N-CSR 1 a_assetalloc.htm PUTNAM ASSET ALLOCATION FUNDS a_assetalloc.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- 07121)

Exact name of registrant as specified in charter: Putnam Asset Allocation Fund

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: September 30, 2007

Date of reporting period: October 1, 2006— September 30, 2007

Item 1. Report to Stockholders:

The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940:


What makes
Putnam different?

A time-honored tradition in
money management

Since 1937, our values have been rooted in a profound sense of responsibility for the money entrusted to us.

A prudent approach to investing

We use a research-driven team approach to seek consistent, dependable, superior investment results over time, although there is no guarantee a fund will meet its objectives.

Funds for every investment goal

We offer a broad range of mutual funds and other financial products so investors and their financial representatives can build diversified portfolios.

A commitment to doing what’s right for investors

With a focus on investment performance, below-average expenses, and in-depth information about our funds, we put the interests of investors first and seek to set the standard for integrity and service.

Industry-leading service

We help investors, along with their financial representatives, make informed investment decisions with confidence.


In 1830, Massachusetts Supreme Judicial Court Justice Samuel Putnam established The Prudent Man Rule, a legal foundation for responsible money management.

THE PRUDENT MAN RULE

All that can be required of a trustee to invest is that he shall conduct himself faithfully and exercise a sound discretion. He is to observe how men of prudence, discretion, and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested.

Putnam
Asset Allocation
Funds

9| 30| 07
Annual Report

Message from the Trustees  1 
About the funds  2 
Performance snapshots  4 
Report from the fund managers  5 
Performance in depth  10 
Expenses  15 
Portfolio turnover  17 
Risk  18 
Your fund’s management  19 
Terms and definitions  20 
Trustee approval of management contract  21 
Other information for shareholders  25 
Financial statements  26 
Federal tax information  171 
Brokerage commissions  171 
Shareholder meeting results  172 
About the Trustees  173 
Officers  177 

Message from the Trustees

Dear Fellow Shareholder:

This November, Putnam Investments celebrates its 70th anniversary. From modest beginnings in Boston, Massachusetts, Putnam has grown into a global asset manager that serves millions of investors worldwide. Coincident with this anniversary, we are pleased to announce that Great-West Lifeco Inc. recently completed its purchase of Putnam Investments from Marsh & McLennan Companies, Inc. Great-West Lifeco is a financial services holding company with operations in Canada, the United States, and Europe and is a member of the Power Financial Corporation group of companies. With this change, Putnam becomes part of a successful organization with a long-standing commitment to high-quality investment management and financial services. The change in ownership is not expected to affect the Putnam funds, the way Putnam manages money, or the funds’ management teams.

We would also like to take this opportunity to announce that Putnam President and Chief Executive Officer Ed Haldeman, one of your fund’s Trustees since 2004, was recently named President of the Funds, assuming this role from George Putnam, III. This change, together with the completion of the transaction with Great-West Lifeco, has enabled George Putnam to become an independent Trustee of the funds. Both George and Ed will continue serving on the Board of Trustees in our collective role of overseeing the Putnam funds on your behalf.

Lastly, we are pleased to announce that a new independent Trustee, Robert J. Darretta, has joined your fund’s Board of Trustees. Mr. Darretta brings extensive leadership experience in corporate finance and accounting. He is a former Vice Chairman of the Board of Directors of Johnson & Johnson, one of the leading U.S. health-care and consumer products companies, where he also served as Chief Financial Officer, Executive Vice President, and Treasurer.

Although the mutual fund industry has undergone many changes since George Putnam introduced his innovative balanced fund in 1937, Putnam’s guiding principles have not. As we celebrate Putnam’s 70-year milestone, we look forward to Putnam continuing its long tradition of prudent money management and to the new chapter opened by its recent change in ownership. As always, we thank you for your support of the Putnam funds.


Putnam Asset Allocation Funds: diversification made easy

Putnam Asset Allocation Funds provide balanced diversification through three portfolios — Growth, Balanced, and Conservative — designed for investors with different goals and attitudes toward risk. Each portfolio has a distinct objective and a target mix of stocks and bonds. The mix of holdings is rebalanced regularly as the funds’ managers take profits on investments that have outperformed and invest the proceeds in areas they believe offer greater future potential. Spreading fund holdings across a variety of asset classes has been shown time and again to be a prudent strategy for long-term investors because it helps smooth the ups and downs of the market.

Combining insights gained from proprietary research with expertise in the tools and concepts of diversification, Putnam’s asset allocation specialists create investment strategies for each of the Putnam Asset Allocation Funds. These strategies integrate the global perspective of an experienced portfolio management team, flexible weightings of asset classes in accordance with their perceived attractiveness, and analysis to add value within each asset class.

The funds’ management team also draws on the resources of Putnam’s global research group, which covers more than 1,000 securities worldwide; recommendations of Putnam’s investment-style teams based on their in-depth analysis of specific market segments; and input from the firm’s economists, market strategists, and currency specialists.

This comprehensive approach, incorporating the insights of many specialists, helps the portfolios adhere to consistent investment objectives as they seek to exploit ever-changing market conditions.

Putnam Asset Allocation Funds can invest in international investments, which involve risks such as currency fluctuations, economic instability, and political developments. The portfolios can invest some or all of their 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 portfolios can also have a significant portion of their 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 have more exposure to interest-rate risk than short-term bonds. Lower-rated bonds may offer higher yields in return for more risk. Unlike bonds, bond funds have ongoing fees and expenses. These risks apply to any fund with a significant portion of its assets invested in bonds.

Diversification does not ensure a profit or protect against loss. It is possible to lose money in a diversified portfolio.


The portfolios invest in a wide range of securities across 10 distinct asset
classes and are actively rebalanced to manage risk.


Performance snapshots

Putnam Asset Allocation Funds

Performance

Class A share average annual total return as of 9/30/07

  Growth Portfolio   Balanced Portfolio   Conservative Portfolio  
(inception dates)    (2/8/94)    (2/7/94)   (2/7/94)   
  Before sales After sales   Before sales   After sales   Before sales   After sales  
  charge   charge   charge   charge   charge   charge  
Annual average             
(life of fund)  9.48 %  9.05 %  8.18 %  7.75 %  6.64 %  6.22 % 
10 years  92.13   81.98   71.86   62.85   63.14   54.54  
Annual average  6.75   6.17   5.56   5.00   5.02   4.45  
5 years  112.01   100.79   74.11   64.95   48.10   40.33  
Annual average  16.22   14.96   11.73   10.53   8.17   7.01  
3 years  51.35   43.39   34.77   27.70   21.50   15.12  
Annual average  14.81   12.76   10.46   8.49   6.71   4.81  
1 year  14.31   8.30   9.36   3.59   5.76   0.22  

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. After sales charge returns reflect a maximum 5.25% load. For a portion of the periods, the funds may have limited expenses, without which returns would have been lower. See pages 10–14 for additional performance information. A 1% short-term trading fee may apply. To obtain the most recent month-end performance, visit www.putnam.com.

Market sector and fund performance

This chart shows the performance of different market sectors for the 12 months ended 9/30/07. See pages 10–14 for additional fund performance information. Index descriptions can be found on page 20.


“We are relying on our research
skill and investment flexibility to
identify opportunities across
global markets, with an eye
toward wealth preservation as
financial markets grapple with the
investment implications of the
weak U.S. housing market.”

Jeffrey Knight, Portfolio Leader,
Putnam Asset Allocation Funds

4

Report from the fund managers

The year in review


For the year ended September 30, 2007, all three Putnam Asset Allocation Funds posted strong returns. The period was marked by continued appreciation across all asset classes, with equities, particularly international equities, leading the advance. However, volatility also increased because of the ongoing troubles of the U.S. real estate market. This volatility was accompanied by changing performance leadership within both equity and fixed-income markets. Asset classes that had lagged behind in recent years have moved ahead.

Putnam Asset Allocation: Growth Portfolio’s class A shares returned 14.31% before sales charges for the period. The portfolio’s benchmark, the Russell 3000 Index, returned 16.52%, and the Putnam Growth Blended Benchmark returned 17.45% . The average return for the portfolio’s Lipper category, Mixed-Asset Target Allocation Growth Funds, was 14.04% .

Putnam Asset Allocation: Balanced Portfolio’s class A shares returned 9.36% before sales charges for the period. The portfolio’s benchmark, the Russell 3000 Index, returned 16.52%, and the Putnam Balanced Blended Benchmark returned 12.89% . The average return for the portfolio’s Lipper category, Mixed-Asset Target Allocation Moderate Funds, was 11.68% .

Putnam Asset Allocation: Conservative Portfolio’s class A shares returned 5.76% before sales charges for the period. The portfolio’s benchmark, the Lehman Aggregate Bond Index, returned 5.14%, and the Putnam Conservative Blended Benchmark returned 9.07% . The average return for the portfolio’s Lipper category, Mixed-Asset Target Allocation Conservative Funds, was 8.05% .

Market overview

Global stock markets recorded strong gains during the funds’ fiscal year, though this advance was accompanied by increasing volatility. Stocks were supported by an impressive global economic growth rate, which the International Monetary Fund (IMF) estimated to be approximately 5%. In these conditions, corporate profit growth has been robust, particularly in the energy, basic materials, capital goods, transportation, utilities, and technology sectors. Merger-and-acquisition activity also contributed to market gains, particularly in Europe. U.S. dollar weakness added to the performance of international securities.

Market volatility increased in large part because of the rising volume of non-performing subprime mortgage debt that originated primarily in the United States. Mortgage defaults caused mounting losses to several hedge funds and global financial institutions during the past summer, and trading in credit markets slowed to a standstill. The consequences included a widening of yield spreads on bonds for all but the highest-quality securities. At the same time, many blue-chip stocks dropped sharply as financial institutions, struggling to maintain liquidity, were in many cases compelled to sell high-quality stocks when they could not find buyers for low-quality bonds.

Fortunately, the U.S. Federal Reserve, the Bank of England, and other central banks took steps to increase liquidity, and, as market confidence improved, most equity markets recovered during September. However, the increase in volatility contributed to a transition in market leadership. In equity markets, large-cap and growth-style stocks led in the final months of the period. In fixed-income markets, high-quality bonds led the performance of high-yield bonds, including emerging-market issues.

Strategy overview: Growth Portfolio

The Growth Portfolio delivered a double-digit return, but underperformed the Russell 3000 Index as well as its

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blended benchmark during the annual period. The portfolio’s flexible investment approach seeks to outperform the stock market over a full market cycle with less volatility than the market. We invest approximately 80% of the fund’s assets in stocks of large, midsize, and small companies, and about 20% in bonds.

As in previous periods, the international equity component was the leading contributor to performance; it benefited from favorable stock selection and from a portion devoted to emerging-market equities, though we trimmed this position during the fiscal year to take profits. Our allocation to small-cap stocks, as well as our security selection in this asset class, performed well. Active currency management added value: overweighting the euro and the Australian dollar versus the U.S. dollar contributed to results at different points during the year.

The most significant adverse factor was our stock selection decisions among U.S. large-cap equities. During the summer’s credit crisis, many financial institutions were compelled to sell high-quality, large-cap equities, simply to maintain trading liquidity. Although this wave of selling was brief, it had an adverse impact on the fund’s performance. Fortunately, the fund participated in the market recovery that occurred in September.

During the second half of the fund’s fiscal year, we adjusted our market exposures to place an emphasis on wealth preservation. We reduced the position in international equities and in U.S. high-yield bonds. We also increased the position in money market securities and in international bonds, while reducing other fixed-income securities and equities.

Strategy overview: Balanced Portfolio

The Balanced Portfolio provided a solid return during the period but underperformed the Russell 3000 Index and its blended benchmark. The portfolio’s flexible investment approach seeks to outperform the stock market over a full market cycle with less volatility than the market. We invest approximately 60% of the fund’s assets in stocks of large, midsize, and small companies, and about 40% in bonds.

As in previous periods, the international equity component was the leading contributor to performance. Our stock selection within this asset class also added to results relative to the Russell 3000 Index. Our allocations to U.S. investment-grade bonds and small-cap stocks also had a positive impact. For much of the period, the portfolio deemphasized U.S. investment-grade bonds, before we added to the position as market volatility increased. Although bonds underperformed stocks for the period as a whole, this allocation decision, as well as our security selection, had a beneficial impact on performance when stock prices fell during the summer months. Active

Growth Portfolio:
Comparison of equity and fixed-income weightings

This chart shows how the fund’s top weightings have changed
over the last six months. Weightings are shown as a percentage of
net assets and include derivative securities. Weightings may differ
from those shown later in this report and will vary over time.


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currency management added value: overweighting the euro and the Australian dollar versus the U.S. dollar contributed to results at different points during the year.

The most significant adverse factor was our stock selection decisions among U.S. large-cap equities, which came under heavy selling pressure during the summer’s credit crisis. During this brief selling wave, high-quality companies actually underperformed the market because they represented the most readily tradable securities for financial institutions struggling to maintain trading liquidity. This selling had an adverse impact on the fund’s short-term returns.

In the second half of the annual period, we adjusted the portfolio’s market exposure to emphasize wealth preservation amid increasing market volatility. We reduced the position in U.S. high-yield bonds and trimmed the weighting in international equities. We also increased the position in money market securities while reducing other fixed-income securities.

Strategy overview: Conservative Portfolio

The Conservative Portfolio’s return during the annual period exceeded that of the Lehman Aggregate Bond Index, but underperformed that of its blended benchmark. The portfolio follows a flexible investment approach designed to avoid losses while participating in rising markets worldwide. It invests approximately 70% of its assets in bonds to generate income. There is also a stock component, intended to protect against inflation while providing a return potentially greater than a pure fixed-income investment.

During the fiscal year, a lower-than-target weighting to U.S. fixed-income securities had a positive impact on results, as both money market and equity securities contributed relatively strong performance. Security selection among U.S. investment-grade securities, including an emphasis on collateralized mortgage-backed securities (CMBSs) and asset-backed securities (ABSs) also helped returns. International positions also provided benefits. While the international equity component was small on an absolute basis, it was larger than that of the blended benchmark, and our security selection in this asset class contributed positively to performance. For the year as a whole, our currency strategies also added strength, as the dollar was generally weak.

The most significant detractor from performance for the period involved our unfavorable stock selection within the U.S. equity weighting. In particular, holdings in the technology and financial sectors had an adverse impact on performance.

During the period, we adjusted our market exposures. We reduced the position in U.S. high-yield bonds in order to reduce the portfolio’s credit-risk exposure. We also trimmed

Balanced Portfolio:
Comparison of equity and fixed-income weightings

This chart shows how the fund’s top weightings have changed
over the last six months. Weightings are shown as a percentage of
net assets and include derivative securities. Weightings may differ
from those shown later in this report and will vary over time.


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positions in equities. We also increased the position in money market securities to help preserve wealth.

Of special interest

Dividend changes for the funds

The Balanced Portfolio’s dividend increased over 30% during the period, from $0.043 to $0.056 per class A share. This change, which was effective in December 2006, is the result of an overall increase in the fund’s distributable income. Similar changes in the fund’s dividend were made for other share classes.

The Conservative Portfolio’s dividend increased nearly 20% during the period, from $0.021 to $0.025 per class A share. This change, which was effective in November 2006, is the result of an overall increase in the fund’s distributable income. Similar changes in the fund’s dividend were made for other share classes.

Conservative Portfolio:
Comparison of equity and fixed-income weightings

This chart shows how the fund’s top weightings have changed
over the last six months. Weightings are shown as a percentage of
net assets and include derivative securities. Weightings may differ
from those shown later in this report and will vary over time.


8

The outlook for your fund

The following commentary reflects anticipated
developments that could affect your fund over the
next six months, as well as your management
team’s plans for responding to them.

Conflicting trends offer opportunities and risks in investment markets today. The credit markets are still adjusting to the increasing amount of non-performing U.S. mortgage debt, which is spread across a variety of structured securities that are traded in global markets. As the full extent of the problem comes gradually to light, there are also concerns about the impact of the weak housing market on U.S. economic growth and consumer spending. Fortunately, recent data indicates that continued growth remains more likely than a recession, and global economic growth is robust. The IMF’s latest economic outlook predicts growth in the U.S. and global economies during 2008. Also, the U.S. Federal Reserve and central banks around the world are taking an active and constructive approach to help credit markets return to normalcy and to support global growth.

On balance, we anticipate a more moderate return landscape than in the past year, and we believe investors must adapt with strategies more suited to a low-return environment. We continue to stress the importance of maintaining comprehensive diversification and a global investment perspective, and pursuing multiple distinct, disciplined strategies designed to add value regardless of market direction. We believe this approach should provide a balance between risk and reward suited to today’s investment landscape.

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

Putnam Asset Allocation Funds can invest in international investments, which involve risks such as currency fluctuations, economic instability, and political developments. The portfolios can invest some or all of their 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 portfolios can also have a significant portion of their 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 have more exposure to interest-rate risk than short-term bonds. Lower-rated bonds may offer higher yields in return for more risk. Unlike bonds, bond funds have ongoing fees and expenses. These risks apply to any fund with a significant portion of its assets invested in bonds. Diversification does not ensure a profit or protect against loss. It is possible to lose money in a diversified portfolio.

Putnam Asset Allocation: Growth Portfolio, Balanced Portfolio, and Conservative Portfolio are series of Putnam Asset Allocation Funds, a registered investment company.

9

Your fund’s performance

This section shows your fund’s performance for periods ended September 30, 2007, the end of its most recent fiscal year. In accordance with regulatory requirements for mutual funds, we also include expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represents past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown.

Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. For the most recent month-end performance, please visit www.putnam.com or call Putnam at 1-800-225-1581. Class Y shares are generally only available to corporate and institutional clients and clients in other approved programs. See the Terms and Definitions section in this report for definitions of the share classes offered by your fund.

Growth Portfolio

Fund performance Total return for periods ended 9/30/07

  Class A     Class B     Class C     Class M     Class R   Class Y  
(inception dates)  (2/8/94 )    (2/16/94 )    (9/1/94 )    (2/3/95 )    (1/21/03 )  (7/14/94 ) 
  NAV   POP   NAV   CDSC   NAV   CDSC   NAV   POP   NAV   NAV  
Annual average                     
(life of fund)  9.48 %  9.05 %  8.67 %  8.67 %  8.62 %  8.62 %  8.93 %  8.66 %  9.21 %  9.75 % 
10 years  92.13   81.98   78.02   78.02   78.02   78.02   82.77   76.87   87.38   96.74  
Annual average  6.75   6.17   5.94   5.94   5.94   5.94   6.22   5.87   6.48   7.00  
5 years  112.01   100.79   104.25   102.25   104.10   104.10   106.53   99.92   109.25   114.47  
Annual average  16.22   14.96   15.35   15.13   15.34   15.34   15.61   14.86   15.91   16.49  
3 years  51.35   43.39   48.06   45.05   48.04   48.04   49.00   44.14   50.21   52.38  
Annual average  14.81   12.76   13.98   13.20   13.97   13.97   14.22   12.96   14.52   15.07  
1 year  14.31   8.30   13.41   8.41   13.40   12.40   13.65   9.95   14.00   14.55  

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After sales charge returns (public offering price, or POP) for class A and M shares reflect a maximum 5.25% and 3.25% load, respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter. Class C shares reflect a 1% CDSC for the first year and is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC. Performance for class B, C, M, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and, except for class Y shares, the higher operating expenses for such shares.

For a portion of the periods, this fund 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.

Fund price and distribution information For the 12-month period ended 9/30/07

Distributions  Class A    Class B  Class C  Class M Class R  Class Y 
Number    1  —  1    1 1  1 
Income    $ 0.080    —    $0.003    $0.015   $0.061  $0.107 
Capital gains    —  —  —    — —  — 
Total  $0.080  —    $0.003    $0.015   $0.061  $0.107 
Share value:  NAV  POP  NAV  NAV  NAV  POP NAV  NAV 
9/30/06  $13.32  $14.06      $13.05    $12.86    $13.09  $13.53   $13.18  $13.44 
9/30/07  15.14  15.98  14.80  14.58  14.86 15.36   14.96  15.28 

Fund’s annual operating expenses For the fiscal year ended 9/30/06

  Class A Class B Class C Class M Class R Class Y
Total annual fund operating expenses  1.23%   1.98%   1.98%   1.73%   1.48%   0.98%  

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.

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Change in the value of a $10,000 investment ($9,475 after sales charge)


Past performance does not indicate future results. At the end of the same time period for the Growth Portfolio, a $10,000 investment in the fund’s class B and class C shares would have been valued at $17,802 and $17,802, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,675 after sales charge) would have been valued at $17,687 at public offering price. A $10,000 investment in the fund’s class R and class Y shares would have been valued at $18,738 and $19,674, respectively.

Balanced Portfolio

Fund performance Total return for periods ended 9/30/07

  Class A      Class B      Class C      Class M      Class R    Class Y   
(inception dates)  (2/7/94)      (2/11/94)      (9/1/94)      (2/6/95)      (1/21/03)    (7/5/94)   
  NAV  POP  NAV  CDSC  NAV  CDSC  NAV  POP  NAV  NAV 
Annual average                     
(life of fund)    8.18%    7.75%    7.38%    7.38%    7.33%    7.33%    7.66%    7.40%    7.89%    8.45% 
10 years  71.86  62.85  59.45  59.45  59.29  59.29  63.42  58.13  67.21  76.24 
Annual average  5.56  5.00  4.78  4.78  4.77  4.77  5.03  4.69  5.28  5.83 
5 years  74.11  64.95  67.80  65.80  67.60  67.60  69.94  64.45  71.44  76.33 
Annual average  11.73  10.53  10.91  10.64  10.88  10.88  11.19  10.46  11.38  12.01 
3 years  34.77  27.70  31.88  28.88  31.78  31.78  32.83  28.56  33.60  35.84 
Annual average  10.46  8.49  9.66  8.82  9.64  9.64  9.93  8.73  10.14  10.75 
1 year  9.36  3.59  8.58  3.58  8.64  7.64  8.83  5.27  9.13  9.61 

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After sales charge returns (public offering price, or POP) for class A and M shares reflect a maximum 5.25% and 3.25% load, respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter. Class C shares reflect a 1% CDSC for the first year and is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC. Performance for class B, C, M, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and, except for class Y shares, the higher operating expenses for such shares.

For a portion of the period, this fund 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.

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Fund price and distribution information For the 12-month period ended 9/30/07

Distributions  Class A    Class B  Class C  Class M  Class R  Class Y 
Number    4  4  4    4  4  4 
Income  $0.224  $0.128  $0.134  $0.161  $0.172  0.255 
Capital gains    —  —  —    —  —  — 
Total  $0.224  $0.128  $0.134  $0.161  $0.172  $0.255 
Share value:  NAV  POP  NAV  NAV  NAV  POP  NAV  NAV 
9/30/06  $11.86  $12.52  $11.78  $11.66  $11.84 $12.24    $11.79  $11.88 
9/30/07  12.74  13.45  12.66  12.53  12.72 13.15    12.69  12.76 

Fund’s annual operating expenses For the fiscal year ended 9/30/06

  Class A  Class B  Class C  Class M  Class R  Class Y 
Total annual fund operating expenses  1.11%  1.86%  1.86%  1.61%  1.36%  0.86% 

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.


Past performance does not indicate future results. At the end of the same time period for the Balanced Portfolio, a $10,000 investment in the fund’s class B and class C shares would have been valued at $15,945 and $15,929, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,675 after sales charge) would have been valued at $15,813 at public offering price. A $10,000 investment in the fund’s class R and class Y shares would have been valued at $16,721 and $17,624, respectively.

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Conservative Portfolio

Fund performance Total return for periods ended 9/30/07

  Class A    Class B    Class C    Class M    Class R  Class Y 
(inception dates)  (2/7/94)      (2/18/94)    (9/1/94)    (2/7/95)    (1/21/03)  (7/14/94) 
  NAV  POP  NAV  CDSC  NAV  CDSC  NAV  POP  NAV  NAV 
Annual average                     
(life of fund)  6.64%  6.22%  5.82%  5.82%  5.82%  5.82%  6.08%  5.82%  6.46%  6.89% 
10 years  63.14  54.54  50.95  50.95  51.41  51.41  54.42  49.34  60.90  67.08 
Annual average  5.02  4.45  4.20  4.20  4.24  4.24  4.44  4.09  4.87  5.27 
5 years  48.10  40.33  42.42  40.42  42.78  42.78  43.98  39.22  47.89  49.98 
Annual average  8.17  7.01  7.33  7.03  7.38  7.38  7.56  6.84  8.14  8.44 
3 years  21.50  15.12  18.58  15.58  19.02  19.02  19.59  15.77  21.62  22.49 
Annual average  6.71  4.81  5.85  4.94  5.98  5.98  6.14  5.00  6.74  7.00 
1 year  5.76  0.22  5.00  0.00  5.21  4.21  5.27  1.84  5.77  6.14 

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After sales charge returns (public offering price, or POP) for class A and M shares reflect a maximum 5.25% and 3.25% load, respectively. Class B share returns reflect the applicable contingent deferred sales charge (CDSC), which is 5% in the first year, declining to 1% in the sixth year, and is eliminated thereafter. Class C shares reflect a 1% CDSC for the first year and is eliminated thereafter. Class R and Y shares have no initial sales charge or CDSC. Performance for class B, C, M, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and, except for class Y shares, the higher operating expenses for such shares.

For a portion of the periods, this fund 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.

Fund price and distribution information For the 12-month period ended 9/30/07

Distributions  Class A  Class B  Class C  Class M  Class R  Class Y 
Number    12  12  12    12  12  12 
Income    $0.296  $0.221  $0.221  $0.246  $0.272  $0.320 
Capital gains    —  —  —    —  —  — 
Total    $0.296  $0.221  $0.221  $0.246  $0.272  $0.320 
Share value:  NAV  POP  NAV  NAV  NAV  POP  NAV  NAV 
9/30/06  $9.59 $10.12    $9.50  $9.49  $9.50 $9.82  $9.67  $9.57 
9/30/07  9.84 10.39  9.75  9.76  9.75 10.08  9.95  9.83 

Fund’s annual operating expenses For the fiscal year ended 9/30/06

  Class A  Class B  Class C  Class M  Class R  Class Y 
Total annual fund operating expenses  1.21%  1.96%  1.96%  1.71%  1.46%  0.96% 

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.

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Change in the value of a $10,000 investment ($9,475 after sales charge)


Past performance does not indicate future results. At the end of the same time period for the Conservative Portfolio, a $10,000 investment in the fund’s class B and class C shares would have been valued at $15,095 and $15,141, respectively, and no contingent deferred sales charges would apply. A $10,000 investment in the fund’s class M shares ($9,675 after sales charge) would have been valued at $14,934 at public offering price. A $10,000 investment in the fund’s class R and class Y shares would have been valued at $16,090 and $16,708, respectively.

Comparative index returns For periods ended 9/30/07

      Lipper Mixed-  Lipper Mixed-  Lipper Mixed- 
      Asset Target  Asset Target  Asset Target 
      Allocation  Allocation  Allocation 
    Lehman  Growth Funds  Moderate Funds  Conservative 
  Russell  Aggregate  category  category  Funds category 
  3000 Index  Bond Index  average*  average†  average‡ 
Annual average           
(life of fund)  10.93%  6.15%  8.54%  7.92%  6.87% 
10 years  93.52  78.54  84.82  73.64  70.14 
Annual average  6.83  5.97  6.20  5.55  5.39 
5 years  111.69  22.45  78.71  68.74  43.74 
Annual average  16.18  4.13  12.20  10.96  7.42 
3 years  47.14  12.04  37.33  31.26  20.11 
Annual average    13.74  3.86  11.09  9.46  6.26 
1 year  16.52  5.14  14.04  11.68  8.05 

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

* Over the 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended 9/30/07, there were 627, 523, 397, 201, and 93 funds, respectively, in this Lipper category.

† Over the 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended 9/30/07, there were 442, 343, 231, 127, and 43 funds, respectively, in this Lipper category.

 ‡ Over the 1-year, 3-year, 5-year, 10-year, and life-of-fund periods ended 9/30/07, there were 401, 255, 135, 52, and 11 funds, respectively, in this Lipper category.

14

Your fund’s expenses

As a mutual fund investor, you pay ongoing expenses, such as management fees, distribution fees (12b-1 fees), and other expenses. In the most recent six-month period, your fund limited these expenses; had it not done so, expenses would have been higher. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You may also pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial representative.

Review your fund’s expenses

The table below shows the expenses you would have paid on a $1,000 investment in each of the three Putnam Asset Allocation Funds from April 1, 2007, to September 30, 2007. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

  Class A  Class B  Class C  Class M  Class R  Class Y 
Growth Portfolio             
Expenses paid per $1,000*  $ 5.76  $ 9.60  $ 9.60  $ 8.32  $ 7.04  $ 4.48 
Ending value (after expenses)  $1,051.40  $1,048.20  $1,047.40  $1,048.70  $1,050.60  $1,052.40 
Balanced Portfolio             
Expenses paid per $1,000*  $ 5.34  $ 9.14  $ 9.14  $ 7.88  $ 6.61  $ 4.07 
Ending value (after expenses)  $1,029.90  $1,026.00  $1,026.50  $1,027.30  $1,028.60  $1,031.20 
Conservative Portfolio             
Expenses paid per $1,000*  $ 5.77  $ 9.54  $ 9.55  $ 8.28  $ 7.03  $ 4.51 
Ending value (after expenses)  $1,017.50  $1,013.70  $1,014.70  $1,015.00  $1,018.10  $1,019.80 

* Expenses for each share class are calculated using each 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 9/30/07. The expense ratio may differ for each share class (see the last table in this section). Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended September 30, 2007, use the calculation method below. To find the value of your investment on April 1, 2007, call Putnam at 1-800-225-1581.

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Compare expenses using the SEC’s method

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

  Class A  Class B  Class C  Class M  Class R  Class Y 
Growth Portfolio             
Expenses paid per $1,000*  $ 5.67  $ 9.45  $ 9.45  $ 8.19  $ 6.93  $ 4.41 
Ending value (after expenses)  $1,019.45  $1,015.69  $1,015.69  $1,016.95  $1,018.20  $1,020.71 
Balanced Portfolio             
Expenses paid per $1,000*  $ 5.32  $ 9.10  $ 9.10  $ 7.84  $ 6.58  $ 4.05 
Ending value (after expenses)  $1,019.80  $1,016.04  $1,016.04  $1,017.30  $1,018.55  $1,021.06 
Conservative Portfolio             
Expenses paid per $1,000*  $ 5.77  $ 9.55  $ 9.55  $ 8.29  $ 7.03  $ 4.51 
Ending value (after expenses)  $1,019.35  $1,015.59  $1,015.59  $1,016.85  $1,018.10  $1,020.61 

* Expenses for each share class are calculated using each 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 9/30/07. The expense ratio may differ for each share class (see the last table in this section). Expenses are calculated by multiplying the expense ratio by the average account value for the period; then multiplying the result by the number of days in the period; and then dividing that result by the number of days in the year.

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 
Growth Portfolio annualized expense ratio*  1.12%  1.87%  1.87%  1.62%  1.37%  0.87% 
Average annualized expense ratio for Lipper peer group†  1.26%  2.01%  2.01%  1.76%  1.51%  1.01% 
Balanced Portfolio annualized expense ratio*  1.05%  1.80%  1.80%  1.55%  1.30%  0.80% 
Average annualized expense ratio for Lipper peer group†  1.21%  1.96%  1.96%  1.71%  1.46%  0.96% 
Conservative Portfolio annualized expense ratio*  1.14%  1.89%  1.89%  1.64%  1.39%  0.89% 
Average annualized expense ratio for Lipper peer group†  1.41%  2.16%  2.16%  1.91%  1.66%  1.16% 

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

† Putnam is committed to keeping fund expenses below the Lipper peer group average expense ratio and will limit fund expenses if they exceed the Lipper average. The Lipper average is a simple average of front-end load funds in the peer group that excludes 12b-1 fees as well as any expense offset and brokerage service arrangements that may reduce fund expenses. To facilitate the comparison in this presentation, Putnam has adjusted the Lipper average to reflect the 12b-1 fees carried by each class of shares other than class Y shares, which do not incur 12b-1 fees. Investors should note that the other funds in the peer group may be significantly smaller or larger than the funds, and that an asset-weighted average would likely be lower than the simple average. Also, the funds and Lipper report expense data at different times and for different periods. Each 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 9/30/07.

16

Your fund’s portfolio turnover

Putnam funds are actively managed by teams of experts who buy and sell securities based on intensive analysis of companies, industries, economies, and markets. Portfolio turnover is a measure of how often a fund’s managers buy and sell securities for your fund. A portfolio turnover of 100%, for example, means that the managers sold and replaced securities valued at 100% of a fund’s 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.

Funds that invest in bonds or other fixed-income instruments may have higher turnover than funds that invest only in stocks. Short-term bond funds tend to have higher turnover than longer-term bond funds, because shorter-term bonds will mature or be sold more frequently than longer-term bonds. You can use the table below to compare your fund’s turnover with the average turnover for funds in its Lipper category.

Turnover comparisons

Percentage of holdings that change every year

  2007  2006  2005  2004  2003 
Growth Portfolio*  81%  85%  112%  120%  126% 
Lipper Mixed-Asset Target Allocation Growth Funds category average  69%  70%  72%  74%  84% 
Balanced Portfolio*  107%  90%  144%  159%  145% 
Lipper Mixed-Asset Target Allocation Moderate Funds category average  71%  73%  76%  71%  75% 
Conservative Portfolio*  151%  133%  209%  259%  200% 
Lipper Mixed-Asset Target Allocation Conservative Funds category average  54%  49%  50%  48%  52% 

Turnover data for the fund is calculated based on the fund’s fiscal-year period, which ends on September 30. Turnover data for the fund’s Lipper category is calculated based on the average of the turnover of each fund in the category for its fiscal year ended during the indicated year. Fiscal years vary across funds in the Lipper category, which may limit the comparability of the fund’s portfolio turnover rate to the Lipper average. Comparative data for 2007 is based on information available as of 9/30/07.

* Portfolio turnover excludes dollar roll transactions.

17

Your fund’s risk

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 September 30, 2007. A higher Morningstar Risk generally indicates that a fund’s monthly returns have varied more widely.

Morningstar determines a fund’s Morningstar Risk by assessing variations in the fund’s monthly returns — with an emphasis on downside variations — over a 3-year period, if available. Those measures are weighted and averaged to produce the fund’s Morningstar Risk. The information shown is provided for the fund’s class A shares only; information for other classes may vary. Morningstar Risk is based on historical data and does not indicate future results. Morningstar does not purport to measure the risk associated with a current investment in a fund, either on an absolute basis or on a relative basis. Low Morningstar Risk does not mean that you cannot lose money on an investment in a fund. Copyright 2007 Morningstar, Inc. All Rights Reserved. The information contained herein (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be 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 Global Asset Allocation Team. Jeffrey Knight is the Portfolio Leader. Robert Kea and Robert Schoen are Portfolio Members of the funds. The Portfolio Leader and Portfolio Members coordinate the team’s management of the fund.

For a complete listing of the members of the Putnam Global Asset Allocation Team, including those who are not Portfolio Leaders or Portfolio Members of your fund, visit Putnam’s Individual Investor Web site at www.putnam.com.

Investment team fund ownership

The table below shows how much the funds’ current Portfolio Leader and Portfolio Members have invested in the funds and in all Putnam mutual funds (in dollar ranges). Information shown is as of September 30, 2007, and September 30, 2006.

GP  Assets in the Growth Portfolio  • Total assets in all Putnam funds 
BP  Assets in the Balanced Portfolio   
CP  Assets in the Conservative Portfolio   

      $1 –  $10,001 –  $50,001 –  $100,001 –  $500,001 –  $1,000,001 
  Year  $0  $10,000  $50,000  $100,000  $500,000  $1,000,000  and over 
Jeffrey Knight  2007          BP CP  GP  • 
Portfolio Leader  2006          BP CP  GP  • 
Robert Kea  2007  BP CP        GP    • 
Portfolio Member  2006  BP CP        GP  •     
Robert Schoen  2007  BP CP        GP    • 
Portfolio Member  2006  BP CP        GP  •     

Trustee and Putnam employee fund ownership

As of September 30, 2007, all of the Trustees of the Putnam funds owned fund shares. The table below shows the approximate value of investments in the three Putnam Asset Allocation Funds 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.

    Putnam 
  Trustees  employees 
Growth Portfolio  $ 1,091,000  $ 27,955,000 
Balanced Portfolio  $ 5,962,000  $ 9,839,000 
Conservative Portfolio  $ 6,790,000  $ 9,008,000 
Total assets in all Putnam funds  $91,000,000  $753,000,000 

Other Putnam funds managed by the Portfolio Leader and Portfolio Members

Jeffrey Knight is also a Portfolio Leader of Putnam Income Strategies Fund and the ten Putnam RetirementReady® Funds, and a Portfolio Member of The George Putnam Fund of Boston.

Robert Kea and Robert Schoen are also Portfolio Members of Putnam Income Strategies Fund and the ten Putnam RetirementReady® Funds.

Jeffrey Knight, Robert Kea, and Robert Schoen may also manage other accounts and variable trust funds advised by Putnam Management or an affiliate.

Changes in your fund’s Portfolio Leader and Portfolio Members

Your fund’s Portfolio Leader and Portfolio Members did not change during the year ended September 30, 2007.

19

Terms and definitions

Important terms

Total return shows how the value of the fund’s shares changed over time, assuming you held the shares through the entire period and reinvested all distributions in the fund.

Net asset value (NAV) is the price, or value, of one share of a mutual fund, without a sales charge. NAVs fluctuate with market conditions. NAV is calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.

Public offering price (POP) is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. POP performance figures shown here assume the 5.25% maximum sales charge for class A shares and 3.25% for class M shares.

Contingent deferred sales charge (CDSC) is generally a charge applied at the time of the redemption of class B or C shares and assumes redemption at the end of the period. Your fund’s class B CDSC declines from a 5% maximum during the first year to 1% during the sixth year. After the sixth year, the CDSC no longer applies. The CDSC for class C shares is 1% for one year after purchase.

Share classes

Class A shares are generally subject to an initial sales charge and no CDSC (except on certain redemptions of shares bought without an initial sales charge).

Class B shares are not subject to an initial sales charge. They may be subject to a CDSC.

Class C shares are not subject to an initial sales charge and are subject to a CDSC only if the shares are redeemed during the first year.

Class M shares have a lower initial sales charge and a higher 12b-1 fee than class A shares and no CDSC (except on certain redemptions of shares bought without an initial sales charge).

Class R shares are not subject to an initial sales charge or CDSC and are available only to certain defined contribution plans.

Class Y shares are not subject to an initial sales charge or CDSC, and carry no 12b-1 fee. They are only available to eligible purchasers, including eligible defined contribution plans or corporate IRAs.

Comparative indexes

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.

Morgan Stanley Capital International (MSCI) EAFE Index is an unmanaged index of equity securities from developed countries in Western Europe, the Far East, and Australasia.

JP Morgan Developed High Yield Index is an unmanaged index of high-yield fixed-income securities issued in developed countries.

Morgan Stanley Capital International (MSCI) Emerging Markets Index is an unmanaged index of equity securities from emerging markets.

Putnam Balanced Blended Benchmark is a benchmark administered by Putnam Management that is 50% the Russell 3000 Index, 35% the Lehman Aggregate Bond Index, 10% the Morgan Stanley Capital International (MSCI) EAFE Index, and 5% the JPMorgan Developed High Yield Index.

Putnam Conservative Blended Benchmark is a benchmark administered by Putnam Management that is 65% the Lehman Aggregate Bond Index, 25% the Russell 3000 Index, 5% the JPMorgan Developed High Yield Index, and 5% the Morgan Stanley Capital International (MSCI) EAFE Index.

Putnam Growth Blended Benchmark is a benchmark administered by Putnam management that is 60% the Russell 3000 Index, 15% the Morgan Stanley Capital International (MSCI) EAFE Index, 15% the Lehman Aggregate Bond Index, 5% the JPMorgan Developed High Yield Index, and 5% the Morgan Stanley Capital International (MSCI) Emerging Markets Index.

Russell 3000 Index is an unmanaged index of the 3,000 largest U.S. companies.

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.

20

Trustee approval of management contract

General conclusions

The Board of Trustees of the Putnam funds oversees the management of each fund and, as required by law, determines annually whether to approve the continuance of your fund’s management contract with Putnam Investment Management (“Putnam Management”). In this regard, the Board of Trustees, with the assistance of its Contract Committee consisting solely of Trustees who are not “interested persons” (as such term is defined in the Investment Company Act of 1940, as amended) of the Putnam funds (the “Independent Trustees”), requests and evaluates all information it deems reasonably necessary under the circumstances. Over the course of several months ending in June 2007, the Contract Committee met several times to consider the information provided by Putnam Management and other information developed with the assistance of the Board’s independent counsel and independent staff. The Contract Committee 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, 2007.

In addition, in anticipation of the sale of Putnam Investments to Great-West Lifeco, at a series of meetings ending in March 2007, the Trustees reviewed and approved new management and distribution arrangements to take effect upon the change of control. Shareholders of all funds approved the management contracts in May 2007, and the change of control transaction was completed on August 3, 2007. Upon the change of control, the management contracts that were approved by the Trustees in June 2007 automatically terminated and were replaced by new contracts that had been approved by shareholders. In connection with their review for the June 2007 continuance of the Putnam funds’ management contracts, the Trustees did not identify any facts or circumstances that would alter the substance of the conclusions and recommendations they made in their review of the contracts to take effect upon the change of control.

The Independent Trustees’ approval was based on the following conclusions:

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

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

These conclusions were based on a comprehensive consideration of all information provided to the Trustees and were not the result of any single factor. Some of the factors that figured particularly in the Trustees’ deliberations and how the Trustees considered these factors are described below, although individual Trustees may have evaluated the information presented differently, giving different weights to various factors. It is also important to recognize that the fee arrangements for your fund and the other Putnam funds are the result of many years of review and discussion between the Independent Trustees and Putnam Management, that certain aspects of such arrangements may receive greater scrutiny in some years than others, and that the Trustees’ conclusions may be based, in part, on their consideration of these same arrangements in prior years.

Management fee schedules and categories; total expenses

The Trustees reviewed the management fee schedules in effect for all Putnam funds, including fee levels and breakpoints, and the assignment of funds to particular fee categories. In reviewing fees and expenses, the Trustees generally focused their attention on material changes in circumstances — for example, changes in a fund’s size or investment style, changes in Putnam Management’s operating costs or responsibilities, or changes in competitive practices in the mutual fund industry — that suggest that consideration of fee changes might be warranted. The Trustees concluded that the circumstances did not warrant changes to the management fee structure of your fund, which had been carefully developed over the years, re-examined on many occasions and adjusted where appropriate. The Trustees focused on two areas of particular interest, as discussed further 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., each fund ranked in the following percentiles in management fees and total expenses (less any applicable 12b-1 fees) as of December 31, 2006 (the first percentile being the least expensive funds and the 100th percentile being the most expensive funds).

21

  Actual   
  Management  Total Expenses 
Fee (percentile)  (percentile) 
Putnam Asset Allocation Funds:     
Conservative Portfolio  57th  21st 
 
Putnam Asset Allocation Funds:     
Balanced Portfolio  48th  34th 
 
Putnam Asset Allocation Funds:     
Growth Portfolio  48th  66th 

(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 implemented in January 2004 and which Putnam Management had committed to maintain at least through 2007. In anticipation of the change of control of Putnam Investments, the Trustees requested, and received a commitment from Putnam Management and Great-West Lifeco, to extend this program through at least June 30, 2009. These expense limitations give effect to a commitment by Putnam Management that the expense ratio of each open-end fund would be no higher than the average expense ratio of the competitive funds included in the fund’s relevant Lipper universe (exclusive of any applicable 12b-1 charges in each case). The Trustees observed that this commitment to limit fund expenses has served shareholders well since its inception.

In order to ensure that the expenses of the Putnam funds continue to meet evolving competitive standards, the Trustees requested, and Putnam Management agreed, to extend for the twelve months beginning July 1, 2007, an additional expense limitation for certain funds at an amount equal to the average expense ratio (exclusive of 12b-1 charges) of a custom peer group of competitive funds selected by Lipper to correspond to the size of the fund. This additional expense limitation will be applied to those open-end funds that had above-average expense ratios (exclusive of 12b-1 charges) based on the custom peer group data for the period ended December 31, 2006. This additional expense limitation will be applied to Putnam Asset Allocation Funds: Growth Portfolio.

• Economies of scale. Your fund currently has the benefit of breakpoints in its management fee that provide shareholders with significant economies of scale, which means that the effective management fee rate of a fund (as a percentage of fund assets) declines as a fund grows in size and crosses specified asset thresholds. Conversely, as a fund shrinks in size — as has been the case for many Putnam funds in recent years — these breakpoints result in increasing fee levels. In recent years, the Trustees have examined the operation of the existing breakpoint structure during periods of both growth and decline in asset levels. The Trustees concluded that the fee schedules in effect for the funds represented an appropriate sharing of economies of scale at current asset levels. In reaching this conclusion, the Trustees considered the Contract Committee’s stated intent to continue to work with Putnam Management to plan for an eventual resumption in the growth of assets, and to consider the potential economies that might be produced under various growth assumptions.

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

Investment performance

The quality of the investment process provided by Putnam Management represented a major factor in the Trustees’ evaluation of the quality of services provided by Putnam Management under your fund’s management contract. The Trustees were assisted in their review of the Putnam funds’ investment process and performance by the work of the Investment Process Committee of the Trustees and the Investment Oversight Committees of the Trustees, which had met on a regular monthly basis with the funds’ portfolio teams throughout the year. The Trustees concluded that Putnam Management generally provides a high-quality investment process — as measured by the experience and skills of the individuals assigned to the management of fund portfolios, the resources made available to such personnel, and in general the ability of Putnam Management to attract and retain high-quality personnel — but also recognized that this does not guarantee favorable investment results for every fund in every

22

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.

The Trustees noted the satisfactory investment performance of many Putnam funds. They also noted the disappointing investment performance of certain funds in recent years and discussed with senior management of Putnam Management the factors contributing to such underperformance and actions being taken to improve performance. The Trustees recognized that, in recent years, Putnam Management has made significant changes in its investment personnel and processes and in the fund product line to address areas of underperformance. In particular, they noted the important contributions of Putnam Management’s leadership in attracting, retaining and supporting high-quality investment professionals and in systematically implementing an investment process that seeks to merge the best features of fundamental and quantitative analysis. The Trustees indicated their intention to continue to monitor performance trends to assess the effectiveness of these changes and to evaluate whether additional changes to address areas of underperformance are warranted.

In the case of the Putnam Asset Allocation Funds, the Trustees considered the Lipper peer group percentile rankings for each fund’s class A share cumulative total return performance results at net asset value for the one-, three- and five-year periods ended March 31, 2007. This information is shown in the following table. (Because of the passage of time, these performance results may differ from the performance results for more recent periods shown elsewhere in this report.) Where applicable, the table also shows the number of funds in the peer groups for the respective periods; this number is indicated in parentheses following the percentile. Note that the first percentile denotes the best performing funds and the 100th percentile denotes the worst performing funds. Past performance is no guarantee of future returns.

  One-year Three-year   Five-year   
  period  period  period 
Putnam Asset Allocation Funds:  48th  37th  27th 
Conservative Portfolio  ( 175/364)  (78/214)  (28/106) 
 
Lipper Mixed-Asset Target       
Allocation Conservative Funds       
 
Putnam Asset Allocation Funds:  38th  34th  37th 
Balanced Portfolio  (227/611)  (169/504)  (136/376) 
 
Lipper Mixed-Asset Target       
Allocation Growth Funds       
 
Putnam Asset Allocation Funds:  13th  7th  10th 
Growth Portfolio  (76/611)  (34/504)  (36/376) 
 
Lipper Mixed-Asset Target       
Allocation Growth Funds       

See page 24 for more recent Lipper performance ranking information for the funds. Past performance is no guarantee of future results.

As a general matter, the Trustees concluded that cooperative efforts between the Trustees and Putnam Management represent the most effective way to address investment performance problems. The Trustees noted that investors in the Putnam funds have, in effect, placed their trust in the Putnam organization, under the oversight of the funds’ Trustees, to make appropriate decisions regarding the management of the funds. Based on the responsiveness of Putnam Management in the recent past to Trustee concerns about investment performance, the Trustees concluded that it is preferable to seek change within Putnam Management to address performance shortcomings. In the Trustees’ view, the alternative of terminating a management contract and engaging a new investment adviser for an underperforming fund would entail significant disruptions and would not provide any greater assurance of improved investment performance.

Brokerage and soft-dollar allocations; other benefits

The Trustees considered various potential benefits that Putnam Management may receive in connection with the services it provides under the management contract with your fund. These include benefits related to brokerage and soft-dollar allocations, whereby a portion of the commissions paid by a fund for brokerage may be used to acquire research services that may be useful to Putnam Management in managing the assets of the fund and of other clients. The Trustees indicated their continued intent to monitor the potential benefits associated with the allocation of fund brokerage to ensure that the principle of seeking “best price and execution” remains paramount in the portfolio trading process.

The Trustees’ annual review of your fund’s management contract also included the review of its distributor’s contract and distribution plan with Putnam Retail Management Limited Partnership and the custodian agreement and investor servicing agreement with Putnam Fiduciary Trust Company (“PFTC”), each of which provides benefits to affiliates of Putnam Management. In the case of the custodian agreement, the Trustees considered that, effective January 1, 2007, the Putnam funds had engaged State Street Bank and Trust Company as custodian and began to transition the responsibility for providing custody services away from PFTC.

23

Comparison of retail and institutional fee schedules

The information examined by the Trustees as part of their annual contract review has included for many years information regarding fees charged by Putnam Management and its affiliates to institutional clients such as defined benefit pension plans, college endowments, etc. This information included comparison of such fees with fees charged to the funds, as well as a detailed assessment of the differences in the services provided to these two types of clients. The Trustees observed, in this regard, that the differences in fee rates between institutional clients and the funds are by no means uniform when examined by individual asset sectors, suggesting that differences in the pricing of investment management services to these types of clients reflect to a substantial degree historical competitive forces operating in separate market places. The Trustees considered the fact that fee rates across all asset sectors are higher on average for funds than for institutional clients, as well as the differences between the services that Putnam Management provides to the Putnam funds and those that it provides to institutional clients of the firm, but did not rely on such comparisons to any significant extent in concluding that the management fees paid by your fund are reasonable.

More Recent Peer Group Rankings

More recent Lipper percentile rankings are shown for the funds in the following table. Note that this information was not available to the Trustees when they approved the continuance of the fund’s management contract. The table shows the Lipper peer group percentile rankings of each fund’s class A share total return performance at net asset value. These rankings were determined on an annualized basis and are for the one-, five-, and ten-year periods ended on the most recent calendar quarter (September 30, 2007). Where applicable, the table also shows the fund’s rank among the total number of funds in its peer group for the respective periods; this information is indicated in parentheses following the percentile. Note that the first percentile denotes the best performing funds and the 100th percentile denotes the worst performing funds.

  One-year  Five-year  Ten-year 
  period  period  period 
Putnam Asset Allocation Funds:  90th  37th  57th 
Conservative Portfolio  (360/401)  (49/135)  (30/52) 
Lipper Mixed-Asset Target       
Allocation Conservative Funds       
 
Putnam Asset Allocation Funds:  83rd  31st  54th 
Balanced Portfolio  (367/442)  (71/231)  (68/127) 
 
Lipper Mixed-Asset Target       
Allocation Moderate Funds       
 
Putnam Asset Allocation Funds:  43rd  7th  36th 
Growth Portfolio  (270/627)  (25/397)  (71/201) 
 
Lipper Mixed-Asset Target       
Allocation Growth Funds       

24

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 7:00 p.m., or Saturdays from 9:00 a.m. to 5:00 p.m. Eastern Time.

Proxy voting

Putnam is committed to managing our mutual funds in the best interests of our shareholders. The Putnam funds’ proxy voting guidelines and procedures, as well as information regarding how your fund voted proxies relating to portfolio securities during the 12-month period ended June 30, 2007, are available on the Putnam Individual Investor Web site, www.putnam.com/individual, and on the SEC’s Web site, www.sec.gov. If you have questions about finding forms on the SEC’s Web site, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.

Fund portfolio holdings

The fund will file a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain the fund’s Forms N-Q on the SEC’s Web site at www.sec.gov. In addition, the fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for information about the SEC’s Web site or the operation of the Public Reference Room.

25

Financial statements

These sections of the report, as well as the accompanying Notes, preceded by the Report of Independent Registered Public Accounting Firm, constitute the fund’s financial statements.

The fund’s portfolio lists all the fund’s investments and their values as of the last day of the reporting period. Holdings are organized by asset type and industry sector, country, or state to show areas of concentration and diversification.

Statement of assets and liabilities shows how the fund’s net assets and share price are determined. All investment and non-investment assets are added together. Any unpaid expenses and other liabilities are subtracted from this total. The result is divided by the number of shares to determine the net asset value per share, which is calculated separately for each class of shares. (For funds with preferred shares, the amount subtracted from total assets includes the liquidation preference of preferred shares.)

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

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

Financial highlights provide an overview of the fund’s investment results, per-share distributions, expense ratios, net investment income ratios, and portfolio turnover in one summary table, reflecting the five most recent reporting periods. In a semiannual report, the highlight table also includes the current reporting period.

26

Report of Independent Registered Public Accounting Firm

To the Trustees and Shareholders of
Putnam Asset Allocation Funds:

In our opinion, the accompanying statements of assets and liabilities, including the funds’ portfolios, 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 each of the funds (Growth Portfolio, Balanced Portfolio and Conservative Portfolio) constituting the Putnam Asset Allocation Funds (the “trust”) at September 30, 2007, and the results of each of their operations, the changes in each of their 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 trust’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 September 30, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Boston, Massachusetts
November 15, 2007

27

The funds’ portfolios 9/30/07

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares    Value  Shares    Value  Shares    Value 
Banking      6.5%      5.1%      3.2% 
Allied Irish Banks PLC (Ireland)  85,999  $  2,086,104  65,247  $  1,582,716  17,278  $  419,118 
Australia & New Zealand Banking Group,                   
Ltd. (Australia)  113,755    2,994,829  85,403    2,248,406  23,311    613,709 
Banco do Brasil SA (Brazil)  82,400    1,389,376  —    —  —    — 
Banco Latinoamericano de Exportaciones                   
SA Class E (Panama)  35,400    643,572  25,300    459,954  —    — 
Bank of America Corp. #  152,627    7,672,559  124,893    6,278,371  43,514    2,187,449 
Bank of Cyprus PCL (Cyprus)  33,230    587,009  —    —  —    — 
BankUnited Financial Corp. Class A  26,800    416,472  19,500    303,030  —    — 
Banner Corp.  15,200    522,728  11,000    378,290  —    — 
Barclays PLC (United Kingdom)  662,561    8,069,440  467,476    5,693,468  127,052    1,547,387 
BNP Paribas SA (France)  93,387    10,225,905  69,442    7,603,920  19,093    2,090,689 
Boston Private Financial Holdings, Inc.  26,500    737,760  19,900    554,016  7,000    194,880 
Center Financial Corp.  25,400    353,314  18,600    258,726  —    — 
China Merchants Bank Co., Ltd. (China)  107,500    469,385  —    —  —    — 
Citizens Republic Bancorp, Inc.  34,400    554,184  30,900    497,799  10,900    175,599 
City Bank  22,200    637,584  15,800    453,776  —    — 
City Holding Co.  14,100    513,381  10,300    375,023  —    — 
Comerica, Inc.  4,300    220,504  3,200    164,096  1,100    56,408 
Commerzbank AG (Germany)  21,285    862,249  16,134    653,583  4,410    178,648 
Corus Bankshares, Inc.  28,400    369,768  20,500    266,910  —    — 
DBS Group Holdings, Ltd. (Singapore)  254,000    3,676,390  188,000    2,721,108  52,000    752,647 
Dexia (Belgium)  13,102    397,087  —    —  —    — 
Downey Financial Corp.  9,000    520,200  6,600    381,480  —    — 
First Community Bancorp  4,300    235,253  3,200    175,072  1,100    60,181 
First Midwest Bancorp, Inc.  20,300    693,448  15,200    519,232  5,400    184,464 
First Niagara Financial Group, Inc.  85,000    1,202,750  70,100    991,915  24,800    350,920 
First Regional Bancorp †  13,600    333,608  9,900    242,847  —    — 
FirstFed Financial Corp. †  17,700    877,035  13,200    654,060  —    — 
FirstMerit Corp.  48,900    966,264  36,600    723,216  12,900    254,904 
Frontier Financial Corp.  14,800    345,284  11,100    258,963  3,900    90,987 
Fukuoka Financial Group, Inc. (Japan)  264,000    1,541,693  200,000    1,167,950  52,000    303,667 
Hancock Holding Co.  17,300    693,384  15,100    605,208  5,300    212,424 
HBOS PLC (United Kingdom)  338,522    6,331,497  250,733    4,689,548  67,409    1,260,774 
Imperial Capital Bancorp, Inc.  10,400    293,800  7,500    211,875  —    — 
Industrial & Commercial Bank of China (China)  4,324,000    3,027,319  —    —  —    — 
Intervest Bancshares Corp.  18,200    450,450  13,200    326,700  —    — 
Julius Baer Holding, Ltd. Class B (Switzerland)  16,394    1,226,767  —    —  —    — 
KBC Groupe SA (Belgium)  94,692    13,035,993  70,413    9,693,568  19,360    2,665,239 
KeyCorp #  63,980    2,068,473  50,600    1,635,898  17,900    578,707 
Kookmin Bank (South Korea)  6,356    522,925  —    —  —    — 
Mitsubishi UFJ Financial Group, Inc. (Japan) (F)  333    3,046,055  250    2,286,828  66    603,723 
Mizuho Financial Group, Inc. (Japan)  498    2,825,820  373    2,116,528  100    567,434 
Nara Bancorp, Inc.  29,000    452,980  21,000    328,020  —    — 
National Penn Bancshares, Inc. (SG) (SB)  39,920    653,091  28,575    467,487  —    — 
Nordea AB (Sweden)  843,526    14,718,454  622,500    10,861,832  168,050    2,932,258 
Northern Trust Corp.  7,600    503,652  7,200    477,144  2,500    165,675 
Old National Bancorp (SB)  74,700    1,237,779  61,600    1,020,712  21,800    361,226 
Pacific Capital Bancorp.  92,200    2,424,860  72,200    1,898,860  20,300    533,890 
PFF Bancorp, Inc.  15,400    236,236  11,300    173,342  —    — 
PNC Financial Services Group  43,700    2,975,970  35,300    2,403,930  12,500    851,250 
Preferred Bank  15,500    609,770  11,200    440,608  —    — 
Provident Bankshares Corp.  34,300    1,074,619  28,600    896,038  10,100    316,433 
Societe Generale (France)  75,223    12,631,265  55,355    9,295,078  15,019    2,521,954 
Southwest Bancorp, Inc.  25,600    481,792  18,600    350,052  —    — 
Standard Bank Investment Corp., Ltd.                   
(South Africa) ##  217,245    3,149,047  —    —  —    — 
Sterling Bancshares, Inc.  62,700    715,407  54,900    626,409  19,400    221,354 

28

COMMON STOCKS*  Growth 78.1% Balanced 62.3% Conservative 37.9%
  Shares  Value Shares  Value Shares  Value
Banking continued       
Sterling Financial Corp.  35,700  $ 960,687 30,100  $ 809,991 10,600  $ 285,246
Sumitomo Mitsui Financial Group, Inc. (Japan)  175  1,357,994 132  1,024,316 36  279,359
Suncorp-Metway, Ltd. (Australia)  26,385  474,951 —  — —  —
SVB Financial Group †  23,700  1,122,432 19,600  928,256 6,900  326,784
Swedbank AB (Sweden)  9,700  324,790 —  — —  —
Taylor Capital Group, Inc.  19,000  530,670 13,600  379,848 —  —
Toronto-Dominion Bank (Canada)  10,600  814,153 —  — —  —
Trustmark Corp.  24,700  692,588 18,500  518,740 6,600  185,064
Turkiye Garanti Bankasi AS (Turkey)  140,999  1,080,743 —  — —  —
U.S. Bancorp  172,087  5,597,990 139,954  4,552,704 49,500  1,610,235
UCBH Holdings, Inc.  6,800  118,864 5,100  89,148 1,800  31,464
Umpqua Holdings Corp.  33,000  660,330 24,700  494,247 8,700  174,087
Unibanco-Uniao de Bancos Brasileiros SA       
ADR (Brazil)  14,500  1,907,475 —  — —  —
United Bankshares, Inc.  11,700  356,148 8,700  264,828 3,100  94,364
United Community Banks, Inc.  9,700  237,844 10,900  267,268 3,900  95,628
Vineyard National Bancorp  26,010  434,887 18,900  316,008 —  —
Wachovia Corp.  140,313  7,036,697 114,015  5,717,852 40,296  2,020,844
Washington Mutual, Inc.  216,100  7,630,491 176,900  6,246,339 61,600  2,175,096
Wells Fargo & Co.  279,560  9,957,927 228,852  8,151,708 80,900  2,881,658
Westpac Banking Corp. (Australia)  329,255  8,317,090 223,533  5,646,517 60,533  1,529,084
   
 
 
    175,117,291   121,821,362   34,942,911
 
Basic Materials    5.7%    4.0%    2.3% 
Arcelor Mittal (Luxembourg)  214,830  16,967,040 159,746  12,616,566 43,923  3,468,991
Arch Chemicals, Inc.  66,910  3,136,741 51,120  2,396,506 10,800  506,304
Balfour Beatty PLC (United Kingdom)  94,676  918,781 76,653  743,877 20,828  202,125
BASF AG (Germany)  18,438  2,551,991 13,712  1,897,868 3,717  514,467
BHP Billiton, Ltd. (Australia)  373,244  14,688,279 277,542  10,922,116 76,313  3,003,147
BlueScope Steel, Ltd. (Australia)  90,031  857,504 72,892  694,263 19,806  188,643
Buckeye Technologies, Inc. †  7,900  119,606 11,900  180,166 4,200  63,588
Builders FirstSource, Inc. †  30,000  323,400 30,000  323,400 10,600  114,268
Cambrex Corp.  115,500  1,257,795 82,661  900,178 —  —
Carpenter Technology Corp.  13,000  1,690,130 9,400  1,222,094 —  —
Cemex SA de CV ADR (Mexico) (SG)  63,748  1,907,340 —  — —  —
Ceradyne, Inc. † (SG)  10,000  757,400 7,500  568,050 2,700  204,498
CF Industries Holdings, Inc.  73,300  5,564,203 56,414  4,282,387 12,100  918,511
Chaoda Modern Agriculture (Hong Kong)  1,520,000  1,230,077 —  — —  —
China Oriental Group Co., Ltd. (Hong Kong)  52,000  29,688 —  — —  —
Clariant AG (Switzerland) †  115,024  1,414,935 89,369  1,099,347 24,115  296,644
Cleveland-Cliffs, Inc. (SB)  50,900  4,477,673 39,821  3,503,053 7,700  677,369
Companhia Vale do Rio Doce (CVRD) ADR (Brazil)  124,644  4,229,171 —  — —  —
Companhia Vale do Rio Doce       
(CVRD) (Preference A) ADR (Brazil)  105,600  3,004,320 —  — —  —
Dongkuk Steel Mill Co., Ltd. (South Korea)  32,500  1,708,442 —  — —  —
Dow Chemical Co. (The) #  52,900  2,277,874 43,800  1,886,028 15,500  667,430
Drew Industries, Inc. †  6,100  248,148 4,600  187,128 1,600  65,088
Fletcher Building, Ltd. (New Zealand)  310,612  2,984,688 230,969  2,219,394 63,508  610,252
FMC Corp.  88,000  4,577,760 73,800  3,839,076 25,400  1,321,308
Grasim Industries, Ltd. (India)  7,600  671,074 —  — —  —
Grief, Inc. Class A  11,998  728,039 8,600  521,848 —  —
H.B. Fuller Co.  54,000  1,602,720 42,800  1,270,304 6,700  198,856
Haynes International, Inc. †  14,700  1,254,939 10,593  904,324 —  —
Hecla Mining Co. †  47,400  424,230 34,144  305,589 —  —
Hyundai Steel Co. (South Korea)  23,110  1,938,572 —  — —  —
International Nickel Indonesia Tbk PT (Indonesia)  265,500  1,841,159 —  — —  —
Italcementi SpA (Italy)  25,813  572,378 20,899  463,415 5,679  125,926

29

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares  Value  Shares  Value  Shares  Value 
Basic Materials continued             
JFE Holdings, Inc. (Japan)  22,600  $ 1,594,773  17,200  $ 1,213,721  4,900  $ 345,769 
Kajima Corp. (Japan)  78,000  267,482  —  —  —  — 
Kazakhstan Kagazy PLC GDR (Kazakhstan) †  346,178  1,609,728  —  —  —  — 
Koninklijke DSM NV (Netherlands)  28,391  1,533,346  22,421  1,210,917  6,366  343,816 
Koppers Holdings, Inc.  56,200  2,169,882  41,100  1,586,871  2,700  104,247 
Layne Christensen Co. †  22,200  1,231,656  18,300  1,015,284  5,900  327,332 
LG Chemical, Ltd. (South Korea)  19,530  2,042,888  —  —  —  — 
LG Engineering & Construction, Ltd. (South Korea)  11,950  2,059,233  —  —  —  — 
Matsushita Electric Works, Ltd. (Japan)  61,000  734,343  46,000  553,767  13,000  156,499 
Minerals Technologies, Inc.  1,800  120,600  1,300  87,100  500  33,500 
MMC Norilsk Nickel ADR (Russia)  8,327  2,267,026  —  —  —  — 
Monsanto Co.  32,400  2,777,976  26,700  2,289,258  9,000  771,660 
Nucor Corp.  2,200  130,834  1,600  95,152  600  35,682 
Olin Corp.  22,400  501,312  21,000  469,980  7,400  165,612 
OM Group, Inc. †  23,400  1,235,754  16,500  871,365  —  — 
Orascom Construction Industries (OCI) (Egypt)  17,958  1,507,861  —  —  —  — 
Packaging Corp. of America  27,100  787,797  20,300  590,121  7,200  209,304 
Perini Corp. †  35,900  2,007,887  28,500  1,594,005  10,100  564,893 
Potlatch Corp. (R)  19,600  882,588  16,800  756,504  5,900  265,677 
PPG Industries, Inc.  54,440  4,112,942  44,350  3,350,643  15,700  1,186,135 
Quanex Corp.  54,550  2,562,759  42,275  1,986,080  8,800  413,424 
Rautaruukki OYJ (Finland)  56,150  3,404,317  42,750  2,591,889  11,350  688,139 
Rayonier, Inc.  50,725  2,436,829  42,250  2,029,690  14,900  715,796 
RBC Bearings, Inc. †  19,400  743,990  14,600  559,910  5,100  195,585 
Rio Tinto PLC (United Kingdom)  9,342  807,813  —  —  —  — 
Salzgitter AG (Germany)  5,010  984,671  —  —  —  — 
Schulman (A.), Inc.  10,900  215,057  8,200  161,786  2,900  57,217 
SGL Carbon AG (Germany) †  7,038  403,709  —  —  —  — 
Shin-Etsu Chemical Co. (Japan)  23,200  1,598,011  17,600  1,212,284  5,000  344,399 
Sika AG (Switzerland)  105  204,711  —  —  —  — 
Silgan Holdings, Inc.  26,900  1,445,875  19,399  1,042,696  —  — 
Skanska AB Class B (Sweden)  120,800  2,397,794  90,200  1,790,406  24,200  480,353 
Smurfit Kappa PLC (Ireland) †  11,187  259,394  —  —  —  — 
Smurfit Kappa PLC 144A (Ireland) †  3,209  74,407  —  —  —  — 
Southern Copper Corp. (SG) (SB) (SC)  75,886  9,396,963  61,700  7,640,311  21,800  2,699,494 
Steel Dynamics, Inc.  13,400  625,780  9,605  448,554  —  — 
Sun Hydraulics Corp.  5,000  159,000  3,700  117,660  1,300  41,340 
Terra Industries, Inc. †  13,400  418,884  10,100  315,726  3,600  112,536 
ThyssenKrupp AG (Germany)  18,000  1,147,056  13,600  866,665  3,700  235,784 
Voest-Alpine AG (Austria)  98,702  8,534,776  73,451  6,351,318  19,659  1,699,916 
W.R. Grace & Co. † (SG) (SB)  9,000  241,740  6,800  182,648  2,400  64,464 
Xingda International Holdings, Ltd. (China)  3,054,000  1,032,740  —  —  —  — 
   
 
 
    154,628,281    95,929,288    25,405,988 
 
Biotechnology    —%    —%    —% 
Basilea Pharmaceutical 144A             
(Switzerland) †  797  181,899  —  —  —  — 
 
Capital Goods    6.1%    4.9%    2.9% 
ABB, Ltd. (Switzerland)  27,681  729,562  22,412  590,692  7,040  185,547 
Actividades de Construccion y Servicios             
SA (Spain)  77,949  4,304,424  58,007  3,203,206  15,581  860,399 
Acuity Brands, Inc.  18,700  943,976  15,800  797,584  5,000  252,400 
AGCO Corp. † (SG)  30,900  1,568,793  22,300  1,132,171  —  — 
Alliance Global Group, Inc. (Philippines) †  1,530,000  177,688  —  —  —  — 
Alliance Global Group, Inc. 144A             
(Philippines) †  2,284,200  265,278  —  —  —  — 
Alstom (France)  4,883  993,364  —  —  —  — 

30

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares    Value  Shares    Value  Shares    Value 
Capital Goods continued                   
American Science & Engineering, Inc. (SG)  17,500  $  1,096,550  12,612  $  790,268  —  $  — 
Andritz AG (Austria)  53,309    3,685,427  37,229    2,573,764  10,236    707,649 
Applied Industrial Technologies, Inc.  50,450    1,555,374  36,253    1,117,680  —    — 
Astec Industries, Inc. †  10,800    620,460  8,100    465,345  2,900    166,605 
Autoliv, Inc. (Sweden)  36,900    2,204,775  30,800    1,840,300  10,900    651,275 
BAE Systems PLC (United Kingdom)  178,243    1,799,018  135,783    1,370,466  39,970    403,420 
Bharat Heavy Electricals, Ltd. (India)  58,644    2,998,045  —    —  —    — 
Boeing Co. (The)  120,350    12,635,547  99,100    10,404,509  34,700    3,643,153 
Bouygues SA (France)  33,012    2,849,371  24,566    2,120,370  6,821    588,742 
CAE, Inc. (Canada)  42,900    578,247  —    —  —    — 
Canon, Inc. (Japan)  91,250    4,949,269  67,900    3,682,798  18,400    997,990 
Cascade Corp.  16,300    1,062,271  11,800    769,006  —    — 
Clean Harbors, Inc. †  18,200    810,264  13,194    587,397  —    — 
Columbus McKinnon Corp. †  32,100    798,969  23,090    574,710  —    — 
Cookson Group PLC (United Kingdom)  130,012    2,028,821  82,158    1,282,065  23,327    364,015 
Cummins, Inc.  72,260    9,241,331  58,680    7,504,585  20,700    2,647,323 
Curtiss-Wright Corp. (SG) (SB)  17,700    840,750  12,612    599,070  —    — 
Daelim Industrial Co. (South Korea)  4,420    814,963  —    —  —    — 
Daito Trust Construction Co., Ltd. (Japan)  19,300    928,395  9,500    456,982  2,600    125,069 
Disco Corp. (Japan)  9,400    522,952  —    —  —    — 
Eaton Corp. (SG)  11,500    1,138,960  9,600    950,784  3,400    336,736 
Emerson Electric Co.  109,080    5,805,238  89,000    4,736,580  31,500    1,676,430 
EnPro Industries, Inc. †  38,890    1,578,934  31,300    1,270,780  11,100    450,660 
European Aeronautic Defense and                   
Space Co. (Netherlands)  24,004    738,458  19,435    597,898  5,281    162,464 
Freightcar America, Inc.  42,300    1,615,860  33,200    1,268,240  7,000    267,400 
Gardner Denver, Inc. †  27,200    1,060,800  19,403    756,717  —    — 
General Cable Corp. † (SB)  41,300    2,772,056  29,799    2,000,109  —    — 
Glory, Ltd. (Japan)  26,100    828,820  —    —  —    — 
Hardinge, Inc.  10,300    358,749  10,300    358,749  3,600    125,388 
Heico Corp. (SG)  19,000    937,840  13,700    676,232  —    — 
Herman Miller, Inc.  116,800    3,169,952  87,500    2,374,750  30,900    838,626 
II-VI, Inc. †  41,200    1,422,636  30,389    1,049,332  6,000    207,180 
Illinois Tool Works, Inc. (SG) (SB)  63,700    3,799,068  52,300    3,119,172  18,500    1,103,340 
IMI PLC (United Kingdom)  95,341    1,042,229  77,191    843,821  20,975    229,290 
Intevac, Inc. †  45,100    685,520  33,800    513,760  11,900    180,880 
Legrand SA (France)  10,127    340,592  —    —  —    — 
Leighton Holdings, Ltd. (Australia)  92,538    4,211,182  70,558    3,210,925  19,227    874,975 
Lockheed Martin Corp.  88,800    9,633,912  72,800    7,898,072  25,400    2,755,646 
LoJack Corp. †  36,145    685,309  26,090    494,666  —    — 
MAN AG (Germany)  3,976    578,966  3,013    438,738  828    120,569 
Manitowoc Co., Inc. (The)  14,300    633,204  12,900    571,212  4,600    203,688 
Matthews International Corp.  20,500    897,900  14,300    626,340  —    — 
McDermott International, Inc. †  21,000    1,135,680  17,500    946,400  6,200    335,296 
Moog, Inc. †  50,900    2,236,546  36,791    1,616,597  —    — 
MTU Aero Engines Holding AG (Germany)  4,650    283,318  —    —  —    — 
Murray & Roberts Holdings, Ltd. (South Africa)  159,263    2,085,750  —    —  —    — 
Nexans SA (France)  2,033    334,617  —    —  —    — 
Nordson Corp. (SG) (SB) (SC)  14,300    718,003  12,500    627,625  4,400    220,924 
Northrop Grumman Corp.  14,700    1,146,600  12,100    943,800  4,300    335,400 
OKUMA Corp. (Japan)  19,000    275,405  —    —  —    — 
Orbital Sciences Corp. †  78,100    1,736,944  57,457    1,277,844  11,800    262,432 
Parker-Hannifin Corp.  23,300    2,605,639  19,200    2,147,136  6,800    760,444 
Pliant Corp. (F) †  —    —  —    —  3    1 
Raytheon Co.  109,000    6,956,380  90,300    5,762,946  31,400    2,003,947 
Rieter Holding AG (Switzerland)  6,067    3,285,661  4,512    2,443,531  1,241    672,079 
Rofin-Sinar Technologies, Inc. †  11,900    835,499  8,441    592,643  —    — 
Samsung Heavy Industries Co., Ltd.                   
(South Korea)  34,150    1,814,179  —    —  —    — 

31

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares    Value  Shares    Value  Shares    Value 
Capital Goods continued                   
Schneider Electric SA (France)  2,121  $  268,144  —  $  —  —  $  — 
Siemens AG (Germany)  8,175    1,124,730  —    —  —    — 
Spartan Motors, Inc. (SG) (SB)  40,540    682,288  29,219    491,756  —    — 
Steelcase, Inc. (SG) (SB)  126,600    2,276,268  105,400    1,895,092  37,300    670,654 
Sumitomo Heavy Industries, Ltd. (Japan)  59,000    760,249  —    —  —    — 
Superior Essex, Inc. †  7,000    260,960  7,900    294,512  2,800    104,384 
Teledyne Technologies, Inc. †  22,700    1,211,953  16,396    875,382  —    — 
Terex Corp. †  7,380    656,968  5,534    492,637  2,000    178,040 
Thomas & Betts Corp. †  70,400    4,128,256  57,600    3,377,664  20,400  1,196,256 
Tomkins PLC (United Kingdom)  156,045    725,253  126,339    587,188  34,329    159,551 
United Industrial Corp. (SG) (SB)  34,100    2,566,366  24,633    1,853,880  —    — 
United Technologies Corp.  45,100    3,629,648  36,100    2,905,328  12,800  1,030,144 
USEC, Inc. † (SG) (SB) (SC)  149,070    1,527,968  115,555    1,184,439  23,700    242,925 
Vinci SA (France)  66,484    5,197,709  46,134    3,606,749  12,490    976,466 
Volvo AB Class A (Sweden)  161,200    2,805,221  119,900    2,086,513  31,300    544,686 
Wabtec Corp. (SG) (SB)  65,700    2,461,122  53,453    2,002,349  13,700    513,202 
Wartsila OYJ Class B (Finland)  32,200    2,207,714  25,100    1,720,920  6,900    473,082 
Zelan Berhad (Malaysia)  1,178,000    2,141,682  —    —  —    — 
Zumtobel AG (Austria)  9,580    364,981  —    —  —    — 
   
 
 
      165,387,770    115,352,776    31,806,772 
 
Communication Services      4.2%      3.1%      2.0% 
Adelphia Recovery Trust (Ser. ACC-1) †  194,250    15,540  262,238    20,979  121,406    9,712 
Alaska Communications Systems Group, Inc.  8,700    125,715  6,600    95,370  2,300    33,235 
America Movil SAB de C.V. ADR Ser. L                   
(Mexico) (SG)  41,474    2,654,336  —    —  —    — 
AT&T, Inc. #  300,319    12,706,497  246,941  10,448,074  86,524  3,660,830 
Atlantic Tele-Network, Inc.  21,900    796,065  15,700    570,695  —    — 
Belgacom SA (Belgium)  17,083    793,186  13,831    642,192  3,759    174,535 
Brasil Telecom SA (Preference) (Brazil)  22,020    207,940  —    —  —    — 
C-COR.net Corp. †  33,800    388,362  33,800    388,362  11,900    136,731 
Carphone Warehouse Group PLC                   
(The) (United Kingdom) (SG)  94,768    675,461  —    —  —    — 
Centennial Communications Corp. †  87,500    885,500  62,650    634,018  —    — 
China Mobile, Ltd. (Hong Kong)  223,500    3,662,771  —    —  —    — 
China Mobile, Ltd. ADR (Hong Kong)  7,800    639,912  —    —  —    — 
Chunghwa Telecom Co., Ltd. (Taiwan)  1,217,700    2,261,247  —    —  —    — 
Coleman Cable, Inc. † (SB)  59,000    816,560  42,268    584,989  —    — 
Comcast Corp. Class A † (SG)  86,550    2,092,779  71,700    1,733,706  25,300    611,754 
Deutsche Telekom AG (Germany)  32,202    633,178  26,099    513,176  7,089    139,389 
Deutsche Telekom AG ADR (Germany)  56,066    1,100,576  45,432    891,830  12,364    242,705 
DirecTV Group, Inc. (The) †  138,700    3,367,636  115,500    2,804,340  39,500    959,060 
Echostar Communications Corp. Class A †  42,100    1,970,701  35,700    1,671,117  12,600    589,806 
Embarq Corp.  21,619    1,202,016  17,746    986,678  6,275    348,890 
France Telecom SA (France)  46,396    1,555,096  37,391    1,253,267  11,234    376,540 
Globe Telecom, Inc. (Philippines)  50,800    1,657,112  —    —  —    — 
Golden Telecom, Inc. (Russia) (SG) (SB)  23,600    1,899,564  18,900    1,521,261  6,700    539,283 
InterDigital, Inc. † (SG) (SB)  106,300    2,208,914  86,508    1,797,636  24,900    517,422 
j2 Global Communications, Inc. †  13,600    445,128  10,200    333,846  3,600    117,828 
KDDI Corp. (Japan)  1,643    12,172,130  1,221    9,045,752  335  2,481,840 
Koninklijke (Royal) KPN NV (Netherlands)  215,092    3,735,153  142,014    2,466,126  37,865    657,540 
Liberty Global, Inc. Class A †  88,400    3,626,168  72,700    2,982,154  25,700  1,054,214 
Mobile Telesystems ADR (Russia)  42,950    2,976,865  —    —  —    — 
Nice Systems, Ltd. ADR (Israel) †  24,500    878,080  17,366    622,397  —    — 
Nippon Telegraph & Telephone                   
(NTT) Corp. (Japan)  760    3,550,897  568    2,653,828  152    710,179 
Novatel Wireless, Inc. † (SG)  14,400    326,160  10,800    244,620  3,800    86,070 
NTELOS Holdings Corp.  4,300    126,678  3,200    94,272  1,100    32,406 

32

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares  Value  Shares  Value  Shares  Value 
Communication Services continued             
NTT DoCoMo, Inc. (Japan)  638  $ 907,562  517  $ 735,438  141  $ 200,574 
Premiere Global Services, Inc. †  120,400  1,523,060  88,026  1,113,529  11,900  150,535 
Rogers Communications Class B (Canada)  12,100  551,528  —  —  —  — 
SAVVIS, Inc. †  21,700  841,526  15,620  605,744  —  — 
Sprint Nextel Corp.  401,180  7,622,420  329,820  6,266,580  116,600  2,215,400 
StarHub, Ltd. (Singapore)  190,000  395,977  —  —  —  — 
Syniverse Holdings, Inc. †  75,000  1,192,500  54,242  862,448  5,900  93,810 
Telecom Corp. of New Zealand, Ltd.             
(New Zealand)  2,165,631  7,314,184  1,610,352  5,438,789  442,788  1,495,469 
Telecom Egypt (Egypt)  622,892  1,896,583  —  —  —  — 
Telefonica SA (Spain)  126,386  3,540,078  66,885  1,873,452  18,116  507,430 
Telekom Austria AG (Austria)  15,127  396,080  12,248  320,697  3,519  92,140 
Telephone and Data Systems, Inc.  12,500  834,375  10,700  714,225  3,300  220,275 
USA Mobility, Inc. †  62,500  1,054,375  52,000  877,240  18,400  310,408 
Verizon Communications, Inc.  268,876  11,905,829  220,253  9,752,803  77,900  3,449,412 
Vodafone Group PLC (United Kingdom)  109,789  396,314  —  —  —  — 
   
 
 
    112,526,314    73,561,630    22,215,422 
 
Communications Equipment    1.4%    1.2%    0.8% 
Arris Group, Inc. †  8,300  102,505  6,200  76,570  2,200  27,170 
Cisco Systems, Inc. † #  559,490  18,524,714  457,276  15,140,408  160,700  5,320,777 
CommScope, Inc. †  25,400  1,276,096  18,600  934,464  —  — 
F5 Networks, Inc. †  16,600  617,354  11,642  432,966  —  — 
Nokia OYJ (Finland)  383,210  14,577,751  248,364  9,448,053  67,462  2,566,332 
Qualcomm, Inc.  61,070  2,580,818  50,400  2,129,904  17,800  752,228 
Telefonaktiebolaget LM Ericsson AB             
Class B (Sweden)  378,892  1,518,865  237,027  950,170  71,539  286,778 
   
 
 
    39,198,103    29,112,535    8,953,285 
 
Computers    2.0%    1.6%    0.8% 
Acme Packet, Inc. † (SB)  75,900  1,170,378  54,135  834,762  —  — 
Actuate Corp. †  103,100  664,995  75,137  484,634  —  — 
Anixter International, Inc. †  12,000  989,400  8,538  703,958  —  — 
ANSYS, Inc. † (SG) (SB)  76,100  2,600,337  54,759  1,871,115  —  — 
Apple Computer, Inc. †  24,000  3,684,960  19,900  3,055,446  7,000  1,074,780 
Atheros Communications †  20,300  608,391  14,456  433,246  —  — 
Blackbaud, Inc.  42,300  1,067,652  30,657  773,783  —  — 
Brocade Communications Systems, Inc. †  135,000  1,155,600  113,800  974,128  40,200  344,112 
Checkpoint Systems, Inc. †  35,700  942,123  26,000  686,140  2,200  58,058 
Compuware Corp. † (SG) (SB)  136,700  1,096,334  102,500  822,050  36,200  290,324 
Emulex Corp. †  69,300  1,328,481  51,100  979,587  9,600  184,032 
EPIQ Systems, Inc. †  44,100  829,962  32,174  605,515  —  — 
Fujitsu, Ltd. (Japan)  105,000  739,917  85,000  598,980  23,000  162,077 
Hewlett-Packard Co. (SG)  295,600  14,717,924  242,500  12,074,075  85,100  4,237,129 
Hitachi, Ltd. (Japan)  756,000  5,023,946  562,000  3,734,732  155,000  1,030,042 
Hutchinson Technology, Inc. †  47,400  1,166,040  39,100  961,860  13,800  339,480 
Immersion Corp. †  8,100  132,678  6,000  98,280  2,100  34,398 
Jack Henry & Associates, Inc.  44,500  1,150,770  32,075  829,460  —  — 
Mitsubishi Electric Corp. (Japan)  150,000  1,875,668  110,000  1,375,490  32,000  400,142 
Palm, Inc. † (SG) (SB) (SC)  15,500  252,185  11,600  188,732  4,100  66,707 
Polycom, Inc. † (SG) (SC)  95,200  2,557,072  75,411  2,025,539  16,500  443,190 
Progress Software Corp. †  3,900  118,170  2,900  87,870  1,000  30,300 
Research in Motion, Ltd. (Canada) †  6,760  665,180  —  —  —  — 
Satyam Computer Services, Ltd. (India)  98,547  1,100,650  —  —  —  — 
Silicon Storage Technology, Inc. †  110,500  355,810  82,900  266,938  29,300  94,346 
Smart Modular Technologies WWH, Inc. †  49,200  351,780  35,400  253,110  —  — 
SPSS, Inc. †  56,300  2,316,182  43,565  1,792,264  10,400  427,856 
TDK Corp. (Japan)  8,000  702,083  —  —  —  — 

33

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares  Value  Shares  Value  Shares    Value 
Computers continued               
Vasco Data Security International, Inc. †  25,400  $  896,874  18,186  $ 642,148  —  $  — 
Verint Systems, Inc. †  18,400  478,400  13,000  338,000  —    — 
Wistron Corp. (Taiwan)  1,164,582  2,099,673  —  —  —    — 
   
 
 
    52,839,615    37,491,842    9,216,973 
 
Conglomerates    1.4%    1.3%      0.8% 
3M Co.  67,120  6,281,090  54,210  5,072,972  19,200  1,796,736 
AMETEK, Inc.  13,250  572,665  9,314  402,551  —    — 
Ansell, Ltd. (Australia)  120,978  1,347,147  97,947  1,090,686  30,762    342,549 
General Electric Co. #  240,980  9,976,572  198,278  8,208,709  70,100  2,902,140 
Honeywell International, Inc.  26,800  1,593,796  21,700  1,290,499  7,700    457,919 
Itochu Corp. (Japan)  416,000  5,044,732  310,000  3,759,296  83,000  1,006,521 
Swire Pacific, Ltd. (Hong Kong)  767,500  9,301,672  571,000  6,920,202  156,500  1,896,693 
Vivendi SA (France)  104,691  4,421,754  77,908  3,290,541  21,098    891,100 
   
 
 
 
    38,539,428    30,035,456    9,293,658 
 
Consumer Cyclicals    7.7%    6.1%      3.3% 
Aaron Rents, Inc.  27,600  615,480  24,100  537,430  8,500    189,550 
Adidas-Salomon AG (Germany)  11,448  751,417  9,269  608,393  2,800    183,785 
Aegis Group PLC (United Kingdom)  391,382  1,000,568  316,874  810,088  100,148    256,028 
Aeropostale, Inc. †  24,500  466,970  18,350  349,751  6,450    122,937 
Aggreko PLC (United Kingdom)  25,923  306,442  —  —  —    — 
Aisin Seiki Co., Ltd. (Japan)  50,600  2,025,216  39,400  1,576,947  10,500    420,252 
Amazon.com, Inc. † (SG) (SB)  47,100  4,387,365  39,300  3,660,795  13,500  1,257,525 
American Axle & Manufacturing Holdings, Inc.  5,300  133,825  8,000  202,000  2,800    70,700 
American Woodmark Corp. (SG) (SB) (SC)  51,800  1,284,122  45,300  1,122,987  14,900    369,371 
Arbitron, Inc.  17,100  775,314  12,127  549,838  —    — 
Aristocrat Leisure, Ltd. (Australia)  28,837  354,831  —  —  —    — 
Astral Media, Inc. (Canada)  7,100  313,332  —  —  —    — 
Bankrate, Inc. † (SG) (SB)  8,200  378,184  6,200  285,944  2,200    101,464 
Berkeley Group Holdings PLC               
(United Kingdom) †  146,458  4,295,345  108,989  3,196,448  29,370    861,368 
Big Lots, Inc. †  67,400  2,011,216  56,400  1,682,976  20,000    596,800 
Blue Nile, Inc. † (SG) (SB) (SC)  28,040  2,639,125  21,724  2,044,663  4,600    432,952 
British Sky Broadcasting PLC               
(United Kingdom)  198,595  2,822,857  120,541  1,713,387  32,222    458,008 
Brown Shoe Co., Inc.  24,000  465,600  17,075  331,255  —    — 
Buckle, Inc. (The)  71,421  2,709,713  54,711  2,075,735  9,221    349,845 
Callaway Golf Co.  22,200  355,422  16,600  265,766  5,900    94,459 
Canadian Tire Corp., Ltd. Class A (Canada)  5,300  423,456  —  —  —    — 
Casey’s General Stores, Inc.  12,100  335,170  12,100  335,170  3,200    88,640 
Cash America International, Inc.  16,800  631,680  11,900  447,440  —    — 
Charlotte Russe Holding, Inc. †  55,500  812,520  46,800  685,152  16,600    243,024 
Compass Group PLC (United Kingdom)  55,246  341,227  —  —  —    — 
Consolidated Graphics, Inc. †  15,800  992,082  11,500  722,085  —    — 
Continental AG (Germany)  6,247  864,465  2,170  300,286  596    82,475 
CPI Corp.  17,000  654,840  12,276  472,872  —    — 
CRA International, Inc. †  2,400  115,656  1,800  86,742  600    28,914 
CTC Media, Inc. (Russia) †  42,300  928,908  35,200  772,992  12,400    272,304 
Daily Mail and General Trust Class A               
(United Kingdom)  88,909  1,145,571  67,605  871,074  19,194    247,310 
Davis Service Group PLC (United Kingdom)  90,155  987,382  72,992  799,412  20,704    226,751 
De La Rue PLC (United Kingdom)  21,609  322,622  —  —  —    — 
Deckers Outdoor Corp. † (SG) (SB) (SC)  45,500  4,995,900  35,248  3,870,230  6,500    713,700 
Deluxe Corp.  18,800  692,592  14,100  519,444  5,000    184,200 
Desarrolladora Homex SA de CV ADR               
(Mexico) †  22,100  1,226,550  —  —  —    — 
DG FastChannel, Inc. †  31,300  738,054  22,500  530,550  —    — 

34

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares    Value  Shares    Value  Shares    Value 
Consumer Cyclicals continued                   
Dolby Laboratories, Inc. Class A †  36,200  $  1,260,484  29,600  $  1,030,672  10,500  $  365,610 
Dollar Tree Stores, Inc. †  80,500    3,263,470  66,600    2,699,964  22,800    924,312 
Dongfeng Motor Group Co., Ltd. (China)  3,230,000    2,822,501  —    —  —    — 
Dress Barn, Inc. † (SG) (SB)  39,500    671,895  28,778    489,514  1,900    32,319 
DSW, Inc. Class A † (SG) (SB)  45,400    1,142,718  32,527    818,705  —    — 
EMAP PLC (United Kingdom)  50,696    911,378  41,045    737,879  12,195    219,233 
Expedia, Inc. †  68,200    2,174,216  57,100    1,820,348  20,200    643,976 
Experian Group, Ltd. (Ireland)  113,940    1,204,766  66,814    706,470  18,126    191,659 
EZCORP, Inc. Class A †  135,800    1,826,510  105,629    1,420,710  12,800    172,160 
Family Dollar Stores, Inc.  56,900    1,511,264  48,800    1,296,128  17,200    456,832 
Fiat SpA (Italy)  215,328    6,516,805  160,239    4,849,561  42,841    1,296,564 
Fossil, Inc. †  12,800    478,208  9,600    358,656  3,400    127,024 
GameStop Corp. †  41,600    2,344,160  32,900    1,853,915  11,600    653,660 
Genlyte Group, Inc. (The) † (SG) (SB)  26,500    1,702,890  20,859    1,340,399  4,600    295,596 
Gildan Activewear, Inc. (Canada) †  14,900    590,810  —    —  —    — 
Goodman Global, Inc. †  21,980    524,882  15,710    375,155  —    — 
Greek Organization of Football                   
Prognostics (OPAP) SA (Greece)  10,496    407,367  —    —  —    — 
Guess ?, Inc.  41,300    2,024,939  32,900    1,613,087  11,600    568,748 
Gymboree Corp. (The) †  35,400    1,247,496  25,890    912,364  3,100    109,244 
Hasbro, Inc.  50,700    1,413,516  41,200    1,148,656  14,500    404,260 
Helen of Troy, Ltd. (Bermuda) †  5,600    108,136  4,200    81,102  1,500    28,965 
Home Retail Group (United Kingdom)  79,369    605,068  64,260    489,885  18,126    138,183 
IG Group Holdings PLC (United Kingdom)  43,386    336,076  —    —  —    — 
Industria de Diseno Textil (Inditex) SA (Spain)  61,771    4,165,546  41,528    2,800,453  11,155    752,241 
inVentiv Health, Inc. †  27,100    1,187,522  19,694    862,991  —    — 
J Crew Group, Inc. †  21,400    888,100  18,100    751,150  6,400    265,600 
Jackson Hewitt Tax Service, Inc.  68,000    1,901,280  57,300    1,602,108  20,300    567,588 
Jakks Pacific, Inc. † (SG) (SB) (SC)  60,500    1,615,955  48,130    1,285,552  7,000    186,970 
JC Penney Co., Inc. (Holding Co.)  10,900    690,733  8,100    513,297  2,900    183,773 
Jos. A. Bank Clothiers, Inc. † (SG) (SB)  57,600    1,924,992  41,278    1,379,511  —    — 
Kuoni Reisen Holding AG (Switzerland)  1,644    777,272  1,246    589,100  343    162,168 
Landauer, Inc.  17,000    866,320  12,300    626,808  —    — 
Lear Corp. †  4,200    134,820  3,200    102,720  1,100    35,310 
Lewis Group, Ltd. (South Africa)  274,378    2,267,322  —    —  —    — 
Liberty Media Corp. — Capital Ser. A †  12,000    1,497,960  9,800    1,223,334  3,500    436,905 
Lodgenet Entertainment Corp. † (SG) (SB) (SC)  40,000    1,014,400  33,300    844,488  11,800    299,248 
Lojas Americanas SA (Preference) (Brazil)  119,615    1,188,315  —    —  —    — 
Maidenform Brands, Inc. †  55,100    874,988  39,679    630,103  —    — 
Manpower, Inc.  14,800    952,380  12,400    797,940  4,400    283,140 
Marks & Spencer Group PLC (United Kingdom)  264,583    3,330,625  196,894    2,478,542  53,138    668,912 
Marvel Entertainment, Inc. †  48,400    1,134,496  35,380    829,307  5,400    126,576 
Matsushita Electric Industrial Co., Ltd. (Japan)  172,000    3,215,918  129,000    2,411,939  34,000    635,705 
Mattel, Inc.  148,400    3,481,464  119,200    2,796,432  42,100    987,666 
Maximus, Inc.  21,900    954,402  16,400    714,712  5,800    252,764 
Mecom Group PLC (United Kingdom) †  282,883    462,842  —    —  —    — 
Mediaset SpA (Italy)  59,635    616,075  48,283    498,800  13,120    135,540 
Melco International Development                   
(Hong Kong)  231,000    432,289  —    —  —    — 
Men’s Wearhouse, Inc. (The) (SG) (SB) (SC)  56,850    2,872,062  44,050    2,225,406  9,000    454,680 
Monarch Casino & Resort, Inc. †  29,200    830,740  21,053    598,958  —    — 
Morningstar, Inc. †  27,500    1,688,500  21,600    1,326,240  3,000    184,200 
NBTY, Inc. †  47,000    1,908,200  37,600    1,526,560  13,300    539,980 
Next PLC (United Kingdom)  69,789    2,803,266  51,936    2,086,151  13,951    560,380 
NIKE, Inc. Class B  37,600    2,205,616  31,300    1,836,058  11,100    651,126 
Nintendo Co., Ltd. (Japan)  700    362,827  —    —  —    — 
Omnicom Group, Inc.  32,000    1,538,880  25,700    1,235,913  9,100    437,619 
Pacific Sunwear of California, Inc. †  118,700    1,756,760  94,900    1,404,520  33,500    495,800 

35

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares  Value  Shares  Value  Shares  Value 
Consumer Cyclicals continued             
Perry Ellis International, Inc. † (SG) (SB) (SC)  69,600  $ 1,928,616  54,750  $ 1,517,123  12,100  $ 335,291 
Phillips-Van Heusen Corp.  69,500  3,647,360  52,257  2,742,447  4,700  246,656 
Piaggio & C. SpA (Italy)  103,141  419,440  —  —  —  — 
Piaggio & C. SpA 144A (Italy)  8,632  35,103  —  —  —  — 
Pinault-Printemps-Redoute SA (France)  2,067  389,144  —  —  —  — 
PRA International †  34,000  999,600  24,351  715,919  —  — 
Praktiker Bau — und Heimwerkermaerkte             
AG (Germany)  12,490  467,827  —  —  —  — 
Priceline.com, Inc. † (SB)  12,800  1,136,000  10,700  949,625  3,800  337,250 
RadioShack Corp. (SG) (SB)  59,600  1,231,336  48,700  1,006,142  15,800  326,428 
S.A. D’Ieteren NV (Belgium)  2,147  958,862  1,739  776,647  473  211,244 
Sherwin-Williams Co. (The)  66,000  4,336,860  54,700  3,594,337  19,300  1,268,203 
Skechers U.S.A., Inc. Class A †  —  —  4,500  99,450  1,600  35,360 
Sodexho Alliance SA (France)  11,051  764,781  —  —  —  — 
Sony Corp. (Japan)  67,200  3,235,475  45,200  2,176,242  12,300  592,207 
Sotheby’s Holdings, Inc. Class A (SB)  16,400  783,756  11,836  565,642  —  — 
Standard Parking Corp. †  19,800  787,842  14,262  567,485  —  — 
Steven Madden, Ltd.  97,265  1,843,172  75,356  1,427,996  14,000  265,300 
Suzuki Motor Corp. (Japan)  23,900  705,366  —  —  —  — 
Target Corp. (SG) (SB)  26,300  1,671,891  21,100  1,341,327  7,500  476,775 
Team, Inc. †  34,430  942,693  24,759  677,901  —  — 
TeleTech Holdings, Inc. †  45,100  1,078,341  36,808  880,079  8,700  208,017 
Tempur-Pedic International, Inc. (SG) (SB)  57,500  2,055,625  41,523  1,484,447  —  — 
TJX Cos., Inc. (The)  38,600  1,122,102  31,900  927,333  11,300  328,491 
Toro Co. (The)  36,100  2,123,763  26,168  1,539,463  —  — 
Town Sports International Holdings, Inc. †  37,100  564,291  26,388  401,361  —  — 
Toyota Motor Corp. (Japan)  10,100  592,001  8,200  480,635  2,200  128,951 
True Religion Apparel, Inc. † (SG) (SB)  25,200  443,520  18,142  319,299  —  — 
TUI Travel PLC (United Kingdom) †  203,986  1,051,324  154,949  798,592  43,950  226,514 
Tupperware Brands Corp.  35,400  1,114,746  25,418  800,413  —  — 
United Business Media PLC (United Kingdom)  35,893  508,353  29,060  411,577  8,349  118,247 
URS Corp. †  10,400  587,080  7,500  423,375  —  — 
Valeo SA (France)  64,669  3,600,617  48,087  2,677,371  13,221  736,114 
Volkswagon AG (Germany)  9,553  2,160,541  7,239  1,637,199  1,988  449,613 
Volkswagen AG (Preference) (Germany)  5,618  773,575  4,256  586,034  1,169  160,966 
Wal-Mart de Mexico SA de CV Ser. V (Mexico)  712,720  2,614,709  —  —  —  — 
Wal-Mart Stores, Inc.  189,250  8,260,763  154,032  6,723,497  54,400  2,374,560 
Walt Disney Co. (The)  128,227  4,409,727  103,889  3,572,743  36,700  1,262,113 
Warnaco Group, Inc. (The) †  79,000  3,086,530  60,225  2,352,991  5,500  214,885 
Watson Wyatt Worldwide, Inc. Class A  24,100  1,083,054  17,400  781,956  —  — 
Weiqiao Textile Co. (China)  908,500  1,699,363  —  —  —  — 
Wiley (John) & Sons, Inc. Class A  30,700  1,379,351  25,100  1,127,743  8,900  399,877 
William Hill PLC (United Kingdom)  440,183  5,793,188  327,568  4,311,077  88,402  1,163,447 
WMS Industries, Inc. †  4,000  132,400  3,000  99,300  1,100  36,410 
Wolverine World Wide, Inc.  48,800  1,337,120  34,907  956,452  —  — 
Yamaha Motor Co., Ltd. (Japan)  127,000  3,227,425  94,400  2,398,968  25,500  648,026 
   
 
 
    208,018,074    145,300,303    36,335,543 
 
Consumer Finance    0.6%    0.5%    0.3% 
Asta Funding, Inc.  66,600  2,552,112  51,014  1,954,856  7,600  291,232 
Capital Trust, Inc. Class A (R)  46,205  1,640,278  36,800  1,306,400  9,900  351,450 
Credit Saison Co., Ltd. (Japan)  64,700  1,664,629  49,000  1,260,692  13,500  347,334 
Diamond Lease Co., Ltd. (Japan)  76,300  2,520,739  56,700  1,873,209  15,400  508,773 
First Marblehead Corp. (The)  39,900  1,513,407  32,400  1,228,932  11,400  432,402 
Housing Development Finance Corp. (India)  34,605  2,193,223  —  —  —  — 
Mastercard, Inc. Class A  26,100  3,862,017  19,600  2,900,212  6,900  1,020,993 
World Acceptance Corp. †  29,842  987,173  21,793  720,912  —  — 
   
 
 
    16,933,578    11,245,213    2,952,184 

36

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares    Value  Shares    Value  Shares    Value 
Consumer Staples      7.6%      6.3%      4.0% 
Acucar Guarani SA (Brazil) †  97,500  $  585,426  —  $  —  —  $  — 
Acucar Guarani SA 144A (Brazil) †  125,945    756,220  —    —  —    — 
Administaff, Inc.  22,700    824,010  17,000    617,100  6,000    217,800 
Alberto-Culver Co. (SG)  130,400    3,232,616  98,617    2,444,715  14,800    366,892 
Alliance One International, Inc. †  145,953    954,533  106,552    696,850  16,480    107,779 
Altria Group, Inc. #  224,430    15,604,618  184,934    12,858,461  64,900    4,512,497 
American Greetings Corp. Class A  25,200    665,280  18,100    477,840  —    — 
Autogrill SpA (Italy)  123,138    2,373,783  91,636    1,766,506  24,624    474,687 
Avon Products, Inc.  45,600    1,711,368  36,800    1,381,104  13,000    487,890 
BAT Industries PLC (United Kingdom)  19,795    709,293  —    —  —    — 
BJ’s Wholesale Club, Inc. †  22,800    756,048  16,400    543,824  —    — 
Blyth Industries, Inc.  22,700    464,215  21,300    435,585  7,500    153,375 
Brinker International, Inc.  57,000    1,564,080  45,750    1,255,380  16,150    443,156 
Britvic PLC (United Kingdom)  56,888    375,802  —    —  —    — 
Buffalo Wild Wings, Inc. †  24,000    905,280  20,600    777,032  7,300    275,356 
Campbell Soup Co.  19,800    732,600  17,300    640,100  6,100    225,700 
CBRL Group, Inc.  71,500    2,917,200  57,700    2,354,160  15,300    624,240 
CEC Entertainment, Inc. †  45,200    1,214,524  37,000    994,190  13,100    351,997 
Chattem, Inc. †  18,000    1,269,360  13,000    916,760  —    — 
Coca-Cola Co. (The)  27,100    1,557,437  23,400    1,344,798  7,700    442,519 
Coca-Cola Femsa SA de CV ADR (Mexico)  34,600    1,484,686  —    —  —    — 
Coca-Cola Hellenic Bottling Co., SA (Greece)  8,150    470,984  —    —  —    — 
Colgate-Palmolive Co.  58,600    4,179,352  49,100    3,501,812  16,900    1,205,308 
Colruyt SA (Belgium)  3,510    741,997  2,842    600,785  773    163,409 
Darden Restaurants, Inc.  42,270    1,769,422  33,710    1,411,101  11,900    498,134 
DeVry, Inc.  9,800    362,698  7,300    270,173  2,600    96,226 
Domino’s Pizza, Inc. (SG)  62,500    1,036,875  45,038    747,180  —    — 
Estee Lauder Cos., Inc. (The) Class A (SG)  60,800    2,581,568  49,900    2,118,754  17,600    747,296 
Flowers Foods, Inc.  27,550    600,590  19,950    434,910  —    — 
General Mills, Inc.  80,800    4,687,208  66,600    3,863,466  23,500    1,363,235 
Heidrick & Struggles International, Inc.  47,100    1,716,795  40,000    1,458,000  13,300    484,785 
Heineken NV (Netherlands)  207,336    13,614,913  154,175    10,124,046  42,393    2,783,776 
Hite Brewery Co., Ltd. (South Korea)  8,540    1,189,733  —    —  —    — 
Imperial Sugar Co. (SG) (SB) (SC)  57,900    1,512,927  49,600    1,296,048  17,500    457,275 
InBev NV (Belgium)  145,694    13,213,537  101,711    9,224,553  27,966    2,536,342 
Inchcape PLC (United Kingdom)  529,339    4,557,763  393,916    3,391,732  106,678    918,529 
Ingles Markets, Inc. Class A  19,800    567,468  14,000    401,240  —    — 
ITT Educational Services, Inc. †  24,000    2,920,560  19,500    2,372,955  6,900    839,661 
Jack in the Box, Inc. †  9,799    635,367  7,000    453,880  —    — 
Japan Tobacco, Inc. (Japan)  1,607    8,839,449  1,118    6,149,660  305    1,677,680 
Jardine Cycle & Carriage, Ltd. (Singapore)  120,000    1,488,095  91,000    1,128,472  25,000    310,020 
Jeronimo Martins, SGPS, SA (Portugal)  86,053    529,221  —    —  —    — 
Kimberly-Clark Corp.  25,400    1,784,604  20,300    1,426,278  7,200    505,872 
Koninklijke Ahold NV (Netherlands) †  35,833    541,979  29,012    438,811  8,336    126,083 
Korn/Ferry International †  59,200    977,392  49,300    813,943  17,400    287,274 
Kroger Co.  125,900    3,590,668  100,900    2,877,668  35,700    1,018,164 
Kroton Educacional SA (Brazil) †  37,600    826,092  —    —  —    — 
Kroton Educacional SA 144A (Brazil) †  12,750    280,124  —    —  —    — 
Labor Ready, Inc. †  121,100    2,241,561  93,851    1,737,182  24,600    455,346 
Longs Drug Stores Corp. (SG)  76,700    3,809,689  57,954    2,878,575  8,500    422,195 
Mannatech, Inc. (SG) (SB) (SC)  89,700    726,570  67,200    544,320  23,800    192,780 
Marfig Frigorificos e Comercio de                   
Aliementos SA (Brazil) †  122,400    1,269,432  —    —  —    — 
Marfig Frigorificos e Comercio de                   
Aliementos SA 144A (Brazil) †  26,780    277,740  —    —  —    — 
Marubeni Corp. (Japan)  202,000    1,842,603  151,000    1,377,391  48,000    437,846 
McDonald’s Corp.  56,100    3,055,767  45,400    2,472,938  16,000    871,520 
Meiji Dairies Corp. (Japan)  540,000    3,049,631  401,000    2,264,634  108,000    609,926 

37

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares  Value  Shares  Value  Shares  Value 
Consumer Staples continued             
MGP Ingredients, Inc. (SG) (SC)  58,800  $ 603,876  44,000  $ 451,880  15,600  $ 160,212 
Molson Coors Brewing Co. Class B  7,700  767,459  6,700  667,789  2,400  239,208 
Nash Finch Co. (SG) (SB) (SC)  81,130  3,231,408  64,418  2,565,769  11,900  473,977 
Nestle SA (Switzerland)  3,641  1,636,932  —  —  —  — 
New Oriental Education & Technology             
Group ADR (China) †  7,200  479,232  —  —  —  — 
Nutri/System, Inc. † (SG) (SB)  14,745  691,393  10,641  498,956  —  — 
Olam International, Ltd. (Singapore)  134,000  282,000  —  —  —  — 
Olam International, Ltd. 144A (Singapore)  49,000  103,119  —  —  —  — 
Oriflame Cosmetics SA SDR (Luxembourg)  51,350  3,119,616  38,150  2,317,690  10,500  637,896 
Papa John’s International, Inc. †  33,200  811,408  28,400  694,096  10,000  244,400 
PepsiCo, Inc.  41,500  3,040,290  34,900  2,556,774  12,300  901,098 
Pernod-Ricard SA (France)  1,044  227,966  —  —  —  — 
Prestige Brands Holdings, Inc. †  101,800  1,117,764  73,000  801,540  —  — 
Raffles Education Corp., Ltd. (Singapore)  161,000  247,382  —  —  —  — 
Ralcorp Holdings, Inc. †  17,800  993,596  14,800  826,136  5,200  290,264 
Reckitt Benckiser PLC (United Kingdom)  29,986  1,761,322  —  —  —  — 
Reynolds American, Inc. (SG) (SB) (SC)  130,800  8,317,572  107,600  6,842,284  38,000  2,416,420 
Robert Half International, Inc.  50,100  1,495,986  43,300  1,292,938  14,300  426,998 
Ruby Tuesday, Inc.  48,600  891,324  40,500  742,770  14,300  262,262 
Safeway, Inc. (SG) (SB) (SC)  257,700  8,532,447  209,500  6,936,545  74,000  2,450,140 
Sanderson Farms, Inc.  5,200  216,684  5,900  245,853  2,100  87,507 
Sara Lee Corp.  187,100  3,122,699  151,000  2,520,190  53,400  891,246 
Seaboard Corp.  585  1,146,600  435  852,600  40  78,400 
Sinclair Broadcast Group, Inc. Class A  141,200  1,700,048  104,100  1,253,364  17,500  210,700 
Sonic Corp. † (SB)  46,200  1,081,080  38,500  900,900  13,600  318,240 
Spartan Stores, Inc.  38,000  856,140  27,500  619,575  —  — 
SRA International, Inc. Class A †  22,400  628,992  16,200  454,896  —  — 
Tesco PLC (United Kingdom)  87,499  786,051  —  —  —  — 
Time Warner, Inc. (SG) (SB) (SC)  355,220  6,521,839  290,023  5,324,822  102,500  1,881,900 
Toyo Suisan Kaisha, Ltd. (Japan)  181,000  3,402,742  136,000  2,556,757  36,000  676,789 
Uni-Charm Corp. (Japan)  5,500  337,290  —  —  —  — 
Unilever NV (Netherlands)  26,076  805,550  21,112  652,200  5,737  177,230 
Universal Corp.  17,100  837,045  14,600  714,670  5,200  254,540 
USANA Health Sciences, Inc. †  2,660  116,375  1,929  84,394  —  — 
UST, Inc. (SG) (SB) (SC)  47,710  2,366,416  39,300  1,949,280  13,900  689,440 
VFB, LLC (F) ‡ †  —  —  —  —  254,213  5,259 
Woolworths, Ltd. (Australia)  345,966  9,113,481  245,881  6,477,029  66,584  1,753,964 
Yum! Brands, Inc.  83,720  2,832,248  70,920  2,399,224  25,100  849,133 
   
 
 
    206,372,125    149,485,833    44,069,793 
 
Electronics    2.2%    1.4%    0.8% 
Advanced Analogic Technologies, Inc. †  86,700  922,488  62,169  661,478  —  — 
ALPS Electric Co., Ltd. (Japan)  133,700  1,603,872  98,000  1,175,613  27,100  325,093 
Analogic Corp.  3,200  204,032  2,400  153,024  900  57,384 
Ansoft Corp. †  68,100  2,245,938  53,159  1,753,184  13,700  451,826 
AU Optronics Corp. (Taiwan)  1,418,692  2,411,788  —  —  —  — 
Comtech Group, Inc. (China) †  28,000  509,880  21,000  382,410  7,400  134,754 
Cubic Corp.  14,100  594,597  10,600  447,002  3,700  156,029 
Diodes, Inc. † (SG)  24,000  770,400  17,390  558,219  —  — 
FEI Co. †  68,000  2,137,240  54,200  1,703,506  19,100  600,313 
FINETEC Corp. (South Korea)  19,357  409,058  —  —  —  — 
Greatbatch, Inc. †  60,100  1,598,059  44,210  1,175,544  9,000  239,310 
Hon Hai Precision Industry Co., Ltd. (Taiwan)  306,624  2,304,458  —  —  —  — 
Infineon Technologies AG (Germany) †  25,856  446,048  19,592  337,986  5,382  92,846 
Intel Corp. #  262,330  6,783,854  213,626  5,524,368  75,500  1,952,430 
Itron, Inc. †  14,600  1,358,822  10,672  993,243  —  — 
LG Electronics, Inc. (South Korea)  31,070  2,895,653  —  —  —  — 

38

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares  Value  Shares  Value  Shares  Value 
Electronics continued             
Littelfuse, Inc. † (SG) (SB)  36,800  $ 1,313,392  30,100  $ 1,074,269  10,600  $ 378,314 
MEMC Electronic Materials, Inc. † (SG) (SB) (SC)  58,400  3,437,424  48,100  2,831,166  16,500  971,190 
Mentor Graphics Corp. †  66,540  1,004,754  48,030  725,253  —  — 
Methode Electronics, Inc. Class A  54,000  812,700  40,400  608,020  14,300  215,215 
National Semiconductor Corp.  66,900  1,814,328  53,500  1,450,920  18,900  512,568 
NEC Corp. (Japan)  47,000  227,618  38,000  184,031  11,000  53,272 
NVIDIA Corp. †  40,300  1,460,472  32,700  1,185,048  11,600  420,384 
Omron Corp. (Japan)  44,400  1,170,544  35,800  943,817  10,500  276,818 
Park Electrochemical Corp.  13,600  456,688  9,900  332,442  —  — 
RF Micro Devices, Inc. †  285,300  1,920,069  224,000  1,507,520  50,600  340,538 
Rotork PLC (United Kingdom)  20,412  421,641  —  —  —  — 
Samsung Electronics Co., Ltd.             
(South Korea)  8,518  5,346,778  —  —  —  — 
Samsung Electronics Co., Ltd.             
(Preference) (South Korea)  1,308  605,888  —  —  —  — 
Samsung Electronics Co., Ltd. GDR (South Korea)  806  252,883  —  —  —  — 
Shinko Electric Industries (Japan)  32,200  709,696  —  —  —  — 
Texas Instruments, Inc. (SG)  19,500  713,505  17,100  625,689  6,000  219,540 
Toshiba Corp. (Japan)  591,000  5,499,759  376,000  3,499,001  100,000  930,585 
TTM Technologies, Inc. †  113,470  1,312,848  81,547  943,499  —  — 
Vanguard International             
Semiconductor Corp. (Taiwan)  1,699,791  1,517,716  —  —  —  — 
Varian, Inc. †  38,800  2,468,068  32,000  2,035,520  11,300  718,793 
Xilinx, Inc.  26,600  695,324  19,900  520,186  7,000  182,980 
   
 
 
    60,358,282    33,331,958    9,230,182 
 
Energy    7.0%    5.1%    3.3% 
Alon USA Energy, Inc.  32,200  1,087,716  23,390  790,114  —  — 
BP PLC (United Kingdom)  466,818  5,418,128  301,836  3,503,263  81,461  945,478 
Chevron Corp. (SG) (SB) #  173,002  16,189,527  142,384  13,324,295  50,000  4,679,000 
China Petroleum & Chemical Corp. (China)  2,046,000  2,523,658  —  —  —  — 
China Petroleum & Chemical Corp. ADR             
(China) (SG)  16,400  2,019,004  —  —  —  — 
China Shenhua Energy Co., Ltd. (China)  447,500  2,676,840  —  —  —  — 
ConocoPhillips #  97,229  8,533,789  79,131  6,945,328  27,999  2,457,472 
Core Laboratories NV             
(Netherlands) † (SG)  13,400  1,707,026  9,411  1,198,867  —  — 
Dawson Geophysical Co. †  16,700  1,294,417  13,700  1,061,887  4,800  372,048 
Delek US Holdings, Inc.  27,900  699,732  20,900  524,172  7,400  185,592 
Devon Energy Corp.  7,400  615,680  5,500  457,600  2,000  166,400 
Dresser-Rand Group, Inc. †  86,600  3,698,686  71,600  3,058,036  24,500  1,046,395 
ENI SpA (Italy)  237,315  8,814,403  175,312  6,511,475  47,213  1,753,595 
ENSCO International, Inc.  34,800  1,952,280  29,300  1,643,730  9,800  549,780 
Exxon Mobil Corp. #  288,430  26,697,081  236,157  21,858,692  83,100  7,691,736 
Frontier Oil Corp.  85,000  3,539,400  60,877  2,534,918  —  — 
Gazprom (Russia)  712,543  7,859,349  —  —  —  — 
Global Industries, Ltd. †  173,100  4,459,056  143,800  3,704,288  50,800  1,308,608 
GulfMark Offshore, Inc. †  47,637  2,318,016  39,500  1,922,070  14,000  681,240 
Halliburton Co.  9,700  372,480  9,700  372,480  3,400  130,560 
Helmerich & Payne, Inc.  29,800  978,334  21,600  709,128  —  — 
Holly Corp.  43,400  2,596,622  34,809  2,082,622  7,800  466,674 
ION Geophysical Corp. † (SG) (SB)  95,970  1,327,265  69,270  958,004  —  — 
JA Solar Holdings Co., Ltd. ADR (China) † (SG)  26,000  1,168,700  18,336  824,203  —  — 
Lukoil (Russia)  27,758  2,312,241  —  —  —  — 
Lukoil ADR (Russia)  25,564  2,119,767  —  —  —  — 
Marathon Oil Corp.  184,420  10,515,628  151,420  8,633,968  52,900  3,016,358 
Matrix Service Co. †  55,300  1,158,535  39,776  833,307  —  — 
NATCO Group, Inc. †  32,065  1,659,364  25,737  1,331,890  9,097  470,770 

39

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares  Value  Shares  Value  Shares  Value 
Energy continued             
Noble Corp.  26,800  $ 1,314,540  21,900  $ 1,074,195  7,700  $ 377,685 
Norsk Hydro ASA (Norway)  117,265  5,103,020  87,245  3,796,640  23,425  1,019,385 
Occidental Petroleum Corp.  50,400  3,229,632  42,100  2,697,768  14,400  922,752 
Oil States International, Inc. †  13,000  627,900  9,217  445,181  —  — 
Parker Drilling Co. †  47,100  382,452  35,300  286,636  12,500  101,500 
PetroChina Co., Ltd. (China)  178,000  330,368  —  —  —  — 
PetroChina Co., Ltd. ADR (China)  5,400  999,594  —  —  —  — 
Petroleo Brasileiro SA ADR (Brazil)  18,086  1,365,493  —  —  —  — 
Petroleo Brasileiro SA ADR (Preference) (Brazil)  46,460  3,005,962  —  —  —  — 
PTT PCL (Thailand)  230,800  2,256,503  —  —  —  — 
Questar Corp.  76,200  4,002,786  62,300  3,272,619  21,400  1,124,142 
Renewable Energy Corp. AS (Norway) †  17,627  812,869  —  —  —  — 
Repsol YPF SA (Spain)  41,769  1,492,985  31,761  1,135,260  9,018  322,338 
Rosetta Resources, Inc. †  19,700  361,298  19,700  361,298  7,000  128,380 
Royal Dutch Shell PLC Class B (Netherlands)  247,510  10,184,894  183,195  7,538,369  49,708  2,045,456 
Saipem SpA (Italy)  30,285  1,292,953  —  —  —  — 
Sasol, Ltd. (South Africa)  19,596  845,357  —  —  —  — 
SEACOR Holdings, Inc. †  10,100  960,510  8,500  808,350  2,700  256,770 
S-Oil Corp. (South Korea)  20,669  1,831,978  —  —  —  — 
Statoil ASA (Norway)  224,065  7,640,422  157,500  5,370,614  43,310  1,476,833 
Swift Energy Co. †  17,300  707,916  12,200  499,224  —  — 
Technicas Reunidas SA (Spain)  4,305  317,890  —  —  —  — 
Technicas Reunidas SA 144A (Spain)  8,594  634,599  —  —  —  — 
Thai Oil PCL (Thailand)  623,900  1,561,007  —  —  —  — 
Tidewater, Inc. (SG) (SB) (SC)  96,400  6,057,776  79,000  4,964,360  27,900  1,753,236 
Total SA (France)  31,601  2,571,115  —  —  —  — 
Trico Marine Services, Inc. † (SG)  65,900  1,963,820  54,900  1,636,020  19,400  578,120 
Unit Corp. †  14,700  711,480  10,700  517,880  —  — 
Western Refining, Inc. (SG) (SB)  32,601  1,322,949  23,039  934,923  —  — 
   
 
 
    190,202,792    120,123,674    36,028,303 
 
Financial    2.6%    2.1%    1.5% 
Acta Holding ASA (Norway)  210,870  950,905  —  —  —  — 
Advanta Corp. Class B  100,850  2,765,307  77,059  2,112,958  10,800  296,136 
Ameriprise Financial, Inc.  143,600  9,062,596  118,000  7,446,980  41,200  2,600,132 
Chubb Corp. (The)  77,800  4,173,192  63,400  3,400,776  22,400  1,201,536 
Citigroup, Inc. #  274,953  12,832,057  226,937  10,591,150  79,500  3,710,265 
Contifinancial Corp. Liquidating Trust Units (F)  1,914,537  191  —  —  510,233  51 
Deutsche Boerse AG (Germany)  5,428  739,668  4,396  599,038  1,262  171,971 
Discover Financial Services  61,950  1,288,560  50,650  1,053,520  17,950  373,360 
Hitachi Capital Corp. (Japan)  97,000  1,221,833  73,500  925,822  20,200  254,444 
Interactive Data Corp.  68,465  1,930,713  53,490  1,508,418  9,200  259,440 
Intercontinental Exchange, Inc. †  23,000  3,493,700  18,500  2,810,150  6,600  1,002,540 
JPMorgan Chase & Co.  151,202  6,928,076  123,081  5,639,571  43,500  1,993,170 
Korea Investment Holdings Co., Ltd. (South Korea)  31,080  2,033,027  —  —  —  — 
Lehman Brothers Holdings, Inc.  8,400  518,532  6,300  388,899  2,200  135,806 
Loews Corp.  45,600  2,204,760  36,100  1,745,435  12,800  618,880 
Man Group PLC (United Kingdom)  240,782  2,725,696  179,045  2,026,822  48,535  549,425 
Nationwide Financial Services, Inc. Class A  19,900  1,071,018  16,600  893,412  5,900  317,538 
Nationwide Health Properties, Inc. (R)  16,200  488,106  15,200  457,976  5,400  162,702 
ORIX Corp. (Japan)  23,070  5,224,619  14,950  3,385,698  4,040  914,931 
PMI Group, Inc. (The)  31,400  1,026,780  23,500  768,450  8,300  271,410 
Radian Group, Inc.  12,400  288,672  9,300  216,504  3,300  76,824 
Royal Bank of Scotland Group PLC             
(United Kingdom)  412,647  4,430,715  307,081  3,297,221  83,157  892,882 
Shinhan Financial Group Co., Ltd.             
(South Korea)  48,150  3,110,909  —  —  —  — 

40

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares  Value  Shares    Value  Shares    Value 
Financial continued                 
Shinhan Financial Group Co., Ltd. ADR                 
(South Korea)  3,700  $ 474,710  —  $  —  —  $  — 
Singapore Exchange, Ltd. (Singapore)  88,000  760,393  —    —  —    — 
Travelers Cos., Inc. (The)  32,300  1,625,982  27,700    1,394,418  9,200    463,128 
   
 
 
    71,370,717    50,663,218    16,266,571 
 
Health Care    7.3%      6.4%      3.9% 
Acorda Therapeutics, Inc. † (SC)  61,492  1,128,378  51,228    940,034  18,081    331,786 
Aetna, Inc. #  138,900  7,538,103  114,500    6,213,915  40,500  2,197,935 
Affymetrix, Inc. †  34,600  877,802  24,749    627,882  —    — 
Albany Molecular Research, Inc. †  31,341  473,249  22,593    341,154  —    — 
Alfresa Holdings Corp. (Japan)  9,500  606,137  7,700    491,290  2,100    133,988 
Align Technology, Inc. †  4,800  121,584  3,600    91,188  1,300    32,929 
Alliance Imaging, Inc. †  96,300  872,478  65,704    595,278  —    — 
Alnylam Pharmaceuticals, Inc. † (SG) (SB)  4,200  137,634  3,200    104,864  1,100    36,047 
Amedisys, Inc. † (SG)  24,800  952,816  20,000    768,400  2,400    92,208 
American Dental Partners, Inc. †  21,500  602,215  15,523    434,799  —    — 
American Oriental Bioengineering, Inc. (China) †  209,800  2,339,270  161,433    1,799,978  26,300    293,245 
AMN Healthcare Services, Inc. † (SG) (SB)  41,600  779,168  29,881    559,671  —    — 
Applera Corp.- Applied Biosystems Group  7,200  249,408  5,400    187,056  1,900    65,816 
Apria Healthcare Group, Inc. †  54,800  1,425,348  39,345    1,023,363  —    — 
Astellas Pharma, Inc. (Japan)  23,900  1,144,601  —    —  —    — 
AstraZeneca PLC (United Kingdom)  146,744  7,349,959  108,516    5,435,235  29,495  1,477,315 
Basilea Pharmaceutica AG (Switzerland) †  457  104,301  —    —  —    — 
Bayer AG (Germany)  7,298  581,282  —    —  —    — 
Becton, Dickinson and Co.  28,400  2,330,220  23,500    1,928,175  8,300    681,015 
Bio-Rad Laboratories, Inc. Class A †  12,590  1,139,395  9,054    819,387  —    — 
Biogen Idec, Inc. †  10,600  703,098  9,300    616,869  3,300    218,889 
Bristol-Myers Squibb Co.  86,360  2,488,895  70,925    2,044,059  25,100    723,382 
China Medical Technologies, Inc. ADR                 
(China) (SG) (SB)  67,800  2,901,162  48,390    2,070,608  —    — 
Corvel Corp. †  52,000  1,202,240  42,500    982,600  15,000    346,800 
Coventry Health Care, Inc. †  79,180  4,925,788  65,295    4,062,002  23,100  1,437,051 
Cubist Pharmaceuticals, Inc. †  10,100  213,413  7,500    158,475  2,700    57,051 
Cutera, Inc. † (SG)  69,400  1,818,974  51,077    1,338,728  10,300    269,963 
Cynosure, Inc. Class A †  46,200  1,704,780  37,500    1,383,750  13,300    490,770 
Cypress Bioscience, Inc. †  83,100  1,137,639  62,300    852,887  22,000    301,180 
Eli Lilly Co. (SG) (SB) (SC)  57,400  3,267,782  47,700    2,715,561  16,800    956,424 
Enzon Pharmaceuticals, Inc. † (SB) (SC)  88,400  778,804  66,200    583,222  23,400    206,154 
Forest Laboratories, Inc. †  59,000  2,200,110  48,900    1,823,481  17,300    645,117 
GlaxoSmithKline PLC (United Kingdom)  245,302  6,506,941  148,641    3,942,887  40,253  1,067,761 
Haemonetics Corp. †  24,000  1,186,080  19,389    958,204  4,442    219,524 
Healthspring, Inc. †  122,888  2,396,316  95,548    1,863,186  22,313    435,104 
Hologic, Inc. † (SG)  10,700  652,700  7,665    467,565  —    — 
Humana, Inc. †  100,920  7,052,290  82,400    5,758,112  29,150  2,037,002 
Illumina, Inc. † (SB)  17,100  887,148  12,321    639,213  —    — 
Immucor, Inc. †  20,900  747,175  14,941    534,141  —    — 
Incyte Pharmaceuticals, Inc. †  242,600  1,734,590  195,800    1,399,970  69,200    494,780 
InterMune, Inc. † (SG)  58,200  1,113,366  48,000    918,240  17,000    325,210 
Invitrogen Corp. †  8,500  694,705  6,039    493,567  —    — 
Johnson & Johnson #  179,612  11,800,508  147,204    9,671,303  51,500  3,383,550 
K-V Pharmceuticals Co. Class A †  25,200  720,720  18,413    526,612  —    — 
Kinetic Concepts, Inc. †  13,800  776,664  10,100    568,428  —    — 
LCA-Vision, Inc.  7,100  208,669  5,300    155,767  1,900    55,841 
LifeCell Corp. † (SB)  30,300  1,138,371  21,829    820,116  —    — 
Magellan Health Services, Inc. †  35,200  1,428,416  25,574    1,037,793  —    — 
Martek Biosciences Corp. † (SG) (SB)  92,700  2,691,081  66,730    1,937,172  —    — 

41

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares  Value  Shares  Value  Shares  Value 
Health Care continued             
McKesson Corp.  102,200  $ 6,008,338  84,400  $ 4,961,876  29,300  $ 1,722,547 
Medcath Corp. †  43,300  1,189,018  35,400  972,084  12,500  343,250 
Medicines Co. †  29,600  527,176  22,200  395,382  7,800  138,918 
Medicis Pharmaceutical Corp. Class A (SG) (SB)  19,600  597,996  17,600  536,976  6,200  189,162 
Mentor Corp. (SG)  63,100  2,905,755  48,213  2,220,209  8,300  382,215 
Merck & Co., Inc.  264,960  13,695,782  217,713  11,253,585  76,350  3,946,532 
Merck KGaA (Germany)  3,176  383,393  —  —  —  — 
Meridian Bioscience, Inc.  28,750  871,700  20,715  628,079  —  — 
Millennium Pharmaceuticals, Inc. †  163,300  1,657,495  131,200  1,331,680  46,400  470,960 
Neurocrine Biosciences, Inc. † (SG)  95,300  953,000  79,400  794,000  28,100  281,000 
Novartis AG (Switzerland)  15,101  834,040  —  —  —  — 
OraSure Technologies, Inc. †  61,300  616,065  44,045  442,652  —  — 
Par Pharmaceutical Cos., Inc. †  76,200  1,414,272  60,469  1,122,305  15,300  283,968 
Pfizer, Inc.  273,549  6,682,802  222,997  5,447,817  78,800  1,925,084 
Quidel Corp. †  67,500  1,320,300  54,304  1,062,186  8,900  174,084 
Regeneron Pharmaceuticals, Inc. †  26,500  471,700  19,209  341,920  —  — 
Roche Holding AG (Switzerland)  43,049  7,811,952  27,435  4,978,534  7,460  1,353,740 
Salix Pharmaceuticals, Ltd. † (SG) (SB)  78,786  978,522  56,996  707,890  —  — 
Savient Pharmaceuticals, Inc. † (SG)  226,200  3,291,210  181,000  2,633,550  46,700  679,485 
Schering AG (Germany)  11,857  1,779,007  9,214  1,382,455  2,566  384,999 
Schering-Plough Corp. (SB)  325,000  10,279,750  266,500  8,429,395  94,200  2,979,546 
Sciele Pharma, Inc. † (SG) (SB) (SC)  117,400  3,054,748  89,541  2,329,857  17,000  442,340 
Steris Corp.  40,745  1,113,561  29,275  800,086  1,100  30,063 
Stewart Enterprises, Inc. Class A  33,500  255,270  25,100  191,262  8,900  67,818 
Symbion Health, Ltd. (Australia)  229,199  846,707  185,566  685,518  50,422  186,269 
Taisho Pharmaceutical Co., Ltd. (Japan)  102,000  2,007,803  80,000  1,574,747  22,000  433,055 
Techne Corp. †  14,000  883,120  10,284  648,715  —  — 
Terumo Corp. (Japan)  17,700  892,168  —  —  —  — 
Teva Pharmaceutical Industries, Ltd.             
ADR (Israel)  26,797  1,191,663  —  —  —  — 
United Therapeutics Corp. † (SG)  11,400  758,556  8,150  542,301  —  — 
UnitedHealth Group, Inc.  79,638  3,856,868  64,912  3,143,688  22,960  1,111,953 
Valeant Pharmaceuticals International †  51,900  803,412  37,222  576,197  —  — 
Waters Corp. †  51,100  3,419,612  41,000  2,743,720  14,500  970,340 
WellCare Health Plans, Inc. †  96,100  10,131,823  77,433  8,163,761  22,900  2,414,347 
West Pharmaceutical Services, Inc.  20,900  870,694  15,700  654,062  5,500  229,130 
Wyeth  135,400  6,032,070  110,900  4,940,595  39,200  1,746,360 
XenoPort, Inc. †  14,000  658,700  12,600  592,830  4,500  211,725 
Zoll Medical Corp. †  61,270  1,588,118  48,794  1,264,740  10,200  264,384 
   
 
 
    198,465,939    151,180,841    42,377,111 
 
Insurance    3.1%    2.6%    1.6% 
Aegon NV (Netherlands)  78,263  1,499,775  59,944  1,148,723  17,208  329,762 
Allianz SE (Germany)  14,591  3,411,340  8,578  2,005,516  2,359  551,528 
Allstate Corp. (The)  113,700  6,502,503  93,300  5,335,827  32,400  1,852,956 
American Financial Group, Inc.  87,825  2,504,769  72,110  2,056,577  25,450  725,834 
American Physicians Capital, Inc.  12,900  502,584  9,300  362,328  —  — 
Amerisafe, Inc. †  40,965  677,561  29,540  488,592  —  — 
Arch Capital Group, Ltd. (Bermuda) †  36,600  2,723,406  29,900  2,224,859  10,600  788,746 
Argo Group International Holdings, Ltd. (Bermuda) †  15,950  693,985  11,541  502,149  —  — 
Aspen Insurance Holdings, Ltd. (Bermuda)  51,600  1,440,156  41,200  1,149,892  7,100  198,161 
Commerce Group, Inc. (SG) (SB) (SC)  43,720  1,288,428  35,500  1,046,185  12,578  370,674 
Corporacion Mapfre SA (Spain)  742,229  3,357,304  552,341  2,498,389  149,646  676,890 
EMC Insurance Group, Inc.  12,700  330,073  9,200  239,108  —  — 
ING Groep NV (Netherlands)  118,427  5,260,456  88,130  3,914,681  23,785  1,056,515 
Max Re Capital, Ltd. (Bermuda)  8,550  239,742  6,409  179,708  2,265  63,511 
Muenchener Rueckversicherungs-Gesellschaft             
AG (Germany)  5,009  963,247  4,100  788,444  1,300  249,994 

42

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares  Value  Shares  Value  Shares    Value 
Insurance continued               
Navigators Group, Inc. †  18,240  $ 989,520  13,250  $ 718,813  —  $  — 
Odyssey Re Holdings Corp.  57,900  2,148,669  45,800  1,699,638  16,200    601,182 
Philadelphia Consolidated Holding Corp. †  70,000  2,893,800  58,500  2,418,390  16,700    690,378 
Ping An Insurance (Group) Co.,               
of China, Ltd. (China)  145,000  2,004,226  —  —  —    — 
Platinum Underwriters Holdings, Ltd.               
(Bermuda)  3,400  122,264  2,600  93,496  900    32,364 
Prudential PLC (United Kingdom)  41,490  637,688  —  —  —    — 
QBE Insurance Group, Ltd. (Australia)  138,908  4,158,288  93,632  2,802,926  25,268    756,412 
Safeco Corp.  113,900  6,972,958  93,000  5,693,460  32,300  1,977,406 
Safety Insurance Group, Inc.  17,800  639,732  12,700  456,438  —    — 
Sai-Soc Assicuratrice Industriale SpA               
(SAI) (Italy)  184,550  8,642,635  137,250  6,427,535  37,750  1,767,865 
SCOR (France)  113,022  3,030,284  84,042  2,253,288  23,108    619,559 
SeaBright Insurance Holdings, Inc. †  49,700  848,379  36,000  614,520  —    — 
Security Capital Assurance, Ltd.               
(Bermuda)  5,800  132,472  4,400  100,496  1,500    34,260 
Selective Insurance Group  22,900  487,312  16,600  353,248  —    — 
W.R. Berkley Corp.  220,445  6,531,785  182,952  5,420,868  63,575  1,883,727 
Zenith National Insurance Corp.  63,147  2,834,669  50,958  2,287,505  12,457    559,195 
Zurich Financial Services AG               
(Switzerland)  31,446  9,440,828  18,952  5,689,836  5,153  1,547,052 
   
 
 
 
    83,910,838    60,971,435    17,333,971 
 
Investment Banking/Brokerage    1.8%    1.5%      1.0% 
3i Group PLC (United Kingdom)  441,757  9,007,710  328,488  6,698,082  90,322  1,841,724 
Affiliated Managers Group †  10,800  1,377,108  7,975  1,016,892  —    — 
Calamos Asset Management, Inc. Class A  46,200  1,304,226  34,700  979,581  12,200    344,406 
Challenger Financial Services Group,               
Ltd. (Australia)  161,562  884,478  130,805  716,097  39,012    213,573 
Deutsche Bank AG (Germany)  11,886  1,532,857  9,236  1,191,104  2,466    318,023 
Goldman Sachs Group, Inc. (The)  58,200  12,614,268  47,400  10,273,476  16,800  3,641,232 
Greenhill & Co., Inc.  8,600  525,030  6,138  374,725  —    — 
Harris & Harris Group, Inc. †  66,600  708,624  54,600  580,944  19,200    204,288 
Interactive Brokers Group, Inc.               
Class A †  13,700  359,762  10,300  270,478  3,600    94,536 
Investment Technology Group, Inc. †  34,000  1,461,320  24,157  1,038,268  —    — 
Knight Capital Group, Inc. Class A †  72,900  871,884  61,500  735,540  21,700    259,532 
Macquarie Bank, Ltd. (Australia)  12,686  945,045  10,271  765,139  2,791    207,916 
Merrill Lynch & Co., Inc.  46,100  3,286,008  38,100  2,715,768  13,500    962,280 
Morgan Stanley  124,200  7,824,600  101,300  6,381,900  35,800  2,255,400 
Penson Worldwide, Inc. †  25,000  462,000  18,116  334,784  —    — 
Schroders PLC (United Kingdom)  29,056  824,229  23,525  667,332  6,393    181,350 
SembCorp Industries, Ltd. (Singapore)  94,000  407,218  —  —  —    — 
Shin Kong Financial Holding Co., Ltd.               
(Taiwan)  1,775,193  1,625,175  —  —  —    — 
SWS Group, Inc.  127,000  2,246,630  99,300  1,756,617  23,400    413,946 
   
 
 
    48,268,172    36,496,727    10,938,206 
 
Other    0.1%    0.4%      —% 
iShares Russell 2000 Growth Index Fund  8,200  702,986  11,900  1,020,187  —    — 
iShares Russell 2000 Value Index Fund  30,377  2,336,903  11,146  857,462  —    — 
S&P 500 Index Depository Receipts (SPDR               
Trust Series 1)  —  —  51,689  7,886,708  —    — 
 
 
 
 
    3,039,889    9,764,357      — 

43

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares  Value  Shares  Value  Shares    Value 
Photography/Imaging    —%    —%      —% 
Ikon Office Solutions, Inc.  52,100  $  669,485  37,100  $ 476,735  —  $  — 
 
Real Estate    1.4%    1.0%      0.5% 
Anthracite Capital, Inc. (R)  57,700  525,070  41,900  381,290  —    — 
Boston Properties, Inc. (R)  2,400  249,360  1,800  187,020  600    62,340 
CB Richard Ellis Group, Inc. Class A †  61,300  1,706,592  49,500  1,378,080  17,500    487,200 
CBL & Associates Properties (R)  15,000  525,750  11,000  385,550  —    — 
Cousins Properties, Inc. (R)  69,600  2,043,456  54,500  1,600,120  14,100    413,976 
Emaar Properties (United Arab Emirates)  437,761  1,275,958  —  —  —    — 
Entertainment Properties Trust (R)  59,397  3,017,368  45,990  2,336,292  13,100    665,480 
FelCor Lodging Trust, Inc. (R)  45,500  906,815  38,400  765,312  13,600    271,048 
First Industrial Realty Trust (R)  6,100  237,107  4,600  178,802  1,600    62,192 
Globe Trade Centre SA (Poland) †  127,314  2,289,452  —  —  —    — 
Gramercy Capital Corp. (R)  63,400  1,595,778  46,700  1,175,439  10,300    259,251 
Guangzhou R&F Properties Co., Ltd. (China)  241,600  1,130,877  —  —  —    — 
Immoeast AG (Austria) †  153,885  1,677,580  —  —  —    — 
Jones Lang LaSalle, Inc.  69,600  7,152,096  56,605  5,816,730  18,600  1,911,336 
Lexington Corporate Properties Trust (R)  50,520  1,010,905  36,400  728,364  —    — 
LTC Properties, Inc. (R)  45,600  1,079,352  33,100  783,477  —    — 
Medical Properties Trust, Inc. (R)  94,700  1,261,404  77,500  1,032,300  27,400    364,968 
Metrovacesa SA (Spain)  9,673  1,100,742  7,330  834,119  2,013    229,070 
National Health Investors, Inc. (R)  25,700  794,387  18,700  578,017  —    — 
National Retail Properties, Inc. (R)  30,200  736,276  26,400  643,632  9,300    226,734 
NorthStar Realty Finance Corp. (R)  56,800  564,024  41,200  409,116  —    — 
Omega Healthcare Investors, Inc. (R)  83,900  1,302,967  68,000  1,056,040  13,000    201,890 
PS Business Parks, Inc. (R)  10,729  609,944  7,778  442,179  —    — 
RAIT Investment Trust (R)  12,900  106,167  9,300  76,539  —    — 
Ramco-Gershenson Properties (R)  18,900  590,436  14,100  440,484  5,000    156,200 
Realty Income Corp. (R)  4,300  120,185  3,300  92,235  1,100    30,745 
Saul Centers, Inc. (R)  13,100  674,650  9,400  484,100  —    — 
Senior Housing Properties Trust (R)  17,800  392,668  13,300  293,398  4,700    103,682 
Shimo Property Holdings, Ltd. (China)  332,500  1,012,296  —  —  —    — 
Tanger Factory Outlet Centers (R)  3,100  125,829  2,400  97,416  800    32,472 
Universal Health Realty Income Trust (R)  18,000  639,540  12,900  458,337  —    — 
Urstadt Biddle Properties, Inc. Class A (R)  40,500  626,535  29,500  456,365  —    — 
Winthrop Realty Trust (R)  135,100  909,223  98,000  659,540  —    — 
   
 
 
    37,990,789    23,770,293    5,478,584 
 
Semiconductor    0.6%    0.4%      0.3% 
Advanced Energy Industries, Inc. † (SG)  105,200  1,588,520  75,194  1,135,429  —    — 
Applied Materials, Inc. (SG)  77,300  1,600,110  66,200  1,370,340  23,400    484,380 
Credence Systems Corp. †  312,700  966,243  263,700  814,833  93,200    287,988 
Genesis Microchip, Inc. †  14,500  113,680  10,900  85,456  3,900    30,576 
Greatek Electronics, Inc. (Taiwan)  769,640  1,151,402  —  —  —    — 
LTX Corp. †  203,100  725,067  152,300  543,711  53,800    192,066 
Novatek Microelectronics Corp., Ltd. (Taiwan)  246,599  1,070,699  —  —  —    — 
Novellus Systems, Inc. †  59,900  1,632,874  51,400  1,401,164  18,100    493,406 
Photronics, Inc. †  122,300  1,395,443  98,700  1,126,167  34,900    398,209 
Spansion, Inc. Class A † (SG)  204,793  1,730,501  174,043  1,470,663  61,528    519,912 
Taiwan Semiconductor Manufacturing Co.,               
Ltd. (Taiwan)  982,182  1,910,009  —  —  —    — 
Varian Semiconductor Equipment †  19,050  1,019,556  13,583  726,962  —    — 
Veeco Instruments, Inc. †  75,400  1,461,252  61,200  1,186,056  21,600    418,608 
   
 
 
 
    16,365,356    9,860,781    2,825,145 
 
Software    2.4%    2.1%      1.3% 
Aspen Technology, Inc. †  63,300  906,456  44,918  643,226  —    — 
Autodesk, Inc. †  157,100  7,850,287  129,000  6,446,130  44,900  2,243,653 

44

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares  Value  Shares  Value  Shares    Value 
Software continued               
Blackboard, Inc. † (SG) (SB)  16,100  $ 738,024  11,545  $ 529,223  —  $  — 
BMC Software, Inc. †  259,500  8,104,185  211,400  6,602,022  74,700  2,332,881 
Capcom Co., Ltd. (Japan)  16,000  368,861  —  —  —    — 
Chordiant Software, Inc. †  139,900  1,939,014  108,746  1,507,220  19,100    264,726 
Epicor Software Corp. †  53,100  731,187  38,127  525,009  —    — 
Informatica Corp. †  65,300  1,025,210  46,936  736,895  —    — 
Interwoven, Inc. †  42,900  610,467  32,200  458,206  11,400    162,222 
Intuit, Inc. †  102,000  3,090,600  82,800  2,508,840  29,300    887,790 
JDA Software Group, Inc. † (SG) (SB)  100,500  2,076,330  77,908  1,609,579  15,000    309,900 
Manhattan Associates, Inc. † (SG)  61,100  1,674,751  48,400  1,326,644  11,700    320,697 
Mantech International Corp. Class A †  12,700  456,946  9,500  341,810  3,400    122,332 
Microsoft Corp. (SG) (SB)  473,500  13,949,310  390,931  11,516,827  137,100  4,038,966 
MicroStrategy, Inc. †  11,400  904,476  8,215  651,778  —    — 
NTT Data Corp. (Japan)  713  3,174,460  533  2,373,053  143    636,673 
Omnicell, Inc. †  21,900  625,026  16,400  468,056  5,800    165,532 
Oracle Corp. †  329,060  7,124,149  267,893  5,799,883  94,700  2,050,255 
Parametric Technology Corp. †  93,585  1,630,251  66,768  1,163,099  —    — 
SAP AG (Germany)  13,208  773,649  —  —  —    — 
Sybase, Inc. † (SB)  150,100  3,471,813  114,009  2,637,028  19,000    439,470 
SYNNEX Corp. †  28,200  579,792  20,400  419,424  —    — 
The9, Ltd. ADR (China) † (SG) (SB)  15,400  531,146  11,060  381,459  —    — 
TIBCO Software, Inc. †  32,500  240,175  36,600  270,474  12,900    95,331 
Trend Micro, Inc. (Japan)  11,500  496,614  —  —  —    — 
Vignette Corp. †  48,800  979,416  34,900  700,443  —    — 
Websense, Inc. †  58,620  1,156,573  48,300  952,959  17,100    337,383 
   
 
 
 
    65,209,168    50,569,287    14,407,811 
 
Technology    0.9%    0.8%      0.6% 
Avnet, Inc. †  37,800  1,506,708  30,500  1,215,730  10,800    430,488 
Electronic Data Systems Corp.  217,800  4,756,752  178,800  3,904,992  63,200  1,380,288 
IBM Corp.  137,540  16,202,212  112,700  13,276,060  39,600  4,664,880 
ON Semiconductor Corp. † (SG) (SB)  65,800  826,448  46,470  583,663  —    — 
   
 
 
 
    23,292,120    18,980,445    6,475,656 
 
Technology Services    1.1%    1.0%      0.5% 
Accenture, Ltd. Class A (Bermuda)  5,900  237,475  4,400  177,100  1,600    64,400 
Authorize.Net Holdings, Inc. †  90,829  1,601,315  64,500  1,137,135  —    — 
Automatic Data Processing, Inc.  36,500  1,676,445  29,300  1,345,749  10,400    477,672 
Blue Coat Systems, Inc. †  61,100  4,812,236  45,816  3,608,468  6,300    496,188 
Computer Sciences Corp. †  41,500  2,319,850  31,100  1,738,490  11,000    614,900 
Convergys Corp. †  34,900  605,864  31,400  545,104  11,100    192,696 
CSG Systems International, Inc. † (SG) (SB)  102,200  2,171,750  83,800  1,780,750  23,700    503,625 
eBay, Inc. †  86,300  3,367,426  71,900  2,805,538  25,400    991,108 
Factset Research Systems, Inc.  18,800  1,288,740  13,462  922,820  —    — 
Global Sources, Ltd. (Bermuda) †  16,366  362,834  11,788  261,340  —    — 
IHS, Inc. Class A †  19,500  1,101,555  16,300  920,787  5,200    293,748 
Neopost SA (France)  2,462  347,509  —  —  —    — 
Oce NV (Netherlands)  47,487  998,771  38,447  808,637  10,447    219,727 
SAIC, Inc. †  38,800  744,572  33,900  650,541  12,000    230,280 
SonicWall, Inc. †  336,400  2,936,772  257,846  2,250,996  50,100    437,373 
Sykes Enterprises, Inc. †  166,800  2,770,548  134,600  2,235,706  31,800    528,198 
Trizetto Group †  93,300  1,633,683  73,927  1,294,462  17,300    302,923 
United Internet AG (Germany)  21,590  486,439  —  —  —    — 
United Online, Inc. (SG)  65,900  989,159  47,800  717,478  —    — 
   
 
 
 
    30,452,943    23,201,101    5,352,838 

45

COMMON STOCKS*  Growth 78.1%  Balanced 62.3%  Conservative 37.9% 
  Shares  Value  Shares  Value  Shares  Value 
Transportation    1.9%    1.5%    0.9% 
Accuride Corp. †  65,000  $ 787,150  55,700  $ 674,527  19,700  $ 238,567 
Air Arabia (United Arab Emirates) †  4,043,094  1,475,823  —  —  —  — 
Alaska Air Group, Inc. †  4,960  114,526  3,700  85,433  1,300  30,017 
All America Latina Logistica SA (Brazil)  102,100  1,454,591  —  —  —  — 
British Airways PLC (United Kingdom) †  1,381,094  10,825,331  1,026,974  8,049,657  282,380  2,213,359 
Central Japan Railway Co. (Japan)  556  5,902,714  417  4,427,036  112  1,189,036 
Continental Airlines, Inc. Class B † (SG) (SB) (SC)  132,200  4,366,566  109,800  3,626,694  38,800  1,281,564 
Deutsche Lufthansa AG (Germany)  14,874  428,082  11,271  324,386  3,096  89,105 
Double Hull Tankers, Inc. (Jersey) (SG) (SB)  15,500  230,795  11,600  172,724  4,100  61,049 
ExpressJet Holdings, Inc. † (SB)  212,750  657,398  182,241  563,125  64,377  198,925 
Horizon Lines, Inc. Class A (SG)  33,800  1,031,914  27,836  849,833  3,400  103,802 
Hornbeck Offshore Services, Inc. †  12,600  462,420  9,400  344,980  3,300  121,110 
HUB Group, Inc. Class A †  41,800  1,255,254  30,172  906,065  —  — 
National Express Group PLC (United Kingdom)  57,427  1,452,853  42,865  1,084,447  12,159  307,612 
Neptune Orient Lines, Ltd. (Singapore)  494,000  1,761,907  392,000  1,398,112  113,000  403,027 
Northwest Airlines Corp. †  26,600  473,480  19,000  338,200  —  — 
Orient Overseas International, Ltd. (Hong Kong)  57,000  542,652  —  —  —  — 
Overseas Shipholding Group  63,400  4,871,022  50,800  3,902,964  14,000  1,075,620 
Republic Airways Holdings, Inc. †  80,500  1,704,185  69,000  1,460,730  24,400  516,548 
Singapore Airlines, Ltd. (Singapore)  88,670  1,107,762  71,870  897,878  21,470  268,227 
SkyWest, Inc.  88,300  2,222,511  69,800  1,756,866  24,700  621,699 
UAL Corp. † (SG) (SB)  119,400  5,555,682  99,000  4,606,470  34,300  1,595,979 
Yang Ming Marine Transport (Taiwan)  1,982,713  1,591,069  —  —  —  — 
   
 
 
    50,275,687    35,470,127    10,315,246 
 
Utilities & Power    2.5%    1.9%    1.3% 
Alliant Energy Corp.  49,300  1,889,176  39,300  1,505,976  13,900  532,648 
Black Hills Corp.  2,800  114,856  4,200  172,284  1,500  61,530 
Centrica PLC (United Kingdom)  44,288  344,649  —  —  —  — 
CEZ AS (Czech Republic)  22,861  1,407,327  —  —  —  — 
China Resources Power Holdings Co. (Hong Kong)  300,000  922,694  —  —  —  — 
Companhia Energetica de Minas Gerais             
ADR (Brazil) (SG)  89,778  1,914,965  —  —  —  — 
Constellation Energy Group, Inc.  27,600  2,367,804  22,800  1,956,012  7,700  660,583 
E.On AG (Germany)  13,346  2,469,168  9,920  1,835,318  2,725  504,157 
Edison International  141,470  7,844,512  115,715  6,416,397  40,300  2,234,635 
Electric Power Development Co. (Japan)  92,600  3,603,441  69,000  2,685,070  18,700  727,693 
Enel SpA (Italy)  51,979  588,901  —  —  —  — 
Energen Corp. (SG) #  116,480  6,653,338  93,100  5,317,872  27,306  1,559,719 
Energias de Portugal (EDP) SA (Portugal)  241,105  1,410,534  194,306  1,136,746  55,167  322,743 
First Philippine Holdings Corp. (Philippines)  602,510  1,040,934  —  —  —  — 
FirstEnergy Corp.  31,700  2,007,878  26,600  1,684,844  8,900  563,726 
Kelda Group PLC (United Kingdom)  59,906  1,056,120  45,392  800,244  12,467  219,789 
Mirant Corp. †  8,700  353,916  6,500  264,420  2,300  93,564 
National Grid PLC (United Kingdom)  65,991  1,058,124  53,429  856,700  14,518  232,787 
Northwest Natural Gas Co.  44,700  2,042,790  34,900  1,594,930  8,200  374,740 
OGE Energy Corp.  18,100  599,110  16,300  539,530  5,800  191,980 
Osaka Gas Co., Ltd. (Japan)  836,000  2,933,170  622,000  2,182,335  167,000  585,932 
PG&E Corp. (SB)  190,900  9,125,020  154,900  7,404,220  54,700  2,614,660 
Portland General Electric Co. (SG)  47,200  1,312,160  38,600  1,073,080  13,600  378,080 
Public Service Enterprise Group, Inc.  5,400  475,146  4,100  360,759  1,400  123,186 
RWE AG (Germany)  21,150  2,661,782  10,276  1,293,261  2,752  346,346 
Scottish and Southern Energy PLC (United Kingdom)  21,832  674,674  —  —  —  — 
Suez SA (France)  6,260  368,908  —  —  —  — 
Tenaga Nasional Berhad (Malaysia)  582,000  1,611,317  —  —  —  — 
Tokyo Electric Power Co. (Japan)  128,700  3,247,752  95,600  2,412,471  26,300  663,682 
Vector, Ltd. (New Zealand)  251,632  467,080  203,728  378,160  60,761  112,785 
Veolia Environnement (France)  47,735  4,113,348  35,525  3,061,207  9,542  822,239 

46

       
COMMON STOCKS*    Growth 78.1%    Balanced 62.3%    Conservative 37.9% 
    Shares  Value    Shares  Value    Shares    Value 
Utilities & Power continued                     
Westar Energy, Inc.    45,200  $ 1,110,112    33,000  $ 810,480    3,800  $  93,328 
WGL Holdings, Inc.    21,600  732,024    16,200  549,018    5,700    193,173 
     
   
   
      68,522,730      46,291,334        14,213,705 
 
Total common stocks (cost $1,729,638,132,                     
$1,183,522,440 and $327,531,057)      $ 2,118,137,385      $ 1,480,488,551      $  416,435,858 
 
 
CORPORATE BONDS AND NOTES*    Growth 3.3%    Balanced 6.8%    Conservative 9.6% 
    Principal      Principal      Principal     
    amount  Value    amount  Value    amount    Value 
Basic Materials      0.3%      0.4%        0.5% 
Abitibi-Consolidated, Inc. debs. 8.85s,                     
2030 (Canada)  $  45,000  $  31,050  $  55,000  $ 37,950  $  30,000  $  20,700 
AK Steel Corp. company guaranty 7 3/4s, 2012    300,000  303,750    365,000  369,563    190,000    192,375 
Aleris International, Inc. company                     
guaranty 10s, 2016    200,000  177,000    205,000  181,425    100,000    88,500 
Aleris International, Inc. company                     
guaranty 9s, 2014 ‡‡    185,000  171,125    190,000  175,750    85,000    78,625 
Algoma Acquisition Corp. 144A unsec.                     
notes 9 7/8s, 2015 (Canada)    110,000    97,900    105,000  93,450    50,000    44,500 
ARCO Chemical Co. debs. 10 1/4s, 2010    185,000  197,950    130,000    139,100    85,000    90,950 
Builders FirstSource, Inc. company                     
guaranty FRN 9.808s, 2012    265,000  255,063    250,000  240,625    120,000    115,500 
Clondalkin Acquisition BV 144A sec. FRN                     
7.694s, 2013 (Netherlands)    75,000  72,000    75,000  72,000    75,000    72,000 
Clondalkin Industries BV 144A                     
sr. notes 8s, 2014 (Netherlands)  EUR  45,000  63,504    45,000  63,504    25,000    35,280 
Compass Minerals International, Inc.                     
sr. notes stepped-coupon zero %                     
(12 3/4s, 12/15/07), 2012 ††  $  160,000  165,600  $  165,000  170,775  $  50,000    51,750 
Domtar, Inc. notes 7 7/8s, 2011 (Canada)    230,000  236,325    205,000  210,638    95,000    97,613 
Dow Chemical Co. (The) Pass Through                     
Trust 144A company guaranty 4.027s, 2009    —  —    270,000  265,339    320,000    314,476 
Equistar Chemicals, LP/Equistar Funding Corp.                     
company guaranty 10 1/8s, 2008    53,000  54,988    52,000  53,950    —    — 
Freeport-McMoRan Copper & Gold, Inc.                     
sr. unsec. bonds 8 3/8s, 2017    600,000  655,500    580,000  633,650    270,000    294,975 
Freeport-McMoRan Copper & Gold, Inc.                     
sr. unsec. FRN 8.564s, 2015    115,000  119,456    110,000  114,263    50,000    51,938 
Freeport-McMoRan Copper & Gold, Inc.                     
sr. unsec. notes 8 1/4s, 2015    300,000  323,250    295,000  317,863    135,000    145,463 
Georgia-Pacific Corp. debs. 9 1/2s, 2011    170,000  179,350    350,000  369,250    262,000    276,410 
Georgia-Pacific Corp. notes 8 1/8s, 2011    —  —    140,000  142,100    140,000    142,100 
Georgia-Pacific Corp. sr. notes 8s, 2024    175,000  170,625    195,000  190,125    90,000    87,750 
Gerdau Ameristeel Corp. sr. notes 10 3/8s,                     
2011 (Canada)    280,000  294,000    270,000  283,500    130,000    136,500 
Hercules, Inc. company guaranty 6 3/4s, 2029    60,000  59,550    60,000  59,550    30,000    29,775 
Hexion U.S. Finance Corp./Hexion Nova                     
Scotia Finance ULC company                     
guaranty 9 3/4s, 2014    350,000  385,000    325,000  357,500    150,000    165,000 
Huntsman, LLC company guaranty 11 5/8s, 2010  1,000  1,060    1,000  1,060    —    — 
Jefferson Smurfit Corp. company                     
guaranty 8 1/4s, 2012    55,000  55,138    25,000  25,063    30,000    30,075 
Lubrizol Corp. (The) sr. notes 5 1/2s, 2014    —  —    100,000  96,559    95,000    91,731 
Lyondell Chemical Co. company                     
guaranty 8 1/4s, 2016    515,000  580,663    460,000  518,650    215,000    242,413 

47

CORPORATE BONDS AND NOTES*    Growth 3.3%    Balanced 6.8%    Conservative 9.6% 
    Principal      Principal      Principal   
    amount  Value    amount  Value    amount  Value 
Basic Materials continued                   
Lyondell Chemical Co. company                   
guaranty 8s, 2014  $  150,000  $ 165,000  $  165,000  $ 181,500  $  80,000  $ 88,000 
MacDermid, Inc. 144A                   
sr. sub. notes 9 1/2s, 2017    310,000  299,150    295,000  284,675    135,000  130,275 
Metals USA, Inc. sec. notes 11 1/8s, 2015    185,000  197,025    220,000  234,300    110,000  117,150 
Momentive Performance Materials, Inc.                   
144A sr. notes 9 3/4s, 2014    460,000  455,400    470,000  465,300    230,000  227,700 
Mosaic Co. (The) 144A sr. notes 7 5/8s, 2016    110,000  117,288    105,000  111,956    50,000  53,313 
Mosaic Co. (The) 144A sr. notes 7 3/8s, 2014    110,000  115,500    110,000  115,500    50,000  52,500 
NewPage Corp. company guaranty 10s, 2012    85,000  89,463    105,000  110,513    50,000  52,625 
NewPage Holding Corp. sr. notes FRN                   
12.36s, 2013 ‡‡    80,606  78,994    75,917  74,399    37,803  37,047 
Norske Skog Canada, Ltd. company                   
guaranty Ser. D, 8 5/8s, 2011 (Canada)    75,000  58,500    87,000  67,860    45,000  35,100 
Novelis, Inc. company guaranty 7 1/4s, 2015    345,000  332,925    353,000  340,645    140,000  135,100 
Potash Corp. of Saskatchewan                   
notes 5 7/8s, 2036 (Canada)    —  —    215,000  196,182    220,000  200,744 
Rockwood Specialties Group, Inc.                   
company guaranty 7 5/8s, 2014  EUR  210,000  294,855    220,000  308,895    135,000  189,549 
Smurfit-Stone Container                   
Enterprises, Inc. sr. unsec. 8s, 2017  $  180,000  176,850  $  175,000  171,938  $  85,000  83,513 
Steel Dynamics, Inc. 144A                   
sr. notes 6 3/4s, 2015    470,000  453,550    796,000  768,140    521,000  502,765 
Stone Container Corp. sr. notes 8 3/8s, 2012    35,000  35,000    50,000  50,000    —  — 
Stone Container Finance company                   
guaranty 7 3/8s, 2014 (Canada)    45,000  42,975    45,000  42,975    20,000  19,100 
Tube City IMS Corp. company                   
guaranty 9 3/4s, 2015    190,000  185,725    190,000  185,725    90,000  87,975 
Ucar Finance, Inc. company                   
guaranty 10 1/4s, 2012    18,000  18,765    18,000  18,765    9,000  9,383 
Westvaco Corp. unsec. notes 7 1/2s, 2027    —  —    55,000  58,134    50,000  52,849 
Wheeling-Pittsburgh Steel Corp.                   
sr. notes Ser. A, 5s, 2011 ‡‡    —  —    —  —    618  477 
Wheeling-Pittsburgh Steel Corp.                   
sr. notes Ser. B, 6s, 2010 ‡‡    —  —    —  —    435  336 
Xstrata Finance Canada, Ltd. 144A                   
company guaranty 5.8s, 2016 (Canada)    —  —    180,000  178,994    195,000  193,910 
     
   
   
      7,766,812      9,149,598      5,165,810 
 
Capital Goods      0.3%      0.3%      0.4% 
Alliant Techsystems, Inc.                   
sr. sub. notes 6 3/4s, 2016    355,000  351,450    330,000  326,700    150,000  148,500 
Allied Waste North America, Inc.                   
company guaranty 6 7/8s, 2017    385,000  386,925    380,000  381,900    175,000  175,875 
Allied Waste North America, Inc. sec.                   
notes Ser. B, 5 3/4s, 2011    10,000  9,825    120,000  117,900    55,000  54,038 
American Railcar Industries, Inc.                   
sr. unsec. 7 1/2s, 2014    95,000  94,525    95,000  94,525    45,000  44,775 
Baldor Electric Co. company                   
guaranty 8 5/8s, 2017    415,000  435,750    380,000  399,000    175,000  183,750 
Berry Plastics Holding Corp. company                   
guaranty 10 1/4s, 2016    90,000  88,200    120,000  117,600    70,000  68,600 
Berry Plastics Holding Corp. sec.                   
notes 8 7/8s, 2014    310,000  316,975    285,000  291,413    135,000  138,038 
Blount, Inc. sr. sub. notes 8 7/8s, 2012    115,000  116,869    155,000  157,519    70,000  71,138 
Bombardier, Inc. 144A sr. notes 8s,                   
2014 (Canada)    255,000  267,113    245,000  256,638    75,000  78,563 

48

CORPORATE BONDS AND NOTES*    Growth 3.3%  Balanced 6.8%    Conservative 9.6% 
    Principal      Principal      Principal   
    amount    Value  amount  Value    amount  Value 
Capital Goods continued                   
Caterpillar Financial Services Corp.                   
sr. unsec. notes Ser. MTN, 5.85s, 2017  $  —  $  —  $ 300,000  $ 302,732  $  335,000  $ 338,051 
Crown Americas, LLC/Crown Americas                   
Capital Corp. sr. notes 7 5/8s, 2013    185,000    189,856  235,000  241,169    115,000  118,019 
General Cable Corp. company                   
guaranty 7 1/8s, 2017    190,000    186,200  175,000  171,500    80,000  78,400 
General Cable Corp. company                   
guaranty FRN 7.735s, 2015    85,000    82,450  80,000  77,600    35,000  33,950 
Greenbrier Cos., Inc. company                   
guaranty 8 3/8s, 2015    190,000    189,525  220,000  219,450    115,000  114,713 
Hawker Beechcraft Acquisition Co., LLC                   
144A sr. notes 8 7/8s, 2015 ‡‡    285,000    287,138  260,000  261,950    120,000  120,900 
Hawker Beechcraft Acquisition Co., LLC                   
144A sr. notes 8 1/2s, 2015    225,000    230,063  220,000  224,950    100,000  102,250 
Hawker Beechcraft Acquisition Co., LLC                   
144A sr. sub. notes 9 3/4s, 2017    45,000    46,013  45,000  46,013    20,000  20,450 
Hexcel Corp. sr. sub. notes 6 3/4s, 2015    190,000    187,625  195,000  192,563    95,000  93,813 
L-3 Communications Corp. company                   
guaranty 7 5/8s, 2012    290,000    296,525  388,000  396,730    181,000  185,073 
L-3 Communications Corp. company                   
guaranty 6 1/8s, 2013    205,000    201,413  125,000  122,813    75,000  73,688 
L-3 Communications Corp. company                   
guaranty Ser. B, 6 3/8s, 2015    170,000    167,025  355,000  348,788    230,000  225,975 
L-3 Communications Corp.                   
sr. sub. notes 5 7/8s, 2015    —    —  95,000  91,200    110,000  105,600 
Legrand SA debs. 8 1/2s, 2025 (France)    540,000    631,800  725,000  848,250    450,000  526,500 
Manitowoc Co., Inc. (The)                   
sr. notes 7 1/8s, 2013    290,000    288,550  275,000  273,625    125,000  124,375 
Milacron Escrow Corp. sec.                   
notes 11 1/2s, 2011    240,000    225,600  265,000  249,100    130,000  122,200 
Mueller Water Products, Inc. company                   
guaranty 7 3/8s, 2017    120,000    115,200  115,000  110,400    55,000  52,800 
Owens-Brockway Glass Container, Inc.                   
company guaranty 6 3/4s, 2014  EUR  220,000    306,855  100,000  139,479    100,000  139,479 
Owens-Brockway Glass Container, Inc.                   
sr. sec. notes 8 3/4s, 2012  $  120,000    125,550  $ 240,000  251,100  $  130,000  136,013 
RBS Global, Inc. / Rexnord Corp.                   
company guaranty 9 1/2s, 2014    625,000    646,875  560,000  579,600    265,000  274,275 
TD Funding Corp. company                   
guaranty 7 3/4s, 2014    355,000    358,550  330,000  333,300    150,000  151,500 
Tekni-Plex, Inc. sec. notes 10 7/8s, 2012    195,000    209,625  215,000  231,125    105,000  112,875 
Titan International, Inc. company                   
guaranty 8s, 2012    260,000    259,350  255,000  254,363    125,000  124,688 
WCA Waste Corp. company                   
guaranty 9 1/4s, 2014    125,000    128,750  120,000  123,600    55,000  56,650 
     
 
   
        7,428,170    8,234,595      4,395,514 
 
Communication Services        0.3%    0.6%      1.0% 
American Tower Corp. 144A sr. notes 7s, 2017    175,000    175,656  620,000  622,325    465,000  466,744 
Ameritech Capital Funding company                   
guaranty 6 1/4s, 2009    —    —  450,000  459,000    295,000  300,900 
AT&T Wireless Services, Inc.                   
sr. notes 8 3/4s, 2031    —    —  253,000  320,310    264,000  334,237 
BCM Ireland Finance, Ltd. 144A FRN                   
9.506s, 2016 (Cayman Islands)  EUR  90,000    129,808  105,000  151,443    50,000  72,116 
Bellsouth Capital Funding unsec.                   
notes 7 7/8s, 2030  $  —    —  $ 1,170,000  $ 1,352,369  $  1,020,000  1,178,988 

49

CORPORATE BONDS AND NOTES*  Growth 3.3%    Balanced 6.8%    Conservative 9.6% 
  Principal        Principal        Principal     
  amount    Value    amount    Value    amount    Value 
Communication Services continued                       
Centennial Cellular Operating Co., LLC                       
company guaranty 10 1/8s, 2013  $ 100,000  $  106,000  $  155,000  $  164,300  $  —  $  — 
Centennial Communications Corp.                       
sr. notes 10s, 2013  260,000    274,950    255,000    269,663    115,000    121,613 
Cincinnati Bell, Inc. company                       
guaranty 7 1/4s, 2013  300,000    302,250    425,000    428,188    180,000    181,350 
Citizens Communications Co.                       
notes 9 1/4s, 2011  340,000    368,900    480,000    520,800    225,000    244,125 
Cricket Communications, Inc. company                       
guaranty 9 3/8s, 2014  135,000    137,025    150,000    152,250    75,000    76,125 
Digicel Group, Ltd. 144A                       
sr. notes 8 7/8s, 2015 (Bermuda)  205,000    192,700    205,000    192,700    100,000    94,000 
Digicel, Ltd. 144A sr. notes 9 1/4s,                       
2012 (Jamaica)  220,000    226,050    180,000    184,950    100,000    102,750 
Dobson Communications Corp.                       
sr. notes 8 7/8s, 2013  270,000    286,200    345,000    365,700    170,000    180,200 
France Telecom notes 8 1/2s, 2031 (France)  —    —    20,000    25,706    —    — 
Inmarsat Finance PLC company guaranty                       
stepped-coupon zero % (10 3/8s, 11/15/08),                       
2012 (United Kingdom) ††  299,000    286,293    241,000    230,758    111,000    106,283 
Intelsat Bermuda, Ltd. company                       
guaranty FRN 8.886s, 2015 (Bermuda)  155,000    156,550    140,000    141,400    60,000    60,600 
Intelsat Bermuda, Ltd. sr. unsec.                       
11 1/4s, 2016 (Bermuda)  510,000    541,875    530,000    563,125    250,000    265,625 
Intelsat Intermediate Holding Co., Ltd.                       
company guaranty stepped-coupon zero %                       
(9 1/4s, 2/1/10), 2015 (Bermuda) ††  95,000    78,138    75,000    61,688    30,000    24,675 
iPCS, Inc. 144A sec. FRN 7.481s, 2013  105,000    101,850    100,000    97,000    45,000    43,650 
Level 3 Financing, Inc. company                       
guaranty 12 1/4s, 2013  130,000    143,325    125,000    137,813    60,000    66,150 
Level 3 Financing, Inc. company                       
guaranty 9 1/4s, 2014  305,000    300,425    295,000    290,575    140,000    137,900 
Level 3 Financing, Inc. company                       
guaranty 8 3/4s, 2017  150,000    144,750    150,000    144,750    70,000    67,550 
MetroPCS Wireless, Inc. 144A                       
sr. notes 9 1/4s, 2014  185,000    188,700    200,000    204,000    100,000    102,000 
MetroPCS Wireless, Inc. 144A                       
sr. notes 9 1/4s, 2014  70,000    71,400    65,000    66,300    30,000    30,600 
Nextel Communications, Inc.                       
sr. notes Ser. E, 6 7/8s, 2013  —    —    135,000    135,540    140,000    140,560 
Nextel Communications, Inc.                       
sr. notes Ser. F, 5.95s, 2014  —    —    930,000    887,880    790,000    754,221 
Nordic Telephone Co. Holdings ApS 144A                       
sr. notes 8 7/8s, 2016 (Denmark)  210,000    221,550    205,000    216,275    75,000    79,125 
PAETEC Holding Corp. 144A                       
sr. notes 9 1/2s, 2015  115,000    115,000    105,000    105,000    50,000    50,000 
PanAmSat Corp. company guaranty 9s, 2014  115,000    118,450    105,000    108,150    50,000    51,500 
Qwest Communications International, Inc.                       
company guaranty 7 1/2s, 2014  355,000    359,438    225,000    227,813    105,000    106,313 
Qwest Corp. debs. 7 1/4s, 2025  85,000    83,513    115,000    112,988    55,000    54,038 
Qwest Corp. notes 8 7/8s, 2012  715,000    780,244    740,000    807,525    345,000    376,481 
Rogers Wireless, Inc. sec.                       
notes 6 3/8s, 2014 (Canada)  —    —    235,000    237,391    200,000    202,035 
Rural Cellular Corp. sr. notes 9 7/8s, 2010  105,000    109,725    60,000    62,700    25,000    26,125 
Rural Cellular Corp. 144A                       
sr. sub. notes FRN 8.621s, 2013  150,000    153,750    140,000    143,500    65,000    66,625 
Southwestern Bell Telephone debs. 7s, 2027  —    —    —    —    110,000    112,355 

50

CORPORATE BONDS AND NOTES*  Growth 3.3%  Balanced 6.8%    Conservative 9.6% 
  Principal      Principal      Principal   
  amount    Value  amount  Value    amount  Value 
Communication Services continued                 
Sprint Capital Corp. company                 
guaranty 6.9s, 2019  $ —  $  —  $ 175,000  $ 175,692  $  115,000  $ 115,455 
Sprint Capital Corp. company                 
guaranty 6 7/8s, 2028  —    —  435,000  419,818    475,000  458,422 
Syniverse Technologies, Inc.                 
sr. sub. notes Ser. B, 7 3/4s, 2013  65,000    62,075  85,000  81,175    40,000  38,200 
Telecom Italia Capital SA company                 
guaranty 7.2s, 2036 (Luxembourg)  —    —  110,000  116,249    105,000  110,965 
Telecom Italia Capital SA company                 
guaranty 5 1/4s, 2015 (Luxembourg)  —    —  215,000  204,106    240,000  227,839 
Telecom Italia Capital SA company                 
guaranty 5 1/4s, 2013 (Luxembourg)  —    —  140,000  135,870    110,000  106,755 
Telecom Italia Capital SA company                 
guaranty 4s, 2010 (Luxembourg)  —    —  5,000  4,867    50,000  48,673 
Telefonica Emisones SAU company                 
guaranty 7.045s, 2036 (Spain)  —    —  200,000  214,319    225,000  241,109 
Telefonica Emisones SAU company                 
guaranty 6.421s, 2016 (Spain)  —    —  75,000  77,168    75,000  77,168 
Telefonica Emisones SAU company                 
guaranty 6.221s, 2017 (Spain)  —    —  310,000  313,167    180,000  181,839 
Telefonica Europe BV company                 
guaranty 8 1/4s, 2030 (Netherlands)  —    —  125,000  149,403    120,000  143,427 
Telus Corp. notes 8s, 2011 (Canada)  —    —  260,000  281,377    280,000  303,021 
Time Warner Telecom, Inc. company                 
guaranty 9 1/4s, 2014  160,000    166,000  175,000  181,563    85,000  88,188 
Verizon Communications, Inc. sr. unsec.                 
5.55s, 2016  —    —  1,230,000  1,217,844    780,000  772,291 
Verizon Communications, Inc. sr. unsec.                 
bonds 5 1/2s, 2017  —    —  365,000  357,636    315,000  308,645 
Verizon New England, Inc.                 
sr. notes 6 1/2s, 2011  —    —  245,000  253,873    365,000  378,219 
Verizon New Jersey, Inc. debs. 8s, 2022  —    —  160,000  182,643    165,000  188,350 
Verizon Pennsylvania, Inc. debs. 8.35s, 2030  —    —  210,000  250,809    225,000  268,724 
Verizon Virginia, Inc. debs. Ser. A, 4 5/8s, 2013  —    —  —  —    95,000  90,452 
West Corp. company guaranty 11s, 2016  75,000    78,750  70,000  73,500    35,000  36,750 
West Corp. company guaranty 9 1/2s, 2014  145,000    149,713  140,000  144,550    65,000  67,113 
Windstream Corp. company                 
guaranty 8 5/8s, 2016  355,000    378,519  340,000  362,525    155,000  165,269 
Windstream Corp. company                 
guaranty 8 1/8s, 2013  160,000    168,400  160,000  168,400    80,000  84,200 
     
 		  
   
      7,157,972    15,558,429      10,778,633 
 
Conglomerates      —%    —%      —% 
Siemens Financieringsmaatschappij 144A                 
notes 5 3/4s, 2016 (Netherlands)  —    —  155,000  156,310    160,000  161,352 
 
Consumer Cyclicals      0.5%    0.8%      1.0% 
American Media, Inc. company                 
guaranty 8 7/8s, 2011  45,000    39,375  55,000  48,125    30,000  26,250 
American Media, Inc. company                 
guaranty Ser. B, 10 1/4s, 2009  155,000    137,950  195,000  173,550    100,000  89,000 
Aramark Corp. company guaranty 8 1/2s, 2015  275,000    280,500  270,000  275,400    125,000  127,500 
ArvinMeritor, Inc. sr. unsec.                 
notes 8 1/8s, 2015  110,000    106,700  120,000  116,400    60,000  58,200 
Associated Materials, Inc. company                 
guaranty 9 3/4s, 2012  180,000    182,700  215,000  218,225    110,000  111,650 
Autonation, Inc. company guaranty 7s, 2014  30,000    28,650  35,000  33,425    20,000  19,100 

51

Growth 3.3% Balanced 6.8% Conservative 9.6%
  Principal        Principal        Principal     
  amount    Value    amount    Value    amount    Value 
Consumer Cyclicals continued                       
Autonation, Inc. company guaranty FRN                       
7.248s, 2013  $ 50,000  $  47,750  $  55,000  $  52,525  $  30,000  $  28,650 
Bon-Ton Stores, Inc. (The) company                       
guaranty 10 1/4s, 2014  160,000    149,600    200,000    187,000    100,000    93,500 
Boyd Gaming Corp. sr. sub. notes 7 3/4s, 2012  370,000    380,175    350,000    359,625    160,000    164,400 
Boyd Gaming Corp. sr. sub. notes 7 1/8s, 2016  160,000    154,800    195,000    188,663    105,000    101,588 
CanWest Media, Inc. company                       
guaranty 8s, 2012 (Canada)  391,391    383,563    384,071    376,390    139,145    136,362 
Cenveo Corp., sr. sub. notes 7 7/8s, 2013  70,000    63,700    82,000    74,620    43,000    39,130 
Corrections Corporation of America                       
sr. notes 7 1/2s, 2011  125,000    125,938    160,000    161,200    85,000    85,638 
D.R. Horton, Inc. sr. notes 7 7/8s, 2011  —    —    115,000    111,458    130,000    125,996 
D.R. Horton, Inc. sr. notes 5 7/8s, 2013  —    —    140,000    125,427    365,000    327,007 
DaimlerChrysler NA Holding Corp.                       
company guaranty 8s, 2010  —    —    590,000    630,300    440,000    470,054 
DaimlerChrysler NA Holding Corp.                       
company guaranty 7.2s, 2009  —    —    —    —    35,000    36,255 
DaimlerChrysler NA Holding Corp.                       
company guaranty 6 1/2s, 2013  —    —    35,000    36,197    50,000    51,710 
DaimlerChrysler NA Holding Corp.                       
notes Ser. MTN, 5 3/4s, 2011  —    —    245,000    247,278    445,000    449,138 
Dana Corp. notes 5.85s, 2015  225,000    181,125    245,000    197,225    120,000    96,600 
Dex Media, Inc. notes 8s, 2013  60,000    60,450    65,000    65,488    30,000    30,225 
Ford Motor Co. notes 7.45s, 2031  170,000    133,450    195,000    153,075    95,000    74,575 
Ford Motor Credit Corp. notes 7 7/8s, 2010  640,000    625,615    650,000    635,391    280,000    273,707 
Ford Motor Credit Corp. notes 7.8s, 2012  110,000    104,643    —    —    100,000    95,130 
Ford Motor Credit Corp. notes 7 3/8s, 2009  85,000    83,347    105,000    102,958    50,000    49,028 
Ford Motor Credit Corp. notes 6 3/8s, 2008  —    —    215,000    209,919    235,000    229,446 
Ford Motor Credit Corp. sr. notes 9 7/8s, 2011  1,330,000    1,349,981    1,090,000    1,106,375    445,000    451,685 
Ford Motor Credit Corp. sr. unsec.                       
9 3/4s, 2010  145,000    147,927    179,000    182,613    —    — 
General Motors Corp. debs. 9.4s, 2021  60,000    57,000    55,000    52,250    25,000    23,750 
General Motors Corp. notes 7.2s, 2011  990,000    945,450    975,000    931,125    450,000    429,750 
Goodman Global Holding Co., Inc.                       
sr. notes FRN Ser. B, 8.36s, 2012  280,000    277,200    250,000    247,500    120,000    118,800 
Goodyear Tire & Rubber Co. (The)                       
notes 7.857s, 2011  —    —    4,000    4,060    —    — 
Goodyear Tire & Rubber Co. (The)                       
sr. notes 9s, 2015  3,000    3,203    1,000    1,068    —    — 
Hanesbrands, Inc. company guaranty FRN                       
Ser. B, 8.784s, 2014  230,000    228,850    220,000    218,900    100,000    99,500 
Hilton Hotels Corp. notes 7 5/8s, 2012  175,000    199,106    160,000    182,040    75,000    85,331 
Host Marriott, LP sr. notes Ser. M, 7s, 2012 (R)  320,000    322,400    450,000    453,375    210,000    211,575 
iPayment, Inc. company guaranty 9 3/4s, 2014  65,000    62,075    75,000    71,625    35,000    33,425 
JC Penney Co., Inc. debs. 7.65s, 2016  —    —    25,000    27,210    25,000    27,210 
JC Penney Co., Inc. notes 6 7/8s, 2015  —    —    195,000    202,226    210,000    217,782 
JC Penney Co., Inc. sr. notes 6 3/8s, 2036  —    —    162,000    151,581    150,000    140,352 
Jostens IH Corp. company guaranty 7 5/8s, 2012  160,000    162,800    220,000    223,850    105,000    106,838 
K. Hovnanian Enterprises, Inc. company                       
guaranty 8 7/8s, 2012  70,000    52,500    80,000    60,000    40,000    30,000 
Lamar Media Corp. company                       
guaranty 7 1/4s, 2013  185,000    185,925    260,000    261,300    120,000    120,600 
Lamar Media Corp. company                       
guaranty Ser. B, 6 5/8s, 2015  70,000    67,550    80,000    77,200    40,000    38,600 
Levi Strauss & Co. sr. notes 9 3/4s, 2015  290,000    304,500    275,000    288,750    125,000    131,250 
Levi Strauss & Co. sr. notes 8 7/8s, 2016  115,000    118,450    145,000    149,350    75,000    77,250 
Marriott International, Inc.                       
notes 6 3/8s, 2017  —    —    210,000    210,979    218,000    219,017 

52

CORPORATE BONDS AND NOTES*  Growth 3.3%    Balanced 6.8%    Conservative 9.6% 
  Principal        Principal        Principal     
  amount    Value    amount    Value    amount    Value 
Consumer Cyclicals continued                       
Meritage Homes Corp. company                       
guaranty 6 1/4s, 2015  $ 275,000  $  216,906  $  285,000  $  224,794  $  130,000  $  102,538 
Meritage Homes Corp. sr. notes 7s, 2014  30,000    24,000    15,000    12,000    5,000    4,000 
MGM Mirage, Inc. company                       
guaranty 8 1/2s, 2010  85,000    88,825    95,000    99,275    50,000    52,250 
MGM Mirage, Inc. sr. notes 6 3/4s, 2012  315,000    309,881    436,000    428,915    216,000    212,490 
Michaels Stores, Inc. company                       
guaranty 11 3/8s, 2016  255,000    260,738    250,000    255,625    115,000    117,588 
Mohegan Tribal Gaming Authority                       
sr. sub. notes 6 3/8s, 2009  90,000    89,550    130,000    129,350    59,000    58,705 
Neiman-Marcus Group, Inc. company                       
guaranty 9s, 2015  465,000    495,225    505,000    537,825    250,000    266,250 
NTK Holdings, Inc. sr. disc.                       
notes zero %, 2014  210,000    129,150    230,000    141,450    110,000    67,650 
Office Depot, Inc. notes 6 1/4s, 2013  —    —    119,000    119,951    128,000    129,023 
Omnicom Group, Inc. sr. notes 5.9s, 2016  —    —    140,000    139,256    150,000    149,203 
Park Place Entertainment Corp.                       
sr. notes 7s, 2013  265,000    276,263    260,000    271,050    120,000    125,100 
Pinnacle Entertainment, Inc.                       
sr. sub. notes 8 1/4s, 2012  250,000    253,125    240,000    243,000    110,000    111,375 
Pinnacle Entertainment, Inc. 144A                       
sr. sub. notes 7 1/2s, 2015  240,000    227,100    225,000    212,906    105,000    99,356 
Quebecor Media notes 7 3/4s, 2016 (Canada) ##  65,000    62,400    60,000    57,600    25,000    24,000 
R.H. Donnelley Corp. sr. disc.                       
notes Ser. A-1, 6 7/8s, 2013  55,000    51,975    65,000    61,425    35,000    33,075 
R.H. Donnelley Corp. sr. disc.                       
notes Ser. A-2, 6 7/8s, 2013  95,000    89,775    115,000    108,675    60,000    56,700 
R.H. Donnelley Corp. sr. notes 8 7/8s, 2017  85,000    86,488    105,000    106,838    55,000    55,963 
R.H. Donnelley Corp.                       
sr. notes Ser. A-3, 8 7/8s, 2016  75,000    76,406    95,000    96,781    50,000    50,938 
R.H. Donnelley, Inc. company                       
guaranty 10 7/8s, 2012  125,000    133,125    119,000    126,735    17,000    18,105 
Reader’s Digest Association, Inc. (The)                       
144A sr. sub. notes 9s, 2017  205,000    184,500    200,000    180,000    90,000    81,000 
Scientific Games Corp. company                       
guaranty 6 1/4s, 2012  165,000    159,019    235,000    226,481    110,000    106,013 
Sealy Mattress Co.                       
sr. sub. notes 8 1/4s, 2014  190,000    191,425    270,000    272,025    125,000    125,938 
Standard Pacific Corp.                       
sr. notes 6 1/2s, 2008  170,000    151,300    185,000    164,650    95,000    84,550 
Starwood Hotels & Resorts Worldwide, Inc.                       
sr. unsec. 6 1/4s, 2013  —    —    285,000    286,041    320,000    321,168 
Station Casinos, Inc. sr. notes 6s, 2012  305,000    289,750    405,000    384,750    190,000    180,500 
Tenneco Automotive, Inc. company                       
guaranty 8 5/8s, 2014  240,000    241,800    160,000    161,200    70,000    70,525 
Tenneco Automotive, Inc. sec.                       
notes Ser. B, 10 1/4s, 2013  30,000    32,175    30,000    32,175    15,000    16,088 
Texas Industries, Inc. sr. unsec.                       
notes 7 1/4s, 2013  320,000    319,200    295,000    294,263    140,000    139,650 
THL Buildco, Inc. (Nortek                       
Holdings, Inc.) sr. sub. notes 8 1/2s, 2014  525,000    455,438    435,000    377,363    190,000    164,825 
Trump Entertainment Resorts, Inc. sec.                       
notes 8 1/2s, 2015  500,000    416,250    550,000    457,875    255,000    212,288 
UCI Holdco, Inc. 144A sr. notes FRN                       
12.694s, 2013 ‡‡  249,330    236,864    249,330    236,864    116,707    110,872 
United Auto Group, Inc. company                       
guaranty 7 3/4s, 2016  195,000    186,713    200,000    191,500    100,000    95,750 

53

CORPORATE BONDS AND NOTES*    Growth 3.3%    Balanced 6.8%    Conservative 9.6% 
    Principal      Principal      Principal   
    amount  Value    amount  Value    amount  Value 
Consumer Cyclicals continued                   
United Components, Inc. sr. sub. notes                   
9 3/8s, 2013  $  80,000  $ 81,200  $  70,000  $ 71,050  $  35,000  $ 35,525 
Vertis, Inc. company guaranty Ser. B,                   
10 7/8s, 2009    550,000  532,125    565,000  546,638    265,000  256,388 
Vertis, Inc. 144A sub. notes 13 1/2s, 2009    60,000  44,400    35,000  25,900    15,000  11,100 
Wimar Opco, LLC 144A                   
sr. sub. notes 9 5/8s, 2014    570,000  441,750    585,000  453,375    290,000  224,750 
Wyndham Worldwide Corp. sr. unsec. 6s, 2016    —  —    210,000  203,377    215,000  208,219 
Wynn Las Vegas, LLC/Wynn Las Vegas                   
Capital Corp. 1st mtge. 6 5/8s, 2014    270,000  264,600    380,000  372,400    175,000  171,500 
Yankee Acquisition Corp. company                   
guaranty Ser. B, 8 1/2s, 2015    185,000  179,450    170,000  164,900    80,000  77,600 
     
   
   
      15,033,839      18,359,519      10,381,112 
 
Consumer Staples      0.4%      0.9%      1.2% 
Adelphia Communications Corp. escrow                   
bonds zero %, 2010    200,000  32,000    270,000  43,200    125,000  20,000 
Affinion Group, Inc. company                   
guaranty 11 1/2s, 2015    175,000  183,750    175,000  183,750    85,000  89,250 
Affinion Group, Inc. company                   
guaranty 10 1/8s, 2013    315,000  332,325    300,000  316,500    135,000  142,425 
Affinity Group, Inc. sr. sub. notes 9s, 2012    175,000  178,500    250,000  255,000    115,000  117,300 
AMC Entertainment, Inc. company                   
guaranty 11s, 2016    205,000  218,325    275,000  292,875    119,000  126,735 
AMC Entertainment, Inc.                   
sr. sub. notes 8s, 2014    115,000  109,538    165,000  157,163    64,000  60,960 
Avis Budget Car Rental, LLC company                   
guaranty 7 3/4s, 2016    120,000  117,600    145,000  142,100    75,000  73,500 
Avis Budget Car Rental, LLC company                   
guaranty 7 5/8s, 2014    95,000  93,338    105,000  103,163    55,000  54,038 
Buffets, Inc. company guaranty 12 1/2s, 2014    260,000  182,000    275,000  192,500    135,000  94,500 
Campbell Soup Co. debs. 8 7/8s, 2021    —  —    300,000  381,578    255,000  324,342 
CCH, LLC/Capital Corp. sr. unsec.                   
notes 10 1/4s, 2010    275,000  281,188    265,000  270,963    210,000  214,725 
CCH I Holdings, LLC company                   
guaranty 12 1/8s, 2015    25,000  23,375    15,000  14,025    5,000  4,675 
CCH I, LLC/Capital Corp. sec.                   
notes 11s, 2015    595,000  602,438    660,000  668,250    124,000  125,550 
CCH II, LLC/Capital Corp. sr. unsec.                   
notes Ser. B, 10 1/4s, 2010    670,000  696,800    615,000  639,600    380,000  395,200 
Chiquita Brands International, Inc.                   
sr. notes 8 7/8s, 2015    25,000  22,500    30,000  27,000    15,000  13,500 
Chiquita Brands International, Inc.                   
sr. notes 7 1/2s, 2014    150,000  129,000    170,000  146,200    85,000  73,100 
Church & Dwight Co., Inc. company                   
guaranty 6s, 2012    130,000  125,125    180,000  173,250    85,000  81,813 
Cinemark, Inc. sr. disc. notes stepped-coupon                   
zero % (9 3/4s, 3/15/09), 2014 ††    405,000  382,725    380,000  359,100    175,000  165,375 
Cox Communications, Inc. notes 7 1/8s, 2012    —  —    310,000  328,545    390,000  413,331 
Cox Communications, Inc. 144A                   
notes 5 7/8s, 2016    —  —    355,000  347,510    335,000  327,932 
Cox Enterprises, Inc. 144A notes 7 7/8s, 2010    —  —    225,000  240,726    110,000  117,688 
CSC Holdings, Inc. debs. Ser. B, 8 1/8s, 2009    405,000  412,088    570,000  579,975    265,000  269,638 
CSC Holdings, Inc. sr. notes 6 3/4s, 2012    130,000  125,125    50,000  48,125    20,000  19,250 
CSC Holdings, Inc. sr. notes Ser. B, 7 5/8s, 2011    125,000  125,313    50,000  50,125    20,000  20,050 
CVS Caremark Corp. sr. unsec. FRN 6.302s, 2037    —  —    760,000  738,620    715,000  694,886 

54

CORPORATE BONDS AND NOTES*    Growth 3.3%    Balanced 6.8%    Conservative 9.6% 
    Principal        Principal        Principal     
    amount    Value    amount    Value    amount    Value 
Consumer Staples continued                         
CVS Caremark Corp. 144A pass-through                         
certificates 6.117s, 2013  $  —  $  —  $  337,763  $  339,654  $  301,574  $  303,263 
Dean Foods Co. company guaranty 7s, 2016    105,000    99,750    125,000    118,750    60,000    57,000 
Del Monte Corp. company guaranty 6 3/4s, 2015    230,000    220,800    320,000    307,200    150,000    144,000 
Del Monte Corp. sr. sub. notes 8 5/8s, 2012    35,000    35,525    45,000    45,675    20,000    20,300 
Delhaize Group 144A notes 6 1/2s, 2017 (Belgium)    —    —    200,000    207,574    170,000    176,438 
Diageo PLC company guaranty 8s, 2022    —    —    165,000    195,306    135,000    159,796 
DirecTV Holdings, LLC company                         
guaranty 6 3/8s, 2015    290,000    275,138    395,000    374,756    90,000    85,388 
Dole Food Co. company guaranty 7 1/4s, 2010    85,000    80,325    83,000    78,435    —    — 
Dole Food Co. sr. notes 8 5/8s, 2009    98,000    98,245    197,000    197,493    88,000    88,220 
Echostar DBS Corp. company guaranty 7s, 2013    150,000    153,375    165,000    168,713    85,000    86,913 
Echostar DBS Corp. company                         
guaranty 6 5/8s, 2014    55,000    55,275    10,000    10,050    —    — 
Echostar DBS Corp. sr. notes 6 3/8s, 2011    650,000    653,250    655,000    658,275    295,000    296,475 
Elizabeth Arden, Inc. company                         
guaranty 7 3/4s, 2014    210,000    206,850    275,000    270,875    130,000    128,050 
Estee Lauder Cos., Inc. (The) sr. unsec. 6s, 2037    —    —    360,000    348,368    310,000    299,984 
Estee Lauder Cos., Inc. (The) sr. unsec. 5.55s, 2017    —    —    95,000    93,398    80,000    78,651 
General Mills, Inc. sr. unsub. 5.65s, 2012    —    —    290,000    292,582    325,000    327,893 
Hertz Corp. company guaranty 8 7/8s, 2014    335,000    345,050    360,000    370,800    180,000    185,400 
Idearc, Inc. company guaranty 8s, 2016    550,000    548,625    590,000    588,525    285,000    284,288 
Insight Midwest, LP/Insight                         
Capital, Inc. sr. notes 9 3/4s, 2009    —    —    —    —    52,000    52,065 
Interpublic Group of Companies, Inc.                         
notes 6 1/4s, 2014    155,000    138,725    190,000    170,050    100,000    89,500 
Ion Media Networks, Inc. 144A sr. sec.                         
notes 11.61s, 2013    70,000    71,400    90,000    91,800    45,000    45,900 
Ion Media Networks, Inc. 144A sr. sec.                         
notes 8.61s, 2012    90,000    89,550    110,000    109,450    60,000    59,700 
Jarden Corp. company guaranty 7 1/2s, 2017    200,000    193,500    200,000    193,500    90,000    87,075 
Kroger Co. company guaranty 6 3/4s, 2012    —    —    —    —    150,000    157,736 
Kroger Co. company guaranty 6.4s, 2017    —    —    215,000    219,230    100,000    101,968 
Liberty Media Corp. debs. 8 1/4s, 2030    195,000    191,100    245,000    240,100    120,000    117,600 
News America Holdings, Inc. company                         
guaranty 7 3/4s, 2024    —    —    350,000    383,331    300,000    328,570 
News America Holdings, Inc.                         
debs. 7 3/4s, 2045    —    —    620,000    686,385    505,000    559,071 
Nielsen Finance, LLC/Nielsen                         
Finance Co. company guaranty 10s, 2014    195,000    206,213    190,000    200,925    90,000    95,175 
Nielsen Finance, LLC/Nielsen Finance Co.                         
company guaranty stepped-coupon zero %                         
(12 1/2s, 8/1/11), 2016 ††    130,000    91,000    125,000    87,500    60,000    42,000 
NTL Cable PLC sr. notes 9 1/8s, 2016                         
(United Kingdom)    —    —    100,000    103,750    —    — 
OSI Restaurant Partners, Inc. 144A                         
sr. notes 10s, 2015    115,000    101,775    110,000    97,350    50,000    44,250 
Pilgrim’s Pride Corp. sr. unsec.                         
7 5/8s, 2015    38,000    38,950    40,000    41,000    17,000    17,425 
Pinnacle Foods Finance, LLC 144A                         
sr. notes 9 1/4s, 2015    125,000    119,063    115,000    109,538    55,000    52,388 
Pinnacle Foods Finance, LLC 144A                         
sr. sub. notes 10 5/8s, 2017    130,000    121,875    125,000    117,188    60,000    56,250 
Playtex Products, Inc. company                         
guaranty 9 3/8s, 2011    95,000    98,206    135,000    139,556    65,000    67,194 
Playtex Products, Inc. company                         
guaranty 8s, 2011    70,000    73,675    80,000    84,200    40,000    42,100 

55

CORPORATE BONDS AND NOTES*    Growth 3.3%    Balanced 6.8%    Conservative 9.6% 
    Principal      Principal      Principal   
    amount  Value    amount  Value    amount  Value 
Consumer Staples continued                   
Prestige Brands, Inc. sr. sub. notes 9 1/4s, 2012  $  150,000  $ 151,500  $  210,000  $ 212,100  $  100,000  $ 101,000 
Rainbow National Services, LLC 144A                   
sr. notes 8 3/4s, 2012    305,000  316,438    310,000  321,625    150,000  155,625 
Rental Services Corp. company                   
guaranty 9 1/2s, 2014    240,000  229,200    230,000  219,650    105,000  100,275 
Reynolds American, Inc. company                   
guaranty 7 1/4s, 2013    260,000  274,484    285,000  300,877    140,000  147,799 
Rite Aid Corp. company guaranty 9 3/8s, 2015    255,000  237,150    235,000  218,550    110,000  102,300 
Rite Aid Corp. sec. notes 7 1/2s, 2017    245,000  230,606    225,000  211,781    105,000  98,831 
Sinclair Broadcast Group, Inc. company                   
guaranty 8s, 2012    37,000  37,833    36,000  36,810    —  — 
Sirius Satellite Radio, Inc. sr. unsec.                   
notes 9 5/8s, 2013    140,000  138,950    180,000  178,650    90,000  89,325 
Spectrum Brands, Inc. company                   
guaranty 11 1/2s, 2013 ‡‡    140,000  124,600    145,000  129,050    65,000  57,850 
Spectrum Brands, Inc. company                   
guaranty 7 3/8s, 2015    260,000  200,200    300,000  231,000    150,000  115,500 
Supervalu, Inc. sr. notes 7 1/2s, 2014    215,000  218,763    210,000  213,675    95,000  96,663 
TCI Communications, Inc. company                   
guaranty 7 7/8s, 2026    —  —    1,140,000  1,255,860    830,000  914,355 
TCI Communications, Inc. debs. 9.8s, 2012    —  —    65,000  75,234    50,000  57,873 
TCI Communications, Inc. debs. 7 7/8s, 2013    —  —    530,000  580,033    660,000  722,305 
Time Warner, Inc. debs. 9.15s, 2023    —  —    25,000  30,487    105,000  128,044 
Time Warner, Inc. debs. 9 1/8s, 2013    —  —    705,000  808,224    555,000  636,261 
Time Warner Cable, Inc. 144A sr. unsec.                   
6.55s, 2037    —  —    505,000  494,566    390,000  381,942 
Time Warner Cable, Inc. 144A sr. unsec.                   
5.85s, 2017    —  —    270,000  262,877    215,000  209,328 
Time Warner Entertainment Co., LP                   
debs. 8 3/8s, 2023    —  —    —  —    25,000  28,943 
United Rentals NA, Inc.                   
sr. sub. notes 7s, 2014    410,000  418,200    400,000  408,000    155,000  158,100 
Universal City Florida Holding Co.                   
sr. notes 8 3/8s, 2010    140,000  141,050    200,000  201,500    95,000  95,713 
Univision Communications, Inc. 144A                   
sr. notes 9 3/4s, 2015 ‡‡    165,000  160,875    150,000  146,250    75,000  73,125 
Viacom, Inc. sr. notes 5 3/4s, 2011    —  —    130,000  131,258    140,000  141,354 
Young Broadcasting, Inc. company                   
guaranty 10s, 2011    180,000  166,050    170,000  156,825    79,000  72,878 
     
   
   
      11,726,192      21,266,007      13,463,178 
 
Electronics      —%      —%      —% 
Tyco Electronics Group S sr. unsec. 6s,                   
2012 (Luxembourg)    —  —    420,000  423,112    365,000  367,705 
 
Energy      0.2%      0.5%      0.7% 
Anadarko Petroleum Corp. sr. notes 6.45s, 2036    —  —    122,000  121,190    105,000  104,302 
Anadarko Petroleum Corp. sr. notes 5.95s, 2016    —  —    85,000  84,250    93,000  92,180 
Arch Western Finance, LLC sr. notes 6 3/4s, 2013    455,000  445,900    515,000  504,700    255,000  249,900 
Chaparral Energy, Inc. 144A sr. notes 8 7/8s, 2017    290,000  271,875    275,000  257,813    125,000  117,188 
Chesapeake Energy Corp. company                   
guaranty 7 3/4s, 2015    383,000  394,011    —  —    —  — 
Chesapeake Energy Corp. sr. notes 7 1/2s, 2013    —  —    515,000  529,163    250,000  256,875 
Chesapeake Energy Corp. sr. notes 7s, 2014    —  —    200,000  201,250    —  — 
Chesapeake Energy Corp. sr. unsec.                   
notes 7 5/8s, 2013    —  —    225,000  235,125    230,000  240,350 
Complete Production Services, Inc.                   
company guaranty 8s, 2016    290,000  286,738    300,000  296,625    150,000  148,313 

56

CORPORATE BONDS AND NOTES*    Growth 3.3%    Balanced 6.8%    Conservative 9.6% 
    Principal        Principal        Principal     
    amount    Value    amount    Value    amount    Value 
Energy continued                         
Compton Petroleum Corp. company                         
guaranty 7 5/8s, 2013 (Canada)  $  305,000  $  294,325  $  345,000  $  332,925  $  170,000  $  164,050 
Comstock Resources, Inc.                         
sr. notes 6 7/8s, 2012    125,000    120,313    175,000    168,438    80,000    77,000 
Denbury Resources, Inc.                         
sr. sub. notes 7 1/2s, 2015    230,000    235,750    220,000    225,500    105,000    107,625 
Encore Acquisition Co.                         
sr. sub. notes 6s, 2015    290,000    261,725    402,000    362,805    184,000    166,060 
Enterprise Products Operating, LP                         
company guaranty FRB 7.034s, 2068    —    —    270,000    247,329    125,000    114,504 
Enterprise Products Operating, LP                         
company guaranty FRN 8.375s, 2066    —    —    460,000    472,766    485,000    498,460 
EOG Resources, Inc. sr. unsec. 5 7/8s, 2017    —    —    235,000    234,921    205,000    204,931 
Forest Oil Corp. sr. notes 8s, 2011    230,000    238,625    340,000    352,750    220,000    228,250 
Harvest Operations Corp.                         
sr. notes 7 7/8s, 2011 (Canada)    165,000    159,638    205,000    198,338    110,000    106,425 
Hess Corp. bonds 7 7/8s, 2029    —    —    240,000    275,860    270,000    310,343 
Hilcorp Energy I, LP/Hilcorp                         
Finance Co. 144A sr. notes 9s, 2016    70,000    71,400    80,000    81,600    40,000    40,800 
Inergy, LP/Inergy Finance Corp.                         
sr. notes 6 7/8s, 2014    285,000    275,025    380,000    366,700    190,000    183,350 
Kerr-McGee Corp. sec. notes 6.95s, 2024    180,000    186,487    230,000    238,289    110,000    113,965 
Marathon Oil Corp. unsub. bonds 6.6s, 2037    —    —    205,000    210,564    175,000    179,750 
Marathon Oil Corp. unsub. notes 6s, 2017    —    —    80,000    80,321    70,000    70,281 
Massey Energy Co. sr. notes 6 5/8s, 2010    230,000    224,825    230,000    224,825    105,000    102,638 
Motiva Enterprises, LLC 144A sr. notes 5.2s, 2012    —    —    80,000    80,145    70,000    70,127 
Newfield Exploration Co.                         
sr. sub. notes 6 5/8s, 2016    —    —    145,000    142,463    155,000    152,288 
Newfield Exploration Co.                         
sr. sub. notes 6 5/8s, 2014    245,000    240,713    230,000    225,975    105,000    103,163 
Nexen, Inc. bonds 6.4s, 2037 (Canada)    —    —    445,000    432,431    380,000    369,267 
Offshore Logistics, Inc. company                         
guaranty 6 1/8s, 2013    180,000    174,600    245,000    237,650    115,000    111,550 
OPTI Canada, Inc. 144A company                         
guaranty 8 1/4s, 2014 (Canada)    220,000    221,650    215,000    216,613    100,000    100,750 
Oslo Seismic Services, Inc. 1st mtge.                         
8.28s, 2011    46,317    47,864    67,370    69,621    48,422    50,040 
Peabody Energy Corp. company                         
guaranty 7 3/8s, 2016    95,000    100,225    105,000    110,775    50,000    52,750 
Peabody Energy Corp. sr. notes 5 7/8s, 2016    290,000    283,475    680,000    664,700    420,000    410,550 
PetroHawk Energy Corp. company                         
guaranty 9 1/8s, 2013    400,000    422,000    455,000    480,025    230,000    242,650 
Plains Exploration & Production Co.                         
company guaranty 7s, 2017    245,000    229,075    230,000    215,050    105,000    98,175 
Pogo Producing Co. sr. sub. notes 7 7/8s, 2013    85,000    87,975    95,000    98,325    50,000    51,750 
Pogo Producing Co. sr. sub. notes 6 7/8s, 2017    145,000    145,725    190,000    190,950    90,000    90,450 
Premcor Refining Group, Inc.                         
sr. notes 7 1/2s, 2015    —    —    290,000    302,280    260,000    271,009 
Pride International, Inc. sr. notes 7 3/8s, 2014    195,000    199,875    275,000    281,875    130,000    133,250 
Quicksilver Resources, Inc. company                         
guaranty 7 1/8s, 2016    105,000    103,425    130,000    128,050    70,000    68,950 
Sabine Pass LNG, LP sec. notes 7 1/2s, 2016    465,000    458,025    455,000    448,175    250,000    246,250 
Stallion Oilfield Services/Stallion                         
Oilfield Finance Corp. 144A sr. unsec.                         
notes 9 3/4s, 2015    240,000    234,000    240,000    234,000    115,000    112,125 
Sunoco, Inc. notes 4 7/8s, 2014    —    —    130,000    123,349    110,000    104,372 

57

CORPORATE BONDS AND NOTES*    Growth 3.3%    Balanced 6.8%    Conservative 9.6% 
    Principal      Principal      Principal   
    amount  Value    amount  Value    amount  Value 
Energy continued                   
Targa Resources, Inc. 144A company                   
guaranty 8 1/2s, 2013  $  155,000  $ 155,000  $  165,000  $ 165,000  $  85,000  $ 85,000 
Tesoro Corp. 144A sr. notes 6 1/2s, 2017    —  —    360,000  358,200    305,000  303,475 
Valero Energy Corp. sr. notes 6 1/8s, 2017    —  —    130,000  130,854    150,000  150,986 
Valero Energy Corp. sr. unsec.                   
notes 7 1/2s, 2032    —  —    160,000  175,511    160,000  175,511 
Weatherford International, Inc. 144A                   
company guaranty 6.8s, 2037    —  —    110,000  112,981    90,000  92,439 
Weatherford International, Inc. 144A                   
company guaranty 6.35s, 2017    —  —    130,000  132,244    100,000  101,726 
Weatherford International, Ltd. company                   
guaranty 6 1/2s, 2036    —  —    205,000  201,828    205,000  201,828 
Weatherford International, Ltd.                   
sr. notes 5 1/2s, 2016    —  —    95,000  91,722    105,000  101,377 
Whiting Petroleum Corp. company                   
guaranty 7s, 2014    120,000  115,200    150,000  144,000    75,000  72,000 
     
   
   
      6,685,464      12,498,839      8,001,348 
 
Financial      0.2%      1.3%      2.4% 
AGFC Capital Trust I company guaranty 6s, 2067    —  —    180,000  167,092    185,000  171,734 
American Express Co. sr. unsec. notes 6.15s, 2017  —  —    220,000  222,013    265,000  267,425 
American International Group, Inc. jr.                   
sub. bond 6 1/4s, 2037    —  —    705,000  665,199    600,000  566,127 
Ameriprise Financial, Inc. jr. sub. FRN                   
7.518s, 2066    —  —    405,000  414,993    450,000  461,104 
Amvescap PLC company guaranty 5 5/8s,                   
2012 (United Kingdom)    —  —    180,000  177,016    155,000  152,430 
Barclays Bank PLC FRB 6.278s, 2049                   
(United Kingdom)    —  —    250,000  217,857    240,000  209,142 
Bear Stearns Cos., Inc. (The)                   
sr. notes 6.4s, 2017    —  —    580,000  574,582    500,000  495,330 
Block Financial Corp. notes 5 1/8s, 2014    —  —    155,000  141,538    155,000  141,538 
Bosphorus Financial Services, Ltd. 144A                   
sec. sr. notes FRN 7.358s, 2012 (Cayman Islands)  200,000  198,010    529,000  523,736    602,000  596,010 
Brandywine Operating Partnership, LP                   
sr. unsec. 5.7s, 2017 (R)    —  —    290,000  271,093    250,000  233,701 
Camden Property Trust notes 5.7s, 2017 (R)    —  —    270,000  254,155    235,000  221,209 
Capital One Capital III company                   
guaranty 7.686s, 2036    —  —    375,000  368,458    375,000  368,458 
Chubb Corp. (The) sr. notes 6s, 2037    —  —    5,000  4,805    85,000  81,691 
CIT Group, Inc. jr. sub. FRN 6.1s, 2067    —  —    1,120,000  929,925    965,000  801,230 
CIT Group, Inc. sr. notes 5.4s, 2013    —  —    60,000  56,269    50,000  46,891 
CIT Group, Inc. sr. notes 5s, 2014    —  —    435,000  392,782    410,000  370,208 
Citigroup, Inc. sub. notes 5s, 2014    —  —    126,000  121,454    215,000  207,242 
CNA Financial Corp. unsec.                   
notes 6 1/2s, 2016    —  —    165,000  167,431    175,000  177,578 
CNA Financial Corp. unsec. notes 6s, 2011    —  —    165,000  166,804    170,000  171,859 
Colonial Properties Trust notes 6 1/4s, 2014 (R)    —  —    170,000  169,706    185,000  184,680 
Countrywide Capital III company                   
guaranty Ser. B, 8.05s, 2027    —  —    230,000  197,800    180,000  154,800 
Credit Suisse Guernsey, Ltd. jr.                   
sub. FRN 5.86s, 2049 (Guernsey)    —  —    490,000  463,482    420,000  397,270 
Deutsche Bank Capital Funding Trust VII                   
144A FRB 5.628s, 2049    —  —    235,000  218,338    260,000  241,565 
Developers Diversified Realty Corp.                   
unsec. notes 5 3/8s, 2012 (R)    —  —    85,000  82,797    85,000  82,797 

58

CORPORATE BONDS AND NOTES*  Growth 3.3%  Balanced 6.8%    Conservative 9.6% 
  Principal      Principal        Principal     
  amount    Value  amount    Value    amount    Value 
Financial continued                     
Dresdner Funding Trust I 144A                     
bonds 8.151s, 2031  $ —  $  —  $ 485,000  $  526,051  $  415,000  $  450,126 
Duke Realty, LP sr. unsec. 6 1/2s, 2018  —    —  170,000    168,170    145,000    143,439 
E*Trade Financial Corp. sr. unsec.                     
notes 8s, 2011  180,000    179,100  255,000    253,725    120,000    119,400 
Equity One, Inc. notes 5 3/8s, 2015 (R)  —    —  190,000    177,190    195,000    181,853 
ERP Operating, LP notes 5 3/4s, 2017  —    —  295,000    281,890    250,000    238,890 
Finova Group, Inc. notes 7 1/2s, 2009  191,998    37,440  271,197    52,883    127,198    24,804 
Fleet Capital Trust V bank guaranty FRN                     
6.646s, 2028  —    —  225,000    212,508    220,000    207,786 
Fund American Cos., Inc. notes 5 7/8s, 2013  —    —  300,000    296,983    275,000    272,235 
GATX Financial Corp. notes 5.8s, 2016  —    —  120,000    116,283    130,000    125,973 
General Electric Capital Corp.                     
sr. unsec. 5 5/8s, 2017  —    —  1,035,000    1,034,716    965,000    964,736 
General Motors Acceptance Corp.                     
bonds 8s, 2031  —    —  235,000    230,554    320,000    313,946 
General Motors Acceptance Corp.                     
notes 6 3/4s, 2014  410,000    371,615  464,000    420,559    241,000    218,437 
General Motors Acceptance Corp.                     
notes 6 7/8s, 2011  475,000    452,040  605,000    575,757    295,000    280,741 
General Motors Acceptance Corp.                     
notes 6 7/8s, 2012  370,000    347,054  470,000    440,852    240,000    225,116 
General Motors Acceptance Corp.                     
notes 7 3/4s, 2010  140,000    138,861  180,000    178,536    95,000    94,227 
General Motors Acceptance Corp.                     
notes 7s, 2012  70,000    66,532  305,000    289,891    355,000    337,414 
General Motors Acceptance Corp.                     
notes FRN 7.821s, 2014  1,180,000    1,087,840  706,000    650,860    224,000    206,505 
General Motors Acceptance Corp.                     
sr. unsub. notes 5.85s, 2009  220,000    215,325  240,000    234,900    130,000    127,238 
GMAC, LLC unsub. notes 6 5/8s, 2012  205,000    191,848  145,000    135,698    70,000    65,509 
GMAC, LLC unsub. notes FRN 6.808s, 2009  —    —  925,000    890,826    615,000    592,279 
Goldman Sachs Group, Inc (The)                     
sub. notes 6 3/4s, 2037  —    —  565,000    567,843    485,000    487,441 
Health Care REIT, Inc. sr. notes 6s, 2013 (R)  —    —  85,000    84,661    90,000    89,641 
Highwood Properties, Inc. sr. unsec.                     
bonds 5.85s, 2017 (R)  —    —  340,000    322,195    290,000    274,814 
Hospitality Properties Trust notes 6 3/4s, 2013 (R)  —    —  175,000    180,793    175,000    180,793 
Hospitality Properties Trust sr. unsec. 6.7s, 2018 (R)  —    —  325,000    323,112    250,000    248,548 
HRPT Properties Trust bonds 5 3/4s, 2014 (R)  —    —  115,000    112,723    105,000    102,921 
HRPT Properties Trust notes 6 1/4s, 2016 (R)  —    —  105,000    101,474    95,000    91,810 
HSBC Finance Capital Trust IX FRN                     
5.911s, 2035  —    —  700,000    664,423    800,000    759,341 
HSBC Holdings PLC sub. notes 6 1/2s,                     
2037 (United Kingdom)  —    —  1,495,000    1,504,765    1,090,000    1,097,120 
HUB International Holdings, Inc. 144A                     
sr. notes 9s, 2014  50,000    48,000  50,000    48,000    25,000    24,000 
HUB International Holdings, Inc. 144A                     
sr. sub. notes 10 1/4s, 2015  70,000    65,100  70,000    65,100    30,000    27,900 
ILFC E-Capital Trust II 144A FRB 6 1/4s, 2065  —    —  615,000    592,809    670,000    645,824 
iStar Financial, Inc. sr. unsec.                     
notes 5 7/8s, 2016 (R)  —    —  345,000    308,766    380,000    340,090 
JPMorgan Chase Bank NA sub. notes 6s, 2017  —    —  330,000    333,095    280,000    282,626 
JPMorgan Chase Capital XVIII                     
bonds Ser. R, 6.95s, 2036  —    —  343,000    337,177    300,000    294,907 
JPMorgan Chase Capital XXV bonds 6.8s, 2037  —    —  330,000    330,503    285,000    285,434 
Kimco Realty Corp. sr. sub. notes 5.7s, 2017 (R)  —    —  205,000    198,163    175,000    169,163 

59

CORPORATE BONDS AND NOTES*    Growth 3.3%    Balanced 6.8%    Conservative 9.6% 
    Principal        Principal      Principal   
    amount    Value    amount  Value    amount  Value 
Financial continued                     
Lehman Brothers Holdings, Inc.                     
sr. unsec. 6.2s, 2014  $  —  $  —  $  565,000  $ 567,238  $  485,000  $ 486,921 
Lehman Brothers Holdings, Inc.                     
sub. notes 5 3/4s, 2017    —    —    140,000  134,547    160,000  153,768 
Leucadia National Corp. sr. unsec. 7 1/8s, 2017    195,000    185,738    185,000  176,213    85,000  80,963 
Leucadia National Corp. sr. unsec. 8 1/8s, 2015    115,000    115,719    95,000  95,594    45,000  45,281 
Liberty Mutual Insurance 144A notes 7.697s, 2097    —    —    490,000  474,994    510,000  494,382 
Lincoln National Corp. FRB 7s, 2066    —    —    190,000  195,810    210,000  216,422 
Loews Corp. notes 5 1/4s, 2016    —    —    95,000  91,361    100,000  96,170 
MetLife, Inc. jr. sub. FRN 6.4s, 2036    —    —    415,000  394,603    430,000  408,866 
Nationwide Financial Services, Inc.                     
notes 5 5/8s, 2015    —    —    125,000  123,083    425,000  418,483 
Nationwide Health Properties, Inc.                     
notes 6 1/2s, 2011 (R)    —    —    145,000  150,970    150,000  156,176 
Nationwide Mutual Insurance Co. 144A                     
notes 8 1/4s, 2031    —    —    210,000  252,988    —  — 
Nuveen Investments, Inc.                     
sr. notes 5 1/2s, 2015    —    —    110,000  92,884    110,000  92,884 
OneAmerica Financial Partners, Inc.                     
144A bonds 7s, 2033    —    —    295,000  297,108    330,000  332,358 
Petroplus Finance, Ltd. company                     
guaranty 6 3/4s, 2014 (Bermuda)    270,000    259,200    260,000  249,600    75,000  72,000 
ProLogis Trust sr. notes 5 3/4s, 2016 (R)    —    —    200,000  192,834    215,000  207,296 
Prudential Holdings, LLC 144A                     
bonds 8.695s, 2023    —    —    540,000  662,915    435,000  534,015 
RBS Capital Trust IV company                     
guaranty FRN 5.998s, 2049    —    —    485,000  460,962    505,000  479,971 
Realogy Corp. 144A sr. notes 10 1/2s, 2014    665,000    566,913    640,000  545,600    295,000  251,488 
Regency Centers, LP sr. unsec. 5 7/8s, 2017    —    —    230,000  221,963    195,000  188,186 
Rouse Co., LP/TRC Co-Issuer Inc. 144A                     
sr. notes 6 3/4s, 2013 (R)    —    —    165,000  161,854    175,000  171,663 
Rouse Co. (The) notes 7.2s, 2012 (R)    —    —    150,000  151,307    170,000  171,481 
Royal Bank of Scotland Group PLC                     
bonds 7.64s, 2049 (United Kingdom)    —    —    400,000  400,000    300,000  300,000 
Simon Property Group, LP                     
unsub. bonds 5 3/4s, 2015 (R)    —    —    83,000  81,094    83,000  81,094 
SLM Corp. notes Ser. MTNA, 4 1/2s, 2010    —    —    460,000  430,619    390,000  365,090 
Sovereign Bancorp, Inc. sr. notes 4.8s, 2010    —    —    155,000  151,432    155,000  151,432 
Swiss Re Capital I, LP 144A FRN 6.854s,                     
2049 (United Kingdom)    —    —    185,000  182,911    195,000  192,798 
Travelers Cos., Inc. (The) sr. unsec.                     
notes 6 1/4s, 2037    —    —    255,000  246,917    220,000  213,027 
UBS AG/Jersey Branch FRN 8.588s, 2008 (Jersey)    —    —    685,000  695,275    530,000  537,950 
Unitrin, Inc. sr. notes 6s, 2017    —    —    255,000  247,954    220,000  213,921 
USI Holdings Corp. 144A sr. notes FRN                     
9.433s, 2014    45,000    42,750    45,000  42,750    20,000  19,000 
Washington Mutual Bank/Henderson NV                     
sub. notes Ser. BKNT, 5.95s, 2013    —    —    250,000  246,788    250,000  246,788 
Westfield Group sr. notes 5.7s, 2016 (Australia)    —    —    205,000  198,300    230,000  222,483 
Westpac Capital Trust III 144A                     
sub. notes FRN 5.819s, 2049 (Australia)    —    —    295,000  277,908    230,000  216,674 
Willis Group North America, Inc.                     
company guaranty 6.2s, 2017    —    —    215,000  213,328    185,000  183,561 
ZFS Finance USA Trust I 144A bonds FRB                     
6 1/2s, 2037    —    —    740,000  690,945    630,000  588,237 
     
   
   
        4,569,085      30,014,408      25,985,875 

60

CORPORATE BONDS AND NOTES*  Growth 3.3%    Balanced 6.8%    Conservative 9.6% 
  Principal      Principal      Principal   
  amount  Value    amount  Value    amount  Value 
Health Care    0.2%      0.3%      0.4% 
Accellent, Inc. company guaranty 10 1/2s, 2013  $ 80,000  $ 74,000  $  80,000  $ 74,000  $  40,000  $ 37,000 
AstraZeneca PLC sr. unsub. 5.9s, 2017                 
(United Kingdom)  —  —    655,000  664,870    565,000  573,513 
Bayer Corp. 144A FRB 6.2s, 2008  —  —    220,000  220,425    160,000  160,309 
Community Health Systems, Inc. 144A                 
sr. notes 8 7/8s, 2015  630,000  647,325    585,000  601,088    270,000  277,425 
DaVita, Inc. company guaranty 6 5/8s, 2013  190,000  188,575    235,000  233,238    125,000  124,063 
Elan Finance PLC/Elan Finance Corp.                 
company guaranty 7 3/4s, 2011 (Ireland)  135,000  132,806    190,000  186,913    90,000  88,538 
HCA, Inc. notes 6 1/4s, 2013  50,000  44,250    48,000  42,480    —  — 
HCA, Inc. sr. notes 7 7/8s, 2011  416,000  408,720    590,000  579,675    275,000  270,188 
HCA, Inc. 144A sec. notes 9 1/4s, 2016  350,000  371,875    370,000  393,125    185,000  196,563 
HCA, Inc. 144A sec. notes 9 1/8s, 2014  65,000  68,575    —  —    —  — 
HCA, Inc. 144A sec. sr. notes 9 5/8s, 2016 ‡‡  300,000  320,250    325,000  346,938    155,000  165,463 
Healthsouth Corp. company guaranty 10 3/4s, 2016  150,000  157,875    145,000  152,613    65,000  68,413 
Hospira, Inc. sr. notes 6.05s, 2017  —  —    190,000  186,909    165,000  162,316 
Hospira, Inc. sr. notes 5.55s, 2012  —  —    265,000  264,686    230,000  229,728 
Omnicare, Inc. sr. sub. notes 6 7/8s, 2015  35,000  32,375    45,000  41,625    25,000  23,125 
Omnicare, Inc. sr. sub. notes 6 1/8s, 2013  230,000  213,325    325,000  301,438    150,000  139,125 
Psychiatric Solutions, Inc. company                 
guaranty 7 3/4s, 2015  165,000  167,063    210,000  212,625    100,000  101,250 
Select Medical Corp. company                 
guaranty 7 5/8s, 2015  285,000  255,075    280,000  250,600    130,000  116,350 
Service Corporation International                 
sr. notes 6 3/4s, 2016  255,000  247,031    360,000  348,750    170,000  164,688 
Stewart Enterprises, Inc. sr. notes 6 1/4s, 2013  205,000  199,363    270,000  262,575    125,000  121,563 
Sun Healthcare Group, Inc. 144A sr. sub.                 
notes 9 1/8s, 2015  200,000  204,000    195,000  198,900    90,000  91,800 
Surgical Care Affiliates, Inc. 144A                 
sr. notes 8 7/8s, 2015 ‡‡  80,000  76,000    75,000  71,250    35,000  33,250 
Surgical Care Affiliates, Inc. 144A                 
sr. sub. notes 10s, 2017  80,000  76,800    75,000  72,000    35,000  33,600 
Tenet Healthcare Corp. notes 7 3/8s, 2013  300,000  254,250    360,000  305,100    165,000  139,838 
Tenet Healthcare Corp. sr. notes 9 1/4s, 2015  165,000  145,613    235,000  207,388    110,000  97,075 
US Oncology Holdings, Inc. 144A                 
sr. unsec. notes FRN 10.759s, 2012 ‡‡  115,000  102,350    115,000  102,350    50,000  44,500 
US Oncology, Inc. company guaranty 9s, 2012  175,000  176,313    215,000  216,613    105,000  105,788 
Vanguard Health Holding Co. II, LLC                 
sr. sub. notes 9s, 2014  250,000  242,500    255,000  247,350    120,000  116,400 
Ventas Realty, LP/Capital Corp. company                 
guaranty 9s, 2012 (R)  165,000  179,438    235,000  255,563    110,000  119,625 
Ventas Realty, LP/Capital Corp.                 
sr. notes 6 3/4s, 2017 (R)  —  —    145,000  144,638    140,000  139,650 
   
   
   
    4,985,747      7,185,725      3,941,146 
 
Other    0.5%      0.5%      0.2% 
Dow Jones CDX NA HY pass-through                 
certificates Ser. 5-T1, 8 3/4s, 2010  3,360,000  3,469,200    2,400,000  2,478,000    960,000  991,200 
Lehman Brothers HY TRAINS (Targeted                 
Return Index Securities) 144A FRN 7.14s, 2016  10,028,000  9,828,401    9,536,000  9,346,123    1,360,000  1,332,927 
   
   
   
    13,297,601      11,824,123      2,324,127 
 
Technology    0.2%      0.3%      0.3% 
Activant Solutions, Inc. company                 
guaranty 9 1/2s, 2016  70,000  61,600    70,000  61,600    35,000  30,800 
Advanced Micro Devices, Inc. sr. notes 7 3/4s, 2012  208,000  191,360    280,000  257,600    130,000  119,600 
Amkor Technologies, Inc. sr. notes 7 3/4s, 2013  415,000  400,475    373,000  359,945    166,000  160,190 

61

CORPORATE BONDS AND NOTES*    Growth 3.3%    Balanced 6.8%    Conservative 9.6% 
    Principal        Principal      Principal   
    amount    Value    amount  Value    amount  Value 
Technology continued                     
Arrow Electronics, Inc. debs. 7 1/2s, 2027  $  —  $  —  $  160,000  $ 167,676  $  175,000  $ 183,395 
Avnet, Inc. notes 6s, 2015    —    —    160,000  156,408    160,000  156,408 
Celestica, Inc. sr. sub. notes 7 7/8s, 2011 (Canada)    60,000    57,750    85,000  81,813    40,000  38,500 
Celestica, Inc. sr. sub. notes 7 5/8s, 2013 (Canada)    175,000    162,750    145,000  134,850    65,000  60,450 
Compucom Systems, Inc.                     
sr. sub. notes 12 1/2s, 2015    215,000    209,625    195,000  190,125    90,000  87,750 
Compucom Systems, Inc. 144A sr. notes 12s, 2014    165,000    207,900    180,000  226,800    90,000  113,400 
Electronic Data Systems Corp. sr. sec.                     
notes Ser. B, 6 1/2s, 2013    280,000    282,500    355,000  358,170    175,000  176,563 
Freescale Semiconductor, Inc. sr. sec.                     
notes 10 1/8s, 2016    230,000    213,900    240,000  223,200    120,000  111,600 
Freescale Semiconductor, Inc.                     
sr. unsec. 9 1/8s, 2014 ‡‡    225,000    208,125    240,000  222,000    120,000  111,000 
Freescale Semiconductor, Inc.                     
sr. unsec. 8 7/8s, 2014    270,000    260,550    315,000  303,975    160,000  154,400 
IBM Corp. sr. unsec. 5.7s, 2017    —    —    415,000  417,845    435,000  437,982 
Iron Mountain, Inc. company guaranty 8 3/4s, 2018    60,000    62,400    70,000  72,800    35,000  36,400 
Iron Mountain, Inc. company guaranty 8 5/8s, 2013    5,000    5,063    —  —    90,000  91,125 
Iron Mountain, Inc. company guaranty 6 5/8s, 2016    245,000    229,075    90,000  84,150    40,000  37,400 
Iron Mountain, Inc. sr. sub. notes 8 1/4s, 2011    215,000    215,000    360,000  360,000    40,000  40,000 
Lucent Technologies, Inc. debs. 6.45s, 2029    450,000    373,500    440,000  365,200    205,000  170,150 
Nortel Networks, Ltd. 144A company                     
guaranty 10 3/4s, 2016 (Canada)    50,000    52,250    60,000  62,700    30,000  31,350 
Nortel Networks, Ltd. 144A company                     
guaranty FRN 9.61s, 2011 (Canada)    160,000    160,000    185,000  185,000    95,000  95,000 
NXP BV/NXP Funding, LLC sec. FRN                     
7.998s, 2013 (Netherlands)    170,000    157,888    185,000  171,819    95,000  88,231 
NXP BV/NXP Funding, LLC sec.                     
notes 7 7/8s, 2014 (Netherlands)    275,000    264,688    300,000  288,750    150,000  144,375 
Open Solutions, Inc. 144A                     
sr. sub. notes 9 3/4s, 2015    65,000    62,563    70,000  67,375    35,000  33,688 
Seagate Technology Hdd Holdings company                     
guaranty 6.8s, 2016 (Cayman Islands)    95,000    92,768    105,000  102,533    50,000  48,825 
Solectron Global Finance Corp. company                     
guaranty 8s, 2016    90,000    97,425    110,000  119,075    55,000  59,538 
SunGard Data Systems, Inc. company                     
guaranty 10 1/4s, 2015    90,000    94,050    100,000  104,500    56,000  58,520 
SunGard Data Systems, Inc. company                     
guaranty 9 1/8s, 2013    340,000    353,600    416,000  432,640    206,000  214,240 
Travelport, LLC company guaranty 9 7/8s, 2014    205,000    209,100    205,000  209,100    95,000  96,900 
Unisys Corp. sr. notes 8s, 2012    110,000    104,225    135,000  127,913    70,000  66,325 
Xerox Corp. sr. notes 6.4s, 2016    —    —    335,000  339,144    285,000  288,525 
     
 		    
   
        4,790,130      6,254,706      3,542,630 
 
Transportation        —%      0.1%      0.1% 
American Airlines, Inc. pass-through                     
certificates Ser. 01-1, 6.817s, 2011    —    —    110,000  106,975    70,000  68,075 
American Airlines, Inc. pass-through                     
certificates Ser. 01-2, 7.858s, 2011    —    —    115,000  121,325    120,000  126,600 
Continental Airlines, Inc. pass-through                     
certificates Ser. 97-4A, 6.9s, 2018    —    —    60,933  62,151    50,777  51,793 
Continental Airlines, Inc. pass-through                     
certificates Ser. 98-1A, 6.648s, 2017    —    —    331,480  331,480    233,781  233,781 
Continental Airlines, Inc. pass-through                     
certificates Ser. 98-3, 6.32s, 2008    —    —    5,000  4,988    75,000  74,813 
Delta Air Lines, Inc. notes 8.3s,                     
2029 (In default) †    210,000    12,075    230,000  13,225    110,000  6,325 

62

CORPORATE BONDS AND NOTES*    Growth 3.3%    Balanced 6.8%    Conservative 9.6% 
    Principal        Principal      Principal   
    amount    Value    amount  Value    amount  Value 
Transportation continued                     
Northwest Airlines Corp. pass-through                     
certificates Ser. 00-1, 7.15s, 2019  $  —  $  —  $  543,880  $ 560,197  $  469,955  $ 484,054 
Southwest Airlines Co. pass-through                     
certificates 6.15s, 2022    —    —    65,000  65,081    130,000  130,163 
Union Pacific Corp. 144A pass-through                     
certificates 5.214s, 2014    —    —    115,000  113,899    100,000  99,043 
United AirLines, Inc. pass-through                     
certificates 6.636s, 2022    —    —    255,000  249,900    215,000  210,700 
     
   
   
        12,075      1,629,221      1,485,347 
 
Utilities & Power        0.2%      0.8%      1.4% 
AEP Texas North Co. sr. notes Ser. B, 5 1/2s, 2013    —    —    165,000  162,502    190,000  187,123 
AES Corp. (The) 144A sec. notes 8 3/4s, 2013    380,000    398,050    530,000  555,175    245,000  256,638 
Appalachian Power Co. sr. notes 5.8s, 2035    —    —    145,000  133,068    120,000  110,125 
Arizona Public Services Co. notes 6 1/2s, 2012    —    —    240,000  248,637    265,000  274,536 
Atmos Energy Corp. sr. unsub. 6.35s, 2017    —    —    320,000  325,077    275,000  279,363 
Beaver Valley II Funding debs. 9s, 2017    —    —    314,000  348,163    348,000  385,862 
Boardwalk Pipelines, LP company                     
guaranty 5 7/8s, 2016    —    —    370,000  365,774    350,000  346,002 
Bruce Mansfield Unit pass-through                     
certificates 6.85s, 2034    —    —    720,000  731,474    595,000  604,482 
CenterPoint Energy Houston Electric, LLC                     
general ref. mtge. Ser. M2, 5 3/4s, 2014    —    —    10,000  9,994    90,000  89,949 
CenterPoint Energy Resources Corp.                     
notes 7 3/4s, 2011    —    —    240,000  255,103    185,000  196,642 
Cleveland Electric Illuminating Co.                     
(The) 144A sr. notes Ser. D, 7.88s, 2017    —    —    115,000  130,894    110,000  125,203 
CMS Energy Corp. unsub. notes 6.55s, 2017    —    —    20,000  19,500    15,000  14,625 
Colorado Interstate Gas Co. debs. 6.85s, 2037    30,000    29,665    50,000  49,442    25,000  24,721 
Colorado Interstate Gas Co. sr. notes 5.95s, 2015    10,000    9,835    15,000  14,753    10,000  9,835 
Commonwealth Edison Co. 1st mtge. 6.15s, 2017    —    —    130,000  131,742    110,000  111,474 
Commonwealth Edison Co. 1st mtge. 5.9s, 2036    —    —    385,000  360,488    330,000  308,990 
Consolidated Natural Gas Co.                     
sr. notes 5s, 2014    —    —    180,000  170,342    315,000  298,099 
Dayton Power & Light Co. (The) 1st                     
mtge. 5 1/8s, 2013    —    —    170,000  166,112    160,000  156,341 
Dominion Resources, Inc. jr.                     
sub. notes FRN 6.3s, 2066    —    —    525,000  520,143    405,000  401,253 
Dynegy Holdings, Inc. sr. unsec.                     
notes 8 3/8s, 2016    255,000    256,275    250,000  251,250    115,000  115,575 
Dynegy-Roseton Danskamme company                     
guaranty Ser. B, 7.67s, 2016    145,000    145,363    195,000  195,488    90,000  90,225 
Edison Mission Energy sr. unsec.                     
notes 7 3/4s, 2016    70,000    72,450    80,000  82,800    40,000  41,400 
Edison Mission Energy sr. unsec.                     
notes 7 1/2s, 2013    75,000    76,875    90,000  92,250    45,000  46,125 
Edison Mission Energy 144A sr. notes 7.2s, 2019    215,000    211,775    205,000  201,925    95,000  93,575 
Edison Mission Energy 144A sr. notes 7s, 2017    150,000    147,750    140,000  137,900    65,000  64,025 
El Paso Corp. sr. notes Ser. MTN, 7 3/4s, 2032    225,000    228,474    215,000  218,320    95,000  96,467 
El Paso Natural Gas Co. 144A sr. unsec.                     
bond 5.95s, 2017    —    —    40,000  39,065    35,000  34,182 
Enbridge Energy Partners, LP sr. unsec.                     
notes 5 7/8s, 2016    —    —    205,000  201,358    215,000  211,180 
Entergy Gulf States, Inc. 1st mtge.                     
5 1/4s, 2015    —    —    215,000  202,648    225,000  212,073 
Ferrellgas, LP/Finance sr. notes 6 3/4s, 2014    215,000    209,625    300,000  292,500    140,000  136,500 

63

CORPORATE BONDS AND NOTES*  Growth 3.3%    Balanced 6.8%    Conservative 9.6% 
  Principal        Principal        Principal     
  amount    Value    amount    Value    amount    Value 
Utilities & Power continued                       
Florida Power Corp. 1st mtge. 6.35s, 2037  $ —  $  —  $  280,000  $  285,366  $  275,000  $  280,270 
Indianapolis Power & Light 144A 1st                       
mtge. 6.3s, 2013  —    —    115,000    118,276    110,000    113,134 
Indiantown Cogeneration, LP 1st mtge.                       
Ser. A-10, 9.77s, 2020  —    —    215,000    250,441    225,000    262,089 
Ipalco Enterprises, Inc. sec. notes 8 3/8s, 2008  —    —    55,000    56,100    60,000    61,200 
ITC Holdings Corp. 144A notes 5 7/8s, 2016  —    —    260,000    258,138    285,000    282,959 
Kansas Gas & Electric bonds 5.647s, 2021  —    —    85,000    81,178    80,000    76,402 
Kinder Morgan, Inc. notes 6s, 2017  —    —    175,000    172,183    150,000    147,586 
Kinder Morgan, Inc. sr. notes 6 1/2s, 2012  —    —    150,000    148,688    155,000    153,644 
MidAmerican Energy Holdings Co.                       
bonds 6 1/8s, 2036  —    —    540,000    524,224    565,000    548,494 
MidAmerican Energy Holdings Co. 144A                       
bonds 6 1/2s, 2037  —    —    445,000    449,808    280,000    283,025 
Mirant Americas Generation, Inc.                       
sr. notes 8.3s, 2011  215,000    218,225    215,000    218,225    100,000    101,500 
Mirant North America, LLC company                       
guaranty 7 3/8s, 2013  375,000    380,625    410,000    416,150    205,000    208,075 
National Fuel Gas Co. notes 5 1/4s, 2013  —    —    145,000    145,615    100,000    100,424 
Nevada Power Co. general ref. mtge.                       
Ser. L, 5 7/8s, 2015  —    —    110,000    107,422    145,000    141,601 
Northwestern Corp. sec. notes 5 7/8s, 2014  —    —    265,000    258,352    285,000    277,850 
NRG Energy, Inc. company guaranty 7 3/8s, 2017  100,000    100,375    110,000    110,413    55,000    55,206 
NRG Energy, Inc. sr. notes 7 3/8s, 2016  820,000    822,050    775,000    776,938    360,000    360,900 
Oncor Electric Delivery Co. debs. 7s, 2022  —    —    145,000    147,843    130,000    132,549 
Oncor Electric Delivery Co. sec.                       
notes 7 1/4s, 2033  —    —    195,000    202,176    220,000    228,096 
Pacific Gas & Electric Co. sr. unsub. 5.8s, 2037  —    —    260,000    245,964    225,000    212,854 
PacifiCorp Sinking Fund 1st mtge. 6 1/4s, 2037  —    —    205,000    204,744    180,000    179,775 
Potomac Edison Co. 144A 1st mtge. 5.8s, 2016  —    —    260,000    265,328    285,000    290,840 
Power Receivable Finance, LLC 144A                       
sr. notes 6.29s, 2012  —    —    194,451    200,236    168,085    173,086 
PPL Energy Supply, LLC bonds Ser. A, 5.7s, 2015  —    —    135,000    131,950    145,000    141,724 
Progress Energy, Inc. sr. unsec.                       
notes 5 5/8s, 2016  —    —    205,000    200,292    220,000    214,948 
PSEG Energy Holdings, Inc.                       
sr. notes 8 1/2s, 2011  175,000    184,192    225,000    236,819    110,000    115,778 
Public Service Co. of Colorado                       
sr. notes Ser. A, 6 7/8s, 2009  —    —    215,000    221,737    205,000    211,424 
Public Service Co. of New Mexico                       
sr. notes 4.4s, 2008  —    —    125,000    123,724    100,000    98,979 
Puget Sound Energy, Inc. jr. sub. FRN                       
Ser. A, 6.974s, 2067  —    —    415,000    414,812    355,000    354,839 
Sierra Pacific Power Co. general ref.                       
mtge. Ser. P, 6 3/4s, 2037  —    —    755,000    758,958    600,000    603,145 
Sierra Pacific Resources sr. notes 8 5/8s, 2014  90,000    95,267    125,000    132,315    60,000    63,511 
Southern California Edison Co.                       
notes 6.65s, 2029  —    —    255,000    266,415    275,000    287,310 
Southern California Edison Co.                       
Ser. 06-E 1st mtge. 5.55s, 2037  —    —    270,000    249,198    280,000    258,427 
Southern Natural Gas Co. 144A                       
notes 5.9s, 2017  —    —    155,000    149,990    130,000    125,798 
Spectra Energy Capital, LLC sr. notes 8s, 2019  —    —    250,000    280,268    215,000    241,031 
Teco Energy, Inc. notes 7.2s, 2011  265,000    276,468    610,000    636,398    430,000    448,609 
Teco Energy, Inc. sr. notes 6 3/4s, 2015  10,000    10,235    10,000    10,235    5,000    5,117 
Tennessee Gas Pipeline Co. unsec.                       
notes 7 1/2s, 2017  25,000    26,973    30,000    32,367    15,000    16,184 

64

CORPORATE BONDS AND NOTES*    Growth 3.3%  Balanced 6.8%    Conservative 9.6% 
    Principal      Principal        Principal     
    amount    Value  amount    Value    amount    Value 
Utilities & Power continued                       
TEPPCO Partners, LP company                       
guaranty FRB 7s, 2067  $  —  $  —  $ 205,000  $  184,613  $  175,000  $  157,596 
TransAlta Corp. notes 5 3/4s, 2013 (Canada)    —    —  140,000    138,844    150,000    148,762 
TransCanada Pipelines, Ltd. jr.                       
sub. FRN 6.35s, 2067 (Canada)    —    —  180,000    172,754    155,000    148,760 
TXU Corp. sr. notes Ser. P, 5.55s, 2014    400,000    322,604  435,000    350,832    220,000    177,432 
TXU Energy Co. 144A sr. unsec. FRN                       
6.194s, 2008    —    —  1,040,000    1,040,963    830,000    830,769 
Westar Energy, Inc. 1st mtge. 5.15s, 2017    —    —  15,000    14,227    45,000    42,682 
Westar Energy, Inc. 1st mtge. 5.1s, 2020    —    —  175,000    161,371    165,000    152,150 
Williams Cos., Inc. (The) notes 7 5/8s, 2019    440,000    471,350  420,000    449,925    195,000    208,894 
Williams Cos., Inc. (The) 144A                       
notes 6 3/8s, 2010    50,000    50,250  60,000    60,300    30,000    30,150 
Williams Partners, LP/ Williams                       
Partners Finance Corp. company                       
guaranty 7 1/4s, 2017    80,000    81,600  85,000    86,700    40,000    40,800 
     
 
   
        4,826,351      18,763,702        15,118,968 
 
Total corporate bonds and notes (cost $90,010,974,                     
$164,306,628 and $106,911,349)      $  88,279,438    $  161,318,294      $  105,112,745 
 
 
COLLATERALIZED MORTGAGE OBLIGATIONS*  Growth 3.1%  Balanced 12.2%    Conservative 22.9% 
    Principal      Principal        Principal     
    amount    Value  amount    Value    amount    Value 
Amresco Commercial Mortgage Funding I 144A                       
Ser. 97-C1, Class G, 7s, 2029  $  —  $  —  $ 848  $  848  $  929  $  929 
Ser. 97-C1, Class H, 7s, 2029    38,000    37,903  173,000    172,560    168,000    167,572 
Asset Securitization Corp.                       
Ser. 96-MD6, Class A7, 8.146s, 2029    —    —  569,000    605,373    634,000    674,528 
Ser. 96-D3, Class A1C, 7.4s, 2026    44,759    45,777  273,946    280,179    195,753    200,206 
FRB Ser. 97-D5, Class A5, 7.174s, 2043    150,000    159,496  234,000    248,813    247,000    262,636 
Banc of America Commercial Mortgage, Inc.                       
Ser. 01-1, Class G, 7.324s, 2036    —    —  200,000    208,646    200,000    208,646 
Ser. 06-4, Class A4, 5.634s, 2046    480,000    479,481  920,000    919,005    1,140,000    1,138,767 
Ser. 04-3, Class A5, 5.494s, 2039    230,000    231,187  920,000    924,747    930,000    934,799 
Ser. 06-5, Class A4, 5.414s, 2047    718,000    707,723  1,343,000    1,323,777    1,576,000    1,553,442 
Ser. 07-1, Class XW, Interest Only                       
(IO), 0.465s, 2049    1,833,145    38,966  9,966,916    211,858    5,100,839    108,424 
Ser. 06-1, Class XC, IO, 0.053s, 2045    1,766,502    12,043  11,634,512    79,318    12,775,151    87,094 
Banc of America Commercial Mortgage, Inc. 144A                     
Ser. 01-PB1, Class K, 6.15s, 2035    —    —  133,000    133,011    133,000    133,011 
Ser. 02-PB2, Class XC, IO, 0.186s, 2035    2,754,312    49,276  4,100,004    73,352    2,437,251    43,604 
Ser. 04-4, Class XC, IO, 0.121s, 2042    4,226,268    64,462  11,995,968    182,971    9,455,712    144,225 
Ser. 04-5, Class XC, IO, 0.102s, 2041    5,889,496    73,663  14,295,724    178,803    14,790,319    184,989 
Ser. 05-1, Class XW, IO, 0.086s, 2042    20,843,374    74,341  —    —    26,158,839    93,299 
Ser. 06-4, Class XC, IO, 0.069s, 2046    4,123,471    50,306  19,072,172    232,681    15,944,883    194,528 
Ser. 05-4, Class XC, IO, 0.064s, 2045    6,261,707    43,921  17,821,555    125,003    17,889,606    125,481 
Ser. 06-5, Class XC, IO, 0.048s, 2016    3,301,916    49,218  35,389,357    527,510    30,128,237    449,088 
Banc of America Large Loan                       
FRB Ser. 04-BBA4, Class H, 6.703s, 2018    25,000    24,993  70,000    69,980    73,000    72,979 
FRB Ser. 04-BBA4, Class G, 6.453s, 2018    —    —  94,000    93,998    98,000    97,998 
Banc of America Large Loan 144A                       
FRB Ser. 05-MIB1, Class K, 7.753s, 2022    190,000    185,608  186,000    181,700    187,000    182,677 
FRB Ser. 05-MIB1, Class J, 6.803s, 2022    100,000    97,375  409,000    398,265    343,000    333,997 
Ser. 03-BBA2, Class X1A, IO, zero %, 2015 (F)    333,413    1  953,906    1    872,308    1 

65

COLLATERALIZED MORTGAGE OBLIGATIONS*  Growth 3.1%    Balanced 12.2%    Conservative 22.9% 
  Principal       Principal        Principal     
  amount   Value    amount    Value    amount    Value 
Banc of America Mortgage Securities                     
Ser. 04-D, Class 2A, IO, 0.340s, 2034  $ 798,869 $  2,157  $  2,722,115  $  7,351  $  2,620,430  $  7,076 
Ser. 05-E, Class 2, IO, 0.305s, 2035  2,185,113   10,858    7,302,368    36,287    7,031,159    34,939 
Banc of America Structured Security Trust 144A                     
Ser. 02-X1, Class A3, 5.436s, 2033  —   —    336,512    335,438    345,230    344,129 
Bayview Commercial Asset Trust 144A                     
FRB Ser. 05-1A, Class A1, 5.431s, 2035  37,485   37,016    287,382    283,790    212,413    209,758 
Ser. 04-3, IO, 1.6s, 2035  373,382   24,211    951,365    61,690    936,221    60,708 
Ser. 05-1A, IO, 1.6s, 2035  447,667   30,217    1,245,972    84,103    1,190,432    80,354 
Ser. 07-5A, IO, 1.55s, 2037  —   —    5,225,000    830,909    4,406,000    700,667 
Ser. 07-2A, IO, 1.3s, 2037  1,980,614   256,490    5,456,388    706,602    4,663,545    603,929 
Ser. 07-1, Class S, IO, 1.211s, 2037  1,229,481   140,161    7,664,781    873,785    3,548,437    404,522 
Ser. 06-2A, IO, 0.879s, 2036  149,164   13,185    715,289    63,225    680,397    60,141 
Ser. 05-3A, IO, 0.775s, 2035  1,336,235   99,428    4,305,031    320,335    3,888,593    289,348 
Bear Stearns Alternate Trust Ser. 04-9,                     
Class 1A1, 7.222s, 2034  20,984   20,997    55,447    55,482    50,583    50,615 
Bear Stearns Commercial Mortgage                     
Securities, Inc.                     
FRB Ser. 00-WF2, Class F, 8.452s, 2032  —   —    189,000    203,044    124,000    133,214 
Ser. 07-PW17, Class A3, 5.736s, 2050  1,999,000   2,012,665    8,933,000    8,994,065    7,002,000    7,049,865 
Ser. 07-PW17, Class A4, 5.64s, 2050  985,000   993,003    4,358,000    4,393,409    3,416,000    3,443,755 
Ser. 04-PR3I, Class X1, IO, 0.092s, 2041  482,554   9,252    3,232,856    61,984    5,252,851    100,713 
Ser. 05-PWR9, Class X1, IO, 0.079s, 2042  —   —    8,865,097    83,579    13,353,070    125,891 
Bear Stearns Commercial Mortgage                     
Securities, Inc. 144A                     
Ser. 06-BBA7, Class X1A, IO, 1.791s, 2019  —   —    7,575,680    19,121    5,536,274    13,974 
Ser. 06-PW14, Class XW, IO, 0.691s, 2038  3,197,031   152,732    8,773,896    419,155    8,039,416    384,067 
Ser. 06-PW14, Class X1, IO, 0.047s, 2038  3,438,203   59,099    9,434,629    162,172    8,646,333    148,622 
Ser. 07-PW15, Class X1, IO, 0.042s, 2044  6,196,998   74,544    29,403,545    353,698    19,991,735    240,483 
Ser. 05-PW10, Class X1, IO, 0.032s, 2040  11,495,592   49,540    —    —    —    — 
Ser. 07-PW16, Class X, IO, 0.021s, 2040  10,191,743   11,221    87,485,286    96,321    56,278,446    61,963 
Bear Stearns Small Balance Commercial                     
Trust 144A Ser. 06-1A, Class AIO, IO, 1s, 2034  —   —    2,681,000    41,329    2,794,000    43,071 
Chase Commercial Mortgage                     
Securities Corp. Ser. 00-3, Class A2,                     
7.319s, 2032  10,000   10,447    118,000    123,274    116,000    121,185 
Chase Commercial Mortgage                     
Securities Corp. 144A                     
Ser. 98-1, Class F, 6.56s, 2030  —   —    962,000    970,935    896,000    904,322 
Ser. 98-1, Class G, 6.56s, 2030  —   —    249,000    256,086    231,000    237,574 
Ser. 98-1, Class H, 6.34s, 2030  91,000   78,781    371,000    321,183    362,000    313,392 
Citigroup Commercial Mortgage Trust 144A                     
Ser. 05-C3, Class XC, IO, 0.109s, 2043  13,484,011   138,527    25,069,224    257,547    24,116,894    247,763 
Ser. 06-C5, Class XC, IO, 0.054s, 2049  6,637,199   95,150    37,311,687    534,898    40,372,555    578,778 
Citigroup/Deutsche Bank Commercial                     
Mortgage Trust 144A                     
Ser. 07-CD4, Class XW, IO, 0.561s, 2049  3,351,000   86,917    10,047,000    260,594    7,975,000    206,852 
Ser. 06-CD2, Class X, IO, 0.129s, 2046  2,489,423   13,615    16,442,537    89,924    18,043,094    98,678 
Ser. 07-CD4, Class XC, IO, 0.044s, 2049  11,208,000   105,513    33,599,000    316,303    26,669,000    251,064 
CNL Funding Ser. 99-1, Class A2, 7.645s, 2014  122,000   129,886    455,000    484,412    286,000    304,487 
Commercial Mortgage Acceptance Corp.                     
Ser. 97-ML1, IO, 0.705s, 2017  1,190,829   18,421    4,496,105    69,549    2,920,435    45,175 
Commercial Mortgage Acceptance Corp. 144A                     
Ser. 98-C1, Class F, 6.23s, 2031  —   —    415,000    420,893    404,000    409,737 
Ser. 98-C2, Class F, 5.44s, 2030  1,370,000   1,341,931    2,607,000    2,553,588    2,247,000    2,200,963 
Commercial Mortgage Pass-Through                     
Certificates Ser. 06-C7, Class A4, 5.962s, 2046  80,000   82,200    —    —    —    — 

66

COLLATERALIZED MORTGAGE OBLIGATIONS*  Growth 3.1%  Balanced 12.2%    Conservative 22.9% 
  Principal      Principal        Principal     
  amount    Value  amount    Value    amount    Value 
Commercial Mortgage Pass-Through                     
Certificates 144A                     
FRB Ser. 01-J2A, Class A2F, 6.253s, 2034  $ 118,000  $  117,410  $ 326,000  $  324,370  $  314,000  $  312,430 
Ser. 06-CN2A, Class H, 5.756s, 2019  66,000    65,188  197,000    194,576    218,000    215,318 
Ser. 06-CN2A, Class J, 5.756s, 2019  53,000    51,961  158,000    154,902    174,000    170,588 
Ser. 03-LB1A, Class X1, IO, 0.425s, 2038  933,758    37,788  1,985,170    80,338    2,145,777    86,837 
Ser. 05-C6, Class XC, IO, 0.059s, 2044  8,780,766    58,313  25,740,836    170,945    12,928,480    85,858 
Ser. 05-LP5, Class XC, IO, 0.056s, 2043  5,798,072    53,905  12,915,067    120,071    12,564,209    116,809 
Ser. 06-C8, Class XS, IO, 0.045s, 2046  10,611,539    135,127  28,705,816    365,540    26,152,611    333,027 
Countrywide Alternative Loan Trust                     
Ser. 06-OA10, Class XBI, IO, 2.35s, 2046  323,404    10,814  1,477,101    49,391    1,441,074    48,186 
IFB Ser. 06-6CB, Class 1A3, IO, zero %, 2036  1,432,645    9,402  3,997,408    26,233    4,123,706    27,062 
IFB Ser. 07-23CB, Class A4, IO, 1.369s, 2037  2,075,093    93,217  10,960,849    492,382    9,189,839    412,825 
Credit Suisse Mortgage Capital Certificates                     
FRB Ser. 07-C4, Class A2, 5.811s, 2039  515,000    523,413  2,395,000    2,434,125    1,850,000    1,880,222 
Ser. 06-C5, Class AX, IO, 0.075s, 2039  6,746,845    113,590  18,253,819    307,321    16,633,498    280,042 
Credit Suisse Mortgage Capital Certificates 144A                     
FRB Ser. 06-TFLA, Class K, 6.953s, 2021  50,000    48,125  —    —    484,000    465,850 
Ser. 07-C2, Class AX, IO, 0.280s, 2049  17,364,105    185,171  47,741,044    509,110    37,710,027    402,140 
Ser. 06-C4, Class AX, IO, 0.065s, 2039  6,347,415    105,847  29,326,990    489,045    24,510,816    408,732 
Ser. 07-C1, Class AX, IO, 0.057s, 2040  7,623,922    79,220  36,635,181    380,676    24,865,652    258,379 
Ser. 06-C3, Class AX, IO, 0.034s, 2038  15,469,847    12,082  68,488,253    53,489    74,092,634    57,866 
CRESI Finance Limited Partnership 144A                     
FRB Ser. 06-A, Class C, 5.731s, 2017  —    —  155,000    148,577    161,000    154,328 
Criimi Mae Commercial Mortgage Trust                     
144A Ser. 98-C1, Class B, 7s, 2033  1,602,000    1,604,723  —    —    —    — 
Crown Castle Towers, LLC 144A                     
Ser. 05-1A, Class D, 5.612s, 2035  228,000    223,600  620,000    608,036    597,000    585,480 
CS First Boston Mortgage Securities Corp.                     
Ser. 97-C2, Class F, 7.46s, 2035  52,000    56,743  303,000    330,636    294,000    320,815 
Ser. 04-C2, Class A2, 5.416s, 2036  260,000    259,340  1,050,000    1,047,333    1,050,000    1,047,333 
CS First Boston Mortgage Securities Corp. 144A                     
Ser. 98-C2, Class F, 6 3/4s, 2030  353,000    372,969  —    —    —    — 
FRB Ser. 04-TF2A, Class J, 6.703s, 2016  153,000    151,088  310,000    306,125    349,000    344,638 
FRB Ser. 05-TFLA, Class J, 6.703s, 2020  —    —  67,000    66,498    65,500    65,009 
FRB Ser. 05-TF2A, Class J, 6.653s, 2020  133,000    132,335  449,000    446,755    451,000    448,745 
FRB Ser. 04-TF2A, Class H, 6.453s, 2019  100,000    99,000  132,000    130,680    128,000    126,720 
Ser. 01-CK1, Class AY, IO, 0.894s, 2035  5,014,000    93,033  13,888,000    257,688    13,364,000    247,965 
Ser. 03-C3, Class AX, IO, 0.808s, 2038  8,339,911    319,624  16,164,455    619,497    18,697,087    716,559 
Ser. 02-CP3, Class AX, IO, 0.41s, 2035  1,212,037    46,023  8,262,870    313,755    5,968,011    226,616 
Ser. 04-C4, Class AX, IO, 0.205s, 2039  683,139    15,371  4,576,836    102,979    3,616,959    81,382 
Ser. 05-C2, Class AX, IO, 0.132s, 2037  5,756,132    85,444  13,259,556    196,825    16,715,792    248,129 
Deutsche Mortgage & Asset Receiving Corp.                     
Ser. 98-C1, Class C, 6.861s, 2031  50,000    49,985  —    —    —    — 
Ser. 98-C1, Class X, IO, 0.525s, 2031  1,600,255    18,378  6,201,451    71,220    4,643,736    53,330 
DLJ Commercial Mortgage Corp.                     
Ser. 00-CF1, Class A1B, 7.62s, 2033  38,132    40,080  461,498    485,073    452,698    475,824 
Ser. 99-CG2, Class B3, 6.1s, 2032  —    —  378,000    378,334    332,000    332,293 
Ser. 99-CG2, Class B4, 6.1s, 2032  —    —  571,000    559,385    551,000    539,792 
Ser. 98-CF2, Class B3, 6.04s, 2031  —    —  100,000    101,453    100,000    101,453 
Fannie Mae                     
IFB Ser. 07-75, Class JS, 11.31s, 2037  195,164    233,923  975,822    1,169,615    780,657    935,692 
IFB Ser. 06-70, Class SM, 11.209s, 2036  —    —  114,917    133,317    107,784    125,042 
Ser. 03-W6, Class PT1, 9.987s, 2042  34,736    38,172  138,389    152,075    80,852    88,848 
IFB Ser. 07-75, Class CS, 9.581s, 2037  —    —  618,660    739,645    514,558    615,186 
Ser. 02-T1, Class A4, 9 1/2s, 2031  4,170    4,559  —    —    —    — 
Ser. 02-T4, Class A4, 9 1/2s, 2041  33,322    36,245  269,924    293,596    34,632    37,669 
Ser. 02-T6, Class A3, 9 1/2s, 2041  34,242    37,138  87,255    94,637    86,054    93,334 
Ser. 02-T12, Class A4, 9 1/2s, 2042  16,803    18,304  42,958    46,797    42,265    46,042 

67

COLLATERALIZED MORTGAGE OBLIGATIONS*  Growth 3.1%    Balanced 12.2%    Conservative 22.9% 
  Principal        Principal        Principal     
  amount    Value    amount    Value    amount    Value 
Fannie Mae                       
Ser. 04-T3, Class PT1, 9.163s, 2044  $ 33,273  $  36,177  $  221,053  $  240,350  $  105,172  $  114,354 
IFB Ser. 06-62, Class PS, 9.113s, 2036  194,803    225,168    371,425    429,320    302,161    349,261 
IFB Ser. 06-48, Class TQ, 8.813s, 2036  —    —    627,535    707,300    662,863    747,118 
IFB Ser. 06-70, Class SJ, 8.813s, 2036  199,191    230,346    —    —    86,983    100,588 
IFB Ser. 06-76, Class QB, 8.813s, 2036  331,774    382,119    523,249    602,651    470,307    541,674 
IFB Ser. 06-79, Class PS, 8.813s, 2036  —    —    426,471    502,921    337,584    398,100 
IFB Ser. 07-60, Class SB, 8.813s, 2037  —    —    501,595    547,755    388,932    424,724 
IFB Ser. 05-37, Class SU, 8.675s, 2035  136,848    151,656    547,390    606,623    547,390    606,623 
IFB Ser. 06-63, Class SP, 8.513s, 2036  360,475    409,472    569,586    647,005    511,840    581,410 
IFB Ser. 06-49, Class SE, 8.475s, 2036  317,608    348,965    896,991    985,551    777,087    853,809 
IFB Ser. 07-W7, Class 1A4, 8.393s, 2037  239,757    256,171    533,235    569,741    453,648    484,705 
IFB Ser. 06-60, Class AK, 8.275s, 2036  143,187    156,301    571,874    624,250    440,037    480,339 
IFB Ser. 06-60, Class TK, 8.075s, 2036  96,075    103,886    248,833    269,066    234,422    253,483 
IFB Ser. 06-104, Class GS, 8.024s, 2036  —    —    240,434    265,729    242,228    267,712 
IFB Ser. 06-104, Class ES, 7.794s, 2036  129,927    143,543    569,885    629,608    649,633    717,714 
IFB Ser. 07-1, Class NK, 7.528s, 2037  293,363    325,231    1,917,304    2,125,578    1,474,081    1,634,208 
Ser. 99-T2, Class A1, 7 1/2s, 2039  100,695    106,846    27,335    29,004    21,608    22,928 
Ser. 00-T6, Class A1, 7 1/2s, 2030  —    —    —    —    1,055    1,106 
Ser. 01-T1, Class A1, 7 1/2s, 2040  13,055    13,687    69,175    72,526    43,516    45,624 
Ser. 01-T3, Class A1, 7 1/2s, 2040  13,030    13,634    33,008    34,540    34,311    35,904 
Ser. 01-T4, Class A1, 7 1/2s, 2028  19,086    20,313    125,972    134,064    103,068    109,689 
Ser. 01-T5, Class A3, 7 1/2s, 2030  12,246    12,829    265,689    278,335    53,777    56,336 
Ser. 01-T10, Class A2, 7 1/2s, 2041  9,181    9,633    98,271    103,103    75,748    79,472 
Ser. 01-T12, Class A2, 7 1/2s, 2041  48,822    51,447    135,875    143,182    130,374    137,385 
Ser. 02-14, Class A2, 7 1/2s, 2042  129,289    133,472    505,629    521,988    601,656    621,122 
Ser. 02-26, Class A2, 7 1/2s, 2048  81,274    85,429    467,279    491,170    409,080    429,994 
Ser. 02-T1, Class A3, 7 1/2s, 2031  31,689    33,328    656,291    690,247    99,236    104,370 
Ser. 02-T4, Class A3, 7 1/2s, 2041  48,969    51,640    364,881    384,789    442,921    467,087 
Ser. 02-T12, Class A3, 7 1/2s, 2042  18,652    19,619    106,913    112,458    62,616    65,863 
Ser. 02-T19, Class A3, 7 1/2s, 2042  24,029    25,316    —    —    —    — 
Ser. 03-W1, Class 2A, 7 1/2s, 2042  116,079    122,019    1,194,656    1,255,787    894,964    940,760 
Ser. 03-W10, Class 1A1, 7 1/2s, 2032  27,946    29,346    181,896    191,012    178,424    187,365 
Ser. 04-T2, Class 1A4, 7 1/2s, 2043  66,468    70,468    181,830    192,774    174,190    184,674 
Ser. 04-T3, Class 1A4, 7 1/2s, 2044  3,125    3,313    13,889    14,725    9,028    9,571 
IFB Ser. 07-81, Class SC, 7.013s, 2037  —    —    761,928    796,838    605,381    633,119 
Ser. 01-T10, Class A1, 7s, 2041  —    —    4,012    4,160    5,777    5,991 
Ser. 01-W3, Class A, 7s, 2041  69,376    72,391    84,157    87,814    84,610    88,286 
Ser. 02-14, Class A1, 7s, 2042  176,803    183,734    360,067    374,183    338,692    351,969 
Ser. 02-26, Class A1, 7s, 2048  45,344    47,182    257,466    267,900    258,572    269,050 
Ser. 02-T4, Class A2, 7s, 2041  20,550    21,311    93,531    96,998    70,413    73,022 
Ser. 02-T16, Class A2, 7s, 2042  43,570    45,373    247,227    257,458    248,227    258,498 
Ser. 02-T18, Class A3, 7s, 2042  17,621    18,360    —    —    —    — 
Ser. 03-W3, Class 1A2, 7s, 2042  73,907    76,983    119,629    124,608    120,464    125,478 
Ser. 03-W8, Class 2A, 7s, 2042  37,265    38,860    —    —    —    — 
Ser. 04-T2, Class 1A3, 7s, 2043  49,657    51,941    —    —    —    — 
Ser. 04-T3, Class 1A3, 7s, 2044  81,998    85,753    300,771    314,545    —    — 
Ser. 04-W1, Class 2A2, 7s, 2033  430,206    450,299    1,116,806    1,168,966    1,074,125    1,124,292 
Ser. 04-W12, Class 1A3, 7s, 2044  175,911    184,137    —    —    —    — 
Ser. 05-W4, Class 1A3, 7s, 2035  147,025    153,406    593,373    619,125    508,438    530,504 
IFB Ser. 06-104, Class CS, 6.609s, 2036  142,926    146,915    593,834    610,407    734,915    755,426 
Ser. 371, Class 2, IO, 6 1/2s, 2036  1,751,175    466,835    3,957,437    1,054,989    3,772,490    1,005,685 
Ser. 381, Class 14, IO, 6 1/2s, 2037  235,670    59,323    609,458    153,412    580,482    146,118 
Ser. 381, Class 16, IO, 6 1/2s, 2037  —    —    144,584    36,394    144,584    36,394 
Ser. 381, Class 15, IO, 6 1/2s, 2037  100,429    25,578    258,799    65,913    247,211    62,961 
IFB Ser. 06-30, Class HK, 6.075s, 2036  182,378    183,624    —    —    —    — 
IFB Ser. 07-30, Class FS, 6.062s, 2037  699,424    711,826    1,876,995    1,910,278    1,443,102    1,468,692 
IFB Ser. 06-115, Class ES, 6.035s, 2036  —    —    767,436    815,270    590,191    626,977 
IFB Ser. 05-74, Class SK, 6.019s, 2035  179,644    184,479    612,032    628,505    589,479    605,345 

68

COLLATERALIZED MORTGAGE OBLIGATIONS*  Growth 3.1%    Balanced 12.2%    Conservative 22.9% 
  Principal        Principal        Principal     
  amount    Value    amount    Value    amount    Value 
Fannie Mae                       
IFB Ser. 05-74, Class CP, 5.935s, 2035  $ 155,536  $  162,366  $  329,735  $  344,216  $  331,290  $  345,840 
IFB Ser. 05-74, Class CS, 5.909s, 2035  155,536    159,077    375,618    384,172    377,951    386,558 
IFB Ser. 05-57, Class CD, 5.883s, 2035  158,608    164,222    285,495    295,599    277,565    287,388 
IFB Ser. 06-8, Class PK, 5 7/8s, 2036  196,895    197,729    584,419    586,895    642,593    645,315 
IFB Ser. 05-99, Class SA, 5.752s, 2035  81,500    83,550    392,014    401,877    393,644    403,548 
IFB Ser. 05-106, Class US, 5.752s, 2035  252,037    262,720    803,816    837,887    806,996    841,202 
IFB Ser. 06-8, Class HP, 5.752s, 2036  174,248    180,233    494,556    511,543    546,659    565,436 
IFB Ser. 06-8, Class WK, 5.752s, 2036  181,283    186,203    794,926    816,500    874,691    898,429 
IFB Ser. 06-27, Class SP, 5.752s, 2036  200,000    209,199    452,000    472,790    498,000    520,906 
IFB Ser. 05-115, Class NQ, 5.695s, 2036  —    —    191,823    192,172    193,265    193,617 
IFB Ser. 05-45, Class DA, 5.605s, 2035  184,934    190,070    554,033    569,419    646,500    664,455 
IFB Ser. 05-74, Class DM, 5.569s, 2035  223,164    228,661    762,542    781,325    734,154    752,237 
IFB Ser. 05-45, Class DC, 5.495s, 2035  154,112    157,748    539,392    552,118    385,280    394,370 
IFB Ser. 05-114, Class SP, 5.469s, 2036  —    —    235,681    231,617    237,371    233,277 
IFB Ser. 06-46, Class SK, 5.385s, 2036  239,754    244,447    —    —    —    — 
IFB Ser. 06-60, Class CS, 5.275s, 2036  117,830    113,367    257,582    247,826    232,007    223,219 
IFB Ser. 05-57, Class DC, 5.098s, 2034  156,922    160,349    493,184    503,955    478,239    488,684 
IFB Ser. 05-45, Class PC, 4.856s, 2034  76,233    77,253    230,099    233,178    230,798    233,886 
IFB Ser. 05-95, Class CP, 4.648s, 2035  —    —    74,192    74,618    74,192    74,618 
IFB Ser. 05-95, Class OP, 4.506s, 2035  —    —    227,000    216,074    228,000    217,026 
IFB Ser. 05-106, Class JC, 4.213s, 2035  —    —    169,277    157,448    161,042    149,788 
IFB Ser. 05-83, Class QP, 4.053s, 2034  —    —    133,916    126,483    133,916    126,483 
IFB Ser. 05-72, Class SB, 4.047s, 2035  —    —    837,402    805,443    641,859    617,363 
IFB Ser. 06-90, Class SE, IO, 2.669s, 2036  191,116    21,098    694,744    76,696    1,011,358    111,648 
IFB Ser. 07-W6, Class 6A2, IO, 2.669s, 2037  100,250    8,000    962,402    76,802    773,358    61,716 
IFB Ser. 03-66, Class SA, IO, 2.519s, 2033  197,971    16,867    643,674    54,841    646,023    55,042 
Ser. 03-W12, Class 2, IO, 2.23s, 2043  1,106,913    65,897    2,205,585    131,303    1,814,190    108,002 
IFB Ser. 07-W6, Class 5A2, IO, 2.159s, 2037  132,732    9,983    1,273,242    95,767    1,023,510    76,984 
IFB Ser. 07-W2, Class 3A2, IO, 2.149s, 2037  281,857    20,031    1,446,126    102,773    1,218,614    86,604 
IFB Ser. 07-W4, Class 4A2, IO, 2.149s, 2037  919,985    65,229    4,756,949    337,281    4,178,948    296,299 
IFB Ser. 05-113, Class AI, IO, 2.099s, 2036  —    —    225,647    19,742    328,341    28,726 
IFB Ser. 05-113, Class DI, IO, 2.099s, 2036  1,243,375    93,138    4,240,995    317,683    3,885,325    291,041 
IFB Ser. 05-52, Class DC, IO, 2.069s, 2035  299,861    30,326    666,294    67,384    693,394    70,125 
IFB Ser. 04-24, Class CS, IO, 2.019s, 2034  260,947    20,190    900,667    69,687    869,823    67,301 
IFB Ser. 04-89, Class EI, IO, 2.019s, 2034  697,701    57,286    —    —    —    — 
IFB Ser. 06-60, Class SI, IO, 2.019s, 2036  554,350    47,598    1,454,568    124,893    1,223,028    105,012 
IFB Ser. 07-W7, Class 3A2, IO, 1.999s, 2037  444,433    29,308    2,113,024    139,344    1,788,548    117,946 
IFB Ser. 03-122, Class SA, IO, 1.969s, 2028  318,478    18,190    1,131,686    64,636    1,088,996    62,198 
IFB Ser. 03-122, Class SJ, IO, 1.969s, 2028  338,848    19,628    1,204,033    69,743    1,156,295    66,978 
IFB Ser. 06-60, Class DI, IO, 1.939s, 2035  181,955    12,450    660,512    45,196    961,552    65,795 
Ser. 03-W10, Class 1, IO, 1.929s, 2043  986,029    49,419    4,713,376    236,231    6,859,372    343,787 
Ser. 03-W10, Class 3, IO, 1.933s, 2043  345,637    17,615    1,419,109    72,323    1,107,179    56,426 
IFB Ser. 04-60, Class SW, IO, 1.919s, 2034  472,159    40,305    1,643,722    140,314    1,575,870    134,522 
IFB Ser. 05-65, Class KI, IO, 1.869s, 2035  814,336    53,277    1,201,994    78,639    1,501,479    98,233 
Ser. 03-W8, Class 12, IO, 1.636s, 2042  1,501,603    70,421    5,328,233    249,879    4,102,555    192,398 
IFB Ser. 07-30, Class WI, IO, 1.629s, 2037  2,604,863    165,526    8,900,474    565,581    7,099,670    451,149 
IFB Ser. 07-39, Class PI, IO, 1.629s, 2037  361,279    24,221    940,892    63,078    790,114    52,970 
IFB Ser. 07-54, Class CI, IO, 1.629s, 2037  121,012    9,033    1,143,324    85,339    918,725    68,575 
IFB Ser. 05-17, Class ES, IO, 1.619s, 2035  201,459    13,836    715,848    49,162    687,465    47,213 
IFB Ser. 05-17, Class SY, IO, 1.619s, 2035  150,654    10,338    331,295    22,733    318,159    21,832 
IFB Ser. 05-73, Class SI, IO, 1.619s, 2035  72,128    4,383    365,689    22,224    351,984    21,391 
IFB Ser. 06-12, Class SD, IO, 1.619s, 2035  —    —    2,512,384    186,773    2,529,953    188,079 
IFB Ser. 06-56, Class SM, IO, 1.619s, 2036  1,179,857    78,053    3,447,753    228,084    2,671,302    176,718 
IFB Ser. 06-128, Class SH, IO, 1.619s, 2037  122,303    7,197    877,280    51,627    903,856    53,191 
IFB Ser. 07-28, Class SE, IO, 1.619s, 2037  400,666    28,103    1,168,689    81,974    916,488    64,284 
IFB Ser. 07-W2, Class 2A2, IO, 1.619s, 2037  386,396    24,252    1,981,012    124,337    1,669,150    104,763 
IFB Ser. 07-W4, Class 3A2, IO, 1.619s, 2037  903,355    53,482    4,671,437    276,565    4,104,008    242,971 
IFB Ser. 06-123, Class CI, IO, 1.609s, 2037  913,134    66,005    2,647,167    191,347    2,084,529    150,678 

69

COLLATERALIZED MORTGAGE OBLIGATIONS*    Growth 3.1%    Balanced 12.2%    Conservative 22.9% 
    Principal      Principal        Principal     
    amount  Value    amount    Value    amount    Value 
Fannie Mae                       
IFB Ser. 06-123, Class UI, IO, 1.609s, 2037  $  375,954 $  26,287  $  988,555  $  69,121  $  830,493  $  58,069 
IFB Ser. 07-30, Class IE, IO, 1.609s, 2037    527,075  44,229    2,591,451    217,461    2,175,138    182,526 
IFB Ser. 07-W5, Class 2A2, IO, 1.609s, 2037    —  —    539,502    21,580    451,698    18,068 
IFB Ser. 05-82, Class SY, IO, 1.599s, 2035    444,156  26,689    1,513,757    90,959    1,457,238    87,563 
IFB Ser. 05-45, Class SR, IO, 1.589s, 2035    578,530  34,557    2,014,028    120,303    1,930,891    115,337 
IFB Ser. 05-17, Class SA, IO, 1.569s, 2035    819,877  63,768    922,362    71,740    885,792    68,895 
IFB Ser. 05-17, Class SE, IO, 1.569s, 2035    282,646  21,736    1,004,331    77,234    964,511    74,172 
IFB Ser. 05-23, Class SG, IO, 1.569s, 2035    300,071  20,871    1,066,849    74,204    1,024,712    71,273 
IFB Ser. 05-29, Class SY, IO, 1.569s, 2035    876,982  66,195    —    —    —    — 
IFB Ser. 05-54, Class SA, IO, 1.569s, 2035    419,914  24,342    1,451,188    84,124    1,401,013    81,215 
IFB Ser. 05-57, Class DI, IO, 1.569s, 2035    637,582  40,074    2,221,027    139,600    2,129,944    133,875 
IFB Ser. 05-84, Class SG, IO, 1.569s, 2035    445,393  32,903    1,424,104    105,205    1,428,428    105,525 
IFB Ser. 05-95, Class CI, IO, 1.569s, 2035    259,460  18,887    838,919    61,067    842,850    61,353 
IFB Ser. 05-104, Class NI, IO, 1.569s, 2035    438,012  30,767    981,146    68,918    989,907    69,533 
IFB Ser. 05-104, Class SI, IO, 1.569s, 2033    233,584  14,828    2,268,364    144,000    1,763,129    111,927 
IFB Ser. 06-16, Class SM, IO, 1.569s, 2036    481,577  33,243    1,119,060    77,249    871,342    60,149 
IFB Ser. 06-23, Class SC, IO, 1.569s, 2036    517,898  35,937    1,358,002    94,231    1,140,467    79,136 
IFB Ser. 07-15, Class BI, IO, 1.569s, 2037    633,553  43,659    1,666,759    114,860    1,399,710    96,457 
IFB Ser. 05-83, Class QI, IO, 1.559s, 2035    —  —    224,528    18,007    226,282    18,148 
IFB Ser. 06-128, Class GS, IO, 1.549s, 2037    139,448  10,150    1,308,599    95,247    1,051,866    76,561 
IFB Ser. 05-83, Class SL, IO, 1.539s, 2035    746,971  47,094    2,429,121    153,148    2,438,239    153,722 
IFB Ser. 06-114, Class IS, IO, 1.519s, 2036    219,416  13,435    1,122,678    68,745    946,231    57,940 
IFB Ser. 07-63, Class SB, IO, 1.519s, 2037    2,369,364  138,666    6,634,614    388,287    5,686,672    332,809 
IFB Ser. 06-115, Class GI, IO, 1.509s, 2036    —  —    1,039,525    73,058    858,157    60,312 
IFB Ser. 06-115, Class IE, IO, 1.509s, 2036    334,693  23,776    862,659    61,283    724,068    51,437 
IFB Ser. 06-117, Class SA, IO, 1.509s, 2036    498,079  31,498    1,310,496    82,874    1,100,636    69,602 
IFB Ser. 06-121, Class SD, IO, 1.509s, 2036    426,321  29,833    2,577,921    180,395    1,967,983    137,713 
IFB Ser. 06-109, Class SG, IO, 1.499s, 2036    615,460  39,835    1,787,166    115,673    1,368,187    88,555 
IFB Ser. 06-104, Class IM, IO, 1.489s, 2036    109,243  7,217    365,768    24,163    464,281    30,671 
IFB Ser. 06-104, Class SY, IO, 1.489s, 2036    245,443  14,867    823,504    49,881    1,045,249    63,312 
IFB Ser. 06-109, Class SH, IO, 1.489s, 2036    440,546  33,966    1,292,905    99,682    1,015,170    78,269 
IFB Ser. 05-122, Class SG, IO, 1.469s, 2035    115,950  7,910    1,126,117    76,826    876,649    59,807 
IFB Ser. 06-8, Class JH, IO, 1.469s, 2036    758,294  54,439    3,895,925    279,693    3,279,562    235,443 
IFB Ser. 06-8, Class PS, IO, 1.469s, 2036    248,152  18,326    —    —    —    — 
IFB Ser. 06-44, Class IS, IO, 1.469s, 2036    407,939  24,762    1,107,993    67,254    1,262,141    76,611 
IFB Ser. 06-45, Class SM, IO, 1.469s, 2036    204,911  11,582    1,071,730    60,577    1,158,707    65,493 
IFB Ser. 06-45, Class XS, IO, 1.469s, 2034    436,283  27,798    —    —    —    — 
IFB Ser. 06-128, Class SC, IO, 1.469s, 2037    934,448  56,576    4,194,043    253,928    3,287,025    199,013 
IFB Ser. 07-W6, Class 4A2, IO, 1.469s, 2037    699,722  41,737    4,946,553    295,049    3,975,651    237,137 
IFB Ser. 05-95, Class OI, IO, 1.459s, 2035    —  —    124,881    10,304    125,761    10,377 
IFB Ser. 06-92, Class JI, IO, 1.449s, 2036    277,695  17,982    700,155    45,337    909,565    58,897 
IFB Ser. 06-92, Class LI, IO, 1.449s, 2036    486,189  29,074    1,277,335    76,385    1,072,578    64,140 
IFB Ser. 06-96, Class ES, IO, 1.449s, 2036    276,341  17,512    1,670,564    105,865    1,274,386    80,759 
IFB Ser. 06-99, Class AS, IO, 1.449s, 2036    389,865  24,080    997,572    61,614    1,249,126    77,151 
IFB Ser. 06-85, Class TS, IO, 1.429s, 2036    327,929  19,604    1,243,039    74,309    1,460,227    87,293 
IFB Ser. 06-61, Class SE, IO, 1.419s, 2036    434,566  25,201    1,368,052    79,335    1,527,208    88,564 
IFB Ser. 07-76, Class SA, IO, 1.409s, 2037    517,117  27,261    1,240,086    65,373    1,240,086    65,373 
IFB Ser. 07-W7, Class 2A2, IO, 1.399s, 2037    823,884  47,851    3,377,922    196,187    2,888,555    167,765 
IFB Ser. 03-124, Class ST, IO, 1.369s, 2034    129,997  6,810    —    —    —    — 
Ser. 06-116, Class ES, IO, 1.519s, 2036    351,208  21,292    837,294    50,761    1,005,453    60,956 
IFB Ser. 06-70, Class WI, IO, 1.319s, 2036    194,170  8,313    923,295    39,529    782,225    33,489 
IFB Ser. 07-W8, Class 2A2, IO, 1.319s, 2037    520,875  26,929    2,470,667    127,733    2,090,487    108,078 
IFB Ser. 07-30, Class JS, IO, 1.309s, 2037    881,259  53,631    2,315,887    140,939    1,944,782    118,354 
IFB Ser. 07-30, Class LI, IO, 1.309s, 2037    1,433,596  91,324    4,192,933    267,101    3,248,975    206,968 
IFB Ser. 07-W2, Class 1A2, IO, 1.299s, 2037    1,037,817  58,498    5,324,368    300,117    4,487,992    252,973 
IFB Ser. 07-W4, Class 2A2, IO, 1.289s, 2037    1,037,271  54,237    5,362,679    280,402    4,710,568    246,305 
Ser. 06-104, Class SG, IO, 1.469s, 2036    727,127  45,657    1,839,017    115,475    2,253,376    141,493 

70

COLLATERALIZED MORTGAGE OBLIGATIONS*  Growth 3.1%  Balanced 12.2%    Conservative 22.9% 
  Principal      Principal        Principal     
  amount    Value  amount    Value    amount    Value 
Fannie Mae                     
IFB Ser. 07-54, Class IA, IO, 1.279s, 2037  $ 243,797  $  15,288  $ 1,196,734  $  75,043  $  1,003,244  $  62,910 
IFB Ser. 07-54, Class IB, IO, 1.279s, 2037  243,797    15,288  1,196,734    75,043    1,003,244    62,910 
IFB Ser. 07-54, Class IC, IO, 1.279s, 2037  243,797    15,288  1,196,734    75,043    1,003,244    62,910 
IFB Ser. 07-54, Class ID, IO, 1.279s, 2037  243,797    15,288  1,196,734    75,043    1,003,244    62,910 
IFB Ser. 07-54, Class IE, IO, 1.279s, 2037  243,797    15,288  1,196,734    75,043    1,003,244    62,910 
IFB Ser. 07-54, Class IF, IO, 1.279s, 2037  361,825    22,689  1,781,073    111,685    1,491,806    93,546 
IFB Ser. 07-54, Class UI, IO, 1.279s, 2037  159,016    10,677  1,586,259    106,512    1,297,493    87,122 
IFB Ser. 06-115, Class JI, IO, 1.249s, 2036  1,228,517    75,205  3,557,199    217,759    2,796,252    171,176 
IFB Ser. 06-123, Class BI, IO, 1.249s, 2037  2,213,659    131,521  6,438,059    382,506    5,063,745    300,854 
IFB Ser. 07-15, Class CI, IO, 1.249s, 2037  1,677,275    102,738  4,871,636    298,401    3,835,118    234,911 
IFB Ser. 06-123, Class LI, IO, 1.189s, 2037  820,899    47,208  2,379,684    136,850    1,872,387    107,677 
Ser. 06-94, Class NI, IO, 1.37s, 2036  358,807    21,648  895,865    54,051    1,097,934    66,243 
FRB Ser. 03-W17, Class 12, IO, 1.153s, 2033  —    —  1,738,779    66,769    1,669,321    64,102 
IFB Ser. 07-39, Class AI, IO, 0.989s, 2037  415,701    21,636  2,112,108    109,928    1,778,011    92,539 
IFB Ser. 07-32, Class SD, IO, 0.979s, 2037  286,644    14,373  1,419,843    71,195    1,192,439    59,792 
IFB Ser. 07-33, Class SD, IO, 0.979s, 2037  1,598,249    75,979  4,772,023    226,857    3,641,508    173,114 
IFB Ser. 05-74, Class SE, IO, 0.969s, 2035  2,018,933    87,682  2,741,142    119,048    2,505,758    108,825 
IFB Ser. 05-82, Class SI, IO, 0.969s, 2035  849,714    34,042  2,894,641    115,966    2,787,206    111,662 
IFB Ser. 07-1, Class CI, IO, 0.969s, 2037  281,009    14,398  1,383,642    70,895    1,159,393    59,405 
IFB Ser. 07-30, Class UI, IO, 0.969s, 2037  239,510    12,700  1,175,690    62,341    985,603    52,262 
IFB Ser. 07-32, Class SC, IO, 0.969s, 2037  376,459    18,619  1,880,384    92,999    1,578,452    78,066 
IFB Ser. 07-W4, Class 1A2, IO, 0.959s, 2037  3,147,524    140,208  16,487,879    734,461    13,815,453    615,416 
IFB Ser. 05-74, Class NI, IO, 0.949s, 2035  466,171    24,779  —    —    —    — 
IFB Ser. 07-W5, Class 1A2, IO, 0.949s, 2037  558,137    16,744  2,718,823    81,565    2,277,826    68,335 
IFB Ser. 07-4, Class PS, IO, 0.924s, 2037  1,164,095    53,839  5,638,890    260,799    4,755,513    219,942 
IFB Ser. 05-58, Class IK, IO, 0.869s, 2035  266,814    15,481  923,305    53,572    891,214    51,710 
Ser. 03-T2, Class 2, IO, 0.819s, 2042  716,445    15,927  6,895,781    153,293    4,903,169    108,997 
IFB Ser. 07-75, Class ID, IO, 0.739s, 2037  149,708    7,216  1,404,873    67,719    1,129,252    54,433 
Ser. 03-W6, Class 51, IO, 0.683s, 2042  490,885    8,173  2,195,768    36,560    1,739,011    28,955 
Ser. 06-W3, Class 1AS, IO, zero %, 2046  1,574,231    61,985  4,614,623    181,701    4,621,828    181,984 
Ser. 01-T12, Class IO, 0.564s, 2041  2,600,717    32,071  1,304,482    16,086    868,051    10,705 
Ser. 03-W2, Class 1, IO, 0.47s, 2042  347,391    3,983  12,197,293    139,858    9,765,555    111,975 
Ser. 01-50, Class B1, IO, 0.459s, 2041  3,215,402    29,214  2,273,593    20,657    1,522,172    13,830 
Ser. 02-T4, Class IO, 0.453s, 2041  7,005,867    67,107  7,363,649    70,534    4,656,356    44,601 
Ser. 02-T1, Class IO, IO, 0.427s, 2031  1,201,032    9,643  1,491,373    11,974    946,984    7,603 
Ser. 03-W6, Class 3, IO, 0.367s, 2042  659,168    6,638  2,948,143    29,690    2,335,037    23,516 
Ser. 02-W8, Class 1, IO, 0.353s, 2042  1,353,691    11,607  —    —    —    — 
Ser. 03-W6, Class 23, IO, 0.351s, 2042  708,877    6,880  3,169,879    30,767    2,510,493    24,367 
Ser. 01-79, Class BI, IO, 0.341s, 2045  1,169,093    9,116  7,967,820    62,131    5,665,605    44,179 
Ser. 372, Class 1, Principal Only (PO),                     
zero %, 2036  2,062,622    1,546,876  11,283,959    8,462,477    9,305,721    6,978,885 
Ser. 03-34, Class P1, PO, zero %, 2043  38,605    25,913  —    —    —    — 
Ser. 04-38, Class AO, PO, zero %, 2034  333,181    235,725  926,476    655,482    859,986    608,440 
Ser. 04-61, Class CO, PO, zero %, 2031  232,098    186,838  702,272    565,324    629,554    506,787 
Ser. 06-56, Class XF, zero %, 2036  —    —  79,893    83,188    79,893    83,188 
Ser. 07-15, Class IM, IO, zero %, 2009  427,139    4,742  1,238,139    13,747    1,046,208    11,616 
Ser. 07-16, Class TS, IO, zero %, 2009  1,693,099    16,252  4,958,030    47,592    4,225,753    40,563 
Ser. 07-31, Class TS, IO, zero %, 2009  1,090,102    9,918  3,160,166    28,751    2,668,773    24,280 
FRB Ser. 05-36, Class QA, zero %, 2035  —    —  103,879    96,982    100,266    93,609 
FRB Ser. 05-57, Class UL, zero %, 2035  153,694    155,084  530,791    535,595    512,677    517,317 
FRB Ser. 05-65, Class CU, zero %, 2034  —    —  148,445    182,876    142,801    175,922 
FRB Ser. 05-65, Class ER, zero %, 2035  165,778    162,184  562,857    550,656    541,889    530,142 
FRB Ser. 05-79, Class FE, zero %, 2035  43,726    46,257  —    —    —    — 
FRB Ser. 05-81, Class DF, zero %, 2033  —    —  60,717    64,454    58,819    62,440 
FRB Ser. 06-1, Class HF, zero %, 2032  —    —  61,785    60,832    94,045    92,594 
IFB Ser. 06-75, Class FY, zero %, 2036  —    —  266,362    275,685    208,979    216,293 
FRB Ser. 06-104, Class EK, zero %, 2036  70,629    70,879  93,230    93,561    127,838    128,291 
FRB Ser. 06-115, Class SN, zero %, 2036  91,680    98,886  506,076    545,850    431,815    465,753 

71

COLLATERALIZED MORTGAGE OBLIGATIONS*    Growth 3.1%    Balanced 12.2%    Conservative 22.9% 
    Principal      Principal        Principal   
    amount  Value    amount    Value    amount  Value 
Federal Home Loan Mortgage Corp.                     
Structured Pass-Through Securities                     
Ser. T-42, Class A6, 9 1/2s, 2042  $  17,585  $  19,154  $  44,790  $  48,790  $  44,126  48,067 
Ser. T-42, Class A5, 7 1/2s, 2042    111,875  117,558    262,488    275,823    440,152  462,512 
Ser. T-51, Class 2A, 7 1/2s, 2042    115,123  120,862    253,746    266,394    294,731  309,423 
Ser. T-58, Class 4A, 7 1/2s, 2043    530,805  560,682    172,518    182,229    94,948  100,293 
Ser. T-41, Class 2A, 7s, 2032    13,091  13,590    37,179    38,596    37,441  38,867 
Ser. T-58, Class 3A, 7s, 2043    20,852  21,781    18,880    19,720    —  — 
Ser. T-60, Class 1A2, 7s, 2044    134,868  141,066    824,853    862,759    829,720  867,849 
Ser. T-56, Class A, IO, 0.524s, 2043    633,331  9,064    2,224,665    31,839    1,774,362  25,395 
Ser. T-56, Class 3, IO, 0.361s, 2043    598,864  1,377    1,988,852    4,574    1,624,796  3,737 
Ser. T-56, Class 1, IO, 0.286s, 2043    752,954  1,054    2,501,012    3,501    2,042,944  2,860 
Ser. T-56, Class 2, IO, 0.059s, 2043    691,140  553    2,295,055    1,836    1,874,885  1,500 
FFCA Secured Lending Corp. Ser. 99-1A,                     
Class C1, 7.59s, 2025    100,000  75,070    —    —    —  — 
FFCA Secured Lending Corp. 144A                     
Ser. 00-1, Class X, IO, 1.348s, 2020    426,979  22,412    1,650,795    86,652    1,055,024  55,379 
Ser. 00-1, Class A2, 7.77s, 2027    115,770  124,494    393,973    423,659    208,209  223,898 
First Union National Bank-Bank                     
of America Commercial Mortgage 144A                     
Ser. 01-C1, Class 3, IO, 1.95s, 2033    —  —    6,657,316    301,602    5,929,560  268,632 
First Union-Lehman Brothers Commercial                     
Mortgage Trust II                     
Ser. 97-C2, Class F, 7 1/2s, 2029    —  —    580,000    624,737    538,000  579,497 
Ser. 97-C2, Class G, 7 1/2s, 2029    71,000  77,045    185,000    200,752    288,000  312,522 
First Union-Lehman Brothers-Bank                     
of America 144A Ser. 98-C2, Class G, 7s, 2035    —  —    717,000    752,929    703,000  738,227 
Freddie Mac                     
IFB Ser. 3182, Class PS, 5.59s, 2032    85,113  95,316    497,059    556,645    495,357  554,739 
IFB Ser. 3339, Class JS, 5.444s, 2037    —  —    546,909    618,846    454,951  514,792 
IFB Ser. 3339, Class WS, 5.092s, 2037    —  —    597,868    709,537    497,070  589,912 
IFB Ser. 3153, Class SQ, 5.025s, 2036    450,277  505,196    —    —    —  — 
IFB Ser. 3202, Class PS, 4.725s, 2036    —  —    296,122    331,900    500,730  561,231 
IFB Ser. 3153, Class SX, 4.488s, 2036    280,294  305,748    241,956    263,928    —  — 
IFB Ser. 3202, Class HM, 4.487s, 2036    —  —    187,179    205,251    280,328  307,395 
IFB Ser. 3331, Class SE, 4.485s, 2037    —  —    436,004    469,513    378,196  407,263 
IFB Ser. 3349, Class SA, 4.485s, 2037    —  —    1,729,632    1,893,497    1,500,008  1,642,119 
IFB Ser. 3149, Class SU, 3.843s, 2036    —  —    435,301    419,900    365,203  352,282 
IFB Ser. 3114, Class GK, 3.39s, 2036    —  —    196,106    200,476    215,028  219,821 
IFB Ser. 2976, Class KL, 3.291s, 2035    176,802  179,252    564,570    572,395    541,509  549,014 
IFB Ser. 3081, Class DC, 3.274s, 2035    167,854  172,254    320,599    329,005    320,599  329,005 
IFB Ser. 2979, Class AS, 3.181s, 2034    —  —    140,986    141,727    141,787  142,532 
IFB Ser. 2990, Class DP, 3.181s, 2034    82,346  83,060    487,490    491,714    470,197  474,271 
IFB Ser. 3153, Class UT, 2.924s, 2036    173,844  169,493    142,551    138,984    —  — 
IFB Ser. 2927, Class SI, IO, 2.748s, 2035    222,724  26,235    792,203    93,316    760,862  89,625 
IFB Ser. 3065, Class DC, 2.603s, 2035    175,847  166,399    500,950    474,033    502,666  475,656 
IFB Ser. 3031, Class BS, 2.344s, 2035    204,624  191,798    —    —    —  — 
IFB Ser. 2990, Class LB, 2.243s, 2034    174,432  162,408    591,884    551,085    566,481  527,433 
IFB Ser. 2990, Class WP, 2.187s, 2035    77,020  75,010    363,532    354,046    351,209  342,045 
IFB Ser. 2828, Class GI, IO, 1.748s, 2034    253,344  23,574    830,548    77,283    829,604  77,195 
IFB Ser. 3184, Class SP, IO, 1.598s, 2033    191,866  14,217    1,809,687    134,098    1,453,897  107,734 
IFB Ser. 2869, Class SH, IO, 1.548s, 2034    127,508  8,323    439,655    28,699    422,224  27,561 
IFB Ser. 2869, Class JS, IO, 1.498s, 2034    582,271  37,279    1,908,885    122,213    1,906,715  122,074 
IFB Ser. 3203, Class SH, IO, 1.388s, 2036    108,781  9,716    1,027,760    91,800    825,863  73,767 
Ser. 3236, Class ES, IO, 0.948s, 2036    437,854  26,017    1,130,315    67,163    1,278,322  75,958 
IFB Ser. 2755, Class SG, IO, 1.348s, 2031    356,046  21,114    1,725,541    102,325    1,455,016  86,282 
IFB Ser. 2594, Class SE, IO, 1.298s, 2030    269,524  15,053    —    —    —  — 
IFB Ser. 2815, Class PT, IO, 1.298s, 2032    255,303  18,735    907,170    66,572    871,203  63,933 

72

COLLATERALIZED MORTGAGE OBLIGATIONS*  Growth 3.1%    Balanced 12.2%    Conservative 22.9% 
  Principal        Principal        Principal     
  amount    Value    amount    Value    amount    Value 
Freddie Mac                       
IFB Ser. 2828, Class TI, IO, 1.298s, 2030  $ 149,372  $  10,272  $  454,874  $  31,281  $  456,225  $  31,374 
IFB Ser. 3360, Class SC, 1.285s, 2037  —    —    988,565    928,015    759,519    712,999 
IFB Ser. 3012, Class ST, 1.251s, 2035  82,520    78,651    —    —    —    — 
IFB Ser. 3297, Class BI, IO, 1.008s, 2037  1,379,392    101,433    3,624,868    266,553    3,044,274    223,859 
IFB Ser. 2922, Class SE, IO, 0.998s, 2035  330,647    20,562    1,150,949    71,575    1,103,464    68,622 
IFB Ser. 3028, Class ES, IO, 0.998s, 2035  735,521    53,356    2,348,760    170,383    2,358,070    171,058 
IFB Ser. 3281, Class BI, IO, 0.998s, 2037  291,245    20,284    708,381    49,335    594,702    41,418 
IFB Ser. 3284, Class IV, IO, 0.998s, 2037  97,571    7,630    909,363    71,109    763,006    59,665 
IFB Ser. 3287, Class SD, IO, 0.998s, 2037  594,048    38,725    1,730,284    112,794    1,354,996    88,330 
IFB Ser. 3045, Class DI, IO, 0.978s, 2035  371,506    22,756    2,732,468    167,374    4,078,983    249,853 
IFB Ser. 2927, Class ES, IO, 0.948s, 2035  177,205    9,665    628,212    34,263    603,563    32,919 
IFB Ser. 2950, Class SM, IO, 0.948s, 2016  254,256    15,532    1,425,206    87,062    1,307,076    79,846 
IFB Ser. 3054, Class CS, IO, 0.948s, 2035  170,543    8,866    510,868    26,560    514,675    26,758 
IFB Ser. 3066, Class SI, IO, 0.948s, 2035  635,580    46,105    1,619,255    117,461    1,625,317    117,901 
IFB Ser. 3107, Class DC, IO, 0.948s, 2035  385,683    28,864    2,289,042    171,309    2,523,495    188,855 
IFB Ser. 3118, Class SD, IO, 0.948s, 2036  530,679    30,660    1,847,538    106,741    1,771,194    102,330 
IFB Ser. 3129, Class SP, IO, 0.948s, 2035  146,557    8,058    980,600    53,918    1,059,652    58,265 
IFB Ser. 3136, Class NS, IO, 0.948s, 2036  1,158,035    72,896    1,563,797    98,438    1,745,132    109,853 
IFB Ser. 3256, Class S, IO, 0.938s, 2036  213,270    15,547    2,006,249    146,256    1,611,794    117,500 
IFB Ser. 3031, Class BI, IO, 0.937s, 2035  158,120    12,530    444,320    35,208    445,901    35,333 
IFB Ser. 3244, Class SB, IO, 0.908s, 2036  386,424    25,845    1,015,531    67,921    853,120    57,058 
IFB Ser. 3244, Class SG, IO, 0.908s, 2036  445,128    30,591    1,169,551    80,377    981,899    67,481 
IFB Ser. 2962, Class BS, IO, 0.898s, 2035  766,780    44,657    2,686,829    156,479    2,559,530    149,065 
IFB Ser. 3114, Class TS, IO, 0.898s, 2030  920,777    51,543    2,981,606    166,904    3,004,786    168,202 
IFB Ser. 3147, Class SH, IO, 0.898s, 2036  1,339,652    95,222    3,490,966    248,137    2,939,183    208,917 
IFB Ser. 3236, Class IS, IO, 0.898s, 2036  722,907    46,640    1,900,840    122,636    1,595,348    102,927 
IFB Ser. 3326, Class GS, IO, 0.898s, 2037  1,071,826    61,912    5,910,776    341,427    4,921,549    284,286 
IFB Ser. 2990, Class LI, IO, 0.878s, 2034  244,189    17,432    863,329    61,630    826,307    58,988 
IFB Ser. 3128, Class JI, IO, 0.878s, 2036  607,724    42,449    1,663,868    116,219    1,885,549    131,703 
IFB Ser. 3065, Class DI, IO, 0.868s, 2035  83,116    6,549    351,582    27,704    353,245    27,835 
IFB Ser. 3153, Class JI, IO, 0.868s, 2036  399,652    23,361    1,901,233    111,131    1,610,157    94,117 
IFB Ser. 3229, Class BI, IO, 0.868s, 2036  91,009    5,445    303,953    18,186    386,127    23,103 
IFB Ser. 3240, Class S, IO, 0.868s, 2036  1,413,192    94,557    4,118,710    275,584    3,244,763    217,108 
IFB Ser. 3114, Class GI, IO, 0.848s, 2036  165,176    13,143    467,445    37,194    514,520    40,939 
IFB Ser. 3145, Class GI, IO, 0.848s, 2036  495,842    36,430    1,357,583    99,744    1,538,823    113,059 
IFB Ser. 3218, Class AS, IO, 0.828s, 2036  141,576    8,569    1,351,244    81,790    1,133,504    68,610 
IFB Ser. 3221, Class SI, IO, 0.828s, 2036  589,113    36,706    1,548,578    96,487    1,299,861    80,990 
IFB Ser. 3153, Class UI, IO, 0.818s, 2036  2,394,280    186,757    532,259    41,517    3,144,766    245,295 
IFB Ser. 3202, Class PI, IO, 0.788s, 2036  1,595,430    99,968    4,194,049    262,795    3,521,516    220,655 
IFB Ser. 3201, Class SG, IO, 0.748s, 2036  741,446    45,984    1,950,511    120,970    1,637,924    101,583 
IFB Ser. 3203, Class SE, IO, 0.748s, 2036  661,163    40,412    1,736,549    106,142    1,458,631    89,155 
IFB Ser. 3171, Class PS, IO, 0.733s, 2036  355,647    22,325    1,707,105    107,160    1,442,910    90,576 
IFB Ser. 3152, Class SY, IO, 0.728s, 2036  454,461    31,136    1,267,979    86,871    1,392,002    95,368 
IFB Ser. 3199, Class S, IO, 0.698s, 2036  323,029    19,274    853,913    50,951    1,248,926    74,520 
IFB Ser. 3284, Class BI, IO, 0.698s, 2037  437,982    25,585    1,151,348    67,258    967,132    56,496 
IFB Ser. 3284, Class LI, IO, 0.688s, 2037  1,804,668    112,370    5,526,680    344,126    4,298,529    267,654 
IFB Ser. 3281, Class AI, IO, 0.678s, 2037  1,690,503    105,521    4,910,058    306,485    3,865,364    241,276 
IFB Ser. 3012, Class UI, IO, 0.668s, 2035  104,438    6,114    —    —    —    — 
IFB Ser. 3274, Class JS, IO, 0.658s, 2037  732,480    40,521    3,518,021    194,616    2,979,971    164,851 
IFB Ser. 3311, Class IA, IO, 0.658s, 2037  345,486    22,316    1,688,396    109,060    1,414,154    91,346 
IFB Ser. 3311, Class IB, IO, 0.658s, 2037  345,486    22,316    1,688,396    109,060    1,414,154    91,346 
IFB Ser. 3311, Class IC, IO, 0.658s, 2037  345,486    22,316    1,688,396    109,060    1,414,154    91,346 
IFB Ser. 3311, Class ID, IO, 0.658s, 2037  345,486    22,316    1,688,396    109,060    1,414,154    91,346 
IFB Ser. 3311, Class IE, IO, 0.658s, 2037  345,486    22,316    2,501,364    161,573    2,075,849    134,087 
IFB Ser. 3240, Class GS, IO, 0.628s, 2036  864,804    52,273    2,493,212    150,703    1,968,809    119,005 
IFB Ser. 3339, Class TI, IO, 0.388s, 2037  235,194    12,807    2,217,546    120,749    1,781,745    97,019 
IFB Ser. 3288, Class SJ, IO, 0.378s, 2037  362,031    16,742    1,848,808    85,498    1,559,372    72,113 
IFB Ser. 3284, Class CI, IO, 0.368s, 2037  1,289,643    67,480    3,762,734    196,884    2,950,489    154,383 

73

COLLATERALIZED MORTGAGE OBLIGATIONS*  Growth 3.1%    Balanced 12.2%    Conservative 22.9% 
  Principal      Principal        Principal     
  amount  Value    amount    Value    amount    Value 
Freddie Mac                     
IFB Ser. 3016, Class SQ, IO, 0.358s, 2035  $ 296,079  $  11,442  $  896,239  $  34,634  $  990,810  $  38,289 
IFB Ser. 3291, Class SA, IO, 0.358s, 2037  396,659  17,454    2,401,070    105,654    1,832,710    80,645 
IFB Ser. 3012, Class WI, IO, 0.348s, 2035  162,882  8,939    —    —    —    — 
IFB Ser. 3284, Class WI, IO, 0.348s, 2037  2,142,010  108,634    6,244,989    316,720    4,897,657    248,389 
IFB Ser. 3286, Class SA, IO, 0.348s, 2037  253,199  10,761    2,410,182    102,433    2,021,753    85,924 
IFB Ser. 3012, Class IG, IO, 0.328s, 2035  384,951  19,688    —    —    —    — 
IFB Ser. 3235, Class SA, IO, 0.198s, 2036  345,445  14,005    905,178    36,698    760,165    30,819 
Ser. 236, PO, zero %, 2036  99,407  74,887    —    —    —    — 
Ser. 239, PO, zero %, 2036  305,562  227,535    2,301,426    1,713,743    2,297,010    1,710,455 
Ser. 242, PO, zero %, 2036  5,383,093  4,054,358    9,449,446    7,116,992    10,276,338    7,739,778 
Ser. 246, PO, zero %, 2037  945,983  711,766    9,459,832    7,117,662    7,604,870    5,721,972 
Ser. 1208, Class F, PO, zero %, 2022  8,203  6,917    —    —    —    — 
FRB Ser. 3003, Class XF, zero %, 2035  126,978  125,610    452,043    447,170    436,171    431,469 
FRB Ser. 3036, Class AS, zero %, 2035  —  —    82,894    86,112    —    — 
FRB Ser. 3117, Class AF, zero %, 2036  —  —    93,885    108,340    —    — 
FRB Ser. 3122, Class GF, zero %, 2036  —  —    445,287    454,849    373,672    381,697 
FRB Ser. 3147, Class SF, zero %, 2036  —  —    742,432    763,719    554,221    570,112 
FRB Ser. 3149, Class XF, zero %, 2036  —  —    234,101    243,966    185,401    193,214 
FRB Ser. 3174, Class SF, zero %, 2036  —  —    267,040    284,644    210,350    224,217 
FRB Ser. 3231, Class X, zero %, 2036  —  —    136,566    146,467    148,153    158,894 
FRB Ser. 3231, Class XB, zero %, 2036  —  —    394,453    402,107    320,493    326,712 
FRB Ser. 3239, Class BF, zero %, 2036  235,060  266,058    606,067    685,992    492,045    556,934 
FRB Ser. 3263, Class TA, zero %, 2037  —  —    153,658    182,136    124,482    147,553 
Ser. 3300, PO, zero %, 2037  —  —    869,290    665,007    745,106    570,006 
FRB Ser. 3326, Class WF, zero %, 2035  270,855  265,746    540,762    530,562    564,438    553,791 
FRB Ser. 3326, Class XF, zero %, 2037  —  —    550,176    543,124    468,846    462,836 
FRB Ser. 3326, Class YF, zero %, 2037  —  —    1,363,418    1,518,841    1,230,471    1,370,738 
FRB Ser. 3327, Class YF, zero %, 2037  253,065  260,910    542,283    559,093    444,292    458,064 
FRB Ser. 3349, Class DO, zero %, 2037  —  —    291,982    283,522    246,142    239,010 
GE Capital Commercial Mortgage Corp. 144A                     
Ser. 05-C2, Class XC, IO, 0.054s, 2043  11,791,872  85,412    20,900,615    151,390    20,097,895    145,576 
Ser. 05-C3, Class XC, IO, 0.059s, 2045  25,090,413  128,388    48,740,239    249,404    49,116,733    251,330 
Ser. 07-C1, Class XC, IO, 0.042s, 2019  25,648,879  181,870    71,701,527    508,418    56,516,886    400,748 
GMAC Commercial Mortgage Securities, Inc.                     
Ser. 99-C3, Class F, 8.082s, 2036  56,000  58,180    75,000    77,920    112,000    116,360 
Ser. 97-C1, Class X, IO, 1.315s, 2029  492,125  27,989    —    —    —    — 
Ser. 05-C1, Class X1, IO, 0.166s, 2043  4,577,779  59,369    19,255,383    249,723    20,913,635    271,229 
GMAC Commercial Mortgage Securities, Inc. 144A                     
Ser. 99-C3, Class G, 6.974s, 2036  —  —    350,039    355,115    306,364    310,806 
Ser. 06-C1, Class XC, IO, 0.056s, 2045  19,831,258  143,321    —    —    36,024,946    260,352 
Government National Mortgage Association                     
IFB Ser. 07-26, Class WS, 8.445s, 2037  253,329  341,709    1,472,476    1,986,184    1,131,075    1,525,677 
IFB Ser. 07-44, Class SP, 7.741s, 2036  —  —    729,287    842,566    574,920    664,221 
IFB Ser. 06-34, Class SA, 6.563s, 2036  —  —    112,259    123,532    105,132    115,689 
IFB Ser. 07-51, Class SP, 6.503s, 2037  144,518  155,985    277,077    299,061    464,452    501,304 
Ser. 07-57, Class QA, 6s, 2037 ##  634,000  31,898    3,064,000    154,158    2,550,000    128,297 
Ser. 07-58, Class PS, IO, 6s, 2037 ##  668,000  46,622    515,000    35,944    3,568,000    249,025 
Ser. 07-58, Class SA, IO, 6s, 2037 ##  1,300,000  66,028    1,001,000    50,842    6,939,000    352,439 
Ser. 07-59, Class PS, IO, 6s, 2037 ##  201,000  12,751    965,000    61,217    804,000    51,004 
Ser. 07-59, Class SD, IO, 6s, 2037 ##  1,250,000  61,719    8,450,000    417,219    3,200,000    158,000 
Ser. 07-59, Class SP, IO, 6s, 2037 ##  628,000  40,035    4,246,000    270,683    1,608,000    102,510 
IFB Ser. 07-38, Class AS, 5.66s, 2037  294,457  347,110    1,275,979    1,504,142    1,079,675    1,272,735 
IFB Ser. 05-7, Class JM, 4.37s, 2034  169,835  169,270    585,390    583,440    565,154    563,272 
IFB Ser. 05-84, Class SB, 3.259s, 2035  85,805  80,536    —    —    —    — 
IFB Ser. 05-68, Class DP, 2.572s, 2035  119,893  114,657    —    —    —    — 
IFB Ser. 06-62, Class SI, IO, 1.884s, 2036  571,930  43,676    1,504,846    114,920    1,263,012    96,452 
IFB Ser. 07-1, Class SL, IO, 1.864s, 2037  304,259  24,026    816,940    64,510    641,084    50,623 
IFB Ser. 07-1, Class SM, IO, 1.854s, 2037  304,259  23,930    816,940    64,253    641,084    50,422 

74

COLLATERALIZED MORTGAGE OBLIGATIONS*  Growth 3.1%  Balanced 12.2%    Conservative 22.9% 
  Principal      Principal        Principal     
  amount    Value  amount    Value    amount    Value 
Government National Mortgage Association                     
IFB Ser. 05-66, Class SP, 1.658s, 2035  $ —  $  —  $ 309,814  $  288,620  $  311,570  $  290,255 
IFB Ser. 05-84, Class SL, 1.658s, 2035  205,043    191,533  —    —    —    — 
IFB Ser. 07-53, Class ES, IO, 1.4s, 2037  295,000    13,068  1,419,000    62,857    1,201,000    53,201 
IFB Ser. 07-26, Class SG, IO, 1.354s, 2037  734,735    52,329  1,931,644    137,574    1,621,554    115,489 
IFB Ser. 07-9, Class BI, IO, 1.324s, 2037  976,312    60,925  4,266,223    266,224    3,661,171    228,467 
IFB Ser. 06-69, Class SA, IO, 1.304s, 2036  456,396    27,810  2,758,754    168,102    2,105,622    128,304 
IFB Ser. 07-11, Class SA, IO, 1.304s, 2037  116,797    8,063  1,116,382    77,064    936,320    64,635 
IFB Ser. 07-14, Class SB, IO, 1.304s, 2037  223,945    15,404  1,073,191    73,821    907,414    62,418 
IFB Ser. 07-22, Class S, IO, 1.304s, 2037  394,056    30,191  1,026,903    78,676    864,760    66,254 
IFB Ser. 07-25, Class SA, IO, 1.304s, 2037  323,276    18,800  1,598,958    92,989    1,341,499    78,016 
IFB Ser. 07-25, Class SB, IO, 1.304s, 2037  536,212    31,184  3,123,389    181,644    2,620,085    152,374 
IFB Ser. 07-26, Class LS, IO, 1.304s, 2037  1,527,524    106,419  4,016,053    279,790    3,372,417    234,949 
IFB Ser. 07-26, Class SA, IO, 1.304s, 2037  911,697    55,204  4,470,567    270,697    3,748,090    226,951 
IFB Ser. 07-51, Class SJ, IO, 1.254s, 2037  260,310    20,599  1,244,698    98,494    1,054,203    83,420 
IFB Ser. 06-38, Class SG, IO, 1.154s, 2033  918,075    43,755  4,494,363    214,197    3,771,973    179,768 
IFB Ser. 07-51, Class SG, IO, 1.084s, 2037  1,011,629    55,056  1,937,543    105,448    3,253,159    177,048 
IFB Ser. 07-26, Class SD, IO, 1.048s, 2037  452,447    30,950  2,218,046    151,727    1,858,778    127,151 
IFB Ser. 07-9, Class DI, IO, 1.014s, 2037  494,353    26,561  2,162,082    116,166    1,855,243    99,680 
IFB Ser. 06-28, Class GI, IO, 1.004s, 2035  310,467    16,746  1,879,633    101,381    1,434,506    77,372 
IFB Ser. 07-48, Class SB, IO, 0.898s, 2037  217,360    11,990  2,071,316    114,256    1,737,899    95,865 
IFB Ser. 05-65, Class SI, IO, 0.854s, 2035  166,706    8,814  1,073,643    56,766    1,079,131    57,056 
IFB Ser. 05-68, Class KI, IO, 0.804s, 2035  1,464,348    93,444  —    —    —    — 
IFB Ser. 07-53, Class SG, IO, 0.797s, 2037  200,000    10,658  892,000    47,536    755,000    40,235 
IFB Ser. 06-14, Class S, IO, 0.754s, 2036  352,166    16,913  1,690,396    81,182    1,431,331    68,740 
IFB Ser. 07-9, Class AI, IO, 0.748s, 2037  517,698    31,180  1,976,996    119,071    1,576,080    94,924 
IFB Ser. 06-11, Class ST, IO, 0.744s, 2036  218,968    10,374  1,046,552    49,584    886,696    42,010 
IFB Ser. 07-36, Class SY, IO, 0.718s, 2037  310,526    17,460  1,501,209    84,408    1,268,808    71,341 
IFB Ser. 07-1, Class S, IO, 0.704s, 2037  975,410    43,718  2,567,447    115,074    2,154,526    96,567 
IFB Ser. 07-3, Class SA, IO, 0.704s, 2037  929,733    41,350  2,446,376    108,804    2,053,274    91,321 
IFB Ser. 07-7, Class EI, IO, 0.704s, 2037  859,669    37,813  2,125,526    93,491    1,710,993    75,258 
IFB Ser. 07-8, Class SA, IO, 0.704s, 2037  2,012,694    100,635  5,858,917    292,946    4,462,592    223,130 
IFB Ser. 07-9, Class CI, IO, 0.704s, 2037  643,787    28,133  2,813,132    122,930    2,413,965    105,487 
IFB Ser. 07-19, Class SJ, IO, 0.704s, 2037  391,330    17,386  1,931,251    85,800    1,620,821    72,008 
IFB Ser. 07-23, Class ST, IO, 0.704s, 2037  258,365    10,492  2,466,207    100,152    2,068,795    84,013 
IFB Ser. 07-27, Class SD, IO, 0.704s, 2037  441,183    19,323  1,152,613    50,482    967,354    42,368 
IFB Ser. 07-53, Class SC, IO, 0.703s, 2037  340,000    14,447  1,621,000    68,878    1,369,000    58,170 
IFB Ser. 07-53, Class SE, IO, 0.697s, 2037  200,000    10,098  300,000    15,146    —    — 
IFB Ser. 07-21, Class S, IO, 0.448s, 2037  473,738    23,270  2,343,058    115,090    1,971,852    96,857 
IFB Ser. 07-43, Class SC, IO, 0.348s, 2037  192,223    8,672  1,792,504    80,867    1,462,032    65,958 
FRB Ser. 98-2, Class EA, PO, zero %, 2028  17,581    14,128  3,354    2,695    —    — 
Ser. 99-31, Class MP, PO, zero %, 2029  13,889    11,590  65,619    54,757    32,809    27,378 
FRB Ser. 07-35, Class UF, zero %, 2037  105,843    113,716  220,424    236,822    181,583    195,091 
FRB Ser. 07-49, Class UF, zero %, 2037  109,714    107,931  210,532    207,111    175,937    173,078 
Government National Mortgage                     
Association 144A IFB Ser. 06-GG8,                     
Class X, IO, 0.857s, 2039  2,188,062    84,018  10,118,416    388,531    8,459,643    324,837 
Greenwich Capital Commercial Funding Corp.                     
Ser. 07-GG9, Class A4, 5.444s, 2039  844,000    833,321  3,195,000    3,154,575    1,063,000    1,049,550 
Ser. 05-GG5, Class XC, IO, 0.051s, 2037  12,849,367    51,197  40,928,679    163,075    41,040,905    163,522 
Greenwich Capital Commercial                     
Funding Corp. 144A                     
Ser. 07-GG9, Class X, IO, 0.324s, 2039  3,161,942    73,120  17,184,252    397,386    8,795,058    203,386 
Ser. 05-GG3, Class XC, IO, 0.142s, 2042  10,463,527    165,128  28,919,850    456,391    24,731,885    390,300 
GS Mortgage Securities Corp. II                     
FRB Ser. 07-GG10, Class A3, 5.993s, 2045  318,000    319,623  1,426,000    1,433,277    1,118,000    1,123,706 
FRB Ser. 07-GG10, Class AM, 5.993s, 2045  1,081,000    1,093,752  4,981,000    5,039,760    3,872,000    3,917,678 
Ser. 06-GG8, Class A4, 5.56s, 2039  794,000    793,571  1,462,000    1,461,211    1,658,000    1,657,105 
Ser. 04-GG2, Class A6, 5.396s, 2038  298,000    297,657  865,000    864,005    953,000    951,904 

75

COLLATERALIZED MORTGAGE OBLIGATIONS*  Growth 3.1%  Balanced 12.2%    Conservative 22.9% 
  Principal    Principal        Principal     
  amount  Value  amount    Value    amount    Value 
GS Mortgage Securities Corp. II 144A                   
FRB Ser. 03-FL6A, Class L, 9.003s, 2015  $ 87,000   $ 86,130  $ 124,000  $  122,760  $  114,000  $  112,860 
FRB Ser. 07-EOP, Class J, 6.648s, 2009  130,000  125,450  383,000    369,595    240,000    231,600 
Ser. 98-C1, Class F, 6s, 2030  —  —  280,000    279,958    282,000    281,958 
Ser. 03-C1, Class X1, IO, 0.529s, 2040  6,997,268  120,714  5,754,185    99,269    8,292,645    143,061 
Ser. 05-GG4, Class XC, IO, 0.178s, 2039  8,513,721  138,348  23,115,466    375,626    22,259,338    361,714 
Ser. 04-C1, Class X1, IO, 0.158s, 2028  5,512,333  32,729  7,509,991    44,591    7,509,991    44,591 
Ser. 06-GG6, Class XC, IO, 0.038s, 2038  3,475,650  10,726  34,778,406    107,324    25,128,250    77,544 
GSR Mortgage Loan Trust                   
IFB Ser. 06-4F, Class 4A2, IO, 2.019s, 2036  —  —  920,626    46,654    782,244    39,641 
IFB Ser. 06-7F, Class 5A2, IO, 1.969s, 2036  —  —  1,087,755    48,846    924,251    41,504 
Ser. 05-AR2, Class 2A1, 4.838s, 2035  185,200  182,747  440,920    435,081    463,328    457,193 
HVB Mortgage Capital Corp.                   
Ser. 03-FL1A, Class K, 8.67s, 2022  118,000  114,460  —    —    —    — 
Home Equity Asset Trust FRB Ser. 04-8,                   
Class A4, 5.491s, 2035  479  479  —    —    —    — 
JPMorgan Chase Commercial Mortgage                   
Securities Corp.                   
Ser. 97-C5, Class F, 7.561s, 2029  64,000  68,575  204,000    218,584    204,000    218,584 
FRB Ser. 07-LD12, Class AM, 6.261s, 2051  2,099,000  2,126,875  9,037,000    9,157,011    7,182,000    7,277,377 
FRB Ser. 07-LD12, Class A3, 6.189s, 2051  3,282,000  3,329,195  14,127,000    14,330,146    11,228,000    11,389,459 
FRB Ser. 07-LD11, Class A3, 6.007s, 2049  407,000  411,831  1,778,000    1,799,105    1,394,000    1,410,547 
FRB Ser. 07-LD11, Class AM, 6.007s, 2049  479,000  477,055  2,228,000    2,218,954    1,721,000    1,714,013 
FRB Ser. 07-CB19, Class AM, 5.937s, 2049  1,269,000  1,259,089  5,834,000    5,788,436    4,542,000    4,506,527 
Ser. 07-CB20, Class A3, 5.863s, 2051  816,000  821,581  3,569,000    3,593,412    2,789,000    2,808,077 
Ser. 07-CB20, Class A4, 5.837s, 2051  979,000  988,633  4,283,000    4,325,145    3,347,000    3,379,934 
Ser. 06-CB15, Class A4, 5.814s, 2043  477,000  484,321  1,612,000    1,636,741    1,381,000    1,402,195 
Ser. 06-CB14, Class AM, 5.629s, 2044  315,000  310,036  1,213,000    1,193,883    1,126,000    1,108,254 
Ser. 06-CB16, Class A4, 5.552s, 2045  735,000  730,061  1,361,000    1,351,854    1,650,000    1,638,912 
Ser. 06-CB14, Class A4, 5.481s, 2044  220,000  218,453  844,000    838,067    946,000    939,350 
Ser. 07-CB18, Class AM, 5.466s, 2047  891,000  865,339  4,081,000    3,963,467    3,185,000    3,093,272 
FRB Ser. 07-LDPX, Class AM, 5.464s, 2049  488,000  470,842  2,268,000    2,188,257    1,752,000    1,690,400 
Ser. 05-LDP2, Class AM, 4.78s, 2042  100,000  93,176  420,000    391,339    400,000    372,704 
Ser. 06-LDP8, Class X, IO, 0.574s, 2045  2,901,150  114,305  13,421,791    528,819    11,221,090    442,111 
Ser. 06-CB17, Class X, IO, 0.514s, 2043  2,424,807  89,791  13,246,171    490,506    14,213,700    526,333 
Ser. 06-LDP9, Class X, IO, 0.642s, 2047  3,224,841  100,776  5,624,002    175,750    5,271,566    164,736 
Ser. 07-LDPX, Class X, IO, 0.347s, 2049  4,829,717  108,669  20,374,149    458,418    16,149,021    363,353 
Ser. 06-CB16, Class X1, IO, 0.057s, 2045  3,311,004  50,658  15,317,755    234,362    12,806,337    195,937 
Ser. 06-LDP7, Class X, IO, 0.009s, 2045  13,386,898  12,550  49,765,419    46,655    49,765,419    46,655 
JPMorgan Chase Commercial Mortgage                   
Securities Corp. 144A                   
Ser. 00-C9, Class G, 6 1/4s, 2032  38,000  38,274  240,000    241,732    260,000    261,876 
Ser. 06-FL2A, Class X1, IO, 0.855s, 2018  1,457,296  2,186  7,478,702    11,218    7,980,133    11,970 
Ser. 03-ML1A, Class X1, IO, 0.616s, 2039  788,072  25,951  —    —    —    — 
Ser. 05-LDP2, Class X1, IO, 0.128s, 2042  16,863,118  276,661  41,267,250    677,041    34,471,534    565,549 
Ser. 05-LDP1, Class X1, IO, 0.098s, 2046  4,676,694  42,383  14,677,036    133,011    13,224,330    119,845 
Ser. 05-CB12, Class X1, IO, 0.122s, 2037  4,181,916  39,859  11,970,168    114,091    11,506,800    109,674 
Ser. 05-LDP3, Class X1, IO, 0.078s, 2042  16,296,116  122,221  17,315,240    129,864    29,082,026    218,115 
Ser. 07-CB20, Class X1, IO, 0.049s, 2051  6,871,000  87,416  38,654,000    491,776    31,304,000    398,265 
Ser. 05-LDP5, Class X1, IO, 0.044s, 2044  22,860,914  103,589  69,129,082    313,241    76,101,393    344,834 
Ser. 06-LDP6, Class X1, IO, 0.049s, 2043  —  —  22,820,681    117,669    16,452,026    84,831 
Ser. 06-CB14, Class X1, IO, 0.066s, 2044  12,331,503  53,950  27,586,336    120,690    29,995,897    131,232 
Key Commercial Mortgage                   
Ser. 07-SL1, Class A2, 5.761s, 2040  1,091,000  1,063,896  —    —    —    — 
Ser. 07-SL1, Class A1, 5.498s, 2040  848,492  843,620  —    —    —    — 
LB Commercial Conduit Mortgage Trust 144A                   
Ser. 99-C1, Class F, 6.41s, 2031  —  —  149,428    151,325    136,004    137,731 
Ser. 99-C1, Class G, 6.41s, 2031  —  —  159,961    166,594    145,590    151,627 

76

COLLATERALIZED MORTGAGE OBLIGATIONS*  Growth 3.1%  Balanced 12.2%    Conservative 22.9% 
  Principal      Principal        Principal     
  amount    Value  amount    Value    amount    Value 
LB Commercial Conduit Mortgage Trust 144A                     
Ser. 98-C4, Class G, 5.6s, 2035  $ —  $  —  $ 132,000  $  133,099  $  127,000  $  128,057 
Ser. 98-C4, Class H, 5.6s, 2035  —    —  223,000    211,612    215,000    204,021 
LB-UBS Commercial Mortgage Trust                     
Ser. 07-C6, Class AM, 6.114s, 2017  1,074,000    1,092,795  4,620,000    4,700,850    3,672,000    3,736,260 
Ser. 07-C6, Class A2, 5.845s, 2012  1,022,000    1,045,915  4,401,000    4,503,983    3,498,000    3,579,853 
Ser. 04-C7, Class A6, 4.786s, 2029  121,000    116,521  362,000    348,600    400,000    385,194 
Ser. 07-C2, Class XW, IO, 0.73s, 2040  1,181,621    46,047  4,599,524    179,239    3,620,838    141,100 
LB-UBS Commercial Mortgage Trust 144A                     
Ser. 03-C5, Class XCL, IO, 0.992s, 2037  2,274,065    35,428  10,504,321    163,650    8,779,745    136,782 
Ser. 06-C7, Class XW, IO, 0.914s, 2038  1,782,775    80,114  9,528,108    428,174    10,244,214    460,354 
Ser. 05-C3, Class XCL, IO, 0.193s, 2040  3,215,718    66,010  14,408,237    295,763    11,878,487    243,834 
Ser. 05-C2, Class XCL, IO, 0.154s, 2040  14,868,360    160,267  29,703,015    320,170    39,392,682    424,616 
Ser. 05-C5, Class XCL, IO, 0.143s, 2020  5,002,010    68,196  13,937,851    190,024    15,019,903    204,776 
Ser. 05-C7, Class XCL, IO, 0.094s, 2040  12,457,374    106,795  32,352,076    277,348    32,438,900    278,092 
Ser. 06-C1, Class XCL, IO, 0.08s, 2041  10,556,988    111,288  —    —    30,739,232    324,041 
Ser. 07-C2, Class XCL, IO, 0.075s, 2040  10,149,744    162,448  39,525,320    632,607    31,113,019    497,968 
Ser. 06-C7, Class XCL, IO, 0.071s, 2038  3,357,809    58,020  16,465,449    284,506    15,422,750    266,490 
Lehman Brothers Floating Rate                     
Commercial Mortgage Trust 144A                     
FRB Ser. 04-LLFA, Class H, 6.703s, 2017  175,000    175,191  184,000    184,201    214,000    214,234 
FRB Ser. 05-LLFA, 6.553s, 2018  23,000    22,943  93,000    92,768    89,000    88,778 
Lehman Mortgage Trust                     
IFB Ser. 06-7, Class 1A9, 10.133s, 2036  —    —  167,742    188,805    167,742    188,805 
FB Ser. 07-5, Class 4A3, 9.293s, 2036  180,015    197,166  781,003    855,415    666,618    730,132 
IFB Ser. 06-7, Class 4A2, IO, 2.619s, 2036  —    —  919,961    60,171    990,271    64,770 
IFB Ser. 07-5, Class 8A2, IO, 2.589s, 2036  —    —  1,381,064    86,178    1,173,998    73,258 
IFB Ser. 07-4, Class 3A2, IO, 2.069s, 2037  302,756    18,118  1,224,564    73,283    1,052,390    62,979 
IFB Ser. 06-5, Class 2A2, IO, 2.019s, 2036  638,129    34,767  1,764,837    96,153    1,985,761    108,189 
Ser. 07-1, Class 3A2, IO, 2.119s, 2037  —    —  1,256,787    94,325    1,143,393    85,814 
IFB Ser. 07-2, Class 2A13, IO, 1.559s, 2037  —    —  1,914,709    118,702    1,642,287    101,813 
IFB Ser. 07-4, Class 2A2, IO, 1.539s, 2037  1,156,679    66,776  4,741,894    273,753    4,054,777    234,085 
IFB Ser. 07-1, Class 2A3, IO, 1.499s, 2037  1,379,504    88,556  3,354,681    215,350    1,999,760    128,373 
IFB Ser. 06-9, Class 2A2, IO, 1.489s, 2037  1,363,306    83,485  1,824,980    111,757    1,674,865    102,564 
Ser. 06-9, Class 2A3, IO, 1.489s, 2036  —    —  2,606,387    159,710    2,401,412    147,150 
IFB Ser. 06-8, Class 2A2, IO, 1.449s, 2036  —    —  546,323    24,753    1,274,753    57,758 
IFB Ser. 06-7, Class 2A4, IO, 1.419s, 2036  —    —  2,993,838    132,754    3,218,242    142,705 
IFB Ser. 06-7, Class 2A5, IO, 1.419s, 2036  —    —  2,714,075    154,099    2,917,468    165,647 
IFB Ser. 06-6, Class 1A2, IO, 1.369s, 2036  —    —  1,070,708    47,740    1,184,267    52,803 
IFB Ser. 06-6, Class 1A3, IO, 1.369s, 2036  —    —  1,481,871    75,371    1,634,498    83,134 
IFB Ser. 06-6, Class 5A2, IO, 1.369s, 2036  678,360    19,668  1,491,713    43,251    1,267,176    36,741 
IFB Ser. 07-5, Class 10A2, IO, 1.209s, 2037  575,005    22,865  2,358,592    93,791    2,016,909    80,204 
IFB Ser. 06-5, Class 1A3, IO, 0.269s, 2036  173,265    1,519  500,722    4,390    534,934    4,690 
IFB Ser. 06-7, Class 1A3, IO, 0.219s, 2036  —    —  1,277,086    13,073    1,370,947    14,033 
IFB Ser. 06-9, Class 1A6, IO, 0.019s, 2037  —    —  1,563,032    12,388    1,432,319    11,352 
MASTR Adjustable Rate Mortgages Trust                     
Ser. 04-7, Class 2A1, 7.286s, 2034  19,839    19,632  48,852    48,343    48,976    48,465 
Ser. 04-13, Class 3A6, 3.786s, 2034  266,000    258,339  771,000    748,795    838,000    813,866 
Ser. 04-03, Class 4AX, IO, 1.417s, 2034 (F)  150,109    2,299  512,352    7,847    492,383    7,541 
Ser. 05-2, Class 7AX, IO, 0.168s, 2035 (F)  383,928    1,141  1,307,933    3,886    1,259,491    3,742 
Merrill Lynch Capital Funding Corp.                     
Ser. 06-4, Class XC, IO, 0.062s, 2049  16,176,341    233,799  47,342,125    684,242    40,489,266    585,196 
Merrill Lynch Floating Trust 144A                     
FRB Ser. 06-1, Class TM, 6.253s, 2022  554,812    557,861  491,834    494,536    579,804    582,990 
Ser. 06-1, Class X1TM, IO, 6.166s, 2022  5,468,000    612  4,841,000    542    5,713,000    640 
Ser. 06-1, Class X1A, IO, 1.474s, 2022  11,291,251    170,453  10,075,833    152,105    11,925,664    180,030 
Merrill Lynch Mortgage Investors, Inc.                     
Ser. 98-C3, Class E, 7.108s, 2030  —    —  137,000    147,785    127,000    136,997 
FRB Ser. 05-A9, Class 3A1, 5.279s, 2035  448,184    443,422  1,301,640    1,287,810    1,415,275    1,400,238 
Ser. 96-C2, Class JS, IO, 2.264s, 2028  294,986    23,507  173,976    13,864    66,380    5,290 

77

COLLATERALIZED MORTGAGE OBLIGATIONS*  Growth 3.1%  Balanced 12.2%    Conservative 22.9% 
  Principal    Principal        Principal     
  amount  Value  amount    Value    amount    Value 
Merrill Lynch Mortgage Trust                   
FRB Ser. 07-C1, Class A4, 6.022s, 2050  $ 191,000  $  194,505  $ 645,000  $  656,837  $  552,000  $  562,130 
FRB Ser. 07-C1, Class AM, 6.022s, 2050  191,000  192,100  884,000    889,092    702,000    706,044 
Ser. 05-MCP1, Class XC, IO, 0.091s, 2043  4,474,876  58,034  15,146,408    196,430    14,568,910    188,941 
Merrill Lynch Mortgage Trust 144A                   
Ser. 05-LC1, Class X, IO, 0.236s, 2044  2,449,984  20,480  7,386,883    61,750    8,129,361    67,956 
Ser. 04-KEY2, Class XC, IO, 0.247s, 2039  2,891,921  61,114  7,891,594    166,772    9,339,953    197,379 
Merrill Lynch/Countrywide Commercial                   
Mortgage Trust FRB Ser. 07-8,                   
Class A2, 6.119s, 2049  382,000  389,329  1,724,000    1,757,076    1,346,000    1,371,824 
Merrill Lynch/Countrywide Commercial                   
Mortgage Trust 144A                   
Ser. 06-1, Class X, IO, 0.134s, 2039  4,526,739  21,926  20,040,052    97,069    21,680,017    105,013 
Ser. 06-3, Class XC, IO, 0.055s, 2046  4,399,041  70,825  20,351,166    327,654    17,014,272    273,930 
Ser. 07-7, Class X, IO, 0.02s, 2050  11,860,000  45,865  77,750,000    300,674    61,453,000    237,650 
Mezz Cap Commercial Mortgage Trust 144A                   
Ser. 04-C2, Class X, IO, 6.004s, 2040  207,611  60,272  528,464    153,420    517,537    150,247 
Ser. 05-C3, Class X, IO, 5.555s, 2044  408,011  114,881  645,525    181,756    646,511    182,033 
Ser. 06-C4, Class X, IO, 5.476s, 2016  1,015,000  336,780  2,542,000    843,442    2,615,000    867,664 
Morgan Stanley Capital 144A                   
Ser. 05-RR6, Class X, IO, 1.709s, 2043  983,896  39,702  2,854,281    115,175    4,592,825    185,328 
Morgan Stanley Capital I                   
Ser. 98-CF1, Class D, 7.35s, 2032  67,000  68,629  —    —    —    — 
FRB Ser. 06-IQ11, Class A4, 5.944s, 2042  477,000  481,894  1,612,000    1,628,541    1,381,000    1,395,170 
FRB Ser. 07-IQ14, Class AM, 5.877s, 2049  230,000  228,692  1,062,000    1,055,961    825,000    820,309 
Ser. 07-HQ11, Class A4, 5.447s, 2044  1,452,000  1,440,373  5,543,000    5,498,613    1,850,000    1,835,186 
Ser. 05-HQ6, Class A4A, 4.989s, 2042  278,000  273,313  827,000    813,057    915,000    899,573 
Ser. 04-HQ4, Class A7, 4.97s, 2040  144,000  140,390  427,000    416,295    473,000    461,142 
Morgan Stanley Capital I 144A                   
Ser. 98-HF1, Class F, 7.18s, 2030  14,000  14,050  124,000    124,439    115,000    115,408 
Ser. 04-RR, Class F5, 6s, 2039  —  —  395,000    327,495    340,000    281,895 
Ser. 04-RR, Class F6, 6s, 2039  —  —  395,000    305,103    350,000    270,345 
Ser. 05-HQ5, Class X1, IO, 0.095s, 2042  3,252,781  24,523  8,918,450    67,237    7,020,273    52,926 
Ser. 05-HQ6, Class X1, IO, 0.1s, 2042  8,212,191  82,964  18,116,664    183,025    17,996,491    181,811 
Morgan Stanley Mortgage Loan Trust                   
Ser. 05-5AR, Class 2A1, 5.353s, 2035  365,351  363,232  644,307    640,571    1,082,519    1,076,242 
Mortgage Capital Funding, Inc.                   
FRB Ser. 98-MC2, Class E, 7.236s, 2030  53,000  53,787  215,000    218,193    206,000    209,060 
Ser. 97-MC2, Class X, IO, 1.328s, 2012  76,982  114  21,328    32    —    — 
Permanent Financing PLC FRB Ser. 8,                   
Class 2C, 6.124s, 2042 (United Kingdom)  165,000  163,918  —    —    —    — 
PNC Mortgage Acceptance Corp. 144A                   
Ser. 99-CM1, Class B3, 7.1s, 2032  —  —  813,000    833,488    757,000    776,076 
Ser. 00-C1, Class J, 6 5/8s, 2010  —  —  118,000    102,609    189,000    164,349 
Ser. 00-C2, Class J, 6.22s, 2033  —  —  276,000    278,067    291,000    293,180 
Residential Asset Securitization Trust IFB                   
Ser. 06-A7CB, Class 1A6, IO, 0.419s, 2036  100,338  1,521  281,717    4,270    292,329    4,431 
Residential Funding Mortgage Securities I                   
ISer. 04-S5, Class 2A1, 4 1/2s, 2019  331,666  316,770  1,172,604    1,119,939    1,302,445    1,243,949 
Salomon Brothers Mortgage Securities VII 144A                   
Ser. 02-KEY2, Class X1, IO, 0.841s, 2036  2,697,432  128,514  10,011,268    476,968    8,769,829    417,822 
SBA CMBS Trust 144A Ser. 05-1A,                   
Class D, 6.219s, 2035  —  —  200,000    203,387    200,000    203,387 
STRIPS 144A                   
Ser. 03-1A, Class L, 5s, 2018 (Cayman Islands)  —  —  172,000    159,745    165,000    153,244 
Ser. 03-1A, Class M, 5s, 2018 (Cayman Islands)  —  —  116,000    104,015    112,000    100,428 
Ser. 04-1A, Class K, 5s, 2018 (Cayman Islands)  100,000  95,469  —    —    —    — 
Ser. 04-1A, Class L, 5s, 2018 (Cayman Islands)  —  —  76,000    69,665    74,000    67,831 

78

COLLATERALIZED MORTGAGE OBLIGATIONS*  Growth 3.1%    Balanced 12.2%    Conservative 22.9% 
    Principal        Principal        Principal     
    amount    Value    amount    Value    amount    Value 
Structured Adjustable Rate Mortgage Loan Trust                         
Ser. 04-8, Class 1A3, 7.209s, 2034  $  13,142  $  13,345  $  6,497  $  6,598  $  11,961  $  12,145 
FRB Ser. 05-18, Class 6A1, 5.242s, 2035    200,412    199,374    493,027    490,473    521,200    518,500 
Wachovia Bank Commercial Mortgage Trust                         
Ser. 04-C15, Class A4, 4.803s, 2041    215,000    206,857    637,000    612,873    705,000    678,298 
Ser. 06-C28, Class XC, IO, 0.564s, 2048    3,141,001    79,059    10,944,097    275,463    11,026,939    277,548 
Ser. 06-C29, Class IO, 0.528s, 2048    17,925,009    495,806    47,121,992    1,303,394    42,931,860    1,187,495 
Wachovia Bank Commercial Mortgage Trust 144A                       
FRB Ser. 05-WL5A, Class L, 9.053s, 2018    —    —    164,000    163,029    156,000    155,076 
Ser. 03-C3, Class IOI, IO, 0.504s, 2035    500,342    15,182    3,759,303    114,072    3,762,896    114,181 
Ser. 07-C31, IO, 0.435s, 2047    9,194,326    178,738    35,803,283    696,016    28,182,760    547,873 
Ser. 05-C18, Class XC, IO, 0.107s, 2042    12,754,198    130,220    21,763,333    222,204    25,129,868    256,576 
Ser. 06-C27, Class XC, IO, 0.074s, 2045    3,780,665    36,672    17,489,443    169,648    14,621,765    141,831 
Wachovia Bank Commercial Mortgage Trust 144A                       
Ser. 06-C23, Class XC, IO, 0.06s, 2045    4,880,781    29,480    32,170,231    194,308    35,313,128    213,291 
Ser. 06-C26, Class XC, IO, 0.053s, 2045    17,858,179    66,254    14,224,757    52,774    8,809,503    32,683 
WAMU Commercial Mortgage Securities                         
Trust 144A                         
Ser. 07-SL2, Class A1, 5.424s, 2049    1,873,009    1,838,549    —    —    —    — 
Ser. 07-SL2, Class X, IO, 1.077s, 2049    1,369,161    60,703    5,825,858    258,295    4,614,982    204,610 
Washington Mutual 144A Ser. 06-SL1,                         
Class X, IO, 0.938s, 2043    449,521    22,423    2,404,394    119,938    2,584,996    128,947 
Washington Mutual Asset                         
Securities Corp. 144A                         
Ser. 05-C1A, Class G, 5.72s, 2036    —    —    46,000    42,307    44,000    40,468 
Ser. 05-C1A, Class F, 5.3s, 2036    107,000    99,330    —    —    —    — 
Wells Fargo Mortgage Backed Securities Trust                         
Ser. 06-AR10, Class 3A1, 5.3s, 2036    276,642    273,340    639,736    632,100    642,502    634,833 
Ser. 05-AR16, Class 2A1, 4.944s, 2035    —    —    —    —    90,558    89,812 
Ser. 05-AR2, Class 2A1, 4.545s, 2035    123,112    120,756    309,809    303,879    324,691    318,476 
Ser. 04-R, Class 2A1, 4.362s, 2034    125,629    123,195    316,099    309,974    331,730    325,303 
Ser. 05-AR9, Class 1A2, 4.353s, 2035    379,605    371,277    —    —    138,410    135,373 
Ser. 05-AR12, Class 2A5, 4.318s, 2035    1,425,000    1,394,273    4,555,000    4,456,783    4,382,000    4,287,513 
Ser. 05-AR10, Class 2A18, IO, 0.61s, 2035    —    —    9,846,000    80,079    9,480,000    77,103 
 
Total collateralized mortgage                         
obligations (cost $83,123,972, $286,503,071                         
and $248,938,238)      $  83,678,855      $  290,122,264      $  251,978,541 
 
 
U.S. GOVERNMENT AND AGENCY                         
MORTGAGE OBLIGATIONS*    Growth 2.0%    Balanced 8.0%    Conservative 12.9% 
    Principal        Principal        Principal     
    amount    Value    amount    Value    amount    Value 
U.S. Government Guaranteed Mortgage Obligations      0.5%        3.1%        2.8% 
Government National Mortgage                         
Association Pass-Through Certificates                         
6 1/2s, with due dates from                         
February 20, 2026 to August 20, 2037  $  12,537,614  $  12,816,534  $  72,115,420  $  73,719,543  $  30,124,234  $  30,794,072 
6 1/2s, TBA, October 1, 2037    1,300,000    1,328,031    —    —    —    — 
     
 		    
 		    
 
        14,144,565        73,719,543        30,794,072 

79

U.S. GOVERNMENT AND AGENCY               
MORTGAGE OBLIGATIONS*  Growth 2.0%  Balanced 8.0%    Conservative 12.9% 
  Principal    Principal      Principal   
  amount  Value  amount  Value    amount  Value 
U.S. Government Agency Mortgage Obligations    1.5%    4.9%      10.1% 
Federal Home Loan Mortgage Corporation               
Pass-Through Certificates               
6s, with due dates from July 1, 2013               
to October 1, 2021  $ 466,122  $ 472,918  $ 48,928   $ 49,572  $  58,128  $ 58,893 
5 1/2s, with due dates from June 1, 2035 to               
November 1, 2036  75,462  73,938  357,696  351,422    357,696  351,422 
5 1/2s, with due dates from August 1, 2012               
to April 1, 2020  614,742  614,442  301,450  303,504    355,929  358,636 
Federal National Mortgage Association               
Pass-Through Certificates               
7s, with due dates from October 1, 2029               
to January 1, 2036  1,222,904  1,276,537  2,380,140  2,485,949    2,929,793  3,033,367 
7s, March 1, 2018  —  —  —  —    449,001  470,832 
6 1/2s, with due dates from               
July 1, 2034 to September 1, 2037  10,206,218  10,395,286  26,816,296  27,312,814    19,703,002  20,069,380 
6 1/2s, TBA, October 1, 2037  3,600,000  3,665,250  12,000,000  12,217,500    13,500,000  13,744,688 
6s, with due dates from               
September 1, 2035 to August 1, 2037  —  —  943,889  945,875    925,103  926,800 
Federal National Mortgage Association               
Pass-Through Certificates               
6s, with due dates from October 1, 2008               
to September 1, 2021  2,572,834  2,608,788  4,560,901  4,611,632    2,383,556  2,409,235 
6s, TBA, October 1, 2037  1,900,000  1,902,969  —  —    —  — 
5 1/2s, with due dates from               
August 1, 2022 to August 1, 2037  1,149,723  1,137,940  37,844,634  37,171,566    17,175,044  17,056,388 
5 1/2s, with due dates from               
February 1, 2014 to July 1, 2022  7,851,295  7,840,066  438,864  437,938    20,423,588  20,395,943 
5s, with due dates from May 1, 2034               
to July 1, 2037  2,325,258  2,221,050  11,376,014  10,871,135    7,402,563  7,073,496 
5s, May 1, 2021  —  —  232,138  227,786    —  — 
5s, TBA, October 1, 2037  5,600,000  5,344,500  14,600,000  13,933,875    12,600,000  12,025,125 
4 1/2s, with due dates from               
November 1, 2020 to November 1, 2035  2,640,714  2,515,936  2,511,695  2,388,791    11,423,030  10,986,038 
4 1/2s, with due dates from               
April 1, 2020 to October 1, 2020  1,094,719  1,058,920  3,886,856  3,759,469    2,250,232  2,176,485 
    41,128,540    117,068,828      111,136,728 
 
Total U.S. government and agency mortgage               
obligations (cost $55,163,448, $190,755,178               
and $141,520,751)  $  55,273,105  $  190,788,371    $  141,930,800 
 
 
U.S. TREASURY OBLIGATIONS*  Growth 0.1%  Balanced 0.1%    Conservative —% 
  Principal    Principal      Principal   
  amount  Value  amount  Value    amount  Value 
U.S. Treasury Notes               
4 1/4s, August 15, 2014  $ 200,000  $ 198,500  $ 3,400,000  $ 3,374,500  $  —  $ — 
4 1/4s, November 15, 2013  20,000  19,942  100,000  99,711    —  — 
3 1/2s, November 15, 2009  1,700,000  1,683,266  —  —    —  — 
 
Total U.S. treasury obligations               
(cost $1,904,462, $3,517,006 and $—)    $  1,901,708    $  3,474,211      $  — 

80

ASSET-BACKED SECURITIES*    Growth 1.0%  Balanced 3.9%    Conservative 7.5% 
    Principal      Principal        Principal     
    amount    Value  amount    Value    amount    Value 
Accredited Mortgage Loan Trust FRB                       
Ser. 05-4, Class A2C, 5.341s, 2035  $  —  $  —  $ 143,000  $  140,439  $  112,000  $  109,994 
Ace Securities Corp. FRB Ser. 06-HE3,                       
Class A2C, 5.281s, 2036    119,000    113,838  549,000    525,185    436,000    417,087 
Adjustable Rate Mortgage Trust FRB                       
Ser. 04-5, Class 3A1, 4.964s, 2035    683,482    667,353  1,879,575    1,835,221    1,339,600    1,307,989 
Advanta Business Card Master Trust FRB                       
Ser. 04-C1, Class C, 6.546s, 2013    159,000    154,581  —    —    212,000    206,109 
Aegis Asset Backed Securities Trust 144A                       
Ser. 04-5N, Class Note, 5s, 2034    9,445    8,961  14,628    13,878    14,210    13,482 
Ser. 04-6N, Class Note, 4 3/4s, 2035    9,064    8,600  12,811    12,154    12,690    12,040 
AFC Home Equity Loan Trust Ser. 99-2,                       
Class 1A, 5.915s, 2029    350,644    351,541  652,545    654,215    464,209    465,397 
American Express Credit Account Master                       
Trust 144A Ser. 04-C, Class C, 6.253s, 2012    75,095    74,689  458,341    455,858    367,708    365,717 
Ameriquest Mortgage Securities, Inc.                       
FRB Ser. 06-R1, Class M10, 7.631s, 2036    —    —  142,000    42,600    261,000    78,300 
FRB Ser. 04-R10, Class A5, 5.521s, 2034    451    450  —    —    —    — 
FRB Ser. 04-R11, Class A2, 5.501s, 2034 (F)    9,862    9,639  —    —    —    — 
AMP CMBS 144A FRB Ser. 06-1A, Class A,                       
6.444s, 2047 (Cayman Islands) (F)    —    —  —    —    440,000    312,374 
Arcap REIT, Inc. 144A                       
Ser. 03-1A, Class E, 7.11s, 2038    —    —  286,000    291,996    223,000    227,675 
Ser. 04-1A, Class E, 6.42s, 2039    —    —  240,272    235,256    227,202    222,458 
Argent Securities, Inc. FRB Ser. 06-W4,                       
Class A2C, 5.291s, 2036    211,000    204,670  975,000    945,750    775,000    751,750 
Asset Backed Funding Certificates FRB                       
Ser. 05-WMC1, Class M1, 5.571s, 2035    29,000    27,260  583,000    548,020    404,000    379,760 
Asset Backed Funding Certificates 144A                       
FRB Ser. 06-OPT3, Class B, 7.631s, 2036    —    —  89,000    19,630    58,000    12,793 
Asset Backed Funding Corp. NIM Trust 144A FRB                       
Ser. 05-OPT1, Class B1, 7.631s, 2035    50,000    18,471  —    —    117,000    43,223 
Asset Backed Securities Corp. Home                       
Equity Loan Trust                       
FRB Ser. 04-HE7, Class A2, 5.511s, 2034    3,337    3,294  —    —    —    — 
FRB Ser. 04-HE6, Class A2, 5.491s, 2034    77,763    76,840  275,390    272,120    264,196    261,059 
FRB Ser. 06-HE2, Class A3, 5.321s, 2036    58,000    56,435  270,000    262,714    215,000    209,198 
FRB Ser. 06-HE4, Class A5, 5.291s, 2036    157,000    150,709  720,000    691,150    578,000    554,840 
FRB Ser. 06-HE7, Class A4, 5.271s, 2036    —    —  324,000    309,835    252,000    240,983 
Banc of America Mortgage Securities FRB                       
Ser. 03-F, Class 2A1, 3.734s, 2033    111,563    110,256  306,519    302,927    218,878    216,313 
Bank One Issuance Trust FRB Ser. 03-C4,                       
Class C4, 6.783s, 2011    110,000    109,828  280,000    279,563    250,000    249,609 
Bay View Auto Trust                       
Ser. 05-LJ2, Class D, 5.27s, 2014    62,000    60,508  139,000    135,656    134,000    130,776 
Ser. 05-LJ2, Class C, 4.92s, 2014    100,000    98,910  46,000    45,499    45,000    44,510 
Bayview Commercial Asset Trust 144A                       
Ser. 06-4A, Class IO, IO, 1.14s, 2036    374,669    46,184  1,089,063    134,246    1,289,015    158,893 
Bayview Financial Acquisition Trust                       
Ser. 04-B, Class A1, 6.005s, 2039    —    —  861,452    861,449    1,131,240    1,131,236 
FRB Ser. 04-D, Class A, 5.519s, 2044    95,439    83,986  311,956    274,522    304,549    268,003 
Ser. 05-B, Class A, IO, 4.466s, 2039    946,881    95  909,229    91    2,369,173    237 
Bayview Financial Asset Trust 144A                       
FRB Ser. 03-SSRA, Class M, 6.481s, 2038    50,647    50,282  150,763    149,678    117,784    116,936 
FRB Ser. 03-SSRA, Class A, 5.831s, 2038    50,647    50,647  150,763    150,763    117,784    117,784 
FRB Ser. 04-SSRA, Class A1, 5.731s, 2039    121,910    121,606  174,107    173,672    168,712    168,290 
Bear Stearns Asset Backed Securities Trust IFB                       
Ser. 07-AC5, Class A6, IO, 1.419s, 2037    808,179    32,327  5,072,388    202,896    4,153,036    166,121 

81

ASSET-BACKED SECURITIES*    Growth 1.0%    Balanced 3.9%    Conservative 7.5% 
    Principal        Principal        Principal     
    amount    Value    amount    Value    amount    Value 
Bear Stearns Asset Backed Securities, Inc.                         
FRB Ser. 06-EC1, Class M9, 7.131s, 2035  $  —  $  —  $  146,000  $  28,470  $  161,000  $  31,395 
FRB Ser. 06-PC1, Class M9, 6.881s, 2035    —    —    —    —    100,000    24,000 
FRB Ser. 03-3, Class A2, 5.721s, 2043    125,204    123,169    434,763    427,698    343,078    337,503 
FRB Ser. 03-1, Class A1, 5.631s, 2042    128,208    126,124    365,779    359,835    260,232    256,004 
FRB Ser. 05-3, Class A1, 5.581s, 2035    128,548    126,459    —    —    —    — 
FRB Ser. 03-ABF1, Class A, 5.501s, 2034    28,062    27,606    —    —    —    — 
FRB Ser. 06-2, Class A1, 5.261s, 2036    266,930    262,092    —    —    —    — 
Bear Stearns Asset Backed                         
Securities, Inc. 144A FRB Ser. 06-HE2,                         
Class M10, 7.381s, 2036    —    —    108,000    25,920    —    — 
Bombardier Capital Mortgage Securitization Corp.                         
Ser. 99-B, Class A2, 6.975s, 2012    —    —    51,727    33,105    66,700    42,688 
Ser. 01-A, Class A, 6.805s, 2030    134,130    137,235    205,532    210,291    196,523    201,073 
CARMAX Auto Owner Trust Ser. 04-2,                         
Class D, 3.67s, 2011    6,777    6,695    26,717    26,396    24,781    24,483 
Chase Credit Card Master Trust FRB                         
Ser. 03-3, Class C, 6.833s, 2010    170,000    170,104    470,000    470,288    420,000    420,257 
Chase Funding Loan Acquisition Trust                         
FRB Ser. 04-AQ1, Class A2, 5.531s, 2034    81,326    78,483    —    —    —    — 
Chase Funding Net Interest Margin 144A                         
Ser. 04-OPT1, Class Note, 4.458s, 2034    13,691    12,596    26,191    24,096    32,824    30,198 
Citibank Credit Card Issuance Trust FRB                         
Ser. 01-C1, Class C1, 6.44s, 2010    110,000    109,948    240,000    239,888    210,000    209,902 
Citigroup Mortgage Loan Trust, Inc.                         
FRB Ser. 05-HE4, Class M11, 7.631s, 2035    41,000    12,300    —    —    —    — 
FRB Ser. 05-HE4, Class M12, 7.181s, 2035    49,000    9,800    —    —    —    — 
Ser. 03-HE3, Class A, 5.885s, 2033    740,080    724,279    —    —    —    — 
FRB Ser. 05-OPT1, Class M1, 5.551s, 2035    49,000    46,526    222,000    210,791    174,000    165,215 
IFB Ser. 07-6, Class 2A5, IO, 1.519s, 2037    692,367    27,348    1,748,831    69,079    1,486,410    58,713 
Citigroup Mortgage Loan Trust, Inc.                         
144A FRB Ser. 03-HE4, Class A, 5.541s, 2033    278,957    271,336    —    —    —    — 
Conseco Finance Securitizations Corp.                         
Ser. 02-2, Class A, IO, 8 1/2s, 2033    123,976    21,615    467,494    81,506    294,444    51,335 
Ser. 00-4, Class A6, 8.31s, 2032    160,549    132,804    2,682,750    2,219,136    2,633,198    2,178,147 
Ser. 00-5, Class A6, 7.96s, 2032    554,000    509,441    2,190,000    2,013,854    2,006,000    1,844,653 
Ser. 02-1, Class M1F, 7.954s, 2033    —    —    510,000    502,017    676,000    665,419 
FRB Ser. 02-1, Class M1A, 7.715s, 2033    725,000    689,595    1,996,000    1,898,525    1,264,000    1,202,273 
Ser. 02-2, Class M1, 7.424s, 2033    83,000    85,632    216,000    222,850    154,000    158,884 
Ser. 01-4, Class A4, 7.36s, 2033    444,396    464,288    1,113,181    1,163,008    1,089,515    1,138,283 
Ser. 00-6, Class A5, 7.27s, 2031    190,357    191,432    495,095    497,890    352,328    354,317 
Ser. 01-1, Class A5, 6.99s, 2032    635,479    595,283    3,228,894    3,024,657    2,816,890    2,638,714 
Ser. 01-3, Class A4, 6.91s, 2033    —    —    368,240    367,152    362,618    361,546 
Ser. 02-1, Class A, 6.681s, 2033    204,270    208,527    637,667    650,956    519,861    530,695 
Countryplace Manufactured Housing                         
Contract Ser. 05-1, Class A1, 4.23s, 2035    26,550    26,491    —    —    —    — 
Countrywide Alternative Loan Trust                         
Ser. 07-25, Class 1A3, 6 1/2s, 2037    1,681,000    1,663,139    10,051,000    9,944,208    8,538,000    8,447,284 
Ser. 05-24, Class IIAX, IO, 1.691s, 2035    786,728    20,841    2,185,540    57,897    2,090,243    55,373 
Ser. 05-24, Class 1AX, IO, 1.222s, 2035    1,888,053    37,130    2,744,694    53,977    2,629,999    51,722 
Countrywide Asset Backed Certificates                         
FRB Ser. 04-6, Class 2A5, 5.521s, 2034    39,523    38,511    353,684    344,622    296,353    288,761 
FRB Ser. 04-5, Class 4A3, 5.451s, 2034    42,924    41,454    151,196    146,016    145,558    140,571 
FRB Ser. 05-14, Class 3A2, 5.371s, 2036    36,000    35,124    163,000    159,034    128,000    124,886 
Countrywide Asset Backed NIM                         
Certificates 144A                         
Ser. 04-BC1N, Class Note, 5 1/2s, 2035    —    —    225    90    214    85 
Ser. 04-14, Class N, 5s, 2036    2,079    1,954    8,190    7,699    8,107    7,620 

82

ASSET-BACKED SECURITIES*  Growth 1.0%    Balanced 3.9%    Conservative 7.5% 
  Principal      Principal        Principal     
  amount  Value    amount    Value    amount    Value 
Countrywide Home Loans                     
Ser. 06-0A5, Class X, IO, 2.366s, 2046  $ 765,595  $  25,839  $  2,266,381  $  76,490  $  2,497,930  $  84,305 
Ser. 05-9, Class 1X, IO, 1.839s, 2035  565,804  10,432    2,005,877    36,983    1,918,485    35,372 
Ser. 05-2, Class 2X, IO, zero %, 2035  847,454  18,008    2,356,848    50,083    2,251,122    47,836 
Countrywide Home Loans 144A                     
IFB Ser. 05-R2, Class 2A3, 8s, 2035  122,785  126,468    —    —    229,743    236,635 
IFB Ser. 05-R1, Class 1AS, IO, 0.621s, 2035  278,232  9,713    1,989,331    69,444    1,983,843    69,253 
IFB Ser. 05-R2, Class 1AS, IO, 0.241s, 2035  263,985  9,012    1,708,985    58,343    1,574,888    53,765 
Credit-Based Asset Servicing and                     
Securitization FRB Ser. 02-CB2,                     
Class A2, 5.681s, 2032  42,975  42,653    —    —    —    — 
Crest, Ltd. 144A Ser. 03-2A, Class D2,                     
6.723s, 2038 (Cayman Islands)  —  —    339,000    298,625    313,000    275,722 
CS First Boston Mortgage                     
Securities Corp. 144A Ser. 04-FR1N,                     
Class A, 5s, 2034  56,025  33,615    78,257    46,954    85,371    51,223 
DB Master Finance, LLC 144A Ser. 06-1,                     
Class M1, 8.285s, 2031  —  —    204,000    203,561    214,000    213,539 
FHLMC Structured Pass Through                     
Securities IFB Ser. T-56, Class 2ASI,                     
IO, 2.969s, 2043  170,844  14,895    767,280    66,897    609,955    53,180 
Fieldstone Mortgage Investment Corp.                     
FRB Ser. 05-1, Class M3, 5.671s, 2035  —  —    143,000    130,130    138,000    125,580 
Finance America NIM Trust 144A                     
Ser. 04-1, Class A, 5 1/4s, 2034  —  —    16,152    15    14,683    13 
First Franklin Mortgage Loan Asset                     
Backed Certificates                     
FRB Ser. 04-FF10, Class A2, 5.531s, 2032  20,367  20,049    —    —    —    — 
FRB Ser. 06-FF7, Class 2A3, 5.281s, 2036  163,000  155,207    744,000    708,428    583,000    555,125 
First Horizon Alternative Mortgage                     
Securities FRB Ser. 05-AA10,                     
Class 2A1, 5.761s, 2035  458,641  454,742    1,260,960    1,250,242    898,525    890,887 
Ford Credit Auto Owner Trust Ser. 04-A,                     
Class C, 4.19s, 2009  140,000  138,141    240,000    236,813    130,000    128,273 
Fremont Home Loan Trust                     
FRB Ser. 05-E, Class 2A4, 5.461s, 2036  231,000  219,450    1,045,000    992,750    816,000    775,200 
FRB Ser. 06-2, Class 2A3, 5.301s, 2036  392,000  380,240    1,688,000    1,637,360    1,342,000    1,301,740 
Fremont NIM Trust 144A                     
Ser. 04-3, Class B, 7 1/2s, 2034  —  —    42,218    338    40,939    328 
Ser. 04-3, Class A, 4 1/2s, 2034  446  6    1,473    21    1,141    17 
GE Corporate Aircraft Financing, LLC 144A                     
FRB Ser. 05-1A, Class C, 6.431s, 2019  —  —    269,000    269,000    271,000    271,000 
Ser. 04-1A, Class B, 6.355s, 2018  23,070  23,088    25,146    25,166    24,454    24,473 
Gears Auto Owner Trust 144A Ser. 05-AA,                     
Class E1, 8.22s, 2012  —  —    443,000    440,777    442,000    439,782 
GEBL 144A                     
Ser. 04-2, Class D, 8.503s, 2032  —  —    132,029    108,264    162,381    133,152 
Ser. 04-2, Class C, 6.603s, 2032  —  —    98,643    83,846    162,381    138,024 
Granite Mortgages PLC                     
FRB Ser. 03-2, Class 1C, 6.91s, 2043                     
(United Kingdom)  262,595  255,057    —    —    —    — 
FRB Ser. 03-3, Class 1C, 6.81s, 2044                     
(United Kingdom)  60,000  58,875    230,000    225,688    —    — 
FRB Ser. 02-2, Class 1C, 6.61s, 2043                     
(United Kingdom)  71,591  71,233    182,955    182,040    175,000    174,125 
Green Tree Financial Corp.                     
Ser. 96-8, Class A7, 8.05s, 2027  7,709  8,058    —    —    —    — 
Ser. 96-5, Class M1, 8.05s, 2027  —  —    238,206    227,585    322,794    308,401 
Ser. 99-5, Class A5, 7.86s, 2030  452,245  413,805    2,932,486    2,683,225    2,395,859    2,192,211 

83

ASSET-BACKED SECURITIES*  Growth 1.0%  Balanced 3.9%    Conservative 7.5% 
  Principal    Principal        Principal     
  amount  Value  amount    Value    amount    Value 
Green Tree Financial Corp.                   
Ser. 97-2, Class A7, 7.62s, 2028  $ 198,731  $ 207,169  $ —  $  —  $  —  $  — 
Ser. 97-6, Class A9, 7.55s, 2029  72,855  75,922  —    —    136,055    141,782 
Ser. 97-4, Class A7, 7.36s, 2029  13,519  14,044  52,847    54,899    113,887    118,308 
Ser. 95-8, Class M1, 7.3s, 2026  52,281  55,307  —    —    —    — 
Ser. 96-10, Class M1, 7.24s, 2028  —  —  449,000    424,305    625,000    590,625 
Ser. 97-6, Class M1, 7.21s, 2029  293,000  281,123  688,000    660,111    946,000    907,652 
Ser. 96-2, Class A4, 7.2s, 2027  260,473  264,380  —    —    —    — 
Ser. 97-6, Class A8, 7.07s, 2029  47,419  48,711  —    —    53,379    54,833 
Ser. 95-10, Class B1, 7.05s, 2027  18,441  18,021  —    —    —    — 
Ser. 99-4, Class A5, 6.97s, 2031  13,491  13,513  —    —    —    — 
Ser. 98-4, Class A7, 6.87s, 2030  57,986  56,537  147,196    143,517    104,574    101,960 
Ser. 97-7, Class A8, 6.86s, 2029  9,216  9,430  36,026    36,862    77,637    79,440 
Ser. 99-3, Class A7, 6.74s, 2031  108,000  109,215  147,000    148,654    151,000    152,699 
Green Tree Financial Corp.                   
Ser. 99-3, Class A6, 6 1/2s, 2031  —  —  194,059    194,059    188,279    188,279 
Ser. 99-2, Class A7, 6.44s, 2030  —  —  563,800    558,671    785,759    778,610 
Ser. 98-7, Class M1, 6.4s, 2030  118,000  89,832  218,000    165,961    136,000    103,535 
Ser. 99-1, Class A6, 6.37s, 2025  113,000  113,565  359,000    360,795    224,000    225,120 
Ser. 98-2, Class A5, 6.24s, 2016  12,820  11,729  —    —    —    — 
Greenpoint Manufactured Housing                   
Ser. 00-3, Class IA, 8.45s, 2031  143,542  139,180  699,811    678,542    730,310    708,113 
Ser. 99-5, Class M1A, 8.3s, 2026  —  —  198,000    183,070    157,000    145,162 
Ser. 99-5, Class A4, 7.59s, 2028  193,891  198,164  424,465    433,819    290,837    297,247 
Greenpoint Mortgage Funding Trust                   
Ser. 05-AR1, Class X1, IO, 1.36s, 2045  530,871  12,940  1,474,771    35,948    1,410,548    34,382 
GS Auto Loan Trust 144A Ser. 04-1,                   
Class D, 5s, 2011  —  —  257,594    257,378    252,014    251,803 
GSAMP Trust                   
FRB Ser. 05-HE3, Class A1B, 5.391s, 2035  14,712  14,418  —    —    —    — 
FRB Ser. 06-HE5, Class A2C, 5.281s, 2036  584,000  557,404  2,514,000    2,399,511    1,998,000    1,907,010 
GSAMP Trust 144A Ser. 05-NC1, Class N,                   
5s, 2035  133  113  351    298    337    287 
GSMPS Mortgage Loan Trust                   
Ser. 05-RP3, Class 1A4, 8 1/2s, 2035  38,499  40,186  —    —    75,927    79,255 
Ser. 05-RP3, Class 1A3, 8s, 2035  124,579  129,393  —    —    244,458    253,904 
Ser. 05-RP3, Class 1A2, 7 1/2s, 2035  102,076  104,823  —    —    200,069    205,453 
GSMPS Mortgage Loan Trust 144A                   
Ser. 05-RP2, Class 1A3, 8s, 2035  78,856  81,897  215,255    223,555    206,197    214,148 
Ser. 05-RP1, Class 1A2, 7 1/2s, 2035  103,449  106,795  —    —    —    — 
Ser. 05-RP2, Class 1A2, 7 1/2s, 2035  89,576  92,042  246,822    253,615    235,625    242,109 
IFB Ser. 04-4, Class 1AS, IO, 0.6s, 2034  2,985,497  129,868  1,845,489    80,278    8,977,332    390,511 
Guggenheim Structured Real Estate                   
Funding, Ltd. 144A                   
FRB Ser. 05-2A, Class D, 6.681s, 2030                   
(Cayman Islands)  —  —  250,000    223,500    250,000    223,500 
FRB Ser. 05-1A, Class D, 6.661s, 2030                   
(Cayman Islands)  —  —  105,140    95,874    100,844    91,957 
HASCO NIM Trust 144A Ser. 05-OP1A,                   
Class A, 6 1/4s, 2035 (Cayman Islands)  —  —  108,438    73,738    119,077    80,972 
High Income Trust Securities 144A FRB                   
Ser. 03-1A, Class A, 5.856s, 2036                   
(Cayman Islands)  —  —  491,923    442,730    447,660    402,894 
Home Equity Asset Trust                   
FRB Ser. 04-7, Class A3, 5.521s, 2035  309  298  —    —    —    — 
FRB Ser. 06-1, Class 2A4, 5.461s, 2036  117,000  107,668  527,000    484,966    415,000    381,900 
Hyundai Auto Receivables Trust                   
Ser. 04-A, Class D, 4.1s, 2011  62,417  61,806  59,761    59,176    55,777    55,231 

84

ASSET-BACKED SECURITIES*  Growth 1.0%  Balanced 3.9%    Conservative 7.5% 
  Principal    Principal        Principal     
  amount  Value  amount    Value    amount    Value 
Impac CMB Trust FRB Ser. 04-8,                   
Class 1A, 5.491s, 2034  $  12,133 $  11,966  $ —  $  —  $  —  $  — 
JPMorgan Mortgage Acquisition Corp. FRB                   
Ser. 06-FRE1, Class A4, 5.421s, 2035  100,000  96,190  443,000    426,122    347,000    333,779 
Lehman ABS Manufactured Housing                   
Contract Ser. 01-B, Class M1, 6.63s, 2028  185,000  178,091  171,000    164,614    176,000    169,427 
Lehman XS Trust                   
Ser. 07-6, Class 3A6, 6 1/2s, 2037  575,009  567,821  5,159,999    5,095,499    4,321,994    4,267,969 
FRB Ser. 07-6, Class 2A1, 5.341s, 2037 (F)  1,269,935  1,238,217  5,902,246    5,754,830    4,559,961    4,446,070 
IFB Ser. 07-3, Class 4B, IO, 1.559s, 2037  435,608  24,382  1,785,717    99,949    1,526,931    85,465 
LNR CDO, Ltd. 144A FRB Ser. 03-1A,                   
Class EFL, 8.136s, 2036 (Cayman Islands)  105,000  102,736  595,000    582,170    460,000    450,081 
Long Beach Mortgage Loan Trust                   
FRB Ser. 06-4, Class 2A4, 5.391s, 2036  111,000  102,342  503,000    463,766    394,000    363,268 
FRB Ser. 06-1, Class 2A3, 5.321s, 2036  166,000  161,020  770,000    746,900    612,000    593,640 
Marriott Vacation Club Owner Trust 144A                   
Ser. 05-2, Class D, 6.205s, 2027  —  —  28,052    27,088    30,130    29,095 
FRB Ser. 02-1A, Class A1, 6.196s, 2024  23,324  23,304  98,840    98,754    97,223    97,139 
Ser. 04-2A, Class D, 5.389s, 2026  —  —  20,214    19,911    19,825    19,529 
Ser. 04-1A, Class C, 5.265s, 2026  —  —  50,754    50,077    47,128    46,500 
MASTR Adjustable Rate Mortgages Trust                   
Ser. 06-OA1, Class X, IO, 2.094s, 2046  1,297,797  40,151  1,169,971    36,196    2,997,076    92,722 
MASTR Asset Backed Securities Trust                   
FRB Ser. 04-HE1, Class A1, 5.531s, 2034  4,209  4,118  —    —    —    — 
FRB Ser. 04-OPT2, Class A2, 5.481s, 2034 (F)  18,452  17,773  —    —    —    — 
FRB Ser. 06-FRE2, Class A4, 5.281s, 2036  58,000  55,934  262,000    252,666    206,000    198,661 
MASTR Asset Backed Securities NIM Trust                   
144A Ser. 04-HE1A, Class Note, 5.191s,                   
2034 (Cayman Islands)  450  270  1,585    951    1,539    924 
MASTR Reperforming Loan Trust 144A                   
Ser. 05-1, Class 1A4, 7 1/2s, 2034  107,087  111,986  298,312    311,962    284,653    297,678 
Ser. 05-2, Class 1A3, 7 1/2s, 2035  139,198  145,531  —    —    528,268    552,303 
MBNA Credit Card Master Note Trust FRB                   
Ser. 03-C5, Class C5, 6.933s, 2010  170,000  170,212  470,000    470,586    420,000    420,524 
Merit Securities Corp. 144A FRB                   
Ser. 11PA, Class 3A1, 5.749s, 2027  312,183  293,452  448,428    421,522    369,041    346,899 
Merrill Lynch Mortgage Investors, Inc.                   
FRB Ser. 02-HE1, Class A2, 6.131s, 2032  2,992  2,992  —    —    —    — 
FRB Ser. 04-HE2, Class A1A, 5.531s, 2035  4,844  4,812  —    —    —    — 
Ser. 04-WMC3, Class B3, 5s, 2035 (F)  23,412  19,190  69,482    56,952    64,195    52,619 
Merrill Lynch Mortgage Investors, Inc. 144A                   
Ser. 04-FM1N, Class N1, 5s, 2035                   
(Cayman Islands) (In default) †  1,529  1,506  2,399    2,363    2,214    2,181 
Ser. 04-HE2N, Class N1, 5s, 2035                   
(Cayman Islands) (In default) †  4,113  4,051  6,745    6,644    5,867    5,779 
Ser. 05-WM1N, Class N1, 5s, 2035  956  810  2,656    2,249    2,538    2,149 
Ser. 04-WM1N, Class N1, 4 1/2s,                   
2034 (In default) †  1,604  64  3,041    122    3,759    150 
Ser. 04-WM3N, Class N1, 4 1/2s,                   
2035 (In default) †  —  —  9,640    2,761    8,614    2,467 
Mid-State Trust Ser. 11, Class B,                   
8.221s, 2038  51,337  49,415  197,763    190,360    152,844    147,122 
Morgan Stanley ABS Capital I FRB                   
Ser. 04-HE8, Class A4, 5.511s, 2034  11,221  10,915  —    —    —    — 
Morgan Stanley Auto Loan Trust 144A                   
Ser. 04-HB2, Class E, 5s, 2012  —  —  13,041    13,000    12,187    12,149 
Navigator CDO, Ltd. 144A FRB Ser. 03-1A,                   
Class A1, 6.048s, 2015 (Cayman Islands)  72,230  72,157  125,505    125,380    118,846    118,727 

85

ASSET-BACKED SECURITIES*  Growth 1.0%    Balanced 3.9%    Conservative 7.5% 
  Principal      Principal        Principal     
  amount  Value    amount    Value    amount    Value 
Navistar Financial Corp. Owner Trust                     
Ser. 05-A, Class C, 4.84s, 2014  $ 42,517 $  41,084  $  99,917  $  96,548  $  96,197  $  92,953 
Ser. 04-B, Class C, 3.93s, 2012  10,028  9,624    38,745    37,183    42,847    41,120 
New Century Home Equity Loan Trust                     
Ser. 03-5, Class AI7, 5.15s, 2033  91,578  86,568    311,179    294,153    272,865    257,936 
Nomura Asset Acceptance Corp.                     
Ser. 04-R3, Class PT, 7.759s, 2035  77,853  78,289    101,998    102,569    100,682    101,246 
Nomura Asset Acceptance Corp. 144A                     
Ser. 04-R2, Class PT, 9.087s, 2034  —  —    93,734    95,965    87,533    89,616 
Novastar Home Equity Loan                     
FRB Ser. 04-4, Class A1B, 5.531s, 2035  1,459  1,458    —    —    —    — 
FRB Ser. 06-1, Class A2C, 5.291s, 2036  138,000  132,259    626,000    599,958    488,000    467,699 
FRB Ser. 06-2, Class A2C, 5.281s, 2036  138,000  130,849    626,000    593,559    488,000    462,711 
Oakwood Mortgage Investors, Inc.                     
Ser. 96-C, Class B1, 7.96s, 2027  551,482  378,382    743,780    510,322    462,533    317,353 
Ser. 00-A, Class A3, 7.945s, 2022  75,649  68,109    294,295    264,966    287,951    259,254 
Ser. 95-B, Class B1, 7.55s, 2021  —  —    185,000    120,250    267,000    173,550 
Ser. 01-E, Class A4, 6.81s, 2031  642,894  570,452    847,648    752,135    917,924    814,492 
Ser. 99-A, Class A3, 6.09s, 2029  221,966  208,705    —    —    —    — 
Ser. 01-E, Class A, IO, 6s, 2009  166,188  16,508    567,495    56,372    380,533    37,800 
Ser. 01-D, Class A3, 5.9s, 2022  23,466  18,773    73,658    58,927    52,799    42,239 
Ser. 02-C, Class A1, 5.41s, 2032  300,351  276,794    887,280    817,688    821,078    756,679 
Ser. 01-D, Class A2, 5.26s, 2019  54,273  39,313    —    —    331,765    240,318 
Ser. 02-A, Class A2, 5.01s, 2020  212,933  194,163    —    —    106,467    97,081 
Oakwood Mortgage Investors, Inc. 144A                     
Ser. 01-B, Class A4, 7.21s, 2030  —  —    91,371    81,552    120,932    107,936 
Ser. 01-B, Class A3, 6.535s, 2023  —  —    76,120    71,801    54,866    51,752 
Ocean Star PLC 144A                     
FRB Ser. 04, Class D, 7.8s, 2018 (Ireland)  23,000  20,700    133,000    119,700    123,000    110,700 
FRB Ser. 05-A, Class D, 7s, 2012 (Ireland)  27,000  26,055    149,000    143,785    150,000    144,750 
Option One Mortgage Loan Trust FRB                     
Ser. 05-4, Class M11, 7.631s, 2035  —  —    46,000    14,720    51,000    16,320 
Origen Manufactured Housing                     
Ser. 04-B, Class A3, 4 3/4s, 2021  56,000  54,924    —    —    —    — 
Ser. 04-B, Class A2, 3.79s, 2017  82,525  81,609    52,724    52,139    48,713    48,172 
Park Place Securities, Inc.                     
FRB Ser. 04-MCW1, Class A2, 5.511s, 2034  12,388  11,892    —    —    —    — 
FRB Ser. 04-WCW1, Class A2, 5.511s, 2034  6,326  5,959    22,405    21,106    21,497    20,250 
FRB Ser. 04-WHQ2, Class A3A, 5.481s, 2035  6,211  5,865    50,157    47,361    48,651    45,940 
Park Place Securities, Inc. 144A FRB                     
Ser. 04-MHQ1, Class M10, 7.631s, 2034  —  —    88,000    48,400    97,000    53,350 
People’s Choice Net Interest Margin                     
Note 144A Ser. 04-2, Class B, 5s, 2034  —  —    4,456    4,233    4,456    4,233 
Permanent Financing PLC                     
FRB Ser. 3, Class 3C, 6.874s, 2042                     
(United Kingdom)  110,000  107,921    280,000    274,708    270,000    264,897 
FRB Ser. 4, Class 3C, 6.524s, 2042                     
(United Kingdom)  177,000  174,241    500,000    492,205    503,000    495,158 
Pillar Funding PLC 144A                     
FRB Ser. 04-1A, Class C1, 6.694s, 2011                     
(United Kingdom)  134,000  128,809    474,000    455,637    422,000    405,651 
FRB Ser. 04-2A, Class C, 6.574s, 2011                     
(United Kingdom)  —  —    183,000    174,530    169,000    161,178 
Popular ABS Mortgage Pass-Through Trust                     
FRB Ser. 04-4, Class AV1, 5.471s, 2034  3,639  3,549    —    —    —    — 
Providian Gateway Master Trust 144A FRB                     
Ser. 04-EA, Class D, 6.683s, 2011  217,000  217,020    125,000    125,011    116,000    116,011 
Renaissance Home Equity Loan Trust FRB                     
Ser. 04-3, Class AV1, 5.551s, 2034  176,838  173,402    —    —    —    — 

86

ASSET-BACKED SECURITIES*  Growth 1.0%    Balanced 3.9%    Conservative 7.5% 
  Principal      Principal        Principal     
  amount  Value    amount    Value    amount    Value 
Residential Asset Mortgage Products, Inc.                     
Ser. 02-SL1, Class AI3, 7s, 2032  $  105,465   $ 105,760  $  343,837  $  344,799  $  216,310  $  216,916 
FRB Ser. 06-NC3, Class A2, 5.321s, 2036  200,000  194,650    927,000    902,202    737,000    717,285 
FRB Ser. 06-RZ2, Class A2, 5.301s, 2036  289,000  286,110    —    —    —    — 
FRB Ser. 07-RZ1, Class A2, 5.291s, 2037  207,000  195,552    840,000    793,543    667,000    630,111 
Residential Asset Securities Corp. FRB                     
Ser. 06-EMX3, Class A2, 5.311s, 2036  1,216,000  1,188,640    —    —    —    — 
Residential Asset Securities Corp. 144A                     
FRB Ser. 05-KS10, Class B, 7.881s, 2035  43,000  9,030    229,000    48,090    251,000    52,710 
Ser. 04-NT12, Class Note, 4.7s, 2035  —  —    1,089    1,051    1,150    1,110 
Ser. 04-NT, Class Note, 4 1/2s, 2034  22,980  1,149    33,397    1,670    36,001    1,800 
Residential Asset Securitization Trust                     
IFB Ser. 07-A3, Class 2A2, IO, 1.559s, 2037  1,027,359  62,325    4,502,932    273,171    3,862,287    234,307 
Saco I Trust FRB Ser. 05-10, Class 1A1,                     
5.391s, 2033  122,712  110,441    292,735    263,461    322,304    290,073 
SAIL Net Interest Margin Notes 144A                     
Ser. 03-3, Class A, 7 3/4s, 2033                     
(Cayman Islands) (In default) †  2,566  8    3,381    10    7,825    23 
Ser. 03-BC2A, Class A, 7 3/4s, 2033                     
(Cayman Islands) (In default) †  18,358  551    4,166    125    —    — 
Ser. 04-4A, Class B, 7 1/2s, 2034                     
(Cayman Islands) (In default) †  —  —    49,135    5    —    — 
Ser. 03-5, Class A, 7.35s, 2033                     
(Cayman Islands) (In default) †  10,843  216    1,785    36    1,024    20 
Ser. 03-6A, Class A, 7s, 2033                     
(Cayman Islands) (In default) †  —  —    3,582    61    2,792    47 
Ser. 03-8A, Class A, 7s, 2033                     
(Cayman Islands) (In default) †  —  —    13,439    54    10,582    42 
Ser. 03-9A, Class A, 7s, 2033                     
(Cayman Islands) (In default) †  —  —    17,378    17    11,202    11 
Saxon Asset Securities Trust FRB                     
Ser. 04-3, Class A, 5.471s, 2034  26,837  26,057    —    —    —    — 
Securitized Asset Backed                     
Receivables, LLC FRB Ser. 07-NC2,                     
Class A2B, 5.271s, 2037  171,000  165,870    789,000    765,330    628,000    609,160 
Sequoia Mortgage Funding Co. 144A                     
Ser. 04-A, Class AX1, IO, 0.8s, 2008  742,133  1,825    —    —    —    — 
SG Mortgage Securities Trust FRB                     
Ser. 06-OPT2, Class A3D, PO, 5.341s, 2036  234,000  219,235    1,061,000    994,051    832,000    779,501 
Sharps SP I, LLC Net Interest Margin Trust 144A                     
Ser. 04-HE1N, Class Note, 4.94s, 2034                     
(Cayman Islands) (In default) †  30,811  1    31,792    1    31,792    1 
Soundview Home Equity Loan Trust                     
FRB Ser. 06-OPT3, Class 2A3, 5.301s, 2036  111,000  107,809    502,000    487,568    394,000    382,673 
FRB Ser. 06-3, Class A3, 5.291s, 2036  587,000  566,959    2,527,000    2,440,728    2,009,000    1,940,413 
Soundview Home Equity Loan Trust 144A                     
FRB Ser. 05-CTX1, Class B1, 7.631s, 2035  58,000  20,300    —    —    134,000    46,900 
Structured Adjustable Rate Mortgage Loan Trust                     
FRB Ser. 07-8, Class 1A2, 6 1/4s, 2037  899,621  897,102    4,464,677    4,452,176    3,677,140    3,666,844 
Ser. 05-9, Class AX, IO, 1.111s, 2035  1,838,327  28,724    5,000,390    78,131    4,781,435    74,710 
Ser. 04-19, Class 2A1X, IO, 0.83s, 2035  482,539  4,825    —    —    —    — 
Structured Adjustable Rate Mortgage                     
Loan Trust 144A Ser. 04-NP2, Class A,                     
5.855s, 2034  55,726  55,720    215,548    215,527    222,904    222,882 
Structured Asset Investment Loan Trust                     
FRB Ser. 06-BNC2, Class A6, 5.391s, 2036  111,000  102,951    503,000    466,526    394,000    365,430 
Structured Asset Investment Loan Trust 144A                     
FRB Ser. 05-HE3, Class M11, 7.631s, 2035  —  —    —    —    225,000    22,500 

87

ASSET-BACKED SECURITIES*  Growth 1.0%  Balanced 3.9%    Conservative 7.5% 
  Principal    Principal        Principal     
  amount  Value  amount    Value    amount    Value 
Structured Asset Receivables Trust 144A                   
FRB Ser. 05-1, 5.87s, 2015  $ — $  —  $ 1,151,174  $  1,132,467  $  1,109,010  $  1,090,988 
Structured Asset Securities Corp.                   
Ser. 07-4, Class 1A4, IO, 1s, 2037  4,394,709  138,837  13,470,947    425,571    13,773,167    435,119 
Ser. 07-4, Class 1A3, IO, 1.121s, 2037  4,394,709  201,778  13,470,947    618,503    13,773,167    632,379 
Structured Asset Securities Corp. 144A                   
Ser. 07-RF1, Class 1A, IO, 0.303s, 2037  —  —  5,047,100    162,888    4,010,803    129,443 
Ser. 06-RF4, Class 1A, IO, 0.356s, 2036  —  —  2,364,987    77,333    2,020,873    66,080 
Terwin Mortgage Trust 144A FRB                   
Ser. 06-9HGA, Class A1, 5.211s, 2037  166,091  164,357  —    —    —    — 
Thornburg Mortgage Securities Trust FRB                   
Ser. 06-4, Class A2B, 5.251s, 2011  315,374  315,374  —    —    —    — 
TIAA Real Estate CDO, Ltd. Ser. 03-1A,                   
Class E, 8s, 2038 (Cayman Islands)  —  —  349,000    298,252    299,000    255,522 
TIAA Real Estate CDO, Ltd. 144A                   
FRB Ser. 02-1A, Class III, 7.6s, 2037                   
(Cayman Islands)  100,000  96,771  384,000    371,601    278,000    269,023 
Ser. 02-1A, Class IIFX, 6.77s, 2037                   
(Cayman Islands)  200,000  198,546  —    —    —    — 
WAMU Mortgage Pass-Through Certificates                   
FRB Ser. 04-AR1, Class A, 4.229s, 2034  99,897  98,352  275,121    270,865    196,170    193,135 
Washington Mutual Mortgage Pass-Through                   
Certificates Ser. 07-2, Class CX, IO, 7s, 2037  94,510  15,841  431,566    72,336    344,584    57,757 
Wells Fargo Home Equity Trust FRB                   
Ser. 07-1, Class A3, 5.451s, 2037  —  —  222,000    202,188    174,000    158,472 
WFS Financial Owner Trust                   
Ser. 05-1, Class D, 4.09s, 2012  30,704  30,375  —    —    25,285    25,015 
Ser. 04-3, Class D, 4.07s, 2012  12,294  12,186  49,620    49,186    45,150    44,755 
Ser. 04-4, Class D, 3.58s, 2012  27,763  27,434  22,211    21,947    21,453    21,199 
Whinstone Capital Management, Ltd. 144A                   
FRB Ser. 1A, Class B3, 6.26s, 2044                   
(United Kingdom)  —  —  291,103    285,775    291,881    286,540 
 
Total asset-backed securities (cost $28,197,893,                   
$94,379,267 and $84,253,175)    $  27,787,745    $  92,698,956      $  82,365,034 

PURCHASED OPTIONS OUTSTANDING*  Growth 0.2%  Balanced 0.6%    Conservative 1.0% 
  Expiration date/  Contract     Contract       Contract    
  strike price  amount   Value  amount   Value    amount   Value 
Option on an interest rate swap                 
with JPMorgan Chase Bank,                 
N.A. for the right to receive                 
a fixed rate of 5.39%                 
versus the three month                 
USD-LIBOR-BBA                 
maturing on January 29, 2018.  Jan-08/5.39  $ 10,076,000 $  246,358  $ 19,812,000 $  484,403  $  16,390,000 $  400,736 
 
Option on an interest rate swap                 
with JPMorgan Chase Bank,                 
N.A. for the right to pay a                 
fixed rate of 5.39%                 
versus the three month                 
USD-LIBOR-BBA                 
maturing on January 29, 2018.  Jan-08/5.39  10,076,000   110,332  19,812,000   216,941    16,390,000   179,471 

88

PURCHASED OPTIONS OUTSTANDING*  Growth 0.2%  Balanced 0.6%  Conservative 1.0% 
  Expiration date/  Contract    Contract    Contract   
  strike price  amount  Value  amount  Value  amount  Value 
Option on an interest rate swap               
with Lehman Brothers Special               
Financing, Inc. for the right               
to receive a fixed rate of 5.3475%               
versus the three month               
USD-LIBOR-BBA               
maturing on February 4, 2018.  Jan-08/5.348  $ 5,076,000   $ 115,327  $ 14,572,000 $ 331,076  $  12,403,000 $  281,796 
 
Option on an interest rate swap               
with Lehman Brothers               
Special Financing, Inc. for the               
right to pay a fixed rate swap of               
5.3475% versus the three               
month USD-LIBOR-BBA               
maturing on February 4, 2018.  Jan-08/5.348  5,076,000  64,465  14,572,000  185,064  12,403,000  157,518 
 
Option on an interest rate swap               
with JPMorgan Chase Bank, N.A.               
for the right to receive a fixed               
rate of 5.34% versus the three               
month USD-LIBOR-BBA               
maturing on February 15, 2018.  Feb-08/5.34  1,597,000  36,747  —  —  —  — 
 
Option on an interest rate swap               
with JPMorgan Chase Bank,               
N.A. for the right to pay a               
fixed rate of 5.34%               
versus the three month               
USD-LIBOR-BBA maturing               
on February 15, 2018.  Feb-08/5.34  1,597,000  22,023  —  —  —  — 
 
Option on an interest rate swap               
with Goldman Sachs               
International for the right to               
receive a fixed rate swap               
of 4.965% versus the               
three month               
USD-LIBOR-BBA               
maturing on April 29, 2013.  Apr-08/4.965  19,000,000  283,100  53,000,000  789,700  48,000,000  715,200 
 
Option on an interest rate swap               
with Goldman Sachs               
International for the right to               
pay a fixed rate swap               
of 4.965% versus the               
three month               
USD-LIBOR-BBA               
maturing on April 29, 2013.  Apr-08/4.965  19,000,000  232,180  53,000,000  647,660  48,000,000  586,560 
 
Option on an interest rate swap               
with Goldman Sachs               
International for the right to               
receive a fixed rate swap               
of 5.16% versus the three month               
USD-LIBOR-BBA maturing on               
April 28, 2018.  Apr-08/5.16  1,586,000  30,039  —  —  —  — 
 
Option on an interest rate swap               
with Goldman Sachs               
International for the right to pay               
a fixed rate swap of 5.16%               
versus the three month               
USD-LIBOR-BBA maturing on               
April 28, 2018.  Apr-08/5.16  1,586,000  39,602  —  —  —  — 

89

PURCHASED OPTIONS OUTSTANDING*  Growth 0.2%  Balanced 0.6%  Conservative 1.0% 
  Expiration date/  Contract    Contract    Contract   
  strike price  amount  Value  amount  Value  amount  Value 
Option on an interest rate swap               
with JPMorgan Chase Bank, N.A.               
for the right to receive a fixed rate               
of 5.175% versus the three month               
USD-LIBOR-BBA maturing on               
April 29, 2018.  Apr-08/5.175 $  9,000,000 $  176,130   $  27,000,000   $  528,390   $  24,000,000   $  469,680 
 
Option on an interest rate swap               
with JPMorgan Chase Bank, N.A.               
for the right to pay a fixed rate               
of 5.175% versus the three               
month USD-LIBOR-BBA               
maturing on April 29, 2018.  Apr-08/5.175  9,000,000  218,520  27,000,000  655,560  24,000,000  582,720 
 
Option on an interest rate swap               
with Goldman Sachs               
International for the right to               
receive a fixed rate of 5.1975%               
versus the three month               
USD-LIBOR-BBA maturing               
on May 14, 2018.  May-08/5.198  2,794,000  58,227  9,744,000  203,065  7,233,000  150,736 
 
Option on an interest rate swap               
with Goldman Sachs               
International for the right to               
pay a fixed rate of 5.1975%               
versus the three month               
USD-LIBOR-BBA maturing               
on May 14, 2018.  May-08/5.198  2,794,000  68,341  9,744,000  238,338  7,233,000  176,919 
 
Option on an interest rate swap               
with Lehman Brothers               
Special Financing, Inc. for the               
right to receive a fixed rate of               
5.20% versus the three               
month USD-LIBOR-BBA               
maturing on May 14, 2018.  May-08/5.2  4,114,000  86,065  12,203,000  255,287  9,715,000  203,238 
 
Option on an interest rate swap               
with Lehman Brothers Special               
Financing, Inc. for the right to               
pay a fixed rate of 5.20% versus               
the three month USD-LIBOR-BBA             
maturing on May 14, 2018.  May-08/5.2  4,114,000  100,135  12,203,000  297,021  9,715,000  236,463 
 
Option on an interest rate swap               
with Lehman Brothers Special               
Financing, Inc. for the right               
to receive a fixed rate of 5.21%               
versus the three month               
USD-LIBOR-BBA               
maturing on May 14, 2018.  May-08/5.21  1,646,000  35,010  4,881,000  103,819  3,886,000  82,655 
 
Option on an interest rate swap               
with Lehman Brothers Special               
Financing, Inc. for the right to               
pay a fixed rate of 5.21% versus               
the three month USD-LIBOR-BBA             
maturing on May 14, 2018.  May-08/5.21  1,646,000  39,422  4,881,000  116,900  3,886,000  93,070 
 
Option on an interest rate swap               
with JPMorgan Chase Bank, N.A.               
for the right to receive a fixed rate               
of 5.215% versus the three month               
USD-LIBOR-BBA maturing on               
May 14, 2018.  May-08/5.215  8,228,000  176,491  24,406,000  523,509  19,430,000  416,774 

90

PURCHASED OPTIONS OUTSTANDING*  Growth 0.2%  Balanced 0.6%  Conservative 1.0% 
  Expiration date/  Contract    Contract    Contract   
  strike price  amount  Value  amount  Value  amount  Value 
Option on an interest rate swap               
with JPMorgan Chase Bank, N.A.               
for the right to pay a fixed rate               
of 5.215% versus the three month               
USD-LIBOR-BBA               
maturing on May 14, 2018.  May-08/5.215  $ 8,228,000 $ 195,415  $ 24,406,000 $ 579,643  $ 19,430,000 $ 461,463 
 
Option on an interest rate swap               
with JPMorgan Chase Bank, N.A.               
for the right to receive a fixed rate               
of 5.22% versus the three               
month USD-LIBOR-BBA               
maturing on May 14, 2018.  May-08/5.22  2,794,000  60,406  9,744,000  210,665  7,233,000  156,377 
 
Option on an interest rate swap               
with JPMorgan Chase Bank,               
N.A. for the right to pay a               
fixed rate of 5.22% versus the               
three month USD-LIBOR-BBA               
maturing on May 14, 2018.  May-08/5.22  2,794,000  65,771  9,744,000  229,374  7,233,000  170,265 
 
Option on an interest rate swap               
with JPMorgan Chase Bank, N.A.               
for the right to receive a fixed               
rate of 5.235% versus the               
three month USD-LIBOR-BBA               
maturing on May 8, 2018.  May-08/5.235  5,616,000  123,384  16,824,000  369,623  13,370,000  293,739 
 
Option on an interest rate swap               
with JPMorgan Chase Bank, N.A.               
for the right to pay a fixed rate               
of 5.235% versus the three month               
USD-LIBOR-BBA               
maturing on May 8, 2018.  May-08/5.235  5,616,000  126,922  16,824,000  380,222  13,370,000  302,162 
 
Option on an interest rate swap               
with JPMorgan Chase Bank, N.A.               
for the right to receive a fixed               
rate of 5.45% versus the three               
month USD-LIBOR-BBA               
maturing on May 28, 2018.  May-08/5.45  14,575,000  454,594  —  —  —  — 
 
Option on an interest rate swap               
with JPMorgan Chase Bank, N.A.               
for the right to pay a fixed rate of               
5.45% versus the three month               
USD-LIBOR-BBA maturing on               
May 28, 2018.  May-08/5.45  14,575,000  234,075  —  —  —  — 
 
Option on an interest rate swap               
with JPMorgan Chase Bank, N.A.               
for the right to receive a fixed               
rate of 5.315% versus the three               
month USD-LIBOR-BBA               
maturing on April 8, 2019.  Apr-09/5.315  6,132,000  187,271  29,348,000  896,288  23,230,000  709,444 
 
Option on an interest rate swap               
with JPMorgan Chase Bank, N.A.               
for the right to pay a fixed rate               
of 5.315% versus the three month               
USD-LIBOR-BBA maturing               
on April 8, 2019.  Apr-09/5.315  6,132,000  216,950  29,348,000  1,038,332  23,230,000  821,877 

91

PURCHASED OPTIONS OUTSTANDING*  Growth 0.2%    Balanced 0.6%    Conservative 1.0% 
  Expiration date/  Contract      Contract      Contract   
    strike price  amount  Value    amount  Value    amount  Value 
Option on an interest rate swap                     
with Goldman Sachs International                   
for the right to receive a fixed                     
rate swap of 5.325% versus the                     
three month USD-LIBOR-BBA                   
maturing on April 8, 2019.  Apr-09/5.325 $  6,132,000   $ 189,356  $  29,348,000  $  906,266  $  23,230,000  $  717,342 
 
Option on an interest rate swap                     
with Goldman Sachs International                   
for the right to pay a fixed rate                     
swap of 5.325% versus the three                     
month USD-LIBOR-BBA                     
maturing on April 8, 2019.  Apr-09/5.325  6,132,000  214,620    29,348,000  1,027,180    23,230,000  813,050 
 
Option on an interest rate swap with                   
Deutschbank for the right to                     
receive a fixed rate swap of                     
5.385% versus the three month                     
USD-LIBOR-BBA maturing on                     
April 16, 2019.  Apr-09/5.385  5,940,000  195,961    32,873,000  1,084,480    20,822,000  686,918 
 
Option on an interest rate swap                     
with Deutschbank for the right                     
to pay a fixed rate swap of                     
5.385% versus the three month                     
USD-LIBOR-BBA                     
maturing on April 16, 2019.  Apr-09/5.385  5,940,000  196,198    32,873,000  1,085,795    20,822,000  687,751 
 
Total purchased options outstanding                   
(cost $4,181,318, $12,147,152                     
and $9,618,894)        $  4,599,437      $  13,384,601      $  10,553,924 
 
 
SENIOR LOANS* (c)      Growth —%    Balanced —%    Conservative —% 
      Principal      Principal      Principal   
      amount  Value    amount  Value    amount  Value 
Sandridge Energy bank term loan FRN                   
8.985s, 2014    $  100,000   $ 99,000  $  95,000   $ 94,050  $  45,000  $  44,550 
Sandridge Energy bank term loan FRN                   
8 5/8s, 2015      410,000  403,850    400,000  394,000    190,000  187,150 
 
Total senior loans (cost $510,000,                   
$495,000 and $235,000)        $  502,850      $ 488,050      $ 231,700 
 
 
CONVERTIBLE BONDS AND NOTES*                   
(cost $439,341, $433,917 and $200,687)    Growth —%    Balanced —%    Conservative —% 
      Principal      Principal      Principal   
      amount  Value    amount  Value    amount  Value 
DRS Technologies, Inc. 144A cv. unsec.                   
notes 2s, 2026      $  405,000  $  435,375  $  400,000  $  430,000  $  185,000  $  198,875 
 
 
WARRANTS* †      Growth —%    Balanced —%    Conservative —% 
  Expiration Strike                 
  date  price  Warrants  Value    Warrants  Value    Warrants  Value 
Abu Dhabi Commercial Bank 144A                     
(United Arab Emirates)  6/20/10  $0.01  702,069  $  1,208,261    —  $  —    —   $ — 
Dayton Superior Corp. 144A (F)  6/15/09  0.01  630  6,635    —  —    330  3,475 
 
Total warrants                     
(cost $1,388,415, $— and $6,238)        $  1,214,896      $  —      $  3,475 

92

MUNICIPAL BONDS AND NOTES*      Growth —%    Balanced —%  Conservative 0.1% 
      Principal      Principal    Principal   
Rating **    amount  Value    amount  Value  amount  Value 
MI Tobacco Settlement Fin. Auth. Rev.                   
Bonds, Ser. A, 7.309s, 6/1/34  Baa3    $ —  $  —  $  220,000  $  217,400  $ 230,000   $ 227,281 
WV Tobacco Settlement Fin. Auth. Rev.                   
Bonds, Ser. A, 7.467s, 6/1/47  Baa3    —  —    660,000  649,763  520,000  511,935 
 
Total municipal bonds and notes                   
(cost $—, $879,976 and $749,975)      $  —    $  867,163    $ 739,216 
 
 
SHORT-TERM INVESTMENTS*      Growth 17.1%    Balanced 10.4%  Conservative 9.7% 
    Principal amount/    Principal amount/    Principal amount/   
      shares  Value    shares  Value  shares  Value 
Interest in $100,000,000 joint                   
tri-party repurchase agreement dated                   
September 28, 2007 with Bank of                   
America Securities, LLC due October 1,                   
2007 with respect to various U.S.                   
Government obligations — maturity value                   
of $33,299,146 and $5,327,263 (for                   
Growth Portfolio and Balanced Portfolio,                   
respectively) for an effective yield of 5.10%                   
(collateralized by Fannie Mae securities                   
with a yield of 5.00% and a due date of                   
October 1, 2035 valued at $102,000,001)    $ 33,285,000    $ 33,285,000  $ 5,325,000    $ 5,325,000  $  —  $  — 
 
Short-term investments held as                   
collateral for loaned securities                   
with yields ranging from 3.90%                   
to 6.49% and due dates ranging from                   
October 1, 2007 to November 27, 2007 (d)    173,347,809  173,069,529    116,970,150  116,781,825  12,889,849  12,869,096 
Putnam Prime Money Market Fund (e)    258,122,122  258,122,122    124,331,804  124,331,804  94,025,098  94,025,098 
 
Total short-term investments (cost $464,476,651,                 
$246,438,629 and $106,894,194)        $ 464,476,651      $  246,438,629    $  106,894,194 
 
 
TOTAL INVESTMENTS                   
Total investments (cost $2,459,034,606,                   
$2,183,378,264 and $1,026,859,558)      $ 2,846,287,445   $ 2,480,499,090 $ 1,116,444,362

* Percentages indicated are based on net assets as follows:

Growth Portfolio  $2,712,954,180 
Balanced Portfolio  2,375,383,552 
Conservative Portfolio  1,100,025,907 

** The Moody’s or Standard & Poor’s ratings indicated are believed to be the most recent ratings available at September 30, 2007 for the securities listed. Ratings are generally ascribed to securities at the time of issuance. While the agencies may from time to time revise such ratings, they undertake no obligation to do so, and the ratings do not necessarily represent what the agencies would ascribe to these securities at September 30, 2007. 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.

† †The interest rate and date shown parenthetically represent the new interest rate to be paid and the date the fund will begin accruing interest at this rate.

‡ Restricted, excluding 144A securities, as to public resale. VFB, LLC was acquired on various dates from 6/22/99 to 1/21/00 with a cost of $230,697 (for Conservative Portfolio). The total market value of restricted securities held by the fund was less than 0.01% of the fund’s net assets.

‡‡ Income may be received in cash or additional securities at the discretion of the issuer.

# These securities, in part or in entirety, were pledged and segregated with the custodian to cover margin requirements for futures contracts for one or more of the funds at September 30, 2007.

## Forward commitments (Note 1).

(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 September 30, 2007. 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).

93

(d) See Note 1 to the financial statements.

(e) See Note 5 to the financial statements regarding investments in Putnam Prime Money Market Fund.

(F) Security is valued at fair value following procedures approved by the Trustees. On September 30, 2007, fair value pricing was also used for certain foreign securities in the portfolio (Note 1).

(R) Real Estate Investment Trust.

(SG)Securities on loan, in part or in entirety, at September 30, 2007 (Growth Portfolio).

(SB) Securities on loan, in part or in entirety, at September 30, 2007 (Balanced Portfolio).

(SC)Securities on loan, in part or in entirety, at September 30, 2007 (Conservative Portfolio).

At September 30, 2007, liquid assets totaling $181,567,093, $202,383,212 and $52,926,484 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) have been designated as collateral for open forward commitments, swap contracts, forward contracts, options and futures contracts.

144A after the name of an issuer represents securities exempt from registration under Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

ADR, SDR or GDR after the name of a foreign holding stands for American Depository Receipts, Swedish Depository Receipts or Global Depository Receipts, respectively, 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 September 30, 2007.

The dates shown on debt obligations are the original maturity dates.

Inverse Floating Rate Bonds (IFB) are securities that pay interest rates that vary inversely to changes in the market interest rates. As interest rates rise, inverse floaters produce less current income. The interest rates shown are the current interest rates at September 30, 2007.

DIVERSIFICATION BY COUNTRY

Distribution of investments by country of issue at September 30, 2007 (as a percentage of Portfolio Value):

Growth Portfolio   
Australia  1.8% 
Austria  0.5 
Belgium  1.1 
Brazil  0.9 
China  1.1 
Finland  0.8 
France  2.1 
Germany  1.2 
Hong Kong  0.6 
Italy  1.1 
Japan  4.7 
Luxembourg  0.8 
Netherlands  1.5 
Norway  0.5 
Russia  0.8 
South Korea  1.1 
Spain  0.7 
Sweden  0.9 
Switzerland  1.0 
Taiwan  0.7 
United Kingdom  4.2 
United States  68.2 
Other  3.7 
Total  100.0% 
 
Balanced Portfolio   
Australia  1.5% 
Belgium  0.9 
Finland  0.6 
France  1.5 
Germany  0.8 
Italy  0.9 
Japan  3.7 
Luxembourg  0.7 
Netherlands  1.3 
Spain  0.5 
Sweden  0.7 
Switzerland  0.7 
United Kingdom  3.4 
United States  80.1 
Other  2.7 
Total  100.0% 

94

Conservative Portfolio   
Australia  0.9% 
Belgium  0.5 
France  0.9 
Germany  0.5 
Italy  0.5 
Japan  2.1 
Luxembourg  0.5 
Netherlands  0.8 
United Kingdom  2.2 
United States  87.5 
Other  3.6 
Total  100.0% 

Growth Portfolio

FORWARD CURRENCY CONTRACTS TO BUY at 9/30/07 (aggregate face value $567,457,953)       
    Aggregate    Delivery  Unrealized 
  Value  face value  date  appreciation 
Australian Dollar  $129,637,942  $121,803,408    10/17/07  $ 7,834,534 
Brazilian Real  9,446,527  8,924,401  10/17/07  522,126 
British Pound  24,684,807  24,345,921  12/19/07  338,886 
Canadian Dollar  22,819,688  22,446,569  10/17/07  373,119 
Chilean Peso  4,877,108  4,766,918  10/17/07  110,190 
Danish Krone  911,812  881,888  12/19/07  29,924 
Euro  117,891,424  113,979,817  12/19/07  3,911,607 
Hong Kong Dollar  2,773,501  2,759,449  11/21/07  14,052 
Hungarian Forint  3,729,387  3,555,670  12/19/07  173,717 
Indian Rupee  2,302,432  2,261,126  11/21/07  41,306 
Japanese Yen  103,137,513  102,988,042  11/21/07  149,471 
Mexican Peso  1,123,067  1,121,208  10/17/07  1,859 
New Zealand Dollar  4,208,070  4,056,898  10/17/07  151,172 
Norwegian Krone  135,048,720  127,106,764  12/19/07  7,941,956 
Polish Zloty  7,812  7,707  12/19/07  105 
South African Rand  4,495,458  4,366,832  10/17/07  128,626 
South Korean Won  2,049,135  2,034,695  11/21/07  14,440 
Swedish Krona  1,116,371  1,051,458  12/19/07  64,913 
Swiss Franc  19,513,578  18,999,182  12/19/07  514,396 
Total        $22,316,399 
 
 
FORWARD CURRENCY CONTRACTS TO SELL at 9/30/07 (aggregate face value $740,285,543)       
        Unrealized 
    Aggregate  Delivery  appreciation/ 
  Value  face value  date  (depreciation) 
Australian Dollar  $ 25,902,661  $ 24,823,816  10/17/07  $ (1,078,845) 
British Pound  93,414,194  92,045,781  12/19/07  (1,368,413) 
Canadian Dollar  92,271,279  87,404,715  10/17/07  (4,866,564) 
Czech Koruna  2,813,898  2,699,123  12/19/07  (114,775) 
Euro  181,017,591  174,854,392  12/19/07  (6,163,199) 
Japanese Yen  166,648,840  163,206,754  11/21/07  (3,442,086) 
New Zealand Dollar  5,384,404  5,532,202  10/17/07  147,798 
Norwegian Krone  21,162,692  19,689,995  12/19/07  (1,472,697) 
Polish Zloty  23,324  21,904  12/19/07  (1,420) 
Singapore Dollar  8,837,177  8,677,931  11/21/07  (159,246) 
South African Rand  1,367,213  1,265,487  10/17/07  (101,726) 
Swedish Krona  98,491,567  93,959,074  12/19/07  (4,532,493) 
Swiss Franc  55,336,481  53,925,523  12/19/07  (1,410,958) 
Taiwan Dollar  12,306,114  12,178,846  11/21/07  (127,268) 
Total        $(24,691,892) 

95

FUTURES CONTRACTS OUTSTANDING at 9/30/07         
        Unrealized 
  Number of    Expiration  appreciation/ 
  contracts  Value  date  (depreciation) 
Amsterdam Exchange Index (Short)  176  $ 27,248,081  Oct-07  $ 80,183 
Canadian Government Bond 10 yr (Long)  113  12,788,998  Dec-07  45,059 
Dow Jones Euro Stoxx 50 Index (Short)  1,959  123,300,548  Dec-07  (384,907) 
Euro-Bobl 5 yr (Long)  23  3,533,917  Dec-07  (5,641) 
Euro-Bund 10 yr (Long)  105  16,882,224  Dec-07  (150,102) 
Euro-Bund 10 yr (Short)  113  18,168,488  Dec-07  104,509 
Euro-CAC 40 Index (Long)  503  41,104,435  Oct-07  (62,804) 
Euro-Dollar 90 day (Long)  98  23,392,600  Mar-08  83,033 
Euro-Dollar 90 day (Short)  223  53,310,938  Jun-08  (197,257) 
Euro-Dollar 90 day (Short)  211  50,476,475  Sep-08  (177,424) 
Euro-Dollar 90 day (Long)  90  21,463,876    Sep-09  37,031 
FTSE 100 Index (Long)  569  75,868,606  Dec-07  (377,522) 
FTSE 100 Index (Short)  128  17,067,103  Dec-07  57,952 
Japanese Government Bond 10 yr (Long)  11  12,938,808  Dec-07  (36,479) 
Japanese Government Bond 10 yr (Short)  9  10,586,297  Dec-07  (9,449) 
OMXS 30 Index (Short)  903  17,113,646  Oct-07  (226,368) 
Russell 2000 Index Mini (Long)  1,925  156,541,000  Dec-07  5,612,438 
Russell 2000 Index Mini (Short)  2,838  230,786,160  Dec-07  (6,676,754) 
S&P 500 Index (Long)  290  111,512,250  Dec-07  3,042,087 
S&P 500 Index E-Mini (Long)  4,438  341,282,200  Dec-07  7,825,651 
S&P 500 Index E-Mini (Short)  374  28,760,600  Dec-07  (911,438) 
S&P ASX 200 Index (Short)  127  18,633,348  Dec-07  (756,218) 
S&P/MIB Index (Short)  58  16,569,832  Dec-07  145,452 
S&P Mid Cap 400 Index E-Mini (Long)  671  59,940,430  Dec-07  170,571 
SGX MSCI Singapore Index (Short)  50  3,068,381  Oct-07  (34,675) 
Tokyo Price Index (Short)  484  68,516,039  Dec-07  (4,485,577) 
U.K. Gilt 10 yr (Long)  17  3,718,131  Dec-07  8,296 
U.S. Treasury Bond 20 yr (Long)  207  23,048,156  Dec-07  175,603 
U.S. Treasury Note 2 yr (Short)  79  16,356,703  Dec-07  (55,555) 
U.S. Treasury Note 5 yr (Short)  165  17,660,157  Dec-07  (23,491) 
U.S. Treasury Note 10 yr (Long)  255  27,866,719  Dec-07  211,708 
U.S. Treasury Note 10 yr (Short)  174  19,014,938  Dec-07  (11,054) 
Total        $ 3,016,858 
 
 
WRITTEN OPTIONS OUTSTANDING at 9/30/07 (premiums received $2,966,002)       
    Contract  Expiration date/   
    amount  strike price  Value 
Blue Coat Systems, Inc. (Call)    $ 3,880  Oct-09/87.80  $ 10,437 
Option on an interest rate swap with Citibank, N.A. for the obligation to receive a fixed rate       
of 5.7% versus the three month USD-LIBOR-BBA maturing on May 14, 2018.  1,078,000  May-08/5.70  9,907 
 
Option on an interest rate swap with Citibank, N.A. for the obligation to pay a fixed rate of       
5.7% versus the three month USD-LIBOR-BBA maturing on May 14, 2018.  1,078,000  May-08/5.70  46,850 
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.  4,114,000  May-12/5.51  212,365 
 
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.  4,114,000  May-12/5.51  164,240 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to receive a fixed rate of 5.905% versus the three month USD-LIBOR-BBA       
maturing on December 17, 2017.    52,118,000  Dec-07/5.905  47,427 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to pay a fixed rate of 5.905% versus the three month USD-LIBOR-BBA maturing       
on December 17, 2017.    52,118,000  Dec-07/5.905  2,845,645 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to receive a fixed rate of 5.95% versus the three month USD-LIBOR-BBA       
maturing on June 16, 2018.    2,512,000  Jun-08/5.95  15,549 

96

WRITTEN OPTIONS OUTSTANDING at 9/30/07 (premiums received $2,966,002) continued       
  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 5.95% versus the three month USD-LIBOR-BBA maturing       
on June 16, 2018.  $ 2,512,000  Jun-08/5.95  $ 146,173 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to receive a fixed rate of 5.84% versus the three month USD-LIBOR-BBA       
maturing on June 18, 2018.  1,246,000  Jun-08/5.84  9,968 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to pay a fixed rate of 5.84% versus the three month USD-LIBOR-BBA maturing       
on June 18, 2018.  1,246,000  Jun-08/5.84  64,393 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the         
obligation to receive a fixed rate of 5.835 versus the three month USD-LIBOR-BBA       
maturing on June 18, 2018.  374,000  Jun-08/5.835  3,022 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to pay a fixed rate of 5.835% versus the three month USD-LIBOR-BBA       
maturing on June 18, 2018.  374,000  Jun-08/5.835  19,220 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to receive a fixed rate of 5.385% versus the three month USD-LIBOR-BBA       
maturing on August 28, 2018.  3,501,000  Aug-08/5.385  80,089 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to pay a fixed rate of 5.385% versus the three month USD-LIBOR-BBA maturing       
on August 28, 2018.  3,501,000  Aug-08/5.385  107,218 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to receive a fixed rate of 5.35% versus the three month USD-LIBOR-BBA       
maturing on August 28, 2018.  1,400,000  Aug-08/5.35  33,706 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to pay a fixed rate of 5.35% versus the three month USD-LIBOR-BBA maturing       
on August 28, 2018.  1,400,000  Aug-08/5.35  40,915 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to receive a fixed rate of 5.225% versus the three month USD-LIBOR-BBA       
maturing on August 28, 2018.  2,032,000  Mar-08/5.225  39,055 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to pay a fixed rate of 5.225% versus the three month USD-LIBOR-BBA maturing       
on March 5, 2018.  2,032,000  Mar-08/5.225  39,258 
 
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.  823,000  May-12/5.52  42,195 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to pay a fixed rate of 5.225% versus the three month USD-LIBOR-BBA maturing       
on May 14, 2022.  823,000  May-12/5.52  33,342 
 
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.  2,057,000  May-12/5.515  105,382 
 
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.  2,057,000  May-12/5.515  83,045 
 
Total      $4,199,401 
 
 
TBA SALE COMMITMENTS OUTSTANDING at 9/30/07 (proceeds receivable $10,544,082)       
  Principal  Settlement   
  amount  date  Value 
FNMA, 6 1/2s, October 1, 2037  $2,500,000  10/11/07  $ 2,545,313 
FNMA, 5 1/2s, October 1, 2037  469,000  10/11/07  459,620 
FNMA, 5s, October 1, 2037  7,902,000  10/11/07  7,541,472 
Total      $10,546,405 

97

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/07     
      Payments  Payments  Unrealized 
Swap counterparty /  Termination  made by  received by  appreciation/ 
Notional amount  date  fund per annum  fund per annum  (depreciation) 
Bank of America, N.A.           
  $ 80,000    5/31/16  5.58909%  3 month USD-LIBOR-BBA  $ (3,624) 
  786,000  10/2/16  5.15631%  3 month USD-LIBOR-BBA  (9,935) 
  130,000  6/24/15  4.39%  3 month USD-LIBOR-BBA  4,309 
  2,500,000  4/6/10  4.6375%  3 month USD-LIBOR-BBA  (22,197) 
  740,000  6/17/15  4.555%  3 month USD-LIBOR-BBA  17,295 
  4,800,000  10/21/15  4.943%  3 month USD-LIBOR-BBA  (4,858) 
  110,000  6/23/15  4.45%  3 month USD-LIBOR-BBA  3,206 
  260,000  6/23/15  4.466%  3 month USD-LIBOR-BBA  7,302 
  5,500,000  9/1/15  3 month USD-LIBOR-BBA  4.53%  (208,441) 
  9,748,000  9/24/09  3 month USD-LIBOR-BBA  4.7375%  14,506 
  1,000,000  3/30/09  3.075%  3 month USD-LIBOR-BBA  23,180 
Bear Stearns Bank PLC         
  5,500,000  4/24/12  5.027%  3 month USD-LIBOR-BBA  (105,710) 
Citibank, N.A.         
  4,920,000  7/27/09  5.504%  3 month USD-LIBOR-BBA  (71,745) 
  230,000  4/7/14  5.377%  3 month USD-LIBOR-BBA  (6,706) 
Credit Suisse First Boston International         
  687,400  7/9/14  4.945%  3 month USD-LIBOR-BBA  3,666 
  13,580,000  10/7/14  3 month USD-LIBOR-BBA  4.624%  (198,847) 
Credit Suisse International         
  269,000  3/21/16  3 month USD-LIBOR-BBA  5.20497%  1,461 
  18,500,000  12/4/08  4.9485%  3 month USD-LIBOR-BBA  (244,139) 
  1,111,000  9/28/16  5.10886%  3 month USD-LIBOR-BBA  3,725 
  516,000  8/29/12  5.04556%  3 month USD-LIBOR-BBA  (3,518) 
Deutsche Bank AG         
  317,679  8/2/32  5.86%  3 month USD-LIBOR-BBA  (18,341) 
  283,084  8/2/22  3 month USD-LIBOR-BBA  5.7756%  12,332 
Goldman Sachs Capital Markets, L.P.         
  317,679  8/12/32  5.689%  3 month USD-LIBOR-BBA  (10,693) 
  2,448,129  8/15/10  3 month USD-LIBOR-BBA  5.405%  (44,337) 
  283,084  8/12/22  3 month USD-LIBOR-BBA  5.601%  7,049 
  639,659  8/1/32  5.919%  3 month USD-LIBOR-BBA  (42,159) 
  570,000  8/1/22  3 month USD-LIBOR-BBA  5.845%  28,971 
Goldman Sachs International         
  8,287,000  11/21/08  5.0925%  3 month USD-LIBOR-BBA  (125,430) 
  1,700,000  1/8/12  3 month USD-LIBOR-BBA  4.98%  8,477 
  1,846,000  12/20/16  3 month USD-LIBOR-BBA  5.074%  9,540 
  690,000  4/7/14  5.33842%  3 month USD-LIBOR-BBA  (21,943) 
  285,000  5/3/16  5.565%  3 month USD-LIBOR-BBA  (12,607) 
  414,000  9/29/16  3 month USD-LIBOR-BBA  5.1275%  (662) 
  795,000  10/19/16  5.32413%  3 month USD-LIBOR-BBA  (20,003) 
  1,243,000  9/29/08  5.085%  3 month USD-LIBOR-BBA  (3,117) 
  1,865,000  11/20/26  3 month USD-LIBOR-BBA  5.261%  (11,843) 
  8,290,000  11/20/08  5.16%  3 month USD-LIBOR-BBA  (132,101) 
  1,835,000  11/21/26  3 month USD-LIBOR-BBA  5.2075%  (23,450) 
  3,968,000  9/21/17  5.149%  3 month USD-LIBOR-BBA  16,089 
  14,259,300  9/21/09  3 month USD-LIBOR-BBA  4.60%  (17,212) 
  975,000  9/14/17  5.0625%  3 month USD-LIBOR-BBA  11,654 
  1,999,000  9/14/14  4.906%  3 month USD-LIBOR-BBA  17,004 
  7,200,000  7/25/09  5.327%  3 month USD-LIBOR-BBA  (80,580) 
  21,860,000  6/12/17  3 month USD-LIBOR-BBA  5.7175%  1,176,366 
  8,931,300  9/19/09  3 month USD-LIBOR-BBA  4.763%  8,501 

98

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
      Payments  Payments  Unrealized 
Swap counterparty /  Termination  made by  received by  appreciation/ 
Notional amount  date  fund per annum  fund per annum  (depreciation) 
JPMorgan Chase Bank, N.A.         
  $810,000  1/26/17  5.287%  3 month USD-LIBOR-BBA  $ (6,602) 
  640,000  6/16/15  4.538%  3 month USD-LIBOR-BBA  15,668 
  1,859,000  11/20/26  3 month USD-LIBOR-BBA  5.266%  (10,656) 
  2,841,000  12/19/16  5.0595%  3 month USD-LIBOR-BBA  (11,533) 
  1,200,000  8/4/16  3 month USD-LIBOR-BBA  5.5195%  31,634 
  2,700,000  8/4/08  3 month USD-LIBOR-BBA  5.40%  10,347 
  3,600,000  4/23/17  5.186%  3 month USD-LIBOR-BBA  (45,751) 
  739,000  9/18/16  5.291%  3 month USD-LIBOR-BBA  (6,728) 
  5,150,000  3/8/17  3 month USD-LIBOR-BBA  5.28%  31,587 
  600,000  4/17/09  5.12%  3 month USD-LIBOR-BBA  (11,063) 
  200,000  4/17/17  3 month USD-LIBOR-BBA  5.266%  3,831 
  486,000  9/28/16  3 month USD-LIBOR-BBA  5.1223%  (1,032) 
  7,234,000  4/11/17  5.1975%  3 month USD-LIBOR-BBA  (81,850) 
  2,690,000  10/10/13  5.09%  3 month USD-LIBOR-BBA  (49,684) 
  160,000  6/24/15  4.387%  3 month USD-LIBOR-BBA  5,335 
  685,000  2/23/17  5.211%  3 month USD-LIBOR-BBA  (1,307) 
  13,000,000  9/2/15  3 month USD-LIBOR-BBA  4.4505%  (560,925) 
  466,000  8/2/15  3 month USD-LIBOR-BBA  4.6570%  (13,541) 
  1,930,000  10/10/13  5.054%  3 month USD-LIBOR-BBA  (31,321) 
  2,763,000  11/14/11  5.0235%  3 month USD-LIBOR-BBA  (53,696) 
  2,210,000  6/29/15  3 month USD-LIBOR-BBA  4.296%  (86,803) 
  7,000,000  1/17/16  4.946%  3 month USD-LIBOR-BBA  89,434 
  17,000,000  8/25/10  4.4725%  3 month USD-LIBOR-BBA  128,509 
  644,000  1/31/17  3 month USD-LIBOR-BBA  5.415%  11,481 
  8,269,000  11/20/08  5.165%  3 month USD-LIBOR-BBA  (132,329) 
  4,353,000  8/15/11  5.412%  3 month USD-LIBOR-BBA  (92,935) 
  4,400,000  10/21/15  4.916%  3 month USD-LIBOR-BBA  3,900 
  1,457,000  9/28/08  5.096%  3 month USD-LIBOR-BBA  (3,743) 
  3,870,000  11/6/16  3 month USD-LIBOR-BBA  5.12%  34,534 
  19,800,000  8/13/12  3 month USD-LIBOR-BBA  5.2%  267,641 
  4,139,000  8/29/17  5.2925%  3 month USD-LIBOR-BBA  (34,427) 
  10,099,000  8/24/09  3 month USD-LIBOR-BBA  4.9125%  35,293 
  700,000  8/7/12  3 month USD-LIBOR-BBA  5.194%  9,522 
  1,175,000  8/29/17  5.263%  3 month USD-LIBOR-BBA  (5,125) 
  1,200,000  7/25/17  3 month USD-LIBOR-BBA  5.652%  42,513 
  3,430,000  7/5/17  3 month USD-LIBOR-BBA  4.55%  (176,003) 
  7,300,000  6/27/17  3 month USD-LIBOR-BBA  5.712%  395,905 
  1,507,000  9/27/17  5.2335%  3 month USD-LIBOR-BBA  (3,773) 
  3,968,000  9/21/17  5.15%  3 month USD-LIBOR-BBA  15,810 
  14,259,300  9/21/09  3 month USD-LIBOR-BBA  4.6125%  (13,883) 
Lehman Brothers Special Financing, Inc.         
  16,076,000  8/3/11  5.445%  3 month USD-LIBOR-BBA  (370,854) 
  13,949,000  8/3/16  5.5675%  3 month USD-LIBOR-BBA  (419,812) 
  965,000  10/23/16  5.325%  3 month USD-LIBOR-BBA  (24,307) 
  965,000  10/23/16  3 month USD-LIBOR-BBA  5.3275%  24,491 
  2,400,000  10/23/08  3 month USD-LIBOR-BBA  5.26%  41,432 
  2,400,000  10/23/08  5.255%  3 month USD-LIBOR-BBA  (41,259) 
  14,433,000  3/15/09  4.9298%  3 month USD-LIBOR-BBA  (30,781) 
  3,494,125  8/29/09  5.005%  3 month USD-LIBOR-BBA  (18,316) 
  3,942,000  8/29/09  5.001%  3 month USD-LIBOR-BBA  (21,005) 
  384,000  8/29/17  5.3187%  3 month USD-LIBOR-BBA  (3,387) 
  976,000  8/29/17  5.29125%  3 month USD-LIBOR-BBA  (6,519) 
  985,708  8/29/12  5.075%  3 month USD-LIBOR-BBA  (8,215) 

99

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
    Payments  Payments  Unrealized 
Swap counterparty /  Termination  made by  received by  appreciation/ 
Notional amount  date  fund per annum  fund per annum  (depreciation) 
Lehman Brothers Special Financing, Inc. continued       
$ 3,000,000  3/16/17  5.034%  3 month USD-LIBOR-BBA  $ 35,000 
141,000  8/3/36  3 month USD-LIBOR-BBA  5.67%  4,670 
7,039,000  8/3/08  3 month USD-LIBOR-BBA  5.425%  28,625 
7,670,000  11/29/16  3 month USD-LIBOR-BBA  5.02%  10,626 
21,370,000  11/29/08  3 month USD-LIBOR-BBA  5.045%  312,005 
1,900,000  11/29/26  3 month USD-LIBOR-BBA  5.135%  (40,954) 
1,530,000  9/29/13  5.0555%  3 month USD-LIBOR-BBA  (7,781) 
10,390,000  11/15/08  5.1125%  3 month USD-LIBOR-BBA  (157,390) 
2,300,000  11/15/26  3 month USD-LIBOR-BBA  5.246%  (17,681) 
7,140,000  9/8/16  5.3275%  3 month USD-LIBOR-BBA  (82,959) 
7,900,000  3/16/09  4.9275%  3 month USD-LIBOR-BBA  (16,604) 
2,371,000  3/15/17  5.0431%  3 month USD-LIBOR-BBA  25,994 
2,426,000  9/11/17  5.0525%  3 month USD-LIBOR-BBA  30,989 
217,271  8/29/17  3 month USD-LIBOR-BBA  5.32%  1,917 
1,190,000  8/24/12  5.085%  3 month USD-LIBOR-BBA  (10,046) 
3,968,000  9/24/17  5.285%  3 month USD-LIBOR-BBA  (25,929) 
8,900,000  5/29/12  5.28%  3 month USD-LIBOR-BBA  (271,508) 
5,954,200  9/19/09  3 month USD-LIBOR-BBA  4.755%  4,758 
14,259,300  9/24/09  3 month USD-LIBOR-BBA  4.695%  9,694 
Merrill Lynch Capital Services, Inc.         
553,964  8/1/12  5.204%  3 month USD-LIBOR-BBA  (7,776) 
570,000  8/1/22  3 month USD-LIBOR-BBA  5.845%  28,971 
283,084  8/12/22  3 month USD-LIBOR-BBA  5.601%  7,049 
275,120  8/13/12  4.94%  3 month USD-LIBOR-BBA  (545) 
7,200,000  3/2/11  5.815%  3 month USD-LIBOR-BBA  (239,222) 
Morgan Stanley Capital Services, Inc.         
1,452,000  2/20/17  5.192%  3 month USD-LIBOR-BBA  (661) 
413,000  8/29/17  5.26021%  3 month USD-LIBOR-BBA  (2,768) 
Total        $(1,631,389) 
 
 
TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07     
 
    Fixed payments  Total return  Unrealized 
Swap counterparty /  Termination  received (paid) by  received by  appreciation/ 
Notional amount  date  fund per annum  or paid by fund  (depreciation) 
Bank of America, N.A.         
$5,430,000  5/2/08  5 bp plus change  Banc of America  $(61,547) 
    in spread of Banc  Securities- CMBS   
    of America  AAA 10 year Index   
    Securities AAA     
    10 yr Index     
    multiplied by     
    the modified     
    duration factor     
1,320,000  5/2/08  10 bp plus  Banc of America  (13,892) 
    change in spread  Securities- CMBS   
    of Banc of America  AAA 10 year Index   
    Securities AAA     
    10 yr Index multiplied by     
    the modified duration factor     

100

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
      Fixed payments  Total return  Unrealized 
Swap counterparty /    Termination  received (paid) by  received by  appreciation/ 
Notional amount    date  fund per annum  or paid by fund  (depreciation) 
Citibank, N.A.           
$68,220,117    4/3/08  (Russell 2000  3 month USD-  $2,879,054 
      Total Return  LIBOR-BBA   
      Index)     
1,230,000  (F)  5/2/08  12.5 bp plus  Banc of America  (6,131) 
      change in spread  Securities- CMBS   
      of Banc  AAA 10 year Index   
      of America     
      Securities AAA     
      10 yr Index     
      multiplied by     
      the modified     
      duration factor     
231,499,511    10/8/08  (1 month USD-  A basket of  9,637,372 
      LIBOR-BBA plus  equity positions as   
      25 bp)  set forth by the issuer   
230,497,460    10/8/08  1 month USD-  A basket of  (11,127,352) 
      LIBOR-BBA minus  equity positions as   
      30 bp  set forth by the issuer   
67,916,517    9/11/08  (3 month USD-  PowerShares QQQ  4,826,650 
      LIBOR-BBA minus     
      30 bp)     
67,849,063    9/11/08  3 month USD-  The units  (1,850,275) 
      LIBOR-BBA minus  of Financial   
      75 bp  Select Sector   
        SPDR Fund   
50,453,447    1/16/08  3 month USD-  (Russell 2000  2,436,510 
      LIBOR-BBA  Total Return   
        Index)   
4,389,000  (F)  10/1/07  (7.5 bp plus  The spread  85,575 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
2,310,000  (F)  10/31/07  10 bp plus  Banc of America  (13,110) 
      change in spread  Securities- CMBS   
      of Banc  AAA 10 year Index   
      of America     
      Securities AAA     
      10 yr Index     
      multiplied by     
      the modified     
      duration factor     
1,810,000  (F)  11/2/07  15 bp plus  Banc of America  (10,717) 
      change in spread  Securities- CMBS   
      of Banc  AAA 10 year Index   
      of America     
      Securities AAA     
      10 yr Index     
      multiplied by     
      the modified     
      duration factor     
17,605,835    9/4/08  1 month USD-  Russell 2000  (242,791) 
      LIBOR-BBA minus  Total Return   
      0.95%  Index   
Deutsche Bank AG           
224,000  (F)  2/1/08  (75 bp minus  The spread  (3,186) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     

101

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
      Fixed payments  Total return  Unrealized 
Swap counterparty /    Termination  received (paid) by  received by  appreciation/ 
Notional amount    date  fund per annum  or paid by fund  (depreciation) 
 
Deutsche Bank AG continued         
 
$ 169,000  (F)  2/1/08  50 bp plus  The spread  $ 3,287 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
1,235,000  (F)  2/1/08  30 bp plus  The spread  23,690 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
Goldman Sachs International         
 
1,070,000    5/2/08  10 bp plus  Banc of America  9,875 
      change in spread  Securities- CMBS   
      of Banc of America  AAA 10 year Index   
      Securities AAA     
      10 yr Index     
      multiplied by     
      the modified     
      duration factor     
2,920,000    1/1/08  (10 bp plus  The spread  52,507 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
JPMorgan Chase Bank, N.A.         
91,789,386    9/24/08  3 month USD-  Russell 2000  1,186,120 
      LIBOR-BBA  Total Return   
        Index   
9,785,357    10/8/07  (1 month USD-  Standard & Poors 500  26,395 
      LIBOR-BBA plus  Transportation Index   
      25 bp)     
8,526,358    10/8/07  (1 month USD-  Standard & Poors 500  585,368 
      LIBOR-BBA plus  Materials   
      25 bp)  Index   
7,970,304    10/8/07  (1 month USD-  Standard & Poors 500  204,785 
      LIBOR-BBA plus  Pharmaceuticals,   
      25 bp)  Biotechnology &   
        Life Sciences   
        Index   
17,901,062    10/8/07  (1 month USD-  Standard & Poors  634,609 
      LIBOR-BBA plus  500 Diversified   
      25 bp)  Financials Index   
7,382,285    10/8/07  (1 month USD-  Standard & Poors  187,496 
      LIBOR-BBA plus  500 Utilities   
      25 bp)  Index   
22,755,291    10/8/07  (1 month USD-  Standard & Poors  946,749 
      LIBOR-BBA plus  500 Insurance   
      25 bp)  Index   
26,881,756    10/8/07  (1 month USD-  Standard & Poors  1,651,609 
      LIBOR-BBA plus  500 Capital   
      25 bp)  Goods Index   
27,120,192    10/8/07  (1 month USD-  Standard & Poors  843,406 
      LIBOR-BBA plus  500 Technology   
      25 bp)  Hardware &   
        Equipment Index   

102

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
    Fixed payments  Total return  Unrealized 
Swap counterparty /  Termination  received (paid) by  received by  appreciation/ 
Notional amount  date  fund per annum  or paid by fund  (depreciation) 
JPMorgan Chase Bank, N.A. continued         
 
$13,824,731  10/8/07  (1 month USD-  Standard & Poors  $ (37,011) 
    LIBOR-BBA plus  500 Commercial   
    25 bp)  Services &   
      Supplies Index   
23,290,639  10/8/07  (1 month USD-  Standard & Poors  (337,519) 
    LIBOR-BBA plus  500 Consumer   
    25 bp)  Durables &   
      Apparel Index   
36,747,277  10/8/07  (1 month USD-  Standard & Poors  (289,857) 
    LIBOR-BBA plus  500 Media Index   
    25 bp)     
9,599,377  10/8/07  (1 month USD-  Standard & Poors  220,607 
    LIBOR-BBA plus  500 Health Care   
    25 bp)  Equipment &   
      Services Index   
14,050,730  10/8/07  1 month USD-  Standard & Poors  (759,046) 
    LIBOR-BBA minus  500 Real Estate   
    30 bp  Index   
29,902,988  10/8/07  1 month USD-  Standard & Poors  42,871 
    LIBOR-BBA minus  500 Banks Index   
    30 bp     
19,932,591  10/8/07  1 month USD-  Standard & Poors  (1,322,813) 
    LIBOR-BBA minus  500 Household &   
    30 bp  Personal   
      Products Index   
15,181,651  10/8/07  1 month USD-  Standard & Poors  (615,457) 
    LIBOR-BBA minus  500 Food   
    30 bp  Beverage &   
      Tobacco Index   
14,005,509  10/8/07  1 month USD-  Standard and  69,864 
    LIBOR-BBA minus  Poor’s 500   
    30 bp  Semiconductors and   
      Semiconductors   
      Equipment   
      Industry Group   
      Index   
18,320,717  10/8/07  1 month USD-  Standard & Poors  (856,866) 
    LIBOR-BBA minus  500 Energy Index   
    30 bp     
4,995,454  10/8/07  1 month USD-  Standard & Poors  (204,585) 
    LIBOR-BBA minus  500 Consumer   
    30 bp  Services Index   
2,624,860  10/8/07  1 month USD-  Standard & Poors  (103,687) 
    LIBOR-BBA minus  500 Software &   
    30 bp  Services Index   
5,750,221  10/8/07  1 month USD-  Standard & Poors  146,683 
    LIBOR-BBA minus  500 Retailing   
    30 bp  Index   
13,145,821  10/8/07  1 month USD-  Standard & Poors  (732,170) 
    LIBOR-BBA minus  500 Automobiles   
    30 bp  & Components   
      Index   
27,815,985  10/8/07  1 month USD-  Standard & Poors  (1,179,124) 
    LIBOR-BBA minus  500 Telecommunication   
    30 bp  Services Index   
46,058,445  10/8/07  1 month USD-  Standard & Poors  (1,928,347) 
    LIBOR-BBA minus  500 Food &   
    30 bp  Staples   
      Retailing GICS   
      Industry Group   
      Index   

103

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
      Fixed payments  Total return  Unrealized 
Swap counterparty /    Termination  received (paid) by  received by  appreciation/ 
Notional amount    date  fund per annum  or paid by fund  (depreciation) 
JPMorgan Chase Bank, N.A. continued         
 
$ 43,000    2/1/08  (50 bp minus  The spread  $ (310) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
1,511,000    2/1/08  25 bp plus  The spread  19,643 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
1,363,000    10/1/07  17.5 bp plus  The spread  (27,260) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
1,431,150  (F)  8/1/08  17.5 bp minus  The spread  12,084 
      change in spread  return of Lehman   
      of Lehman  Brothers AAA   
      Brothers AAA  8.5+ CMBS Index   
      8.5+ Commercial  adjusted by   
      Mortgage Backed  modified   
      Securities Index  duration factor   
Lehman Brothers Special Financing, Inc.         
7,900,000  (F)  4/1/08  (175 bp minus  The spread  (47,217) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
7,900,000  (F)  9/1/08  Beginning  The spread  103,604 
      of period nominal  return of Lehman   
      spread of Lehman  Brothers AAA   
      Brothers AAA  8.5+ CMBS Index   
      8.5+ Commercial  adjusted by   
      Mortgage Backed  modified   
      Securities Index  duration factor   
6,438,000  (F)  3/1/08  (2.5 bp plus  The spread  (67,189) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
3,444,000  (F)  3/1/08  70 bp minus  The spread  51,919 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     

104

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
      Fixed payments  Total return  Unrealized 
Swap counterparty /    Termination  received (paid) by  received by  appreciation/ 
Notional amount    date  fund per annum  or paid by fund  (depreciation) 
Lehman Brothers Special Financing, Inc. continued       
 
$ 2,424,000  (F)  2/1/08  57.5 bp plus  The spread  $ 32,373 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
1,366,000  (F)  1/1/08  (5 bp plus  The spread  26,721 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
2,920,000  (F)  1/1/08  (Beginning  The spread  40,947 
      of period nominal  return of Lehman   
      spread of Lehman  Brothers AAA   
      Brothers AAA  8.5+ CMBS Index   
      8.5+ Commercial  adjusted by   
      Mortgage Backed  modified   
      Securities Index)  duration factor   
2,920,000  (F)  1/1/08  (10 bp plus  The spread  39,397 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
4,642,000  (F)  2/1/08  50 bp minus  The spread  61,348 
      beginning  return of Lehman   
      of period nominal  Brothers Aaa   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
8,799,939    5/1/08  (1 month USD-  Lehman Brothers  (241,435) 
      LIBOR-BBA minus  U.S. High Yield   
      0.50%)  Index   
4,000,004    4/1/08  ($4,000,004)  Lehman Brothers  (76,578) 
        U.S. High Yield Index   
3,026,000  (F)  10/1/07  10 bp plus  The spread  (58,855) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
3,230,196    3/1/08  (1 month USD-  Lehman Brothers  (75,636) 
      LIBOR-BBA minus  U.S. High Yield   
      20 bp)  Index   
132,884,899    2/1/08  (1 month USD-  Lehman Brothers  582,603 
      LIBOR-BBA plus  US Aggregate RBI   
      15 bp)  Series 1 Index   
4,170,000  (F)  3/1/08  (120 bp minus  The spread  (55,637) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     

105

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
      Fixed payments  Total return  Unrealized 
Swap counterparty /    Termination  received (paid) by  received by  appreciation/ 
Notional amount    date  fund per annum  or paid by fund  (depreciation) 
Lehman Brothers Special Financing, Inc. continued       
 
$ 5,562,000  (F)  2/1/08  (100 bp minus  The spread  $ (97,028) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
5,756,000  (F)  2/1/08  30 bp plus  The spread  106,477 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
1,235,000  (F)  2/1/08  50 bp minus  The spread  20,111 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
3,330,000  (F)  12/2/07  8 bp plus  The spread  (56,027) 
      beginning  return of Lehman   
      of period nominal  Brothers Aaa   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
Merrill Lynch International         
1,465,661    2/5/08  (12 month USD-  MSCI Daily Total  504,989 
      LIBOR-BBA minus  Return Net   
      300 BP)  Emerging Markets   
        India USD Index   
40,162,686    11/27/07  (3 month USD-  Russell 2000  (716,394) 
      LIBOR-BBA minus  Total Return   
      0.70%)  Index   
24,623,392    10/26/07  3 month USD-  Russell 2000  1,043,314 
      LIBOR-BBA minus  Total Return   
      0.85%  Index   
Morgan Stanley Capital Services Inc.         
350,000    10/31/07  10 bp plus  Banc of America  (3,144) 
      change in spread  Securities- CMBS   
      of Banc  AAA 10 year Index   
      of America     
      Securities AAA     
      10 yr Index     
      multiplied by     
      the modified     
      duration factor     
4,416,000    1/31/08  25 bp minus  The spread  (66,047) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     

106

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
    Fixed payments  Total return  Unrealized 
Swap counterparty /  Termination  received (paid) by  received by  appreciation/ 
Notional amount  date  fund per annum  or paid by fund  (depreciation) 
 
Morgan Stanley Capital Services Inc. continued       
 
$ 1,209,000  1/31/08  110 bp minus  The spread  $ 10,642 
    change in spread  return of Lehman   
    of Lehman  Brothers AAA   
    Brothers AAA  8.5+ CMBS Index   
    8.5+ Commercial  adjusted by   
    Mortgage Backed  modified   
    Securities Index  duration factor   
1,047,000  1/31/08  80 bp minus  Banc of America  14,316 
    change in spread  Securities- CMBS   
    of Banc  AAA 10 year Index   
    of America     
    Securities AAA     
    10 yr Index     
    multiplied by     
    the modified     
    duration factor     
1,047,000  1/31/08  70 bp minus  The spread  11,211 
    change in spread  return of Lehman   
    of Lehman  Brothers AAA   
    Brothers AAA  8.5+ CMBS Index   
    8.5+ Commercial  adjusted by   
    Mortgage Backed  modified   
    Securities Index  duration factor   
830,000  11/30/07  7.5 bp plus  The spread  (12,774) 
    beginning  return of Lehman   
    of period nominal  Brothers Aaa   
    spread of Lehman  8.5+ CMBS Index   
    Brothers AAA  adjusted by   
    8.5+ Commercial  modified   
    Mortgage Backed  duration factor   
    Securities Index     
5,462,000  1/31/08  40 bp plus  The spread  40,489 
    beginning  return of Lehman   
    of period nominal  Brothers Aaa   
    spread of Lehman  8.5+ CMBS Index   
    Brothers AAA  adjusted by   
    8.5+ Commercial  modified   
    Mortgage Backed  duration factor   
    Securities Index     
 
Total        $ 6,126,256 

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

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/07         
  Upfront      Fixed payments  Unrealized 
Swap counterparty /  premium  Notional  Termination  received (paid) by  appreciation/ 
Referenced debt*  received (paid)**  amount    date  fund per annum  (depreciation) 
Bank of America, N.A.           
DJ ABX NA CMBX BBB Index  $ 623  $905,000  10/12/52  (134 bp)  $ 69,726 
DJ CDX NA HY Series 8           
Index  478,325  80,560,000  6/20/12  (275 bp)  2,553,685 
 
Nalco Co. 7.75%,11/15/11  —  70,000    9/20/12  350 bp  1,949 
Bear Stearns International, Ltd.             
DJ ABX NA CMBX BBB Index  (5,264)  1,086,860  10/12/52  (134 bp)  77,726 
Citibank, N.A.           
Freescale Semiconductor, 8 7/8%,           
12/15/14  —  190,000  9/20/12  495 bp  (376) 

107

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/07 continued       
  Upfront      Fixed payments  Unrealized 
Swap counterparty /  premium  Notional  Termination  received (paid) by  appreciation/ 
Referenced debt*  received (paid)**  amount  date  fund per annum  (depreciation) 
Credit Suisse International           
Dynegy Holdings, Inc.,           
6 7/8%, 4/1/11  $ —  $ 115,000    6/20/17  297 bp  $ (7,648) 
Nalco Co. 7.75%,           
11/15/11  —  70,000  9/20/12  320bp  1,077 
Deutsche Bank AG           
Nalco Co. 7.75%,           
11/15/11  —  60,000    12/20/12  363 bp  1,981 
Goldman Sachs International           
DJ CDX NA HY Series 8           
Index  152,915  10,170,000  6/20/12  35 bp  41,522 
General Motors Corp.,           
7 1/8%, 7/15/13  —  160,000  9/20/08  620 bp  5,130 
General Motors Corp.,           
7 1/8%, 7/15/13  —  35,000  9/20/08  620 bp  1,122 
JPMorgan Chase Bank, N.A.           
DJ CDX NA CMBX AAA Index  —  1,363,000  3/15/49  (7 bp)  8,768 
General Motors Corp.,           
7 1/8%, 7/15/13  —  25,000  9/20/08  500 bp  508 
Lehman Brothers Special Financing, Inc.         
DJ CDX NA IG Series 8           
Index  (1,039)  2,640,000  6/20/12  (35 bp)  27,877 
DJ ABX NA CMBX BBB Index  (1,114)  270,400  10/12/52  (134 bp)  21,354 
DJ CDX NA CMBX AA Index  6,654  210,000  3/15/49  (15 bp)  10,579 
DJ CDX NA CMBX AAA Index  —  2,112,000  3/15/49  (7 bp)  16,556 
DJ CDX NA EM Series 7           
Index  (870,048)  80,560,000  6/20/12  125 bp  (1,065,294) 
DJ CDX NA HY Series 7           
Index  (197,535)  5,000,000  12/20/11  325 bp  (150,844) 
DJ CDX NA IG Series 8           
Index  23,253  1,488,000  6/20/12  35 bp  6,955 
Nalco Co. 7.75%,           
11/15/11  —  70,000  9/20/12  340 bp  1,658 
Sungard Data Systems,           
Inc., 9 1/8%, 8/15/13  —  50,000  9/20/12  395 bp  1,829 
Merrill Lynch Capital Services, Inc.           
General Motors Corp.,           
7 1/8%, 7/15/13  —  110,000  9/20/08  500 bp  2,234 
Merrill Lynch International           
Dynegy Holdings, Inc.,           
6 7/8%, 4/1/11  —  115,000  6/20/17  295 bp  (7,781) 
Morgan Stanley Capital Services, Inc.           
DJ ABX NA CMBX BBB Index  (275)  378,051  10/12/52  (134 bp)  28,592 
DJ CDX NA IG Series 8           
Index  (86)  8,000  6/20/12  (35 bp)  1 
DJ CDX NA IG Series 8           
Index  41,636  3,463,000  6/20/12  35 bp  3,706 
Dynegy Holdings, Inc.,           
6 7/8%, 4/1/11  —  115,000  6/20/12  225 bp  (3,947) 
General Motors Corp.,           
7 1/8%, 7/15/13  —  30,000  9/20/08  500 bp  609 
Jefferson Smurfit Corp,           
7.5%, 6/1/13  —  70,000  9/20/12  445 bp  3,417 
Nalco Co. 7.75%,           
11/15/11  —  70,000  9/20/12  330 bp  1,367 
Total          $1,654,038 

* 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.

108

Balanced Portfolio

FORWARD CURRENCY CONTRACTS TO BUY at 9/30/07 (aggregate face value $497,046,245)       
    Aggregate  Delivery  Unrealized 
  Value  face value  date  appreciation 
Australian Dollar  $114,085,319  $107,226,045  10/17/07  $ 6,859,274 
Brazilian Real  8,059,086  7,609,193  10/17/07  449,893 
British Pound  21,047,641  20,757,942  12/19/07  289,699 
Canadian Dollar  17,911,562  17,692,062  10/17/07  219,500 
Chilean Peso  4,527,043  4,440,845    10/17/07  86,198 
Euro  106,402,440  102,954,525  12/19/07  3,447,915 
Hong Kong Dollar  1,620,489  1,612,279  11/21/07  8,210 
Hungarian Forint  3,558,620  3,390,284  12/19/07  168,336 
Indian Rupee  2,345,420  2,303,342    11/21/07  42,078 
Japanese Yen  86,413,350  86,263,924  11/21/07  149,426 
Mexican Peso  880,906  880,370  10/17/07  536 
New Zealand Dollar  3,833,476  3,701,067  10/17/07  132,409 
Norwegian Krone  119,365,709  112,340,149  12/19/07  7,025,560 
Polish Zloty  41,566  41,006  12/19/07  560 
South African Rand  4,014,150  3,898,179  10/17/07  115,971 
South Korean Won  1,794,484  1,781,853  11/21/07  12,631 
Swiss Franc  20,689,636  20,153,180  12/19/07  536,456 
Total        $19,544,652 
 
 
FORWARD CURRENCY CONTRACTS TO SELL at 9/30/07 (aggregate face value $648,989,088)       
        Unrealized 
    Aggregate  Delivery  appreciation/ 
  Value  face value  date  (depreciation) 
Australian Dollar  $ 21,999,381  $ 21,084,621  10/17/07  $ (914,760) 
British Pound  81,760,475  80,555,028  12/19/07  (1,205,447) 
Canadian Dollar  82,661,520  78,290,135  10/17/07  (4,371,385) 
Czech Koruna  2,726,936  2,616,106  12/19/07  (110,830) 
Danish Krone  1,072,517  1,037,319  12/19/07  (35,198) 
Euro  153,419,366  147,972,274  12/19/07  (5,447,092) 
Japanese Yen  145,059,640  142,345,131  11/21/07  (2,714,509) 
New Zealand Dollar  5,419,009  5,567,757  10/17/07  148,748 
Norwegian Krone  13,411,269  12,439,355  12/19/07  (971,914) 
Polish Zloty  34,132  32,055  12/19/07  (2,077) 
Singapore Dollar  8,471,069  8,316,516  11/21/07  (154,553) 
South African Rand  1,235,397  1,135,840  10/17/07  (99,557) 
Swedish Krona  86,970,162  82,961,515  12/19/07  (4,008,647) 
Swiss Franc  55,536,829  54,044,295  12/19/07  (1,492,534) 
Taiwan Dollar  10,709,858  10,591,141  11/21/07  (118,717) 
Total        $(21,498,472) 
 
 
FUTURES CONTRACTS OUTSTANDING at 9/30/07         
        Unrealized 
  Number of    Expiration  appreciation/ 
  contracts  Value  date  (depreciation) 
Amsterdam Exchange Index (Short)  142  $ 21,984,247  Oct-07  $ 64,693 
Canadian Government Bond 10 yr (Long)  143  16,184,307  Dec-07  57,013 
Dow Jones Euro Stoxx 50 Index (Short)  1,366  85,976,798  Dec-07  (261,075) 
Euro-Bobl 5 yr (Long)  28  4,302,160  Dec-07  (6,867) 
Euro-Bund 10 yr (Long)  129  20,741,018  Dec-07  (184,411) 
Euro-Bund 10 yr (Short)  135  21,705,716  Dec-07  124,856 
Euro-CAC 40 Index (Long)  339  27,702,591  Oct-07  (42,327) 
Euro-Dollar 90 day (Long)  424  101,208,800  Mar-08  359,247 

109

FUTURES CONTRACTS OUTSTANDING at 9/30/07 continued         
        Unrealized 
  Number of    Expiration  appreciation/ 
  contracts  Value  date  (depreciation) 
Euro-Dollar 90 day (Short)  655  $156,585,938  Jun-08  $ (579,420) 
Euro-Dollar 90 day (Short)  831  198,795,975  Sep-08  (714,248) 
Euro-Dollar 90 day (Long)  281  67,014,988  Sep-09  115,549 
FTSE 100 Index (Long)  453  60,401,544  Dec-07  (300,558) 
FTSE 100 Index (Short)  117  15,600,399  Dec-07  55,712 
Japanese Government Bond 10 yr (Long)  14  16,467,573  Dec-07  (46,429) 
Japanese Government Bond 10 yr (Short)  12  14,115,063  Dec-07  (12,600) 
OMXS 30 Index (Short)  679  12,868,400  Oct-07  (168,516) 
Russell 2000 Index Mini (Long)  1,107  90,021,240  Dec-07  3,251,370 
Russell 2000 Index Mini (Short)  1,568  127,509,760  Dec-07  (4,124,672) 
S&P 500 Index (Long)  94  36,145,350    Dec-07  1,010,803 
S&P 500 Index E-Mini (Long)  3,188  245,157,200  Dec-07  5,508,327 
S&P 500 Index E-Mini (Short)  328  25,223,200  Dec-07  (799,336) 
S&P ASX 200 Index (Short)  189  27,729,942  Dec-07  (1,211,271) 
S&P/MIB Index (Short)  43  12,284,531  Dec-07  107,835 
S&P Mid Cap 400 Index E-Mini (Long)  443  39,573,190  Dec-07  28,466 
SGX MSCI Singapore Index (Short)  43  2,638,807  Oct-07  (35,907) 
Tokyo Price Index (Short)  384  54,359,833  Dec-07  (3,560,498) 
U.K. Gilt 10 yr (Long)  22  4,811,699  Dec-07  10,736 
U.S. Treasury Bond 20 yr (Long)  535  59,568,906  Dec-07  453,674 
U.S. Treasury Note 2 yr (Short)  1,260  260,879,063  Dec-07  (1,170,961) 
U.S. Treasury Note 5 yr (Long)  65  6,957,031  Dec-07  51,167 
U.S. Treasury Note 5 yr (Short)  344  36,818,750  Dec-07  (115,162) 
U.S. Treasury Note 10 yr (Long)  702  76,715,438  Dec-07  584,298 
Total        $(1,550,512) 
 
 
WRITTEN OPTIONS OUTSTANDING at 9/30/07 (premiums received $9,180,323)       
    Contract  Expiration date/   
    amount  strike price  Value 
Blue Coat Systems, Inc. (Call)    2,801  Oct-07/87.80  $ 7,535 
S&P 500 Index Depository Receipts (SPDR Trust Series 1) (Call)    51,689  Oct-07/156.28  30,497 
 
Option on an interest rate swap with Goldman Sachs International for the obligation       
to receive a fixed rate of 5.79% versus the three month USD-LIBOR-BBA maturing on       
January 16, 2018.    74,216,000  Jan-08/5.79  207,063 
 
Option on an interest rate swap with Goldman Sachs International for the obligation to       
pay a fixed rate of 5.79% versus the three month USD-LIBOR-BBA maturing on       
January 16, 2018.    74,216,000  Jan-08/5.79  3,493,347 
 
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.    12,203,000  May-12/5.51  629,919 
 
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.    12,203,000  May-12/5.51  487,171 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to pay a fixed rate of 5.225% versus the three month USD-LIBOR-BBA       
maturing on March 5, 2018.    7,124,000  Mar-08/5.225  137,636 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to receive a fixed rate of 5.225% versus the three month USD-LIBOR-BBA       
maturing on March 5, 2018.    7,124,000  Mar-08/5.225  136,923 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to receive a fixed rate of 5.95% versus the three month USD-LIBOR-BBA       
maturing on June 16, 2018.    44,022,000  Jun-08/5.95  272,496 

110

WRITTEN OPTIONS OUTSTANDING at 9/30/07 (premiums received $9,180,323) continued       
  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 5.95% versus the three month USD-LIBOR-BBA       
maturing on June 16, 2018.  $44,022,000  Jun-08/5.95  $ 2,561,640 
 
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.  53,578,000  Aug-08/5.31  1,476,610 
 
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.  53,578,000    Aug-08/5.31  1,376,953 
 
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.  2,440,500  May-12/5.52  98,872 
 
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.  2,440,500  May-12/5.52  125,124 
 
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.  6,101,500  May-12/5.515  312,586 
 
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.  6,101,500  May-12/5.515  246,330 
Total      $11,600,702 
 
 
TBA SALE COMMITMENTS OUTSTANDING at 9/30/07 (proceeds receivable $95,505,992)       
  Principal  Settlement   
  amount  date  Value 
FNMA, 6 1/2s, October 1, 2037  $30,800,000  10/11/07  $31,358,250 
FNMA, 6s, October 1, 2037  900,000  10/11/07  901,406 
FNMA, 5 1/2s, October 1, 2037  34,105,000  10/11/07  33,422,901 
FNMA, 5s, October 1, 2037  25,936,000  10/11/07  24,752,670 
FNMA, 4 1/2s, October 1, 2022  5,400,000  10/16/07  5,205,093 
Total      $95,640,320 

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/07     
    Payments  Payments  Unrealized 
Swap counterparty /  Termination  made by  received by  appreciation/ 
Notional amount  date  fund per annum  fund per annum  (depreciation) 
Bank of America, N.A.         
$ 17,346,000  12/22/09  3.965%  3 month USD-LIBOR-BBA  $ 80,994 
1,470,000  10/3/16  5.15630%  3 month USD-LIBOR-BBA  (18,580) 
800,000  6/24/15  4.39%  3 month USD-LIBOR-BBA  26,517 
18,600,000  4/6/10  4.6375%  3 month USD-LIBOR-BBA  (165,146) 
4,410,000  6/17/15  4.555%  3 month USD-LIBOR-BBA  103,071 
8,600,000  10/21/15  4.943%  3 month USD-LIBOR-BBA  (8,704) 
660,000  6/23/15  4.45%  3 month USD-LIBOR-BBA  19,237 
1,590,000  6/23/15  4.466%  3 month USD-LIBOR-BBA  44,650 
1,500,000  9/1/15  3 month USD-LIBOR-BBA  4.53%  (56,848) 
27,200,000  1/14/10  3 month USD-LIBOR-BBA  4.106%  (409,096) 
954,000  9/24/09  3 month USD-LIBOR-BBA  4.7375%  1,420 
20,743,000  1/28/24  3 month USD-LIBOR-BBA  5.2125%  (394,069) 
7,100,000  3/30/09  3.075%  3 month USD-LIBOR-BBA  164,575 

111

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
    Payments  Payments  Unrealized 
Swap counterparty /  Termination  made by  received by  appreciation/ 
Notional amount  date  fund per annum  fund per annum  (depreciation) 
Bear Stearns Bank PLC         
$ 16,400,000  4/24/12  5.027%  3 month USD-LIBOR-BBA  $ (315,208) 
Citibank, N.A.         
13,500,000  7/27/09  5.504%  3 month USD-LIBOR-BBA  (196,860) 
900,000  4/7/14  5.377%  3 month USD-LIBOR-BBA  (30,382) 
Credit Suisse First Boston International         
9,662,000  3/9/09  3 month USD-LIBOR-BBA  3.195%  (223,048) 
Credit Suisse International         
802,000  3/21/16  3 month USD-LIBOR-BBA  5.20497%  4,356 
2,060,000  9/28/16  5.10886%  3 month USD-LIBOR-BBA  6,906 
2,399,000  8/29/12  5.04556%  3 month USD-LIBOR-BBA  (16,357) 
Deutsche Bank AG         
1,404,369  8/2/32  5.86%  3 month USD-LIBOR-BBA  (81,078) 
1,251,434  8/2/22  3 month USD-LIBOR-BBA  5.7756%  54,518 
Goldman Sachs Capital Markets, L.P.         
1,404,369  8/12/32  5.689%  3 month USD-LIBOR-BBA  (47,270) 
9,013,565  8/15/10  3 month USD-LIBOR-BBA  5.405%  (163,243) 
1,251,434  8/12/22  3 month USD-LIBOR-BBA  5.601%  31,163 
2,822,353  8/1/32  5.919%  3 month USD-LIBOR-BBA  (186,019) 
2,515,000  8/1/22  3 month USD-LIBOR-BBA  5.845%  127,827 
Goldman Sachs International         
33,572,000  11/21/08  5.0925%  3 month USD-LIBOR-BBA  (508,136) 
6,080,000  1/8/12  3 month USD-LIBOR-BBA  4.98%  30,319 
4,999,000  12/20/16  3 month USD-LIBOR-BBA  5.074%  25,835 
2,770,000  4/7/14  5.33842%  3 month USD-LIBOR-BBA  (88,088) 
1,095,000  5/3/16  5.565%  3 month USD-LIBOR-BBA  (48,437) 
2,762,000  9/29/16  3 month USD-LIBOR-BBA  5.1275%  (4,415) 
1,464,000  10/19/16  5.32413%  3 month USD-LIBOR-BBA  (36,835) 
8,657,000  9/29/08  5.085%  3 month USD-LIBOR-BBA  (21,711) 
7,686,000  11/20/26  3 month USD-LIBOR-BBA  5.261%  (48,808) 
34,166,000  11/20/08  5.16%  3 month USD-LIBOR-BBA  (544,435) 
7,431,000  11/21/26  3 month USD-LIBOR-BBA  5.2075%  (94,961) 
11,821,800  9/21/17  5.149%  3 month USD-LIBOR-BBA  47,932 
42,465,200  9/21/09  3 month USD-LIBOR-BBA  4.60%  (51,259) 
4,358,000  9/14/17  5.0625%  3 month USD-LIBOR-BBA  52,089 
8,933,000  9/14/14  4.906%  3 month USD-LIBOR-BBA  75,988 
50,200,000  7/25/09  5.327%  3 month USD-LIBOR-BBA  (561,824) 
8,111,000  6/12/17  3 month USD-LIBOR-BBA  5.7175%  436,489 
45,000,000  10/1/12  3 month USD-LIBOR-BBA  4.909%  77,976 
26,240,200  9/19/09  3 month USD-LIBOR-BBA  4.763%  24,976 
JPMorgan Chase Bank, N.A.         
3,840,000  6/16/15  4.538%  3 month USD-LIBOR-BBA  94,006 
37,730,000  12/7/08  3 month USD-LIBOR-BBA  4.8485%  435,791 
7,664,000  11/20/26  3 month USD-LIBOR-BBA  5.266%  (43,932) 
4,472,000  12/19/16  5.0595%  3 month USD-LIBOR-BBA  (18,154) 
12,700,000  8/4/16  3 month USD-LIBOR-BBA  5.5195%  334,795 
24,400,000  8/4/08  3 month USD-LIBOR-BBA  5.40%  93,506 
16,210,000  12/7/26  5.036%  3 month USD-LIBOR-BBA  556,911 
8,800,000  4/23/17  5.186%  3 month USD-LIBOR-BBA  (111,835) 
1,368,000  9/18/16  5.291%  3 month USD-LIBOR-BBA  (12,455) 
18,126,000  3/8/17  3 month USD-LIBOR-BBA  5.28%  111,175 
3,100,000  4/17/09  5.12%  3 month USD-LIBOR-BBA  (57,161) 
1,000,000  4/17/17  3 month USD-LIBOR-BBA  5.266%  19,134 
3,238,000  9/28/16  3 month USD-LIBOR-BBA  5.1223%  (6,873) 
12,180,000  10/10/13  5.09%  3 month USD-LIBOR-BBA  (224,961) 

112

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
    Payments  Payments  Unrealized 
Swap counterparty /  Termination  made by  received by  appreciation/ 
Notional amount  date  fund per annum  fund per annum  (depreciation) 
JPMorgan Chase Bank, N.A. continued         
$ 960,000  6/24/15  4.387%  3 month USD-LIBOR-BBA  $ 32,011 
3,084,000  2/23/17  5.211%  3 month USD-LIBOR-BBA  (5,885) 
4,000,000  9/2/15  3 month USD-LIBOR-BBA  4.4505%  (172,592) 
2,690,000  8/2/15  3 month USD-LIBOR-BBA  4.6570%  (78,168) 
8,750,000  10/10/13  5.054%  3 month USD-LIBOR-BBA  (142,001) 
13,300,000  6/29/15  3 month USD-LIBOR-BBA  4.296%  (522,387) 
35,000,000  1/17/16  4.946%  3 month USD-LIBOR-BBA  447,169 
42,206,000  1/31/17  3 month USD-LIBO R-BBA  5.415%  752,408 
34,078,000  11/20/08  5.165%  3 month USD-LIBOR-BBA  (545,352) 
20,700,000  3/7/15  3 month USD-LIBOR-BBA  4.798%  (364,210) 
7,800,000  10/21/15  4.916%  3 month USD-LIBOR-BBA  6,914 
10,143,000  9/28/08  5.096%  3 month USD-LIBOR-BBA  (26,055) 
69,400,000  8/13/12  3 month USD-LIBOR-BBA  5.2%  938,095 
17,075,000  8/29/17  5.2925%  3 month USD-LIBOR-BBA  (142,023) 
2,800,000  8/7/12  3 month USD-LIBOR-BBA  5.194%  38,086 
5,426,000  8/29/17  5.263%  3 month USD-LIBOR-BBA  (23,665) 
8,600,000  7/25/17  3 month USD-LIBOR-BBA  5.652%  304,677 
19,820,000  7/5/17  3 month USD-LIBOR-BBA  4.55%  (1,017,019) 
10,000,000  9/25/12  3 month USD-LIBOR-BBA  4.945%  30,575 
18,300,000  6/27/17  3 month USD-LIBOR-BBA  5.712%  992,473 
6,589,000  9/27/17  5.2335%  3 month USD-LIBOR-BBA  (16,497) 
11,821,800  9/21/17  5.15%  3 month USD-LIBOR-BBA  47,102 
42,465,200  9/21/09  3 month USD-LIBOR-BBA  4.6125%  (41,345) 
Lehman Brothers Special Financing, Inc.         
40,316,000  8/3/11  5.445%  3 month USD-LIBOR-BBA  (930,043) 
51,091,000  8/3/16  5.5675%  3 month USD-LIBOR-BBA  (1,537,644) 
25,180,000  12/28/16  5.084%  3 month USD-LIBOR-BBA  (170,161) 
4,452,000  10/23/16  5.325%  3 month USD-LIBOR-BBA  (112,140) 
4,452,000  10/23/16  3 month USD-LIBOR-BBA  5.3275%  112,990 
11,076,000  10/23/08  3 month USD-LIBOR-BBA  5.26%  191,209 
11,076,000  10/23/08  5.255%  3 month USD-LIBOR-BBA  (190,412) 
37,352,000  3/15/09  4.9298%  3 month USD-LIBOR-BBA  (79,659) 
14,326,072  8/29/09  5.005%  3 month USD-LIBOR-BBA  (75,098) 
30,117,000  8/29/09  5.001%  3 month USD-LIBOR-BBA  (160,479) 
4,107,000  8/29/17  5.3187%  3 month USD-LIBOR-BBA  (36,227) 
4,076,000  8/29/17  5.29125%  3 month USD-LIBOR-BBA  (27,213) 
5,193,029  8/29/12  5.075%  3 month USD-LIBOR-BBA  (43,280) 
20,700,000  3/16/17  5.034%  3 month USD-LIBOR-BBA  241,503 
622,000  8/3/36  3 month USD-LIBOR-BBA  5.67%  20,601 
46,963,000  8/3/08  3 month USD-LIBOR-BBA  5.425%  190,980 
10,730,000  11/29/16  3 month USD-LIBOR-BBA  5.02%  14,865 
36,430,000  11/29/08  3 month USD-LIBOR-BBA  5.045%  531,882 
4,560,000  11/29/26  3 month USD-LIBOR-BBA  5.135%  (98,290) 
15,850,000  9/29/13  5.0555%  3 month USD-LIBOR-BBA  (80,604) 
18,750,000  9/8/16  5.3275%  3 month USD-LIBOR-BBA  (217,854) 
55,000,000  3/16/09  4.9275%  3 month USD-LIBOR-BBA  (115,597) 
11,112,000  9/11/17  5.0525%  3 month USD-LIBOR-BBA  141,940 
890,858  8/29/17  3 month USD-LIBOR-BBA  5.32%  7,859 
7,090,000  8/24/12  5.085%  3 month USD-LIBOR-BBA  (59,854) 
11,821,800  9/24/17  5.285%  3 month USD-LIBOR-BBA  (77,251) 
43,500,000  5/29/12  5.28%  3 month USD-LIBOR-BBA  (1,327,033) 
17,493,500  9/19/09  3 month USD-LIBOR-BBA  4.755%  13,980 
42,465,200  9/24/09  3 month USD-LIBOR-BBA  4.695%  28,870 

113

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
    Payments  Payments  Unrealized 
Swap counterparty /  Termination  made by  received by  appreciation/ 
Notional amount  date  fund per annum  fund per annum  (depreciation) 
Merrill Lynch Capital Services, Inc.         
$ 2,444,243  8/1/12  5.204%  3 month USD-LIBOR-BBA  $ (34,311) 
2,515,000  8/1/22  3 month USD-LIBOR-BBA  5.845%  127,827 
1,251,434  8/12/22  3 month USD-LIBOR-BBA  5.601%  31,163 
1,216,226  8/13/12  4.94%  3 month USD-LIBOR-BBA  (2,409) 
Morgan Stanley Capital Services, Inc.         
5,473,000  2/20/17  5.19%  3 month USD-LIBOR-BBA  (2,490) 
1,936,000  8/29/17  5.26021%  3 month USD-LIBOR-BBA  (8,013) 
 
Total        $(4,952,114) 
 
 
 
TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07     
 
    Fixed payments  Total return  Unrealized 
Swap counterparty /  Termination  received (paid) by  received by  appreciation/ 
Notional amount  date  fund per annum  or paid by fund  (depreciation) 
Bank of America, N.A.         
$ 14,480,000  5/2/08  5 bp plus change  Banc of America  $ (164,125) 
    in spread  Securities- CMBS   
    of Banc  AAA 10 year Index   
    of America     
    Securities AAA     
    10 yr Index     
    multiplied by     
    the modified     
    duration factor     
8,650,000  5/2/08  10 bp plus  Banc of America  (91,033) 
    change in spread  Securities- CMBS   
    of Banc  AAA 10 year Index   
    of America     
    Securities AAA     
    10 yr Index     
    multiplied by     
    the modified     
    duration factor     
Citibank, N.A.         
163,845,925  4/3/08  (Russell 2000  3 month USD-  6,914,694 
    Total Return  LIBOR-BBA   
    Index)     
8,120,000  (F)  5/2/08  12.5 bp plus  Banc of America  (40,478) 
    change in spread  Securities- CMBS   
    of Banc  AAA 10 year Index   
    of America     
    Securities AAA     
    10 yr Index     
    multiplied by     
    the modified     
    duration factor     
174,014,695  10/8/08  (1 month USD-  A basket of  7,244,349 
    LIBOR-BBA plus  equity positions as   
    25 bp)  set forth by the issuer   
173,261,547  10/8/08  1 month USD-  A basket of  (8,364,272) 
    LIBOR-BBA minus  equity positions as   
    30 bp  set forth by the issuer   
51,290,076  9/11/08  (3 month USD-  PowerShares QQQ  3,645,052 
    LIBOR-BBA minus     
    30 bp)     
51,239,161  9/11/08  3 month USD-  The units  (1,397,316) 
    LIBOR-BBA minus  of Financial   
    75 bp  Select Sector   
      SPDR Fund   

114

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
      Fixed payments  Total return  Unrealized 
Swap counterparty /    Termination  received (paid) by  received by  appreciation/ 
Notional amount    date  fund per annum  or paid by fund  (depreciation) 
Citibank, N.A. continued         
 
$ 55,260,238    1/16/08  3 month USD-  (Russell 2000  $ 2,668,641 
      LIBOR-BBA  Total Return   
        Index)   
13,000,000  (F)  10/1/07  (7.5 bp plus  The spread  253,470 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
11,680,000  (F)  10/31/07  10 bp plus  Banc of America  (66,290) 
      change in spread  Securities- CMBS   
      of Banc  AAA 10 year Index   
      of America     
      Securities AAA     
      10 yr Index     
      multiplied by     
      the modified     
      duration factor     
4,830,000  (F)  11/2/07  15 bp plus  Banc of America  (28,600) 
      change in spread  Securities- CMBS   
      of Banc  AAA 10 year Index   
      of America     
      Securities AAA     
      10 yr Index     
      multiplied by     
      the modified     
      duration factor     
Deutsche Bank AG           
4,501,000  (F)  2/1/08  30 bp plus  The spread  86,338 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
Goldman Sachs International         
12,550,000    1/1/08  (10 bp plus  The spread  225,673 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
12,950,000    5/2/08  10 bp plus  Banc of America  119,516 
      change in spread  Securities- CMBS   
      of Banc  AAA 10 year Index   
      of America     
      Securities AAA     
      10 yr Index     
      multiplied by     
      the modified     
      duration factor     
768,000    9/15/11  678 bp (1 month  Ford Credit Auto  15,656 
      USD-LIBOR-BBA)  Owner Trust   
        Series 2005-B   
        Class D   

115

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
    Fixed payments  Total return  Unrealized 
Swap counterparty /  Termination  received (paid) by  received by  appreciation/ 
Notional amount  date  fund per annum  or paid by fund  (depreciation) 
JPMorgan Chase Bank, N.A.         
$ 21,148,000 (F)  3/1/08  (115 bp minus  The spread  $ (333,466) 
    beginning  return of Lehman   
    of period nominal  Brothers AAA   
    spread of Lehman  8.5+ CMBS Index   
    Brothers AAA  adjusted by   
    8.5+ Commercial  modified   
    Mortgage Backed  duration factor   
    Securities Index)     
24,956,946  9/24/08  3 month USD-  Russell 2000  322,498 
    LIBOR-BBA  Total Return   
      Index   
8,693,837  10/8/07  (1 month USD-  Standard & Poors 500  23,451 
    LIBOR-BBA plus  Transportation   
    25 bp)  Index   
7,575,245  10/8/07  (1 month USD-  Standard & Poors 500  520,071 
    LIBOR-BBA plus  Materials   
    25 bp)  Index   
7,081,274  10/8/07  (1 month USD-  Standard & Poors 500  181,944 
    LIBOR-BBA plus  Pharmaceuticals,   
    25 bp)  Biotechnology &   
      Life Sciences   
      Index   
15,903,506  10/8/07  (1 month USD-  Standard & Poors  563,795 
    LIBOR-BBA plus  500 Diversified   
    25 bp)  Financials Index   
6,558,682  10/8/07  (1 month USD-  Standard & Poors  166,579 
    LIBOR-BBA plus  500 Utilities   
    25 bp)  Index   
20,216,555  10/8/07  (1 month USD-  Standard & Poors  841,123 
    LIBOR-BBA plus  500 Insurance   
    25 bp)  Index   
23,882,660  10/8/07  (1 month USD-  Standard & Poors  1,467,346 
    LIBOR-BBA plus  500 Capital   
    25 bp)  Goods Index   
24,094,588  10/8/07  (1 month USD-  Standard & Poors  749,313 
    LIBOR-BBA plus  500 Technology   
    25 bp)  Hardware &   
      Equipment Index   
12,282,275  10/8/07  (1 month USD-  Standard & Poors  (32,880) 
    LIBOR-BBA plus  500 Commercial   
    25 bp)  Services &   
      Supplies Index   
20,692,200  10/8/07  (1 month USD-  Standard & Poors  (299,863) 
    LIBOR-BBA plus  500 Consumer   
    25 bp)  Durables &   
      Apparel Index   
32,647,724  10/8/07  (1 month USD-  Standard & Poors  (257,519) 
    LIBOR-BBA plus  500 Media Index   
    25 bp)     
8,528,481  10/8/07  (1 month USD-  Standard & Poors  195,996 
    LIBOR-BBA plus  500 Health Care   
    25 bp)  Equipment &   
      Services Index   
12,483,031  10/8/07  1 month USD-  Standard & Poors  (674,357) 
    LIBOR-BBA minus  500 Real Estate   
    30 bp  Index   
26,567,151  10/8/07  1 month USD-  Standard & Poors  38,088 
    LIBOR-BBA minus  500 Banks Index   
    30 bp     
17,708,711  10/8/07  1 month USD-  Standard & Poors  (1,175,226) 
    LIBOR-BBA minus  500 Household &   
    30 bp  Personal   
      Products Index   

116

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
    Fixed payments  Total return  Unrealized 
Swap counterparty /  Termination  received (paid) by  received by  appreciation/ 
Notional amount  date  fund per annum  or paid by fund  (depreciation) 
JPMorgan Chase Bank, N.A. continued         
 
$ 13,487,805  10/8/07  1 month USD-  Standard & Poors  $ (546,789) 
    LIBOR-BBA minus  500 Food   
    30 bp  Beverage &   
      Tobacco Index   
12,442,884  10/8/07  1 month USD-  Standard &  62,069 
    LIBOR-BBA minus  Poors 500   
    30 bp  Semiconductors   
      and   
      Semiconductors   
      Equipment   
      Industry Group   
      Index   
16,276,495  10/8/07  1 month USD-  Standard & Poors  (761,257) 
    LIBOR-BBA minus  500 Energy Index   
    30 bp     
4,438,046  10/8/07  1 month USD-  Standard & Poors  (181,758) 
    LIBOR-BBA minus  500 Consumer   
    30 bp  Services Index   
2,331,987  10/8/07  1 month USD-  Standard & Poors  (92,119) 
    LIBOR-BBA minus  500 Software &   
    30 bp  Services Index   
5,108,894  10/8/07  1 month USD-  Standard & Poors  130,323 
    LIBOR-BBA minus  500 Retailing   
    30 bp  Index   
11,679,204  10/8/07  1 month USD-  Standard & Poors  (650,485) 
    LIBOR-BBA minus  500 Automobiles   
    30 bp  & Components   
      Index   
24,712,731  10/8/07  1 month USD-  Standard & Poors  (1,047,577) 
    LIBOR-BBA minus  500   
    30 bp  Telecommunicatio   
      n Services Index   
40,919,868  10/8/07  1 month USD-  Standard & Poors  (1,713,208) 
    LIBOR-BBA minus  500 Food &   
    30 bp  Staples   
      Retailing GICS   
      Industry Group   
      Index   
6,229,000  2/1/08  25 bp plus  The spread  80,977 
    beginning  return of Lehman   
    of period nominal  Brothers AAA   
    spread of Lehman  8.5+ CMBS Index   
    Brothers AAA  adjusted by   
    8.5+ Commercial  modified   
    Mortgage Backed  duration factor   
    Securities Index     
3,886,000  10/1/07  17.5 bp plus  The spread  (77,720) 
    beginning  return of Lehman   
    of period nominal  Brothers AAA   
    spread of Lehman  8.5+ CMBS Index   
    Brothers AAA  adjusted by   
    8.5+ Commercial  modified   
    Mortgage Backed  duration factor   
    Securities Index     
5,170,200 (F)  8/1/08  17.5 bp minus  The spread  43,655 
    change in spread  return of Lehman   
    of Lehman  Brothers AAA   
    Brothers AAA  8.5+ CMBS Index   
    8.5+ Commercial  adjusted by   
    Mortgage Backed  modified   
    Securities Index  duration factor   

117

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
      Fixed payments  Total return  Unrealized 
Swap counterparty /    Termination  received (paid) by  received by  appreciation/ 
Notional amount    date  fund per annum  or paid by fund  (depreciation) 
Lehman Brothers Special Financing, Inc.         
$ 21,900,000  (F)  4/1/08  (175 bp minus  The spread  $ (130,892) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
21,900,000  (F)  9/1/08  Beginning  The spread  287,208 
      of period nominal  return of Lehman   
      spread of Lehman  Brothers AAA   
      Brothers AAA  8.5+ CMBS Index   
      8.5+ Commercial  adjusted by   
      Mortgage Backed  modified   
      Securities Index  duration factor   
17,726,000  (F)  3/1/08  (2.5 bp plus  The spread  (184,994) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
11,648,000  (F)  3/1/08  70 bp minus  The spread  175,594 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
11,356,000  (F)  2/1/08  (45 bp minus  The spread  (177,845) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
8,787,000  (F)  2/1/08  57.5 bp plus  The spread  117,352 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
12,109,000  (F)  1/1/08  (5 bp plus  The spread  236,876 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
12,550,000  (F)  1/1/08  (Beginning  The spread  175,989 
      of period nominal  return of Lehman   
      spread of Lehman  Brothers AAA   
      Brothers AAA  8.5+ CMBS Index   
      8.5+ Commercial  adjusted by   
      Mortgage Backed  modified   
      Securities Index)  duration factor   

118

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
      Fixed payments  Total return  Unrealized 
Swap counterparty /    Termination  received (paid) by  received by  appreciation/ 
Notional amount    date  fund per annum  or paid by fund  (depreciation) 
Lehman Brothers Special Financing, Inc. continued       
 
$ 12,550,000  (F)  1/1/08  (10 bp plus  The spread  $ 169,325 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
3,599,432    5/1/08  (1 month USD-  Lehman Brothers  (98,754) 
      LIBOR-BBA minus  U.S. High Yield   
      0.50%)  Index   
8,625,000  (F)  10/1/07  10 bp plus  The spread  (167,756) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
3,969,769    3/1/08  (1 month USD-  Lehman Brothers  (92,953) 
      LIBOR-BBA minus  U.S. High Yield   
      20 bp)  Index   
108,048,916    2/1/08  (1 month USD-  Lehman Brothers  473,715 
      LIBOR-BBA plus  US Aggregate RBI   
      15 bp)  Series 1 Index   
15,863,000  (F)  3/1/08  (120 bp minus  The spread  (211,647) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
24,415,000  (F)  2/1/08  30 bp plus  The spread  451,638 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
4,502,000  (F)  2/1/08  50 bp minus  The spread  73,310 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
12,160,000  (F)  12/1/07  8 bp plus  The spread  (204,592) 
      beginning  return of Lehman   
      of period nominal  Brothers Aaa   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
Merrill Lynch International         
10,039,833    11/27/07  (3 month USD-  Russell 2000  (179,084) 
      LIBOR-BBA minus  Total Return   
      0.70%)  Index   
18,661,191    10/26/07  3 month USD-  Russell 2000  790,691 
      LIBOR-BBA minus  Total Return   
      0.85%  Index   

119

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
    Fixed payments  Total return  Unrealized 
Swap counterparty /  Termination  received (paid) by  received by  appreciation/ 
Notional amount  date  fund per annum  or paid by fund  (depreciation) 
 
Morgan Stanley Capital Services Inc.         
$ 6,170,000  10/31/07  10 bp plus  Banc of America  $ (55,423) 
    change in spread  Securities- CMBS   
    of Banc  AAA 10 year Index   
    of America     
    Securities AAA     
    10 yr Index     
    multiplied by     
    the modified     
    duration factor     
21,341,000  1/31/08  110 bp minus  The spread  187,846 
    change in spread  return of Lehman   
    of Lehman  Brothers AAA   
    Brothers AAA  8.5+ CMBS Index   
    8.5+ Commercial  adjusted by   
    Mortgage Backed  modified   
    Securities Index  duration factor   
3,823,000  1/31/08  80 bp minus  Banc of America  52,273 
    change in spread  Securities- CMBS   
    of Banc  AAA 10 year Index   
    of America     
    Securities AAA     
    10 yr Index     
    multiplied by     
    the modified     
    duration factor     
3,823,000  1/31/08  70 bp minus  The spread  40,939 
    change in spread  return of Lehman   
    of Lehman  Brothers AAA   
    Brothers AAA  8.5+ CMBS Index   
    8.5+ Commercial  adjusted by   
    Mortgage Backed  modified   
    Securities Index  duration factor   
3,040,000  11/30/07  7.5 bp plus  The spread  (46,785) 
    beginning  return of Lehman   
    of period nominal  Brothers AAA   
    spread of Lehman  8.5+ CMBS Index   
    Brothers AAA  adjusted by   
    8.5+ Commercial  modified   
    Mortgage Backed  duration factor   
    Securities Index     
19,873,000  1/31/08  40 bp plus  The spread  147,315 
    beginning  return of Lehman   
    of period nominal  Brothers AAA   
    spread of Lehman  8.5+ CMBS Index   
    Brothers AAA  adjusted by   
    8.5+ Commercial  modified   
    Mortgage Backed  duration factor   
    Securities Index     
 
Total        $10,393,625 

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

120

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/07         
  Upfront      Fixed payments  Unrealized 
Swap counterparty /  premium  Notional  Termination  received (paid) by  appreciation/ 
Referenced debt*  received (paid)**  amount    date  fund per annum  (depreciation) 
Bank of America, N.A.           
DJ ABX NA CMBX BBB Index  $ 1,846  $ 2,685,000  10/12/52  (134 bp)  $ 207,993 
DJ CDX NA HY Series 8           
Index  437,172  73,629,000  6/20/12  (275 bp)  2,334,571 
DJ CDX NA IG Series 8           
Index  (4,190)  7,225,000  6/20/17  (60 bp)  103,077 
DJ CDX NA IG Series 8           
Index  (42,988)  11,805,000  6/20/17  (60 bp)  132,277 
L-3 Communications           
Corp. 7 5/8%, 6/15/12  —  65,000  6/20/11  (101 bp)  18 
Nalco, Co.           
7.75%,11/15/11  —  60,000  9/20/12  350 bp  1,670 
Bear Stearns International, Ltd.           
DJ ABX NA CMBX BBB Index  15,603  3,221,698  10/12/52  (134 bp)  260,885 
Citibank, N.A.           
CMS Energy Corp.,           
6.875%, 12/15/15  —  550,000  6/20/12  57 bp  (11,262) 
Freescale           
Semiconductor, 8 7/8%,           
12/15/14  —  170,000  9/20/12  495 bp  (336) 
Credit Suisse International           
Dynegy Holdings Inc.,           
6 7/8%, 4/1/11  —  105,000  6/20/17  297 bp  (6,983) 
Nalco, Co. 7.75%,           
11/15/11  —  65,000  9/20/12  320bp  1,000 
Sprint Capital Corp, 8           
3/8%, 3/15/12  —  930,000  6/20/12  (59 bp)  1,469 
Deutsche Bank AG           
DJ CDX NA IG Series 8           
Index 7-10% tranche  —  1,107,000  6/20/12  22 bp  (16,885) 
France Telecom, 7.25%,           
1/28/13  —  410,000  6/20/16  70 bp  6,951 
Nalco, Co. 7.75%,           
11/15/11  —  60,000  12/20/12  363 bp  1,981 
Goldman Sachs International           
Any one of the underlying securities           
in the basket of BB CMBS securities  —  1,804,000  (a)  2.461%  111,171 
DJ CDX NA HY Series 8           
Index  (886)  41,695  6/20/10  (275 bp)  (1,036) 
DJ CDX NA HY Series 8           
Index  447,769  29,780,000  6/20/12  35 bp  121,587 
DJ CDX NA IG Series 8           
Index  (6)  7,220,000  6/20/17  (60 bp)  107,189 
DJ CDX NA IG Series 8           
Index  (44,427)  10,555,000  6/20/17  (60 bp)  112,280 
General Motors Corp.,           
7 1/8%, 7/15/13  —  180,000  9/20/08  620 bp  5,772 
General Motors Corp.,           
7 1/8%, 7/15/13  —  40,000  9/20/08  620 bp  1,283 
Lehman Brothers           
Holdings, 6 5/8%,           
1/18/12  —  565,000  9/20/17  (67.8 bp)  7,155 
Merrill Lynch & Co.,           
5%, 1/15/15  —  565,000  9/20/12  48 bp  (2,833) 
Merrill Lynch & Co.,           
5%, 1/15/15  —  565,000  9/20/17  (59.8 bp)  (24) 
JPMorgan Chase Bank, N.A.           
DJ CDX NA CMBX AAA Index  —  3,886,000  3/15/49  (7 bp)  24,954 
General Motors Corp.,           
7 1/8%, 7/15/13  —  30,000  9/20/08  500 bp  609 

121

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/07 continued       
    Upfront      Fixed payments  Unrealized 
Swap counterparty /    premium  Notional  Termination  received (paid) by  appreciation/ 
Referenced debt*  received (paid)**  amount  date  fund per annum  (depreciation) 
Lehman Brothers Special Financing, Inc.           
Bear Stearns Co. Inc.,             
5.3%, 10/30/15    $ —  $ 565,000  9/20/12  63.5 bp  $ (6,365) 
Bear Stearns Co. Inc.,             
5.3%, 10/30/15    —  565,000  9/20/17  (77 bp)  5,336 
CMS Energy Corp.,             
6.875%, 12/15/15    —  140,000  6/20/12  62 bp  (2,573) 
DJ ABX NA CMBX BBB Index  3,193  775,000  10/12/52  (134 bp)  67,415 
DJ CDX NA CMBX AA Index  (15,399)  486,000  3/15/49  (15 bp)  (6,327) 
DJ CDX NA CMBX AAA Index  —  8,625,000  3/15/49  (7 bp)  47,088 
DJ CDX NA EM Series 7             
Index    (795,193)  73,629,000  6/20/12  125 bp  (973,641) 
DJ CDX NA HY Series 8             
Index    (52,290)  1,494,000  6/20/10  (275 bp)  (57,654) 
DJ CDX NA HY Series 8             
Index 35-60% tranche    —  24,229,000  6/20/12  104 bp  (338,986) 
DJ CDX NA HY Series 9             
Index 25-35% tranche    —  5,000,000  12/20/10  104.5 bp  — 
DJ CDX NA IG Series 8             
Index    77,261  4,944,000  6/20/12  35 bp  23,109 
DJ CDX NA IG Series 8             
Index    40,554  1,158,692  6/20/10  275 bp  44,714 
DJ CDX NA IG Series 8             
Index    162,137  10,533,000  6/20/12  35 bp  45,043 
DJ CDX NA IG Series 8             
Index 30-100% tranche    —  17,192,450  6/20/12  (3.125 bp)  47,119 
DJ CDX NA IG Series 8             
Index 30-100% tranche    —  14,066,550  6/20/12  (8 bp)  8,844 
DJ CDX NA IG Series 8             
Index 7-10% tranche    —  429,000  6/20/14  (152 bp)  (9,710) 
Goldman Sachs Group,             
Inc., 6.6%, 1/15/12    —  565,000  9/20/17  (58 bp)  (3,688) 
Morgan Stanley Dean             
Witter, 6.6% 4/1/12    —  565,000  9/20/12  48 bp  (1,392) 
Morgan Stanley Dean             
Witter, 6.6% 4/1/12    —  565,000  9/20/17  (60.5 bp)  (2,489) 
Nalco, Co. 7.75%,             
11/15/11    —  60,000  9/20/12  340 bp  1,421 
Sungard Data Systems,             
Inc., 9 1/8%, 8/15/13    —  60,000  9/20/12  395 bp  2,195 
Merrill Lynch Capital Services, Inc.           
General Motors Corp.,             
7 1/8%, 7/15/13    —  125,000  9/20/08  500 bp  2,538 
Merrill Lynch International             
Dynegy Holdings Inc.,             
6 7/8%, 4/1/11    —  105,000  6/20/17  295 bp  (7,104) 
Morgan Stanley Capital Services, Inc.           
DJ ABX NA CMBX BBB Index  815  1,121,000  10/12/52  (134 bp)  86,161 
DJ CDX NA HY Series 8             
Index    (6,126)  377,003  6/20/10  275 bp  (4,773) 
DJ CDX NA IG Series 8             
Index    216,417  18,000,000  6/20/12  35 bp  19,262 
DJ CDX NA IG Series 8             
Index    —  7,165,000  6/20/17  (60 bp)  106,376 
DJ CDX NA IG Series 8             
Index 7-10% tranche    —  429,000  6/20/14  95 bp  (4,346) 
Dynegy Holdings Inc.,             
6 7/8%, 4/1/11    —  105,000  6/20/12  225 bp  (3,604) 
General Motors Corp.,             
7 1/8%, 7/15/13    —  30,000  9/20/08  500 bp  609 

122

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/07 continued       
  Upfront      Fixed payments  Unrealized 
Swap counterparty /  premium  Notional  Termination  received (paid) by  appreciation/ 
Referenced debt*  received (paid)**  amount  date  fund per annum  (depreciation) 
Morgan Stanley Capital Services, Inc. continued         
Jefferson Smurfit Corp,           
7.5%, 6/1/13  $  —  $ 35,000  9/20/12  445 bp  $ 1,708 
Nalco, Co. 7.75%,           
11/15/11  —  65,000  9/20/12  330 bp  1,269 
Total          $2,592,088 

* 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.

Conservative Portfolio

FORWARD CURRENCY CONTRACTS TO BUY at 9/30/07 (aggregate face value $114,492,494)       
    Aggregate    Delivery  Unrealized 
  Value  face value  date  appreciation 
Australian Dollar  $25,873,727  $24,270,413  10/17/07  $1,603,314 
Brazilian Real  1,859,260  1,756,696  10/17/07  102,564 
British Pound  4,802,057  4,736,250  12/19/07  65,807 
Canadian Dollar  4,128,952  4,078,000  10/17/07  50,952 
Chilean Peso  1,027,456  1,004,257  10/17/07  23,199 
Danish Krone  900,669  871,111  12/19/07  29,558 
Euro  24,293,416  23,509,364  12/19/07  784,052 
Hong Kong Dollar  383,968  382,023  11/21/07  1,945 
Hungarian Forint  818,502  779,800  12/19/07  38,702 
Indian Rupee  567,029  556,857  11/21/07  10,172 
Japanese Yen  19,426,650  19,422,947  11/21/07  3,703 
Mexican Peso  220,445  220,216  10/17/07  229 
New Zealand Dollar  889,726  858,947  10/17/07  30,779 
Norwegian Krone  28,099,914  26,442,243  12/19/07  1,657,671 
Polish Zloty  9,822  9,690  12/19/07  132 
Singapore Dollar  441,842  433,687  11/21/07  8,155 
South African Rand  939,072  911,763  10/17/07  27,309 
South Korean Won  407,577  404,712  11/21/07  2,865 
Swiss Franc  3,942,006  3,843,518  12/19/07  98,488 
Total        $4,539,596 
 
FORWARD CURRENCY CONTRACTS TO SELL at 9/30/07 (aggregate face value $160,321,730)       
    Aggregate  Delivery  Unrealized 
  Value  face value  date  depreciation 
Australian Dollar  $ 6,533,194  $6,257,881  10/17/07  $ (275,313) 
British Pound  24,428,362  24,080,543  12/19/07  (347,819) 
Canadian Dollar  18,457,858  17,483,425  10/17/07  (974,433) 
Czech Koruna  634,472  608,724  12/19/07  (25,748) 
Euro  41,812,433  40,230,961  12/19/07  (1,581,472) 
Japanese Yen  35,070,813  34,330,996  11/21/07  (739,817) 
Norwegian Krone  2,196,201  2,038,185  12/19/07  (158,016) 
Polish Zloty  8,533  8,014  12/19/07  (519) 
Singapore Dollar  1,075,958  1,056,631  11/21/07  (19,327) 
South African Rand  293,241  271,423  10/17/07  (21,818) 
Swedish Krona  20,141,297  19,198,805  12/19/07  (942,492) 
Swiss Franc  12,647,211  12,309,421  12/19/07  (337,790) 
Taiwan Dollar  2,474,192  2,446,721  11/21/07  (27,471) 
Total        $(5,452,035) 

123

FUTURES CONTRACTS OUTSTANDING at 9/30/07         
        Unrealized 
  Number of    Expiration  appreciation/ 
  contracts  Value  date  (depreciation) 
Amsterdam Exchange Index (Short)  36  $ 5,573,471  Oct-07  $ 16,401 
Canadian Government Bond 10 yr (Long)  96  10,864,989  Dec-07  38,300 
Dow Jones Euro Stoxx 50 Index (Short)  498  31,344,396  Dec-07  (99,007) 
Euro-Bobl 5 yr (Long)  25  3,841,215  Dec-07  (6,130) 
Euro-Bund 10 yr (Long)  120  19,293,970  Dec-07  (171,546) 
Euro-Bund 10 yr (Short)  137  22,027,282  Dec-07  126,705 
Euro-CAC 40 Index (Long)  90  7,354,670  Oct-07  (11,238) 
Euro-Dollar 90 day (Long)  465  110,995,500  Mar-08  393,985 
Euro-Dollar 90 day (Short)  557  133,157,813  Jun-08  (492,778) 
Euro-Dollar 90 day (Short)  846  202,384,350  Sep-08  (746,614) 
Euro-Dollar 90 day (Long)  240  57,237,000  Sep-09  98,672 
FTSE 100 Index (Long)  151  20,133,848  Dec-07  (100,186) 
FTSE 100 Index (Short)  64  8,533,551  Dec-07  35,772 
Japanese Government Bond 10 yr (Long)  13  15,291,318  Dec-07  (43,112) 
Japanese Government Bond 10 yr (Short)  8  9,410,042  Dec-07  (8,400) 
OMXS 30 Index (Long)  39  739,128  Oct-07  11,741 
OMXS 30 Index (Short)  177  3,354,502  Oct-07  (42,359) 
Russell 2000 Index Mini (Long)  329  26,754,280  Dec-07  962,372 
Russell 2000 Index Mini (Short)  407  33,097,240  Dec-07  (1,123,722) 
S&P 500 Index (Long)  36  13,842,900  Dec-07  387,116 
S&P 500 Index E-Mini (Short)  428  32,913,200  Dec-07  (1,043,036) 
S&P ASX 200 Index (Short)  62  9,096,595  Dec-07  (399,196) 
S&P/MIB Index (Short)  12  3,428,241  Dec-07  30,094 
S&P Mid Cap 400 Index E-Mini (Long)  12  1,071,960  Dec-07  30,646 
S&P Mid Cap 400 Index E-Mini (Short)  16  1,429,280  Dec-07  5,408 
SGX MSCI Singapore Index (Short)  26  1,595,558  Oct-07  (27,406) 
Tokyo Price Index (Short)  135  19,110,878  Dec-07  (1,328,551) 
U.K. Gilt 10 yr (Long)  20  4,374,271  Dec-07  9,759 
U.K. Gilt 10 yr (Short)  32  6,998,834  Dec-07  (8,776) 
U.S. Treasury Bond 20 yr (Long)  471  52,442,906  Dec-07  398,849 
U.S. Treasury Note 2 yr (Short)  556  115,118,063    Dec-07  (446,638) 
U.S. Treasury Note 5 yr (Long)  76  8,134,375  Dec-07  59,826 
U.S. Treasury Note 5 yr (Short)  168  17,981,250  Dec-07  (41,894) 
U.S. Treasury Note 10 yr (Long)  426  46,553,813  Dec-07  305,724 
Total        $(3,229,219) 

WRITTEN OPTIONS OUTSTANDING at 9/30/07 (premiums received $8,546,975)       
  Contract  Expiration date/   
  amount  strike price  Value 
Option on an interest rate swap with Goldman Sachs International for the obligation to       
receive a fixed rate of 5.79% versus the three month USD-LIBOR-BBA maturing on       
January 16, 2018.  $62,952,000  Jan-08/5.79  $ 175,636 
 
Option on an interest rate swap with Goldman Sachs International for the obligation to       
pay a fixed rate of 5.79% versus the three month USD-LIBOR-BBA maturing on       
January 16, 2018.  62,952,000  Jan-08/5.79  2,963,151 
 
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.  9,715,000  May-12/5.51  501,488 
  
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.  9,715,000  May-12/5.51  387,844 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to receive a fixed rate of 5.225% versus the three month USD-LIBOR-BBA       
maturing on March 5, 2018.  7,746,000  Mar-08/5.225  148,878 

124

WRITTEN OPTIONS OUTSTANDING at 9/30/07 (premiums received $8,546,975) continued       
  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 5.225% versus the three month USD-LIBOR-BBA       
maturing on March 5, 2018.  $ 7,746,000  Mar-08/5.225  $ 149,653 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to receive a fixed rate of 5.95% versus the three month USD-LIBOR-BBA       
maturing on June 16, 2018.  51,424,000  Jun-08/5.95  318,315 
 
Option on an interest rate swap with Lehman Brothers Special Financing, Inc. for the       
obligation to pay a fixed rate of 5.95% versus the three month USD-LIBOR-BBA       
maturing on June 16, 2018.  51,424,000  Jun-08/5.95  2,992,362 
 
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.  48,472,000  Aug-08/5.31  1,245,730 
 
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.  48,472,000  Aug-08/5.31  1,335,888 
 
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.  4,857,500  May-12/5.515  248,855 
 
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.  4,857,500  May-12/5.515  196,107 
 
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.  1,943,000  May-12/5.52  99,618 
 
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.  1,943,000  May-12/5.52  78,717 
Total      $10,842,242 

TBA SALE COMMITMENTS OUTSTANDING at 9/30/07 (proceeds receivable $30,742,429)       
  Principal  Settlement   
  amount  date  Value 
FNMA, 6 1/2s, October 1, 2037  $13,000,000  10/11/07  $13,235,625 
FNMA, 6s, October 1, 2037  900,000  10/11/07  901,406 
FNMA, 5 1/2s, October 1, 2037  4,664,000  10/11/07  4,570,720 
FNMA, 5s, October 1, 2037  12,600,000  10/11/07  12,025,125 
Total      $30,732,876 

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/07     
    Payments  Payments  Unrealized 
Swap counterparty /  Termination  made by  received by  appreciation/ 
Notional amount  date  fund per annum  fund per annum  (depreciation) 
Bank of America, N.A.         
$13,689,000  12/22/09  3.965%  3 month USD-LIBOR-BBA  $ 63,918 
1,725,000  10/3/16  5.15630%  3 month USD-LIBOR-BBA  (21,803) 
770,000  6/24/15  4.39%  3 month USD-LIBOR-BBA  25,523 
15,300,000  4/6/10  4.6375%  3 month USD-LIBOR-BBA  (135,846) 
4,260,000  6/17/15  4.555%  3 month USD-LIBOR-BBA  99,565 
6,300,000  10/21/15  4.943%  3 month USD-LIBOR-BBA  (6,376) 
640,000  6/23/15  4.45%  3 month USD-LIBOR-BBA  18,654 
1,540,000  6/23/15  4.466%  3 month USD-LIBOR-BBA  43,249 
5,000,000  9/1/15  3 month USD-LIBOR-BBA  4.53%  (189,492) 
12,300,000  1/14/10  3 month USD-LIBOR-BBA  4.106%  (184,995) 

125

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
    Payments  Payments  Unrealized 
Swap counterparty /  Termination  made by  received by  appreciation/ 
Notional amount  date  fund per annum  fund per annum  (depreciation) 
Bank of America, N.A. continued         
$18,177,000  1/28/24  3 month USD-LIBOR-BBA  5.2125%  $ (345,321) 
7,000,000  3/30/09  3.075%  3 month USD-LIBOR-BBA  162,257 
Bear Stearns Bank PLC         
14,000,000  4/24/12  5.027%  3 month USD-LIBOR-BBA  (269,080) 
Citibank, N.A.         
18,650,000  7/27/09  5.504%  3 month USD-LIBOR-BBA  (271,958) 
910,000  4/7/14  5.377%  3 month USD-LIBOR-BBA  (30,719) 
Credit Suisse First Boston International         
19,400,000  11/17/09  3.947%  3 month USD-LIBOR-BBA  131,113 
Credit Suisse International         
887,000  3/21/16  3 month USD-LIBOR-BBA  5.20497%  4,817 
2,464,000  9/28/16  5.10886%  3 month USD-LIBOR-BBA  8,261 
1,853,000  8/29/12  5.04556%  3 month USD-LIBOR-BBA  (12,634) 
Deutsche Bank AG         
925,147  8/2/32  5.86%  3 month USD-LIBOR-BBA  (53,411) 
824,399  8/2/22  3 month USD-LIBOR-BBA  5.7756%  35,914 
Goldman Sachs Capital Markets, L.P.         
925,147  8/12/32  5.689%  3 month USD-LIBOR-BBA  (31,140) 
5,675,208  8/15/10  3 month USD-LIBOR-BBA  5.405%  (102,782) 
824,399  8/12/22  3 month USD-LIBOR-BBA  5.601%  20,529 
1,851,643  8/1/32  5.919%  3 month USD-LIBOR-BBA  (122,040) 
1,650,000  8/1/22  3 month USD-LIBOR-BBA  5.845%  83,862 
Goldman Sachs International         
26,326,000  11/21/08  5.0925%  3 month USD-LIBOR-BBA  (398,462) 
6,330,000  1/8/12  3 month USD-LIBOR-BBA  4.98%  31,566 
5,193,000  12/20/16  3 month USD-LIBOR-BBA  5.074%  26,838 
2,770,000  4/7/14  5.33842%  3 month USD-LIBOR-BBA  (88,088) 
1,017,000  5/3/16  5.565%  3 month USD-LIBOR-BBA  (44,987) 
6,031,000  9/29/16  3 month USD-LIBOR-BBA  5.1275%  (9,641) 
1,660,000  10/19/16  5.32413%  3 month USD-LIBOR-BBA  (41,767) 
19,018,000  9/29/08  5.085%  3 month USD-LIBOR-BBA  (47,695) 
6,109,000  11/20/26  3 month USD-LIBOR-BBA  5.261%  (38,794) 
27,184,000  11/20/08  5.16%  3 month USD-LIBOR-BBA  (433,177) 
5,821,000  11/21/26  3 month USD-LIBOR-BBA  5.2075%  (74,387) 
2,895,200  9/21/17  5.149%  3 month USD-LIBOR-BBA  11,739 
10,473,000  9/21/09  3 month USD-LIBOR-BBA  4.60%  (12,642) 
3,416,000  9/14/17  5.0625%  3 month USD-LIBOR-BBA  40,830 
7,002,000  9/14/14  4.906%  3 month USD-LIBOR-BBA  59,562 
11,900,000  7/25/09  5.327%  3 month USD-LIBOR-BBA  (133,181) 
11,385,000  6/12/17  3 month USD-LIBOR-BBA  5.7175%  612,668 
22,316,700  9/19/09  3 month USD-LIBOR-BBA  4.763%  21,242 
JPMorgan Chase Bank, N.A.         
3,710,000  6/16/15  4.538%  3 month USD-LIBOR-BBA  90,824 
6,092,000  11/20/26  3 month USD-LIBOR-BBA  5.266%  (34,921) 
3,882,000  12/19/16  5.0595%  3 month USD-LIBOR-BBA  (15,759) 
14,800,000  8/4/16  3 month USD-LIBOR-BBA  5.5195%  390,155 
25,700,000  8/4/08  3 month USD-LIBOR-BBA  5.40%  98,488 
14,500,000  4/23/17  5.186%  3 month USD-LIBOR-BBA  (184,274) 
1,659,000  9/18/16  5.291%  3 month USD-LIBOR-BBA  (15,104) 
17,583,000  3/8/17  3 month USD-LIBOR-BBA  5.28%  107,844 
7,069,000  9/28/16  3 month USD-LIBOR-BBA  5.1223%  (15,004) 
13,990,000  10/10/13  5.09%  3 month USD-LIBOR-BBA  (258,391) 
920,000  6/24/15  4.387%  3 month USD-LIBOR-BBA  30,677 

126

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
    Payments  Payments  Unrealized 
Swap counterparty /  Termination  made by  received by  appreciation/ 
Notional amount  date  fund per annum  fund per annum  (depreciation) 
JPMorgan Chase Bank, N.A. continued         
$12,600,000  9/2/15  3 month USD-LIBOR-BBA  4.4505%  $ (543,666) 
2,156,000  8/2/15  3 month USD-LIBOR-BBA  4.6570%  (62,651) 
10,050,000  10/10/13  5.054%  3 month USD-LIBOR-BBA  (163,099) 
12,900,000  6/29/15  3 month USD-LIBOR-BBA  4.296%  (506,676) 
31,000,000  1/17/16  4.946%  3 month USD-LIBOR-BBA  396,064 
2,932,000  1/31/17  3 month USD-LIBOR-BBA  5.415%  52,269 
27,115,000  11/20/08  5.165%  3 month USD-LIBOR-BBA  (433,923) 
22,000,000  3/7/15  3 month USD-LIBOR-BBA  4.798%  (387,083) 
5,163,000  8/15/11  5.412%  3 month USD-LIBOR-BBA  (110,228) 
5,700,000  10/21/15  4.916%  3 month USD-LIBOR-BBA  5,053 
22,282,000  9/28/08  5.096%  3 month USD-LIBOR-BBA  (57,238) 
70,200,000  8/13/12  3 month USD-LIBOR-BBA  5.2%  948,909 
13,962,000  8/29/17  5.2925%  3 month USD-LIBOR-BBA  (116,131) 
2,200,000  8/7/12  3 month USD-LIBOR-BBA  5.194%  29,925 
4,241,000  8/29/17  5.263%  3 month USD-LIBOR-BBA  (18,497) 
2,000,000  7/25/17  3 month USD-LIBOR-BBA  5.652%  70,855 
15,880,000  7/5/17  3 month USD-LIBOR-BBA  4.55%  (814,847) 
20,800,000  6/27/17  3 month USD-LIBOR-BBA  5.712%  1,128,056 
5,149,000  9/27/17  5.2335%  3 month USD-LIBOR-BBA  (12,892) 
2,895,200  9/21/17  5.15%  3 month USD-LIBOR-BBA  11,535 
10,473,000  9/21/09  3 month USD-LIBOR-BBA  4.6125%  (10,197) 
Lehman Brothers Special Financing, Inc.         
24,138,000  8/3/11  5.445%  3 month USD-LIBOR-BBA  (556,835) 
26,397,000  8/3/16  5.5675%  3 month USD-LIBOR-BBA  (794,449) 
26,210,000  12/28/16  5.084%  3 month USD-LIBOR-BBA  (177,121) 
5,046,000  10/23/16  5.325%  3 month USD-LIBOR-BBA  (127,102) 
5,046,000  10/23/16  3 month USD-LIBOR-BBA  5.3275%  128,065 
12,553,000  10/23/08  3 month USD-LIBOR-BBA  5.26%  216,707 
12,553,000  10/23/08  5.255%  3 month USD-LIBOR-BBA  (215,803) 
29,401,000  3/15/09  4.9298%  3 month USD-LIBOR-BBA  (62,702) 
12,250,354  8/29/09  5.005%  3 month USD-LIBOR-BBA  (64,217) 
24,945,000  8/29/09  5.001%  3 month USD-LIBOR-BBA  (132,920) 
3,439,000  8/29/17  5.3187%  3 month USD-LIBOR-BBA  (30,335) 
3,491,000  8/29/17  5.29125%  3 month USD-LIBOR-BBA  (23,308) 
4,425,010  8/29/12  5.075%  3 month USD-LIBOR-BBA  (36,879) 
14,300,000  3/16/17  5.034%  3 month USD-LIBOR-BBA  166,835 
410,000  8/3/36  3 month USD-LIBOR-BBA  5.67%  13,580 
6,002,000  8/3/08  5.425%  3 month USD-LIBOR-BBA  (24,408) 
3,990,000  11/29/16  3 month USD-LIBOR-BBA  5.02%  5,528 
17,700,000  11/29/08  3 month USD-LIBOR-BBA  5.045%  258,422 
3,010,000  11/29/26  3 month USD-LIBOR-BBA  5.135%  (64,880) 
20,650,000  9/29/13  5.0555%  3 month USD-LIBOR-BBA  (105,014) 
41,960,000  9/8/16  5.3275%  3 month USD-LIBOR-BBA  (487,527) 
38,000,000  3/16/09  4.9275%  3 month USD-LIBOR-BBA  (79,867) 
7,701,000  4/12/12  3 month USD-LIBOR-BBA  5.087%  168,503 
8,672,000  9/11/17  5.0525%  3 month USD-LIBOR-BBA  110,773 
761,781  8/29/17  3 month USD-LIBOR-BBA  5.32%  6,720 
6,020,000  8/24/12  5.085%  3 month USD-LIBOR-BBA  (50,821) 
2,895,200  9/24/17  5.285%  3 month USD-LIBOR-BBA  (18,919) 
30,200,000  5/29/12  5.28%  3 month USD-LIBOR-BBA  (921,296) 
14,877,800  9/19/09  3 month USD-LIBOR-BBA  4.755%  11,890 
10,473,000  9/24/09  3 month USD-LIBOR-BBA  4.695%  7,120 

127

INTEREST RATE SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
    Payments  Payments  Unrealized 
Swap counterparty /  Termination  made by  received by  appreciation/ 
Notional amount  date  fund per annum  fund per annum  (depreciation) 
Merrill Lynch Capital Services, Inc.         
$ 1,603,579  8/1/12  5.204%  3 month USD-LIBOR-BBA  $ (22,510) 
1,650,000  8/1/22  3 month USD-LIBOR-BBA  5.845%  83,863 
824,399  8/12/22  3 month USD-LIBOR-BBA  5.601%  20,529 
801,206  8/13/12  4.94%  3 month USD-LIBOR-BBA  (1,587) 
Morgan Stanley Capital Services, Inc.         
1,850,000  2/20/17  5.19%  3 month USD-LIBOR-BBA  (842) 
1,502,000  8/29/17  5.26021%  3 month USD-LIBOR-BBA  (6,217) 
Total        $(4,805,262) 

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07     
 
    Fixed payments  Total return  Unrealized 
Swap counterparty /  Termination  received (paid) by  received by  appreciation/ 
Notional amount  date  fund per annum  or paid by fund  (depreciation) 
Bank of America, N.A.         
$15,280,000  5/2/08  5 bp plus change  Banc of America  $(173,193) 
    in spread  Securities- CMBS   
    of Banc  AAA 10 year Index   
    of America     
    Securities AAA     
    10 yr Index     
    multiplied by     
    the modified     
    duration factor     
6,050,000  5/2/08  10 bp plus  Banc of America  (63,671) 
    change in spread  Securities- CMBS   
    of Banc  AAA 10 year Index   
    of America     
    Securities AAA     
    10 yr Index     
    multiplied by     
    the modified     
    duration factor     
Citibank, N.A.         
18,266,918  4/3/08  (Russell 2000  3 month USD-  770,908 
    Total Return  LIBOR-BBA   
    Index)     
5,670,000 (F)  5/2/08  12.5 bp plus  Banc of America  (28,265) 
    change in spread  Securities- CMBS   
    of Banc  AAA 10 year Index   
    of America     
    Securities AAA     
    10 yr Index     
    multiplied by     
    the modified     
    duration factor     
61,398,222  10/8/08  (1 month USD-  A basket of  2,556,024 
    LIBOR-BBA plus  equity positions as   
    25 bp)  set forth by the issuer   
61,132,458  9/11/08  1 month USD-  A basket of  (2,951,192) 
    LIBOR-BBA minus  equity positions as   
    30 bp  set forth by the issuer   
13,089,757  9/11/08  (3 month USD-  PowerShares QQQ  930,255 
    LIBOR-BBA minus     
    30 bp)     
13,076,755  9/11/08  3 month USD-  The units  (356,609) 
    LIBOR-BBA minus  of Financial   
    75 bp  Select Sector   
      SPDR Fund   

128

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued   
 
      Fixed payments  Total return  Unrealized
Swap counterparty /    Termination  received (paid) by  received by  appreciation/
Notional amount    date  fund per annum  or paid by fund  (depreciation)
 
Citibank, N.A. continued       
 
$11,500,000  (F)  10/1/07  (7.5 bp plus  The spread  $224,223
      beginning  return of Lehman 
      of period nominal  Brothers AAA 
      spread of Lehman  8.5+ CMBS Index 
      Brothers AAA  adjusted by 
      8.5+ Commercial  modified 
      Mortgage Backed  duration factor 
      Securities Index)   
7,610,000  (F)  10/31/07  10 bp plus  Banc of America  (43,191)
      change in spread  Securities- CMBS 
      of Banc  AAA 10 year Index 
      of America   
      Securities AAA   
      10 yr Index   
      multiplied by   
      the modified   
      duration factor   
5,090,000  (F)  11/2/07  15 bp plus  Banc of America  (30,140)
      change in spread  Securities- CMBS 
      of Banc  AAA 10 year Index 
      of America   
      Securities AAA   
      10 yr Index   
      multiplied by   
      the modified   
      duration factor   
Deutsche Bank AG         
3,972,000  (F)  2/1/08  30 bp plus  The spread  76,191
      beginning  return of Lehman 
      of period nominal  Brothers AAA 
      spread of Lehman  8.5+ CMBS Index 
      Brothers AAA  adjusted by 
      8.5+ Commercial  modified 
      Mortgage Backed  duration factor 
      Securities Index   
Goldman Sachs International       
846,000    9/15/11  678 bp (1 month  Ford Credit Auto  17,247
      USD-LIBOR-BBA)  Owner Trust 
        Series 2005-B 
        Class D 
8,250,000    5/2/08  10 bp plus  Banc of America  76,139
      change in spread  Securities- CMBS 
      of Banc  AAA 10 year Index 
      of America   
      Securities AAA   
      10 yr Index   
      multiplied by   
      the modified   
      duration factor   
10,240,000    1/1/08  (10 bp plus  The spread  184,135
      beginning  return of Lehman 
      of period nominal  Brothers AAA 
      spread of Lehman  8.5+ CMBS Index 
      Brothers AAA  adjusted by 
      8.5+ Commercial  modified 
      Mortgage Backed  duration factor 
      Securities Index)   

129

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
    Fixed payments  Total return  Unrealized 
Swap counterparty /  Termination  received (paid) by  received by  appreciation/ 
Notional amount  date  fund per annum  or paid by fund  (depreciation) 
JPMorgan Chase Bank, N.A.         
$19,012,000  (F)  3/1/08  (115 bp minus  The spread  $(299,785) 
    beginning  return of Lehman   
    of period nominal  Brothers AAA   
    spread of Lehman  8.5+ CMBS Index   
    Brothers AAA  adjusted by   
    8.5+ Commercial  modified   
    Mortgage Backed  duration factor   
    Securities Index)     
27,492,641  9/24/08  3 month USD-  Russell 2000  355,265 
    LIBOR-BBA  Total Return   
      Index   
4,032,752  10/8/07  (1 month USD-  Standard & Poors 500  10,877 
    LIBOR-BBA plus  Transportation   
    25 bp)  Index   
3,513,995  10/8/07  (1 month USD-  Standard & Poors  241,250 
    LIBOR-BBA plus  500 Materials   
    25 bp)  Index   
3,284,838  10/8/07  (1 month USD-  Standard & Poors  84,400 
    LIBOR-BBA plus  500   
    25 bp)  Pharmaceuticals,   
      Biotechnology &   
      Life Sciences   
      Index   
7,377,544  10/8/07  (1 month USD-  Standard & Poors  261,541 
    LIBOR-BBA plus  500 Diversified   
    25 bp)  Financials Index   
3,042,464  10/8/07  (1 month USD-  Standard & Poors  77,273 
    LIBOR-BBA plus  500 Utilities   
    25 bp)  Index   
9,377,817  10/8/07  (1 month USD-  Standard & Poors  390,170 
    LIBOR-BBA plus  500 Insurance   
    25 bp)  Index   
11,078,577  10/8/07  (1 month USD-  Standard & Poors  680,665 
    LIBOR-BBA plus  500 Capital   
    25 bp)  Goods Index   
11,176,841  10/8/07  (1 month USD-  Standard & Poors  347,587 
    LIBOR-BBA plus  500 Technology   
    25 bp)  Hardware &   
      Equipment Index   
5,697,448  10/8/07  (1 month USD-  Standard & Poors  (15,253) 
    LIBOR-BBA plus  500 Commercial   
    25 bp)  Services &   
      Supplies Index   
9,598,605  10/8/07  (1 month USD-  Standard & Poors  (139,100) 
    LIBOR-BBA plus  500 Consumer   
    25 bp)  Durables &   
      Apparel Index   
15,144,600  10/8/07  (1 month USD-  Standard & Poors  (119,459) 
    LIBOR-BBA plus  500 Media Index   
    25 bp)     
3,956,134  10/8/07  (1 month USD-  Standard & Poors  90,917 
    LIBOR-BBA plus  500 Health Care   
    25 bp)  Equipment &   
      Services Index   
5,790,598  10/8/07  1 month USD-  Standard & Poors  (312,819) 
    LIBOR-BBA minus  500 Real Estate   
    30 bp  Index   
12,323,786  10/8/07  1 month USD-  Standard & Poors  17,668 
    LIBOR-BBA minus  500 Banks Index   
    30 bp     
8,214,670  10/8/07  1 month USD-  Standard & Poors  (545,161) 
    LIBOR-BBA minus  500 Household &   
    30 bp  Personal   
      Products Index   

130

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
    Fixed payments  Total return  Unrealized 
Swap counterparty /  Termination  received (paid) by  received by  appreciation/ 
Notional amount  date  fund per annum  or paid by fund  (depreciation) 
JPMorgan Chase Bank, N.A. continued         
 
$ 6,256,567  10/8/07  1 month USD-  Standard & Poors  $(253,639) 
    LIBOR-BBA minus  500 Food   
    30 bp  Beverage &   
      Tobacco Index   
5,772,151  10/8/07  1 month USD-  Standard and &  28,793 
    LIBOR-BBA minus  Poor’s 500   
    30 bp  Semiconductors   
      and   
      Semiconductors   
      Equipment   
      Industry Group   
      Index   
7,550,319  10/8/07  1 month USD-  Standard & Poors  (353,131) 
    LIBOR-BBA minus  500 Energy Index   
    30 bp     
2,058,754  10/8/07  1 month USD-  Standard & Poors  (84,315) 
    LIBOR-BBA minus  500 Consumer   
    30 bp  Services Index   
1,081,530  10/8/07  1 month USD-  Standard & Poors  (42,723) 
    LIBOR-BBA minus  500 Software &   
    30 bp  Services Index   
2,369,867  10/8/07  1 month USD-  Standard & Poors  60,453 
    LIBOR-BBA minus  500 Retailing   
    30 bp  Index   
5,417,680  10/8/07  1 month USD-  Standard & Poors  (301,742) 
    LIBOR-BBA minus  500 Automobiles   
    30 bp  & Components   
      Index   
11,463,753  10/8/07  1 month USD-  Standard & Poors  (485,951) 
    LIBOR-BBA minus  500   
    30 bp  Telecommunication   
      Services Index   
18,981,802  10/8/07  1 month USD-  Standard & Poors  (794,719) 
    LIBOR-BBA minus  500 Food &   
    30 bp  Staples   
      Retailing GICS   
      Industry Group   
      Index   
5,649,000  2/1/08  25 bp plus  The spread  73,437 
    beginning  return of Lehman   
    of period nominal  Brothers AAA   
    spread of Lehman  8.5+ CMBS Index   
    Brothers AAA  adjusted by   
    8.5+ Commercial  modified   
    Mortgage Backed  duration factor   
    Securities Index     
3,339,000  10/1/07  17.5 bp plus  The spread  (66,780) 
    beginning  return of Lehman   
    of period nominal  Brothers AAA   
    spread of Lehman  8.5+ CMBS Index   
    Brothers AAA  adjusted by   
    8.5+ Commercial  modified   
    Mortgage Backed  duration factor   
    Securities Index     
4,634,700   (F) 8/1/08  17.5 bp minus  The spread  39,133 
    change in spread  return of Lehman   
    of Lehman  Brothers AAA   
    Brothers AAA  8.5+ CMBS Index   
    8.5+ Commercial  adjusted by   
    Mortgage Backed  modified   
    Securities Index  duration factor   

131

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
      Fixed payments  Total return  Unrealized 
Swap counterparty /    Termination  received (paid) by  received by  appreciation/ 
Notional amount    date  fund per annum  or paid by fund  (depreciation) 
Lehman Brothers Special Financing, Inc.         
$18,700,000  (F)  4/1/08  (175 bp minus  The spread  $(111,766) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
18,700,000  (F)  9/1/08  Beginning  The spread  245,241 
      of period nominal  return of Lehman   
      spread of Lehman  Brothers AAA   
      Brothers AAA  8.5+ CMBS Index   
      8.5+ Commercial  adjusted by   
      Mortgage Backed  modified   
      Securities Index  duration factor   
16,043,000  (F)  3/1/08  (2.5 bp plus  The spread  (167,430) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
9,964,000  (F)  3/1/08  70 bp minus  The spread  150,207 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
5,140,000  (F)  2/1/08  (45 bp minus  The spread  (80,497) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
7,814,000  (F)  2/1/08  57.5 bp plus  The spread  104,358 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
9,326,000  (F)  1/1/08  (5 bp plus  The spread  182,435 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
10,240,000  (F)  1/1/08  (Beginning  The spread  143,596 
      of period nominal  return of Lehman   
      spread of Lehman  Brothers AAA   
      Brothers AAA  8.5+ CMBS Index   
      8.5+ Commercial  adjusted by   
      Mortgage Backed  modified   
      Securities Index)  duration factor   

132

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
      Fixed payments  Total return  Unrealized 
Swap counterparty /    Termination  received (paid) by  received by  appreciation/ 
Notional amount    date  fund per annum  or paid by fund  (depreciation) 
Lehman Brothers Special Financing, Inc. continued       
 
$10,240,000  (F)  1/1/08  (10 bp plus  The spread  $ 138,158 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
1,449,337    5/1/08  (1 month USD-  Lehman Brothers  (39,764) 
      LIBOR-BBA minus 0.50%)  U.S. High Yield Index   
3,500,000    4/1/08  ($3,500,000)  Lehman Brothers  (67,006) 
        U.S. High Yield Index   
7,410,000  (F)  10/1/07  10 bp plus  The spread  (144,124) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
2,099,990    3/1/08  (1 month USD-  Lehman Brothers  (49,172) 
      LIBOR-BBA minus  U.S. High Yield   
      20 bp)  Index   
99,818,409    2/1/08  (1 month USD-  Lehman Brothers  437,631 
      LIBOR-BBA plus  US Aggregate RBI   
      15 bp)  Series 1 Index   
14,261,000  (F)  3/1/08  (120 bp minus  The spread  (190,273) 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index)     
22,143,000  (F)  2/1/08  30 bp plus  The spread  409,610 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
3,973,000  (F)  2/1/08  50 bp minus  The spread  64,696 
      beginning  return of Lehman   
      of period nominal  Brothers AAA   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
18,206,000  (F)  3/1/08  40 bp minus  The spread  242,650 
      beginning  return of Lehman   
      of period nominal  Brothers Aaa   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     
11,590,000  (F)  12/2/07  8 bp plus  The spread  (195,002) 
      beginning  return of Lehman   
      of period nominal  Brothers Aaa   
      spread of Lehman  8.5+ CMBS Index   
      Brothers AAA  adjusted by   
      8.5+ Commercial  modified   
      Mortgage Backed  duration factor   
      Securities Index     

133

TOTAL RETURN SWAP CONTRACTS OUTSTANDING at 9/30/07 continued     
 
    Fixed payments  Total return  Unrealized 
Swap counterparty /  Termination  received (paid) by  received by  appreciation/ 
Notional amount  date  fund per annum  or paid by fund  (depreciation) 
Morgan Stanley Capital Services Inc.         
$ 3,960,000  10/31/07  10 bp plus  Banc of America  $ (35,571) 
    change in spread  Securities- CMBS   
    of Banc  AAA 10 year Index   
    of America     
    Securities AAA     
    10 yr Index     
    multiplied by     
    the modified     
    duration factor     
3,382,000  1/31/08  80 bp minus  Banc of America  46,243 
    change in spread  Securities- CMBS   
    of Banc  AAA 10 year Index   
    of America     
    Securities AAA     
    10 yr Index     
    multiplied by     
    the modified     
    duration factor     
3,382,000  1/31/08  70 bp minus  The spread  36,216 
    change in spread  return of Lehman   
    of Lehman  Brothers AAA   
    Brothers AAA  8.5+ CMBS Index   
    8.5+ Commercial  adjusted by   
    Mortgage Backed  modified   
    Securities Index  duration factor   
2,900,000  11/30/07  7.5 bp plus  The spread  (44,631) 
    beginning  return of Lehman   
    of period nominal  Brothers AAA   
    spread of Lehman  8.5+ CMBS Index   
    Brothers AAA  adjusted by   
    8.5+ Commercial  modified   
    Mortgage Backed  duration factor   
    Securities Index     
17,813,000  1/31/08  40 bp plus  The spread  132,044 
    beginning  return of Lehman   
    of period nominal  Brothers AAA   
    spread of Lehman  8.5+ CMBS Index   
    Brothers AAA  adjusted by   
    8.5+ Commercial  modified   
    Mortgage Backed  duration factor   
    Securities Index     
 
Total        $1,341,562 

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

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/07         
  Upfront      Fixed payments  Unrealized 
Swap counterparty /  premium  Notional  Termination  received (paid) by  appreciation/ 
Referenced debt*  received (paid)**  amount  date  fund per annum  (depreciation) 
Bank of America, N.A.           
DJ ABX NA CMBX BBB Index  $ 1,718  $2,499,000  10/12/52  (134 bp)  $ 191,978 
DJ CDX NA HY Series 8           
Index  198,105  33,365,000  6/20/12  (275 bp)  1,057,912 
DJ CDX NA IG Series 8           
Index  (4,338)  7,480,000  6/20/17  (60 bp)  106,715 
DJ CDX NA IG Series 8           
Index  (47,285)  12,985,000  6/20/17  (60 bp)  145,499 
L-3 Communications           
Corp. 7 5/8%, 6/15/12  —  65,000  6/20/11  (101 bp)  18 
Nalco Co. 7.75%,11/15/11  —  30,000  9/20/12  350 bp  835 
Bear Stearns International, Ltd.           
DJ ABX NA CMBX BBB Index  14,524  2,998,898  10/12/52  (134 bp)  242,843 

134

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/07 continued         
  Upfront      Fixed payments    Unrealized 
Swap counterparty /  premium  Notional  Termination  received (paid) by  appreciation/ 
Referenced debt*  received (paid)**  amount  date  fund per annum  (depreciation) 
Citibank, N.A.             
CMS Energy Corp.,             
6.875%, 12/15/15  $ —  $ 470,000  6/20/12  57 bp  $  (9,624) 
Freescale             
Semiconductor, 8 7/8%,             
12/15/14  —  80,000  9/20/12  495 bp    (158) 
Credit Suisse International             
Dynegy Holdings, Inc.,             
6 7/8%, 4/1/11  —  50,000  6/20/17  297 bp    (3,325) 
Nalco Co. 7.75%,             
11/15/11  —  30,000  9/20/12  320bp    461 
Sprint Capital Corp. 8             
3/8%, 3/15/12  —  790,000  6/20/12  (59 bp)    1,248 
Deutsche Bank AG             
DJ CDX NA IG Series 8             
Index 7-10% tranche  —  953,000  6/20/12  22 bp    (14,536) 
France Telecom, 7.25%,             
1/28/13  —  390,000  6/20/16  70 bp    6,612 
Nalco Co. 7.75%,             
11/15/11  —  25,000  12/20/12  363 bp    825 
Goldman Sachs International             
Any one of the             
underlying securities             
in the basket of BB             
CMBS securities  —  1,678,000  (a)  2.461%    103,407 
DJ CDX NA HY Series 8             
Index  (759)  35,714  6/20/10  (275 bp)    (887) 
DJ CDX NA HY Series 8             
Index  405,217  26,950,000  6/20/12  35 bp    110,032 
DJ CDX NA IG Series 8             
Index  (6)  7,475,000  6/20/17  (60 bp)    110,973 
DJ CDX NA IG Series 8             
Index  (50,424)  11,980,000  6/20/17  (60 bp)    127,439 
General Motors Corp.,             
7 1/8%, 7/15/13  —  90,000  9/20/08  620 bp    2,886 
General Motors Corp.,             
7 1/8%, 7/15/13  —  20,000  9/20/08  620 bp    641 
Lehman Brothers             
Holdings, 6 5/8%,             
1/18/12  —  485,000  9/20/17  (67.8 bp)    6,142 
Merrill Lynch & Co.,             
5%, 1/15/15  —  485,000  9/20/12  48 bp    (2,431) 
Merrill Lynch & Co.,             
5%, 1/15/15  —  485,000  9/20/17  (59.8 bp)    (21) 
JPMorgan Chase Bank, N.A.             
DJ CDX NA CMBX AAA Index  —  3,339,000  3/15/49  (7 bp)    21,441 
DJ CDX NA IG Series 8             
Index  76,337  4,757,000  6/20/12  35 bp    24,233 
General Motors Corp.,             
7 1/8%, 7/15/13  —  15,000  9/20/08  500 bp    305 
Lehman Brothers Special Financing, Inc.           
Bear Stearns Co. Inc.,             
5.3%, 10/30/15  —  485,000  9/20/12  63.5 bp    (5,464) 
Bear Stearns Co. Inc.,             
5.3%, 10/30/15  —  485,000  9/20/17  (77 bp)    4,581 
CMS Energy Corp.,             
6.875%, 12/15/15  —  120,000  6/20/12  62 bp    (2,206) 
DJ ABX NA CMBX BBB Index  3,049  740,000  10/12/52  (134 bp)    64,371 
DJ CDX NA CMBX AA Index  (15,241)  481,000  3/15/49  (15 bp)    (6,262) 
DJ CDX NA CMBX AAA Index  —  7,410,000  3/15/49  (7 bp)    40,455 

135

CREDIT DEFAULT CONTRACTS OUTSTANDING at 9/30/07 continued       
  Upfront      Fixed payments  Unrealized 
Swap counterparty /  premium  Notional  Termination  received (paid) by  appreciation/ 
Referenced debt*  received (paid)**  amount  date  fund per annum  (depreciation) 
Lehman Brothers Special Financing, Inc. continued         
DJ CDX NA EM Series 7           
Index  $ (360,342)  $ 33,365,000  6/20/12  125 bp  $ (441,206) 
DJ CDX NA HY Series 8           
Index  (44,100)  1,260,000  6/20/10  (275 bp)  (48,624) 
DJ CDX NA HY Series 8           
Index 35-60% tranche  —  20,769,000  6/20/12  104 bp  (290,577) 
DJ CDX NA HY Series 9           
Index 25-35% tranche  —  4,300,000  12/20/10  104.5 bp  — 
DJ CDX NA IG Series 8           
Index  34,099  974,239  6/20/10  275 bp  37,596 
DJ CDX NA IG Series 8           
Index  22,320  1,450,000  6/20/12  35 bp  6,438 
DJ CDX NA IG Series 8           
Index 30-100% tranche  —  14,744,950  6/20/12  (3.125 bp)  40,411 
DJ CDX NA IG Series 8           
Index 30-100% tranche  —  12,064,050  6/20/12  (8 bp)  7,585 
DJ CDX NA IG Series 8           
Index 7-10% tranche  —  360,000  6/20/14  (152 bp)  (8,148) 
Goldman Sachs Group,           
Inc., 6.6%, 1/15/12  —  485,000  9/20/17  (58 bp)  (3,166) 
Morgan Stanley Dean           
Witter, 6.6% 4/1/12  —  485,000  9/20/12  48 bp  (1,195) 
Morgan Stanley Dean           
Witter, 6.6% 4/1/12  —  485,000  9/20/17  (60.5 bp)  (2,136) 
Nalco Co. 7.75%, 11/15/11  —  30,000  9/20/12  340 bp  711 
Sungard Data Systems,           
Inc., 9 1/8%, 8/15/13  —  30,000  9/20/12  395 bp  1,097 
Merrill Lynch Capital Services, Inc.         
General Motors Corp.,           
7 1/8%, 7/15/13  —  65,000  9/20/08  500 bp  1,320 
Merrill Lynch International           
Dynegy Holdings, Inc.,           
6 7/8%, 4/1/11  —  50,000  6/20/17  295 bp  (3,383) 
Morgan Stanley Capital Services, Inc.         
DJ ABX NA CMBX BBB Index  758  1,043,200  10/12/52  (134 bp)  80,181 
DJ CDX NA HY Series 8           
Index  (5,067)  321,475  6/20/10  275 bp  (3,914) 
DJ CDX NA IG Series 8           
Index  130,417  8,470,000  6/20/12  35 bp  37,644 
DJ CDX NA IG Series 8           
Index  194,775  16,200,000  6/20/12  35 bp  17,336 
DJ CDX NA IG Series 8           
Index  —  7,450,000  6/20/17  (60 bp)  110,608 
DJ CDX NA IG Series 8           
Index 7-10% tranche  —  360,000  6/20/14  95 bp  (3,571) 
Dynegy Holdings Inc.,           
6 7/8%, 4/1/11  —  50,000  6/20/12  225 bp  (1,716) 
General Motors Corp.,           
7 1/8%, 7/15/13  —  15,000  9/20/08  500 bp  305 
Jefferson Smurfit           
Corp., 7.5%, 6/1/13  —  35,000  9/20/12  445 bp  1,708 
Nalco Co. 7.75%,           
11/15/11  —  30,000  9/20/12  330 bp  586 
Total          $1,862,828 

* 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.

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

136

Statement of assets and liabilities 9/30/07

Putnam Asset Allocation: Growth Portfolio   
ASSETS   
Investment in securities, at value, including $167,308,842 of securities on loan (Note 1):   
Unaffiliated issuers (identified cost $2,200,912,484)  $2,588,165,323 
Affiliated issuers (identified cost $258,122,122) (Note 5)  258,122,122 
Foreign currency (cost $45,545,863) (Note 1)  46,310,573 
Dividends, interest and other receivables  8,948,385 
Receivable for shares of the fund sold  6,019,663 
Receivable for securities sold  16,213,020 
Receivable for sales of delayed delivery securities (Note 1)  10,560,287 
Receivable for open forward currency contracts (Note 1)  22,486,331 
Receivable for closed forward currency contracts (Note 1)  4,875,897 
Receivable for closed swap contracts (Note 1)  293,936 
Premium paid on swap contracts (Note 1)  1,075,361 
Unrealized appreciation on swap contracts (Note 1)  35,386,996 
Total assets  2,998,457,894 
 
LIABILITIES   
Payable to custodian (Note 2)  3,312,950 
Payable for variation margin (Note 1)  2,139,560 
Payable for securities purchased  7,100,431 
Payable for purchases of delayed delivery securities (Note 1)  12,314,404 
Payable for shares of the fund repurchased  3,905,305 
Payable for compensation of Manager (Notes 2 and 5)  3,705,010 
Payable for investor servicing (Note 2)  932,856 
Payable for custodian fees (Note 2)  143,256 
Payable for Trustee compensation and expenses (Note 2)  199,955 
Payable for administrative services (Note 2)  6,899 
Payable for distribution fees (Note 2)  1,653,760 
Payable for open forward currency contracts (Note 1)  24,861,824 
Payable for closed forward currency contracts (Note 1)  7,009,925 
Payable for closed swap contracts (Note 1)  90,039 
Premium received on swap contracts (Note 1)  703,406 
Unrealized depreciation on swap contracts (Note 1)  29,238,091 
Written options outstanding, at value (premiums received $2,966,002) (Notes 1 and 3)  4,199,401 
TBA sale commitments, at value (proceeds receivable $10,544,082) (Note 1)  10,546,405 
Collateral on securities loaned, at value (Note 1)  173,069,529 
Other accrued expenses  370,708 
Total liabilities  285,503,714 
Net assets  $2,712,954,180 

(Continued on next page)

137

Statement of assets and liabilities (Continued)

REPRESENTED BY   
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)  $2,330,907,737 
Distributions in excess of net investment income (Note 1)  (13,553,048) 
Accumulated net realized gain on investments and foreign currency transactions (Note 1)  2,049,585 
Net unrealized appreciation of investments and assets and liabilities in foreign currencies  393,549,906 
Total — Representing net assets applicable to capital shares outstanding  $2,712,954,180 
 
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE   
Net asset value and redemption price per class A share ($1,763,893,459 divided by 116,529,529 shares)  $15.14 
Offering price per class A share (100/94.75 of $15.14)*  $15.98 
Net asset value and offering price per class B share ($432,178,145 divided by 29,210,414 shares)**  $14.80 
Net asset value and offering price per class C share ($241,464,025 divided by 16,562,180 shares)**  $14.58 
Net asset value and redemption price per class M share ($50,657,411 divided by 3,408,189 shares)  $14.86 
Offering price per class M share (100/96.75 of $14.86)*  $15.36 
Net asset value, offering price and redemption price per class R share ($7,446,691 divided by 497,873 shares)  $14.96 
Net asset value, offering price and redemption price per class Y share ($217,314,449 divided by 14,217,741 shares)  $15.28 

* 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.

138

Statement of operations Year ended 9/30/07

Putnam Asset Allocation: Growth Portfolio   
INVESTMENT INCOME   
Dividends (net of foreign tax of $1,858,333)  $ 37,341,380 
Interest (including interest income of $8,822,546 from investments in affiliated issuers) (Note 5)  23,953,875 
Securities lending  1,113,772 
Total investment income  62,409,027 
 
EXPENSES   
Compensation of Manager (Note 2)  13,615,893 
Investor servicing fees (Note 2)  5,249,121 
Custodian fees (Note 2)  1,206,448 
Trustee compensation and expenses (Note 2)  90,100 
Administrative services (Note 2)  52,102 
Distribution fees — Class A (Note 2)  3,782,588 
Distribution fees — Class B (Note 2)  4,159,655 
Distribution fees — Class C (Note 2)  2,022,693 
Distribution fees — Class M (Note 2)  350,437 
Distribution fees — Class R (Note 2)  40,662 
Other  1,012,778 
Non-recurring costs (Notes 2 and 7)  1,363 
Costs assumed by Manager (Notes 2 and 7)  (1,363) 
Fees waived and reimbursed by Manager (Note 5)  (143,096) 
Total expenses  31,439,381 
Expense reduction (Note 2)  (522,451) 
Net expenses  30,916,930 
Net investment income  31,492,097 
Net realized gain on investments (net of foreign taxes of $121,210) (Notes 1 and 3)  106,008,234 
Net realized loss on swap contracts (Note 1)  (58,140,438) 
Net realized gain on futures contracts (Note 1)  4,673,632 
Net realized gain on foreign currency transactions (Note 1)  1,811,616 
Net realized gain on written options (Notes 1 and 3)  274,801 
Net unrealized depreciation of assets and liabilities in foreign currencies during the year  (5,035,415) 
Net unrealized appreciation of investments, futures contracts, swap contracts, written options and TBA sale commitments during the year  209,013,921 
Net gain on investments  258,606,351 
Net increase in net assets resulting from operations  $290,098,448 

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

139

Statement of changes in net assets

Putnam Asset Allocation: Growth Portfolio     
INCREASE IN NET ASSETS     
  Year ended  Year ended 
  9/30/07  9/30/06 
Operations:     
Net investment income  $ 31,492,097  $ 21,043,041 
Net realized gain on investments and foreign currency transactions  54,627,845  104,495,743 
Net unrealized appreciation of investments and assets and liabilities in foreign currencies  203,978,506  56,190,492 
Net increase in net assets resulting from operations  290,098,448  181,729,276 
Distributions to shareholders (Note 1):     
From ordinary income     
Net investment income     
Class A  (7,447,050)  (6,684,450) 
Class B  —  (351,132) 
Class C  (38,086)  (209,543) 
Class M  (47,209)  (120,535) 
Class R  (29,365)  (10,862) 
Class Y  (1,310,547)  (1,487,947) 
Redemption fees (Note 1)  11,760  8,738 
Increase from capital share transactions (Note 4)  563,286,369  170,844,886 
Total increase in net assets  844,524,320  343,718,431 
 
NET ASSETS     
Beginning of year  1,868,429,860  1,524,711,429 
End of year (including distributions in excess of net investment income of $13,553,048     
and undistributed net investment income of $3,458,686, respectively)  $2,712,954,180  $1,868,429,860 

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

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141

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

Putnam Asset Allocation: Growth Portfolio                       
 
INVESTMENT OPERATIONS:          LESS DISTRIBUTIONS:        RATIOS AND SUPPLEMENTAL DATA:     
      Net            Total      Ratio of net   
  Net asset    realized and  Total  From      Net asset  return  Net  Ratio of  investment   
  value,  Net  unrealized  from  net      value,  at net  assets,  expenses to  income (loss)  Portfolio 
  beginning  investment  gain (loss) on  investment  investment  Total  Redemption  end  asset  end of period  average net  to average  turnover 
Period ended  of period  income (loss)(a)  investments  operations  income  distributions  fees  of period  value (%)(b)  (in thousands)  assets (%)(c)  net assets (%)  (%)(h) 
CLASS A                           
September 30, 2007  $13.32  .22(d)  1.68  1.90  (.08)  (.08)  —(e)  $15.14  14.31  $1,763,893  1.14(d)  1.52(d)  80.70 
September 30, 2006  11.97  .19(d,g)  1.26  1.45  (.10)  (.10)  —(e)  13.32  12.19(g)  1,152,980  1.14(d,g)  1.51(d,g)  85.02 
September 30, 2005  10.26  .15(d,f)  1.69  1.84  (.13)  (.13)  —(e)  11.97  18.02  775,947  1.25(d)  1.34(d,f)  111.90 
September 30, 2004  9.22  .11(d)  1.13  1.24  (.20)  (.20)  —(e)  10.26  13.51  547,168  1.32(d)  1.12(d)  120.17 
September 30, 2003  7.69  .13  1.64  1.77  (.24)  (.24)  —  9.22  23.41  629,578  1.35  1.54  126.07 
 
CLASS B                           
September 30, 2007  $13.05  .11(d)  1.64  1.75  —  —  —(e)  $14.80  13.41  $432,178  1.89(d)  .76(d)  80.70 
September 30, 2006  11.73  .09(d,g)  1.24  1.33  (.01)  (.01)  —(e)  13.05  11.37(g)  363,651  1.89(d,g)  .75(d,g)  85.02 
September 30, 2005  10.06  .06(d,f)  1.67  1.73  (.06)  (.06)  —(e)  11.73  17.22  315,199  2.00(d)  .59(d,f)  111.90 
September 30, 2004  9.06  .04(d)  1.09  1.13  (.13)  (.13)  —(e)  10.06  12.55  261,591  2.07(d)  .37(d)  120.17 
September 30, 2003  7.54  .06  1.62  1.68  (.16)  (.16)  —  9.06  22.57  236,650  2.10  .78  126.07 
 
CLASS C                           
September 30, 2007  $12.86  .11(d)  1.61  1.72  —(e)  —(e)  —(e)  $14.58  13.40  $241,464  1.89(d)  .77(d)  80.70 
September 30, 2006  11.57  .09(d,g)  1.22  1.31  (.02)  (.02)  —(e)  12.86  11.38(g)  150,255  1.89(d,g)  .76(d,g)  85.02 
September 30, 2005  9.92  .06(d,f)  1.64  1.70  (.05)  (.05)  —(e)  11.57  17.21  96,350  2.00(d)  .59(d,f)  111.90 
September 30, 2004  8.93  .04(d)  1.08  1.12  (.13)  (.13)  —(e)  9.92  12.57  73,936  2.07(d)  .37(d)  120.17 
September 30, 2003  7.44  .06  1.59  1.65  (.16)  (.16)  —  8.93  22.47  76,075  2.10  .78  126.07 
 
CLASS M                           
September 30, 2007  $13.09  .14(d)  1.65  1.79  (.02)  (.02)  —(e)  $14.86  13.65  $50,657  1.64(d)  1.00(d)  80.70 
September 30, 2006  11.77  .12(d,g)  1.24  1.36  (.04)  (.04)  —(e)  13.09  11.60(g)  40,409  1.64(d,g)  1.00(d,g)  85.02 
September 30, 2005  10.09  .09(d,f)  1.67  1.76  (.08)  (.08)  —(e)  11.77  17.48  34,029  1.75(d)  .84(d,f)  111.90 
September 30, 2004  9.07  .06(d)  1.11  1.17  (.15)  (.15)  —(e)  10.09  12.97  29,373  1.82(d)  .62(d)  120.17 
September 30, 2003  7.56  .08  1.61  1.69  (.18)  (.18)  —  9.07  22.70  32,490  1.85  1.02  126.07 
 
CLASS R                           
September 30, 2007  $13.18  .18(d)  1.66  1.84  (.06)  (.06)  —(e)  $14.96  14.00  $7,447  1.39(d)  1.28(d)  80.70 
September 30, 2006  11.87  .17(d,g)  1.23  1.40  (.09)  (.09)  —(e)  13.18  11.85(g)  6,258  1.39(d,g)  1.31(d,g)  85.02 
September 30, 2005  10.21  .12(d,f)  1.68  1.80  (.14)  (.14)  —(e)  11.87  17.80  1,285  1.50(d)  1.10(d,f)  111.90 
September 30, 2004  9.21  .09(d)  1.11  1.20  (.20)  (.20)  —(e)  10.21  13.15  32  1.57(d)  .87(d)  120.17 
September 30, 2003†  8.08  .07  1.06  1.13  —  —  —  9.21  13.99*  1  1.11*  .89*  126.07 
 
CLASS Y                           
September 30, 2007  $13.44  .26(d)  1.69  1.95  (.11)  (.11)  —(e)  $15.28  14.55  $217,314  .89(d)  1.75(d)  80.70 
September 30, 2006  12.08  .22(d,g)  1.27  1.49  (.13)  (.13)  —(e)  13.44  12.40(g)  154,877  .89(d,g)  1.73(d,g)  85.02 
September 30, 2005  10.35  .18(d,f)  1.70  1.88  (.15)  (.15)  —(e)  12.08  18.35  301,901  1.00(d)  1.58(d,f)  111.90 
September 30, 2004  9.30  .14(d)  1.13  1.27  (.22)  (.22)  —(e)  10.35  13.79  432,322  1.07(d)  1.37(d)  120.17 
September 30, 2003  7.76  .15  1.65  1.80  (.26)  (.26)  —  9.30  23.70  420,617  1.10  1.79  126.07 

See notes to financial highlights at the end of this section.

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

142  143 

Financial highlights (Continued)

* Not annualized.

† For the period January 21, 2003 (commencement of operations) to September 30, 2003.

(a) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period.

(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

(c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).

(d) Reflects 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 
September 30, 2007  0.01% 
September 30, 2006  0.01 
September 30, 2005  0.02 
September 30, 2004  <0.01 

(e) Amount represents less than $0.01 per share.

(f) Reflects a non-recurring accrual related to Putnam Management’s settlement with the SEC regarding brokerage allocation practices, which amounted to the following amounts:

 
    Percentage 
    of average 
  Per share  net assets 
Class A  <$0.01  0.01% 
Class B  <0.01  0.01 
Class C  <0.01  0.01 
Class M  <0.01  0.01 
Class R  <0.01  0.01 
Class Y  <0.01  0.01 

(g) 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 0.07% of average net assets for the period ended September 30, 2006.

(h) Portfolio turnover excludes dollar roll transactions.

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

144

Statement of assets and liabilities 9/30/07

Putnam Asset Allocation: Balanced Portfolio   
ASSETS   
Investment in securities, at value, including $112,698,312 of securities on loan (Note 1):   
Unaffiliated issuers (identified cost $2,059,046,460)  $2,356,167,286 
Affiliated issuers (identified cost $124,331,804) (Note 5)  124,331,804 
Foreign currency (cost $36,218,315) (Note 1)  37,165,908 
Dividends, interest and other receivables  9,046,570 
Receivable for shares of the fund sold  5,738,992 
Receivable for securities sold  24,434,323 
Receivable for sales of delayed delivery securities (Notes 1)  95,643,119 
Receivable from Manager (Note 2)  102,935 
Receivable for open forward currency contracts (Note 1)  19,698,163 
Receivable for closed forward currency contracts (Note 1)  4,328,306 
Receivable for open swap contracts (Note 1)  25,763 
Receivable for closed swap contracts (Note 1)  486,445 
Premium paid on swap contracts (Note 1)  961,505 
Unrealized appreciation on swap contracts (Note 1)  42,322,122 
Total assets  2,720,453,241 
 
LIABILITIES   
Payable to custodian (Note 2)  5,618,050 
Payable for variation margin (Note 1)  3,067,330 
Payable for securities purchased  10,899,761 
Payable for purchases of delayed delivery securities (Notes 1)  26,324,320 
Payable for shares of the fund repurchased  5,691,589 
Payable for compensation of Manager (Notes 2 and 5)  3,330,953 
Payable for investor servicing (Note 2)  670,360 
Payable for Trustee compensation and expenses (Note 2)  224,745 
Payable for administrative services (Note 2)  3,196 
Payable for distribution fees (Note 2)  1,419,589 
Payable for open forward currency contracts (Note 1)  21,651,983 
Payable for closed forward currency contracts (Note 1)  6,105,419 
Payable for open swap contracts (Note 1)  37,419 
Payable for closed swap contracts (Note 1)  71,989 
Premium received on swap contracts (Note 1)  1,402,767 
Unrealized depreciation on swap contracts (Note 1)  34,288,523 
Written options outstanding, at value (premiums received $9,180,323) (Notes 1 and 3)  11,600,702 
TBA sale commitments, at value (proceeds receivable $95,505,992) (Note 1)  95,640,320 
Collateral on securities loaned, at value (Note 1)  116,781,825 
Other accrued expenses  238,849 
Total liabilities  345,069,689 
Net assets  $2,375,383,552 

(Continued on next page)

145

Statement of assets and liabilities (Continued)

REPRESENTED BY   
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)  $2,182,905,145 
Distributions in excess of net investment income (Note 1)  (24,015,279) 
Accumulated net realized loss on investments and foreign currency transactions (Note 1)  (83,582,755) 
Net unrealized appreciation of investments and assets and liabilities in foreign currencies  300,076,441 
Total — Representing net assets applicable to capital shares outstanding  $2,375,383,552 
 
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE   
Net asset value and redemption price per class A share ($1,619,706,188 divided by 127,110,384 shares)  $12.74 
Offering price per class A share (100/94.75 of $12.74)*  $13.45 
Net asset value and offering price per class B share ($311,753,924 divided by 24,619,485 shares)**  $12.66 
Net asset value and offering price per class C share ($162,250,996 divided by 12,951,083 shares)**  $12.53 
Net asset value and redemption price per class M share ($38,124,250 divided by 2,996,448 shares)  $12.72 
Offering price per class M share (100/96.75 of $12.72)*  $13.15 
Net asset value, offering price and redemption price per class R share ($5,150,883 divided by 405,776 shares)  $12.69 
Net asset value, offering price and redemption price per class Y share ($238,397,311 divided by 18,676,462 shares)  $12.76 

* 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.

146

Statement of operations Year ended 9/30/07

Putnam Asset Allocation: Balanced Portfolio   
INVESTMENT INCOME   
Interest (including interest income of $13,488,472 from investments in affiliated issuers) (Note 5)  $ 44,308,038 
Dividends (net of foreign tax of $1,008,297)  27,031,746 
Securities lending  910,166 
Total investment income  72,249,950 
 
 
EXPENSES   
Compensation of Manager (Note 2)  12,975,753 
Investor servicing fees (Note 2)  3,963,302 
Custodian fees (Note 2)  513,062 
Trustee compensation and expenses (Note 2)  87,045 
Administrative services (Note 2)  46,847 
Distribution fees — Class A (Note 2)  3,810,138 
Distribution fees — Class B (Note 2)  3,291,569 
Distribution fees — Class C (Note 2)  1,484,849 
Distribution fees — Class M (Note 2)  279,108 
Distribution fees — Class R (Note 2)  51,077 
Other  713,985 
Non-recurring costs (Notes 2 and 7)  1,321 
Costs assumed by Manager (Notes 2 and 7)  (1,321) 
Fees waived and reimbursed by Manager (Note 5)  (220,617) 
Total expenses  26,996,118 
Expense reduction (Note 2)  (505,860) 
Net expenses  26,490,258 
Net investment income  45,759,692 
Net realized gain on investments (Notes 1 and 3)  67,629,514 
Net realized loss on swap contracts (Note 1)  (56,113,105) 
Net realized loss on futures contracts (Note 1)  (920,616) 
Net realized gain on foreign currency transactions (Note 1)  3,040,381 
Net realized gain on written options (Notes 1 and 3)  1,621,479 
Net increase from payments by affiliates (Note 2)  5,387 
Net unrealized depreciation of assets and liabilities in foreign currencies during the year  (3,777,985) 
Net unrealized appreciation of investments, futures contracts, swap contracts, written options, and TBA sale commitments during the year  133,147,300 
Net gain on investments  144,632,355 
Net increase in net assets resulting from operations  $190,392,047 

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

147

Statement of changes in net assets

Putnam Asset Allocation: Balanced Portfolio     
INCREASE IN NET ASSETS     
  Year ended  Year ended 
  9/30/07  9/30/06 
Operations:     
Net investment income  $ 45,759,692  $ 35,029,176 
Net realized gain on investments and foreign currency transactions  15,263,040  66,402,150 
Net unrealized appreciation of investments and assets and liabilities in foreign currencies  129,369,315  68,214,714 
Net increase in net assets resulting from operations  190,392,047  169,646,040 
Distributions to shareholders (Note 1):     
From ordinary income     
Net investment income     
Class A  (27,387,020)  (23,836,313) 
Class B  (3,358,713)  (4,317,206) 
Class C  (1,630,697)  (1,479,301) 
Class M  (477,984)  (519,992) 
Class R  (132,749)  (72,778) 
Class Y  (4,068,344)  (3,796,620) 
Redemption fees (Note 1)  6,913  3,997 
Increase (decrease) from capital share transactions (Note 4)  228,829,194  (50,641,573) 
Total increase in net assets  382,172,647  84,986,254 
 
NET ASSETS     
Beginning of year  1,993,210,905  1,908,224,651 
End of year (including distributions in excess of net investment income of     
$24,015,279 and $6,491,015, respectively)  $2,375,383,552  $1,993,210,905 

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

148

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149

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

Putnam Asset Allocation: Balanced Portfolio                       
 
INVESTMENT OPERATIONS:          LESS DISTRIBUTIONS:        RATIOS AND SUPPLEMENTAL DATA:     
      Net            Total      Ratio of net   
  Net asset    realized and  Total  From      Net asset  return  Net  Ratio of  investment   
  value,  Net  unrealized  from  net      value,  at net  assets,  expenses to  income (loss)  Portfolio 
  beginning  investment  gain (loss) on  investment  investment  Total  Redemption  end  asset  end of period  average net  to average  turnover 
Period ended  of period  income (loss)(a)  investments  operations  income  distributions  fees  of period  value (%)(b)  (in thousands)  assets (%)(c)  net assets (%)  (%)(h) 
CLASS A                           
September 30, 2007  $11.86  .27(d)  .83  1.10  (.22)  (.22)  —(e)  $12.74  9.36  $1,619,706  1.06(d)  2.19(d)  106.89 
September 30, 2006  11.04  .23(d,g)  .82  1.05  (.23)  (.23)  —(e)  11.86  9.64(g)  1,329,409  1.00(d,g)  2.04(d,g)  90.03 
September 30, 2005  9.94  .18(d,f)  1.05  1.23  (.13)  (.13)  —(e)  11.04  12.40  1,077,903  1.12(d)  1.72(d,f)  144.41 
September 30, 2004  9.26  .13(d)  .79  .92  (.24)  (.24)  —(e)  9.94  10.05  911,128  1.21(d)  1.36(d)  159.30 
September 30, 2003  8.10  .14  1.25  1.39  (.23)  (.23)  —  9.26  17.40  1,156,736  1.20  1.62  145.04 
 
CLASS B                           
September 30, 2007  $11.78  .18(d)  .83  1.01  (.13)  (.13)  —(e)  $12.66  8.58  $311,754  1.81(d)  1.43(d)  106.89 
September 30, 2006  10.96  .14(d,g)  .83  .97  (.15)  (.15)  —(e)  11.78  8.88(g)  324,825  1.75(d,g)  1.28(d,g)  90.03 
September 30, 2005  9.87  .10(d,f)  1.04  1.14  (.05)  (.05)  —(e)  10.96  11.54  340,442  1.87(d)  .97(d,f)  144.41 
September 30, 2004  9.20  .06(d)  .78  .84  (.17)  (.17)  —(e)  9.87  9.20  327,229  1.96(d)  .61(d)  159.30 
September 30, 2003  8.05  .08  1.23  1.31  (.16)  (.16)  —  9.20  16.52  310,616  1.95  .87  145.04 
 
CLASS C                           
September 30, 2007  $11.66  .18(d)  .82  1.00  (.13)  (.13)  —(e)  $12.53  8.64  $162,251  1.81(d)  1.43(d)  106.89 
September 30, 2006  10.87  .14(d,g)  .80  .94  (.15)  (.15)  —(e)  11.66  8.72(g)  128,541  1.75(d,g)  1.29(d,g)  90.03 
September 30, 2005  9.79  .10(d,f)  1.03  1.13  (.05)  (.05)  —(e)  10.87  11.58  101,610  1.87(d)  .97(d,f)  144.41 
September 30, 2004  9.13  .06(d)  .77  .83  (.17)  (.17)  —(e)  9.79  9.15  83,403  1.96(d)  .61(d)  159.30 
September 30, 2003  7.99  .07  1.23  1.30  (.16)  (.16)  —  9.13  16.52  87,992  1.95  .87  145.04 
 
CLASS M                           
September 30, 2007  $11.84  .21(d)  .83  1.04  (.16)  (.16)  —(e)  $12.72  8.83  $38,124  1.56(d)  1.68(d)  106.89 
September 30, 2006  11.02  .17(d,g)  .82  .99  (.17)  (.17)  —(e)  11.84  9.11(g)  34,730  1.50(d,g)  1.54(d,g)  90.03 
September 30, 2005  9.92  .13(d,f)  1.05  1.18  (.08)  (.08)  —(e)  11.02  11.87  32,605  1.62(d)  1.22(d,f )  144.41 
September 30, 2004  9.24  .08(d)  .79  .87  (.19)  (.19)  —(e)  9.92  9.49  31,184  1.71(d)  .86(d)  159.30 
September 30, 2003  8.08  .09  1.25  1.34  (.18)  (.18)  —  9.24  16.85  39,902  1.70  1.11  145.04 
 
CLASS R                           
September 30, 2007  $11.79  .24(d)  .83  1.07  (.17)  (.17)  —(e)  $12.69  9.13  $5,151  1.31(d)  1.95(d)  106.89 
September 30, 2006  10.99  .22(d,g)  .79  1.01  (.21)  (.21)  —(e)  11.79  9.25(g)  9,385  1.25(d,g)  1.87(d,g)  90.03 
September 30, 2005  9.91  .16(d,f)  1.03  1.19  (.11)  (.11)  —(e)  10.99  12.06  1,210  1.37(d)  1.49(d,f)  144.41 
September 30, 2004  9.25  .12(d)  .77  .89  (.23)  (.23)  —(e)  9.91  9.73  44  1.46(d)  1.11(d)  159.30 
September 30, 2003†  8.50  .08  .76  .84  (.09)  (.09)  —  9.25  10.00*  1  1.00*  .95*  145.04 
 
CLASS Y                           
September 30, 2007  $11.88  .30(d)  .84  1.14  (.26)  (.26)  —(e)  $12.76  9.61  $238,397  .81(d)  2.43(d)  106.89 
September 30, 2006  11.06  .26(d,g)  .82  1.08  (.26)  (.26)  —(e)  11.88  9.89(g)  166,321  .75(d,g)  2.28(d,g)  90.03 
September 30, 2005  9.95  .21(d,f)  1.06  1.27  (.16)  (.16)  —(e)  11.06  12.77  354,455  .87(d)  1.97(d,f)  144.41 
September 30, 2004  9.27  .16(d)  .79  .95  (.27)  (.27)  —(e)  9.95  10.32  439,865  .96(d)  1.61(d)  159.30 
September 30, 2003  8.11  .16  1.25  1.41  (.25)  (.25)  —  9.27  17.67  564,799  .95  1.87  145.04 

See notes to financial highlights at the end of this section.

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

150  151 

Financial highlights (Continued)

† For the period January 21, 2003 (commencement of operations) to September 30, 2003.

* Not annualized.

(a) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period.

(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

(c) Includes amounts paid through expense offset and brokerage service arrangements (Note 2).

(d) Reflects waivers of certain fund expenses in connection with investments in Putnam Prime Money Market Fund in effect during the period. As a result of such waivers, the expenses of each class reflect a reduction of the following amounts (Note 5):

  Percentage 
  of average 
  net assets 
September 30, 2007  0.01% 
September 30, 2006  0.01 
September 30, 2005  0.02 
September 30, 2004  <0.01 

(e) Amount represents less than $0.01 per share.

(f) Reflects a non-recurring accrual related to Putnam Management’s settlement with the SEC regarding brokerage allocation practices, which amounted to the following amounts:

    Percentage 
    of average 
  Per share  net assets 
Class A  <$0.01  0.01% 
Class B  <0.01  0.01 
Class C  <0.01  0.01 
Class M  <0.01  0.01 
Class R  <0.01  0.01 
Class Y  <0.01  0.01 

(g) 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 0.08% of average net assets for the period ended September 30, 2006.

(h) Portfolio turnover excludes dollar roll transactions.

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

152

Statement of assets and liabilities 9/30/07

Putnam Asset Allocation: Conservative Portfolio   
 
ASSETS   
Investment in securities, at value, including $12,392,690 of securities on loan (Note 1):   
Unaffiliated issuers (identified cost $932,834,460)  $1,022,419,264 
Affiliated issuers (identified cost $94,025,098) (Note 5)  94,025,098 
Cash  13,142,049 
Foreign currency (cost $13,143,531) (Note 1)  13,470,693 
Dividends, interest and other receivables  3,292,225 
Receivable for shares of the fund sold  4,323,541 
Receivable for securities sold  23,022,934 
Receivable for sales of delayed delivery securities (Notes 1)  30,792,027 
Receivable from Manager (Note 2)  178,935 
Receivable for open forward currency contracts (Note 1)  4,549,911 
Receivable for closed forward currency contracts (Note 1)  1,061,231 
Receivable for open swap contracts (Note 1)  12,191 
Receivable for closed swap contracts (Note 1)  654,247 
Premium paid on swap contracts (Note 1)  527,562 
Unrealized appreciation on swap contracts (Note 1)  18,704,310 
Total assets  1,230,176,218 
 
 
LIABILITIES   
Payable for variation margin (Note 1)  68,422 
Payable for securities purchased  17,110,374 
Payable for purchases of delayed delivery securities (Notes 1)  25,923,063 
Payable for shares of the fund repurchased  1,261,865 
Payable for compensation of Manager (Notes 2 and 5)  1,699,664 
Payable for investor servicing (Note 2)  339,020 
Payable for Trustee compensation and expenses (Note 2)  115,014 
Payable for administrative services (Note 2)  2,079 
Payable for distribution fees (Note 2)  419,421 
Payable for open forward currency contracts (Note 1)  5,462,350 
Payable for closed forward currency contracts (Note 1)  1,490,415 
Payable for open swap contracts (Note 1)  32,884 
Payable for closed swap contracts (Note 1)  329,396 
Premium received on swap contracts (Note 1)  1,081,319 
Unrealized depreciation on swap contracts (Note 1)  20,305,182 
Written options outstanding, at value (premiums received $8,546,975) (Notes 1 and 3)  10,842,242 
TBA sale commitments, at value (proceeds receivable $30,742,429) (Note 1)  30,732,876 
Collateral on securities loaned, at value (Note 1)  12,869,096 
Other accrued expenses  65,629 
Total liabilities  130,150,311 
Net assets  $1,100,025,907 

(Continued on next page)

153

Statement of assets and liabilities (Continued)

REPRESENTED BY   
Paid-in capital (Unlimited shares authorized) (Notes 1 and 4)  $1,077,036,572 
Distributions in excess of net investment income (Note 1)  (3,183,472) 
Accumulated net realized loss on investments and foreign currency transactions (Note 1)  (55,743,848) 
Net unrealized appreciation of investments and assets and liabilities in foreign currencies  81,916,655 
Total — Representing net assets applicable to capital shares outstanding  $1,100,025,907 
 
 
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE   
Net asset value and redemption price per class A share ($492,124,695 divided by 49,998,137 shares)  $9.84 
Offering price per class A share (100/94.75 of $9.84)*  $10.39 
Net asset value and offering price per class B share ($73,812,924 divided by 7,568,497 shares)**  $9.75 
Net asset value and offering price per class C share ($56,646,516 divided by 5,803,774 shares)**  $9.76 
Net asset value and redemption price per class M share ($12,409,339 divided by 1,272,741 shares)  $9.75 
Offering price per class M share (100/96.75 of $9.75)*  $10.08 
Net asset value, offering price and redemption price per class R share ($1,250,936 divided by 125,770 shares)  $9.95 
Net asset value, offering price and redemption price per class Y share ($463,781,497 divided by 47,196,722 shares)  $9.83 

* 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.

154

Statement of operations Year ended 9/30/07

Putnam Asset Allocation: Conservative Portfolio   
INVESTMENT INCOME   
Interest (including interest income of $8,652,870 from investments in affiliated issuers) (Note 5)  $35,643,423 
Dividends (net of foreign tax of $270,630)  7,716,011 
Securities lending  196,842 
Total investment income  43,556,276 
 
EXPENSES   
Compensation of Manager (Note 2)  6,698,229 
Investor servicing fees (Note 2)  1,995,463 
Custodian fees (Note 2)  289,948 
Trustee compensation and expenses (Note 2)  56,687 
Administrative services (Note 2)  30,772 
Distribution fees — Class A (Note 2)  1,155,431 
Distribution fees — Class B (Note 2)  824,370 
Distribution fees — Class C (Note 2)  518,026 
Distribution fees — Class M (Note 2)  91,688 
Distribution fees — Class R (Note 2)  5,837 
Other  357,386 
Non-recurring costs (Notes 2 and 7)  613 
Costs assumed by Manager (Notes 2 and 7)  (613) 
Fees waived and reimbursed by Manager (Note 5)  (144,126) 
Total expenses  11,879,711 
Expense reduction (Note 2)  (361,137) 
Net expenses  11,518,574 
Net investment income  32,037,702 
Net realized gain on investments (Notes 1 and 3)  16,161,575 
Net realized loss on swap contracts (Note 1)  (14,567,233) 
Net realized loss on futures contracts (Note 1)  (5,005,330) 
Net realized gain on foreign currency transactions (Note 1)  1,155,296 
Net realized gain on written options (Notes 1 and 3)  1,254,058 
Net increase from payments by affiliates (Note 2)  118,850 
Net unrealized depreciation of assets and liabilities in foreign currencies during the year  (1,392,082) 
Net unrealized appreciation of investments, futures contracts, swap contracts, written options and TBA sale commitments during the year  27,731,521 
Net gain on investments  25,456,655 
Net increase in net assets resulting from operations  $57,494,357 

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

155

Statement of changes in net assets

Putnam Asset Allocation: Conservative Portfolio     
INCREASE IN NET ASSETS     
  Year ended  Year ended 
  9/30/07  9/30/06 
Operations:     
Net investment income  $ 32,037,702  $ 26,833,294 
Net realized gain (loss) on investments and foreign currency transactions  (882,784)  10,245,191 
Net unrealized appreciation of investments and assets and liabilities in foreign currencies  26,339,439  20,335,519 
Net increase in net assets resulting from operations  57,494,357  57,414,004 
Distributions to shareholders (Note 1):     
From ordinary income     
Net investment income     
Class A  (13,942,663)  (13,671,190) 
Class B  (1,876,948)  (2,827,861) 
Class C  (1,174,564)  (1,179,477) 
Class M  (309,260)  (356,858) 
Class R  (32,017)  (18,619) 
Class Y  (13,945,501)  (13,695,158) 
Redemption fees (Note 1)  5,593  3,426 
Increase from capital share transactions (Note 4)  122,462,025  7,629,939 
Total increase in net assets  148,681,022  33,298,206 
 
NET ASSETS     
Beginning of year  951,344,885  918,046,679 
End of year (including distribution in excess of net investment income of $3,183,472     
and undistributed net investment income of $3,048,174, respectively)  $1,100,025,907  $951,344,885 

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

156

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157

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

Putnam Asset Allocation: Conservative Portfolio                       
 
INVESTMENT OPERATIONS:          LESS DISTRIBUTIONS:        RATIOS AND SUPPLEMENTAL DATA:     
      Net            Total      Ratio of net   
  Net asset    realized and  Total  From      Net asset  return  Net  Ratio of  investment   
  value,  Net  unrealized  from  net      value,  at net  assets,  expenses to  income (loss)  Portfolio 
  beginning  investment  gain (loss) on  investment  investment  Total  Redemption  end  asset  end of period  average net  to average  turnover 
Period ended  of period  income (loss)(a)  investments  operations  income  distributions  fees  of period  value (%)(b)  (in thousands)  assets (%)(c)  net assets (%)  (%)(h) 
CLASS A                           
September 30, 2007  $9.59  .30(d)  .25  .55  (.30)  (.30)  —(e)  $9.84  5.76  $492,125  1.15(d)  3.09(d)  150.59 
September 30, 2006  9.33  .28(d,g)  .31  .59  (.33)  (.33)  —(e)  9.59  6.46(g)  414,952  1.06(d,g)  2.95(d,g)  133.41 
September 30, 2005  8.84  .21(d,f)  .48  .69  (.20)  (.20)  —(e)  9.33  7.92  378,616  1.20(d)  2.28(d,f)  209.05 
September 30, 2004  8.65  .15(d)  .37  .52  (.33)  (.33)  —(e)  8.84  6.11  590,441  1.39(d)  1.66(d)  258.72 
September 30, 2003  7.94  .21  .93  1.14  (.43)  (.43)  —  8.65  14.88  680,678  1.39  2.55  200.28 
 
CLASS B                           
September 30, 2007  $9.50  .23(d)  .24  .47  (.22)  (.22)  —(e)  $9.75  5.00  $73,813  1.90(d)  2.36(d)  150.59 
September 30, 2006  9.25  .20(d,g)  .31  .51  (.26)  (.26)  —(e)  9.50  5.61(g)  89,287  1.81(d,g)  2.21(d,g)  133.41 
September 30, 2005  8.78  .14(d,f)  .47  .61  (.14)  (.14)  —(e)  9.25  6.94  109,941  1.95(d)  1.56(d,f)  209.05 
September 30, 2004  8.60  .08(d)  .37  .45  (.27)  (.27)  —(e)  8.78  5.23  120,168  2.14(d)  .92(d)  258.72 
September 30, 2003  7.89  .15  .93  1.08  (.37)  (.37)  —  8.60  14.14  127,586  2.14  1.80  200.28 
 
CLASS C                           
September 30, 2007  $9.49  .23(d)  .26  .49  (.22)  (.22)  —(e)  $9.76  5.21  $56,647  1.90(d)  2.34(d)  150.59 
September 30, 2006  9.24  .20(d,g)  .31  .51  (.26)  (.26)  —(e)  9.49  5.64(g)  46,990  1.81(d,g)  2.20(d,g)  133.41 
September 30, 2005  8.76  .14(d,f)  .48  .62  (.14)  (.14)  —(e)  9.24  7.08  38,901  1.95(d)  1.56(d,f)  209.05 
September 30, 2004  8.58  .08(d)  .37  .45  (.27)  (.27)  —(e)  8.76  5.24  35,850  2.14(d)  .92(d)  258.72 
September 30, 2003  7.88  .15  .92  1.07  (.37)  (.37)  —  8.58  13.99  38,868  2.14  1.81  200.28 
 
CLASS M                           
September 30, 2007  $9.50  .25(d)  .25  .50  (.25)  (.25)  —(e)  $9.75  5.27  $12,409  1.65(d)  2.59(d)  150.59 
September 30, 2006  9.25  .23(d,g)  .30  .53  (.28)  (.28)  —(e)  9.50  5.86(g)  11,794  1.56(d,g)  2.45(d,g)  133.41 
September 30, 2005  8.77  .16(d,f)  .48  .64  (.16)  (.16)  —(e)  9.25  7.32  12,913  1.70(d)  1.81(d,f)  209.05 
September 30, 2004  8.59  .10(d)  .37  .47  (.29)  (.29)  —(e)  8.77  5.51  12,728  1.89(d)  1.17(d)  258.72 
September 30, 2003  7.90  .16  .92  1.08  (.39)  (.39)  —  8.59  14.10  16,114  1.89  2.09  200.28 
 
CLASS R                           
September 30, 2007  $9.67  .28(d)  .27  .55  (.27)  (.27)  —(e)  $9.95  5.77  $1,251  1.40(d)  2.84(d)  150.59 
September 30, 2006  9.38  .26(d,g)  .34  .60  (.31)  (.31)  —(e)  9.67  6.49(g)  927  1.31(d,g)  2.70(d,g)  133.41 
September 30, 2005  8.86  .19(d,f)  .51  .70  (.18)  (.18)  —(e)  9.38  7.98  428  1.45(d)  2.10(d,f)  209.05 
September 30, 2004  8.65  .13(d)  .39  .52  (.31)  (.31)  —(e)  8.86  6.10  102  1.64(d)  1.41(d)  258.72 
September 30, 2003†  8.01  .13  .66  .79  (.15)  (.15)  —  8.65  9.91*  1  1.13*  1.60*  200.28 
 
CLASS Y                           
September 30, 2007  $9.57  .33(d)  .25  .58  (.32)  (.32)  —(e)  $9.83  6.14  $463,781  .90(d)  3.34(d)  150.59 
September 30, 2006  9.31  .30(d,g)  .31  .61  (.35)  (.35)  —(e)  9.57  6.75(g)  387,395  .81(d,g)  3.20(d,g)  133.41 
September 30, 2005  8.83  .24(d,f)  .47  .71  (.23)  (.23)  —(e)  9.31  8.11  377,247  .95(d)  2.62(d,f)  209.05 
September 30, 2004  8.64  .17(d)  .38  .55  (.36)  (.36)  —(e)  8.83  6.40  89,925  1.14(d)  1.87(d)  258.72 
September 30, 2003  7.94  .23  .92  1.15  (.45)  (.45)  —  8.64  15.08  169,684  1.14  2.83  200.28 

See notes to financial highlights at the end of this section.

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

158  159 

Financial highlights (Continued)

† For the period January 21, 2003 (commencement of operations) to September 30, 2003.

* Not annualized.

(a) Per share net investment income (loss) has been determined on the basis of the weighted average number of shares outstanding during the period.

(b) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.

(c) Includes amounts paid through 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 
September 30, 2007  0.01% 
September 30, 2006  0.03 
September 30, 2005  0.08 
September 30, 2004  0.01 

(e) Amount represents less than $0.01 per share.

(f) Reflects a non-recurring accrual related to Putnam Management’s settlement with the SEC regarding brokerage allocation practices, which amounted to the following amounts:

    Percentage 
    of average 
  Per share  net assets 
Class A  <$0.01  <0.01% 
Class B  <0.01  <0.01 
Class C  <0.01  <0.01 
Class M  <0.01  <0.01 
Class R  <0.01  <0.01 
Class Y  <0.01  <0.01 

(g) 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 0.10% of average net assets for the period ended September 30, 2006.

(h) Portfolio turnover excludes dollar roll transactions.

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

160

Notes to financial statements 9/30/07

Note 1: Significant accounting policies

Putnam Asset Allocation Funds (the “trust”), a Massachusetts business trust, is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company which consists of a series of investment portfolios (the “funds”), each of which is represented by a separate series of shares of beneficial interest. The trust currently offers three funds: Growth Portfolio, Balanced Portfolio and Conservative Portfolio, whose objectives are to seek capital appreciation, total return and total return consistent with preservation of capital, respectively.

Each fund offers class A, class B, class C, class M, class R and class Y shares. Class A and class M shares are sold with a maximum front-end sales charge of 5.25% and 3.25%, respectively, and generally do not pay a contingent deferred sales charge. Class B shares, which convert to class A shares after approximately eight years, do not pay a front-end sales charge and are subject to a contingent deferred sales charge if those shares are redeemed within six years of purchase. Class C shares have a one-year 1.00% contingent deferred sales charge and do not convert to class A shares. Class R shares, which are offered to qualified employee-benefit plans, are sold without a front-end sales charge or a contingent deferred sales charge. The expenses for class A, class B, class C, class M and class R shares may differ based on the distribution fee of each class, which is identified in Note 2. Class Y shares, which are sold at net asset value, are generally subject to the same expenses as class A, class B, class C, 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.

Effective October 2, 2006, a 1.00% redemption fee may apply on any shares purchased on or after such date that are redeemed (either by selling or exchanging into another fund) within 7 days of purchase. The redemption fee is accounted for as an addition to paid-in-capital. Prior to October 2, 2006, a 2.00% redemption fee applied to any shares that were redeemed (either by selling or exchanging into another fund) within 5 days of purchase.

Investment income, realized and unrealized gains and losses and expenses of each fund are borne pro-rata based on the relative net assets of each class to the total net assets of each 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 that fund. In addition, the Trustees declare separate dividends on each class of shares.

In the normal course of business, the funds enter into contracts that may include agreements to indemnify another party under given circumstances. The funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be, but have not yet been, made against the funds. However, the funds expect the risk of material loss to be remote.

The following is a summary of significant accounting policies consistently followed by the funds in the preparation of their 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 funds’ 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 funds 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 funds to a significant extent. At September 30, 2007, fair value pricing was used for certain foreign securities in the portfolios. Securities quoted in foreign currencies, if any, are translated into U.S. dollars at the current exchange rate. Certain investments, including certain restricted securities and derivatives, are also valued at fair value following procedures approved by the Trustees. Such valuations and procedures are reviewed periodically by the Trustees. The fair value of securities is generally determined as the amount that the funds could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. By its nature, a fair value price is a good faith estimate of the value of a security at a given point in time and does not reflect an actual market price, which may be different by a material amount.

B) Joint trading account Pursuant to an exemptive order from the Securities and Exchange Commission (the “SEC”), each fund may transfer uninvested cash balances, including cash collateral received under security lending arrangements, into a joint trading account along with the cash of other registered investment companies and certain other accounts managed by Putnam Management. These balances may be invested in issues of high-grade, short-term investments having maturities of up to 397 days for collateral received under security lending arrangements and up to 90 days for other cash investments.

C) Repurchase agreements Each 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

161

or sell is executed). Gains or losses on securities sold are determined on the identified cost basis.

Interest income is recorded on the accrual basis. Dividend income, net of applicable withholding taxes, is recognized on the ex-dividend date except that certain dividends from foreign securities, if any, are recognized as soon as the fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Dividends representing a return of capital or capital gains, if any, are reflected as a reduction of cost and/or as a realized gain.

All premiums/discounts are amortized/accreted on a yield-to-maturity basis.

Securities purchased or sold on a forward commitment or 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.

Each fund earned certain fees in connection with its senior loan purchasing activities. These fees are treated as market discount and are recorded as income in the Statement of operations.

E) Stripped securities Each 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 funds 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 funds 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 funds do 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 funds’ 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.

Each fund may be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned.

G) Forward currency contracts Each 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 funds’ portfolios.

H) Futures and options contracts Each fund may use futures and options contracts to hedge against changes in the values of securities the fund owns or expects to purchase, or for other investment purposes. Each 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 each 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 funds’ portfolios.

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

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

K) Credit default contracts Each fund may enter into credit default contracts where one party, the protection buyer, makes an upfront or periodic payment to a counterparty, the protection seller, in exchange for the right to receive a contingent payment. The maximum amount of the payment may equal the notional amount, at par, of the underlying index or security as a result of a related credit event. Payments are made upon a credit default event of the disclosed primary referenced obligation or all other equally ranked obligations of the reference entity. An upfront payment received by the fund, as the protection seller, is recorded as a liability on the fund’s books. An upfront payment made by the fund, as the protection buyer, is recorded as an asset on the fund’s books. Periodic payments received or paid by the fund are recorded as realized gains or losses. The credit default contracts are marked-to-market daily based upon quotations from an independent pricing service or market makers and the change, if any, is recorded as unrealized gain or loss. Payments received or made as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as realized gains or losses. In addition to bearing the risk that the credit event will occur, the fund could be exposed to market risk due to unfavorable changes in interest rates or in the price of the underlying security or index, the possibility that the fund may be unable to close out its position at the same time or at the same price as if it had purchased comparable publicly traded securities or that the counterparty may default on its obligation to perform. Risks of loss may exceed amounts recognized on the Statement of assets and liabilities. Credit default contracts outstanding at period end, if any, are listed after the funds’ portfolios.

L) TBA purchase commitments Each 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 each 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 Each fund may enter into TBA sale commitments to hedge its portfolio positions or to sell mortgage-backed securities it owns under delayed delivery arrangements. Proceeds of TBA sale commitments are not received until the contractual settlement date. During the time a TBA sale commitment is outstanding, equivalent deliverable securities or an offsetting TBA purchase commitment deliverable on or before the sale commitment date, are held as “cover” for the transaction.

Unsettled TBA sale commitments are valued at the fair value of the underlying securities, generally according to the procedures described under “Security valuation” above. The contract is marked-to-market daily and the change in market value is recorded by the fund as an unrealized gain or loss. If the TBA sale commitment is closed through the acquisition of an offsetting purchase commitment, the fund realizes a gain or loss. If the fund delivers securities under the commitment, the fund realizes a gain or a loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. TBA sale commitments outstanding at period end, if any, are listed after the funds’ portfolios.

N) Dollar rolls To enhance returns, each fund may enter into dollar rolls (principally using TBAs) in which the fund sells securities for delivery in the current month and simultaneously contracts to purchase similar securities on a specified future date. During the period between the sale and subsequent purchase, the fund will not be entitled to receive income and principal payments on the securities sold. The fund will, however, retain the difference between the initial sales price and the forward price for the future purchase. The fund will also be able to earn interest on the cash proceeds that are received from the initial sale. The fund may be exposed to market or credit risk if the price of the security changes unfavorably or the counterparty fails to perform under the terms of the agreement.

O) Securities lending Each fund may lend securities, through its agents, to qualified borrowers in order to earn additional income. The loans are

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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 September 30, 2007, the value of securities loaned amounted to $167,308,842, $112,698,312 and $12,392,690 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively). The funds received cash collateral of $173,069,529, $116,781,825 and $12,869,096 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively), which is pooled with collateral of other Putnam funds into 54 (Growth Portfolio) and 52 (Balanced Portfolio and Conservative Portfolio) issues of short-term investments.

P) Federal taxes It is the policy of each 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, as amended. Therefore, no provision has been made for federal taxes on income, capital gains or unrealized appreciation on securities held nor for excise tax on income and capital gains.

At September 30, 2007, Balanced Portfolio and Conservative Portfolio had capital loss carryovers of $73,296,521 and $54,515,023, respectively available to the extent allowed by the Code to offset future net capital gain, if any. These capital loss carryovers will expire on September 30, 2011.

Pursuant to federal income tax regulations applicable to regulated investment companies, the funds have elected to defer to their fiscal year ending September 30, 2008 $5,521,754, $12,611,088 and $2,304,924 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) of losses recognized during the period November 1, 2006 to September 30, 2007.

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, foreign currency gains and losses, post-October loss deferrals, both realized and unrealized gains and losses on certain futures contracts, income on swap contracts (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio) and interest only securities (Balanced Portfolio and Conservative Portfolio). Reclassifications are made to the funds’ respective capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations. For the year ended September 30, 2007, reclassifications were as follows:

Undistributed Net Investment Income   
Growth Portfolio  $(39,631,574) 
Balanced Portfolio  (26,228,449) 
Conservative Portfolio  (6,988,395) 

   
Accumulated Net Realized Loss     
Growth Portfolio  $  39,634,532 
Balanced Portfolio    36,098,447 
Conservative Portfolio    6,982,376 
Paid-in Capital     
Growth Portfolio  $  (2,958) 
Balanced Portfolio    (9,869,998) 
Conservative Portfolio    6,019 

The tax basis components of distributable earnings and the federal tax cost as of September 30, 2007 were as follows:

Growth Portfolio   
Unrealized appreciation  $ 454,843,913 
Unrealized depreciation  (75,062,094) 
  ——————————————— 
Net unrealized appreciation  379,781,819 
Undistributed long-term gain  18,294.663 
Post-October loss  (5,521,754) 
Cost for federal income tax purposes  $2,466,505,626 
 
Balanced Portfolio   
Unrealized appreciation  $ 352,809,931 
Unrealized depreciation  (62,386,342) 
  ——————————————— 
Net unrealized appreciation  290,423,589 
Capital loss carryforward  (73,296,521) 
Post-October loss  (12,611,088) 
Cost for federal income tax purposes  $2,190,075,501 
 
Conservative Portfolio   
Unrealized appreciation  $ 110,777,124 
Unrealized depreciation  (23,752,324) 
  ——————————————— 
Net unrealized appreciation  87,024,800 
Capital loss carryforward  (54,515,023) 
Post-October loss  (2,304,924) 
Cost for federal income tax purposes  $1,029,419,562 

R) Expenses of the trust Expenses directly charged or attributable to any fund will be paid from the assets of that fund. Generally, expenses of the trust will be allocated among and charged to the assets of each fund on a basis that the Trustees deem fair and equitable, which may be based on the relative assets of each fund or the nature of the services performed and relative applicability to each fund.

Note 2: Management fee, administrative services and
other transactions

Putnam Management is paid for management and investment advisory services quarterly based on the average net assets of each fund. Such fee is based on the following annual rates: 0.70% of the first $500 million of average net assets, 0.60% of the next $500 million, 0.55% of the next $500 million, 0.50% of the next $5 billion, 0.475% of the next $5 billion, 0.455% of the next $5 billion, 0.44% of the next $5 billion and 0.43% thereafter.

Putnam Management has agreed to waive fees and reimburse expenses of each fund through June 30, 2009 to the extent necessary to ensure that each 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

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12b-1 fees and without giving effect to any expense offset and brokerage service arrangements that may reduce fund expenses.

Putnam Management has further agreed to waive fees and reimburse expenses of the Growth Portfolio for the period from July 1, 2007 through June 30, 2008 to the extent necessary to ensure that the fund’s expenses do not exceed the simple average of the expenses of a custom group of competitive funds selected by Lipper, Inc. based on the size of the fund. The expense reimbursement is based on a comparison of the fund’s total expenses with the average operating expenses of the funds in this Lipper custom peer group for their respective 2006 fiscal years, excluding 12b-1 fees and after adjustment for certain expense offset and brokerage service arrangements that reduced expenses of the fund.

For the year ended September 30, 2007, the funds’ expenses were limited to the lower of the limits specified above and accordingly, Putnam Management did not waive any of its management fee from the funds.

Effective August 3, 2007, Marsh & McLennan Companies, Inc. sold its ownership interest in Putnam Management, its parent companies and affiliates to a wholly-owned subsidiary of Great-West Lifeco, Inc. Each fund’s shareholders have approved a new management contract for the fund that became effective upon the sale.

For the year ended September 30, 2007, Putnam Management has assumed $1,363, $1,321 and $613 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) of legal, shareholder servicing and communication, audit and Trustee fees incurred by each fund in connection with certain legal and regulatory matters (including those described in Note 7).

In October 2007, Putnam Management agreed to and did reimburse each fund in the amount of $73,462, $192,828, $268,429 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) in connection with the misidentification in 2006 of the characteristics of certain securities in the funds’ portfolios. The reimbursement by Putnam Management had no impact on total return.

Putnam Management voluntarily reimbursed Balanced Portfolio and Conservative Portfolio $5,387 and $118,850, respectively, for a trading error which occurred during the period. The effect of the loss incurred and the reimbursement by Putnam Management of such amounts had no impact on total returns.

The funds reimburse Putnam Management an allocated amount for the compensation and related expenses of certain officers of the funds and their staff who provide administrative services to the funds. The aggregate amount of all such reimbursements is determined annually by the Trustees.

Custodial services for each 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 each 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 each fund. Putnam Investor Services received fees for investor servicing, subject to certain limitations, based on the number of shareholder accounts in each funds and the level of defined contribution plan assets in each fund. During the year ended September 30, 2007, the funds incurred $6,217,528, $4,348,123 and $2,201,813 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) for custody and investor servicing agent functions provided by PFTC.

Under the custodian contract between each fund and State Street, the custodian bank has a lien on the securities of each fund to the extent permitted by the fund’s investment restrictions to cover any advances made by the custodian bank for the settlement of securities purchased by the fund. At September 30, 2007, the payable to the custodian bank (for Growth Portfolio and Balanced Portfolio) represents the amount due for cash advanced for the settlement of securities purchased.

The funds have entered into arrangements with PFTC and State Street whereby PFTC’s and State Street’s fees are reduced by credits allowed on cash balances. The funds also reduced expenses through brokerage service arrangements. For the year ended September 30, 2007, the funds’ expenses were reduced by $522,451, $505,860 and $361,137 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) under these arrangements.

Each independent Trustee of the funds receives an annual Trustee fee, of which $761, $711 and $460 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) as a quarterly retainer, has been allocated to the funds, 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.

Each 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.

Each fund has adopted an unfunded noncontributory defined benefit pension plan (the “Pension Plan”) covering all Trustees of the funds 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 funds is included in Trustee compensation and expenses in the Statements of operations. Accrued pension liability is included in Payable for Trustee compensation and expenses in the Statements of assets and liabilities. The Trustees have terminated the Pension Plan with respect to any Trustee first elected after 2003.

Each fund has adopted distribution plans (the “Plans”) with respect to its class A, class B, class C, class M and class R shares pursuant to Rule 12b-1 under the Investment Company Act of 1940. The purpose of the Plans is to compensate Putnam Retail Management, a wholly-owned subsidiary of Putnam, LLC and Putnam Retail Management GP, Inc., for services provided and expenses incurred in distributing shares of the funds. The Plans provide for payments by each fund to Putnam Retail Management at an annual rate of up to 0.35%, 1.00%, 1.00%, 1.00% and 1.00% of the average net assets attributable to class A, class B, class C, class M and class R shares, respectively. The Trustees have approved payment by each 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.

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For the year ended September 30, 2007, Putnam Retail Management, acting as underwriter, received the following:

  Class A  Class M 
  Net  Net 
  Commissions  Commissions 
Growth Portfolio  $572,496  $8,087 
Balanced Portfolio  382,688  4,765 
Conservative Portfolio  95,161  1,934 
  Class B  Class C 
  Contingent  Contingent 
  Deferred  Deferred 
  Sales Charges  Sales Charges 
Growth Portfolio  $369,748  $31,137 
Balanced Portfolio  331,126  24,724 
Conservative Portfolio  102,298  10,403 

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 September 30, 2007, Putnam Retail Management, acting as underwriter, received the following:

 
  Class A  Class M 
  Deferred  Deferred 
  Sales Charges  Sales Charges 
Growth Portfolio  $16,684  $— 
Balanced Portfolio  12,106  — 
Conservative Portfolio  467  — 

Note 3: Purchases and sales of securities

During the year ended September 30, 2007, cost of purchases and proceeds from sales of investment securities other than short-term investments were as follows:

 
U.S. Government Securities     
  Purchases  Sales 
Growth Portfolio  $9,649,142  $6,429,242 
Balanced Portfolio  3,715,333  3,715,333 
Conservative Portfolio  4,037,921  6,492,999 
 
Other Securities     
  Purchases  Sales 
Growth Portfolio  $2,064,961,422  $1,719,232,454 
Balanced Portfolio  2,418,431,651  2,094,810,608 
Conservative Portfolio  1,520,384,061  1,258,738,778 

Written option transactions during the year ended September 30, 2007 are summarized as follows:

  Contract  Premiums 
Growth Portfolio  Amounts  Received 
Written options     
outstanding at     
beginning of year  $ 13,080,000  $ 477,767 
Options opened  136,293,953  2,771,522 
Options exercised  —  — 
Options expired  (6,860,000)  (265,311) 
Options closed  (73)  (17,976) 
Written options     
outstanding at     
end of year  $142,513,880  $2,966,002 
 
  Contract  Premiums 
Balanced Portfolio  Amounts  Received 
Written options     
outstanding at     
beginning of year  $ 53,939,689  $ 2,028,120 
Options opened  385,693,611  8,800,536 
Options exercised  —  — 
Options expired  (40,208,579)  (1,591,449) 
Options closed  (231)  (56,884) 
Written options     
outstanding at     
end of year  $399,424,490  $ 9,180,323 
 
  Contract  Premiums 
Conservative Portfolio  Amounts  Received 
Written options     
outstanding at     
beginning of year  $ 47,252,000  $ 1,764,729 
Options opened  358,727,198  8,059,322 
Options exercised  —  — 
Options expired  (31,760,000)  (1,228,318) 
Options closed  (198)  (48,758) 
Written options     
outstanding at     
end of year  $374,219,000  $ 8,546,975 

Note 4: Capital shares

At September 30, 2007, there was an unlimited number of shares of beneficial interest authorized. Transactions in capital shares were as follows:

Growth Portfolio:     
CLASS A  Shares  Amount 
Year ended 9/30/07: 
Shares sold  49,394,482  $ 714,263,561 
Shares issued in connection with     
reinvestment of distributions  513,672  7,206,819 
Shares repurchased  (19,916,795)  (289,497,473) 
Net increase  29,991,359  $ 431,972,907 
 
Year ended 9/30/06:     
Shares sold  38,664,985  $ 489,972,563 
Shares issued in connection with     
reinvestment of distributions  536,598  6,514,294 
Shares repurchased  (17,463,960)  (219,675,426) 
Net increase  21,737,623  $ 276,811,431 

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CLASS B  Shares  Amount 
Year ended 9/30/07:     
Shares sold  9,941,081  $ 140,374,912 
Shares issued in connection with     
reinvestment of distributions  —  — 
Shares repurchased  (8,604,613)  (122,588,795) 
Net increase  1,336,468  $ 17,786,117 
 
Year ended 9/30/06:     
Shares sold  10,155,844  $ 126,273,710 
Shares issued in connection with     
reinvestment of distributions  28,064  335,771 
Shares repurchased  (9,179,020)  (113,756,664) 
Net increase  1,004,888  $ 12,852,817 
 
CLASS C  Shares  Amount 
Year ended 9/30/07:     
Shares sold  7,068,104  $ 98,926,128 
Shares issued in connection with     
reinvestment of distributions  2,328  31,659 
Shares repurchased  (2,194,558)  (30,775,911) 
Net increase  4,875,874  $ 68,181,876 
 
Year ended 9/30/06:     
Shares sold  4,716,321  $ 57,930,595 
Shares issued in connection with     
reinvestment of distributions  15,551  183,348 
Shares repurchased  (1,371,637)  (16,789,631) 
Net increase  3,360,235  $ 41,324,312 
 
CLASS M  Shares  Amount 
Year ended 9/30/07:     
Shares sold  890,847  $12,702,808 
Shares issued in connection with     
reinvestment of distributions  3,316  45,856 
Shares repurchased  (573,304)  (8,178,217) 
Net increase  320,859  $ 4,570,447 
 
Year ended 9/30/06:     
Shares sold  824,301  $10,237,347 
Shares issued in connection with     
reinvestment of distributions  9,918  118,820 
Shares repurchased  (638,666)  (7,965,198) 
Net increase  195,553  $ 2,390,969 

CLASS R  Shares  Amount 
Year ended 9/30/07:     
Shares sold  314,485  $ 4,503,517 
Shares issued in connection with     
reinvestment of distributions  2,114  29,365 
Shares repurchased  (293,482)  (4,208,290) 
Net increase  23,117  $ 324,592 
 
Year ended 9/30/06:     
Shares sold  408,571  $ 5,173,547 
Shares issued in connection with     
reinvestment of distributions  902  10,862 
Shares repurchased  (43,024)  (533,138) 
Net increase  366,449  $ 4,651,271 
 
CLASS Y  Shares  Amount 
Year ended 9/30/07:     
Shares sold  7,103,031  $ 103,903,164 
Shares issued in connection with     
reinvestment of distributions  92,684  1,310,547 
Shares repurchased  (4,497,487)  (64,763,281) 
Net increase  2,698,228  40,450,430 
 
Year ended 9/30/06:     
Shares sold  4,124,585  52,313,145 
Shares issued in connection with     
reinvestment of distributions  121,664  1,487,947 
Shares repurchased  (17,722,193)  (220,987,006) 
Net decrease  (13,475,944)  $(167,185,914) 
 
Balanced Portfolio:     
CLASS A  Shares  Amount 
Year ended 9/30/07:     
Shares sold  43,989,625  $ 550,413,768 
Shares issued in connection with     
reinvestment of distributions  2,092,978  26,157,309 
Shares repurchased  (31,098,194)  (390,178,638) 
Net increase  14,984,409  $ 186,392,439 
 
Year ended 9/30/06:     
Shares sold  39,574,113  $ 451,846,355 
Shares issued in connection with     
reinvestment of distributions  2,016,629  22,770,815 
Shares repurchased  (27,082,282)  (308,419,046) 
Net increase  14,508,460  $ 166,198,124 

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CLASS B  Shares  Amount 
Year ended 9/30/07:     
Shares sold  6,143,300  $ 76,283,337 
Shares issued in connection with     
reinvestment of distributions  253,215  3,142,916 
Shares repurchased  (9,362,150)  (116,653,435) 
Net decrease  (2,965,635)  $ (37,227,182) 
 
Year ended 9/30/06:     
Shares sold  7,546,153  $ 85,221,717 
Shares issued in connection with     
reinvestment of distributions  361,588  4,039,363 
Shares repurchased  (11,373,608)  (128,492,821) 
Net decrease  (3,465,867)  $ (39,231,741) 
 
CLASS C  Shares  Amount 
Year ended 9/30/07:     
Shares sold  3,989,290  $ 49,116,520 
Shares issued in connection with     
reinvestment of distributions  111,515  1,370,182 
Shares repurchased  (2,171,843)  (26,728,947) 
Net increase  1,928,962  $ 23,757,755 
 
Year ended 9/30/06:     
Shares sold  3,570,987  $ 40,060,820 
Shares issued in connection with     
reinvestment of distributions  115,335  1,278,551 
Shares repurchased  (2,011,544)  (22,539,113) 
Net increase  1,674,778  $ 18,800,258 
 
CLASS M  Shares  Amount 
Year ended 9/30/07:     
Shares sold  648,825  $ 8,089,016 
Shares issued in connection with     
reinvestment of distributions  36,762  458,630 
Shares repurchased  (623,352)  (7,771,202) 
Net increase  62,235  $ 776,444 
 
Year ended 9/30/06:     
Shares sold  646,138  $ 7,337,360 
Shares issued in connection with     
reinvestment of distributions  44,108  496,232 
Shares repurchased  (714,178)  (8,133,498) 
Net decrease  (23,932)  $ (299,906) 

CLASS R  Shares  Amount 
Year ended 9/30/07:     
Shares sold  291,998  $ 3,636,355 
Shares issued in connection with     
reinvestment of distributions  10,653  132,749 
Shares repurchased  (692,653)  (8,617,617) 
Net decrease  (390,002)  $ (4,848,513) 
 
Year ended 9/30/06:     
Shares sold  1,155,979  $13,290,431 
Shares issued in connection with     
reinvestment of distributions  6,432  72,778 
Shares repurchased  (476,786)  (5,484,373) 
Net increase  685,625  $ 7,878,836 
 
CLASS Y  Shares  Amount 
Year ended 9/30/07:     
Shares sold  10,065,783  $ 127,031,290 
Shares issued in connection with     
reinvestment of distributions  324,998  4,068,344 
Shares repurchased  (5,719,357)  (71,121,383) 
Net increase  4,671,424  $ 59,978,251 
 
Year ended 9/30/06:     
Shares sold  5,404,275  $61,516,446 
Shares issued in connection with     
reinvestment of distributions  335,817  3,796,620 
Shares repurchased  (23,790,217)  (269,300,210) 
Net decrease  (18,050,125)  $(203,987,144) 
 
Conservative Portfolio:     
CLASS A  Shares  Amount 
Year ended 9/30/07:     
Shares sold  17,272,079  $ 169,376,762 
Shares issued in connection with     
reinvestment of distributions  1,365,157  13,343,502 
Shares repurchased  (11,924,353)  (116,968,282) 
Net increase  6,712,883  65,751,982 
 
Year ended 9/30/06:     
Shares sold  14,651,816  $ 137,424,816 
Shares issued in connection with     
reinvestment of distributions  1,409,720  13,138,419 
Shares repurchased  (13,359,361)  (125,477,862) 
Net increase  2,702,175  25,085,373 

168

CLASS B  Shares  Amount 
Year ended 9/30/07:     
Shares sold  1,710,100  $ 16,607,105 
Shares issued in connection with     
reinvestment of distributions  172,226  1,668,852 
Shares repurchased  (3,715,042)  (36,119,970) 
Net decrease  (1,832,716)  $(17,844,013) 
 
Year ended 9/30/06:     
Shares sold  1,981,831  $ 18,389,260 
Shares issued in connection with     
reinvestment of distributions  274,841  2,536,698 
Shares repurchased  (4,737,745)  (44,007,165) 
Net decrease  (2,481,073)  $(23,081,207) 
 
CLASS C  Shares  Amount 
Year ended 9/30/07:     
Shares sold  2,036,431  $ 19,777,151 
Shares issued in connection with     
reinvestment of distributions  101,750  986,474 
Shares repurchased  (1,286,299)  (12,476,087) 
Net increase  851,882  $ 8,287,538 
 
Year ended 9/30/06:     
Shares sold  1,667,936  $ 15,493,382 
Shares issued in connection with     
reinvestment of distributions  112,352  1,036,254 
Shares repurchased  (1,040,521)  (9,660,728) 
Net increase  739,767  $ 6,868,908 
 
CLASS M  Shares  Amount 
Year ended 9/30/07:     
Shares sold  224,533  $ 2,184,329 
Shares issued in connection with     
reinvestment of distributions  30,761  297,998 
Shares repurchased  (224,129)  (2,170,760) 
Net increase  31,165  $ 311,567 
 
Year ended 9/30/06:     
Shares sold  261,504  $ 2,427,608 
Shares issued in connection with     
reinvestment of distributions  37,596  347,175 
Shares repurchased  (453,892)  (4,197,349) 
Net decrease  (154,792)  $(1,422,566) 

CLASS R  Shares  Amount 
Year ended 9/30/07:     
Shares sold  87,194  $ 859,834 
Shares issued in connection with     
reinvestment of distributions  3,241  32,017 
Shares repurchased  (60,534)  (597,172) 
Net increase  29,901  $ 294,679 
 
Year ended 9/30/06:     
Shares sold  78,336  $ 740,927 
Shares issued in connection with     
reinvestment of distributions  1,981  18,619 
Shares repurchased  (30,048)  (283,376) 
Net increase  50,269  $ 476,170 
 
CLASS Y  Shares  Amount 
Year ended 9/30/07:     
Shares sold  9,824,015  $ 96,143,251 
Shares issued in connection with     
reinvestment of distributions  1,429,572  13,945,501 
Shares repurchased  (4,544,101)  (44,428,480) 
Net increase  6,709,486  $ 65,660,272 
 
Year ended 9/30/06:     
Shares sold  6,608,799  $ 61,825,623 
Shares issued in connection with     
reinvestment of distributions  1,472,481  13,695,158 
Shares repurchased  (8,104,166)  (75,817,520) 
Net decrease  (22,886)  $ (296,739) 

Note 5: Investment in Putnam Prime Money Market Fund

Each 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 each fund are reduced by an amount equal to the management and administrative services fees paid by Putnam Prime Money Market Fund with respect to assets invested by the fund in Putnam Prime Money Market Fund. For the year ended September 30, 2007, management fees paid were reduced by $143,096, $220,617 and $144,126 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) relating to the funds’ investment in Putnam Prime Money Market Fund. Income distributions earned by the funds are recorded as income in the Statement of operations and totaled $8,822,546, $13,488,472 and $8,652,870 (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) for the year ended September 30, 2007. During the year ended September 30, 2007, cost of purchases and proceeds of sales of investments in Putnam Prime Money Market Fund aggregated as follows:

  Cost of  Proceeds of 
  Purchases  Sales 
Growth Portfolio  $1,483,874,560  $1,354,030,840 
Balanced Portfolio  1,190,855,322  1,345,418,668 
Conservative Portfolio  657,245,315  766,637,287 

169

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.

Note 7: 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. Payments from Putnam Management will be distributed to certain open-end Putnam funds and their shareholders. These allegations and related matters have served as the general basis for certain lawsuits, including purported class action lawsuits against Putnam Management and, in a limited number of cases, some Putnam funds. Putnam Management believes that these lawsuits will have no material adverse effect on the funds or on Putnam Management’s ability to provide investment management services. In addition, Putnam Management has agreed to bear any costs incurred by the Putnam funds as a result of these matters.

Putnam Management and Putnam Retail Management are named as defendants in a civil suit in which the plaintiffs allege that the management and distribution fees paid by certain Putnam funds were excessive and seek recovery under the Investment Company Act of 1940. Putnam Management and Putnam Retail Management have contested the plaintiffs’ claims and the matter is currently pending in the U.S. District Court for the District of Massachusetts. Based on currently available information, Putnam Management believes that this action is without merit and that it is unlikely to have a material effect on Putnam Management’s and Putnam Retail Management’s ability to provide services to their clients, including the funds.

Note 8: New accounting pronouncements

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (the “Interpretation”). The Interpretation prescribes a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken by a filer in the filer’s tax return. The Interpretation is not expected to have a material effect on the funds’ financial statements. However, the conclusions regarding the Interpretation may be subject to review and adjustment at a later date based on factors including, but not limited to, further implementation guidance expected from the FASB, and on-going analysis of tax laws, regulations and interpretations thereof.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (the “Standard”). The Standard defines fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. The Standard applies to fair value measurements already required or permitted by existing standards. The Standard is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Putnam Management is currently evaluating what impact the adoption of the Standard will have on the funds’ financial statements.

170

Federal tax information and brokerage
commissions (unaudited)

Federal tax information

Pursuant to Section 852 of the Internal Revenue Code, as amended, Growth Portfolio hereby designates, $18,294,663 as long-term capital gain, for its taxable year ended September 30, 2007.

The funds have designated 100.00%, 54.07% and 16.34% (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively) of ordinary income distributions as qualifying for the dividends received deduction for corporations.

For their tax year ended September 30, 2007, the funds hereby designate 100.00%, 93.53% and 26.63%, (for Growth Portfolio, Balanced Portfolio and Conservative Portfolio, respectively), or, in each case, the maximum amount allowable of their taxable ordinary income distributions as qualified dividends taxed at the individual net capital gain rates.

The Form 1099 you receive in January 2008 will show the tax status of all distributions paid to your account in calendar 2007.

Brokerage commissions

Brokerage commissions are paid to firms that execute trades on behalf of your fund. When choosing these firms, Putnam is required by law to seek the best execution of the trades, taking all relevant factors into consideration, including expected quality of execution and commission rate. Listed below are the largest relationships based upon brokerage commissions for your fund and the other funds in Putnam's Global Asset Allocation group for the year ended September 30, 2007. The other Putnam mutual funds in this group are Putnam Income Strategies Fund, Putnam RetirementReady Funds, and Putnam VT Global Asset Allocation Fund.

The top five firms that received brokerage commissions for trades executed for the Global Asset Allocation group are (in descending order) Goldman Sachs, Citigroup Global Markets, Merrill Lynch, Credit Suisse First Boston, and Lehman Brothers. Commissions paid to these firms together represented approximately 52% of the total brokerage commissions paid for the year ended September 30, 2007.

Commissions paid to the next 10 firms together represented approximately 32% of the total brokerage commissions paid during the period. These firms are (in alphabetical order) Bank of America London, Bear Stearns & Company, CIBC World Markets, Deutsche Bank Securities, JPMorgan Clearing, Morgan Stanley Dean Witter, RBC Capital Markets, SG Cowen Securities Corp., UBS Warburg, and Weeden & Company.

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.

171

Shareholder meeting
results (unaudited)

May 15, 2007 meeting

A proposal to approve a new management contract between the funds and Putnam Investment Management, LLC was approved as follows:

  Votes for  Votes against  Abstentions 
Growth Portfolio  89,790,840  3,015,762  3,278,547 
Balanced Portfolio  104,197,924  2,457,507  3,672,313 
Conservative Portfolio  81,090,159  1,179,685  1,345,634 

All tabulations are rounded to the nearest whole number.

172

About the Trustees

Jameson A. Baxter (Born 1943), Trustee since 1994, Vice Chairman since 2005

Ms. Baxter is the President of Baxter Associates, Inc., a private investment firm.

Ms. Baxter serves as a Director of ASHTA Chemicals, Inc., Ryerson, Inc. (a metals service corporation), the Mutual Fund Directors Forum, and Advocate Health Care. She is Chairman Emeritus of the Board of Trustees, Mount Holyoke College, having served as Chairman for five years. Until 2007, she was a Director of Banta Corporation (a printing and supply chain management company). Until 2004, she was a Director of BoardSource (formerly the National Center for Nonprofit Boards), and until 2002, she was a Director of Intermatic Corporation (a manufacturer of energy control products).

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

Charles B. Curtis (Born 1940), Trustee since 2001

Mr. Curtis is President and Chief Operating Officer of the Nuclear Threat Initiative (a private foundation dealing with national security issues) and serves as Senior Advisor to the United Nations Foundation.

Mr. Curtis is a member of the Council on Foreign Relations and serves as a Director of Edison International and Southern California Edison. Until 2006, Mr. Curtis served as a member of the Trustee Advisory Council of the Applied Physics Laboratory, Johns Hopkins University. Until 2003, Mr. Curtis was a member of the Electric Power Research Institute Advisory Council and the University of Chicago Board of Governors for Argonne National Laboratory. Prior to 2002, Mr. Curtis was a Member of the Board of Directors of the Gas Technology Institute and the Board of Directors of the Environment and Natural Resources Program Steering Committee, John F. Kennedy School of Government, Harvard University. Until 2001, Mr. Curtis was a member of the Department of Defense Policy Board and Director of EG&G Technical Services, Inc. (a fossil energy research and development support company).

From August 1997 to December 1999, Mr. Curtis was a Partner at Hogan & Hartson L.L.P., a Washington, D.C. law firm. Prior to May 1997, Mr. Curtis was Deputy Secretary of Energy and Under Secretary of the U.S. Department of Energy. He served as Chairman of the Federal Energy Regulatory Commission from 1977 to 1981 and has held positions on the staff of the U.S. House of Representatives, the U.S. Treasury Department, and the SEC.

Robert J. Darretta (Born 1946), Trustee since 2007

Mr. Darretta serves as Director of UnitedHealth Group, a diversified health-care conglomerate.

Until April 2007, Mr. Darretta was Vice Chairman of the Board of Directors of Johnson & Johnson, a diversified health-care conglomerate. Prior to 2007, Mr. Darretta held several accounting and finance positions with Johnson & Johnson, including Chief Financial Officer, Executive Vice President, and Treasurer.

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

Myra R. Drucker (Born 1948), Trustee since 2004

Ms. Drucker is Chair of the Board of Trustees of Commonfund (a not-for-profit firm specializing in asset management for educational endowments and foundations), Vice Chair of the Board of Trustees of Sarah Lawrence College, and a member of the Investment Committee of the Kresge Foundation (a charitable trust). She is also a director of New York Stock Exchange LLC, a wholly-owned subsidiary of the publicly-traded NYSE Group, Inc., a director of Interactive Data Corporation (a provider of financial market data, analytics, and related services to financial institutions and individual investors), and an advisor to RCM Capital Management (an investment management firm).

Ms. Drucker is an ex-officio member of the New York Stock Exchange (NYSE) Pension Managers Advisory Committee, having served as Chair for seven years.

Until August 31, 2004, Ms. Drucker was Managing Director and a member of the Board of Directors of General Motors Asset Management and Chief Investment Officer of General Motors Trust Bank. Ms. Drucker also served as a member of the NYSE Corporate Accountability and Listing Standards Committee and the NYSE/NASD IPO Advisory Committee.

Prior to joining General Motors Asset Management in 2001, Ms. Drucker held various executive positions in the investment management industry. Ms. Drucker served as Chief Investment Officer of Xerox Corporation (a technology and service company in the document industry), where she was responsible for the investment of the company’s pension assets. Ms. Drucker was also Staff Vice President and Director of Trust Investments for International Paper (a paper products, paper distribution, packaging and forest products company) and previously served as Manager of Trust Investments for Xerox Corporation. Ms. Drucker received a B.A. degree in Literature and Psychology from Sarah Lawrence College and pursued graduate studies in economics, statistics and portfolio theory at Temple University.

173

John A. Hill (Born 1942), Trustee since 1985 and Chairman since 2000

Mr. Hill is Vice Chairman of First Reserve Corporation, a private equity buyout firm that specializes in energy investments in the diversified worldwide energy industry.

Mr. Hill is a Director of Devon Energy Corporation and various private companies controlled by First Reserve Corporation, as well as Chairman of TH Lee, Putnam Investment Trust (a closed-end investment company advised by an affiliate of Putnam Management). He is also a Trustee of Sarah Lawrence College. Until 2005, he was a Director of Continuum Health Partners of New York.

Prior to acquiring First Reserve Corporation in 1983, Mr. Hill held executive positions in investment banking and investment management with several firms and with the federal government, including Deputy Associate Director of the Office of Management and Budget and Deputy Director of the Federal Energy Administration. He is active in various business associations, including the Economic Club of New York, and lectures on energy issues in the United States and Europe. Mr. Hill holds a B.A. degree in Economics from Southern Methodist University and pursued graduate studies there as a Woodrow Wilson Fellow.

Paul L. Joskow (Born 1947), Trustee since 1997

Dr. Joskow is the Elizabeth and James Killian Professor of Economics and Management, and Director of the Center for Energy and Environmental Policy Research at the Massachusetts Institute of Technology.

Dr. Joskow serves as a Director of TransCanada Corporation (an energy company focused on natural gas transmission and power services) and 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 topics in industrial organization, government regulation of industry, and competition policy. He is active in industry restructuring, environmental, energy, competition and privatization policies —serving as an advisor to governments and corporations worldwide. Dr. Joskow holds a Ph.D. and M. Phil from Yale University and a B.A. from Cornell University.

Elizabeth T. Kennan (Born 1938), Trustee since 1992

Dr. Kennan is a Partner of Cambus-Kenneth Farm (thoroughbred horse and cattle breeding). She is President Emeritus of Mount Holyoke College.

Dr. Kennan served as Chairman and is now Lead Director of Northeast Utilities. She is a Trustee of the National Trust for Historic Preservation, of Centre College and of Midway College in Midway, Kentucky. Until 2006, she was a member of The Trustees of Reservations. Prior to 2001, Dr. Kennan served on the oversight committee of the Folger Shakespeare Library. Prior to June 2005, she was a Director of Talbots, Inc., and she has served as Director on a number of other boards, including Bell Atlantic, Chastain Real Estate, Shawmut Bank, Berkshire Life Insurance, and Kentucky Home Life Insurance. Dr. Kennan has also served as President of Five Colleges Incorporated 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. Dr. Kennan holds a Ph.D. from the University of Washington in Seattle, an M.S. from St. Hilda’s College at Oxford University and an A.B. from Mount Holyoke College. She holds several honorary doctorates.

Kenneth R. Leibler (Born 1949), Trustee since 2006

Mr. Leibler is a founding partner and former Chairman of the Boston Options Exchange, an electronic marketplace for the trading of listed derivative securities.

Mr. Leibler currently serves as a Trustee of Beth Israel Deaconess Hospital in Boston. He is also lead director of Ruder Finn Group, a global communications and advertising firm, and a director of Northeast Utilities, which operates New England’s largest energy delivery system. Prior to December 2006, he served as a director of the Optimum Funds group. Prior to October 2006, he served as a director of ISO New England, the organization responsible for the operation of the electric generation system in the New England states. Prior to 2000, Mr. Leibler was a director of the Investment Company Institute in Washington, D.C.

174

Prior to January 2005, Mr. Leibler served as Chairman and Chief Executive Officer of the Boston Stock Exchange. Prior to January 2000, he served as President and Chief Executive Officer of Liberty Financial Companies, a publicly traded diversified asset management organization. Prior to June 1990, he served as President and Chief Operating Officer of the American Stock Exchange (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 (Born 1945), Trustee since 1984

Mr. Patterson is Senior Partner of Cabot Properties, L.P. and Chairman of Cabot Properties, Inc. (a private equity firm investing in commercial real estate).

Mr. Patterson serves as Chairman Emeritus and Trustee of the Joslin Diabetes Center. Prior to June 2003, he was a Trustee of Sea Education Association. Prior to December 2001, he was President and Trustee of Cabot Industrial Trust (a publicly traded real estate investment trust). Prior to February 1998, he was Executive Vice President and Director of Acquisitions of Cabot Partners Limited Partnership (a registered investment adviser involved in institutional real estate investments). Prior to 1990, he served as Executive Vice President of Cabot, Cabot & Forbes Realty Advisors, Inc. (the predecessor company of Cabot Partners).

 Mr. Patterson practiced law and held various positions in state government and was the founding Executive Director of the Massachusetts Industrial Finance Agency. Mr. Patterson is a graduate of Harvard College and Harvard Law School.

George Putnam, III (Born 1951), Trustee since 1984

Mr. Putnam is Chairman of New Generation Research, Inc. (a publisher of financial advisory and other research services), and President of New Generation Advisers, Inc. (a registered investment advisor to private funds). Mr. Putnam founded the New Generation companies in 1986.

Mr. Putnam is a Director of The Boston Family Office, LLC (a registered investment adviser). He is a Trustee of St. Mark’s School. Until 2006, he was a Trustee of Shore Country Day School, and until 2002 was a Trustee of the Sea Education Association.

Mr. Putnam previously worked as an attorney with the law firm of Dechert LLP (formerly known as Dechert Price & Rhoads) in Philadelphia. He is a graduate of Harvard College, Harvard Business School and Harvard Law School.

W. Thomas Stephens (Born 1942), Trustee since 1997

Mr. Stephens is Chairman and Chief Executive Officer of Boise Cascade, L.L.C. (a paper, forest products and timberland assets company).

Mr. Stephens is a Director of TransCanadaPipelines, Ltd. (an energy infrastructure company). Until 2004, Mr. Stephens was a Director of Xcel Energy Incorporated (a public utility company), Qwest Communications, and Norske Canada, Inc. (a paper manufacturer). Until 2003, Mr. Stephens was a Director of Mail-Well, Inc. (a diversified printing company). He served as Chairman of Mail-Well until 2001 and as CEO of MacMillan-Bloedel, Ltd. (a forest products company) until 1999.

 Prior to 1996, Mr. Stephens was Chairman and Chief Executive Officer of Johns Manville Corporation. He holds B.S. and M.S. degrees from the University of Arkansas.

Richard B. Worley (Born 1945), Trustee since 2004

Mr. Worley is Managing Partner of Permit Capital LLC, an investment management firm.

Mr. Worley serves as a Trustee of the University of Pennsylvania Medical Center, The Robert Wood Johnson Foundation (a philanthropic organization devoted to health care issues), and the National Constitution Center. He is also a Director of The Colonial Williamsburg Foundation (a historical preservation organization) and the Philadelphia Orchestra Association. Mr. Worley also serves on the investment committees of Mount Holyoke College and World Wildlife Fund (a wildlife conservation organization).

Prior to joining Permit Capital LLC in 2002, Mr. Worley served as Chief Strategic Officer of Morgan Stanley Investment Management. He previously served as President, Chief Executive Officer and Chief Investment Officer of Morgan Stanley Dean Witter Investment Management and as a Managing Director of Morgan Stanley, a financial services firm. Mr. Worley also was the Chairman of Miller Anderson & Sherrerd, an investment management firm.

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

175

Charles E. Haldeman, Jr.* (Born 1948), Trustee since 2004 and President of the Funds since 2007

Mr. Haldeman is President and Chief Executive Officer of Putnam, LLC (“Putnam Investments”) and President of the Putnam Funds. He is a member of Putnam Investments’ Executive Board of Directors and Advisory Council. Prior to November 2003, Mr. Haldeman served as Co-Head of Putnam Investments’ Investment Division.

Prior to joining Putnam Investments in 2002, Mr. Haldeman held executive positions in the investment management industry. He previously served as Chief Executive Officer of Delaware Investments and President and Chief Operating Officer of United Asset Management. Mr. Haldeman was also a partner and director of Cooke & Bieler, Inc. (an investment management firm).

 Mr. Haldeman currently serves on the Board of Governors of the Investment Company Institute and as Chair of the Board of Trustees of Dartmouth College. He also serves on the Partners HealthCare Investment Committee, the Tuck School of Business and Dartmouth College Board of Overseers, and the Harvard Business School Board of Dean’s Advisors. He is a graduate of Dartmouth College, Harvard Law School and Harvard Business School. Mr. Haldeman is also a Chartered Financial Analyst (CFA) charterholder.

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

As of September 30, 2007, there were 103 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 is President and Chief Executive Officer of Putnam Investments.

176

Officers

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

Charles E. Porter (Born 1938)  Richard S. Robie, III (Born 1960) 
Executive Vice President, Principal Executive Officer, Associate  Vice President 
Treasurer, and Compliance Liaison  Since 2004 
Since 1989   
Senior Managing Director, Putnam Investments, Putnam Management 
Jonathan S. Horwitz (Born 1955)  and Putnam Retail Management. Prior to 2003, Senior Vice President, 
Senior Vice President and Treasurer  United Asset Management Corporation 
Since 2004   
Francis J. McNamara, III (Born 1955) 
Prior to 2004, Managing Director,  Vice President and Chief Legal Officer 
Putnam Investments  Since 2004 
 
Steven D. Krichmar (Born 1958)  Senior Managing Director, Putnam Investments, Putnam Management 
Vice President and Principal Financial Officer  and Putnam Retail Management. Prior to 2004, General Counsel, 
Since 2002  State Street Research & Management Company 
 
Senior Managing Director, Putnam Investments  Robert R. Leveille (Born 1969) 
Vice President and Chief Compliance Officer 
Janet C. Smith (Born 1965)  Since 2007 
Vice President, Principal Accounting Officer and Assistant Treasurer   
Since 2007  Managing Director, Putnam Investments, Putnam Management, 
and Putnam Retail Management. Prior to 2004, member of Bell 
Managing Director, Putnam Investments and Putnam Management  Boyd & Lloyd LLC. Prior to 2003, Vice President and Senior Counsel, 
Liberty Funds Group LLC 
Susan G. Malloy (Born 1957)   
Vice President and Assistant Treasurer  Mark C. Trenchard (Born 1962) 
Since 2007  Vice President and BSA Compliance Officer 
Since 2002 
Managing Director, Putnam Investments   
Managing Director, Putnam Investments 
Beth S. Mazor (Born 1958)   
Vice President  Judith Cohen (Born 1945) 
Since 2002  Vice President, Clerk and Assistant Treasurer 
Since 1993 
Managing Director, Putnam Investments   
Wanda M. McManus (Born 1947) 
James P. Pappas (Born 1953)  Vice President, Senior Associate Treasurer and Assistant Clerk 
Vice President  Since 2005 
Since 2004   
Nancy E. Florek (Born 1957) 
Managing Director, Putnam Investments and Putnam Management.  Vice President, Assistant Clerk, Assistant Treasurer 
During 2002, Chief Operating Officer, Atalanta/Sosnoff  and Proxy Manager 
Management Corporation  Since 2005 

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

177

The Putnam Family of Funds

The following is a list of Putnam’s open-end mutual funds offered to the public. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund before investing. For a prospectus containing this and other information for any Putnam fund or product, call your financial advisor at 1-800-225-1581 and ask for a prospectus. Please read the prospectus carefully before investing.

Growth funds
Discovery Growth Fund
Growth Opportunities Fund
Health Sciences Trust
International New Opportunities Fund*
New Opportunities Fund
OTC & Emerging Growth Fund
Small Cap Growth Fund*
Vista Fund
Voyager Fund

Blend funds
Capital Appreciation Fund
Capital Opportunities Fund*
Europe Equity Fund*
Global Equity Fund*
Global Natural Resources Fund*
International Capital Opportunities Fund*
International Equity Fund*
Investors Fund
Research Fund
Tax Smart Equity Fund®
Utilities Growth and Income Fund

Value funds
Classic Equity Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
International Growth and Income Fund*
Mid Cap Value Fund
New Value Fund
Small Cap Value Fund*

Income funds
American Government Income Fund
Diversified Income Trust
Floating Rate Income Fund
Global Income Trust*
High Yield Advantage Fund*
High Yield Trust*
Income Fund
Limited Duration Government Income Fund
Money Market Fund†
U.S. Government Income Trust

Tax-free income funds
AMT-Free Insured Municipal Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund§
Tax-Free High Yield Fund

State tax-free income funds:
Arizona, California, Massachusetts, Michigan, Minnesota,
New Jersey, New York, Ohio, and Pennsylvania

Asset allocation funds
Income Strategies Fund
Putnam Asset Allocation Funds — three investment portfolios that
spread your money across a variety of stocks, bonds, and money
market investments.

The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio

Putnam RetirementReady® Funds
Putnam RetirementReady Funds — ten investment portfolios that
offer diversification among stocks, bonds, and money market instru-
ments and adjust to become more conservative over time based on a
target date for withdrawing assets.

The ten funds:
Putnam RetirementReady 2050 Fund
Putnam RetirementReady 2045 Fund
Putnam RetirementReady 2040 Fund
Putnam RetirementReady 2035 Fund
Putnam RetirementReady 2030 Fund
Putnam RetirementReady 2025 Fund
Putnam RetirementReady 2020 Fund
Putnam RetirementReady 2015 Fund
Putnam RetirementReady 2010 Fund
Putnam RetirementReady Maturity Fund

* A 1% redemption fee on total assets redeemed or exchanged within 90 days of purchase may be imposed for all share classes of these funds.

† An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve your investment at $1.00 per share, it is possible to lose money by investing in the fund.

With the exception of money market funds, a 1% redemption fee may be applied to shares exchanged or sold within 7 days of purchase (90 days, for certain funds).

Check your account balances and the most recent month-end performance at www.putnam.com.

178

Services for shareholders

Investor services

Help your investment grow Set up a program for systematic investing from a Putnam fund or from your own savings or checking account. (Regular investing does not guarantee a profit or protect against loss in a declining market.)

Switch funds easily You can move money from one Putnam fund to another within the same class of shares without a service charge.

This privilege is subject to change or termination. An exchange of funds may result in a taxable event. In addition, a 1% redemption fee will be applied to shares exchanged or sold within 7 days of purchase, and, for certain funds, this fee applies on total assets redeemed or exchanged within 90 days of purchase.

Access your money easily You can have checks sent regularly or redeem shares any business day at the then-current net asset value, which may be more or less than the original cost of the shares. Class B and class C shares carry a sales charge that is applied to certain withdrawals.

How to buy additional shares You may buy shares through your financial advisor or directly from Putnam. To open an account by mail, send a check made payable to the name of the fund along with a completed fund application. To add to an existing account, complete the investment slip found at the top of your Confirmation of Activity statement and return it with a check payable to your fund.

For more information

Visit www.putnam.com A secure section of our Web site contains complete information on your account, including balances and transactions, updated daily. You may also conduct transactions, such as exchanges, additional investments, and address changes. Log on today to get your password.

Call us toll free at 1-800-225-1581 Ask a helpful Putnam representative or your financial advisor for details about any of these or other services, or see your prospectus.

179

Putnam puts your interests first

In January 2004, Putnam began introducing a number of voluntary initiatives designed to reduce fund expenses, provide investors with more useful information, and help safeguard the interests of all Putnam investors. Visit www.putnam.com for details.

Cost-cutting initiatives

Reduced sales charges The maximum sales charge for class A shares has been reduced to 5.25% for equity funds (formerly 5.75%) and 3.75% for most income funds (formerly 4.50%) . The maximum sales charge for class M shares has been reduced to 3.25% for equity funds (formerly 3.50%) .*

Lower class B purchase limit To help ensure that investors are in the most cost-effective share class, the maximum amount that can be invested in class B shares has been reduced to $100,000. (Larger trades or accumulated amounts will be refused.)

Ongoing expenses will be limited Through calendar 2007, total ongoing expenses, including management fees for all funds, will be maintained at or below the average of each fund’s industry peers in its Lipper load-fund universe. For more information, please see the Statement of Additional information.

Improved disclosure

Putnam fund prospectuses and shareholder reports have been revised to disclose additional information that will help shareholders compare funds and weigh their costs and risks along with their potential benefits. Shareholders will find easy-to-understand information about fund expense ratios, portfolio manager compensation, risk comparisons, turnover comparisons, brokerage commissions, and employee and trustee ownership of Putnam funds. Disclosure of breakpoint discounts has also been enhanced to alert investors to potential cost savings.

Protecting investors’ interests

Short-term trading fee introduced To discourage short-term trading, which can interfere with a fund’s long-term strategy, a 1% short-term trading fee may be imposed on any Putnam fund shares (other than money market funds) redeemed or exchanged within seven calendar days of purchase (for certain funds, this fee applies for 90 days).

* The maximum sales charge for class A shares of Putnam Limited Duration Government Income Fund and Putnam Floating Rate Income Fund remains 3.25% .

180

Fund information

Founded 70 years ago, Putnam Investments was built around the concept that a balance between risk and reward is the hallmark of a well-rounded financial program. We manage over 100 mutual funds in growth, value, blend, fixed income, and international.

Investment Manager  Officers  Judith Cohen 
Putnam Investment  Charles E. Haldeman, Jr.  Vice President, Clerk and Assistant Treasurer 
Management, LLC  President  Wanda M. McManus 
One Post Office Square      
Boston, MA 02109  Charles E. Porter  Vice President, Senior Associate Treasurer 
Executive Vice President, Principal  and Assistant Clerk 
Marketing Services  Executive Officer, Associate Treasurer  Nancy E. Florek 
Putnam Retail Management  and Compliance Liaison   
One Post Office Square    Vice President, Assistant Clerk, 
Boston, MA 02109  Jonathan S. Horwitz  Assistant Treasurer and Proxy Manager 
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 Adkins Baxter, Vice Chairman  Vice President   
Charles B. Curtis      
Robert J. Darretta  James P. Pappas   
Myra R. Drucker  Vice President   
Charles E. Haldeman, Jr.   
Paul L. Joskow  Richard S. Robie, III   
Elizabeth T. Kennan  Vice President   
Kenneth R. Leibler       
Robert E. Patterson  Francis J. McNamara, III   
George Putnam, III  Vice President and Chief Legal Officer   
W. Thomas Stephens   
Richard B. Worley  Robert R. Leveille   
Vice President and Chief Compliance Officer   
    
Mark C. Trenchard   
Vice President and BSA Compliance Officer

This report is for the information of shareholders of Putnam Asset Allocation Funds. It may also be used as sales literature when preceded or accompanied by the current prospectus, the most recent copy of Putnam's Quarterly Performance Summary, and Putnam's Quarterly Ranking Summary. For more recent performance, please visit www.putnam.com. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund, which are described in its prospectus. For this and other information or to request a prospectus, call 1-800-225-1581 toll free. Please read the prospectus carefully before investing. The fund's Statement of Additional Information contains additional information about the fund's Trustees and is available without charge upon request by calling 1-800-225-1581.


Item 2. Code of Ethics:

(a) The fund’s principal executive, financial and accounting officers are employees of Putnam Investment Management, LLC, the Fund's investment manager. As such they are subject to a comprehensive Code of Ethics adopted and administered by Putnam Investments which is designed to protect the interests of the firm and its clients. The Fund has adopted a Code of Ethics which incorporates the Code of Ethics of Putnam Investments with respect to all of its officers and Trustees who are employees of Putnam Investment Management, LLC. For this reason, the Fund has not adopted a separate code of ethics governing its principal executive, financial and accounting officers.

(c) In August 2007, the Code of Ethics of Putnam Investment Management, LLC was amended to reflect the change in ownership of Putnam Investments Trust, the parent company of Putnam Investment Management, LLC, from Marsh & McLennan Companies, Inc. (“MMC”) to Great-West Lifeco Inc., a subsidiary of Power Financial Corporation. In addition to administrative and non-substantive changes, the Code of Ethics was amended to remove a prohibition, which applied to members of Putnam Investments’ Executive Board and senior members of the staff of the Chief Financial Officer of Putnam Investments, on transactions in MMC securities during the period between the end of a calendar quarter and the public announcement of MMC’s earnings for that quarter.

Item 3. Audit Committee Financial Expert:

The Funds' Audit and Compliance Committee is comprised solely of Trustees who are "independent" (as such term has been defined by the Securities and Exchange Commission ("SEC") in regulations implementing Section 407 of the Sarbanes-Oxley Act (the "Regulations")). The Trustees believe that each of the members of the Audit and Compliance Committee also possess a combination of knowledge and experience with respect to financial accounting matters, as well as other attributes, that qualify them for service on the Committee. In addition, the Trustees have determined that each of Mr. Patterson, Mr. Stephens, Mr. Leibler, Mr. Hill and Mr. Darretta meets the financial literacy requirements of the New York Stock Exchange's rules and qualifies as an "audit committee financial expert" (as such term has been defined by the Regulations) based on their review of his pertinent experience and education. Certain other Trustees, although not on the Audit and Compliance Committee, would also qualify as "audit committee financial experts." The SEC has stated that the designation or identification of a person as an audit committee financial expert pursuant to this Item 3 of Form N-CSR does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the Audit and Compliance Committee and the Board of Trustees in the absence of such designation or identification.

Item 4. Principal Accountant Fees and Services:

The following table presents fees billed in each of the last two fiscal years for services rendered to the fund by the fund’s independent auditor:

Fiscal    Audit-     
year  Audit  Related  Tax  All Other 
ended  Fees  Fees  Fees  Fees 
 
September 30, 2007  $585,061  $410  $62,807  $7,397* 
September 30, 2006  $572,246*  $1,197  $63,546  $12,987 

* Includes fees of $1,396 and $3,808 billed by the fund’s independent auditor to the fund for procedures necessitated by regulatory and litigation matters for the fiscal years ended September

30, 2007 and September 30, 2006, respectively. These fees were reimbursed to the fund by Putnam Investment Management, LLC (“Putnam Management”).

For the fiscal years ended September 30, 2007and September 30, 2006, the fund’s independent auditor billed aggregate non-audit fees in the amounts of $ 173,820 and $359,410 respectively, to the fund, Putnam Management and any entity controlling, controlled by or under common control with Putnam Management that provides ongoing services to the fund.

Audit Fees represent fees billed for the fund’s last two fiscal years.

Audit-Related Fees represent fees billed in the fund’s last two fiscal years for services traditionally performed by the fund’s auditor, including accounting consultation for proposed transactions or concerning financial accounting and reporting standards and other audit or attest services not required by statute or regulation.

Tax Fees represent fees billed in the fund’s last two fiscal years for tax compliance, tax planning and tax advice services. Tax planning and tax advice services include assistance with tax audits, employee benefit plans and requests for rulings or technical advice from taxing authorities.

All Other Fees represent fees billed for services relating to an analysis of recordkeeping fees and to the valuation of derivative securities.

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 
September 30,         
2007  $ -  $ 26,129  $ -  $ - 
September 30,         
2006  $ -  $ 153,160  $ -  $ - 

Item 5. Audit Committee of Listed Registrants

Not applicable

Item 6. Schedule of Investments:

The registrant’s schedule of investments in unaffiliated issuers is included in the report to shareholders in Item 1 above.

Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies:

Not applicable

Item 8. Portfolio Managers of Closed-End Investment Companies

Not Applicable

Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers:

Not applicable

Item 10. Submission of Matters to a Vote of Security Holders:

Not applicable

Item 11. Controls and Procedures:

(a) The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the effectiveness of the design and operation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the design and operation of such procedures are generally effective to provide reasonable assurance that information required to be disclosed by the registrant in this report is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms.

(b) Changes in internal control over financial reporting: During the period, Putnam Fiduciary Trust Company, the fund's transfer agent, began utilizing shareholder systems and systems support provided by DST Systems, Inc. and certain of its affiliates.

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.

Putnam Asset Allocation Funds

By (Signature and Title):

/s/Janet C. Smith
Janet C. Smith
Principal Accounting Officer

Date: November 29, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title):

/s/Charles E. Porter
Charles E. Porter
Principal Executive Officer

Date: November 29, 2007

By (Signature and Title):

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

Date: November 29, 2007