UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
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Investment Company Act file number: (811- 00058)
Exact name of registrant as specified in charter: The George Putnam Fund of Boston
Address of principal executive offices: One Post Office Square, Boston, Massachusetts 02109
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| Name and address of agent for service: | Beth S. Mazor, Vice President |
| | One Post Office Square |
| | Boston, Massachusetts 02109 |
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| Copy to: | John W. Gerstmayr, Esq. |
| | Ropes & Gray LLP |
| | One International Place |
| | Boston, Massachusetts 02110 |
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| Registrant’s telephone number, including area code: | (617) 292-1000 |
Date of fiscal year end: July 31, 2006
Date of reporting period: August 1, 2005—July 31, 2006
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Item 1. Report to Stockholders:
The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
What makes Putnam different?
In 1830, Massachusetts Supreme Judicial Court Justice Samuel Putnam established The Prudent Man Rule, a legal foundation for responsible money management.
THE PRUDENT MAN RULE
All that can be required of a trustee to invest is that he shall conduct himself faithfully and exercise a sound discretion. He is to observe how men of prudence, discretion, and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested.
A time-honored tradition
in money management |
Since 1937, our values have been rooted in a profound sense of responsibility for the money entrusted to us.
A prudent approach to investing
We use a research-driven team approach to seek consistent, dependable, superior investment results over time, although there is no guarantee a fund will meet its objectives.
Funds for every investment goal
We offer a broad range of mutual funds and other financial products so investors and their financial representatives can build diversified portfolios.
A commitment to doing
what’s right for investors |
We have below-average expenses and stringent investor protections, and provide a wealth of information about the Putnam funds.
Industry-leading service
We help investors, along with their financial representatives, make informed investment decisions with confidence.
The George
Putnam Fund
of Boston |
| Message from the Trustees | 2 |
| About the fund | 4 |
| Report from the fund managers | 7 |
| Performance | 14 |
| Expenses | 17 |
| Portfolio turnover | 19 |
| Risk | 20 |
| Your fund’s management | 21 |
| Terms and definitions | 24 |
| Trustee approval of management contract | 26 |
| Other information for shareholders | 31 |
| Financial statements | 32 |
| Federal tax information | 94 |
| Brokerage commissions | 95 |
| About the Trustees | 96 |
| Officers | 102 |
Cover photograph: © White-Packert Photography
Message from the Trustees
Dear Fellow Shareholder
Over the last three months of your fund’s reporting period, investors were particularly preoccupied with the course of the economy. Beginning in May, a more pessimistic outlook pervaded the markets as leading economic indicators began to warn of slower growth and the Federal Reserve (the Fed) continued its series of interest-rate increases. The resulting correction undercut much of the progress that markets had achieved in the previous three months of the period.
However, we believe that today’s higher interest rates, far from being a threat to global economic fundamentals, are in fact an integral part of them. Economic growth may, indeed, be slowing somewhat as a result of the higher rates, but we consider this a typical development for the middle of an economic cycle, and one that could help provide the basis for a longer and more durable business expansion and a continued healthy investment environment. The recent correction brought valuations back to attractive levels, creating opportunities in a wide array of markets and sectors. Furthermore, since the Fed paused in its tightening cycle shortly after the close of the reporting period, the market atmosphere has gradually become more optimistic. Putnam Investments’ management team, under the leadership of Chief Executive Officer Ed Haldeman, continues to focus on investment performance, and the investment professionals managing your fund have been working to take advantage of the opportunities presented by this environment.
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We would like to take this opportunity to announce the retirement of one of your fund’s Trustees, John Mullin, an independent Trustee of the Putnam funds since 1997. We thank him for his service.
In the following pages, members of your fund’s management team discuss the fund’s performance and strategies for the fiscal period ended July 31, 2006, and provide their outlook for the months ahead. As always, we thank you for your support of the Putnam funds.
Respectfully yours,
The George Putnam Fund of Boston: providing the
benefits of balanced investing for nearly 70 years |
Your fund launched in 1937 when George Putnam, a Boston investment manager, decided to start a fund with an innovative approach — a balance of stocks to seek capital appreciation and bonds to help provide current income. The original portfolio featured industrial stocks, such as U.S. Smelting, Refining, & Mining Co., and railroad bonds.
This balanced approach made sense then, and we believe it continues to make sense now. In the late 1930s, the stock market experienced dramatic swings as businesses struggled to recover from the Great Depression and as the shadow of war began to spread across Europe and Asia. Today, global political and economic uncertainties also challenge investors.
Although the fund has experienced volatility at times, its balanced approach has kept it on course. When stocks were weak, the fund’s bonds helped results. Similarly, stocks have often provided leadership when bonds were hurt by rising interest rates or inflation.
In a letter to shareholders dated July 12, 1938, George Putnam articulated the balanced strategy: “Successful investing calls not so much for some clairvoyant ability to read the future as for the courage to stick to tested, common sense policies in the face of the unreliable emotional stresses and strains that constantly sweep the market place.” Putnam remains committed to this prudent approach to investing today.
The George Putnam Fund of Boston seeks to provide a balanced investment composed of a well-diversified portfolio of stocks and bonds that produce both capital growth and current income. The fund targets attractively priced stocks of large, established companies that the management team believes are poised to experience positive change and improved financial performance. The bond portion is a diversified mix of mainly investment-grade securities. The fund may be appropriate for investors seeking current income and long-term growth from a balanced investment.
Highlights
• For the 12 months ended July 31, 2006, The George Putnam Fund of Boston’s class A shares returned 3.89% without sales charges.
• The fund’s new equity benchmark — the S&P 500/Citigroup Value Index, discussed below —returned 11.70% during the period, and the fund’s bond benchmark, the Lehman Aggregate Bond Index, returned 1.46% .
• The fund’s custom-blended benchmark, which includes a stock and a bond index and is intended to provide a suitable performance target for a balanced fund, changed during the period. It had been made up of 60% S&P 500/Barra Value Index and 40% Lehman Aggregate Bond Index. Effective April 1, 2006, the S&P 500/Citigroup Value Index replaced the S&P 500/Barra Value Index. See the “Of Special Interest” section on page 12 for more information.
• The one-year return of the custom-blended benchmark that reflects the former equity benchmark through March 31, 2006, and the new equity benchmark starting April 1, 2006, is 6.86% .
• Had the S&P 500/Citigroup Value Index been the equity benchmark for the entire year, the one-year return of the custom-blended benchmark would be 7.66% .
• The average return for the fund’s Lipper category, Balanced Funds, was 4.30% for the period.
• Additional fund performance, comparative performance, and Lipper data can be found in the performance section beginning on page 14.
Performance (Total return for class A shares for periods ended 7/31/06)
Since the fund’s inception (11/5/37), average annual return is 9.34% at NAV and 9.25% at POP.
| | Average annual return | Cumulative return |
| | NAV | POP | NAV | POP |
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| 10 years | 7.45% | 6.87% | 105.10% | 94.29% |
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| 5 years | 4.18 | 3.05 | 22.70 | 16.22 |
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| 3 years | 8.14 | 6.21 | 26.45 | 19.82 |
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| 1 year | 3.89 | –1.57 | 3.89 | –1.57 |
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Data is historical. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance assumes reinvestment of distributions and does not account for taxes. Returns at NAV do not reflect a sales charge of 5.25% . For the most recent month-end performance, visit www.putnam.com. For a portion of the period, this fund limited expenses, without which returns would have been lower. A short-term trading fee of up to 2% may apply.
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Report from the fund managers
The year in review |
In an environment of increased market volatility and weakened consumer spending, your fund generated modest returns for its 2006 fiscal year. The portfolio’s emphasis on larger-capitalization value stocks proved effective as these stocks generally outperformed smaller-capitalization stocks and growth stocks. The fund benefited from effective weightings and stock selection within the basic materials, transportation, and energy sectors. However, the fund underperformed its custom-blended benchmark, due in part to our stock selection within the communications services, financial, and health-care sectors. We continue to believe the performance of these stocks is likely to improve in the fund’s 2007 fiscal year. While the fund underperformed the average for its category, Lipper Balanced Funds, for the fiscal year, it performed in the top quartile of this same Lipper peer group for the six months ended July 31, 2006, and its results were above the median for the three- and five-year periods. The fund’s bond portfolio outperformed its benchmark and helped stabilize fund returns. Our emphasis on asset-backed and collateralized mortgage-backed securities (ABSs and CMBSs, respectively) provided a relative advantage, as did the portfolio’s shorter duration, which means it had a reduced sensitivity to changes in interest rates.
Market overview
Volatility in U.S. financial markets increased during the second six months of the fund’s 2006 fiscal year. Americans weary of the ongoing war in Iraq were also concerned about the nuclear ambitions of North Korea and Iran and an escalation of violence in the Middle East. In addition, consumers felt the pinch of higher energy costs as well as higher borrowing costs as the Fed raised short-term interest rates incrementally. At the end of the period, the federal funds rate — the rate at which banks make overnight loans to other banks, which the Fed has authority to set — stood at 5.25%, a full two percentage points higher than a year earlier. Yields on two-year Treasury
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notes rose more than yields on 10-year Treasury bonds and, as a result, the yield curve, a graphical representation of interest rates across all bond maturities, flattened. For the full period, stocks outperformed bonds, although stocks and bonds had similar performance in the latter half of the fiscal year. Large-cap stocks slightly outperformed small caps. Value stocks continued to outperform growth stocks by a very wide margin. For example, the large-cap Russell 1000 Value Index returned 11.59%, while the Russell 1000 Growth Index fell –0.76% . However, most domestic equity and bond indexes posted single-digit returns, which signaled a slower-growth environment. Against this backdrop, higher-yielding stocks outperformed those with lower yields as investors sought dividends to enhance their returns. The market’s strongest-performing sectors in the most recent six months were defensive sectors: communications services, consumer s taples, and utilities. We believe this reflected investors’ sense of uncertainty and desire for safer havens. The weakest sectors included technology, transportation, and basic materials.
Strategy overview
In the first half of the fiscal year, we increased the fund’s allocation to fixed-income investments. This reflected our belief that the Fed would soon stop raising short-term interest rates.
Market sector performance
These indexes provide an overview of performance in different market sectors for the 12 months
ended 7/31/06. |
| Equities | |
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| S&P 500/Citigroup Value Index (large-company value stocks) | 11.70% |
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| Russell 1000 Growth Index (large-company growth stocks) | –0.76% |
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| Russell 1000 Index (large-company stocks) | 5.23% |
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| Russell 2000 Index (small-company stocks) | 4.24% |
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| Bonds | |
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| Lehman Aggregate Bond Index (broad bond market) | 1.46% |
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| JP Morgan Global High Yield Index (global high-yield corporate bonds) | 4.64% |
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| Lehman Government Bond Index (U.S. Treasury and agency securities) | 1.24% |
|
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Historically, bond prices have rallied when a period of restrictive monetary policy comes to an end and the Fed adopts a more neutral stance.
The portfolio remained positioned to benefit from increased corporate capital spending and a fall-off in consumer spending. Indeed, we have seen a decline in consumer discretionary spending because energy costs and variable-rate loans and credit lines require more of the consumers’ monthly cash flow.
Our stock selection proved most effective within the sectors that under-performed during the period, including basic materials and transportation. In comparison to its equity benchmark, the fund’s underweight position in Dow Chemical and overweight position in Freeport-McMoRan Copper & Gold were helpful. The fund also benefited from underweighting railroad stocks, as railroads experienced a decline in shipments resulting from weaker
Portfolio composition comparison
This chart shows how the fund’s weightings have changed over the last six months. Weightings
are shown as a percentage of net assets. Holdings will vary over time. |
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consumer spending. Within the energy sector, the fund’s underweight position in ExxonMobil and overweighting of both Cameron International and Apache helped relative returns. However, our stock selection within communications services detracted from results. The fund did not own AT&T or BellSouth, which rallied on news that AT&T would acquire BellSouth. Within the financial sector, an overweight to Ace Limited and an underweight position in brokerage companies hindered performance.
Relative to the bond benchmark, the fund benefited from overweight positions in ABSs and collateralized CMBSs. Overall, security selection was a positive factor, as was our strategic positioning to take advantage of a flattening yield curve.
In addition, the fund’s shorter duration helped protect the value of the portfolio in a period of rising interest rates, since bond prices move in the opposite direction of interest rates. Combined, these strategies helped the bond portfolio outperform its benchmark, the Lehman Aggregate Bond Index, during the period.
Your fund’s holdings
Stocks that helped fund performance during the period included Freeport-McMoRan Copper & Gold, Comcast, and Lockheed Martin. Freeport is one of the largest mining companies in the world, and it benefited during the period from news that a competing mine had significantly smaller copper reserves than had been previously
Top equity holdings
This table shows the fund's top holdings, and the percentage of the fund’s net assets that each
comprised, as of 7/31/06. The fund’s holdings will change over time. |
| Holding (percent of fund’s net assets) | Industry |
|
| Citigroup, Inc. (2.7%) | Banking |
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| Bank of America Corp. (2.5%) | Banking |
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| The Goldman Sachs Group, Inc. (1.7%) | Investment banking/brokerage |
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| Exxon Mobil Corp. (1.6%) | Oil and gas |
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| Verizon Communications, Inc. (1.3%) | Regional Bells |
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| Hewlett-Packard Co. (1.3%) | Computers |
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| Morgan Stanley (1.2%) | Investment banking/brokerage |
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| JPMorgan Chase & Co. (1.2%) | Financial |
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| General Electric Co. (1.2%) | Conglomerates |
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| Wells Fargo & Co. (1.2%) | Banking |
|
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thought. In addition, in the early part of the fiscal period, copper prices had escalated to such a degree that investors sold many of the copper stocks, believing the strength in these issues was unsustainable. However, our analysis suggested that the demand for copper and the current supply level would support higher valuations. This hypothesis proved correct when shares of Freeport, among others, bounced back. Demand from China for all metals and building materials remains strong, and we believe the long-term prospects for Freeport are attractive.
Lockheed continued to be a strong contributor to fund returns. Defense companies, in general, perform well when the U.S. military is actively engaged in various theatres throughout the world. We believe the company has exceptionally able management, and we expect to maintain this position.
As new technologies develop, the services provided by cable companies and phone companies are converging. Cable companies are delving into voice-over-Internet protocol (VoIP) phone service, while phone companies are increasingly developing video technology. The fund had an overweight position in cable provider Comcast. We believed that Comcast would bring its phone services to market sooner, thus putting the regional Bells at a competitive disadvantage. Comcast has since rolled out its VoIP service and has gotten a more positive response than many had expected. We have sold a portion of the fund’s holdings to lock in gains, but are maintaining a position.
Detractors from fund performance for the period included our position in Dell Computer and not owning BellSouth. Dell’s business model is different from that of its competitors. The company sells directly to consumers by mail, and has no retail stores. This distribution strategy is more cost effective and provides a competitive edge. However, shares of Dell fell on news of problems with customer service. Also, sales of the company’s laptops lagged behind competitors’ products. Despite these difficulties, we are encouraged by recent improvements in customer service and by the array of new products Dell will introduce this fall. We have taken the opportunity to increase the fund’s position in Dell.
Relative to the benchmark, the fund avoided BellSouth and AT&T, because we believed the fundamentals for the regional Bell operating companies (RBOCs) are poor. These companies face a variety of obstacles that are stifling growth and profitability. More people are using cell phones rather than landlines for long-distance calls. A large group of companies are vying for consumer dollars earmarked for phone, video, and wireless services. As mentioned above, these services are starting to converge, and in our view, cable companies have the advantage. The competition is so tough that RBOCs cannot command the prices they want for their services. Furthermore, keeping up with new technology is a tremendous expense for the RBOCs.
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Despite these negative fundamentals, the market embraced the news in March 2006 that AT&T would acquire BellSouth. The stock rose as post-acquisition cost-cutting measures proved more effective than anticipated. Although we missed the opportunity to participate in this rally, we are convinced that the longer-term fundamentals for RBOCs warrant caution, and we plan to maintain the fund’s underweight to this part of the telecommunications sector.
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.
Of special interest
On April 1, 2006, the fund’s equity benchmark, the S&P 500/Barra Value Index, was discontinued. The fund’s new benchmark, the S&P 500/Citigroup Value Index, was selected for its similarity to the former benchmark and its appropriateness as a benchmark for your fund’s equity portfolio. Our discussion of investment decisions in this report reflects this change during the period.
Additionally, the fund’s distribution for November 2005 included an extra one-time distribution of income. For class A shares, this amounted to $0.1010 per share; similar amounts were included in the distributions for other share classes.
The outlook for your fund
The following commentary reflects anticipated developments that could affect your fund over the next six months, as well as your management team’s plans for responding to them.
For several months, the fund has been positioned to benefit from a slackening in consumer spending and an increase in capital spending. This strategy has panned out, as many of the retail stocks directly related to consumer spending had weakened in the latter half of the fund’s fiscal year. Gasoline and electricity prices are up, consumer debt levels are up, adjustable-rate mortgages are rising, and the housing market is slowing. All of these factors have led consumer stocks to weaken. In contrast, corporate balance sheets are healthy, businesses are enjoying very strong cash flows, inventory levels are appropriate, and orders remain robust. Although businesses have faced rising costs for raw materials, many have been able to pass these costs on to consumers. Recently, this strategy has met some resistance, as consumers are tightening their belts.
After three years of strong returns both domestically and abroad from stocks and bonds, we believe we are heading into a period of lower returns. Despite this somewhat lukewarm outlook, a low-return environment is typically favorable for your fund, which emphasizes equity yields and also typically invests 40% of the overall portfolio in bonds. In periods of uncertainty and heightened volatility, investors often prefer larger-cap, value-oriented stocks — the mainstay of your fund — and bonds, which offer steady income. We are looking for opportunities to build positions in stocks that have become especially cheap, particularly in the consumer sector.
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We will focus on those securities that we believe have been undervalued by the markets and that have more potential than is reflected by their current price. We will also emphasize equity yields as we strive to provide an attractive return for shareholders.
Although the Fed paused in its series of interest-rate increases shortly after the close of the period, we have not ruled out the possibility that further rate increases will occur should infla-tionary pressures swell. We also believe that short-term interest rates are poised to rise globally as other central banks around the world address inflationary pressures. For the fund’s bond portfolio, we favor opportunities within the securitized universe, such as ABSs and CMBSs. The portfolio remains underweighted in corporate bonds, and we have moderated the fund’s shorter-duration posture and positioned for a steeper yield curve. We continue to maintain a high-quality bond portfolio that is defensively positioned against potential underperformance of corporate bonds. As always, we pursue opportunities for higher levels of income, while adhering to our conservative, disciplined, and balanced investment approach.
The views expressed in this report are exclusively those of Putnam Management. They are not meant as investment advice.
The fund may invest a portion of its assets in small and/or midsize companies. Such investments increase the risk of greater price fluctuations.
The use of derivatives involves special risks and may result in losses.
The fund may have a significant portion of its holdings in bonds. Mutual funds that invest in bonds are subject to certain risks including interest-rate risk, credit risk, and inflation risk. As interest rates rise, the prices of bonds fall. Long-term bonds are more exposed to interest-rate risk than short-term bonds. Unlike bonds, bond funds have ongoing fees and expenses.
Value investing seeks underpriced stocks, but there is no guarantee that a stock’s price will rise.
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Your fund’s performance
This section shows your fund’s performance for periods ended July 31, 2006, the end of its fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance as of the most recent calendar quarter-end. Performance should always be considered in light of a fund’s investment strategy. Data represents past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. For the most recent month-end performance, please visit www.putnam.com or call Putnam at 1-800-225-1581. Class Y shares are generally only available to corporate and institutional clients. See the Terms and Definitions section in this report for definitions of the share classes offered by your fund.
Fund performance
Total return for periods ended 7/31/06 |
| | Class A | | Class B | | Class C | | Class M | | Class R | Class Y |
| (inception dates) | (11/5/37) | | (4/27/92) | | (7/26/99) | | (12/1/94) | | (1/21/03) | (3/31/94) |
| | NAV | POP | NAV | CDSC | NAV | CDSC | NAV | POP | NAV | NAV |
|
| Annual average | | | | | | | | | | |
| (life of fund) | 9.34% | 9.25% | 8.31% | 8.31% | 8.52% | 8.52% | 8.58% | 8.53% | 9.06% | 9.39% |
|
| 10 years | 105.10 | 94.29 | 90.19 | 90.19 | 90.10 | 90.10 | 95.18 | 88.82 | 100.09 | 110.23 |
| Annual average | 7.45 | 6.87 | 6.64 | 6.64 | 6.63 | 6.63 | 6.92 | 6.56 | 7.18 | 7.71 |
|
| 5 years | 22.70 | 16.22 | 18.18 | 16.18 | 18.10 | 18.10 | 19.67 | 15.81 | 21.20 | 24.26 |
| Annual average | 4.18 | 3.05 | 3.40 | 3.04 | 3.38 | 3.38 | 3.66 | 2.98 | 3.92 | 4.44 |
|
| 3 years | 26.45 | 19.82 | 23.61 | 20.61 | 23.57 | 23.57 | 24.56 | 20.53 | 25.58 | 27.42 |
| Annual average | 8.14 | 6.21 | 7.32 | 6.45 | 7.31 | 7.31 | 7.60 | 6.42 | 7.89 | 8.41 |
|
| 1 year | 3.89 | –1.57 | 3.05 | –1.90 | 3.01 | 2.02 | 3.34 | –0.01 | 3.57 | 4.09 |
|
Performance assumes reinvestment of distributions and does not account for taxes. Returns at public offering price (POP) for class A and M shares reflect a sales charge of 5.25% and 3.25%, respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter. Class C shares reflect a 1% CDSC the first year that is eliminated thereafter. Class R 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, except for class Y shares, the higher operating expenses for such shares.
For a portion of the period, this fund limited expenses, without which returns would have been lower.
A 2% short-term trading fee may be applied to shares exchanged or sold within 5 days of purchase.
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Change in the value of a $10,000 investment ($9,475 after sales charge)
Cumulative total return from 7/31/96 to 7/31/06 |
Past performance does not indicate future results. At the end of the same time period, a $10,000 investment in the fund’s class B and class C shares would have been valued at $19,019 and $19,010, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares would have been valued at $18,882 at public offering price. A $10,000 investment in the fund’s class R and class Y shares would have been valued at $20,009 and $21,023, respectively. See first page of performance section for performance calculation method.
Comparative index returns
For periods ended 7/31/06 |
| | | Lehman | George | Lipper |
| | S&P 500/ | Aggregate | Putnam | Balanced |
| | Citigroup | Bond | Blended | Funds category |
| | Value Index | Index | Index | average* |
|
| Annual average | | | | |
| (life of fund) | —† | —† | —† | —† |
|
| 10 years | 156.09% | 84.76% | 132.78% | 100.00% |
| Annual average | 9.86 | 6.33 | 8.82 | 7.02 |
|
| 5 years | 39.78 | 26.35 | 36.77 | 19.36 |
| Annual average | 6.93 | 4.79 | 6.46 | 3.53 |
|
| 3 years | 55.37 | 11.46 | 36.73 | 26.51 |
| Annual average | 15.82 | 3.68 | 10.99 | 8.12 |
|
| 1 year | 11.70 | 1.46 | 7.66 | 4.30 |
|
Index and Lipper results should be compared to fund performance at net asset value.
* Over the 1-, 3-, 5-, and 10-year periods ended 7/31/06, there were 399, 275, 213, and 92 funds, respectively, in this Lipper category.
† The benchmarks were not in existence at the time of the fund’s inception. The S&P 500/Citigroup Value Index commenced 6/30/95. The Lehman Aggregate Bond Index commenced 12/31/75. The George Putnam Blended Index commenced 6/30/95.
The Lipper average commenced 12/31/59.
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Fund price and distribution information
For the 12-month period ended 7/31/06 |
| Distributions | Class A | | Class B | Class C | Class M | | Class R | Class Y |
|
| Number | 4 | | 4 | 4 | 4 | | 4 | 4 |
|
| Income | $0.501 | $0.358 | $0.364 | $0.409 | $0.464 | $0.548 |
|
| Capital gains | | | | | | | | |
|
| Long-term | 0.358 | 0.358 | 0.358 | 0.358 | 0.358 | 0.358 |
|
| Short-term | 0.023 | 0.023 | 0.023 | 0.023 | 0.023 | 0.023 |
|
| Total | $0.882 | $0.739 | $0.745 | $0.790 | $0.845 | $0.929 |
|
| Share value: | NAV | POP | NAV | NAV | NAV | POP | NAV | NAV |
| 7/31/05 | $18.40 | $19.42 | $18.22 | $18.30 | $18.22 | $18.83 | $18.36 | $18.46 |
|
| 7/31/06 | 18.21 | 19.22 | 18.02 | 18.09 | 18.02 | 18.63 | 18.15 | 18.26 |
|
| Current yield | | | | | | | | |
|
| (end of period) | | | | | | | | |
| Current | | | | | | | | |
| dividend rate1 | 2.20% | 2.08% | 1.42% | 1.44% | 1.71% | 1.65% | 1.98% | 2.45% |
|
| Current 30-day | | | | | | | | |
| SEC yield2 | 2.73 | 2.59 | 1.99 | 1.99 | 2.24 | 2.16 | 2.48 | 2.98 |
|
1 Most recent distribution, excluding capital gains, annualized and divided by NAV or POP at end of period.
2 Based only on investment income, calculated using SEC guidelines.
Fund performance for most recent calendar quarter
Total return for periods ended 6/30/06 |
| | Class A | | Class B | | Class C | | Class M | | Class R | Class Y |
| (inception dates) | (11/5/37) | | (4/27/92) | | (7/26/99) | | (12/1/94) | | (1/21/03) | (3/31/94) |
| | NAV | POP | NAV | CDSC | NAV | CDSC | NAV | POP | NAV | NAV |
|
| Annual average | | | | | | | | | | |
| (life of fund) | 9.34% | 9.25% | 8.30% | 8.30% | 8.51% | 8.51% | 8.58% | 8.53% | 9.06% | 9.39% |
|
| 10 years | 99.16 | 88.74 | 84.84 | 84.84 | 84.71 | 84.71 | 89.59 | 83.42 | 94.33 | 104.40 |
| Annual average | 7.13 | 6.56 | 6.34 | 6.34 | 6.33 | 6.33 | 6.61 | 6.25 | 6.87 | 7.41 |
|
| 5 years | 21.97 | 15.58 | 17.53 | 15.53 | 17.47 | 17.47 | 19.02 | 15.17 | 20.48 | 23.61 |
| Annual average | 4.05 | 2.94 | 3.28 | 2.93 | 3.27 | 3.27 | 3.54 | 2.87 | 3.80 | 4.33 |
|
| 3 years | 24.32 | 17.78 | 21.56 | 18.56 | 21.53 | 21.53 | 22.43 | 18.43 | 23.45 | 25.28 |
| Annual average | 7.53 | 5.61 | 6.72 | 5.84 | 6.72 | 6.72 | 6.98 | 5.80 | 7.27 | 7.80 |
|
| 1 year | 4.57 | –0.90 | 3.79 | –1.20 | 3.75 | 2.75 | 4.02 | 0.66 | 4.25 | 4.82 |
|
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Your fund’s expenses
As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. In the most recent six-month period, your fund limited these expenses; had it not done so, expenses would have been higher. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial advisor.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in The George Putnam Fund of Boston from February 1, 2006, to July 31, 2006. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| | Class A | Class B | Class C | Class M | Class R | Class Y |
|
| Expenses paid per $1,000* | $ 4.79 | $ 8.51 | $ 8.51 | $ 7.27 | $ 6.03 | $ 3.54 |
|
| Ending value (after expenses) | $1,011.10 | $1,007.20 | $1,006.70 | $1,008.00 | $1,009.20 | $1,012.30 |
|
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended 7/31/06. The expense ratio may differ for each share class (see the table at the bottom of the next page). Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year. Does not reflect the effect of a non-recurring reimbursement by Putnam. If this amount had been reflected in the table above, expenses for each share class would have been lower.
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended July 31, 2006, use the calculation method below. To find the value of your investment on February 1, 2006, go to www.putnam.com and log on to your account. Click on the “Transaction History” tab in your Daily Statement and enter 02/01/2006 in both the “from” and “to” fields. Alternatively, call Putnam at 1-800-225-1581.
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Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| | Class A | Class B | Class C | Class M | Class R | Class Y |
|
| Expenses paid per $1,000* | $ 4.81 | $ 8.55 | $ 8.55 | $ 7.30 | $ 6.06 | $ 3.56 |
|
| Ending value (after expenses) | $1,020.03 | $1,016.31 | $1,016.31 | $1,017.55 | $1,018.79 | $1,021.27 |
|
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of net assets for the six months ended 7/31/06. The expense ratio may differ for each share class (see the table at the bottom of this page). Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year. Does not reflect the effect of a non-recurring reimbursement by Putnam. If this amount had been reflected in the table above, expenses for each share class would have been lower.
Compare expenses using industry averages
You can also compare your fund’s expenses with the average of its peer group, as defined by Lipper, an independent fund-rating agency that ranks funds relative to others that Lipper considers to have similar investment styles or objectives. The expense ratio for each share class shown below indicates how much of your fund’s net assets have been used to pay ongoing expenses during the period.
| | Class A | Class B | Class C | Class M | Class R | Class Y |
|
| Your fund's annualized | | | | | | |
| expense ratio* | 0.96% | 1.71% | 1.71% | 1.46% | 1.21% | 0.71% |
|
| Average annualized expense | | | | | | |
| ratio for Lipper peer group† | 1.27% | 2.02% | 2.02% | 1.77% | 1.52% | 1.02% |
|
* For the fund’s most recent fiscal half year; may differ from expense ratios based on one-year data in the financial highlights. Does not reflect the effect of a non-recurring reimbursement by Putnam. If this amount had been reflected in the table above, the expense ratio for each share class would have been lower.
† Simple average of the expenses of all front-end load funds in the fund’s Lipper peer group, calculated in accordance with Lipper’s standard method for comparing fund expenses (excluding 12b-1 fees and without giving effect to any expense offset and brokerage service arrangements that may reduce fund expenses). This average reflects each fund’s expenses for its most recent fiscal year available to Lipper as of 6/30/06. To facilitate comparison, Putnam has adjusted this average to reflect the 12b-1 fees carried by each class of shares other than class Y shares, which do not incur 12b-1 fees. The peer group may include funds that are significantly smaller or larger than the fund, which may limit the comparability of the fund’s expenses to the simple average, which typically is higher than the asset-weighted average.
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Your fund’s
portfolio turnover |
Putnam funds are actively managed by teams of experts who buy and sell securities based on intensive analysis of companies, industries, economies, and markets. Portfolio turnover is a measure of how often a fund’s managers buy and sell securities for your fund. A portfolio turnover of 100%, for example, means that the managers sold and replaced securities valued at 100% of a fund’s assets within a one-year period. Funds with high turnover may be more likely to generate capital gains and dividends that must be distributed to shareholders as taxable income. High turnover may also cause a fund to pay more brokerage commissions and other transaction costs, which may detract from performance.
Funds that invest in bonds or other fixed-income instruments may have higher turnover than funds that invest only in stocks. Short-term bond funds tend to have higher turnover than longer-term bond funds, because shorter-term bonds will mature or be sold more frequently than longer-term bonds. You can use the table below to compare your fund’s turnover with the average turnover for funds in its Lipper category.
Turnover comparisons
Percentage of holdings that change every year |
| | 2006 | 2005 | 2004 | 2003 | 2002 |
|
| The George Putnam | | | | | |
| Fund of Boston | 117%* | 169%* | 166% | 121%†‡ | 132%† |
|
| Lipper Balanced Funds | | | | | |
| category average | 71% | 72% | 74% | 81% | 82% |
|
Turnover data for the fund is calculated based on the fund’s fiscal-year period, which ends on July 31. Turnover data for the fund’s Lipper category is calculated based on the average of the turnover of each fund in the category for its fiscal year ended during the indicated year. Fiscal years vary across funds in the Lipper category, which may limit the comparability of the fund’s portfolio turnover rate to the Lipper average. Comparative data for 2006 is based on information available as of 07/31/06.
* Portfolio turnover excludes dollar roll transactions.
† Portfolio turnover excludes certain Treasury note transactions executed in connection with a short-term trading strategy.
‡ Portfolio turnover excludes the impact of assets received from the acquisition of Putnam Balanced Fund and Putnam Balanced Retirement Fund.
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Your fund’s risk
This risk comparison is designed to help you understand how your fund compares with other funds. The comparison utilizes a risk measure developed by Morningstar, an independent fund-rating agency. This risk measure is referred to as the fund’s Overall Morningstar Risk.
Your fund’s Overall Morningstar® Risk
Your fund’s Overall Morningstar Risk is shown alongside that of the average fund in its broad asset class, as determined by Morningstar. The risk bar broadens the comparison by translating the fund’s Overall Morningstar Risk into a percentile, which is based on the fund’s ranking among all funds rated by Morningstar as of June 30, 2006. A higher Overall Morningstar Risk generally indicates that a fund’s monthly returns have varied more widely.
Morningstar determines a fund’s Overall Morningstar Risk by assessing variations in the fund’s monthly returns — with an emphasis on downside variations — over 3-, 5-, and 10-year periods, if available. Those measures are weighted and averaged to produce the fund’s Overall Morningstar Risk. The information shown is provided for the fund’s class A shares only; information for other classes may vary. Overall Morningstar Risk is based on historical data and does not indicate future results. Morningstar does not purport to measure the risk associated with a current investment in a fund, either on an absolute basis or on a relative basis. Low Overall Morningstar Risk does not mean that you cannot lose money on an investment in a fund. Copyright 2006 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
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Your fund’s management
Your fund is managed by the members of the Putnam Large-Cap Value, Core Fixed-Income, and Global Asset Allocation teams. Jeanne Mockard is the Portfolio Leader of the fund. Geoffrey Kelley, Jeffrey Knight, and Raman Srivastava are Portfolio Members. The Portfolio Leader and Portfolio Members coordinate the teams’ management of the fund. For a complete listing of the members of the Putnam Large-Cap Value, Core Fixed-Income, and Global Asset Allocation teams, including those who are not Portfolio Leaders or Portfolio Members of your fund, visit Putnam’s Individual Investor Web site at www.putnam.com.
Investment team fund ownership
The table below shows how much the fund’s current Portfolio Leader and Portfolio Members have invested in the fund and in all Putnam mutual funds (in dollar ranges). Information shown is as of July 31, 2006, and July 31, 2005.
N/A indicates the individual was not a Portfolio Leader or Portfolio Member as of 7/31/05.
Trustee and Putnam employee fund ownership
As of July 31, 2006, all of the Trustees on the Board of the Putnam funds owned fund shares. The table below shows the approximate value of investments in the fund and all Putnam funds as of that date by the Trustees and Putnam employees. These amounts include investments by the Trustees’ and employees’ immediate family members and investments through retirement and deferred compensation plans.
| | | Total assets in |
| | Assets in the fund | all Putnam funds |
|
| Trustees | $ 819,000 | $ 87,000,000 |
|
| Putnam employees | $8,350,000 | $409,000,000 |
|
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Fund manager compensation
The total 2005 fund manager compensation that is attributable to your fund is approximately $3,700,000. This amount includes a portion of 2005 compensation paid by Putnam Management to the fund managers listed in this section for their portfolio management responsibilities, calculated based on the fund assets they manage taken as a percentage of the total assets they manage. The compensation amount also includes a portion of the 2005 compensation paid to the Chief Investment Officers of the teams and the Group Chief Investment Officers of the fund’s broader investment categories for their oversight responsibilities, calculated based on the fund assets they oversee taken as a percentage of the total assets they oversee. This amount does not include compensation of other personnel involved in research, trading, administration, systems, compliance, or fund operations; nor does it include non-compensation costs. These percentages are determined as of the fund’s fiscal period-end. For personnel who joined Putnam Management during or after 2005, the calculation reflects annualized 2005 compensation or an estimate of 2006 compensation, as applicable.
Other Putnam funds managed by the Portfolio Leader
and Portfolio Members |
Jeffrey Knight is also a Portfolio Leader of the three Putnam Asset Allocation Funds, Putnam Income Strategies Fund, and the ten Putnam RetirementReady Funds.
Raman Srivastava is also a Portfolio Member of Putnam Income Fund.
Jeanne Mockard, Geoffrey Kelley, Jeffrey Knight, and Raman Srivastava may also manage other accounts and variable trust funds advised by Putnam Management or an affiliate.
Changes in your fund’s Portfolio Leader and Portfolio Members
During the year ended July 31, 2006, Portfolio Member Geoffrey Kelley joined your fund’s management team. During the same period, Portfolio Members Michael Abata and Kevin Cronin left the management team, though they continue in their other fund management roles at Putnam.
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Putnam fund ownership by Putnam’s Executive Board
The table below shows how much the members of Putnam’s Executive Board have invested in all Putnam mutual funds (in dollar ranges). Information shown is as of July 31, 2006, and July 31, 2005.
| | | | $1 – | $10,001 – | $50,001 – | $100,001 – | $500,001 – | $1,000,001 |
| | Year | $0 | $10,000 | $50,000 | $100,000 | $500,000 | $1,000,000 | and over |
|
| Philippe Bibi | 2006 | | | | | | | • |
|
|
| Chief Technology Officer | 2005 | | | | | | | • |
|
| Joshua Brooks | 2006 | | | | | | | • |
|
|
| Deputy Head of Investments | 2005 | | | | | | | • |
|
| William Connolly | 2006 | | | | | | | • |
|
|
| Head of Retail Management | N/A | | | | | | | |
|
| Kevin Cronin | 2006 | | | | | | | • |
|
|
| Head of Investments | 2005 | | | | | | | • |
|
| Charles Haldeman, Jr. | 2006 | | | | | | | • |
|
|
| President and CEO | 2005 | | | | | | | • |
|
| Amrit Kanwal | 2006 | | | | | | • | |
|
|
| Chief Financial Officer | 2005 | | | | | | • | |
|
| Steven Krichmar | 2006 | | | | | | • | |
|
|
| Chief of Operations | 2005 | | | | | | | • |
|
| Francis McNamara, III | 2006 | | | | | | | • |
|
|
| General Counsel | 2005 | | | | | | | • |
|
| Richard Robie, III | 2006 | | | | | | • | |
|
|
| Chief Administrative Officer | 2005 | | | | | | • | |
|
| Edward Shadek | 2006 | | | | | | | • |
|
|
| Deputy Head of Investments | 2005 | | | | | | | • |
|
| Sandra Whiston | 2006 | | | | | | • | |
|
|
| Head of Institutional Management | N/A | | | | | | | |
|
N/A indicates the individual was not a member of Putnam’s Executive Board as of 7/31/05.
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Terms and definitions
Important terms
Total return shows how the value of the fund’s shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund.
Net asset value (NAV) is the price, or value, of one share of a mutual fund, without a sales charge. NAVs fluctuate with market conditions. NAV is calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.
Public offering price (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume the 5.25% maximum sales charge for class A shares and 3.25% for class M shares.
Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.
Share classes
Class A shares are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class B shares are not subject to an initial sales charge. They may be subject to a CDSC.
Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.
Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC (except on certain redemptions of shares bought without an initial sales charge).
Class R shares are not subject to an initial sales charge or CDSC and are available only to certain defined contribution plans.
Class Y shares are not subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They are only available to eligible purchasers, including eligible defined contribution plans or corporate IRAs.
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Comparative indexes
George Putnam Blended Index is an unmanaged index administered by Putnam Management, 60% of which is the Standard and Poor’s 500/Citigroup Value Index and 40% of which is the Lehman Aggregate Bond Index.
JP Morgan Global High Yield Index is an unmanaged index of global high-yield fixed-income securities.
Lehman Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
Lehman Government Bond Index is an unmanaged index of U.S. Treasury and agency securities.
Russell 1000 Index is an unmanaged index of the 1,000 largest companies in the Russell 3000 Index.
Russell 1000 Growth Index is an unmanaged index of those companies in the large-cap Russell 1000 Index chosen for their growth orientation.
Russell 2000 Index is an unmanaged index of the 2,000 smallest companies in the Russell 3000 Index.
S&P 500/Citigroup Value Index is an unmanaged capitalization-weighted index of large-cap stocks chosen for their value orientation.
Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index.
Lipper is a third-party industry-ranking entity that ranks mutual 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 averages reflect performance trends for funds within a category.
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Trustee approval of
management contract |
General conclusions
The Board of Trustees of the Putnam funds oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of your fund’s management contract with Putnam Management. In this regard, the Board of Trustees, with the assistance of its Contract Committee consisting solely of Trustees who are not “interested persons” (as such term is defined in the Investment Company Act of 1940, as amended) of the Putnam funds (the “Independent Trustees”), requests and evaluates all information it deems reasonably necessary under the circumstances. Over the course of several months ending in June 2006, the Contract Committee met four times to consider the information provided by Putnam Management and other information developed with the assistance of the Board’s independent counsel and independent staff. The Contract Committee reviewed and discussed key aspects of this information with all of the Independe nt Trustees. Upon completion of this review, the Contract Committee recommended, and the Independent Trustees approved, the continuance of your fund’s management contract, effective July 1, 2006.
This approval was based on the following conclusions:
•That the fee schedule in effect for your fund represents reasonable compensation in light of the nature and quality of the services being provided to the fund, the fees paid by competitive funds and the costs incurred by Putnam Management in providing such services, and
•That such fee schedule represents an appropriate sharing between fund shareholders and Putnam Management of such economies of scale as may exist in the management of the fund at current asset levels.
These conclusions were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations and how the Trustees considered these factors are described below, although individual Trustees may have evaluated the information presented differently, giving different weights to various factors. It is also important to recognize that the fee arrangements for your fund and the other Putnam funds are the result of many years of review and discussion between the Independent Trustees and Putnam Management, that certain aspects of such arrangements may receive greater scrutiny in some years than others, and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements in prior years.
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Management fee schedules and categories; total expenses
The Trustees reviewed the management fee schedules in effect for all Putnam funds, including fee levels and breakpoints, and the assignment of funds to particular fee categories. In reviewing fees and expenses, the Trustees generally focused their attention on material changes in circumstances — for example, changes in a fund’s size or investment style, changes in Putnam Management’s operating costs, or changes in competitive practices in the mutual fund industry — that suggest that consideration of fee changes might be warranted. The Trustees concluded that the circumstances did not warrant changes to the management fee structure of your fund, which had been carefully developed over the years, re-examined on many occasions and adjusted where appropriate. The Trustees focused on two areas of particular interest, as discussed further below:
• Competitiveness. The Trustees reviewed comparative fee and expense information for competitive funds, which indicated that, in a custom peer group of competitive funds selected by Lipper Inc., your fund ranked in the 21st percentile in management fees and in the 24th percentile in total expenses (less any applicable 12b-1 fees) as of December 31, 2005 (the first percentile being the least expensive funds and the 100th percentile being the most expensive funds). (Because the fund’s custom peer group is smaller than the fund’s broad Lipper Inc. peer group, this expense information may differ from the Lipper peer expense information found elsewhere in this report.) The Trustees noted that expense ratios for a number of Putnam funds, which show the percentage of fund assets used to pay for management and administrative services, distribution (12b-1) fees and other expenses, had been increa sing recently as a result of declining net assets and the natural operation of fee breakpoints.
The Trustees noted that the expense ratio increases described above were currently being controlled by expense limitations implemented in January 2004 and which Putnam Management, in consultation with the Contract Committee, has committed to maintain at least through 2007. These expense limitations give effect to a commitment by Putnam Management that the expense ratio of each open-end fund would be no higher than the average expense ratio of the competitive funds included in the fund’s relevant Lipper universe (exclusive of any applicable 12b-1 charges in each case). The Trustees observed that this commitment to limit fund expenses has served shareholders well since its inception. In order to ensure that the expenses of the Putnam funds continue to meet evolving competitive standards, the Trustees requested, and Putnam Management agreed, to implement an additional expense limitation for certain funds for the twelve months beginning January 1, 2007 equal to the average expense ratio (exclusive of 12b-1 charges) of a custom peer group of competitive funds selected by Lipper based on the size of the fund. This additional expense limitation will be applied to those open-end funds that had above-average expense ratios (exclusive of 12b-1 charges) based on the Lipper custom peer group data for the period ended December 31, 2005. This additional expense limitation will not be applied to your fund.
27
• Economies of scale. Your fund currently has the benefit of breakpoints in its management fee that provide shareholders with significant economies of scale, which means that the effective management fee rate of a fund (as a percentage of fund assets) declines as a fund grows in size and crosses specified asset thresholds. Conversely, as a fund shrinks in size — as has been the case for many Putnam funds in recent years — these breakpoints result in increasing fee levels. In recent years, the Trustees have examined the operation of the existing breakpoint structure during periods of both growth and decline in asset levels. The Trustees concluded that the fee schedules in effect for the funds represented an appropriate sharing of economies of scale at current asset levels. In reaching this conclusion, the Trustees considered the Contract Committee’s stated intent to continue to work with Putnam Management to plan for an eventual resumption in the growth of assets, including a study of potential economies that might be produced under various growth assumptions.
In connection with their review of the management fees and total expenses of the Putnam funds, the Trustees also reviewed the costs of the services to be provided and profits to be realized by Putnam Management and its affiliates from the relationship with the funds. This information included trends in revenues, expenses and profitability of Putnam Management and its affiliates relating to the investment management and distribution services provided to the funds. In this regard, the Trustees also reviewed an analysis of Putnam Management’s revenues, expenses and profitability with respect to the funds’ management contracts, allocated on a fund-by-fund basis. Because many of the costs incurred by Putnam Management in managing the funds are not readily identifiable to particular funds, the Trustees observed that the methodology for allocating costs is an important factor in evaluating Putnam Management’s costs and profitability, both as to the Putnam funds in the aggregate and as to individual funds. The Trustees reviewed Putnam Management’s cost allocation methodology with the assistance of independent consultants and concluded that this methodology was reasonable and well-considered.
Investment performance
The quality of the investment process provided by Putnam Management represented a major factor in the Trustees’ evaluation of the quality of services provided by Putnam Management under your fund’s management contract. The Trustees were assisted in their review of the Putnam funds’ investment process and performance by the work of the Investment Process Committee of the Trustees and the Investment Oversight Committee of the Trustees, which meet on a regular monthly basis with the funds’ portfolio teams throughout the year. The Trustees concluded that Putnam Management generally provides a high-quality investment process — as measured by the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to such personnel, and in general the ability of Putnam Management to attract and retain high-quality personnel — but also recognize that this does not guarantee favorable investment results for every fund in every time period.
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The Trustees considered the investment performance of each fund over multiple time periods and considered information comparing each fund’s performance with various benchmarks and with the performance of competitive funds.
The Trustees noted the satisfactory investment performance of many Putnam funds. They also noted the disappointing investment performance of certain funds in recent years and discussed with senior management of Putnam Management the factors contributing to such underperfor-mance and actions being taken to improve performance. The Trustees recognized that, in recent years, Putnam Management has made significant changes in its investment personnel and processes and in the fund product line to address areas of underperformance. In particular, they noted the important contributions of Putnam Management’s leadership in attracting, retaining and supporting high-quality investment professionals and in systematically implementing an investment process that seeks to merge the best features of fundamental and quantitative analysis. The Trustees indicated their intention to continue to monitor performance trends to assess the effectiveness of these changes and to evaluate whether additional changes to address areas of underperformance are warranted.
In the case of your fund, the Trustees considered that your fund’s class A share cumulative total return performance at net asset value was in the following percentiles of its Lipper Inc. peer group (Lipper Balanced Funds) for the one-, three- and five-year periods ended March 31, 2006 (the first percentile being the best performing funds and the 100th percentile being the worst performing funds):
| One-year period | Three-year period | Five-year period |
|
| 81st | 57th | 40th |
(Because of the passage of time, these performance results may differ from the performance results for more recent periods shown elsewhere in this report. Over the one-, three- and five-year periods ended March 31, 2006, there were 665, 481, and 393 funds, respectively, in your fund’s Lipper peer group.* Past performance is no guarantee of future performance.)
The Trustees noted the disappointing performance for your fund for the one-year period ended March 31, 2006. In this regard, the Trustees considered that Putnam Management had made changes to the fund’s investment team that it believed would strengthen the investment process by focusing on a blend of quantitative techniques and fundamental analysis.
As a general matter, the Trustees concluded that cooperative efforts between the Trustees and Putnam Management represent the most effective way to address investment performance problems. The Trustees noted that investors in the Putnam funds have, in effect, placed their
* The percentile rankings for your fund’s class A share annualized total return performance in the Lipper Balanced Funds category for the one-, five- and ten-year periods ended June 30, 2006, were 76%, 36%, and 39%, respectively. Over the one-, five- and ten-year periods ended June 30, 2006, the fund ranked 523rd out of 691, 140th out of 395, and 72nd out of 188 funds, respectively. Note that this more recent information was not available when the Trustees approved the continuance of your fund’s management contract.
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trust in the Putnam organization, under the oversight of the funds’ Trustees, to make appropriate decisions regarding the management of the funds. Based on the responsiveness of Putnam Management in the recent past to Trustee concerns about investment performance, the Trustees concluded that it is preferable to seek change within Putnam Management to address performance shortcomings. In the Trustees’ view, the alternative of terminating a management contract and engaging a new investment adviser for an underperforming fund would entail significant disruptions and would not provide any greater assurance of improved investment performance.
Brokerage and soft-dollar allocations; other benefits
The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under the management contract with your fund. These include benefits related to brokerage and soft-dollar allocations, whereby a portion of the commissions paid by a fund for brokerage may be used to acquire research services that may be useful to Putnam Management in managing the assets of the fund and of other clients. The Trustees indicated their continued intent to monitor the potential benefits associated with the allocation of fund brokerage to ensure that the principle of seeking “best price and execution” remains paramount in the portfolio trading process.
The Trustees’ annual review of your fund’s management contract also included the review of its distributor’s contract and distribution plan with Putnam Retail Management Limited Partnership and the custodian agreement and investor servicing agreement with Putnam Fiduciary Trust Company, all of which provide benefits to affiliates of Putnam Management.
Comparison of retail and institutional fee schedules
The information examined by the Trustees as part of their annual contract review has included for many years information regarding fees charged by Putnam Management and its affiliates to institutional clients such as defined benefit pension plans, college endowments, etc. This information included comparison of such fees with fees charged to the funds, as well as a detailed assessment of the differences in the services provided to these two types of clients. The Trustees observed, in this regard, that the differences in fee rates between institutional clients and the mutual funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investment management services to these types of clients reflect to a substantial degree historical competitive forces operating in separate market places. The Trustees considered the fact that fee rates across all asset sectors are higher on average for mutual funds than for institutional clients, as well as the differences between the services that Putnam Management provides to the Putnam funds and those that it provides to institutional clients of the firm, but did not rely on such comparisons to any significant extent in concluding that the management fees paid by your fund are reasonable.
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Other information
for shareholders |
Putnam’s policy on confidentiality
In order to conduct business with our shareholders, we must obtain certain personal information such as account holders’ addresses, telephone numbers, Social Security numbers, and the names of their financial advisors. We use this information to assign an account number and to help us maintain accurate records of transactions and account balances. It is our policy to protect the confidentiality of your information, whether or not you currently own shares of our funds, and in particular, not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personal information from unauthorized use. Under certain circumstances, we share this information with outside vendors who provide services to us, such as mailing and proxy solicitation. In those cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. We may also share this information with our Putnam affiliates to service your account or provide you with information about other Putnam products or services. It is also our policy to share account information with your financial advisor, if you’ve listed one on your Putnam account. If you would like clarification about our confidentiality policies or have any questions or concerns, please don’t hesitate to contact us at 1-800-225-1581, Monday through Friday, 8:30 a.m. to 7:00 p.m., or Saturdays from 9:00 a.m. to 5:00 p.m. Eastern Time.
Proxy voting
Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2006, are available on the Putnam Individual Investor Web site, www.putnam.com/individual, and on the SEC’s Web site, www.sec.gov. If you have questions about finding forms on the SEC’s Web site, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.
Fund portfolio holdings
The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain the fund’s Forms N-Q on the SEC’s Web site at www.sec.gov. In addition, the fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC’s Web site or the operation of the Public Reference Room.
31
Financial statements
A guide to financial statements
These sections of the report, as well as the accompanying Notes, preceded by the Report of Independent Registered Public Accounting Firm, constitute the fund’s financial statements.
The fund’s portfolio lists all the fund’s investments and their values as of the last day of the reporting period. Holdings are organized by asset type and industry sector, country, or state to show areas of concentration and diversification.
Statement of assets and liabilities shows how the fund’s net assets and share price are determined. All investment and noninvestment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the 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 year.
Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund’s investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlight table also includes the current reporting period.
32
Report of Independent Registered
Public Accounting Firm |
To the Trustees and Shareholders of
The George Putnam Fund of Boston: |
In our opinion, the accompanying statement of assets and liabilities, including the fund's portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of The George Putnam Fund of Boston (the "fund") at July 31, 2006, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned at July 31, 2006, by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 18, 2006 |
33
The fund’s portfolio 7/31/06
| COMMON STOCKS (58.2%)* | | | |
|
| | Shares | | Value |
|
| Aerospace and Defense (2.0%) | | | |
| Boeing Co. (The) | 265,600 | $ | 20,562,752 |
| Lockheed Martin Corp. | 440,500 | | 35,099,040 |
| Raytheon Co. | 416,900 | | 18,789,683 |
| United Technologies Corp. | 255,300 | | 15,877,107 |
| | | | 90,328,582 |
|
| |
| Airlines (0.3%) | | | |
| Southwest Airlines Co. | 802,300 | | 14,433,377 |
|
| |
| Automotive (0.3%) | | | |
| Ford Motor Co. (S) | 1,942,200 | | 12,954,474 |
|
| |
| Banking (7.7%) | | | |
| Bank of America Corp. | 2,172,645 | | 111,956,397 |
| Citigroup, Inc. # | 2,539,300 | | 122,673,583 |
| U.S. Bancorp | 813,460 | | 26,030,720 |
| Wachovia Corp. | 239,600 | | 12,849,748 |
| Washington Mutual, Inc. (S) | 452,600 | | 20,231,220 |
| Wells Fargo & Co. | 732,500 | | 52,989,050 |
| | | | 346,730,718 |
|
| |
| Beverage (0.7%) | | | |
| Coca-Cola Co. (The) | 491,400 | | 21,867,300 |
| Coca-Cola Enterprises, Inc. | 534,600 | | 11,472,516 |
| | | | 33,339,816 |
|
| |
| Biotechnology (0.1%) | | | |
| Biogen Idec, Inc. † | 58,100 | | 2,447,172 |
|
| |
| Building Materials (1.3%) | | | |
| Masco Corp. (S) | 1,402,100 | | 37,478,133 |
| Sherwin-Williams Co. (The) (S) | 278,400 | | 14,087,040 |
| Vulcan Materials Co. | 92,000 | | 6,161,240 |
| | | | 57,726,413 |
|
| |
| Cable Television (0.5%) | | | |
| Comcast Corp. Class A † (S) | 656,200 | | 22,560,156 |
|
| |
| Chemicals (0.9%) | | | |
| E.I. du Pont de Nemours & Co. (S) | 426,800 | | 16,926,888 |
| PPG Industries, Inc. | 47,100 | | 2,898,534 |
| Rohm & Haas Co. (S) | 430,100 | | 19,836,212 |
| | | | 39,661,634 |
|
| |
| Commercial and Consumer Services (0.5%) | | | |
| Cendant Corp. | 1,465,100 | | 21,991,151 |
34
| COMMON STOCKS (58.2%)* continued | | | |
|
| | Shares | | Value |
|
| Communications Equipment (0.4%) | | | |
| Cisco Systems, Inc. † | 960,130 | $ | 17,138,321 |
|
| |
| Computers (2.9%) | | | |
| Apple Computer, Inc. † | 95,000 | | 6,456,200 |
| Dell, Inc. † (S) | 1,036,300 | | 22,466,984 |
| EMC Corp. † | 2,235,400 | | 22,689,310 |
| Hewlett-Packard Co. | 1,849,200 | | 59,007,972 |
| IBM Corp. | 291,000 | | 22,526,310 |
| | | | 133,146,776 |
|
| |
| Conglomerates (3.0%) | | | |
| General Electric Co. | 1,656,100 | | 54,137,909 |
| Honeywell International, Inc. | 495,900 | | 19,191,330 |
| Textron, Inc. | 148,500 | | 13,351,635 |
| Tyco International, Ltd. (Bermuda) | 1,954,950 | | 51,004,646 |
| | | | 137,685,520 |
|
| |
| Construction (0.3%) | | | |
| Martin Marietta Materials, Inc. | 77,000 | | 6,200,040 |
| USG Corp. † (S) | 177,600 | | 8,233,536 |
| | | | 14,433,576 |
|
| |
| Consumer Finance (0.8%) | | | |
| Capital One Financial Corp. | 255,200 | | 19,739,720 |
| Countrywide Financial Corp. | 418,200 | | 14,984,106 |
| | | | 34,723,826 |
|
| |
| Electric Utilities (2.9%) | | | |
| Dominion Resources, Inc. | 161,450 | | 12,670,596 |
| DPL, Inc. (S) | 305,700 | | 8,486,232 |
| Duke Energy Corp. | 118,200 | | 3,583,824 |
| Entergy Corp. (S) | 219,400 | | 16,915,740 |
| Exelon Corp. (S) | 290,515 | | 16,820,819 |
| FirstEnergy Corp. | 390,200 | | 21,851,200 |
| PG&E Corp. (S) | 688,150 | | 28,682,092 |
| Public Service Enterprise Group, Inc. | 99,900 | | 6,736,257 |
| Wisconsin Energy Corp. | 347,200 | | 14,651,840 |
| | | | 130,398,600 |
|
| |
| Electrical Equipment (0.1%) | | | |
| Emerson Electric Co. | 51,400 | | 4,056,488 |
|
| |
| Electronics (1.2%) | | | |
| Analog Devices, Inc. | 509,800 | | 16,481,834 |
| Arrow Electronics, Inc. † | 234,000 | | 6,612,840 |
| Intel Corp. | 1,309,501 | | 23,571,018 |
| Motorola, Inc. | 392,300 | | 8,928,748 |
| | | | 55,594,440 |
35
| COMMON STOCKS (58.2%)* continued | | | |
|
| | Shares | | Value |
|
| Energy (0.7%) | | | |
| BJ Services Co. | 190,000 | $ | 6,891,300 |
| Cameron International Corp. † | 214,200 | | 10,797,822 |
| Pride International, Inc. † | 533,100 | | 15,923,697 |
| | | | 33,612,819 |
|
| |
| Financial (2.0%) | | | |
| Freddie Mac | 47,340 | | 2,739,092 |
| JPMorgan Chase & Co. | 1,197,300 | | 54,620,826 |
| MGIC Investment Corp. | 199,200 | | 11,336,472 |
| Radian Group, Inc. (S) | 207,800 | | 12,785,934 |
| St. Paul Travelers Cos., Inc. (The) | 187,200 | | 8,573,760 |
| | | | 90,056,084 |
|
| |
| Food (0.5%) | | | |
| General Mills, Inc. | 474,100 | | 24,605,790 |
|
| |
| Health Care Services (0.9%) | | | |
| Cardinal Health, Inc. | 297,700 | | 19,945,900 |
| CIGNA Corp. | 89,300 | | 8,148,625 |
| McKesson Corp. | 248,800 | | 12,537,032 |
| | | | 40,631,557 |
|
| |
| Homebuilding (0.3%) | | | |
| Lennar Corp. (S) | 115,100 | | 5,148,423 |
| NVR, Inc. † | 18,036 | | 8,927,820 |
| | | | 14,076,243 |
|
| |
| Household Furniture and Appliances (0.4%) | | | |
| Whirlpool Corp. (S) | 215,400 | | 16,626,726 |
|
| |
| Insurance (4.5%) | | | |
| ACE, Ltd. (Bermuda) | 437,500 | | 22,544,375 |
| American International Group, Inc. | 521,150 | | 31,618,171 |
| Axis Capital Holdings, Ltd. (Bermuda) | 367,716 | | 10,869,685 |
| Berkshire Hathaway, Inc. Class B † | 3,280 | | 9,994,160 |
| Chubb Corp. (The) | 831,400 | | 41,919,188 |
| Everest Re Group, Ltd. (Barbados) | 373,000 | | 35,289,530 |
| Genworth Financial, Inc. Class A | 359,760 | | 12,339,768 |
| Hartford Financial Services Group, Inc. (The) | 51,900 | | 4,403,196 |
| Prudential Financial, Inc. | 318,600 | | 25,054,704 |
| Willis Group Holdings, Ltd. (United Kingdom) | 326,200 | | 10,611,286 |
| | | | 204,644,063 |
|
| |
| Investment Banking/Brokerage (4.4%) | | | |
| Allied Capital Corp. (S) | 727,100 | | 20,467,865 |
| Bear Stearns Cos., Inc. (The) (S) | 119,900 | | 17,010,213 |
| Federated Investors, Inc. | 274,300 | | 8,506,043 |
| Goldman Sachs Group, Inc. (The) | 493,600 | | 75,397,400 |
| Lehman Brothers Holdings, Inc. | 344,600 | | 22,381,770 |
| Morgan Stanley | 837,000 | | 55,660,500 |
| | | | 199,423,791 |
36
| COMMON STOCKS (58.2%)* continued | | | |
|
| | Shares | | Value |
|
| Leisure (0.1%) | | | |
| Brunswick Corp. | 141,500 | $ | 4,184,155 |
|
| |
| Lodging/Tourism (0.4%) | | | |
| Carnival Corp. | 176,900 | | 6,892,024 |
| Royal Caribbean Cruises, Ltd. | 319,400 | | 10,827,660 |
| | | | 17,719,684 |
|
| |
| Machinery (1.7%) | | | |
| Cummins, Inc. (S) | 154,100 | | 18,029,700 |
| Ingersoll-Rand Co., Ltd. Class A (Bermuda) | 418,400 | | 14,978,720 |
| Parker-Hannifin Corp. | 405,800 | | 29,314,992 |
| Terex Corp. † (S) | 307,600 | | 13,792,784 |
| | | | 76,116,196 |
|
| |
| Manufacturing (0.2%) | | | |
| Cooper Industries, Ltd. Class A | 28,900 | | 2,490,024 |
| Illinois Tool Works, Inc. | 168,700 | | 7,714,651 |
| | | | 10,204,675 |
|
| |
| Media (0.6%) | | | |
| Walt Disney Co. (The) (S) | 881,300 | | 26,165,797 |
|
| |
| Medical Services (0.5%) | | | |
| WellPoint, Inc. † | 308,300 | | 22,968,350 |
|
| |
| Medical Technology (1.1%) | | | |
| Baxter International, Inc. | 393,700 | | 16,535,400 |
| Becton, Dickinson and Co. | 304,000 | | 20,039,680 |
| Boston Scientific Corp. † | 592,800 | | 10,083,528 |
| PerkinElmer, Inc. | 194,800 | | 3,512,244 |
| | | | 50,170,852 |
|
| |
| Metals (0.8%) | | | |
| Freeport-McMoRan Copper & Gold, Inc. Class B (S) | 63,700 | | 3,475,472 |
| Nucor Corp. (S) | 220,700 | | 11,734,619 |
| Phelps Dodge Corp. (S) | 142,300 | | 12,428,482 |
| Steel Dynamics, Inc. | 124,000 | | 7,194,480 |
| | | | 34,833,053 |
|
| |
| Oil & Gas (4.1%) | | | |
| Apache Corp. | 121,500 | | 8,562,105 |
| Chevron Corp. | 359,500 | | 23,647,910 |
| Devon Energy Corp. (S) | 157,300 | | 10,167,872 |
| EOG Resources, Inc. | 105,900 | | 7,852,485 |
| Exxon Mobil Corp. | 1,091,300 | | 73,924,662 |
| Hess Corp. (S) | 129,100 | | 6,829,390 |
| Marathon Oil Corp. (S) | 250,600 | | 22,714,384 |
| Newfield Exploration Co. † | 131,800 | | 6,112,884 |
| Occidental Petroleum Corp. | 83,100 | | 8,954,025 |
37
| COMMON STOCKS (58.2%)* continued | | | |
|
| | Shares | | Value |
|
| Oil & Gas continued | | | |
| Sunoco, Inc. (S) | 88,300 | $ | 6,140,382 |
| Tesoro Corp. | 41,900 | | 3,134,120 |
| Valero Energy Corp. | 116,900 | | 7,882,567 |
| | | | 185,922,786 |
|
| |
| Pharmaceuticals (0.8%) | | | |
| Barr Pharmaceuticals, Inc. † | 102,900 | | 5,120,304 |
| Pfizer, Inc. | 451,400 | | 11,731,886 |
| Watson Pharmaceuticals, Inc. † | 319,400 | | 7,151,366 |
| Wyeth | 276,900 | | 13,421,343 |
| | | | 37,424,899 |
|
| |
| Power Producers (0.3%) | | | |
| AES Corp. (The) † | 681,200 | | 13,528,632 |
|
| |
| Publishing (0.2%) | | | |
| R. R. Donnelley & Sons Co. | 283,900 | | 8,287,041 |
|
| |
| Railroads (0.3%) | | | |
| Norfolk Southern Corp. | 334,100 | | 14,506,622 |
|
| |
| Regional Bells (1.3%) | | | |
| Verizon Communications, Inc. | 1,789,100 | | 60,507,362 |
|
| |
| Restaurants (0.5%) | | | |
| McDonald’s Corp. | 680,800 | | 24,093,512 |
|
| |
| Retail (0.9%) | | | |
| Barnes & Noble, Inc. | 74,700 | | 2,503,944 |
| Gap, Inc. (The) (S) | 302,700 | | 5,251,845 |
| Home Depot, Inc. (The) | 161,501 | | 5,605,700 |
| Office Depot, Inc. † | 471,000 | | 16,979,550 |
| Staples, Inc. | 233,400 | | 5,046,108 |
| Target Corp. (S) | 130,600 | | 5,997,152 |
| | | | 41,384,299 |
|
| |
| Semiconductor (0.2%) | | | |
| Applied Materials, Inc. | 466,800 | | 7,347,432 |
|
| |
| Software (1.3%) | | | |
| McAfee, Inc. † | 449,300 | | 9,682,415 |
| Microsoft Corp. (S) | 547,000 | | 13,144,410 |
| Oracle Corp. † | 1,504,900 | | 22,528,353 |
| Symantec Corp. † | 779,600 | | 13,541,652 |
| | | | 58,896,830 |
|
| |
| Technology Services (1.1%) | | | |
| Accenture, Ltd. Class A (Bermuda) | 1,017,800 | | 29,780,828 |
| Fair Isaac Corp. | 143,200 | | 4,837,296 |
| VeriSign, Inc. † | 916,300 | | 16,429,259 |
| | | | 51,047,383 |
38
| COMMON STOCKS (58.2%)* continued | | | | |
|
| | | Shares | | Value |
|
| Telecommunications (1.0%) | | | | |
| Sprint Nextel Corp. (S) | | 2,167,700 | $ | 42,920,460 |
|
| |
| Tobacco (0.9%) | | | | |
| Altria Group, Inc. | | 392,700 | | 31,404,219 |
| Loews Corp. — Carolina Group | | 194,000 | | 11,131,720 |
| | | | | 42,535,939 |
|
| |
| Waste Management (0.3%) | | | | |
| Waste Management, Inc. | | 431,100 | | 14,821,218 |
|
| |
| Total common stocks (cost $2,199,613,672) | | | $ | 2,638,615,290 |
|
| |
| |
| COLLATERALIZED MORTGAGE OBLIGATIONS (15.5%)* | | | | |
|
| | | Principal amount | | Value |
| |
| AMP CMBS 144A FRB Ser. 06-1A, Class A, 6.231s, 2047 | | | | |
| (Cayman Islands) | $ | 1,910,000 | $ | 1,910,000 |
| Amresco Commercial Mortgage Funding I Ser. 97-C1, | | | | |
| Class G, 7s, 2029 | | 1,030,000 | | 1,032,519 |
| Amresco Commercial Mortgage Funding I 144A | | | | |
| Ser. 97-C1, Class H, 7s, 2029 | | 664,000 | | 668,995 |
| Asset Securitization Corp. Ser. 96-MD6, Class A7, 8.009s, 2029 | | 1,858,000 | | 1,930,722 |
| Banc of America Commercial Mortgage, Inc. | | | | |
| Ser. 01-1, Class G, 7.324s, 2036 | | 950,000 | | 996,916 |
| Ser. 04-3, Class A5, 5.303s, 2039 | | 4,690,000 | | 4,623,449 |
| FRB Ser. 05-1, Class A5, 4.981s, 2042 | | 252,000 | | 244,163 |
| Ser. 06-1, Class XC, Interest Only (IO), 0.040s, 2045 | | 41,197,545 | | 293,549 |
| Banc of America Commercial Mortgage, Inc. 144A | | | | |
| Ser. 01-PB1, Class K, 6.15s, 2035 | | 715,000 | | 707,804 |
| Ser. 02-PB2, Class XC, IO, 0.220s, 2035 | | 9,879,863 | | 183,318 |
| Ser. 05-1, Class XW, IO, 0.105s, 2042 | | 278,208,959 | | 1,303,510 |
| Ser. 05-4, Class XC, IO, 0.039s, 2045 | | 83,338,400 | | 604,685 |
| Banc of America Large Loan | | | | |
| FRB Ser. 04-BBA4, Class H, 6.319s, 2018 | | 142,000 | | 142,470 |
| FRB Ser. 04-BBA4, Class G, 6.069s, 2018 | | 449,000 | | 450,429 |
| Banc of America Large Loan 144A | | | | |
| FRB Ser. 02-FL2A, Class L1, 8.337s, 2014 | | 427,000 | | 426,209 |
| FRB Ser. 02-FL2A, Class K1, 7.837s, 2014 | | 148,000 | | 147,765 |
| FRB Ser. 05-BOCA, Class M, 7.469s, 2016 | | 956,000 | | 955,990 |
| FRB Ser. 05-MIB1, Class K, 7.369s, 2022 | | 496,000 | | 488,404 |
| FRB Ser. 05-ESHA, Class K, 7.159s, 2020 | | 1,660,000 | | 1,660,899 |
| FRB Ser. 05-BOCA, Class L, 7.069s, 2016 | | 456,000 | | 455,996 |
| FRB Ser. 06-LAQ, Class L, 6.895s, 2021 | | 920,000 | | 922,902 |
| FRB Ser. 06-LAQ, Class M, 6.99s, 2021 | | 1,104,000 | | 1,106,779 |
| FRB Ser. 05-BOCA, Class K, 6.719s, 2016 | | 470,000 | | 469,996 |
| FRB Ser. 05-BOCA, Class J, 6.469s, 2016 | | 200,000 | | 199,998 |
| FRB Ser. 05-MIB1, Class J, 6.419s, 2022 | | 1,400,000 | | 1,402,374 |
| FRB Ser. 05-BOCA, Class H, 6.319s, 2016 | | 200,000 | | 199,998 |
| FRB Ser. 05-ESHA, Class G, 6.239s, 2020 | | 1,024,000 | | 1,024,752 |
39
| COLLATERALIZED MORTGAGE OBLIGATIONS (15.5%)* continued | | | |
|
| | | Principal amount | | Value |
|
| Banc of America Large Loan 144A | | | | |
| Ser. 06-LAQ, Class X1, IO, 0.675s, 2021 | $ | 50,159,000 | $ | 365,520 |
| Ser. 03-BBA2, Class X1A, IO, 0.169s, 2015 | | 25,878,375 | | 1,501 |
| Banc of America Structured Security Trust 144A | | | | |
| Ser. 02-X1, Class A3, 5.436s, 2033 | | 1,843,281 | | 1,840,904 |
| Bayview Commercial Asset Trust 144A | | | | |
| FRB Ser. 05-1A, Class A1, 5.685s, 2035 | | 1,840,041 | | 1,840,041 |
| Ser. 04-2, IO, 1.72s, 2034 | | 9,516,682 | | 708,547 |
| Ser. 06-2A, IO, 0.879s, 2036 | | 3,464,602 | | 306,163 |
| Ser. 05-3A, IO, 0.775s, 2035 | | 21,126,893 | | 1,733,611 |
| Ser. 05-1A, IO, 0.775s, 2035 | | 7,819,487 | | 603,567 |
| Ser. 04-3, IO, 0.775s, 2035 | | 6,445,788 | | 497,534 |
| Bear Stearns Commercial Mortgage Securities, Inc. | | | | |
| Ser. 05-PWR9, Class X1, IO, 0.028s, 2042 | | 41,613,762 | | 411,269 |
| Bear Stearns Commercial Mortgage | | | | |
| Securities, Inc. 144A | | | | |
| FRB Ser. 05-LXR1, Class J, 7.019s, 2018 | | 1,795,000 | | 1,795,000 |
| FRB Ser. 05-LXR1, Class H, 6.569s, 2018 | | 997,000 | | 997,000 |
| FRB Ser. 05-LXR1, Class G, 6.319s, 2018 | | 997,000 | | 997,000 |
| Ser. 06-BBA7, Class X1A, IO, 1.708s, 2019 | | 31,284,000 | | 658,769 |
| Ser. 05-LXR1, Class X1, IO, 0.792s, 2018 | | 96,649,000 | | 529,801 |
| Ser. 05-PW10, Class X1, IO, 0.032s, 2040 | | 64,488,713 | | 297,228 |
| Bear Stearns Commercial Mortgage Securitization Corp. | | | | |
| Ser. 00-WF2, Class F, 8.198s, 2032 | | 456,000 | | 503,460 |
| Ser. 04-PR3I, Class X1, IO, 0.232s, 2041 | | 16,364,528 | | 363,325 |
| Chase Commercial Mortgage Securities Corp. | | | | |
| Ser. 00-3, Class A2, 7.319s, 2032 | | 553,000 | | 584,064 |
| Chase Commercial Mortgage Securities Corp. 144A | | | | |
| Ser. 98-1, Class F, 6.56s, 2030 | | 4,600,000 | | 4,666,351 |
| Ser. 98-1, Class G, 6.56s, 2030 | | 1,171,000 | | 1,192,770 |
| Ser. 98-1, Class H, 6.34s, 2030 | | 1,761,000 | | 1,459,113 |
| Citigroup Commercial Mortgage Trust 144A Ser. 05-C3, | | | | |
| Class XC, IO, 0.069s, 2043 | | 118,523,823 | | 1,231,537 |
| Citigroup/Deutsche Bank Commercial Mortgage Trust | | | | |
| 144A Ser. 06-CD2, Class X, IO, 0.38s, 2046 | | 76,726,764 | | 455,604 |
| Commercial Mortgage Acceptance Corp. Ser. 97-ML1, | | | | |
| Class A3, 6.57s, 2030 | | 4,937,500 | | 4,947,865 |
| Commercial Mortgage Acceptance Corp. 144A | | | | |
| Ser. 98-C1, Class F, 6.23s, 2031 | | 2,013,000 | | 2,048,892 |
| Commercial Mortgage Pass-Through Certificates | | | | |
| Ser. 04-LB2A, Class A4, 4.715s, 2039 | | 26,622,000 | | 24,976,041 |
| Commercial Mortgage Pass-Through Certificates 144A | | | | |
| FRB Ser. 01-J2A, Class A2F, 5.869s, 2034 | | 1,590,000 | | 1,607,058 |
| Ser. 06-CN2A, Class H, 5.57s, 2019 | | 939,000 | | 922,017 |
| Ser. 06-CN2A, Class J, 5.57s, 2019 | | 751,000 | | 734,572 |
| Ser. 03-LB1A, Class X1, IO, 0.304s, 2038 | | 9,190,318 | | 377,308 |
| Ser. 05-LP5, Class XC, IO, 0.056s, 2043 | | 73,674,328 | | 759,803 |
| Ser. 05-C6, Class XC, IO, 0.030s, 2044 | | 67,445,734 | | 426,797 |
40
| COLLATERALIZED MORTGAGE OBLIGATIONS (15.5%)* continued | | | |
|
| | | Principal amount | | Value |
|
| Countrywide Alternative Loan Trust | | | | |
| Ser. 04-15, Class 1A1, 4.944s, 2034 | $ | 655,028 | $ | 650,525 |
| Ser. 05-24, Class 1AX, IO, 1.221s, 2035 | | 23,100,480 | | 410,472 |
| Ser. 05-24, Class IIAX, IO, 0.201s, 2035 | | 18,223,641 | | 501,843 |
| FRB Ser. 06-OA10, Class XBI, IO, 0.338s, 2046 | | 7,547,997 | | 394,760 |
| IFB Ser. 06-14CB, Class A9, IO, zero %, 2036 | | 1,918,828 | | 10,344 |
| IFB Ser. 06-19CB, Class A2, IO, zero %, 2036 | | 1,280,974 | | 4,403 |
| IFB Ser. 06-20CB, Class A14, IO, zero %, 2036 | | 1,078,568 | | 2,022 |
| IFB Ser. 06-6CB, Class 1A3, IO, zero %, 2036 | | 22,919,392 | | 53,717 |
| Credit Suisse Mortgage Capital Certificates 144A | | | | |
| Ser. 06-C3, Class AX, IO, 0.006s, 2038 | | 103,316,000 | | 113,028 |
| CRESI Finance Limited Partnership 144A | | | | |
| FRB Ser. 06-A, Class D, 6.149s, 2017 | | 232,000 | | 232,000 |
| FRB Ser. 06-A, Class C, 5.949s, 2017 | | 688,000 | | 688,000 |
| Criimi Mae Commercial Mortgage Trust 144A | | | | |
| Ser. 98-C1, Class B, 7s, 2033 | | 3,385,000 | | 3,394,817 |
| Crown Castle Towers, LLC 144A Ser. 05-1A, Class D, | | | | |
| 5.612s, 2035 | | 2,903,000 | | 2,843,352 |
| CS First Boston Mortgage Securities Corp. | | | | |
| Ser. 97-C2, Class F, 7.46s, 2035 | | 1,239,000 | | 1,344,340 |
| Ser. 04-C2, Class A2, 5.416s, 2036 | | 5,070,000 | | 4,976,162 |
| FRB Ser. 04-C3, Class A5, 5.113s, 2036 | | 92, 000 | | 88,499 |
| Ser. 05-C4, Class A5, 5.104s, 2038 | | 2,284,000 | | 2,179,370 |
| Ser. 04-C3, Class A3, 4.302s, 2036 | | 196,000 | | 189,443 |
| CS First Boston Mortgage Securities Corp. 144A | | | | |
| FRB Ser. 05-TFLA, Class J, 6.319s, 2020 | | 518,000 | | 517,996 |
| FRB Ser. 04-TF2A, Class J, 6.319s, 2016 | | 313,000 | | 312,756 |
| FRB Ser. 05-TF2A, Class J, 6.269s, 2020 | | 1,237,000 | | 1,237,000 |
| FRB Ser. 05-TFLA, Class H, 6.119s, 2020 | | 319,000 | | 318,998 |
| FRB Ser. 04-TF2A, Class H, 6.069s, 2019 | | 627,000 | | 626,967 |
| Ser. 01-CK1, Class AY, IO, 0.785s, 2035 | | 67,907,000 | | 1,907,232 |
| Ser. 02-CP3, Class AX, IO, 0.416s, 2035 | | 22,846,649 | | 904,896 |
| Ser. 03-C3, Class AX, IO, 0.436s, 2038 | | 52,157,027 | | 2,155,405 |
| Ser. 05-C2, Class AX, IO, 0.080s, 2037 | | 76,674,495 | | 1,130,105 |
| DLJ Commercial Mortgage Corp. | | | | |
| Ser. 00-CF1, Class A1B, 7.62s, 2033 | | 2,212,000 | | 2,347,113 |
| Ser. 99-CG2, Class B3, 6.1s, 2032 | | 1,752,000 | | 1,745,333 |
| Ser. 99-CG2, Class B4, 6.1s, 2032 | | 2,785,000 | | 2,766,087 |
| Ser. 98-CF2, Class B3, 6.04s, 2031 | | 814,188 | | 817,123 |
| DLJ Mortgage Acceptance Corp. 144A Ser. 97-CF1, | | | | |
| Class A3, 7.76s, 2030 | | 1,000,000 | | 1,004,009 |
| Fannie Mae | | | | |
| IFB Ser. 06-70, Class BS, 14.3s, 2036 | | 491,000 | | 569,532 |
| Ser. 03-W6, Class PT1, 9.731s, 2042 | | 309,538 | | 328,767 |
| Ser. 04-T3, Class PT1, 9.698s, 2044 | | 746,859 | | 843,578 |
| Ser. 02-T12, Class A4, 9 1/2s, 2042 | | 261,983 | | 275,721 |
| Ser. 02-T4, Class A4, 9 1/2s, 2041 | | 1,540,119 | | 1,619,250 |
| Ser. 02-T6, Class A3, 9 1/2s, 2041 | | 531,535 | | 555,507 |
| Ser. 06-20, Class IP, IO, 8s, 2030 | | 1,163,722 | | 246,593 |
| IFB Ser. 05-37, Class SU, 7.66s, 2035 | | 3,226,130 | | 3,389,848 |
41
| COLLATERALIZED MORTGAGE OBLIGATIONS (15.5%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| Fannie Mae | | | | |
| IFB Ser. 06-62, Class PS, 7.59s, 2036 | $ | 1,718,137 | $ | 1,812,769 |
| Ser. 02-26, Class A2, 7 1/2s, 2048 | | 2,457,630 | | 2,552,505 |
| Ser. 05-W3, Class 1A, 7 1/2s, 2045 | | 3,052,360 | | 3,190,110 |
| Ser. 05-W1, Class 1A4, 7 1/2s, 2044 | | 3,157,696 | | 3,291,916 |
| Ser. 04-W12, Class 1A4, 7 1/2s, 2044 | | 760,272 | | 792,709 |
| Ser. 04-W14, Class 2A, 7 1/2s, 2044 | | 354,853 | | 369,842 |
| Ser. 04-W8, Class 3A, 7 1/2s, 2044 | | 3,615,216 | | 3,771,433 |
| Ser. 04-W11, Class 1A4, 7 1/2s, 2044 | | 1,989,307 | | 2,074,305 |
| Ser. 04-W2, Class 5A, 7 1/2s, 2044 | | 4,828,451 | | 5,034,698 |
| Ser. 04-T3, Class 1A4, 7 1/2s, 2044 | | 75,173 | | 78,355 |
| Ser. 04-W9, Class 2A3, 7 1/2s, 2044 | | 2,496,843 | | 2,601,204 |
| Ser. 04-T2, Class 1A4, 7 1/2s, 2043 | | 1,108,286 | | 1,155,294 |
| Ser. 03-W1, Class 2A, 7 1/2s, 2042 | | 565,315 | | 586,232 |
| Ser. 03-W4, Class 4A, 7 1/2s, 2042 | | 345,932 | | 358,831 |
| Ser. 02-T18, Class A4, 7 1/2s, 2042 | | 273,905 | | 284,777 |
| Ser. 03-W3, Class 1A3, 7 1/2s, 2042 | | 1,334,397 | | 1,387,373 |
| Ser. 02-T16, Class A3, 7 1/2s, 2042 | | 2,570,661 | | 2,672,444 |
| Ser. 02-T19, Class A3, 7 1/2s, 2042 | | 1,539,527 | | 1,600,773 |
| Ser. 03-W2, Class 1A3, 7 1/2s, 2042 | | 2,882,191 | | 2,996,937 |
| Ser. 02-W6, Class 2A, 7 1/2s, 2042 | | 2,528,070 | | 2,623,635 |
| Ser. 02-T12, Class A3, 7 1/2s, 2042 | | 431,737 | | 447,737 |
| Ser. 02-W4, Class A5, 7 1/2s, 2042 | | 5,339,447 | | 5,542,423 |
| Ser. 02-W1, Class 2A, 7 1/2s, 2042 | | 2,647,366 | | 2,737,702 |
| Ser. 02-14, Class A2, 7 1/2s, 2042 | | 874,627 | | 907,534 |
| Ser. 01-T10, Class A2, 7 1/2s, 2041 | | 2,587,184 | | 2,679,736 |
| Ser. 02-T4, Class A3, 7 1/2s, 2041 | | 489,294 | | 506,926 |
| Ser. 02-T6, Class A2, 7 1/2s, 2041 | | 6,299,749 | | 6,516,631 |
| Ser. 01-T12, Class A2, 7 1/2s, 2041 | | 2,405,398 | | 2,491,337 |
| Ser. 01-T8, Class A1, 7 1/2s, 2041 | | 2,262,683 | | 2,339,700 |
| Ser. 01-T7, Class A1, 7 1/2s, 2041 | | 6,399,138 | | 6,612,606 |
| Ser. 01-T3, Class A1, 7 1/2s, 2040 | | 387,030 | | 400,226 |
| Ser. 01-T1, Class A1, 7 1/2s, 2040 | | 866,705 | | 897,670 |
| Ser. 99-T2, Class A1, 7 1/2s, 2039 | | 243,370 | | 253,524 |
| Ser. 03-W10, Class 1A1, 7 1/2s, 2032 | | 1,077,392 | | 1,117,704 |
| Ser. 02-T1, Class A3, 7 1/2s, 2031 | | 689,757 | | 715,363 |
| Ser. 00-T6, Class A1, 7 1/2s, 2030 | | 2,132,765 | | 2,211,358 |
| Ser. 01-T5, Class A3, 7 1/2s, 2030 | | 47,405 | | 49,084 |
| Ser. 02-W7, Class A5, 7 1/2s, 2029 | | 1,566,621 | | 1,627,605 |
| Ser. 01-T4, Class A1, 7 1/2s, 2028 | | 4,904,705 | | 5,121,837 |
| Ser. 02-W3, Class A5, 7 1/2s, 2028 | | 1,434,758 | | 1,488,739 |
| IFB Ser. 06-76, Class QB, 7 1/2s, 2036 | | 1,825,000 | | 1,912,507 |
| IFB Ser. 06-48, Class TQ, 7.29s, 2036 | | 3,114,761 | | 3,193,759 |
| IFB Ser. 06-60, Class TK, 7.06s, 2036 | | 881,952 | | 874,579 |
| IFB Ser. 06-30, Class KN, 7.05s, 2036 | | 2,325,543 | | 2,239,044 |
| Ser. 02-26, Class A1, 7s, 2048 | | 1,486,909 | | 1,524,477 |
| Ser. 04-T3, Class 1A3, 7s, 2044 | | 703,097 | | 723,692 |
| Ser. 03-W3, Class 1A2, 7s, 2042 | | 713,674 | | 732,952 |
| Ser. 02-T16, Class A2, 7s, 2042 | | 1,515,079 | | 1,555,908 |
| Ser. 02-14, Class A1, 7s, 2042 | | 141,869 | | 145,362 |
42
| COLLATERALIZED MORTGAGE OBLIGATIONS (15.5%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| Fannie Mae | | | | |
| Ser. 02-T4, Class A2, 7s, 2041 | $ | 898,155 | $ | 920,227 |
| Ser. 01-W3, Class A, 7s, 2041 | | 565,206 | | 579,155 |
| Ser. 04-W1, Class 2A2, 7s, 2033 | | 7,697,548 | | 7,920,667 |
| IFB Ser. 06-63, Class SP, 6.99s, 2036 | | 1,988,356 | | 2,042,566 |
| IFB Ser. 06-70, Class PK, 6.2s, 2036 | | 1,500,000 | | 1,491,753 |
| IFB Ser. 05-74, Class SK, 5.321s, 2035 | | 3,231,511 | | 3,123,933 |
| IFB Ser. 06-60, Class CS, 4.345s, 2036 | | 860,016 | | 770,572 |
| IFB Ser. 05-74, Class CS, 5.211s, 2035 | | 1,999,475 | | 1,924,479 |
| IFB Ser. 06-70, Class US, 5.115s, 2032 | | 2,861,000 | | 2,749,815 |
| IFB Ser. 05-74, Class CP, 5.005s, 2035 | | 1,753,248 | | 1,695,568 |
| IFB Ser. 05-76, Class SA, 5.005s, 2034 | | 2,483,177 | | 2,371,912 |
| IFB Ser. 05-57, Class CD, 4.931s, 2035 | | 1,582,453 | | 1,531,154 |
| IFB Ser. 06-8, Class PK, 4.86s, 2036 | | 3,025,317 | | 2,813,840 |
| IFB Ser. 06-27, Class SP, 4.822s, 2036 | | 2,143,000 | | 2,054,820 |
| IFB Ser. 06-11, Class PS, 4.822s, 2036 | | 2,932,341 | | 2,769,243 |
| IFB Ser. 06-8, Class HP, 4.822s, 2036 | | 2,702,886 | | 2,575,607 |
| IFB Ser. 06-8, Class WK, 4.822s, 2036 | | 4,104,533 | | 3,867,104 |
| IFB Ser. 05-106, Class US, 4.822s, 2035 | | 4,235,484 | | 4,087,599 |
| IFB Ser. 05-99, Class SA, 4.822s, 2035 | | 2,089,404 | | 1,997,446 |
| IFB Ser. 05-114, Class SP, 4.771s, 2036 | | 1,183,344 | | 1,097,552 |
| IFB Ser. 05-45, Class DA, 4.675s, 2035 | | 3,282,602 | | 3,120,708 |
| IFB Ser. 05-74, Class DM, 4.638s, 2035 | | 3,991,183 | | 3,779,879 |
| IFB Ser. 05-45, Class DC, 4.565s, 2035 | | 2,560,394 | | 2,423,511 |
| IFB Ser. 06-46, Class SW, 4.455s, 2034 | | 3,210,037 | | 2,955,240 |
| IFB Ser. 05-57, Class DC, 4.274s, 2034 | | 2,849,062 | | 2,738,288 |
| IFB Ser. 05-45, Class PC, 4.095s, 2034 | | 1,525,147 | | 1,459,084 |
| IFB Ser. 05-95, Class CP, 3.896s, 2035 | | 331,438 | | 313,523 |
| IFB Ser. 05-95, Class OP, 3.722s, 2035 | | 1,046,000 | | 903,885 |
| IFB Ser. 05-106, Class JC, 3.426s, 2035 | | 771,362 | | 657,162 |
| IFB Ser. 05-93, Class AS, 3.412s, 2034 | | 910,393 | | 793,998 |
| IFB Ser. 05-83, Class QP, 3.393s, 2034 | | 669,522 | | 592,696 |
| IFB Ser. 02-89, Class S, IO, 2.815s, 2033 | | 3,622,516 | | 319,234 |
| IFB Ser. 97-44, Class SN, IO, 2.93s, 2023 | | 1,379,805 | | 119,215 |
| IFB Ser. 02-36, Class QH, IO, 2.665s, 2029 | | 618,631 | | 7,748 |
| IFB Ser. 03-66, Class SA, IO, 2.265s, 2033 | | 3,975,333 | | 289,456 |
| Ser. 03-W12, Class 2, IO, 2.234s, 2043 | | 10,316,293 | | 500,378 |
| IFB Ser. 03-48, Class S, IO, 2.165s, 2033 | | 1,740,226 | | 125,079 |
| IFB Ser. 02-92, Class SB, IO, 1.965s, 2030 | | 1,309,854 | | 78,531 |
| IFB Ser. 05-56, Class TP, 1.995s, 2033 | | 745,313 | | 639,645 |
| Ser. 03-W10, Class 1, IO, 1.956s, 2043 | | 32,197,153 | | 1,437,076 |
| Ser. 03-W10, Class 3, IO, 1.929s, 2043 | | 8,072,387 | | 368,382 |
| IFB Ser. 05-113, Class DI, IO, 1.845s, 2036 | | 30,847,733 | | 1,654,338 |
| IFB Ser. 04-24, Class CS, IO, 1.765s, 2034 | | 5,060,912 | | 331,332 |
| IFB Ser. 03-122, Class SA, IO, 1.715s, 2028 | | 7,070,547 | | 323,176 |
| IFB Ser. 03-122, Class SJ, IO, 1.715s, 2028 | | 7,522,810 | | 352,034 |
| IFB Ser. 04-65, Class ST, IO, 1.665s, 2034 | | 5,455,953 | | 283,028 |
| IFB Ser. 04-51, Class S0, IO, 1.665s, 2034 | | 983,700 | | 47,648 |
| IFB Ser. 04-60, Class SW, IO, 1.665s, 2034 | | 9,511,031 | | 604,921 |
| IFB Ser. 05-65, Class KI, IO, 1.615s, 2035 | | 20,380,507 | | 1,095,735 |
43
| COLLATERALIZED MORTGAGE OBLIGATIONS (15.5%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| Fannie Mae | | | | |
| Ser. 03-W8, Class 12, IO, 1.638s, 2042 | $ | 32,477,559 | $ | 1,199,022 |
| IFB Ser. 06-65, Class DS, IO, 1.265s, 2036 | | 4,399,336 | | 217,217 |
| IFB Ser. 05-42, Class SA, IO, 1.415s, 2035 | | 7,933,241 | | 400,037 |
| Ser. 03-W3, Class 2IO2, IO, 1.456s, 2042 | | 512,732 | | 448 |
| IFB Ser. 05-73, Class SI, IO, 1.365s, 2035 | | 1,962,786 | | 96,428 |
| IFB Ser. 05-17, Class ES, IO, 1.365s, 2035 | | 4,065,415 | | 238,301 |
| IFB Ser. 05-17, Class SY, IO, 1.365s, 2035 | | 1,878,287 | | 109,629 |
| IFB Ser. 05-82, Class SW, IO, 1.345s, 2035 | | 7,293,911 | | 302,868 |
| IFB Ser. 05-82, Class SY, IO, 1.345s, 2035 | | 9,281,272 | | 420,757 |
| IFB Ser. 05-45, Class SR, IO, 1.335s, 2035 | | 12,743,775 | | 591,580 |
| IFB Ser. 05-47, Class SW, IO, 1.335s, 2035 | | 10,372,901 | | 420,994 |
| IFB Ser. 05-95, Class CI, IO, 1.315s, 2035 | | 4,403,152 | | 237,264 |
| IFB Ser. 05-84, Class SG, IO, 1.315s, 2035 | | 7,683,830 | | 406,667 |
| IFB Ser. 05-87, Class SG, IO, 1.315s, 2035 | | 9,683,822 | | 443,660 |
| IFB Ser. 05-89, Class S, IO, 1.315s, 2035 | | 13,303,961 | | 600,297 |
| IFB Ser. 05-69, Class AS, IO, 1.315s, 2035 | | 1,997,220 | | 98,925 |
| IFB Ser. 05-54, Class SA, IO, 1.315s, 2035 | | 8,944,800 | | 377,359 |
| IFB Ser. 05-23, Class SG, IO, 1.315s, 2035 | | 6,107,606 | | 325,421 |
| IFB Ser. 05-29, Class SX, IO, 1.315s, 2035 | | 7,319,989 | | 389,977 |
| IFB Ser. 05-57, Class CI, IO, 1.315s, 2035 | | 5,397,874 | | 261,765 |
| IFB Ser. 05-17, Class SA, IO, 1.315s, 2035 | | 5,554,945 | | 313,191 |
| IFB Ser. 05-17, Class SE, IO, 1.315s, 2035 | | 5,968,690 | | 333,967 |
| IFB Ser. 05-57, Class DI, IO, 1.315s, 2035 | | 13,052,137 | | 599,562 |
| IFB Ser. 04-92, Class S, IO, 1.315s, 2034 | | 6,208,360 | | 312,361 |
| IFB Ser. 05-104, Class SI, IO, 1.315s, 2033 | | 10,061,928 | | 519,246 |
| IFB Ser. 05-83, Class QI, IO, 1.305s, 2035 | | 1,109,129 | | 66,996 |
| IFB Ser. 06-61, Class SE, IO, 1.165s, 2036 | | 7,439,331 | | 249,887 |
| IFB Ser. 05-92, Class SC, IO, 1.295s, 2035 | | 10,316,046 | | 535,969 |
| IFB Ser. 05-73, Class SD, IO, 1.295s, 2035 | | 4,959,359 | | 285,549 |
| IFB Ser. 06-20, Class PI, IO, 1.295s, 2030 | | 9,991,649 | | 350,925 |
| IFB Ser. 05-83, Class SL, IO, 1.285s, 2035 | | 20,180,776 | | 923,193 |
| IFB Ser. 06-20, Class IG, IO, 1.265s, 2036 | | 25,795,862 | | 1,079,101 |
| IFB Ser. 06-8, Class NS, IO, 1.245s, 2036 | | 12,427,695 | | 627,760 |
| Ser. 03-W6, Class 11, IO, 1.286s, 2035 | | 2,757,367 | | 5,661 |
| IFB Ser. 06-44, Class IS, IO, 1.215s, 2036 | | 4,946,105 | | 234,940 |
| IFB Ser. 06-45, Class SM, IO, 1.215s, 2036 | | 6,258,806 | | 287,517 |
| IFB Ser. 06-42, Class IB, IO, 1.205s, 2036 | | 5,162,080 | | 207,309 |
| IFB Ser. 06-20, Class IB, IO, 1.205s, 2036 | | 11,055,500 | | 443,990 |
| IFB Ser. 05-95, Class OI, IO, 1.205s, 2035 | | 623,372 | | 37,419 |
| IFB Ser. 06-53, Class US, IO, 1.195s, 2036 | | 7,473,815 | | 348,908 |
| IFB Ser. 06-42, Class CI, IO, 1.165s, 2036 | | 20,956,205 | | 963,080 |
| IFB Ser. 04-72, Class SB, IO, 1.115s, 2034 | | 4,005,315 | | 145,193 |
| IFB Ser. 03-112, Class SA, IO, 1.115s, 2028 | | 3,801,904 | | 112,584 |
| IFB Ser. 06-58, Class SI, IO, 1.155s, 2036 | | 7,116,475 | | 334,448 |
| Ser. 03-W17, Class 12, IO, 1.156s, 2033 | | 9,846,528 | | 286,688 |
| Ser. 03-T2, Class 2, IO, 0.830s, 2042 | | 47,883,333 | | 846,781 |
| IFB Ser. 05-67, Class BS, IO, 0.765s, 2035 | | 5,208,361 | | 161,134 |
| IFB Ser. 05-74, Class SE, IO, 0.715s, 2035 | | 17,704,398 | | 443,095 |
| IFB Ser. 05-82, Class SI, IO, 0.715s, 2035 | | 16,508,622 | | 410,136 |
44
| COLLATERALIZED MORTGAGE OBLIGATIONS (15.5%)* continued | | | |
|
| | | Principal amount | | Value |
|
| Fannie Mae | | | | |
| IFB Ser. 05-87, Class SE, IO, 0.665s, 2035 | $ | 38,787,216 | $ | 945,289 |
| Ser. 03-W3, Class 2IO1, IO, 0.685s, 2042 | | 4,247,558 | | 65,879 |
| Ser. 03-W6, Class 51, IO, 0.682s, 2042 | | 13,694,523 | | 256,713 |
| IFB Ser. 05-58, Class IK, IO, 0.615s, 2035 | | 4,317,620 | | 165,540 |
| IFB Ser. 04-54, Class SW, IO, 0.615s, 2033 | | 2,341,303 | | 55,270 |
| Ser. 01-T12, Class IO, 0.0569s, 2041 | | 28,544,903 | | 319,980 |
| Ser. 03-W2, Class 1, IO, 0.472s, 2042 | | 25,832,199 | | 240,213 |
| Ser. 02-T4, IO, 0.45s, 2041 | | 10,299,980 | | 87,965 |
| Ser. 03-W3, Class 1, IO, 0.439s, 2042 | | 33,519,543 | | 309,235 |
| Ser. 02-T1, Class IO, IO, 0.428s, 2031 | | 26,042,070 | | 230,967 |
| Ser. 03-W6, Class 3, IO, 0.365s, 2042 | | 18,471,370 | | 202,026 |
| Ser. 03-W6, Class 23, IO, 0.352s, 2042 | | 20,118,433 | | 212,679 |
| Ser. 01-79, Class BI, IO, 0.331s, 2045 | | 5,261,586 | | 34,884 |
| Ser. 03-W4, Class 3A, IO, 0.328s, 2042 | | 17,602,339 | | 156,371 |
| Ser. 03-W8, Class 11, IO, 0.03s, 2042 | | 7,216,101 | | 512 |
| Ser. 03-W6, Class 21, IO, 0.004s, 2042 | | 4,545,374 | | 70 |
| Ser. 05-113, Class DO, Principal Only (PO), zero %, 2036 | | 4,741,048 | | 3,728,161 |
| Ser. 363, Class 1, PO, zero %, 2035 | | 16,530,604 | | 11,670,425 |
| Ser. 361, Class 1, PO, zero %, 2035 | | 9,370,174 | | 7,121,958 |
| Ser. 05-65, Class KO, PO, zero %, 2035 | | 729,933 | | 566,773 |
| Ser. 04-38, Class AO, PO, zero %, 2034 | | 4,876,207 | | 3,456,012 |
| Ser. 342, Class 1, PO, zero %, 2033 | | 2,113,246 | | 1,577,671 |
| Ser. 02-82, Class TO, PO, zero %, 2032 | | 1,402,745 | | 1,069,812 |
| Ser. 04-61, Class CO, PO, zero %, 2031 | | 3,065,000 | | 2,278,157 |
| Ser. 05-38, PO, zero %, 2031 | | 431,000 | | 305,875 |
| FRB Ser. 05-117, Class GF, zero %, 2036 | | 945,255 | | 890,312 |
| FRB Ser. 05-65, Class ER, zero %, 2035 | | 3,009,968 | | 3,097,141 |
| FRB Ser. 05-57, Class UL, zero %, 2035 | | 3,131,839 | | 3,264,944 |
| FRB Ser. 05-36, Class QA, zero %, 2035 | | 577,538 | | 581,202 |
| FRB Ser. 05-65, Class CU, zero %, 2034 | | 425,077 | | 600,638 |
| FRB Ser. 05-81, Class DF, zero %, 2033 | | 419,549 | | 446,426 |
| Federal Home Loan Mortgage Corp. | | | | |
| Structured Pass-Through Securities | | | | |
| Ser. T-42, Class A6, 9 1/2s, 2042 | | 280,032 | | 294,565 |
| Ser. T-60, Class 1A3, 7 1/2s, 2044 | | 5,405,409 | | 5,635,009 |
| Ser. T-59, Class 1A3, 7 1/2s, 2043 | | 3,794,365 | | 3,962,591 |
| Ser. T-58, Class 4A, 7 1/2s, 2043 | | 721,619 | | 749,562 |
| Ser. T-57, Class 1A3, 7 1/2s, 2043 | | 4,051,851 | | 4,210,440 |
| Ser. T-51, Class 2A, 7 1/2s, 2042 | | 764,896 | | 792,432 |
| Ser. T-42, Class A5, 7 1/2s, 2042 | | 1,175,938 | | 1,213,804 |
| Ser. T-41, Class 3A, 7 1/2s, 2032 | | 3,422,959 | | 3,547,280 |
| Ser. T-60, Class 1A2, 7s, 2044 | | 5,222,966 | | 5,373,586 |
| Ser. T-41, Class 2A, 7s, 2032 | | 132,530 | | 135,697 |
| Ser. T-56, Class A, IO, 0.621s, 2043 | | 12,246,534 | | 131,981 |
| Ser. T-56, Class 3, IO, 0.358s, 2043 | | 14,978,820 | | 154,642 |
| Ser. T-56, Class 1, IO, 0.279s, 2043 | | 18,535,731 | | 127,439 |
| Ser. T-56, Class 2, IO, 0.039s, 2043 | | 16,840,994 | | 43,499 |
| FFCA Secured Lending Corp. 144A Ser. 00-1, Class A2, | | | | |
| 7.77s, 2027 | | 5,737,293 | | 6,051,381 |
45
| COLLATERALIZED MORTGAGE OBLIGATIONS (15.5%)* continued | | | |
|
| | | Principal amount | | Value |
|
| First Union National Bank-Bank of America Commercial | | | | |
| Mortgage 144A Ser. 01-C1, Class 3, IO, 1.688s, 2033 | $ | 31,305,173 | $ | 1,926,759 |
| First Union-Lehman Brothers Commercial | | | | |
| Mortgage Trust II | | | | |
| Ser. 97-C2, Class F, 7 1/2s, 2029 | | 2,726,000 | | 2,931,203 |
| Ser. 97-C2, Class G, 7 1/2s, 2029 | | 832,000 | | 901,995 |
| Ser. 97-C1, Class A3, 7.38s, 2029 | | 1,396,839 | | 1,399,187 |
| First Union-Lehman Brothers-Bank of America 144A | | | | |
| Ser. 98-C2, Class G, 7s, 2035 | | 3,410,000 | | 3,571,941 |
| Freddie Mac | | | | |
| IFB Ser. 2990, Class LB, 3.224s, 2034 | | 3,129,690 | | 2,732,118 |
| IFB Ser. 3153, Class UK, 7.207s, 2036 | | 718,645 | | 755,570 |
| Ser. 3114, Class BL, IO, 7 1/2s, 2030 | | 482,716 | | 93,759 |
| IFB Ser. 3153, Class SX, 6.406s, 2036 | | 1,012,947 | | 1,024,502 |
| IFB Ser. 2963, Class SV, 7 1/8s, 2034 | | 904,000 | | 905,095 |
| IFB Ser. 3182, Class PS, 7 1/8s, 2032 | | 2,651,000 | | 2,767,920 |
| IFB Ser. 3081, Class DC, 5.001s, 2035 | | 1,670,136 | | 1,552,047 |
| IFB Ser. 3153, Class UT, 4.331s, 2036 | | 584,538 | | 528,355 |
| IFB Ser. 3114, Class GK, 4.925s, 2036 | | 1,052,509 | | 982,549 |
| IFB Ser. 2976, Class LC, 4.735s, 2035 | | 1,255,029 | | 1,173,034 |
| IFB Ser. 2976, Class KL, 4.698s, 2035 | | 2,958,553 | | 2,757,130 |
| IFB Ser. 2990, Class DP, 4.588s, 2034 | | 2,591,661 | | 2,435,302 |
| IFB Ser. 2979, Class AS, 4.588s, 2034 | | 746,592 | | 701,096 |
| IFB Ser. 3072, Class SA, 4.441s, 2035 | | 639,143 | | 573,456 |
| IFB Ser. 3072, Class SM, 4.111s, 2035 | | 1,029,771 | | 910,502 |
| IFB Ser. 3072, Class SB, 3.965s, 2035 | | 972,081 | | 854,444 |
| IFB Ser. 3065, Class DC, 3.754s, 2035 | | 2,511,193 | | 2,190,875 |
| IFB Ser. 3050, Class SA, 3.453s, 2034 | | 1,779,335 | | 1,548,446 |
| IFB Ser. 2927, Class SI, IO, 3.131s, 2035 | | 4,732,968 | | 492,622 |
| IFB Ser. 2990, Class WP, 3.177s, 2035 | | 2,034,408 | | 1,868,381 |
| IFB Ser. 2538, Class SH, IO, 2.181s, 2032 | | 704,010 | | 45,350 |
| IFB Ser. 2828, Class GI, IO, 2.131s, 2034 | | 5,207,022 | | 466,097 |
| IFB Ser. 2869, Class SH, IO, 1.931s, 2034 | | 2,701,463 | | 148,958 |
| IFB Ser. 2869, Class JS, IO, 1.881s, 2034 | | 12,880,106 | | 696,588 |
| IFB Ser. 2882, Class SL, IO, 1.831s, 2034 | | 2,715,002 | | 184,073 |
| IFB Ser. 2815, Class PT, IO, 1.681s, 2032 | | 5,119,253 | | 299,874 |
| IFB Ser. 2828, Class TI, IO, 1.681s, 2030 | | 2,444,205 | | 136,723 |
| IFB Ser. 3033, Class SF, IO, 1.431s, 2035 | | 3,676,108 | | 130,961 |
| IFB Ser. 3028, Class ES, IO, 1.381s, 2035 | | 12,719,567 | | 773,617 |
| IFB Ser. 2922, Class SE, IO, 1.381s, 2035 | | 7,055,370 | | 306,468 |
| IFB Ser. 3045, Class DI, IO, 1.361s, 2035 | | 23,787,513 | | 942,409 |
| IFB Ser. 3136, Class NS, IO, 1.331s, 2036 | | 6,725,485 | | 348,715 |
| IFB Ser. 3118, Class SD, IO, 1.331s, 2036 | | 11,994,058 | | 457,273 |
| IFB Ser. 3054, Class CS, IO, 1.331s, 2035 | | 2,787,749 | | 119,352 |
| IFB Ser. 3107, Class DC, IO, 1.331s, 2035 | | 11,952,485 | | 721,668 |
| IFB Ser. 3129, Class SP, IO, 1.331s, 2035 | | 4,894,593 | | 218,730 |
| IFB Ser. 3066, Class SI, IO, 1.331s, 2035 | | 8,196,587 | | 479,475 |
| IFB Ser. 2924, Class SA, IO, 1.331s, 2035 | | 10,020,122 | | 407,067 |
| IFB Ser. 2927, Class ES, IO, 1.331s, 2035 | | 3,818,335 | | 164,588 |
| IFB Ser. 2950, Class SM, IO, 1.331s, 2016 | | 5,280,012 | | 261,526 |
46
| COLLATERALIZED MORTGAGE OBLIGATIONS (15.5%)* continued | | | |
|
| | | Principal amount | | Value |
|
| Freddie Mac | | | | |
| IFB Ser. 3031, Class BI, IO, 1.321s, 2035 | $ | 2,370,905 | $ | 147,900 |
| IFB Ser. 3067, Class SI, IO, 1.281s, 2035 | | 9,535,635 | | 579,332 |
| IFB Ser. 2986, Class WS, IO, 1.281s, 2035 | | 2,952,907 | | 87,336 |
| IFB Ser. 2962, Class BS, IO, 1.281s, 2035 | | 15,568,926 | | 697,798 |
| IFB Ser. 3114, Class TS, IO, 1.281s, 2030 | | 18,036,761 | | 735,657 |
| IFB Ser. 3114, Class BI, IO, 1.281s, 2030 | | 7,106,650 | | 269,004 |
| IFB Ser. 3174, Class BS, IO, 1.151s, 2036 | | 4,952,532 | | 184,700 |
| IFB Ser. 3128, Class JI, IO, 1.261s, 2036 | | 7,514,035 | | 406,584 |
| IFB Ser. 2990, Class LI, IO, 1.261s, 2034 | | 4,606,282 | | 259,734 |
| IFB Ser. 3065, Class DI, IO, 1.251s, 2035 | | 1,827,181 | | 104,908 |
| IFB Ser. 3145, Class GI, IO, 1.231s, 2036 | | 6,065,339 | | 348,070 |
| IFB Ser. 3114, Class GI, IO, 1.231s, 2036 | | 2,558,253 | | 148,695 |
| IFB Ser. 3081, Class DI, IO, 1.111s, 2035 | | 2,238,306 | | 104,623 |
| IFB Ser. 2988, Class AS, IO, 0.831s, 2035 | | 1,452,103 | | 41,423 |
| IFB Ser. 3016, Class SP, IO, 0.741s, 2035 | | 2,392,063 | | 65,035 |
| IFB Ser. 3016, Class SQ, IO, 0.741s, 2035 | | 5,453,683 | | 156,793 |
| IFB Ser. 2937, Class SY, IO, 0.731s, 2035 | | 2,272,046 | | 59,641 |
| IFB Ser. 2957, Class SW, IO, 0.631s, 2035 | | 12,509,778 | | 318,608 |
| IFB Ser. 2815, Class S, IO, 0.631s, 2032 | | 5,518,802 | | 132,783 |
| Ser. 236, PO, zero %, 2036 | | 9,434,350 | | 7,035,829 |
| Ser. 3045, Class DO, PO, zero %, 2035 | | 1,876,394 | | 1,432,231 |
| Ser. 231, PO, zero %, 2035 | | 79,860,797 | | 57,024,677 |
| Ser. 228, PO, zero %, 2035 | | 18,773,499 | | 13,971,920 |
| FRB Ser. 3022, Class TC, zero %, 2035 | | 448,281 | | 519,095 |
| FRB Ser. 3003, Class XF, zero %, 2035 | | 2,768,654 | | 2,923,092 |
| FRB Ser. 2986, Class XT, zero %, 2035 | | 271,476 | | 294,296 |
| FRB Ser. 2958, Class FL, zero %, 2035 | | 1,154,406 | | 1,067,415 |
| FRB Ser. 3046, Class WF, zero %, 2035 | | 648,297 | | 644,632 |
| FRB Ser. 3054, Class XF, zero %, 2034 | | 274,154 | | 282,978 |
| GE Capital Commercial Mortgage Corp. Ser. 04-C2, | | | | |
| Class A4, 4.893s, 2040 | | 6,296,000 | | 5,959,676 |
| GE Capital Commercial Mortgage Corp. 144A | | | | |
| Ser. 05-C2, Class XC, IO, 0.062s, 2043 | | 88,501,797 | | 738,677 |
| Ser. 05-C3, Class XC, IO, 0.035s, 2045 | | 232,044,079 | | 1,205,469 |
| General Growth Properties-Mall Properties Trust 144A | | | | |
| FRB Ser. 01-C1A, Class D3, 7.619s, 2014 | | 1,557,210 | | 1,558,670 |
| GMAC Commercial Mortgage Securities, Inc. | | | | |
| Ser. 99-C3, Class F, 7.836s, 2036 | | 592,000 | | 629,989 |
| Ser. 04-C2, Class A4, 5.301s, 2038 | | 10,233,000 | | 9,975,139 |
| Ser. 03-C2, Class A2, 5.287s, 2040 | | 6,249,000 | | 6,191,709 |
| Ser. 97-C1, Class X, IO, 1.501s, 2029 | | 13,758,153 | | 422,863 |
| Ser. 05-C1, Class X1, IO, 0.1106s, 2043 | | 99,281,000 | | 1,776,236 |
| GMAC Commercial Mortgage Securities, Inc. 144A | | | | |
| Ser. 99-C3, Class G, 6.974s, 2036 | | 1,614,303 | | 1,611,806 |
| Ser. 06-C1, Class XC, IO, 0.032s, 2045 | | 128,536,757 | | 868,651 |
| Government National Mortgage Association | | | | |
| IFB Ser. 06-34, Class SA, 7.56s, 2036 | | 426,000 | | 419,354 |
| IFB Ser. 05-7, Class JM, 4.868s, 2034 | | 3,281,991 | | 3,143,397 |
| IFB Ser. 05-66, Class SP, 2.938s, 2035 | | 1,506,783 | | 1,304,228 |
47
| COLLATERALIZED MORTGAGE OBLIGATIONS (15.5%)* continued | | | |
|
| | | Principal amount | | Value |
|
| Government National Mortgage Association | | | | |
| IFB Ser. 04-86, Class SW, IO, 1.372s, 2034 | $ | 6,149,041 | $ | 300,014 |
| IFB Ser. 06-26, Class S, IO, 1.122s, 2036 | | 19,591,539 | | 844,355 |
| IFB Ser. 05-65, Class SI, IO, 0.972s, 2035 | | 6,205,214 | | 226,192 |
| IFB Ser. 05-68, Class SI, IO, 0.922s, 2035 | | 20,784,791 | | 824,479 |
| IFB Ser. 06-14, Class S, IO, 0.872s, 2036 | | 5,730,130 | | 191,176 |
| IFB Ser. 05-51, Class SJ, IO, 0.822s, 2035 | | 6,166,565 | | 227,833 |
| IFB Ser. 05-68, Class S, IO, 0.822s, 2035 | | 12,161,282 | | 436,313 |
| IFB Ser. 05-28, Class SA, IO, 0.822s, 2035 | | 15,242,672 | | 466,412 |
| Ser. 98-2, Class EA, PO, zero %, 2028 | | 141,763 | | 107,613 |
| Greenwich Capital Commercial Funding Corp. | | | | |
| Ser. 05-GG5, Class XC, IO, 0.037s, 2037 | | 184,999,693 | | 816,600 |
| Greenwich Capital Commercial Funding Corp. 144A | | | | |
| Ser. 05-GG3, Class XC, IO, 0.070s, 2042 | | 127,160,297 | | 2,066,355 |
| GS Mortgage Securities Corp. II | | | | |
| Ser. 04-GG2, Class A6, 5.396s, 2038 | | 3,745,000 | | 3,670,991 |
| Ser. 05-GG4, Class A4, 4.761s, 2039 | | 197,000 | | 184,057 |
| Ser. 05-GG4, Class A4B, 4.732s, 2039 | | 835,000 | | 779,316 |
| GS Mortgage Securities Corp. II 144A | | | | |
| FRB Ser. 03-FL6A, Class L, 8.619s, 2015 | | 565,000 | | 568,178 |
| Ser. 98-C1, Class F, 6s, 2030 | | 1,286,000 | | 1,276,545 |
| Ser. 03-C1, Class X1, IO, 0.266s, 2040 | | 29,267,099 | | 530,227 |
| Ser. 04-C1, Class X1, IO, 0.107s, 2028 | | 36,475,874 | | 300,641 |
| Ser. 05-GG4, Class XC, IO, 0.104s, 2039 | | 108,337,614 | | 2,073,650 |
| Ser. 06-GG6, Class XC, IO, 0.033s, 2038 | | 53,006,138 | | 180,138 |
| JP Morgan Commercial Mortgage Finance Corp. | | | | |
| Ser. 97-C5, Class F, 7.561s, 2029 | | 911,000 | | 986,953 |
| JPMorgan Chase Commercial Mortgage Securities Corp. | | | | |
| Ser. 06-CB14, Class A4, 5.481s, 2044 | | 8,500,000 | | 8,351,505 |
| Ser. 06-CB14, Class AM, 5.446s, 2044 | | 5,502,000 | | 5,409,981 |
| Ser. 06-LDP7, Class X, IO, 0.009s, 2045 | | 229,929,735 | | 197,597 |
| FRB Ser. 04-PNC1, Class A4, 5.374s, 2041 | | 75,000 | | 73,826 |
| Ser. 05-CB11, Class A4, 5.335s, 2037 | | 6,441,000 | | 6,481,256 |
| Ser. 05-CB12, Class A4, 4.895s, 2037 | | 198,000 | | 186,790 |
| Ser. 04-C3, Class A5, 4.878s, 2042 | | 189,000 | | 178,340 |
| Ser. 05-LDP2, Class AM, 4.78s, 2042 | | 1,990,000 | | 1,857,276 |
| JPMorgan Chase Commercial Mortgage Securities Corp. 144A | | | | |
| Ser. 04-FL1A, Class X1A, IO, 1.968s, 2019 | | 2,387,941 | | 7,889 |
| Ser. 03-ML1A, Class X1, IO, 0.329s, 2039 | | 49,549,881 | | 1,811,668 |
| Ser. 05-LDP1, Class X1, IO, 0.053s, 2046 | | 37,862,990 | | 354,966 |
| Ser. 05-CB12, Class X1, IO, 0.054s, 2037 | | 55,941,498 | | 596,563 |
| Ser. 05-LDP2, Class X1, IO, 0.078s, 2042 | | 169,601,608 | | 2,795,777 |
| Ser. 05-LDP4, Class X1, IO, 0.042s, 2042 | | 111,645,322 | | 1,037,953 |
| Ser. 06-LDP6, Class X1, IO, 0.036s, 2043 | | 68,771,084 | | 368,033 |
| Ser. 05-LDP3, Class X1, IO, 0.036s, 2042 | | 82,656,323 | | 619,922 |
| Ser. 05-LDP5, Class X1, IO, 0.034s, 2044 | | 347,243,691 | | 1,627,705 |
| LB Commercial Conduit Mortgage Trust 144A | | | | |
| Ser. 99-C1, Class F, 6.41s, 2031 | | 715,303 | | 716,545 |
| Ser. 99-C1, Class G, 6.41s, 2031 | | 765,731 | | 706,539 |
48
| COLLATERALIZED MORTGAGE OBLIGATIONS (15.5%)* continued | | | |
|
| | | Principal amount | | Value |
|
| LB Commercial Conduit Mortgage Trust 144A | | | | |
| Ser. 98-C4, Class G, 5.6s, 2035 | $ | 634,000 | $ | 617,093 |
| Ser. 98-C4, Class H, 5.6s, 2035 | | 1,074,000 | | 1,017,657 |
| LB-UBS Commercial Mortgage Trust | | | | |
| Ser. 01-C3, Class A2, 6.365s, 2028 | | 67,000 | | 69,018 |
| Ser. 05-C7, Class AM, 5.263s, 2040 | | 1,044,000 | | 1,005,969 |
| Ser. 04-C7, Class A6, 4.786s, 2029 | | 1,733,000 | | 1,629,397 |
| LB-UBS Commercial Mortgage Trust 144A | | | | |
| Ser. 05-C2, Class XCL, IO, 0.113s, 2040 | | 134,873,429 | | 1,423,479 |
| Ser. 05-C3, Class XCL, IO, 0.128s, 2040 | | 67,567,809 | | 1,439,422 |
| Ser. 05-C5, Class XCL, IO, 0.083s, 2020 | | 70,301,565 | | 1,000,858 |
| Ser. 05-C7, Class XCL, IO, 0.073s, 2040 | | 84,278,331 | | 785,719 |
| Ser. 06-C1, Class XCL, IO, 0.062s, 2041 | | 67,131,778 | | 726,269 |
| Lehman Brothers Floating Rate Commercial Mortgage Trust 144A | | | | |
| FRB Ser. 03-LLFA, Class L, 9.109s, 2014 | | 1,704,000 | | 1,705,753 |
| FRB Ser. 04-LLFA, Class H, 6.319s, 2017 | | 733,000 | | 735,978 |
| FRB Ser. 05-LLFA, 6.169s, 2018 | | 423,000 | | 423,000 |
| Lehman Mortgage Trust | | | | |
| IFB Ser. 06-3, Class 1A7, IO, 0.015s, 2036 | | 1,308,718 | | 5,112 |
| IFB Ser. 06-4, Class 1A3, IO, 0.05s, 2036 | | 2,022,000 | | 12,953 |
| Merrill Lynch Mortgage Investors, Inc. Ser. 98-C3, | | | | |
| Class E, 6.94s, 2030 | | 644,000 | | 677,385 |
| Merrill Lynch Mortgage Trust | | | | |
| FRB Ser. 04-BPC1, Class A5, 4.855s, 2041 | | 193,000 | | 182,122 |
| FRB Ser. 05-MCP1, Class A4, 4.747s, 2043 | | 187,000 | | 174,754 |
| Ser. 05-MCP1, Class XC, IO, 0.047s, 2043 | | 71,860,990 | | 954,404 |
| Merrill Lynch Mortgage Trust 144A Ser. 05-LC1, | | | | |
| Class X, IO, 0.067s, 2044 | | 37,910,165 | | 368,736 |
| Merrill Lynch/Countrywide Commercial Mortgage Trust | | | | |
| 144A Ser. 06-1, Class X, IO, 0.039s, 2039 | | 30,420,000 | | 175,866 |
| Mezz Cap Commercial Mortgage Trust 144A | | | | |
| Ser. 04-C1, Class X, IO, 7.847s, 2037 | | 3,199,864 | | 1,162,576 |
| Ser. 04-C2, Class X, IO, 2.593s, 2040 | | 2,522,174 | | 842,761 |
| Ser. 05-C3, Class X, IO, 2.279s, 2044 | | 2,887,851 | | 924,564 |
| Morgan Stanley Capital 144A | | | | |
| Ser. 05-RR6, Class X, IO, 1.639s, 2043 | | 10,637,157 | | 692,479 |
| Ser. 05-HQ6, Class X1, IO, 0.044s, 2042 | | 76,956,910 | | 811,665 |
| Morgan Stanley Capital I | | | | |
| Ser. 05-HQ6, Class A4A, 4.989s, 2042 | | 3,963,000 | | 3,763,681 |
| Ser. 04-HQ4, Class A7, 4.97s, 2040 | | 2,047,000 | | 1,951,437 |
| Morgan Stanley Capital I 144A | | | | |
| Ser. 98-HF1, Class F, 7.18s, 2030 | | 482,000 | | 491,072 |
| Ser. 04-RR, Class F5, 6s, 2039 | | 1,000,000 | | 840,586 |
| Ser. 04-RR, Class F6, 6s, 2039 | | 1,700,000 | | 1,379,418 |
| Ser. 05-HQ5, Class X1, IO, 0.076s, 2042 | | 52,452,334 | | 407,712 |
| Morgan Stanley Dean Witter Capital I Ser. 00-LIF2, | | | | |
| Class A1, 6.96s, 2033 | | 304,850 | | 308,173 |
| Mortgage Capital Funding, Inc. FRB Ser. 98-MC2, | | | | |
| Class E, 7.095s, 2030 | | 1,020,000 | | 1,041,425 |
| Permanent Financing PLC FRB Ser. 8, Class 2C, 5.7s, | | | | |
| 2042 (United Kingdom) | | 2,054,000 | | 2,053,462 |
49
| COLLATERALIZED MORTGAGE OBLIGATIONS (15.5%)* continued | | | |
|
| | | Principal amount | | Value |
|
| PNC Mortgage Acceptance Corp. 144A | | | | |
| Ser. 99-CM1, Class B3, 7.1s, 2032 | $ | 3,870,000 | $ | 3,980,130 |
| Ser. 00-C1, Class J, 6 5/8s, 2010 | | 456,000 | | 426,027 |
| Ser. 00-C2, Class J, 6.22s, 2033 | | 998,000 | | 1,002,579 |
| Provident Funding Mortgage Loan Trust FRB Ser. 05-2, | | | | |
| Class 1A1A, 4.405s, 2035 | | 3,402,555 | | 3,352,580 |
| Pure Mortgages 144A | | | | |
| FRB Ser. 04-1A, Class F, 8.714s, 2034 (Ireland) | | 2,645,000 | | 2,660,473 |
| Ser. 04-1A, Class E, 6.464s, 2034 (Ireland) | | 1,041,000 | | 1,041,260 |
| Salomon Brothers Mortgage Securities VII 144A | | | | |
| Ser. 03-CDCA, Class X3CD, IO, 1.43s, 2015 | | 3,824,595 | | 10,992 |
| SBA CMBS Trust 144A Ser. 05-1A, Class D, 6.219s, 2035 | | 600,000 | | 592,114 |
| STRIPS 144A | | | | |
| Ser. 03-1A, Class L, 5s, 2018 (Cayman Islands) | | 757,000 | | 656,077 |
| Ser. 03-1A, Class M, 5s, 2018 (Cayman Islands) | | 513,000 | | 425,790 |
| Ser. 04-1A, Class L, 5s, 2018 (Cayman Islands) | | 337,000 | | 290,834 |
| Wachovia Bank Commercial Mortgage Trust | | | | |
| Ser. 06-C23, Class A4, 5.418s, 2045 | | 24,362,000 | | 23,831,152 |
| Ser. 05-C17, Class A4, 5.083s, 2042 | | 7,065,000 | | 6,763,890 |
| Ser. 04-C15, Class A4, 4.803s, 2041 | | 3,055,000 | | 2,865,306 |
| Wachovia Bank Commercial Mortgage Trust 144A | | | | |
| FRB Ser. 05-WL5A, Class L, 8.669s, 2018 | | 771,000 | | 764,570 |
| Ser. 03-C3, Class IOI, IO, 0.339s, 2035 | | 17,938,943 | | 554,874 |
| Ser. 06-C23, Class XC, IO, 0.045s, 2045 | | 91,005,191 | | 558,772 |
| Ser. 06-C26, Class XC, IO, 0.038s, 2045 | | 35,137,681 | | 130,712 |
| Washington Mutual Asset Securities Corp. 144A | | | | |
| Ser. 05-C1A, Class G, 5.72s, 2036 | | 222,000 | | 209,391 |
| Washington Mutual Multi-Fam., Mtge. 144A Ser. 01-1, | | | | |
| Class B5, 7.198s, 2031 (Cayman Islands) | | 1,305,000 | | 1,349,010 |
|
| Total collateralized mortgage obligations (cost $730,523,515) | | | $ | 702,008,666 |
|
| |
| |
| U.S. GOVERNMENT AND AGENCY MORTGAGE OBLIGATIONS (14.3%)* | | |
|
| | | Principal amount | | Value |
| |
| U.S. Government Guaranteed Mortgage Obligations (—%) | | | | |
| Government National Mortgage Association | | | | |
| Pass-Through Certificates | | | | |
| 7s, with due dates from August 15, 2029 to | | | | |
| October 15, 2031 | $ | 318,924 | $ | 331,535 |
|
| |
| U.S. Government Agency Mortgage Obligations (14.3%) | | | | |
| Federal Home Loan Mortgage Corporation | | | | |
| 8 3/4s, with due dates from May 1, 2009 to June 1, 2009 | | 132,814 | | 135,568 |
| Federal Home Loan Mortgage Corporation | | | | |
| Pass-Through Certificates | | | | |
| 6s, with due dates from October 1, 2031 to March 1, 2035 | | 58,504 | | 58,410 |
| 5 1/2s, with due dates from June 1, 2035 to June 1, 2035 | | 2,583,681 | | 2,518,241 |
| 5 1/2s, July 1, 2016 | | 491,318 | | 486,942 |
50
| U.S. GOVERNMENT AND AGENCY MORTGAGE OBLIGATIONS (14.3%)* continued | | |
|
| | | Principal amount | | Value |
|
| U.S. Government Agency Mortgage Obligations continued | | | | |
| Federal National Mortgage Association | | | | |
| Pass-Through Certificates | | | | |
| 11s, with due dates from October 1, 2015 to March 1, 2016 | $ | 8,912 | $ | 9,625 |
| 9s, with due dates from January 1, 2027 to July 1, 2032 | | 237,557 | | 256,256 |
| 8 3/4s, July 1, 2009 | | 3,905 | | 3,999 |
| 8s, with due dates from August 1, 2026 to July 1, 2033 | | 1,137,633 | | 1,171,830 |
| 7 1/2s, with due dates from October 1, 2025 to July 1, 2033 | | 725,857 | | 751,562 |
| 7s, with due dates from February 1, 2033 to January 1, 2036 | | 6,604,521 | | 6,776,826 |
| 7s, with due dates from November 1, 2007 to February 1, 2017 | | 1,221,178 | | 1,244,363 |
| 6 1/2s, with due dates from February 1, 2033 | | | | |
| to December 1, 2034 | | 6,268,792 | | 6,356,071 |
| 6 1/2s, with due dates from July 1, 2010 to May 1, 2011 | | 273,160 | | 277,212 |
| 6s, with due dates from May 1, 2035 to June 1, 2036 | | 15,645,497 | | 15,550,755 |
| 6s, with due dates from December 1, 2013 to May 1, 2017 | | 196,313 | | 198,104 |
| 6s, TBA, August 1, 2036 | | 13,500,000 | | 13,412,461 |
| 5 1/2s, with due dates from August 1, 2021 to April 1, 2036 | | 13,917,774 | | 13,523,661 |
| 5 1/2s, with due dates from April 1, 2009 to January 1, 2021 | | 161,064 | | 159,365 |
| 5 1/2s, TBA, August 1, 2036 | | 394,450,000 | | 383,047,949 |
| 5s, with due dates from July 1, 2035 to May 1, 2036 | | 20,710,271 | | 19,607,063 |
| 5s, with due dates from April 1, 2020 to March 1, 2021 | | 381,514 | | 371,140 |
| 5s, TBA, August 1, 2021 | | 91,000,000 | | 88,405,080 |
| 4 1/2s, with due dates from April 1, 2020 to January 1, 2021 | | 1,050,848 | | 1,005,489 |
| 4 1/2s, TBA, September 1, 2021 | | 38,100,000 | | 36,346,806 |
| 4 1/2s, TBA, August 1, 2021 | | 56,000,000 | | 53,475,626 |
| 4s, with due dates from May 1, 2019 to August 1, 2020 | | 902,914 | | 842,102 |
| | | | | 645,992,506 |
|
| |
| Total U.S. government and agency mortgage obligations (cost $640,824,891) | $ | 646,324,041 |
|
| |
| |
| U.S. TREASURY OBLIGATIONS (0.7%)* (cost $33,199,875) | | | | |
|
| | | Principal amount | | Value |
| |
| U.S. Treasury Notes 3 7/8s, May 15, 2010 | $ | 34,000,000 | $ | 32,799,375 |
|
| |
| |
| ASSET-BACKED SECURITIES (7.2%)* | | | | |
|
| | | Principal amount | | Value |
| |
| Aames Mortgage Investment Trust FRB Ser. 04-1, | | | | |
| Class 2A1, 5.725s, 2034 | $ | 816,326 | $ | 817,006 |
| ABSC NIMS Trust 144A Ser. 05-HE2, Class A1, 4 1/2s, | | | | |
| 2035 (Cayman Islands) | | 724,674 | | 710,398 |
| Advanta Business Card Master Trust FRB Ser. 04-C1, | | | | |
| Class C, 6.428s, 2013 | | 210,000 | | 212,604 |
| Advanta Mortgage Loan Trust Ser. 00-1, Class A4, | | | | |
| 8.61s, 2028 | | 31,892 | | 31,751 |
| Aegis Asset Backed Securities Trust 144A | | | | |
| Ser. 04-5N, Class Note, 5s, 2034 | | 125,119 | | 124,063 |
| Ser. 04-6N, Class Note, 4 3/4s, 2035 | | 191,552 | | 189,607 |
51
| ASSET-BACKED SECURITIES (7.2%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| AFC Home Equity Loan Trust Ser. 99-2, Class 1A, | | | | |
| 5.795s, 2029 | $ | 3,188,192 | $ | 3,201,020 |
| American Express Credit Account Master Trust 144A | | | | |
| Ser. 04-C, Class C, 5.869s, 2012 | | 5,296,340 | | 5,297,166 |
| American Home Mortgage Investment Trust | | | | |
| FRB Ser. 04-3, Class 3A, 3.71s, 2034 | | 1,521,062 | | 1,510,187 |
| FRB Ser. 04-3, Class 2A, 3.59s, 2034 | | 1,674,391 | | 1,659,413 |
| Americredit Automobile Receivables Trust 144A | | | | |
| Ser. 05-1, Class E, 5.82s, 2012 | | 667,357 | | 666,589 |
| Ameriquest Mortgage Securities, Inc. FRB Ser. 06-R1, | | | | |
| Class M10, 7.885s, 2036 | | 902,000 | | 792,008 |
| Arcap REIT, Inc. 144A | | | | |
| Ser. 03-1A, Class E, 7.11s, 2038 | | 1,283,000 | | 1,316,200 |
| Ser. 04-1A, Class E, 6.42s, 2039 | | 1,112,000 | | 1,081,194 |
| Asset Backed Funding Corp. NIM Trust 144A FRB | | | | |
| Ser. 05-OPT1, Class B1, 7.885s, 2035 | | 407,000 | | 323,276 |
| Asset Backed Securities Corp. Home Equity Loan Trust | | | | |
| FRB Ser. 04-HE9, Class A2, 5.755s, 2034 | | 386,898 | | 387,393 |
| FRB Ser. 05-HE1, Class A3, 5.675s, 2035 | | 600,530 | | 601,084 |
| Asset Backed Securities Corp. Home Equity Loan Trust | | | | |
| 144A FRB Ser. 06-HE2, Class M11, 7.885s, 2036 | | 242,000 | | 196,764 |
| Aviation Capital Group Trust 144A FRB Ser. 03-2A, | | | | |
| Class G1, 6.078s, 2033 | | 952,499 | | 953,913 |
| Banc of America Mortgage Securities | | | | |
| Ser. 04-D, Class 2A, IO, 0.492s, 2034 | | 14,646,657 | | 75,763 |
| Ser. 05-E, Class 2, IO, 0.306s, 2035 | | 34,569,000 | | 240,935 |
| Bank One Issuance Trust FRB Ser. 03-C4, Class C4, 6.399s, 2011 | | 210,000 | | 213,129 |
| Bay View Auto Trust Ser. 05-LJ2, Class D, 5.27s, 2014 | | 420,000 | | 411,697 |
| Bayview Financial Acquisition Trust | | | | |
| FRB Ser. 03-G, Class A1, 6s, 2039 | | 4,813,000 | | 4,817,252 |
| Ser. 04-B, Class A1, 5.9s, 2039 | | 4,211,489 | | 4,211,472 |
| FRB Ser. 03-F, Class A, 5.9s, 2043 | | 1,816,680 | | 1,821,222 |
| FRB Ser. 04-D, Class A, 5.79s, 2044 | | 2,427,395 | | 2,429,221 |
| Ser. 04-D, Class A, IO, 3.938s, 2007 | | 11,483,122 | | 287,963 |
| Ser. 05-B, Class A, IO, 3.444s, 2039 | | 9,294,923 | | 296,712 |
| Bayview Financial Acquisition Trust 144A FRN | | | | |
| Ser. 04-B, Class M2, 7.3s, 2039 | | 200,000 | | 203,661 |
| Bayview Financial Asset Trust 144A | | | | |
| FRB Ser. 03-SSRA, Class M, 6.735s, 2038 | | 1,148,249 | | 1,160,765 |
| FRB Ser. 03-SSRA, Class A, 6.085s, 2038 | | 968,466 | | 974,180 |
| FRB Ser. 04-SSRA, Class A1, 5.985s, 2039 | | 1,267,273 | | 1,271,202 |
| Bear Stearns Adjustable Rate Mortgage Trust | | | | |
| Ser. 04-1, Class 11A1, 3.617s, 2034 | | 3,779,687 | | 3,767,765 |
| Bear Stearns Alternate Trust | | | | |
| Ser. 04-9, Class 1A1, 4.947s, 2034 | | 717,313 | | 713,137 |
| Ser. 05-5, Class 21A1, 4.741s, 2035 | | 3,922,853 | | 3,881,480 |
| Bear Stearns Asset Backed Securities NIM Trust 144A | | | | |
| Ser. 04-HE10, Class A2, 5s, 2034 (Cayman Islands) | | 245,000 | | 242,856 |
| Ser. 04-HE8N, Class A1, 5s, 2034 | | 2,783 | | 2,781 |
| Ser. 04-HE10, Class A1, 4 1/4s, 2034 (Cayman Islands) | | 48,639 | | 48,335 |
52
| ASSET-BACKED SECURITIES (7.2%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| Bear Stearns Asset Backed Securities, Inc. | | | | |
| FRB Ser. 06-EC1, Class M9, 7.385s, 2035 | $ | 698,000 | $ | 573,014 |
| FRB Ser. 06-PC1, Class M9, 7.135s, 2035 | | 414,000 | | 337,539 |
| FRB Ser. 03-3, Class A2, 5.975s, 2043 | | 2,229,000 | | 2,234,224 |
| FRB Ser. 03-1, Class A1, 5.885s, 2042 | | 535,490 | | 535,487 |
| FRB Ser. 05-3, Class A1, 5.835s, 2035 | | 1,135,132 | | 1,135,132 |
| Bear Stearns Asset Backed Securities, Inc. 144A FRB | | | | |
| Ser. 06-HE2, Class M10, 7.635s, 2036 | | 251,000 | | 227,312 |
| Broadhollow Funding, LLC 144A FRB Ser. 04-A, | | | | |
| Class Sub, 6.57s, 2009 | | 1,610,000 | | 1,628,676 |
| Capital Auto Receivables Asset Trust 144A | | | | |
| Ser. 06-1, Class D, 7.16s, 2013 | | 500,000 | | 496,523 |
| Ser. 05-1, Class D, 6 1/2s, 2011 | | 1,442,000 | | 1,414,512 |
| Capital One Multi-Asset Execution Trust FRB | | | | |
| Ser. 02-C1, Class C1, 8.119s, 2010 | | 570,000 | | 585,230 |
| CARMAX Auto Owner Trust Ser. 04-2, Class D, 3.67s, 2011 | | 276,303 | | 271,200 |
| CARSSX Finance, Ltd. 144A | | | | |
| FRB Ser. 04-AA, Class B4, 10.869s, 2011 (Cayman Islands) | | 694,723 | | 725,496 |
| FRB Ser. 04-AA, Class B3, 8.719s, 2011 (Cayman Islands) | | 90,645 | | 92,658 |
| CDO Repackaging Trust Series 144A FRB Ser. 03-2, | | | | |
| Class A, 9.516s, 2008 | | 3,105,000 | | 3,299,063 |
| Chase Credit Card Master Trust FRB Ser. 03-3, | | | | |
| Class C, 6.449s, 2010 | | 1,730,000 | | 1,759,085 |
| Chase Funding Net Interest Margin 144A Ser. 04-OPT1, | | | | |
| Class Note, 4.458s, 2034 | | 203,539 | | 200,836 |
| CHEC NIM Ltd., 144A | | | | |
| Ser. 04-2, Class N2, 8s, 2034 (Cayman Islands) | | 129,459 | | 128,877 |
| Ser. 04-2, Class N3, 8s, 2034 (Cayman Islands) | | 169,000 | | 160,625 |
| Citibank Credit Card Issuance Trust FRB Ser. 01-C1, | | | | |
| Class C1, 6.587s, 2010 | | 1,060,000 | | 1,073,126 |
| Citigroup Mortgage Loan Trust, Inc. FRB | | | | |
| Ser. 06-WMC1, Class M10, 8.885s, 2035 | | 201,000 | | 180,154 |
| Conseco Finance Securitizations Corp. | | | | |
| Ser. 02-1, Class M2, 9.546s, 2033 | | 2,974,000 | | 1,605,960 |
| Ser. 01-4, Class B1, 9.4s, 2033 | | 2,737 | | 14 |
| Ser. 02-2, Class A, IO, 8 1/2s, 2033 | | 7,141,130 | | 1,584,010 |
| Ser. 00-4, Class A6, 8.31s, 2032 | | 8,597,000 | | 7,308,989 |
| Ser. 00-5, Class A6, 7.96s, 2032 | | 3,727,000 | | 3,165,885 |
| Ser. 00-5, Class A4, 7.47s, 2032 | | 173,214 | | 173,328 |
| Ser. 01-4, Class A4, 7.36s, 2033 | | 6,025,000 | | 5,816,288 |
| Ser. 01-1, Class A5, 6.99s, 2032 | | 2,692,000 | | 2,451,622 |
| Ser. 01-3, Class A4, 6.91s, 2033 | | 8,065,000 | | 7,589,746 |
| Ser. 02-1, Class A, 6.681s, 2033 | | 7,873,163 | | 7,914,803 |
| Ser. 01-1, Class A4, 6.21s, 2032 | | 1,527,981 | | 1,528,844 |
| Consumer Credit Reference IDX Securities 144A FRB | | | | |
| Ser. 02-1A, Class A, 7.437s, 2007 | | 3,061,000 | | 3,110,741 |
| Countrywide Asset Backed Certificates 144A | | | | |
| Ser. 04-6N, Class N1, 6 1/4s, 2035 | | 141,595 | | 140,944 |
| Ser. 04-BC1N, Class Note, 5 1/2s, 2035 | | 113,947 | | 111,840 |
| Ser. 04-14N, 5s, 2036 | | 140,855 | | 139,376 |
53
| ASSET-BACKED SECURITIES (7.2%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| Countrywide Home Loans | | | | |
| FRB Ser. 05-22, Class 2A1, 5.304s, 2035 | $ | 3,440,311 | $ | 3,404,833 |
| Ser. 06-0A5, Class X, IO, 1.779s, 2046 | | 13,555,970 | | 665,598 |
| Ser. 05-2, Class 2X, IO, 0.187s, 2035 | | 20,546,569 | | 468,719 |
| Ser. 05-9, Class 1X, IO, 1.166s, 2035 | | 18,928,486 | | 442,927 |
| Countrywide Home Loans 144A | | | | |
| Ser. 05-R2, Class 2A3, 8s, 2035 | | 1,439,726 | | 1,503,164 |
| IFB Ser. 05-R1, Class 1AS, IO, 0.808s, 2035 (SN) | | 10,186,907 | | 203,738 |
| IFB Ser. 06-R1, Class AS, IO, 0.751s, 2036 (SN) | | 20,114,099 | | 528,618 |
| IFB Ser. 05-R3, Class AS, IO, 0.710s, 2035 (SN) | | 6,982,233 | | 159,957 |
| IFB Ser. 05-R2, Class 1AS, IO, 0.419s, 2035 (SN) | | 9,476,721 | | 269,374 |
| Crest, Ltd. 144A Ser. 03-2A, Class D2, 6.723s, 2038 | | | | |
| (Cayman Islands) | | 1,617,000 | | 1,593,440 |
| CS First Boston Mortgage Securities Corp. 144A | | | | |
| Ser. 04-FR1N, Class A, 5s, 2034 | | 587,550 | | 581,675 |
| DB Master Finance, LLC 144A Ser. 06-1, Class M1, | | | | |
| 8.285s, 2031 | | 373,000 | | 378,134 |
| Fieldstone Mortgage Investment Corp. FRB Ser. 05-1, | | | | |
| Class M3, 5.925s, 2035 | | 700,000 | | 701,354 |
| Finance America NIM Trust 144A Ser. 04-1, Class A, | | | | |
| 5 1/4s, 2034 | | 78,556 | | 7,856 |
| First Chicago Lennar Trust 144A Ser. 97-CHL1, | | | | |
| Class D, 7.636s, 2039 | | 1,333,344 | | 1,327,843 |
| First Franklin Mortgage Loan NIM Trust 144A | | | | |
| Ser. 04-FF7A, Class A, 5s, 2034 (Cayman Islands) | | 46,411 | | 46,340 |
| First Horizon Mortgage Pass-Through Trust | | | | |
| Ser. 05-AR2, Class 1A1, 4.829s, 2035 | | 2,538,849 | | 2,511,905 |
| First Plus Home Loan Trust Ser. 97-3, Class B1, 7.79s, 2023 | | 553,819 | | 554,165 |
| Ford Credit Auto Owner Trust Ser. 04-A, Class C, | | | | |
| 4.19s, 2009 | | 650,000 | | 630,945 |
| Fort Point CDO, Ltd. FRB Ser. 03-2A, Class A2, | | | | |
| 6.288s, 2038 (Cayman Islands) | | 616,000 | | 621,606 |
| Foxe Basin, Ltd. 144A FRB Ser. 03-1A, Class A1, | | | | |
| 5.829s, 2015 (Cayman Islands) | | 2,000,000 | | 2,003,600 |
| Fremont NIM Trust 144A | | | | |
| Ser. 04-3, Class B, 7 1/2s, 2034 | | 209,509 | | 195,633 |
| Ser. 04-D, Class N2, 7 1/2s, 2034 (Cayman Islands) | | 41,667 | | 41,667 |
| Ser. 04-D, Class N1, 4 1/2s, 2034 (Cayman Islands) | | 45,149 | | 45,061 |
| Ser. 04-3, Class A, 4 1/2s, 2034 | | 123,913 | | 123,223 |
| G-Force CDO, Ltd. 144A Ser. 03-1A, Class E, 6.58s, | | | | |
| 2038 (Cayman Islands) | | 939,000 | | 920,954 |
| G-Star, Ltd. 144A FRB Ser. 02-2A, Class BFL, 7.385s, | | | | |
| 2037 (Cayman Islands) | | 308,000 | | 319,571 |
| GE Capital Credit Card Master Note Trust FRB | | | | |
| Ser. 04-2, Class C, 5.849s, 2010 | | 1,903,750 | | 1,905,624 |
| GE Corporate Aircraft Financing, LLC 144A | | | | |
| FRB Ser. 05-1A, Class C, 6.685s, 2019 | | 1,680,000 | | 1,679,983 |
| Ser. 04-1A, Class B, 6.235s, 2018 | | 179,608 | | 181,079 |
| Gears Auto Owner Trust Ser. 05-AA, Class E1, 8.22s, 2012 | | 1,962,000 | | 1,934,052 |
54
| ASSET-BACKED SECURITIES (7.2%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| GEBL 144A | | | | |
| Ser. 04-2, Class D, 8.119s, 2032 | $ | 724,647 | $ | 724,647 |
| Ser. 04-2, Class C, 6.219s, 2032 | | 271,522 | | 271,521 |
| GMAC Mortgage Corp. Loan Trust Ser. 04-HE5, Class A, | | | | |
| IO, 6s, 2007 | | 4,879,050 | | 187,843 |
| Granite Mortgages PLC | | | | |
| FRB Ser. 01-1, Class 1C, 6.9s, 2041 (United Kingdom) | | 2,024,000 | | 2,046,375 |
| FRB Ser. 02-1, Class 1C, 6.8s, 2042 (United Kingdom) | | 1,186,839 | | 1,192,329 |
| FRB Ser. 02-2, Class 1C, 6.33s, 2043 (United Kingdom) | | 650,000 | | 655,282 |
| Green Tree Financial Corp. | | | | |
| Ser. 99-5, Class A5, 7.86s, 2030 | | 16,750,000 | | 14,609,330 |
| Ser. 97-4, Class A7, 7.36s, 2029 | | 683,246 | | 687,517 |
| Ser. 95-8, Class B1, 7.3s, 2026 | | 362,579 | | 287,749 |
| Ser. 97-7, Class A8, 6.86s, 2029 | | 501,576 | | 503,457 |
| Ser. 99-3, Class A6, 6 1/2s, 2031 | | 1,137,000 | | 1,124,948 |
| Ser. 99-3, Class A5, 6.16s, 2031 | | 99,051 | | 99,670 |
| Greenpoint Manufactured Housing Ser. 00-3, Class IA, | | | | |
| 8.45s, 2031 | | 3,749,614 | | 3,420,124 |
| Greenpoint Mortgage Funding Trust Ser. 05-AR1, | | | | |
| Class X1, IO, 0.195s, 2045 | | 12,671,234 | | 348,459 |
| GS Auto Loan Trust 144A Ser. 04-1, Class D, 5s, 2011 | | 1,156,849 | | 1,151,858 |
| GSAMP Trust 144A | | | | |
| Ser. 05-NC1, Class N, 5s, 2035 | | 202,290 | | 201,845 |
| Ser. 04-NIM2, Class N, 4 7/8s, 2034 | | 376,816 | | 375,195 |
| Ser. 04-NIM1, Class N2, zero %, 2034 | | 579,178 | | 426,564 |
| GSMPS Mortgage Loan Trust | | | | |
| Ser. 05-RP3, Class 1A4, 8 1/2s, 2035 | | 382,786 | | 405,364 |
| Ser. 05-RP3, Class 1A3, 8s, 2035 | | 1,123,633 | | 1,178,556 |
| Ser. 05-RP3, Class 1A2, 7 1/2s, 2035 | | 1,013,776 | | 1,050,510 |
| GSMPS Mortgage Loan Trust 144A | | | | |
| Ser. 05-RP2, Class 1A3, 8s, 2035 | | 1,373,363 | | 1,440,673 |
| Ser. 05-RP1, Class 1A3, 8s, 2035 | | 166,960 | | 175,089 |
| Ser. 05-RP2, Class 1A2, 7 1/2s, 2035 | | 1,562,487 | | 1,618,905 |
| IFB Ser. 05-RP1, Class 1AS, IO, 0.906s, 2035 (SN) | | 7,286,978 | | 193,479 |
| IFB Ser. 04-4, Class 1AS, IO, 0.767s, 2034 (SN) | | 16,241,872 | | 334,583 |
| IFB Ser. 06-RP1, Class 1AS, IO, 0.504s, 2036 (SN) | | 19,747,644 | | 404,951 |
| GSR Mortgage Loan Trust | | | | |
| Ser. 05-AR2, Class 2A1, 4.859s, 2035 | | 2,185,357 | | 2,144,352 |
| FRB Ser. 04-12, Class 2A2, 3.554s, 2034 | | 1,262,259 | | 1,241,242 |
| Guggenheim Structured Real Estate Funding, Ltd. 144A | | | | |
| FRB Ser. 05-2A, Class D, 6.935s, 2030 (Cayman Islands) | | 1,141,000 | | 1,144,195 |
| FRB Ser. 05-1A, Class D, 6.915s, 2030 (Cayman Islands) | | 2,225,000 | | 2,225,000 |
| HASCO NIM Trust 144A Ser. 05-OP1A, Class A, 6 1/4s, 2035 | | 937,122 | | 905,447 |
| High Income Trust Securities 144A FRB Ser. 03-1A, | | | | |
| Class A, 5.66s, 2036 (Cayman Islands) | | 2,232,185 | | 2,134,527 |
| Holmes Financing PLC FRB Ser. 8, Class 2C, 6.227s, | | | | |
| 2040 (United Kingdom) | | 746,000 | | 747,641 |
| Home Equity Asset Trust 144A Ser. 04-4N, Class A, 5s, 2034 | | 45,952 | | 45,377 |
| Hyundai Auto Receivables Trust Ser. 04-A, Class D, 4.1s, 2011 | | 429,000 | | 420,832 |
55
| ASSET-BACKED SECURITIES (7.2%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| JPMorgan Mortgage Acquisition Corp. FRB | | | | |
| Ser. 05-OPT2, Class M11, 7.635s, 2035 | $ | 645,000 | $ | 546,194 |
| Lehman Manufactured Housing Ser. 98-1, Class 1, IO, | | | | |
| 0.809s, 2028 | | 21,710,232 | | 413,681 |
| LNR CDO, Ltd. 144A | | | | |
| FRB Ser. 03-1A, Class EFL, 8.4s, 2036 (Cayman Islands) | | 2,585,000 | | 2,794,121 |
| FRB Ser. 02-1A, Class FFL, 8.15s, 2037 (Cayman Islands) | | 5,220,000 | | 5,220,000 |
| Long Beach Asset Holdings Corp. NIM Trust 144A | | | | |
| Ser. 05-1, Class N1, 4.115s, 2035 | | 55,177 | | 54,763 |
| Long Beach Mortgage Loan Trust | | | | |
| Ser. 04-3, Class S1, IO, 4 1/2s, 2006 | | 11,796,132 | | 250,668 |
| Ser. 04-3, Class S2, IO, 4 1/2s, 2006 | | 5,898,104 | | 125,335 |
| Long Beach Mortgage Loan Trust 144A FRB Ser. 06-WL3, | | | | |
| Class B1, 7.885s, 2036 | | 953,000 | | 788,952 |
| Madison Avenue Manufactured Housing Contract | | | | |
| FRB Ser. 02-A, Class B1, 8.635s, 2032 | | 4,059,503 | | 2,841,652 |
| Ser. 02-A IO, 0.3s, 2032 | | 160,939,715 | | 1,760,278 |
| Marriott Vacation Club Owner Trust 144A | | | | |
| Ser. 05-2, Class D, 6.205s, 2027 | | 145,120 | | 143,346 |
| FRB Ser. 02-1A, Class A1, 6.078s, 2024 | | 1,366,031 | | 1,377,603 |
| Ser. 04-2A, Class D, 5.389s, 2026 | | 129,419 | | 123,985 |
| Ser. 04-2A, Class C, 4.741s, 2026 | | 119,066 | | 113,689 |
| MASTR Adjustable Rate Mortgages Trust | | | | |
| Ser. 04-7, Class 2A1, 4.645s, 2034 | | 815,781 | | 817,844 |
| Ser. 04-13, Class 3A6, 3.786s, 2034 | | 2,253,000 | | 2,144,296 |
| Ser. 06-OA1, Class X, IO, 2.268s, 2046 | | 6,666,169 | | 335,308 |
| Ser. 04-03, Class 4AX, IO, 1.417s, 2034 | | 2,908,078 | | 64,850 |
| Ser. 05-2, Class 7AX, IO, 0.168s, 2035 | | 7,735,505 | | 21,659 |
| MASTR Asset Backed Securities NIM Trust 144A | | | | |
| Ser. 04-CI5, Class N2, 9s, 2034 (Cayman Islands) | | 309,483 | | 92,845 |
| Ser. 04-HE1A, Class Note, 5.191s, 2034 (Cayman Islands) | | 24,901 | | 24,769 |
| MASTR Reperforming Loan Trust 144A | | | | |
| Ser. 05-2, Class 1A3, 7 1/2s, 2035 | | 916,732 | | 946,812 |
| Ser. 05-1, Class 1A4, 7 1/2s, 2034 | | 2,205,383 | | 2,277,747 |
| MBNA Credit Card Master Note Trust FRB Ser. 03-C5, | | | | |
| Class C5, 6.549s, 2010 | | 1,730,000 | | 1,761,069 |
| Merit Securities Corp. 144A FRB Ser. 11PA, | | | | |
| Class 3A1, 6.02s, 2027 | | 5,772,664 | | 5,484,031 |
| Merrill Lynch Mortgage Investors, Inc. | | | | |
| Ser. 03-WM3N, Class N1, 8s, 2034 | | 7,571 | | 7,467 |
| FRB Ser. 05-A9, Class 3A1, 5.298s, 2035 | | 4,490,010 | | 4,447,916 |
| Merrill Lynch Mortgage Investors, Inc. 144A | | | | |
| Ser. 05-WM1N, Class N1, 5s, 2035 | | 132,079 | | 130,263 |
| Ser. 04-HE2N, Class N1, 5s, 2035 (Cayman Islands) | | 74,001 | | 72,614 |
| Ser. 04-FM1N, Class N1, 5s, 2035 (Cayman Islands) | | 20,324 | | 20,089 |
| Ser. 04-OP1N, Class N1, 4 3/4s, 2035 (Cayman Islands) | | 3,519 | | 3,484 |
| Ser. 04-WM3N, Class N1, 4 1/2s, 2035 | | 59,861 | | 58,888 |
| Ser. 04-WM2N, Class N1, 4 1/2s, 2034 | | 28,685 | | 28,381 |
| Ser. 04-WM1N, Class N1, 4 1/2s, 2034 | | 1,936 | | 1,922 |
56
| ASSET-BACKED SECURITIES (7.2%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| Metris Master Trust FRB Ser. 04-2, Class C, 6.728s, 2010 | $ | 1,050,000 | $ | 1,052,587 |
| Metris Master Trust 144A FRB Ser. 04-2, Class D, | | | | |
| 8.628s, 2010 | | 668,000 | | 674,680 |
| Mid-State Trust | | | | |
| Ser. 11, Class B, 8.221s, 2038 | | 404,732 | | 395,198 |
| Ser. 10, Class B, 7.54s, 2036 | | 772,992 | | 661,078 |
| MMCA Automobile Trust Ser. 02-1, Class B, 5.37s, 2010 | | 877,689 | | 874,354 |
| Morgan Stanley ABS Capital I FRB Ser. 04-WMC3, | | | | |
| Class A2PT, 5.675s, 2035 | | 940,889 | | 941,419 |
| Morgan Stanley Auto Loan Trust 144A | | | | |
| Ser. 04-HB1, Class D, 5 1/2s, 2011 | | 486,539 | | 483,854 |
| Ser. 04-HB2, Class E, 5s, 2012 | | 445,734 | | 430,721 |
| Morgan Stanley Mortgage Loan Trust Ser. 05-5AR, | | | | |
| Class 2A1, 5.408s, 2035 | | 5,965,280 | | 5,941,980 |
| N-Star Real Estate CDO, Ltd. 144A FRB Ser. 04-2A, | | | | |
| Class C1, 7.4s, 2039 (Cayman Islands) | | 544,000 | | 559,385 |
| Navigator CDO, Ltd. 144A FRB Ser. 03-1A, Class A1, | | | | |
| 5.66s, 2015 (Cayman Islands) | | 1,168,000 | | 1,169,752 |
| Navistar Financial Corp. Owner Trust | | | | |
| Ser. 05-A, Class C, 4.84s, 2014 | | 747,912 | | 732,087 |
| Ser. 04-B, Class C, 3.93s, 2012 | | 289,336 | | 280,737 |
| New Century Home Equity Loan Trust Ser. 03-5, | | | | |
| Class AI7, 5.15s, 2033 | | 1,734,000 | | 1,656,520 |
| Newcastle CDO, Ltd. 144A FRB Ser. 3A, Class 4FL, | | | | |
| 8.6s, 2038 (Cayman Islands) | | 624,000 | | 626,652 |
| Nomura Asset Acceptance Corp. Ser. 04-R3, Class PT, | | | | |
| 8.35s, 2035 | | 581,278 | | 602,440 |
| Nomura Asset Acceptance Corp. 144A Ser. 04-R2, | | | | |
| Class PT, 9.087s, 2034 | | 521,200 | | 544,084 |
| Oakwood Mortgage Investors, Inc. Ser. 02-C, | | | | |
| Class A1, 5.41s, 2032 | | 4,646,365 | | 3,912,388 |
| Oakwood Mortgage Investors, Inc. 144A Ser. 01-B, | | | | |
| Class A4, 7.21s, 2030 | | 688,914 | | 601,101 |
| Ocean Star PLC 144A | | | | |
| FRB Ser. 04, Class D, 7.464s, 2018 (Ireland) | | 623,000 | | 632,053 |
| FRB Ser. 05-A, Class D, 6.664s, 2012 (Ireland) | | 696,000 | | 695,930 |
| Option One Mortgage Loan Trust FRB Ser. 05-4, | | | | |
| Class M11, 7.885s, 2035 | | 216,000 | | 190,148 |
| Origen Manufactured Housing Ser. 04-B, Class A2, | | | | |
| 3.79s, 2017 | | 431,000 | | 420,292 |
| Park Place Securities, Inc. FRB Ser. 04-WHQ2, | | | | |
| Class A3A, 5.735s, 2035 | | 955,894 | | 956,709 |
| Park Place Securities, Inc. 144A | | | | |
| FRB Ser. 05-WCW2, Class M11, 7.885s, 2035 | | 896,000 | | 676,760 |
| FRB Ser. 04-MHQ1, Class M10, 7.885s, 2034 | | 415,000 | | 380,463 |
| People’s Choice Net Interest Margin Note 144A | | | | |
| Ser. 04-2, Class B, 5s, 2034 | | 282,277 | | 281,228 |
| Permanent Financing PLC FRB Ser. 3, Class 3C, 6.45s, | | | | |
| 2042 (United Kingdom) | | 1,300,000 | | 1,315,218 |
57
| ASSET-BACKED SECURITIES (7.2%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| Pillar Funding PLC 144A | | | | |
| FRB Ser. 04-1A, Class C1, 6.329s, 2011 (United Kingdom) | $ | 657,000 | $ | 664,794 |
| FRB Ser. 04-2A, Class C, 6.209s, 2011 (United Kingdom) | | 912,000 | | 919,079 |
| Providian Gateway Master Trust 144A | | | | |
| FRB Ser. 04-AA, Class D, 7.219s, 2011 | | 1,204,000 | | 1,215,968 |
| FRB Ser. 04-EA, Class D, 6.299s, 2011 | | 701,000 | | 707,411 |
| Ser. 04-FA, Class E, 5s, 2011 | | 500,000 | | 500,000 |
| Ser. 04-DA, Class D, 4.4s, 2011 | | 944,000 | | 920,769 |
| Renaissance NIM Trust 144A Ser. 05-1, Class N, 4.7s, 2035 | | 84,950 | | 84,950 |
| Residential Accredit Loans, Inc. Ser. 04-QA5, | | | | |
| Class A2, 4.982s, 2034 | | 533,999 | | 530,857 |
| Residential Asset Securities Corp. 144A | | | | |
| FRB Ser. 05-KS10, Class B, 8.135s, 2035 | | 1,165,000 | | 1,031,585 |
| Ser. 04-NT, Class Note, 5s, 2034 | | 161,553 | | 155,091 |
| Ser. 04-N10B, Class A1, 5s, 2034 | | 148,495 | | 147,846 |
| Ser. 04-NT12, Class Note, 4.7s, 2035 | | 75,220 | | 74,999 |
| Residential Asset Securitization Trust IFB | | | | |
| Ser. 06-A7CB, Class 1A6, IO, 0.165s, 2036 | | 1,274,677 | | 13,743 |
| Residential Funding Mortgage Ser. 04-S5, Class 2A1, 4 1/2s, 2019 | | 3,079,981 | | 2,894,566 |
| Residential Funding Mortgage Securities I FRB | | | | |
| Ser. 05-SA2, Class 1A, 4.686s, 2035 | | 1,745,663 | | 1,726,774 |
| Saco I Trust FRB Ser. 05-10, Class 1A1, 5.645s, 2033 | | 1,996,371 | | 1,996,995 |
| SAIL Net Interest Margin Notes 144A | | | | |
| Ser. 03-3, Class A, 7 3/4s, 2033 (Cayman Islands) | | 22,036 | | 7,713 |
| Ser. 03-BC2A, Class A, 7 3/4s, 2033 (Cayman Islands) | | 133,867 | | 13,387 |
| Ser. 04-4A, Class B, 7 1/2s, 2034 (Cayman Islands) | | 225,262 | | 42,271 |
| Ser. 03-5, Class A, 7.35s, 2033 (Cayman Islands) | | 8,720 | | 4,360 |
| Ser. 03-8A, Class A, 7s, 2033 (Cayman Islands) | | 48,411 | | 5,809 |
| Ser. 03-9A, Class A, 7s, 2033 (Cayman Islands) | | 66,014 | | 6,601 |
| Ser. 03-6A, Class A, 7s, 2033 (Cayman Islands) | | 12,564 | | 6,282 |
| Ser. 03-7A, Class A, 7s, 2033 (Cayman Islands) | | 19,639 | | 6,874 |
| Ser. 04-10A, Class A, 5s, 2034 (Cayman Islands) | | 229,064 | | 228,231 |
| Ser. 04-BN2A, Class A, 5s, 2034 (Cayman Islands) | | 31,212 | | 31,098 |
| Ser. 05-2A, Class A, 4 3/4s, 2035 (Cayman Islands) | | 651,505 | | 646,190 |
| Ser. 04-11A, Class A2, 4 3/4s, 2035 (Cayman Islands) | | 454,398 | | 450,723 |
| Ser. 04-AA, Class A, 4 1/2s, 2034 (Cayman Islands) | | 18,061 | | 18,020 |
| Ser. 05-1A, Class A, 4 1/4s, 2035 (Cayman Islands) | | 475,533 | | 471,333 |
| Sasco Net Interest Margin Trust 144A | | | | |
| Ser. 05-NC1A, Class A, 4 3/4s, 2035 (Cayman Islands) | | 590,990 | | 586,521 |
| Ser. 05-WF1A, Class A, 4 3/4s, 2035 | | 417,147 | | 414,776 |
| Sharps SP I, LLC Net Interest Margin Trust 144A | | | | |
| Ser. 04-HS1N, Class Note, 5.92s, 2034 (Cayman Islands) | | 34,927 | | 34,927 |
| Ser. 04-HE2N, Class NA, 5.43s, 2034 (Cayman Islands) | | 23,587 | | 23,410 |
| Ser. 04-HE1N, Class Note, 4.94s, 2034 (Cayman Islands) | | 144,254 | | 36,063 |
| Ser. 04-RM2N, Class NA, 4s, 2035 (Cayman Islands) | | 108,362 | | 108,227 |
| Ser. 04-HE4N, Class NA, 3 3/4s, 2034 (Cayman Islands) | | 185,211 | | 183,359 |
| Soundview Home Equity Loan Trust 144A FRB | | | | |
| Ser. 05-CTX1, Class B1, 7.885s, 2035 | | 466,000 | | 406,935 |
| South Coast Funding 144A FRB Ser. 3A, Class A2, | | | | |
| 6.36s, 2038 (Cayman Islands) | | 470,000 | | 470,423 |
58
| ASSET-BACKED SECURITIES (7.2%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| Structured Adjustable Rate Mortgage Loan Trust | | | | |
| FRB Ser. 05-18, Class 6A1, 5.312s, 2035 | $ | 2,899,970 | $ | 2,871,810 |
| Ser. 04-12, Class 1A2, 4.963s, 2034 | | 1,769,397 | | 1,777,066 |
| Ser. 04-10, Class 1A1, 4.907s, 2034 | | 1,267,501 | | 1,272,231 |
| Ser. 04-8, Class 1A3, 4.675s, 2034 | | 54,915 | | 55,129 |
| Ser. 04-6, Class 1A, 4.39s, 2034 | | 5,577,914 | | 5,596,668 |
| Ser. 05-9, Class AX, IO, 0.955s, 2035 | | 39,299,300 | | 613,069 |
| Structured Adjustable Rate Mortgage Loan Trust 144A | | | | |
| Ser. 04-NP2, Class A, 5.735s, 2034 | | 1,218,813 | | 1,218,935 |
| Structured Asset Investment Loan Trust 144A | | | | |
| FRB Ser. 06-BNC2, Class B1, 7.885s, 2036 | | 273,000 | | 243,413 |
| FRB Ser. 05-HE3, Class M11, 7.885s, 2035 | | 974,000 | | 793,394 |
| Structured Asset Receivables Trust 144A FRB | | | | |
| Ser. 05-1, 5.575s, 2015 | | 5,295,587 | | 5,293,935 |
| Structured Asset Securities Corp. | | | | |
| Ser. 03-40A, Class 1A, 5.042s, 2034 | | 692,675 | | 695,600 |
| IFB Ser. 05-10, Class 3A3, 4.991s, 2034 | | 3,137,810 | | 2,751,133 |
| Ser. 04-8, Class 1A1, 4.675s, 2034 | | 1,058,357 | | 1,062,483 |
| IFB Ser. 05-6, Class 5A8, 3.13s, 2035 | | 4,457,118 | | 3,486,183 |
| Structured Asset Securities Corp. 144A | | | | |
| Ser. 98-RF3, Class A, IO, 6.1s, 2028 | | 3,893,680 | | 405,795 |
| IFB Ser. 05-RF6, Class AIO, IO, 1.099s, 2043 (SN) | | 6,404,648 | | 166,683 |
| IFB Ser. 05-RF4, Class AIO, IO, 0.797s, 2035 (SN) | | 4,983,367 | | 121,730 |
| Terwin Mortgage Trust FRB Ser. 04-5HE, Class A1B, | | | | |
| 5.805s, 2035 | | 733,459 | | 733,966 |
| TIAA Real Estate CDO, Ltd. Ser. 03-1A, Class E, 8s, | | | | |
| 2038 (Cayman Islands) | | 1,698,000 | | 1,706,584 |
| Wells Fargo Home Equity Trust 144A Ser. 04-2, | | | | |
| Class N2, 8s, 2034 (Cayman Islands) | | 196,826 | | 196,828 |
| Wells Fargo Mortgage Backed Securities Trust | | | | |
| Ser. 06-AR10, Class 3A1, 5.099s, 2036 | | 3,875,199 | | 3,823,271 |
| FRB Ser. 05-AR2, Class 2A1, 4.546s, 2035 | | 1,637,874 | | 1,594,143 |
| FRB Ser. 04-R, Class 2A1, 4.354s, 2034 | | 1,667,792 | | 1,624,763 |
| Ser. 05-AR9, Class 1A2, 4.353s, 2035 | | 2,336,093 | | 2,277,941 |
| Ser. 05-AR12, Class 2A5, 4.319s, 2035 | | 21,411,000 | | 20,739,091 |
| Ser. 05-AR10, Class 2A18, IO, 0.61s, 2035 | | 44,983,000 | | 597,916 |
| WFS Financial Owner Trust | | | | |
| Ser. 05-1, Class D, 4 1/4s, 2012 | | 522,472 | | 514,076 |
| Ser. 04-3, Class D, 4.07s, 2012 | | 486,697 | | 479,835 |
| Ser. 04-4, Class D, 3.58s, 2012 | | 211,947 | | 208,354 |
| Ser. 04-1, Class D, 3.17s, 2011 | | 198,828 | | 196,358 |
| Whinstone Capital Management, Ltd. 144A FRB Ser. 1A, | | | | |
| Class B3, 6.385s, 2044 (United Kingdom) | | 1,687,000 | | 1,686,947 |
| Whole Auto Loan Trust Ser. 03-1, Class C, 3.13s, 2010 | | 40,582 | | 40,534 |
| Whole Auto Loan Trust 144A Ser. 04-1, Class D, 5.6s, 2011 | | 526,771 | | 522,884 |
|
| Total asset-backed securities (cost $335,259,821) | | | | $325,066,444 |
59
| CORPORATE BONDS AND NOTES (4.5%)* | | | | |
|
| | | Principal amount | | Value |
|
| Advertising and Marketing Services (—%) | | | | |
| Omnicom Group, Inc. sr. notes 5.9s, 2016 | $ | 635,000 | $ | 621,631 |
|
| |
| Aerospace and Defense (0.1%) | | | | |
| L-3 Communications Corp. sr. sub. notes 5 7/8s, 2015 | | 435,000 | | 407,813 |
| L-3 Communications Corp. sr. sub. notes Class B, 6 3/8s, 2015 | | 595,000 | | 571,200 |
| Lockheed Martin Corp. bonds 8 1/2s, 2029 | | 1,145,000 | | 1,463,990 |
| Raytheon Co. debs. 6 3/4s, 2018 | | 185,000 | | 196,394 |
| | | | | 2,639,397 |
|
| |
| Airlines (0.1%) | | | | |
| American Airlines, Inc. pass-through certificates | | | | |
| Ser. 01-2, 7.858s, 2011 | | 525,000 | | 551,250 |
| Continental Airlines, Inc. pass-through certificates | | | | |
| Ser. 98-3, 6.32s, 2008 | | 2,895,000 | | 2,899,171 |
| | | | | 3,450,421 |
|
| |
| Automotive (0.4%) | | | | |
| DaimlerChrysler NA Holding Corp. company guaranty 7.2s, 2009 | | 3,720,000 | | 3,860,523 |
| DaimlerChrysler NA Holding Corp. company | | | | |
| guaranty 6 1/2s, 2013 (S) | | 1,130,000 | | 1,138,351 |
| Ford Motor Credit Corp. notes 7 3/8s, 2009 | | 2,925,000 | | 2,759,076 |
| Ford Motor Credit Corp. notes 6 3/8s, 2008 | | 980,000 | | 922,344 |
| Ford Motor Credit Corp. notes 5 5/8s, 2008 | | 1,709,000 | | 1,604,989 |
| Ford Motor Credit Corp. 144A sr. unsecd. notes 9 3/4s, 2010 | | 772,000 | | 764,087 |
| General Motors Acceptance Corp. FRN 6.457s, 2007 | | 1,870,000 | | 1,858,155 |
| General Motors Acceptance Corp. FRN Ser. MTN, 6.407s, 2007 | | 1,170,000 | | 1,167,702 |
| General Motors Acceptance Corp. FRN Ser. MTN, | | | | |
| 6.039s, 2007 | | 1,815,000 | | 1,807,969 |
| Johnson Controls, Inc. sr. notes 5 1/2s, 2016 | | 840,000 | | 805,918 |
| | | | | 16,689,114 |
|
| |
| Banking (0.6%) | | | | |
| Bank One Corp. sub. notes 5 1/4s, 2013 | | 100,000 | | 97,797 |
| Barclays Bank PLC FRB 6.278s, 2049 (United Kingdom) | | 1,110,000 | | 1,014,723 |
| Citigroup, Inc. sub. notes 5s, 2014 | | 2,377,000 | | 2,253,995 |
| Countrywide Capital III company guaranty Ser. B, 8.05s, 2027 | | 1,035,000 | | 1,171,941 |
| Deutsche Bank Capital Funding Trust VII 144A FRB 5.628s, 2049 | | 1,145,000 | | 1,083,961 |
| Fleet Capital Trust V bank guaranty FRN 6.396s, 2028 | | 935,000 | | 932,688 |
| Greenpoint Capital Trust I company guaranty 9.1s, 2027 | | 600,000 | | 640,009 |
| JPMorgan Chase Capital XV notes 5 7/8s, 2035 (S) | | 3,380,000 | | 3,078,389 |
| NB Capital Trust IV company guaranty 8 1/4s, 2027 | | 5,540,000 | | 5,825,449 |
| PNC Bank NA notes 4 7/8s, 2017 | | 1,030,000 | | 945,439 |
| Royal Bank of Scotland Group PLC bonds Ser. 1, | | | | |
| 9.118s, 2049 (United Kingdom) | | 1,900,000 | | 2,101,784 |
| Royal Bank of Scotland Group PLC FRB 7.648s, 2049 | | | | |
| (United Kingdom) | | 400,000 | | 441,604 |
| Sovereign Bancorp, Inc. 144A sr. notes 4.8s, 2010 | | 730,000 | | 704,895 |
| UBS AG/Jersey Branch FRN 8.414s, 2008 (Jersey) | | 3,020,000 | | 3,106,825 |
| UBS Preferred Funding Trust I company guaranty 8.622s, 2049 | | 1,345,000 | | 1,479,886 |
60
| CORPORATE BONDS AND NOTES (4.5%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| Banking continued | | | | |
| Washington Mutual Bank/Henderson NV | | | | |
| sub. notes Ser. BKNT, 5.95s, 2013 | $ | 1,030,000 | $ | 1,029,541 |
| Westpac Capital Trust III 144A sub. notes FRN | | | | |
| 5.819s, 2049 (Australia) | | 1,010,000 | | 982,821 |
| | | | | 26,891,747 |
|
| |
| Beverage (—%) | | | | |
| Diageo PLC company guaranty 8s, 2022 | | 760,000 | | 899,051 |
|
| |
| Broadcasting (0.1%) | | | | |
| Chancellor Media Corp. company guaranty 8s, 2008 | | 1,355,000 | | 1,412,249 |
| News America Holdings, Inc. debs. 7 3/4s, 2045 | | 1,065,000 | | 1,136,688 |
| News America, Inc. company guaranty 6.4s, 2035 | | 1,645,000 | | 1,546,539 |
| Viacom, Inc. 144A sr. notes 5 3/4s, 2011 | | 610,000 | | 598,633 |
| | | | | 4,694,109 |
|
| |
| Cable Television (0.1%) | | | | |
| Comcast Corp. company guaranty 4.95s, 2016 | | 165,000 | | 149,492 |
| Cox Communications, Inc. notes 6 3/4s, 2011 | | 800,000 | | 820,902 |
| Cox Enterprises, Inc. 144A notes 7 7/8s, 2010 | | 1,045,000 | | 1,110,746 |
| TCI Communications, Inc. debs. 9.8s, 2012 | | 1,870,000 | | 2,168,585 |
| TCI Communications, Inc. debs. 8 3/4s, 2015 | | 1,115,000 | | 1,281,380 |
| TCI Communications, Inc. debs. 7 7/8s, 2013 | | 1,240,000 | | 1,346,171 |
| | | | | 6,877,276 |
|
| |
| Chemicals (0.1%) | | | | |
| Dow Chemical Co. (The) Pass Through Trust 144A | | | | |
| company guaranty 4.027s, 2009 | | 1,510,000 | | 1,434,376 |
| ICI Wilmington, Inc. company guaranty 5 5/8s, 2013 | | 1,235,000 | | 1,192,606 |
| Lubrizol Corp. (The) sr. notes 5 1/2s, 2014 | | 470,000 | | 447,976 |
| Potash Corp. of Saskatchewan notes 7 3/4s, 2011 (Canada) | | 510,000 | | 552,231 |
| | | | | 3,627,189 |
|
| |
| Conglomerates (—%) | | | | |
| Tyco International Group SA company guaranty 6 3/4s, | | | | |
| 2011 (Luxembourg) | | 1,185,000 | | 1,235,021 |
|
| |
| Consumer Finance (0.1%) | | | | |
| American Express Co. FRN 6.8s, 2066 | | 840,000 | | 849,109 |
| Block Financial Corp. notes 5 1/8s, 2014 | | 760,000 | | 701,700 |
| HSBC Finance Capital Trust IX FRN 5.911s, 2035 | | 3,300,000 | | 3,214,916 |
| | | | | 4,765,725 |
|
| |
| Consumer Goods (—%) | | | | |
| Fortune Brands, Inc. notes 5 3/8s, 2016 | | 1,170,000 | | 1,090,606 |
|
| |
| Electric Utilities (0.6%) | | | | |
| AEP Texas North Co. sr. notes Ser. B, 5 1/2s, 2013 | | 905,000 | | 880,224 |
| Appalachian Power Co. sr. notes 5.8s, 2035 | | 510,000 | | 462,301 |
| Beaver Valley II Funding debs. 9s, 2017 | | 1,465,000 | | 1,637,094 |
61
| CORPORATE BONDS AND NOTES (4.5%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| Electric Utilities continued | | | | |
| CenterPoint Energy Houston Electric, LLC general | | | | |
| ref. mtge. Ser. M2, 5 3/4s, 2014 | $ | 110,000 | $ | 108,111 |
| Cleveland Electric Illuminating Co. (The) 144A | | | | |
| sr. notes Ser. D, 7.88s, 2017 | | 550,000 | | 625,427 |
| Commonwealth Edison Co. 1st mtge. 5.9s, 2036 | | 950,000 | | 887,190 |
| Consumers Energy Co. 1st mtge. 5s, 2012 | | 1,210,000 | | 1,156,062 |
| Consumers Energy Co. 1st mtge. Ser. B, 5 3/8s, 2013 | | 805,000 | | 779,263 |
| Dayton Power & Light Co. (The) 1st mtge. 5 1/8s, 2013 | | 975,000 | | 937,406 |
| Entergy Gulf States, Inc. 1st mtge. 5 1/4s, 2015 | | 985,000 | | 905,200 |
| Indianapolis Power & Light 144A 1st mtge. 6.3s, 2013 | | 515,000 | | 521,310 |
| Ipalco Enterprises, Inc. sec. notes 8 3/8s, 2008 | | 440,000 | | 453,200 |
| Kansas Gas & Electric bonds 5.647s, 2021 | | 395,000 | | 378,995 |
| MidAmerican Energy Holdings Co. 144A bonds 6 1/8s, 2036 (S) | | 2,410,000 | | 2,319,083 |
| Monongahela Power Co. 1st mtge. 5s, 2006 | | 2,185,000 | | 2,182,162 |
| Nevada Power Co. 2nd mtge. 9s, 2013 | | 478,000 | | 518,826 |
| Nevada Power Co. general ref. mtge. Ser. L, 5 7/8s, 2015 | | 525,000 | | 505,911 |
| Oncor Electric Delivery Co. debs. 7s, 2022 | | 675,000 | | 707,618 |
| Oncor Electric Delivery Co. sec. notes 7 1/4s, 2033 | | 820,000 | | 890,565 |
| PacifiCorp Sinking Fund 1st mtge. 5.45s, 2013 | | 1,020,000 | | 1,002,904 |
| Power Receivable Finance, LLC 144A sr. notes 6.29s, 2012 (S) | | 1,126,090 | | 1,127,329 |
| PPL Energy Supply LLC bonds Ser. A, 5.7s, 2015 | | 640,000 | | 613,901 |
| Progress Energy, Inc. sr. unsecd. notes 5 5/8s, 2016 | | 970,000 | | 941,365 |
| Public Service Co. of Colorado sr. notes Ser. A, 6 7/8s, 2009 | | 375,000 | | 387,061 |
| Public Service Co. of New Mexico sr. notes 4.4s, 2008 | | 570,000 | | 555,014 |
| Southern California Edison Co. 1st mtge. 5s, 2014 | | 230,000 | | 219,404 |
| Southern California Edison Co. notes 6.65s, 2029 | | 1,205,000 | | 1,243,571 |
| Teco Energy, Inc. notes 7.2s, 2011 | | 1,070,000 | | 1,092,738 |
| TransAlta Corp. notes 5 3/4s, 2013 (Canada) | | 665,000 | | 646,733 |
| Westar Energy, Inc. 1st mtge. 5.15s, 2017 | | 75,000 | | 69,460 |
| Westar Energy, Inc. 1st mtge. 5.1s, 2020 | | 800,000 | | 715,909 |
| | | | | 25,471,337 |
|
| |
| Electronics (—%) | | | | |
| Arrow Electronics, Inc. debs. 7 1/2s, 2027 | | 760,000 | | 800,949 |
| Avnet, Inc. notes 6s, 2015 | | 765,000 | | 726,973 |
| | | | | 1,527,922 |
|
| |
| Energy (—%) | | | | |
| Weatherford International, Ltd. sr. notes 5 1/2s, 2016 | | 455,000 | | 438,973 |
|
| |
| Financial (0.7%) | | | | |
| Bosphorus Financial Services, Ltd. 144A sec. FRN | | | | |
| 7.202s, 2012 (Cayman Islands) | | 2,378,000 | | 2,360,144 |
| CIT Group, Inc. sr. notes 7 3/4s, 2012 | | 1,015,000 | | 1,111,625 |
| CIT Group, Inc. sr. notes 5s, 2015 | | 780,000 | | 730,584 |
| CIT Group, Inc. sr. notes 5s, 2014 | | 1,885,000 | | 1,782,507 |
| Executive Risk Capital Trust company guaranty | | | | |
| Ser. B, 8.675s, 2027 | | 1,545,000 | | 1,627,920 |
62
| CORPORATE BONDS AND NOTES (4.5%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| Financial continued | | | | |
| Fund American Cos. Inc. notes 5 7/8s, 2013 | $ | 1,370,000 | $ | 1,316,833 |
| GATX Financial Corp notes 5.8s, 2016 | | 560,000 | | 544,067 |
| ILFC E-Capital Trust I 144A FRB 5.9s, 2065 (S) | | 295,000 | | 291,880 |
| ILFC E-Capital Trust II 144A FRB 6 1/4s, 2065 | | 1,710,000 | | 1,648,934 |
| International Lease Finance Corp. notes 4 3/4s, 2012 | | 2,630,000 | | 2,512,873 |
| Liberty Mutual Insurance 144A notes 7.697s, 2097 | | 2,095,000 | | 2,020,384 |
| Loews Corp. notes 5 1/4s, 2016 | | 510,000 | | 479,481 |
| MetLife, Inc. notes 5.7s, 2035 | | 725,000 | | 664,291 |
| MetLife, Inc. notes 5s, 2015 | | 1,210,000 | | 1,136,557 |
| Nationwide Financial Services, Inc. notes 5 5/8s, 2015 | | 465,000 | | 452,413 |
| Nationwide Mutual Insurance Co. 144A notes 8 1/4s, 2031 | | 375,000 | | 438,678 |
| Nuveen Investments, Inc. sr. notes 5 1/2s, 2015 | | 505,000 | | 477,598 |
| Nuveen Investments, Inc. sr. notes 5s, 2010 | | 505,000 | | 489,440 |
| OneAmerica Financial Partners, Inc. 144A bonds 7s, 2033 | | 710,000 | | 707,330 |
| Prudential Holdings LLC 144A bonds 8.695s, 2023 | | 1,510,000 | | 1,813,072 |
| Safeco Capital Trust I company guaranty 8.072s, 2037 | | 1,365,000 | | 1,436,657 |
| St. Paul Travelers Cos., Inc. (The) sr. unsecd. notes 5 1/2s, 2015 | | 80,000 | | 76,433 |
| Sun Life Canada Capital Trust 144A company | | | | |
| guaranty 8.526s, 2049 | | 2,115,000 | | 2,239,155 |
| Swiss Re Capital I LP 144A company guaranty FRN 6.854s, 2049 | | 850,000 | | 850,493 |
| Transamerica Capital III company guaranty 7 5/8s, 2037 | | 1,095,000 | | 1,181,230 |
| ZFS Finance USA Trust I 144A bonds FRB 6.15s, 2065 (S) | | 1,510,000 | | 1,466,278 |
| | | | | 29,856,857 |
|
| |
| Food (—%) | | | | |
| Dean Foods Co. company guaranty 7s, 2016 | | 680,000 | | 657,900 |
|
| |
| Forest Products and Packaging (0.1%) | | | | |
| Georgia-Pacific Corp. notes 8 1/8s, 2011 | | 635,000 | | 633,413 |
| Weyerhaeuser Co. debs. 7.95s, 2025 | | 895,000 | | 960,620 |
| Weyerhaeuser Co. debs. 7 3/8s, 2032 | | 880,000 | | 911,046 |
| | | | | 2,505,079 |
|
| |
| Gaming & Lottery (0.1%) | | | | |
| GTECH Holdings Corp. notes 4 3/4s, 2010 | | 640,000 | | 619,606 |
| Harrah’s Operating Co., Inc. company guaranty 5 3/4s, 2017 | | 770,000 | | 707,956 |
| Park Place Entertainment Corp. sr. notes 7s, 2013 | | 1,020,000 | | 1,044,206 |
| | | | | 2,371,768 |
|
| |
| Health Care (—%) | | | | |
| Health Management Associates, Inc. sr. notes 6 1/8s, 2016 | | 625,000 | | 574,853 |
|
| |
| Homebuilding (—%) | | | | |
| D.R. Horton, Inc. sr. notes 7 7/8s, 2011 | | 565,000 | | 595,307 |
| D.R. Horton, Inc. sr. notes 5 7/8s, 2013 | | 660,000 | | 618,949 |
| | | | | 1,214,256 |
|
| |
| Investment Banking/Brokerage (0.1%) | | | | |
| Lehman Brothers E-Capital Trust I FRN 5.954s, 2065 | | 2,420,000 | | 2,421,254 |
63
| CORPORATE BONDS AND NOTES (4.5%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| Media (0.1%) | | | | |
| Time Warner Entertainment Co., LP debs. 8 3/8s, 2023 | $ | 170,000 | $ | 188,980 |
| Time Warner, Inc. debs. 9.15s, 2023 | | 340,000 | | 412,748 |
| Time Warner, Inc. debs. 9 1/8s, 2013 | | 2,435,000 | | 2,785,316 |
| | | | | 3,387,044 |
|
| |
| Medical Services (—%) | | | | |
| Ventas Realty LP/Capital Corp. company guaranty | | | | |
| 6 3/4s, 2010 (R) | | 275,000 | | 275,688 |
| WellPoint, Inc. notes 5s, 2014 | | 515,000 | | 485,025 |
| WellPoint, Inc. unsecd. notes 5 1/4s, 2016 | | 590,000 | | 561,681 |
| | | | | 1,322,394 |
|
| |
| Metals (—%) | | | | |
| Newmont Mining Corp. notes 5 7/8s, 2035 | | 675,000 | | 605,167 |
| Teck Cominco, Ltd. notes 6 1/8s, 2035 (Canada) | | 650,000 | | 586,269 |
| Teck Cominco, Ltd. notes 5 3/8s, 2015 (Canada) | | 120,000 | | 112,757 |
| | | | | 1,304,193 |
|
| |
| Natural Gas Utilities (0.1%) | | | | |
| Atmos Energy Corp. notes 4.95s, 2014 | | 1,125,000 | | 1,036,308 |
| CenterPoint Energy Resources Corp. notes 7 3/4s, 2011 | | 1,060,000 | | 1,138,849 |
| Consolidated Natural Gas Co. sr. notes 5s, 2014 | | 530,000 | | 491,052 |
| Duke Energy Field Services, LLC 144A notes 5 3/8s, 2015 | | 260,000 | | 246,869 |
| Enbridge Energy Partners LP sr. notes 5.35s, 2014 | | 555,000 | | 525,593 |
| Kinder Morgan, Inc. sr. notes 6 1/2s, 2012 | | 685,000 | | 653,153 |
| National Fuel Gas Co. notes 5 1/4s, 2013 | | 545,000 | | 528,248 |
| | | | | 4,620,072 |
|
| |
| Oil & Gas (0.1%) | | | | |
| Amerada Hess Corp. bonds 7 7/8s, 2029 | | 1,160,000 | | 1,319,057 |
| Chesapeake Energy Corp. sr. unsecd. notes 7 5/8s, 2013 | | 1,010,000 | | 1,026,413 |
| Enterprise Products Operating LP company | | | | |
| guaranty Ser. B, 6 3/8s, 2013 | | 595,000 | | 601,439 |
| Forest Oil Corp. sr. notes 8s, 2011 | | 610,000 | | 626,775 |
| Motiva Enterprises, LLC 144A sr. notes 5.2s, 2012 | | 530,000 | | 516,665 |
| Newfield Exploration Co. sr. sub. notes 6 5/8s, 2016 | | 650,000 | | 625,625 |
| Premcor Refining Group, Inc. sr. notes 7 1/2s, 2015 | | 220,000 | | 228,617 |
| Sunoco, Inc. notes 4 7/8s, 2014 | | 590,000 | | 547,090 |
| Valero Energy Corp. sr. unsecd. notes 7 1/2s, 2032 | | 745,000 | | 835,342 |
| | | | | 6,327,023 |
|
| |
| Pharmaceuticals (0.1%) | | | | |
| Bayer Corp. 144A FRB 6.2s, 2008 | | 845,000 | | 851,464 |
| Hospira, Inc. notes 5.9s, 2014 | | 430,000 | | 425,677 |
| Wyeth notes 5 1/2s, 2014 | | 2,475,000 | | 2,425,158 |
| | | | | 3,702,299 |
|
| |
| Photography/Imaging (—%) | | | | |
| Xerox Corp. sr. notes 6.4s, 2016 | | 1,030,000 | | 987,513 |
64
| CORPORATE BONDS AND NOTES (4.5%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| Power Producers (—%) | | | | |
| York Power Funding 144A notes 12s, 2007 | | | | |
| (Cayman Islands) (In default) (F) † | $ | 157,726 | $ | 13,154 |
|
| |
| Railroads (0.1%) | | | | |
| BNSF Funding Trust I company guaranty FRB 6.613s, 2055 | | 2,285,000 | | 2,174,856 |
| Union Pacific Corp. 144A pass-through certificates 5.214s, 2014 | | 590,000 | | 567,362 |
| | | | | 2,742,218 |
|
| |
| Real Estate (0.3%) | | | | |
| Brandywine Operating Partnership LP notes 5 3/4s, 2012 (R) | | 505,000 | | 499,839 |
| Colonial Properties Trust notes 6 1/4s, 2014 (R) | | 660,000 | | 659,125 |
| Developers Diversified Realty Corp. unsecd. | | | | |
| notes 5 3/8s, 2012 (R) | | 385,000 | | 374,219 |
| Equity One, Inc. company guaranty 3 7/8s, 2009 (R) | | 840,000 | | 801,538 |
| ERP Operating LP notes 6.584s, 2015 | | 600,000 | | 624,266 |
| Health Care REIT, Inc. sr. notes 6s, 2013 (R) | | 385,000 | | 376,285 |
| Heritage Property Investment Trust company | | | | |
| guaranty 5 1/8s, 2014 (R) | | 795,000 | | 756,757 |
| Hospitality Properties Trust notes 6 3/4s, 2013 (R) | | 780,000 | | 806,805 |
| HRPT Properties Trust bonds 5 3/4s, 2014 (R) | | 530,000 | | 516,996 |
| HRPT Properties Trust notes 6 1/4s, 2016 (R) | | 525,000 | | 523,710 |
| iStar Financial, Inc. sr. unsecd. notes 5 7/8s, 2016 (R) | | 1,630,000 | | 1,575,864 |
| Nationwide Health Properties, Inc. notes 6 1/2s, 2011 (R) | | 650,000 | | 656,533 |
| ProLogis Trust sr. notes 5 3/4s, 2016 (R) | | 905,000 | | 878,607 |
| Rouse Co. (The) notes 7.2s, 2012 (R) | | 1,420,000 | | 1,437,002 |
| Simon Property Group LP unsub. 5 3/4s, 2015 (R) | | 740,000 | | 724,782 |
| | | | | 11,212,328 |
|
| |
| Regional Bells (0.1%) | | | | |
| Ameritech Capital Funding company guaranty 6 1/4s, 2009 | | 200,000 | | 203,000 |
| Citizens Communications Co. sr. notes 6 1/4s, 2013 | | 685,000 | | 652,463 |
| Southwestern Bell Telephone debs. 7s, 2027 | | 1,075,000 | | 1,073,203 |
| Verizon New England, Inc. sr. notes 6 1/2s, 2011 | | 2,285,000 | | 2,313,766 |
| Verizon New Jersey, Inc. debs. 8s, 2022 | | 770,000 | | 832,835 |
| Verizon Pennsylvania, Inc. debs. 8.35s, 2030 | | 980,000 | | 1,086,632 |
| | | | | 6,161,899 |
|
| |
| Retail (0.1%) | | | | |
| CVS Corp. 144A pass-through certificates 6.117s, 2013 | | 1,611,063 | | 1,612,094 |
| Delhaize America, Inc. company guaranty 8 1/8s, 2011 | | 1,370,000 | | 1,457,581 |
| JC Penney Co., Inc. debs. 7.65s, 2016 | | 110,000 | | 120,745 |
| JC Penney Co., Inc. notes 6 7/8s, 2015 | | 910,000 | | 946,644 |
| Kroger Co. company guaranty 6 3/4s, 2012 | | 275,000 | | 284,494 |
| Office Depot, Inc. notes 6 1/4s, 2013 | | 563,000 | | 568,302 |
| | | | | 4,989,860 |
|
| |
| Shipping (—%) | | | | |
| Ryder System, Inc. notes Ser. MTN, 5.95s, 2011 | | 450,000 | | 451,611 |
65
| CORPORATE BONDS AND NOTES (4.5%)* continued | | | | |
|
| | | Principal amount | | Value |
|
| Software (—%) | | | | |
| Computer Associates International, Inc. 144A | | | | |
| sr. notes 6 1/8s, 2014 | $ | 980,000 | $ | 899,967 |
|
| |
| Telecommunications (0.3%) | | | | |
| AT&T Corp. sr. notes 8s, 2031 | | 670,000 | | 781,727 |
| AT&T Wireless Services, Inc. sr. notes 8 3/4s, 2031 | | 2,225,000 | | 2,755,086 |
| Embarq Corp. notes 7.082s, 2016 | | 900,000 | | 905,756 |
| France Telecom notes 8 1/2s, 2031 (France) | | 180,000 | | 222,065 |
| France Telecom notes 7 3/4s, 2011 (France) | | 455,000 | | 492,907 |
| Nextel Communications, Inc. sr. notes Ser. E, 6 7/8s, 2013 | | 600,000 | | 606,627 |
| Rogers Wireless, Inc. sec. notes 6 3/8s, 2014 (Canada) | | 765,000 | | 733,444 |
| Sprint Capital Corp. company guaranty 6.9s, 2019 | | 715,000 | | 742,636 |
| Sprint Capital Corp. company guaranty 6 7/8s, 2028 | | 1,965,000 | | 1,988,287 |
| Telecom Italia Capital SA company guaranty 6 3/8s, | | | | |
| 2033 (Luxembourg) | | 290,000 | | 268,692 |
| Telecom Italia Capital SA company guaranty 5 1/4s, | | | | |
| 2013 (Luxembourg) | | 1,335,000 | | 1,251,098 |
| Telecom Italia Capital SA company guaranty 4s, | | | | |
| 2010 (Luxembourg) | | 60,000 | | 56,480 |
| Telecom Italia Capital SA notes 5 1/4s, 2015 (Luxembourg) | | 965,000 | | 881,817 |
| Telefonica Emisones SAU company guaranty 7.045s, | | | | |
| 2036 (Spain) | | 1,220,000 | | 1,253,420 |
| Telefonica Emisones SAU company guaranty 6.421s, | | | | |
| 2016 (Spain) | | 270,000 | | 273,509 |
| | | | | 13,213,551 |
|
| |
| Telephone (—%) | | | | |
| Telefonica Europe BV company guaranty 8 1/4s, | | | | |
| 2030 (Netherlands) | | 595,000 | | 688,666 |
|
| |
| Total corporate bonds and notes (cost $208,549,990) | | | $ | 202,545,278 |
|
| |
| |
| CONVERTIBLE PREFERRED STOCKS (0.4%)* | | | | |
|
| | | Shares | | Value |
| |
| Hartford Financial Services Group, Inc. (The) $3.50 cv. pfd. | | 20,476 | $ | 1,528,022 |
| Hartford Financial Services Group, Inc. (The) $3.00 cv. pfd. | | 70,503 | | 5,217,222 |
| Huntsman Corp. $2.50 cv. pfd. | | 109,061 | | 3,898,931 |
| XL Capital, Ltd. $1.625 cv. pfd. (Bermuda) | | 245,200 | | 5,239,924 |
|
| Total convertible preferred stocks (cost $14,836,324) | | | $ | 15,884,099 |
66
| PURCHASED OPTIONS OUTSTANDING (0.1%)* | | | |
|
| | | Expiration date/ | | |
| | | strike price | Contract amount | Value |
|
| Option on an interest rate swap | | | | |
| with JPMorgan Chase Bank, N.A. for the | | | | |
| right to pay a fixed rate of 5.28% versus | | | | |
| the three month USD-LIBOR-BBA maturing on | | | | |
| March 8, 2017. | | Mar-07/5.28 | $ 89,553,000 | $ 2,614,992 |
| Option on an interest rate swap | | | | |
| with JPMorgan Chase Bank, N.A. for the | | | | |
| right to receive a fixed rate of 5.28% | | | | |
| versus the three month USD-LIBOR-BBA | | | | |
| maturing on March 8, 2017. | | Mar-07/5.28 | 89,553,000 | 777,687 |
|
| Total purchased options outstanding (cost $4,392,574) | | | $ 3,392,679 |
|
| MUNICIPAL BONDS AND NOTES (—%)* | | | | |
|
| | | Rating ** | Principal amount | Value |
|
| MI Tobacco Settlement Fin. Auth. Rev. | | | | |
| Bonds, Ser. A, 7.309s, 6/1/34 | | Baa3 | $ 1,005,000 | $ 1,012,950 |
| NJ State Tpk. Auth. Rev. Bonds, Ser. B | | | | |
| AMBAC, 4.252s, 1/1/16 | | Aaa | 1,065,000 | 976,328 |
| AMBAC, U.S. Govt. Coll., 4.252s, | | | | |
| 1/1/16 (Prerefunded) | | Aaa | 55,000 | 50,147 |
|
| Total municipal bonds and notes (cost $2,090,343) | | | $ 2,039,425 |
|
| UNITS (—%)* (cost $988,223) | | | | |
|
| | | | Units | Value |
|
| Cendant Corp. units 4.89s, 2006 | | | 10,100 | $ 504,651 |
|
| WARRANTS (—%)* † (cost $0) | | | | |
|
| | Expiration | Strike | | |
| | date | price | Warrants | Value |
|
| Raytheon Co. | 6/16/11 | $ 1.164 | 29,195 | $ 376,616 |
|
| PREFERRED STOCKS (—%)* (cost $8,700) | | | | |
|
| | | | Shares | Value |
| Ion Media Networks, Inc. 14.25% cum. pfd. ‡‡ | | | 1 | $ 8,550 |
67
| SHORT-TERM INVESTMENTS (18.6%)* | | | |
|
| | Principal amount/shares | | Value |
|
| Short-term investments held as collateral for loaned | | | |
| securities with yields ranging from 5.27% to 5.44% | | | |
| and due dates ranging from August 1, 2006 to | | | |
| August 23, 2006 (d) | $ 321,344,319 | $ | 321,233,796 |
| | | |
| Putnam Prime Money Market Fund (e) | 448,019,911 | | 448,019,911 |
| Interest in $521,000,000 joint tri-party repurchase | | | |
| agreement dated July 31, 2006 with UBS | | | |
| Securities, LLC due August 1, 2006 with respect | | | |
| to various U.S. Government obligations — maturity | | | |
| value of $73,162,729 for an effective yield | | | |
| of 5.28% (collateralized by Freddie Mac and Fannie | | | |
| Mae with yields ranging from 3.5% to 12.0% and due | | | |
| dates ranging from January 1, 2007 to July 1, 2036, | | | |
| valued at $531,422,424) | 73,152,000 | | 73,152,000 |
|
| |
| Total short-term investments (cost $842,405,707) | | $ | 842,405,707 |
|
| |
| |
| TOTAL INVESTMENTS | | | |
| Total investments (cost $5,012,693,635) | | $ | 5,411,970,821 |
* Percentages indicated are based on net assets of $4,532,828,636.
** The Moody’s or Standard & Poor’s ratings indicated are believed to be the most recent ratings available at July 31, 2006 for the securities listed. Ratings are generally ascribed to securities at the time of issuance. While the agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings do not necessarily represent what the agencies would ascribe to these securities at July 31, 2006. Ratings are not covered by the Report of Independent Registered Public Accounting Firm. Security ratings are defined in the Statement of Additional Information.
† Non-income-producing security.
(S) Securities on loan, in part or in entirety, at July 31, 2006.
‡‡ Income may be received in cash or additional securities at the discretion of the issuer.
# A portion of this security was pledged and segregated with the custodian to cover margin requirements for futures contracts at July 31, 2006.
(R) Real Estate Investment Trust.
(SN) The securities noted above were purchased during the period for an aggregate cost of $3,495,624. During the period, questions arose regarding a potential misidentification of the characteristics of these securities. As a result of initial inquiries into the matter, the values of these securities was adjusted to the values shown in this schedule aggregating $2,383,113. An investigation of the facts surrounding the acquisition and valuation of these securities is currently underway to determine whether the Fund may have claims against other parties in this regard.
(d) See Note 1 to the financial statements.
(e) See Note 5 to the financial statements regarding investments in Putnam Prime Money Market Fund.
(F) Security is valued at fair value following procedures approved by the Trustees.
At July 31, 2006, liquid assets totaling $726,778,766 have been designated as collateral for open forward commitments and swap contracts.
144A after the name of an issuer represents securities exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
TBA after the name of a security represents to be announced securities (Note 1).
The rates shown on Floating Rate Bonds (FRB) and Floating Rate Notes (FRN) are the current interest rates at July 31, 2006.
The dates shown on debt obligations are the original maturity dates.
68
Inverse Floating Rate Bonds (IFB) are securities that pay interest rates that vary inversely to changes in the market interest rates. As interest rates rise, inverse floaters produce less current income. The interest rates shown are the current interest rates at July 31, 2006.
AMBAC represents AMBAC Indemnity Corporation.
U.S. Govt. Coll. represents U.S. government collateralized.
| WRITTEN OPTIONS OUTSTANDING at 7/31/06 (premiums received $8,198,261) | | | |
|
| | | Contract | Expiration date/ |
| | | amount | strike price | | Value |
| |
| Option on an interest rate swap with JPMorgan Chase | | | | |
| Bank, N.A. for the obligation to pay a fixed rate of 4.55% | | | | |
| versus the three month USD-LIBOR-BBA maturing on | | | | |
| July 5, 2017. | | $76,820,000 | Jul-07/4.55 | | $ 191,044 |
| | | | |
| Option on an interest rate swap with Lehman Brothers | | | | |
| International for the obligation to receive a fixed rate of | | | | |
| 5.225% semi-annually versus the three month | | | | | |
| USD- LIBOR-BBA maturing March 5, 2018. | | 32,581,000 | Mar-08/5.225 | 1,434,444 |
| | | | |
| Option on an interest rate swap with Lehman Brothers | | | | |
| International for the obligation to pay a fixed rate of | | | | |
| 5.225% semi-annually versus the three month | | | | | |
| USD-LIBOR-BBA maturing March 5, 2018. | | 32,581,000 | Mar-08/5.225 | 581,766 |
| | | | |
| Option on an interest rate swap with JPMorgan | | | | |
| Chase Bank, N.A. for the obligation to receive a | | | | |
| fixed rate of 4.55% versus the three month | | | | | |
| USD-LIBOR-BBA maturing on July 5, 2017. | | 76,820,000 | Jul-07/4.55 | | 5,871,114 |
|
| |
| Total | | | | | $8,078,368 |
|
| |
| |
| FUTURES CONTRACTS OUTSTANDING at 7/31/06 | | | | |
|
| | | | | | Unrealized |
| | Number of | | Expiration | | appreciation/ |
| | contracts | Value | date | (depreciation) |
| |
| U.S. Treasury Note 2 yr (Short) | 1,727 | $351,390,531 | Sep-06 | | $ 143,625 |
| U.S. Treasury Note 10 yr (Long) | 2,393 | 253,732,781 | Sep-06 | | 2,145,165 |
| U.S. Treasury Note 5 yr (Short) | 2,402 | 250,333,438 | Sep-06 | | (1,095,784) |
| Euro 90 day (Long) | 499 | 117,913,700 | Sep-06 | | (232,073) |
| S&P 500 Index E-Mini (Long) | 747 | 47,873,363 | Sep-06 | | 284,336 |
| Euro 90 day (Short) | 148 | 35,016,800 | Mar-07 | | 266,672 |
| U.S. Treasury Bond 20 yr (Short) | 171 | 18,516,094 | Sep-06 | | (301,099) |
|
| Total | | | | | $ 1,210,842 |
|
| |
| |
| TBA SALE COMMITMENTS OUTSTANDING at 7/31/06 (proceeds receivable $132,934,836) | | |
|
| | | Principal | Settlement | | |
| | | amount | date | | Value |
| |
| FNMA, 5s, August 1, 2021 | | $45,500,000 | 8/17/06 | $ | 44,202,541 |
| FNMA, 4 1/2s, September 1, 2021 | | 56,000,000 | 9/18/06 | | 53,423,126 |
| FNMA, 4 1/2s, August 1, 2021 | | 38,100,000 | 8/17/06 | | 36,382,524 |
|
| Total | | | | $134,008,191 |
69
| INTEREST RATE SWAP CONTRACTS OUTSTANDING at 7/31/06 | | |
|
| | | Payments | Payments | Unrealized |
| Swap counterparty / | Termination | made by | received by | appreciation/ |
| Notional amount | date | fund per annum | fund per annum | (depreciation) |
|
| Bank of America, N.A. | | | | |
| $ 700,000 | 9/1/15 | 3 month USD-LIBOR-BBA | 4.53% | $ (42,230) |
|
| 53,000,000 | 10/21/15 | 4.943% | 3 month USD-LIBOR-BBA | 1,589,264 |
|
| 3,720,000 | 6/24/15 | 4.39% | 3 month USD-LIBOR-BBA | 297,458 |
|
| 3,070,000 | 6/23/15 | 4.45% | 3 month USD-LIBOR-BBA | 232,570 |
|
| 7,440,000 | 6/23/15 | 4.466% | 3 month USD-LIBOR-BBA | 555,238 |
|
| 20,610,000 | 6/17/15 | 4.555% | 3 month USD-LIBOR-BBA | 1,405,409 |
|
| 248,000,000 | 5/21/07 | 3.95% | 3 month USD-LIBOR-BBA | 3,738,297 |
|
| 84,900,000 | 4/6/10 | 4.6375% | 3 month USD-LIBOR-BBA | 1,187,592 |
|
| 87,100,000 | 1/14/10 | 3 month USD-LIBOR-BBA | 4.106% | (3,565,979) |
|
| 102,075,000 | 12/22/09 | 3.965% | 3 month USD-LIBOR-BBA | 4,624,565 |
|
| 82,772,000 | 1/28/24 | 3 month USD-LIBOR-BBA | 5.2125% | (3,929,745) |
|
| Citibank, N.A. | | | | |
| 56,920,000 | 7/27/09 | 5.504% | 3 month USD-LIBOR-BBA | (216,264) |
|
| 4,380,000 | 4/7/14 | 5.377% | 3 month USD-LIBOR-BBA | (26,826) |
|
| Credit Suisse First Boston International | | | |
| 6,600,000 | 11/17/09 | 3.947% | 3 month USD-LIBOR-BBA | 300,514 |
|
| Credit Suisse International | | | | |
| 3,843,000 | 3/21/16 | 3 month USD-LIBOR-BBA | 5.20497% | (46,931) |
|
| Goldman Sachs Capital Markets, L.P. | | | |
| 4,968,000 | 5/3/16 | 5.565% | 3 month USD-LIBOR-BBA | (13,555) |
|
| 13,380,000 | 4/7/14 | 5.33842% | 3 month USD-LIBOR-BBA | (47,009) |
|
| JPMorgan Chase Bank, N.A. | | | | |
| 47,810,000 | 10/21/15 | 4.916% | 3 month USD-LIBOR-BBA | 1,529,495 |
|
| 10,430,000 | 8/2/15 | 4.657% | 3 month USD-LIBOR-BBA | (515,860) |
|
| 63,370,000 | 6/29/15 | 3 month USD-LIBOR-BBA | 4.296% | (5,483,597) |
|
| 4,470,000 | 6/24/15 | 3 month USD-LIBOR-BBA | 4.387% | 363,656 |
|
| 17,930,000 | 6/16/15 | 4.538% | 3 month USD-LIBOR-BBA | 1,242,579 |
|
| 170,000,000 | 3/30/08 | 3 month USD-LIBOR-BBA | 5.163% | 1,381,359 |
|
| 94,000,000 | 3/30/16 | 3 month USD-LIBOR-BBA | 5.2755% | (559,886) |
|
| 126,500,000 | 3/7/15 | 3 month USD-LIBOR-BBA | 4.798% | (4,700,465) |
|
| 183,000,000 | 1/17/16 | 4.946% | 3 month USD-LIBOR-BBA | 7,938,738 |
|
| Lehman Brothers Special Financing, Inc. | | | |
| 9,307,000 | 1/23/14 | 4.419% | 3 month USD-LIBOR-BBA | 615,428 |
|
| 9,307,000 | 1/23/14 | 4.408% | 3 month USD-LIBOR-BBA | 616,007 |
|
| 250,586,000 | 7/13/08 | 3 month USD-LIBOR-BBA | 5.63% | 932,737 |
|
| 81,190,000 | 7/13/16 | 5.707% | 3 month USD-LIBOR-BBA | (1,005,191) |
|
| 25,000,000 | 5/5/16 | 5.653% | 3 month USD-LIBOR-BBA | (236,888) |
|
| 28,400,000 | 5/5/08 | 5.3975% | 3 month USD-LIBOR-BBA | 8,658 |
|
| 36,500,000 | 4/28/16 | 5.613% | 3 month USD-LIBOR-BBA | (706,609) |
|
| 63,000,000 | 7/15/10 | 4.38% | 3 month USD-LIBOR-BBA | 2,293,906 |
|
| 8,300,000 | 6/16/15 | 4.5475% | 3 month USD-LIBOR-BBA | (569,627) |
|
| 30,200,000 | 6/16/07 | 4.0525% | 3 month USD-LIBOR-BBA | (434,835) |
|
| 54,300,000 | 4/28/08 | 5.4025% | 3 month USD-LIBOR-BBA | (684,470) |
|
| 1,990,000 | 4/10/15 | 5.41053% | 3 month USD-LIBOR-BBA | (11,894) |
|
| 50,000,000 | 4/2/16 | 5.399% | 3 month USD-LIBOR-BBA | (146,481) |
|
70
| INTEREST RATE SWAP CONTRACTS OUTSTANDING at 7/31/06 continued | |
|
| | | Payments | Payments | Unrealized |
| Swap counterparty / | Termination | made by | received by | appreciation/ |
| Notional amount | date | fund per annum | fund per annum | (depreciation) |
|
| Lehman Brothers Special Financing, Inc. | | | |
| 94,000,000 | 4/2/08 | 5.275% | 3 month USD-LIBOR-BBA | $ (949,698) |
|
| 10,192,000 | 12/16/13 | 4.579% | 3 month USD-LIBOR-BBA | 565,660 |
|
| 10,708,000 | 12/15/13 | 4.710% | 3 month USD-LIBOR-BBA | 508,410 |
|
| 3,658,000 | 12/11/13 | 3 month USD-LIBOR-BBA | 4.641% | (188,878) |
|
| 26,541,000 | 3/21/14 | 5.17596% | 3 month USD-LIBOR-BBA | 176,413 |
|
| 87,235,000 | 12/19/15 | 5.0265% | 3 month USD-LIBOR-BBA | 3,238,210 |
|
| Total | | | | $11,259,245 |
| TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 7/31/06 | | |
|
| |
| | | Fixed payments | Total return | Unrealized |
| Swap counterparty / | Termination | received (paid) by | received by | appreciation/ |
| Notional amount | date | fund per annum | or paid by fund | (depreciation) |
|
| Citibank, N.A. | | | | |
| $16,150,000 | 11/1/06 | (7.5 bp plus | Lehman Brothers | $ 11,784 |
| | | beginning | AAA 8.5+ CMBS | |
| | | of period nominal | Index adjusted | |
| | | spread of Lehman | by modified | |
| | | Brothers AAA | duration factor | |
| | | 8.5+ Commercial | | |
| | | Mortgage Backed | | |
| | | Securities Index) | | |
|
| Deutsche Bank AG London | | | | |
| 16,150,000 | 11/1/06 | (5 bp plus | Lehman Brothers | 10,741 |
| | | nominal spread | AAA 8.5+ CMBS | |
| | | of Lehman | Index adjusted | |
| | | Brothers AAA | by modified | |
| | | 8.5+ Commercial | duration factor | |
| | | Mortgage Backed | | |
| | | Securities Index) | | |
|
| Goldman Sachs International | | | | |
| 15,120,000 | 11/1/06 | (5 bp plus | Lehman Brothers | 11,400 |
| | | change in spread | AAA 8.5+ CMBS | |
| | | on the Lehman | Index adjusted | |
| | | Brothers AAA | by modified | |
| | | 8.5+ Commercial | duration factor | |
| | | Mortgage Backed | | |
| | | Securities Index | | |
| | | multiplied by | | |
| | | the modified | | |
| | | duration factor) | | |
|
| 3,843,000 | 9/15/11 | 678 bp (1 month | Ford Credit Auto | (5,379) |
| | | USD-LIBOR) | Owner Trust | |
| | | | Series 2005-B | |
| | | | Class D | |
|
71
| TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 7/31/06 continued | |
|
| |
| | | Fixed payments | Total return | Unrealized |
| Swap counterparty / | Termination | received (paid) by | received by | appreciation/ |
| Notional amount | date | fund per annum | or paid by fund | (depreciation) |
|
| Goldman Sachs International continued | | | | |
| |
| $ 71,700,000 | 12/1/06 | (5 bp plus | Lehman Brothers | $202,337 |
| | | change in spread | Aaa 8.5+ CMBS | |
| | | on the Lehman | Index adjusted | |
| | | Brothers Aaa | by modified | |
| | | 8.5+ Commercial | duration factor | |
| | | Mortgage Backed | | |
| | | Securities Index | | |
| | | multiplied by | | |
| | | the modified | | |
| | | duration factor) | | |
|
| |
| Total | | | | $230,883 |
| CREDIT DEFAULT CONTRACTS OUTSTANDING at 7/31/06 | | | |
|
| | | Upfront | | | Fixed payments | Unrealized |
| Swap counterparty / | | premium | Notional | Termination | received (paid) | by appreciation/ |
| Referenced debt* | | received (paid)** | amount | date | fund per annum | (depreciation) |
|
| Bank of America, N.A. | | | | | | |
| L-3 Communications | | | | | | |
| Corp. 7 5/8s, 2012 | $ | — | $ 735,000 | 9/20/11 | (111 bp) | $ (1,921) |
|
| L-3 Communications | | | | | | |
| Corp. 7 5/8s, 2012 | | — | 295,000 | 6/20/11 | (101 bp) | (58) |
|
| Waste Management, | | | | | | |
| 7.375%, 8/1/10 | | — | 1,140,000 | 9/20/12 | 64 bp | 13,231 |
|
| Citibank, N.A. | | | | | | |
| DJ CDX NA HY Series 6 | | | | | | |
| Index | | 489 | 391,500 | 6/20/11 | (345 bp) | (816) |
|
| DJ CDX NA HY Series 6 | | | | | | |
| Index | | 3,181 | 195,750 | 6/20/11 | (345 bp) | 2,528 |
|
| DJ CDX NA HY Series 6 | | | | | | |
| Index 25-35% tranche | | — | 1,566,000 | 6/20/11 | 80 bp | (9,332) |
|
| DJ CDX NA HY Series 6 | | | | | | |
| Index 25-35% tranche | | — | 783,000 | 6/20/11 | 74 bp | (7,193) |
|
| Deutsche Bank AG | | | | | | |
| France Telecom, 7.25%, | | | | | | |
| 1/28/2013 | | — | 1,870,000 | 6/20/16 | 70 bp | 5,005 |
|
| Goldman Sachs Capital Markets, L.P. | | | | | |
| DJ CDX NA HY Series 6 | | | | | | |
| Index | | 4,813 | 481,250 | 6/20/11 | (345 bp) | 3,208 |
|
| DJ CDX NA HY Series 6 | | | | | | |
| Index 25-35% tranche | | — | 1,925,000 | 6/20/11 | 74 bp | (16,576) |
|
| DJ CDX NA IG Series 5 | | | | | | |
| Index | | (67,392) | 26,770,000 | 12/20/10 | (45 bp) | (141,411) |
|
| DJ CDX NA IG Series 5 | | | | | | |
| Index 3-7% tranche | | — | 1,030,000 | 12/20/10 | (115 bp) | (17,141) |
|
| DJ CDX NA IG Series 5 | | | | | | |
| Index 3-7% tranche | | — | 1,198,000 | 12/20/10 | (113 bp) | (18,962) |
|
| Goodrich Corp., 7 5/8%, | | | | | | |
| 12/15/12 | | — | 930,000 | 9/20/10 | 49 bp | 6,744 |
|
| Noble Energy, Inc., 8%, | | | | | | |
| 4/1/27 | | — | 1,145,000 | 6/20/13 | 60 bp | (9,493) |
|
72
| CREDIT DEFAULT CONTRACTS OUTSTANDING at 7/31/06 continued | | |
|
| | Upfront | | | Fixed payments | Unrealized |
| Swap counterparty / | premium | Notional | Termination | received (paid) | by appreciation/ |
| Referenced debt* | received (paid)** | amount | date | fund per annum | (depreciation) |
|
| Goldman Sachs International | | | | | |
| DJ CDX NA HY Series 6 | | | | | |
| Index | $ 1,201 | $ 480,500 | 6/20/11 | (345 bp) | $ (401) |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index 25-35% tranche | — | 1,922,000 | 6/20/11 | 85 bp | (7,729) |
|
| DJ CDX NA IG Series 6 | | | | | |
| Index | — | 5,974,000 | 6/20/13 | 55 bp | 3,573 |
|
| DJ CDX NA IG Series 6 | | | | | |
| Index | 2,562 | 5,974,000 | 6/20/13 | (50 bp) | 2,380 |
|
| Any one of the underlying | | | | | |
| securities in the | | | | | |
| basket of BB CMBS | | | | | |
| securities | — | 8,582,000 | (a) | 2.461% | 428,172 |
|
| Lehman Brothers Special Financing, Inc. | | | | |
| DJ CDX NA HY Series 6 | | | | | |
| Index | (1,198) | 479,250 | 6/20/11 | (345 bp) | (2,796) |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index | 2,884 | 384,500 | 6/20/11 | (345 bp) | 1,601 |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index | 4,730 | 473,000 | 6/20/11 | (345 bp) | 3,152 |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index 25-35% tranche | — | 1,917,000 | 6/20/11 | 96 bp | 1,342 |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index 25-35% tranche | — | 1,538,000 | 6/20/11 | 74 bp | (13,497) |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index 25-35% tranche | — | 1,892,000 | 6/20/11 | 72 bp | (17,993) |
|
| DJ CDX NA IG Series 5 | | | | | |
| Index | (3,905) | 12,095,000 | 12/20/10 | 45 bp | (37,348) |
|
| DJ CDX NA IG Series 4 | | | | | |
| Index | (8,731) | 6,520,000 | 12/20/10 | (45 bp) | (26,759) |
|
| DJ CDX NA IG Series 4 | | | | | |
| Index 3-7% tranche | — | 1,567,000 | 6/20/12 | 309 bp | 92,461 |
|
| DJ CDX NA IG Series 4 | | | | | |
| Index 3-7% tranche | — | 1,258,500 | 6/20/10 | (124.5 bp) | (31,000) |
|
| DJ CDX NA IG Series 5 | | | | | |
| Index | 57,952 | 25,760,000 | 12/20/10 | (45 bp) | (9,625) |
|
| DJ CDX NA IG Series 5 | | | | | |
| Index | (24,130) | 13,240,000 | 12/20/10 | (45 bp) | (60,739) |
|
| Hilton Hotels, 7 5/8%, | | | | | |
| 12/1/2012 | — | 1,465,000 | 6/20/13 | 94 bp | (23,020) |
|
| Merrill Lynch International | | | | | |
| DJ CDX NA IG Series 5 | | | | | |
| Index | (3,874) | 6,010,000 | 12/20/10 | (45 bp) | (20,491) |
|
| Merrill Lynch International & Co. C.V. | | | | |
| DJ CDX NA IG Series 5 | | | | | |
| Index 3-7% tranche | — | 1,030,000 | 12/20/12 | 246 bp | 21,877 |
|
73
| CREDIT DEFAULT CONTRACTS OUTSTANDING at 7/31/06 continued | | |
|
| | Upfront | | | Fixed payments | Unrealized |
| Swap counterparty / | premium | Notional | Termination | received (paid) | by appreciation/ |
| Referenced debt* | received (paid)** | amount | date | fund per annum | (depreciation) |
|
| Morgan Stanley Capital Services, Inc. | | | | |
| DJ CDX NA HY Series 6 | | | | | |
| Index | $ (3,660) | $ 488,000 | 6/20/11 | (345 bp) | $ (5,287) |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index | (2,534) | 506,750 | 6/20/11 | (345 bp) | (4,223) |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index | (1,491) | 298,250 | 6/20/11 | (345 bp) | (2,486) |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index | — | 489,250 | 6/20/11 | (345 bp) | (1,631) |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index | 4,895 | 489,500 | 6/20/11 | (345 bp) | 3,263 |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index 25-35% tranche | — | 1,952,000 | 6/20/11 | 107.5 bp | 11,192 |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index 25-35% tranche | — | 2,027,000 | 6/20/11 | 106 bp | 10,345 |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index 25-35% tranche | — | 1,193,000 | 6/20/11 | 103.5 bp | 4,762 |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index 25-35% tranche | — | 1,957,000 | 6/20/11 | 88.5 bp | (4,906) |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index 25-35% tranche | — | 1,958,000 | 6/20/11 | 73 bp | (17,965) |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index 25-35% tranche | 7,953 | 489,375 | 6/20/11 | 345 bp | 6,320 |
|
| DJ CDX NA HY Series 6 | | | | | |
| Index 25-35% tranche | — | 1,957,500 | 6/20/11 | 74 bp | (17,983) |
|
| DJ CDX NA IG Series 4 | | | | | |
| Index 3-7% tranche | — | 9,426,500 | 6/20/10 | (62 bp) | (21,763) |
|
| DJ CDX NA IG Series 4 | | | | | |
| Index 3-7% tranche | — | 2,517,000 | 6/20/12 | 275 bp | 104,828 |
|
| DJ CDX NA IG Series 4 | | | | | |
| Index 3-7% tranche | — | 1,567,000 | 6/20/10 | (110.5 bp) | (30,868) |
|
| DJ CDX NA IG Series 5 | | | | | |
| Index 3-7% tranche | — | 1,030,000 | 12/20/12 | 248 bp | 23,003 |
|
| DJ CDX NA IG Series 5 | | | | | |
| Index 3-7% tranche | — | 1,030,000 | 12/20/10 | (115 bp) | (17,141) |
|
| Total | | | | | $150,433 |
* Payments related to the reference debt are made upon a credit default event.
** Upfront premium is based on the difference between the original spread on issue date and the market spread on day of execution.
(a) Terminating on the date on which the notional amount is reduced to zero or the date on which the assets securing the reference entity are liquidated.
The accompanying notes are an integral part of these financial statements.
74
Statement of assets and liabilities 7/31/06
| ASSETS | |
|
| Investment in securities, at value, including $313,400,149 | |
| of securities on loan (Note 1): | |
| Unaffiliated issuers (identified cost $4,564,673,724) | $4,963,950,910 |
| Affiliated issuers (identified cost $448,019,911) (Note 5) | 448,019,911 |
|
| Cash | 4,625,453 |
|
| Dividends, interest and other receivables | 14,379,657 |
|
| Receivable for shares of the fund sold | 2,754,202 |
|
| Receivable for securities sold | 7,581,633 |
|
| Receivable for sales of delayed delivery securities (Note 1) | 133,231,145 |
|
| Unrealized appreciation on swap contracts (Note 1) | 36,327,412 |
|
| Receivable for closed swap contracts (Note 1) | 118,260 |
|
| Premium paid on swap contracts (Note 1) | 116,915 |
|
| Total assets | 5,611,105,498 |
|
| |
| LIABILITIES | |
|
| Payable for variation margin (Note 1) | 201,331 |
|
| Payable for securities purchased | 2,338,182 |
|
| Payable for purchases of delayed delivery securities (Note 1) | 569,565,083 |
|
| Payable for shares of the fund repurchased | 9,411,923 |
|
| Payable for compensation of Manager (Notes 2 and 5) | 5,557,576 |
|
| Payable for investor servicing and custodian fees (Note 2) | 680,625 |
|
| Payable for Trustee compensation and expenses (Note 2) | 435,897 |
|
| Payable for administrative services (Note 2) | 5,438 |
|
| Payable for distribution fees (Note 2) | 1,380,574 |
|
| Written options outstanding, at value (premiums received $8,198,261) (Note 1) | 8,078,368 |
|
| Unrealized depreciation on swap contracts (Note 1) | 24,686,851 |
|
| Premiums received on swap contracts (Note 1) | 90,660 |
|
| TBA sales commitments, at value (proceeds receivable $132,934,836) (Note 1) | 134,008,191 |
|
| Collateral on securities loaned, at value (Note 1) | 321,233,796 |
|
| Other accrued expenses | 602,367 |
|
| Total liabilities | 1,078,276,862 |
|
| Net assets | $4,532,828,636 |
(Continued on next page)
75
Statement of assets and liabilities (Continued)
| REPRESENTED BY | |
|
| Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $3,946,186,749 |
|
| Undistributed net investment income (Note 1) | 15,088,106 |
|
| Accumulated net realized gain on investments | |
| and foreign currency transactions (Note 1) | 160,425,063 |
|
| Net unrealized appreciation of investments | |
| and assets and liabilities in foreign currencies | 411,128,718 |
|
| Total — Representing net assets applicable to capital shares outstanding | $4,532,828,636 |
|
| |
| COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
|
| Net asset value and redemption price per class A share | |
| ($3,155,761,146 divided by 173,327,736 shares) | $18.21 |
|
| Offering price per class A share | |
| (100/94.75 of $18.21)* | $19.22 |
|
| Net asset value and offering price per class B share | |
| ($624,026,248 divided by 34,631,401 shares)** | $18.02 |
|
| Net asset value and offering price per class C share | |
| ($70,192,151 divided by 3,879,256 shares)** | $18.09 |
|
| Net asset value and redemption price per class M share | |
| ($187,338,361 divided by 10,395,145 shares) | $18.02 |
|
| Offering price per class M share | |
| (100/96.75 of $18.02)* | $18.63 |
|
| Net asset value, offering price and redemption price per class R share | |
| ($1,525,378 divided by 84,024 shares) | $18.15 |
|
| Net asset value, offering price and redemption price per class Y share | |
| ($493,985,352 divided by 27,057,141 shares) | $18.26 |
* On single retail sales of less than $50,000. On sales of $50,000 or more the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
76
Statement of operations Year ended 7/31/06
| INVESTMENT INCOME | |
|
| Interest (including interest income of $11,186,954 | |
| from investments in affiliated issuers) (Note 5) | $ 95,466,295 |
|
| Dividends | 60,982,495 |
|
| Securities lending | 360,495 |
|
| Total investment income | 156,809,285 |
|
| |
| EXPENSES | |
|
| Compensation of Manager (Note 2) | 23,837,931 |
|
| Investor servicing fees (Note 2) | 9,125,947 |
|
| Custodian fees (Note 2) | 480,131 |
|
| Trustee compensation and expenses (Note 2) | 164,887 |
|
| Administrative services (Note 2) | 82,219 |
|
| Distribution fees — Class A (Note 2) | 8,187,795 |
|
| Distribution fees — Class B (Note 2) | 7,750,685 |
|
| Distribution fees — Class C (Note 2) | 740,579 |
|
| Distribution fees — Class M (Note 2) | 1,532,417 |
|
| Distribution fees — Class R (Note 2) | 5,394 |
|
| Other | 1,102,800 |
|
| Non-recurring costs (Notes 2 and 7) | 70,722 |
|
| Costs assumed by Manager (Notes 2 and 7) | (70,722) |
|
| Fees waived and reimbursed by Manager (Notes 5 and 6) | (2,793,360) |
|
| Total expenses | 50,217,425 |
|
| Expense reduction (Note 2) | (1,102,511) |
|
| Net expenses | 49,114,914 |
|
| Net investment income | 107,694,371 |
|
| Net realized gain on investments (Notes 1 and 3) | 352,152,050 |
|
| Net realized gain on swap contracts (Note 1) | 5,137,064 |
|
| Net realized loss on futures contracts (Note 1) | (11,647,842) |
|
| Net realized gain on foreign currency transactions (Note 1) | 9,997 |
|
| Net unrealized depreciation of assets and liabilities | |
| in foreign currencies during the year | (5,843) |
|
| Net unrealized depreciation of investments, futures contracts, swap contracts, | |
| written options and TBA sale commitments during the year | (276,606,834) |
|
| Net gain on investments | 69,038,592 |
|
| Net increase in net assets resulting from operations | $ 176,732,963 |
The accompanying notes are an integral part of these financial statements.
77
Statement of changes in net assets
| DECREASE IN NET ASSETS | | | | |
|
| | | Year ended | | Year ended |
| | | 7/31/06 | | 7/31/05 |
|
| Operations: | | | | |
| Net investment income | $ | 107,694,371 | $ | 100,672,170 |
|
| Net realized gain on investments | | | | |
| and foreign currency transactions | | 345,651,269 | | 388,377,420 |
|
| Net unrealized depreciation of investments | | | | |
| and assets and liabilities in foreign currencies | | (276,612,677) | | 73,207,522 |
|
| Net increase in net assets resulting from operations | | 176,732,963 | | 562,257,112 |
|
| Distributions to shareholders: (Note 1) | | | | |
|
| From net investment income | | | | |
|
| Class A | | (90,591,899) | | (63,734,158) |
|
| Class B | | (15,898,776) | | (11,829,280) |
|
| Class C | | (1,499,446) | | (879,740) |
|
| Class M | | (4,675,982) | | (3,086,878) |
|
| Class R | | (25,114) | | (7,354) |
|
| Class Y | | (17,912,483) | | (16,948,666) |
|
| From net realized short-term gain on investments | | | | |
|
| Class A | | (4,165,494) | | — |
|
| Class B | | (1,042,091) | | — |
|
| Class C | | (95,268) | | — |
|
| Class M | | (264,982) | | — |
|
| Class R | | (993) | | — |
|
| Class Y | | (806,000) | | — |
|
| From net realized long-term gain on investments | | | | |
|
| Class A | | (64,836,816) | | — |
|
| Class B | | (16,220,380) | | — |
|
| Class C | | (1,482,867) | | — |
|
| Class M | | (4,124,503) | | — |
|
| Class R | | (15,451) | | — |
|
| Class Y | | (12,545,570) | | — |
|
| Redemption fees (Note 1) | | 9,454 | | 18,029 |
|
| Decrease from capital share transactions (Note 4) | | (738,162,782) | | (694,050,829) |
|
| Total decrease in net assets | $ | (797,624,480) | $ | (228,261,764) |
|
| |
| NET ASSETS | | | | |
| Beginning of year | $5,330,453,116 | $5,558,714,880 |
|
| End of year (including undistributed net investment | | | | |
| income of $15,088,106 and $26,861,482, respectively) | $4,532,828,636 | $5,330,453,116 |
The accompanying notes are an integral part of these financial statements.
78
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79
Financial highlights (For a common share outstanding throughout the period)
| INVESTMENT OPERATIONS: | | | | LESS DISTRIBUTIONS: | | | | | RATIOS AND SUPPLEMENTAL DATA: | |
| | | | | | | | | | | | | | |
| | | | Net | | | | | | | Total | | | Ratio of net | |
| | Net asset | Net | realized and | Total | From | From | | | Net asset | return | Net | Ratio of | investment | |
| | value, | investment | unrealized | from | net | net realized | | | value, | at net | assets, | expenses to | income (loss) | Portfolio |
| | beginning | income | gain (loss) on | investment | investment | gain on | Total | Redemption | end | asset | end of period | average net | to average | turnover |
| Period ended | of period | (loss)(a) | investments | operations | income | investments | distributions | fees | of period | value (%)(b) | (in thousands) | assets (%)(c) | net assets (%) | (%) |
|
| CLASS A | | | | | | | | | | | | | | |
| July 31, 2006 | $18.40 | .42(d,e) | .27 | .69 | (.50) | (.38) | (.88) | —(g) | $18.21 | 3.89(e) | $3,155,761 | .90(d,e) | 2.31(d,e) | 117.11(h) |
| July 31, 2005 | 16.91 | .35(d,f) | 1.47 | 1.82 | (.33) | — | (.33) | —(g) | 18.40 | 10.89 | 3,458,405 | .98(d) | 1.97(d,f) | 169.29(h) |
| July 31, 2004 | 15.72 | .32(d) | 1.20 | 1.52 | (.33) | — | (.33) | —(g) | 16.91 | 9.77 | 3,322,532 | 1.00(d) | 1.90(d) | 165.66 |
| July 31, 2003 | 15.02 | .37 | .81 | 1.18 | (.48) | — | (.48) | — | 15.72 | 8.06 | 3,784,601 | .99 | 2.50 | 121.38(i,j) |
| July 31, 2002 | 17.24 | .45 | (2.17) | (1.72) | (.48) | (.02) | (.50) | — | 15.02 | (10.20) | 2,990,984 | .96 | 2.75 | 131.89(i) |
|
| |
| CLASS B | | | | | | | | | | | | | | |
| July 31, 2006 | $18.22 | .28(d,e) | .26 | .54 | (.36) | (.38) | (.74) | —(g) | $18.02 | 3.05(e) | $624,026 | 1.65(d,e) | 1.58(d,e) | 117.11(h) |
| July 31, 2005 | 16.73 | .21(d,f) | 1.48 | 1.69 | (.20) | — | (.20) | —(g) | 18.22 | 10.17 | 917,951 | 1.73(d) | 1.22(d,f) | 169.29(h) |
| July 31, 2004 | 15.56 | .19(d) | 1.19 | 1.38 | (.21) | — | (.21) | —(g) | 16.73 | 8.88 | 1,095,665 | 1.75(d) | 1.16(d) | 165.66 |
| July 31, 2003 | 14.87 | .26 | .80 | 1.06 | (.37) | — | (.37) | — | 15.56 | 7.25 | 1,308,605 | 1.74 | 1.75 | 121.38(i,j) |
| July 31, 2002 | 17.07 | .33 | (2.15) | (1.82) | (.36) | (.02) | (.38) | — | 14.87 | (10.86) | 1,068,667 | 1.71 | 2.00 | 131.89(i) |
|
| |
| CLASS C | | | | | | | | | | | | | | |
| July 31, 2006 | $18.30 | .28(d,e) | .25 | .53 | (.36) | (.38) | (.74) | —(g) | $18.09 | 3.01(e) | $70,192 | 1.65(d,e) | 1.56(d,e) | 117.11(h) |
| July 31, 2005 | 16.81 | .21(d,f) | 1.48 | 1.69 | (.20) | — | (.20) | —(g) | 18.30 | 10.14 | 77,024 | 1.73(d) | 1.22(d,f) | 169.29(h) |
| July 31, 2004 | 15.63 | .19(d) | 1.20 | 1.39 | (.21) | — | (.21) | —(g) | 16.81 | 8.92 | 75,185 | 1.75(d) | 1.16(d) | 165.66 |
| July 31, 2003 | 14.94 | .26 | .80 | 1.06 | (.37) | — | (.37) | — | 15.63 | 7.25 | 91,282 | 1.74 | 1.73 | 121.38(i,j) |
| July 31, 2002 | 17.16 | .33 | (2.16) | (1.83) | (.37) | (.02) | (.39) | — | 14.94 | (10.88) | 53,186 | 1.71 | 1.99 | 131.89(i) |
|
| |
| CLASS M | | | | | | | | | | | | | | |
| July 31, 2006 | $18.22 | .33(d,e) | .26 | .59 | (.41) | (.38) | (.79) | —(g) | $18.02 | 3.34(e) | $187,338 | 1.40(d,e) | 1.81(d,e) | 117.11(h) |
| July 31, 2005 | 16.74 | .26(d,f) | 1.47 | 1.73 | (.25) | — | (.25) | —(g) | 18.22 | 10.39 | 215,816 | 1.48(d) | 1.47(d,f) | 169.29(h) |
| July 31, 2004 | 15.57 | .23(d) | 1.19 | 1.42 | (.25) | — | (.25) | —(g) | 16.74 | 9.18 | 217,046 | 1.50(d) | 1.40(d) | 165.66 |
| July 31, 2003 | 14.87 | .30 | .80 | 1.10 | (.40) | — | (.40) | — | 15.57 | 7.58 | 239,662 | 1.49 | 2.02 | 121.38(i,j) |
| July 31, 2002 | 17.08 | .37 | (2.16) | (1.79) | (.40) | (.02) | (.42) | — | 14.87 | (10.69) | 222,176 | 1.46 | 2.25 | 131.89(i) |
|
| |
| CLASS R | | | | | | | | | | | | | | |
| July 31, 2006 | $18.36 | .36(d,e) | .27 | .63 | (.46) | (.38) | (.84) | —(g) | $18.15 | 3.57(e) | $1,525 | 1.15(d,e) | 2.00(d,e) | 117.11(h) |
| July 31, 2005 | 16.89 | .30(d,f) | 1.48 | 1.78 | (.31) | — | (.31) | —(g) | 18.36 | 10.63 | 726 | 1.23(d) | 1.67(d,f) | 169.29(h) |
| July 31, 2004 | 15.70 | .21(d) | 1.29 | 1.50 | (.31) | — | (.31) | —(g) | 16.89 | 9.60 | 127 | 1.25(d) | 1.33(d) | 165.66 |
| July 31, 2003 † | 15.05 | .17 | .65 | .82 | (.17) | — | (.17) | — | 15.70 | 5.52* | 1 | .65* | 1.18* | 121.38(i,j) |
|
| |
| CLASS Y | | | | | | | | | | | | | | |
| July 31, 2006 | $18.46 | .47(d,e) | .26 | .73 | (.55) | (.38) | (.93) | —(g) | $18.26 | 4.09(e) | $493,985 | .65(d,e) | 2.59(d,e) | 117.11(h) |
| July 31, 2005 | 16.95 | .40(d,f) | 1.49 | 1.89 | (.38) | — | (.38) | —(g) | 18.46 | 11.26 | 660,532 | .73(d) | 2.23(d,f) | 169.29(h) |
| July 31, 2004 | 15.76 | .36(d) | 1.21 | 1.57 | (.38) | — | (.38) | —(g) | 16.95 | 10.03 | 848,161 | .75(d) | 2.16(d) | 165.66 |
| July 31, 2003 | 15.05 | .41 | .82 | 1.23 | (.52) | — | (.52) | — | 15.76 | 8.38 | 880,435 | .74 | 2.76 | 121.38(i,j) |
| July 31, 2002 | 17.28 | .49 | (2.17) | (1.68) | (.53) | (.02) | (.55) | — | 15.05 | (10.01) | 731,900 | .71 | 3.00 | 131.89(i) |
|
See notes to financial highlights at the end of this section.
The accompanying notes are an integral part of these financial statements.
Financial highlights (Continued)
* Not annualized.
† For the period January 21, 2003 (commencement of operations) to July 31, 2003.
(a) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period.
(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).
(d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Market Fund during the period. As a result of such waivers, the expenses of each class, as a percentage of its net assets, reflect a reduction of the following amounts (Note 5):
| | 7/31/06 | 7/31/05 | 7/31/04 |
|
| Class A | 0.01% | 0.01% | <0.01% |
|
| Class B | 0.01 | 0.01 | <0.01 |
|
| Class C | 0.01 | 0.01 | <0.01 |
|
| Class M | 0.01 | 0.01 | <0.01 |
|
| Class R | 0.01 | 0.01 | <0.01 |
|
| Class Y | 0.01 | 0.01 | <0.01 |
|
(e) Reflects a non-recurring reimbursement from Putnam Investments relating to the calculation of certain amounts paid by the fund to Putnam in previous years for transfer agent services, which amounted to the following amounts for the period ended July 31, 2006 (Note 6):
| | | Percentage of |
| | Per share | net assets |
|
| Class A | $0.01 | 0.05% |
|
| Class B | 0.01 | 0.05 |
|
| Class C | 0.01 | 0.05 |
|
| Class M | 0.01 | 0.05 |
|
| Class R | 0.01 | 0.06 |
|
| Class Y | 0.01 | 0.05 |
|
(f) Reflects a non-recurring accrual related to Putnam Management’s settlement with the SEC regarding brokerage allocation practices, which amounted to the following amounts (Note 6):
| | | Percentage of |
| | Per share | net assets |
|
| Class A | <$0.01 | 0.02% |
|
| Class B | <0.01 | 0.02 |
|
| Class C | <0.01 | 0.02 |
|
| Class M | <0.01 | 0.02 |
|
| Class R | <0.01 | 0.02 |
|
| Class Y | <0.01 | 0.02 |
|
(g) Amount represents less than $0.01 per share.
(h) Portfolio turnover excludes dollar roll transactions.
(i) Portfolio turnover excludes certain treasury note transactions executed in connection with a short-term trading strategy.
(j) Portfolio turnover excludes the impact of assets received from the acquisition of Putnam Balanced Fund and Putnam Balanced Retirement Fund.
The accompanying notes are an integral part of these financial statements.
82
Notes to financial statements 7/31/06
Note 1: Significant accounting policies
The George Putnam Fund of Boston (“the fund”), a Massachusetts business trust, is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The fund seeks to provide a balanced investment comprised of a well-diversi-fied portfolio of stocks and bonds, which will produce both capital growth and current income.
The fund offers class A, class B, class C, class M, class R and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 5.25% and 3.25%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge, if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are offered to qualified employee-benefit plans, are sold without a front-end sales charge or a contingent deferred sales charge. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, c lass M and class R shares, but do not bear a distribution fee. Class Y shares are sold to certain eligible purchasers including certain defined contribution plans (including corporate IRAs), bank trust departments, trust companies and certain college savings plans.
A 2.00% redemption fee may apply to any shares that are redeemed (either by selling or exchanging into another fund) within 5 days of purchase. The redemption fee is accounted for as an addition to paid-in-capital.
The redemption fees discussed above will be replaced, effective October 2, 2006 by a 1.00% redemption fee on any shares purchased on or after such date that are redeemed (either by selling or exchanging into another fund) within 7 days of purchase.
Investment income, realized and unrealized gains and losses and expenses of the fund are borne pro-rata based on the relative net assets of each class to the total net assets of the fund, except that each class bears expenses unique to that class (including the distribution fees applicable to such classes). Each class votes as a class only with respect to its own distribution plan or other matters on which a class vote is required by law or determined by the Trustees. Shares of each class would receive their pro-rata share of the net assets of the fund, if the fund were liquidated. In addition, the Trustees declare separate dividends on each class of shares.
In the normal course of business, the fund enters into contracts that may include agreements to indemnify another party under given circumstances. The fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the fund. However, the fund expects the risk of material loss to be remote.
The following is a summary of significant accounting policies consistently followed by the fund in the preparation of its financial statements. The preparation of financial statements is in conformity with accounting principles generally accepted in the United States of America and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are readily available are valued at the last reported sales price on their principal exchange, or official closing price for certain markets. If no sales are reported — as in the case of some securities traded over-the-counter — a security is valued at its last reported bid price.
83
Market quotations are not considered to be readily available for certain debt obligations; such investments are valued on the basis of valuations furnished by an independent pricing service approved by the Trustees or dealers selected by Putnam Investment Management, LLC (“Putnam Management”), the fund’s manager, an indirect wholly-owned subsidiary of Putnam, LLC. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. Accordingly, on cert ain days, the fund will fair value foreign equity securities taking into account multiple factors, including movements in the U.S. securities markets. The number of days on which fair value prices will be used will depend on market activity and it is possible that fair value prices will be used by the fund to a significant extent. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate. Other investments, including certain restricted securities, are valued at fair value following procedures approved by the Trustees. Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security at a given point in time and does not reflect an actual market price, which may be differ ent by a material amount.
B) Joint trading account Pursuant to an exemptive order from the Securities and Exchange Commission, the fund may transfer uninvested cash balances, including cash collateral received under security lending arrangements, into a joint trading account along with the cash of other registered investment companies and certain other accounts managed by Putnam Investment Management, LLC (“Putnam Management”), the fund’s manager, an indirect wholly-owned subsidiary of Putnam, LLC. These balances may be invested in issues of high-grade short-term investments having maturities of up to 397 days for collateral received under security lending arrangements and up to 90 days for other cash investments.
C) Repurchase agreements The fund, or any joint trading account, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. Collateral for certain tri-party repurchase agreements is held at the counterparty’s custodian in a segregated account for the benefit of the fund and the coun-terparty. Putnam Management is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security transactions are recorded on the trade date (the date the order to buy or sell is executed). Gains or losses on securities sold are determined on the identified cost basis. Interest income is recorded on the accrual basis. Dividend income, net of applicable withholding taxes, is recognized on the ex-dividend date except that certain dividends from foreign securities, if any, are recognized as soon as the fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital or capital gains, if any, are reflected as a reduction of cost and/or as a realized gain when the amounts are conclusively determined. All premiums/discounts are amortized/accreted on a yield-to-maturity basis. Securities purchased or sold on a delayed delivery or a forward commitment basis m ay be settled a
84
month or more after the trade date; interest income is accrued based on the terms of the securities. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.
E) Stripped securities The fund may invest in stripped securities which represent a participation in securities that may be structured in classes with rights to receive different portions of the interest and principal. Interest-only securities receive all of the interest and principal-only securities receive all of the principal. If the interest-only securities experience greater than anticipated prepayments of principal, the fund may fail to recoup fully its initial investment in these securities. Conversely, principal-only securities increase in value if prepayments are greater than anticipated and decline if prepayments are slower than anticipated. The market value of these securities is highly sensitive to changes in interest rates.
F) Foreign currency translation The accounting records of the fund are maintained in U.S. dollars. The market value of foreign securities, currency holdings, and other assets and liabilities are recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when earned or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on closed forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions and the difference between the amount of investment income and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of open forward currency contracts and assets and liabilities other than investments at the period end, resulting from changes in the exchange rate. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments.
G) Forward currency contracts The fund may buy and sell forward currency contracts, which are agreements between two parties to buy and sell currencies at a set price on a future date. These contracts are used to protect against a decline in value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in the value of a currency in which securities a fund intends to buy are denominated, when a fund holds cash reserves and short term investments), or for other investment purposes. The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is marked to market daily and the change in market value is recorded as an unrealized gain or loss. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position. Risks may exceed amounts recognized on the statement of assets and liabilities. Forward currency contracts outstanding at period end, if any, are listed after the fund’s portfolio.
H) Futures and options contracts The fund may use futures and options contracts to hedge against
85
changes in the values of securities the fund owns or expects to purchase, or for other investment purposes. The fund may also write options on swaps or securities it owns or in which it may invest to increase its current returns.
The potential risk to the fund is that the change in value of futures and options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparty to the contract is unable to perform. Risks may exceed amounts recognized on the statement of assets and liabilities. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as a reduction to the cost of investments.
Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as “variation margin.” Exchange traded options are valued at the last sale price or, if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by dealers. Futures and written option contracts outstanding at period end, if any, are listed after the fund’s portfolio.
I) Total return swap contracts The fund may enter into total return swap contracts, which are arrangements to exchange a market linked return for a periodic payment, both based on a notional principal amount. To the extent that the total return of the security, index or other financial measure underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the fund will receive a payment from or make a payment to the counterparty. Total return swap contracts are marked to market daily based upon quotations from market makers and the change, if any, is recorded as unrealized gain or loss. Payments received or made are recorded as realized gains or loss. Certain total return swap contracts may include extended effective dates. Income related to these swap contracts is accrued based on the terms of the contract. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or in the price of the underlying security or index, the possibility that there is no liquid market for these agreements or that the counterparty may default on its obligation to perform. Risk of loss may exceed amounts recognized on the statement of assets and liabilities. Total return swap contracts outstanding at period end, if any, are listed after the fund’s portfolio.
J) Interest rate swap contracts The fund may enter into interest rate swap contracts, which are arrangements between two parties to exchange cash flows based on a notional principal amount, to manage the fund’s exposure to interest rates. Interest rate swap contracts are marked to market daily based upon quotations from an independent pricing service or market makers and the change, if any, is recorded as unrealized gain or loss. Payments received or made are recorded as realized gains or loss. Certain interest rate swap contracts may include extended effective dates. Income related to these swap contracts is accrued based on the terms of the contract. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or if the counterparty defaults on its obligation to perform. Risk of loss may exceed amounts recognized on the statement of assets and liabilities. Interest rate swap contracts outstanding at period end, if any, are listed after the fund’s portfolio.
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K) Credit default contracts The fund may enter into credit default contracts where one party, the protection buyer, makes an upfront or periodic payment to a counter party, the protection seller, in exchange for the right to receive a contingent payment. The maximum amount of the payment may equal the notional amount, at par, of the underlying index or security as a result of a related credit event. An upfront payment received by the fund, as the protection seller, is recorded as a liability on the fund’s books. An upfront payment made by the fund, as the protection buyer, is recorded as an asset on the fund’s books. Periodic payments received or paid by the fund are recorded as realized gains or losses. The credit default contracts are marked to market daily based upon quotations from an independent pricing service or market makers and the change, if any, is recorded as unrealized gain or loss. Payments received or made as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as realized gains or losses. In addition to bearing the risk that the credit event will occur, the fund could be exposed to market risk due to unfavorable changes in interest rates or in the price of the underlying security or index, the possibility that the fund may be unable to close out its position at the same time or at the same price as if it had purchased comparable publicly traded securities or that the counterparty may default on its obligation to perform. Risks of loss may exceed amounts recognized on the statement of assets and liabilities. Credit default contracts outstanding at period end, if any, are listed after the fund’s portfolio.
L) TBA purchase commitments The fund may enter into “TBA” (to be announced) commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established, the principal value has not been finalized. However, the amount of the commitments will not significantly differ from the principal amount. The fund holds, and maintains until settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price, or the fund may enter into offsetting contracts for the forward sale of other securities it owns. Income on the securities will not be earned until settlement date. TBA purchase commitments may be considered securities themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of dec line in the value of the fund’s other assets. Unsettled TBA purchase commitments are valued at fair value of the underlying securities, according to the procedures described under “Security valuation” above. The contract is “marked-to-market” daily and the change in market value is recorded by the fund as an unrealized gain or loss.
Although the fund will generally enter into TBA purchase commitments with the intention of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, the fund may dispose of a commitment prior to settlement if Putnam Management deems it appropriate to do so.
M) TBA sale commitments The fund may enter into TBA sale commitments to hedge its portfolio positions or to sell mortgage-backed securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, equivalent deliverable securities or an offsetting TBA purchase commitment deliverable on or before the sale commitment date, are held as “cover” for the transaction.
Unsettled TBA sale commitments are valued at fair value of the underlying securities, generally according to the procedures described under “Security valuation” above. The contract is “marked-to-market” daily and the change in market value is recorded by the fund as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the fund realizes a gain or loss. If the fund delivers securities under the commitment, the fund realizes a gain or a loss from the sale of the securities based upon the unit price established at the date the commitment was
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entered into. TBA sale commitments outstanding at period end, if any, are listed after the fund’s portfolio.
N) Dollar rolls To enhance returns, the fund may enter into dollar rolls (principally using TBAs) in which the fund sells securities for delivery in the current month and simultaneously contracts to purchase similar securities on a specified future date. During the period between the sale and subsequent purchase, the fund will not be entitled to receive income and principal payments on the securities sold. The fund will, however, retain the difference between the initial sales price and the forward price for the future purchase. The fund will also be able to earn interest on the cash proceeds that are received from the initial sale. The fund may be exposed to market or credit risk if the price of the security changes unfavorably or the counterparty fails to perform under the terms of the agreement.
O) Security lending The fund may lend securities, through its agents, to qualified borrowers in order to earn additional income. The loans are collateralized by cash and/or securities in an amount at least equal to the market value of the securities loaned. The market value of securities loaned is determined daily and any additional required collateral is allocated to the fund on the next business day. The risk of borrower default will be borne by the fund’s agents; the fund will bear the risk of loss with respect to the investment of the cash collateral. Income from securities lending is included in investment income on the statement of operations. At July 31, 2006, the value of securities loaned amounted to $313,400,149. The fund received cash collateral of $321,233,796 which is pooled with collateral of other Putnam funds into 24 issues of high grade short-term investments. P) Fed eral taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code of 1986 (the “Code”) applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code, as amended. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains.
At July 31, 2006, the fund had a capital loss carryover of $29,751,500 available to the extent allowed by the Code to offset future net capital gain, if any. The amount of the carryover and the expiration dates are:
| Loss Carryover | Expiration |
|
| $23,801,180 | July 31, 2010 |
|
| 5,950,320 | July 31, 2011 |
|
Q) Distributions to shareholders Distributions to shareholders from net investment income are recorded by the fund on the ex-dividend date. Distributions from capital gains, if any, are recorded on the ex-dividend date and paid at least annually. The amount and character of income and gains to be distributed are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These differences include temporary and permanent differences of losses on wash sale transactions, interest only securities and income on swap contracts. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. For the year ended July 31, 2006, the fund reclassified $11,135,953 to increase undistributed net investment income and $162,502 to increase paid-in-capital, with a decrea se to accumulated net realized gains of $11,298,455.
The tax basis components of distributable earnings and the federal tax cost at July 31, 2006 were as follows:
| Unrealized appreciation | $ 513,426,229 |
| Unrealized depreciation | (146,780,668) |
| | ——————————————— |
| Net unrealized appreciation | 366,645,561 |
| Undistributed ordinary income | 14,799,968 |
| Undistributed short-term gain | 24,557,589 |
| Undistributed long-term gain | 199,843,761 |
| Capital loss carryforward | (29,751,500) |
| Cost for federal income | |
| tax purposes | $5,045,325,260 |
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Note 2: Management fee, administrative
services and other transactions |
Putnam Management is paid for management and investment advisory services quarterly based on the average net assets of the fund. Such fee is based on the following annual rates: 0.65% of the first $500 million of average net assets, 0.55% of the next $500 million, 0.50% of the next $500 million, 0.45% of the next $5 billion, 0.425% of the next $5 billion, 0.405% of the next $5 billion, 0.39% of the next $5 billion and 0.38% thereafter.
Putnam Management has agreed to waive fees and reimburse expenses of the fund through July 31, 2007 to the extent necessary to ensure that the fund’s expenses do not exceed the simple average of the expenses of all front-end load funds viewed by Lipper Inc. as having the same investment classification or objective as the fund. The expense reimbursement is based on a comparison of the fund’s expenses with the average annualized operating expenses of the funds in its Lipper peer group for each calendar quarter during the fund’s last fiscal year, excluding 12b-1 fees and without giving effect to any expense offset and brokerage service arrangements that may reduce fund expenses. For the year ended July 31, 2006, Putnam Management did not waive any of its management fee from the fund.
For the year ended July 31, 2006, Putnam Management has assumed $70,722 of legal, shareholder servicing and communication, audit and Trustee fees incurred by the fund in connection with certain legal and regulatory matters (including those described in Note 6).
The fund reimburses Putnam Management an allocated amount for the compensation and related expenses of certain officers of the fund and their staff who provide administrative services to the fund. The aggregate amount of all such reimbursements is determined annually by the Trustees.
Custodial functions for the fund’s assets are provided by Putnam Fiduciary Trust Company (“PFTC”), a subsidiary of Putnam, LLC. PFTC receives fees for custody services based on the fund’s asset level, the number of its security holdings and transaction volumes. Putnam Investor Services, a division of PFTC, provides investor servicing agent functions to the fund. Putnam Investor Services receives fees for investor servicing based on the number of shareholder accounts in the fund and the level of defined contribution plan assets in the fund. During the year ended July 31, 2006, the fund incurred $9,606,078 for these services.
The fund has entered into an arrangement with PFTC whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the fund’s expenses. The fund also reduced expenses through brokerage service arrangements. For the year ended July 31, 2006, the fund’s expenses were reduced by $1,102,511 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of which $1,148, as a quarterly retainer, has been allocated to the fund, and an additional fee for each Trustees meeting attended. Trustees receive additional fees for attendance at certain committee meetings, industry seminars and for certain compliance-related matters. Trustees also are reimbursed for expenses they incur relating to their services as Trustees. George Putnam, III, who is not an independent Trustee, also receives the foregoing fees for his services as Trustee.
The fund has adopted a Trustee Fee Deferral Plan (the “Deferral Plan”) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable on or after July 1, 1995. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan.
The fund has adopted an unfunded noncontribu-tory defined benefit pension plan (the “Pension Plan”) covering all Trustees of the fund who have served as a Trustee for at least five years and were first elected prior to 2004. Benefits under the Pension Plan are equal to 50% of the Trustee’s average annual attendance and retainer fees for the three years ended December 31, 2005. Pension expense for the fund is included in Trustee
89
compensation and expenses in the statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.
The fund has adopted distribution plans (the “Plans”) with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management, a wholly-owned subsidiary of Putnam, LLC and Putnam Retail Management GP, Inc., for services provided and expenses incurred in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively.
For the year ended July 31, 2006, Putnam Retail Management, acting as underwriter, received net commissions of $184,386 and $2,850 from the sale of class A and class M shares, respectively, and received $700,881 and $5,642 in contingent deferred sales charges from redemptions of class B and class C shares, respectively.
A deferred sales charge of up to 1.00% and 0.65% is assessed on certain redemptions of class A and class M shares, respectively. For the year ended July 31, 2006, Putnam Retail Management, acting as underwriter, received $1,419 and no monies on class A and class M redemptions, respectively.
Note 3: Purchases and sales of securities
During the year ended July 31, 2006, cost of purchases and proceeds from sales of investment securities other than U.S. government securities and short-term investments aggregated $5,314,793,865 and $6,396,281,616, respectively.
There were no purchases or sales of U.S.
government securities.
Written option transactions during the year
ended July 31, 2006 are summarized as follows: |
| | Contract | Premiums |
| | Amounts | Received |
|
| Written options | | |
| outstanding at | | |
| beginning of year | $153,640,000 | $5,942,027 |
|
| Options opened | 65,162,000 | 2,256,234 |
| Options exercised | | |
| Options expired | — | — |
| Options closed | — | — |
|
| Written options | | |
| outstanding at | | |
| end of year | $218,802,000 | $8,198,261 |
Note 4: Capital shares
At July 31, 2006, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
| CLASS A | Shares | Amount |
|
| Year ended 7/31/06: | | |
| Shares sold | 26,056,673 | $ 472,538,555 |
|
| Shares issued | | |
| in connection | | |
| with reinvestment | | |
| of distributions | 8,267,038 | 148,562,850 |
|
| | 34,323,711 | 621,101,405 |
|
| Shares | | |
| repurchased | (48,907,255) | (887,113,170) |
|
| Net decrease | (14,583,544) | $(266,011,765) |
| |
| Year ended 7/31/05: | | |
| Shares sold | 32,384,442 | $ 574,245,635 |
|
| Shares issued | | |
| in connection | | |
| with reinvestment | | |
| of distributions | 3,333,997 | 58,742,671 |
|
| | 35,718,439 | 632,988,306 |
|
| Shares | | |
| repurchased | (44,333,728) | (784,605,393) |
|
| Net decrease | (8,615,289) | $(151,617,087) |
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| CLASS B | Shares | Amount |
|
| Year ended 7/31/06: | | |
| Shares sold | 2,534,039 | $ 45,555,631 |
|
| Shares issued | | |
| in connection | | |
| with reinvestment | | |
| of distributions | 1,744,635 | 31,032,061 |
|
| | 4,278,674 | 76,587,692 |
|
| Shares | | |
| repurchased | (20,039,885) | (359,943,585) |
|
| Net decrease | (15,761,211) | $(283,355,893) |
| |
| Year ended 7/31/05: | | |
| Shares sold | 5,236,764 | $ 91,543,092 |
|
| Shares issued | | |
| in connection | | |
| with reinvestment | | |
| of distributions | 630,414 | 10,998,211 |
|
| | 5,867,178 | 102,541,303 |
|
| Shares | | |
| repurchased | (20,958,534) | (367,671,388) |
|
| Net decrease | (15,091,356) | $(265,130,085) |
|
| |
| CLASS C | Shares | Amount |
|
| Year ended 7/31/06: | | |
| Shares sold | 576,960 | $ 10,389,241 |
|
| Shares issued | | |
| in connection | | |
| with reinvestment | | |
| of distributions | 153,025 | 2,732,848 |
|
| | 729,985 | 13,122,089 |
|
| Shares | | |
| repurchased | (1,060,812) | (19,144,461) |
|
| Net decrease | (330,827) | $ (6,022,372) |
| |
| Year ended 7/31/05: | | |
| Shares sold | 800,334 | $ 14,156,023 |
|
| Shares issued | | |
| in connection | | |
| with reinvestment | | |
| of distributions | 44,540 | 781,476 |
|
| | 844,874 | 14,937,499 |
|
| Shares | | |
| repurchased | (1,108,465) | (19,549,142) |
|
| Net decrease | (263,591) | $ (4,611,643) |
| CLASS M | Shares | Amount | |
|
| Year ended 7/31/06: | | | |
| Shares sold | 1,197,570 | $ 21,508,865 |
|
| Shares issued | | | |
| in connection | | | |
| with reinvestment | | | |
| of distributions | 503,392 | 8,954,415 |
|
| | 1,700,962 | 30,463,280 |
|
| Shares | | | |
| repurchased | (3,148,056) | (56,568,184) |
|
| Net decrease | (1,447,094) | $(26,104,904) |
| |
| Year ended 7/31/05: | | | |
| Shares sold | 2,152,981 | $ 37,764,959 |
|
| Shares issued | | | |
| in connection | | | |
| with reinvestment | | | |
| of distributions | 174,045 | 3,038,978 |
|
| | 2,327,026 | 40,803,937 |
|
| Shares | | | |
| repurchased | (3,448,793) | (60,632,306) |
|
| Net decrease | (1,121,767) | $(19,828,369) |
|
| |
| CLASS R | Shares | Amount | |
|
| Year ended 7/31/06: | | | |
| Shares sold | 68,286 | $1,234,680 |
|
| Shares issued | | | |
| in connection | | | |
| with reinvestment | | | |
| of distributions | 2,315 | 41,544 | |
|
| | 70,601 | 1,276,224 |
|
| Shares | | | |
| repurchased | (26,086) | (473,694) | |
|
| Net increase | 44,515 | $ 802,530 | |
| |
| Year ended 7/31/05: | | | |
| Shares sold | 34,944 | $ 617,759 | |
|
| Shares issued | | | |
| in connection | | | |
| with reinvestment | | | |
| of distributions | 414 | 7,354 | |
|
| | 35,358 | 625,113 | |
|
| Shares | | | |
| repurchased | (3,357) | (59,966) | |
|
| Net increase | 32,001 | $ 565,147 | |
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| CLASS Y | Shares | Amount |
|
| Year ended 7/31/06: | | |
| Shares sold | 6,287,577 | $ 114,028,313 |
|
| Shares issued | | |
| in connection | | |
| with reinvestment | | |
| of distributions | 1,735,510 | 31,261,000 |
|
| | 8,023,087 | 145,289,313 |
|
| Shares | | |
| repurchased | (16,756,758) | (302,759,691) |
|
| Net decrease | (8,733,671) | $(157,470,378) |
| |
| Year ended 7/31/05: | | |
| Shares sold | 8,972,215 | $ 159,374,817 |
|
| Shares issued | | |
| in connection | | |
| with reinvestment | | |
| of distributions | 961,528 | 16,948,666 |
|
| | 9,933,743 | 176,323,483 |
|
| Shares | | |
| repurchased | (24,182,974) | (429,752,275) |
|
| Net decrease | (14,249,231) | $(253,428,792) |
Note 5: Investment in Putnam Prime
Money Market Fund |
Pursuant to an exemptive order from the Securities and Exchange Commission, the fund invests in Putnam Prime Money Market Fund, an open-end management investment company managed by Putnam Management. Management fees paid by the fund are reduced by an amount equal to the management and administrative services fees paid by Putnam Prime Money Market Fund with respect to assets invested by the fund in Putnam Prime Money Market Fund. For the year ended July 31, 2006, management fees paid were reduced by $317,704 relating to the fund’s investment in Putnam Prime Money Market Fund. Income distributions earned by the fund are recorded as income in the statement of operations and totaled $11,186,954 for the year ended July 31, 2006. During the year ended July 31, 2006, cost of purchases and cost of sales of investments in Putnam Prime Money Market Fund aggregated $1,680,498,805 and $1,418,075,889, respectively.
Note 6: Regulatory matters and litigation
Putnam Management has entered into agreements with the Securities and Exchange Commission and the Massachusetts Securities Division settling charges connected with excessive short-term trading by Putnam employees and, in the case of the charges brought by the Massachusetts Securities Division, by participants in some Putnam-administered 401(k) plans. Pursuant to these settlement agreements, Putnam Management will pay a total of $193.5 million in penalties and restitution, with $153.5 million being paid to certain open-end funds and their shareholders. The amount will be allocated to shareholders and funds pursuant to a plan developed by an independent consultant, and will be paid following approval of the plan by the SEC and the Massachusetts Securities Division.
The Securities and Exchange Commission’s and Massachusetts Securities Division’s allegations and related matters also serve as the general basis for numerous lawsuits, including purported class action lawsuits filed against Putnam Management and certain related parties, including certain Putnam funds. Putnam Management will bear any costs incurred by Putnam funds in connection with these lawsuits. Putnam Management believes that the likelihood that the pending private lawsuits and purported class action lawsuits will have a material adverse financial impact on the fund is remote, and the pending actions are not likely to materially affect its ability to provide investment management services to its clients, including the Putnam funds.
Pursuant to a settlement with the Securities and Exchange Commission relating to Putnam Management’s brokerage allocation practices, on October 13, 2005 the fund received $919,245 in proceeds paid by Putnam Management. The fund had accrued a receivable for this amount in the prior fiscal year.
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In March 2006, the fund received $2,475,656 from Putnam to address issues relating to the calculation of certain amounts paid by the Putnam mutual funds to Putnam for transfer agent services. This amount is included in Fees waived and reimbursed by Manager or affiliate on the Statement of operations. Review of this matter is ongoing and the amount received by the fund may be adjusted in the future. Such adjustment is not expected to be material.
Putnam Management and Putnam Retail Management are named as defendants in a civil suit in which the plaintiffs allege that the management and distribution fees paid by certain Putnam funds were excessive and seek recovery under the Investment Company Act of 1940. Putnam Management and Putnam Retail Management have contested the plaintiffs’ claims and the matter is currently pending in the U.S. District Court for the District of Massachusetts. Based on currently available information, Putnam Management believes that this action is without merit and that it is unlikely to have a material effect on Putnam Management’s and Putnam Retail Management’s ability to provide services to their clients, including the fund.
Note 7: New accounting pronouncement
In June 2006, FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (the “Interpretation”). The Interpretation prescribes a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken by a filer in the filer’s tax return. The Interpretation will become effective for fiscal years beginning after December 15, 2006 but will also apply to tax positions reflected in the fund’s financial statements as of that date. No determination has been made whether the adoption of the Interpretation will require the fund to make any adjustments to its net assets or have any other effect on the fund’s financial statements.
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Federal tax information
(Unaudited) |
Pursuant to Section 852 of the Internal Revenue Code, as amended, the fund hereby designates $275,908,012 as long term capital gain, for its taxable year ended July 31, 2006.
The fund designated 38.91% of ordinary income distributions as qualifying for the dividends received deduction for corporations.
For its tax year ended July 31, 2006, the fund hereby designates 40.21%, or the maximum amount allowable, of its taxable ordinary income distributions as qualified dividends taxed at the individual net capital gain rates.
The Form 1099 you receive in January 2007 will show the tax status of all distributions paid to your account in calendar 2006.
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Brokerage commissions
(Unaudited) |
Brokerage commissions are paid to firms that execute trades on behalf of your fund. When choosing these firms, Putnam is required by law to seek the best execution of the trades, taking all relevant factors into consideration, including expected quality of execution and commission rate. Listed below are the largest relationships based upon brokerage commissions for your fund and the other funds in Putnam’s Large-Cap Value group for the year ended July 31, 2006. The other Putnam mutual funds in this group are Putnam Classic Equity Fund, Putnam Convertible Income-Growth Trust, Putnam Equity Income Fund, The Putnam Fund for Growth and Income, Putnam New Value Fund, Putnam VT Equity Income Fund, Putnam VT The George Putnam Fund of Boston, Putnam VT Growth and Income Fund, and Putnam VT New Value Fund.
The top five firms that received brokerage commissions for trades executed for the Large-Cap Value group are (in descending order) Citigroup Global Markets, Goldman Sachs, UBS Warburg, Deutsche Bank Securities, and Merrill Lynch. Commissions paid to these firms together represented approximately 46% of the total brokerage commissions paid for the year ended July 31, 2006.
Commissions paid to the next 10 firms together represented approximately 38% of the total brokerage commissions paid during the period. These firms are (in alphabetical order) Bank of America, Bear Stearns & Company, Credit Suisse First Boston, JP Morgan Clearing, Lazard Freres + Co., Lehman Brothers, Morgan Stanley Dean Witter, RBC Capital Markets, Sanford Bernstein, and Wachovia Securities.
Commission amounts do not include “mark-ups” paid on bond or derivative trades made directly with a dealer. Additional information about brokerage commissions is available on the Securities and Exchange Commission (SEC) Web site at www.sec.gov. Putnam funds disclose commissions by firm to the SEC in semiannual filings on Form N-SAR.
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About the Trustees
Jameson A. Baxter (Born 1943), Trustee since 1994, Vice Chairman since 2005
Ms. Baxter is the President of Baxter Associates, Inc., a private investment firm that she founded in 1986.
Ms. Baxter serves as a Director of ASHTA Chemicals, Inc., Banta Corporation (a printing and digital imaging firm), Ryerson Tull, Inc. (a steel service corporation), the Mutual Fund Directors Forum, Advocate Health Care and BoardSource, formerly the National Center for Nonprofit Boards. She is Chairman Emeritus of the Board of Trustees, Mount Holyoke College, having served as Chairman for five years and as a board member for thirteen years. Until 2002, Ms. Baxter was a Director of Intermatic Corporation (a manufacturer of energy control products).
Ms. Baxter has held various positions in investment banking and corporate finance, including Vice President and Principal of the Regency Group, and Vice President of and Consultant to First Boston Corporation. She is a graduate of Mount Holyoke College.
Charles B. Curtis (Born 1940), Trustee since 2001
Mr. Curtis is President and Chief Operating Officer of the Nuclear Threat Initiative (a private foundation dealing with national security issues) and serves as Senior Advisor to the United Nations Foundation.
Mr. Curtis is a member of the Council on Foreign Relations and the Trustee Advisory Council of the Applied Physics Laboratory, Johns Hopkins University. Until 2003, Mr. Curtis was a member of the Electric Power Research Institute Advisory Council and the University of Chicago Board of Governors for Argonne National Laboratory. Prior to 2002, Mr. Curtis was a Member of the Board of Directors of the Gas Technology Institute and the Board of Directors of the Environment and Natural Resources Program Steering Committee, John F. Kennedy School of Government, Harvard University. Until 2001, Mr. Curtis was a member of the Department of Defense Policy Board and Director of EG&G Technical Services, Inc. (a fossil energy research and development support company).
From August 1997 to December 1999, Mr. Curtis was a Partner at Hogan & Hartson L.L.P., a Washington, D.C. law firm. Prior to May 1997, Mr. Curtis was Deputy Secretary of Energy and Under Secretary of the U.S. Department of Energy. He served as Chairman of the Federal Energy Regulatory Commission from 1977 to 1981 and has held positions on the staff of the U.S. House of Representatives, the U.S. Treasury Department, and the SEC.
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Myra R. Drucker (Born 1948), Trustee since 2004
Ms. Drucker is Chair of the Board of Trustees of Commonfund (a not-for-profit firm specializing in asset management for educational endowments and foundations), Vice Chair of the Board of Trustees of Sarah Lawrence College, and a member of the Investment Committee of the Kresge Foundation (a charitable trust). She is also a director of New York Stock Exchange LLC, a wholly-owned subsidiary of the publicly-traded NYSE Group, Inc. She is an advisor to Hamilton Lane LLC and RCM Capital Management (investment management firms).
Ms. Drucker is an ex-officio member of the New York Stock Exchange (NYSE) Pension Managers Advisory Committee, having served as Chair for seven years and a member of the Executive Committee of the Committee on Investment of Employee Benefit Assets.
Until August 31, 2004, Ms. Drucker was Managing Director and a member of the Board of Directors of General Motors Asset Management and Chief Investment Officer of General Motors Trust Bank. Ms. Drucker also served as a member of the NYSE Corporate Accountability and Listing Standards Committee and the NYSE/NASD IPO Advisory Committee.
Prior to joining General Motors Asset Management in 2001, Ms. Drucker held various executive positions in the investment management industry. Ms. Drucker served as Chief Investment Officer of Xerox Corporation (a technology and service company in the document industry), where she was responsible for the investment of the company’s pension assets. Ms. Drucker was also Staff Vice President and Director of Trust Investments for International Paper (a paper, paper distribution, packaging and forest products company) and previously served as Manager of Trust Investments for Xerox Corporation. Ms. Drucker received a B.A. degree in Literature and Psychology from Sarah Lawrence College and pursued graduate studies in economics, statistics and portfolio theory at Temple University.
John A. Hill (Born 1942), Trustee since 1985 and Chairman since 2000
Mr. Hill is Vice Chairman of First Reserve Corporation, a private equity buyout firm that specializes in energy investments in the diversified worldwide energy industry.
Mr. Hill is a Director of Devon Energy Corporation, TransMontaigne Oil Company and various private companies controlled by First Reserve Corporation, as well as Chairman of TH Lee, Putnam Investment Trust (a closed-end investment company advised by an affiliate of Putnam Management). He is also a Trustee of Sarah Lawrence College. Until 2005, he was a Director of Continuum Health Partners of New York.
Prior to acquiring First Reserve Corporation in 1983, Mr. Hill held executive positions in investment banking and investment management with several firms and with the federal government, including Deputy Associate Director of the Office of Management and Budget and Deputy
97
Director of the Federal Energy Administration. He is active in various business associations, including the Economic Club of New York, and lectures on energy issues in the United States and Europe. Mr. Hill holds a B.A. degree in Economics from Southern Methodist University and pursued graduate studies there as a Woodrow Wilson Fellow.
Paul L. Joskow (Born 1947), Trustee since 1997
Dr. Joskow is the Elizabeth and James Killian Professor of Economics and Management, and Director of the Center for Energy and Environmental Policy Research at the Massachusetts Institute of Technology.
Dr. Joskow serves as a Director of National Grid plc (a UK-based holding company with interests in electric and gas transmission and distribution and telecommunications infrastructure) and TransCanada Corporation (an energy company focused on natural gas transmission and power services). He also serves on the Board of Overseers of the Boston Symphony Orchestra. Prior to February 2005, he served on the board of the Whitehead Institute for Biomedical Research (a non-profit research institution) and has been President of the Yale University Council since 1993. Prior to February 2002, he was a Director of State Farm Indemnity Company (an automobile insurance company), and, prior to March 2000, he was a Director of New England Electric System (a public utility holding company).
Dr. Joskow has published five books and numerous articles on topics in industrial organization, government regulation of industry, and competition policy. He is active in industry restructuring, environmental, energy, competition and privatization policies — serving as an advisor to governments and corporations worldwide. Dr. Joskow holds a Ph.D. and M. Phil from Yale University and a B.A. from Cornell University.
Elizabeth T. Kennan (Born 1938), Trustee since 1992
Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse and cattle breeding). She is President Emeritus of Mount Holyoke College.
Dr. Kennan served as Chairman and is now Lead Director of Northeast Utilities. Until 2005, she was a Director of Talbots, Inc. She has served as Director on a number of other boards, including Bell Atlantic, Chastain Real Estate, Shawmut Bank, Berkshire Life Insurance and Kentucky Home Life Insurance. She is a Trustee of the National Trust for Historic Preservation, of Centre College and of Midway College in Midway, Kentucky. Until 2006, she was a member of The Trustees of Reservations. Dr. Kennan has served on the oversight committee of the Folger Shakespeare Library, as President of Five Colleges Incorporated, as a Trustee of Notre Dame University and is active in various educational and civic associations.
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As a member of the faculty of Catholic University for twelve years, until 1978, Dr. Kennan directed the post-doctoral program in Patristic and Medieval Studies, taught history and published numerous articles. Dr. Kennan holds a Ph.D. from the University of Washington in Seattle, an M.S. from St. Hilda’s College at Oxford University and an A.B. from Mount Holyoke College. She holds several honorary doctorates.
Robert E. Patterson (Born 1945), Trustee since 1984
Mr. Patterson is Senior Partner of Cabot Properties, L.P. and Chairman of Cabot Properties, Inc. (a private equity firm investing in commercial real estate).
Mr. Patterson serves as Chairman Emeritus and Trustee of the Joslin Diabetes Center and as a Director of Brandywine Trust Group, LLC. Prior to June 2003, he was a Trustee of Sea Education Association. Prior to December 2001, he was President and Trustee of Cabot Industrial Trust (a publicly traded real estate investment trust). Prior to February 1998, he was Executive Vice President and Director of Acquisitions of Cabot Partners Limited Partnership (a registered investment adviser involved in institutional real estate investments). Prior to 1990, he served as Executive Vice President of Cabot, Cabot & Forbes Realty Advisors, Inc. (the predecessor company of Cabot Partners).
Mr. Patterson practiced law and held various positions in state government and was the founding Executive Director of the Massachusetts Industrial Finance Agency. Mr. Patterson is a graduate of Harvard College and Harvard Law School.
W. Thomas Stephens (Born 1942), Trustee since 1997
Mr. Stephens is Chairman and Chief Executive Officer of Boise Cascade, L.L.C. (a paper, forest products and timberland assets company).
Until 2005, Mr. Stephens was a director of TransCanadaPipelines, Ltd. Until 2004, Mr. Stephens was a Director of Xcel Energy Incorporated (a public utility company), Qwest Communications, and Norske Canada, Inc. (a paper manufacturer). Until 2003, Mr. Stephens was a Director of Mail-Well, Inc. (a diversified printing company). He served as Chairman of Mail-Well until 2001 and as CEO of MacMillan-Bloedel, Ltd. (a forest products company) until 1999.
Prior to 1996, Mr. Stephens was Chairman and Chief Executive Officer of Johns Manville Corporation. He holds B.S. and M.S. degrees from the University of Arkansas.
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Richard B. Worley (Born 1945), Trustee since 2004
Mr. Worley is Managing Partner of Permit Capital LLC, an investment management firm.
Mr. Worley serves on the Executive Committee of the University of Pennsylvania Medical Center, is a Trustee of The Robert Wood Johnson Foundation (a philanthropic organization devoted to health care issues) and is a Director of The Colonial Williamsburg Foundation (a historical preservation organization). Mr. Worley also serves on the investment committees of Mount Holyoke College and World Wildlife Fund (a wildlife conservation organization).
Prior to joining Permit Capital LLC in 2002, Mr. Worley served as Chief Strategic Officer of Morgan Stanley Investment Management. He previously served as President, Chief Executive Officer and Chief Investment Officer of Morgan Stanley Dean Witter Investment Management and as a Managing Director of Morgan Stanley, a financial services firm. Mr. Worley also was the Chairman of Miller Anderson & Sherrerd, an investment management firm.
Mr. Worley holds a B.S. degree from University of Tennessee and pursued graduate studies in economics at the University of Texas.
Charles E. Haldeman, Jr.* (Born 1948), Trustee since 2004
Mr. Haldeman is President and Chief Executive Officer of Putnam, LLC (“Putnam Investments”). He is a member of Putnam Investments’ Executive Board of Directors and Advisory Council. Prior to November 2003, Mr. Haldeman served as Co-Head of Putnam Investments’ Investment Division.
Prior to joining Putnam Investments in 2002, Mr. Haldeman held executive positions in the investment management industry. He previously served as Chief Executive Officer of Delaware Investments and President & Chief Operating Officer of United Asset Management. Mr. Haldeman was also a partner and director of Cooke & Bieler, Inc. (an investment management firm).
Mr. Haldeman currently serves on the Board of Governors of the Investment Company Institute and as a Trustee of Dartmouth College, and he is a member of the Partners HealthCare Systems Investment Committee. He is a graduate of Dartmouth College, Harvard Law School and Harvard Business School. Mr. Haldeman is also a Chartered Financial Analyst (CFA) charterholder.
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George Putnam, III* (Born 1951), Trustee since 1984 and President since 2000
Mr. Putnam is President of New Generation Research, Inc. (a publisher of financial advisory and other research services), and of New Generation Advisers, Inc. (a registered investment advisor to private funds). Mr. Putnam founded the New Generation companies in 1986.
Mr. Putnam is a Director of The Boston Family Office, LLC (a registered investment adviser). He is a Trustee of St. Mark’s School and Shore Country Day School, and until 2002 was a Trustee of the Sea Education Association.
Mr. Putnam previously worked as an attorney with the law firm of Dechert LLP (formerly known as Dechert Price & Rhoads) in Philadelphia. He is a graduate of Harvard College, Harvard Business School and Harvard Law School.
The address of each Trustee is One Post Office Square, Boston, MA 02109.
As of July 31, 2006, there were 108 Putnam Funds. All Trustees serve as Trustees of all Putnam funds.
Each Trustee serves for an indefinite term, until his or her resignation, retirement at age 72, death, or removal.
* Trustees who are or may be deemed to be “interested persons” (as defined in the Investment Company Act of 1940) of the fund, Putnam Management, Putnam Retail Management, or Marsh & McLennan Companies, Inc., the parent company of Putnam, LLC and its affiliated companies. Messrs. Haldeman and Putnam, III are deemed “interested persons” by virtue of their positions as officers of the fund, Putnam Management or Putnam Retail Management and as shareholders of Marsh & McLennan Companies, Inc. Mr. Putnam, III is the President of your fund and each of the other Putnam funds. Mr. Haldeman is President and Chief Executive Officer of Putnam Investments.
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Officers
In addition to George Putnam, III, the other officers of the fund are shown below:
| Charles E. Porter (Born 1938) | Richard S. Robie, III (Born 1960) |
| Executive Vice President, Associate Treasurer, | Vice President |
| Compliance Liaison and Principal | Since 2004 |
| Executive Officer | |
| Since 1989 | Senior Managing Director, Putnam |
| Investments, Putnam Management |
| Jonathan S. Horwitz (Born 1955) | and Putnam Retail Management. Prior |
| Senior Vice President and Treasurer | to 2003, Senior Vice President, United |
| Since 2004 | Asset Management Corporation |
|
|
| Prior to 2004, Managing Director, | Francis J. McNamara, III (Born 1955) |
| Putnam Investments | Vice President and Chief Legal Officer |
| Since 2004 |
| Steven D. Krichmar (Born 1958) | |
| Vice President and Principal Financial Officer | Senior Managing Director, Putnam |
| Since 2002 | Investments, Putnam Management |
| and Putnam Retail Management. Prior |
| Senior Managing Director, Putnam | to 2004, General Counsel, State Street |
| Investments. Prior to July 2001, Partner, | Research & Management Company |
| PricewaterhouseCoopers LLP | |
| Charles A. Ruys de Perez (Born 1957) |
| Michael T. Healy (Born 1958) | Vice President and Chief Compliance Officer |
| Assistant Treasurer and Principal | Since 2004 |
| Accounting Officer | |
| Since 2000 | Managing Director, Putnam Investments |
| |
| Managing Director, Putnam Investments | Mark C. Trenchard (Born 1962) |
| Vice President and BSA Compliance Officer |
| Beth S. Mazor (Born 1958) | Since 2002 |
| Vice President | |
| Since 2002 | Managing Director, Putnam Investments |
| |
| Managing Director, Putnam Investments | Judith Cohen (Born 1945) |
| Vice President, Clerk and Assistant Treasurer |
| James P. Pappas (Born 1953) | Since 1993 |
| Vice President | |
| Since 2004 | Wanda M. McManus (Born 1947) |
| Vice President, Senior Associate Treasurer |
| Managing Director, Putnam Investments | and Assistant Clerk |
| and Putnam Management. During 2002, | Since 2005 |
| Chief Operating Officer, Atalanta/Sosnoff | |
| Management Corporation; prior to 2001, | Nancy E. Florek (Born 1957) |
| President and Chief Executive Officer, | Vice President, Assistant Clerk, |
| UAM Investment Services, Inc. | Assistant Treasurer and Proxy Manager |
| Since 2005 |
| | |
The address of each Officer is One Post Office Square, Boston, MA 02109.
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Putnam puts your
interests first |
In January 2004, Putnam began introducing a number of voluntary initiatives designed to reduce fund expenses, provide investors with more useful information, and help safeguard the interests of all Putnam investors. Visit www.putnam.com for details.
Cost-cutting initiatives
Reduced sales charges The maximum sales charge for class A shares has been reduced to 5.25% for equity funds (formerly 5.75%) and 3.75% for most income funds (formerly 4.50%) . The maximum sales charge for class M shares has been reduced to 3.25% for equity funds (formerly 3.50%) .*
Lower class B purchase limit To help ensure that investors are in the most cost-effective share class, the maximum amount that can be invested in class B shares has been reduced to $100,000. (Larger trades or accumulated amounts will be refused.)
Ongoing expenses will be limited Through calendar 2006, total ongoing expenses, including management fees for all funds, will be maintained at or below the average of each fund’s industry peers in its Lipper load-fund universe. For more information, please see the Statement of Additional information.
Improved disclosure
Putnam fund prospectuses and shareholder reports have been revised to disclose additional information that will help shareholders compare funds and weigh their costs and risks along with their potential benefits. Shareholders will find easy-to-understand information about fund expense ratios, portfolio manager compensation, risk comparisons, turnover comparisons, brokerage commissions, and employee and trustee ownership of Putnam funds. Disclosure of breakpoint discounts has also been enhanced to alert investors to potential cost savings.
Protecting investors’ interests
Short-term trading fee introduced To discourage short-term trading, which can interfere with a fund’s long-term strategy, a 2% short-term trading fee may be imposed on any Putnam fund shares (other than money market funds) redeemed or exchanged within five calendar days of purchase.
* The maximum sales charge for class A shares of Putnam Limited Duration Government Income Fund (formerly Putnam Intermediate U.S. Government Income Fund) and Putnam Floating Rate Income Fund remains 3.25% .
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The Putnam
family of funds |
The following is a complete list of Putnam’s open-end mutual funds. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund before investing. For a prospectus containing this and other information for any Putnam fund or product, call your financial advisor at 1-800-225-1581 and ask for a prospectus. Please read the prospectus carefully before investing.
| Growth funds | Value funds |
| Discovery Growth Fund | Classic Equity Fund |
| Growth Opportunities Fund | Convertible Income-Growth Trust |
| Health Sciences Trust | Equity Income Fund |
| International New Opportunities Fund* | The George Putnam Fund of Boston |
| New Opportunities Fund | The Putnam Fund for Growth |
| OTC & Emerging Growth Fund | and Income |
| Small Cap Growth Fund | International Growth and Income Fund* |
| Vista Fund | Mid Cap Value Fund |
| Voyager Fund | New Value Fund |
| | Small Cap Value Fund† |
| Blend funds |
| Capital Appreciation Fund | Income funds |
| Capital Opportunities Fund | American Government Income Fund |
| Europe Equity Fund* | Diversified Income Trust |
| Global Equity Fund* | Floating Rate Income Fund |
| Global Natural Resources Fund* | Global Income Trust* |
| International Capital | High Yield Advantage Fund*† |
| Opportunities Fund* | High Yield Trust* |
| International Equity Fund* | Income Fund |
| Investors Fund | Limited Duration Government |
| Research Fund | Income Fund‡ |
| Tax Smart Equity Fund® | Money Market Fund§ |
| Utilities Growth and Income Fund | U.S. Government Income Trust |
| |
* A 1% redemption fee on total assets redeemed or exchanged between 6 and 90 days of purchase may be imposed for all share classes of these funds.
† Closed to new investors.
‡ Formerly Putnam Intermediate U.S. Government Income Fund.
§ An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve your investment at $1.00 per share, it is possible to lose money by investing in the fund.
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| Tax-free income funds | Putnam RetirementReady® Funds |
| AMT-Free Insured Municipal Fund** | Putnam RetirementReady Funds — ten |
| Tax Exempt Income Fund | investment portfolios that offer diversifica- |
| Tax Exempt Money Market Fund§ | tion among stocks, bonds, and money |
| Tax-Free High Yield Fund | market instruments and adjust to become |
| more conservative over time based on a |
| State tax-free income funds: | target date for withdrawing assets. |
| Arizona, California, Florida, Massachusetts, | |
| Michigan, Minnesota, New Jersey, New York, | The ten funds: |
| Ohio, and Pennsylvania | Putnam RetirementReady 2050 Fund |
| Putnam RetirementReady 2045 Fund |
| Asset allocation funds | Putnam RetirementReady 2040 Fund |
| Income Strategies Fund | Putnam RetirementReady 2035 Fund |
| Putnam Asset Allocation Funds — three | Putnam RetirementReady 2030 Fund |
| investment portfolios that spread your | Putnam RetirementReady 2025 Fund |
| money across a variety of stocks, bonds, | Putnam RetirementReady 2020 Fund |
| and money market investments. | Putnam RetirementReady 2015 Fund |
| Putnam RetirementReady 2010 Fund |
| The three portfolios: | Putnam RetirementReady Maturity Fund |
| Asset Allocation: Balanced Portfolio | |
| Asset Allocation: Conservative Portfolio | |
| Asset Allocation: Growth Portfolio | |
| |
** Formerly Putnam Tax-Free Insured Fund.
With the exception of money market funds, a 2% redemption fee may be applied to shares exchanged or sold within 5 days of purchase.
Check your account balances and the most recent month-end performance at www.putnam.com.
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Services for shareholders
Investor services
Help your investment grow Set up a program for systematic investing from a Putnam fund or from your own savings or checking account. (Regular investing does not guarantee a profit or protect against loss in a declining market.)
Switch funds easily* You can move money from one Putnam fund to another within the same class of shares without a service charge.
Access your money easily You can have checks sent regularly or redeem shares any business day at the then-current net asset value, which may be more or less than the original cost of the shares. Class B and class C shares carry a sales charge that is applied to certain withdrawals.
How to buy additional shares You may buy shares through your financial advisor or directly from Putnam. To open an account by mail, send a check made payable to the name of the fund along with a completed fund application. To add to an existing account, complete the investment slip found at the top of your Confirmation of Activity statement and return it with a check payable to your fund.
For more information
Visit www.putnam.com A secure section of our Web site contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.
Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.
*This privilege is subject to change or termination. An exchange of funds may result in a taxable event. In addition, a 2% redemption fee will be applied to shares exchanged or sold within 5 days of purchase, and certain funds have imposed a 1% redemption fee on total assets redeemed or exchanged between 6 and 90 days of purchase.
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Fund information
Founded over 65 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage over 100 mutual funds in growth, value, blend, fixed income, and international.
| Investment Manager | Robert E. Patterson | Richard S. Robie, III |
| Putnam Investment | George Putnam, III | Vice President |
| Management, LLC | W. Thomas Stephens | |
| One Post Office Square | Richard B. Worley | Francis J. McNamara, III |
| Boston, MA 02109 | | Vice President and |
| Officers | Chief Legal Officer |
| Marketing Services | George Putnam, III | |
| Putnam Retail Management | President | Charles A. Ruys de Perez |
| One Post Office Square | | Vice President and |
| Boston, MA 02109 | Charles E. Porter | Chief Compliance Officer |
| Executive Vice President, | |
| Custodian | Associate Treasurer, | Mark C. Trenchard |
| Putnam Fiduciary | Compliance Liaison and | Vice President and |
| Trust Company | Principal Executive Officer | BSA Compliance Officer |
| | |
| Legal Counsel | Jonathan S. Horwitz | Judith Cohen |
| Ropes & Gray LLP | Senior Vice President | Vice President, Clerk and |
| and Treasurer | Assistant Treasurer |
| Independent Registered | | |
| Public Accounting Firm | Steven D. Krichmar | Wanda M. McManus |
| PricewaterhouseCoopers LLP | Vice President and | Vice President, Senior Associate |
| Principal Financial Officer | Treasurer and Assistant Clerk |
| Trustees | | |
| John A. Hill, Chairman | Michael T. Healy | Nancy E. Florek |
| Jameson Adkins Baxter, | Assistant Treasurer and | Vice President, Assistant Clerk, |
| Vice Chairman | Principal Accounting Officer | Assistant Treasurer and |
| Charles B. Curtis | | Proxy Manager |
| Myra R. Drucker | Beth S. Mazor | |
| Charles E. Haldeman, Jr. | Vice President | |
| Paul L. Joskow | | |
| Elizabeth T. Kennan | James P. Pappas | |
| Vice President | |
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This report is for the information of shareholders of The George Putnam Fund of Boston. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit www.putnam.com. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund’s Statement of Additional Information contains additional information about the fund’s Trustees and is available without charge upon request by calling 1-800-225-1581.
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Item 2. Code of Ethics:
(a) The fund’s principal executive, financial and accounting officers are employees of Putnam Investment Management, LLC, the Fund's investment manager. As such they are subject to a comprehensive Code of Ethics adopted and administered by Putnam Investments which is designed to protect the interests of the firm and its clients. The Fund has adopted a Code of Ethics which incorporates the Code of Ethics of Putnam Investments with respect to all of its officers and Trustees who are employees of Putnam Investment Management, LLC. For this reason, the Fund has not adopted a separate code of ethics governing its principal executive, financial and accounting officers.
(c) None
Item 3. Audit Committee Financial Expert:
The Funds' Audit and Compliance Committee is comprised solely of Trustees who are "independent" (as such term has been defined by the Securities and Exchange Commission ("SEC") in regulations implementing Section 407 of the Sarbanes-Oxley Act (the "Regulations")). The Trustees believe that each of the members of the Audit and Compliance Committee also possess a combination of knowledge and experience with respect to financial accounting matters, as well as other attributes, that qualify them for service on the Committee. In addition, the Trustees have determined that all members of the Funds' Audit and Compliance Committee meet the financial literacy requirements of the New York Stock Exchange's rules and that Mr. Patterson, Mr. Stephens and Mr. Hill qualify as "audit committee financial experts" (as such term has been defined by the Regulations) based on their review of their pertinent experience and education. Certain other Trustees, although not on the Audit and Compliance Committee, would also qualify as "audit committee financial experts." The SEC has stated that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit and Compliance Committee and the Board of Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services:
The following table presents fees billed in each of the last two fiscal years for services rendered to the fund by the fund’s independent auditor:
| Fiscal | | | | |
| year | Audit | Audit-Related | Tax | All Other |
| ended | Fees | Fees | Fees | Fees |
| |
| July 31, 2006 | $255,386* | $ 1,262 | $9,699 | $5,050 |
| July 31, 2005 | $129,981* | $-- | $8,471 | $3,605 |
* Includes fees of $4,312 and $3,086 billed by the fund’s independent auditor to the fund for audit procedures necessitated by regulatory and litigation matters for the fiscal years ended July 31, 2006 and July 31, 2005, respectively. These fees were reimbursed to the fund by Putnam Investment Management, LLC (“Putnam Management”).
For the fiscal years ended July 31, 2006 and July 31, 2005, the fund’s independent auditor billed aggregate non-audit fees in the amounts of $285,682 and $207,406 respectively, to the fund, Putnam Management and any entity controlling, controlled by or under common control with Putnam Management that provides ongoing services to the fund.
Audit Fees represent fees billed for the fund’s last two fiscal years.
Audit-Related Fees represent fees billed in the fund’s last two fiscal years for services traditionally performed by the fund’s auditor, including accounting consultation for proposed transactions or concerning financial accounting and reporting standards and other audit or attest services not required by statute or regulation.
Tax Fees represent fees billed in the fund’s last two fiscal years for tax compliance, tax planning and tax advice services. Tax planning and tax advice services include assistance with tax audits, employee benefit plans and requests for rulings or technical advice from taxing authorities.
All Other Fees represent fees billed for services relating to valuation of derivative securities and an analysis of recordkeeping fees.
Pre-Approval Policies of the Audit and Compliance Committee. The Audit and Compliance Committee of the Putnam funds has determined that, as a matter of policy, all work performed for the funds by the funds’ independent auditors will be pre-approved by the Committee itself and thus will generally not be subject to pre-approval procedures.
The Audit and Compliance Committee also has adopted a policy to pre-approve the engagement by Putnam Management and certain of its affiliates of the funds’ independent auditors, even in circumstances where pre-approval is not required by applicable law. Any such requests by Putnam Management or certain of its affiliates are typically submitted in writing to the Committee and explain, among other things, the nature of the proposed engagement, the estimated fees, and why this work should be performed by that particular audit firm as opposed to another one.
The following table presents fees billed by the fund’s independent auditor for services required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X.
| Fiscal | Audit- | | All | Total |
| year | Related | Tax | Other | Non-Audit |
| ended | Fees | Fees | Fees | Fees |
| July 31, | | | | |
| 2006 | $ - | $ 153,160 | $ - | $ - |
| July | | | | |
| 30, 2005 | $ - | $ - | $ - | $ - |
Item 5. Audit Committee of Listed Registrants
Not applicable
Item 6. Schedule of Investments:
The registrant’s schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above.
Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies:
Not applicable
Item 8. Portfolio Managers of Closed-End Investment Companies
Not Applicable
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers:
Item 10. Submission of Matters to a Vote of Security Holders:
Item 11. Controls and Procedures:
|
(a) The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms.
(b) Changes in internal control over financial reporting: Not applicable
(a)(1) The Code of Ethics of The Putnam Funds, which incorporates the Code of Ethics of Putnam Investments, is filed herewith.
(a)(2) Separate certifications for the principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are filed herewith.
(b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, are filed herewith.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
The George Putnam Fund of Boston
By (Signature and Title):
/s/Michael T. Healy
Michael T. Healy
Principal Accounting Officer
Date: September 28, 2006
|
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title):
/s/Charles E. Porter
Charles E. Porter
Principal Executive Officer
|
Date: September 28, 2006
By (Signature and Title):
/s/Steven D. Krichmar
Steven D. Krichmar
Principal Financial Officer
Date: September 28, 2006
