N-CSR 1 a_georgeputfundboston.htm THE GEORGE PUTNAM FUND OF BOSTON a_georgeputfundboston.htm
UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549 
  
FORM N-CSR 
 
CERTIFIED SHAREHOLDER REPORT OF REGISTERED 
MANAGEMENT INVESTMENT COMPANIES 
 
Investment Company Act file number: (811- 00058)   
 
Exact name of registrant as specified in charter: The George Putnam Fund of Boston 
 
Address of principal executive offices: One Post Office Square, Boston, Massachusetts 02109 
 
Name and address of agent for service:  Beth S. Mazor, Vice President 
  One Post Office Square 
  Boston, Massachusetts 02109 
 
Copy to:  John W. Gerstmayr, Esq. 
  Ropes & Gray LLP 
  One International Place 
  Boston, Massachusetts 02110 
 
Registrant’s telephone number, including area code:  (617) 292-1000 
 
Date of fiscal year end: July 31, 2008     
 
Date of reporting period: August 1, 2007— July 31, 2008 

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 | 08
Annual Report

Message from the Trustees  1 
About the fund  2 
Performance and portfolio snapshots  4 
Interview with your fund’s Portfolio Leader  5 
Performance in depth.  8 
Expenses  10 
Portfolio turnover  12 
Risk  12 
Your fund’s management.  13 
Terms and definitions  14 
Trustee approval of management contract  15 
Other information for shareholders.  18 
Financial statements  19 
Federal tax information  64 
Brokerage commissions.  64 
About the Trustees  65 
Officers  68 

Cover photograph: © White-Packert Photography

Message from the Trustees

Dear Fellow Shareholder:

The past 12 months have presented the economy with a growing set of challenges, and financial markets have responded with losses across a wide range of sectors globally. It is always unsettling to see the markets and one’s investment returns declining. Times like these are a reminder of why it is important to keep a long-term perspective, to ensure that your portfolio is well diversified, and to seek the counsel of your financial representative.

At Putnam, we continually strive to offer the best investment returns, innovative products, and award-winning service to our shareholders. In keeping with this tradition, we are pleased to announce that Robert L. Reynolds, a well-known leader and visionary in the mutual fund industry, has joined the Putnam leadership team as President and Chief Executive Officer of Putnam Investments, effective July 1, 2008. Charles E. Haldeman, Jr., former President and CEO, has taken on the role of Chairman of Putnam Investment Management, LLC, the firm’s fund management company.

Mr. Reynolds brings to Putnam substantial industry experience and an outstanding record of success, including serving as Vice Chairman and Chief Operating Officer at Fidelity Investments from 2000 to 2007. We look forward to working with Bob as we continue our goal to position Putnam to exceed our shareholders’ expectations.

We would also like to take this opportunity to welcome new shareholders to the fund and to thank all of our investors for your continued confidence in Putnam.


About the fund
Providing the benefits of balanced investing for over 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 the shadow of war began to spread across Europe and Asia. Today, the credit crisis 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 this way: “Successful investing calls not so much for some clairvoyant ability to read the future as for the courage to stick to tested, commonsense 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.


Performance and portfolio snapshots

Average annual total return (%) comparison as of 7/31/08


Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 5.75%; had they, returns would have been lower. See pages 5 and 8–10 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 benchmarks and Lipper group were not in existence at the time of the fund’s inception. The S&P 500/Citigroup Value Index commenced 6/30/95. The George Putnam Blended Index commenced 6/30/95. The Lipper average commenced 12/31/59.

“We see a once-in-a-decade opportunity to
add to the fund’s holdings.”

Jeanne Mockard, Portfolio Leader,The George Putnam Fund of Boston

Allocations are represented as a percentage of net assets and may not equal 100%. Holdings and allocations may vary over time.

Equity sector allocations as of 7/31/08


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Jeanne, thanks for taking the time to sit down with us today. How did the fund perform for the 12-month period ended July 31, 2008?

It was an extremely difficult and unusual period for the fund. Because it is a balanced fund with a 60%/40% stock-bond split, when the equity portion of the portfolio underperforms, the bond portion is supposed to provide stability. During this period, both portions of the portfolio underperformed. The fund’s class A shares posted a loss of 11.84% for the period, significantly trailing its Lipper peer group, which had an average negative return of 5.73%, but outperforming the fund’s benchmark, which lost 15.86%.

Why was the decline so pronounced in comparison to the fund’s Lipper peer group and its benchmark?

The primary reason the fund trailed its Lipper peer group is that we focus on domestic value stocks plus bonds, while many of our peers invest in growth stocks and international stocks and bonds. For the period, growth outperformed value by significant margins. Among other things, growth investors had more exposure to energy, which helped performance, and less exposure to financials, which detracted from performance. The fund also trailed its secondary blended benchmark (60% S&P 500/Citigroup Value Index and 40% Lehman Aggregate Bond Index) due to stock selection.

From a sector perspective, let’s talk about what hurt performance in the fund’s equity portfolio.

The worst-performing sector in the value area was financials, followed by consumer cyclicals. Any stock tied to the housing market suffered because of the fallout from the subprime mortgage crisis, and any stock connected to the consumer was punished because of recessionary fears. From a sector-weighting standpoint, we benefited from being overweight energy and basic materials and underweight financials and consumer cyclicals. From a stock selection standpoint, however, we chose what turned out to be a number of weak performers.

Please discuss some of those weak performers.

The biggest detractor was an out-of-benchmark holding, R.H. Donnelley Corporation, a yellow pages company. Investors were concerned about its amount of leverage, slower-than-expected sales, and competition from online search engines. We continue to believe it’s a viable business for mom-and-pop companies seeking low-cost advertising. The fund maintains a small position in the

Broad market index and fund performance

This comparison shows your fund’s performance in the context of broad market indexes for the 12 months ended 7/31/08. See the previous page and pages 8–10 for additional fund performance information. Index descriptions can be found on page 14.


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stock. The second-biggest detractor was US Airways. Last fall, we felt that airline stocks were inexpensively priced. Oil hovered around $80 per barrel. The industry was seeing a recovery thanks to consolidation, reduced flights, and solid demand from the business traveler. But as oil prices rose, profit margins eroded and investors’ concerns sent shares tumbling.

Within energy, another significant detractor was the fund’s exposure to Valero Energy Corporation, the largest independent oil refiner in the U.S. market, which was hurt by rising oil prices. Valero’s refining profits — the difference between the cost of oil it purchases and the price it can get for its distillates — narrowed significantly. The most successful stocks in the energy sector during the period were the integrated companies, such as ExxonMobil, that are more diversified; not only does ExxonMobil explore and drill for oil, but it also refines it and sells it.

We were underweight financials overall, but had exposure to Wachovia Corporation and Citigroup, which disappointed during the period because of their exposure to debt associated with the subprime mortgage crisis.

Which individual holdings helped performance on a relative basis?

Our strongest performer was Terra Industries, a producer of nitrogen- and methanol-based fertilizers and other products for the agricultural and industrial markets. The company was helped by record demand overseas, particularly in Asia. An overweight in the industrial and capital goods sectors, namely shares of U.S. Steel, Freeport-McMoRan, and Gardner Denver, also boosted returns. All of these companies benefited from large investments in infrastructure and industrialization overseas.

How did the bond portion of the portfolio perform?

As I mentioned earlier, what typically happens in this type of environment is that when the equity portion gets volatile, the bond portion holds up and adds stability. But the epicenter of today’s problems is the credit markets. As a result, there has been some significant underperformance on the bond side. For most of 2007, we navigated well through the subprime crisis. In November, however, investors’ concerns followed into the high-quality safe haven of AAA-rated commercial mortgage-backed securities (CMBS) and select other asset-backed securities. This investor reaction hurt performance of these high-quality holdings within the portfolio.

Going forward, what fixed-income strategies are you considering?

We see a once-in-a-decade opportunity to add to the fund’s holdings. Because of the huge disparities in supply and demand in the marketplace and because many financial firms are trying to remove many structured

Top 10 equity holdings

This table shows the fund’s top 10 equity holdings and the percentage of the fund’s net assets that each represented as of 7/31/08. Also shown is each holding’s market sector and the specific industry within that sector. Holdings will vary over time.

HOLDING (percentage of fund’s net assets)  SECTOR  INDUSTRY 
General Electric Co. (2.8%)  Conglomerates  Conglomerates 
AT&T, Inc. (1.8%)  Communication services  Regional Bells 
JPMorgan Chase & Co. (1.7%)  Financials  Financial 
Bank of America Corp. (1.5%)  Financials  Banking 
Pfizer, Inc. (1.2%)  Health care  Pharmaceuticals 
Verizon Communications, Inc. (1.1%)  Communication services  Regional Bells 
Citigroup, Inc. (1.1%)  Financials  Financial 
Wells Fargo & Co. (1.1%)  Financials  Banking 
Hewlett-Packard Co. (1.1%)  Technology  Computers 
Procter & Gamble Co. (0.8%)  Consumer staples  Consumer goods 

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securities from their books, we are seeing high-quality paper come to market at fire-sale prices. We want to take advantage of these opportunities for long-term investors. It will likely be a choppy ride back, but there are assets backing these instruments and these instruments are going to mature.

What is your outlook for the rest of 2008?

Mark Twain once said, “History does not repeat itself but it does rhyme,” or shares similarities. With that in mind, I’ve been looking back at the 1990–1992 recession and trying to spot similarities and also factors that might be different today. Back then, residential real estate prices plummeted and we had a banking crisis, two strong factors in today’s downturn.

I believe we’re somewhere between the fourth and sixth inning of this downturn, and we’re about a year and half into this slowdown, by some estimates. Housing inventories need to come down, the credit crisis needs to play out further, and the consumer needs to regain confidence, although anecdotal evidence points to some improvement as of late. What’s more, while there was some improvement in July, it would be helpful to see oil settle down into a more reasonable price range.

Of course, 1990–1992 was a two-year recession. This one may last a bit longer. It feels like we’re bouncing along the bottom. But I believe this is where long-term opportunities can be extremely compelling.

Thank you, Jeanne, for your time and insights today.

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

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

Of special interest

We are pleased to report that your fund’s dividend has increased due to an increase in interest income. Effective May 1, 2008, the new dividend rate of $0.157 per share, paid quarterly, reflects a 24.6% increase over the prior rate.

I N  T H E  N E W S

In early September, the U.S. government announced plans to take over the Federal National Mortgage Association (Fannie Mae) and the Federal Home Mortgage Corporation (Freddie Mac), the companies that play key roles in the U.S. home mortgage market. Created by Congress as “government-sponsored enterprises,” Fannie Mae and Freddie Mac are publicly traded companies with a mandate to foster a liquid mortgage market by acting as reliable purchasers of mortgage loans, which they repackage and sell as mortgage-backed securities. Under the plan, the U.S.Treasury will buy $1 billion of preferred shares in each company and place both companies under the control of the Federal Housing Finance Authority.The government also has pledged to provide up to $200 billion to the companies as they cope with heavy losses resulting from rising home mortgage defaults and falling real estate prices.

Portfolio composition comparison

This chart shows how the fund’s weightings have changed over the past six months. Weightings are shown as a percentage of net assets. Holdings will vary over time.


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Your fund’s performance

This section shows your fund’s performance, price, and distribu tion information for periods ended July 31, 2008, the end of its most recent 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. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section of 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 7/31/08

  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)  9.03%  8.94%  8.01%  8.01%  8.21%  8.21%  8.28%  8.23%  8.76%  9.09% 
10 years  39.30  31.28  29.23  29.23  29.29  29.29  32.67  28.00  35.94  42.95 
Annual average  3.37  2.76  2.60  2.60  2.60  2.60  2.87  2.50  3.12  3.64 
5 years  23.72  16.61  19.13  17.35  19.23  19.23  20.72  16.52  22.34  25.35 
Annual average  4.35  3.12  3.56  3.25  3.58  3.58  3.84  3.11  4.12  4.62 
3 years  1.65  –4.18  –0.69  –2.96  –0.61  –0.61  0.16  –3.35  0.90  2.39 
Annual average  0.55  –1.41  –0.23  –1.00  –0.20  –0.20  0.05  –1.13  0.30  0.79 
1 year  –11.84  –16.89  –12.50  –16.37  –12.41  –13.19  –12.23  –15.31  –12.04  –11.57 

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 5.75% and 3.50% load, respectively, as of 1/2/08. 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. Life of fund performance for all classes is based on the period starting on 11/5/37 and ending on 7/31/08. Class C shares reflect a 1% CDSC for the first year that is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC. Performance for class B, C, M, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and, except for class Y shares, the higher operating expenses for such shares.

For a portion of the 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.

Change in the value of a $10,000 investment ($9,425 after sales charge)

Cumulative total return from 7/31/98 to 7/31/08

 

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 $12,923 and $12,929, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,650 after sales charge) would have been valued at $12,800 at public offering price. A $10,000 investment in the fund’s class R and class Y shares would have been valued at $13,594 and $14,295, respectively.

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Comparative index returns For periods ended 7/31/08

      George Putnam   
      Blended Index   
      (60% S&P 500/Citigroup   
      Value Index and   
  S&P 500/Citigroup  Lehman Aggregate  40% Lehman Aggregate  Lipper Balanced Funds 
  Value Index  Bond Index  Bond Index)  category average* 
Annual average (life of fund)  —†  —†  —†  —† 
10 years  47.28%  73.31%  63.66%  48.60% 
Annual average  3.95  5.65  5.05  3.92 
5 years  51.41  24.92  42.30  33.90 
Annual average  8.65  4.55  7.31  5.96 
3 years  8.85  13.71  12.04  10.11 
Annual average  2.87  4.37  3.86  3.22 
1 year  –15.86  6.15  –6.90  –5.73 

Index and Lipper results should be compared to fund performance at net asset value.

* Over the 1-year, 3-year, 5-year, and 10-year periods ended 7/31/08, there were 824, 631, 450, and 263 funds, respectively, in this Lipper category.

† The benchmarks were not in existence at the time of the fund’s inception. The S&P 500/Citigroup Value Index commenced 6/30/95. The Lehman Aggregate Bond Index commenced 12/31/75. The George Putnam Blended Index commenced 6/30/95. The Lipper Balanced Funds category average commenced 12/31/59.

Fund price and distribution information For the 12-month period ended 7/31/08

Distributions:  Class A    Class B  Class C  Class M    Class R  Class Y 
Number  4    4  4  4     4  4 
Income  $0.641    $0.501  $0.508  $0.553    $0.601  $0.685 
Capital gains — Long-term  0.943    0.943  0.943  0.943    0.943  0.943 
Capital gains — Short-term  0.586    0.586  0.586  0.586    0.586  0.586 
Total  $2.170    $2.030  $2.037  $2.082    $2.130  $2.214 
Share value:  NAV  POP  NAV  NAV  NAV  POP  NAV  NAV 
7/31/07  $18.10  $19.20*  $17.90  $17.97  $17.89  $18.54*  $18.04  $18.15 
7/31/08  13.99  14.84  13.83  13.90  13.82  14.32  13.94  14.04 
Current yield (end of period)  NAV  POP  NAV  NAV  NAV  POP  NAV  NAV 
Current dividend rate 1  4.49%  4.23%  3.62%  3.65%  3.97%  3.83%  4.30%  4.76% 
Current 30-day SEC yield 2,3  N/A  4.48  4.01  4.01  N/A  4.11  4.51  5.00 

The classification of distributions, if any, is an estimate. Final distribution information will appear on your year-end tax forms.

* Adjusted to reflect an increase in sales charges that took effect on 1/2/08.

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 and calculated using the maximum offering price for each share class, in accordance with SEC guidelines.

Fund performance as of most recent calendar quarter Total return for periods ended 6/30/08

  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)  9.05%  8.96%  8.02%  8.02%  8.23%  8.23%  8.30%  8.24%  8.78%  9.10% 
10 years  37.77  29.83  27.83  27.83  27.80  27.80  31.12  26.52  34.48  41.28 
Annual average  3.26  2.64  2.49  2.49  2.48  2.48  2.75  2.38  3.01  3.52 
5 years  23.31  16.19  18.74  16.97  18.76  18.76  20.23  16.03  21.86  24.84 
Annual average  4.28  3.05  3.50  3.18  3.50  3.50  3.75  3.02  4.03  4.54 
3 years  3.72  –2.22  1.38  –0.95  1.38  1.38  2.16  –1.42  2.91  4.46 
Annual average  1.22  –0.75  0.46  –0.32  0.46  0.46  0.71  –0.48  0.96  1.47 
1 year  –13.75  –18.69  –14.40  –18.18  –14.42  –15.17  –14.20  –17.22  –13.95  –13.54 

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Fund’s annual operating expenses For the fiscal year ended 7/31/07

  Class A  Class B  Class C  Class M  Class R  Class Y 
Total annual fund operating expenses  0.98%  1.73%  1.73%  1.48%  1.23%  0.73% 

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.

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 following information, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.

Review your fund’s expenses

The following table shows the expenses you would have paid on a $1,000 investment in The George Putnam Fund of Boston from February 1, 2008, to July 31, 2008. 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*  $4.86  $8.38  $8.39  $7.21  $6.04  $3.68 
Ending value (after expenses)  $897.50  $894.30  $895.00  $895.70  $896.70  $899.00 

* 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 7/31/08. 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, 2008, use the following calculation method. To find the value of your investment on February 1, 2008, call Putnam at 1-800-225-1581.


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Compare expenses using the SEC’s method

The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the following table shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total costs) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.

  Class A  Class B  Class C  Class M  Class R  Class Y 
Expenses paid per $1,000*  $5.17  $8.92  $8.92  $7.67  $6.42  $3.92 
Ending value (after expenses)  $1,019.74  $1,016.01  $1,016.01  $1,017.26  $1,018.50  $1,020.98 

* 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 7/31/08. 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.

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*  1.03%  1.78%  1.78%  1.53%  1.28%  0.78% 
Average annualized expense ratio for Lipper peer group†  1.20%  1.95%  1.95%  1.70%  1.45%  0.95% 

* For the fund’s most recent fiscal half year; may differ from expense ratios based on one-year data in the financial highlights.

† Putnam keeps fund expenses below the Lipper peer group average expense ratio by limiting our 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 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; the fund’s expense ratio shown here is annualized data for the most recent six-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 6/30/08.

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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 average portfolio value within a given period. Funds with high turnover may be more likely to generate capital gains 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.

You can use the following table 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

  2008  2007  2006  2005  2004 
The George Putnam Fund of Boston  124%  144%  117%  169%  166% 
Lipper Balanced Funds category average  61%  62%  70%  72%  74% 

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 2008 is based on information available as of 7/31/08.

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, 2008. 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 2008 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

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Your fund’s management

Your fund is managed by the members of the Putnam Large-Cap Value, Core Fixed-Income, and Global Asset Allocation teams. Jeanne Mockard is the Portfolio Leader of the fund. Geoffrey Kelley, Jeffrey Knight, and Raman Srivastava are Portfolio Members. The Portfolio Leader and Portfolio Members coordinate the teams’ management of the fund.

For a complete listing of the members of the Putnam Large-Cap Value, Core Fixed-Income, and Global Asset Allocation teams, including those who are not Portfolio Leaders or Portfolio Members of your fund, please visit the Individual Investors section of www.putnam.com.

Trustee and Putnam employee fund ownership

As of July 31, 2008, 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.

Other Putnam funds managed by the
Portfolio Leader and Portfolio Members

Jeffrey Knight is also a Portfolio Leader of the Putnam Asset Allocation Funds (Growth, Balanced, and Conservative Portfolios), Putnam Income Strategies Fund, Putnam Voyager Fund, and Putnam Growth Opportunities Fund, and a Portfolio Member of Putnam Discovery Growth Fund.

Raman Srivastava is also a Portfolio Member of Putnam Income Fund and Putnam Global Income Trust.

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.

  Assets in  Total assets in 
  the fund  all Putnam funds 
Trustees  $941,000  $76,000,000 
Putnam employees  $5,625,000  $568,000,000 

Investment team fund ownership

The following table 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, 2008, and 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 5.75% maximum sales charge for class A shares and 3.50% 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 generally only available to corporate and institutional clients and clients in other approved programs.

Comparative indexes

George Putnam Blended Index is an unmanaged index administered by Putnam Management, 60% of which is the S&P 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 2008, 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 reviewed 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, 2008.

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, were subject to the continued application of certain expense reductions and waivers and other considerations noted below, 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. In this regard, the Trustees also noted that shareholders of your fund voted in 2007 to approve new management contracts containing an identical fee structure. The Trustees focused on two areas of particular interest, as discussed further below:

• Competitiveness. The Trustees reviewed comparative fee and expense information for competitive funds, which indicated that, in a custom peer group of competitive funds selected by Lipper Inc., your fund ranked in the 34th percentile in management fees and in the 31st percentile in total expenses (less any applicable 12b-1 fees) as of December 31, 2007 (the first percentile being the least expensive funds and the 100th percentile being the most expensive funds). (Because the fund’s custom peer group is smaller than the fund’s broad Lipper Inc. peer group, this expense information may differ from the Lipper peer expense information found elsewhere in this report.) The Trustees noted that expense ratios for a number of Putnam funds, which show the percentage of fund assets used to pay for management and administrative services, distribution (12b-1) fees and other expenses, had been 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 initially implemented in January 2004. The Trustees have received a commitment from Putnam Management and its parent company to continue 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, 2008, 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

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expense ratios (exclusive of 12b-1 charges) based on the custom peer group data for the period ended December 31, 2007. 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.

In addition, the Trustees devoted particular attention to analyzing the Putnam funds’ fees and expenses relative to those of competitors in fund complexes of comparable size and with a comparable mix of asset categories. The Trustees concluded that this analysis did not reveal any matters requiring further attention at the current time.

• 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 the fund (as a percentage of fund assets) declines as the fund grows in size and crosses specified asset thresholds. Conversely, if the 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 schedule in effect for your fund represented an appropriate sharing of economies of scale at current asset levels.

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 Oversight Coordinating 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 high-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.

While the Trustees noted the satisfactory investment performance of certain Putnam funds, they considered the disappointing investment performance of many funds in recent periods, particularly over periods in 2007 and 2008. They 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 taken steps to strengthen its investment personnel and processes to address areas of underperformance, including recent efforts to further centralize Putnam Management’s equity research function. In this regard, the Trustees took into consideration efforts by Putnam Management to improve its ability to assess and mitigate investment risk in individual funds, across asset classes, and across the complex as a whole. The Trustees indicated their intention to continue to monitor performance trends to assess the effectiveness of these efforts 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-year, three-year and five-year periods ended December 31, 2007 (the first percentile being the best-performing funds and the 100th percentile being the worst-performing funds):

One-year period  95th 
Three-year period  84th 
Five-year period  79th 

(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-year, three-year and five-year periods ended December 31, 2007, there were 814, 614 and 441 funds, respectively, in your fund’s Lipper peer group*. Past performance is no guarantee of future returns.

The Trustees noted the disappointing performance for your fund for the one-year, three-year, and five-year periods ended December 31, 2007. In this regard, the Trustees considered that, similar to the experience of certain other Putnam funds with exposure to the large-cap equity space, your fund’s performance would have been materially better over these periods but for

* The percentile rankings for your fund’s class A share annualized total return performance in the Lipper Balanced Funds category for the one-year, five-year and ten-year periods ended June 30, 2008 were 95%, 90% and 67%, respectively. Over the one-year, five-year and ten-year periods ended June 30, 2008, your fund ranked 780 out of 825, 396 out of 440 and 173 out of 260 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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the performance of a limited number of portfolio choices in the financial sector that experienced extreme distress in the market turmoil that began in the summer of 2007. In addition, following leadership and portfolio management team changes, Putnam Management continues to make efforts to enhance the strength of the Large Cap Equities team, and Putnam Management has centralized the equity research structure. These changes were made to strengthen the investment process, which focuses on a blend of quantitative techniques and fundamental analysis, and to enhance the performance potential for Putnam funds with exposure to the large-cap equity space.

As a general matter, the Trustees believe 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 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 considered changes made in 2008, at Putnam Management’s request, to the Putnam funds’ brokerage allocation policy, which expanded the permitted categories of brokerage and research services payable with soft dollars and increased the permitted soft dollar allocation to third-party services over what had been authorized in previous years. The Trustees indicated their continued intent to monitor the potential benefits associated with the allocation of fund brokerage and trends in industry practice 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 arrangements also included the review of its distributor’s contract and distribution plan with Putnam Retail Management Limited Partnership and the investor servicing agreement with Putnam Fiduciary Trust Company (“PFTC”), each of which provides benefits to affiliates of Putnam Management. In the case of the investor servicing agreement, the Trustees considered that certain shareholder servicing functions were shifted to a third-party service provider by PFTC in 2007.

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 comparisons 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 mutual funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investment management services to these types of clients reflect to a substantial degree historical competitive forces operating in separate market places. The Trustees considered the fact that fee rates across different asset classes are typically higher on average for mutual funds than for institutional clients, as well as the differences between the services that Putnam Management provides to the Putnam funds and those that it provides to institutional clients of the firm, but did not rely on such comparisons to any significant extent in concluding that the management fees paid by your fund are reasonable.

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Other information for shareholders

Putnam’s policy on confidentiality

In order to conduct business with our shareholders, we must obtain certain personal information such as account holders’ addresses, telephone numbers, Social Security numbers, and the names of their financial representatives. We use this information to assign an account number and to help us maintain accurate records of transactions and account balances. It is our policy to protect the confidentiality of your information, whether or not you currently own shares of our funds, and, in particular, not to sell information about you or your accounts to outside marketing firms. We have safeguards in place designed to prevent unauthorized access to our computer systems and procedures to protect personal information from unauthorized use. Under certain circumstances, we share this information with outside vendors who provide services to us, such as mailing and proxy solicitation. In those cases, the service providers enter into confidentiality agreements with us, and we provide only the information necessary to process transactions and perform other services related to your account. We may also share this information with our Putnam affiliates to service your account or provide you with information about other Putnam products or services. It is also our policy to share account information with your financial representative, 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 8:00 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, 2008, are available in the Individual Investors section of www.putnam.com, 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 noninvestment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)

Statement of operations shows the fund’s net investment gain or loss. This is done by first adding up all the fund’s earnings — from dividends and interest income — and subtracting its operating expenses to determine net investment income (or loss). Then, any net gain or loss the fund realized on the sales of its holdings — as well as any unrealized gains or losses over the period — is added to or subtracted from the net investment result to determine the fund’s net gain or loss for the fiscal year.

Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned.

Financial highlights provide an overview of the fund’s investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semi-annual 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, 2008, 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, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
September 16, 2008

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The fund’s portfolio 7/31/08

U.S. GOVERNMENT AND AGENCY  Principal   
MORTGAGE OBLIGATIONS (51.9%)*  amount  Value 
U.S. Government Guaranteed Mortgage Obligations (1.1%)   
Government National Mortgage Association     
Pass-Through Certificates     
6 1/2s, with due dates from January 20, 2034     
to November 20, 2037  $28,874,162  $29,771,749 
    29,771,749 
U.S. Government Agency Mortgage Obligations (50.8%)   
Federal Home Loan Mortgage Corporation     
8 3/4s, with due dates from     
May 1, 2009 to June 1, 2009  10,539  10,661 
Federal Home Loan Mortgage Corporation     
Pass-Through Certificates     
6s, March 1, 2035  23,788  24,082 
5 1/2s, with due dates from     
May 1, 2035 to June 1, 2035  2,037,022  2,000,486 
5 1/2s, July 1, 2016  285,175  290,945 
Federal National Mortgage Association     
Pass-Through Certificates     
9s, with due dates from     
January 1, 2027 to April 1, 2032  201,623  222,242 
8s, with due dates from     
August 1, 2026 to March 1, 2033  714,019  734,471 
7 1/2s, with due dates from     
August 1, 2028 to July 1, 2033  495,287  527,033 
7s, with due dates from     
February 1, 2033 to January 1, 2036  3,380,397  3,553,245 
7s, with due dates from     
July 1, 2014 to December 1, 2014  502,401  521,493 
6 1/2s, with due dates from     
June 1, 2036 to December 1, 2037  4,080,450  4,194,787 
6 1/2s, with due dates from     
September 1, 2010 to May 1, 2011  62,301  64,647 
6 1/2s, TBA, September 1, 2038  66,000,000  67,549,456 
6 1/2s, TBA, August 1, 2038  66,000,000  67,742,809 
6s, with due dates from     
May 1, 2036 to September 1, 2037  13,725,473  13,819,516 
6s, with due dates from     
October 1, 2011 to September 1, 2021  1,044,472  1,071,077 
6s, TBA, September 1, 2038  58,000,000  58,083,827 
6s, TBA, August 1, 2038  58,000,000  58,249,220 
5 1/2s, with due dates from     
January 1, 2037 to December 1, 2037  21,140,246  20,732,638 
5 1/2s, TBA, September 1, 2038  309,000,000  301,588,820 
5 1/2s, TBA, August 1, 2038  566,000,000  553,795,625 
5 1/2s, TBA, August 1, 2022  25,000,000  25,078,125 
5s, with due dates from     
April 1, 2021 to June 1, 2021  294,602  290,677 
5s, TBA, September 1, 2038  7,000,000  6,629,766 
5s, TBA, August 1, 2038  199,000,000  188,894,541 
4 1/2s, with due dates from     
July 1, 2020 to February 1, 2022  46,811,668  45,346,411 
4 1/2s, TBA, August 1, 2022  10,000,000  9,582,812 
4s, with due dates from     
May 1, 2019 to August 1, 2020  682,008  644,642 
    1,431,244,054 
 
Total U.S. government and agency mortgage obligations   
(cost $1,455,555,917)    $1,461,015,803 
 
COMMON STOCKS (49.7%)*  Shares  Value 
 
Basic Materials (3.2%)     
Dow Chemical Co. (The)  191,800  $6,388,858 
E.I. du Pont de Nemours & Co.  160,900  7,049,029 
Freeport-McMoRan Copper & Gold, Inc. Class B S  117,392  11,357,676 
Lubrizol Corp. (The)  154,500  7,694,100 

COMMON STOCKS (49.7%)* cont.  Shares  Value 
Basic Materials cont.     
Nucor Corp.  170,500  $9,756,010 
Packaging Corp. of America S  270,000  6,890,400 
PPG Industries, Inc.  134,900  8,180,336 
Reliance Steel & Aluminum Co. S  104,800  6,619,168 
Southern Copper Corp. S  173,900  4,830,942 
Terra Industries, Inc. S  208,800  11,275,200 
United States Steel Corp.  60,100  9,637,636 
    89,679,355 
Capital Goods (3.7%)     
Ball Corp. S  98,400  4,386,672 
Boeing Co. (The)  212,100  12,961,431 
Caterpillar, Inc. S  183,000  12,722,160 
Cummins, Inc.  81,200  5,386,808 
Eaton Corp.  21,700  1,541,568 
Gardner Denver, Inc. †  180,500  8,230,800 
General Dynamics Corp.  75,000  6,685,500 
L-3 Communications Holdings, Inc.  83,300  8,220,877 
Lockheed Martin Corp.  78,500  8,189,905 
Northrop Grumman Corp.  192,500  12,972,575 
Precision Castparts Corp.  50,700  4,736,901 
Raytheon Co.  169,500  9,649,635 
Teleflex, Inc.  33,500  2,054,220 
WESCO International, Inc. †  146,100  5,500,665 
    103,239,717 
Communication Services (3.7%)     
AT&T, Inc. #  1,630,882  50,247,474 
CenturyTel, Inc. S  268,700  9,992,953 
Embarq Corp.  57,400  2,627,198 
Sprint Nextel Corp. S  911,100  7,416,354 
Verizon Communications, Inc.  949,900  32,334,596 
    102,618,575 
Conglomerates (3.3%)     
General Electric Co. S  2,782,800  78,725,412 
Honeywell International, Inc. S  258,100  13,121,804 
    91,847,216 
Consumer Cyclicals (3.0%)     
Amazon.com, Inc. † S  69,600  5,313,264 
AutoZone, Inc. †  16,900  2,201,901 
Big Lots, Inc. † S  246,200  7,499,252 
Carnival Corp. S  152,800  5,644,432 
GameStop Corp. † S  101,900  4,127,969 
Gap, Inc. (The) S  145,100  2,339,012 
JC Penney Co., Inc. (Holding Co.) S  64,500  1,988,535 
Lennar Corp. S  357,700  4,328,170 
Lowe’s Cos., Inc. S  258,000  5,242,560 
Macy’s, Inc.  205,500  3,865,455 
Nordstrom, Inc. S  89,800  2,580,852 
NVR, Inc. † S  14,056  7,763,410 
R. H. Donnelley Corp. † S  403,400  625,270 
RadioShack Corp.  135,200  2,255,136 
Regal Entertainment Group Class A S  618,300  10,294,695 
Wal-Mart Stores, Inc.  49,100  2,878,242 
Walt Disney Co. (The)  236,900  7,189,915 
Whirlpool Corp. S  109,000  8,251,300 
    84,389,370 
Consumer Staples (5.2%)     
Altria Group, Inc. #  156,400  3,182,740 
American Greetings Corp. Class A  261,800  3,879,876 

21

COMMON STOCKS (49.7%)* cont.  Shares  Value 
Consumer Staples cont.     
Clorox Co.  105,300  $5,738,850 
Comcast Corp. Class A S  232,400  4,792,088 
Corn Products International, Inc.  85,700  3,985,907 
Darden Restaurants, Inc.  165,100  5,377,307 
Energizer Holdings, Inc. †  43,100  3,074,754 
General Mills, Inc.  217,500  14,004,825 
H.J. Heinz Co.  55,700  2,806,166 
JM Smucker Co. (The)  118,300  5,765,942 
Kimberly-Clark Corp.  70,000  4,048,100 
Kraft Foods, Inc. Class A  160,443  5,105,296 
Kroger Co. S  201,200  5,689,936 
Lorillard, Inc. †  66,700  4,476,237 
McDonald’s Corp.  58,500  3,497,715 
MPS Group, Inc. †  191,700  2,208,384 
Newell Rubbermaid, Inc.  307,400  5,081,322 
Pepsi Bottling Group, Inc. (The)  359,900  10,023,215 
Philip Morris International, Inc. #  319,800  16,517,670 
Procter & Gamble Co. (The)  357,900  23,435,292 
Robert Half International, Inc. S  249,100  6,299,739 
SYSCO Corp.  63,800  1,809,368 
Universal Corp.  118,400  6,111,808 
    146,912,537 
Energy (2.4%)     
Chevron Corp.  231,500  19,575,640 
Exxon Mobil Corp.  87,600  7,045,668 
Global Industries, Ltd. †  287,900  3,437,526 
Hess Corp.  99,400  10,079,160 
Marathon Oil Corp.  147,600  7,301,772 
National-Oilwell Varco, Inc. †  80,000  6,290,400 
Sunoco, Inc. S  54,100  2,197,001 
Tesoro Corp. S  102,000  1,574,880 
Valero Energy Corp.  335,000  11,192,350 
    68,694,397 
Financial (12.1%)     
Allied World Assurance Company Holdings, Ltd.     
(Bermuda)  126,400  5,259,504 
Allstate Corp. (The)  225,800  10,436,476 
American International Group, Inc.  88,300  2,300,215 
Assurant, Inc.  56,400  3,390,768 
Axis Capital Holdings, Ltd. (Bermuda)  287,927  9,121,527 
Bank of America Corp.  1,262,700  41,542,830 
Bank of New York Mellon Corp. (The)  273,700  9,716,350 
BB&T Corp.  128,900  3,611,778 
CB Richard Ellis Group, Inc. Class A †  268,800  3,776,640 
CBL & Associates Properties R  339,200  6,587,264 
Chubb Corp. (The)  146,200  7,023,448 
Citigroup, Inc. #  1,677,200  31,346,868 
Endurance Specialty Holdings, Ltd. (Bermuda)  152,200  4,657,320 
Everest Re Group, Ltd. (Bermuda)  39,500  3,231,100 
Freddie Mac  641,500  5,241,055 
General Growth Properties, Inc. R  61,000  1,672,010 
Goldman Sachs Group, Inc. (The)  79,000  14,539,160 
Hartford Financial Services Group, Inc. (The)  44,754  2,836,956 
Jones Lang LaSalle, Inc.  88,700  4,225,668 
JPMorgan Chase & Co.  1,149,500  46,704,185 
KeyCorp  421,500  4,446,825 
Lehman Brothers Holdings, Inc.  243,500  4,222,290 

COMMON STOCKS (49.7%)* cont.  Shares  Value 
Financial cont.     
Marshall & Ilsley Corp. S  327,499  $4,977,985 
Merrill Lynch & Co., Inc.  308,900  8,232,185 
Morgan Stanley  420,200  16,589,496 
National City Corp.  269,400  1,274,262 
PNC Financial Services Group  135,800  9,681,182 
ProLogis Trust R  97,600  4,770,688 
RenaissanceRe Holdings, Ltd. (Bermuda)  210,700  10,718,309 
SunTrust Banks, Inc.  37,400  1,535,644 
Travelers Cos., Inc. (The)  156,000  6,882,720 
U.S. Bancorp  291,000  8,907,510 
W.R. Berkley Corp.  172,000  4,062,640 
Wells Fargo & Co.  987,800  29,900,706 
XL Capital, Ltd. Class A (Bermuda) S  182,900  3,272,081 
Zions Bancorp. S  117,200  3,430,444 
    340,126,089 
Health Care (5.4%)     
Aetna, Inc.  101,600  4,166,616 
AmerisourceBergen Corp.  198,100  8,294,447 
Baxter International, Inc.  135,200  9,276,072 
Boston Scientific Corp. † S  253,900  3,018,871 
Bristol-Myers Squibb Co.  158,700  3,351,744 
Coventry Health Care, Inc. † S  111,100  3,929,607 
Covidien, Ltd.  247,512  12,187,491 
Endo Pharmaceuticals Holdings, Inc. †  215,400  4,986,510 
Express Scripts, Inc. †  67,800  4,782,612 
Humana, Inc. † S  102,300  4,491,993 
King Pharmaceuticals, Inc. † S  649,800  7,479,198 
McKesson Corp.  272,400  15,251,676 
Medco Health Solutions, Inc. †  138,400  6,861,872 
Merck & Co., Inc.  396,200  13,034,980 
Par Pharmaceutical Cos., Inc. †  132,700  2,295,710 
Pfizer, Inc.  1,857,600  34,681,392 
UnitedHealth Group, Inc.  76,700  2,153,736 
WellPoint, Inc. †  254,200  13,332,790 
    153,577,317 
Technology (5.0%)     
Accenture, Ltd. Class A (Bermuda) S  289,400  12,085,344 
Apple Computer, Inc. †  13,200  2,098,140 
Applied Materials, Inc. S  659,300  11,419,076 
Arrow Electronics, Inc. †  120,900  3,895,398 
Atmel Corp. †  1,320,300  4,660,659 
Avnet, Inc. † S  116,100  3,164,886 
BMC Software, Inc. †  57,000  1,874,730 
Computer Sciences Corp. †  38,000  1,800,060 
eBay, Inc. †  148,600  3,740,262 
Hewlett-Packard Co.  663,700  29,733,760 
IBM Corp.  142,800  18,275,544 
Intel Corp.  878,100  19,485,039 
Microsoft Corp.  113,000  2,906,360 
Nokia OYJ ADR (Finland)  225,700  6,166,124 
Oracle Corp. †  278,900  6,004,717 
SanDisk Corp. †  252,200  3,556,020 
Texas Instruments, Inc. S  215,400  5,251,452 
Thermo Electron Corp. †  65,500  3,964,060 
    140,081,631 

22

COMMON STOCKS (49.7%)* cont.  Shares  Value 
 
Transportation (0.4%)     
AMR Corp. † S  404,600  $3,653,538 
UAL Corp. S  131,100  1,089,441 
Union Pacific Corp.  30,600  2,522,664 
US Airways Group, Inc. † S  791,900  4,007,014 
    11,272,657 
Utilities & Power (2.3%)     
Dominion Resources, Inc. S  50,200  2,217,836 
DTE Energy Co. S  117,600  4,819,248 
Duke Energy Corp. S  299,200  5,259,936 
Edison International  263,000  12,713,420 
Energen Corp.  92,200  5,550,440 
Entergy Corp. S  44,700  4,779,324 
FirstEnergy Corp.  112,100  8,244,955 
FPL Group, Inc.  78,600  5,072,058 
PG&E Corp.  204,450  7,877,459 
Sempra Energy  76,600  4,301,856 
Wisconsin Energy Corp.  107,000  4,827,840 
    65,664,372 
 
Total common stocks (cost $1,537,066,637)    $1,398,103,233 
 
COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)*  amount  Value 
 
Adjustable Rate Mortgage Trust FRB     
Ser. 04-5, Class 3A1, 4.943s, 2035  $2,655,912  $2,177,851 
Asset Backed Funding Certificates 144A FRB     
Ser. 06-OPT3, Class B, 4.961s, 2036  157,000  9,247 
Asset Securitization Corp.     
Ser. 96-MD6, Class A7, 8.335s, 2029  1,513,507  1,569,477 
FRB Ser. 97-D5, Class A5, 7.184s, 2043  325,000  332,418 
Banc of America Commercial Mortgage, Inc.     
Ser. 01-1, Class G, 7.324s, 2036  950,000  952,889 
FRB Ser. 07-3, Class A3, 5.838s, 2049  1,200,000  1,162,719 
Ser. 07-2, Class A2, 5.634s, 2049  1,198,000  1,170,674 
Ser. 06-4, Class A2, 5.522s, 2046  6,770,000  6,739,493 
Ser. 04-3, Class A5, 5.316s, 2039  4,690,000  4,602,860 
Ser. 05-6, Class A2, 5.165s, 2047  675,000  665,999 
FRB Ser. 05-1, Class A5, 5.239s, 2042  252,000  241,691 
Ser. 07-5, Class XW, Interest Only (IO),     
0.44s, 2051  33,965,075  799,583 
Ser. 07-1, Class XW, IO, 0.291s, 2049  17,066,074  277,554 
Ser. 06-1, Class XC, IO, 0.059s, 2045  40,653,106  226,773 
Banc of America Commercial Mortgage, Inc. 144A   
Ser. 01-PB1, Class K, 6.15s, 2035  715,000  651,913 
Ser. 02-PB2, Class XC, IO, 0.261s, 2035  9,093,877  157,722 
Ser. 04-4, Class XC, IO, 0.172s, 2042  30,182,431  392,934 
Ser. 04-5, Class XC, IO, 0.15s, 2041  48,634,698  521,871 
Ser. 05-1, Class XW, IO, 0.102s, 2042  243,038,422  620,102 
Ser. 06-5, Class XC, IO, 0.079s, 2016  100,100,949  1,184,110 
Ser. 06-4, Class XC, IO, 0.075s, 2046  49,754,597  502,521 
Ser. 05-4, Class XC, IO, 0.075s, 2045  81,744,329  474,821 
Banc of America Funding Corp. FRB     
Ser. 06-D, Class 6A1, 5.99s, 2036  590,368  442,776 
Banc of America Large Loan     
FRB Ser. 04-BBA4, Class H, 3.408s, 2018  142,000  139,715 
FRB Ser. 04-BBA4, Class G, 3.158s, 2018  449,000  442,686 
Banc of America Large Loan 144A     
FRB Ser. 05-MIB1, Class K, 4.458s, 2022  496,000  402,535 
FRB Ser. 05-MIB1, Class J, 3.508s, 2022  1,400,000  1,205,313 

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
Banc of America Mortgage Securities     
FRB Ser. 03-F, Class 2A1, 4.389s, 2033  $348,802  $345,314 
Ser. 05-E, Class 2, IO, 0.3s, 2035  29,993,602  118,334 
Ser. 04-D, Class 2A, IO, 0.27s, 2034  11,119,772  12,162 
Banc of America Structured Security Trust     
144A Ser. 02-X1, Class A3, 5.436s, 2033  1,503,864  1,510,212 
Bayview Commercial Asset Trust 144A     
FRB Ser. 05-1A, Class A1, 2.761s, 2035  1,116,615  971,455 
Ser. 04-2, IO, 2.22s, 2034  4,470,537  171,669 
Ser. 06-2A, IO, 1.798s, 2036  2,708,251  206,910 
Ser. 05-3A, IO, 1.6s, 2035  14,438,512  941,391 
Ser. 05-1A, IO, 1.6s, 2035  4,852,099  239,694 
Ser. 04-3, IO, 1.6s, 2035  3,135,402  120,399 
Ser. 07-5A, IO, 1.55s, 2037  13,310,478  1,655,823 
Ser. 07-2A, IO, 1.3s, 2037  15,032,824  1,519,818 
Ser. 07-1, Class S, IO, 1.211s, 2037  12,968,108  1,208,628 
Ser. 06-4A, IO, 1.14s, 2036  2,075,052  208,335 
Bear Stearns Alternate Trust     
Ser. 04-9, Class 1A1, 6.7s, 2034  142,804  126,110 
FRB Ser. 06-5, Class 2A2, 6 1/4s, 2036  6,985,796  5,361,598 
FRB Ser. 06-6, Class 2A1, 5.919s, 2036  92,088  59,247 
FRB Ser. 05-7, Class 23A1, 5.694s, 2035  195,125  146,830 
Bear Stearns Commercial     
Mortgage Securities, Inc.     
FRB Ser. 00-WF2, Class F, 8.447s, 2032  456,000  428,060 
Ser. 07-PW17, Class A3, 5.736s, 2050  14,895,000  14,113,310 
Ser. 04-PR3I, Class X1, IO, 0.397s, 2041  14,279,956  206,531 
Ser. 05-PWR9, Class X1, IO, 0.09s, 2042  40,679,171  327,467 
Bear Stearns Commercial     
Mortgage Securities, Inc. 144A     
Ser. 06-PW14, Class XW, IO, 0.69s, 2038  18,118,356  700,999 
Ser. 06-PW14, Class X1, IO, 0.078s, 2038  19,484,674  294,413 
Ser. 07-PW15, Class X1, IO, 0.067s, 2044 F  64,254,790  601,269 
Ser. 05-PW10, Class X1, IO, 0.057s, 2040  63,145,128  217,851 
Ser. 07-PW16, Class X, IO, 0.021s, 2040  143,574,906  117,731 
Bear Stearns Small Balance Commercial Trust     
144A Ser. 06-1A, Class AIO, IO, 1s, 2034  7,445,600  92,579 
Chase Commercial Mortgage Securities Corp.     
Ser. 00-3, Class A2, 7.319s, 2032  542,811  562,336 
Chase Commercial Mortgage Securities     
Corp. 144A     
Ser. 98-1, Class F, 6.56s, 2030  4,600,000  4,598,229 
Ser. 98-1, Class G, 6.56s, 2030  1,171,000  1,038,375 
Ser. 98-1, Class H, 6.34s, 2030  1,761,000  1,323,144 
Citigroup Ser. 08-C7, Class A2A, 6.034s, 2012  105,000  104,798 
Citigroup Commercial Mortgage Trust     
Ser. 08-C7, Class A3, 6.096s, 2014  190,000  188,594 
Citigroup Commercial Mortgage Trust 144A     
Ser. 05-C3, Class XC, IO, 0.117s, 2043  115,481,861  1,001,444 
Ser. 06-C5, Class XC, IO, 0.073s, 2049  122,794,284  1,328,673 
Citigroup Mortgage Loan Trust, Inc.     
FRB Ser. 06-AR5, Class 2A5A, 6.196s, 2036  132,825  91,417 
FRB Ser. 06-AR7, Class 2A2A, 5.661s, 2036  1,075,181  731,123 
IFB Ser. 07-6, Class 2A5, IO, 4.189s, 2037  4,545,330  361,545 
Citigroup/Deutsche Bank Commercial Mortgage     
Trust Ser. 06-CD3, Class A4, 5.658s, 2048  759,000  735,808 
Citigroup/Deutsche Bank Commercial     
Mortgage Trust 144A     
Ser. 07-CD4, Class XW, IO, 0.377s, 2049  26,658,954  539,427 
Ser. 06-CD2, Class X, IO, 0.086s, 2046  76,152,157  305,258 
Ser. 07-CD4, Class XC, IO, 0.051s, 2049  89,150,577  686,042 
Commercial Mortgage Acceptance Corp. 144A     
Ser. 98-C1, Class F, 6.23s, 2031  2,013,000  2,044,027 
Ser. 98-C2, Class F, 5.44s, 2030  3,255,000  3,131,911 
Commercial Mortgage Loan Trust Ser. 08-LS1,     
Class A4B, 6.02s, 2017  1,806,000  1,735,918 

23

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
Commercial Mortgage Pass-Through     
Certificates 144A     
Ser. 06-CN2A, Class H, 5.57s, 2019  $939,000  $817,013 
Ser. 06-CN2A, Class J, 5.57s, 2019  751,000  649,421 
FRB Ser. 01-J2A, Class A2F, 2.96s, 2034  1,590,000  1,399,200 
Ser. 03-LB1A, Class X1, IO, 0.461s, 2038  8,306,634  319,116 
Ser. 05-LP5, Class XC, IO, 0.087s, 2043  70,205,008  555,364 
Ser. 06-C8, Class XS, IO, 0.067s, 2046  57,502,573  597,150 
Ser. 05-C6, Class XC, IO, 0.059s, 2044  66,810,452  377,092 
Countrywide Alternative Loan Trust     
Ser. 06-45T1, Class 2A2, 6s, 2037  275,791  204,085 
Ser. 06-J8, Class A4, 6s, 2037  223,664  154,328 
Ser. 07-HY5R, Class 2A1A, 5.544s, 2047  125,597  109,093 
IFB Ser. 04-2CB, Class 1A5, IO, 5.139s, 2034  96,901  5,394 
Ser. 05-24, Class 1AX, IO, 1.222s, 2035  9,539,787  199,739 
Countrywide Home Loans     
FRB Ser. 05-HYB7, Class 6A1, 5.713s, 2035  466,616  335,963 
Ser. 05-9, Class 1X, IO, 3.126s, 2035  8,364,501  190,488 
Ser. 05-2, Class 2X, IO, 1.16s, 2035  8,344,536  167,869 
Countrywide Home Loans 144A     
IFB Ser. 05-R2, Class 2A3, 8s, 2035  920,574  957,029 
IFB Ser. 05-R1, Class 1AS, IO, 3.511s, 2035  6,782,398  481,124 
IFB Ser. 05-R2, Class 1AS, IO, 3.155s, 2035  6,551,791  370,032 
Credit Suisse Mortgage Capital Certificates     
FRB Ser. 07-C4, Class A2, 6.004s, 2039  4,505,000  4,456,369 
Ser. 06-C5, Class AX, IO, 0.092s, 2039  36,613,267  531,918 
Credit Suisse Mortgage Capital     
Certificates 144A     
Ser. 07-C2, Class AX, IO, 0.114s, 2049  121,851,064  1,043,776 
Ser. 06-C4, Class AX, IO, 0.089s, 2039  76,627,419  984,010 
Ser. 07-C1, Class AX, IO, 0.07s, 2040  80,591,842  702,519 
Ser. 06-C3, Class AX, IO, 0.021s, 2038  102,613,122  10,261 
CRESI Finance Limited Partnership 144A     
FRB Ser. 06-A, Class D, 3.261s, 2017  232,000  214,383 
FRB Ser. 06-A, Class C, 3.061s, 2017  688,000  646,828 
Criimi Mae Commercial Mortgage Trust     
144A Ser. 98-C1, Class B, 7s, 2033  2,253,659  2,255,913 
Crown Castle Towers, LLC 144A Ser. 05-1A,     
Class D, 5.612s, 2035  2,903,000  2,769,839 
CS First Boston Mortgage Securities Corp.     
Ser. 97-C2, Class F, 7.46s, 2035  1,239,000  1,297,089 
Ser. 04-C2, Class A2, 5.416s, 2036  5,070,000  4,943,960 
FRB Ser. 04-C3, Class A5, 5.113s, 2036  92,000  87,094 
Ser. 04-C3, Class A3, 4.302s, 2036  196,000  194,667 
CS First Boston Mortgage Securities Corp. 144A     
FRB Ser. 05-TFLA, Class J, 3.408s, 2020  259,000  246,050 
FRB Ser. 04-TF2A, Class J, 3.408s, 2016  313,000  287,960 
FRB Ser. 05-TF2A, Class J, 3.358s, 2020  407,807  379,261 
FRB Ser. 04-TF2A, Class H, 3.158s, 2019  627,000  595,650 
Ser. 01-CK1, Class AY, IO, 0.782s, 2035  62,914,673  970,754 
Ser. 03-C3, Class AX, IO, 0.541s, 2038  51,342,940  1,922,065 
Ser. 02-CP3, Class AX, IO, 0.417s, 2035  20,589,566  712,180 
Ser. 04-C4, Class AX, IO, 0.247s, 2039  11,532,715  229,144 
Ser. 05-C2, Class AX, IO, 0.14s, 2037  75,101,149  1,010,035 
DLJ Commercial Mortgage Corp.     
Ser. 00-CF1, Class A1B, 7.62s, 2033  2,129,150  2,210,603 
Ser. 99-CG2, Class B3, 6.1s, 2032  1,752,000  1,748,699 
Ser. 99-CG2, Class B4, 6.1s, 2032  2,785,000  2,715,375 
Ser. 98-CF2, Class B3, 6.04s, 2031  814,188  818,699 
Fannie Mae     
IFB Ser. 06-70, Class SM, 33.904s, 2036  332,668  459,200 
IFB Ser. 07-75, Class JS, 32.67s, 2037  2,129,155  2,961,319 
IFB Ser. 07-80, Class AS, 29.67s, 2037  885,925  1,147,252 
IFB Ser. 07-1, Class NR, 28.795s, 2037  70,866  84,767 
IFB Ser. 07-75, Class CS, 28.271s, 2037  1,430,636  1,933,294 

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
Fannie Mae     
IFB Ser. 06-62, Class PS, 25.133s, 2036  $1,347,980  $1,734,094 
IFB Ser. 07-60, Class SB, 24.833s, 2037  761,639  939,961 
IFB Ser. 06-76, Class QB, 24.833s, 2036  1,454,403  1,868,642 
IFB Ser. 06-48, Class TQ, 24.833s, 2036  2,675,250  3,388,638 
IFB Ser. 06-63, Class SP, 24.533s, 2036  1,593,545  2,012,691 
IFB Ser. 07-W7, Class 1A4, 24.413s, 2037  1,444,944  1,741,364 
IFB Ser. 07-81, Class SC, 23.033s, 2037  1,242,239  1,480,075 
IFB Ser. 07-1, Class NK, 22.213s, 2037  3,576,464  4,384,790 
IFB Ser. 06-104, Class GS, 21.857s, 2036  959,629  1,140,159 
IFB Ser. 06-104, Class ES, 21.144s, 2036  1,796,846  2,182,361 
IFB Ser. 05-37, Class SU, 19.355s, 2035  2,191,070  2,592,832 
IFB Ser. 06-49, Class SE, 19.155s, 2036  2,334,392  2,743,298 
IFB Ser. 06-60, Class AK, 18.955s, 2036  1,144,440  1,339,160 
IFB Ser. 06-60, Class TK, 18.755s, 2036  754,027  878,377 
IFB Ser. 06-104, Class CS, 18.624s, 2036  1,959,926  2,204,012 
IFB Ser. 07-30, Class FS, 18.428s, 2037  3,607,223  4,032,527 
IFB Ser. 07-96, Class AS, 17.844s, 2037  1,763,433  1,915,215 
IFB Ser. 05-25, Class PS, 17.331s, 2035  75,558  85,409 
IFB Ser. 06-115, Class ES, 16.715s, 2036  1,487,734  1,699,815 
IFB Ser. 06-8, Class PK, 16.555s, 2036  2,592,641  2,813,021 
IFB Ser. 05-57, Class CD, 15.895s, 2035  1,162,183  1,296,205 
IFB Ser. 05-74, Class CP, 15.725s, 2035  1,358,799  1,519,139 
IFB Ser. 05-115, Class NQ, 15.708s, 2036  751,490  786,142 
IFB Ser. 06-27, Class SP, 15.542s, 2036  2,039,784  2,275,967 
IFB Ser. 06-8, Class HP, 15.542s, 2036  2,166,102  2,408,197 
IFB Ser. 06-8, Class WK, 15.542s, 2036  3,460,701  3,822,148 
IFB Ser. 05-106, Class US, 15.542s, 2035  3,256,009  3,636,055 
IFB Ser. 05-99, Class SA, 15.542s, 2035  1,598,229  1,760,429 
IFB Ser. 05-45, Class DA, 15.395s, 2035  2,584,726  2,858,393 
IFB Ser. 05-74, Class DM, 15.359s, 2035  3,142,023  3,463,724 
IFB Ser. 05-45, Class DC, 15.285s, 2035  2,016,058  2,222,084 
IFB Ser. 06-60, Class CS, 15.065s, 2036  739,113  769,838 
IFB Ser. 05-57, Class DC, 13.776s, 2034  1,933,766  2,088,739 
IFB Ser. 05-74, Class SK, 13.362s, 2035  2,504,481  2,706,712 
IFB Ser. 05-74, Class CS, 13.252s, 2035  1,549,630  1,667,274 
IFB Ser. 05-45, Class PC, 12.866s, 2034  1,021,993  1,090,437 
IFB Ser. 05-114, Class SP, 12.812s, 2036  941,920  979,832 
IFB Ser. 05-95, Class OP, 12.753s, 2035  979,503  999,941 
IFB Ser. 05-95, Class CP, 12.559s, 2035  234,321  250,376 
IFB Ser. 05-106, Class JC, 12.492s, 2035  674,634  673,506 
IFB Ser. 05-83, Class QP, 10.995s, 2034  556,208  553,110 
IFB Ser. 05-72, Class SB, 10.722s, 2035  1,574,082  1,584,105 
Ser. 03-W6, Class PT1, 9.992s, 2042  198,560  224,033 
Ser. 02-T12, Class A4, 9 1/2s, 2042  179,086  193,688 
Ser. 02-T4, Class A4, 9 1/2s, 2041  973,504  1,079,402 
Ser. 02-T6, Class A3, 9 1/2s, 2041  355,239  392,383 
Ser. 04-T3, Class PT1, 8.931s, 2044  521,229  577,736 
Ser. 02-26, Class A2, 7 1/2s, 2048  1,605,678  1,714,710 
Ser. 04-T3, Class 1A4, 7 1/2s, 2044  47,965  51,468 
Ser. 04-T2, Class 1A4, 7 1/2s, 2043  756,321  811,534 
Ser. 03-W1, Class 2A, 7 1/2s, 2042  1,444,607  1,542,508 
Ser. 02-T19, Class A3, 7 1/2s, 2042  1,078,408  1,153,419 
Ser. 02-T12, Class A3, 7 1/2s, 2042  293,479  312,418 
Ser. 02-14, Class A2, 7 1/2s, 2042  567,550  604,168 
Ser. 01-T10, Class A2, 7 1/2s, 2041  1,841,955  1,957,694 
Ser. 02-T4, Class A3, 7 1/2s, 2041  309,281  328,672 
Ser. 01-T12, Class A2, 7 1/2s, 2041  1,584,166  1,682,612 
Ser. 01-T3, Class A1, 7 1/2s, 2040  275,472  292,357 
Ser. 01-T1, Class A1, 7 1/2s, 2040  589,702  630,981 
Ser. 99-T2, Class A1, 7 1/2s, 2039  163,506  176,843 
Ser. 386, Class 26, IO, 7 1/2s, 2038  88,659  17,797 
Ser. 383, Class 88, IO, 7 1/2s, 2037  93,005  19,654 
Ser. 383, Class 89, IO, 7 1/2s, 2037  72,438  15,409 
Ser. 383, Class 87, IO, 7 1/2s, 2037  115,922  25,372 
Ser. 03-W10, Class 1A1, 7 1/2s, 2032  686,772  732,614 
Ser. 02-T1, Class A3, 7 1/2s, 2031  485,944  518,028 

24

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
Fannie Mae     
Ser. 00-T6, Class A1, 7 1/2s, 2030  $1,421,893  $1,512,249 
Ser. 01-T5, Class A3, 7 1/2s, 2030  162,732  173,171 
Ser. 01-T4, Class A1, 7 1/2s, 2028  3,397,849  3,651,287 
Ser. 02-26, Class A1, 7s, 2048  1,086,537  1,146,612 
Ser. 04-T3, Class 1A3, 7s, 2044  494,269  523,609 
Ser. 03-W3, Class 1A2, 7s, 2042  494,360  522,436 
Ser. 02-T16, Class A2, 7s, 2042  1,014,127  1,073,060 
Ser. 02-14, Class A1, 7s, 2042  89,758  94,546 
Ser. 02-T4, Class A2, 7s, 2041  585,355  615,907 
Ser. 01-W3, Class A, 7s, 2041  344,553  363,962 
Ser. 386, Class 24, IO, 7s, 2038  89,420  20,162 
Ser. 386, Class 25, IO, 7s, 2038  88,635  20,123 
Ser. 386, Class 22, IO, 7s, 2038  101,744  23,751 
Ser. 386, Class 21, IO, 7s, 2037  115,788  26,996 
Ser. 386, Class 23, IO, 7s, 2037  112,261  25,487 
Ser. 383, Class 84, IO, 7s, 2037  104,993  25,549 
Ser. 383, Class 85, IO, 7s, 2037  86,503  20,778 
Ser. 383, Class 79, IO, 7s, 2037  108,013  26,276 
Ser. 383, Class 80, IO, 7s, 2037  233,614  57,890 
Ser. 383, Class 81, IO, 7s, 2037  129,268  31,239 
Ser. 383, Class 82, IO, 7s, 2037  128,320  30,020 
Ser. 383, Class 83, IO, 7s, 2037  107,192  25,832 
Ser. 04-W1, Class 2A2, 7s, 2033  5,095,610  5,395,999 
Ser. 386, Class 20, IO, 6 1/2s, 2038  111,991  25,848 
Ser. 386, Class 14, IO, 6 1/2s, 2038  1,339,526  325,599 
Ser. 386, Class 12, IO, 6 1/2s, 2038  688,017  165,080 
Ser. 386, Class 19, IO, 6 1/2s, 2038  109,203  25,069 
Ser. 386, Class 17, IO, 6 1/2s, 2037  167,065  40,139 
Ser. 386, Class 16, IO, 6 1/2s, 2037  114,845  26,810 
Ser. 383, Class 60, IO, 6 1/2s, 2037  531,342  138,865 
Ser. 383, Class 62, IO, 6 1/2s, 2037  147,150  37,830 
Ser. 383, Class 69, IO, 6 1/2s, 2037  90,146  23,243 
Ser. 383, Class 63, IO, 6 1/2s, 2037  114,840  29,031 
Ser. 383, Class 64, IO, 6 1/2s, 2037  213,190  55,148 
Ser. 383, Class 67, IO, 6 1/2s, 2037  112,776  29,006 
Ser. 383, Class 58, IO, 6 1/2s, 2037  247,581  63,375 
Ser. 383, Class 59, IO, 6 1/2s, 2037  155,899  39,312 
Ser. 383, Class 61, IO, 6 1/2s, 2037  124,014  31,502 
Ser. 383, Class 65, IO, 6 1/2s, 2037  146,904  38,234 
Ser. 383, Class 66, IO, 6 1/2s, 2037  149,223  38,744 
Ser. 383, Class 72, IO, 6 1/2s, 2037  674,849  170,932 
Ser. 383, Class 77, IO, 6 1/2s, 2037  89,815  22,639 
Ser. 383, Class 78, IO, 6 1/2s, 2037  91,089  22,932 
Ser. 381, Class 14, IO, 6 1/2s, 2037  1,918,192  450,111 
Ser. 381, Class 16, IO, 6 1/2s, 2037  376,480  97,562 
Ser. 381, Class 15, IO, 6 1/2s, 2037  813,492  192,219 
Ser. 383, Class 73, IO, 6 1/2s, 2037  202,819  50,965 
Ser. 383, Class 76, IO, 6 1/2s, 2037  121,912  30,972 
Ser. 383, Class 70, IO, 6 1/2s, 2037  313,937  78,940 
Ser. 383, Class 74, IO, 6 1/2s, 2037  167,069  41,902 
Ser. 383, Class 71, IO, 6 1/2s, 2036  132,863  33,197 
Ser. 383, Class 75, IO, 6 1/2s, 2036  106,635  26,977 
Ser. 371, Class 2, IO, 6 1/2s, 2036  3,480,344  1,004,698 
Ser. 389, Class 6, IO, 6s, 2038  103,387  27,206 
Ser. 386, Class 10, IO, 6s, 2038  94,018  22,893 
Ser. 386, Class 8, IO, 6s, 2038  1,138,846  269,790 
Ser. 383, Class 40, IO, 6s, 2038  1,121,383  276,328 
Ser. 383, Class 41, IO, 6s, 2038  984,813  242,515 
Ser. 383, Class 42, IO, 6s, 2038  735,275  181,646 
Ser. 383, Class 43, IO, 6s, 2038  585,934  145,036 
Ser. 383, Class 44, IO, 6s, 2038  534,943  132,155 
Ser. 383, Class 45, IO, 6s, 2038  411,966  102,636 
Ser. 383, Class 46, IO, 6s, 2038  358,009  89,193 
Ser. 383, Class 47, IO, 6s, 2038  317,349  79,063 
Ser. 383, Class 48, IO, 6s, 2038  284,097  70,917 
Ser. 383, Class 52, IO, 6s, 2038  115,419  28,811 

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
Fannie Mae     
Ser. 386, Class 9, IO, 6s, 2038  $512,952  $124,878 
Ser. 383, Class 28, IO, 6s, 2038  1,176,573  298,218 
Ser. 383, Class 29, IO, 6s, 2038  1,495,091  379,418 
Ser. 383, Class 30, IO, 6s, 2038  799,523  203,279 
Ser. 383, Class 31, IO, 6s, 2038  716,134  182,078 
Ser. 383, Class 32, IO, 6s, 2038  486,697  124,125 
Ser. 383, Class 33, IO, 6s, 2038  416,107  105,929 
Ser. 383, Class 37, IO, 6s, 2038  162,033  41,451 
Ser. 386, Class 7, IO, 6s, 2038  626,764  161,696 
Ser. 383, Class 34, IO, 6s, 2037  168,408  42,556 
Ser. 383, Class 35, IO, 6s, 2037  139,101  35,107 
Ser. 383, Class 36, IO, 6s, 2037  109,850  27,742 
Ser. 383, Class 38, IO, 6s, 2037  88,809  22,482 
Ser. 383, Class 50, IO, 6s, 2037  194,191  47,700 
Ser. 386, Class 6, IO, 6s, 2037  300,847  74,913 
Ser. 383, Class 49, IO, 6s, 2037  146,364  36,043 
Ser. 383, Class 51, IO, 6s, 2037  150,883  37,062 
Ser. 383, Class 57, IO, 6s, 2037  92,121  22,758 
Ser. 372, Class 2, IO, 6s, 2036  939,288  261,828 
Ser. 383, Class 98, IO, 6s, 2022  162,307  27,607 
Ser. 383, Class 99, IO, 6s, 2022  78,377  12,972 
Ser. 383, Class 18, IO, 5 1/2s, 2038  562,374  137,846 
Ser. 383, Class 19, IO, 5 1/2s, 2038  513,529  125,873 
Ser. 383, Class 25, IO, 5 1/2s, 2038  89,295  21,260 
Ser. 386, Class 3, IO, 5 1/2s, 2037  311,281  75,787 
Ser. 386, Class 4, IO, 5 1/2s, 2037  127,037  31,300 
Ser. 386, Class 5, IO, 5 1/2s, 2037  94,398  23,546 
Ser. 383, Class 14, IO, 5 1/2s, 2037  201,690  49,864 
Ser. 383, Class 15, IO, 5 1/2s, 2037  91,156  22,156 
Ser. 383, Class 3, IO, 5 1/2s, 2037  980,820  244,524 
Ser. 383, Class 4, IO, 5 1/2s, 2037  877,052  218,654 
Ser. 383, Class 5, IO, 5 1/2s, 2037  498,598  124,303 
Ser. 383, Class 6, IO, 5 1/2s, 2037  447,473  111,682 
Ser. 383, Class 7, IO, 5 1/2s, 2037  441,157  109,897 
Ser. 383, Class 10, IO, 5 1/2s, 2037  162,824  41,143 
Ser. 383, Class 11, IO, 5 1/2s, 2037  113,396  28,435 
Ser. 383, Class 12, IO, 5 1/2s, 2037  103,057  25,892 
Ser. 383, Class 13, IO, 5 1/2s, 2037  104,032  26,137 
Ser. 383, Class 8, IO, 5 1/2s, 2037  179,025  45,911 
Ser. 383, Class 9, IO, 5 1/2s, 2037  170,460  39,025 
Ser. 383, Class 20, IO, 5 1/2s, 2037  317,223  79,024 
Ser. 383, Class 21, IO, 5 1/2s, 2037  300,499  74,858 
Ser. 383, Class 22, IO, 5 1/2s, 2037  203,425  50,578 
Ser. 383, Class 23, IO, 5 1/2s, 2037  183,782  45,695 
Ser. 383, Class 24, IO, 5 1/2s, 2037  128,776  31,154 
Ser. 383, Class 26, IO, 5 1/2s, 2037  94,830  23,669 
Ser. 379, Class 2, IO, 5 1/2s, 2037  228,461  63,857 
Ser. 363, Class 2, IO, 5 1/2s, 2035  2,869,515  793,386 
Ser. 383, Class 95, IO, 5 1/2s, 2022  255,368  44,251 
Ser. 383, Class 97, IO, 5 1/2s, 2022  107,572  18,053 
Ser. 383, Class 94, IO, 5 1/2s, 2022  128,609  22,011 
Ser. 383, Class 96, IO, 5 1/2s, 2022  139,707  22,888 
IFB Ser. 07-W6, Class 6A2, IO, 5.339s, 2037  1,866,621  205,402 
IFB Ser. 06-90, Class SE, IO, 5.339s, 2036  1,940,098  252,134 
IFB Ser. 04-51, Class XP, IO, 5.239s, 2034  123,935  15,535 
IFB Ser. 03-66, Class SA, IO, 5.189s, 2033  2,666,196  312,966 
IFB Ser. 04-17, Class ST, IO, 5.139s, 2034  138,763  16,885 
Ser. 383, Class 2, IO, 5s, 2037  95,719  24,374 
Ser. 383, Class 92, IO, 5s, 2022  111,166  18,305 
IFB Ser. 07-W6, Class 5A2, IO, 4.829s, 2037  2,718,990  295,536 
IFB Ser. 07-W4, Class 4A2, IO, 4.819s, 2037  12,303,092  1,268,123 
IFB Ser. 07-W2, Class 3A2, IO, 4.819s, 2037  3,618,856  371,541 
IFB Ser. 06-115, Class BI, IO, 4.799s, 2036  3,272,723  252,804 
IFB Ser. 05-113, Class AI, IO, 4.769s, 2036  620,014  54,551 
IFB Ser. 05-113, Class DI, IO, 4.769s, 2036  19,495,789  1,939,647 
IFB Ser. 05-52, Class DC, IO, 4.739s, 2035  1,719,116  189,868 

25

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
Fannie Mae     
IFB Ser. 07-60, Class AX, IO, 4.689s, 2037  $7,546,430  $797,127 
IFB Ser. 06-60, Class SI, IO, 4.689s, 2036  3,518,791  384,832 
IFB Ser. 06-60, Class UI, IO, 4.689s, 2036  1,413,136  138,715 
IFB Ser. 04-24, Class CS, IO, 4.689s, 2034  3,760,160  418,735 
IFB Ser. 04-12, Class WS, IO, 4.689s, 2033  105,033  10,815 
IFB Ser. 07-W7, Class 3A2, IO, 4.669s, 2037  4,592,844  450,360 
IFB Ser. 03-122, Class SA, IO, 4.639s, 2028  4,706,596  321,380 
IFB Ser. 03-122, Class SJ, IO, 4.639s, 2028  4,887,460  339,996 
IFB Ser. 06-60, Class DI, IO, 4.609s, 2035  1,755,706  158,370 
IFB Ser. 04-60, Class SW, IO, 4.589s, 2034  6,932,239  732,553 
IFB Ser. 05-65, Class KI, IO, 4.539s, 2035  13,023,002  1,151,697 
IFB Ser. 08-10, Class LI, IO, 4.519s, 2038  367,243  38,398 
IFB Ser. 08-01, Class GI, IO, 4.499s, 2037  13,910,114  1,535,966 
IFB Ser. 05-42, Class SA, IO, 4.339s, 2035  205,922  17,060 
IFB Ser. 07-32, Class JS, IO, 4.329s, 2037  613,897  63,418 
IFB Ser. 07-39, Class LI, IO, 4.309s, 2037  198,058  18,810 
IFB Ser. 07-23, Class SI, IO, 4.309s, 2037  2,926,699  203,621 
IFB Ser. 07-54, Class CI, IO, 4.299s, 2037  2,291,270  223,867 
IFB Ser. 07-39, Class PI, IO, 4.299s, 2037  2,213,797  152,555 
IFB Ser. 07-30, Class WI, IO, 4.299s, 2037  18,798,883  1,584,807 
IFB Ser. 07-28, Class SE, IO, 4.289s, 2037  2,419,647  234,394 
IFB Ser. 06-128, Class SH, IO, 4.289s, 2037  2,705,764  231,797 
IFB Ser. 06-56, Class SM, IO, 4.289s, 2036  6,734,249  564,562 
IFB Ser. 05-73, Class SI, IO, 4.289s, 2035  1,536,364  124,356 
IFB Ser. 05-12, Class SC, IO, 4.289s, 2035  2,248,351  183,182 
IFB Ser. 05-17, Class ES, IO, 4.289s, 2035  3,028,754  251,182 
IFB Ser. 05-17, Class SY, IO, 4.289s, 2035  1,394,341  115,656 
IFB Ser. 05-45, Class PL, IO, 4.289s, 2034  207,941  19,625 
IFB Ser. 07-W5, Class 2A2, IO, 4.279s, 2037  1,166,288  95,636 
IFB Ser. 07-30, Class IE, IO, 4.279s, 2037  6,623,662  734,563 
IFB Ser. 06-123, Class CI, IO, 4.279s, 2037  5,437,976  516,376 
IFB Ser. 06-123, Class UI, IO, 4.279s, 2037  2,419,329  225,439 
IFB Ser. 05-82, Class SY, IO, 4.269s, 2035  5,959,863  483,498 
IFB Ser. 05-45, Class EW, IO, 4.259s, 2035  2,693,701  219,060 
IFB Ser. 05-45, Class SR, IO, 4.259s, 2035  8,197,500  665,961 
IFB Ser. 07-15, Class BI, IO, 4.239s, 2037  3,939,607  360,435 
IFB Ser. 06-126, Class CS, IO, 4.239s, 2037  1,524,795  139,337 
IFB Ser. 06-16, Class SM, IO, 4.239s, 2036  2,080,395  186,578 
IFB Ser. 05-95, Class CI, IO, 4.239s, 2035  3,545,618  347,463 
IFB Ser. 05-84, Class SG, IO, 4.239s, 2035  5,800,577  550,641 
IFB Ser. 05-57, Class NI, IO, 4.239s, 2035  1,235,964  101,411 
IFB Ser. 05-54, Class SA, IO, 4.239s, 2035  5,805,351  491,644 
IFB Ser. 05-23, Class SG, IO, 4.239s, 2035  4,540,319  420,374 
IFB Ser. 05-29, Class SX, IO, 4.239s, 2035  74,561  6,742 
IFB Ser. 05-17, Class SA, IO, 4.239s, 2035  3,961,261  389,515 
IFB Ser. 05-17, Class SE, IO, 4.239s, 2035  4,297,389  383,915 
IFB Ser. 05-57, Class DI, IO, 4.239s, 2035  9,216,631  769,456 
IFB Ser. 05-7, Class SC, IO, 4.239s, 2035  242,751  20,316 
IFB Ser. 05-83, Class QI, IO, 4.229s, 2035  965,376  100,107 
IFB Ser. 06-128, Class GS, IO, 4.219s, 2037  2,571,513  243,451 
Ser. 06-116, Class ES, IO, 4.189s, 2036  1,651,357  139,000 
IFB Ser. 06-114, Class IS, IO, 4.189s, 2036  2,771,819  248,782 
IFB Ser. 06-116, Class LS, IO, 4.189s, 2036  210,076  19,630 
IFB Ser. 06-115, Class GI, IO, 4.179s, 2036  2,593,349  240,614 
IFB Ser. 06-115, Class IE, IO, 4.179s, 2036  2,132,190  176,638 
IFB Ser. 06-117, Class SA, IO, 4.179s, 2036  3,158,894  274,900 
IFB Ser. 06-121, Class SD, IO, 4.179s, 2036  5,214,573  456,964 
IFB Ser. 06-109, Class SG, IO, 4.169s, 2036  3,719,154  329,283 
IFB Ser. 06-104, Class IM, IO, 4.159s, 2036  811,245  75,148 
IFB Ser. 06-104, Class SY, IO, 4.159s, 2036  1,731,328  142,234 
IFB Ser. 06-109, Class SH, IO, 4.159s, 2036  2,799,437  266,418 
IFB Ser. 06-111, Class SA, IO, 4.159s, 2036  744,290  69,358 
Ser. 06-104, Class SG, IO, 4.139s, 2036  3,349,441  258,048 
IFB Ser. 07-W6, Class 4A2, IO, 4.139s, 2037  11,051,327  1,020,037 
IFB Ser. 06-128, Class SC, IO, 4.139s, 2037  8,844,156  773,358 
IFB Ser. 06-43, Class SI, IO, 4.139s, 2036  4,183,619  370,116 

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
Fannie Mae     
IFB Ser. 06-44, Class IS, IO, 4.139s, 2036  $3,857,426  $326,826 
IFB Ser. 06-8, Class JH, IO, 4.139s, 2036  9,659,885  905,637 
IFB Ser. 05-122, Class SG, IO, 4.139s, 2035  2,104,546  184,751 
IFB Ser. 05-57, Class MS, IO, 4.139s, 2035  178,318  14,043 
IFB Ser. 05-95, Class OI, IO, 4.129s, 2035  540,841  65,506 
IFB Ser. 06-92, Class JI, IO, 4.119s, 2036  1,935,928  177,539 
IFB Ser. 06-92, Class LI, IO, 4.119s, 2036  3,115,576  274,085 
IFB Ser. 06-96, Class ES, IO, 4.119s, 2036  3,399,085  296,307 
IFB Ser. 06-99, Class AS, IO, 4.119s, 2036  2,235,085  198,581 
IFB Ser. 06-85, Class TS, IO, 4.099s, 2036  4,819,728  392,246 
IFB Ser. 06-61, Class SE, IO, 4.089s, 2036  4,511,325  341,050 
IFB Ser. 07-75, Class PI, IO, 4.079s, 2037  3,611,128  294,531 
IFB Ser. 07-76, Class SA, IO, 4.079s, 2037  3,490,188  328,582 
IFB Ser. 07-W7, Class 2A2, IO, 4.069s, 2037  8,760,559  782,635 
IFB Ser. 07-88, Class MI, IO, 4.059s, 2037  1,136,882  83,628 
Ser. 06-94, Class NI, IO, 4.039s, 2036  1,646,122  123,446 
IFB Ser. 07-116, Class IA, IO, 4.039s, 2037  12,827,109  1,101,849 
IFB Ser. 07-103, Class AI, IO, 4.039s, 2037  14,967,883  1,267,288 
IFB Ser. 07-1, Class NI, IO, 4.039s, 2037  8,316,018  646,338 
IFB Ser. 07-15, Class NI, IO, 4.039s, 2022  4,118,365  317,712 
IFB Ser. 08-3, Class SC, IO, 3.989s, 2038  1,887,733  155,517 
IFB Ser. 07-109, Class XI, IO, 3.989s, 2037  2,236,235  193,773 
IFB Ser. 07-109, Class YI, IO, 3.989s, 2037  3,370,176  256,180 
IFB Ser. 07-W8, Class 2A2, IO, 3.989s, 2037  6,003,523  509,983 
IFB Ser. 07-88, Class JI, IO, 3.989s, 2037  4,483,167  374,952 
IFB Ser. 06-79, Class SH, IO, 3.989s, 2036  213,081  18,799 
IFB Ser. 07-54, Class KI, IO, 3.979s, 2037  1,700,396  98,823 
IFB Ser. 07-30, Class JS, IO, 3.979s, 2037  5,601,328  467,355 
IFB Ser. 07-30, Class LI, IO, 3.979s, 2037  8,526,163  733,851 
IFB Ser. 07-W2, Class 1A2, IO, 3.969s, 2037  2,534,015  227,693 
IFB Ser. 07-106, Class SN, IO, 3.949s, 2037  3,590,973  280,796 
IFB Ser. 07-54, Class IA, IO, 3.949s, 2037  2,989,464  254,053 
IFB Ser. 07-54, Class IB, IO, 3.949s, 2037  2,989,464  254,053 
IFB Ser. 07-54, Class IC, IO, 3.949s, 2037  2,989,464  254,053 
IFB Ser. 07-54, Class ID, IO, 3.949s, 2037  2,989,464  254,053 
IFB Ser. 07-54, Class IE, IO, 3.949s, 2037  2,989,464  254,053 
IFB Ser. 07-54, Class IF, IO, 3.949s, 2037  4,448,062  376,236 
IFB Ser. 07-54, Class NI, IO, 3.949s, 2037  2,681,843  234,546 
IFB Ser. 07-54, Class UI, IO, 3.949s, 2037  3,611,256  342,348 
IFB Ser. 07-109, Class AI, IO, 3.939s, 2037  11,668,210  1,011,559 
IFB Ser. 07-91, Class AS, IO, 3.939s, 2037  2,366,362  187,144 
IFB Ser. 07-91, Class HS, IO, 3.939s, 2037  2,532,403  197,844 
IFB Ser. 07-15, Class CI, IO, 3.919s, 2037  10,117,105  848,716 
IFB Ser. 06-123, Class BI, IO, 3.919s, 2037  12,342,978  1,016,257 
IFB Ser. 06-115, Class JI, IO, 3.919s, 2036  7,335,504  615,910 
IFB Ser. 07-109, Class PI, IO, 3.889s, 2037  3,676,175  300,543 
IFB Ser. 06-123, Class LI, IO, 3.859s, 2037  4,890,089  393,518 
IFB Ser. 08-1, Class NI, IO, 3.789s, 2037  6,069,748  446,976 
IFB Ser. 07-116, Class BI, IO, 3.789s, 2037  11,884,062  872,614 
IFB Ser. 08-01, Class AI, IO, 3.789s, 2037  16,887,603  1,399,601 
IFB Ser. 08-10, Class GI, IO, 3.769s, 2038  4,411,078  282,780 
IFB Ser. 08-13, Class SA, IO, 3.759s, 2038  411,133  30,589 
IFB Ser. 08-1, Class HI, IO, 3.739s, 2037  7,882,076  634,726 
IFB Ser. 07-39, Class AI, IO, 3.659s, 2037  5,156,116  374,264 
IFB Ser. 07-32, Class SD, IO, 3.649s, 2037  3,523,233  263,830 
IFB Ser. 07-30, Class UI, IO, 3.639s, 2037  2,910,579  218,964 
IFB Ser. 07-32, Class SC, IO, 3.639s, 2037  4,677,842  355,207 
IFB Ser. 07-1, Class CI, IO, 3.639s, 2037  3,400,232  251,427 
IFB Ser. 05-74, Class SE, IO, 3.639s, 2035  11,985,061  737,315 
IFB Ser. 05-82, Class SI, IO, 3.639s, 2035  11,398,911  723,419 
IFB Ser. 05-92, Class US, IO, 3.639s, 2025  541,181  35,542 
IFB Ser. 05-14, Class SE, IO, 3.589s, 2035  2,287,898  152,404 
IFB Ser. 05-58, Class IK, IO, 3.539s, 2035  4,317,620  385,684 
IFB Ser. 08-1, Class BI, IO, 3.449s, 2038  9,178,353  561,698 
IFB Ser. 07-75, Class ID, IO, 3.409s, 2037  2,891,000  208,071 
Ser. 03-W12, Class 2, IO, 2.219s, 2043  6,936,248  453,958 

26

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
Fannie Mae     
Ser. 03-W10, Class 3, IO, 1.939s, 2043  $5,391,870  $311,670 
Ser. 03-W10, Class 1, IO, 1.918s, 2043  21,399,177  1,198,465 
Ser. 03-W8, Class 12, IO, 1.636s, 2042  22,238,578  1,207,326 
FRB Ser. 03-W17, Class 12, IO, 1.148s, 2033  6,824,323  240,182 
Ser. 03-T2, Class 2, IO, 0.811s, 2042  31,719,476  887,536 
Ser. 03-W3, Class 2IO1, IO, 0.682s, 2042  2,883,362  62,812 
Ser. 03-W6, Class 51, IO, 0.675s, 2042  9,024,398  182,857 
Ser. 06-W3, Class 1AS, IO, 0.662s, 2046  11,954,038  759,791 
Ser. 01-T12, Class IO, 0.565s, 2041  18,520,953  308,350 
Ser. 03-W2, Class 1, IO, 0.467s, 2042  16,768,060  239,277 
Ser. 02-T4, IO, 0.45s, 2041  6,702,881  82,956 
Ser. 03-W3, Class 1, IO, 0.439s, 2042  22,577,193  237,011 
Ser. 02-T1, Class IO, IO, 0.422s, 2031  18,163,902  224,450 
Ser. 03-W6, Class 3, IO, 0.367s, 2042  12,615,777  142,832 
Ser. 03-W4, Class 3A, IO, 0.352s, 2042  12,065,179  139,575 
Ser. 03-W6, Class 23, IO, 0.352s, 2042  13,194,062  162,516 
Ser. 01-79, Class BI, IO, 0.335s, 2045  3,439,823  32,242 
Ser. 08-33, Principal Only (PO), zero %, 2038  827,260  562,296 
Ser. 08-9, PO, zero %, 2038  598,537  432,160 
Ser. 07-112, Class EO, PO, zero %, 2037  305,841  215,389 
Ser. 07-89, Class PO, PO, zero %, 2037  504,472  357,523 
Ser. 07-64, Class LO, PO, zero %, 2037  1,445,696  1,038,755 
Ser. 07-47, Class B0, PO, zero %, 2037  146,109  106,844 
Ser. 07-14, Class KO, PO, zero %, 2037  342,932  245,896 
Ser. 06-125, Class MO, PO, zero %, 2037  525,861  383,046 
Ser. 06-125, Class OX, PO, zero %, 2037  136,787  92,462 
Ser. 06-116, Class OD, PO, zero %, 2036  82,361  57,777 
Ser. 06-117, Class OA, PO, zero %, 2036  360,127  275,375 
Ser. 06-81, Class OP, PO, zero %, 2036  332,473  237,990 
Ser. 06-84, Class OT, PO, zero %, 2036  73,446  54,876 
Ser. 06-56, Class XF, zero %, 2036  219,555  193,104 
Ser. 06-46, Class OC, PO, zero %, 2036  127,499  92,371 
Ser. 06-16, Class OG, PO, zero %, 2036  188,422  131,046 
Ser. 04-38, Class AO, PO, zero %, 2034  3,815,369  2,723,024 
Ser. 04-61, Class CO, PO, zero %, 2031  2,786,566  2,277,347 
Ser. 07-15, Class IM, IO, zero %, 2009  3,290,487  2,095 
Ser. 07-16, Class TS, IO, zero %, 2009  13,375,844  46,906 
FRB Ser. 07-76, Class SF, zero %, 2037  176,244  163,015 
FRB Ser. 06-115, Class SN, zero %, 2036  1,140,806  1,089,634 
FRB Ser. 06-104, Class EK, zero %, 2036  265,284  246,799 
FRB Ser. 05-117, Class GF, zero %, 2036  210,394  159,181 
FRB Ser. 05-65, Class ER, zero %, 2035  2,477,350  2,116,849 
FRB Ser. 05-57, Class UL, zero %, 2035  2,213,874  1,956,247 
FRB Ser. 05-36, Class QA, zero %, 2035  471,620  390,614 
FRB Ser. 05-65, Class CU, zero %, 2034  308,628  365,819 
FRB Ser. 05-81, Class DF, zero %, 2033  244,794  223,419 
FRB Ser. 06-1, Class HF, zero %, 2032  189,091  172,979 
IFB Ser. 06-75, Class FY, zero %, 2036  454,953  455,125 
Federal Home Loan Mortgage Corp.     
Structured Pass-Through Securities     
Ser. T-42, Class A6, 9 1/2s, 2042  182,566  196,661 
Ser. T-58, Class 4A, 7 1/2s, 2043  469,797  502,909 
Ser. T-51, Class 2A, 7 1/2s, 2042  488,218  520,386 
Ser. T-42, Class A5, 7 1/2s, 2042  776,286  826,372 
Ser. T-60, Class 1A2, 7s, 2044  3,398,088  3,597,766 
Ser. T-41, Class 2A, 7s, 2032  77,767  81,873 
IFB Ser. T-56, Class 2ASI, IO, 5.639s, 2043  1,762,869  205,484 
Ser. T-56, Class A, IO, 0.524s, 2043  7,902,048  131,892 
Ser. T-56, Class 3, IO, 0.366s, 2043  9,489,472  124,165 
Ser. T-56, Class 1, IO, 0.285s, 2043  12,175,437  105,228 
Ser. T-56, Class 2, IO, 0.028s, 2043  11,149,321  33,989 
FFCA Secured Lending Corp. 144A Ser. 00-1,     
Class A2, 7.77s, 2027  4,059,581  4,068,591 
First Horizon Alternative Mortgage Securities     
FRB Ser. 05-AA10, Class 2A1, 5.74s, 2035  1,787,378  1,286,912 

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
First Union National Bank-Bank of America     
Commercial Mortgage 144A Ser. 01-C1,     
Class 3, IO, 1.679s, 2033  $29,847,970  $941,493 
First Union-Lehman Brothers Commercial     
Mortgage Trust II     
Ser. 97-C2, Class F, 7 1/2s, 2029  2,726,000  2,881,622 
Ser. 97-C2, Class G, 7 1/2s, 2029  832,000  710,431 
First Union-Lehman Brothers-Bank of America     
144A Ser. 98-C2, Class G, 7s, 2035  3,410,000  3,262,824 
Freddie Mac     
IFB Ser. 3360, Class SB, 28.98s, 2037  830,068  1,105,624 
IFB Ser. 3339, Class WS, 28.157s, 2037  1,352,284  1,820,003 
IFB Ser. 3339, Class JS, 26.861s, 2037  1,178,866  1,505,681 
IFB Ser. 3202, Class PS, 24.495s, 2036  896,968  1,126,122 
IFB Ser. 3349, Class SA, 24.255s, 2037  4,726,826  5,843,443 
IFB Ser. 3331, Class SE, 24.255s, 2037  1,151,367  1,394,265 
IFB Ser. 3153, Class SX, 20.963s, 2036  789,410  951,044 
IFB Ser. 3202, Class HM, 20.962s, 2036  601,784  726,288 
IFB Ser. 3153, Class JS, 20.813s, 2036  78,267  89,069 
IFB Ser. 3182, Class PS, 18.77s, 2032  1,989,851  2,381,360 
IFB Ser. 3081, Class DC, 18.101s, 2035  1,293,361  1,453,084 
IFB Ser. 3114, Class GK, 16.57s, 2036  864,745  953,115 
IFB Ser. 3360, Class SC, 16.546s, 2037  1,928,053  2,020,808 
IFB Ser. 3408, Class EK, 15.904s, 2037  3,911,260  4,125,297 
IFB Ser. 2976, Class KL, 15.372s, 2035  2,420,787  2,639,340 
IFB Ser. 2990, Class DP, 15.263s, 2034  2,049,467  2,234,007 
IFB Ser. 2979, Class AS, 15.262s, 2034  580,607  618,079 
IFB Ser. 3153, Class UT, 15.006s, 2036  481,905  506,499 
IFB Ser. 3149, Class SU, 12.904s, 2036  1,021,545  1,041,659 
IFB Ser. 3065, Class DC, 12.488s, 2035  2,121,057  2,147,770 
IFB Ser. 3012, Class FS, 10.731s, 2035  75,814  75,729 
IFB Ser. 2990, Class WP, 10.688s, 2035  1,429,595  1,455,579 
IFB Ser. 2990, Class LB, 10.665s, 2034  2,533,534  2,496,342 
IFB Ser. 246, Class S54, IO, 6.143s, 2037  293,264  39,957 
IFB Ser. 2927, Class SI, IO, 6.043s, 2035  3,340,007  435,558 
IFB Ser. 2828, Class GI, IO, 5.043s, 2034  3,929,325  447,121 
IFB Ser. 3184, Class SP, IO, 4.893s, 2033  3,606,302  340,803 
IFB Ser. 2869, Class SH, IO, 4.843s, 2034  1,807,811  147,809 
IFB Ser. 2869, Class JS, IO, 4.793s, 2034  8,619,329  703,686 
IFB Ser. 239, IO, 4.743s, 2036  404,487  39,185 
IFB Ser. 2882, Class LS, IO, 4.743s, 2034  1,740,976  184,119 
IFB Ser. 3203, Class SH, IO, 4.683s, 2036  2,038,125  227,895 
IFB Ser. 2815, Class PT, IO, 4.593s, 2032  3,927,971  326,685 
IFB Ser. 2828, Class TI, IO, 4.593s, 2030  1,809,866  150,341 
IFB Ser. 3397, Class GS, IO, 4.543s, 2037  2,219,745  190,794 
IFB Ser. 3297, Class BI, IO, 4.303s, 2037  8,911,796  854,403 
IFB Ser. 3287, Class SD, IO, 4.293s, 2037  3,460,918  316,432 
IFB Ser. 3281, Class BI, IO, 4.293s, 2037  1,720,809  156,186 
IFB Ser. 3281, Class CI, IO, 4.293s, 2037  1,380,735  125,916 
IFB Ser. 3249, Class SI, IO, 4.293s, 2036  1,546,651  149,886 
IFB Ser. 3028, Class ES, IO, 4.293s, 2035  10,085,586  918,593 
IFB Ser. 2990, Class TS, IO, 4.293s, 2035  214,170  16,244 
IFB Ser. 2922, Class SE, IO, 4.293s, 2035  4,665,503  358,393 
IFB Ser. 3045, Class DI, IO, 4.273s, 2035  16,047,795  1,318,894 
IFB Ser. 3236, Class ES, IO, 4.243s, 2036  3,225,624  241,517 
IFB Ser. 3136, Class NS, IO, 4.243s, 2036  5,342,598  430,622 
IFB Ser. 3118, Class SD, IO, 4.243s, 2036  7,493,921  548,871 
IFB Ser. 3107, Class DC, IO, 4.243s, 2035  9,886,956  928,185 
IFB Ser. 2927, Class ES, IO, 4.243s, 2035  2,614,564  190,216 
IFB Ser. 2950, Class SM, IO, 4.243s, 2016  5,106,238  430,109 
IFB Ser. 3256, Class S, IO, 4.233s, 2036  3,916,193  372,931 
IFB Ser. 3031, Class BI, IO, 4.232s, 2035  1,926,639  196,140 
IFB Ser. 3370, Class TS, IO, 4.213s, 2037  223,286  18,194 
IFB Ser. 3244, Class SB, IO, 4.203s, 2036  2,464,077  223,230 
IFB Ser. 3244, Class SG, IO, 4.203s, 2036  2,871,090  264,660 
IFB Ser. 3236, Class IS, IO, 4.193s, 2036  4,470,780  395,759 

27

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
Freddie Mac     
IFB Ser. 3033, Class SG, IO, 4.193s, 2035  $89,761  $8,060 
IFB Ser. 2962, Class BS, IO, 4.193s, 2035  11,039,527  929,839 
IFB Ser. 3114, Class TS, IO, 4.193s, 2030  12,158,113  884,699 
IFB Ser. 3128, Class JI, IO, 4.173s, 2036  5,863,464  544,167 
IFB Ser. 2990, Class LI, IO, 4.173s, 2034  3,788,835  363,883 
IFB Ser. 3240, Class S, IO, 4.163s, 2036  8,519,937  769,085 
IFB Ser. 3229, Class BI, IO, 4.163s, 2036  661,434  47,096 
IFB Ser. 3153, Class JI, IO, 4.163s, 2036  4,166,622  332,591 
IFB Ser. 3065, Class DI, IO, 4.163s, 2035  1,465,853  145,153 
IFB Ser. 3145, Class GI, IO, 4.143s, 2036  4,819,735  463,184 
IFB Ser. 3114, Class GI, IO, 4.143s, 2036  2,067,715  214,255 
IFB Ser. 3339, Class JI, IO, 4.133s, 2037  8,936,564  712,242 
IFB Ser. 3218, Class AS, IO, 4.123s, 2036  3,037,255  268,108 
IFB Ser. 3221, Class SI, IO, 4.123s, 2036  3,610,179  311,211 
IFB Ser. 3153, Class UI, IO, 4.113s, 2036  3,582,308  374,869 
IFB Ser. 3202, Class PI, IO, 4.083s, 2036  9,979,999  865,483 
IFB Ser. 3355, Class MI, IO, 4.043s, 2037  2,530,263  203,357 
IFB Ser. 3201, Class SG, IO, 4.043s, 2036  4,576,751  394,273 
IFB Ser. 3203, Class SE, IO, 4.043s, 2036  4,122,157  350,563 
IFB Ser. 3238, Class LI, IO, 4.033s, 2036  163,300  13,687 
IFB Ser. 3171, Class PS, IO, 4.028s, 2036  3,902,602  317,520 
IFB Ser. 3152, Class SY, IO, 4.023s, 2036  4,429,251  405,026 
IFB Ser. 3366, Class SA, IO, 3.993s, 2037  302,040  25,252 
IFB Ser. 3284, Class BI, IO, 3.993s, 2037  2,815,858  230,338 
IFB Ser. 3260, Class SA, IO, 3.993s, 2037  2,725,869  209,388 
IFB Ser. 3199, Class S, IO, 3.993s, 2036  2,377,198  202,706 
IFB Ser. 3284, Class LI, IO, 3.983s, 2037  11,306,951  959,343 
IFB Ser. 3281, Class AI, IO, 3.973s, 2037  10,328,753  884,399 
IFB Ser. 3311, Class EI, IO, 3.953s, 2037  3,002,062  255,798 
IFB Ser. 3311, Class IA, IO, 3.953s, 2037  4,241,234  368,201 
IFB Ser. 3311, Class IB, IO, 3.953s, 2037  4,241,234  369,785 
IFB Ser. 3311, Class IC, IO, 3.953s, 2037  4,241,234  368,201 
IFB Ser. 3311, Class ID, IO, 3.953s, 2037  4,241,234  368,201 
IFB Ser. 3311, Class IE, IO, 3.953s, 2037  6,053,284  525,514 
IFB Ser. 3382, Class SI, IO, 3.943s, 2037  592,142  48,685 
IFB Ser. 3375, Class MS, IO, 3.943s, 2037  338,112  27,100 
IFB Ser. 3240, Class GS, IO, 3.923s, 2036  5,088,738  421,951 
IFB Ser. 3416, Class BI, IO, 3.793s, 2038  632,592  50,362 
IFB Ser. 2967, Class SA, IO, 3.693s, 2035  235,785  15,696 
IFB Ser. 3339, Class TI, IO, 3.683s, 2037  4,463,532  341,599 
IFB Ser. 3284, Class CI, IO, 3.663s, 2037  7,827,896  587,469 
IFB Ser. 3016, Class SQ, IO, 3.653s, 2035  3,795,125  239,943 
IFB Ser. 3235, Class SA, IO, 3.493s, 2036  479,816  29,314 
IFB Ser. 3424, Class UI, IO, 3.303s, 2037  222,708  14,131 
Ser. 3403, PO, zero %, 2037  93,833  68,935 
Ser. 3366, Class AO, PO, zero %, 2037  115,107  80,537 
Ser. 3369, Class BO, PO, zero %, 2037  89,546  63,208 
Ser. 246, PO, zero %, 2037  1,708,830  1,243,216 
Ser. 3391, PO, zero %, 2037  450,931  319,244 
Ser. 3292, Class DO, PO, zero %, 2037  277,420  200,164 
Ser. 3292, Class OA, PO, zero %, 2037  188,706  130,523 
Ser. 3296, Class OK, PO, zero %, 2037  163,133  113,189 
Ser. 3274, Class MO, PO, zero %, 2037  87,671  61,502 
Ser. 3300, PO, zero %, 2037  2,021,629  1,489,631 
Ser. 3252, Class LO, PO, zero %, 2036  658,410  475,412 
Ser. 3255, Class CO, PO, zero %, 2036  387,124  274,285 
Ser. 3218, Class AO, PO, zero %, 2036  224,354  163,274 
Ser. 239, PO, zero %, 2036  7,600,132  5,495,236 
Ser. 3206, Class EO, PO, zero %, 2036  81,962  61,635 
Ser. 3175, Class MO, PO, zero %, 2036  409,233  291,348 
Ser. 3210, PO, zero %, 2036  166,337  121,760 
Ser. 3139, Class CO, PO, zero %, 2036  480,547  338,449 
Ser. 2587, Class CO, PO, zero %, 2032  1,421,611  1,112,745 
FRB Ser. 3349, Class DO, zero %, 2037  226,029  203,799 
FRB Ser. 3327, Class YF, zero %, 2037  914,930  864,280 
FRB Ser. 3326, Class XF, zero %, 2037  1,411,261  1,219,266 

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
Freddie Mac     
FRB Ser. 3326, Class YF, zero %, 2037  $2,951,402  $2,939,846 
FRB Ser. 3263, Class TA, zero %, 2037  300,455  305,745 
FRB Ser. 3241, Class FH, zero %, 2036  637,795  535,593 
FRB Ser. 3341, Class FA, zero %, 2036  88,415  80,686 
FRB Ser. 3231, Class XB, zero %, 2036  481,501  466,611 
FRB Ser. 3283, Class HF, zero %, 2036  105,956  105,147 
FRB Ser. 3231, Class X, zero %, 2036  299,912  298,427 
FRB Ser. 3147, Class SF, zero %, 2036  1,377,975  1,209,713 
FRB Ser. 3130, Class JF, zero %, 2036  54,443  49,598 
FRB Ser. 3117, Class AF, zero %, 2036  186,938  147,571 
FRB Ser. 3326, Class WF, zero %, 2035  2,127,406  1,790,011 
FRB Ser. 3036, Class AS, zero %, 2035  193,233  161,286 
FRB Ser. 3003, Class XF, zero %, 2035  2,057,779  1,752,236 
GE Capital Commercial Mortgage Corp. 144A     
Ser. 05-C2, Class XC, IO, 0.074s, 2043  85,277,587  530,866 
Ser. 07-C1, Class XC, IO, 0.067s, 2019  184,177,585  996,847 
Ser. 05-C3, Class XC, IO, 0.06s, 2045  229,631,738  971,524 
GMAC Commercial Mortgage Securities, Inc.     
Ser. 99-C3, Class F, 7.878s, 2036  592,000  605,203 
Ser. 97-C1, Class X, IO, 1.277s, 2029  3,550,434  184,957 
Ser. 05-C1, Class X1, IO, 0.185s, 2043  91,751,184  1,034,041 
GMAC Commercial Mortgage Securities,     
Inc. 144A     
Ser. 99-C3, Class G, 6.974s, 2036  1,614,303  1,545,866 
Ser. 06-C1, Class XC, IO, 0.064s, 2045  127,331,310  710,543 
Government National Mortgage Association     
IFB Ser. 07-26, Class WS, 44.902s, 2037  3,061,593  5,033,517 
IFB Ser. 07-38, Class AS, 32s, 2037  2,720,245  3,774,461 
IFB Ser. 06-34, Class SA, 24.791s, 2036  326,071  404,799 
IFB Ser. 07-51, Class SP, 24.731s, 2037  932,126  1,144,046 
IFB Ser. 07-44, Class SP, 23.592s, 2036  1,404,035  1,773,139 
IFB Ser. 07-35, Class DK, 19.988s, 2035  767,000  912,134 
IFB Ser. 05-66, Class SP, 12.633s, 2035  1,249,861  1,259,861 
IFB Ser. 05-7, Class JM, 11.308s, 2034  2,370,890  2,469,302 
Ser. 07-17, Class CI, IO, 7 1/2s, 2037  96,768  24,631 
IFB Ser. 08-29, Class SA, IO, 5.322s, 2038  410,344  41,102 
IFB Ser. 06-69, Class SI, IO, 4.922s, 2036  195,781  20,742 
IFB Ser. 06-61, Class SM, IO, 4.922s, 2036  132,660  11,504 
IFB Ser. 06-62, Class SI, IO, 4.922s, 2036  3,217,483  293,145 
IFB Ser. 07-1, Class SL, IO, 4.902s, 2037  1,475,455  138,106 
IFB Ser. 07-1, Class SM, IO, 4.892s, 2037  1,475,455  137,688 
IFB Ser. 05-68, Class PU, IO, 4.842s, 2032  165,114  18,279 
IFB Ser. 04-59, Class SH, IO, 4.79s, 2034  89,510  9,009 
IFB Ser. 04-59, Class SC, IO, 4.74s, 2034  1,893,556  195,305 
IFB Ser. 04-26, Class IS, IO, 4.74s, 2034  74,284  4,935 
IFB Ser. 07-49, Class NY, IO, 4.642s, 2035  11,557,302  1,031,714 
IFB Ser. 07-47, Class SA, IO, 4.64s, 2036  88,664  9,517 
IFB Ser. 07-35, Class NY, IO, 4.44s, 2035  134,000  11,217 
IFB Ser. 07-26, Class SG, IO, 4.392s, 2037  4,753,099  426,241 
IFB Ser. 07-9, Class BI, IO, 4.362s, 2037  9,486,960  781,181 
IFB Ser. 07-31, Class CI, IO, 4.352s, 2037  2,558,344  202,786 
IFB Ser. 07-25, Class SA, IO, 4.342s, 2037  3,345,730  256,450 
IFB Ser. 07-25, Class SB, IO, 4.342s, 2037  6,525,094  535,149 
IFB Ser. 07-22, Class S, IO, 4.342s, 2037  2,641,996  252,379 
IFB Ser. 07-11, Class SA, IO, 4.342s, 2037  2,471,801  214,935 
IFB Ser. 07-14, Class SB, IO, 4.342s, 2037  2,653,009  231,385 
IFB Ser. 06-69, Class SA, IO, 4.342s, 2036  376,397  33,331 
IFB Ser. 05-84, Class AS, IO, 4.342s, 2035  182,311  16,508 
IFB Ser. 07-26, Class SD, IO, 4.34s, 2037  4,719,650  390,632 
IFB Ser. 07-26, Class SL, IO, 4.34s, 2037  220,788  19,503 
IFB Ser. 07-51, Class SJ, IO, 4.292s, 2037  3,018,098  268,186 
IFB Ser. 07-53, Class SY, IO, 4.277s, 2037  152,222  14,570 
IFB Ser. 07-58, Class PS, IO, 4.242s, 2037  5,152,867  425,117 
IFB Ser. 04-88, Class S, IO, 4.242s, 2032  89,264  6,128 
IFB Ser. 04-17, Class QN, IO, 4.24s, 2034  111,538  9,559 

28

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
Government National Mortgage Association     
IFB Ser. 07-59, Class PS, IO, 4.212s, 2037  $2,339,839  $189,281 
IFB Ser. 07-59, Class SP, IO, 4.212s, 2037  4,743,571  390,377 
IFB Ser. 07-68, Class PI, IO, 4.192s, 2037  4,287,343  354,439 
IFB Ser. 06-38, Class SG, IO, 4.192s, 2033  9,790,632  744,509 
IFB Ser. 07-48, Class SB, IO, 4.19s, 2037  3,806,845  269,030 
IFB Ser. 07-53, Class SG, IO, 4.142s, 2037  1,801,374  130,728 
IFB Ser. 07-74, Class SI, IO, 4.11s, 2037  102,975  7,916 
IFB Ser. 08-3, Class SA, IO, 4.092s, 2038  5,756,527  389,549 
IFB Ser. 07-79, Class SY, IO, 4.092s, 2037  10,047,184  677,548 
IFB Ser. 07-64, Class AI, IO, 4.092s, 2037  18,609,175  1,373,309 
IFB Ser. 07-53, Class ES, IO, 4.092s, 2037  2,663,418  157,813 
IFB Ser. 07-17, Class AI, IO, 4.09s, 2037  10,374,807  797,641 
IFB Ser. 07-10, Class SB, IO, 4.062s, 2037  1,045,301  83,467 
IFB Ser. 08-2, Class SV, IO, 4.06s, 2038  1,462,650  110,698 
IFB Ser. 08-4, Class SA, IO, 4.058s, 2038  11,572,132  773,525 
IFB Ser. 07-67, Class SI, IO, 4.052s, 2037  8,145,619  529,465 
IFB Ser. 07-9, Class DI, IO, 4.052s, 2037  4,835,006  358,535 
IFB Ser. 07-57, Class QA, IO, 4.042s, 2037  6,143,670  439,962 
IFB Ser. 07-58, Class SA, IO, 4.042s, 2037  8,310,960  556,502 
IFB Ser. 07-58, Class SC, IO, 4.042s, 2037  4,829,158  306,505 
IFB Ser. 07-61, Class SA, IO, 4.042s, 2037  3,283,566  237,596 
IFB Ser. 07-53, Class SC, IO, 4.042s, 2037  2,920,544  175,046 
IFB Ser. 07-27, Class S, IO, 4.042s, 2037  1,537,084  121,478 
IFB Ser. 07-28, Class SG, IO, 4.042s, 2037  1,352,762  108,580 
IFB Ser. 08-34, Class SH, IO, 4.042s, 2037  119,289  9,634 
IFB Ser. 06-26, Class S, IO, 4.042s, 2036  541,497  43,234 
IFB Ser. 06-28, Class GI, IO, 4.042s, 2035  3,995,256  300,112 
IFB Ser. 08-2, Class SM, IO, 4.04s, 2038  250,479  18,754 
IFB Ser. 07-9, Class AI, IO, 4.04s, 2037  4,026,114  341,393 
IFB Ser. 07-58, Class SD, IO, 4.032s, 2037  4,562,509  285,834 
IFB Ser. 07-59, Class SD, IO, 4.012s, 2037  7,841,737  513,516 
IFB Ser. 07-36, IO, 4.012s, 2037  727,245  57,552 
IFB Ser. 07-36, Class SG, IO, 4.012s, 2037  1,109,180  83,882 
IFB Ser. 06-49, Class SA, IO, 4.002s, 2036  449,173  33,395 
IFB Ser. 05-92, Class S, IO, 3.942s, 2032  327,236  20,606 
IFB Ser. 08-40, Class SA, IO, 3.94s, 2038  677,385  50,246 
IFB Ser. 05-71, Class SA, IO, 3.9s, 2035  238,373  17,429 
IFB Ser. 05-65, Class SI, IO, 3.892s, 2035  4,209,105  325,793 
IFB Ser. 08-15, Class PI, IO, 3.842s, 2035  138,788  11,322 
IFB Ser. 06-16, Class SX, IO, 3.832s, 2036  189,876  14,344 
IFB Ser. 07-17, Class IB, IO, 3.792s, 2037  2,233,998  149,790 
IFB Ser. 06-14, Class S, IO, 3.792s, 2036  3,677,292  264,787 
IFB Ser. 05-57, Class PS, IO, 3.792s, 2035  85,663  7,704 
IFB Ser. 07-17, Class IC, IO, 3.79s, 2037  5,346,997  348,675 
IFB Ser. 06-11, Class ST, IO, 3.782s, 2036  2,306,668  164,336 
IFB Ser. 07-27, Class SD, IO, 3.742s, 2037  2,376,180  178,896 
IFB Ser. 07-19, Class SJ, IO, 3.742s, 2037  4,086,330  254,092 
IFB Ser. 07-23, Class ST, IO, 3.742s, 2037  5,021,960  302,317 
IFB Ser. 07-8, Class SA, IO, 3.742s, 2037  3,518,367  243,070 
IFB Ser. 07-9, Class CI, IO, 3.742s, 2037  6,322,638  412,885 
IFB Ser. 07-7, Class EI, IO, 3.742s, 2037  4,223,509  261,993 
IFB Ser. 07-7, Class JI, IO, 3.742s, 2037  6,583,645  449,764 
IFB Ser. 07-1, Class S, IO, 3.742s, 2037  5,335,131  332,805 
IFB Ser. 07-3, Class SA, IO, 3.742s, 2037  5,092,169  316,825 
IFB Ser. 07-25, Class KS, IO, 3.74s, 2037  959,428  74,005 
IFB Ser. 07-21, Class S, IO, 3.74s, 2037  5,487,086  352,567 
IFB Ser. 05-17, Class S, IO, 3.722s, 2035  96,649  8,735 
IFB Ser. 07-31, Class AI, IO, 3.72s, 2037  2,941,523  268,143 
IFB Ser. 07-62, Class S, IO, 3.69s, 2037  117,481  8,941 
IFB Ser. 05-3, Class SN, IO, 3.642s, 2035  275,877  19,031 
IFB Ser. 07-43, Class SC, IO, 3.64s, 2037  3,478,285  213,751 
IFB Ser. 07-73, Class MI, IO, 3.542s, 2037  8,467,935  449,927 
IFB Ser. 04-41, Class SG, IO, 3.542s, 2034  269,849  10,999 
IFB Ser. 07-67, Class EI, IO, 0.02s, 2037  4,401,262  2,532 
IFB Ser. 07-67, Class GI, IO, 0.02s, 2037  12,886,688  7,392 
Ser. 07-73, Class MO, PO, zero %, 2037  651,380  458,860 

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
Government National Mortgage Association     
FRB Ser. 07-73, Class KI, IO, zero %, 2037  $6,513,796  $172,216 
FRB Ser. 07-73, Class KM, zero %, 2037  651,380  635,770 
FRB Ser. 07-49, Class UF, zero %, 2037  227,544  207,788 
FRB Ser. 07-33, Class TB, zero %, 2037  66,811  56,282 
FRB Ser. 07-35, Class UF, zero %, 2037  378,295  377,654 
FRB Ser. 07-22, Class TA, zero %, 2037  253,367  262,894 
FRB Ser. 98-2, Class EA, PO, zero %, 2028  93,564  78,565 
Government National Mortgage Association     
144A IFB Ser. 06-GG8, Class X,     
IO, 0.672s, 2039  26,401,159  819,880 
Greenpoint Mortgage Funding Trust     
Ser. 05-AR1, Class X1, IO, 4.041s, 2045  5,529,282  110,586 
Greenwich Capital Commercial Funding Corp.     
Ser. 05-GG5, Class XC, IO, 0.063s, 2037  183,248,153  629,916 
Greenwich Capital Commercial Funding     
Corp. 144A     
Ser. 07-GG9, Class X, IO, 0.323s, 2039  29,429,197  510,413 
Ser. 05-GG3, Class XC, IO, 0.151s, 2042  135,895,972  1,900,420 
GS Mortgage Securities Corp. II     
FRB Ser. 07-GG10, Class A3, 5.993s, 2045  2,285,000  2,211,831 
Ser. 06-GG6, Class A2, 5.506s, 2038  2,998,000  2,986,368 
Ser. 05-GG4, Class A4, 4.761s, 2039  197,000  184,573 
GS Mortgage Securities Corp. II 144A     
Ser. 98-C1, Class F, 6s, 2030  1,286,000  1,279,223 
FRB Ser. 07-EOP, Class J, 3.313s, 2009  428,000  389,480 
Ser. 04-C1, Class X1, IO, 0.596s, 2028  25,997,582  204,122 
Ser. 05-GG4, Class XC, IO, 0.213s, 2039  106,946,995  1,675,224 
Ser. 03-C1, Class X1, IO, 0.209s, 2040  19,401,620  384,153 
Ser. 06-GG6, Class XC, IO, 0.042s, 2038  52,637,575  143,931 
GSMPS Mortgage Loan Trust     
Ser. 05-RP3, Class 1A4, 8 1/2s, 2035  240,184  235,990 
Ser. 05-RP3, Class 1A3, 8s, 2035 F  731,188  709,076 
Ser. 05-RP3, Class 1A2, 7 1/2s, 2035  660,074  664,148 
GSMPS Mortgage Loan Trust 144A     
Ser. 05-RP2, Class 1A3, 8s, 2035  878,076  844,874 
Ser. 05-RP1, Class 1A3, 8s, 2035  114,081  111,617 
Ser. 05-RP2, Class 1A2, 7 1/2s, 2035  978,277  984,315 
IFB Ser. 04-4, Class 1AS, IO, 3.552s, 2034  11,039,179  736,306 
GSR Mortgage Loan Trust Ser. 05-AR2,     
Class 2A1, 4.835s, 2035  1,650,529  1,518,487 
HASCO NIM Trust 144A Ser. 05-OP1A,     
Class A, 6 1/4s, 2035 (Cayman Islands)  261,849  26,185 
HSI Asset Loan Obligation FRB Ser. 07-AR1,     
Class 2A1, 6.133s, 2037  7,700,670  6,006,523 
IMPAC Secured Assets Corp. FRB Ser. 07-2,     
Class 1A1A, 2.571s, 2037  4,746,089  3,983,192 
IndyMac Index Mortgage Loan Trust     
FRB Ser. 06-AR25, Class 5A1, 6.335s, 2036  85,379  66,801 
FRB Ser. 07-AR15, Class 1A1, 6.244s, 2037  286,195  206,060 
FRB Ser. 07-AR9, Class 2A1, 6.064s, 2037  285,579  205,617 
FRB Ser. 07-AR11, Class 1A1, 5.649s, 2037  3,387,798  2,066,557 
FRB Ser. 05-AR31, Class 3A1, 5.639s, 2036  9,124,815  6,387,370 
FRB Ser. 05-AR5, Class 4A1, 5.463s, 2035  238,211  192,018 
JPMorgan Alternative Loan Trust     
FRB Ser. 06-A3, Class 2A1, 6.069s, 2036  115,529  89,230 
FRB Ser. 06-A1, Class 5A1, 5.945s, 2036  198,563  150,908 
FRB Ser. 06-A6, Class 1A1, 2.621s, 2036  136,191  94,876 
JPMorgan Chase Commercial Mortgage     
Securities Corp.     
Ser. 97-C5, Class F, 7.561s, 2029  911,000  914,881 
FRB Ser. 07-LD12, Class AM, 6.261s, 2051  5,510,000  5,003,300 
FRB Ser. 07-LD12, Class A3, 5.19s, 2051  26,282,000  25,362,393 
Ser. 07-CB20, Class A3, 5.863s, 2051  5,740,000  5,476,477 
FRB Ser. 07-LD11, Class A3, 6.007s, 2049  2,850,000  2,717,988 

29

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
JPMorgan Chase Commercial Mortgage     
Securities Corp.     
Ser. 06-CB15, Class A4, 5.814s, 2043  $4,443,000  $4,281,263 
Ser. 07-CB20, Class A4, 5.794s, 2051  3,738,000  3,453,090 
Ser. 06-CB14, Class A4, 5.481s, 2044  4,125,000  3,920,689 
FRB Ser. 04-PNC1, Class A4, 5.54s, 2041  75,000  73,147 
Ser. 05-CB12, Class A4, 4.895s, 2037  198,000  185,023 
Ser. 04-C3, Class A5, 4.878s, 2042  189,000  177,462 
Ser. 05-LDP2, Class AM, 4.78s, 2042  1,990,000  1,799,265 
Ser. 06-LDP8, Class X, IO, 0.573s, 2045  35,019,209  1,071,588 
Ser. 06-CB17, Class X, IO, 0.513s, 2043  42,803,182  1,302,929 
Ser. 06-LDP9, Class X, IO, 0.455s, 2047  9,809,589  233,366 
Ser. 07-LDPX, Class X, IO, 0.347s, 2049  54,513,296  932,705 
Ser. 06-CB16, Class X1, IO, 0.073s, 2045  39,918,991  506,971 
Ser. 06-LDP7, Class X, IO, 0.009s, 2045  227,977,565  174,478 
JPMorgan Chase Commercial Mortgage     
Securities Corp. 144A     
Ser. 03-ML1A, Class X1, IO, 0.585s, 2039  38,436,005  1,345,260 
Ser. 05-LDP2, Class X1, IO, 0.192s, 2042  165,537,536  2,488,991 
Ser. 05-LDP1, Class X1, IO, 0.119s, 2046  54,229,885  420,191 
Ser. 05-CB12, Class X1, IO, 0.102s, 2037  54,290,810  469,836 
Ser. 05-LDP3, Class X1, IO, 0.073s, 2042  81,410,258  536,663 
Ser. 05-LDP5, Class X1, IO, 0.061s, 2044  344,098,946  1,342,450 
Ser. 07-CB20, Class X1, IO, 0.058s, 2051  89,054,534  959,117 
Ser. 06-LDP6, Class X1, IO, 0.058s, 2043  68,246,511  303,844 
LB Commercial Conduit Mortgage Trust 144A     
Ser. 99-C1, Class F, 6.41s, 2031  715,303  671,119 
Ser. 99-C1, Class G, 6.41s, 2031  765,731  558,733 
Ser. 98-C4, Class G, 5.6s, 2035  634,000  586,380 
Ser. 98-C4, Class H, 5.6s, 2035  1,074,000  1,061,690 
LB-UBS Commercial Mortgage Trust     
Ser. 01-C3, Class A2, 6.365s, 2028  67,000  68,307 
Ser. 07-C6, Class A2, 5.845s, 2012  8,188,000  8,181,505 
Ser. 04-C7, Class A6, 4.786s, 2029  1,733,000  1,636,572 
Ser. 07-C2, Class XW, IO, 0.536s, 2040  11,762,049  356,285 
LB-UBS Commercial Mortgage Trust 144A     
Ser. 03-C5, Class XCL, IO, 0.735s, 2037  19,628,033  322,920 
Ser. 06-C7, Class XW, IO, 0.718s, 2038  30,441,639  1,099,712 
Ser. 05-C3, Class XCL, IO, 0.211s, 2040  66,379,157  1,148,928 
Ser. 05-C2, Class XCL, IO, 0.168s, 2040  122,741,941  1,069,683 
Ser. 05-C5, Class XCL, IO, 0.117s, 2020  69,415,982  781,811 
Ser. 05-C7, Class XCL, IO, 0.097s, 2040  82,956,702  581,238 
Ser. 06-C1, Class XCL, IO, 0.087s, 2041  66,522,175  593,275 
Ser. 06-C7, Class XCL, IO, 0.082s, 2038  47,026,314  669,686 
Ser. 07-C2, Class XCL, IO, 0.077s, 2040  101,072,301  1,075,207 
Lehman Brothers Floating Rate Commercial     
Mortgage Trust 144A     
FRB Ser. 04-LLFA, Class H, 3.408s, 2017  733,000  652,370 
FRB Ser. 05-LLFA, Class J, 3.258s, 2018  423,000  359,550 
Lehman Mortgage Trust     
IFB Ser. 06-7, Class 1A9, 26.153s, 2036  698,273  802,042 
IFB Ser. 07-5, Class 4A3, 25.313s, 2037  1,978,870  2,159,965 
IFB Ser. 06-7, Class 4A2, IO, 5.289s, 2036  3,231,800  315,228 
IFB Ser. 07-5, Class 8A2, IO, 5.259s, 2036  3,315,807  295,534 
Ser. 07-1, Class 3A2, IO, 4.789s, 2037  3,798,793  398,710 
IFB Ser. 06-9, Class 3A2, IO, 4.769s, 2037  2,346,961  234,623 
IFB Ser. 07-4, Class 3A2, IO, 4.739s, 2037  3,093,712  272,540 
IFB Ser. 06-5, Class 2A2, IO, 4.689s, 2036  6,780,941  590,332 
IFB Ser. 07-2, Class 2A13, IO, 4.229s, 2037  5,531,638  495,058 
IFB Ser. 07-4, Class 2A2, IO, 4.209s, 2037  12,662,042  1,140,087 
IFB Ser. 07-1, Class 2A3, IO, 4.169s, 2037  6,424,425  596,297 
IFB Ser. 06-7, Class 2A5, IO, 4.161s, 2036  10,243,103  852,331 
Ser. 06-9, Class 2A3, IO, 4.159s, 2036  7,686,129  712,045 
IFB Ser. 06-9, Class 2A2, IO, 4.159s, 2037  5,612,310  500,151 
IFB Ser. 06-7, Class 2A4, IO, 4.089s, 2036  10,920,148  827,322 
IFB Ser. 06-6, Class 1A2, IO, 4.039s, 2036  4,056,800  294,400 

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
Lehman Mortgage Trust     
IFB Ser. 06-6, Class 1A3, IO, 4.039s, 2036  $5,830,217  $438,390 
IFB Ser. 07-5, Class 10A2, IO, 3.879s, 2037  6,215,524  429,255 
Local Insight Media Finance, LLC Ser. 07-1W,     
Class A1, 5.53s, 2012  5,071,307  4,740,657 
MASTR Adjustable Rate Mortgages Trust     
Ser. 04-7, Class 2A1, 6.094s, 2034  140,319  108,925 
FRB Ser. 04-13, Class 3A6, 3.788s, 2034  2,253,000  2,124,804 
Ser. 04-03, Class 4AX, IO, 1.417s, 2034  1,927,310  9,637 
Ser. 05-2, Class 7AX, IO, 0.17s, 2035  5,201,122  9,102 
MASTR Alternative Loans Trust Ser. 06-3,     
Class 1A1, 6 1/4s, 2036  178,673  134,004 
MASTR Reperforming Loan Trust 144A     
Ser. 05-2, Class 1A3, 7 1/2s, 2035  628,895  675,283 
Ser. 05-1, Class 1A4, 7 1/2s, 2034  1,544,131  1,489,623 
Merit Securities Corp. 144A FRB Ser. 11PA,     
Class 3A1, 3.08s, 2027  4,568,926  3,929,277 
Merrill Lynch Capital Funding Corp. Ser. 06-4,     
Class XC, IO, 0.107s, 2049  89,380,400  1,081,352 
Merrill Lynch Floating Trust 144A     
FRB Ser. 06-1, Class TM, 2.958s, 2022  1,019,621  881,972 
Ser. 06-1, Class X1A, IO, 1.515s, 2022  17,880,590  106,166 
Merrill Lynch Mortgage Investors, Inc.     
FRB Ser. 98-C3, Class E, 7.059s, 2030  644,000  665,863 
FRB Ser. 05-A9, Class 3A1, 5.277s, 2035  3,484,407  3,386,482 
Merrill Lynch Mortgage Trust     
FRB Ser. 07-C1, Class A3, 6.023s, 2050  1,576,000  1,527,439 
FRB Ser. 07-C1, Class A4, 6.023s, 2050  1,777,000  1,674,002 
FRB Ser. 04-BPC1, Class A5, 4.855s, 2041  193,000  184,215 
FRB Ser. 05-MCP1, Class A4, 4.747s, 2043  187,000  173,658 
Ser. 05-MCP1, Class XC, IO, 0.126s, 2043  69,847,762  816,511 
Merrill Lynch Mortgage Trust 144A     
Ser. 04-KEY2, Class XC, IO, 0.22s, 2039  15,778,854  309,477 
Ser. 05-LC1, Class X, IO, 0.101s, 2044  36,642,654  245,893 
Merrill Lynch/Countrywide Commercial     
Mortgage Trust     
FRB Ser. 07-8, Class A3, 6.156s, 2049  4,551,000  4,320,060 
FRB Ser. 07-8, Class A2, 6.12s, 2049  2,784,000  2,723,221 
Ser. 07-9, Class A4, 5.748s, 2049  7,750,000  7,181,149 
Merrill Lynch/Countrywide Commercial     
Mortgage Trust 144A     
Ser. 06-3, Class XC, IO, 0.097s, 2046  52,308,629  695,705 
Ser. 06-1, Class X, IO, 0.078s, 2039  29,925,774  106,572 
Ser. 07-7, Class X, IO, 0.019s, 2050  192,152,226  554,100 
Mezz Cap Commercial Mortgage Trust 144A     
Ser. 04-C1, Class X, IO, 7.796s, 2037  3,072,900  722,990 
Ser. 04-C2, Class X, IO, 6.004s, 2040  2,422,737  561,504 
Ser. 05-C3, Class X, IO, 5.555s, 2044  2,848,194  654,257 
Ser. 06-C4, Class X, IO, 5.074s, 2016  8,524,085  2,234,143 
Morgan Stanley Capital 144A Ser. 05-RR6,     
Class X, IO, 1.598s, 2043 F  9,907,726  368,458 
Morgan Stanley Capital I     
FRB Ser. 08-T29, Class A3, 6.46s, 2043  1,316,000  1,301,879 
FRB Ser. 06-IQ11, Class A4, 5.943s, 2042  4,443,000  4,333,082 
FRB Ser. 07-IQ14, Class AM, 5.877s, 2049  1,732,000  1,507,873 
Ser. 05-HQ6, Class A4A, 4.989s, 2042  3,963,000  3,728,056 
Ser. 04-HQ4, Class A7, 4.97s, 2040  2,047,000  1,945,633 
Morgan Stanley Capital I 144A     
Ser. 98-HF1, Class F, 7.18s, 2030  36,781  36,799 
Ser. 04-RR, Class F5, 6s, 2039  1,000,000  650,000 
Ser. 04-RR, Class F6, 6s, 2039  1,700,000  1,020,000 
Ser. 07-HQ13, Class X1, IO, 0.672s, 2044  59,841,179  1,676,151 
Ser. 05-HQ5, Class X1, IO, 0.14s, 2042  22,641,013  141,280 
Ser. 05-HQ6, Class X1, IO, 0.096s, 2042  75,679,343  629,623 

30

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
Morgan Stanley Mortgage Loan Trust     
Ser. 05-5AR, Class 2A1, 4.905s, 2035  $3,777,451  $2,568,666 
Mortgage Capital Funding, Inc. FRB     
Ser. 98-MC2, Class E, 7.185s, 2030  1,020,000  1,045,914 
Nomura Asset Acceptance Corp.     
Ser. 04-R3, Class PT, 7.543s, 2035  431,127  392,369 
Nomura Asset Acceptance Corp. 144A     
Ser. 04-R2, Class PT, 9.087s, 2034  352,941  398,929 
Permanent Financing PLC 144A FRB Ser. 9A,     
Class 3A, 2.796s, 2033 (United Kingdom)  3,086,000  2,979,224 
Permanent Master Issuer PLC FRB Ser. 07-1,     
Class 4A, 2.871s, 2033 (United Kingdom)  3,745,000  3,603,439 
PNC Mortgage Acceptance Corp. 144A     
Ser. 99-CM1, Class B3, 7.1s, 2032  3,870,000  3,792,058 
Ser. 00-C1, Class J, 6 5/8s, 2010  456,000  303,459 
Ser. 00-C2, Class J, 6.22s, 2033  1,113,000  1,012,140 
Residential Asset Securitization Trust     
Ser. 07-A5, Class 2A3, 6s, 2037  3,123,351  2,280,046 
IFB Ser. 07-A3, Class 2A2, IO, 4.229s, 2037  12,682,121  1,174,213 
Residential Funding Mortgage Securities I     
Ser. 04-S5, Class 2A1, 4 1/2s, 2019  2,441,279  2,257,499 
Saco I Trust FRB Ser. 05-10, Class 1A1,     
2.721s, 2033  1,021,014  428,826 
Salomon Brothers Mortgage Securities VII     
144A Ser. 02-KEY2, Class X1, IO, 0.722s, 2036  22,834,749  960,031 
SBA CMBS Trust 144A Ser. 05-1A,     
Class D, 6.219s, 2035  600,000  570,180 
STRIPS 144A     
Ser. 03-1A, Class L, 5s, 2018 (Cayman Islands)  757,000  590,460 
Ser. 03-1A, Class M, 5s, 2018 (Cayman Islands)  513,000  359,100 
Ser. 04-1A, Class L, 5s, 2018 (Cayman Islands)  337,000  242,640 
Structured Adjustable Rate     
Mortgage Loan Trust     
FRB Ser. 07-8, Class 1A2, 6 1/4s, 2037  9,847,576  8,119,825 
FRB Ser. 06-9, Class 1A1, 5.694s, 2036  98,747  75,843 
FRB Ser. 05-18, Class 6A1, 5.247s, 2035  1,928,368  1,581,262 
Ser. 04-8, Class 1A3, 5.128s, 2034  11,051  8,676 
Ser. 05-9, Class AX, IO, 1.532s, 2035  19,256,965  387,573 
Structured Adjustable Rate Mortgage Loan     
Trust 144A Ser. 04-NP2, Class A, 2.811s, 2034  611,469  556,436 
Structured Asset Securities Corp.     
IFB Ser. 07-4, Class 1A3, IO, 3.79s, 2037  44,311,016  2,864,784 
Ser. 07-4, Class 1A4, IO, 1s, 2037  46,935,882  1,290,737 
Structured Asset Securities Corp. 144A     
Ser. 07-RF1, Class 1A, IO, 3.307s, 2037  12,026,376  574,997 
Ser. 06-RF4, Class 1A, IO, 0.356s, 2036  6,410,891  338,968 
Wachovia Bank Commercial Mortgage Trust     
FRB Ser. 07-C33, Class A3, 6.1s, 2051  3,570,000  3,454,475 
Ser. 07-C30, Class A3, 5.246s, 2043  5,721,000  5,613,517 
Ser. 04-C15, Class A4, 4.803s, 2041  3,055,000  2,877,503 
Ser. 06-C28, Class XC, IO, 0.38s, 2048  23,342,651  472,222 
Ser. 06-C29, IO, 0.374s, 2048  97,721,702  2,034,566 
Ser. 07-C34, IO, 0.357s, 2046  24,009,661  515,728 
Wachovia Bank Commercial Mortgage     
Trust 144A     
FRB Ser. 05-WL5A, Class L, 5.758s, 2018  771,000  616,800 
Ser. 03-C3, Class IOI, IO, 0.428s, 2035  15,920,790  422,100 
Ser. 07-C31, IO, 0.26s, 2047  91,536,018  1,406,909 
Ser. 06-C27, Class XC, IO, 0.07s, 2045  45,572,313  455,723 
Ser. 06-C23, Class XC, IO, 0.054s, 2045  90,107,655  475,768 
Ser. 06-C26, Class XC, IO, 0.04s, 2045  34,361,495  94,838 

COLLATERALIZED  Principal   
MORTGAGE OBLIGATIONS (27. 3%)* cont.  amount  Value 
WAMU Commercial Mortgage Securities     
Trust 144A     
Ser. 05-C1A, Class G, 5.72s, 2036  $222,000  $131,020 
Ser. 06-SL1, Class X, IO, 0.937s, 2043  7,565,044  277,788 
Ser. 07-SL2, Class X, IO, 0.851s, 2049  14,929,395  498,343 
WAMU Mortgage Pass-Through Certificates     
FRB Ser. 04-AR1, Class A, 4.229s, 2034  376,835  331,615 
Washington Mutual Mortgage Pass-Through     
Certificates Ser. 07-2, Class CX, IO, 7s, 2037  891,619  184,469 
Washington Mutual Multi-Fam., Mtge.     
144A Ser. 01-1, Class B5, 7.189s, 2031     
(Cayman Islands)  1,305,000  1,192,817 
Wells Fargo Mortgage Backed Securities Trust     
Ser. 06-AR10, Class 3A1, 5.005s, 2036  2,335,868  2,222,724 
Ser. 05-AR2, Class 2A1, 4.544s, 2035  1,224,457  1,115,970 
Ser. 04-R, Class 2A1, 4.366s, 2034  1,213,122  1,164,598 
Ser. 05-AR9, Class 1A2, 4.365s, 2035  1,446,385  1,041,397 
Ser. 05-AR12, Class 2A5, 4.317s, 2035  18,969,000  17,503,348 
Ser. 05-AR10, Class 2A18, IO, 0.61s, 2035  44,983,000  171,422 
Total collateralized mortgage obligations     
(cost $746,281,567)    $769,202,014 
 
CORPORATE BONDS AND  Principal   
NOTES (13.8%)*  amount  Value 
Basic Materials (0.5%)     
ArcelorMittal 144A notes 6 1/8s, 2018     
(Luxembourg)  $1,440,000  $1,382,839 
Domtar Corp. company guaranty     
Ser. *, 7 7/8s, 2011 (Canada)  310,000  309,225 
Dow Chemical Co. (The) Pass Through     
Trust 144A company guaranty 4.027s, 2009  1,510,000  1,520,710 
Freeport-McMoRan Copper & Gold, Inc.     
sr. unsec. notes 8 3/8s, 2017  2,290,000  2,404,500 
Freeport-McMoRan Copper & Gold, Inc.     
sr. unsec. notes FRN 5.883s, 2015  120,000  120,741 
Georgia-Pacific Corp. debs. 9 1/2s, 2011  556,000  560,170 
Georgia-Pacific Corp. notes 8 1/8s, 2011  635,000  625,475 
International Paper Co. bonds 7.95s, 2018  770,000  765,685 
International Paper Co. bonds 7.4s, 2014  225,000  226,189 
Lubrizol Corp. (The) sr. notes 5 1/2s, 2014  470,000  448,093 
Monsanto Co. company guaranty sr.     
unsec. notes 5 7/8s, 2038  515,000  488,350 
Monsanto Co. sr. unsec. unsub.     
notes 5 1/8s, 2018  355,000  346,893 
Mosaic Co. (The) 144A sr. unsec.     
unsub. notes 7 5/8s, 2016  1,085,000  1,139,250 
Nucor Corp. notes 5.85s, 2018 S  960,000  964,941 
Packaging Corp. of America unsec.     
unsub. notes 5 3/4s, 2013  345,000  338,275 
PPG Industries, Inc. sr. unsec. unsub.     
notes 6.65s, 2018  185,000  188,541 
Rhodia SA 144A company guaranty unsec. sr.     
notes 7.713s, 2013 (France)  EUR 265,000  371,845 
Sealed Air Corp. 144A notes 5 5/8s, 2013  $210,000  203,616 
Steel Dynamics, Inc. company guaranty sr.     
unsec. unsub. notes 6 3/4s, 2015  1,080,000  1,015,200 
Steel Dynamics, Inc. company guaranty sr.     
unsec. unsub. notes 7 3/8s, 2012  700,000  693,000 
United States Steel Corp. sr.     
unsec. unsub. notes 7s, 2018  215,000  211,644 

31

CORPORATE BONDS AND  Principal   
NOTES (13.8%)* cont.  amount  Value 
Basic Materials cont.     
Westvaco Corp. unsec. notes 7 1/2s, 2027  $158,000  $157,219 
Xstrata Finance Canada, Ltd. 144A     
company guaranty 5.8s, 2016 (Canada)  735,000  692,466 
    15,174,867 
Capital Goods (0.6%)     
Caterpillar Financial Services Corp. sr.     
unsec. 4.85s, 2012  820,000  828,461 
Caterpillar Financial Services Corp. sr.     
unsec. notes Ser. MTN, 5.85s, 2017  1,505,000  1,537,330 
Caterpillar Financial Services Corp. sr.     
unsec. notes Ser. MTN, 5.45s, 2018  980,000  964,720 
Covidien International Finance SA company     
guaranty sr. unsec. unsub. notes 6.55s,     
2037 (Luxembourg)  505,000  490,498 
Covidien International Finance SA company     
guaranty sr. unsec. unsub. notes 6s, 2017     
(Luxembourg)  585,000  585,307 
Eaton Corp. notes 5.6s, 2018  1,220,000  1,199,263 
John Deere Capital Corp. sr. unsec.     
notes Ser. MTN, 5.35s, 2018  335,000  328,560 
L-3 Communications Corp. company     
guaranty Ser. B, 6 3/8s, 2015  595,000  559,300 
L-3 Communications Corp. sr. sub.     
notes 5 7/8s, 2015  435,000  403,463 
Legrand SA unsec. unsub. debs.     
8 1/2s, 2025 (France)  860,000  906,639 
Pitney Bowes, Inc. sr. unsec. notes 5.6s, 2018  125,000  121,556 
Rexam PLC 144A bond 6 3/4s, 2013     
(United Kingdom)  4,580,000  4,582,469 
United Technologies Corp. sr. unsec.     
notes 6 1/8s, 2038 S  3,140,000  3,092,224 
United Technologies Corp. sr. unsec.     
notes 5 3/8s, 2017  1,310,000  1,312,357 
    16,912,147 
Communication Services (1.3%)     
ALLTEL Corp. sr. notes 7s, 2012  600,000  615,000 
American Tower Corp. 144A sr.     
notes 7s, 2017 S  1,250,000  1,246,875 
Ameritech Capital Funding company     
guaranty 6 1/4s, 2009  200,000  203,466 
AT&T Wireless Services, Inc. sr.     
notes 8 3/4s, 2031  1,139,000  1,326,476 
AT&T Wireless Services, Inc. sr. notes     
7 7/8s, 2011  3,140,000  3,345,601 
AT&T, Inc. sr. unsec. unsub. bonds     
5 1/2s, 2018  245,000  239,151 
AT&T, Inc. sr. unsec. unsub. notes     
6.3s, 2038  3,645,000  3,433,804 
AT&T, Inc. sr. unsec. unsub. notes     
5.6s, 2018 S  2,135,000  2,106,482 
AT&T, Inc. sr. unsec. unsub. notes     
4.95s, 2013  1,135,000  1,135,253 
Bellsouth Capital Funding unsec. notes     
7 7/8s, 2030  1,800,000  1,920,384 
British Telecommunications PLC sr. unsec.     
notes 5.15s, 2013 (United Kingdom)  1,875,000  1,834,369 
CenturyTel, Inc. sr. unsec. notes 5 1/2s, 2013  65,000  61,365 
Embarq Corp. sr. unsec. unsub. notes     
6.738s, 2013  425,000  409,170 
France Telecom notes 8 1/2s, 2031 (France)  180,000  213,022 

CORPORATE BONDS AND  Principal   
NOTES (13.8%)* cont.  amount  Value 
Communication Services cont.     
Nextel Communications, Inc. sr. notes     
Ser. E, 6 7/8s, 2013  $600,000  $471,000 
Nextel Communications, Inc. sr. notes     
Ser. F, 5.95s, 2014  2,655,000  2,017,800 
Qwest Corp. sr. notes FRN 6.026s, 2013  135,000  125,213 
Rogers Wireless, Inc. sec. notes     
6 3/8s, 2014 (Canada)  2,055,000  2,061,927 
Southwestern Bell Telephone debs. 7s, 2027  1,075,000  1,062,956 
Telecom Italia Capital SA company     
guaranty 7.2s, 2036 (Luxembourg)  350,000  329,889 
Telecom Italia Capital SA company guaranty     
5 1/4s, 2015 (Luxembourg)  965,000  879,679 
Telecom Italia Capital SA company guaranty     
5 1/4s, 2013 (Luxembourg)  515,000  486,066 
Telecom Italia Capital SA company guaranty     
4s, 2010 (Luxembourg)  60,000  59,030 
Telecom Italia Capital SA company guaranty sr.     
unsec. notes FRN 3.395s, 2011 (Luxembourg)  465,000  443,691 
Telefonica Emisones SAU company guaranty     
7.045s, 2036 (Spain)  690,000  704,352 
Telefonica Emisones SAU company guaranty     
6.421s, 2016 (Spain)  270,000  273,325 
Telefonica Emisones SAU company guaranty     
6.221s, 2017 (Spain)  385,000  383,415 
Telefonica Europe BV company guaranty     
8 1/4s, 2030 (Netherlands)  595,000  673,880 
Telus Corp. notes 8s, 2011 (Canada)  1,055,000  1,123,720 
Verizon Communications, Inc. sr. unsec. notes     
6.4s, 2038  145,000  135,812 
Verizon Communications, Inc. sr. unsec. notes     
5.55s, 2016  1,460,000  1,419,692 
Verizon New England, Inc. sr. notes 6 1/2s, 2011  2,285,000  2,344,568 
Verizon New Jersey, Inc. debs. 8s, 2022  770,000  802,246 
Verizon Pennsylvania, Inc. debs. 8.35s, 2030  980,000  1,074,492 
Vodafone Group PLC unsec. notes     
6.15s, 2037 (United Kingdom)  1,550,000  1,395,789 
    36,358,960 
Conglomerates (0.1%)     
General Electric Co. sr. unsec. notes     
5 1/4s, 2017 S  720,000  697,545 
Honeywell International, Inc. sr. unsec. notes     
5.3s, 2018  455,000  444,334 
Parker Hannifin Corp. sr. unsec. unsub. notes     
6 1/4s, 2038  975,000  973,578 
Parker Hannifin Corp. sr. unsec. unsub. notes     
5 1/2s, 2018  445,000  444,768 
Siemens Financieringsmaatschappij 144A notes     
5 3/4s, 2016 (Netherlands) S  680,000  676,382 
    3,236,607 
Consumer Cyclicals (0.5%)     
D.R. Horton, Inc. sr. notes 7 7/8s, 2011  565,000  516,975 
D.R. Horton, Inc. sr. notes 5 7/8s, 2013  660,000  554,400 
DaimlerChrysler NA Holding Corp.     
company guaranty 6 1/2s, 2013  565,000  568,993 
DaimlerChrysler NA Holding Corp.     
company guaranty unsec. notes 7.2s, 2009  1,545,000  1,585,830 
DaimlerChrysler NA Holding Corp.     
company guaranty unsec. unsub. notes     
Ser. MTN, 5 3/4s, 2011  1,730,000  1,733,984 

32

CORPORATE BONDS AND  Principal   
NOTES (13.8%)* cont.  amount  Value 
Consumer Cyclicals cont.     
Expedia, Inc. sr. unsec. notes company guaranty     
7.456s, 2018  $100,000  $96,500 
Federated Department Stores, Inc.     
company guaranty sr. unsec. notes 6 5/8s, 2011  60,000  58,707 
Ford Motor Credit Co., LLC notes 6 3/8s, 2008  980,000  967,750 
Hanson PLC company guaranty 6 1/8s, 2016     
(United Kingdom)  175,000  170,080 
JC Penney Co., Inc. debs. 7.65s, 2016  110,000  108,511 
JC Penney Co., Inc. notes 6 7/8s, 2015  910,000  867,485 
Marriott International, Inc. notes 6 3/8s, 2017  926,000  844,281 
Marriott International, Inc. sr. unsec. Ser. J,     
5 5/8s, 2013  150,000  140,764 
Mattel, Inc. sr. unsec. notes 5 5/8s, 2013  330,000  324,487 
MGM Mirage, Inc. company guaranty 8 1/2s, 2010  130,000  125,125 
Mohawk Industries, Inc. sr. unsec. notes     
6 1/8s, 2016  235,000  218,269 
Omnicom Group, Inc. sr. notes 5.9s, 2016  635,000  617,505 
Starwood Hotels & Resorts Worldwide, Inc.     
company guaranty 7 7/8s, 2012  710,000  716,741 
Starwood Hotels & Resorts Worldwide, Inc.     
sr. unsec. notes 6 1/4s, 2013  1,445,000  1,375,461 
Target Corp. bonds 6 1/2s, 2037  1,705,000  1,638,152 
VF Corp. sr. unsec. 5.95s, 2017  730,000  716,758 
Vulcan Materials Co. sr. unsec. unsub. notes     
5.6s, 2012  875,000  867,987 
    14,814,745 
Consumer Staples (1.5%)     
Anheuser-Busch Cos., Inc. sr. unsec. notes     
5.6s, 2017  215,000  202,020 
Cadbury Schweppes US Finance LLC 144A     
company guaranty sr. unsec. notes 5 1/8s, 2013  230,000  220,971 
Campbell Soup Co. debs. 8 7/8s, 2021  855,000  1,109,308 
Comcast Corp. unsec. bonds 6.4s, 2038  1,260,000  1,145,978 
ConAgra Foods, Inc. unsec. notes 7 7/8s, 2010  2,750,000  2,906,186 
Cox Communications, Inc. notes 7 1/8s, 2012  890,000  930,565 
Cox Communications, Inc. 144A notes     
5 7/8s, 2016  1,155,000  1,110,514 
Cox Enterprises, Inc. 144A notes 7 7/8s, 2010  1,045,000  1,099,217 
CVS Caremark, Corp. sr. unsec. FRN     
6.302s, 2037  2,485,000  2,130,888 
CVS Caremark, Corp. 144A pass-through     
certificates 6.117s, 2013  1,956,740  1,938,897 
Delhaize Group sr. unsub. notes     
6 1/2s, 2017 (Belgium)  565,000  563,814 
Diageo Capital PLC company guaranty     
5 3/4s, 2017 (United Kingdom)  925,000  903,021 
Diageo Capital PLC company guaranty     
5.2s, 2013 (United Kingdom)  395,000  395,543 
Diageo PLC company guaranty 8s, 2022  760,000  865,987 
Estee Lauder Cos., Inc. (The) sr. unsec.     
notes 6s, 2037  1,040,000  937,788 
Estee Lauder Cos., Inc. (The) sr. unsec. notes     
5.55s, 2017  280,000  270,914 
H.J. Heinz Co. sr. unsec. notes 5.35s, 2013  455,000  452,771 
Kellogg Co. sr. unsub. 5 1/8s, 2012  165,000  166,526 
Kraft Foods, Inc. notes 6 1/8s, 2018  765,000  745,388 
Kroger Co. company guaranty 6 3/4s, 2012  275,000  287,887 
Kroger Co. company guaranty 6.4s, 2017  995,000  1,016,847 

CORPORATE BONDS AND  Principal   
NOTES (13.8%)* cont.  amount  Value 
Consumer Staples cont.     
McDonald’s Corp. sr. unsec.     
Ser. MTN, 6.3s, 2038  $535,000  $525,434 
McDonald’s Corp. sr. unsec. bond 6.3s, 2037  860,000  848,597 
McDonald’s Corp. sr. unsec. bond 5.8s, 2017  435,000  441,790 
Newell Rubbermaid, Inc. sr. unsec. notes     
5 1/2s, 2013  160,000  155,035 
News America Holdings, Inc. company     
guaranty 7 3/4s, 2024  1,045,000  1,101,375 
News America Holdings, Inc. debs.     
7 3/4s, 2045  1,955,000  2,013,108 
R. R. Donnelley & Sons Co. sr. unsec. notes     
5 5/8s, 2012  165,000  161,415 
Reynolds American, Inc. company guaranty     
7 1/4s, 2013  695,000  715,614 
SABMiller PLC 144A notes 6 1/2s, 2018     
(United Kingdom)  540,000  534,152 
Sara Lee Corp. sr. unsec. unsub. notes     
6 1/4s, 2011  865,000  879,010 
Supervalu, Inc. notes 7 7/8s, 2009  520,000  525,200 
TCI Communications, Inc. company guaranty     
7 7/8s, 2026  2,170,000  2,257,197 
TCI Communications, Inc. debs. 9.8s, 2012  1,870,000  2,102,333 
TCI Communications, Inc. debs. 7 7/8s, 2013  1,240,000  1,335,081 
Tesco PLC 144A sr. unsec. unsub. notes 6.15s,     
2037 (United Kingdom)  1,080,000  977,830 
Time Warner Cable, Inc. company guaranty     
sr. notes 7.3s, 2038 S  2,735,000  2,732,728 
Time Warner Cable, Inc. company guaranty     
sr. unsec. 6 3/4s, 2018  770,000  777,672 
Time Warner Entertainment Co., LP debs.     
8 3/8s, 2023  170,000  181,390 
Time Warner, Inc. debs. 9.15s, 2023  340,000  380,812 
Time Warner, Inc. debs. 9 1/8s, 2013 S  2,435,000  2,661,221 
Viacom, Inc. sr. notes 5 3/4s, 2011  610,000  604,281 
Yum! Brands, Inc. sr. unsec. unsub. 6 1/4s, 2018 S  1,040,000  1,001,440 
    42,313,745 
Energy (0.5%)     
Anadarko Petroleum Corp. sr. notes 5.95s, 2016  575,000  572,063 
Chesapeake Energy Corp. sr. unsec. notes     
7 5/8s, 2013 S  1,010,000  1,027,675 
ConocoPhillips comp 5.9s, 2038  45,000  43,853 
ConocoPhillips company guaranty unsec. sr.     
notes 5.2s, 2018  20,000  19,743 
El Paso Natural Gas Co. sr. unsec. notes     
5.95s, 2017  120,000  115,033 
Enterprise Products Operating LP     
company guaranty FRB 8 3/8s, 2066  1,945,000  1,900,296 
Enterprise Products Operating LP     
company guaranty FRB 7.034s, 2068  55,000  47,957 
Enterprise Products Operating, LLC     
company guaranty sr. notes 6 1/2s, 2019  340,000  341,790 
EOG Resources, Inc. sr. unsec. notes 5 7/8s, 2017  645,000  644,683 
Forest Oil Corp. sr. notes 8s, 2011  610,000  619,150 
Hess Corp. bonds 7 7/8s, 2029  538,000  611,530 
Motiva Enterprises, LLC 144A sr.     
notes 5.2s, 2012  225,000  233,632 
Newfield Exploration Co. sr. sub.     
notes 6 5/8s, 2016  650,000  606,125 

33

CORPORATE BONDS AND  Principal   
NOTES (13.8%)* cont.  amount  Value 
Energy cont.     
Nexen, Inc. unsec. unsub. notes     
6.4s, 2037 (Canada)  $595,000  $551,237 
Peabody Energy Corp. sr. notes     
5 7/8s, 2016  805,000  768,775 
Petro-Canada sr. unsec. unsub. notes     
6.05s, 2018 (Canada)  700,000  686,738 
Premcor Refining Group, Inc. sr. notes     
7 1/2s, 2015  1,330,000  1,373,367 
Sunoco, Inc. notes 4 7/8s, 2014  590,000  548,429 
Tesoro Corp. company guaranty     
6 1/2s, 2017 S  1,025,000  871,250 
Weatherford International, Inc.     
company guaranty sr. unsec. unsub.     
bonds 6.8s, 2037  245,000  244,664 
Weatherford International, Inc.     
company guaranty sr.unsec. unsub.     
bonds 6.35s, 2017  280,000  283,184 
Weatherford International, Ltd. company     
guaranty 6 1/2s, 2036 (Bermuda)  855,000  811,836 
Weatherford International, Ltd.     
sr. notes 5 1/2s, 2016 (Bermuda)  455,000  437,488 
XTO Energy, Inc. sr. unsec. notes 6 3/8s, 2038 S  770,000  714,905 
XTO Energy, Inc. sr. unsec. notes 5 1/2s, 2018 S  390,000  364,878 
    14,440,281 
Financial (5.3%)     
AGFC Capital Trust I company guaranty 6s, 2067  620,000  474,007 
Allstate Life Global Funding Trusts notes     
Ser. MTN, 5 3/8s, 2013 S  1,805,000  1,805,975 
American Express Bank FSB notes     
Ser. BKN1, 5.55s, 2012  2,465,000  2,400,799 
American Express Co. sr. unsec.     
notes 6.15s, 2017  1,275,000  1,208,469 
American International Group, Inc. jr.     
sub. bond 6 1/4s, 2037  2,075,000  1,549,142 
Ameriprise Financial, Inc. jr. sub. FRN     
7.518s, 2066  1,745,000  1,502,312 
Amvescap PLC company guaranty     
5 5/8s, 2012 (Bermuda)  520,000  501,501 
ANZ National International Ltd. 144A bank     
guaranty sr. unsec. note 6.2s, 2013 (New Zealand)  545,000  545,140 
Bank of America Corp. sr. unsec. notes     
5.65s, 2018 S  3,435,000  3,210,058 
Bank of New York Mellon Corp. (The)     
sr. unsec. unsub. notes Ser. G, 4.95s, 2012  600,000  595,259 
BankAmerica Capital III bank guaranty jr.     
unsec. FRN Ser. *, 3.361s, 2027  4,140,000  2,986,091 
Barclays Bank PLC unsec. FRN     
3 1/8s, 2049 (United Kingdom)  2,290,000  1,419,800 
Barclays Bank PLC 144A sub. bonds     
FRB 7.7s, 2049 (United Kingdom)  1,875,000  1,810,465 
Bear Stearns Cos., Inc. (The) notes     
Ser. MTN, 6.95s, 2012 S  1,715,000  1,767,829 
Bear Stearns Cos., Inc. (The) sr. notes     
6.4s, 2017  370,000  365,198 
Bear Stearns Cos., Inc. (The) sr. unsec. notes     
7 1/4s, 2018  1,325,000  1,377,392 
Block Financial Corp. notes 5 1/8s, 2014  205,000  189,506 
Bosphorus Financial Services, Ltd. 144A sec. sr.     
notes FRN 4.476s, 2012 (Cayman Islands)  2,229,375  2,152,214 

CORPORATE BONDS AND  Principal   
NOTES (13.8%)* cont.  amount  Value 
Financial cont.     
Capital One Capital III company guaranty     
7.686s, 2036 S  $1,280,000  $969,434 
Capital One Financial Corp. sr. unsec.     
unsub. notes FRN Ser. MTN, 2.976s, 2009  240,000  225,181 
Chubb Corp. (The) sr. notes 6 1/2s, 2038  765,000  725,485 
Chubb Corp. (The) sr. notes 5 3/4s, 2018  405,000  389,551 
CIT Group, Inc. jr. sub. FRN 6.1s, 2067  3,330,000  1,315,350 
CIT Group, Inc. sr. notes 5.4s, 2013  155,000  116,833 
CIT Group, Inc. sr. notes 5s, 2015 S  170,000  121,374 
CIT Group, Inc. sr. notes 5s, 2014  110,000  80,310 
Citigroup, Inc. sr. unsec. bonds 6 7/8s, 2038  681,000  660,837 
Citigroup, Inc. sr. unsec. notes 6 1/8s, 2018 S  3,230,000  3,091,478 
Citigroup, Inc. sub. notes 5s, 2014 S  1,295,000  1,174,570 
CNA Financial Corp. unsec. notes 6 1/2s, 2016  1,015,000  962,540 
CNA Financial Corp. unsec. notes 6s, 2011  730,000  733,424 
Credit Suisse Guernsey Ltd. jr. sub.     
FRN 5.86s, 2049 (Guernsey)  1,416,000  1,151,433 
Deutsche Bank AG/London notes     
4 7/8s, 2013 (Germany)  2,805,000  2,753,026 
Deutsche Bank Capital Funding Trust VII     
144A FRB 5.628s, 2049  1,145,000  950,650 
Developers Diversified Realty Corp. unsec.     
notes 5 3/8s, 2012 R  385,000  354,166 
Dresdner Funding Trust I 144A bonds     
8.151s, 2031  1,250,000  1,019,208 
Duke Realty LP sr. unsec. notes 6 1/2s, 2018  1,445,000  1,330,975 
Duke Realty LP sr. unsec. notes 6 1/4s, 2013 R  865,000  844,926 
Equity One, Inc. notes 5 3/8s, 2015 R  695,000  602,768 
Erac USA Finance Co. 144A company guaranty     
6 3/8s, 2017  1,120,000  945,668 
Fleet Capital Trust V bank guaranty FRN     
3.813s, 2028  1,010,000  752,668 
Fund American Cos., Inc. notes 5 7/8s, 2013  1,370,000  1,276,406 
GATX Financial Corp. notes 5.8s, 2016  560,000  537,482 
General Electric Capital Corp. sr. unsec.     
5 5/8s, 2017  3,520,000  3,426,924 
General Electric Capital Corp. sr. unsec. notes     
5 7/8s, 2038 S  5,195,000  4,665,271 
General Electric Capital Corp. sub. notes FRN     
6 3/8s, 2067  1,420,000  1,311,604 
Genworth Financial, Inc. sr. unsec. Ser. MTN,     
6.515s, 2018  220,000  195,610 
Genworth Life Institutional Funding Trust notes     
Ser. MTN, 5 7/8s, 2013  1,315,000  1,270,672 
GMAC, LLC sr. unsec. unsub. notes 7s, 2012  845,000  532,405 
GMAC, LLC sr. unsec. unsub. notes FRN     
3.926s, 2009  2,920,000  2,584,328 
Goldman Sachs Group, Inc. (The) sr. notes     
5.45s, 2012  1,210,000  1,214,263 
Goldman Sachs Group, Inc. (The) sub. notes     
6 3/4s, 2037  2,990,000  2,666,026 
Hartford Financial Services Group, Inc. (The)     
jr. sub. debs. FRB 8 1/8s, 2068  2,570,000  2,468,084 
Hartford Financial Services Group, Inc. (The)     
sr. unsec. 5 1/2s, 2016  550,000  523,016 
HCP, Inc. sr. unsec. Ser. MTN, 6.7s, 2018 R  15,000  12,924 
Health Care Property Investors, Inc. sr. unsec.     
notes 6s, 2017 R  1,180,000  974,210 

34

CORPORATE BONDS AND  Principal   
NOTES (13.8%)* cont.  amount  Value 
Financial cont.     
Health Care REIT, Inc. sr. notes 6s, 2013 R  $385,000  $367,982 
Highwood Properties, Inc. sr. unsec. bonds     
5.85s, 2017 R  1,005,000  851,395 
Hospitality Properties Trust notes     
6 3/4s, 2013 R  780,000  725,607 
HRPT Properties Trust bonds 5 3/4s, 2014 R  530,000  476,897 
HRPT Properties Trust notes 6 1/4s, 2016 R  525,000  466,644 
HSBC Bank USA NA sub. notes 7s, 2039  1,710,000  1,656,281 
HSBC Finance Capital Trust IX FRN     
5.911s, 2035  3,300,000  2,527,724 
HSBC Holdings PLC sub. notes     
6 1/2s, 2037 (United Kingdom)  3,555,000  3,209,440 
ILFC E-Capital Trust II 144A FRB 6 1/4s, 2065  2,560,000  1,879,478 
International Lease Finance Corp. sr.     
unsec. 6 3/8s, 2013  210,000  187,509 
International Lease Finance Corp. sr.     
unsec. Ser. MTN, 6 5/8s, 2013  75,000  66,874 
iStar Financial, Inc. sr. unsec. notes 5 7/8s, 2016 R  1,630,000  1,092,100 
iStar Financial, Inc. sr. unsec. notes     
Ser. B, 4 7/8s, 2009 R  705,000  669,750 
JPMorgan Chase & Co. notes 6.4s, 2038  780,000  718,944 
JPMorgan Chase & Co. sr. notes 6s, 2018 S  1,130,000  1,096,367 
JPMorgan Chase Capital XVIII bonds     
Ser. R, 6.95s, 2036 S  1,996,000  1,722,532 
JPMorgan Chase Capital XXV bonds 6.8s, 2037  780,000  659,055 
KeyCorp MTN sr. unsec. notes 6 1/2s, 2013 S  375,000  312,665 
Lehman Brothers Holdings, Inc. sr. unsec.     
notes Ser. MTN, 5s, 2011  1,535,000  1,480,426 
Lehman Brothers Holdings, Inc. sub.     
notes 7 1/2s, 2038  3,735,000  3,400,380 
Lehman Brothers Holdings, Inc. sub.     
notes 5 3/4s, 2017  55,000  47,416 
Liberty Mutual Group 144A company     
guaranty FRB 10 3/4s, 2058  2,475,000  2,326,826 
Liberty Mutual Insurance 144A notes     
7.697s, 2097  2,160,000  1,816,672 
Lincoln National Corp. jr. unsec. sub. deb.     
FRB 7s, 2066  790,000  693,502 
Lincoln National Corp. sr. unsec. notes     
6.3s, 2037  480,000  426,736 
Loews Corp. notes 5 1/4s, 2016  510,000  483,143 
Marsh & McLennan Cos., Inc. sr. unsec.     
notes 6 1/4s, 2012  1,620,000  1,667,821 
Marsh & McLennan Cos., Inc. sr. unsec.     
notes 5 3/8s, 2014  980,000  928,743 
Merrill Lynch & Co., Inc. notes 5.45s, 2013  1,940,000  1,810,495 
Merrill Lynch & Co., Inc. notes Ser. MTN,     
6.15s, 2013 S  460,000  438,684 
Merrill Lynch & Co., Inc. notes FRN Ser. MTN,     
3s, 2011  835,000  745,015 
Merrill Lynch & Co., Inc. sub. 7 3/4s, 2038  2,865,000  2,599,300 
MetLife Capital Trust IV jr. sub. debs.     
7 7/8s, 2067  5,200,000  4,794,660 
Monumental Global Funding, Ltd. 144A notes     
5 1/2s, 2013 (Cayman Islands) S  1,410,000  1,414,336 
Nationwide Financial Services, Inc. notes     
5 5/8s, 2015  465,000  462,505 

CORPORATE BONDS AND  Principal   
NOTES (13.8%)* cont.  amount  Value 
Financial cont.     
Nationwide Health Properties, Inc. notes     
6 1/2s, 2011 R  $650,000  $659,467 
Nationwide Health Properties, Inc.     
unsec. notes 6 1/4s, 2013 R  1,130,000  1,109,971 
Nationwide Mutual Insurance Co.     
144A notes 8 1/4s, 2031  375,000  372,626 
Nuveen Investments, Inc. sr. notes 5 1/2s, 2015  505,000  350,975 
OneAmerica Financial Partners, Inc.     
144A bonds 7s, 2033  1,240,000  1,283,260 
Pacific Life Global Funding 144A notes     
5.15s, 2013  1,525,000  1,514,632 
ProLogis Trust sec. notes 6 5/8s, 2018  520,000  479,328 
ProLogis Trust sr. notes 5 3/4s, 2016 R  375,000  350,673 
Protective Life Secured Trusts sr. sec. notes     
5.45s, 2012  840,000  824,322 
Prudential Financial, Inc. jr. unsec. sub. notes     
FRN 8 7/8s, 2038  115,000  111,299 
Prudential Financial, Inc. notes Ser. MTN,     
6s, 2017  845,000  805,543 
Prudential Holdings LLC 144A bonds     
8.695s, 2023  1,510,000  1,723,876 
Regency Centers LP sr. unsec. 5 7/8s, 2017  650,000  598,826 
Rouse Co LP/TRC Co-Issuer Inc. 144A sr.     
notes 6 3/4s, 2013 R  695,000  584,428 
Rouse Co. (The) notes 7.2s, 2012 R  645,000  563,361 
Royal Bank of Scotland Group PLC jr. sub.     
notes FRN Ser. MTN, 7.64s, 2049     
(United Kingdom)  700,000  599,762 
Simon Property Group LP sr. unsec. notes     
6 1/8s, 2018  1,375,000  1,278,434 
Simon Property Group LP unsub. bonds     
5 3/4s, 2015 R  371,000  361,595 
SLM Corp. notes Ser. MTNA, 4 1/2s, 2010  1,345,000  1,239,001 
Sovereign Bancorp, Inc. sr. notes 4.8s, 2010  730,000  641,977 
Sovereign Bank sub. notes 8 3/4s, 2018  3,925,000  3,401,319 
State Street Capital Trust IV company guaranty     
jr. unsec. sub. bond FRB 3.776s, 2037  925,000  688,934 
Swiss Re Capital I LP 144A company guaranty     
FRN 6.854s, 2049 (United Kingdom)  850,000  758,767 
Travelers Cos., Inc. (The) sr. unsec. notes     
6 1/4s, 2037  730,000  670,397 
Travelers Cos., Inc. (The) sr. unsec. notes     
5.8s, 2018  640,000  613,257 
Unitrin, Inc. sr. notes 6s, 2017  740,000  613,510 
Wachovia Bank NA sr. unsec. sub. notes     
6.6s, 2038 S  693,000  544,692 
Wachovia Bank NA sub. notes Ser. BKNT,     
6s, 2017  2,310,000  2,007,956 
Wachovia Corp. sr. unsec. notes Ser. MTN,     
5 1/2s, 2013 S  925,000  854,047 
Washington Mutual Bank/Henderson NV     
sub. notes Ser. BKNT, 5.95s, 2013  780,000  538,200 
Wells Fargo & Co. FRN 7.7s, 2049  552,000  523,008 
Wells Fargo & Co. sr. notes 4 3/8s, 2013 S  2,120,000  2,016,911 
Westfield Group sr. notes 5.7s, 2016 (Australia) S  875,000  785,966 
Westpac Capital Trust III 144A sub. notes     
FRN 5.819s, 2049  1,010,000  935,977 

35

CORPORATE BONDS AND  Principal   
NOTES (13.8%)* cont.  amount  Value 
Financial cont.     
Willis Group North America, Inc. company     
guaranty 6.2s, 2017  $605,000  $563,540 
ZFS Finance USA Trust I 144A bonds FRB     
6 1/2s, 2037  2,130,000  1,837,108 
    147,823,086 
Health Care (0.4%)     
Aetna, Inc. sr. unsec. unsub. notes 6 3/4s, 2037  3,535,000  3,296,168 
AmerisourceBergen Corp. company guaranty     
sr. unsec. notes 5 5/8s, 2012  20,000  19,928 
AstraZeneca PLC sr. unsub. notes     
5.9s, 2017 (United Kingdom)  1,805,000  1,855,944 
Cardinal Health, Inc. sr. unsec. unsub. notes     
5 1/2s, 2013  330,000  329,774 
GlaxoSmith Kline Capital Inc, company     
guaranty sr. notes 5.65s, 2018  1,840,000  1,839,812 
Hospira, Inc. sr. notes 6.05s, 2017  560,000  540,595 
Hospira, Inc. sr. notes 5.55s, 2012  785,000  776,668 
UnitedHealth Group, Inc. sr. unsec. notes     
6 7/8s, 2038  360,000  327,278 
UnitedHealth Group, Inc. sr. unsec. notes     
6s, 2018 S  525,000  502,252 
UnitedHealth Group, Inc. sr. unsec. notes     
5 1/2s, 2012  755,000  741,422 
Ventas Realty LP/Capital Corp. sr. notes     
6 3/4s, 2017 R  470,000  442,975 
    10,672,816 
Technology (0.4%)     
Arrow Electronics, Inc. debs. 7 1/2s, 2027  760,000  737,122 
Avnet, Inc. notes 6s, 2015  765,000  733,853 
Computer Sciences Corp. sr. unsec. unsub.     
notes 5s, 2013  65,000  63,130 
Fiserv, Inc. sr. unsec. unsub. notes company     
guaranty 6.8s, 2017 S  760,000  763,527 
Fiserv, Inc. sr. unsec. unsub. notes company     
guaranty 6 1/8s, 2012  760,000  760,056 
IBM Corp. sr. unsec. notes 5.7s, 2017  1,820,000  1,847,075 
Lexmark International Inc, sr. unsec. notes     
5.9s, 2013  2,200,000  2,148,454 
Motorola, Inc. sr. notes 8s, 2011  205,000  204,828 
Motorola, Inc. sr. unsec. notes 6 5/8s, 2037  1,040,000  773,230 
Motorola, Inc. sr. unsec. notes 6s, 2017  530,000  445,113 
Tyco Electronics Group SA company guaranty     
6.55s, 2017 (Luxembourg)  180,000  177,900 
Tyco Electronics Group SA sr. unsec. notes     
company guaranty 6s, 2012 (Luxembourg)  1,150,000  1,157,312 
Xerox Corp. sr. notes 6.4s, 2016  1,030,000  1,015,864 
Xerox Corp. sr. unsec. notes 6.35s, 2018  960,000  928,653 
Xerox Corp. sr. unsec. notes 5 1/2s, 2012  665,000  653,337 
    12,409,454 
Transportation (0.4%)     
American Airlines, Inc. pass-through certificates     
Ser. 01-1, 6.817s, 2011  100,000  76,250 
American Airlines, Inc. pass-through certificates     
Ser. 01-2, 7.858s, 2011  525,000  483,000 
Canadian National Railway Co. sr. unsec. unsub.     
notes 5.55s, 2018 (Canada)  625,000  609,719 
Continental Airlines, Inc. pass-through certificates     
Ser. 98-3, 6.32s, 2008  2,895,000  2,876,906 
Delta Air Lines, Inc. pass-through certificates     
6.821s, 2022  899,876  740,148 

CORPORATE BONDS AND  Principal   
NOTES (13.8%)* cont.  amount  Value 
Transportation cont.     
Norfolk Southern Corp. sr. unsec. notes     
5 3/4s, 2018  $1,215,000  $1,187,088 
Northwest Airlines Corp. pass-through     
certificates Ser. 00-1, 7.15s, 2019  1,514,646  1,257,156 
Ryder System, Inc. sr. unsec. unsub. notes     
Ser. MTN, 6s, 2013  330,000  324,178 
Southwest Airlines Co. pass-through     
certificates 6.15s, 2022 S  845,102  794,619 
Southwest Airlines Co. sr. unsec. unsub.     
notes 6 1/2s, 2012  55,000  54,216 
Union Pacific Corp. sr. unsub. notes 5 3/4s, 2017  750,000  728,432 
Union Pacific Corp. 144A pass-through     
certificates 5.214s, 2014  590,000  576,141 
United AirLines, Inc. pass-through certificates     
6.636s, 2022 S  680,293  555,010 
    10,262,863 
Utilities & Power (2.3%)     
AEP Texas North Co. sr. notes Ser. B,     
5 1/2s, 2013  905,000  893,368 
American Water Capital Corp. sr. unsec. bond     
6.593s, 2037  455,000  415,794 
American Water Capital Corp. sr. unsec. bond     
6.085s, 2017  510,000  489,340 
Appalachian Power Co. sr. notes 5.8s, 2035  510,000  427,624 
Arizona Public Services Co. notes 6 1/2s, 2012  1,040,000  1,050,691 
Atmos Energy Corp. sr. unsub. notes     
6.35s, 2017  905,000  888,070 
Beaver Valley II Funding debs. 9s, 2017  1,327,000  1,426,843 
Boardwalk Pipelines LP company guaranty     
5 7/8s, 2016  1,950,000  1,856,013 
Bruce Mansfield Unit pass-through certificates     
6.85s, 2034  2,390,000  2,394,174 
CenterPoint Energy Houston Electric, LLC     
general ref. mtge. Ser. M2, 5 3/4s, 2014  110,000  109,585 
CenterPoint Energy Resources Corp. notes     
7 3/4s, 2011  1,060,000  1,097,291 
CMS Energy Corp. unsub. notes 6.55s, 2017  50,000  47,938 
Commonwealth Edison Co. 1st mtge.     
6.15s, 2017  275,000  274,422 
Commonwealth Edison Co. 1st mtge.     
5.9s, 2036  1,145,000  1,022,995 
Commonwealth Edison Co. 1st mtge. sec.     
bond 5.8s, 2018  495,000  481,447 
Consolidated Natural Gas Co. sr. notes     
5s, 2014  530,000  502,915 
Consumers Energy Co. 1st mtge. sec. bond     
5.65s, 2018  1,805,000  1,773,651 
Dayton Power & Light Co. (The) 1st mtge.     
5 1/8s, 2013  826,000  834,585 
Dominion Resources, Inc. jr. sub. notes FRN     
6.3s, 2066  3,085,000  2,786,585 
Dominion Resources, Inc. sr. unsec. unsub.     
notes Ser. A, 5.6s, 2016  1,050,000  1,014,115 
Duke Energy Carolinas LLC 1st mtge. sec.     
bond 6.05s, 2038 S  630,000  611,732 
Duke Energy Corp. sr. unsec. notes 6 1/4s, 2018  1,675,000  1,688,408 
E.ON International Finance BV 144A notes     
5.8s, 2018 (Netherlands)  2,500,000  2,455,868 
Entergy Gulf States, Inc. 1st mtge. 5 1/4s, 2015  985,000  917,878 

36

CORPORATE BONDS AND  Principal   
NOTES (13.8%)* cont.  amount  Value 
Utilities & Power cont.     
FirstEnergy Corp. notes Ser. B, 6.45s, 2011  $862,000  $880,393 
Florida Power Corp. 1st mtge. 6.35s, 2037  1,040,000  1,034,988 
Florida Power Corp. 1st mtge. sec. bond     
6.4s, 2038  1,810,000  1,820,415 
Indianapolis Power & Light 144A 1st mtge.     
6.3s, 2013  515,000  531,958 
Indiantown Cogeneration LP 1st mtge. Ser.     
A-10, 9.77s, 2020  775,000  817,788 
Ipalco Enterprises, Inc. 144A sr. sec. notes     
7 1/4s, 2016  170,000  170,425 
ITC Holdings Corp. 144A notes 5 7/8s, 2016  1,090,000  1,051,902 
ITC Holdings Corp. 144A sr. unsec. notes     
6.05s, 2018  365,000  359,018 
Kansas Gas & Electric bonds 5.647s, 2021  388,342  370,381 
Kinder Morgan, Inc. notes 6s, 2017 S  545,000  535,094 
Kinder Morgan, Inc. sr. notes 6 1/2s, 2012  558,000  553,815 
MidAmerican Energy Holdings Co. bonds     
6 1/8s, 2036  2,345,000  2,202,302 
MidAmerican Energy Holdings Co. sr. unsec.     
bond 6 1/2s, 2037 S  380,000  374,787 
National Fuel Gas Co. notes 5 1/4s, 2013  545,000  533,637 
Nevada Power Co. general ref. mtge.     
Ser. L, 5 7/8s, 2015  525,000  517,910 
Northwestern Corp. sec. notes 5 7/8s, 2014  1,090,000  1,070,070 
Oncor Electric Delivery Co. debs. 7s, 2022  675,000  651,241 
Oncor Electric Delivery Co. sec. notes     
7 1/4s, 2033  820,000  796,596 
Pacific Gas & Electric Co. sr. unsec. notes     
6.35s, 2038  350,000  345,150 
Pacific Gas & Electric Co. sr. unsub. 5.8s, 2037 S  775,000  713,791 
PacifiCorp Sinking Fund 1st mtge. 6 1/4s, 2037  520,000  499,358 
Potomac Edison Co. 144A 1st mtge. 5.8s, 2016  1,085,000  1,065,553 
Power Receivable Finance, LLC 144A sr.     
notes 6.29s, 2012  760,183  778,184 
PPL Energy Supply LLC bonds Ser. A, 5.7s, 2015  640,000  594,169 
Public Service Co. of Colorado sr. notes     
Ser. A, 6 7/8s, 2009  375,000  384,392 
Public Service Co. of New Mexico sr. notes     
4.4s, 2008  570,000  568,751 
Puget Sound Energy, Inc. jr. sub. FRN Ser. A,     
6.974s, 2067  1,185,000  1,029,469 
Rockies Express Pipeline, LLC 144A sr. notes     
7 1/2s, 2038  3,285,000  3,361,665 
Rockies Express Pipeline, LLC 144A sr. notes     
6.85s, 2018  470,000  479,106 
Sierra Pacific Power Co. general ref. mtge.     
Ser. P, 6 3/4s, 2037  1,760,000  1,714,944 
Southern California Edison Co. 1st mtge.     
Ser. 06-E, 5.55s, 2037  895,000  823,684 
Southern California Edison Co. notes     
6.65s, 2029  1,030,000  1,046,605 
Southern Natural Gas. Co. 144A notes     
5.9s, 2017  460,000  441,040 
Spectra Energy Capital, LLC company guaranty     
sr. unsec. unsub. notes 6.2s, 2018  1,080,000  1,043,345 
Spectra Energy Capital, LLC sr. notes 8s, 2019  780,000  847,201 
Spectra Energy Capital, LLC sr. unsec.     
unsub. notes 5.668s, 2014  330,000  322,406 

CORPORATE BONDS AND  Principal   
NOTES (13.8%)* cont.  amount  Value 
Utilities & Power cont.     
Teco Finance, Inc. company guaranty sr.     
unsec. unsub. notes 7.2s, 2011  $1,070,000  $1,100,763 
TEPPCO Partners LP company guaranty     
FRB 7s, 2067  595,000  514,228 
TransAlta Corp. notes 5 3/4s, 2013 (Canada)  665,000  640,541 
TransAlta Corp. sr. unsec. notes     
6.65s, 2018 (Canada) S  2,175,000  2,143,913 
TransCanada Pipelines, Ltd. jr. sub. FRN     
6.35s, 2067 (Canada)  520,000  439,428 
TransCanada Pipelines, Ltd. sr. unsec.     
6.2s, 2037 (Canada)  890,000  809,378 
Union Electric Co. 1st mtge. sr. sec. bond     
6.7s, 2019 S  960,000  975,703 
West Penn Power Co. 1st mtge. 5.95s, 2017  995,000  989,327 
Westar Energy, Inc. 1st mtge. 5.15s, 2017  75,000  69,985 
Westar Energy, Inc. 1st mtge. 5.1s, 2020  800,000  718,301 
    64,194,432 
 
Total corporate bonds and notes     
(cost $413,124,823)    $388,614,003 
 
ASSET-BACKED  Principal   
SECURITIES (5.7%)*  amount  Value 
Accredited Mortgage Loan Trust     
FRB Ser. 05-1, Class M2, 3.151s, 2035  $349,000  $164,030 
FRB Ser. 05-4, Class A2C, 2.671s, 2035  302,000  268,780 
Ace Securities Corp.     
FRB Ser. 06-OP2, Class A2C, 2.611s, 2036  759,000  409,860 
FRB Ser. 06-HE3, Class A2C, 2.611s, 2036  1,021,000  744,992 
Ace Securities Corp. 144A Ser. 03-MH1,     
Class M2, 6 1/2s, 2030  478,481  399,520 
Advanta Business Card Master Trust FRB     
Ser. 04-C1, Class C, 3.508s, 2013  210,000  188,748 
Aegis Asset Backed Securities Trust 144A     
Ser. 04-6N, Class Note, 4 3/4s, 2035  59,595  6 
AFC Home Equity Loan Trust Ser. 99-2,     
Class 1A, 2.893s, 2029  2,195,860  1,427,309 
American Express Credit Account Master     
Trust 144A Ser. 04-C, Class C, 2.958s, 2012  431,181  420,940 
Ameriquest Mortgage Securities, Inc.     
FRB Ser. 06-R1, Class M10, 4.961s, 2036  902,000  34,637 
FRB Ser. 03-8, Class M2, 4.211s, 2033  483,788  106,433 
AMP CMBS 144A FRB Ser. 06-1A, Class A,     
3.526s, 2047 (Cayman Islands)  1,910,000  771,946 
Arcap REIT, Inc. 144A     
Ser. 03-1A, Class E, 7.11s, 2038  1,283,000  1,070,642 
Ser. 04-1A, Class E, 6.42s, 2039  1,112,000  786,820 
Argent Securities, Inc.     
FRB Ser. 03-W3, Class M3, 4.731s, 2033  53,720  7,521 
FRB Ser. 06-W4, Class A2C, 2.621s, 2036  1,813,000  1,232,840 
Asset Backed Funding Certificates     
FRB Ser. 04-OPT2, Class M2, 3.461s, 2033  524,512  262,256 
FRB Ser. 05-WMC1, Class M1, 2.901s, 2035  564,000  389,160 
Asset Backed Funding Corp. NIM Trust 144A     
FRB Ser. 05-OPT1, Class B1, 4.961s, 2035  407,000  18,335 
Asset Backed Securities Corp.     
Home Equity Loan Trust     
FRB Ser. 06-HE2, Class A3, 2.651s, 2036  383,785  288,767 
FRB Ser. 06-HE4, Class A5, 2.621s, 2036  1,346,000  1,009,500 
FRB Ser. 06-HE7, Class A4, 2.601s, 2036  529,000  343,850 

37

ASSET-BACKED  Principal   
SECURITIES (5.7%)* cont.  amount  Value 
Aviation Capital Group Trust 144A FRB     
Ser. 03-2A, Class G1, 3.158s, 2033  $830,173  $738,854 
BankAmerica Manufactured Housing     
Contract Trust Ser. 97-2, Class M, 6.9s, 2028  732,000  928,401 
Bay View Auto Trust Ser. 05-LJ2, Class D,     
5.27s, 2014  420,000  409,500 
Bayview Financial Acquisition Trust     
Ser. 04-B, Class A1, 3.483s, 2039  3,880,768  3,221,037 
FRB Ser. 04-D, Class A, 2.85s, 2044  1,109,757  766,842 
Bayview Financial Acquisition Trust 144A FRN     
Ser. 04-B, Class M2, 6.26s, 2039  184,294  152,680 
Bayview Financial Asset Trust 144A     
FRB Ser. 03-SSRA, Class M, 3.811s, 2038  670,724  491,305 
FRB Ser. 03-SSRA, Class A, 3.161s, 2038  565,708  453,981 
FRB Ser. 04-SSRA, Class A1, 3.061s, 2039  748,951  552,351 
Bear Stearns Asset Backed Securities, Inc.     
FRB Ser. 06-EC1, Class M9, 4.461s, 2035  698,000  13,960 
FRB Ser. 06-PC1, Class M9, 4.211s, 2035  414,000  31,050 
FRB Ser. 05-HE1, Class M3, 3.391s, 2035  489,000  161,370 
FRB Ser. 03-3, Class A2, 3.051s, 2043  1,884,300  1,669,678 
FRB Ser. 03-1, Class A1, 2.961s, 2042  449,859  373,543 
FRB Ser. 05-3, Class A1, 2.911s, 2035  402,229  336,183 
Bear Stearns Asset Backed Securities, Inc.     
144A FRB Ser. 06-HE2, Class M10, 4.711s, 2036  251,000  19,286 
Capital Auto Receivables Asset Trust 144A     
Ser. 06-1, Class D, 7.16s, 2013  500,000  483,984 
Ser. 05-1, Class D, 6 1/2s, 2011  1,442,000  1,345,285 
Citigroup Mortgage Loan Trust, Inc. FRB     
Ser. 05-OPT1, Class M1, 2.881s, 2035  324,987  210,478 
Conseco Finance Securitizations Corp.     
Ser. 02-2, Class A, IO, 8 1/2s, 2033  5,472,549  437,804 
Ser. 00-4, Class A6, 8.31s, 2032  7,799,483  6,122,595 
Ser. 00-5, Class A6, 7.96s, 2032  3,340,612  2,522,162 
Ser. 02-1, Class M1F, 7.954s, 2033  1,004,000  913,809 
Ser. 01-4, Class A4, 7.36s, 2033  4,568,998  4,310,360 
Ser. 00-6, Class A5, 7.27s, 2031  940,554  799,471 
Ser. 01-1, Class A5, 6.99s, 2032  6,177,644  5,730,960 
Ser. 01-3, Class A4, 6.91s, 2033  6,791,239  6,409,918 
Ser. 02-1, Class A, 6.681s, 2033  4,855,732  4,790,653 
Countrywide Asset Backed Certificates     
FRB Ser. 05-BC3, Class M1, 2.981s, 2035  332,000  177,620 
FRB Ser. 04-6, Class 2A5, 2.851s, 2034  888,046  697,116 
FRB Ser. 05-14, Class 3A2, 2.701s, 2036  194,702  172,312 
Credit-Based Asset Servicing and     
Securitization 144A     
Ser. 06-MH1, Class B1, 6 1/4s, 2036  359,000  251,300 
Ser. 06-MH1, Class M1, 6 1/4s, 2036  485,000  395,275 
Ser. 06-MH1, Class M2, 6 1/4s, 2036  214,000  171,200 
Crest, Ltd. 144A Ser. 03-2A, Class D2,     
6.723s, 2038 (Cayman Islands)  1,617,000  1,099,560 
CS First Boston Mortgage Securities Corp. 144A     
Ser. 04-FR1N, Class A, 5s, 2034  159,418  12,753 
DB Master Finance, LLC 144A Ser. 06-1,     
Class M1, 8.285s, 2031  373,000  305,297 
Equifirst Mortgage Loan Trust FRB Ser. 05-1,     
Class M5, 3.131s, 2035  201,000  50,250 
Fieldstone Mortgage Investment Corp. FRB     
Ser. 05-1, Class M3, 3.001s, 2035  700,000  616,000 
First Franklin Mortgage Loan Asset Backed     
Certificates FRB Ser. 06-FF7, Class 2A3,     
2.611s, 2036  1,203,000  960,047 
First Plus Home Loan Trust Ser. 97-3,     
Class B1, 7.79s, 2023  258,206  244,008 

ASSET-BACKED  Principal   
SECURITIES (5.7%)* cont.  amount  Value 
Fort Point CDO, Ltd. FRB Ser. 03-2A,     
Class A2, 3.732s, 2038 (Cayman Islands)  $616,000  $61,600 
Foxe Basin, Ltd. 144A FRB Ser. 03-1A, Class A1,     
3.276s, 2015 (Cayman Islands)  2,000,000  1,930,000 
Fremont Home Loan Trust     
FRB Ser. 05-E, Class 2A4, 2.791s, 2036  1,688,000  1,151,891 
FRB Ser. 06-2, Class 2A3, 2.631s, 2036  3,141,000  2,340,045 
G-Star, Ltd. 144A FRB Ser. 02-2A, Class BFL,     
4.461s, 2037 (Cayman Islands)  308,000  252,560 
GE Corporate Aircraft Financing, LLC 144A     
FRB Ser. 05-1A, Class C, 3.761s, 2019  1,680,000  1,142,400 
Ser. 04-1A, Class B, 3.333s, 2018  51,768  49,179 
Gears Auto Owner Trust 144A Ser. 05-AA,     
Class E1, 8.22s, 2012  1,962,000  1,838,058 
GEBL 144A     
Ser. 04-2, Class D, 5.221s, 2032  569,634  290,513 
Ser. 04-2, Class C, 3.308s, 2032  213,440  143,005 
Green Tree Financial Corp.     
Ser. 96-5, Class M1, 8.05s, 2027  512,386  430,646 
Ser. 99-5, Class A5, 7.86s, 2030  14,600,111  12,264,093 
Ser. 97-2, Class A7, 7.62s, 2028  303,746  316,333 
Ser. 97-4, Class A7, 7.36s, 2029  469,564  451,829 
Ser. 95-8, Class B1, 7.3s, 2026  362,579  303,377 
Ser. 96-10, Class M1, 7.24s, 2028  972,000  855,360 
Ser. 97-3, Class A5, 7.14s, 2028  404,412  409,745 
Ser. 98-4, Class A7, 6.87s, 2030  288,076  282,314 
Ser. 97-7, Class A8, 6.86s, 2029  299,986  285,273 
Ser. 99-3, Class A6, 6 1/2s, 2031  208,522  201,223 
Ser. 98-6, Class A7, 6.45s, 2030  360,055  362,647 
Ser. 99-2, Class A7, 6.44s, 2030  1,100,803  941,512 
Ser. 99-1, Class A6, 6.37s, 2025  1,023,000  1,002,540 
Greenpoint Manufactured Housing     
Ser. 00-3, Class IA, 8.45s, 2031  10,558,570  8,982,176 
Ser. 99-5, Class M1A, 8.3s, 2026  488,000  440,750 
GS Auto Loan Trust 144A Ser. 04-1, Class D,     
5s, 2011  1,156,849  1,155,576 
GSAMP Trust FRB Ser. 06-HE5, Class A2C,     
2.611s, 2036  4,677,000  2,769,682 
Guggenheim Structured Real Estate Funding,     
Ltd. 144A     
FRB Ser. 05-2A, Class D, 4.011s, 2030     
(Cayman Islands)  1,141,000  619,449 
FRB Ser. 05-1A, Class D, 3.991s, 2030     
(Cayman Islands)  502,743  397,167 
High Income Trust Securities 144A FRB     
Ser. 03-1A, Class A, 3.284s, 2036     
(Cayman Islands)  1,430,132  785,679 
Home Equity Asset Trust FRB Ser. 06-1,     
Class 2A4, 2.791s, 2036  848,000  513,040 
Hyundai Auto Receivables Trust Ser. 04-A,     
Class D, 4.1s, 2011  28,166  28,103 
JPMorgan Mortgage Acquisition Corp.     
FRB Ser. 05-OPT2, Class M11, 4.711s, 2035  645,000  32,250 
FRB Ser. 06-FRE1, Class A4, 2.751s, 2035  716,000  456,808 
Lehman Manufactured Housing Ser. 98-1,     
Class 1, IO, 0.807s, 2028  14,116,388  124,224 
Lehman XS Trust     
Ser. 07-6, Class 3A6, 6 1/2s, 2037  11,839,026  9,132,093 
IFB Ser. 07-3, Class 4B, IO, 4.229s, 2037  4,398,639  361,329 
FRB Ser. 07-6, Class 2A1, 2.671s, 2037  8,516,759  6,145,693 

38

ASSET-BACKED  Principal   
SECURITIES (5.7%)* cont.  amount  Value 
LNR CDO, Ltd. 144A     
FRB Ser. 03-1A, Class EFL, 5.461s, 2036     
(Cayman Islands)  $2,585,000  $904,750 
FRB Ser. 02-1A, Class FFL, 5.212s, 2037     
(Cayman Islands)  5,220,000  2,349,000 
Long Beach Mortgage Loan Trust     
FRB Ser. 05-2, Class M4, 3.081s, 2035  558,000  195,300 
FRB Ser. 06-4, Class 2A4, 2.721s, 2036  813,000  411,386 
FRB Ser. 06-1, Class 2A3, 2.651s, 2036  1,433,000  1,189,390 
Madison Avenue Manufactured Housing Contract   
FRB Ser. 02-A, Class B1, 5.711s, 2032  4,059,503  2,861,897 
FRB Ser. 02-A, Class M2, 4.711s, 2032  278,000  231,748 
Ser. 02-A IO, 0.3s, 2032  121,804,459  1,514,517 
Marriott Vacation Club Owner Trust 144A     
Ser. 05-2, Class D, 6.205s, 2027  85,675  84,423 
Ser. 04-2A, Class D, 5.389s, 2026  80,301  79,062 
Ser. 04-2A, Class C, 4.741s, 2026  73,877  73,236 
FRB Ser. 02-1A, Class A1, 3.158s, 2024  689,938  650,516 
MASTR Asset Backed Securities Trust FRB     
Ser. 06-FRE2, Class A4, 2.611s, 2036  424,000  225,031 
Mid-State Trust     
Ser. 11, Class B, 8.221s, 2038  333,036  275,266 
Ser. 10, Class B, 7.54s, 2036  612,796  507,699 
Morgan Stanley ABS Capital I     
FRB Ser. 05-HE2, Class M5, 3.141s, 2035  349,000  69,800 
FRB Ser. 05-HE1, Class M3, 2.981s, 2034  349,000  139,600 
FRB Ser. 06-NC4, Class M2, 2.761s, 2036  489,000  39,120 
N-Star Real Estate CDO, Ltd. 144A FRB     
Ser. 04-2A, Class C1, 4.46s, 2039     
(Cayman Islands)  544,000  447,440 
Navigator CDO, Ltd. 144A FRB Ser. 03-1A,     
Class A1, 3.166s, 2015 (Cayman Islands)  388,697  379,290 
Navistar Financial Corp. Owner Trust     
Ser. 05-A, Class C, 4.84s, 2014  247,676  225,002 
Ser. 04-B, Class C, 3.93s, 2012  129,117  118,080 
New Century Home Equity Loan Trust     
Ser. 03-5, Class AI7, 5.15s, 2033  1,559,412  1,325,500 
FRB Ser. 03-4, Class M3, 4.511s, 2033  30,325  1,820 
Novastar Home Equity Loan     
FRB Ser. 06-1, Class A2C, 2.621s, 2036  1,010,000  880,316 
FRB Ser. 06-2, Class A2C, 2.611s, 2036  1,010,000  739,001 
Oakwood Mortgage Investors, Inc.     
Ser. 00-D, Class A3, 6.99s, 2022  59,844  57,439 
Ser. 01-D, Class A3, 5.9s, 2022  150,822  108,592 
Ser. 02-C, Class A1, 5.41s, 2032  3,536,666  2,793,966 
Oakwood Mortgage Investors, Inc. 144A     
Ser. 01-B, Class A4, 7.21s, 2030  513,171  419,922 
Ser. 01-B, Class A3, 6.535s, 2023  148,557  125,514 
Ocean Star PLC 144A     
FRB Ser. 04, Class D, 5.016s, 2018 (Ireland)  623,000  546,683 
FRB Ser. 05-A, Class D, 4.216s, 2012 (Ireland)  696,000  556,800 
Option One Mortgage Loan Trust FRB Ser. 05-4,   
Class M11, 4.961s, 2035  216,000  23,760 
Origen Manufactured Housing Ser. 04-B,     
Class A2, 3.79s, 2017  108,818  104,444 
Park Place Securities, Inc.     
FRB Ser. 05-WCH1, Class M4, 3.291s, 2036  227,000  63,560 
FRB Ser. 04-WHQ2, Class A3A, 2.811s, 2035  164,648  145,713 
Park Place Securities, Inc. 144A FRB     
Ser. 04-MHQ1, Class M10, 4.961s, 2034  203,202  10,160 
People’s Financial Realty Mortgage Securities     
Trust FRB Ser. 06-1, Class 1A2, 2.591s, 2036  1,587,000  1,039,485 
Permanent Financing PLC FRB Ser. 3, Class 3C,     
3.846s, 2042 (United Kingdom)  1,300,000  1,293,559 

ASSET-BACKED  Principal   
SECURITIES (5.7%)* cont.  amount  Value 
Pillar Funding PLC 144A     
FRB Ser. 04-1A, Class C1, 3.813s, 2011     
(United Kingdom)  $657,000  $560,495 
FRB Ser. 04-2A, Class C, 3.66s, 2011     
(United Kingdom)  912,000  742,466 
Residential Asset Mortgage Products, Inc.     
FRB Ser. 06-NC3, Class A2, 2.651s, 2036  1,471,127  1,278,080 
FRB Ser. 07-RZ1, Class A2, 2.621s, 2037  1,562,000  1,136,477 
Residential Asset Securities Corp. FRB     
Ser. 05-EMX1, Class M2, 3.191s, 2035  793,000  317,200 
Residential Asset Securities Corp. 144A     
FRB Ser. 05-KS10, Class B, 5.211s, 2035  1,165,000  11,650 
Ser. 04-NT, Class Note, 4 1/2s, 2034     
(In default) †  76,375  2,291 
SAIL Net Interest Margin Notes 144A     
Ser. 04-4A, Class B, 7 1/2s, 2034     
(Cayman Islands) (In default) †  214,965  22 
Securitized Asset Backed Receivables, LLC     
FRB Ser. 05-HE1, Class M2, 3.111s, 2035  349,000  87,250 
FRB Ser. 07-NC2, Class A2B, 2.601s, 2037  1,468,000  968,880 
SG Mortgage Securities Trust     
FRB Ser. 06-OPT2, Class A3D, PO,     
2.671s, 2036  1,718,000  728,776 
FRB Ser. 06-FRE1, Class A2B, 2.641s, 2036  807,000  544,725 
Soundview Home Equity Loan Trust     
FRB Ser. 06-OPT3, Class 2A3, 2.631s, 2036  814,000  626,144 
FRB Ser. 06-3, Class A3, 2.621s, 2036  4,702,000  3,708,279 
Soundview Home Equity Loan Trust 144A     
FRB Ser. 05-CTX1, Class B1, 4.961s, 2035  466,000  13,980 
South Coast Funding 144A FRB Ser. 3A,     
Class A2, 3.916s, 2038 (Cayman Islands)  470,000  2,350 
Structured Asset Investment Loan Trust     
FRB Ser. 06-BNC2, Class A6, 2.721s, 2036  814,000  356,643 
Structured Asset Investment Loan Trust 144A     
FRB Ser. 05-HE3, Class M11, 4.961s, 2035  832,386  12,070 
Structured Asset Receivables Trust 144A     
FRB Ser. 05-1, 3.286s, 2015  5,198,090  4,834,223 
Structured Asset Securities Corp. 144A     
Ser. 98-RF3, Class A, IO, 6.1s, 2028  2,652,148  253,980 
TIAA Real Estate CDO, Ltd. Ser. 03-1A,     
Class E, 8s, 2038  1,698,000  891,144 
Wells Fargo Home Equity Trust FRB Ser. 07-1,     
Class A3, 2.781s, 2037  359,000  186,770 
WFS Financial Owner Trust Ser. 05-1,     
Class D, 4.09s, 2012  68,556  68,088 
Whinstone Capital Management, Ltd. 144A FRB     
Ser. 1A, Class B3, 3.7s, 2044 (United Kingdom)  591,276  441,979 
 
Total asset-backed securities     
(cost $205,458,181)    $160,129,041 

39

PURCHASED OPTIONS OUTSTANDING (1.7%)*  Expiration date/  Contract   
  strike price  amount  Value 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the right to receive       
a fixed rate of 5.37% versus the three month USD-LIBOR-BBA maturing November 12, 2019.  Nov-09/5.37  $117,731,000  $5,944,238 
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the right to receive a fixed       
rate of 5.355% versus the three month USD-LIBOR-BBA maturing on November 12, 2019.  Nov-09/5.355  117,731,000  5,861,826 
Option on an interest rate swap with Goldman Sachs International for the right to receive a fixed       
rate of 5.355% versus the three month USD-LIBOR-BBA maturing November 12, 2019.  Nov-09/5.355  117,731,000  5,861,826 
Option on an interest rate swap with Goldman Sachs International for the right to pay a fixed rate of       
5.355% versus the three month USD-LIBOR-BBA maturing on November 12, 2019.  Nov-09/5.355  117,731,000  2,858,509 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the right to pay a       
fixed rate of 5.37% versus the three month USD-LIBOR-BBA maturing November 12, 2019.  Nov-09/5.37  117,731,000  2,806,707 
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the right to pay a fixed rate       
of 5.355% versus the three month USD-LIBOR-BBA maturing November 12, 2019.  Nov-09/5.355  117,731,000  2,858,509 
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the right to pay a fixed rate       
of 5.03% versus the three month USD-LIBOR-BBA maturing on February 16, 2020.  Feb-10/5.03  81,840,000  3,243,319 
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the right to receive a fixed rate       
of 5.03% versus the three month USD-LIBOR-BBA maturing on February 16, 2020.  Feb-10/5.03  81,840,000  3,010,894 
Option on an interest rate swap with Goldman Sachs International for the right to receive a fixed rate       
of 5.325% versus the three month USD-LIBOR-BBA maturing April 08, 2019.  Apr-09/5.325  54,984,000  2,719,509 
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 08, 2019.  Apr-09/5.315  54,984,000  2,689,267 
Option on an interest rate swap with Deutschbank for the right to receive a fixed rate of 5.385%       
versus the three month USD-LIBOR-BBA maturing April 16, 2019.  Apr-09/5.385  43,245,000  2,281,606 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the right to pay a       
fixed rate of 5.315% versus the three month USD-LIBOR-BBA maturing February 7, 2023.  Feb-13/5.315  43,076,000  2,244,690 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the right to receive a       
fixed rate of 5.315% versus the three month USD-LIBOR-BBA maturing February 7, 2023.  Feb-13/5.315  43,076,000  2,111,586 
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 08, 2019.  Apr-09/5.315  54,984,000  790,120 
Option on an interest rate swap with Goldman Sachs International for the right to pay a fixed rate of       
5.325% versus the three month USD-LIBOR-BBA maturing April 08, 2019.  Apr-09/5.325  54,984,000  777,474 
Option on an interest rate swap with Deutschbank for the right to pay a fixed rate of 5.385% versus the       
three month USD-LIBOR-BBA maturing April 16, 2019.  Apr-09/5.385  43,245,000  573,861 
Total purchased options outstanding (cost $46,702,032)      $46,633,941 
   

SENIOR LOANS (1.0%)* c  Principal amount  Value 
Basic Materials (0.1%)     
Aleris International, Inc. bank term loan FRN Ser. B, 4 1/2s, 2013  $413,899  $355,263 
Georgia-Pacific, LLC bank term loan FRN Ser. B, 4.449s, 2013  620,816  585,537 
Momentive Performance Materials, Inc. bank term loan FRN 4 3/4s, 2013  615,780  562,412 
NewPage Holding Corp. bank term loan FRN 6.563s, 2014  620,880  612,860 
    2,116,072 
Capital Goods (0.2%)     
Allied Waste Industries, Inc. bank term loan FRN 6.82s, 2012  527,551  516,120 
Allied Waste Industries, Inc. bank term loan FRN 4.228s, 2012  877,449  858,438 
BE Aerospace, Inc. bank term loan FRN Ser. B, 5 3/4s, 2014  155,000  154,871 
Hawker Beechcraft Acquisition Co., LLC bank term loan FRN 2.601s, 2014  33,423  31,073 
Hawker Beechcraft Acquisition Co., LLC bank term loan FRN Ser. B, 4.801s, 2014  572,084  531,859 
Polypore, Inc. bank term loan FRN Ser. B, 4.72s, 2014  620,864  580,508 
Sequa Corp. bank term loan FRN 6.025s, 2014  1,070,211  1,010,457 
Wesco Aircraft Hardware Corp. bank term loan FRN 5.06s, 2013  624,000  596,700 
    4,280,026 
Communication Services (0.2%)     
Cricket Communications, Inc. bank term loan FRN Ser. B, 6 1/2s, 2013  620,832  606,260 
Crown Castle International Corp. bank term loan FRN 4.301s, 2014  310,428  289,940 
Intelsat Corp. bank term loan FRN Ser. B2, 5.288s, 2011  206,926  195,071 
Intelsat Corp. bank term loan FRN Ser. B2-A, 5.288s, 2013  206,988  195,130 
Intelsat Corp. bank term loan FRN Ser. B2-C, 5.288s, 2013  206,926  195,071 
Level 3 Communications, Inc. bank term loan FRN 4.943s, 2014  624,000  563,160 

40

SENIOR LOANS (1.0%)* c cont.  Principal amount  Value 
Communication Services cont.     
MetroPCS Wireless, Inc. bank term loan FRN 4.989s, 2013  $620,841  $589,255 
PAETEC Holding Corp. bank term loan FRN Ser. B1, 4.983s, 2013  608,510  581,888 
Time Warner Telecom, Inc. bank term loan FRN Ser. B, 4.49s, 2013  620,848  592,600 
West Corp. bank term loan FRN 4.954s, 2013  622,424  557,556 
    4,365,931 
Consumer Cyclicals (0.2%)     
Allison Transmission bank term loan FRN Ser. B, 5.322s, 2014  620,872  555,060 
Aramark Corp. bank term loan FRN 2.025s, 2014  37,275  35,392 
Aramark Corp. bank term loan FRN Ser. B, 4.676s, 2014  586,725  557,096 
Dana Corp. bank term loan FRN 6 3/4s, 2015  620,880  573,150 
Goodman Global Holdings, Inc. bank term loan FRN Ser. B, 7 1/2s, 2011  490,220  483,173 
Goodyear Tire & Rubber Co. (The) bank term loan FRN 4.54s, 2010  624,000  572,520 
Harrah’s Operating Co., Inc. bank term loan FRN Ser. B2, 5.8s, 2015  622,440  551,082 
Lear Corp bank term loan FRN 5.132s, 2013  622,111  568,583 
National Bedding Co. bank term loan FRN 4.602s, 2011  288,535  225,539 
Navistar Financial Corp. bank term loan FRN 5.695s, 2012  166,400  153,296 
Navistar International Corp. bank term loan FRN 6.191s, 2012  457,600  421,564 
Ticketmaster bank term loan FRN Ser. B, 6.04s, 2014 U  450,000  450,000 
Yankee Candle Co., Inc. bank term loan FRN 4.804s, 2014  370,000  332,383 
    5,478,838 
Consumer Staples (0.2%)     
Affinion Group, Inc. bank term loan FRN Ser. B, 5.17s, 2013  624,000  595,400 
Cablevision Systems Corp. bank term loan FRN 4.206s, 2013  620,824  587,584 
Charter Communications, Inc. bank term loan FRN 4.8s, 2014  620,880  545,339 
Cinemark USA, Inc. bank term loan FRN 4.533s, 2013  623,271  585,875 
DirecTV Holdings, LLC bank term loan FRN 5 1/4s, 2013  1,350,000  1,346,625 
Idearc, Inc. bank term loan FRN Ser. B, 4.787s, 2014  620,848  459,945 
Pinnacle Foods Holding Corp. bank term loan FRN Ser. B, 5.433s, 2014  620,864  565,504 
Spectrum Brands, Inc. bank term loan FRN 2.321s, 2013  39,838  37,482 
Spectrum Brands, Inc. bank term loan FRN Ser. B1, 6.606s, 2013  581,201  515,816 
Univision Communications, Inc. bank term loan FRN Ser. B, 5.124s, 2014  624,000  508,755 
VNU Group BV bank term loan FRN Ser. B, 4.734s, 2013 (Netherlands)  620,842  576,607 
    6,324,932 
Financial (—%)     
Lender Processing Services, Inc. bank term loan FRN Ser. B, 4.963s, 2014  840,000  837,900 
    837,900 
Health Care (—%)     
Health Management Associates, Inc. bank term loan FRN 4.551s, 2014  592,964  547,010 
IASIS Healthcare, LLC/IASIS Capital Corp. bank term loan FRN 7.62s, 2014  39,891  36,966 
IASIS Healthcare, LLC/IASIS Capital Corp. bank term loan FRN Ser. B, 4.463s, 2014  432,330  400,625 
IASIS Healthcare, LLC/IASIS Capital Corp. bank term loan FRN Ser. DD, 4.463s, 2014  149,591  138,621 
Sun Healthcare Group, Inc. bank term loan FRN 2.701s, 2014  104,035  97,013 
Sun Healthcare Group, Inc. bank term loan FRN Ser. B, 4.726s, 2014  312,102  291,036 
Sun Healthcare Group, Inc. bank term loan FRN Ser. DD, 4.912s, 2014  64,280  59,941 
    1,571,212 
Technology (0.1%)     
First Data Corp. bank term loan FRN Ser. B1, 5.243s, 2014  618,882  568,856 
Freescale Semiconductor, Inc. bank term loan FRN Ser. B, 4.221s, 2013  410,914  369,309 
SunGard Data Systems, Inc. bank term loan FRN 4.508s, 2014  620,848  584,141 
Travelport bank term loan FRN Ser. B, 4.733s, 2013  249,280  208,461 
Travelport bank term loan FRN Ser. DD, 4.733s, 2013  372,837  310,386 
    2,041,153 
Transportation (—%)     
Ceva Group PLC bank term loan FRN 7.208s, 2015 (Netherlands)  165,000  118,800 
    118,800 

41

SENIOR LOANS (1.0%)* c cont.  Principal amount  Value 
Utilities & Power (—%)     
Energy Future Holdings Corp. bank term loan FRN Ser. B2, 6.236s, 2014  $620,872  $583,398 
NRG Energy, Inc. bank term loan FRN 4.451s, 2014  197,099  187,336 
NRG Energy, Inc. bank term loan FRN 4.301s, 2014  402,375  382,445 
    1,153,179 
 
Total senior loans (cost $27,697,543)    $28,288,043 
 
INVESTMENT COMPANIES (0.2%)*  Shares  Value 
American Capital, Ltd. S  255,900  $5,199,888 
Total investment companies (cost $8,684,325)    $5,199,888 
 
CONVERTIBLE PREFERRED STOCKS (0.2%)*  Shares  Value 
Citigroup, Inc. Ser. T, $3.25 cv. pfd.  103,890  $4,558,174 
Total convertible preferred stocks (cost $5,194,500)    $4,558,174 
 
CONVERTIBLE BONDS AND NOTES (0.1%)*  Principal amount  Value 
Ford Motor Co. cv. sr. notes 4 1/4s, 2036  $4,519,000  $3,140,705 
Total convertible bonds and notes (cost $4,519,000)    $3,140,705 
   

MUNICIPAL BONDS AND NOTES (0.1%)*  Rating**  Principal amount  Value 
Chicago, Transit Auth. Transfer Tax Receipts Rev. Bonds, Ser. B, 6.899s, 12/1/40  Aa3  $945,000  $959,525 
MI Tobacco Settlement Fin. Auth. Rev. Bonds, Ser. A, 7.309s, 6/1/34  Baa3  980,000  876,208 
Tobacco Settlement Fin. Auth. of WVA Rev. Bonds, Ser. A, 7.467s, 6/1/47  Baa3  1,440,000  1,286,366 
Total municipal bonds and notes (cost $3,364,821)      $3,122,099 
   

WARRANTS (—%)* †  Expiration date  Strike price  Warrants  Value 
Raytheon Co.  6/16/11  $37.50  27,504  $566,857 
Total warrants (cost $0)        $566,857 
   

SHORT-TERM INVESTMENTS (11.0%)*  Principal amount/shares  Value 
Short-term investments held as collateral for loaned securities with yields ranging from 2.00% to 2.96% and     
due dates ranging from August 1, 2008 to September 26, 2008 d  $211,472,017  $211,207,870 
Interest in $420,000,000 joint tri-party repurchase agreement dated July 31, 2008 with Deutsche Bank Securities     
due August 1, 2008 — maturity value of $25,901,583 for an effective yield of 2.2% (collateralized by various     
mortgage-backed securities with yields ranging from 4.0% to 8.5% and due dates ranging from     
March 1, 2011 to August 1, 2038, valued at $426,310,111)  25,900,000  25,900,000 
U.S. Treasury Bills for an effective yield of 1.68%, maturity date September 18, 2008 #  24,500,000  24,445,136 
Putnam Prime Money Market Fund e  47,194,730  47,194,730 
Total short-term investments (cost $308,747,736)    $308,747,736 
 
TOTAL INVESTMENTS     
Total investments (cost $4,762,397,082)    $4,577,321,537 

42

Key to holding’s currency abbreviations

EUR  Euro     

* Percentages indicated are based on net assets of $2,815,521,248.

** The Moody’s, Standard & Poor’s or Fitch ratings indicated are believed to be the most recent ratings available at July 31, 2008 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, 2008. Securities rated by Putnam are indicated by “/P.” Securities rated by Fitch are indicated by “/F.” The rating of an insured security represents what is believed to be the most recent rating of the insurer’s claims-paying ability available at July 31, 2008 and does not reflect any subsequent changes. 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 these securities were pledged and segregated with the custodian to cover margin requirements for futures contracts at July 31, 2008.

c Senior loans are exempt from registration under the Securities Act of 1933, as amended, but contain certain restrictions on resale and cannot be sold publicly. These loans pay interest at rates which adjust periodically. The interest rates shown for senior loans are the current interest rates at July 31, 2008. Senior loans are also subject to mandatory and/or optional prepayment which cannot be predicted. As a result, the remaining maturity may be substantially less than the stated maturity shown (Notes 1 and 6).

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 Is valued at fair value following procedures approved by the Trustees. (Note 1)

R Real Estate Investment Trust.

S Securities on loan, in part or in entirety, at July 31, 2008.

U This security, in part or in entirety, represents unfunded loan commitments (Note 7).

At July 31, 2008, liquid assets totaling $750,926,681 have been designated as collateral for open forward commitments, swap contracts and forward 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.

ADR after the name of a foreign holding stands for American Depository Receipts representing ownership of foreign securities on deposit with a custodian bank.

TBA after the name of a security represents to be announced securities (Note 1).

The rates shown on Floating Rate Bonds (FRB) and Floating Rate Notes (FRN) are the current interest rates at July 31, 2008.

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, 2008.

FORWARD CURRENCY CONTRACTS TO SELL at 7/31/08  Aggregate  Delivery  Unrealized 
  face value  date  depreciation 
Euro  $377,282  9/17/08  $(2,682) 
Total      $(2,682) 
   

FUTURES CONTRACTS OUTSTANDING at 7/31/08        Unrealized 
  Number of    Expiration  appreciation/ 
  contracts  Value  date  (depreciation) 
Euro-Dollar 90 day (Short)  483  $116,813,550  Jun-09  $627,036 
Euro-Dollar 90 day (Short)  1,442  347,810,400  Sep-09  1,925,365 
Euro-Dollar 90 day (Short)  1,347  323,818,800  Dec-09  2,156,286 
Euro-Dollar 90 day (Short)  81  19,423,800  Mar-10  81,117 
S&P 500 Index E-Mini (Long)  4,435  280,957,250  Sep-08  (15,749,408) 
U.S. Treasury Bond 20 yr (Long)  3,044  351,582,000  Sep-08  6,829,406 
U.S. Treasury Note 2 yr (Short)  16,833  3,568,596,000  Sep-08  (12,315,345) 
U.S. Treasury Note 5 yr (Short)  12,410  1,381,678,984  Sep-08  (6,859,474) 
U.S. Treasury Note 10 yr (Long)  9,144  1,049,988,375  Sep-08  14,278,278 
U.S. Treasury Note 10 yr (Short)  33  3,789,328  Sep-08  (9,265) 
Total        $(9,036,004) 

43

WRITTEN OPTIONS OUTSTANDING at 7/31/08 (premiums received $43,872,569)  Contract  Expiration date/   
  amount  strike price  Value 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the obligation to pay a       
fixed rate of 5.31% versus the three month USD-LIBOR-BBA maturing on August 29, 2018.  $130,817,000  Aug-08/5.31  $6,472,825 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the obligation to       
receive a fixed rate of 5.31% versus the three month USD-LIBOR-BBA maturing on August 29, 2018.  130,817,000  Aug-08/5.31  56,251 
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation to pay a fixed rate       
of 5.00% versus the three month USD-LIBOR-BBA maturing on December 19, 2018.  92,650,000  Dec-08/5.00  2,923,108 
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation to receive a fixed       
rate of 5.00% versus the three month USD-LIBOR-BBA maturing on December 19, 2018.  92,650,000  Dec-08/5.00  1,375,853 
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation to pay a fixed rate       
of 5.215% versus the three month USD-LIBOR-BBA maturing on February 18, 2020.  111,851,000  Feb-10/5.215  4,902,429 
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation to pay a fixed rate       
of 5.22% versus the three month USD-LIBOR-BBA maturing on February 24, 2020.  71,681,000  Feb-10/5.22  3,157,548 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the obligation to pay       
a fixed rate of 2.36% versus the three month USD-LIBOR-BBA maturing September 22, 2010.  259,127,000  Sep-08/2.36  12,956 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the obligation to       
receive a fixed rate of 2.36% versus the three month USD-LIBOR-BBA maturing September 22, 2010.  259,127,000  Sep-08/2.36  5,882,183 
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation to receive a fixed       
rate of 5.215% versus the three month USD-LIBOR-BBA maturing on February 18, 2020.  111,851,000  Feb-10/5.215  3,684,372 
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation to pay a fixed       
rate of 5.08% versus the three month USD-LIBOR-BBA maturing on February 24, 2020.  71,681,000  Feb-10/5.08  2,774,055 
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation to receive a fixed       
rate of 5.08% versus the three month USD-LIBOR-BBA maturing on February 24, 2020.  71,681,000  Feb-10/5.08  2,730,329 
Option on an interest rate swap with JPMorgan Chase Bank, N.A. for the obligation to receive a fixed       
rate of 5.22% versus the three month USD-LIBOR-BBA maturing on February 24, 2020.  71,681,000  Feb-10/5.22  2,367,623 
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  1,151,099 
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  876,167 
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  578,323 
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  436,748 
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  231,694 
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  173,955 
Total      $39,787,518 
   

TBA SALE COMMITMENTS OUTSTANDING at 7/31/08 (proceeds receivable $678,124,023)  Principal  Settlement   
Agency  amount  date  Value 
FNMA, 6 1/2s, August 1, 2038  $66,000,000  8/13/08  $67,742,809 
FNMA, 6s, August 1, 2038  58,000,000  8/13/08  58,249,220 
FNMA, 5 1/2s, August 1, 2038  377,000,000  8/13/08  368,870,938 
FNMA, 5s, August 1, 2038  196,000,000  8/13/08  186,046,885 
Total      $680,909,852 

44

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 7/31/08

    Upfront         
    premium         
Swap  Notional  received  Termination  Payments made by  Payments received by  Unrealized appreciation/ 
counterparty  amount  (paid)  date  fund per annum  fund per annum  (depreciation) 
Bank of America, N.A.          
  $82,772,000  $—  1/28/24  3 month USD-LIBOR-BBA  5.2125%  $2,655,642 
  34,964,000  —  5/23/10  3 month USD-LIBOR-BBA  3.155%  (81,825) 
  58,967,000  —  6/6/18  4.6675%  3 month USD-LIBOR-BBA  (168,920) 
  102,075,000  —  12/22/09  3.965%  3 month USD-LIBOR-BBA  (1,223,940) 
  87,100,000  —  1/14/10  3 month USD-LIBOR-BBA  4.106%  1,161,468 
  84,900,000  —  4/6/10  4.6375%  3 month USD-LIBOR-BBA  (2,976,043) 
  14,800,000  —  7/18/13  4.14688%  3 month USD-LIBOR-BBA  8,962 
  970,000  —  9/24/09  3 month USD-LIBOR-BBA  4.7375%  31,228 
  20,610,000  —  6/17/15  4.555%  3 month USD-LIBOR-BBA  (196,002) 
  7,440,000  —  6/23/15  4.466%  3 month USD-LIBOR-BBA  (28,119) 
  3,070,000  —  6/23/15  4.45%  3 month USD-LIBOR-BBA  (8,604) 
  3,720,000  —  6/24/15  4.39%  3 month USD-LIBOR-BBA  3,332 
  53,000,000  —  10/21/15  4.943%  3 month USD-LIBOR-BBA  (2,255,108) 
  4,636,000  —  10/3/16  5.15630%  3 month USD-LIBOR-BBA  (261,170) 
  700,000  —  9/1/15  3 month USD-LIBOR-BBA  4.53%  13,316 
  35,934,000  —  5/8/28  4.95%  3 month USD-LIBOR-BBA  8,921 
Bear Stearns Bank plc          
  63,600,000  —  4/24/12  5.027%  3 month USD-LIBOR-BBA  (3,191,040) 
Citibank, N.A.          
  65,000,000  —  7/21/18  4.80625%  3 month USD-LIBOR-BBA  (711,341) 
  4,380,000  —  4/7/14  5.377%  3 month USD-LIBOR-BBA  (309,004) 
  56,920,000  —  7/27/09  5.504%  3 month USD-LIBOR-BBA  (1,376,787) 
  10,114,000  —  10/26/12  4.6275%  3 month USD-LIBOR-BBA  (347,252) 
  87,779,000  —  11/9/09  4.387%  3 month USD-LIBOR-BBA  (1,691,711) 
  90,203,000  —  11/9/17  5.0825%  3 month USD-LIBOR-BBA  (3,486,038) 
  41,870,000  —  11/23/17  4.885%  3 month USD-LIBOR-BBA  (946,158) 
  2,700,000  —  11/9/17  3 month USD-LIBOR-BBA  5.07641%  103,066 
  51,736,000  —  12/24/09  3 month USD-LIBOR-BBA  3.8675%  545,680 
  9,733,000  —  12/24/27  4.9425%  3 month USD-LIBOR-BBA  33,849 
Credit Suisse First Boston International          
  6,600,000  —  11/17/09  3.947%  3 month USD-LIBOR-BBA  (83,922) 
Credit Suisse International          
  3,922,000  —  8/29/12  5.04556%  3 month USD-LIBOR-BBA  (217,798) 
  16,000,000  —  7/29/18  3 month USD-LIBOR-BBA  4.75%  96,498 
  3,843,000  —  3/21/16  3 month USD-LIBOR-BBA  5.20497%  232,243 
  80,000,000  —  1/9/09  3 month USD-LIBOR-BBA  5.145%  876,869 
  7,071,000  —  10/16/17  3 month USD-LIBOR-BBA  5.297%  452,539 
  6,762,000  —  9/28/16  5.10886%  3 month USD-LIBOR-BBA  (359,507) 
Deutsche Bank AG          
  8,000,000  —  7/10/13  3 month USD-LIBOR-BBA  4.149%  (678) 
  16,000,000  —  7/29/18  3 month USD-LIBOR-BBA  4.75%  96,498 
  16,169,000  —  10/16/17  3 month USD-LIBOR-BBA  5.297%  1,034,805 
  11,100,000  —  11/7/17  3 month USD-LIBOR-BBA  5.056%  406,483 
Goldman Sachs International          
  25,439,000  —  3/11/38  5.029%  3 month USD-LIBOR-BBA  (425,458) 
  13,650,000  —  4/2/18  4.076%  3 month USD-LIBOR-BBA  473,462 
  137,156,000  —  4/3/18  3 month USD-LIBOR-BBA  4.19%  (3,488,096) 
  69,773,000  —  4/8/10  3 month USD-LIBOR-BBA  2.64%  (289,762) 
  43,068,000  —  4/23/18  4.43%  3 month USD-LIBOR-BBA  299,572 
  59,528,000  —  5/19/18  4.525%  3 month USD-LIBOR-BBA  462,446 
  71,732,000  —  5/30/28  5.014%  3 month USD-LIBOR-BBA  (505,677) 
  376,000  —  4/11/12  3.1825%  3 month USD-LIBOR-BBA  6,766 
  55,949,000  —  9/29/08  5.085%  3 month USD-LIBOR-BBA  (1,017,254) 

45

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 7/31/08 cont.

    Upfront         
    premium         
Swap  Notional  received  Termination  Payments made by  Payments received by  Unrealized appreciation/ 
counterparty  amount  (paid)  date  fund per annum  fund per annum  (depreciation) 
Goldman Sachs International cont.            
  $17,771,000  $—  9/29/16  3 month USD-LIBOR-BBA  5.1275%  $964,515 
  4,331,000  —  10/19/16  5.32413%  3 month USD-LIBOR-BBA  (289,215) 
  34,600,000  —  7/25/09  5.327%  3 month USD-LIBOR-BBA  (783,807) 
  161,722,000  —  11/20/08  5.16%  3 month USD-LIBOR-BBA  (1,866,564) 
  36,385,000  —  11/20/26  3 month USD-LIBOR-BBA  5.261%  1,451,070 
  158,394,000  —  11/21/08  5.0925%  3 month USD-LIBOR-BBA  (1,781,471) 
  35,081,000  —  11/21/26  3 month USD-LIBOR-BBA  5.2075%  1,166,468 
  18,233,000  —  12/20/16  3 month USD-LIBOR-BBA  5.074%  685,363 
  22,090,000  —  1/8/12  3 month USD-LIBOR-BBA  4.98%  801,029 
  12,500,000  —  10/1/17  3 month USD-LIBOR-BBA  5.253%  769,830 
  3,930,000  —  11/9/17  3 month USD-LIBOR-BBA  5.071%  148,359 
  13,380,000  —  4/7/14  5.33842%  3 month USD-LIBOR-BBA  (915,415) 
  4,968,000  —  5/3/16  5.565%  3 month USD-LIBOR-BBA  (374,988) 
  14,495,000  —  9/14/14  4.906%  3 month USD-LIBOR-BBA  (660,140) 
  7,071,000  —  9/14/17  5.0625%  3 month USD-LIBOR-BBA  (339,325) 
  72,398,100  —  9/19/09  3 month USD-LIBOR-BBA  4.763%  2,378,237 
  108,912,400  —  9/21/09  3 month USD-LIBOR-BBA  4.60%  3,269,040 
  30,314,000  —  9/21/17  5.149%  3 month USD-LIBOR-BBA  (1,627,159) 
  1,990,000  —  11/9/17  3 month USD-LIBOR-BBA  5.08%  76,517 
  205,784,000  —  1/16/18  5.790%  3 month USD-LIBOR-BBA  (18,276,134) 
JPMorgan Chase Bank, N.A.          
  17,320,000  —  2/15/18  3 month USD-LIBOR-BBA  5.34%  1,243,855 
  5,125,000  —  2/15/13  3 month USD-LIBOR-BBA  3.585%  (54,204) 
  8,200,000  —  2/15/18  3 month USD-LIBOR-BBA  4.422%  (29,002) 
  5,125,000  —  2/15/13  3.585%  3 month USD-LIBOR-BBA  54,204 
  8,200,000  —  2/15/18  4.422%  3 month USD-LIBOR-BBA  29,002 
  40,500,000  —  4/23/17  5.186%  3 month USD-LIBOR-BBA  (2,252,618) 
  57,486,000  —  8/15/11  5.412%  3 month USD-LIBOR-BBA  (3,768,675) 
  306,762,000  —  3/5/18  4.325%  3 month USD-LIBOR-BBA  3,785,848 
  63,909,000  —  3/7/18  4.45%  3 month USD-LIBOR-BBA  135,549 
  50,608,000  —  3/12/18  3 month USD-LIBOR-BBA  4.4525%  (122,711) 
  15,899,000  —  3/11/38  5.0025%  3 month USD-LIBOR-BBA  (198,921) 
  113,217,000  —  3/11/38  5.03%  3 month USD-LIBOR-BBA  (1,910,934) 
  230,165,000  —  3/15/10  3 month USD-LIBOR-BBA  2.5%  (1,354,185) 
  111,087,000  —  3/20/13  3 month USD-LIBOR-BBA  3.145%  (3,624,244) 
  157,185,000  —  3/20/13  3 month USD-LIBOR-BBA  3.13%  (5,235,811) 
  55,034,000  —  3/25/10  3 month USD-LIBOR-BBA  2.325%  (539,596) 
  92,513,000  —  3/26/10  3 month USD-LIBOR-BBA  2.33375%  (896,088) 
  183,000,000  —  1/17/16  4.946%  3 month USD-LIBOR-BBA  (5,477,410) 
  4,639,000  —  9/18/16  5.291%  3 month USD-LIBOR-BBA  (309,420) 
  154,761,000  —  4/8/13  3 month USD-LIBOR-BBA  3.58406%  (2,096,833) 
  65,551,000  —  9/28/08  5.096%  3 month USD-LIBOR-BBA  (1,204,951) 
  58,275,000  —  5/23/10  3 month USD-LIBOR-BBA  3.16%  (130,583) 
  60,000,000  —  6/13/13  4.47%  3 month USD-LIBOR-BBA  (961,503) 
  126,500,000  —  3/7/15  3 month USD-LIBOR-BBA  4.798%  4,853,936 
  61,200,000  —  6/27/17  3 month USD-LIBOR-BBA  5.712%  5,089,670 
  76,820,000  —  7/5/17  3 month USD-LIBOR-BBA  4.55%  (294,607) 
  44,550,000  —  10/10/13  5.054%  3 month USD-LIBOR-BBA  (2,363,741) 
  61,990,000  —  10/10/13  5.09%  3 month USD-LIBOR-BBA  (3,411,878) 
  35,000,000  —  6/27/18  3 month USD-LIBOR-BBA  4.8305%  503,460 
  103,000,000  —  7/10/13  3 month USD-LIBOR-BBA  4.176%  117,523 
  134,430,000  —  7/16/10  3 month USD-LIBOR-BBA  3.384%  (33,645) 

46

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 7/31/08 cont.

    Upfront         
    premium         
Swap  Notional  received  Termination  Payments made by  Payments received by  Unrealized appreciation/ 
counterparty  amount  (paid)  date  fund per annum  fund per annum  (depreciation) 
JPMorgan Chase Bank, N.A. cont.          
  $59,604,000  $—  7/22/10  3 month USD-LIBOR-BBA  3.565%  $179,174 
  220,611,000  —  7/28/10  3 month USD-LIBOR-BBA  3.5141%  395,398 
  161,308,000  —  11/20/08  5.165%  3 month USD-LIBOR-BBA  (1,864,989) 
  36,282,000  —  11/20/26  3 month USD-LIBOR-BBA  5.266%  1,469,089 
  5,900,000  —  7/25/17  3 month USD-LIBOR-BBA  5.652%  452,221 
  94,000,000  —  3/30/16  3 month USD-LIBOR-BBA  5.2755%  6,188,217 
  5,472,000  —  12/19/16  5.0595%  3 month USD-LIBOR-BBA  (200,318) 
  9,442,000  —  1/19/17  3 month USD-LIBOR-BBA  5.249%  450,563 
  37,105,000  —  1/19/09  5.24%  3 month USD-LIBOR-BBA  (420,184) 
  65,346,000  —  1/31/17  3 month USD-LIBOR-BBA  5.415%  3,874,539 
  89,553,000  —  3/8/17  3 month USD-LIBOR-BBA  5.28%  5,922,949 
  20,829,000  —  9/28/16  3 month USD-LIBOR-BBA  5.1223%  1,128,552 
  17,930,000  —  6/16/15  4.538%  3 month USD-LIBOR-BBA  (154,827) 
  4,470,000  —  6/24/15  4.387%  3 month USD-LIBOR-BBA  4,822 
  63,370,000  —  6/29/15  3 month USD-LIBOR-BBA  4.296%  (425,220) 
  10,430,000  —  8/2/15  3 month USD-LIBOR-BBA  4.6570%  298,327 
  179,500,000  —  8/13/12  3 month USD-LIBOR-BBA  5.2%  11,245,675 
  32,041,000  —  8/29/17  5.2925%  3 month USD-LIBOR-BBA  (2,154,597) 
  8,923,000  —  8/29/17  5.263%  3 month USD-LIBOR-BBA  (580,980) 
  108,912,400  —  9/21/09  3 month USD-LIBOR-BBA  4.6125%  3,289,052 
  30,314,000  —  9/21/17  5.15%  3 month USD-LIBOR-BBA  (1,629,690) 
  10,596,000  —  9/27/17  5.2335%  3 month USD-LIBOR-BBA  (639,006) 
  1,775,000  —  10/30/12  4.68375%  3 month USD-LIBOR-BBA  (65,310) 
  6,980,000  —  11/7/17  3 month USD-LIBOR-BBA  5.05771%  256,544 
  87,779,000  —  11/9/09  4.3975%  3 month USD-LIBOR-BBA  (1,705,222) 
  90,203,000  —  11/9/17  5.0895%  3 month USD-LIBOR-BBA  (3,535,284) 
  57,843,000  —  12/11/17  3 month USD-LIBOR-BBA  4.65%  181,848 
  9,733,000  —  12/24/27  4.9675%  3 month USD-LIBOR-BBA  3,037 
  156,100,000  —  8/4/08  3 month USD-LIBOR-BBA  5.40%  3,115,925 
  81,200,000  —  8/4/16  3 month USD-LIBOR-BBA  5.5195%  7,037,492 
  47,810,000  —  10/21/15  4.916%  3 month USD-LIBOR-BBA  (1,950,371) 
  72,119,000  —  1/18/18  4.27625%  3 month USD-LIBOR-BBA  2,050,261 
  5,559,000  —  1/24/18  4.135%  3 month USD-LIBOR-BBA  220,789 
  7,412,000  —  1/24/18  4.175%  3 month USD-LIBOR-BBA  271,498 
  7,412,000  —  1/24/18  4.1625%  3 month USD-LIBOR-BBA  278,632 
  167,546,000  —  1/31/18  3 month USD-LIBOR-BBA  4.25%  (5,178,795) 
Lehman Brothers Special Financing, Inc.          
  70,357,000  423,171  2/26/18  4.65%  3 month USD-LIBOR-BBA  (617,650) 
  82,238,000  —  3/19/13  3 month USD-LIBOR-BBA  3.0675%  (2,971,867) 
  457,729,000  —  3/20/13  3 month USD-LIBOR-BBA  3.13666%  (15,107,632) 
  78,344,000  —  3/20/13  3 month USD-LIBOR-BBA  3.215%  (2,304,924) 
  288,370,000  —  3/26/10  3 month USD-LIBOR-BBA  2.3525%  (2,687,890) 
  288,370,000  —  3/26/10  3 month USD-LIBOR-BBA  2.395%  (2,449,244) 
  111,087,000  —  3/20/13  3 month USD-LIBOR-BBA  3.07%  (4,005,597) 
  168,421,000  —  3/20/13  3 month USD-LIBOR-BBA  3.06%  (6,149,823) 
  551,000,000  —  3/25/13  3 month USD-LIBOR-BBA  3.2292%  (15,995,574) 
  187,000,000  —  3/25/38  4.583%  3 month USD-LIBOR-BBA  10,307,773 
  160,856,000  —  3/25/10  3 month USD-LIBOR-BBA  2.275%  (1,733,992) 
  226,325,000  —  4/3/18  4.087%  3 month USD-LIBOR-BBA  7,658,659 
  35,063,000  —  5/30/10  3 month USD-LIBOR-BBA  3.4275%  98,222 
  15,365,000  —  4/16/18  3 month USD-LIBOR-BBA  4.405%  (132,944) 
  47,842,000  —  4/19/38  4.8425%  3 month USD-LIBOR-BBA  731,160 

47

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 7/31/08 cont.

    Upfront         
    premium         
Swap             Notional  received  Termination  Payments made by  Payments received by  Unrealized appreciation/ 
counterparty  amount  (paid)  date  fund per annum  fund per annum  (depreciation) 
Lehman Brothers Special Financing, Inc. cont.        
  $35,440,000  $—  4/21/38  4.945%  3 month USD-LIBOR-BBA  $(23,913) 
  86,500,000  —  5/29/12  5.28%  3 month USD-LIBOR-BBA  (4,424,666) 
  43,076,000  —  5/18/18  4.2375%  3 month USD-LIBOR-BBA  1,315,152 
  60,000,000  —  6/30/13  3 month USD-LIBOR-BBA  4.362%  622,003 
  404,071,000  —  6/3/10  3 month USD-LIBOR-BBA  3.41%  852,846 
  62,066,000  —  6/3/38  5.0975%  3 month USD-LIBOR-BBA  (949,572) 
  39,024,000  —  6/10/38  5.1275%  3 month USD-LIBOR-BBA  (762,149) 
  18,940,000  —  8/24/12  5.085%  3 month USD-LIBOR-BBA  (1,087,884) 
  39,298,515  —  8/29/09  5.005%  3 month USD-LIBOR-BBA  (1,455,660) 
  75,305,000  —  8/29/09  5.001%  3 month USD-LIBOR-BBA  (2,791,874) 
  8,974,000  —  8/29/17  5.29125%  3 month USD-LIBOR-BBA  (605,114) 
  10,100,871  —  8/29/12  5.075%  3 month USD-LIBOR-BBA  (575,211) 
  27,000,000  —  6/26/13  3 month USD-LIBOR-BBA  4.465%  404,773 
  104,000,000  —  7/10/13  3 month USD-LIBOR-BBA  4.176%  118,664 
  29,149,000  —  7/17/18  3 month USD-LIBOR-BBA  4.715%  112,264 
  1,100,000  —  7/18/18  3 month USD-LIBOR-BBA  4.625%  (3,787) 
  14,000,000  —  7/29/18  3 month USD-LIBOR-BBA  4.75%  84,436 
  24,300,000  —  8/4/13  3 month USD-LIBOR-BBA  4.158%  — 
  91,930,000  —  12/28/16  5.084%  3 month USD-LIBOR-BBA  (3,472,053) 
  2,443,839  —  8/29/17  3 month USD-LIBOR-BBA  5.32%  170,094 
  153,985,000  —  8/3/08  3 month USD-LIBOR-BBA  5.425%  3,092,634 
  150,213,000  —  8/3/11  5.445%  3 month USD-LIBOR-BBA  (10,087,153) 
  267,010,000  —  8/3/16  5.5675%  3 month USD-LIBOR-BBA  (24,056,165) 
  135,710,000  —  9/8/16  5.3275%  3 month USD-LIBOR-BBA  (9,523,460) 
  111,090,000  —  9/29/13  5.0555%  3 month USD-LIBOR-BBA  (6,006,931) 
  46,981,000  —  10/23/08  3 month USD-LIBOR-BBA  5.26%  890,245 
  18,884,000  —  10/23/16  3 month USD-LIBOR-BBA  5.3275%  1,262,259 
  46,981,000  —  10/23/08  5.255%  3 month USD-LIBOR-BBA  (889,136) 
  18,884,000  —  10/23/16  5.325%  3 month USD-LIBOR-BBA  (1,258,732) 
  86,483,000  —  3/15/09  4.9298%  3 month USD-LIBOR-BBA  (2,344,760) 
  18,115,000  —  9/11/17  5.0525%  3 month USD-LIBOR-BBA  (859,847) 
  48,265,400  —  9/19/09  3 month USD-LIBOR-BBA  4.755%  1,580,214 
  108,912,400  —  9/24/09  3 month USD-LIBOR-BBA  4.695%  3,438,905 
  30,314,000  —  9/24/17  5.285%  3 month USD-LIBOR-BBA  (1,952,827) 
  10,114,000  —  10/26/12  4.61375%  3 month USD-LIBOR-BBA  (341,533) 
  4,000,000  —  11/7/17  3 month USD-LIBOR-BBA  5.05521%  146,233 
  87,779,000  —  11/9/09  4.403%  3 month USD-LIBOR-BBA  (1,712,466) 
  90,203,000  —  11/9/17  5.067%  3 month USD-LIBOR-BBA  (3,377,316) 
  3,470,000  —  11/9/17  3 month USD-LIBOR-BBA  5.068%  130,172 
  40,788,000  —  12/11/17  3 month USD-LIBOR-BBA  4.839%  725,546 
  51,736,000  —  12/24/09  3 month USD-LIBOR-BBA  3.84625%  529,546 
  26,033,000  —  4/12/12  3 month USD-LIBOR-BBA  5.087%  1,378,334 
  40,000  —  1/16/18  4.375%  3 month USD-LIBOR-BBA  828 
  72,023,000  —  2/8/10  2.728%  3 month USD-LIBOR-BBA  59,195 
  52,122,000  —  2/7/18  4.217%  3 month USD-LIBOR-BBA  1,050,522 
  133,300,000  —  2/14/13  3.563%  3 month USD-LIBOR-BBA  1,538,102 
  47,478,000  —  2/21/18  4.599%  3 month USD-LIBOR-BBA  (503,979) 
  288,370,000  —  3/26/10  3 month USD-LIBOR-BBA  2.325%  (2,842,308) 
Merrill Lynch Capital Services, Inc.          
  10,114,000  —  10/26/12  4.6165%  3 month USD-LIBOR-BBA  (342,616) 
  223,165,000  —  5/19/10  3.2925%  3 month USD-LIBOR-BBA  (59,464) 
  74,426,000  —  7/22/10  3 month USD-LIBOR-BBA  3.5375%  184,517 
  18,100,000  —  11/6/17  5.00693%  3 month USD-LIBOR-BBA  (593,915) 

48

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 7/31/08 cont.

    Upfront         
    premium         
Swap            Notional  received  Termination  Payments made by  Payments received by  Unrealized appreciation/ 
counterparty  amount  (paid)  date  fund per annum  fund per annum  (depreciation) 
Morgan Stanley Capital Services, Inc.          
  $3,161,000  $ —  8/29/17  5.26021%  3 month USD-LIBOR-BBA  $(205,113) 
  3,674,000  —  2/20/17  5.192%  3 month USD-LIBOR-BBA  (222,923) 
Total            $(123,502,427) 

 

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 7/31/08

  Termi-      Unrealized 
Swap                                Notional  nation  Fixed payments received (paid)  Total return received by  appreciation/ 
counterparty  amount  date  by fund per annum  or paid by fund  (depreciation) 
Credit Suisse International  $47,665,000  2F  8/1/08  (Beginning of period nominal spread of Lehman  The spread return of Lehman  $3,187,692 
      Brothers AAA 8.5+ Commercial Mortgage  Brothers AAA 8.5+ CMBS Index   
      Backed Securities Index minus 450 bp)  adjusted by modified duration   
        factor   
 
  95,078,000  2F 8/1/08  (Beginning of period nominal spread of Lehman  The spread return of Lehman  2,037,426 
      Brothers AAA 8.5+ Commercial Mortgage  Brothers AAA 8.5+ CMBS Index   
      Backed Securities Index minus 250 bp)  adjusted by modified duration   
        factor   
 
Deutsche Bank AG  333,285  10/29/08  6 month USD-LIBOR-BBA minus 55 bp  Moody’s Corp  21,999 
 
  30,034,810  10/29/08  6 month USD-LIBOR-BBA minus 5 bp  S&P 500 /Citigroup Pure Value  4,800,395 
        Index   
 
  329,649  10/31/08  6 month USD-LIBOR-BBA minus 55 bp  Moody’s Corp  21,294 
 
 
  30,039,561  10/31/08  6 month USD-LIBOR-BBA minus 5 bp  S&P 500 /Citigroup Pure Value  5,248,479 
        Index   
 
  30,367,636  10/31/08  (6 month USD-LIBOR-BBA plus 5 bp)  S&P 500 /Citigroup Pure Growth  (2,635,390) 
        Index   
 
  30,365,971  10/31/08  (6 month USD-LIBOR-BBA plus 5 bp)  S&P 500 /Citigroup Pure Growth  (2,325,505) 
        Index   
 
  30,038,079  11/4/08  6 month USD-LIBOR-BBA minus 5 bp  S&P 500 /Citigroup Pure Value  4,853,218 
        Index   
 
  30,369,187  11/4/08  (6 month USD-LIBOR-BBA plus 5 bp)  S&P 500 /Citigroup Pure Growth  (2,329,078) 
        Index   
 
  330,312  11/4/08  6 month USD-LIBOR-BBA minus 55 bp  Moody’s Corp  20,400 
 
 
  104,461,064  F  1/7/09  (6 month USD-LIBOR-BBA plus 4 bp)  Russell 3000 Total Return  190,197 
        Growth Fund   
 
  104,458,426  F  1/7/09  6 month USD-LIBOR-BBA minus 4 bp  Russell 3000 Total Return  (1,298,541) 
        Value Fund   
 
Goldman Sachs International  3,843,000  9/15/11  678 bp (1 month USD-LIBOR-BBA)  Ford Credit Auto Owner Trust  (2,862) 
        Series 2005-B Class D   
 
  18,240,000  1F  11/2/08  20 bp plus change in spread of Banc of America  The spread return of Banc of  (306,286) 
      Securities AAA 10 year index multiplied by the  America Securities – CMBS AAA   
      modified duration factor  10 year Index   
JPMorgan Chase Bank, N.A.  $14,595,000  1F  8/1/08  Change in spread of Lehman Brothers AAA 8.5+  The spread return of Lehman  (1,929,211) 
      Commercial Mortgage Backed Securities Index  Brothers AAA 8.5+ CMBS Index   
      minus 17.5 bp  adjusted by modified duration   
        factor   

49

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 7/31/08 cont.

    Termi-      Unrealized 
Swap                                    Notional   nation  Fixed payments received (paid)  Total return received by  appreciation/ 
counterparty  amount  date  by fund per annum  or paid by fund  (depreciation) 
Lehman Brothers Special  $23,678,000  2  8/1/08  (Beginning of period nominal spread of Lehman  The spread return of Lehman  $(708,919) 
Financing, Inc.      Brothers AAA 8.5+ Commercial Mortgage  Brothers AAA 8.5+ CMBS Index   
      Backed Securities Index)  adjusted by modified duration   
        factor   
  20,718,000  2  9/1/08  (Beginning of period nominal spread of Lehman  The spread return of Lehman  (620,297) 
      Brothers AAA 8.5+ Commercial Mortgage  Brothers AAA 8.5+ CMBS Index   
      Backed Securities Index)  adjusted by modified duration   
        factor   
  42,382,000  2  9/1/08  (Beginning of period nominal spread of Lehman  The spread return of Lehman  1,036,113 
      Brothers AAA 8.5+ Commercial Mortgage  Brothers AAA 8.5+ CMBS Index   
      Backed Securities Index minus 250 bp)  adjusted by modified duration   
        factor   
 
  18,240,000  2  11/1/08  (Beginning of period nominal spread of Lehman  The spread return of Lehman  409,087 
      Brothers AAA 8.5+ Commercial Mortgage Backed  Brothers AAA 8.5+ CMBS Index   
      Securities Index minus 175 bp)  adjusted by modified duration factor   
 
  63,100,000  1F  9/1/08  66.7 bp plus beginning of period nominal spread of  The spread return of Lehman  (8,036,291) 
      Lehman Brothers AAA 8.5+ Commercial Mortgage  Brothers AAA 8.5+ CMBS Index   
      Backed Securities Index  adjusted by modified duration factor   
 
  21,365,000  1  8/1/08  Lehman Brothers SD CMBS AAA 8.5+ Index  The spread return of Lehman  (755,075) 
      multiplied by the modified duration factor plus  Brothers SD CMBS AAA 8.5+   
      40 bp  Index   
 
  21,365,000  1  8/1/08  Lehman Brothers SD CMBS AAA 8.5+ Index  The spread return of Lehman  (744,333) 
      multiplied by the modified duration factor plus  Brothers SD CMBS AAA 8.5+   
      50 bp  Index   
 
  54,137,000  1  8/1/08  Lehman Brothers SD CMBS AAA 8.5+ Index  The spread return of Lehman  (2,090,213) 
      multiplied by the modified duration factor minus  Brothers SD CMBS AAA 8.5+   
      25 bp  Index   
Merrill Lynch Capital Services  176,973,205  8/13/08  (2.73%) 5.50%  FNMA 5.50% 30 YR TBA  (1,484,340) 
Morgan Stanley Capital  54,959,000  1  8/1/08  Beginning of period nominal spread of Lehman  The spread return of Lehman  (2,379,164) 
Services, Inc.      Brothers AAA 8.5+ Commercial Mortgage  Brothers AAA 8.5+ CMBS Index   
      Backed Securities Index  adjusted by modified duration   
        factor   
Total          $(5,819,205) 

F Is valued at fair value following procedures approved by the Trustees (Note 1).

1 Fund receives the net fixed and total return payment if positive and pays the net fixed and total return payment if negative.

2 Fund pays the net fixed and total return payment if positive and receives the net fixed and total return payment if negative.

CREDIT DEFAULT CONTRACTS OUTSTANDING at 7/31/08

      Fixed payments  Unrealized 
                                                                   Upfront premium  Notional  Termination  received (paid) by  appreciation/ 
Swap counterparty / Referenced debt*  received (paid)**  amount  date  fund per annum  (depreciation) 
Bank of America, N.A.           
DJ ABX NA CMBX BBB Index  $4,742  $6,896,783  10/12/52  (134 bp)  $3,281,592 
Financial Security Assurance Inc.  —  330,000  12/20/12  95 bp  (64,694) 
Lehman Brothers Holdings, 6 5/8%, 1/18/12  —  1,585,000  9/20/13  269 bp  (31,468) 
Marsh & Mclennan Co. Inc., 5 3/8%, 7/15/14  —  1,620,000  3/20/12  (95 bp)  (24,686) 
Mattel, Inc., 7 1/4%, 7/9/12  —  330,000  3/20/13  (157.2 bp)  (13,205) 
MeadWestvaco Corp., 6.85%, 4/1/12  —  155,000  3/20/18  (177 bp)  — 
Ryder System Inc., 6.95%, 12/1/25  —  330,000  3/20/13  (135 bp)  (3,084) 
Sealed Air Corp., 5 5/8%, 7/15/13  —  210,000  9/20/13  (169 bp)  145 
Spectra Energy Capital, 6 1/4%, 2/15/13  —  330,000  9/20/14  (115 bp)  (5,145) 

50

CREDIT DEFAULT CONTRACTS OUTSTANDING at 7/31/08 

      Fixed payments  Unrealized 
                                                                   Upfront premium  Notional  Termination  received (paid) by  appreciation/ 
Swap counterparty / Referenced debt*  received (paid)**  amount  date  fund per annum  (depreciation) 
Bear Stearns International, Ltd.           
GATX Corp., 8.875%, 6/1/09  $—  $560,000  3/20/16  (100 bp)  $7,433 
Citibank, N.A.           
Arrow Electronic Inc., 6 7/8%, 6/1/18  —  730,000  3/20/13  (43 bp)  6,518 
Conagra Foods Inc., 7%, 10/1/28  —  3,025,000  9/20/10  (27 bp)  2,223 
DJ ABX HE AAA Index  493,295  2,641,776  5/25/46  11 bp  134,123 
DJ ABX NA HE AAA Index  303,542  2,819,694  7/25/45  18 bp  (12,305) 
DJ CDX NA HY Series 9 Index, 35-100% tranche  —  131,659,129  F  12/20/12  112 bp  (2,646,392) 
Donnelley (R.R.) & Sons, 4.95%, 4/1/14  —  165,000  3/20/12  (102 bp)  2,249 
Hartford Financial Services Group, 4 3/4%, 3/1/14  —  505,000  12/20/16  (75 bp)  9,438 
International Lease Finance Corp., 4.15%, 1/20/15  —  210,000  6/20/13  (222.50 bp)  12,109 
Lexmark International, Inc., 5.9%, 6/1/13  —  80,000  6/20/13  108.5 bp  (37) 
Macy’s Retail Holdings, Inc., 6 5/8%, 4/1/11  —  60,000  6/20/11  (162 bp)  478 
Marsh & Mclennan Co. Inc., 5 3/8%, 7/15/14  —  980,000  9/20/14  (105 bp)  (22,819) 
Mohawk Industries, Inc., 7.2%, 4/15/12  —  235,000  3/20/16  (140 bp)  13,942 
Motorola, Inc., 6.5%, 9/1/25  —  820,000  3/20/13  (79 bp)  71,068 
Newell Rubbermaid, Inc., 6.35%, 7/15/28  —  160,000  6/20/13  (85 bp)  2,383 
Qwest Capital Funding, 7 3/4%, 2/15/31  —  135,000  6/20/13  (263 bp)  4,972 
Rexam PLC, 4 3/8%, 3/15/13  —  2,800,000  6/20/13  (145 bp)  51,527 
Sara Lee Corp., 6 1/8%, 11/1/32  —  865,000  9/20/11  (43 bp)  1,360 
Seat Pagine Gialle S.P.A., 8%, 4/30/14  —  55,000  3/20/13  815 bp  (1,500) 
Yum! Brands Inc., 8 7/8%, 4/15/11  —  880,000  3/20/13  (65 bp)  12,172 
Credit Suisse International           
DJ ABX HE AAA Index  856,494  4,466,131  F  5/25/46  11 bp  255,002 
DJ ABX NA HE AAA Index  27,585  224,211  7/25/45  18 bp  1,615 
DJ ABX NA HE AAA Index  25,286  224,211  7/25/45  18 bp  (683) 
DJ CMB NA CMBX AA Index  (201,182)  900,000  F  10/12/52  (25 bp)  (42,096) 
DJ CMB NA CMBX AAA Index  6,576,590  39,512,000  F  12/13/49  8 bp  2,749,584 
DJ CMB NA CMBX AAA Index  9,655,056  61,632,000  2/17/51  35 bp  4,221,334 
DJ CMB NA CMBX AAA Index  (18,205)  219,000  F  12/13/49  (8 bp)  3,007 
Southwest Airlines, 5 1/4%, 10/1/14  —  55,000  3/20/12  (190 bp)  (1,009) 
Sprint Capital Corp, 8 3/8%, 3/15/12  —  2,655,000  6/20/12  (59 bp)  260,779 
Xerox Corp., 6 7/8%, 8/15/11  —  665,000  6/20/12  (86.5 bp)  7,756 
Deutsche Bank AG           
CNA Financial Corp., 5.85%, 12/15/14  —  285,000  9/20/16  (155 bp)  (5,050) 
DJ ABX NA CMBX AAA Index  154,944  2,570,000  2/17/51  35 bp  (67,664) 
DJ ABX NA HE AAA Index  284,446  2,717,824  7/25/45  18 bp  (30,533) 
DJ CDX NA IG Series 10 Index  804  40,000  6/20/13  (155 bp)  319 
DJ CDX NA IG Series 9 Index 30-100% tranche  —  31,320,000  12/20/12  (27.2 bp)  204,287 
DJ CDX NA IG Series 9 Index 30-100% tranche  —  2,250,000  12/20/12  (65 bp)  (19,970) 
DJ iTraxx Europe Series 8 Version 1  (6,235)  65,000  12/20/12  (375 bp)  (1,785) 
DJ iTraxx Europe Series 9 Version 1  15,712  230,000  6/20/13  (650 bp)  (4,019) 
France Telecom, 7.25%, 1/28/13  —  1,870,000  6/20/16  70 bp  (24,746) 
General Electric Capital Corp., 6%, 6/15/12  —  1,745,000  9/20/13  109 bp  (11,864) 
Genworth Financial Inc., 5 3/4%, 6/15/14  —  210,000  6/20/18  (143 bp)  21,009 
Grohe Holding GmBh, 8 5/8%, 10/1/14  —  15,000  6/20/09  400 bp  92 
Grohe Holding GmBh, 8 5/8%, 10/1/14  —  55,000  6/20/09  400 bp  338 
iStar Financial, Inc., 6%, 12/15/10  39,150  580,000  3/20/09  500 bp  11,646 
Packaging Corporation of America, 5 3/4%, 8/1/13  —  345,000  9/20/13  (129 bp)  (2,744) 
Pitney Bowes, Inc., 4 5/8%, 10/1/12  —  125,000  3/20/18  (95 bp)  (3,048) 
PPG Industries, Inc., 7.05%, 8/15/09  —  185,000  3/20/18  (154 bp)  (8,156) 
Reynolds American, Inc., 7 5/8%, 6/1/16  —  695,000  6/20/13  (105 bp)  2,800 
Tyco Electronics Group, 6.55%, 10/1/17  —  180,000  12/20/17  (125.5 bp)  (2,809) 

51

CREDIT DEFAULT CONTRACTS OUTSTANDING at 7/31/08 cont.   Fixed payments  Unrealized 
  Upfront premium  Notional  Termination  received (paid) by  appreciation/ 
Swap counterparty / Referenced debt*  received (paid)**  amount  date  fund per annum  (depreciation) 
Goldman Sachs International        
Any one of the underlying securities in the basket           
of BB CMBS securities  $—  $8,582,000  a  2.461%  $(1,293,522) 
CVS Caremark Corp., 4 7/8%, 9/15/14  —  15,000  9/20/13  (59 bp)  (11) 
CVS Caremark Corp., 4 7/8%, 9/15/14  —  20,000  9/20/11  (50 bp)  68 
DJ ABX HE A Index  1,048,040  1,564,000  1/25/38  369 bp  (374,238) 
DJ ABX HE AAA Index  367,573  1,564,000  1/25/38  76 bp  (504,159) 
DJ CDX NA CMBX AAA Index  65,836  1,800,000  3/15/49  7 bp  (72,856) 
DJ CDX NA HY Series 9 Index 25-35% tranche  —  8,420,000  12/20/10  108.65 bp  (336,568) 
DJ CDX NA HY Series 9 Index 25-35% tranche  —  31,320,000  12/20/10  249 bp  (199,352) 
DJ CDX NA HY Series 9 Index 25-35% tranche  —  17,980,000  12/20/10  305 bp  126,729 
DJ CDX NA HY Series 9 Index 25-35% tranche  —  3,930,000  12/20/10  435 bp  150,028 
DJ CDX NA HY Series 9 Index 35-100% tranche  —  8,128,088  12/20/10  153.5 bp  109,899 
DJ CDX NA IG Series 10 Index  (665,022)  90,110,000  6/20/13  155 bp  426,961 
DJ CDX NA IG Series 10 Index  111,715  5,820,000  6/20/18  (150 bp)  (204) 
DJ CDX NA IG Series 10 Index  (720,026)  56,037,000  6/20/13  155 bp  (40,951) 
DJ CDX NA IG Series 10 Index  2,371,742  103,183,000  6/20/18  (150 bp)  387,533 
DJ CDX NA IG Series 10 Index  (2,036,985)  103,565,000  6/20/13  155 bp  (781,950) 
DJ CDX NA IG Series 10 Index  377,774  10,000,000  6/20/18  (150 bp)  185,474 
DJ CDX NA IG Series 10 Index  1,043,106  101,200,000  6/20/18  (150 bp)  (852,370) 
DJ CDX NA IG Series 10 Index 30-100% tranche  —  97,890,000  6/20/13  (44.25 bp)  (69,917) 
DJ CDX NA IG Series 8 Index  1,214,746  86,745,000  6/20/18  (150 bp)  (453,361) 
DJ CMB NA CMBX AAA Index  (526,385)  7,131,000  F  2/17/51  (35 bp)  73,139 
Lehman Brothers Holdings, 6 5/8%, 1/18/12  —  1,585,000  9/20/17  (67.8 bp)  201,202 
Merrill Lynch & Co., 5%, 1/15/15  —  1,585,000  9/20/17  (59.8 bp)  184,521 
Rhodia SA, Euribor+275, 10/15/13  —  265,000  9/20/13  (387 bp)  7,545 
SEAT Pagine Gialle, S.p.A., 8%, 4/30/14  —  45,000  3/20/13  680 bp  (4,326) 
Wind Acquisition 9 3/4%, 12/1/15  —  45,000  3/20/13  597 bp  3,450 
JPMorgan Chase Bank, N.A.           
AllTel Corp., 7 7/8%, 7/1/32  —  75,000  9/20/12  (95 bp)  (409) 
Anheuser-Busch Co., Inc. 5 5/8%, 10/1/10  —  215,000  3/20/17  (133 bp)  (4,831) 
CenturyTel. Inc., 6%, 4/1/17  —  65,000  6/20/13  (95 bp)  1,888 
Codere Finance (Luxembourg) S.A., 8.25%, 6/15/15  —  45,000  3/20/13  795 bp  5,440 
DJ ABX HE AAA Index  543,147  2,832,203  F  5/25/46  11 bp  161,710 
DJ CDX NA HY Series 9 Index 25-35% tranche  —  2,250,000  12/20/10  388.75 bp  60,987 
DJ CDX NA HY Series 9 Index 25-35% tranche  —  8,633,000  12/20/10  105.5 bp  (351,615) 
DJ CDX NA IG Series 9 Index  —  139,160,000  F  12/20/12  (13.55 bp)  1,743,385 
DJ CMB NA CMBX AAA Index  677,817  5,680,000  F  2/17/51  35 bp  200,283 
DJ CMB NA CMBX AAA Index  2,206,440  17,628,000  F  12/13/49  8 bp  499,048 
DJ CMB NA CMBX AAA Index  613,474  5,618,000  F  2/17/51  35 bp  141,152 
DJ iTraxx Europe Crossover Series 8 Version 1  (24,051)  180,000  12/20/12  (375 bp)  (11,727) 
Expedia, Inc., 7.456%, 8/15/18  —  40,000  9/20/13  (300 bp)  (270) 
Freeport-McMoRan Copper & Gold, Inc., 8 3/8%, 4/1/17  —  120,000  6/20/12  (145 bp)  (273) 
GMAC, LLC, 6 7/8%, 8/28/12  23,000  400,000  3/20/09  500 bp  (2,065) 
iStar Financial, Inc., 6%, 12/15/10  39,200  560,000  3/20/09  500 bp  5,568 
Lexmark International, Inc., 5.9%, 6/1/13  —  75,000  6/20/13  (113 bp)  (186) 
Lexmark International, Inc., 5.9%, 6/1/13  —  1,905,000  6/20/13  (113 bp)  (4,662) 
Lexmark International, Inc., 5.9%, 6/1/13  —  140,000  6/20/13  (113 bp)  (312) 
Nextel Communications, 7 3/8%, 8/1/15  —  600,000  9/20/13  (540 bp)  (20,124) 
Washington Mutual, Inc., 5 1/4%, 9/15/17  —  780,000  9/20/13  (785 bp)  33,003 
Lehman Brothers Special Financing, Inc.           
Cadbury Scheppes US Finance, 5 1/8%, 10/1/13  —  230,000  10/20/13  (70 bp)  114 
DJ ABX HE A Index  1,048,040  1,564,000  1/25/38  369 bp  (368,849) 
DJ ABX HE A Index  1,089,065  1,567,000  1/25/38  369 bp  (330,542) 
DJ ABX HE AAA Index  367,573  1,564,000  1/25/38  76 bp  (495,346) 
DJ ABX HE AAA Index  438,760  1,567,000  1/25/38  76 bp  (426,381) 
DJ ABX HE PEN AAA Index  206,062  2,887,916  5/25/46  11 bp  (171,297) 

52

CREDIT DEFAULT CONTRACTS OUTSTANDING at 7/31/08 cont.   Fixed payments  Unrealized 
                                                                   Upfront premium  Notional  Termination  received (paid) by  appreciation/ 
Swap counterparty / Referenced debt*  received (paid)**  amount  date  fund per annum  (depreciation) 
Lehman Brothers Special Financing, Inc. cont.           
DJ ABX HE PEN AAA Index  $210,604  $2,899,789  5/25/46  11 bp  $(168,358) 
DJ CDX NA CMBX AA Index  (76,552)  2,416,000  F  3/15/49  (15 bp)  535,830 
DJ CDX NA HY Series 8 Index 35-60% tranche  —  30,983,000  6/20/12  104 bp  (2,501,181) 
DJ CDX NA HY Series 9 Index 25-35% tranche  —  34,100,000  12/20/10  104.5 bp  (1,397,105) 
DJ CDX NA HY Series 9 Index 25-35% tranche  —  34,100,000  12/20/10  90 bp  (1,515,404) 
DJ CDX NA HY Series 9 Index 25-35% tranche  —  31,320,000  12/20/10  266 bp  (71,932) 
DJ CDX NA HY Series 9 Index 25-35% tranche  —  62,640,000  12/20/10  295 bp  291,380 
DJ CDX NA IG Series 10 Index  853,067  45,580,000  6/20/18  (150 bp)  (23,436) 
DJ CDX NA IG Series 10 Index  356,809  23,585,000  6/20/18  (150 bp)  (96,730) 
DJ CDX NA IG Series 10 Index  1,453  80,000  6/20/13  (155 bp)  484 
DJ CDX NA IG Series 10 Index 30-100% tranche  —  48,198,150  6/20/13  (42 bp)  49,900 
DJ CDX NA IG Series 9 Index  (830,901)  17,938,500  12/20/17  (80 bp)  (203,472) 
DJ CMB NA CMBX AAA Index  (2,241,641)  25,188,500  F  12/13/49  (8 bp)  198,037 
DJ LCDX NA Series 9 Index, 30-100% tranche  —  17,050,000  F  12/20/12  96 bp  97,952 
Domtar Corp., 7 1/8%, 8/15/15  —  310,000  12/20/11  (250 bp)  5,070 
Embarq Corp., 7.082%, 6/1/16  —  405,000  6/20/13  (237 bp)  (112) 
Expedia, Inc., 7.456%, 8/15/18  —  60,000  9/20/13  (305 bp)  (536) 
General Electric Capital Corp., 6%, 6/15/12  —  3,490,000  9/20/13  115 bp  (10,667) 
Goldman Sachs Group, Inc., 6.6%, 1/15/12  —  1,585,000  9/20/17  (58 bp)  78,685 
Hanson Plc, 7 7/8%, 9/27/10  —  175,000  9/20/16  (140 bp)  (114) 
International Lease Finance Corp., 4.15%, 1/20/15  —  75,000  12/20/13  (165 bp)  5,853 
Morgan Stanley Dean Witter, 6.6%, 4/1/12  —  1,585,000  9/20/17  (60.5 bp)  171,852 
Morgan Stanley Dean Witter, 6.6%, 4/1/12  —  1,585,000  9/20/12  48 bp  (114,865) 
Motorola, Inc., 6 1/2%, 9/1/25  —  205,000  11/20/11  (335 bp)  (5,025) 
Telecom Italia SPA, 5 3/8%, 1/29/19  —  145,000  7/20/11  (105 bp)  (345) 
Telecom Italia SPA, 5 3/8%, 1/29/19  —  300,000  7/20/11  (108 bp)  (969) 
US Steel Corp., 6.65%,6/1/37  —  215,000  3/20/18  (141 bp)  3,677 
Yum! Brands, Inc., 8 7/8%, 4/15/11  —  160,000  3/20/18  (130 bp)  (2,011) 
Merrill Lynch International           
AllTel Corp., 7 7/8%, 7/1/32  —  525,000  9/20/12  (97 bp)  (3,172) 
AmerisourceBergen Corp., 5 7/8%, 9/15/15  —  20,000  9/20/12  (65 bp)  (89) 
Block Financial LLC. 5 1/8%, 10/30/14  —  195,000  12/20/14  (69 bp)  3,702 
Computer Sciences Corp, 5%, 2/15/13  —  65,000  3/20/13  (66 bp)  (181) 
KinderMorgan, 6 1/2%, 9/1/12  —  558,000  9/20/12  (128 bp)  (934) 
MGM Mirage Inc., 5 7/8%, 2/27/14  —  130,000  9/20/10  (470 bp)  1,531 
Supervalu, Inc., 7 1/2%, 05/15/12  —  520,000  8/1/09  (90 bp)  3,211 
Morgan Stanley Capital Services, Inc.           
DJ ABX NA CMBX AAA Index  1,520,729  21,365,000  3/15/49  7 bp  (89,503) 
DJ CDX NA IG Series 10 Index  436,487  22,404,500  6/20/18  (150 bp)  5,648 
DJ CDX NA IG Series 10 Index  2,530,536  129,700,000  6/20/18  (150 bp)  36,404 
DJ CDX NA IG Series 10 Index 30-100% tranche  —  39,512,000  6/20/13  (52 bp)  (158,077) 
DJ CDX NA IG Series 10 Index 30-100% tranche  —  45,345,000  6/20/13  (38.6 bp)  89,919 
DJ CMB NA CMBX AA Index  (256,903)  1,126,000  F  10/12/52  (25 bp)  (57,869) 
DJ CMB NA CMBX AAA Index  (59,516)  920,000  12/13/49  (8 bp)  33,331 
DJ CMB NA CMBX AAA Index  1,799,644  14,716,500  2/17/51  35 bp  524,320 
DJ CMB NA CMBX AAA Index  2,901,410  21,796,000  12/13/49  8 bp  701,742 
UBS, AG           
Cardinal Health Inc., 5.85%, 12/15/17  —  330,000  6/20/13  (49 bp)  (1,393) 
Starwood Hotels & Resort, 7 7/8%, 5/1/12  —  710,000  F  6/20/12  (195 bp)  4,530 
Total          $2,257,820 

* 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 Is valued at fair value following procedures approved by the Trustees (Note 1).

The accompanying notes are an integral part of these financial statements.

53

Statement of assets and liabilities 7/31/08

ASSETS   
Investment in securities, at value, including $204,794,302 of   
securities on loan (Note 1):   
Unaffiliated issuers (identified cost $4,715,202,352)  $4,530,126,807 
Affiliated issuers (identified cost $47,194,730) (Note 5)  47,194,730 
Cash  2,763,287 
Dividends, interest and other receivables  17,563,124 
Receivable for shares of the fund sold  3,458,333 
Receivable for securities sold  2,386,545 
Receivable for sales of delayed delivery securities   
(Notes 1, 6 and 7)  679,632,920 
Receivable for custodian fees (Note 2)  62,095 
Premium paid on swap contracts (Note 1)  7,663,604 
Unrealized appreciation on swap contracts (Note 1)  164,056,807 
Receivable for closed swap contracts (Note 1)  3,820,661 
Total assets  5,458,728,913 
 
LIABILITIES   
Payable for variation margin (Note 1)  9,731,504 
Payable for securities purchased  3,136,590 
Payable for purchases of delayed delivery securities   
(Notes 1, 6 and 7)  1,335,582,550 
Payable for shares of the fund repurchased  22,057,283 
Payable for compensation of Manager (Notes 2 and 5)  3,951,679 
Payable for investor servicing fees (Note 2)  580,749 
Payable for Trustee compensation and expenses (Note 2)  473,912 
Payable for administrative services (Note 2)  9,106 
Payable for distribution fees (Note 2)  769,197 
Payable for open forward currency contracts (Note 1)  2,682 
Premiums received on swap contracts (Note 1)  43,324,666 
Written options outstanding, at value   
(premiums received $43,872,569) (Notes 1 and 3)  39,787,518 
Unrealized depreciation on swap contracts (Note 1)  291,120,619 
TBA sales commitments, at value (proceeds receivable   
$678,124,023) (Note 1)  680,909,852 
Collateral on securities loaned, at value (Note 1)  211,207,870 
Other accrued expenses  561,888 
Total liabilities  2,643,207,665 
 
Net assets  $2,815,521,248 

REPRESENTED BY   
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)  $3,153,803,391 
Undistributed net investment income (Note 1)  5,789,547 
Accumulated net realized loss on investments (Note 1)  (24,192,868) 
Net unrealized depreciation of investments and   
assets and liabilities in foreign currencies  (319,878,822) 
Total — Representing net assets applicable   
to capital shares outstanding  $2,815,521,248 
 
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE 
Net asset value and redemption price per class A share   
($2,173,290,742 divided by 155,292,045 shares)  $13.99 
Offering price per class A share (100/94.25 of $13.99)*  $14.84 
Net asset value and offering price per class B share   
($206,269,262 divided by 14,909,858 shares)**  $13.83 
Net asset value and offering price per class C share   
($46,133,989 divided by 3,319,753 shares)**  $13.90 
Net asset value and redemption price per class M share   
($128,093,811 divided by 9,267,660 shares)  $13.82 
Offering price per class M share (100/96.50 of $13.82)*  $14.32 
Net asset value, offering price and redemption price per class R share 
($4,274,441 divided by 306,564 shares)  $13.94 
Net asset value, offering price and redemption price per class Y share 
($257,459,003 divided by 18,337,858 shares)  $14.04 

* 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.

54

Statement of operations Year ended 7/31/08

INVESTMENT INCOME   
Interest (including interest income of $4,377,024   
from investments in affiliated issuers) (Note 5)  $120,582,077 
Dividends  54,216,787 
Securities lending  885,541 
Total investment income  175,684,405 
 
EXPENSES   
Compensation of Manager (Note 2)  18,319,447 
Investor servicing fees (Note 2)  7,954,095 
Custodian fees (Note 2)  150,393 
Trustee compensation and expenses (Note 2)  113,181 
Administrative services (Note 2)  72,812 
Distribution fees — Class A (Note 2)  7,058,533 
Distribution fees — Class B (Note 2)  3,103,774 
Distribution fees — Class C (Note 2)  610,653 
Distribution fees — Class M (Note 2)  1,183,466 
Distribution fees — Class R (Note 2)  11,733 
Other  1,163,454 
Non-recurring costs (Notes 2 and 8)  7,057 
Costs assumed by Manager (Notes 2 and 8)  (7,057) 
Fees waived and reimbursed by Manager (Note 5)  (83,535) 
Total expenses  39,658,006 
Expense reduction (Note 2)  (957,357) 
Net expenses  38,700,649 
Net investment income  136,983,756 
Net realized loss on investments (Notes 1 and 3)  (7,739,297) 
Net increase from payments by affiliates (Note 2)  868,965 
Net realized gain on swap contracts (Note 1)  9,481,015 
Net realized gain on futures contracts (Note 1)  55,765,481 
Net realized gain on foreign currency transactions (Note 1)  2,868 
Net realized loss on written options (Notes 1 and 3)  (15,159,200) 
Net unrealized depreciation of assets and liabilities in   
foreign currencies during the year  (2,682) 
Net unrealized depreciation of investments, futures   
contracts, swap contracts, written options, and   
TBA sale commitments during the year  (609,525,857) 
Net loss on investments  (566,308,707) 
 
Net decrease in net assets resulting from operations  $(429,324,951) 

Statement of changes in net assets

DECREASE IN NET ASSETS     
  Year ended  Year ended 
  7/31/08  7/31/07 
Operations:     
Net investment income  $136,983,756  $113,445,000 
Net realized gain on investments and foreign     
currency transactions  43,219,832  487,497,756 
Net unrealized depreciation of investments     
and assets and liabilities in foreign currencies  (609,528,539)  (121,479,001) 
Net increase (decrease) in net assets     
resulting from operations  (429,324,951)  479,463,755 
Distributions to shareholders (Note 1):     
From ordinary income     
Net investment income     
Class A  (110,582,286)  (91,249,673) 
Class B  (9,668,928)  (10,953,381) 
Class C  (1,904,069)  (1,475,085) 
Class M  (5,379,758)  (4,389,598) 
Class R  (75,390)  (46,016) 
Class Y  (14,153,388)  (14,027,385) 
Net realized short-term gain on investments   
Class A  (100,322,461)  (49,126,952) 
Class B  (11,660,603)  (8,659,988) 
Class C  (2,208,422)  (1,078,286) 
Class M  (5,622,960)  (2,920,573) 
Class R  (65,959)  (25,984) 
Class Y  (12,111,818)  (7,848,561) 
From net realized long-term gain on investments   
Class A  (161,440,412)  (209,675,856) 
Class B  (18,764,418)  (36,961,186) 
Class C  (3,553,826)  (4,602,171) 
Class M  (9,048,552)  (12,465,127) 
Class R  (106,143)  (110,903) 
Class Y  (19,490,519)  (33,497,980) 
Redemption fees (Note 1)  5,227  9,895 
Decrease from capital share transactions     
(Note 4)  (501,093,133)  (291,093,564) 
Total decrease in net assets  (1,416,572,769)  (300,734,619) 
 
NET ASSETS     
Beginning of year  4,232,094,017  4,532,828,636 
End of year (including undistributed net     
investment income of $5,789,547 and     
$19,171,952, respectively)  $2,815,521,248  $4,232,094,017 

The accompanying notes are an integral part of these financial statements.

55

Financial highlights (For a common share outstanding throughout the period)

INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:   RATIOS AND SUPPLEMENTAL DATA:
                          Ratio of net   
  Net asset value,    Net realized and  Total from    From net        Total return  Net assets,  Ratio of expenses  investment income   
  beginning  Net investment  unrealized gain (loss)  investment  From net  realized gain on  Total  Redemption  Net asset value,  at net asset  end of period  to average  (loss) to average  Portfolio 
Period ended  of period  income (loss) a,d  on investments  operations  investment income  investments  distributions  fees g  end of period  value (%) b  (in thousands)  net assets (%) c,d  net assets (%) d  turnover (%) 
Class A                             
July 31, 2008  $18.10  .61  (2.55)  (1.94)  (.64)  (1.53)  (2.17)  —  $13.99  (11.84)  $2,173,291  1.00  3.80  123.75 h 
July 31, 2007  18.21  .48  1.46  1.94  (.52)  (1.53)  (2.05)  —  18.10  10.99  3,184,271  .96  2.61  144.33 h 
July 31, 2006  18.40  .42 e  .27  .69  (.50)  (.38)  (.88)  —  18.21  3.89 e  3,155,761  .90 e  2.31 e  117.11 h 
July 31, 2005  16.91  .35 f  1.47  1.82  (.33)  —  (.33)  —  18.40  10.89  3,458,405  .98  1.97 f  169.29 h 
July 31, 2004  15.72  .32  1.20  1.52  (.33)  —  (.33)  —  16.91  9.77  3,322,532  1.00  1.90  165.66 
Class B                             
July 31, 2008  $17.90  .48  (2.52)  (2.04)  (.50)  (1.53)  (2.03)  —  $13.83  (12.50)  $206,269  1.75  2.99  123.75 h 
July 31, 2007  18.02  .33  1.46  1.79  (.38)  (1.53)  (1.91)  —  17.90  10.15  413,532  1.71  1.82  144.33 h 
July 31, 2006  18.22  .28 e  .26  .54  (.36)  (.38)  (.74)  —  18.02  3.05 e  624,026  1.65 e  1.58 e  117.11 h 
July 31, 2005  16.73  .21 f  1.48  1.69  (.20)  —  (.20)  —  18.22  10.17  917,951  1.73  1.22 f  169.29 h 
July 31, 2004  15.56  .19  1.19  1.38  (.21)  —  (.21)  —  16.73  8.88  1,095,665  1.75  1.16  165.66 
Class C                             
July 31, 2008  $17.97  .49  (2.52)  (2.03)  (.51)  (1.53)  (2.04)  —  $13.90  (12.41)  $46,134  1.75  3.03  123.75 h 
July 31, 2007  18.09  .34  1.45  1.79  (.38)  (1.53)  (1.91)  —  17.97  10.16  69,893  1.71  1.86  144.33 h 
July 31, 2006  18.30  .28 e  .25  .53  (.36)  (.38)  (.74)  —  18.09  3.01 e  70,192  1.65 e  1.56 e  117.11 h 
July 31, 2005  16.81  .21 f  1.48  1.69  (.20)  —  (.20)  —  18.30  10.14  77,024  1.73  1.22 f  169.29 h 
July 31, 2004  15.63  .19  1.20  1.39  (.21)  —  (.21)  —  16.81  8.92  75,185  1.75  1.16  165.66 
Class M                             
July 31, 2008  $17.89  .53  (2.52)  (1.99)  (.55)  (1.53)  (2.08)  —  $13.82  (12.23)  $128,094  1.50  3.31  123.75 h 
July 31, 2007  18.02  .38  1.45  1.83  (.43)  (1.53)  (1.96)  —  17.89  10.42  176,993  1.46  2.10  144.33 h 
July 31, 2006  18.22  .33 e  .26  .59  (.41)  (.38)  (.79)  —  18.02  3.34 e  187,338  1.40 e  1.81 e  117.11 h 
July 31, 2005  16.74  .26 f  1.47  1.73  (.25)  —  (.25)  —  18.22  10.39  215,816  1.48  1.47 f  169.29 h 
July 31, 2004  15.57  .23  1.19  1.42  (.25)  —  (.25)  —  16.74  9.18  217,046  1.50  1.40  165.66 
Class R                             
July 31, 2008  $18.04  .57  (2.54)  (1.97)  (.60)  (1.53)  (2.13)  —  $13.94  (12.04)  $4,274  1.25  3.66  123.75 h 
July 31, 2007  18.15  .44  1.46  1.90  (.48)  (1.53)  (2.01)  —  18.04  10.76  2,044  1.21  2.38  144.33 h 
July 31, 2006  18.36  .36 e  .27  .63  (.46)  (.38)  (.84)  —  18.15  3.57 e  1,525  1.15 e  2.00 e  117.11 h 
July 31, 2005  16.89  .30 f  1.48  1.78  (.31)  —  (.31)  —  18.36  10.63  726  1.23  1.67 f  169.29 h 
July 31, 2004  15.70  .21  1.29  1.50  (.31)  —  (.31)  —  16.89  9.60  127  1.25  1.33  165.66 
Class Y                             
July 31, 2008  $18.15  .66  (2.55)  (1.89)  (.69)  (1.53)  (2.22)  —  $14.04  (11.57)  $257,459  .75  4.05  123.75 h 
July 31, 2007  18.26  .53  1.46  1.99  (.57)  (1.53)  (2.10)  —  18.15  11.24  385,361  .71  2.86  144.33 h 
July 31, 2006  18.46  .47 e  .26  .73  (.55)  (.38)  (.93)  —  18.26  4.09 e  493,985  .65 e  2.59 e  117.11 h 
July 31, 2005  16.95  .40 f  1.49  1.89  (.38)  —  (.38)  —  18.46  11.26  660,532  .73  2.23 f  169.29 h 
July 31, 2004  15.76  .36  1.21  1.57  (.38)  —  (.38)  —  16.95  10.03  848,161  .75  2.16  165.66 

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 an involuntary contractual expense limitation and/or waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund in effect during the period. As a result of such limitation and/or waivers, the expenses of each class reflect a reduction of the following amounts (Notes 2 and 5):

  Percentage of average net assets 
July 31, 2008  <0.01% 
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 less than $0.01 per share and 0.02% of average net assets.

g Amount represents less than $0.01 per share.

h Portfolio turnover excludes dollar roll transactions.

The accompanying notes are an integral part of these financial statements.

56  57 

Notes to financial statements 7/31/08

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 may invest a significant portion of their assets in securitized debt instruments, including mortgage-backed and asset-backed investments. The yields and values of these investments are sensitive to changes in interest rates, the rate of principal payments on the underlying assets and the market’s perception of the issuers. The market for these investments may be volatile and limited, which may make them difficult to buy or sell.

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 5.75% and 3.50%, 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 at net asset value. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, class M and class R shares, but do not bear a distribution fee. Class Y shares are generally only available to corporate and institutional clients and clients in other approved programs.

A 1.00% redemption fee may apply on any shares 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.

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. If the fund were liquidated, shares of each class would receive their pro-rata share of the net assets of the fund. 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’s management team 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, a wholly-owned subsidiary of Putnam, LLC. Such services or dealers determine valuations for normal institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships, generally recognized by institutional traders, between securities. Many securities markets and exchanges outside the U.S. close prior to the close of the New York Stock Exchange and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the New York Stock Exchange. Accordingly, on 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. To the extent a pricing service or dealer is unable to value a security or provides a valuation which Putnam Management does not believe accurately reflects the security’s fair value, the security will be valued at fair value by Putnam Management. Certain investments, including certain restricted securities and derivatives, are also valued at fair value following procedures approved by the Trustees. Such valuations and procedures are reviewed periodically by the Trustees. Certain securities may be valued on the basis of a price provided by a single source. 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.

Lehman Brothers Holdings Inc. made a bankruptcy filing on September 15, 2008, subsequent to the reporting period. The reported values of the fund’s positions as of July 31, 2008 in securities of Lehman or its affiliates and in derivatives to which Lehman or its affiliates is a counterparty do not reflect these developments or portfolio transactions after July 31, 2008.

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 short-term investments having maturities of up to 397 days for collateral received under security lending arrangements and up to 90 days for other cash investments.

C) Repurchase agreements The fund, or any joint trading account, through its custodian, receives delivery of the underlying securities, the market value of which at the time of purchase is required to be in an amount at least equal to the resale price, including accrued interest. Collateral for certain tri-party repurchase agreements is held at the counterparty’s custodian in a segregated account for the benefit of the fund and the counterparty. Putnam Management is responsible for determining that the value of these underlying securities is at all times at least equal to the resale price, including accrued interest.

D) Security transactions and related investment income Security transactions are recorded on the trade date (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.

58

Securities purchased or sold on a delayed delivery 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 is recorded in the books and records of the fund after translation to U.S. dollars based on the exchange rates on that day. The cost of each security is determined using historical exchange rates. Income and withholding taxes are translated at prevailing exchange rates when earned or incurred. The fund does not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices of the securities. Such gains and losses are included with the net realized and unrealized gain or loss on investments. Net realized gains and losses on foreign currency transactions represent net realized exchange gains or losses on closed forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions and the difference between the amount of investment income and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized appreciation and depreciation of assets and liabilities in foreign currencies arise from changes in the value of open forward currency contracts and assets and liabilities other than investments at the period end, resulting from changes in the exchange rate. Investments in foreign securities involve certain risks, including those related to economic instability, unfavorable political developments, and currency fluctuations, not present with domestic investments.

G) Forward currency contracts The fund may buy and sell forward currency contracts, which are agreements between two parties to buy and sell currencies at a set price on a future date. These contracts are used to protect against a decline in value relative to the U.S. dollar of the currencies in which its portfolio securities are denominated or quoted (or an increase in the value of a currency in which securities a fund intends to buy are denominated, when a fund holds cash reserves and short term investments), or for other investment purposes. The U.S. dollar value of forward currency contracts is determined using current forward currency exchange rates supplied by a quotation service. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is marked to market daily and the change in market value is recorded as an unrealized gain or loss. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The fund could be exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the fund is unable to enter into a closing position. Risks may exceed amounts recognized on the Statement of assets and liabilities. Forward currency contracts outstanding at period end, if any, are listed after the fund’s portfolio.

H) Futures and options contracts The fund may use futures and options contracts to hedge against changes in the values of securities the fund owns, owned or expects to purchase, or for other investment purposes. The fund may also write options on swaps or securities it owns or in which it may invest to increase its current returns.

The potential risk to the fund is that the change in value of futures and options contracts may not correspond to the change in value of the hedged instruments. In addition, losses may arise from changes in the value of the underlying instruments, if there is an illiquid secondary market for the contracts, or if the counterparty to the contract is unable to perform. Risks may exceed amounts recognized on the Statement of assets and liabilities. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Realized gains and losses on purchased options are included in realized gains and losses on investment securities. If a written call option is exercised, the premium originally received is recorded as an addition to sales proceeds. If a written put option is exercised, the premium originally received is recorded as a reduction to the cost of investments.

Futures contracts are valued at the quoted daily settlement prices established by the exchange on which they trade. The fund and the broker agree to exchange an amount of cash equal to the daily fluctuation in the value of the futures contract. Such receipts or payments are known as “variation margin.” Exchange traded options are valued at the last sale price or, if no sales are reported, the last bid price for purchased options and the last ask price for written options. Options traded over-the-counter are valued using prices supplied by dealers. Futures and written option contracts outstanding at period end, if any, are listed after the fund’s portfolio.

I) Total return swap contracts The fund may enter into total return swap contracts, which are arrangements to exchange a market linked return for a periodic payment, both based on a notional principal amount. To the extent that the total return of the security, index or other financial measure underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the fund will receive a payment from or make a payment to the counterparty. Total return swap contracts are marked to market daily based upon quotations from market makers and the change, if any, is recorded as an unrealized gain or loss. Payments received or made are recorded as a realized gains or loss. Certain total return swap contracts may include extended effective dates. Income related to these swap contracts is accrued based on the terms of the contract. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or in the price of the underlying security or index, the possibility that there is no liquid market for these agreements or that the counterparty may default on its obligation to perform. Risk of loss may exceed amounts recognized on the Statement of assets and liabilities. Total return swap contracts outstanding at period end, if any, are listed after the fund’s portfolio.

J) Interest rate swap contracts The fund may enter into interest rate swap contracts, which are arrangements between two parties to exchange cash flows based on a notional principal amount, to manage the fund’s exposure to interest rates. Interest rate swap contracts are marked to market daily based upon quotations from an independent pricing service or market makers and the change, if any, is recorded as an unrealized gain or loss. Payments received or made are recorded as a realized gains or loss. Certain interest rate swap contracts may include extended effective dates. Income related to these swap contracts is accrued based on the terms of the contract. The fund could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or if the counterparty defaults on its obligation to perform. Risk of loss may exceed amounts recognized on the Statement of assets and liabilities. Interest rate swap contracts outstanding at period end, if any, are listed after the fund’s portfolio.

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

59

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 an 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 TBA 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, on settlement date. 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 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, 2008, the value of securities loaned amounted to $204,794,302. The fund received cash collateral of $211,207,870 which is pooled with collateral of other Putnam funds into 70 issues of short-term investments.

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, as amended (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. 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, 2008, the fund had a capital loss carryover of $17,850,860 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 
$11,900,540  July 31, 2010 
5,950,320  July 31, 2011 

The tax basis components of distributable earnings and the federal tax cost as of July 31, 2008 were as follows:

Unrealized appreciation  $222,285,810 
Unrealized depreciation  (439,382,086) 
Net unrealized depreciation  (217,096,276) 
Undistributed ordinary income  5,482,169 
Undistributed long-term gain  16,732,712 
Capital loss carryforward  (17,850,860) 
Cost for federal income tax purposes  $4,794,417,813 

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 contract 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, 2008, the fund reclassified $8,602,342 to decrease undistributed net investment income and $3,464 to decrease paid-in-capital, with a decrease to accumulated net realized losses of $8,605,806.

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Note 2: Management fee, administrative services
and other transactions

The fund pays Putnam Management 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, 2008, Putnam Management did not waive any of its management fee from the fund.

For the year ended July 31, 2008, Putnam Management has assumed $7,057 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 8).

In October 2007, Putnam Management agreed to reimburse the fund in the amount of $868,965 in connection with the misidentification in 2006 of the characteristics of certain securities in the fund’s portfolio. The reimbursement by Putnam Management had less than a 0.01% impact on total return during the period.

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 services for the fund’s assets were provided by Putnam Fiduciary Trust Company (“PFTC”), an affiliate of Putnam Management, and by State Street Bank and Trust Company (“State Street”). Custody fees are based on the fund’s asset level, the number of its security holdings, transaction volumes and with respect to PFTC, certain fees related to the transition of assets to State Street. 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, 2008, the fund incurred $7,994,886 for custody and investor servicing agent functions provided by PFTC.

The fund has entered into expense offset arrangements with PFTC and State Street whereby PFTC’s and State Street’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, 2008, the fund’s expenses were reduced by $773,785 under the expense offset arrangements and by $183,572 under the brokerage/service arrangements.

Each independent Trustee of the fund receives an annual Trustee fee, of which $983, 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.

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 Limited Partnership, 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 Limited Partnership 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, 2008, Putnam Retail Management Limited Partnership, acting as underwriter, received net commissions of $139,258 and $1,649 from the sale of class A and class M shares, respectively, and received $279,057 and $4,414 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, 2008, Putnam Retail Management Limited Partnership, acting as underwriter, received $1,418 and no monies on class A and class M redemptions, respectively.

Note 3: Purchases and sales of securities

During the year ended July 31, 2008, cost of purchases and proceeds from sales of investment securities other than U.S. government securities and short-term investments aggregated $4,339,072,406 and $4,453,581,247 respectively. Purchases and sales of U.S. government securities aggregated $136,030,203 and $136,039,505, respectively.

Written option transactions during the year ended July 31, 2008 are summarized as follows:

  Contract  Premiums 
  Amounts  Received 
Written options outstanding     
at beginning of year  $955,599,000  $20,599,166 
Options opened  1,475,614,000  41,103,529 
Options exercised  —  — 
Options expired  (411,568,000)  (6,729,137) 
Options closed  (474,168,000)  (11,100,989) 
Written options outstanding     
at end of year  $1,545,477,000  $43,872,569 

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Note 4: Capital shares

At July 31, 2008, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:

  Year ended 7/31/08  Year ended 7/31/07 
Class A  Shares  Amount  Shares  Amount 
Shares sold  16,056,731  $261,006,315  23,421,130  $433,162,178 
Shares issued in  22,051,614  347,975,308  18,272,904  327,594,319 
connection with         
reinvestment of         
distributions         
  38,108,345  608,981,623  41,694,034  760,756,497 
Shares  (58,788,743)  (919,327,285)  (39,049,327)  (721,568,081) 
repurchased         
Net increase  (20,680,398)  $(310,345,662)  2,644,707  $39,188,416 
(decrease)         
 
  Year ended 7/31/08  Year ended 7/31/07 
Class B  Shares  Amount  Shares  Amount 
Shares sold  917,379  $14,859,933  1,887,613  $34,439,247 
Shares issued in  2,432,178  37,962,145  3,010,636  53,337,927 
connection with         
reinvestment of         
distributions         
  3,349,557  52,822,078  4,898,249  87,777,174 
Shares  (11,543,939)  (184,505,086) (16,425,410)  (301,276,907) 
repurchased         
Net decrease  (8,194,382)  $(131,683,008) (11,527,161)  $(213,499,733) 
 
  Year ended 7/31/08  Year ended 7/31/07 
Class C  Shares  Amount  Shares  Amount 
Shares sold  308,883  $5,097,974  531,413  $9,727,607 
Shares issued in  428,594  6,712,587  355,895  6,334,457 
connection with         
reinvestment of         
distributions         
  737,477  11,810,561  887,308  16,062,064 
Shares  (1,306,785)  (20,413,790)  (877,503)  (16,137,789) 
repurchased         
Net increase  (569,308)  $(8,603,229)  9,805  $(75,725) 
(decrease)         
 
  Year ended 7/31/08  Year ended 7/31/07 
Class M  Shares  Amount  Shares  Amount 
Shares sold  854,157  $13,662,326  1,119,120  $20,403,582 
Shares issued in  1,271,984  19,823,462  1,102,506  19,543,155 
connection with         
reinvestment of         
distributions         
  2,126,141  33,485,788  2,221,626  39,946,737 
Shares  (2,750,693)  (43,141,801)  (2,724,559)  (49,604,364) 
repurchased         
Net decrease  (624,552)  $(9,656,013)  (502,933)  $(9,657,627) 

  Year ended 7/31/08  Year ended 7/31/07 
Class R  Shares  Amount  Shares  Amount 
Shares sold  253,697  $3,765,550  86,222  $1,563,590 
Shares issued in  15,766  247,492  10,185  182,106 
connection with         
reinvestment of         
distributions         
  269,463  4,013,042  96,407  1,745,696 
Shares  (76,230)  (1,193,862)  (67,100)  (1,193,503) 
repurchased         
Net increase  193,233  $2,819,180  29,307  $552,193 
 
  Year ended 7/31/08  Year ended 7/31/07 
Class Y  Shares  Amount  Shares  Amount 
Shares sold  4,457,341  $69,571,597  4,345,678  $80,647,628 
Shares issued in  2,890,613  45,755,725  3,083,571  55,373,926 
connection with         
reinvestment of         
distributions         
  7,347,954  115,327,322  7,429,249  136,021,554 
Shares  (10,242,103)  (158,951,723) (13,254,383)  (243,622,642) 
repurchased         
Net decrease  (2,894,149)  $(43,624,401)  (5,825,134)  $(107,601,088) 

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 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, 2008, management fees paid were reduced by $83,535 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 $4,377,024 for the year ended July 31, 2008. During the year ended July 31, 2008, cost of purchases and proceeds of sales of investments in Putnam Prime Money Market Fund aggregated $1,138,664,934 and $1,509,181,549, respectively.

Note 6: Senior loan commitments

Senior loans are purchased or sold on a when-issued or delayed delivery basis and may be settled a month or more after the trade date, which from time to time can delay the actual investment of available cash balances; interest income is accrued based on the terms of the securities. Senior loans can be acquired through an agent, by assignment from another holder of the loan, or as a participation interest in another holder’s portion of the loan. When the fund invests in a loan or participation, the fund is subject to the risk that an intermediate participant between the fund and the borrower will fail to meet its obligations to the fund, in addition to the risk that the borrower under the loan may default on its obligations.

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Note 7: Unfunded loan commitments

As of July 31, 2008, the fund had unfunded loan commitments of $450,000, which could be extended at the option of the borrower, pursuant to the following loan agreements with the following borrowers:

Borrower  Unfunded Commitments 
Ticketmaster  $450,000 

Note 8: Regulatory matters and litigation

In late 2003 and 2004, Putnam Management settled charges brought by the SEC and the Massachusetts Securities Division in connection with excessive short-term trading in Putnam funds. Distribution of payments from Putnam Management to certain open-end Putnam funds and their shareholders is expected to be completed in the next several months. 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.

Note 9: 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. Upon adoption, the Interpretation did not 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. Each of the fund’s federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service.

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 expands disclosures about fair value measurements. The Standard applies to fair value measurements already required or permitted by existing standards. The Standard is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Putnam Management does not believe the adoption of the Standard will impact the amounts reported in the financial statements; however, additional disclosures will be required about the inputs used to develop the measurements of fair value.

In March 2008, Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS 161”) —an amendment of FASB Statement No. 133 (“SFAS 133”), was issued and is effective for fiscal years beginning after November 15, 2008. SFAS 161 requires enhanced disclosures about how and why an entity uses derivative instruments and how derivative instruments affect an entity’s financial position. Putnam Management is currently evaluating the impact the adoption of SFAS 161 will have on the fund’s financial statement disclosures.

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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 $32,954,218 as long-term capital gain, for its taxable year ended July 31, 2008.

The fund designated 37.36% of ordinary income distributions as qualifying for the dividends received deduction for corporations.

For its tax year ended July 31, 2008, the fund hereby designates 38.10%, 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 2009 will show the tax status of all distributions paid to your account in calendar 2008.

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, 2008. The Putnam mutual funds in this group are The George Putnam Fund of Boston, 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) Morgan Stanley, Merrill Lynch, UBS Securities LLC, Goldman Sachs, and Citigroup Global Markets. Commissions paid to these firms together represented approximately 51% of the total brokerage commissions paid for the year ended July 31, 2008.

Commissions paid to the next 10 firms together represented approximately 34% of the total brokerage commissions paid during the period. These firms are (in alphabetical order) Bear Stearns & Company, Credit Suisse First Boston, Deutsche Bank Securities, J.P. Morgan Securities, Lehman Brothers, Pipeline, RBC Capital Markets, Sanford Bernstein, Wachovia Securities, and Weeden & Co.

Commission amounts do not include “mark-ups” paid on bond or derivative trades made directly with a dealer. Additional information about brokerage commissions is available on the Securities and Exchange Commission (SEC) Web site at www.sec.gov. Putnam funds disclose commissions by firm to the SEC in semiannual filings on Form N-SAR.

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About the Trustees

Jameson A. Baxter

Trustee since 1994 and
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., and the Mutual Fund Directors Forum.

Until 2007, she was a Director of Banta Corporation (a printing and supply chain management company), Ryerson, Inc. (a metals service corporation), and Advocate Health Care. 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). She is Chairman Emeritus of the Board of Trustees, Mount Holyoke College, having served as Chairman for five years.

Ms. Baxter has held various positions in investment banking and corporate finance, including Vice President of and Consultant to First Boston Corporation and Vice President and Principal of the Regency Group. She is a graduate of Mount Holyoke College.

Charles B. Curtis

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 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 LLP, an international law firm headquartered in Washington, D.C. 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

Trustee since 2007

Mr. Darretta serves as Director of United-Health Group, a diversified health-care company.

Until April 2007, Mr. Darretta was Vice Chairman of the Board of Directors of Johnson & Johnson, one of the world’s largest and most broadly based health-care companies. Prior to 2007, he had responsibility for Johnson & Johnson’s finance, investor relations, information technology, and procurement function. He served as Johnson & Johnson Chief Financial Officer for a decade, prior to which he spent two years as Treasurer of the corporation and over ten years leading various Johnson & Johnson operating companies.

Mr. Darretta received a B.S. in Economics from Villanova University.

Myra R. Drucker

Trustee since 2004

Ms. Drucker is Chair of the Board of Trustees of Commonfund (a not-for-profit firm specializing in managing assets 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 NYSE Euronext), and a Director of Interactive Data Corporation (a provider of financial market data and analytics to financial institutions and investors).

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. She serves as an advisor to RCM Capital Management (an investment management firm) and to the Employee Benefits Investment Committee of The Boeing Company (an aerospace firm).

From November 2001 until August 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. From December 1992 to November 2001, Ms. Drucker served as Chief Investment Officer of Xerox Corporation (a document company). Prior to December 1992, Ms. Drucker was Staff Vice President and Director of Trust Investments for International Paper (a paper and packaging company).

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.

Charles E. Haldeman, Jr.*

Trustee since 2004 and
President of the Funds since 2007

Mr. Haldeman is Chairman of Putnam Investment Management, LLC and President of the Putnam Funds. Prior to July 2008, he was President and Chief Executive Officer of Putnam, LLC (“Putnam Investments”). Prior to November 2003, Mr. Haldeman served as Co-Head of Putnam Investments’ Investment Division.

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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 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.

John A. Hill

Trustee since 1985 and Chairman since 2000

John A. Hill is founder and Vice-Chairman of First Reserve Corporation, the leading private equity buyout firm specializing in the worldwide energy industry, with offices in Greenwich, Connecticut; Houston, Texas; London, England; and Shanghai, China. The firm’s investments on behalf of some of the nation’s largest pension and endowment funds are currently concentrated in 26 companies with annual revenues in excess of $13 billion, which employ over 100,000 people in 23 countries.

Mr. Hill is Chairman of the Board of Trustees of the Putnam Mutual Funds, a Director of Devon Energy Corporation and various private companies owned by First Reserve, and serves as a Trustee of Sarah Lawrence College where he chairs the Investment Committee.

Prior to forming First Reserve in 1983, Mr. Hill served as President of F. Eberstadt and Company, an investment banking and investment management firm. Between 1969 and 1976, Mr. Hill held various senior positions in Washington, D.C. with the federal government, including Deputy Associate Director of the Office of Management and Budget and Deputy Administrator of the Federal Energy Administration during the Ford Administration.

Mr. Hill was born and raised in Midland, Texas; received his B.A. in Economics from Southern Methodist University; and pursued graduate studies as a Woodrow Wilson Fellow.

Paul L. Joskow

Trustee since 1997

Dr. Joskow is an economist and President of the Alfred P. Sloan Foundation (a philanthropic institution focused primarily on research and education on issues related to science, technology, and economic performance). He is on leave from his position as the Elizabeth and James Killian Professor of Economics and Management at the Massachusetts Institute of Technology (MIT), where he has been on the faculty since 1972. Dr. Joskow was the Director of the Center for Energy and Environmental Policy Research at MIT from 1999 through 2007.

Dr. Joskow serves as a Trustee of Yale University, as a Director of TransCanada Corporation (an energy company focused on natural gas transmission and power services) and of Exelon Corporation (an energy company focused on power services), and as a member of the Board of Overseers of the Boston Symphony Orchestra. Prior to August 2007, he served as a Director of National Grid (a UK-based holding company with interests in electric and gas transmission and distribution and telecommunications infrastructure). 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 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 MPhil from Yale University and a B.A. from Cornell University.

Elizabeth T. Kennan

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 and 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 and two books. 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.

66

Kenneth R. Leibler

Trustee since 2006

Mr. Leibler is a Founding Partner and former Chairman of the Boston Options Exchange, an electronic marketplace for the trading of 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.

Prior to January 2005, Mr. Leibler served as Chairman and Chief Executive Officerof 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, Mr. Leibler served as President and Chief Operating Officer of the American Stock Exchange (AMEX), and at the time was the youngest person in AMEX 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

Trustee since 1984

Mr. Patterson is Senior Partner of Cabot Properties, LP 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, Mr. Patterson 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

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 adviser to private funds). Mr. Putnam founded the New Generation companies in 1986.

Mr. Putnam is a Director of The Boston Family Office, LLC (a registered investment adviser). He is a Trustee of St. Mark’s School and a Trustee of the Marine Biological Laboratory in Woods Hole, Massachusetts. 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.

Richard B.Worley

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 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 that was acquired by Morgan Stanley in 1996.

Mr. Worley holds a B.S. degree from the University of Tennessee and pursued graduate studies in economics at the University of Texas.

The address of each Trustee is One Post Office Square, Boston, MA 02109.

As of July 31, 2008, there were 99 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 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 Chairman of Putnam Investment Management, LLC, and prior to July 2008 was President and Chief Executive Officer of Putnam Investments.

67

Officers

In addition to Charles E. Haldeman, Jr., the other officers of the fund are shown below:

Charles E. Porter (Born 1938)  James P. Pappas (Born 1953)  Wanda M. McManus (Born 1947) 
Executive Vice President, Principal Executive  Vice President  Vice President, Senior Associate Treasurer 
Officer, Associate Treasurer, and  Since 2004  and Assistant Clerk 
Compliance Liaison  Managing Director, Putnam Investments and  Since 2005 
Since 1989  Putnam Management. During 2002, Chief   
  Operating Officer, Atalanta/Sosnoff    Nancy E. Florek (Born 1957) 
Jonathan S. Horwitz (Born 1955)   Management Corporation Vice President, Assistant Clerk, Assistant 
Senior Vice President and Treasurer    Treasurer and Proxy Manager 
Since 2004  Francis J. McNamara, III (Born 1955)  Since 2005 
Prior to 2004, Managing Director,  Vice President and Chief Legal Officer   
Putnam Investments  Since 2004   
  Senior Managing Director, Putnam   
Steven D. Krichmar (Born 1958)  Investments, Putnam Management   
Vice President and Principal Financial Officer  and Putnam Retail Management. Prior   
Since 2002  to 2004, General Counsel, State Street   
Senior Managing Director,  Research & Management Company    
Putnam Investments     
  Robert R. Leveille (Born 1969)   
Janet C. Smith (Born 1965)  Vice President and Chief Compliance Officer   
Vice President, Principal Accounting Officer  Since 2007   
and Assistant Treasurer  Managing Director, Putnam Investments,   
Since 2007  Putnam Management, and Putnam Retail   
Managing Director, Putnam Investments and  Management. Prior to 2004, member of    
Putnam Management  Bell Boyd & Lloyd LLC. Prior to 2003,    
  Vice President and Senior Counsel,     
Susan G. Malloy (Born 1957)  Liberty Funds Group LLC   
Vice President and Assistant Treasurer     
Since 2007  Mark C. Trenchard (Born 1962)     
Managing Director, Putnam Investments  Vice President and BSA Compliance Officer    
  Since 2002    
Beth S. Mazor (Born 1958)  Managing Director, Putnam Investments    
Vice President     
Since 2002  Judith Cohen (Born 1945)    
Managing Director, Putnam Investments  Vice President, Clerk and Assistant Treasurer   
  Since 1993   

The address of each Officer is One Post Office Square, Boston, MA 02109.

68

Fund information

Founded over 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 nearly 100 mutual funds in growth, value, blend, fixed income, and international.

Investment Manager  Officers  Wanda M. McManus 
Putnam Investment  Charles E. Haldeman, Jr.  Vice President, Senior Associate Treasurer 
Management, LLC  President  and Assistant Clerk 
One Post Office Square     
Boston, MA 02109   Charles E. Porter  Nancy E. Florek 
  Executive Vice President, Principal  Vice President, Assistant Clerk, Assistant 
Marketing Services  Executive Officer, Associate Treasurer and  Treasurer and Proxy Manager 
Putnam Retail Management  Compliance Liaison   
One Post Office Square     
Boston, MA 02109  Jonathan S. Horwitz   
  Senior Vice President and Treasurer   
Custodian     
State Street Bank and Trust Company   Steven D. Krichmar   
  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 A. 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   Francis J. McNamara, III     
Elizabeth T. Kennan  Vice President and Chief Legal Officer   
Kenneth R. Leibler     
Robert E. Patterson   Robert R. Leveille   
George Putnam, III    Vice President and Chief Compliance Officer    
Richard B. Worley   
  Mark C. Trenchard   
Vice President and BSA Compliance Officer    
   
  Judith Cohen   
  Vice President, Clerk and Assistant Treasurer   

This report is for the information of shareholders of The George Putnam Fund of Boston. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam’s Quarterly Performance Summary, and Putnam’s Quarterly Ranking Summary. For more recent performance, please visit www.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 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) In May 2008, the Code of Ethics of Putnam Investment Management, LLC was updated in its entirety to include the amendments adopted in August 2007 as well as a several additional technical, administrative and non-substantive changes.

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. 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, 2008  $338,593  $--  $12,755  $1,247* 
 
July 31, 2007  $261,656  $313  $9,550  $ 4,535* 

* Includes fees of $1,247 and $ 2,992 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, 2008 and July 31, 2007, respectively. These fees were reimbursed to the fund by Putnam Investment Management, LLC (“Putnam Management”).

For the fiscal years ended July 31, 2008 and July 31, 2007, the fund’s independent auditor billed aggregate non-audit fees in the amounts of $92,241 and $129,614 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 relating to the audit and review of the financial statements included in annual reports and registration statements, and other services that are normally provided in connection with statutory and regulatory filings or engagements.

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 and procedures necessitated by regulatory and litigation matters..

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 31,2008  $ -  $ 15,000  $ -  $ - 
 
July 31, 2007  $ -  $ 26,129  $ -  $ - 

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 25, 2008

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 25, 2008

By (Signature and Title):

/s/Steven D. Krichmar
Steven D. Krichmar
Principal Financial Officer

Date: September 25, 2008