%, 3/1/25		865,000	871,273
NRG Energy, Inc. 144A company guaranty sr. notes 3.75%, 6/15/24		620,000	604,949
NRG Energy, Inc. 144A sr. notes 2.45%, 12/2/27		900,000	763,885

CORPORATE BONDS AND NOTES (13.5%)* cont.		Principal amount	Value
Utilities and power cont.
Oncor Electric Delivery Co., LLC sr. notes 5.75%, 3/15/29		$445,000	$461,009
Oncor Electric Delivery Co., LLC 144A sr. bonds 4.95%, 9/15/52		875,000	836,857
Pacific Gas and Electric Co. notes 2.10%, 8/1/27		235,000	202,591
Pacific Gas and Electric Co. sr. bonds 5.90%, 6/15/32		536,000	519,633
Pacific Gas and Electric Co. sr. bonds 4.95%, 7/1/50		565,000	451,841
Pacific Gas and Electric Co. sr. notes 3.30%, 12/1/27		1,050,000	934,500
PacifiCorp sr. bonds 2.70%, 9/15/30		656,000	550,383
Puget Sound Energy, Inc. sr. bonds 5.448%, 6/1/53		570,000	577,261
Sempra Energy sr. unsec. unsub. bonds 5.50%, 8/1/33		630,000	629,851
Vistra Operations Co., LLC 144A company guaranty sr. notes 4.30%, 7/15/29		442,000	394,105
Vistra Operations Co., LLC 144A company guaranty sr. notes 3.55%, 7/15/24		523,000	508,274
WEC Energy Group, Inc. jr. unsec. sub. FRN Ser. A, (ICE LIBOR USD 3 Month + 2.11%), 7.433%, 5/15/67		1,945,000	1,668,810
			23,434,761
Total corporate bonds and notes (cost $260,541,609)			$236,978,234

MORTGAGE-BACKED SECURITIES (0.7%)*		Principal amount	Value
Benchmark Mortgage Trust Ser. 19-B12, Class A5, 3.116%, 8/15/52		$261,000	$229,438
Citigroup Commercial Mortgage Trust
Ser. 14-GC21, Class C, 4.78%, 5/10/47 W		508,000	445,319
Ser. 18-B2, Class A4, 4.009%, 3/10/51		1,749,000	1,614,779
COMM Mortgage Trust
FRB Ser. 12-LC4, Class C, 5.30%, 12/10/44 W		241,000	204,850
FRB Ser. 14-CR18, Class C, 4.735%, 7/15/47 W		2,392,000	2,270,606
CSAIL Commercial Mortgage Trust Ser. 19-C17, Class AS, 3.278%, 9/15/52		1,066,000	893,625
Eagle Re, Ltd. 144A FRB Ser. 18-1, Class M1, (ICE LIBOR USD 1 Month + 1.70%), 6.85%, 11/25/28 (Bermuda)		261,538	267,335
Federal National Mortgage Association
Connecticut Avenue Securities FRB Ser. 16-C01, Class 1M2, (US 30 Day Average SOFR + 6.75%), 11.933%, 8/25/28		210,855	226,395
Connecticut Avenue Securities FRB Ser. 17-C01, Class 1EB1, (US 30 Day Average SOFR + 1.25%), 6.433%, 7/25/29		34,551	34,558
REMICs Ser. 01-79, Class BI, IO, 0.238%, 3/25/45 W		239,525	599
FIRSTPLUS Home Loan Owner Trust Ser. 97-3, Class B1, 7.79%, 11/10/23 (In default) †		194,241	19
JPMorgan Chase Commercial Mortgage Securities Trust FRB Ser. 12-C6, Class D, 4.964%, 5/15/45 W		616,602	565,609
Morgan Stanley Bank of America Merrill Lynch Trust Ser. 16-C28, Class A4, 3.544%, 1/15/49		3,360,000	3,132,405
Morgan Stanley Capital I Trust Ser. 18-L1, Class A4, 4.407%, 10/15/51 W		2,264,000	2,141,401
Morgan Stanley Capital I Trust 144A FRB Ser. 12-C4, Class D, 5.164%, 3/15/45 W		474,857	437,133
TIAA Real Estate CDO, Ltd. 144A Ser. 03-1A, Class E, 8.00%, 12/28/38 (In default) †		2,032,334	20
Total mortgage-backed securities (cost $15,147,923)			$12,464,091