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| UNITED STATES |
| SECURITIES AND EXCHANGE COMMISSION |
| Washington, D.C. 20549 |
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| FORM N-CSR |
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| CERTIFIED SHAREHOLDER REPORT OF REGISTERED |
| MANAGEMENT INVESTMENT COMPANIES |
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| Investment Company Act file number: (811- 00058) | |
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| Exact name of registrant as specified in charter: The George Putnam Fund of Boston |
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| 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, 2007
Date of reporting period: August 1, 2006— July 31, 2007
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?
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
With a focus on investment performance, below-average expenses, and in-depth information about our funds, we put the interests of investors first and seek to set the standard for integrity and service.
Industry-leading service
We help investors, along with their financial representatives, make informed investment decisions with confidence.
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.
The George
Putnam Fund
of Boston
7| 31| 07
Annual Report
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| Message from the Trustees | 1 |
| About the fund | 2 |
| Performance and portfolio snapshots | 4 |
| Report from the fund managers | 5 |
| Performance in depth | 10 |
| Expenses | 13 |
| Portfolio turnover | 15 |
| Risk | 15 |
| Your fund’s management | 16 |
| Terms and definitions | 17 |
| Trustee approval of management contract | 18 |
| Other information for shareholders | 21 |
| Financial statements | 22 |
| Federal tax information | 70 |
| Brokerage commissions | 70 |
| Shareholder meeting results | 71 |
| About the Trustees | 72 |
| Officers | 76 |
Cover photograph: © White-Packert Photography
Message from the Trustees
Dear Fellow Shareholder:
We are pleased to announce that Marsh & McLennan Companies, Inc. recently completed the sale of its ownership interest in Putnam Investments Trust, the parent company of Putnam Management and its affiliates, to Great-West Lifeco Inc. Great-West Lifeco is a financial services holding company with operations in Canada, the United States, and Europe and is a member of the Power Financial Corporation group of companies. With this sale, Putnam becomes part of a successful organization with a long-standing commitment to high-quality investment management and financial services. Please know that the change in ownership is not expected to affect the Putnam funds, the way Putnam manages money, or the funds’ management teams. Putnam will continue to operate as a separate company headquartered in Boston, and there will be no change in your funds’ fees or in the services your funds provide.
We would also like to take this opportunity to announce that Putnam President and Chief Executive Officer Ed Haldeman, one of your fund’s Trustees since 2004, was recently named President of the Funds, assuming this role from George Putnam, III. This change, together with the completion of the transaction with Great-West Lifeco, enables George Putnam to become an independent Trustee of the funds. Both George and Ed will continue serving on the Board of Trustees in our collective role of overseeing the Putnam funds on your behalf.
Lastly, we are pleased to inform you that a new independent Trustee, Robert J. Darretta, has joined your fund’s Board of Trustees. Mr. Darretta brings extensive leadership experience in corporate finance and accounting. He is a former Vice Chairman of the Board of Directors of Johnson & Johnson, one of the leading U.S. health-care and consumer products companies, where he also served as Chief Financial Officer, Executive Vice President, and Treasurer.
In the following pages, members of your fund’s management team discuss the fund’s performance and strategies for the fiscal year ended July 31, 2007, and provide their outlook for the months ahead. As always, we thank you for your support of the Putnam funds.
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 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.
Over seven eventful decades,
the fund’s balance of stocks
and bonds has served share-
holders by providing income
and building wealth.
Performance and portfolio snapshots
The George Putnam Fund of Boston
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge. See pages 10–12 for additional performance information. For a portion of the periods, this fund may have limited expenses, without which returns would have been lower. A 1% short-term trading fee may apply. To obtain the most recent month-end performance, visit www.putnam.com.
* The benchmark and Lipper group were not in existence at the time of the fund’s inception. The George Putnam Blended Index commenced 6/30/95. The Lipper average commenced 12/31/59.
“Relative to the equity benchmark, we ended the
period with an underweight to the financials
sector. In our opinion, the sector may be
starting to work out the difficulties stemming
from the collapse of the subprime mortgage
market. We are monitoring the situation closely
with an eye toward future opportunities.”
Jeanne Mockard, Portfolio Leader, The George Putnam Fund of Boston
Allocations calculated in terms of the market value of the fund’s equity holdings. Holdings and allocations may vary over time.
4
Report from the fund managers
The year in review
The George Putnam Fund of Boston’s performance for its 2007 fiscal year, which ended July 31, 2007, was driven primarily by the strength of holdings in the transportation, manufacturing, and energy sectors. Results were also buoyed by the appreciation of several holdings that were targeted for acquisition or merger. While the fund’s performance was solid on an absolute basis, it lagged the average for its Lipper peer group and its custom blended benchmark (which is made up of 60% S&P 500/Citigroup Value Index and 40% Lehman Aggregate Bond Index and is intended to provide a suitable performance target for a balanced fund). We attribute this relative underperformance to several unfavorable stock selection decisions, including the decision to avoid certain stocks included in the benchmark index when others seemed more attractive. The fund’s allocation to bonds, which was somewhat higher than the peer group average during the period, may also have contributed to the underperformance, since bonds did not perform as well as stocks during the period. However, we believe the fund’s balanced approach and defensive strategy helped keep its share price relatively stable as volatility in both the stock and bond markets began to increase in the second half of the year.
Market overview
Although financial markets delivered overall gains for the fiscal year, periodic bouts of volatility interrupted this progress. Volatility heightened during the second half of the year as the fallout from defaults in the subprime mortgage market began to affect other fixed-income sectors. Pools of higher-risk mortgage loans that had been packaged together and resold lost value. The resulting selloff by hedge funds, insurance companies, real estate investment trusts, and other types of investors sent a wave of volatility throughout world markets. Stocks from the financials sector bore the brunt of this exodus while sectors more tied to the industrial and global economy, such as basic materials, communications services, energy, and capital goods, experienced healthy gains. Continued demand from China, India, and other emerging markets boosted performance in these sectors, as did healthy levels of corporate spending. In the United States, larger-capitalization stocks were stronger than small caps, growth stocks significantly outpaced value stocks, and stocks outperformed bonds. International stocks continued to outpace domestic issues.
Market sector and fund performance
This comparison shows your fund’s performance in the context of different market sectors for the 12 months ended 7/31/07. See the previous page and pages 10–12 for additional fund performance information. Index descriptions can be found on page 17.
5
Strategy overview
The fund maintained its target allocation, 60% stocks and 40% bonds, throughout the second half of its fiscal year. Within the stock portfolio, we continued to emphasize sectors and industries that we believed would benefit from corporate capital spending. Our focus has been on basic materials, capital goods, energy, and transportation. This strategy was effective, and we do not anticipate any major shifts in this approach in the near term.
In our opinion, the financials sector may be starting to work out the difficulties stemming from the collapse of the subprime mortgage market and the subsequent troubles that surfaced in the wider credit markets. We also believe that consumer spending had been fueled largely by home equity loans and rising real estate values. With equity lenders under such pressure, we had been anticipating a falloff in consumer discretionary spending. Accordingly, we were cautious in the areas of financials and consumer cyclical stocks and took underweight positions.
The fund’s bond portfolio had been positioned to benefit from a steeper yield curve. (The yield curve is a graphical representation of the yield differences across a range of bond maturities.) In the second half of the fund’s fiscal year, yields on longer-term bonds rose more than yields on shorter-term securities, which caused the curve to steepen and boosted fund returns. Other strategy decisions that benefited the fund’s fixed-income holdings included an overweight position in manufactured housing bonds, a preference for non-Treasuries versus Treasury securities, and strong performance from the collateralized mortgage obligations (CMOs) in the portfolio. It is worth noting that in the period from 2003 to 2005, the fund was well rewarded for its positions in securities connected with subprime mortgages. However, in late 2005, we became concerned about underwriting standards and excessive leverage and we repositioned the portfolio away from what we considered an increasingly risky area. As a result,
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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in its bond portfolio the fund was not directly exposed to the companies and securities that were most affected by the mortgage defaults.
Your fund’s holdings
The portfolio’s top contributors for the second half of the fiscal year illustrate the effectiveness of our focus on companies we considered likely to benefit from corporate capital spending, as well as the steady demand from China, India and other emerging markets. Relative to the benchmark, the fund maintained overweight positions in each of these holdings, which boosted relative returns.
Indiana-based Cummins Inc. is in the business of designing, building, and distributing several types of engines and power generation systems, as well as all the component parts that make up these systems. It sells and rents equipment and also provides regular servicing and repairs. As the stock appreciated during the period, we trimmed the position somewhat to take profits. We believe the stock continues to offer upside potential.
Huntsman Corporation manufactures a wide variety of chemicals in its 63 facilities located throughout the world. From surfactants to epoxy-based polymers, pigments, and other performance products, it addresses the needs of consumers and industrial customers alike. News of a proposed takeover helped the stock appreciate to the point that we believed it was fully valued, so we sold the fund’s position and reinvested the proceeds elsewhere.
Freeport-McMoRan Copper & Gold operates mines and refineries in Indonesia and Spain, and had benefited from heightened demand for copper and gold. During the period, rumors that the company might be acquired sent share prices higher. We took advantage of the opportunity to sell some shares and realize some gains, but still hold a substantial position.
Shares of long-time fund holding Marathon Oil advanced as the price of oil edged significantly higher between January and July 2007. We trimmed the fund’s position to lock in profits and succeeded in doing so before the price of oil fell in July.
Squeezed by high fuel costs, the airline industry fell into a slump. We took the opportunity to build a position in United Airlines when, in our view, share prices had reached very compelling valuations. Some airlines, United among them, addressed the period’s challenge by reducing capacity. They flew fewer fights, held back on discounted fares, and streamlined operations. These strategies were successful; shares of UAL have advanced dramatically in the past six months, making the stock one of the fund’s top contributors for the period.
Top equity holdings
This table shows the fund’s top holdings, and the percentage of the fund’s net assets that each represented, as of 7/31/07. The fund’s holdings will change over time.
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| Holding | Percent of fund’s net assets | Industry |
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| Citigroup, Inc. | 2.4% | Financial |
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| Bank of America Corp. | 2.4% | Banking |
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| AT&T, Inc. | 1.9% | Telephone |
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| JPMorgan Chase & Co. | 1.6% | Financial |
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| General Electric Co. | 1.6% | Conglomerates |
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| Hewlett-Packard Co. | 1.5% | Computers |
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| ConocoPhillips | 1.3% | Oil and gas |
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| Verizon Communications, Inc. | 1.2% | Regional Bells |
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| Wachovia Corp. | 1.0% | Banking |
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| Microsoft Corp. | 0.9% | Software |
|
7
Not owning shares of oil services company Schlumberger Ltd. detracted from the fund’s relative performance. This company offers a multitude of informational services to oil companies, including project management, technical solutions, measuring, imaging, and monitoring of oil wells for the purposes of exploration and production. We had focused on other companies in this industry that we considered more attractive; while those companies did deliver gains, they did not perform as well as Schlumberger did.
The fund’s overweight position in Lennar Corp., a homebuilding company, dampened performance relative to the benchmark. Shares of Lennar lagged, reflecting the softening in the U.S. housing market. However, we believe Lennar is uniquely positioned to weather a period of weak demand for housing. The company’s strong balance sheet has ample liquidity that may enable it to acquire assets that less savvy homebuilding companies will be forced to sell. Even though the mortgage market is still unraveling, we think that homebuilders, as a group, may have hit their bottom and valuations are, in our opinion, becoming attractive. Consequently, we expect to maintain the Lennar position and are emphasizing other companies from this area as well.
Shares of investment banker and broker/dealer Bear Stearns tumbled during the period, as two hedge funds it managed imploded under the weight of the subprime mortgage debacle. Over the longer term, brokers in general benefited greatly from their involvement in mortgage derivatives, leveraged buyout activity, private equity, and hedge fund trading. However, all of these areas concern us at this time, and we are reassessing our positions, based on recent data. During the period, we reduced the fund’s position in Bear Stearns to an underweight relative to the fund’s equity benchmark.
Another stock that did not meet our expectations during the period was Circuit City. For some time, we have exercised caution when selecting companies that rely upon consumer discretionary purchases, because we believed consumer spending would weaken. In our view, shares of Circuit City had become quite undervalued and were poised to turn around. We consequently established a position, but the stock price had not delivered any significant gains by the end of the period. We are currently maintaining this position because we believe the company has the potential to recover in the coming months.
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
Effective in May 2007, The George Putnam Fund of Boston increased its quarterly dividend, from $0.1140 to $0.1180 per class A share. This change reflects the higher yields and greater interest income earned by the fund, particularly in its fixed-income portfolio.
8
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.
The market has experienced a great deal of volatility in recent months. As a reminder, The George Putnam Fund of Boston includes bonds to limit volatility within the portfolio, and value stocks, which take advantage of opportunities that arise when market volatility is high. For example, as contrarian value seekers, we have taken profits in the strongest areas of the market and are looking for entry points to buy stocks and bonds in market segments that have fallen out of favor. While we remain concerned about the financials sector, we are looking for opportune moments to increase exposure to banks and insurance companies that have been hurt by holding mortgage-related debt.
Although we have taken profits in outperforming sectors, we believe that the emerging markets will continue to drive demand for basic materials, machinery, energy, and capital goods, and so we have maintained the fund’s overweight positions in those areas. In our view, corporate balance sheets appear to be healthy and we anticipate capital spending will continue to be robust in coming months.
Another trend we are monitoring closely is a reduction in the supply of equity following record levels of privatization. Private equity buyers have scooped up publicly held companies, causing the biggest retirement of publicly-held corporate equity in 100 years. Under these conditions, we believe professional, active fund management is a valuable advantage, as are the benefits of experienced fundamental researchers and securities analysts.
As always, we are committed to helping you achieve your financial goals. The George Putnam Fund of Boston is a balanced fund with broad exposure to stocks and bonds. We adhere to a disciplined, conservative investment approach intended to limit volatility and provide the potential for attractive long-term total returns.
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 fluctuations in the value of your investment. This fund may have a significant portion of its holdings in bonds. Mutual funds that invest in bonds are subject to certain risks, including interest-rate risk, credit risk, and inflation risk. As interest rates rise, the prices of bonds fall. Long-term bonds are more exposed to interest-rate risk than short-term bonds. Unlike bonds, bond funds have ongoing fees and expenses. Value investing seeks underpriced stocks, but there is no guarantee that a stock’s price will rise.
9
Your fund’s performance
This section shows your fund’s performance for periods ended July 31, 2007, 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 and expense information taken from the fund’s current prospectus. 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 and clients in other approved programs. 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 7/31/07
| | | | | | | | | | |
| | 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) | 9.36% | 9.28% | 8.33% | 8.33% | 8.54% | 8.54% | 8.61% | 8.56% | 9.09% | 9.42% |
|
| 10 years | 73.08 | 64.00 | 60.58 | 60.58 | 60.47 | 60.47 | 64.73 | 59.39 | 68.86 | 77.46 |
| Annual average | 5.64 | 5.07 | 4.85 | 4.85 | 4.84 | 4.84 | 5.12 | 4.77 | 5.38 | 5.90 |
|
| 5 years | 51.65 | 43.71 | 46.03 | 44.03 | 45.99 | 45.99 | 47.97 | 43.16 | 49.82 | 53.61 |
| Annual average | 8.68 | 7.52 | 7.87 | 7.57 | 7.86 | 7.86 | 8.15 | 7.44 | 8.42 | 8.96 |
|
| 3 years | 27.86 | 21.12 | 25.05 | 22.05 | 24.98 | 24.98 | 25.97 | 21.90 | 26.90 | 28.82 |
| Annual average | 8.54 | 6.60 | 7.74 | 6.87 | 7.72 | 7.72 | 8.00 | 6.82 | 8.26 | 8.81 |
|
| 1 year | 10.99 | 5.15 | 10.15 | 5.18 | 10.16 | 9.17 | 10.42 | 6.81 | 10.76 | 11.24 |
|
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After sales charge returns (public offering price, or POP) for class A and M shares reflect a maximum 5.25% and 3.25% load, 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 for the first year and 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 periods, this fund may have limited expenses, without which returns would have been lower.
A 1% short-term trading fee may be applied to shares exchanged or sold within 7 days of purchase.
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 $16,058 and $16,047, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,675 after sales charge) would have been valued at $15,939 at public offering price. A $10,000 investment in the fund’s class R and class Y shares would have been valued at $16,886 and $17,746, respectively.
10
Comparative index returns For periods ended 7/31/07
| | | | |
| | | | George Putnam Blended | |
| | | | Index (60% S&P 500/ | |
| | | | Citigroup Value Index | |
| | S&P 500/Citigroup | Lehman Aggregate | and 40% Lehman | Lipper Balanced Funds |
| | Value Index | Bond Index | Aggregate Bond Index) | category average† |
|
| Annual average | | | | |
| (life of fund) | —* | —* | —* | —* |
|
| 10 years | 102.60% | 76.11% | 98.46% | 75.29% |
| Annual average | 7.32 | 5.82 | 7.09 | 5.65 |
|
| 5 years | 96.11 | 24.06 | 65.70 | 54.28 |
| Annual average | 14.42 | 4.41 | 10.63 | 9.01 |
|
| 3 years | 53.26 | 12.25 | 35.96 | 30.14 |
| Annual average | 15.30 | 3.93 | 10.78 | 9.15 |
|
| 1 year | 15.82 | 5.58 | 11.78 | 12.07 |
|
Index and Lipper results should be compared to fund performance at net asset value.
* 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 Balanced Funds category average commenced 12/31/59.
† Over the 1-, 3-, 5-, and 10-year periods ended 7/31/07, there were 765, 581, 421, and 225 funds, respectively, in this Lipper category.
Fund price and distribution information For the 12-month period ended 7/31/07
| | | | | | | | |
| Distributions | Class A | | Class B | Class C | Class M | | Class R | Class Y |
|
| Number | 4 | 4 | 4 | 4 | 4 | 4 |
|
| Income | $0.524 | $0.375 | $0.384 | $0.431 | $0.480 | $0.571 |
|
| Capital gains | | | | | | | | |
|
| Long-term | 1.242 | 1.242 | 1.242 | 1.242 | 1.242 | 1.242 |
|
| Short-term | 0.291 | 0.291 | 0.291 | 0.291 | 0.291 | 0.291 |
|
| Total | $2.057 | $1.908 | $1.917 | $1.964 | $2.013 | $2.104 |
| |
| Share value: | NAV | POP | NAV | NAV | NAV | POP | NAV | NAV |
|
| 7/31/06 | $18.21 | $19.22 | $18.02 | $18.09 | $18.02 | $18.63 | $18.15 | $18.26 |
|
| 7/31/07 | 18.10 | 19.10 | 17.90 | 17.97 | 17.89 | 18.49 | 18.04 | 18.15 |
| |
| Current yield (end of period) | | | | | | | | |
|
| Current dividend rate1 | 2.61% | 2.47% | 1.79% | 1.85% | 2.12% | 2.06% | 2.37% | 2.87% |
|
| Current 30-day SEC yield2,3 | | | | | | | | |
| (with expense limitation) | 2.76 | 2.61 | 1.99 | 1.99 | 2.25 | 2.17 | 2.50 | 3.02 |
|
| Current 30-day SEC yield3 | | | | | | | | |
| (without expense limitation) | 2.75 | 2.61 | 1.98 | 1.98 | 2.24 | 2.17 | 2.49 | 3.01 |
|
1 Most recent distribution, excluding capital gains, annualized and divided by NAV or POP at end of period.
2 For a portion of the period, this fund limited expenses, without which yields would have been lower.
3 Based only on investment income, calculated using SEC guidelines.
11
Fund performance as of most recent calendar quarter Total return for periods ended 6/30/07
| | | | | | | | | | |
| | 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) | 9.41% | 9.33% | 8.39% | 8.39% | 8.59% | 8.59% | 8.66% | 8.61% | 9.14% | 9.47% |
|
| 10 years | 86.42 | 76.65 | 72.97 | 72.97 | 72.91 | 72.91 | 77.55 | 71.80 | 81.86 | 91.23 |
| Annual average | 6.43 | 5.85 | 5.63 | 5.63 | 5.63 | 5.63 | 5.91 | 5.56 | 6.16 | 6.70 |
|
| 5 years | 47.33 | 39.59 | 41.91 | 39.91 | 41.98 | 41.98 | 43.80 | 39.11 | 45.58 | 49.24 |
| Annual average | 8.06 | 6.90 | 7.25 | 6.95 | 7.26 | 7.26 | 7.54 | 6.82 | 7.80 | 8.34 |
|
| 3 years | 29.41 | 22.62 | 26.57 | 23.57 | 26.58 | 26.58 | 27.52 | 23.38 | 28.46 | 30.38 |
| Annual average | 8.97 | 7.03 | 8.17 | 7.31 | 8.17 | 8.17 | 8.44 | 7.25 | 8.71 | 9.25 |
|
| 1 year | 15.00 | 8.96 | 14.11 | 9.11 | 14.17 | 13.17 | 14.47 | 10.74 | 14.72 | 15.25 |
|
Fund’s annual operating expenses For the fiscal year ended 7/31/06
| | | | | | | |
| | | Class A | Class B | Class C | Class M | Class R | Class Y |
|
| Total annual fund operating expenses | | 0.96% | 1.71% | 1.71% | 1.46% | 1.21% | 0.71% |
|
Expense information in this table is taken from the most recent prospectus, is subject to change, and may differ from that shown in the next section and in the financial highlights of this report. Expenses are shown as a percentage of average net assets.
12
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 representative.
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, 2007, to July 31, 2007. 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* | | $ 4.82 | $ 8.53 | $ 8.53 | $ 7.29 | $ 6.06 | $ 3.58 |
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| Ending value (after expenses) | | $1,004.20 | $1,000.30 | $1,000.00 | $1,001.20 | $1,002.90 | $1,005.40 |
|
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 7/31/07. The expense ratio may differ for each share class (see the last table in this section). Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.
Estimate the expenses you paid
To estimate the ongoing expenses you paid for the six months ended July 31, 2007, use the calculation method below. To find the value of your investment on February 1, 2007, go to www.putnam.com and log on to your account. Click on the “Transaction History” tab in your Daily Statement and enter 02/01/2007 in both the “from” and “to” fields. Alternatively, call Putnam at 1-800-225-1581.
Compare expenses using the SEC’s method
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the 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* | | $ 4.86 | $ 8.60 | $ 8.60 | $ 7.35 | $ 6.11 | $ 3.61 |
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| Ending value (after expenses) | | $1,019.98 | $1,016.27 | $1,016.27 | $1,017.50 | $1,018.74 | $1,021.22 |
|
* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 7/31/07. The expense ratio may differ for each share class (see the last table in this section). Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.
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Compare expenses using industry averages
You can also compare your fund’s expenses with the average of its peer group, as defined by Lipper, an independent fund-rating agency that ranks funds relative to others that Lipper considers to have similar investment styles or objectives. The expense ratio for each share class shown below indicates how much of your fund’s average 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* | | 0.97% | 1.72% | 1.72% | 1.47% | 1.22% | 0.72% |
|
| Average annualized expense ratio for Lipper peer group† | | 1.24% | 1.99% | 1.99% | 1.74% | 1.49% | 0.99% |
|
* For the fund’s most recent fiscal half year; may differ from expense ratios based on one-year data in the financial highlights.
† Putnam is committed to keeping fund expenses below the Lipper peer group average expense ratio and will limit fund expenses if they exceed the Lipper average. The Lipper average is a simple average of front-end load funds in the peer group that excludes 12b-1 fees as well as any expense offset and brokerage service arrangements that may reduce fund expenses. To facilitate the comparison in this presentation, Putnam has adjusted the Lipper 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. Investors should note that the other funds in the peer group may be significantly smaller or larger than the fund, and that an asset-weighted average would likely be lower than the simple average. Also, the fund and Lipper report expense data at different times and for different periods. The fund’s expense ratio shown here is annualized data for the most recent si x-month period, while the quarterly updated Lipper average is based on the most recent fiscal year-end data available for the peer group funds as of 6/30/07.
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Your fund’s portfolio turnover and Morningstar® Risk
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
| | | | | | |
| | | 2007 | 2006 | 2005 | 2004 | 2003 |
|
| The George Putnam Fund of Boston | | 144%* | 117%* | 169%* | 166% | 121%†‡ |
|
| Lipper Balanced Funds category average | | 68% | 70% | 72% | 74% | 81% |
|
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 2007 is based on information available as of 7/31/07.
* 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.
Your fund’s Morningstar® 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 Morningstar Risk.
Your fund’s Morningstar Risk is shown alongside that of the average fund in its Morningstar category. The risk bar broadens the comparison by translating the fund’s Morningstar Risk into a percentile, which is based on the fund’s ranking among all funds rated by Morningstar as of June 30, 2007. A higher Morningstar Risk generally indicates that a fund’s monthly returns have varied more widely.
Morningstar determines a fund’s Morningstar Risk by assessing variations in the fund’s monthly returns — with an emphasis on downside variations — over a 3-year period, if available. Those measures are weighted and averaged to produce the fund’s Morningstar Risk. The information shown is provided for the fund’s class A shares only; information for other classes may vary. 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 Morningstar Risk does not mean that you cannot lose money on an investment in a fund. Copyright 2007 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 accur ate, 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, 2007, and July 31, 2006.
Trustee and Putnam employee fund ownership
As of July 31, 2007, all of the Trustees 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 | $ 951,000 | $ 92,000,000 |
|
| Putnam employees | $7,068,000 | $446,000,000 |
|
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 Global Income Trust and 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
Your Portfolio Leader and Portfolio Members did not change during the year ended July 31, 2007.
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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.
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.
Lehman Aggregate Bond Index is an unmanaged index of U.S. investment-grade fixed-income securities.
Merrill Lynch 91-Day Treasury Bill Index is an unmanaged index that seeks to measure the performance of U.S. Treasury bills available in the marketplace.
S&P 500 Index is an unmanaged index of common stock performance.
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 Investment Management (“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 2007, the Contract Committee met several 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 revie wed and discussed key aspects of this information with all of the Independent Trustees. The Contract Committee recommended, and the Independent Trustees approved, the continuance of your fund’s management contract, effective July 1, 2007.
In addition, in anticipation of the sale of Putnam Investments to Great-West Lifeco, at a series of meetings ending in March 2007, the Trustees reviewed and approved new management and distribution arrangements to take effect upon the change of control. Shareholders of all funds approved the management contracts in May 2007, and the change of control transaction was completed on August 3, 2007. Upon the change of control, the management contracts that were approved by the Trustees in June 2007 automatically terminated and were replaced by new contracts that had been approved by shareholders. In connection with their review for the June 2007 continuance of the Putnam funds’ management contracts, the Trustees did not identify any facts or circumstances that would alter the substance of the conclusions and recommendations they made in their review of the contracts to take effect upon the change of control.
The Independent Trustees’ approval was based on the following conclusions:
• That the fee schedule in effect for your fund represented reasonable compensation in light of the nature and quality of the services being provided to the fund, the fees paid by competitive funds and the costs incurred by Putnam Management in providing such services, and
• That this fee schedule represented 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.
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 responsibilities, 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 b elow:
• 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 28th percentile in management fees and in the 17th percentile in total expenses (less any applicable 12b-1 fees) as of December 31, 2006 (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
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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 increasing 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 had committed to maintain at least through 2007. In anticipation of the change of control of Putnam Investments, the Trustees requested, and received a commitment from Putnam Management and Great-West Lifeco, to extend this program through at least June 30, 2009. 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 extend for the twelve months beginning July 1, 2007, an additional expense limitation for certain funds at an amount equal to the average expense ratio (exclusive of 12b-1 charges) of a custom peer group of competitive funds selected by Lipper to correspond to 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 custom peer group data for the period ended December 31, 2006. This additional expense limitation will not be applied to your fund because it had a below-average expense ratio relative to its custom peer group.
• 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 sharin g 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, and to consider the 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.
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 Committees of the Trustees, which had met 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 hi gh-quality personnel — but also recognized that this does not guarantee favorable investment results for every fund in every time period. The Trustees considered the investment performance of each fund over multiple time periods and considered information comparing each fund’s performance with various benchmarks and with the performance of competitive funds.
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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 underperformance and actions being taken to improve performance. The Trustees recognized that, in recent years, Putnam Management has made significant changes in its investment personnel and processes and in the fund product line to address areas of underperformance. 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 t hese 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, 2007 (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 |
|
| 8th | 46th | 42nd |
(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, 2007, there were 729, 560, and 405 funds, respectively, in your fund’s Lipper peer group.* Past performance is no guarantee of future returns.)
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 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 M anagement Limited Partnership and the custodian agreement and investor servicing agreement with Putnam Fiduciary Trust Company (“PFTC”), each of which provides benefits to affiliates of Putnam Management. In the case of the custodian agreement, the Trustees considered that, effective January 1, 2007, the Putnam funds had engaged State Street Bank and Trust Company as custodian and began to transition the responsibility for providing custody services away from PFTC.
* 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, 2007 were 38%, 60%, and 49%, respectively. Over the one-, five- and ten-year periods ended June 30, 2007, the fund ranked 284th out of 763, 247th out of 415, and 107th out of 220 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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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 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 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.
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 t hose 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, 2007, 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.
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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 non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)
Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal 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.
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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, 2007, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
September 12, 2007
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The fund’s portfolio 7/31/07
| | | |
| COMMON STOCKS (57.2%)* | | | |
|
| | Shares | | Value |
|
| Banking (5.8%) | | | |
| Bank of America Corp. (S) | 2,133,900 | $ | 101,189,538 |
| BB&T Corp. | 134,000 | | 5,014,280 |
| Marshall & Ilsley Corp. | 118,900 | | 4,899,869 |
| National City Corp. | 283,400 | | 8,329,126 |
| PNC Financial Services Group | 501,600 | | 33,431,640 |
| U.S. Bancorp | 290,200 | | 8,691,490 |
| Wachovia Corp. (S) | 900,600 | | 42,517,326 |
| Washington Mutual, Inc. (S) | 127,800 | | 4,796,334 |
| Wells Fargo & Co. | 1,080,400 | | 36,485,108 |
| | | | 245,354,711 |
|
| |
| Basic Materials (3.6%) | | | |
| Bemis Co., Inc. | 160,000 | | 4,715,200 |
| Cabot Corp. | 148,200 | | 5,984,316 |
| Dow Chemical Co. (The) | 535,400 | | 23,279,192 |
| E.I. du Pont de Nemours & Co. (S) | 187,300 | | 8,752,529 |
| Freeport-McMoRan Copper & | | | |
| Gold, Inc. Class B (S) | 170,592 | | 16,032,236 |
| Lubrizol Corp. (The) | 179,900 | | 11,272,534 |
| Nucor Corp. | 402,300 | | 20,195,460 |
| Rohm & Haas Co. | 160,100 | | 9,048,852 |
| Sonoco Products Co. | 676,300 | | 24,799,921 |
| Steel Dynamics, Inc. (S) | 252,900 | | 10,604,097 |
| United States Steel Corp. (S) | 181,800 | | 17,869,122 |
| | | | 152,553,459 |
|
| |
| Capital Goods (4.3%) | | | |
| Autoliv, Inc. (Sweden) | 46,200 | | 2,583,966 |
| Boeing Co. (The) (S) | 150,000 | | 15,514,500 |
| Caterpillar, Inc. | 264,800 | | 20,866,240 |
| Cummins, Inc. | 46,800 | | 5,555,160 |
| Eaton Corp. | 59,900 | | 5,821,082 |
| General Dynamics Corp. | 87,500 | | 6,874,000 |
| L-3 Communications Holdings, Inc. | 146,000 | | 14,243,760 |
| Lockheed Martin Corp. (S) | 351,400 | | 34,605,872 |
| Northrop Grumman Corp. | 229,700 | | 17,480,170 |
| Pactiv Corp. † | 482,400 | | 15,248,664 |
| Parker-Hannifin Corp. | 101,700 | | 10,035,756 |
| Raytheon Co. | 443,900 | | 24,574,304 |
| Waste Management, Inc. | 243,300 | | 9,252,699 |
| | | | 182,656,173 |
|
| |
| Communication Services (4.2%) | | | |
| ALLTEL Corp. | 168,600 | | 11,119,170 |
| AT&T, Inc. | 2,054,182 | | 80,441,767 |
| CenturyTel, Inc. | 320,400 | | 14,696,748 |
| Embarq Corp. | 237,700 | | 14,687,483 |
| Qwest Communications | | | |
| International, Inc. † | 721,000 | | 6,150,130 |
| Verizon Communications, Inc. | 1,150,000 | | 49,013,000 |
| | | | 176,108,298 |
|
| |
| Conglomerates (2.6%) | | | |
| Danaher Corp. | 153,000 | | 11,426,040 |
| General Electric Co. (S) | 1,764,800 | | 68,403,648 |
| Honeywell International, Inc. | 308,100 | | 17,718,831 |
| Tyco International, Ltd. | 295,412 | | 13,970,033 |
| | | | 111,518,552 |
|
| | | |
| COMMON STOCKS (57.2%)* continued | | | |
|
| | Shares | | Value |
| Consumer Cyclicals (4.0%) | | | |
| AutoZone, Inc. † | 43,400 | $ | 5,503,554 |
| Barnes & Noble, Inc. | 257,100 | | 8,625,705 |
| Big Lots, Inc. † (S) | 415,800 | | 10,752,588 |
| Black & Decker Manufacturing Co. | 52,700 | | 4,562,239 |
| Carnival Corp. (S) | 175,300 | | 7,767,543 |
| Circuit City Stores-Circuit City Group | 712,200 | | 8,475,180 |
| Gannett Co., Inc. (S) | 258,700 | | 12,909,130 |
| Gap, Inc. (The) | 293,600 | | 5,049,920 |
| KB Home (S) | 231,900 | | 7,376,739 |
| Lennar Corp. (S) | 399,300 | | 12,242,538 |
| Macy’s, Inc. | 236,000 | | 8,512,520 |
| Mattel, Inc. | 209,700 | | 4,804,227 |
| NVR, Inc. † (S) | 39,409 | | 22,797,318 |
| OfficeMax, Inc. | 95,000 | | 3,123,600 |
| Regal Entertainment Group Class A (S) | 883,400 | | 18,895,926 |
| Sears Holdings Corp. † | 61,600 | | 8,426,264 |
| Walt Disney Co. (The) | 632,900 | | 20,885,700 |
| | | | 170,710,691 |
|
| |
| Consumer Staples (4.0%) | | | |
| Altria Group, Inc. | 417,100 | | 27,724,637 |
| Anheuser-Busch Cos., Inc. | 65,700 | | 3,204,189 |
| Clorox Co. | 164,300 | | 9,933,578 |
| Colgate-Palmolive Co. | 218,700 | | 14,434,200 |
| General Mills, Inc. | 332,900 | | 18,515,898 |
| H.J. Heinz Co. | 268,000 | | 11,727,680 |
| Kimberly-Clark Corp. | 79,400 | | 5,341,238 |
| Kraft Foods, Inc. Class A | 288,643 | | 9,453,058 |
| Kroger Co. | 234,300 | | 6,082,428 |
| Loews Corp. - Carolina Group | 42,600 | | 3,228,654 |
| McDonald’s Corp. | 66,400 | | 3,178,568 |
| Newell Rubbermaid, Inc. | 448,300 | | 11,857,535 |
| Pepsi Bottling Group, Inc. (The) | 429,400 | | 14,367,724 |
| Procter & Gamble Co. (The) | 250,000 | | 15,465,000 |
| Time Warner, Inc. (S) | 659,700 | | 12,705,822 |
| | | | 167,220,209 |
|
| |
| Energy (3.5%) | | | |
| Chevron Corp. (S) | 284,800 | | 24,282,048 |
| ConocoPhillips | 682,900 | | 55,205,636 |
| Devon Energy Corp. | 75,500 | | 5,633,055 |
| ENSCO International, Inc. | 102,000 | | 6,229,140 |
| Exxon Mobil Corp. | 127,300 | | 10,837,049 |
| Marathon Oil Corp. | 267,100 | | 14,743,920 |
| Pride International, Inc. † | 272,900 | | 9,565,145 |
| Sunoco, Inc. | 61,400 | | 4,096,608 |
| Tesoro Corp. (S) | 117,000 | | 5,826,600 |
| Valero Energy Corp. (S) | 186,600 | | 12,504,066 |
| | | | 148,923,267 |
|
| |
| Financial (5.7%) | | | |
| AMBAC Financial Group, Inc. | 42,600 | | 2,860,590 |
| Chubb Corp. (The) | 156,000 | | 7,863,960 |
| Citigroup, Inc. # | 2,181,100 | | 101,573,827 |
| Hospitality Properties Trust (R) (S) | 189,900 | | 7,284,564 |
| HRPT Properties Trust (R) | 710,400 | | 6,642,240 |
| JPMorgan Chase & Co. | 1,574,700 | | 69,302,547 |
| Lehman Brothers Holdings, Inc. (S) | 137,700 | | 8,537,400 |
24
| | | |
| COMMON STOCKS (57.2%)* continued | | | |
|
| | Shares | | Value |
|
| Financial continued | | | |
| Lincoln National Corp. | 213,900 | $ | 12,902,448 |
| MetLife, Inc. | 184,700 | | 11,122,634 |
| Radian Group, Inc. | 113,800 | | 3,836,198 |
| Travelers Cos., Inc. (The) | 166,500 | | 8,454,870 |
| | | | 240,381,278 |
|
| |
| Health Care (4.7%) | | | |
| Aetna, Inc. | 115,200 | | 5,537,664 |
| AmerisourceBergen Corp. | 302,900 | | 14,269,619 |
| Boston Scientific Corp. † | 587,500 | | 7,725,625 |
| Bristol-Myers Squibb Co. | 179,900 | | 5,110,959 |
| Coventry Health Care, Inc. † | 127,600 | | 7,121,356 |
| Covidien, Ltd. (Bermuda) † | 295,412 | | 12,097,121 |
| King Pharmaceuticals, Inc. † | 418,400 | | 7,116,984 |
| McKesson Corp. | 418,200 | | 24,155,232 |
| Merck & Co., Inc. | 756,000 | | 37,535,400 |
| Pfizer, Inc. | 1,380,800 | | 32,462,608 |
| WellCare Health Plans, Inc. † | 226,100 | | 22,894,886 |
| WellPoint, Inc. † | 311,600 | | 23,407,392 |
| | | | 199,434,846 |
|
| |
| Insurance (1.1%) | | | |
| Allstate Corp. (The) | 231,300 | | 12,293,595 |
| Everest Re Group, Ltd. (Barbados) | 41,000 | | 4,028,250 |
| Genworth Financial, Inc. Class A | 355,560 | | 10,851,691 |
| Hartford Financial Services | | | |
| Group, Inc. (The) | 46,554 | | 4,276,916 |
| Prudential Financial, Inc. | 128,600 | | 11,397,818 |
| W.R. Berkley Corp. | 178,800 | | 5,260,296 |
| | | | 48,108,566 |
|
| |
| Investment Banking/Brokerage (1.8%) | | | |
| Bear Stearns Cos., Inc. (The) | 21,600 | | 2,618,352 |
| Goldman Sachs Group, Inc. (The) | 109,900 | | 20,698,566 |
| Merrill Lynch & Co., Inc. (S) | 302,600 | | 22,452,920 |
| Morgan Stanley | 492,100 | | 31,430,427 |
| | | | 77,200,265 |
|
| |
| Real Estate (0.8%) | | | |
| Apartment Investment & | | | |
| Management Co. Class A (R) | 94,700 | | 4,001,075 |
| CBL & Associates Properties (R) | 362,000 | | 11,544,180 |
| General Growth | | | |
| Properties, Inc. (R) (S) | 170,800 | | 8,194,984 |
| Taubman Centers, Inc. (R) | 175,600 | | 8,444,604 |
| | | | 32,184,843 |
|
| |
| Technology (6.3%) | | | |
| Accenture, Ltd. Class A (Bermuda) | 558,500 | | 23,529,605 |
| Apple Computer, Inc. † | 108,600 | | 14,309,136 |
| Applied Materials, Inc. (S) | 786,600 | | 17,336,664 |
| Atmel Corp. † | 1,515,500 | | 8,168,545 |
| Computer Sciences Corp. † (S) | 186,100 | | 10,362,048 |
| Convergys Corp. † | 542,800 | | 10,340,340 |
| Electronic Data Systems Corp. | 710,700 | | 19,181,793 |
| Hewlett-Packard Co. | 1,369,500 | | 63,038,085 |
| IBM Corp. | 130,800 | | 14,473,020 |
| Intel Corp. | 368,300 | | 8,699,246 |
COMMON STOCKS (57.2%)* continued
| | | |
| | | |
|
| | Shares | | Value |
|
| Technology continued | | | |
| Lexmark International, Inc. | | | |
| Class A † | 189,500 | $ | 7,492,830 |
| Microsoft Corp. | 1,325,600 | | 38,429,144 |
| National Semiconductor Corp. | 111,000 | | 2,884,890 |
| Sun Microsystems, Inc. † | 1,611,900 | | 8,220,690 |
| Tyco Electronics, Ltd. † | 295,412 | | 10,581,658 |
| Xerox Corp. † | 456,800 | | 7,975,728 |
| | | | 265,023,422 |
|
| |
| Transportation (1.6%) | | | |
| AMR Corp. † (S) | 464,400 | | 11,461,392 |
| UAL Corp. † | 511,100 | | 22,559,954 |
| Union Pacific Corp. | 53,800 | | 6,409,732 |
| US Airways Group, Inc. † | 909,000 | | 28,188,090 |
| | | | 68,619,168 |
|
| |
| Utilities & Power (3.2%) | | | |
| Alliant Energy Corp. (S) | 90,300 | | 3,336,585 |
| DTE Energy Co. | 136,900 | | 6,349,422 |
| Duke Energy Corp. (S) | 688,700 | | 11,728,561 |
| Edison International | 313,700 | | 16,591,593 |
| Entergy Corp. | 51,400 | | 5,137,944 |
| FirstEnergy Corp. | 440,800 | | 26,778,600 |
| FPL Group, Inc. | 90,400 | | 5,218,792 |
| NiSource, Inc. | 524,000 | | 9,992,680 |
| Pepco Holdings, Inc. (S) | 123,400 | | 3,340,438 |
| PG&E Corp. (S) | 641,750 | | 27,473,318 |
| Progress Energy, Inc. | 115,400 | | 5,038,364 |
| Sempra Energy | 87,000 | | 4,586,640 |
| Wisconsin Energy Corp. | 223,500 | | 9,594,855 |
| | | | 135,167,792 |
|
| |
| Total common stocks (cost $2,106,310,852) | | $ | 2,421,165,540 |
U.S. GOVERNMENT AND AGENCY MORTGAGE OBLIGATIONS (17.8%)*
| | | |
|
|
| | Principal amount | | Value |
|
| U.S. Government Guaranteed Mortgage Obligations (0.8%) | | |
| Government National Mortgage | | | |
| Association Pass-Through Certificates | | | |
| 6 1/2s, June 20, 2037 ## | $ 4,691,319 | $ | 4,773,967 |
| 6 1/2s, TBA, September 1, 2037 | 12,000,000 | | 12,185,626 |
| 6 1/2s, TBA, August 1, 2037 | 16,800,000 | | 17,086,124 |
| | | | 34,045,717 |
|
| |
| U.S. Government Agency Mortgage Obligations (17.0%) | | |
| Federal Home Loan | | | |
| Mortgage Corporation | | | |
| 8 3/4s, with due dates from | | | |
| May 1, 2009 to June 1, 2009 | 72,903 | | 73,814 |
| Federal Home Loan Mortgage | | | |
| Corporation Pass-Through Certificates | | | |
| 6s, with due dates from | | | |
| September 1, 2021 to March 1, 2035 | 67,915 | | 67,922 |
| 5 1/2s, with due dates from | | | |
| June 1, 2035 to June 1, 2035 | 2,272,263 | | 2,204,365 |
| 5 1/2s, July 1, 2016 | 363,609 | | 364,466 |
25
U.S. GOVERNMENT AND AGENCY MORTGAGE OBLIGATIONS (17.8%)* | | | |
|
|
| 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 | $ 6,666 | $ | 7,236 |
| 9s, with due dates from | | | |
| January 1, 2027 to July 1, 2032 | 213,958 | | 232,093 |
| 8 3/4s, July 1, 2009 | 1,852 | | 1,873 |
| 8s, with due dates from | | | |
| August 1, 2026 to July 1, 2033 | 924,310 | | 949,996 |
| 7 1/2s, with due dates from | | | |
| October 1, 2025 to July 1, 2033 | 577,187 | | 606,896 |
| 7s, with due dates from | | | |
| February 1, 2033 to January 1, 2036 | 4,436,118 | | 4,580,735 |
| 7s, with due dates from November 1, | | | |
| 2007 to February 1, 2017 | 772,782 | | 794,177 |
| 6 1/2s, December 1, 2034 | 16,256 | | 16,511 |
| 6 1/2s, with due dates from | | | |
| July 1, 2010 to May 1, 2011 | 174,023 | | 177,046 |
| 6 1/2s, TBA, August 1, 2037 | 122,300,000 | | 123,551,667 |
| 6s, with due dates from | | | |
| June 1, 2037 to July 1, 2037 | 146,644 | | 145,344 |
| 6s, with due dates from October 1, | | | |
| 2011 to September 1, 2021 | 1,449,528 | | 1,459,054 |
| 6s, TBA, August 1, 2037 | 72,800,000 | | 72,123,186 |
| 5 1/2s, with due dates from | | | |
| April 1, 2036 to March 1, 2037 | 11,336,710 | | 10,966,503 |
| 5 1/2s, with due dates from | | | |
| April 1, 2009 to August 1, 2021 | 427,180 | | 423,034 |
| 5 1/2s, TBA, August 1, 2037 | 51,000,000 | | 49,250,858 |
| 5 1/2s, TBA, August 1, 2022 | 89,300,000 | | 88,211,656 |
| 5s, with due dates from | | | |
| June 1, 2021 to May 1, 2036 | 19,252,662 | | 18,118,398 |
| 5s, April 1, 2021 | 227,235 | | 220,454 |
| 4 1/2s, with due dates from | | | |
| April 1, 2020 to July 1, 2022 | 19,802,292 | | 18,913,639 |
| 4 1/2s, TBA, August 1, 2022 | 339,100,000 | | 323,072,235 |
| 4s, with due dates from | | | |
| May 1, 2019 to August 1, 2020 | 797,477 | | 741,914 |
| | | | 717,275,072 |
|
| |
| Total U.S. government and agency | | | |
| mortgage obligations (cost $747,816,516) | | $ | 751,320,789 |
|
| |
| |
| COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* | |
|
| | Principal amount | | Value |
| |
| Amresco Commercial | | | |
| Mortgage Funding I 144A | | | |
| Ser. 97-C1, Class G, 7s, 2029 | $81,831 | $ | 81,831 |
| Ser. 97-C1, Class H, 7s, 2029 | 664,000 | | 662,005 |
| Asset Securitization Corp. | | | |
| Ser. 96-MD6, Class A7, 7.866s, 2029 | 2,119,000 | | 2,252,043 |
| FRB Ser. 97-D5, Class A5, | | | |
| 7.166s, 2043 | 325,000 | | 345,277 |
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued
| | | | |
|
|
| | Principal amount | | Value |
|
| Banc of America Commercial | | | |
| Mortgage, Inc. | | | |
| Ser. 01-1, Class G, 7.324s, 2036 $ | 950,000 | $ | 988,492 |
| Ser. 06-4, Class A4, 5.634s, 2046 | 3,420,000 | | 3,408,513 |
| Ser. 06-5, Class A4, 5.414s, 2047 | 4,233,000 | | 4,150,384 |
| Ser. 04-3, Class A5, 5.303s, 2039 | 4,690,000 | | 4,679,729 |
| FRB Ser. 05-1, Class A5, 5.12s, 2042 | 252,000 | | 246,563 |
| Ser. 07-1, Class XW, Interest Only | | | |
| (IO), 0.292s, 2049 | 17,097,240 | | 390,775 |
| Ser. 06-1, Class XC, IO, 0.046s, 2045 | 40,950,498 | | 288,209 |
| Banc of America Commercial | | | |
| Mortgage, Inc. 144A | | | |
| Ser. 01-PB1, Class K, 6.15s, 2035 | 715,000 | | 723,168 |
| Ser. 02-PB2, Class XC, IO, | | | |
| 0.198s, 2035 | 9,241,881 | | 168,592 |
| Ser. 04-4, Class XC, IO, | | | |
| 0.135s, 2042 | 31,357,417 | | 496,810 |
| Ser. 04-5, Class XC, IO, | | | |
| 0.105s, 2041 | 49,210,442 | | 647,537 |
| Ser. 05-1, Class XW, IO, | | | |
| 0.087s, 2042 | 267,550,514 | | 926,727 |
| Ser. 05-4, Class XC, IO, | | | |
| 0.06s, 2045 | 82,811,640 | | 594,137 |
| Ser. 06-5, Class XC, IO, | | | |
| 0.049s, 2016 | 75,703,410 | | 1,178,016 |
| Banc of America Large Loan | | | |
| FRB Ser. 04-BBA4, Class | | | |
| H, 6.27s, 2018 | 142,000 | | 142,065 |
| FRB Ser. 04-BBA4, Class | | | |
| G, 6.02s, 2018 | 449,000 | | 449,024 |
| Banc of America Large Loan 144A | | | |
| FRB Ser. 05-MIB1, Class K, | | | |
| 7.32s, 2022 | 496,000 | | 494,903 |
| FRB Ser. 05-MIB1, Class J, | | | |
| 6.37s, 2022 | 1,400,000 | | 1,401,512 |
| Ser. 03-BBA2, Class X1A, IO, | | | |
| 0.175s, 2015 (F) | 4,621,138 | | — |
| Banc of America Mortgage Securities | | | |
| Ser. 04-D, Class 2A, IO, | | | |
| 0.358s, 2034 | 12,728,176 | | 39,280 |
| Ser. 05-E, Class 2, IO, 0.306s, 2035 | 34,071,990 | | 184,377 |
| IFB Ser. 06-2, Class A4, IO, | | | |
| 0.08s, 2036 | 2,560,360 | | 23,930 |
| Banc of America Structured | | | |
| Security Trust 144A Ser. 02-X1, | | | |
| Class A3, 5.436s, 2033 | 1,692,777 | | 1,691,489 |
| Bayview Commercial | | | |
| Asset Trust 144A | | | |
| FRB Ser. 05-1A, Class A1, | | | |
| 5.62s, 2035 | 1,450,543 | | 1,451,704 |
| Ser. 04-2, IO, 1.72s, 2034 | 6,990,005 | | 464,180 |
| Ser. 05-1A, IO, 1.6s, 2035 | 6,174,948 | | 446,478 |
| Ser. 04-3, IO, 1.6s, 2035 | 4,839,401 | | 331,575 |
| Ser. 07-2A, IO, 1.3s, 2037 | 15,682,968 | | 2,242,664 |
| Ser. 07-1, Class S, IO, 1.211s, 2037 | 13,704,675 | | 1,761,033 |
| Ser. 06-4A, Class IO, IO, | | | |
| 1.14s, 2036 | 2,286,689 | | 316,249 |
| Ser. 06-2A, IO, 0.879s, 2036 | 3,120,849 | | 280,339 |
| Ser. 05-3A, IO, 0.775s, 2035 | 18,490,270 | | 1,493,485 |
26
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued | | | |
|
|
| | Principal amount | | Value |
|
| Bear Stearns Alternate Trust | | | |
| Ser. 04-9, Class 1A1, 5.432s, 2034 | $ 463,949 | $ | 462,365 |
| Bear Stearns Commercial Mortgage | | | |
| Securities, Inc. | | | |
| FRB Ser. 00-WF2, Class F, | | | |
| 8.452s, 2032 | 456,000 | | 497,744 |
| Ser. 04-PR3I, Class X1, IO, | | | |
| 0.102s, 2041 | 14,680,908 | | 292,664 |
| Ser. 05-PWR9, Class X1, IO, | | | |
| 0.079s, 2042 | 41,136,538 | | 407,169 |
| Bear Stearns Commercial Mortgage | | | |
| Securities, Inc. 144A | | | |
| Ser. 06-BBA7, Class X1A, IO, | | | |
| 1.756s, 2019 | 28,155,600 | | 151,243 |
| Ser. 06-PW14, Class XW, IO, | | | |
| 0.691s, 2038 | 18,210,577 | | 887,054 |
| Ser. 06-PW14, Class X1, IO, | | | |
| 0.047s, 2038 | 19,583,850 | | 351,133 |
| Ser. 07-PW15, Class X1, IO, | | | |
| 0.043s, 2044 | 64,484,528 | | 804,270 |
| Ser. 05-PW10, Class X1, IO, | | | |
| 0.032s, 2040 | 64,056,501 | | 289,625 |
| Ser. 07-PW16, Class X, IO, | | | |
| 0.022s, 2040 | 143,955,665 | | 165,117 |
| Bear Stearns Small Balance | | | |
| Commercial Trust 144A Ser. 06-1A, | | | |
| Class AIO, IO, 1s, 2034 | 9,307,000 | | 147,966 |
| Chase Commercial Mortgage | | | |
| Securities Corp. Ser. 00-3, | | | |
| Class A2, 7.319s, 2032 | 553,000 | | 577,141 |
| Chase Commercial | | | |
| Mortgage Securities Corp. 144A | | | |
| Ser. 98-1, Class F, 6.56s, 2030 | 4,600,000 | | 4,727,505 |
| Ser. 98-1, Class G, 6.56s, 2030 | 1,171,000 | | 1,209,784 |
| Ser. 98-1, Class H, 6.34s, 2030 | 1,761,000 | | 1,547,010 |
| Citigroup Commercial | | | |
| Mortgage Trust 144A | | | |
| Ser. 05-C3, Class XC, IO, | | | |
| 0.094s, 2043 | 116,943,465 | | 1,224,252 |
| Ser. 06-C5, Class XC, IO, | | | |
| 0.049s, 2049 | 123,267,747 | | 1,791,234 |
| Citigroup/Deutsche Bank Commercial | | | |
| Mortgage Trust 144A | | | |
| Ser. 07-CD4, Class XW, IO, | | | |
| 0.378s, 2049 | 26,715,000 | | 729,445 |
| Ser. 06-CD2, Class X, IO, | | | |
| 0.087s, 2046 | 76,465,214 | | 439,063 |
| Ser. 07-CD4, Class XC, IO, | | | |
| 0.041s, 2049 | 89,338,000 | | 858,482 |
| Commercial Mortgage | | | |
| Acceptance Corp. 144A | | | |
| Ser. 98-C1, Class F, 6.23s, 2031 | 2,013,000 | | 2,048,635 |
| Ser. 98-C2, Class F, 5.44s, 2030 | 3,255,000 | | 3,228,750 |
| Commercial Mortgage | | | |
| Pass-Through Certificates 144A | | | |
| FRB Ser. 01-J2A, Class A2F, | | | |
| 5.82s, 2034 | 1,590,000 | | 1,590,000 |
| Ser. 06-CN2A, Class H, 5.57s, 2019 | 939,000 | | 931,921 |
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued
| | | | |
|
|
| | Principal amount | | Value |
|
| Commercial Mortgage | | | |
| Pass-Through Certificates 144A | | | |
| Ser. 06-CN2A, Class J, 5.57s, 2019 | $ 751,000 | $ | 743,050 |
| Ser. 03-LB1A, Class X1, IO, | | | |
| 0.436s, 2038 | 8,976,513 | | 353,800 |
| Ser. 05-C6, Class XC, IO, 0.059s, | | | |
| 2044 | 67,213,962 | | 475,203 |
| Ser. 05-LP5, Class XC, IO, 0.057s, | | | |
| 2043 | 71,563,670 | | 668,118 |
| Ser. 06-C8, Class XS, IO, 0.045s, | | | |
| 2046 | 57,708,172 | | 732,605 |
| Countrywide Alternative Loan Trust | | | |
| Ser. 06-OA10, Class XBI, IO, | | | |
| 2.355s, 2046 | 6,534,929 | | 236,891 |
| Ser. 05-24, Class IIAX, IO, | | | |
| 1.893s, 2035 | 10,983,838 | | 260,734 |
| Ser. 05-24, Class 1AX, IO, 1.217s, | | | |
| 2035 | 13,351,807 | | 237,462 |
| IFB Ser. 06-6CB, Class 1A3, IO, | | | |
| zero %, 2036 | 17,984,704 | | 56,202 |
| Credit Suisse Mortgage Capital | | | |
| Certificates Ser. 06-C5, | | | |
| Class AX, IO, 0.066s, 2039 | 36,702,824 | | 612,203 |
| Credit Suisse Mortgage | | | |
| Capital Certificates 144A | | | |
| Ser. 07-C2, Class AX, IO, | | | |
| 0.11s, 2049 | 122,005,214 | | 1,324,855 |
| Ser. 07-C1, Class AX, IO, | | | |
| 0.052s, 2040 | 80,775,995 | | 833,043 |
| Ser. 06-C3, Class AX, IO, | | | |
| 0.024s, 2038 | 103,005,952 | | 96,620 |
| CRESI Finance Limited | | | |
| Partnership 144A | | | |
| FRB Ser. 06-A, Class D, 6.12s, 2017 | 232,000 | | 231,999 |
| FRB Ser. 06-A, Class C, 5.92s, 2017 | 688,000 | | 687,791 |
| Criimi Mae Commercial Mortgage | | | |
| Trust 144A Ser. 98-C1, Class B, | | | |
| 7s, 2033 | 3,385,000 | | 3,390,755 |
| Crown Castle Towers, LLC 144A | | | |
| Ser. 05-1A, Class D, 5.612s, 2035 | 2,903,000 | | 2,884,333 |
| CS First Boston Mortgage | | | |
| Securities Corp. | | | |
| Ser. 97-C2, Class F, 7.46s, 2035 | 1,239,000 | | 1,340,183 |
| Ser. 04-C2, Class A2, 5.416s, 2036 | 5,070,000 | | 4,943,808 |
| FRB Ser. 04-C3, Class A5, | | | |
| 5.113s, 2036 | 92,000 | | 88,002 |
| Ser. 04-C3, Class A3, 4.302s, 2036 | 196,000 | | 191,310 |
| CS First Boston Mortgage | | | |
| Securities Corp. 144A | | | |
| FRB Ser. 05-TFLA, Class J, | | | |
| 6.27s, 2020 | 259,000 | | 258,998 |
| FRB Ser. 04-TF2A, Class J, | | | |
| 6.27s, 2016 | 313,000 | | 312,952 |
| FRB Ser. 05-TF2A, Class J, | | | |
| 6.22s, 2020 | 1,237,000 | | 1,237,096 |
| FRB Ser. 04-TF2A, Class H, | | | |
| 6.02s, 2019 | 627,000 | | 626,996 |
| Ser. 01-CK1, Class AY, IO, | | | |
| 0.775s, 2035 | 67,907,000 | | 1,350,182 |
27
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued | | | |
|
|
| | Principal amount | | Value |
|
| CS First Boston Mortgage | | | |
| Securities Corp. 144A | | | |
| Ser. 03-C3, Class AX, IO, | | | |
| 0.762s, 2038 | $ 60,006,280 | $ | 2,343,173 |
| Ser. 02-CP3, Class AX, IO, | | | |
| 0.358s, 2035 | 20,895,854 | | 805,533 |
| Ser. 04-C4, Class AX, IO, | | | |
| 0.189s, 2039 | 11,693,544 | | 264,017 |
| Ser. 05-C2, Class AX, IO, | | | |
| 0.114s, 2037 | 76,082,278 | | 1,120,464 |
| DLJ Commercial | | | |
| Mortgage Corp. | | | |
| Ser. 00-CF1, Class A1B, 7.62s, 2033 | 2,184,994 | | 2,296,795 |
| Ser. 99-CG2, Class B3, 6.1s, 2032 | 1,752,000 | | 1,749,532 |
| Ser. 99-CG2, Class B4, 6.1s, 2032 | 2,785,000 | | 2,773,611 |
| Ser. 98-CF2, Class B3, 6.04s, 2031 | 814,188 | | 822,876 |
| Fannie Mae | | | |
| Ser. 03-W6, Class PT1, | | | |
| 10.031s, 2042 | 234,507 | | 251,019 |
| IFB Ser. 06-70, Class SM, | | | |
| 9.605s, 2036 | 399,269 | | 431,069 |
| Ser. 02-T12, Class A4, 9 1/2s, 2042 | 209,969 | | 220,771 |
| Ser. 02-T4, Class A4, 9 1/2s, 2041 | 1,178,321 | | 1,237,962 |
| Ser. 02-T6, Class A3, 9 1/2s, 2041 | 425,307 | | 446,284 |
| Ser. 04-T3, Class PT1, 9.136s, 2044 | 599,520 | | 641,087 |
| IFB Ser. 06-62, Class PS, 7.98s, 2036 | 1,530,808 | | 1,660,443 |
| IFB Ser. 05-37, Class SU, 7.92s,2035 | 2,686,823 | | 2,862,641 |
| IFB Ser. 06-49, Class SE, 7.72s, 2036 | 2,660,031 | | 2,818,303 |
| IFB Ser. 06-76, Class QB, | | | |
| 7.68s, 2036 | 1,642,493 | | 1,777,333 |
| IFB Ser. 06-79, Class PS, 7.68s, 2036 | 847,403 | | 926,762 |
| IFB Ser. 06-48, Class TQ, | | | |
| 7.68s, 2036 | 2,949,338 | | 3,129,090 |
| IFB Ser. 06-60, Class AK, | | | |
| 7.52s, 2036 | 1,282,605 | | 1,329,756 |
| Ser. 02-26, Class A2, 7 1/2s, 2048 | 1,918,100 | | 1,999,750 |
| Ser. 04-T3, Class 1A4, 7 1/2s, 2044 | 57,789 | | 60,599 |
| Ser. 04-T2, Class 1A4, 7 1/2s, 2043 | 896,869 | | 940,493 |
| Ser. 03-W1, Class 2A, 7 1/2s, 2042 | 1,702,245 | | 1,772,983 |
| Ser. 02-T19, Class A3, 7 1/2s, 2042 | 1,252,860 | | 1,307,172 |
| Ser. 02-T12, Class A3, 7 1/2s, 2042 | 343,741 | | 357,152 |
| Ser. 02-14, Class A2, 7 1/2s, 2042 | 689,311 | | 717,706 |
| Ser. 01-T10, Class A2, 7 1/2s, 2041 | 2,137,780 | | 2,219,568 |
| Ser. 02-T4, Class A3, 7 1/2s, 2041 | 374,351 | | 388,836 |
| Ser. 01-T12, Class A2, 7 1/2s, 2041 | 1,855,527 | | 1,924,496 |
| Ser. 01-T3, Class A1, 7 1/2s, 2040 | 318,811 | | 330,979 |
| Ser. 01-T1, Class A1, 7 1/2s, 2040 | 695,567 | | 721,421 |
| Ser. 99-T2, Class A1, 7 1/2s, 2039 | 195,415 | | 205,066 |
| Ser. 03-W10, Class 1A1, | | | |
| 7 1/2s, 2032 | 819,469 | | 853,009 |
| Ser. 02-T1, Class A3, 7 1/2s, 2031 | 567,151 | | 590,363 |
| Ser. 00-T6, Class A1, 7 1/2s, 2030 | 1,664,677 | | 1,731,410 |
| Ser. 01-T5, Class A3, 7 1/2s, 2030 | 198,565 | | 206,237 |
| Ser. 01-T4, Class A1, 7 1/2s, 2028 | 3,928,080 | | 4,127,489 |
| IFB Ser. 06-63, Class SP, 7.38s, 2036 | 1,786,338 | | 1,891,080 |
| IFB Ser. 06-60, Class TK, 7.32s, 2036 | 870,686 | | 899,319 |
| IFB Ser. 06-104, Class GS, | | | |
| 7.046s, 2036 | 1,086,604 | | 1,135,067 |
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued
| | | | |
|
|
| | Principal amount | | Value |
| Fannie Mae | | | |
| Ser. 02-26, Class A1, 7s, 2048 | $ 1,234,154 | $ | 1,272,320 |
| Ser. 04-T3, Class 1A3, 7s, 2044 | 567,647 | | 588,027 |
| Ser. 03-W3, Class 1A2, 7s, 2042 | 578,556 | | 596,762 |
| Ser. 02-T16, Class A2, 7s, 2042 | 1,184,389 | | 1,221,470 |
| Ser. 02-14, Class A1, 7s, 2042 | 108,276 | | 111,448 |
| Ser. 02-T4, Class A2, 7s, 2041 | 681,707 | | 701,072 |
| Ser. 01-W3, Class A, 7s, 2041 | 419,510 | | 433,194 |
| Ser. 04-W1, Class 2A2, 7s, 2033 | 5,944,398 | | 6,155,193 |
| IFB Ser. 06-104, Class ES, | | | |
| 6.85s, 2036 | 2,037,536 | | 2,128,025 |
| Ser. 371, Class 2, IO, 6 1/2s, 2036 | 18,319,110 | | 4,848,120 |
| IFB Ser. 07-1, Class NK, | | | |
| 6.49s, 2037 | 4,161,373 | | 4,356,562 |
| IFB Ser. 07-81, Class SC, | | | |
| 5.88s, 2037 | 1,361,000 | | 1,332,100 |
| IFB Ser. 06-104, Class CS, | | | |
| 5.76s, 2036 | 2,128,831 | | 2,057,094 |
| IFB Ser. 05-74, Class SK, | | | |
| 5 1/2s, 2035 | 2,856,762 | | 2,822,460 |
| IFB Ser. 05-74, Class CS, | | | |
| 5.39s, 2035 | 1,767,602 | | 1,732,185 |
| IFB Ser. 06-115, Class ES, | | | |
| 5.28s, 2036 | 1,660,692 | | 1,680,474 |
| IFB Ser. 05-74, Class CP, | | | |
| 5.243s, 2035 | 1,549,929 | | 1,540,749 |
| IFB Ser. 07-30, Class FS, | | | |
| 5.187s, 2037 | 4,039,307 | | 3,844,539 |
| IFB Ser. 05-57, Class CD, | | | |
| 5.175s, 2035 | 1,387,735 | | 1,375,625 |
| IFB Ser. 06-8, Class PK, 5.12s, 2036 | 2,827,842 | | 2,670,192 |
| IFB Ser. 06-27, Class SP, 5.06s, 2036 | 2,143,000 | | 2,122,885 |
| IFB Ser. 06-8, Class HP, 5.06s, 2036 | 2,433,015 | | 2,389,108 |
| IFB Ser. 06-8, Class WK, 5.06s, 2036 | 3,840,082 | | 3,741,859 |
| IFB Ser. 05-106, Class US, | | | |
| 5.06s, 2035 | 3,730,521 | | 3,689,575 |
| IFB Ser. 05-99, Class SA, | | | |
| 5.06s, 2035 | 1,844,949 | | 1,810,470 |
| IFB Ser. 05-115, Class NQ, | | | |
| 4.988s, 2036 | 880,648 | | 835,365 |
| IFB Ser. 05-114, Class SP, | | | |
| 4.95s, 2036 | 1,065,174 | | 1,006,323 |
| IFB Ser. 05-45, Class DA, | | | |
| 4.913s, 2035 | 2,922,760 | | 2,854,144 |
| IFB Ser. 05-74, Class DM, | | | |
| 4.877s, 2035 | 3,553,445 | | 3,446,040 |
| IFB Ser. 05-45, Class DC, | | | |
| 4.803s, 2035 | 2,279,722 | | 2,216,847 |
| IFB Ser. 06-60, Class CS, | | | |
| 4.583s, 2036 | 797,470 | | 721,651 |
| IFB Ser. 05-57, Class DC, | | | |
| 4.485s, 2034 | 2,422,566 | | 2,386,502 |
| IFB Ser. 05-45, Class PC, | | | |
| 4.29s, 2034 | 1,268,742 | | 1,243,167 |
| IFB Ser. 05-95, Class CP, | | | |
| 4.089s, 2035 | 283,241 | | 274,208 |
| IFB Ser. 05-95, Class OP, | | | |
| 3.923s, 2035 | 1,046,000 | | 937,468 |
28
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued | | | |
|
|
| | Principal amount | | Value |
|
| Fannie Mae | | | |
| IFB Ser. 05-106, Class JC, | | | |
| 3.628s, 2035 | $ 729,800 | $ | 639,756 |
| IFB Ser. 05-72, Class SB, | | | |
| 3.575s, 2035 | 1,863,444 | | 1,714,838 |
| IFB Ser. 05-83, Class QP, | | | |
| 3.562s, 2034 | 622,720 | | 563,176 |
| IFB Ser. 02-36, Class QH, IO, | | | |
| 2.73s, 2029 | 6,972 | | 11 |
| IFB Ser. 07-W6, Class 6A2, IO, | | | |
| 2.48s, 2037 | 2,353,189 | | 157,363 |
| IFB Ser. 06-90, Class SE, IO, | | | |
| 2.48s, 2036 | 2,243,114 | | 230,036 |
| IFB Ser. 03-66, Class SA, IO, | | | |
| 2.33s, 2033 | 3,088,257 | | 241,769 |
| Ser. 03-W12, Class 2, IO, | | | |
| 2.231s, 2043 | 8,104,589 | | 484,260 |
| IFB Ser. 07-W6, Class 5A2, IO, | | | |
| 1.97s, 2037 | 3,045,207 | | 189,757 |
| IFB Ser. 07-W4, Class 4A2, IO, | | | |
| 1.96s, 2037 | 13,915,861 | | 851,871 |
| IFB Ser. 07-W2, Class 3A2, IO, | | | |
| 1.96s, 2037 | 4,188,652 | | 254,037 |
| Ser. 03-W10, Class 1, IO, | | | |
| 1.934s, 2043 | 25,318,893 | | 1,280,485 |
| Ser. 03-W10, Class 3, IO, | | | |
| 1.931s, 2043 | 6,366,405 | | 327,626 |
| IFB Ser. 05-113, Class AI, IO, | | | |
| 1.91s, 2036 | 722,004 | | 51,518 |
| IFB Ser. 05-113, Class DI, IO, | | | |
| 1.91s, 2036 | 23,321,701 | | 1,487,333 |
| IFB Ser. 05-52, Class DC, IO, | | | |
| 1.88s, 2035 | 1,780,462 | | 173,932 |
| IFB Ser. 06-60, Class SI, IO, | | | |
| 1.83s, 2036 | 4,063,201 | | 306,907 |
| IFB Ser. 04-24, Class CS, IO, | | | |
| 1.83s, 2034 | 4,297,925 | | 298,464 |
| IFB Ser. 03-122, Class SA, IO, | | | |
| 1.78s, 2028 | 5,711,021 | | 283,050 |
| IFB Ser. 03-122, Class SJ, IO, | | | |
| 1.78s, 2028 | 6,011,674 | | 303,371 |
| IFB Ser. 06-60, Class DI, IO, | | | |
| 1 3/4s, 2035 | 2,142,020 | | 124,777 |
| IFB Ser. 04-60, Class SW, IO, | | | |
| 1.73s, 2034 | 8,000,379 | | 600,393 |
| IFB Ser. 05-65, Class KI, IO, | | | |
| 1.68s, 2035 | 15,902,095 | | 909,182 |
| Ser. 03-W8, Class 12, IO, | | | |
| 1.637s, 2042 | 25,919,046 | | 1,234,835 |
| IFB Ser. 07-39, Class PI, IO, | | | |
| 1.44s, 2037 | 2,607,434 | | 145,974 |
| IFB Ser. 07-30, Class WI, IO, | | | |
| 1.44s, 2037 | 22,373,131 | | 1,179,767 |
| IFB Ser. 07-W4, Class 3A2, IO, | | | |
| 1.43s, 2037 | 13,477,485 | | 653,215 |
| IFB Ser. 07-28, Class SE, IO, | | | |
| 1.43s, 2037 | 2,745,947 | | 186,480 |
| IFB Ser. 07-W2, Class 2A2, IO, | | | |
| 1.43s, 2037 | 5,602,171 | | 295,027 |
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued
| | | | |
|
|
| | Principal amount | | Value |
|
| Fannie Mae | | | |
| IFB Ser. 06-128, Class SH, IO, | | | |
| 1.43s, 2037 | $ 3,267,841 | $ | 177,771 |
| IFB Ser. 06-56, Class SM, IO, | | | |
| 1.43s, 2036 | 8,052,899 | | 440,310 |
| IFB Ser. 06-12, Class SD, IO, | | | |
| 1.43s, 2035 | 11,645,475 | | 746,475 |
| IFB Ser. 05-73, Class SI, IO, | | | |
| 1.43s, 2035 | 1,715,921 | | 89,081 |
| IFB Ser. 05-17, Class ES, IO, | | | |
| 1.43s, 2035 | 3,539,664 | | 211,990 |
| IFB Ser. 05-17, Class SY, IO, | | | |
| 1.43s, 2035 | 1,625,541 | | 97,604 |
| IFB Ser. 07-W5, Class 2A2, IO, | | | |
| 1.42s, 2037 | 1,297,002 | | 54,495 |
| IFB Ser. 07-30, Class IE, IO, | | | |
| 1.42s, 2037 | 7,222,965 | | 515,995 |
| IFB Ser. 06-123, Class CI, IO, | | | |
| 1.42s, 2037 | 6,257,436 | | 406,577 |
| IFB Ser. 06-123, Class UI, IO, | | | |
| 1.42s, 2037 | 2,750,075 | | 167,216 |
| IFB Ser. 05-82, Class SY, IO, | | | |
| 1.41s, 2035 | 7,208,170 | | 365,013 |
| IFB Ser. 05-45, Class SR, IO, | | | |
| 1.4s, 2035 | 9,889,830 | | 497,562 |
| IFB Ser. 07-15, Class BI, IO, | | | |
| 1.38s, 2037 | 4,646,053 | | 277,077 |
| IFB Ser. 06-23, Class SC, IO, | | | |
| 1.38s, 2036 | 3,747,391 | | 229,528 |
| IFB Ser. 05-95, Class CI, IO, | | | |
| 1.38s, 2035 | 3,912,671 | | 239,242 |
| IFB Ser. 05-84, Class SG, IO, | | | |
| 1.38s, 2035 | 6,600,873 | | 419,622 |
| IFB Ser. 05-54, Class SA, IO, | | | |
| 1.38s, 2035 | 7,049,139 | | 348,051 |
| IFB Ser. 05-23, Class SG, IO, | | | |
| 1.38s, 2035 | 5,267,932 | | 316,813 |
| IFB Ser. 05-104, Class NI, IO, | | | |
| 1.38s, 2035 | 4,551,286 | | 270,802 |
| IFB Ser. 05-17, Class SA, IO, | | | |
| 1.38s, 2035 | 4,583,054 | | 276,276 |
| IFB Ser. 05-17, Class SE, IO, | | | |
| 1.38s, 2035 | 4,949,228 | | 294,924 |
| IFB Ser. 05-57, Class DI, IO, | | | |
| 1.38s, 2035 | 10,814,326 | | 580,198 |
| IFB Ser. 05-83, Class QI, IO, | | | |
| 1.37s, 2035 | 1,044,826 | | 72,017 |
| IFB Ser. 05-83, Class SL, IO, | | | |
| 1.35s, 2035 | 11,685,610 | | 639,873 |
| Ser. 06-116, Class ES, IO, | | | |
| 1.33s, 2036 | 1,948,462 | | 102,881 |
| IFB Ser. 07-63, Class SB, IO, | | | |
| 1.33s, 2037 | 19,179,882 | | 982,739 |
| IFB Ser. 06-114, Class IS, IO, | | | |
| 1.33s, 2036 | 3,228,628 | | 182,619 |
| IFB Ser. 06-115, Class GI, IO, | | | |
| 1.32s, 2036 | 2,781,381 | | 169,997 |
| IFB Ser. 06-115, Class IE, IO, | | | |
| 1.32s, 2036 | 2,380,071 | | 136,614 |
29
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued | | | |
|
|
| | Principal amount | | Value |
|
| Fannie Mae | | | |
| IFB Ser. 06-117, Class SA, IO, | | | |
| 1.32s, 2036 | $ 3,656,214 | $ | 206,902 |
| IFB Ser. 06-121, Class SD, IO, | | | |
| 1.32s, 2036 | 6,096,395 | | 353,967 |
| IFB Ser. 06-109, Class SG, IO, | | | |
| 1.31s, 2036 | 4,307,733 | | 246,528 |
| IFB Ser. 06-104, Class IM, IO, | | | |
| 1.3s, 2036 | 895,536 | | 50,097 |
| IFB Ser. 06-104, Class SY, IO, | | | |
| 1.3s, 2036 | 2,087,701 | | 108,540 |
| IFB Ser. 06-109, Class SH, IO, | | | |
| 1.3s, 2036 | 3,028,593 | | 201,040 |
| Ser. 06-104, Class SG, IO, 1.28s, | | | |
| 2036 | 4,037,233 | | 204,656 |
| IFB Ser. 07-W6, Class 4A2, IO, | | | |
| 1.28s, 2037 | 11,752,363 | | 561,395 |
| IFB Ser. 06-128, Class SC, IO, | | | |
| 1.28s, 2037 | 10,385,078 | | 554,563 |
| IFB Ser. 06-44, Class IS, IO, | | | |
| 1.28s, 2036 | 4,385,061 | | 234,276 |
| IFB Ser. 06-45, Class SM, IO, | | | |
| 1.28s, 2036 | 4,965,936 | | 244,041 |
| IFB Ser. 06-8, Class JH, IO, | | | |
| 1.28s, 2036 | 11,164,702 | | 638,009 |
| IFB Ser. 05-95, Class OI, IO, | | | |
| 1.27s, 2035 | 582,916 | | 40,330 |
| IFB Ser. 06-92, Class JI, IO, | | | |
| 1.26s, 2036 | 2,156,466 | | 118,000 |
| IFB Ser. 06-96, Class ES, IO, | | | |
| 1.26s, 2036 | 3,969,508 | | 221,809 |
| IFB Ser. 06-99, Class AS, IO, | | | |
| 1.26s, 2036 | 2,569,454 | | 138,237 |
| IFB Ser. 06-85, Class TS, IO, | | | |
| 1.24s, 2036 | 5,728,026 | | 292,456 |
| IFB Ser. 06-61, Class SE, IO, | | | |
| 1.23s, 2036 | 5,558,847 | | 258,597 |
| IFB Ser. 07-76, Class SA, IO, | | | |
| 1.22s, 2037 | 3,653,033 | | 186,195 |
| Ser. 06-94, Class NI, IO, 1.18s, 2036 | 1,973,979 | | 96,581 |
| FRB Ser. 03-W17, Class 12, IO, | | | |
| 1.151s, 2033 | 7,937,337 | | 305,193 |
| IFB Ser. 07-30, Class JS, IO, | | | |
| 1.12s, 2037 | 9,943,880 | | 530,849 |
| IFB Ser. 07-30, Class LI, IO, | | | |
| 1.12s, 2037 | 9,658,888 | | 539,608 |
| IFB Ser. 07-W2, Class 1A2, IO, | | | |
| 1.11s, 2037 | 15,018,159 | | 704,894 |
| IFB Ser. 07-W4, Class 2A2, IO, | | | |
| 1.1s, 2037 | 15,498,336 | | 643,181 |
| IFB Ser. 07-54, Class IA, IO, 1.09s, | | | |
| 2037 | 3,339,510 | | 180,088 |
| IFB Ser. 07-54, Class IB, IO, | | | |
| 1.09s, 2037 | 3,339,510 | | 180,088 |
| IFB Ser. 07-54, Class IC, IO, | | | |
| 1.09s, 2037 | 3,339,510 | | 180,088 |
| IFB Ser. 07-54, Class ID, IO, | | | |
| 1.09s, 2037 | 3,339,510 | | 180,088 |
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued
| | | |
|
|
| | Principal amount | | Value |
|
| Fannie Mae | | | |
| IFB Ser. 07-54, Class IE, IO, | | | |
| 1.09s, 2037 | $ 3,339,510 | $ | 180,088 |
| IFB Ser. 07-54, Class IF, IO, | | | |
| 1.09s, 2037 | 4,968,899 | | 267,955 |
| IFB Ser. 07-54, Class UI, IO, | | | |
| 1.09s, 2037 | 3,875,116 | | 221,641 |
| IFB Ser. 07-15, Class CI, IO, | | | |
| 1.06s, 2037 | 11,480,117 | | 630,202 |
| IFB Ser. 06-123, Class BI, IO, | | | |
| 1.06s, 2037 | 15,196,631 | | 785,975 |
| IFB Ser. 06-115, Class JI, IO, | | | |
| 1.06s, 2036 | 8,371,254 | | 440,238 |
| IFB Ser. 06-123, Class LI, IO, | | | |
| 1s, 2037 | 5,626,988 | | 275,390 |
| Ser. 03-T2, Class 2, IO, | | | |
| 0.821s, 2042 | 37,198,163 | | 842,632 |
| IFB Ser. 07-39, Class AI, IO, | | | |
| 0.8s, 2037 | 5,899,276 | | 248,681 |
| IFB Ser. 07-32, Class SD, IO, | | | |
| 0.79s, 2037 | 3,971,736 | | 185,444 |
| IFB Ser. 07-33, Class SD, IO, | | | |
| 0.79s, 2037 | 11,227,486 | | 424,399 |
| IFB Ser. 07-30, Class UI, IO, | | | |
| 0.78s, 2037 | 3,295,002 | | 146,341 |
| IFB Ser. 07-32, Class SC, IO, | | | |
| 0.78s, 2037 | 5,273,324 | | 244,550 |
| IFB Ser. 07-1, Class CI, IO, | | | |
| 0.78s, 2037 | 3,860,123 | | 160,810 |
| IFB Ser. 05-74, Class SE, IO, | | | |
| 0.78s, 2035 | 14,587,281 | | 505,958 |
| IFB Ser. 05-82, Class SI, IO, | | | |
| 0.78s, 2035 | 13,651,219 | | 488,589 |
| IFB Ser. 07-W4, Class 1A2, IO, | | | |
| 0.77s, 2037 | 45,161,415 | | 1,599,569 |
| IFB Ser. 07-W5, Class 1A2, IO, | | | |
| 0.76s, 2037 | 7,003,757 | | 208,881 |
| Ser. 03-W6, Class 51, IO, | | | |
| 0.683s, 2042 | 10,979,932 | | 182,795 |
| Ser. 03-W3, Class 2IO1, IO, | | | |
| 0.683s, 2042 | 3,446,632 | | 66,927 |
| IFB Ser. 05-58, Class IK, IO, | | | |
| 0.68s, 2035 | 4,317,620 | | 208,447 |
| Ser. 06-W3, Class 1AS, IO, | | | |
| 0.662s, 2046 | 13,802,959 | | 444,283 |
| Ser. 01-T12, Class IO, 0.564s, 2041 | 22,011,434 | | 277,192 |
| Ser. 03-W2, Class 1, IO, | | | |
| 0.47s, 2042 | 19,925,056 | | 229,023 |
| Ser. 02-T4, IO, 0.453s, 2041 | 7,937,757 | | 78,934 |
| Ser. 03-W3, Class 1, IO, | | | |
| 0.442s, 2042 | 26,369,301 | | 231,936 |
| Ser. 02-T1, Class IO, IO, | | | |
| 0.425s, 2031 | 21,163,349 | | 211,211 |
| Ser. 03-W6, Class 3, IO, | | | |
| 0.366s, 2042 | 14,646,190 | | 148,965 |
| Ser. 03-W6, Class 23, IO, | | | |
| 0.352s, 2042 | 15,718,747 | | 154,659 |
| Ser. 01-79, Class BI, IO, | | | |
| 0.337s, 2045 | 4,081,445 | | 32,113 |
30
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued | | | |
|
|
| | Principal amount | | Value |
|
| Fannie Mae | | | |
| Ser. 03-W4, Class 3A, IO, | | | |
| 0.333s, 2042 | $ 14,071,694 | $ | 134,638 |
| FRB Ser. 06-115, Class SN, | | | |
| zero %, 2036 | 1,301,884 | | 1,425,627 |
| FRB Ser. 06-104, Class EK, | | | |
| zero %, 2036 | 363,718 | | 371,075 |
| Ser. 06-84, Class OP, Principal | | | |
| Only (PO), zero %, 2036 | 50,523 | | 48,002 |
| Ser. 372, Class 1, PO, zero %, 2036 | 20,057,719 | | 14,630,481 |
| Ser. 367, Class 1, PO, zero %, 2036 | 1,109,127 | | 776,355 |
| Ser. 363, Class 1, PO, zero %, 2035 | 12,947,845 | | 9,087,757 |
| Ser. 04-38, Class AO, PO, | | | |
| zero %, 2034 | 4,260,599 | | 2,996,832 |
| Ser. 04-61, Class CO, PO, | | | |
| zero %, 2031 | 3,065,000 | | 2,375,903 |
| Ser. 07-31, Class TS, IO, | | | |
| zero %, 2009 | 9,669,085 | | 61,437 |
| Ser. 07-15, Class IM, IO, | | | |
| zero %, 2009 | 3,737,309 | | 26,605 |
| Ser. 07-16, Class TS, IO, | | | |
| zero %, 2009 † | 15,292,921 | | 96,621 |
| FRB Ser. 05-65, Class ER, | | | |
| zero %, 2035 | 2,573,758 | | 2,542,494 |
| FRB Ser. 05-57, Class UL, | | | |
| zero %, 2035 | 2,493,799 | | 2,550,217 |
| FRB Ser. 05-36, Class QA, | | | |
| zero %, 2035 | 487,606 | | 455,252 |
| FRB Ser. 05-65, Class CU, | | | |
| zero %, 2034 | 343,030 | | 469,277 |
| FRB Ser. 05-81, Class DF, | | | |
| zero %, 2033 | 289,593 | | 332,174 |
| FRB Ser. 06-1, Class HF, | | | |
| zero %, 2032 | 274,258 | | 272,108 |
| IFB Ser. 06-75, Class FY, | | | |
| zero %, 2036 | 633,409 | | 730,145 |
| Federal Home Loan Mortgage Corp. | | | |
| Structured Pass-Through Securities | | | |
| Ser. T-42, Class A6, 9 1/2s, 2042 | 218,803 | | 228,234 |
| Ser. T-58, Class 4A, 7 1/2s, 2043 | 566,158 | | 591,859 |
| Ser. T-51, Class 2A, 7 1/2s, 2042 | 587,218 | | 610,818 |
| Ser. T-42, Class A5, 7 1/2s, 2042 | 925,171 | | 952,834 |
| Ser. T-60, Class 1A2, 7s, 2044 | 4,026,114 | | 4,170,996 |
| Ser. T-41, Class 2A, 7s, 2032 | 93,612 | | 96,331 |
| Ser. T-56, Class A, IO, 0.531s, 2043 | 9,386,743 | | 135,991 |
| Ser. T-56, Class 3, IO, 0.376s, 2043 | 11,329,768 | | 26,058 |
| Ser. T-56, Class 1, IO, 0.284s, 2043 | 14,398,330 | | 20,158 |
| Ser. T-56, Class 2, IO, 0.031s, 2043 | 13,114,808 | | 10,492 |
| FFCA Secured Lending Corp. 144A | | | |
| Ser. 00-1, Class A2, 7.77s, 2027 | 4,767,183 | | 5,039,471 |
| First Union National Bank-Bank | | | |
| of America Commercial Mortgage | | | |
| 144A Ser. 01-C1, Class 3, IO, | | | |
| 1.685s, 2033 | 30,826,937 | | 1,488,760 |
| First Union-Lehman Brothers | | | |
| Commercial Mortgage Trust II | | | |
| Ser. 97-C2, Class F, 7 1/2s, 2029 | 2,726,000 | | 2,901,512 |
| Ser. 97-C2, Class G, 7 1/2s, 2029 | 832,000 | | 899,093 |
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued
| | | |
|
|
| | Principal amount | | Value |
|
| First Union-Lehman Brothers-Bank | | | |
| of America 144A Ser. 98-C2, | | | |
| Class G, 7s, 2035 | $ 3,410,000 | $ | 3,574,021 |
| Freddie Mac | | | |
| IFB Ser. 3202, Class PS, 7.32s, 2036 | 1,051,410 | | 1,109,753 |
| IFB Ser. 3182, Class PS, 7.32s, 2032 | 2,311,147 | | 2,471,399 |
| IFB Ser. 3349, Class SA, 7.08s, 2037 | 5,074,000 | | 5,164,912 |
| IFB Ser. 3331, Class SE, 7.08s, 2037 | 1,288,750 | | 1,299,962 |
| IFB Ser. 3202, Class HM, | | | |
| 6.65s, 2036 | 682,548 | | 706,907 |
| IFB Ser. 3153, Class SX, | | | |
| 6.65s, 2036 | 897,743 | | 928,047 |
| IFB Ser. 3081, Class DC, | | | |
| 5.22s, 2035 | 1,470,788 | | 1,419,844 |
| IFB Ser. 3316, Class KS, | | | |
| 5.187s, 2037 | 2,128,581 | | 2,006,218 |
| IFB Ser. 3114, Class GK, | | | |
| 5.12s, 2036 | 953,353 | | 919,945 |
| IFB Ser. 2976, Class KL, | | | |
| 4.877s, 2035 | 2,713,459 | | 2,610,235 |
| IFB Ser. 2990, Class DP, | | | |
| 4.767s, 2034 | 2,329,258 | | 2,240,486 |
| IFB Ser. 2979, Class AS, | | | |
| 4.767s, 2034 | 663,901 | | 631,540 |
| IFB Ser. 3153, Class UT, | | | |
| 4.51s, 2036 | 523,373 | | 482,566 |
| IFB Ser. 3065, Class DC, 3.9s, 2035 | 2,307,862 | | 2,079,446 |
| IFB Ser. 2990, Class LB, | | | |
| 3.348s, 2034 | 2,863,391 | | 2,559,994 |
| IFB Ser. 2990, Class WP, | | | |
| 3.302s, 2035 | 1,756,104 | | 1,655,432 |
| IFB Ser. 2927, Class SI, IO, | | | |
| 3.18s, 2035 | 3,945,267 | | 429,759 |
| IFB Ser. 2828, Class GI, IO, | | | |
| 2.18s, 2034 | 4,502,609 | | 381,024 |
| IFB Ser. 2869, Class SH, IO, | | | |
| 1.98s, 2034 | 2,197,216 | | 127,403 |
| IFB Ser. 2869, Class JS, IO, | | | |
| 1.93s, 2034 | 10,475,942 | | 594,002 |
| IFB Ser. 2815, Class PT, IO, | | | |
| 1.73s, 2032 | 4,464,166 | | 282,905 |
| IFB Ser. 2828, Class TI, IO, | | | |
| 1.73s, 2030 | 2,109,671 | | 126,392 |
| IFB Ser. 3297, Class BI, IO, | | | |
| 1.44s, 2037 | 10,046,769 | | 655,706 |
| IFB Ser. 3284, Class IV, IO, | | | |
| 1.43s, 2037 | 2,529,818 | | 181,042 |
| IFB Ser. 3287, Class SD, IO, | | | |
| 1.43s, 2037 | 4,012,302 | | 244,353 |
| IFB Ser. 3281, Class BI, IO, | | | |
| 1.43s, 2037 | 1,968,214 | | 122,788 |
| IFB Ser. 3028, Class ES, IO, | | | |
| 1.43s, 2035 | 11,468,527 | | 713,919 |
| IFB Ser. 2922, Class SE, IO, | | | |
| 1.43s, 2035 | 5,599,836 | | 283,492 |
| IFB Ser. 3045, Class DI, IO, | | | |
| 1.41s, 2035 | 19,030,495 | | 974,060 |
| Ser. 3236, Class ES, IO, 1.38s, 2036 | 3,762,781 | | 203,566 |
31
| | | |
| COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued |
|
| | Principal amount | | Value |
|
| Freddie Mac | | | |
| IFB Ser. 3136, Class NS, IO, | | | |
| 1.38s, 2036 | $ 6,216,354 | $ | 325,961 |
| IFB Ser. 3118, Class SD, IO, | | | |
| 1.38s, 2036 | 9,128,585 | | 461,596 |
| IFB Ser. 3054, Class CS, IO, | | | |
| 1.38s, 2035 | 2,341,480 | | 108,066 |
| IFB Ser. 3107, Class DC, IO, | | | |
| 1.38s, 2035 | 11,088,384 | | 710,385 |
| IFB Ser. 3129, Class SP, IO, | | | |
| 1.38s, 2035 | 4,495,213 | | 228,074 |
| IFB Ser. 3066, Class SI, IO, | | | |
| 1.38s, 2035 | 7,495,191 | | 457,112 |
| IFB Ser. 2927, Class ES, IO, | | | |
| 1.38s, 2035 | 3,139,409 | | 145,870 |
| IFB Ser. 2950, Class SM, IO, | | | |
| 1.38s, 2016 | 5,985,936 | | 320,140 |
| IFB Ser. 3031, Class BI, IO, | | | |
| 1.37s, 2035 | 2,131,897 | | 145,345 |
| IFB Ser. 3244, Class SB, IO, | | | |
| 1.34s, 2036 | 2,801,293 | | 167,232 |
| IFB Ser. 3244, Class SG, IO, | | | |
| 1.34s, 2036 | 3,263,321 | | 193,105 |
| IFB Ser. 3326, Class GS, IO, | | | |
| 1.33s, 2037 | 7,661,498 | | 403,983 |
| IFB Ser. 3236, Class IS, IO, | | | |
| 1.33s, 2036 | 5,274,729 | | 305,719 |
| IFB Ser. 3147, Class SH, IO, | | | |
| 1.33s, 2036 | 9,671,892 | | 574,965 |
| IFB Ser. 2962, Class BS, IO, | | | |
| 1.33s, 2035 | 13,029,391 | | 659,398 |
| IFB Ser. 3114, Class TS, IO, | | | |
| 1.33s, 2030 | 14,552,420 | | 656,374 |
| IFB Ser. 3128, Class JI, IO, | | | |
| 1.31s, 2036 | 6,644,904 | | 400,460 |
| IFB Ser. 2990, Class LI, IO, | | | |
| 1.31s, 2034 | 4,160,502 | | 254,658 |
| IFB Ser. 3240, Class S, IO, | | | |
| 1.3s, 2036 | 9,738,722 | | 608,880 |
| IFB Ser. 3229, Class BI, IO, | | | |
| 1.3s, 2036 | 754,829 | | 39,148 |
| IFB Ser. 3065, Class DI, IO, | | | |
| 1.3s, 2035 | 1,629,454 | | 109,592 |
| IFB Ser. 3145, Class GI, IO, | | | |
| 1.28s, 2036 | 5,398,226 | | 340,889 |
| IFB Ser. 3114, Class GI, IO, | | | |
| 1.28s, 2036 | 2,274,791 | | 153,306 |
| IFB Ser. 3221, Class SI, IO, | | | |
| 1.26s, 2036 | 4,288,240 | | 233,709 |
| IFB Ser. 3153, Class UI, IO, | | | |
| 1 1/4s, 2036 | 3,935,281 | | 260,209 |
| IFB Ser. 3202, Class PI, IO, | | | |
| 1.22s, 2036 | 11,698,373 | | 632,111 |
| IFB Ser. 3201, Class SG, IO, | | | |
| 1.18s, 2036 | 5,426,772 | | 288,843 |
| IFB Ser. 3203, Class SE, IO, | | | |
| 1.18s, 2036 | 4,851,012 | | 255,729 |
| IFB Ser. 3152, Class SY, IO, | | | |
| 1.16s, 2036 | 4,961,770 | | 282,248 |
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued
| | | |
|
|
| | Principal amount | | Value |
|
| Freddie Mac | | | |
| IFB Ser. 3284, Class BI, IO, | | | |
| 1.13s, 2037 | $ 3,180,341 | $ | 165,453 |
| IFB Ser. 3199, Class S, IO, | | | |
| 1.13s, 2036 | 2,711,635 | | 149,037 |
| IFB Ser. 3284, Class LI, IO, | | | |
| 1.12s, 2037 | 12,935,926 | | 686,389 |
| IFB Ser. 3281, Class AI, IO, | | | |
| 1.11s, 2037 | 11,571,383 | | 653,768 |
| IFB Ser. 3311, Class IA, IO, | | | |
| 1.09s, 2037 | 4,694,273 | | 265,861 |
| IFB Ser. 3311, Class IB, IO, | | | |
| 1.09s, 2037 | 4,694,273 | | 265,861 |
| IFB Ser. 3311, Class IC, IO, | | | |
| 1.09s, 2037 | 4,694,273 | | 265,861 |
| IFB Ser. 3311, Class ID, IO, | | | |
| 1.09s, 2037 | 4,694,273 | | 265,861 |
| IFB Ser. 3311, Class IE, IO, | | | |
| 1.09s, 2037 | 6,699,881 | | 379,449 |
| IFB Ser. 3240, Class GS, IO, | | | |
| 1.06s, 2036 | 5,922,662 | | 319,068 |
| IFB Ser. 3288, Class SJ, IO, | | | |
| 0.81s, 2037 | 5,273,200 | | 224,232 |
| IFB Ser. 3284, Class CI, IO, | | | |
| 0.8s, 2037 | 8,791,289 | | 391,826 |
| IFB Ser. 3291, Class SA, IO, | | | |
| 0.79s, 2037 | 5,714,607 | | 210,298 |
| IFB Ser. 3016, Class SQ, IO, | | | |
| 0.79s, 2035 | 4,493,030 | | 147,367 |
| IFB Ser. 3284, Class WI, IO, | | | |
| 0.78s, 2037 | 14,627,434 | | 514,886 |
| IFB Ser. 3235, Class SA, IO, | | | |
| 0.63s, 2036 | 2,509,997 | | 89,066 |
| Ser. 246, PO, zero %, 2037 | 14,695,982 | | 10,725,184 |
| FRB Ser. 3326, Class XF, zero %, 2037 | 1,606,621 | | 1,759,730 |
| Ser. 3300, PO, zero %, 2037 | 2,573,983 | | 1,884,243 |
| FRB Ser. 3326, Class YF, zero %, 2037 | 4,427,274 | | 5,317,927 |
| Ser. 242, PO, zero %, 2036 | 45,558,740 | | 33,363,781 |
| Ser. 239, PO, zero %, 2036 | 9,060,518 | | 6,549,909 |
| Ser. 236, PO, zero %, 2036 | 5,429,915 | | 3,967,108 |
| FRB Ser. 3326, Class WF, zero %, 2035 | 2,333,984 | | 2,461,972 |
| FRB Ser. 3263, Class TA, zero %, 2037 | 358,270 | | 419,624 |
| FRB Ser. 3239, Class BF, | | | |
| zero %, 2036 | 1,462,801 | | 1,910,132 |
| FRB Ser. 3231, Class XB, | | | |
| zero %, 2036 | 990,552 | | 1,026,792 |
| FRB Ser. 3174, Class SF, | | | |
| zero %, 2036 | 637,331 | | 756,539 |
| FRB Ser. 3149, Class XF, | | | |
| zero %, 2036 | 583,267 | | 607,279 |
| FRB Ser. 3231, Class X, | | | |
| zero %, 2036 | 413,228 | | 506,884 |
| FRB Ser. 3147, Class SF, | | | |
| zero %, 2036 | 1,659,052 | | 1,830,932 |
| FRB Ser. 3117, Class AF, | | | |
| zero %, 2036 | 239,301 | | 284,703 |
| FRB Ser. 3036, Class AS, | | | |
| zero %, 2035 | 200,943 | | 231,485 |
| FRB Ser. 3003, Class XF, | | | |
| zero %, 2035 | 2,133,628 | | 2,367,844 |
32
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued | | | |
|
|
| | Principal amount | | Value |
|
| GE Capital Commercial | | | |
| Mortgage Corp. 144A | | | |
| Ser. 05-C2, Class XC, IO, | | | |
| 0.054s, 2043 | $ 86,057,276 | $ | 655,663 |
| Ser. 05-C3, Class XC, IO, | | | |
| 0.05s, 2045 | 230,966,267 | | 1,190,862 |
| Ser. 07-C1, Class XC, IO, | | | |
| 0.042s, 2019 | 184,536,781 | | 1,448,056 |
| GMAC Commercial Mortgage | | | |
| Securities, Inc. | | | |
| Ser. 99-C3, Class F, 7.814s, 2036 | 592,000 | | 619,055 |
| Ser. 97-C1, Class X, IO, | | | |
| 1.322s, 2029 | 5,993,614 | | 239,745 |
| Ser. 05-C1, Class X1, IO, | | | |
| 0.166s, 2043 | 98,705,898 | | 1,268,568 |
| GMAC Commercial | | | |
| Mortgage Securities, Inc. 144A | | | |
| Ser. 99-C3, Class G, 6.974s, 2036 | 1,614,303 | | 1,648,423 |
| Ser. 06-C1, Class XC, IO, | | | |
| 0.056s, 2045 | 128,035,164 | | 920,317 |
| Government National | | | |
| Mortgage Association | | | |
| IFB Ser. 07-26, Class WS, | | | |
| 10.56s, 2037 | 3,535,538 | | 4,360,619 |
| IFB Ser. 07-44, Class SP, | | | |
| 8.661s, 2020 | 1,517,000 | | 1,625,086 |
| IFB Ser. 06-34, Class SA, | | | |
| 7.62s, 2036 | 385,907 | | 396,812 |
| IFB Ser. 05-7, Class JM, 5.016s, 2034 | 2,813,256 | | 2,728,397 |
| IFB Ser. 05-66, Class SP, 3.1s, 2035 | 1,395,698 | | 1,239,883 |
| IFB Ser. 06-62, Class SI, IO, | | | |
| 2.06s, 2036 | 4,183,169 | | 298,929 |
| IFB Ser. 07-1, Class SL, IO, | | | |
| 2.04s, 2037 | 1,916,131 | | 142,119 |
| IFB Ser. 07-1, Class SM, IO, | | | |
| 2.03s, 2037 | 1,916,131 | | 141,479 |
| IFB Ser. 07-26, Class SG, IO, | | | |
| 1.53s, 2037 | 5,289,399 | | 330,392 |
| IFB Ser. 07-9, Class BI, IO, | | | |
| 1 1/2s, 2037 | 12,704,864 | | 719,633 |
| IFB Ser. 07-25, Class SA, IO, | | | |
| 1.48s, 2037 | 4,490,918 | | 256,431 |
| IFB Ser. 07-25, Class SB, IO, | | | |
| 1.48s, 2037 | 8,758,525 | | 500,112 |
| IFB Ser. 07-26, Class LS, IO, | | | |
| 1.48s, 2037 | 10,990,540 | | 703,054 |
| IFB Ser. 07-26, Class SA, IO, | | | |
| 1.48s, 2037 | 12,534,692 | | 679,017 |
| IFB Ser. 07-26, Class SD, IO, | | | |
| 1.48s, 2037 | 6,253,786 | | 377,228 |
| IFB Ser. 07-26, Class SL, IO, | | | |
| 1.48s, 2037 | 261,740 | | 12,981 |
| IFB Ser. 07-22, Class S, IO, | | | |
| 1.48s, 2037 | 2,815,647 | | 186,867 |
| IFB Ser. 06-69, Class SA, IO, | | | |
| 1.48s, 2036 | 6,551,996 | | 356,765 |
| IFB Ser. 06-38, Class SG, IO, | | | |
| 1.33s, 2033 | 12,620,852 | | 553,020 |
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued
| | | |
|
|
| | Principal amount | | Value |
|
| Government National | | | |
| Mortgage Association | | | |
| IFB Ser. 07-9, Class DI, IO, | | | |
| 1.19s, 2037 | $ 6,454,883 | $ | 301,421 |
| IFB Ser. 07-9, Class AI, IO, | | | |
| 1.18s, 2037 | 4,928,062 | | 250,198 |
| IFB Ser. 06-28, Class GI, IO, | | | |
| 1.18s, 2035 | 4,405,019 | | 201,600 |
| IFB Ser. 05-65, Class SI, IO, | | | |
| 1.03s, 2035 | 5,086,280 | | 218,030 |
| IFB Ser. 07-27, Class SD, IO, | | | |
| 0.88s, 2037 | 3,196,573 | | 113,254 |
| IFB Ser. 07-19, Class SJ, IO, | | | |
| 0.88s, 2037 | 5,432,299 | | 203,222 |
| IFB Ser. 07-21, Class S, IO, | | | |
| 0.88s, 2037 | 6,651,972 | | 271,447 |
| IFB Ser. 07-8, Class SA, IO, | | | |
| 0.88s, 2037 | 13,682,589 | | 574,477 |
| IFB Ser. 07-9, Class CI, IO, | | | |
| 0.88s, 2037 | 8,415,113 | | 307,948 |
| IFB Ser. 07-7, Class EI, IO, | | | |
| 0.88s, 2037 | 5,525,626 | | 198,875 |
| IFB Ser. 07-1, Class S, IO, | | | |
| 0.88s, 2037 | 7,125,572 | | 268,085 |
| IFB Ser. 07-3, Class SA, IO, | | | |
| 0.88s, 2037 | 6,792,029 | | 253,472 |
| IFB Ser. 07-43, Class SC, IO, | | | |
| 0.78s, 2037 | 4,516,000 | | 122,602 |
| FRB Ser. 98-2, Class EA, PO, | | | |
| zero %, 2028 | 112,957 | | 90,253 |
| FRB Ser. 07-35, Class UF, | | | |
| zero %, 2037 | 461,985 | | 492,191 |
| Greenpoint Mortgage Funding Trust | | | |
| Ser. 05-AR1, Class X1, IO, 1.36s, 2045 | 7,487,855 | | 170,817 |
| Greenwich Capital | | | |
| Commercial Funding Corp. | | | |
| Ser. 07-GG9, Class A4, | | | |
| 5.444s, 2039 | 2,106,000 | | 2,027,025 |
| Ser. 05-GG5, Class XC, IO, | | | |
| 0.051s, 2037 | 184,265,382 | | 784,568 |
| Greenwich Capital | | | |
| Commercial Funding Corp. 144A | | | |
| Ser. 07-GG9, Class X, IO, | | | |
| 0.512s, 2039 | 29,473,284 | | 744,200 |
| Ser. 05-GG3, Class XC, IO, | | | |
| 0.118s, 2042 | 126,163,707 | | 2,050,160 |
| GS Mortgage Securities Corp. II | | | |
| Ser. 06-GG8, Class A4, | | | |
| 5.56s, 2039 | 4,326,000 | | 4,196,782 |
| Ser. 04-GG2, Class A6, | | | |
| 5.396s, 2038 | 3,745,000 | | 3,645,346 |
| Ser. 05-GG4, Class A4, | | | |
| 4.761s, 2039 | 197,000 | | 185,333 |
| GS Mortgage Securities Corp. II 144A | | | |
| FRB Ser. 03-FL6A, Class L, | | | |
| 8.57s, 2015 | 565,000 | | 559,350 |
| FRB Ser. 07-EOP, Class J, | | | |
| 6.17s, 2009 | 428,000 | | 423,720 |
33
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued | | | |
|
|
| | Principal amount | | Value |
|
| GS Mortgage Securities Corp. II 144A | | | |
| Ser. 98-C1, Class F, 6s, 2030 | $ 1,286,000 | $ | 1,280,444 |
| Ser. 03-C1, Class X1, IO, | | | |
| 0.368s, 2040 | 28,428,055 | | 473,684 |
| Ser. 05-GG4, Class XC, IO, | | | |
| 0.179s, 2039 | 107,816,968 | | 1,840,469 |
| Ser. 04-C1, Class X1, IO, | | | |
| 0.16s, 2028 | 34,770,166 | | 218,672 |
| Ser. 06-GG6, Class XC, IO, | | | |
| 0.035s, 2038 | 52,874,684 | | 179,691 |
| GSR Mortgage Loan Trust | | | |
| Ser. 05-AR2, Class 2A1, 4.84s, 2035 | 1,885,642 | | 1,859,696 |
| JPMorgan Chase Commercial | | | |
| Mortgage Securities Corp. | | | |
| Ser. 97-C5, Class F, 7.561s, 2029 | 911,000 | | 973,668 |
| Ser. 06-CB16, Class A4, | | | |
| 5.552s, 2045 | 4,616,000 | | 4,569,101 |
| Ser. 06-CB14, Class A4, | | | |
| 5.471s, 2044 | 4,125,000 | | 4,068,941 |
| Ser. 06-CB14, Class AM, | | | |
| 5.381s, 2044 | 5,502,000 | | 5,318,563 |
| FRB Ser. 04-PNC1, Class A4, | | | |
| 5.542s, 2041 | 75,000 | | 73,169 |
| Ser. 05-CB12, Class A4, | | | |
| 4.895s, 2037 | 198,000 | | 185,065 |
| Ser. 04-C3, Class A5, 4.878s, 2042 | 189,000 | | 177,229 |
| Ser. 05-LDP2, Class AM, | | | |
| 4.78s, 2042 | 1,990,000 | | 1,873,439 |
| Ser. 06-CB17, Class X, IO, | | | |
| 0.514s, 2043 | 42,942,044 | | 1,677,316 |
| Ser. 06-LDP9, Class X, IO, | | | |
| 0.456s, 2047 | 9,834,558 | | 319,623 |
| Ser. 07-LDPX, Class X, IO, | | | |
| 0.344s, 2049 | 54,593,848 | | 1,296,604 |
| Ser. 06-LDP7, Class X, IO, | | | |
| 0.009s, 2045 | 229,074,555 | | 178,678 |
| JPMorgan Chase Commercial | | | |
| Mortgage Securities Corp. 144A | | | |
| Ser. 06-FL2A, Class X1, IO, | | | |
| 0.758s, 2018 | 41,520,119 | | 132,994 |
| Ser. 03-ML1A, Class X1, IO, | | | |
| 0.622s, 2039 | 47,622,358 | | 1,633,298 |
| Ser. 05-LDP2, Class X1, IO, | | | |
| 0.113s, 2042 | 167,090,641 | | 2,806,601 |
| Ser. 05-LDP1, Class X1, IO, 0.08s, | | | |
| 2046 | 37,555,111 | | 347,678 |
| Ser. 05-CB12, Class X1, IO, | | | |
| 0.067s, 2037 | 54,712,455 | | 564,222 |
| Ser. 05-LDP3, Class X1, IO, | | | |
| 0.051s, 2042 | 82,082,096 | | 631,648 |
| Ser. 05-LDP5, Class X1, IO, | | | |
| 0.044s, 2044 | 345,907,078 | | 1,567,391 |
| Ser. 06-LDP6, Class X1, IO, | | | |
| 0.042s, 2043 | 68,541,431 | | 369,481 |
| LB Commercial Conduit | | | |
| Mortgage Trust 144A | | | |
| Ser. 99-C1, Class F, 6.41s, 2031 | 715,303 | | 721,190 |
| Ser. 99-C1, Class G, 6.41s, 2031 | 765,731 | | 783,080 |
| | | | |
| COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued |
|
| | Principal amount | | Value |
|
| LB Commercial Conduit | | | |
| Mortgage Trust 144A | | | |
| Ser. 98-C4, Class G, 5.6s, 2035 | $ 634,000 | $ | 627,825 |
| Ser. 98-C4, Class H, 5.6s, 2035 | 1,074,000 | | 998,252 |
| LB-UBS Commercial Mortgage Trust | | | |
| Ser. 01-C3, Class A2, 6.365s, 2028 | 67,000 | | 68,714 |
| Ser. 04-C7, Class A6, 4.786s, 2029 | 1,733,000 | | 1,653,477 |
| Ser. 07-C2, Class XW, IO, | | | |
| 0.536s, 2040 | 11,771,648 | | 458,729 |
| LB-UBS Commercial | | | |
| Mortgage Trust 144A | | | |
| Ser. 06-C7, Class XW, IO, | | | |
| 0.719s, 2038 | 30,492,114 | | 1,427,488 |
| Ser. 05-C3, Class XCL, IO, | | | |
| 0.176s, 2040 | 67,083,147 | | 1,434,282 |
| Ser. 05-C2, Class XCL, IO, | | | |
| 0.146s, 2040 | 123,859,132 | | 1,379,879 |
| Ser. 05-C5, Class XCL, IO, | | | |
| 0.096s, 2020 | 69,998,031 | | 993,365 |
| Ser. 05-C7, Class XCL, IO, | | | |
| 0.081s, 2040 | 83,677,313 | | 758,953 |
| Ser. 06-C1, Class XCL, IO, | | | |
| 0.069s, 2041 | 66,857,715 | | 735,418 |
| Ser. 07-C2, Class XCL, IO, | | | |
| 0.065s, 2040 | 101,154,789 | | 1,590,522 |
| Ser. 06-C7, Class XCL, IO, | | | |
| 0.064s, 2038 | 22,164,549 | | 382,981 |
| Lehman Brothers Floating Rate | | | |
| Commercial Mortgage Trust 144A | | | |
| FRB Ser. 04-LLFA, Class H, | | | |
| 6.27s, 2017 | 733,000 | | 733,801 |
| FRB Ser. 05-LLFA, 6.12s, 2018 | 423,000 | | 421,943 |
| Lehman Mortgage Trust | | | |
| IFB Ser. 06-7, Class 1A9, 9s, 2036 | 869,552 | | 943,376 |
| IFB Ser. 07-5, Class 4A3, | | | |
| 8.16s, 2036 | 2,262,918 | | 2,344,833 |
| FRB Ser. 07-5, Class 4A2, | | | |
| 5.64s, 2037 | 4,176,372 | | 4,129,505 |
| IFB Ser. 06-9, Class 3A2, IO, | | | |
| 1.91s, 2037 | 2,573,401 | | 154,291 |
| IFB Ser. 06-5, Class 2A2, IO, | | | |
| 1.83s, 2036 | 7,859,557 | | 392,163 |
| IFB Ser. 07-2, Class 2A13, IO, | | | |
| 1.37s, 2037 | 5,648,524 | | 306,678 |
| IFB Ser. 07-1, Class 2A3, IO, | | | |
| 1.31s, 2037 | 6,795,741 | | 365,262 |
| Ser. 06-9, Class 2A3, IO, 1.3s, 2036 | 8,432,669 | | 442,144 |
| IFB Ser. 06-9, Class 2A2, IO, | | | |
| 1.3s, 2037 | 5,961,611 | | 313,590 |
| IFB Ser. 06-7, Class 2A4, IO, | | | |
| 1.23s, 2036 | 12,198,999 | | 481,440 |
| IFB Ser. 06-7, Class 2A5, IO, | | | |
| 1.23s, 2036 | 10,942,269 | | 538,164 |
| IFB Ser. 06-6, Class 1A3, IO, | | | |
| 1.18s, 2036 | 6,277,229 | | 285,669 |
| IFB Ser. 06-6, Class 1A2, IO, | | | |
| 1.18s, 2036 | 4,559,433 | | 181,252 |
| IFB Ser. 06-5, Class 1A3, IO, | | | |
| 0.08s, 2036 | 2,118,561 | | 13,003 |
34
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued | | | |
|
|
| | Principal amount | | Value |
|
| Lehman Mortgage Trust | | | |
| IFB Ser. 06-4, Class 1A3, IO, | | | |
| 0.08s, 2036 | $ 1,782,246 | $ | 15,740 |
| IFB Ser. 06-7, Class 1A3, IO, | | | |
| 0.03s, 2036 | 5,078,068 | | 22,851 |
| IFB Ser. 06-9, Class 1A6, IO, | | | |
| zero %, 2037 | 4,364,455 | | 19,777 |
| IFB Ser. 06-7, Class 4A2, IO, | | | |
| 2.43s, 2036 | 3,798,668 | | 220,442 |
| Ser. 07-1, Class 3A2, IO, | | | |
| 1.93s, 2037 | 4,009,821 | | 259,093 |
| MASTR Adjustable Rate | | | |
| Mortgages Trust | | | |
| Ser. 04-7, Class 2A1, 7.265s, 2034 | 363,399 | | 369,418 |
| Ser. 04-13, Class 3A6, 3.786s, 2034 | 2,253,000 | | 2,183,672 |
| Ser. 06-OA1, Class X, IO, | | | |
| 2.09s, 2046 | 4,831,168 | | 152,484 |
| Ser. 04-03, Class 4AX, IO, | | | |
| 1.417s, 2034 | 2,338,737 | | 34,146 |
| Ser. 05-2, Class 7AX, IO, | | | |
| 0.168s, 2035 | 6,259,242 | | 17,604 |
| Merrill Lynch Capital Funding Corp. | | | |
| Ser. 06-4, Class XC, IO, 0.062s, 2049 | 89,644,464 | | 1,325,842 |
| Merrill Lynch Floating Trust 144A | | | |
| Ser. 06-1, Class X1TM, IO, | | | |
| 6.166s, 2022 | 10,040,000 | | 71,770 |
| FRB Ser. 06-1, Class TM, | | | |
| 5.82s, 2022 | 1,020,000 | | 1,023,095 |
| Ser. 06-1, Class X1A, IO, | | | |
| 1.393s, 2022 | 33,518,116 | | 387,134 |
| Merrill Lynch Mortgage Investors, Inc. | | | |
| Ser. 98-C3, Class E, 6.914s, 2030 | 644,000 | | 679,607 |
| FRB Ser. 05-A9, Class 3A1, | | | |
| 5.28s, 2035 | 3,886,348 | | 3,832,910 |
| Merrill Lynch Mortgage Trust | | | |
| FRB Ser. 04-BPC1, Class A5, | | | |
| 4.855s, 2041 | 193,000 | | 184,583 |
| FRB Ser. 05-MCP1, Class A4, | | | |
| 4.747s, 2043 | 187,000 | | 173,429 |
| Ser. 05-MCP1, Class XC, IO, | | | |
| 0.107s, 2043 | 71,272,975 | | 974,435 |
| Merrill Lynch Mortgage Trust 144A | | | |
| Ser. 05-LC1, Class X, IO, | | | |
| 0.236s, 2044 | 37,759,871 | | 328,924 |
| Ser. 04-KEY2, Class XC, IO, | | | |
| 0.181s, 2039 | 16,514,904 | | 349,006 |
| Merrill Lynch/Countrywide | | | |
| Commercial Mortgage Trust 144A | | | |
| Ser. 06-1, Class X, IO, 0.134s, 2039 | 30,420,000 | | 154,477 |
| Ser. 07-7, Class X, IO, 0.02s, 2050 | 192,887,000 | | 776,069 |
| Mezz Cap Commercial | | | |
| Mortgage Trust 144A | | | |
| Ser. 04-C1, Class X, IO, | | | |
| 7.798s, 2037 | 3,077,724 | | 947,362 |
| Ser. 04-C2, Class X, IO, | | | |
| 6.004s, 2040 | 2,508,217 | | 743,843 |
| Ser. 05-C3, Class X, IO, | | | |
| 5.555s, 2044 | 2,885,562 | | 831,403 |
| Ser. 06-C4, Class X, IO, | | | |
| 5.095s, 2016 | 8,768,000 | | 2,904,065 |
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued | | | |
|
|
| | Principal amount | | Value |
|
| Morgan Stanley Capital I 144A | | | |
| Ser. 05-RR6, Class X, IO, | | | |
| 1.622s, 2043 | $ 10,521,652 | $ | 549,758 |
| Ser. 05-HQ6, Class X1, IO, | | | |
| 0.07s, 2042 | 76,363,296 | | 798,060 |
| Morgan Stanley Capital I | | | |
| Ser. 07-HQ11, Class A4, | | | |
| 5.447s, 2044 | 3,674,000 | | 3,501,523 |
| Ser. 05-HQ6, Class A4A, | | | |
| 4.989s, 2042 | 3,963,000 | | 3,791,050 |
| Ser. 04-HQ4, Class A7, 4.97s, 2040 | 2,047,000 | | 1,940,945 |
| Morgan Stanley Capital I 144A | | | |
| Ser. 98-HF1, Class F, 7.18s, 2030 | 482,000 | | 484,080 |
| Ser. 04-RR, Class F5, 6s, 2039 | 1,000,000 | | 881,138 |
| Ser. 04-RR, Class F6, 6s, 2039 | 1,700,000 | | 1,424,422 |
| Ser. 05-HQ5, Class X1, IO, | | | |
| 0.097s, 2042 | 22,852,598 | | 178,095 |
| Morgan Stanley Mortgage Loan Trust | | | |
| Ser. 05-5AR, Class 2A1, 5.357s, 2035 | 4,756,165 | | 4,732,502 |
| Mortgage Capital Funding, Inc. FRB | | | |
| Ser. 98-MC2, Class E, 7.081s, 2030 | 1,020,000 | | 1,034,494 |
| Permanent Financing PLC FRB | | | |
| Ser. 8, Class 2C, 5.76s, 2042 | | | |
| (United Kingdom) | 2,054,000 | | 2,055,386 |
| PNC Mortgage Acceptance | | | |
| Corp. 144A | | | |
| Ser. 99-CM1, Class B3, 7.1s, 2032 | 3,870,000 | | 3,974,142 |
| Ser. 00-C1, Class J, 6 5/8s, 2010 | 456,000 | | 414,458 |
| Ser. 00-C2, Class J, 6.22s, 2033 | 1,113,000 | | 1,120,991 |
| Pure Mortgages 144A | | | |
| FRB Ser. 04-1A, Class F, 8.86s, | | | |
| 2034 (Ireland) | 2,645,000 | | 2,645,000 |
| Ser. 04-1A, Class E, 6.61s, | | | |
| 2034 (Ireland) | 1,041,000 | | 1,040,844 |
| Residential Asset Securitization | | | |
| Trust IFB Ser. 06-A7CB, | | | |
| Class 1A6, IO, 0.23s, 2036 | 1,238,126 | | 11,753 |
| Residential Funding Mortgage | | | |
| Securities I Ser. 04-S5, | | | |
| Class 2A1, 4 1/2s, 2019 | 2,756,431 | | 2,642,589 |
| Salomon Brothers Mortgage | | | |
| Securities VII 144A Ser. 02-KEY2, | | | |
| Class X1, IO, 0.795s, 2036 | 24,107,455 | | 1,154,089 |
| SBA CMBS Trust 144A Ser. 05-1A, | | | |
| Class D, 6.219s, 2035 | 600,000 | | 602,526 |
| STRIPS 144A | | | |
| Ser. 03-1A, Class L, 5s, 2018 | | | |
| (Cayman Islands) | 757,000 | | 680,206 |
| Ser. 03-1A, Class M, 5s, 2018 | | | |
| (Cayman Islands) | 513,000 | | 443,906 |
| Ser. 04-1A, Class L, 5s, 2018 | | | |
| (Cayman Islands) | 337,000 | | 302,352 |
| Structured Adjustable Rate | | | |
| Mortgage Loan Trust | | | |
| Ser. 04-8, Class 1A3, 7.247s, 2034 | 20,229 | | 20,563 |
| FRB Ser. 05-18, Class 6A1, | | | |
| 5.247s, 2035 | 2,222,303 | | 2,202,058 |
| Ser. 05-9, Class AX, IO, | | | |
| 1.113s, 2035 | 24,452,758 | | 351,508 |
35
COLLATERALIZED MORTGAGE OBLIGATIONS (15.1%)* continued | | | |
|
|
| | Principal amount | | Value |
|
| Wachovia Bank Commercial | | | |
| Mortgage Trust | | | |
| Ser. 04-C15, Class A4, 4.803s, 2041 | $ 3,055,000 | $ | 2,909,193 |
| Ser. 06-C28, Class XC, IO, | | | |
| 0.381s, 2048 | 23,395,377 | | 616,000 |
| Ser. 06-C29, IO, 0.372s, 2048 | 97,784,660 | | 2,786,863 |
| Wachovia Bank Commercial | | | |
| Mortgage Trust 144A | | | |
| FRB Ser. 05-WL5A, Class L, | | | |
| 8.62s, 2018 | 771,000 | | 770,846 |
| Ser. 03-C3, Class IOI, IO, | | | |
| 0.364s, 2035 | 17,187,883 | | 519,368 |
| Ser. 07-C31, IO, 0.261s, 2047 | 91,789,053 | | 1,843,124 |
| Ser. 06-C23, Class XC, IO, | | | |
| 0.05s, 2045 | 90,609,438 | | 548,187 |
| Ser. 06-C26, Class XC, IO, | | | |
| 0.041s, 2045 | 35,040,604 | | 130,001 |
| WAMU Commercial Mortgage | | | |
| Securities Trust 144A | | | |
| Ser. 07-SL2, Class X, IO, 0.852s, 2049 | 15,454,500 | | 709,236 |
| Washington Mutual 144A | | | |
| Ser. 06-SL1, Class X, IO, 0.938s, 2043 | 7,702,506 | | 402,002 |
| Washington Mutual Asset | | | |
| Securities Corp. 144A | | | |
| Ser. 05-C1A, Class G, 5.72s, 2036 | 222,000 | | 206,496 |
| Washington Mutual Multi-Fam., | | | |
| Mtge. 144A Ser. 01-1, Class B5, | | | |
| 7.184s, 2031 (Cayman Islands) | 1,305,000 | | 1,311,252 |
| Wells Fargo Mortgage | | | |
| Backed Securities Trust | | | |
| Ser. 06-AR10, Class 3A1, | | | |
| 5.281s, 2036 | 2,842,704 | | 2,807,837 |
| Ser. 05-AR2, Class 2A1, | | | |
| 4.545s, 2035 | 1,412,254 | | 1,385,057 |
| Ser. 04-R, Class 2A1, 4.362s, 2034 | 1,448,279 | | 1,419,313 |
| Ser. 05-AR9, Class 1A2, | | | |
| 4.354s, 2035 | 1,889,507 | | 1,859,472 |
| Ser. 05-AR12, Class 2A5, | | | |
| 4.319s, 2035 | 21,411,000 | | 20,905,120 |
| Ser. 05-AR10, Class 2A18, IO, | | | |
| 0.61s, 2035 | 44,983,000 | | 401,073 |
|
| |
| Total collateralized mortgage obligations | | |
| (cost $650,887,908) | | $ | 640,263,258 |
|
| |
| |
| CORPORATE BONDS AND NOTES (5.4%)* | | |
|
| | Principal amount | | Value |
|
| Basic Materials (0.1%) | | | |
| Dow Chemical Co. (The) Pass | | | |
| Through Trust 144A company | | | |
| guaranty 4.027s, 2009 | $ 1,510,000 | $ | 1,465,243 |
| Georgia-Pacific Corp. | | | |
| debs. 9 1/2s, 2011 | 765,000 | | 784,125 |
| Georgia-Pacific Corp. | | | |
| notes 8 1/8s, 2011 | 635,000 | | 639,763 |
| Lafarge SA notes 6 1/2s, 2016 (France) | 325,000 | | 334,692 |
| Lubrizol Corp. (The) sr. notes | | | |
| 5 1/2s, 2014 | 470,000 | | 445,133 |
CORPORATE BONDS AND NOTES (5.4%)* continued
| | | |
| | |
|
| | Principal amount | | Value |
|
| Basic Materials continued | | | |
| Potash Corp. of Saskatchewan | | | |
| notes 5 7/8s, 2036 (Canada) | $ 785,000 | $ | 732,874 |
| Westvaco Corp. unsec. | | | |
| notes 7 1/2s, 2027 | 175,000 | | 182,404 |
| Xstrata Finance Canada, Ltd. 144A | | | |
| company guaranty 5.8s, 2016 (Canada) | 735,000 | | 720,791 |
| | | | 5,305,025 |
|
| |
| Capital Goods (0.1%) | | | |
| L-3 Communications Corp. company | | | |
| guaranty Ser. B, 6 3/8s, 2015 | 595,000 | | 547,400 |
| L-3 Communications Corp. | | | |
| sr. sub. notes 5 7/8s, 2015 | 435,000 | | 395,850 |
| Legrand SA debs. 8 1/2s, 2025 (France) | 860,000 | | 980,400 |
| | | | 1,923,650 |
|
| |
| Communication Services (0.6%) | | | |
| Ameritech Capital Funding company | | | |
| guaranty 6 1/4s, 2009 | 200,000 | | 202,800 |
| AT&T Wireless Services, Inc. | | | |
| sr. notes 8 3/4s, 2031 | 1,139,000 | | 1,409,600 |
| Bellsouth Capital Funding unsecd. | | | |
| notes 7 7/8s, 2030 | 3,475,000 | | 3,912,906 |
| France Telecom notes 8 1/2s, | | | |
| 2031 (France) | 180,000 | | 225,518 |
| Nextel Communications, Inc. | | | |
| sr. notes Ser. E, 6 7/8s, 2013 | 600,000 | | 576,000 |
| Nextel Communications, Inc. | | | |
| sr. notes Ser. F, 5.95s, 2014 (S) | 2,655,000 | | 2,462,513 |
| Rogers Wireless, Inc. sec. | | | |
| notes 6 3/8s, 2014 (Canada) | 765,000 | | 771,109 |
| Southwestern Bell Telephone | | | |
| debs. 7s, 2027 | 1,075,000 | | 1,089,677 |
| Sprint Capital Corp. company | | | |
| guaranty 6.9s, 2019 | 715,000 | | 702,291 |
| Sprint Capital Corp. company | | | |
| guaranty 6 7/8s, 2028 | 1,965,000 | | 1,839,853 |
| Telecom Italia Capital SA company | | | |
| guaranty 7.2s, 2036 (Luxembourg) | 350,000 | | 350,543 |
| Telecom Italia Capital SA company | | | |
| guaranty 5 1/4s, 2015 (Luxembourg) | 965,000 | | 897,880 |
| Telecom Italia Capital SA company | | | |
| guaranty 5 1/4s, 2013 (Luxembourg) | 515,000 | | 489,703 |
| Telecom Italia Capital SA company | | | |
| guaranty 4s, 2010 (Luxembourg) | 60,000 | | 58,130 |
| Telefonica Emisones SAU company | | | |
| guaranty 7.045s, 2036 (Spain) | 690,000 | | 698,258 |
| Telefonica Emisones SAU company | | | |
| guaranty 6.421s, 2016 (Spain) | 270,000 | | 269,894 |
| Telefonica Emisones SAU company | | | |
| guaranty 6.221s, 2017 (Spain) | 385,000 | | 381,528 |
| Telefonica Europe BV company | | | |
| guaranty 8 1/4s, 2030 (Netherlands) | 595,000 | | 679,818 |
| Telus Corp. notes 8s, 2011 (Canada) | 1,055,000 | | 1,129,717 |
| Verizon Communications, Inc. | | | |
| sr. unsec. bond 6 1/4s, 2037 | 1,715,000 | | 1,646,577 |
| Verizon Communications, Inc. | | | |
| sr. unsec. bond 5 1/2s, 2017 (S) | 1,075,000 | | 1,030,303 |
36
| | | |
| CORPORATE BONDS AND NOTES (5.4%)* continued | | |
|
| | Principal amount | | Value |
|
| Communication Services continued | | | |
| Verizon New England, Inc. | | | |
| sr. notes 6 1/2s, 2011 | $ 2,285,000 | $ | 2,350,886 |
| Verizon New Jersey, Inc. debs. 8s, 2022 | 770,000 | | 857,193 |
| Verizon Pennsylvania, Inc. | | | |
| debs. 8.35s, 2030 | 980,000 | | 1,127,754 |
| | | | 25,160,451 |
|
| |
| Conglomerates (—%) | | | |
| Siemens Financieringsmaatschappij | | | |
| 144A notes 5 3/4s, 2016 (Netherlands) | 680,000 | | 676,385 |
|
| |
| Consumer Cyclicals (0.2%) | | | |
| D.R. Horton, Inc. | | | |
| sr. notes 7 7/8s, 2011 | 565,000 | | 569,014 |
| D.R. Horton, Inc. | | | |
| sr. notes 5 7/8s, 2013 | 660,000 | | 604,906 |
| DaimlerChrysler NA Holding Corp. | | | |
| company guaranty 7.2s, 2009 | 1,545,000 | | 1,592,812 |
| DaimlerChrysler NA Holding Corp. | | | |
| company guaranty 6 1/2s, 2013 | 565,000 | | 576,340 |
| DaimlerChrysler NA Holding Corp. | | | |
| notes Ser. MTN, 5 3/4s, 2011 | 1,730,000 | | 1,728,019 |
| Ford Motor Credit Corp. | | | |
| notes 6 3/8s, 2008 | 980,000 | | 959,900 |
| JC Penney Co., Inc. debs. 7.65s, 2016 | 110,000 | | 119,162 |
| JC Penney Co., Inc. notes 6 7/8s, 2015 | 910,000 | | 938,885 |
| JC Penney Co., Inc. | | | |
| sr. notes 6 3/8s, 2036 | 555,000 | | 515,272 |
| Marriott International, Inc. | | | |
| notes 6 3/8s, 2017 | 926,000 | | 927,256 |
| Office Depot, Inc. notes 6 1/4s, 2013 | 563,000 | | 571,357 |
| Omnicom Group, Inc. | | | |
| sr. notes 5.9s, 2016 | 635,000 | | 625,616 |
| Wyndham Worldwide Corp. sr. unsec. | | | |
| 6s, 2016 | 755,000 | | 715,190 |
| | | | 10,443,729 |
|
| |
| Consumer Staples (0.6%) | | | |
| Campbell Soup Co. debs. 8 7/8s, 2021 | 855,000 | | 1,071,672 |
| Cox Communications, Inc. | | | |
| notes 7 1/8s, 2012 | 890,000 | | 928,768 |
| Cox Communications, Inc. 144A | | | |
| bonds 6.45s, 2036 | 533,000 | | 506,128 |
| Cox Communications, Inc. 144A | | | |
| notes 5 7/8s, 2016 | 537,000 | | 520,828 |
| Cox Enterprises, Inc. 144A | | | |
| notes 7 7/8s, 2010 | 1,045,000 | | 1,105,531 |
| CVS Caremark, Corp. sr. unsec. FRN | | | |
| 6.302s, 2037 | 1,715,000 | | 1,642,696 |
| CVS Caremark, Corp. 144A | | | |
| pass-through certificates 6.117s, 2013 | 2,042,721 | | 2,089,081 |
| Delhaize Group 144A notes 6 1/2s, | | | |
| 2017 (Belgium) | 565,000 | | 578,369 |
| Diageo PLC company guaranty | | | |
| 8s, 2022 | 760,000 | | 896,633 |
| Estee Lauder Cos Inc. (The) | | | |
| sr. unsec. 6s, 2037 | 1,040,000 | | 991,464 |
| | | |
| CORPORATE BONDS AND NOTES (5.4%)* continued | | |
|
| | Principal amount | | Value |
|
| Consumer Staples continued | | | |
| Estee Lauder Cos Inc. (The) | | | |
| sr. unsec. 5.55s, 2017 | $ 280,000 | $ | 275,827 |
| Kroger Co. company | | | |
| guaranty 6 3/4s, 2012 | 275,000 | | 286,155 |
| News America Holdings, Inc. | | | |
| company guaranty 7 3/4s, 2024 | 1,045,000 | | 1,139,528 |
| News America Holdings, Inc. | | | |
| debs. 7 3/4s, 2045 | 1,955,000 | | 2,135,059 |
| TCI Communications, Inc. company | | | |
| guaranty 7 7/8s, 2026 | 2,170,000 | | 2,374,911 |
| TCI Communications, Inc. | | | |
| debs. 9.8s, 2012 | 1,870,000 | | 2,151,031 |
| TCI Communications, Inc. | | | |
| debs. 7 7/8s, 2013 | 1,240,000 | | 1,351,686 |
| Time Warner Cable, Inc. 144A | | | |
| sr. unsec. 6.55s, 2037 | 690,000 | | 648,979 |
| Time Warner Cable, Inc. 144A | | | |
| sr. unsec. 5.85s, 2017 | 475,000 | | 458,676 |
| Time Warner Entertainment Co., LP | | | |
| debs. 8 3/8s, 2023 | 170,000 | | 195,925 |
| Time Warner, Inc. company | | | |
| guaranty 6 1/2s, 2036 | 435,000 | | 412,870 |
| Time Warner, Inc. company | | | |
| guaranty 5 7/8s, 2016 | 800,000 | | 771,175 |
| Time Warner, Inc. debs. 9.15s, 2023 | 340,000 | | 411,159 |
| Time Warner, Inc. debs. 9 1/8s, 2013 | 2,435,000 | | 2,808,342 |
| Viacom, Inc. sr. notes 5 3/4s, 2011 | 610,000 | | 607,873 |
| | | | 26,360,366 |
|
| |
| Energy (0.3%) | | | |
| Anadarko Petroleum Corp. | | | |
| sr. notes 6.45s, 2036 | 730,000 | | 701,505 |
| Anadarko Petroleum Corp. | | | |
| sr. notes 5.95s, 2016 | 355,000 | | 348,245 |
| Chesapeake Energy Corp. | | | |
| sr. unsecd. notes 7 5/8s, 2013 | 1,010,000 | | 1,012,525 |
| Enterprise Products Operating LP | | | |
| company guaranty FRB 7.034s, 2068 | 55,000 | | 50,287 |
| Enterprise Products Operating LP | | | |
| company guaranty FRN 8 3/8s, 2066 | 1,945,000 | | 1,984,398 |
| Forest Oil Corp. sr. notes 8s, 2011 | 610,000 | | 614,575 |
| Hess Corp. bonds 7 7/8s, 2029 | 1,160,000 | | 1,323,384 |
| Motiva Enterprises, LLC 144A | | | |
| sr. notes 5.2s, 2012 | 530,000 | | 522,830 |
| Newfield Exploration Co. | | | |
| sr. sub. notes 6 5/8s, 2016 | 650,000 | | 607,750 |
| Nexen, Inc. bonds 6.4s, 2037 (Canada) | 1,280,000 | | 1,236,004 |
| Peabody Energy Corp. | | | |
| sr. notes 5 7/8s, 2016 | 805,000 | | 700,350 |
| Premcor Refining Group, Inc. | | | |
| sr. notes 7 1/2s, 2015 | 1,330,000 | | 1,372,867 |
| Sunoco, Inc. notes 4 7/8s, 2014 | 590,000 | | 558,710 |
| Tesoro Corp. 144A | | | |
| sr. notes 6 1/2s, 2017 | 1,025,000 | | 973,750 |
| Valero Energy Corp. | | | |
| sr. notes 6 1/8s, 2017 | 160,000 | | 160,598 |
| Valero Energy Corp. sr. unsecd. | | | |
| notes 7 1/2s, 2032 | 745,000 | | 810,655 |
37
| | | |
| CORPORATE BONDS AND NOTES (5.4%)* continued | | |
|
| | Principal amount | | Value |
|
| Energy continued | | | |
| Weatherford International, Inc. | | | |
| 144A company guaranty 6.8s, 2037 | $ 245,000 | $ | 250,363 |
| Weatherford International, Inc. | | | |
| 144A company guaranty 6.35s, 2017 | 280,000 | | 285,734 |
| Weatherford International, Ltd. | | | |
| company guaranty 6 1/2s, 2036 | 855,000 | | 825,844 |
| Weatherford International, Ltd. | | | |
| sr. notes 5 1/2s, 2016 | 455,000 | | 436,451 |
| | | | 14,776,825 |
|
| |
| Financial (2.0%) | | | |
| AGFC Capital Trust I company | | | |
| guaranty 6s, 2067 | 620,000 | | 600,637 |
| American International Group, Inc. | | | |
| jr. sub. bond 6 1/4s, 2037 | 2,075,000 | | 1,923,306 |
| Ameriprise Financial, Inc. jr. | | | |
| sub. FRN 7.518s, 2066 | 1,740,000 | | 1,761,402 |
| Amvescap PLC company | | | |
| guaranty 5 5/8s, 2012 | | | |
| (United Kingdom) | 520,000 | | 517,186 |
| Axa SA 144A sub. notes FRN 6.379s, | | | |
| 2036 (France) | 725,000 | | 640,090 |
| Bank of America NA | | | |
| sub. notes 5.3s, 2017 | 2,015,000 | | 1,914,707 |
| Barclays Bank PLC FRB 6.278s, 2049 | | | |
| (United Kingdom) | 1,110,000 | | 982,949 |
| Block Financial Corp. | | | |
| notes 5 1/8s, 2014 | 760,000 | | 704,670 |
| Bosphorus Financial Services, Ltd. | | | |
| 144A sec. FRN 7.16s, 2012 | | | |
| (Cayman Islands) | 2,378,000 | | 2,402,120 |
| Brandywine Operating Partnership | | | |
| LP sr. unsec. 5.7s, 2017 (R) | 840,000 | | 804,346 |
| Camden Property Trust notes 5.7s, | | | |
| 2017 (R) | 785,000 | | 759,212 |
| Capital One Capital III company | | | |
| guaranty 7.686s, 2036 | 1,790,000 | | 1,712,225 |
| Chubb Corp. (The) sr. notes 6s, 2037 | 670,000 | | 640,669 |
| CIT Group, Inc. jr. sub. FRN 6.1s, 2067 | 3,330,000 | | 2,867,235 |
| CIT Group, Inc. sr. notes 5.4s, 2013 | 155,000 | | 150,683 |
| CIT Group, Inc. sr. notes 5s, 2015 | 780,000 | | 713,342 |
| CIT Group, Inc. sr. notes 5s, 2014 | 1,515,000 | | 1,411,853 |
| Citigroup, Inc. sub. notes 5s, 2014 | 1,105,000 | | 1,049,655 |
| CNA Financial Corp. unsecd. | | | |
| notes 6 1/2s, 2016 | 730,000 | | 728,843 |
| CNA Financial Corp. unsecd. | | | |
| notes 6s, 2011 | 730,000 | | 735,722 |
| Colonial Properties Trust | | | |
| notes 6 1/4s, 2014 (R) | 730,000 | | 740,647 |
| Countrywide Capital III company | | | |
| guaranty Ser. B, 8.05s, 2027 | 1,035,000 | | 1,129,671 |
| Credit Suisse Guernsey Ltd. jr. | | | |
| sub. FRN 5.86s, 2049 (Guernsey) | 1,416,000 | | 1,334,117 |
| Deutsche Bank Capital Funding | | | |
| Trust VII 144A FRB 5.628s, 2049 | 1,145,000 | | 1,097,136 |
| Developers Diversified | | | |
| Realty Corp. unsecd. | | | |
| notes 5 3/8s, 2012 (R) | 385,000 | | 378,360 |
CORPORATE BONDS AND NOTES (5.4%)* continued
| | | |
| | |
|
| | Principal amount | | Value |
|
| Financial continued | | | |
| Dresdner Funding Trust I 144A | | | |
| bonds 8.151s, 2031 | $ 1,410,000 | $ | 1,615,726 |
| Equity One, Inc. notes 5 3/8s, | | | |
| 2015 (R) | 695,000 | | 662,511 |
| ERP Operating LP notes 5 3/4s, | | | |
| 2017 (R) | 840,000 | | 814,207 |
| Fleet Capital Trust V bank | | | |
| guaranty FRN 6.36s, 2028 | 935,000 | | 934,976 |
| Fund American Cos., Inc. | | | |
| notes 5 7/8s, 2013 | 1,370,000 | | 1,352,038 |
| GATX Financial Corp. notes | | | |
| 5.8s, 2016 | 560,000 | | 539,996 |
| General Motors Acceptance Corp. | | | |
| bonds 8s, 2031 | 845,000 | | 793,523 |
| General Motors Acceptance Corp. | | | |
| notes 7s, 2012 (S) | 845,000 | | 787,585 |
| GMAC LLC unsub. notes FRN | | | |
| 6.61s, 2009 | 2,920,000 | | 2,808,158 |
| Health Care REIT, Inc. | | | |
| sr. notes 6s, 2013 (R) | 385,000 | | 386,245 |
| Highwood Properties, Inc. | | | |
| sr. unsec. bonds 5.85s, 2017 (R) | 1,005,000 | | 968,390 |
| Hospitality Properties Trust | | | |
| notes 6 3/4s, 2013 (R) | 780,000 | | 806,167 |
| HRPT Properties Trust | | | |
| bonds 5 3/4s, 2014 (R) | 530,000 | | 525,290 |
| HRPT Properties Trust | | | |
| notes 6 1/4s, 2016 (R) | 525,000 | | 528,442 |
| HSBC Finance Capital Trust IX FRN | | | |
| 5.911s, 2035 | 3,300,000 | | 3,181,514 |
| ILFC E-Capital Trust II 144A FRB | | | |
| 6 1/4s, 2065 | 2,560,000 | | 2,467,116 |
| iStar Financial, Inc. sr. unsecd. | | | |
| notes 5 7/8s, 2016 (R) | 1,630,000 | | 1,462,982 |
| JPMorgan Chase Capital XVIII | | | |
| bonds Ser. R, 6.95s, 2036 | 1,996,000 | | 1,913,068 |
| JPMorgan Chase Capital XX jr. | | | |
| sub. bond Ser. T, 6.55s, 2036 | 565,000 | | 517,823 |
| Kimco Realty Corp. | | | |
| sr. sub. notes 5.7s, 2017 (R) | 600,000 | | 580,990 |
| Lehman Brothers Holdings, Inc. | | | |
| sub. notes 5 3/4s, 2017 | 160,000 | | 149,530 |
| Liberty Mutual Insurance 144A | | | |
| notes 7.697s, 2097 | 2,160,000 | | 2,077,868 |
| Lincoln National Corp. FRB 7s, 2066 | 787,000 | | 790,775 |
| Loews Corp. notes 5 1/4s, 2016 | 510,000 | | 488,819 |
| MetLife, Inc. jr. sub. FRN 6.4s, 2036 | 1,515,000 | | 1,354,795 |
| Nationwide Financial | | | |
| Services, Inc. notes 5 5/8s, 2015 | 465,000 | | 460,830 |
| Nationwide Health Properties, Inc. | | | |
| notes 6 1/2s, 2011 (R) | 650,000 | | 668,067 |
| Nationwide Mutual Insurance Co. | | | |
| 144A notes 8 1/4s, 2031 | 375,000 | | 453,030 |
| NB Capital Trust IV company | | | |
| guaranty 8 1/4s, 2027 | 5,540,000 | | 5,766,198 |
| Nuveen Investments, Inc. | | | |
| sr. notes 5 1/2s, 2015 | 505,000 | | 426,341 |
38
| | | |
| CORPORATE BONDS AND NOTES (5.4%)* continued | | |
|
| | Principal amount | | Value |
|
| Financial continued | | | |
| OneAmerica Financial | | | |
| Partners, Inc. 144A bonds 7s, 2033 | $ 1,240,000 | $ | 1,239,820 |
| PNC Bank NA notes 4 7/8s, 2017 | 1,030,000 | | 945,199 |
| ProLogis Trust sr. notes 5 3/4s, | | | |
| 2016 (R) | 905,000 | | 893,976 |
| Prudential Holdings LLC 144A | | | |
| bonds 8.695s, 2023 | 1,510,000 | | 1,855,956 |
| QBE Capital Funding II LP 144A | | | |
| company guaranty FRN 6.797s, | | | |
| 2049 (Jersey) | 450,000 | | 420,174 |
| RBS Capital Trust IV company | | | |
| guaranty FRN 6.16s, 2049 | 1,290,000 | | 1,293,687 |
| Regency Centers LP sr. unsec. | | | |
| 5 7/8s, 2017 (R) | 650,000 | | 644,592 |
| Rouse Co LP/TRC Co-Issuer Inc. | | | |
| 144A sr. notes 6 3/4s, 2013 (R) | 695,000 | | 692,719 |
| Rouse Co. (The) notes 7.2s, 2012 (R) | 645,000 | | 658,554 |
| Royal Bank of Scotland Group PLC | | | |
| FRB 7.648s, 2049 (United Kingdom) | 400,000 | | 441,147 |
| Simon Property Group LP | | | |
| unsub. bonds 5 3/4s, 2015 (R) | 371,000 | | 365,908 |
| SLM Corp. notes Ser. MTNA, | | | |
| 4 1/2s, 2010 | 1,285,000 | | 1,201,656 |
| Sovereign Bancorp, Inc. | | | |
| sr. notes 4.8s, 2010 | 730,000 | | 714,229 |
| Swiss Re Capital I LP 144A FRN | | | |
| 6.854s, 2049 (United Kingdom) | 850,000 | | 847,998 |
| Travelers Cos., Inc. (The) | | | |
| sr. unsecd. notes 6 1/4s, 2037 | 730,000 | | 685,242 |
| UBS AG/Jersey Branch FRN 8.36s, | | | |
| 2008 (Jersey) | 3,020,000 | | 3,065,300 |
| Unitrin, Inc. sr. notes 6s, 2017 | 740,000 | | 731,442 |
| Washington Mutual Bank/Henderson | | | |
| NV sub. notes Ser. BKNT, 5.95s, 2013 | 1,030,000 | | 1,024,711 |
| Westfield Group sr. notes 5.7s, | | | |
| 2016 (Australia) | 875,000 | | 858,191 |
| Westpac Capital Trust III 144A | | | |
| sub. notes FRN 5.819s, 2049 (Australia) | 1,010,000 | | 1,012,959 |
| Willis Group North America, Inc. | | | |
| company guaranty 6.2s, 2017 | 605,000 | | 605,570 |
| ZFS Finance USA Trust I 144A | | | |
| bonds FRB 6 1/2s, 2037 | 2,130,000 | | 2,009,939 |
| | | | 86,192,752 |
|
| |
| Health Care (0.1%) | | | |
| Bayer Corp. 144A FRB 6.2s, 2008 | 845,000 | | 846,462 |
| Hospira, Inc. sr. notes 6.05s, 2017 | 560,000 | | 551,112 |
| Hospira, Inc. sr. notes 5.55s, 2012 | 785,000 | | 785,565 |
| Ventas Realty LP/Capital Corp. | | | |
| sr. notes 6 3/4s, 2017 (R) | 470,000 | | 439,450 |
| | | | 2,622,589 |
|
| |
| Technology (0.1%) | | | |
| Arrow Electronics, Inc. | | | |
| debs. 7 1/2s, 2027 | 760,000 | | 773,235 |
| Avnet, Inc. notes 6s, 2015 | 765,000 | | 744,945 |
| Xerox Corp. sr. notes 6.4s, 2016 | 1,030,000 | | 1,021,587 |
| | | | 2,539,767 |
|
CORPORATE BONDS AND NOTES (5.4%)* continued
| | | |
| | |
|
| | Principal amount | | Value |
|
| Transportation (0.2%) | | | |
| American Airlines, Inc. | | | |
| pass-through certificates | | | |
| Ser. 01-1, 6.817s, 2011 | $ 100,000 | $ | 99,500 |
| American Airlines, Inc. | | | |
| pass-through certificates | | | |
| Ser. 01-2, 7.858s, 2011 | 525,000 | | 555,188 |
| Continental Airlines, Inc. | | | |
| pass-through certificates | | | |
| Ser. 98-3, 6.32s, 2008 | 2,895,000 | | 2,891,526 |
| Northwest Airlines Corp. | | | |
| pass-through certificates | | | |
| Ser. 00-1, 7.15s, 2019 | 1,570,917 | | 1,671,063 |
| Ryder System, Inc. notes Ser. MTN, | | | |
| 5.95s, 2011 | 450,000 | | 455,583 |
| Union Pacific Corp. 144A | | | |
| pass-through certificates 5.214s, 2014 | 590,000 | | 572,282 |
| United AirLines, Inc. pass-through | | | |
| certificates 6.636s, 2022 | 715,000 | | 712,319 |
| | | | 6,957,461 |
|
| |
| Utilities & Power (1.1%) | | | |
| AEP Texas North Co. | | | |
| sr. notes Ser. B, 5 1/2s, 2013 | 905,000 | | 891,158 |
| Appalachian Power Co. | | | |
| sr. notes 5.8s, 2035 | 510,000 | | 467,400 |
| Arizona Public Services Co. | | | |
| notes 6 1/2s, 2012 | 1,040,000 | | 1,068,757 |
| Atmos Energy Corp. | | | |
| sr. unsub. 6.35s, 2017 | 905,000 | | 919,895 |
| Beaver Valley II Funding debs. 9s, 2017 | 1,436,000 | | 1,617,123 |
| Boardwalk Pipelines LP company | | | |
| guaranty 5 7/8s, 2016 | 1,950,000 | | 1,933,249 |
| Bruce Mansfield Unit 144A | | | |
| pass-through certificates 6.85s, 2034 | 1,820,000 | | 1,870,960 |
| CenterPoint Energy Houston | | | |
| Electric, LLC general ref. mtge. | | | |
| Ser. M2, 5 3/4s, 2014 | 110,000 | | 109,098 |
| CenterPoint Energy Resources Corp. | | | |
| notes 7 3/4s, 2011 | 1,060,000 | | 1,127,514 |
| Cleveland Electric | | | |
| Illuminating Co. (The) 144A | | | |
| sr. notes Ser. D, 7.88s, 2017 | 550,000 | | 624,861 |
| CMS Energy Corp. | | | |
| unsub. notes 6.55s, 2017 | 50,000 | | 47,250 |
| Commonwealth Edison Co. 1st mtge. | | | |
| 5.9s, 2036 | 1,145,000 | | 1,056,712 |
| Consolidated Natural Gas Co. | | | |
| sr. notes 5s, 2014 | 530,000 | | 502,693 |
| Dayton Power & Light Co. (The) 1st | | | |
| mtge. 5 1/8s, 2013 | 975,000 | | 949,884 |
| Dominion Resources, Inc. jr. | | | |
| sub. notes FRN 6.3s, 2066 | 3,085,000 | | 3,073,339 |
| El Paso Natural Gas Co. 144A | | | |
| sr. unsec. bond 5.95s, 2017 | 120,000 | | 116,347 |
| Enbridge Energy Partners LP | | | |
| sr. unsec. notes 5 7/8s, 2016 | 750,000 | | 731,565 |
| Entergy Gulf States, Inc. 1st | | | |
| mtge. 5 1/4s, 2015 | 985,000 | | 922,909 |
39
| | | |
| CORPORATE BONDS AND NOTES (5.4%)* continued | | |
|
| | Principal amount | | Value |
|
| Utilities & Power continued | | | |
| Indianapolis Power & Light 144A | | | |
| 1st mtge. 6.3s, 2013 | $ 515,000 | $ | 528,889 |
| Indiantown Cogeneration LP 1st | | | |
| mtge. Ser. A-10, 9.77s, 2020 | 775,000 | | 885,786 |
| Ipalco Enterprises, Inc. sec. | | | |
| notes 8 3/8s, 2008 | 280,000 | | 280,700 |
| ITC Holdings Corp. 144A | | | |
| notes 5 7/8s, 2016 | 1,090,000 | | 1,071,084 |
| Kansas Gas & Electric | | | |
| bonds 5.647s, 2021 | 395,000 | | 381,783 |
| Kinder Morgan, Inc. notes 6s, 2017 | 545,000 | | 540,128 |
| Kinder Morgan, Inc. | | | |
| sr. notes 6 1/2s, 2012 | 685,000 | | 658,250 |
| MidAmerican Energy Holdings Co. | | | |
| bonds 6 1/8s, 2036 (S) | 2,345,000 | | 2,241,041 |
| National Fuel Gas Co. | | | |
| notes 5 1/4s, 2013 | 545,000 | | 537,454 |
| Nevada Power Co. general ref. | | | |
| mtge. Ser. L, 5 7/8s, 2015 | 525,000 | | 510,538 |
| Northwestern Corp. sec. | | | |
| notes 5 7/8s, 2014 | 1,090,000 | | 1,058,706 |
| Oncor Electric Delivery Co. | | | |
| debs. 7s, 2022 | 675,000 | | 705,359 |
| Oncor Electric Delivery Co. sec. | | | |
| notes 7 1/4s, 2033 | 820,000 | | 887,807 |
| Pacific Gas & Electric Co. | | | |
| sr. unsub. 5.8s, 2037 (S) | 775,000 | | 720,584 |
| Potomac Edison Co. 144A 1st mtge. | | | |
| 5.8s, 2016 | 1,085,000 | | 1,094,473 |
| Power Receivable Finance, LLC 144A | | | |
| sr. notes 6.29s, 2012 | 949,186 | | 964,373 |
| PPL Energy Supply LLC | | | |
| bonds Ser. A, 5.7s, 2015 | 640,000 | | 620,642 |
| Progress Energy, Inc. sr. unsecd. | | | |
| notes 5 5/8s, 2016 | 970,000 | | 947,756 |
| Public Service Co. of Colorado | | | |
| sr. notes Ser. A, 6 7/8s, 2009 | 375,000 | | 385,003 |
| Public Service Co. of New Mexico | | | |
| sr. notes 4.4s, 2008 | 570,000 | | 564,757 |
| Puget Sound Energy, Inc. jr. | | | |
| sub. FRN Ser. A, 6.974s, 2067 | 1,185,000 | | 1,193,094 |
| Sierra Pacific Power Co. general | | | |
| ref. mtge. Ser. P, 6 3/4s, 2037 | 1,700,000 | | 1,668,603 |
| Southern California Edison Co. | | | |
| notes 6.65s, 2029 | 1,030,000 | | 1,081,442 |
| Southern California Edison Co. | | | |
| 06-E 1st mtge. 5.55s, 2037 | 895,000 | | 825,047 |
| Southern Natural Gas. Co. 144A | | | |
| notes 5.9s, 2017 | 460,000 | | 442,749 |
| Spectra Energy Capital, LLC | | | |
| sr. notes 8s, 2019 | 780,000 | | 882,449 |
| Teco Energy, Inc. notes 7.2s, 2011 | 1,070,000 | | 1,091,406 |
| TEPPCO Partners LP company | | | |
| guaranty FRB 7s, 2067 | 595,000 | | 553,925 |
| TransAlta Corp. notes 5 3/4s, | | | |
| 2013 (Canada) | 665,000 | | 652,678 |
| TransCanada Pipelines, Ltd. jr. | | | |
| sub. FRN 6.35s, 2067 (Canada) | 520,000 | | 486,708 |
| | | | |
| CORPORATE BONDS AND NOTES (5.4%)* continued | | |
| |
| | | Principal amount | | Value |
|
| Utilities & Power continued | | | | |
| TXU Energy Co. 144A sr. unsec. FRN | | | | |
| 5.86s, 2008 | | $ 2,555,000 | $ | 2,554,865 |
| Westar Energy, Inc. 1st mtge. | | | | |
| 5.15s, 2017 | | 75,000 | | 70,339 |
| Westar Energy, Inc. 1st mtge. | | | | |
| 5.1s, 2020 | | 800,000 | | 727,453 |
| | | | | 45,846,585 |
|
| |
| Total corporate bonds and notes | | | | |
| (cost $234,580,180) | | | $ | 228,805,585 |
|
| |
| |
| ASSET-BACKED SECURITIES (4.3%)* | | | | |
|
| | | Principal amount | | Value |
|
| Advanta Business Card Master Trust | | | | |
| FRB Ser. 04-C1, Class C, 6.37s, 2013 | | $ 210,000 | $ | 210,657 |
| Aegis Asset Backed | | | | |
| Securities Trust 144A | | | | |
| Ser. 04-5N, Class Note, 5s, 2034 | | 70,213 | | 66,790 |
| Ser. 04-6N, Class Note, | | | | |
| 4 3/4s, 2035 | | 60,504 | | 57,478 |
| AFC Home Equity Loan Trust | | | | |
| Ser. 99-2, Class 1A, 5.73s, 2029 | | 2,562,406 | | 2,569,610 |
| American Express Credit Account | | | | |
| Master Trust 144A Ser. 04-C, | | | | |
| Class C, 5.82s, 2012 | | 3,298,535 | | 3,305,791 |
| Ameriquest Mortgage | | | | |
| Securities, Inc. FRB Ser. 06-R1, | | | | |
| Class M10, 7.82s, 2036 | | 902,000 | | 712,580 |
| AMP CMBS 144A FRB Ser. 06-1A, | | | | |
| Class A, 6.11s, 2047 (Cayman Islands) | | 1,910,000 | | 1,910,000 |
| Arcap REIT, Inc. 144A | | | | |
| Ser. 03-1A, Class E, 7.11s, 2038 | | 1,283,000 | | 1,285,477 |
| Ser. 04-1A, Class E, 6.42s, 2039 | | 1,112,000 | | 1,099,155 |
| Asset Backed Funding Certificates | | | | |
| 144A FRB Ser. 06-OPT3, Class B, | | | | |
| 7.82s, 2036 | | 157,000 | | 98,945 |
| Asset Backed Funding Corp. NIM | | | | |
| Trust 144A FRB Ser. 05-OPT1, | | | | |
| Class B1, 7.82s, 2035 | | 407,000 | | 298,056 |
| Asset Backed Securities Corp. Home | | | | |
| Equity Loan Trust FRB | | | | |
| Ser. 05-HE1, Class A3, 5.61s, 2035 | | 10,707 | | 10,708 |
| Aviation Capital Group Trust 144A | | | | |
| FRB Ser. 03-2A, Class G1, 6.02s, 2033 | 904,601 | | 908,417 |
| Bank One Issuance Trust FRB | | | | |
| Ser. 03-C4, Class C4, 6.35s, 2011 | | 210,000 | | 211,321 |
| Bay View Auto Trust Ser. 05-LJ2, | | | | |
| Class D, 5.27s, 2014 | | 420,000 | | 416,212 |
| Bayview Financial Acquisition Trust | | | | |
| Ser. 04-B, Class A1, 5.82s, 2039 | | 4,211,489 | | 4,211,478 |
| FRB Ser. 04-D, Class A, 5.71s, 2044 | 1,578,180 | | 1,578,426 |
| Ser. 05-B, Class A, IO, 4.466s, 2039 | | 4,334,713 | | 24,794 |
| Bayview Financial Acquisition | | | | |
| Trust 144A FRN Ser. 04-B, | | | | |
| Class M2, 7.22s, 2039 | | 200,000 | | 201,602 |
40
| | | | |
| ASSET-BACKED SECURITIES (4.3%)* continued | | |
|
| | | Principal amount | | Value |
|
| Bayview Financial Asset Trust 144A | | | |
| FRB Ser. 03-SSRA, Class M, | | | | |
| 6.67s, 2038 | | $ 857,186 | $ | 859,586 |
| FRB Ser. 03-SSRA, Class A, | | | | |
| 6.02s, 2038 | | 722,975 | | 724,277 |
| FRB Ser. 04-SSRA, Class A1, | | | | |
| 5.92s, 2039 | | 949,105 | | 950,054 |
| Bear Stearns Asset Backed | | | | |
| Securities Trust IFB Ser. 07-AC5, | | | | |
| Class A6, IO, 1.23s, 2037 | | 12,666,923 | | 457,691 |
| Bear Stearns Asset | | | | |
| Backed Securities, Inc. | | | | |
| FRB Ser. 06-EC1, Class M9, | | | | |
| 7.32s, 2035 | | 698,000 | | 314,100 |
| FRB Ser. 06-PC1, Class M9, | | | | |
| 7.07s, 2035 | | 414,000 | | 207,000 |
| FRB Ser. 03-3, Class A2, | | | | |
| 5.91s, 2043 | | 2,197,474 | | 2,196,788 |
| FRB Ser. 03-1, Class A1, | | | | |
| 5.82s, 2042 | | 535,490 | | 535,490 |
| FRB Ser. 05-3, Class A1, | | | | |
| 5.77s, 2035 | | 609,382 | | 609,382 |
| Bear Stearns Asset Backed | | | | |
| Securities, Inc. 144A FRB | | | | |
| Ser. 06-HE2, Class M10, 7.57s, 2036 | 251,000 | | 125,500 |
| Capital Auto Receivables | | | | |
| Asset Trust 144A | | | | |
| Ser. 06-1, Class D, 7.16s, 2013 | | 500,000 | | 500,332 |
| Ser. 05-1, Class D, 6 1/2s, 2011 | 1,442,000 | | 1,436,874 |
| Capital One Multi-Asset Execution | | | |
| Trust FRB Ser. 02-C1, Class C1, | | | | |
| 8.07s, 2010 | | 570,000 | | 571,737 |
| CARMAX Auto Owner Trust Ser. 04-2, | | | |
| Class D, 3.67s, 2011 | | 143,538 | | 141,996 |
| CARSSX Finance, Ltd. 144A | | | | |
| FRB Ser. 04-AA, Class B4, 10.82s, | | | |
| 2011 (Cayman Islands) | | 694,723 | | 697,074 |
| FRB Ser. 04-AA, Class B3, 8.67s, | | | |
| 2011 (Cayman Islands) | | 90,645 | | 90,806 |
| Chase Credit Card Master Trust FRB | | | |
| Ser. 03-3, Class C, 6.4s, 2010 | | 1,730,000 | | 1,744,574 |
| Chase Funding Net Interest Margin | | | |
| 144A Ser. 04-OPT1, Class Note, | | | | |
| 4.458s, 2034 | | 124,409 | | 122,757 |
| Citibank Credit Card Issuance | | | | |
| Trust FRB Ser. 01-C1, Class C1, | | | | |
| 6.44s, 2010 | | 1,060,000 | | 1,063,727 |
| Conseco Finance Securitizations Corp. | | | |
| Ser. 02-2, Class A, IO, 8 1/2s, 2033 | 6,247,247 | | 1,121,556 |
| Ser. 00-4, Class A6, 8.31s, 2032 | 8,597,000 | | 7,608,345 |
| Ser. 00-5, Class A6, 7.96s, 2032 | 3,727,000 | | 3,381,332 |
| Ser. 02-1, Class M1F, 7.954s, 2033 | 1,004,000 | | 1,040,603 |
| Ser. 01-4, Class A4, 7.36s, 2033 | 5,440,891 | | 5,595,309 |
| Ser. 00-6, Class A5, 7.27s, 2031 | 1,081,194 | | 1,071,187 |
| Ser. 01-1, Class A5, 6.99s, 2032 | 2,544,164 | | 2,438,240 |
| Ser. 01-3, Class A4, 6.91s, 2033 | 7,758,013 | | 7,614,419 |
| Ser. 02-1, Class A, 6.681s, 2033 | 6,262,706 | | 6,332,164 |
| | | | |
| ASSET-BACKED SECURITIES (4.3%)* continued | | |
|
| | | Principal amount | | Value |
|
| Countrywide Alternative Loan Trust | | | |
| IFB Ser. 07-23CB, Class A4, IO, | | | | |
| 1.18s, 2037 | | $ 30,185,000 | $ | 1,144,012 |
| Countrywide Asset Backed NIM | | | | |
| Certificates 144A | | | | |
| Ser. 04-BC1N, Class Note, | | | | |
| 5 1/2s, 2035 | | 1,203 | | 601 |
| Ser. 04-14N, 5s, 2036 | | 40,550 | | 36,496 |
| Countrywide Home Loans | | | | |
| Ser. 06-0A5, Class X, IO, | | | | |
| 2.281s, 2046 | | 10,909,577 | | 392,063 |
| Ser. 05-9, Class 1X, IO, | | | | |
| 1.855s, 2035 | | 10,609,465 | | 182,350 |
| Ser. 05-2, Class 2X, IO, | | | | |
| 1.16s, 2035 | | 11,864,004 | | 235,427 |
| Countrywide Home Loans 144A | | | | |
| IFB Ser. 05-R2, Class 2A3, 8s, 2035 | 1,129,531 | | 1,182,051 |
| IFB Ser. 05-R1, Class 1AS, IO, | | | | |
| 0.799s, 2035 | | 8,030,521 | | 221,287 |
| IFB Ser. 05-R2, Class 1AS, IO, | | | | |
| 0.421s, 2035 | | 7,573,581 | | 192,839 |
| Crest, Ltd. 144A Ser. 03-2A, Class D2, | | | |
| 6.723s, 2038 (Cayman Islands) | | 1,617,000 | | 1,488,450 |
| CS First Boston Mortgage | | | | |
| Securities Corp. 144A | | | | |
| Ser. 04-FR1N, Class A, 5s, 2034 | | 534,327 | | 507,612 |
| DB Master Finance, LLC 144A | | | | |
| Ser. 06-1, Class M1, 8.285s, 2031 | | 373,000 | | 379,426 |
| FHLMC Structured Pass Through | | | | |
| Securities IFB Ser. T-56, | | | | |
| Class 2ASI, IO, 2.78s, 2043 | | 2,077,774 | | 159,729 |
| Fieldstone Mortgage | | | | |
| Investment Corp. FRB Ser. 05-1, | | | | |
| Class M3, 5.86s, 2035 | | 700,000 | | 700,221 |
| Finance America NIM Trust 144A | | | | |
| Ser. 04-1, Class A, 5 1/4s, 2034 | | 78,556 | | 80 |
| First Plus Home Loan Trust | | | | |
| Ser. 97-3, Class B1, 7.79s, 2023 | | 373,992 | | 374,226 |
| Ford Credit Auto Owner Trust | | | | |
| Ser. 04-A, Class C, 4.19s, 2009 | | 650,000 | | 640,162 |
| Fort Point CDO, Ltd. FRB | | | | |
| Ser. 03-2A, Class A2, 6.41s, 2038 | | | | |
| (Cayman Islands) | | 616,000 | | 592,222 |
| Foxe Basin, Ltd. 144A FRB Ser. 03-1A, | | | |
| Class A1, 5.86s, 2015 (Cayman Islands) | 2,000,000 | | 2,001,000 |
| Fremont NIM Trust 144A | | | | |
| Ser. 04-3, Class B, 7 1/2s, 2034 | | 201,495 | | 1,793 |
| Ser. 04-3, Class A, 4 1/2s, 2034 | 5,626 | | 81 |
| G-Star, Ltd. 144A FRB Ser. 02-2A, | | | |
| Class BFL, 7.32s, 2037 (Cayman Islands) | 308,000 | | 308,000 |
| GE Capital Credit Card Master Note | | | |
| Trust FRB Ser. 04-2, Class C, | | | | |
| 5.8s, 2010 | | 1,903,750 | | 1,905,825 |
41
| | | | |
| ASSET-BACKED SECURITIES (4.3%)* continued | | |
|
| | | Principal amount | | Value |
|
| GE Corporate Aircraft | | | | |
| Financing, LLC 144A | | | | |
| FRB Ser. 05-1A, Class C, | | | | |
| 6.62s, 2019 | | $1,680,000 | $ | 1,659,773 |
| Ser. 04-1A, Class B, 6.17s, 2018 | 105,148 | | 105,801 |
| Gears Auto Owner Trust 144A | | | | |
| Ser. 05-AA, Class E1, 8.22s, 2012 | | 1,962,000 | | 1,951,304 |
| GEBL 144A | | | | |
| Ser. 04-2, Class D, 8.07s, 2032 | | 638,976 | | 630,082 |
| Ser. 04-2, Class C, 6.17s, 2032 | | 239,422 | | 238,823 |
| Granite Mortgages PLC | | | | |
| FRB Ser. 01-1, Class 1C, 6.76s, | | | | |
| 2041 (United Kingdom) | | 1,430,000 | | 1,436,536 |
| FRB Ser. 02-2, Class 1C, 6.61s, | | | | |
| 2043 (United Kingdom) | | 517,045 | | 520,148 |
| Green Tree Financial Corp. | | | | |
| Ser. 96-5, Class M1, 8.05s, 2027 | 512,386 | | 479,206 |
| Ser. 99-5, Class A5, 7.86s, 2030 | 16,172,221 | | 15,444,471 |
| Ser. 97-4, Class A7, 7.36s, 2029 | 570,575 | | 586,284 |
| Ser. 95-8, Class B1, 7.3s, 2026 | | 362,579 | | 356,680 |
| Ser. 96-10, Class M1, 7.24s, 2028 | 972,000 | | 972,000 |
| Ser. 98-4, Class A7, 6.87s, 2030 | 330,105 | | 325,979 |
| Ser. 97-7, Class A8, 6.86s, 2029 | 392,041 | | 397,106 |
| Ser. 99-3, Class A6, 6 1/2s, 2031 | 1,076,616 | | 1,065,682 |
| Ser. 99-2, Class A7, 6.44s, 2030 | 1,250,910 | | 1,218,934 |
| Ser. 99-1, Class A6, 6.37s, 2025 | 598,000 | | 600,990 |
| Greenpoint Manufactured Housing | | | |
| Ser. 00-3, Class IA, 8.45s, 2031 | 3,264,610 | | 3,126,184 |
| Ser. 99-5, Class M1A, 8.3s, 2026 | 488,000 | | 458,056 |
| GS Auto Loan Trust 144A Ser. 04-1, | | | |
| Class D, 5s, 2011 | | 1,156,849 | | 1,155,784 |
| GSAMP Trust 144A Ser. 05-NC1, | | | | |
| Class N, 5s, 2035 | | 2,372 | | 2,064 |
| GSMPS Mortgage Loan Trust | | | | |
| Ser. 05-RP3, Class 1A4, 8 1/2s, 2035 | 289,705 | | 306,615 |
| Ser. 05-RP3, Class 1A3, 8s, 2035 | 852,071 | | 893,567 |
| Ser. 05-RP3, Class 1A2, 7 1/2s, 2035 | 777,590 | | 805,024 |
| GSMPS Mortgage Loan Trust 144A | | | |
| Ser. 05-RP2, Class 1A3, 8s, 2035 | 1,042,909 | | 1,093,584 |
| Ser. 05-RP1, Class 1A3, 8s, 2035 | 133,898 | | 140,396 |
| Ser. 05-RP2, Class 1A2, 7 1/2s, 2035 | 1,192,684 | | 1,235,836 |
| IFB Ser. 04-4, Class 1AS, IO, | | | | |
| 0.779s, 2034 | | 12,869,029 | | 442,922 |
| Guggenheim Structured | | | | |
| Real Estate Funding, Ltd. 144A | | | | |
| FRB Ser. 05-2A, Class D, 6.87s, | | | |
| 2030 (Cayman Islands) | | 1,141,000 | | 1,138,946 |
| FRB Ser. 05-1A, Class D, 6.85s, | | | |
| 2030 (Cayman Islands) | | 503,089 | | 474,789 |
| HASCO NIM Trust 144A Ser. 05-OP1A, | | | |
| Class A, 6 1/4s, 2035 (Cayman Islands) | 560,596 | | 420,447 |
| High Income Trust Securities 144A | | | |
| FRB Ser. 03-1A, Class A, 5.856s, | | | | |
| 2036 (Cayman Islands) | | 1,724,468 | | 1,655,490 |
| Hyundai Auto Receivables Trust | | | | |
| Ser. 04-A, Class D, 4.1s, 2011 | | 349,983 | | 347,535 |
| | | | |
| ASSET-BACKED SECURITIES (4.3%)* continued | | |
|
| | | Principal amount | | Value |
|
| JPMorgan Mortgage | | | | |
| Acquisition Corp. FRB | | | | |
| Ser. 05-OPT2, Class M11, | | | | |
| 7.57s, 2035 | | $ 645,000 | $ | 438,600 |
| Lehman Manufactured Housing | | | | |
| Ser. 98-1, Class 1, IO, 0.807s, 2028 | 17,578,355 | | 338,735 |
| LNR CDO, Ltd. 144A | | | | |
| FRB Ser. 03-1A, Class EFL, 8.32s, | | | |
| 2036 (Cayman Islands) | | 2,585,000 | | 2,572,075 |
| FRB Ser. 02-1A, Class FFL, 8.07s, | | | |
| 2037 (Cayman Islands) | | 5,220,000 | | 5,012,242 |
| Madison Avenue | | | | |
| Manufactured Housing Contract | | | | |
| FRB Ser. 02-A, Class B1, | | | | |
| 8.57s, 2032 | | 4,059,503 | | 3,166,412 |
| FRB Ser. 02-A, Class M2, | | | | |
| 7.57s, 2032 | | 278,000 | | 271,787 |
| Ser. 02-A IO, 0.3s, 2032 | | 138,443,353 | | 1,461,657 |
| Marriott Vacation Club | | | | |
| Owner Trust 144A | | | | |
| Ser. 05-2, Class D, 6.205s, 2027 | 110,228 | | 105,836 |
| FRB Ser. 02-1A, Class A1, | | | | |
| 6.02s, 2024 | | 998,881 | | 1,005,037 |
| Ser. 04-2A, Class D, 5.389s, 2026 | 100,688 | | 97,931 |
| Ser. 04-2A, Class C, 4.741s, 2026 | 92,633 | | 90,219 |
| MASTR Asset Backed Securities NIM | | | |
| Trust 144A Ser. 04-HE1A, Class Note, | | | |
| 5.191s, 2034 (Cayman Islands) | | 7,599 | | 3,040 |
| MASTR Reperforming | | | | |
| Loan Trust 144A | | | | |
| Ser. 05-2, Class 1A3, 7 1/2s, 2035 | 732,207 | | 757,742 |
| Ser. 05-1, Class 1A4, 7 1/2s, 2034 | 1,812,144 | | 1,875,781 |
| MBNA Credit Card Master Note Trust | | | |
| FRB Ser. 03-C5, Class C5, 6 1/2s, 2010 | 1,730,000 | | 1,744,873 |
| Merit Securities Corp. 144A FRB | | | | |
| Ser. 11PA, Class 3A1, 5.94s, 2027 | | 5,259,060 | | 4,996,107 |
| Merrill Lynch Mortgage | | | | |
| Investors, Inc. 144A | | | | |
| Ser. 05-WM1N, Class N1, 5s, 2035 | 12,636 | | 12,535 |
| Ser. 04-HE2N, Class N1, 5s, 2035 | | | |
| (Cayman Islands) | | 28,514 | | 28,086 |
| Ser. 04-FM1N, Class N1, 5s, 2035 | | | |
| (Cayman Islands) (In default) † | | 20,197 | | 19,894 |
| Ser. 04-WM3N, Class N1, 4 1/2s, | | | |
| 2035 (In default) † | | 44,508 | | 43,173 |
| Ser. 04-WM1N, Class N1, 4 1/2s, | | | |
| 2034 (In default) † | | 1,921 | | 115 |
| Mid-State Trust | | | | |
| Ser. 11, Class B, 8.221s, 2038 | | 361,519 | | 354,965 |
| Ser. 10, Class B, 7.54s, 2036 | | 683,429 | | 600,031 |
| Morgan Stanley Auto Loan Trust | | | | |
| 144A Ser. 04-HB2, Class E, 5s, 2012 | 110,763 | | 109,655 |
| N-Star Real Estate CDO, Ltd. 144A | | | |
| FRB Ser. 04-2A, Class C1, 7.32s, | | | | |
| 2039 (Cayman Islands) | | 544,000 | | 552,840 |
| Navigator CDO, Ltd. 144A FRB | | | | |
| Ser. 03-1A, Class A1, 5.85s, 2015 | | | | |
| (Cayman Islands) | | 840,278 | | 840,446 |
42
| | | |
| ASSET-BACKED SECURITIES (4.3%)* continued | | |
|
| | Principal amount | | Value |
|
| Navistar Financial Corp. Owner Trust | | | |
| Ser. 05-A, Class C, 4.84s, 2014 | $ 497,842 | $ | 484,095 |
| Ser. 04-B, Class C, 3.93s, 2012 | 201,313 | | 196,405 |
| New Century Home Equity Loan Trust | | | |
| Ser. 03-5, Class AI7, 5.15s, 2033 | 1,643,244 | | 1,580,725 |
| Nomura Asset Acceptance Corp. | | | |
| Ser. 04-R3, Class PT, 7.82s, 2035 | 495,844 | | 498,770 |
| Nomura Asset Acceptance Corp. 144A | | | |
| Ser. 04-R2, Class PT, 9.087s, 2034 | 436,332 | | 446,717 |
| Oakwood Mortgage Investors, Inc. | | | |
| Ser. 01-D, Class A3, 5.9s, 2022 | 163,508 | | 130,807 |
| Ser. 02-C, Class A1, 5.41s, 2032 | 3,985,038 | | 3,567,992 |
| Oakwood Mortgage | | | |
| Investors, Inc. 144A | | | |
| Ser. 01-B, Class A4, 7.21s, 2030 | 590,320 | | 522,112 |
| Ser. 01-B, Class A3, 6.535s, 2023 | 170,891 | | 158,603 |
| Ocean Star PLC 144A | | | |
| FRB Ser. 04, Class D, 7.66s, | | | |
| 2018 (Ireland) | 623,000 | | 629,230 |
| FRB Ser. 05-A, Class D, 6.86s, | | | |
| 2012 (Ireland) | 696,000 | | 696,000 |
| Option One Mortgage Loan Trust FRB | | | |
| Ser. 05-4, Class M11, 7.82s, 2035 | 216,000 | | 129,600 |
| Origen Manufactured Housing | | | |
| Ser. 04-B, Class A2, 3.79s, 2017 | 283,227 | | 279,377 |
| Park Place Securities, Inc. FRB | | | |
| Ser. 04-WHQ2, Class A3A, 5.67s, 2035 | 265,662 | | 265,705 |
| Park Place Securities, Inc. 144A | | | |
| FRB Ser. 04-MHQ1, Class M10, | | | |
| 7.82s, 2034 | 415,000 | | 332,000 |
| People’s Choice Net Interest | | | |
| Margin Note 144A Ser. 04-2, | | | |
| Class B, 5s, 2034 | 21,636 | | 20,401 |
| Permanent Financing PLC FRB | | | |
| Ser. 3, Class 3C, 6.51s, 2042 | | | |
| (United Kingdom) | 1,300,000 | | 1,308,336 |
| Pillar Funding PLC 144A | | | |
| FRB Ser. 04-1A, Class C1, 6.355s, | | | |
| 2011 (United Kingdom) | 657,000 | | 656,955 |
| FRB Ser. 04-2A, Class C, 6.24s, | | | |
| 2011 (United Kingdom) | 912,000 | | 905,052 |
| Providian Gateway Master Trust 144A | | | |
| FRB Ser. 04-EA, Class D, | | | |
| 6 1/4s, 2011 | 701,000 | | 702,459 |
| Ser. 04-FA, Class E, 5s, 2011 | 500,000 | | 498,980 |
| Ser. 04-DA, Class D, 4.4s, 2011 | 944,000 | | 941,640 |
| Residential Asset | | | |
| Securities Corp. 144A | | | |
| FRB Ser. 05-KS10, Class B, | | | |
| 7.82s, 2035 | 1,165,000 | | 233,000 |
| Ser. 04-NT12, Class Note, | | | |
| 4.7s, 2035 | 6,301 | | 6,157 |
| Ser. 04-NT, Class Note, | | | |
| 4 1/2s, 2034 | 142,941 | | 114,353 |
| Residential Asset Securitization | | | |
| Trust IFB Ser. 07-A3, Class 2A2, | | | |
| IO, 1.37s, 2037 | 13,434,185 | | 706,662 |
| Saco I Trust FRB Ser. 05-10, | | | |
| Class 1A1, 5.58s, 2033 | 1,318,756 | | 1,301,447 |
| | | | |
| ASSET-BACKED SECURITIES (4.3%)* continued | | |
|
| | | Principal amount | | Value |
|
| SAIL Net Interest | | | | |
| Margin Notes 144A | | | | |
| Ser. 03-3, Class A, 7 3/4s, 2033 | | | |
| (Cayman Islands) (In default) † | | $ 22,036 | $ | 68 |
| Ser. 03-BC2A, Class A, 7 3/4s, | | | | |
| 2033 (Cayman Islands) | | 133,867 | | 5,355 |
| Ser. 04-4A, Class B, 7 1/2s, 2034 | | | |
| (Cayman Islands) (In default) † | | 214,965 | | 22 |
| Ser. 03-5, Class A, 7.35s, 2033 | | | | |
| (Cayman Islands) | | 8,257 | | 243 |
| Ser. 03-8A, Class A, 7s, 2033 | | | | |
| (Cayman Islands) (In default) † | | 48,411 | | 208 |
| Ser. 03-9A, Class A, 7s, 2033 | | | | |
| (Cayman Islands) (In default) † | | 65,758 | | 106 |
| Ser. 03-6A, Class A, 7s, 2033 | | | | |
| (Cayman Islands) (In default) † | | 12,564 | | 251 |
| Ser. 03-7A, Class A, 7s, 2033 | | | | |
| (Cayman Islands) (In default) † | | 19,639 | | 98 |
| Sharps SP I, LLC Net Interest | | | | |
| Margin Trust 144A Ser. 04-HE1N, | | | | |
| Class Note, 4.94s, 2034 | | | | |
| (Cayman Islands) (In default) † | | 144,254 | | — |
| Soundview Home Equity Loan Trust | | | |
| 144A FRB Ser. 05-CTX1, Class B1, | | | |
| 7.82s, 2035 | | 466,000 | | 342,510 |
| South Coast Funding 144A FRB | | | | |
| Ser. 3A, Class A2, 6.557s, 2038 | | | | |
| (Cayman Islands) | | 470,000 | | 432,400 |
| Structured Adjustable Rate | | | | |
| Mortgage Loan Trust 144A | | | | |
| Ser. 04-NP2, Class A, 5.67s, 2034 | 779,939 | | 779,861 |
| Structured Asset Investment Loan | | | | |
| Trust 144A FRB Ser. 05-HE3, | | | | |
| Class M11, 6.156s, 2035 | | 974,000 | | 487,000 |
| Structured Asset Receivables Trust | | | |
| 144A FRB Ser. 05-1, 5.86s, 2015 | | 5,260,102 | | 5,253,527 |
| Structured Asset Securities Corp. | | | | |
| Ser. 07-4, Class 1A4, IO, 1s, 2037 | 57,220,000 | | 1,792,049 |
| Ser. 07-4, Class 1A3, IO, 0.93s, 2037 | 57,220,000 | | 2,063,442 |
| Structured Asset | | | | |
| Securities Corp. 144A | | | | |
| Ser. 98-RF3, Class A, IO, 6.1s, 2028 | 3,097,936 | | 322,864 |
| Ser. 07-RF1, Class 1A, IO, | | | | |
| 0.488s, 2037 | | 13,441,802 | | 260,771 |
| Ser. 06-RF4, Class 1A, IO, | | | | |
| 0.356s, 2036 | | 7,125,943 | | 169,677 |
| TIAA Real Estate CDO, Ltd. | | | | |
| Ser. 03-1A, Class E, 8s, 2038 | | | | |
| (Cayman Islands) | | 1,698,000 | | 1,611,911 |
| WFS Financial Owner Trust | | | | |
| Ser. 05-1, Class D, 4.09s, 2012 | | 297,058 | | 293,664 |
| Ser. 04-3, Class D, 4.07s, 2012 | | 266,392 | | 264,871 |
| Ser. 04-4, Class D, 3.58s, 2012 | | 118,498 | | 116,721 |
| Ser. 04-1, Class D, 3.17s, 2011 | | 23,739 | | 23,710 |
| Whinstone Capital Management, Ltd. | | | |
| 144A FRB Ser. 1A, Class B3, | | | | |
| 6.26s, 2044 (United Kingdom) | | 1,313,075 | | 1,313,075 |
|
| |
| Total asset-backed securities (cost $188,559,917) | $ | 182,411,186 |
43
| | | |
| PURCHASED OPTIONS OUTSTANDING (0.8%)* | |
| |
| | Expiration | | |
| | date/ | Contract | |
| | strike price | amount | Value |
|
| Option on an interest | | | |
| rate swap with JPMorgan | | | |
| Chase Bank, N.A. for the | | | |
| right to pay a fixed rate of | | | |
| 5.34% versus the three | | | |
| month USD-LIBOR-BBA | | | |
| maturing on | | | |
| February 15, 2018. | Feb-08/5.34 | $ 17,320,000 | $ 471,104 |
| Option on an interest | | | |
| rate swap | | | |
| with JPMorgan Chase | | | |
| Bank, N.A. for the | | | |
| right to receive a | | | |
| fixed rate of 5.34% | | | |
| versus the three | | | |
| month USD-LIBOR-BBA | | | |
| maturing on | | | |
| February 15, 2018. | Feb-08/5.34 | 17,320,000 | 214,422 |
| Option on an interest | | | |
| rate swap | | | |
| with Goldman Sachs, | | | |
| International for the | | | |
| right to pay a fixed | | | |
| rate swap of 4.965% | | | |
| versus the three month | | | |
| USD-LIBOR-BBA | | | |
| maturing April 29, 2013. | Apr-08/4.965 | 184,000,000 | 4,035,120 |
| Option on an interest | | | |
| rate swap | | | |
| with JPMorgan Chase | | | |
| Bank, N.A. for the | | | |
| right to pay a fixed | | | |
| rate of 5.175% versus | | | |
| the three month | | | |
| USD-LIBOR-BBA | | | |
| maturing on | | | |
| April 29, 2018. | Apr-08/5.175 | 92,000,000 | 3,553,960 |
| Option on an interest | | | |
| rate swap with | | | |
| JPMorgan Chase | | | |
| Bank, N.A. for the | | | |
| right to pay a fixed | | | |
| rate of 5.315% versus | | | |
| the three month | | | |
| USD-LIBOR-BBA | | | |
| maturing on | | | |
| April 8, 2019. | Apr-09/5.315 | 54,984,000 | 2,512,219 |
| Option on an interest | | | |
| rate swap with | | | |
| Goldman Sachs, | | | |
| International for the | | | |
| right to pay a fixed | | | |
| rate swap of 5.325% | | | |
| versus the three | | | |
| month USD-LIBOR-BBA | | | |
| maturing April 8, 2019. | Apr-09/5.325 | 54,984,000 | 2,488,026 |
| | | |
| PURCHASED OPTIONS OUTSTANDING (0.8%)* continued | |
| |
| | Expiration | | |
| | date/ | Contract | |
| | strike price | amount | Value |
|
| Option on an interest | | | |
| rate swap | | | |
| with Deutschbank for | | | |
| the right to pay a | | | |
| fixed rate swap | | | |
| of 5.385% versus the | | | |
| three month | | | |
| USD-LIBOR-BBA | | | |
| maturing | | | |
| April 16, 2019. | Apr-09/5.385 $ 43,245,000 | $ 1,856,075 |
| Option on an interest | | | |
| rate swap | | | |
| with JPMorgan Chase | | | |
| Bank, N.A. for the | | | |
| right to pay a fixed | | | |
| rate of 5.215% versus | | | |
| the three month | | | |
| USD-LIBOR-BBA | | | |
| maturing on | | | |
| May 14, 2018. | May-08/5.215 | 41,096,000 | 1,540,278 |
| Option on an interest | | | |
| rate swap | | | |
| with JPMorgan Chase | | | |
| Bank, N.A. for the | | | |
| right to pay a fixed | | | |
| rate of 5.235% versus | | | |
| the three month | | | |
| USD-LIBOR-BBA | | | |
| maturing on | | | |
| May 8, 2018. | May-08/5.235 | 41,859,000 | 1,516,133 |
| Option on an interest | | | |
| rate swap | | | |
| with Goldman Sachs, | | | |
| International for the | | | |
| right to receive a | | | |
| fixed rate swap | | | |
| of 4.965% versus the | | | |
| three month | | | |
| USD-LIBOR-BBA | | | |
| maturing | | | |
| April 29, 2013. | Apr-08/4.965 | 184,000,000 | 1,365,280 |
| Option on an interest | | | |
| rate swap | | | |
| with Goldman Sachs, | | | |
| International for the | | | |
| right to receive a | | | |
| fixed rate swap | | | |
| of 5.325% versus the | | | |
| three month | | | |
| USD-LIBOR-BBA | | | |
| maturing | | | |
| April 8, 2019. | Apr-09/5.325 | 54,984,000 | 1,198,651 |
44
| | | |
| PURCHASED OPTIONS OUTSTANDING (0.8%)* | |
|
| | Expiration | | |
| | date/ | Contract | |
| | strike price | amount | Value |
| Option on an interest | | | |
| rate swap | | | |
| with JPMorgan Chase | | | |
| Bank, N.A. for the | | | |
| right to receive a | | | |
| fixed rate of 5.315% | | | |
| versus the three | | | |
| month USD-LIBOR-BBA | | | |
| maturing on | | | |
| April 8, 2019. | Apr-09/5.315 | $54,984,000 | $ 1,184,355 |
| Option on an interest | | | |
| rate swap | | | |
| with Deutschbank for | | | |
| the right to receive | | | |
| a fixed rate swap | | | |
| of 5.385% versus the | | | |
| three month | | | |
| USD-LIBOR-BBA | | | |
| maturing | | | |
| April 16, 2019. | Apr-09/5.385 | 43,245,000 | 1,016,690 |
| Option on an interest | | | |
| rate swap | | | |
| with JPMorgan Chase | | | |
| Bank, N.A. for the | | | |
| right to receive a | | | |
| fixed rate of 5.175% | | | |
| versus the three | | | |
| month USD-LIBOR-BBA | | | |
| maturing on | | | |
| April 29, 2018. | Apr-08/5.175 | 92,000,000 | 999,120 |
| Option on an interest | | | |
| swap with Goldman | | | |
| Sachs International for | | | |
| the right to pay a fixed | | | |
| rate of 5.1975% versus | | | |
| the three month | | | |
| USD-LIBOR-BBA | | | |
| maturing on | | | |
| May 14, 2018. | May-08/5.198 | 21,602,000 | 828,653 |
| Option on an interest | | | |
| rate swap | | | |
| with JPMorgan Chase | | | |
| Bank, N.A. for the | | | |
| right to pay a fixed | | | |
| rate of 5.22% versus | | | |
| the three month | | | |
| USD-LIBOR-BBA | | | |
| maturing on | | | |
| May 14, 2018. | May-08/5.22 | 21,602,000 | 804,242 |
| | | |
| PURCHASED OPTIONS OUTSTANDING (0.8%)* continued | |
|
| | Expiration | | |
| | date/ | Contract | |
| | strike price | amount | Value |
| Option on an interest | | | |
| rate swap with Lehman | | | |
| Brothers Special | | | |
| Financing, Inc. for | | | |
| the right to pay a | | | |
| fixed rate of 5.20% | | | |
| versus the three | | | |
| month USD-LIBOR-BBA | | | |
| maturing on | | | |
| May 14, 2018. | May-08/5.20 | $20,548,000 | $ 785,756 |
| Option on an interest | | | |
| rate swap | | | |
| with JPMorgan Chase | | | |
| Bank, N.A. for the | | | |
| right to receive a | | | |
| fixed rate of 5.235% | | | |
| versus the three | | | |
| month USD-LIBOR-BBA | | | |
| maturing on | | | |
| May 8, 2018. | May-08/5.235 | 41,859,000 | 523,656 |
| Option on an interest | | | |
| rate swap | | | |
| with JPMorgan Chase | | | |
| Bank, N.A. for the | | | |
| right to receive a | | | |
| fixed rate of 5.215% | | | |
| versus the three | | | |
| month USD-LIBOR-BBA | | | |
| maturing on | | | |
| May 14, 2018. | May-08/5.215 | 41,096,000 | 501,782 |
| Option on an interest | | | |
| rate swap with Lehman | | | |
| Brothers Special | | | |
| Financing, Inc. for | | | |
| the right to pay a | | | |
| fixed rate of 5.21% | | | |
| versus the three | | | |
| month USD-LIBOR-BBA | | | |
| maturing on | | | |
| May 14, 2018. | May-08/5.21 | 8,219,000 | 310,103 |
| Option on an interest | | | |
| rate swap with JPMorgan | | | |
| Chase Bank, N.A. for | | | |
| the right to receive a | | | |
| fixed rate of 5.22% | | | |
| versus the three month | | | |
| USD-LIBOR-BBA | | | |
| maturing on | | | |
| May 14, 2018. | May-08/5.22 | 21,602,000 | 266,353 |
45
| | | |
| PURCHASED OPTIONS OUTSTANDING (0.8%)* | |
|
| | Expiration | | |
| | date/ | Contract | |
| | strike price | amount | Value |
|
| Option on an interest | | | |
| rate swap | | | |
| with Goldman Sachs | | | |
| International for the | | | |
| right to receive a | | | |
| fixed rate of 5.1975% | | | |
| versus the three | | | |
| month USD-LIBOR-BBA | | | |
| maturing on | | | |
| May 14, 2018. | May-08/5.198 | $21,602,000 | $ 255,120 |
| Option on an interest | | | |
| rate swap with Lehman | | | |
| Brothers | | | |
| International | | | |
| (Europe) for the | | | |
| right to receive a | | | |
| fixed rate of 5.20% | | | |
| versus the three | | | |
| month USD-LIBOR-BBA | | | |
| maturing on | | | |
| May 14, 2018. | May-08/5.20 | 20,548,000 | 243,699 |
| Option on an interest | | | |
| rate swap with Lehman | | | |
| Brothers Special | | | |
| Financing, Inc. for | | | |
| the right to receive | | | |
| a fixed rate of 5.21% | | | |
| versus the three | | | |
| month USD-LIBOR-BBA | | | |
| maturing on | | | |
| May 14, 2018. | May-08/5.21 | 8,219,000 | 99,368 |
| Option on an interest | | | |
| rate swap | | | |
| with JPMorgan Chase | | | |
| Bank, N.A. for the | | | |
| right to pay a fixed | | | |
| rate of 5.39% versus | �� | | |
| the three month | | | |
| USD-LIBOR-BBA | | | |
| maturing on | | | |
| January 29, 2018. | Jan-08/5.39 | 59,599,000 | 1,420,840 |
| Option on an interest | | | |
| rate swap with Lehman | | | |
| Brothers | | | |
| International | | | |
| (Europe) for the | | | |
| right to pay a fixed | | | |
| rate swap of 5.3475% | | | |
| versus the three | | | |
| month USD-LIBOR-BBA | | | |
| maturing | | | |
| February 4, 2018. | Jan-08/5.348 | 44,811,000 | 1,172,256 |
| | | |
| PURCHASED OPTIONS OUTSTANDING (0.8%)* continued | |
|
| | Expiration | | |
| | date/ | Contract | |
| | strike price | amount | Value |
|
| Option on an interest | | | |
| rate swap | | | |
| with JPMorgan Chase | | | |
| Bank, N.A. for the | | | |
| right to receive a | | | |
| fixed rate of 5.39% | | | |
| versus the three | | | |
| month USD-LIBOR-BBA | | | |
| maturing on | | | |
| January 29, 2018. | Jan-08/ 5.39 | $59,599,000 | $780,151 |
| Option on an interest | | | |
| rate swap with Lehman | | | |
| Brothers Special | | | |
| Financing, Inc. for | | | |
| the right to receive | | | |
| a fixed rate | | | |
| of 5.3475% versus the | | | |
| three month | | | |
| USD-LIBOR-BBA | | | |
| maturing on | | | |
| February 4, 2018. | Jan-08/ 5.348 | 44,811,000 | 540,421 |
|
| |
| Total purchased options outstanding | | |
| (cost $28,229,036) | | | $ 32,483,833 |
| | | | |
| | | |
| CONVERTIBLE BONDS AND NOTES (0.1%)* (cost $4,519,000) |
|
| | | Principal amount | Value |
| |
| Ford Motor Co. cv. sr. notes | | |
| 4 1/4s, 2036 | | $ 4,519,000 | $5,230,743 |
|
| |
| |
| MUNICIPAL BONDS AND NOTES (0.1%)* | | |
|
| | Rating** | Principal amount | Value |
|
| MI Tobacco Settlement | | | |
| Fin. Auth. Rev. | | | |
| Bonds, Ser. A, | | | |
| 7.309s, 6/1/34 | Baa3 | $ 1,005,000 | $1,023,924 |
| Tobacco Settlement | | | |
| Fin. Auth. Rev. | | | |
| Bonds, Ser. A, | | | |
| 7.467s, 6/1/47 | Baa3 | 1,460,000 | 1,470,395 |
|
| |
| Total municipal bonds and notes | | |
| (cost $2,464,671) | | | $ 2,494,319 |
|
| |
| |
| WARRANTS (—%)* † (cost $0) | | |
|
| Expiration date | Strike Price | Warrants | Value |
|
| Raytheon Co. | 6/16/11 | $37.50 | 29,195 | $587,987 |
46
| | |
| SHORT-TERM INVESTMENTS (22.2%)* | |
|
| | Principal amount/shares | Value |
|
| Short-term investments held as | | |
| collateral for loaned securities | | |
| with yields ranging from 5.29% | | |
| to 5.53% and due dates ranging | | |
| from August 1, 2007 to | | |
| September 21, 2007 (d) | $ 258,640,844 | $ 258,089,002 |
| Bryant Park Funding, LLC for an | | |
| effective yield of 5.27%, | | |
| maturity date August 20, 2007 | 50,000,000 | 49,860,931 |
| Falcon Asset Secur. Corp. for an | | |
| effective yield of 5.27%, | | |
| maturity date August 14, 2007 | 67,662,000 | 67,533,235 |
| Ranger Funding Co., LLC for an | | |
| effective yield of 5.27%, | | |
| maturity date August 13, 2007 | 50,000,000 | 49,912,167 |
| | |
| SHORT-TERM INVESTMENTS (22.2%)* continued | |
|
| Principal amount/shares | Value |
|
| Thunder Bay Funding, Inc. for an | | |
| effective yield of 5.27%, | | |
| maturity date August 9, 2007 | $46,208,000 | $ 46,153,885 |
| Park Ave Receivables for an | | |
| effective yield of 5.28%, | | |
| maturity date August 7, 2007 | 50,000,000 | 49,956,000 |
| Putnam Prime Money Market Fund (e) | 417,711,345 | 417,711,345 |
|
| Total short-term investments (cost $939,216,565) | $939,216,565 |
|
| |
| TOTAL INVESTMENTS | | |
| Total investments (cost $4,902,584,245) | | $ 5,203,979,805 |
* Percentages indicated are based on net assets of $4,232,094,017.
** The Moody’s or Standard & Poor’s ratings indicated are believed to be the most recent ratings available at July 31, 2007 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, 2007. Securities rated by Putnam are indicated by “/P.” Securities rated by Fitch are indicated by “/F.” Ratings are not covered by the Report of Independent Registered Public Accounting Firm. Security ratings are defined in the Statement of Additional Information.
† Non-income-producing security.
# A portion of this security was pledged and segregated with the custodian to cover margin requirements for futures contracts and written options at July 31, 2007.
## Forward commitments (Note 1).
(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.
(R) Real Estate Investment Trust.
(S) Securities on loan, in part or in entirety, at July 31, 2007.
At July 31, 2007, liquid assets totaling $1,359,183,532 have been designated as collateral for open forward commitments, swap contracts and futures contracts.
144A after the name of an issuer represents securities exempt from registration under Rule 144A under the Securities Act of 1933, as amended. 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, 2007.
The dates shown on debt obligations are the original maturity dates.
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, 2007.
| | | | | |
| FUTURES CONTRACTS OUTSTANDING at 7/31/07 | | | | | |
|
| | | | | | Unrealized |
| | Number of | | | Expiration | appreciation/ |
| | contracts | Value | | date | (depreciation) |
|
| Euro-Dollar 90 day (Long) | 1,659 | $394,261,350 | | Mar-08 | $ (336,312) |
| Euro-Dollar 90 day (Long) | 817 | 193,935,375 | | Sep-09 | (572,997) |
| Euro-Dollar 90 day (Short) | 3,138 | 746,569,425 | | Sep-08 | 1,318,377 |
| S&P 500 Index (Long) | 1 | 365,475 | | Sep-07 | (17,160) |
| S&P 500 Index E-Mini (Short) | 620 | 45,322,000 | | Sep-07 | 2,143,960 |
| U.S. Treasury Bond 20 yr (Short) | 7 | 770,438 | | Sep-07 | (5,428) |
| U.S. Treasury Note 2 yr (Short) | 2,391 | 490,005,563 | | Sep-07 | (3,230,152) |
| U.S. Treasury Note 5 yr (Short) | 693 | 73,089,844 | | Sep-07 | 8,369 |
| U.S. Treasury Note 10 yr (Long) | 4,610 | 495,214,844 | | Sep-07 | 8,551,507 |
|
| Total | | | | | $ 7,860,164 |
47
| | | | |
| WRITTEN OPTIONS OUTSTANDING at 7/31/07 (premiums received $20,599,166) | | | | |
|
| | Contract | | Expiration date/ | |
| | amount | | strike price | Value |
|
| Option on an interest rate swap with Goldman Sachs International for the obligation | | | | |
| to pay a fixed rate of 5.79% versus the three month USD-LIBOR-BBA maturing on | | | | |
| January 16, 2018. | $205,784,000 | | Jan-08/5.79 | $ 5,949,215 |
| Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the | | | | |
| obligation to receive a fixed rate of 5.95% versus the three month USD-LIBOR-BBA | | | | |
| maturing June 16, 2018. | 204,503,000 | | Jun-08/5.95 | 2,539,927 |
| Option on an interest rate swap with Goldman Sachs International for the obligation | | | | |
| to receive a fixed rate of 5.79% versus the three month USD-LIBOR-BBA maturing | | | | |
| on January 16, 2018. | 205,784,000 | | Jan-08/5.79 | 2,000,220 |
| Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the | | | | |
| obligation to pay a fixed rate of 5.95% versus the three month USD-LIBOR-BBA | | | | |
| maturing June 16, 2018. | 204,503,000 | | Jun-08/5.95 | 8,233,291 |
| Option on an interest rate swap with Lehman Brothers International for the obligation | | | | |
| to receive a fixed rate of 5.225% versus the three month USD-LIBOR-BBA maturing | | | | |
| March 5, 2018. | 32,581,000 | | Mar-08/5.225 | 1,102,215 |
| Option on an interest rate swap with Lehman Brothers International for the obligation | | | | |
| to pay a fixed rate of 5.225% versus the three month USD-LIBOR-BBA maturing | | | | |
| March 5, 2018. | 32,581,000 | | Mar-08/5.225 | 333,955 |
| Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation | | | | |
| to receive a fixed rate of 5.51% versus the three month USD-LIBOR-BBA maturing | | | | |
| on May 14, 2022. | 20,548,000 | | May-12/5.51 | 1,188,484 |
| Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation | | | | |
| to pay a fixed rate of 5.51% versus the three month USD-LIBOR-BBA maturing on | | | | |
| May 14, 2022. | 20,548,000 | | May-12/5.51 | 714,540 |
| Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the | | | | |
| obligation to receive a fixed rate of 5.515% versus the three month USD-LIBOR-BBA | | | | |
| maturing on May 14, 2022. | 10,274,000 | | May-12/5.515 | 581,827 |
| Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the | | | | |
| obligation to pay a fixed rate of 5.515% versus the three month USD-LIBOR-BBA | | | | |
| maturing on May 14, 2022. | 10,274,000 | | May-12/5.515 | 356,837 |
| Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the | | | | |
| obligation to pay a fixed rate of 5.52% versus the three month USD-LIBOR-BBA | | | | |
| maturing on May 14, 2022. | 4,109,500 | | May-12/5.52 | 143,237 |
| Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the | | | | |
| obligation to receive a fixed rate of 5.52% versus the three month USD-LIBOR-BBA | | | | |
| maturing on May 14, 2022. | 4,109,500 | | May-12/5.52 | 232,031 |
|
| |
| Total | | | | $23,375,779 |
| |
| |
| |
| TBA SALE COMMITMENTS OUTSTANDING at 7/31/07 (proceeds receivable $161,467,367) | | | | |
|
| | Principal | | Settlement | |
| | amount | | date | Value |
|
| FNMA, 6 1/2s, August 1, 2037 | $ 4,700,000 | | 8/14/07 | $ 4,748,102 |
| FNMA, 6s, August 1, 2037 | 18,200,000 | | 8/14/07 | 18,030,796 |
| FNMA, 5 1/2s, August 1, 2037 | 56,300,000 | | 8/14/07 | 54,369,085 |
| FNMA, 4 1/2s, August 1, 2022 | 89,300,000 | | 8/20/07 | 85,079,182 |
|
| Total | | | | $162,227,165 |
48
| | | | | |
| INTEREST RATE SWAP CONTRACTS OUTSTANDING at 7/31/07 | | |
|
| | | | 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% | $ (33,346) |
|
| 4,636,000 | | 10/2/16 | 5.15631% | 3 month USD-LIBOR-BBA | 47,210 |
|
| 53,000,000 | | 10/21/15 | 4.943% | 3 month USD-LIBOR-BBA | 1,089,014 |
|
| 3,720,000 | | 6/24/15 | 4.39% | 3 month USD-LIBOR-BBA | 244,890 |
|
| 3,070,000 | | 6/23/15 | 4.45% | 3 month USD-LIBOR-BBA | 190,520 |
|
| 7,440,000 | | 6/23/15 | 4.466% | 3 month USD-LIBOR-BBA | 454,097 |
|
| 20,610,000 | | 6/17/15 | 4.555% | 3 month USD-LIBOR-BBA | 1,137,430 |
|
| 84,900,000 | | 4/6/10 | 4.6375% | 3 month USD-LIBOR-BBA | 10,500 |
|
| 87,100,000 | | 1/14/10 | 3 month USD-LIBOR-BBA | 4.106% | (2,035,805) |
|
| 102,075,000 | | 12/22/09 | 3.965% | 3 month USD-LIBOR-BBA | 2,620,682 |
|
| 82,772,000 | | 1/28/24 | 3 month USD-LIBOR-BBA | 5.2125% | (3,952,476) |
|
| Bear Stearns Bank plc | | | | | |
| 63,600,000 | | 4/24/12 | 5.027% | 3 month USD-LIBOR-BBA | (178,788) |
|
| Citibank, N.A. | | | | | |
| 56,920,000 | | 7/27/09 | 5.504% | 3 month USD-LIBOR-BBA | (416,617) |
|
| 4,380,000 | | 4/7/14 | 5.377% | 3 month USD-LIBOR-BBA | (59,321) |
|
| Credit Suisse First Boston International | | | | | |
| 6,600,000 | | 11/17/09 | 3.947% | 3 month USD-LIBOR-BBA | 185,013 |
|
| Credit Suisse International | | | | | |
| 6,762,000 | | 9/28/16 | 5.10886% | 3 month USD-LIBOR-BBA | 93,221 |
|
| 80,000,000 | | 1/9/09 | 3 month USD-LIBOR-BBA | 5.145% | (27,056) |
|
| 3,843,000 | | 3/21/16 | 3 month USD-LIBOR-BBA | 5.20497% | (16,851) |
|
| Goldman Sachs International | | | | | |
| 4,968,000 | | 5/3/16 | 5.565% | 3 month USD-LIBOR-BBA | (35,699) |
|
| 34,600,000 | | 7/25/09 | 5.327% | 3 month USD-LIBOR-BBA | (137,902) |
|
| 13,380,000 | | 4/7/14 | 5.33842% | 3 month USD-LIBOR-BBA | (156,421) |
|
| 22,090,000 | | 1/8/12 | 3 month USD-LIBOR-BBA | 4.98% | (229,713) |
|
| 18,233,000 | | 12/20/16 | 3 month USD-LIBOR-BBA | 5.074% | (557,551) |
|
| 35,081,000 | | 11/21/26 | 3 month USD-LIBOR-BBA | 5.2075% | (1,986,087) |
|
| 158,394,000 | | 11/21/08 | 5.0925% | 3 month USD-LIBOR-BBA | 285,935 |
|
| 36,385,000 | | 11/20/26 | 3 month USD-LIBOR-BBA | 5.261% | (1,826,901) |
|
| 161,722,000 | | 11/20/08 | 5.16% | 3 month USD-LIBOR-BBA | 136,100 |
|
| 4,331,000 | | 10/19/16 | 5.32413% | 3 month USD-LIBOR-BBA | (7,575) |
|
| 17,771,000 | | 9/29/16 | 3 month USD-LIBOR-BBA | 5.1275% | (220,409) |
|
| 55,949,000 | | 9/29/08 | 5.085% | 3 month USD-LIBOR-BBA | (636,319) |
|
| JPMorgan Chase Bank, N.A. | | | | | |
| 47,810,000 | | 10/21/15 | 4.916% | 3 month USD-LIBOR-BBA | 1,072,407 |
|
| 81,200,000 | | 8/4/16 | 3 month USD-LIBOR-BBA | 5.5195% | 1,375,160 |
|
| 156,100,000 | | 8/4/08 | 3 month USD-LIBOR-BBA | 5.40% | 2,307,306 |
|
| 10,430,000 | | 8/2/15 | 3 month USD-LIBOR-BBA | 4.6570% | (421,099) |
|
| 63,370,000 | | 6/29/15 | 3 month USD-LIBOR-BBA | 4.296% | (4,555,592) |
|
| 4,470,000 | | 6/24/15 | 4.387% | 3 month USD-LIBOR-BBA | 295,121 |
|
| 17,930,000 | | 6/16/15 | 4.538% | 3 month USD-LIBOR-BBA | 1,008,185 |
|
| 20,829,000 | | 9/28/16 | 3 month USD-LIBOR-BBA | 5.1223% | (271,120) |
|
| 89,553,000 | | 3/8/17 | 3 month USD-LIBOR-BBA | 5.28% | (265,469) |
|
| 65,346,000 | | 1/31/17 | 3 month USD-LIBOR-BBA | 5.415% | (359,875) |
|
| 37,105,000 | | 1/19/09 | 5.24% | 3 month USD-LIBOR-BBA | (36,786) |
|
| 9,442,000 | | 1/19/17 | 3 month USD-LIBOR-BBA | 5.249% | (171,331) |
|
| 5,472,000 | | 12/19/16 | 5.0595% | 3 month USD-LIBOR-BBA | 173,264 |
|
| 170,000,000 | | 3/30/08 | 3 month USD-LIBOR-BBA | 5.163% | 1,995,921 |
|
| 94,000,000 | | 3/30/16 | 3 month USD-LIBOR-BBA | 5.2755% | 113,631 |
|
| 5,900,000 | | 7/25/17 | 3 month USD-LIBOR-BBA | 5.652% | 62,893 |
|
| 36,282,000 | | 11/20/26 | 3 month USD-LIBOR-BBA | 5.266% | (1,800,333) |
|
49
| | | | | |
| INTEREST RATE SWAP CONTRACTS OUTSTANDING at 7/31/07 continued | | |
|
| | | | Payments | Payments | Unrealized |
| Swap counterparty / | | Termination | made by | received by | appreciation/ |
| Notional amount | | date | fund per annum | fund per annum | (depreciation) |
|
| JPMorgan Chase Bank, N.A. continued | | | | | |
| $161,308,000 | | 11/20/08 | 5.165% | 3 month USD-LIBOR-BBA | $ 156,105 |
|
| 61,990,000 | | 10/10/13 | 5.09% | 3 month USD-LIBOR-BBA | 33,394 |
|
| 44,550,000 | | 10/10/13 | 5.054% | 3 month USD-LIBOR-BBA | 122,054 |
|
| 76,820,000 | | 7/5/17 | 3 month USD-LIBOR-BBA | 4.55% | (5,671,919) |
|
| 61,200,000 | | 6/27/17 | 3 month USD-LIBOR-BBA | 5.712% | 956,162 |
|
| 126,500,000 | | 3/7/15 | 3 month USD-LIBOR-BBA | 4.798% | (3,223,151) |
|
| 65,551,000 | | 9/28/08 | 5.096% | 3 month USD-LIBOR-BBA | (753,176) |
|
| 4,639,000 | | 9/18/16 | 5.291% | 3 month USD-LIBOR-BBA | 1,760 |
|
| 183,000,000 | | 1/17/16 | 4.946% | 3 month USD-LIBOR-BBA | 6,300,739 |
|
| 57,486,000 | | 8/15/11 | 5.412% | 3 month USD-LIBOR-BBA | (1,177,428) |
|
| 40,500,000 | | 4/23/17 | 5.186% | 3 month USD-LIBOR-BBA | 445,932 |
|
| Lehman Brothers International (Europe) | | | | | |
| 86,483,000 | | 3/15/09 | 4.9298% | 3 month USD-LIBOR-BBA | (759,353) |
|
| 18,884,000 | | 10/23/16 | 5.325% | 3 month USD-LIBOR-BBA | (32,965) |
|
| 46,981,000 | | 10/23/08 | 5.255% | 3 month USD-LIBOR-BBA | (655,965) |
|
| 18,884,000 | | 10/23/16 | 3 month USD-LIBOR-BBA | 5.3275% | 36,492 |
|
| 46,981,000 | | 10/23/08 | 3 month USD-LIBOR-BBA | 5.26% | 659,377 |
|
| 267,010,000 | | 8/3/16 | 5.5675% | 3 month USD-LIBOR-BBA | (5,442,034) |
|
| 150,213,000 | | 8/3/11 | 5.445% | 3 month USD-LIBOR-BBA | (3,250,985) |
|
| 91,930,000 | | 12/28/16 | 5.084% | 3 month USD-LIBOR-BBA | 2,747,154 |
|
| Lehman Brothers Special Financing, Inc. | | | | | |
| 26,033,000 | | 4/12/12 | 3 month USD-LIBOR-BBA | 5.087% | 143,619 |
|
| 111,090,000 | | 9/29/13 | 5.0555% | 3 month USD-LIBOR-BBA | 247,372 |
|
| 135,710,000 | | 9/8/16 | 5.3275% | 3 month USD-LIBOR-BBA | (356,942) |
|
| 153,985,000 | | 8/3/08 | 3 month USD-LIBOR-BBA | 5.425% | 2,326,516 |
|
| 86,500,000 | | 5/29/12 | 5.28% | 3 month USD-LIBOR-BBA | (37,579) |
|
| Morgan Stanley Capital Services, Inc. | | | | | |
| 3,674,000 | | 2/20/17 | 5.19% | 3 month USD-LIBOR-BBA | 37,510 |
|
| Total | | | | | $(12,645,253) |
| | | | |
| TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 7/31/07 | | |
|
| |
| | | 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) |
|
| Bank of America, N.A. | | | | |
| $55,310,000 | 5/2/08 | 5 bp plus change | Banc of America | $ (940,541) |
| | | in spread | Securities- CMBS | |
| | | of Banc | AAA 10 year Index | |
| | | of America | | |
| | | Securities AAA | | |
| | | 10 yr Index | | |
| | | multiplied by | | |
| | | the modified | | |
| | | duration factor | | |
|
| 17,620,000 | 5/2/08 | 10 bp plus | Banc of America | (286,764) |
| | | change in spread | Securities- CMBS | |
| | | of Banc | AAA 10 year Index | |
| | | of America | | |
| | | Securities AAA | | |
| | | 10 yr Index | | |
| | | multiplied by | | |
| | | the modified | | |
| | | duration factor | | |
|
50
| | | | | |
| TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 7/31/07 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) |
|
| Citibank, N.A. | | | | | |
| $16,550,000 | | 5/2/08 | 12.5 bp plus | Banc of America | $ (312,794) |
| | | | change in spread | Securities- CMBS | |
| | | | of Banc | AAA 10 year Index | |
| | | | of America | | |
| | | | Securities AAA | | |
| | | | 10 yr Index | | |
| | | | multiplied by | | |
| | | | the modified | | |
| | | | duration factor | | |
|
| 39,000,000 | | 10/1/07 | (7.5 bp plus | The spread | 847,430 |
| | | | beginning | return of Lehman | |
| | | | of period nominal | Brothers AAA | |
| | | | spread of Lehman | 8.5+ CMBS Index | |
| | | | Brothers AAA | adjusted by | |
| | | | 8.5+ Commercial | modified | |
| | | | Mortgage Backed | duration factor | |
| | | | Securities Index) | | |
|
| 5,482,000 | | 8/1/07 | (7.5 bp plus | The spread | 119,118 |
| | | | beginning | return of Lehman | |
| | | | of period nominal | Brothers AAA | |
| | | | spread of Lehman | 8.5+ CMBS Index | |
| | | | Brothers AAA | adjusted by | |
| | | | 8.5+ Commercial | modified | |
| | | | Mortgage Backed | duration factor | |
| | | | Securities Index) | | |
|
| 19,720,000 | | 10/31/07 | 10 bp plus change | Banc of America | (375,959) |
| | | | in spread | Securities- CMBS | |
| | | | of Banc | AAA 10 year Index | |
| | | | of America | | |
| | | | Securities AAA | | |
| | | | 10 yr Index | | |
| | | | multiplied by | | |
| | | | the modified | | |
| | | | duration factor | | |
|
| 18,440,000 | | 11/2/07 | 15 bp plus | Banc of America | (358,568) |
| | | | change in spread | Securities- CMBS | |
| | | | of Banc | AAA 10 year Index | |
| | | | of America | | |
| | | | Securities AAA | | |
| | | | 10 yr Index | | |
| | | | multiplied by | | |
| | | | the modified | | |
| | | | duration factor | | |
|
| Goldman Sachs International | | | | | |
| 21,110,000 | | 5/1/08 | 10 bp plus | Banc of America | — |
| | | | change in spread | Securities- CMBS | |
| | | | of Banc | AAA 10 year Index | |
| | | | of America | | |
| | | | Securities AAA | | |
| | | | 10 yr Index | | |
| | | | multiplied by | | |
| | | | the modified | | |
| | | | duration factor | | |
|
| 3,843,000 | | 9/15/11 | 678 bp (1 month | Ford Credit Auto | 56,205 |
| | | | USD-LIBOR-BBA) | Owner Trust | |
| | | | | Series 2005-B | |
| | | | | Class D | |
|
| 34,650,000 (F) | | 1/1/08 | (10 bp plus | The spread | 803,291 |
| | | | beginning | return of Lehman | |
| | | | of period nominal | Brothers AAA | |
| | | | spread of Lehman | 8.5+ CMBS Index | |
| | | | Brothers AAA | adjusted by | |
| | | | 8.5+ Commercial | modified | |
| | | | Mortgage Backed | duration factor | |
| | | | Securities Index) | | |
|
51
| | | | | |
| TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 7/31/07 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) |
|
| JPMorgan Chase Bank, N.A. | | | | | |
| $11,440,000 | | 10/1/07 | 17.5 bp plus | The spread | $ (245,851) |
| | | | beginning | return of Lehman | |
| | | | of period nominal | Brothers AAA | |
| | | | spread of Lehman | 8.5+ CMBS Index | |
| | | | Brothers AAA | adjusted by | |
| | | | 8.5+ Commercial | modified | |
| | | | Mortgage Backed | duration factor | |
| | | | Securities Index | | |
|
| Lehman Brothers International (Europe) | | | | | |
| 31,105,000 | | 1/1/08 | (5 bp plus | The spread | 590,836 |
| | | | beginning | return of Lehman | |
| | | | of period nominal | Brothers AAA | |
| | | | spread of Lehman | 8.5+ CMBS Index | |
| | | | Brothers AAA | adjusted by | |
| | | | 8.5+ Commercial | modified | |
| | | | Mortgage Backed | duration factor | |
| | | | Securities Index) | | |
|
| 34,650,000 | | 1/1/08 | (Beginning | The spread | 710,446 |
| | | | of period nominal | return of Lehman | |
| | | | spread of Lehman | Brothers AAA | |
| | | | Brothers AAA | 8.5+ CMBS Index | |
| | | | 8.5+ Commercial | adjusted by | |
| | | | Mortgage Backed | modified | |
| | | | Securities Index) | duration factor | |
|
| 34,650,000 | | 1/1/08 | (10 bp plus | The spread | 706,406 |
| | | | beginning | return of Lehman | |
| | | | of period nominal | Brothers AAA | |
| | | | spread of Lehman | 8.5+ CMBS Index | |
| | | | Brothers AAA | adjusted by | |
| | | | 8.5+ Commercial | modified | |
| | | | Mortgage Backed | duration factor | |
| | | | Securities Index) | | |
|
| Lehman Brothers Special Financing, Inc. | | | | | |
| 25,390,000 | | 10/1/07 | 10 bp plus | The spread | (480,902) |
| | | | beginning | return of Lehman | |
| | | | of period nominal | Brothers AAA | |
| | | | spread of Lehman | 8.5+ CMBS Index | |
| | | | Brothers AAA | adjusted by | |
| | | | 8.5+ Commercial | modified | |
| | | | Mortgage Backed | duration factor | |
| | | | Securities Index | | |
|
| 52,070,000 | | 12/2/07 | 8 bp plus | The spread | (1,130,336) |
| | | | beginning | return of Lehman | |
| | | | of period nominal | Brothers Aaa | |
| | | | spread of Lehman | 8.5+ CMBS Index | |
| | | | Brothers AAA | adjusted by | |
| | | | 8.5+ Commercial | modified | |
| | | | Mortgage Backed | duration factor | |
| | | | Securities Index | | |
|
| Morgan Stanley Capital Services Inc. | | | | | |
| 10,400,000 | | 10/31/07 | 10 bp plus | Banc of America | (212,056) |
| | | | change in spread | Securities- CMBS | |
| | | | of Banc | AAA 10 year Index | |
| | | | of America | | |
| | | | Securities AAA | | |
| | | | 10 yr Index | | |
| | | | multiplied by | | |
| | | | the modified | | |
| | | | duration factor | | |
|
| 13,020,000 | | 11/30/07 | 7.5 bp plus | The spread | (329,797) |
| | | | beginning | return of Lehman | |
| | | | of period nominal | Brothers Aaa | |
| | | | spread of Lehman | 8.5+ CMBS Index | |
| | | | Brothers AAA | adjusted by | |
| | | | 8.5+ Commercial | modified | |
| | | | Mortgage Backed | duration factor | |
| | | | Securities Index | | |
|
| |
| Total | | | | | $ (839,836) |
| |
| (F) Security is valued at fair value following procedures approved by the Trustees. | | |
52
| | | | | | | |
| CREDIT DEFAULT CONTRACTS OUTSTANDING at 7/31/07 | | | | | | |
| |
| | 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. | | | | | | | |
| DJ ABX NA CMBX BBB Index | $— | | $8,630,000 | | 10/12/52 | (134 bp) | $ 759,940 |
|
| DJ CDX NA IG Series 8 | | | | | | | |
| Index | (17,052) | | 29,422,052 | (F) | 6/20/17 | (60 bp) | 279,938 |
|
| DJ CDX NA IG Series 8 | | | | | | | |
| Index | (224,334) | | 61,829,334 | (F) | 6/20/17 | (60 bp) | 397,877 |
|
| L-3 Communications | | | | | | | |
| Corp. 7 5/8%, 6/15/12 | — | | 295,000 | | 6/20/11 | (101 bp) | 16,299 |
|
| Bear, Stearns International, Ltd. | | | | | | | |
| DJ ABX NA CMBX BBB Index | — | | 10,355,408 | | 10/12/52 | (134 bp) | 914,189 |
|
| Citibank, N.A. | | | | | | | |
| CMS Energy Corp., | | | | | | | |
| 6.875%, 12/15/15 | — | | 1,550,000 | | 6/20/12 | 57 bp | (66,405) |
|
| DJ CDX NA IG Series 6 | | | | | | | |
| Index | 11,681 | | 11,343,319 | | 6/20/13 | (50 bp) | 229,886 |
|
| DJ CDX NA IG Series 6 | | | | | | | |
| Index 7-10% tranche | — | | 11,355,000 | | 6/20/13 | 45.75 bp | (559,418) |
|
| Credit Suisse International | | | | | | | |
| Sprint Capital Corp, 8 | | | | | | | |
| 3/8%, 3/15/12 | — | | 2,655,000 | | 6/20/12 | (59 bp) | 22,439 |
|
| Deutsche Bank AG | | | | | | | |
| DJ CDX NA IG Series 7 | (1) | | 3,591,001 | | 12/20/13 | (50 bp) | 97,375 |
|
| DJ CDX NA IG Series 7 | | | | | | | |
| Index 7-10% tranche | — | | 3,591,000 | (F) | 12/20/13 | 55 bp | (158,932) |
|
| DJ CDX NA IG Series 8 | | | | | | | |
| Index 30-100% tranche | — | | 132,500,000 | | 6/20/12 | (8.5 bp) | 142,463 |
|
| DJ CDX NA IG Series 8 | | | | | | | |
| Index 7-10% tranche | — | | 3,278,000 | (F) | 6/20/12 | 22 bp | (87,665) |
|
| France Telecom, 7.25%, | | | | | | | |
| 1/28/13 | — | | 1,870,000 | | 6/20/16 | 70 bp | 19,199 |
|
| Goldman Sachs International | | | | | | | |
| Any one of the | | | | | | | |
| underlying securities | | | | | | | |
| in the basket of BB | | | | | | | |
| CMBS securities | — | | 8,582,000 | | (a) | 2.461% | 51,902 |
|
| DJ CDX NA HY Series 8 | | | | | | | |
| Index | (84,465) | | 5,384,210 | (F) | 6/20/10 | 275 bp | (235,777) |
|
| DJ CDX NA IG Series 7 | | | | | | | |
| Index | (2) | | 5,989,002 | | 12/20/13 | (50 bp) | 78,564 |
|
| DJ CDX NA IG Series 7 | | | | | | | |
| Index | 9,321 | | 13,829,679 | | 12/20/13 | (50 bp) | 192,288 |
|
| DJ CDX NA IG Series 7 | | | | | | | |
| Index 7-10% tranche | — | | 5,989,000 | | 12/20/13 | 56 bp | (318,834) |
|
| DJ CDX NA IG Series 7 | | | | | | | |
| Index 7-10% tranche | — | | 13,839,000 | | 12/20/13 | 48 bp | (776,921) |
|
| DJ CDX NA IG Series 8 | | | | | | | |
| Index | (23) | | 29,410,023 | (F) | 6/20/17 | (60 bp) | 641,115 |
|
| DJ CDX NA IG Series 8 | | | | | | | |
| Index | (241,326) | | 57,576,326 | (F) | 6/20/17 | (60 bp) | 1,008,577 |
|
| Lehman Brothers | | | | | | | |
| Holdings, 6 5/8%, | | | | | | | |
| 1/18/12 | — | | 1,585,000 | | 9/20/17 | (67.8 bp) | 29,197 |
|
| Lehman Brothers | | | | | | | |
| Holdings, 6 5/8%, | | | | | | | |
| 1/18/12 | — | | 1,585,000 | | 9/20/12 | 55 bp | (19,218) |
|
| Merrill Lynch & Co., | | | | | | | |
| 5%, 1/15/15 | — | | 1,585,000 | | 9/20/12 | 48 bp | (17,229) |
|
| Merrill Lynch & Co., | | | | | | | |
| 5%, 1/15/15 | — | | 1,585,000 | | 9/20/17 | (59.8 bp) | 27,089 |
|
53
| | | | | | | |
| CREDIT DEFAULT CONTRACTS OUTSTANDING at 7/31/07 continued | | | | |
| |
| |
| | Upfront | | | | | Fixed payments | Unrealized |
| Swap counterparty / | premium | | Notional | | Termination | received (paid) by | appreciation/ |
| Referenced debt* | received (paid)** | | amount | | date | fund per annum | (depreciation) |
|
| JPMorgan Chase Bank, N.A. | | | | | | | |
| DJ CDX NA CMBX AAA Index | $ — | | $11,440,000 | | 3/15/49 | (7 bp) | $ 184,420 |
|
| Lehman Brothers Special Financing, Inc. | | | | | | |
| Bear Stearns Co. Inc., | | | | | | | |
| 5.3%, 10/30/15 | — | | 1,585,000 | | 9/20/12 | 63.5 bp | (25,063) |
|
| Bear Stearns Co. Inc., | | | | | | | |
| 5.3%, 10/30/15 | — | | 1,585,000 | | 9/20/17 | (77 bp) | 37,985 |
|
| CMS Energy Corp., | | | | | | | |
| 6.875%, 12/15/15 | — | | 390,000 | | 6/20/12 | 62 bp | (15,880) |
|
| DJ ABX NA CMBX BBB Index | — | | 2,400,000 | (F) | 10/12/52 | (134 bp) | 194,255 |
|
| DJ CDX NA CMBX AAA Index | — | | 25,390,000 | | 3/15/49 | (7 bp) | 497,643 |
|
| DJ CDX NA HY Series 8 | | | | | | | |
| Index | 30,420 | | 1,997,580 | | 6/20/10 | (275 bp) | 88,555 |
|
| DJ CDX NA HY Series 8 | | | | | | | |
| Index 15-25% tranche | — | | 2,535,000 | (F) | 6/20/10 | 80 bp | (184,069) |
|
| DJ CDX NA HY Series 8 | | | | | | | |
| Index 35-60% tranche | — | | 132,500,000 | | 6/20/12 | 275 bp | 3 |
|
| DJ CDX NA HY Series 8 | | | | | | | |
| Index 35-60% tranche | — | | 87,633,000 | | 6/20/12 | 104 bp | (5,831,122) |
|
| DJ CDX NA IG Series 7 | | | | | | | |
| Index | 3,381 | | 5,696,619 | (F) | 12/20/13 | (50 bp) | 113,486 |
|
| DJ CDX NA IG Series 7 | | | | | | | |
| Index 7-10% tranche | — | | 5,700,000 | (F) | 12/20/13 | 54.37 bp | (301,334) |
|
| DJ CDX NA IG Series 8 | | | | | | | |
| Index | 333,720 | | 17,236,280 | | 6/20/14 | 45 bp | — |
|
| DJ CDX NA IG Series 8 | | | | | | | |
| Index 30-100% tranche | — | | 48,198,150 | | 6/20/12 | (3.125 bp) | 202,558 |
|
| DJ CDX NA IG Series 8 | | | | | | | |
| Index 30-100% tranche | — | | 39,434,850 | | 6/20/12 | (8 bp) | 82,844 |
|
| DJ CDX NA IG Series 8 | | | | | | | |
| Index 7-10% tranche | — | | 5,020,000 | | 6/20/14 | (152 bp) | — |
|
| Goldman Sachs Group, | | | | | | | |
| Inc., 6.6%, 1/15/12 | — | | 1,585,000 | | 9/20/12 | 45.5 bp | (19,024) |
|
| Goldman Sachs Group, | | | | | | | |
| Inc., 6.6%, 1/15/12 | — | | 1,585,000 | | 9/20/17 | (58 bp) | 29,243 |
|
| Hilton Hotels, 7 5/8%, | | | | | | | |
| 12/1/12 | — | | 1,465,000 | | 6/20/13 | 94 bp | (160,964) |
|
| Morgan Stanley Dean | | | | | | | |
| Witter, 6.6% 4/1/12 | — | | 1,585,000 | | 9/20/12 | 48 bp | (18,608) |
|
| Morgan Stanley Dean | | | | | | | |
| Witter, 6.6% 4/1/12 | — | | 1,585,000 | | 9/20/17 | (60.5 bp) | 30,919 |
|
| Morgan Stanley Capital Services, Inc. | | | | | | | |
| DJ ABX NA CMBX BBB Index | — | | 3,602,500 | | 10/12/52 | (134 bp) | 302,909 |
|
| DJ CDX NA HY Series 8 | | | | | | | |
| Index | (6,179) | | 418,117 | (F) | 6/20/10 | 275 bp | (15,219) |
|
| DJ CDX NA HY Series 8 | | | | | | | |
| Index | (30,942) | | 2,093,717 | | 6/20/10 | 275 bp | (89,836) |
|
| DJ CDX NA HY Series 8 | | | | | | | |
| Index | 152,328 | | 10,002,872 | | 6/20/10 | (275 bp) | 442,267 |
|
| DJ CDX NA HY Series 8 | | | | | | | |
| Index | 667,044 | | 34,448,956 | | 6/20/14 | 45 bp | — |
|
| DJ CDX NA HY Series 8 | | | | | | | |
| Index | (16,683) | | 1,075,046 | | 6/20/10 | 275 bp | (46,820) |
|
| DJ CDX NA HY Series 8 | | | | | | | |
| Index 0-15% tranche | (65,057) | | 699,757 | (F) | 6/20/10 | 0 bp | 71,404 |
|
| DJ CDX NA HY Series 8 | | | | | | | |
| Index 0-15% tranche | (12,833) | | 139,583 | (F) | 6/20/10 | 0 bp | 14,418 |
|
| DJ CDX NA HY Series 8 | | | | | | | |
| Index 0-25% tranche | — | | 12,694,000 | | 6/20/10 | 79 bp | (924,684) |
|
| DJ CDX NA IG Series 7 | | | | | | | |
| Index | 3,692 | | 6,214,308 | (F) | 12/20/13 | (50 bp) | 123,803 |
|
54
| | | | | | | |
| CREDIT DEFAULT CONTRACTS OUTSTANDING at 7/31/07 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. continued | | | | | | |
| DJ CDX NA IG Series 7 | | | | | | | |
| Index, 7-10% tranche | $— | | $ 6,218,000 | (F) | 12/20/13 | 53 bp | $ (333,171) |
|
| DJ CDX NA IG Series 8 | | | | | | | |
| Index | — | | 29,370,000 | (F) | 6/20/17 | (60 bp) | 296,637 |
|
| DJ CDX NA IG Series 8 | | | | | | | |
| Index 7-10% tranche | — | | 40,130,000 | | 6/20/14 | (156 bp) | — |
|
| Total | | | | | | | $(2,584,507) |
* 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 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.
(F) Security is valued at fair value following procedures approved by the Trustees.
The accompanying notes are an integral part of these financial statements.
55
Statement of assets and liabilities 7/31/07
| |
| ASSETS | |
|
| Investment in securities, at value, including $252,199,290 of securities on loan (Note 1): | |
| Unaffiliated issuers (identified cost $4,484,872,900) | $4,786,268,460 |
| Affiliated issuers (identified cost $417,711,345) (Note 5) | 417,711,345 |
|
| Cash | 13,855,321 |
|
| Dividends, interest and other receivables | 10,633,617 |
|
| Receivable for shares of the fund sold | 2,069,050 |
|
| Receivable for securities sold | 26,316,503 |
|
| Receivable for sales of delayed delivery securities (Note 1) | 161,841,737 |
|
| Receivable for custodian fees (Note 2) | 30,697 |
|
| Unrealized appreciation on swap contracts (Note 1) | 40,568,104 |
|
| Receivable for variation margin (Note 1) | 4,662,484 |
|
| Premium paid on swap contracts (Note 1) | 698,897 |
|
| Receivable for open swap contracts (Note 1) | 966,862 |
|
| Receivable for closed swap contracts (Note 1) | 5,055,220 |
|
| Total assets | 5,470,678,297 |
| |
| |
| LIABILITIES | |
|
| Payable for securities purchased | 36,474,156 |
|
| Payable for purchases of delayed delivery securities (Note 1) | 682,802,221 |
|
| Payable for shares of the fund repurchased | 6,401,842 |
|
| Payable for compensation of Manager (Notes 2 and 5) | 5,424,007 |
|
| Payable for investor servicing (Note 2) | 731,196 |
|
| Payable for Trustee compensation and expenses (Note 2) | 521,616 |
|
| Payable for administrative services (Note 2) | 9,966 |
|
| Payable for distribution fees (Note 2) | 1,246,214 |
|
| Payable for closed swap contracts (Note 1) | 2,890,423 |
|
| Written options outstanding, at value (premiums received $20,599,166) (Notes 1 and 3) | 23,375,779 |
|
| Unrealized depreciation on swap contracts (Note 1) | 56,637,700 |
|
| Premiums received on swap contracts (Note 1) | 1,211,587 |
|
| TBA sales commitments, at value (proceeds receivable $161,467,367) (Note 1) | 162,227,165 |
|
| Collateral on securities loaned, at value (Note 1) | 258,089,002 |
|
| Other accrued expenses | 541,406 |
|
| Total liabilities | 1,238,584,280 |
|
| Net assets | $4,232,094,017 |
|
| |
| REPRESENTED BY | |
|
| Paid-in capital (Unlimited shares authorized) (Notes 1 and 4) | $3,654,894,761 |
|
| Undistributed net investment income (Note 1) | 19,171,952 |
|
| Accumulated net realized gain on investments (Note 1) | 268,377,587 |
|
| Net unrealized appreciation of investments | 289,649,717 |
|
| Total — Representing net assets applicable to capital shares outstanding | $4,232,094,017 |
(Continued on next page)
56
Statement of assets and liabilities (Continued)
| |
| COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE | |
| Net asset value and redemption price per class A share ($3,184,270,872 divided by 175,972,443 shares) | $18.10 |
|
| Offering price per class A share (100/94.75 of $18.10)* | $19.10 |
|
| Net asset value and offering price per class B share ($413,531,760 divided by 23,104,240 shares)** | $17.90 |
|
| Net asset value and offering price per class C share ($69,893,496 divided by 3,889,061 shares)** | $17.97 |
|
| Net asset value and redemption price per class M share ($176,992,968 divided by 9,892,212 shares) | $17.89 |
|
| Offering price per class M share (100/96.75 of $17.89)* | $18.49 |
|
| Net asset value, offering price and redemption price per class R share ($2,043,935 divided by 113,331 shares) | $18.04 |
|
| Net asset value, offering price and redemption price per class Y share ($385,360,986 divided by 21,232,007 shares) | $18.15 |
|
* 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.
57
Statement of operations Year ended 7/31/07
| |
| INVESTMENT INCOME | |
|
| Interest (including interest income of $14,801,846 from investments in affiliated issuers) (Note 5) | $ 102,172,691 |
|
| Dividends | 57,469,772 |
|
| Securities lending | 790,928 |
|
| Total investment income | 160,433,391 |
|
| |
| EXPENSES | |
|
| Compensation of Manager (Note 2) | 22,129,635 |
|
| Investor servicing fees (Note 2) | 8,712,790 |
|
| Custodian fees (Note 2) | 401,310 |
|
| Trustee compensation and expenses (Note 2) | 172,383 |
|
| Administrative services (Note 2) | 74,521 |
|
| Distribution fees — Class A (Note 2) | 8,184,368 |
|
| Distribution fees - Class B (Note 2) | 5,340,309 |
|
| Distribution fees - Class C (Note 2) | 719,741 |
|
| Distribution fees - Class M (Note 2) | 1,416,043 |
|
| Distribution fees - Class R (Note 2) | 9,391 |
|
| Other | 1,043,286 |
|
| Non-recurring costs (Notes 2 and 6) | 12,549 |
|
| Costs assumed by Manager (Notes 2 and 6) | (12,549) |
|
| Fees waived and reimbursed by Manager (Note 5) | (269,766) |
|
| Total expenses | 47,934,011 |
|
| Expense reduction (Note 2) | (945,620) |
|
| Net expenses | 46,988,391 |
|
| Net investment income | 113,445,000 |
|
| Net realized gain on investments (Notes 1 and 3) | 456,034,769 |
|
| Net realized gain on swap contracts (Note 1) | 17,549,992 |
|
| Net realized gain on futures contracts (Note 1) | 7,883,868 |
|
| Net realized gain on written options (Notes 1 and 3) | 6,029,127 |
|
| Net unrealized appreciation of assets and liabilities in foreign currencies during the year | 46,409 |
|
| Net unrealized depreciation of investments, futures contracts, swap contracts, written options, | |
| and TBA sale commitments during the year | (121,525,410) |
|
| Net gain on investments | 366,018,755 |
|
| Net increase in net assets resulting from operations | $ 479,463,755 |
The accompanying notes are an integral part of these financial statements.
58
Statement of changes in net assets
| | |
| DECREASE IN NET ASSETS | | |
|
| | Year ended | Year ended |
| | 7/31/07 | 7/31/06 |
|
| Operations: | | |
| Net investment income | $ 113,445,000 | $ 107,694,371 |
|
| Net realized gain on investments and foreign currency transactions | 487,497,756 | 345,651,269 |
|
| Net unrealized depreciation of investments and assets and liabilities in foreign currencies | (121,479,001) | (276,612,677) |
|
| Net increase in net assets resulting from operations | 479,463,755 | 176,732,963 |
|
| Distributions to shareholders: (Note 1) | | |
|
| From ordinary income | | |
|
| Net investment income | | |
|
| Class A | (91,249,673) | (90,591,899) |
|
| Class B | (10,953,381) | (15,898,776) |
|
| Class C | (1,475,085) | (1,499,446) |
|
| Class M | (4,389,598) | (4,675,982) |
|
| Class R | (46,016) | (25,114) |
|
| Class Y | (14,027,385) | (17,912,483) |
|
| Net realized short-term gain on investments | | |
|
| Class A | (49,126,952) | (4,165,494) |
|
| Class B | (8,659,988) | (1,042,091) |
|
| Class C | (1,078,286) | (95,268) |
|
| Class M | (2,920,573) | (264,982) |
|
| Class R | (25,984) | (993) |
|
| Class Y | (7,848,561) | (806,000) |
|
| From net realized long-term gain on investments | | |
|
| Class A | (209,675,856) | (64,836,816) |
|
| Class B | (36,961,186) | (16,220,380) |
|
| Class C | (4,602,171) | (1,482,867) |
|
| Class M | (12,465,127) | (4,124,503) |
|
| Class R | (110,903) | (15,451) |
|
| Class Y | (33,497,980) | (12,545,570) |
|
| Redemption fees (Note 1) | 9,895 | 9,454 |
|
| Decrease from capital share transactions (Note 4) | (291,093,564) | (738,162,782) |
|
| Total decrease in net assets | (300,734,619) | (797,624,480) |
|
| |
| NET ASSETS | | |
|
| Beginning of year | 4,532,828,636 | 5,330,453,116 |
|
| End of year (including undistributed net investment income of $19,171,952 and $15,088,106, respectively) | $4,232,094,017 | $4,532,828,636 |
The accompanying notes are an integral part of these financial statements.
59
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 | | realized and | Total | From | From | | | Net asset | return | Net | Ratio of | investment | |
| | value, | Net | unrealized | from | net | net realized | | | value, | at net | assets, | expenses to | income (loss) | Portfolio |
| | beginning | investment | gain (loss) on | investment | investment | gain on | Total | Redemption | end | asset | end of period | average net | to average | turnover |
| Period ended | of period | income (loss)(a) | investments | operations | income | investments | distributions | fees | of period | value (%)(b) | (in thousands) | assets (%)(c) | net assets (%) | (%) |
|
| CLASS A | | | | | | | | | | | | | | |
| July 31, 2007 | $18.21 | .48(d) | 1.46 | 1.94 | (.52) | (1.53) | (2.05) | —(g) | $18.10 | 10.99 | $3,184,271 | .96(d) | 2.61(d) | 144.33(h) |
| 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) |
|
| |
| CLASS B | | | | | | | | | | | | | | |
| July 31, 2007 | $18.02 | .33(d) | 1.46 | 1.79 | (.38) | (1.53) | (1.91) | —(g) | $17.90 | 10.15 | $413,532 | 1.71(d) | 1.82(d) | 144.33(h) |
| 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) |
|
| |
| CLASS C | | | | | | | | | | | | | | |
| July 31, 2007 | $18.09 | .34(d) | 1.45 | 1.79 | (.38) | (1.53) | (1.91) | —(g) | $17.97 | 10.16 | $69,893 | 1.71(d) | 1.86(d) | 144.33(h) |
| 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) |
|
| |
| CLASS M | | | | | | | | | | | | | | |
| July 31, 2007 | $18.02 | .38(d) | 1.45 | 1.83 | (.43) | (1.53) | (1.96) | —(g) | $17.89 | 10.42 | $176,993 | 1.46(d) | 2.10(d) | 144.33(h) |
| 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) |
|
| |
| CLASS R | | | | | | | | | | | | | | |
| July 31, 2007 | $18.15 | .44(d) | 1.46 | 1.90 | (.48) | (1.53) | (2.01) | —(g) | $18.04 | 10.76 | $2,044 | 1.21(d) | 2.38(d) | 144.33(h) |
| 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, 2007 | $18.26 | .53(d) | 1.46 | 1.99 | (.57) | (1.53) | (2.10) | —(g) | $18.15 | 11.24 | $385,361 | .71(d) | 2.86(d) | 144.33(h) |
| 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) |
|
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 Money Market Fund during the period. As a result of such waivers, the expenses of each class reflect a reduction of the following amounts (Note 5):
| |
| | Percentage |
| | of average |
| | net assets |
|
| July 31, 2007 | <0.01% |
|
| July 31, 2006 | 0.01 |
|
| July 31, 2005 | 0.01 |
|
| July 31, 2004 | <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 $0.01 per share and 0.05% of average net assets for the period ended July 31, 2006.
(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:
| | |
| | | Percentage |
| | | of average |
| | 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.
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Notes to financial statements 7/31/07
Note 1: Significant accounting policies
The George Putnam Fund of Boston (the “fund”), a Massachusetts business trust, is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The fund seeks to provide a balanced investment comprised of a well-diversified portfolio of stocks and bonds, which will produce both capital growth and current income.
The fund offers class A, class B, class C, class M, class R and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 5.25% and 3.25%, respectively, and 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, ar e generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee. Class Y shares are sold to certain eligible purchasers including certain defined contribution plans (including corporate IRAs), bank trust departments, trust companies, other Putnam funds and products, and certain college savings plans.
Effective October 2, 2006, a 1.00% redemption fee may apply 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. The redemption fee is accounted for as an addition to paid-in-capital. Prior to October 2, 2006, a 2.00% redemption fee applied to any shares that were redeemed (either by selling or exchanging into another fund) within 5 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. 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 tran sactions for comparable securities and various relationships, generally recognized by institutional traders, between securities. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. Accordingly, on certain days, the fund will fair value foreign 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. Certain investments, including certain restricted securities and derivatives, are also valued at fair value following proce dures 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 different by a material amount.
B) Joint trading account Pursuant to an exemptive order from the Securities and Exchange Commission (the “SEC”), the fund may transfer uninvested cash balances, including cash collateral received under security lending arrangements, into a joint trading account along with the cash of other registered investment companies and certain other accounts managed by Putnam Management. These balances may be invested in issues of high-grade short-term investments having maturities of up to 397 days for collateral received under security lending arrangements and up to 90 days for other cash investments.
C) Repurchase agreements The fund, or any joint trading account, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. Collateral for certain tri-party repurchase agreements is held at the counterparty’s custodian in a segregated account for the benefit of the fund and the counterparty. Putnam Management is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest.
63
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. 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 may be settled a month or more after the trade date; interest income is accrued based on the terms of the securities. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.
E) 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 r epresent 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 mar ket 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 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 re corded 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
64
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 losses. 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 losses. 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 re cognized on the Statement of assets and liabilities. Interest rate swap contracts outstanding at period end, if any, are listed after the fund’s portfolio.
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 counterparty, 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. Payments are made upon a credit default event of the disclosed primary referenced obligation or all other equally ranked obligations of the reference entity. 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 decline in the value of the fund’s other assets. Unsettled TBA purchase commitments are valued at fair value of the underlying securities, according to the procedures described under “Security valuation” above. The contract is marked to market daily and the change in market value is recorded by the fund as an unrealized gain or loss.
Although the fund will generally enter into TBA purchase commitments with the intention of acquiring securities for its portfolio or for delivery pursuant to options contracts it has entered into, the fund may dispose of a commitment prior to settlement if Putnam Management deems it appropriate to do so.
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 the fair value of the underlying securities, generally according to the procedures described under “Security valuation” above. The contract is marked to market daily and the change in market value is recorded by the fund as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the fund realizes a gain or loss. If the fund delivers securities under the commitment, the fund realizes a gain or a loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. TBA sale commitments outstanding at period end, if any, are listed after the fund’s portfolio.
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) Securities 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
65
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, 2007, the value of securities loaned amounted to $252,199,290. The fund received cash collateral of $258,089,002 which is pooled with collateral of other Putnam funds into 55 issues of short-term investments. The fund also received high-quality, highly-rated securities of $1,669,850 in non-cash collateral.
P) Federal taxes It is the policy of the fund to distribute all of its taxable income within the prescribed time and otherwise comply with the provisions of the Internal Revenue Code of 1986 (the “Code”) applicable to regulated investment companies. It is also the intention of the fund to distribute an amount sufficient to avoid imposition of any excise tax under Section 4982 of the Code, as amended. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains.
At July 31, 2007, the fund had a capital loss carryover of $23,801,180 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 |
|
| $17,850,860 | 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/or permanent differences of losses on wash sale transactions, unrealized gains and losses on certain futures contracts, income on swap contracts, and interest only securities. Reclassifications are made to the fund’s capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. For the year ended July 31, 2007, the fund r eclassified $12,779,984 to increase undistributed net investment income and $208,319 to decrease paid-in-capital, with a decrease to accumulated net realized gains of $12,571,665.
The tax basis components of distributable earnings and the federal tax cost as of July 31, 2007 were as follows:
| |
| Unrealized appreciation | $ 421,488,534 |
| Unrealized depreciation | (146,650,860) |
| | ——————— |
| Net unrealized appreciation | 274,837,674 |
| Undistributed ordinary income | 11,682,981 |
| Undistributed short-term gain | 130,680,489 |
| Undistributed long-term gain | 195,926,958 |
| Capital loss carryforward | (23,801,180) |
| Cost for federal income tax purposes | $4,929,142,131 |
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 June 30, 2009 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, 2007, Putnam Management did not waive any of its management fee from the fund.
Effective August 3, 2007, Marsh & McLennan Companies, Inc. sold its ownership interest in Putnam Management, its parent companies and affiliates to a wholly-owned subsidiary of Great-West Lifeco, Inc. The fund’s shareholders have approved a new management contract for the fund that became effective upon the sale.
For the year ended July 31, 2007, Putnam Management has assumed $12,549 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).
In July 2006, questions arose regarding a potential misidentification of the characteristics of certain securities then in the fund’s portfolio, and the value of these securities was adjusted. The fund currently expects to be reimbursed for losses relating to this matter by Putnam. The amount of such reimbursement has not yet been determined, but is not expected to be material to the fund.
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 were provided by Putnam Fiduciary Trust Company (“PFTC”), a subsidiary of Putnam, LLC, and by State Street Bank and Trust Company. Custody fees are based on the fund’s asset level, the number of its security holdings and transaction volumes. Putnam Investor Services, a division of PFTC, provided investor servicing agent functions to the fund. Putnam Investor Services received fees for investor servicing, subject to certain limitations, 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, 2007, the fund incurred $9,061,610 for custody and investor servicing agent functions provided by PFTC.
The fund has entered into arrangements with PFTC and State Street Bank and Trust Company whereby PFTC’s and State Street Bank and Trust Company’s fees are reduced by credits allowed on cash balances. The fund also reduced expenses through brokerage service arrangements For the year ended July 31, 2007, the fund’s expenses were reduced by $945,620 under these arrangements.
66
Each independent Trustee of the fund receives an annual Trustee fee, of which $1,101, 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 and 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 was not an independent Trustee during the period, also receives the foregoing fees for his services as Trustee.
The fund has adopted a Trustee Fee Deferral Plan (the “Deferral Plan”) which allows the Trustees to defer the receipt of all or a portion of Trustees fees payable on or after July 1, 1995. The deferred fees remain invested in certain Putnam funds until distribution in accordance with the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan (the “Pension Plan”) covering all Trustees of the fund who have served as a Trustee for at least five years 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. The retirement benefit is payable during a Trustee’s lifetime, beginning the year following retirement, for the number of years of service through December 31, 2006. Pension expense for the fund is included in Trustee compensation and expenses in the Statement of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statement of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.
The fund has adopted distribution plans (the “Plans”) with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management, a wholly-owned subsidiary of Putnam, LLC and Putnam Retail Management GP, Inc., for services provided and expenses incurred in distributing shares of the fund. The Plans provide for payments by the fund to Putnam Retail Management at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by the fund at an annual rate of 0.25%, 1.00%, 1.00%, 0.75% and 0.50% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively.
For the year ended July 31, 2007, Putnam Retail Management, acting as underwriter, received net commissions of $140,998 and $1,700 from the sale of class A and class M shares, respectively, and received $436,895 and $4,809 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, 2007, Putnam Retail Management, acting as underwriter, received $2,235 and no monies on class A and class M redemptions, respectively.
Note 3: Purchases and sales of securities
During the year ended July 31, 2007, cost of purchases and proceeds from sales of investment securities other than U.S. government securities and short-term investments aggregated $5,900,123,128 and $6,632,615,146, respectively. Purchases and sales of U.S. government securities aggregated $15,248,639 and $48,578,873, respectively.
Written option transactions during the year ended July 31, 2007 are summarized as follows:
| | |
| | Contract | Premiums |
| | Amounts | Received |
|
| Written options outstanding | | |
| at beginning of year | $ 218,802,000 | $ 8,198,261 |
|
| Options opened | 890,437,670 | 18,507,920 |
| Options exercised | — | — |
| Options expired | (153,640,000) | (5,942,027) |
| Options closed | (670) | (164,988) |
|
| Written options outstanding | | |
| at end of year | $ 955,599,000 | $20,599,166 |
Note 4: Capital shares
At July 31, 2007, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:
| | |
| CLASS A | Shares | Amount |
|
| Year ended 7/31/07: | | |
| Shares sold | 23,421,130 | $ 433,162,178 |
|
| Shares issued in connection with | | |
| reinvestment of distributions | 18,272,904 | 327,594,319 |
|
| | 41,694,034 | 760,756,497 |
|
| Shares repurchased | (39,049,327) | (721,568,081) |
|
| Net increase | 2,644,707 | $ 39,188,416 |
| |
| 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) |
|
| |
| CLASS B | Shares | Amount |
|
| Year ended 7/31/07: | | |
| Shares sold | 1,887,613 | $ 34,439,247 |
|
| Shares issued in connection with | | |
| reinvestment of distributions | 3,010,636 | 53,337,927 |
|
| | 4,898,249 | 87,777,174 |
|
| Shares repurchased | (16,425,410) | (301,276,907) |
|
| Net decrease | (11,527,161) | $(213,499,733) |
| |
| 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) |
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| | |
| CLASS C | Shares | Amount |
|
| Year ended 7/31/07: | | |
| Shares sold | 531,413 | $ 9,727,607 |
|
| Shares issued in connection with | | |
| reinvestment of distributions | 355,895 | 6,334,457 |
|
| | 887,308 | 16,062,064 |
|
| Shares repurchased | (877,503) | (16,137,789) |
|
| Net increase/decrease | 9,805 | $ (75,725) |
| |
| 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) |
|
| |
| CLASS M | Shares | Amount |
|
| Year ended 7/31/07: | | |
| Shares sold | 1,119,120 | $ 20,403,582 |
|
| Shares issued in connection with | | |
| reinvestment of distributions | 1,102,506 | 19,543,155 |
|
| | 2,221,626 | 39,946,737 |
|
| Shares repurchased | (2,724,559) | (49,604,364) |
|
| Net decrease | (502,933) | $ (9,657,627) |
| |
| 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) |
|
| |
| CLASS R | Shares | Amount |
|
| Year ended 7/31/07: | | |
| Shares sold | 86,222 | $ 1,563,590 |
|
| Shares issued in connection with | | |
| reinvestment of distributions | 10,185 | 182,106 |
|
| | 96,407 | 1,745,696 |
|
| Shares repurchased | (67,100) | (1,193,503) |
|
| Net increase | 29,307 | $ 552,193 |
| |
| 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 |
| | |
| CLASS Y | Shares | Amount |
|
| Year ended 7/31/07: | | |
| | |
| Shares sold | 4,345,678 | $ 80,647,628 |
|
| Shares issued in connection with | | |
| reinvestment of distributions | 3,083,571 | 55,373,926 |
|
| | 7,429,249 | 136,021,554 |
|
| Shares repurchased | (13,254,383) | (243,622,642) |
|
| Net decrease | (5,825,134) | $(107,601,088) |
| |
| 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) |
Note 5: Investment in Putnam Prime Money Market Fund
The fund invests in Putnam Prime Money Market Fund, an open-end management investment company managed by Putnam Management. Investments in Putnam Prime Money Market Fund are valued at its closing net asset value each business day. 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, 2007, management fees paid were reduced by $269,766 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 $14,801,846 for the year ended July 31, 2007. During the year ended July 31, 2007, cost of purchases and proceeds of sales of investments in Putnam Prime Money Market Fund aggregated $1,324,756,404 and $1,355,064,970, respectiv ely.
Note 6: Regulatory matters and litigation
In late 2003 and 2004, Putnam Management settled charges brought by the Securities and Exchange Commission (the “SEC”) and the Massachusetts Securities Division in connection with excessive short-term trading in Putnam funds. Payments from Putnam Management will be distributed to certain open-end Putnam funds and their shareholders. These allegations and related matters have served as the general basis for certain lawsuits, including purported class action lawsuits against Putnam Management and, in a limited number of cases, some Putnam funds. Putnam Management believes that these lawsuits will have no material adverse effect on the funds or on Putnam Management’s ability to provide investment management services. In addition, Putnam Management has agreed to bear any costs incurred by the Putnam funds as a result of these matters.
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
68
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 pronouncements
In June 2006, the Financial Accounting Standards Board (“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 is not expected to have a material effect on the fund’s financial statements. However, the conclusions regarding the Interpretation may be subject to review and adjustment at a later date based on factors including, but not limited to, further implementation guidance expected from the FASB, and on-going analysis of tax laws, regulations and interpretations thereof.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (the “Standard”). The Standard defines fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. The Standard applies to fair value measurements already required or permitted by existing standards. The Standard is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Putnam Management is currently evaluating what impact the adoption of the Standard will have on the fund’s financial statements.
69
Federal tax information and brokerage commissions (unaudited)
Federal tax information
Pursuant to Section 852 of the Internal Revenue Code, as amended, the fund hereby designates $288,114,461 as long-term capital gain, for its taxable year ended July 31, 2007.
The fund designated 19.02% of ordinary income distributions as qualifying for the dividends received deduction for corporations.
For its tax year ended July 31, 2007, the fund hereby designates 19.46%, 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 2008 will show the tax status of all distributions paid to your account in calendar 2007.
Brokerage commissions
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, 2007. 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) Merrill Lynch, Goldman Sachs, Morgan Stanley Dean Witter, UBS Warburg, and Citigroup Global Markets. Commissions paid to these firms together represented approximately 48% of the total brokerage commissions paid for the year ended July 31, 2007.
Commissions paid to the next 10 firms together represented approximately 36% of the total brokerage commissions paid during the period. These firms are (in alphabetical order) Bear Stearns & Company, Credit Suisse First Boston, Deutsche Bank Securities, JPMorgan Clearing, Lazard Freres & Co., Lehman Brothers, Pipeline, 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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Shareholder meeting
results (unaudited)
May 15, 2007 meeting
A proposal to approve a new management contract between the fund and Putnam Investment Management, LLC was approved as follows:
| | |
| Votes for | Votes against | Abstentions |
| 143,838,706 | 4,438,754 | 7,032,986 |
|
| All tabulations rounded to the nearest whole number. | | |
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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.
Ms. Baxter serves as a Director of ASHTA Chemicals, Inc., Ryerson, Inc. (a metals service corporation), the Mutual Fund Directors Forum, and Advocate Health Care. She is Chairman Emeritus of the Board of Trustees, Mount Holyoke College, having served as Chairman for five years. Until 2007, she was a Director of Banta Corporation (a printing and supply chain management company). Until 2004, she was a Director of BoardSource (formerly the National Center for Nonprofit Boards), and until 2002, she 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 serves as a Director of Edison International and Southern California Edison. Until 2006, Mr. Curtis served as a member of 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.
Robert J. Darretta (Born 1946), Trustee since 2007
Mr. Darretta serves as Director of UnitedHealth Group, a diversified health-care conglomerate.
Until April 2007, Mr. Darretta was Vice Chairman of the Board of Directors of Johnson & Johnson, a diversified health-care conglomerate. Prior to 2007, Mr. Darretta held several accounting and finance positions with Johnson & Johnson, including Chief Financial Officer, Executive Vice President, and Treasurer.
Mr. Darretta received a B.S. in Economics from Villanova University.
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., a director of Interactive Data Corporation (a provider of financial market data, analytics, and related services to financial institutions and individual investors), and an advisor to RCM Capital Management (an investment management firm).
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.
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 products, 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.
72
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 and various private companies controlled by First Reserve Corporation, as well as Chairman of TH Lee, Putnam Investment Trust (a closed-end investment company advised by an affiliate of Putnam Management). He is also a Trustee of Sarah Lawrence College. Until 2005, he was a Director of Continuum Health Partners of New York.
Prior to acquiring First Reserve Corporation in 1983, Mr. Hill held executive positions in investment banking and investment management with several firms and with the federal government, including Deputy Associate Director of the Office of Management and Budget and Deputy Director of the Federal Energy Administration. He is active in various business associations, including the Economic Club of New York, and lectures on energy issues in the United States and Europe. Mr. Hill holds a B.A. degree in Economics from Southern Methodist University and pursued graduate studies there as a Woodrow Wilson Fellow.
Paul L. Joskow (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 (a UK-based holding company with interests in electric and gas transmission and distribution and telecommunications infrastructure), a Director of TransCanada Corporation (an energy company focused on natural gas transmission and power services), a Director of Exelon Corporation (an energy company focused on power services), and a Member of the Board of Overseers of the Boston Symphony Orchestra. Prior to July 2006, he served as President of the Yale University Council and continues to serve as a Member of the Council. Prior to February 2005, he served on the board of the Whitehead Institute for Biomedical Research (a non-profit research institution). 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 six 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. 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. Prior to 2001, Dr. Kennan served on the oversight committee of the Folger Shakespeare Library. Prior to June 2005, she was a Director of Talbots, Inc., and 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. Dr. Kennan has also served as President of Five Colleges Incorporated, as a Trustee of Notre Dame University and is active in various educational and civic associations.
As a member of the faculty of Catholic University for twelve years, until 1978, Dr. Kennan directed the post-doctoral program in Patristic and Medieval Studies, taught history and published numerous articles. Dr. Kennan holds a Ph.D. from the University of Washington in Seattle, an M.S. from St. Hilda’s College at Oxford University and an A.B. from Mount Holyoke College. She holds several honorary doctorates.
Kenneth R. Leibler (Born 1949), Trustee since 2006
Mr. Leibler is a founding partner and former Chairman of the Boston Options Exchange, an electronic marketplace for the trading of listed derivative securities.
Mr. Leibler currently serves as a Trustee of Beth Israel Deaconess Hospital in Boston. He is also lead director of Ruder Finn Group, a global communications and advertising firm and a director of Northeast Utilities, which operates New England’s largest energy delivery system. Prior to December 2006, he served as a director of the Optimum Funds group. Prior to October 2006, he served as a director of ISO New England, the organization responsible for the operation of the electric generation system in the New England states. Prior to 2000, Mr. Leibler was a director of the Investment Company Institute in Washington, D.C.
73
Prior to January 2005, Mr. Leibler served as Chairman and Chief Executive Officer of the Boston Stock Exchange. Prior to January 2000, he served as President and Chief Executive Officer of Liberty Financial Companies, a publicly traded diversified asset management organization. Prior to June 1990, he served as President and Chief Operating Officer of the American Stock Exchange, and is the youngest person in Exchange history to hold the title of President. Prior to serving as Amex President, he held the position of Chief Financial Officer and headed its management and marketing operations. Mr. Leibler graduated magna cum laude with a degree in economics from Syracuse University, where he was elected Phi Beta Kappa.
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. 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.
George Putnam, III (Born 1951), Trustee since 1984
Mr. Putnam is Chairman of New Generation Research, Inc. (a publisher of financial advisory and other research services), and President 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. Until 2006, he was a Trustee of 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.
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).
Mr. Stephens is 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.
Richard B. Worley (Born 1945), Trustee since 2004
Mr. Worley is Managing Partner of Permit Capital LLC, an investment management firm.
Mr. Worley serves as a Trustee of the University of Pennsylvania Medical Center, The Robert Wood Johnson Foundation (a philanthropic organization devoted to health care issues), and the National Constitution Center. He is also a Director of The Colonial Williamsburg Foundation (a historical preservation organization) and the Philadelphia Orchestra Association. 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 the University of Tennessee and pursued graduate studies in economics at the University of Texas.
74
Charles E. Haldeman, Jr.* (Born 1948), Trustee since 2004
and President of the Funds since 2007
Mr. Haldeman is President and Chief Executive Officer of Putnam, LLC (“Putnam Investments”) and President of the Putnam Funds. 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 and 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 Chair of the Board of Trustees of Dartmouth College. He also serves on the Partners HealthCare Investment Committee, the Tuck School of Business and Dartmouth College Board of Overseers, and the Harvard Business School Board of Dean’s Advisors. He is a graduate of Dartmouth College, Harvard Law School and Harvard Business School. Mr. Haldeman is also a Chartered Financial Analyst (CFA) charterholder.
The address of each Trustee is One Post Office Square, Boston, MA 02109.
As of July 31, 2007, there were 104 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.
* Trustee who is or may be deemed to be an “interested person” (as defined in the Investment Company Act of 1940) of the fund, Putnam Management, and/or Putnam Retail Management. Mr. Haldeman is the President of your fund and each of the other Putnam funds, and is President and Chief Executive Officer of Putnam Investments.
75
Charles E. Porter (Born 1938)
Executive Vice President, Principal Executive Officer, Associate
Treasurer, and Compliance Liaison
Since 1989
Jonathan S. Horwitz (Born 1955)
Senior Vice President and Treasurer
Since 2004
Prior to 2004, Managing Director,
Putnam Investments
Steven D. Krichmar (Born 1958)
Vice President and Principal Financial Officer
Since 2002
Senior Managing Director, Putnam Investments
Janet C. Smith (Born 1965)
Vice President, Principal Accounting Officer and Assistant Treasurer
Since 2007
Managing Director, Putnam Investments and Putnam Management
Susan G. Malloy (Born 1957)
Vice President and Assistant Treasurer
Since 2007
Managing Director, Putnam Investments
Beth S. Mazor (Born 1958)
Vice President
Since 2002
Managing Director, Putnam Investments
James P. Pappas (Born 1953)
Vice President
Since 2004
Managing Director, Putnam Investments and Putnam Management.
During 2002, Chief Operating Officer, Atalanta/Sosnoff
Management Corporation
Richard S. Robie, III (Born 1960)
Vice President
Since 2004
Senior Managing Director, Putnam Investments, Putnam Management
and Putnam Retail Management. Prior to 2003, Senior Vice President,
United Asset Management Corporation
Francis J. McNamara, III (Born 1955)
Vice President and Chief Legal Officer
Since 2004
Senior Managing Director, Putnam Investments, Putnam Management
and Putnam Retail Management. Prior to 2004, General Counsel,
State Street Research & Management Company
Robert R. Leveille (Born 1969)
Vice President and Chief Compliance Officer
Since 2007
Managing Director, Putnam Investments, Putnam Management,
and Putnam Retail Management. Prior to 2005, member of Bell
Boyd & Lloyd LLC. Prior to 2003, Vice President and Senior Counsel,
Liberty Funds Group LLC
Mark C. Trenchard (Born 1962)
Vice President and BSA Compliance Officer
Since 2002
Managing Director, Putnam Investments
Judith Cohen (Born 1945)
Vice President, Clerk and Assistant Treasurer
Since 1993
Wanda M. McManus (Born 1947)
Vice President, Senior Associate Treasurer and Assistant Clerk
Since 2005
Nancy E. Florek (Born 1957)
Vice President, Assistant Clerk, Assistant Treasurer
and Proxy Manager
Since 2005
The address of each Officer is One Post Office Square, Boston, MA 02109.
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Fund information
Founded nearly 70 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 | Officers | Mark C. Trenchard |
| Putnam Investment | Charles E. Haldeman, Jr. | Vice President and BSA Compliance Officer |
| Management, LLC | President | |
| One Post Office Square | | Judith Cohen |
| Boston, MA 02109 | Charles E. Porter | Vice President, Clerk and Assistant Treasurer |
| | Executive Vice President, Principal | |
| Marketing Services | Executive Officer, Associate Treasurer | Wanda M. McManus |
| Putnam Retail Management | and Compliance Liaison | Vice President, Senior Associate Treasurer |
| One Post Office Square | | and Assistant Clerk |
| Boston, MA 02109 | Jonathan S. Horwitz | |
| | Senior Vice President and Treasurer | Nancy E. Florek |
| Custodian | | Vice President, Assistant Clerk, |
| State Street Bank and Trust Company | Steven D. Krichmar | Assistant Treasurer and Proxy Manager |
| Vice President and Principal Financial Officer | |
| Legal Counsel | | |
| Ropes & Gray LLP | Janet C. Smith | |
| Vice President, Principal Accounting Officer | |
| Independent Registered Public | and Assistant Treasurer | |
| Accounting Firm | | |
| PricewaterhouseCoopers LLP | Susan G. Malloy | |
| Vice President and Assistant Treasurer | |
| Trustees | | |
| John A. Hill, Chairman | Beth S. Mazor | |
| Jameson Adkins Baxter, Vice Chairman | Vice President | |
| Charles B. Curtis | | |
| Robert J. Darretta | James P. Pappas | |
| Myra R. Drucker | Vice President | |
| Charles E. Haldeman, Jr. | | |
| Paul L. Joskow | Richard S. Robie, III | |
| Elizabeth T. Kennan | Vice President | |
| Kenneth R. Leibler | | |
| Robert E. Patterson | Francis J. McNamara, III | |
| George Putnam, III | Vice President and Chief Legal Officer | |
| W. Thomas Stephens | | |
| Richard B. Worley | Robert R. Leveille | |
| Vice President and Chief Compliance Officer | |
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.
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 each of Mr. Patterson, Mr. Stephens, Mr. Leibler, Mr. Hill and Mr. Darretta meets the financial literacy requirements of the New York Stock Exchange's rules and qualifies as an "audit committee financial expert" (as such term has been defined by the Regulations) based on their review of his 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 | | Audit- | | |
| year | Audit | Related | Tax | All Other |
| ended | Fees | Fees | Fees | Fees |
| |
| July 31, 2007 | $261,656 | $313 | $9,550 | $4,535* |
| July 31, 2006 | $255,386* | $1,262 | $9,699 | $5,050 |
* Includes fees of $2,992 and $4,312 billed by the fund’s independent auditor to the fund for procedures necessitated by regulatory and litigation matters for the fiscal years ended July 31, 2007 and July 31, 2006, respectively. These fees were reimbursed to the fund by Putnam Investment Management, LLC (“Putnam Management”).
For the fiscal years ended July 31, 2007and July 31, 2006, the fund’s independent auditor billed aggregate non-audit fees in the amounts of $ 129,614 and $ 285,682 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 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. In reviewing such requests, the Committee considers, among other things, whether the provision of such services by the audit firm are compatible with the independence of the audit firm.
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, | | | | |
| 2007 | $ - | $ 26,129 | $ - | $ - |
| July 31, | | | | |
| 2006 | $ - | $153,160 | $ - | $ - |
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:
Not applicable
Item 10. Submission of Matters to a Vote of Security Holders:
Not applicable
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
Item 12. Exhibits:
(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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
The George Putnam Fund of Boston
By (Signature and Title):
/s/Janet C. Smith
Janet C. Smith
Principal Accounting Officer
Date: September 28, 2007
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, 2007
By (Signature and Title):
/s/Steven D. Krichmar
Steven D. Krichmar
Principal Financial Officer
Date: September 28, 2007
