Putnam
Income
Fund

Semiannual report
4 | 30 | 22

 

 

Message from the Trustees

June 7, 2022

Dear Fellow Shareholder:

The year to date has been difficult for investors, with bond and stock prices falling in repeated market downturns. Inflation has climbed to levels not seen in decades, prompting the U.S. Federal Reserve to reverse the stimulus that had helped support financial assets since 2020. Markets globally also have reacted to the Russia-Ukraine War and the worsening Covid-19 pandemic in China. In the underlying economy, we have seen encouraging signs, such as abundant job openings and wage gains in the United States.

History has shown us that markets eventually recover from crises and may reward those focused on long-term goals rather than short-term uncertainties. At Putnam, professional, active investors are working for you. They are monitoring risks while looking for strong potential investments for your fund. Learn more in the interview with your fund manager(s) in the following pages.

Thank you for investing with Putnam.

 

Since Putnam Income Fund’s launch in 1954, the bond market landscape has undergone a dramatic transformation, with a greater variety of fixed income securities available for investment today than ever before. Amid this evolution, the fund’s goal has remained constant: pursuing high current income and prudent risk management.

The fund’s management team has an average of more than 20 years of industry experience.

In pursuit of the fund’s investment goal, the management team seeks to balance the sources of risk and return in the portfolio. They pursue this strategy by investing in sectors that are not reliant on declining interest rates to drive returns, including sectors that lie outside the benchmark index.

 

 

The end of an era?

For more than 35 years, declining interest rates have driven bond prices higher. But interest rates started to rise in 2022, and strategies that rely on falling rates face headwinds.

Source: Federal Reserve data as of 4/30/22. Past performance is not indicative of future results.

Allocations are shown as a percentage of the fund’s net assets as of 4/30/22. Cash and net other assets, if any, represent the market value weights of cash, derivatives, short-term securities, and other unclassified assets in the portfolio. Summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the use of different classifications of securities for presentation purposes, and rounding. Allocations may not total 100% because the chart includes the notional value of certain derivatives (the economic value for purposes of calculating periodic payment obligations), in addition to the market value of securities. Holdings and allocations may vary over time.

All Bloomberg indices are provided by Bloomberg Index Services Limited.

 

 

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will fluctuate, and you may have a gain or a loss when you sell your shares. Performance of class A shares assumes reinvestment of distributions and does not account for taxes. Fund returns in the bar chart do not reflect a sales charge of 4.00%; had they, returns would have been lower. See below and pages 10–13 for additional performance information. For a portion of the periods, the fund had expense limitations, without which returns would have been lower. To obtain the most recent month-end performance, visit putnam.com.

Returns for periods of less than one year are not annualized.

All Bloomberg indices are provided by Bloomberg Index Services Limited.

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

* The fund’s benchmark, the Bloomberg U.S. Aggregate Bond Index, was introduced on 12/31/75, and the fund’s Lipper category was introduced on 12/31/59. Both post-date the inception date of the fund’s class A shares.

This comparison shows your fund’s performance in the context of broad market indexes for the six months ended 4/30/22. See above and pages 10–13 for additional fund performance information. Index descriptions can be found on page 18.

All Bloomberg indices are provided by Bloomberg Index Services Limited.

 

 

Mike, what was the fund’s investment environment like during the six months ended April 30, 2022?

After posting relatively subdued returns during the early months of the period, fixed income markets became volatile during the first quarter of 2022. A hawkish policy pivot by the U.S. Federal Reserve in the face of rapidly rising inflation, combined with Russia’s invasion of Ukraine, fueled a flight from risk. A resurgence of Covid-19 in China and accompanying lockdowns added to investor nervousness.

Within this environment, credit spreads widened and interest rates rose. [Spreads are the yield advantage credit-sensitive bonds offer over comparable-maturity U.S. Treasuries. Bond prices rise as yield spreads tighten and decline as spreads widen.] The yield on the benchmark 10-year U.S. Treasury climbed from 1.58% on November 1, 2021, to 2.89% on April 29, 2022. In anticipation of Fed policy changes, short-term yields rose even more, causing the yield curve to flatten materially.

On March 16, the Fed approved a 0.25% hike, its first increase since December 2018. Fed Chair Jerome Powell signaled an aggressive

 

 

Credit qualities are shown as a percentage of the fund’s net assets as of 4/30/22. A bond rated BBB or higher (A-3 or higher, for short-term debt) is considered investment grade. This chart reflects the highest security rating provided by one or more of Standard & Poor’s, Moody’s, and Fitch. To-be-announced (TBA) mortgage commitments, if any, are included based on their issuer ratings. Ratings may vary over time.

Cash, derivative instruments, and net other assets are shown in the not-rated category. Payables and receivables for TBA mortgage commitments are included in the not-rated category and may result in negative weights. The fund itself has not been rated by an independent rating agency.

This chart shows how the fund’s sector weightings have changed over the past six months. Allocations are shown as a percentage of the fund’s net assets. Current period summary information may differ from the portfolio schedule included in the financial statements due to the inclusion of derivative securities, any interest accruals, the use of different classifications of securities for presentation purposes, and rounding.

Allocations may not total 100% because the chart includes the notional value of certain derivatives (the economic value for purposes of calculating periodic payment obligations), in addition to the market value of securities. Holdings and allocations may vary over time.

 

 

approach going forward, indicating that additional hikes could occur at each of the remaining six policy meetings in 2022. Shortly after the period ended, the Fed approved a half-percentage-point increase in the federal funds rate. It also announced plans to shrink its $9 trillion asset portfolio starting in June, with up to $30 billion in Treasuries allowed to run off in June, July, and August, followed by $60 billion in subsequent months.

The fund topped both its benchmark and the average return of its Lipper peer group for the period. Which holdings and strategies helped outperformance relative to the benchmark?

Mortgage credit holdings added the most value on a relative basis, led by an allocation to commercial mortgage-backed securities [CMBS]. Our investments consisted of cash bonds along with synthetic exposure via CMBX. By way of explanation, CMBX is a group of tradeable indexes that each reference a basket of 25 CMBS issued in a particular year. Despite broader market volatility, the continued reopening of the economy and the success of vaccines aided the recovery of many types of property, which, in turn, boosted our CMBS positions.

Strategies targeting prepayment risk modestly contributed, fueled by our mortgage basis positioning. This strategy seeks to capitalize on the difference between longer-term U.S. Treasury yields and the interest rates on 30-year home mortgages. It received a lift following the release of the minutes from the Fed’s December 2021 policy meeting. The minutes indicated that the central bank might begin to sell its holdings of government agency mortgage-backed securities [MBS] more rapidly than investors originally anticipated. Moreover, higher interest rates across the yield curve in 2022 significantly dampened mortgage refinancing activity, creating a supportive backdrop for our prepayment strategies. In addition to the contribution from mortgage basis, our holdings of agency interest-only collateralized mortgage obligations [IO CMOs] generated positive relative results during the final month of the period.

What about relative detractors?

An allocation to investment-grade [IG] corporate bonds was the only notable detractor this quarter. IG credit was one of the poorest-performing fixed income sectors, hampered by rising interest rates and widening credit spreads.

What is the team’s near-term outlook?

In light of tightening monetary policy, higher interest rates, and less liquidity in the marketplace, we have a cautious outlook. We anticipate continued bouts of volatility given the conflict in Ukraine, the pace of Fed rate hikes, and potentially negative effects on energy supplies from sanctions on Russia. We’re also concerned about lingering supply-chain disruptions, especially in light of the recent Covid-19 upsurge in China. There is also considerable uncertainty surrounding the Fed’s efforts to contain inflation without pushing the U.S. economy into recession. Moreover, while consumer balance sheets are generally in good shape, in our view, inflation-adjusted wages are beginning to decline.

Investor expectations for multiple 0.50% rate increases at upcoming Fed meetings have pushed U.S. Treasury yields materially higher across the curve. With a number of rate hikes already priced into the market, in our view, we think it’s possible that Treasury prices could rally intermittently, particularly if concerns about economic growth intensify.

 

 

What are your current views on the major sectors in which the fund invests?

Looking first at corporate credit, our view is moderately constructive. We have a positive outlook for market fundamentals and believe valuations have improved. However, the supply/demand backdrop is less favorable than it was last year, in our view.

We believe the fundamental environment will continue to improve in the CMBS market as workers return to offices, consumer traffic increases at retailers, and hotels welcome back business and leisure travelers. Our emphasis on investment opportunities in the U.S. broadly isolates us from geopolitical risk. Moreover, with real assets serving as collateral, along with the potential for rent adjustments, CMBS have historically performed well during periods of rising inflation. Consistent with risk markets generally, CMBS spreads widened during the period. The increased liquidity premium enhanced the appeal of select market segments.

Given that home prices have already risen substantially and mortgage rates have moved up, we are aware that affordability has become a constraint for many prospective buyers. Consequently, we think the pace of home price appreciation is likely to moderate during 2022. Within residential mortgage credit, wider spreads have created better value among mid-tier and lower-rated securities. As of period-end we were finding attractive investment opportunities in that area of the market, as well as among higher-rated securities.

With the Fed beginning the process of reducing the mortgage assets in its portfolio, we believe many prepayment-sensitive securities may offer attractive risk-adjusted returns from current price levels. Many of these securities may also offer meaningful upside potential if mortgage prepayment speeds continue to slow. We think the fund’s prepayment-related strategies provide an important source of diversification in the portfolio. In light of last

ABOUT DERIVATIVES

Derivatives are an increasingly common type of investment instrument, the performance of which is derived from an underlying security, index, currency, or other area of the capital markets. Derivatives employed by the fund’s managers generally serve one of two main purposes: to implement a strategy that may be difficult or more expensive to invest in through traditional securities, or to hedge unwanted risk associated with a particular position.

For example, the fund’s managers might use currency forward contracts to capitalize on an anticipated change in exchange rates between two currencies. This approach would require a significantly smaller outlay of capital than purchasing traditional bonds denominated in the underlying currencies. In another example, the managers may identify a bond that they believe is undervalued relative to its risk of default, but may seek to reduce the interest-rate risk of that bond by using interest-rate swaps, a derivative through which two parties “swap” payments based on the movement of certain rates.

Like any other investment, derivatives may not appreciate in value and may lose money. Derivatives may amplify traditional investment risks through the creation of leverage and may be less liquid than traditional securities. And because derivatives typically represent contractual agreements between two financial institutions, derivatives entail “counterparty risk,” which is the risk that the other party is unable or unwilling to pay. Putnam monitors the counterparty risks we assume. For example, Putnam often enters into collateral agreements that require the counterparties to post collateral on a regular basis to cover their obligations to the fund. Counterparty risk for exchange-traded futures and centrally cleared swaps is mitigated by the daily exchange of margin and other safeguards against default through their respective clearinghouses.

 

 

year’s repricing across the market, we were finding value across a variety of collateral types.

How did you use derivatives during the period?

We used CMBX credit default swaps to hedge the fund’s CMBS credit and market risks as well as to gain access to specific areas of the market. We employed bond futures and interest-rate swaps to take tactical positions at various points along the yield curve and to hedge the risk associated with the fund’s curve positioning. We also used interest-rate swaps to help manage the fund’s duration and yield curve positioning.

Thanks for your time and for bringing us up to date, Mike.

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

Please note that the holdings discussed in this report may not have been held by the fund for the entire period. Portfolio composition is subject to review in accordance with the fund’s investment strategy and may vary in the future. Current and future portfolio holdings are subject to risk. Statements in the Q&A concerning the fund’s performance or portfolio composition relative to those of the fund’s Lipper peer group may reference information produced by Lipper Inc. or through a third party.

Of special interest

As a result of an increase in the income generated by the portfolio, effective May 2022, the fund’s monthly dividend rate per class A share was raised from $0.012 to $0.014. Similar increases were made to other share classes.

 

 

Your fund’s performance

This section shows your fund’s performance, price, and distribution information for periods ended April 30, 2022, the end of the first half of its current fiscal year. In accordance with regulatory requirements for mutual funds, we also include performance information as of the most recent calendar quarter-end and expense information taken from the fund’s current prospectus. Performance should always be considered in light of a fund’s investment strategy. Data represent past performance. Past performance does not guarantee future results. More recent returns may be less or more than those shown. Investment return and principal value will fluctuate, and you may have a gain or a loss when you sell your shares. Performance information does not reflect any deduction for taxes a shareholder may owe on fund distributions or on the redemption of fund shares. For the most recent month-end performance, please visit the Individual Investors section at putnam.com or call Putnam at 1-800-225-1581. Class M, R, R5, R6, and Y shares are not available to all investors. See the Terms and definitions section in this report for definitions of the share classes offered by your fund.

Annualized fund performance Total return for periods ended 4/30/22

 

Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results. After-sales-charge returns for class A and M shares reflect the deduction of the maximum 4.00% and 3.25% sales charge, respectively, levied at the time of purchase. Class B share returns after contingent deferred sales charge (CDSC) reflect the applicable CDSC, which is 5% in the first year, declining over time to 1% in the sixth year, and is eliminated thereafter. Class C share returns after CDSC reflect a 1% CDSC for the first year that is eliminated thereafter. Class R, R5, R6, and Y shares have no initial sales charge or CDSC. Performance for class B, C, M, R, and Y shares before their inception is derived from the historical performance of class A shares, adjusted for the applicable sales charge (or CDSC) and the higher operating expenses for such shares, except for class Y shares, for which 12b-1 fees are not applicable. Performance for class R5 and R6 shares prior to their inception is derived from the historical performance of class Y shares and has not been adjusted for the lower investor servicing fees applicable to class R5 and R6 shares; had it, returns would have been higher.

 

 

 

Returns for periods of less than one year are not annualized.

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

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

Comparative annualized index returns For periods ended 4/30/22

 

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

Returns for periods of less than one year are not annualized.

All Bloomberg indices are provided by Bloomberg Index Services Limited.

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

^* The fund’s benchmark, the Bloomberg U.S. Aggregate Bond Index, was introduced on 12/31/75, and the fund’s Lipper category was introduced on 12/31/59. Both post-date the inception date of the fund’s class A shares.

^† Over the 6-month, 1-year, 3-year, 5-year, and 10-year periods ended 4/30/22, there were 511, 507, 479, 439, and 319 funds, respectively, in this Lipper category.

 

 

Fund price and distribution information For the six-month period ended 4/30/22

 

The classification of distributions, if any, is an estimate. Before-sales-charge share value and current dividend rate for class A and M shares, if applicable, do not take into account any sales charge levied at the time of purchase. After-sales-charge share value, current dividend rate, and current 30-day SEC yield, if applicable, are calculated assuming that the maximum sales charge (4.00% for class A shares and 3.25% for class M shares) was levied at the time of purchase. Final distribution information will appear on your year-end tax forms.

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

² For a portion of the period, the fund had expense limitations, without which yields would have been lower.

³ Based only on investment income and calculated using the maximum offering price for each share class, in accordance with SEC guidelines.

 

 

Annualized fund performance as of most recent calendar quarter
Total return for periods ended 3/31/22

 

See the discussion following the fund performance table on page 10 for information about the calculation of fund performance.

Returns for periods of less than one year are not annualized.

 

 

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

Expense ratios

 

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

Expenses are shown as a percentage of average net assets.

^* Reflects Putnam Management’s contractual obligation to limit certain fund expenses through 2/28/23.

Expenses per $1,000

The following table shows the expenses you would have paid on a $1,000 investment in each class of the fund from 11/1/21 to 4/30/22. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

 

^* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 4/30/22. The expense ratio may differ for each share class.

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

 

 

Estimate the expenses you paid

To estimate the ongoing expenses you paid for the six months ended 4/30/22, use the following calculation method. To find the value of your investment on 11/1/21, call Putnam at 1-800-225-1581.

Compare expenses using the SEC’s method

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

 

^* Expenses for each share class are calculated using the fund’s annualized expense ratio for each class, which represents the ongoing expenses as a percentage of average net assets for the six months ended 4/30/22. The expense ratio may differ for each share class.

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

 

 

Consider these risks before investing

Funds that invest in government securities are not guaranteed. Mortgage-backed investments, unlike traditional debt investments, are also subject to prepayment risk, which means that they may increase in value less than other bonds when interest rates decline and decline in value more than other bonds when interest rates rise. The fund may have to invest the proceeds from prepaid investments in other investments with less attractive terms and yields.

The fund’s investments in mortgage-backed securities and asset-backed securities, and in certain other securities and derivatives, may be or become illiquid. The fund’s exposure to mortgage-backed securities may make the fund’s net asset value more susceptible to economic, market, political, and other developments affecting the housing or real estate markets and the servicing of mortgage loans secured by real estate properties. The fund currently has significant investment exposure to commercial mortgage-backed securities. Bond investments are subject to interest-rate risk (the risk of bond prices falling if interest rates rise) and credit risk (the risk of an issuer defaulting on interest or principal payments). Interest-rate risk is generally greater for longer-term bonds, and credit risk is generally greater for below-investment-grade bonds. Risks associated with derivatives include increased investment exposure (which may be considered leverage) and, in the case of over-the-counter instruments, the potential inability to terminate or sell derivatives positions and the potential failure of the other party to the instrument to meet its obligations. Unlike bonds, funds that invest in bonds have fees and expenses. The value of investments in the fund’s portfolio may fall or fail to rise over time for a variety of reasons, including general economic, political, or financial market conditions; investor sentiment and market perceptions; government actions; geopolitical events or changes; and factors related to a specific issuer, geography, industry, or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund’s portfolio holdings.

Our investment techniques, analyses, and judgments may not produce the outcome we intend. We, or the fund’s other service providers, may experience disruptions or operating errors that could have a negative effect on the fund. You can lose money by investing in the fund.

 

 

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.

Before sales charge, or net asset value, is the price, or value, of one share of a mutual fund, without a sales charge. Before-sales-charge figures fluctuate with market conditions. They are calculated by dividing the net assets of each class of shares by the number of outstanding shares in the class.

After sales charge is the price of a mutual fund share plus the maximum sales charge levied at the time of purchase. After-sales-charge performance figures shown here assume the 4.00% 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 over time 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 closed to new investments and are only available by exchange from class B shares of another Putnam fund or through dividend and/or capital gains reinvestment. They are not subject to an initial sales charge and 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. They are only available to individuals purchasing shares of the fund from Japanese distributors that have selling agreements with Putnam Retail Management.

Class R shares are not subject to an initial sales charge or CDSC and are only available to employer-sponsored retirement plans.

Class R5 shares are not subject to an initial sales charge or CDSC and carry no 12b-1 fee. They are only available to employer-sponsored retirement plans.

Class R6 shares are not subject to an initial sales charge or CDSC and carry no 12b-1 fee. They are generally only available to employer-sponsored retirement plans, corporate and institutional clients, and clients in other approved programs.

Class Y shares are not subject to an initial sales charge or CDSC and carry no 12b-1 fee. They are generally only available to corporate and institutional clients and clients in other approved programs.

Fixed income terms

Current rate is the annual rate of return earned from dividends or interest of an investment. Current rate is expressed as a percentage of the price of a security, fund share, or principal investment.

Mortgage-backed security (MBS), also known as a mortgage “pass-through,” is a type of asset-backed security that is secured by a mortgage or collection of mortgages. The following are types of MBSs:

• Agency credit risk transfer (CRT) security is backed by a reference pool of agency mortgages. Unlike a regular agency pass-through, the principal invested in a CRT is not backed by a U.S. government agency. To compensate investors for this

 

 

risk, a CRT typically offers a higher yield than conventional pass-through securities. Similar to a CMBS, a CRT is structured into various tranches for investors, offering different levels of risk and yield based on the underlying reference pool.

• Agency “pass-through” has its principal and interest backed by a U.S. government agency, such as the Federal National Mortgage Association (Fannie Mae), Government National Mortgage Association (Ginnie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac).

• Collateralized mortgage obligation (CMO) represents claims to specific cash flows from pools of home mortgages. The streams of principal and interest payments on the mortgages are distributed to the different classes of CMO interests in “tranches.” Each tranche may have different principal balances, coupon rates, prepayment risks, and maturity dates. A CMO is highly sensitive to changes in interest rates and any resulting change in the rate at which homeowners sell their properties, refinance, or otherwise prepay loans. CMOs are subject to prepayment, market, and liquidity risks.

° Interest-only (IO) security is a type of CMO in which the underlying asset is the interest portion of mortgage, Treasury, or bond payments.

• Non-agency residential mortgage-backed security (RMBS) is an MBS not backed by Fannie Mae, Ginnie Mae, or Freddie Mac. One type of RMBS is an Alt-A mortgage-backed security.

• Commercial mortgage-backed security (CMBS) is secured by the loan on a commercial property.

Yield curve is a graph that plots the yields of bonds with equal credit quality against their differing maturity dates, ranging from shortest to longest. It is used as a benchmark for other debt, such as mortgage or bank lending rates.

Comparative indexes

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

CMBX Index is an unmanaged index that tracks the performance of a basket of CMBS issued in a particular year.

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

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

Indexes assume reinvestment of all distributions and do not account for fees. Securities and performance of a fund and an index will differ. You cannot invest directly in an index.

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

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

Lipper, a Refinitiv company, is a third-party industry-ranking entity that ranks 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.

 

 

Other information for shareholders

Important notice regarding delivery of shareholder documents

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

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, 2021, are available in the Individual Investors section of putnam.com and on the SEC’s website, www.sec.gov. If you have questions about finding forms on the SEC’s website, you may call the SEC at 1-800-SEC-0330. You may also obtain the Putnam funds’ proxy voting guidelines and procedures at no charge by calling Putnam’s Shareholder Services at 1-800-225-1581.

Fund portfolio holdings

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

Prior to its use of Form N-PORT, the fund filed its complete schedule of its portfolio holdings with the SEC on Form N-Q, which is available online at www.sec.gov.

Trustee and employee fund ownership

Putnam employees and members of the Board of Trustees place their faith, confidence, and, most importantly, investment dollars in Putnam mutual funds. As of April 30, 2022, Putnam employees had approximately $492,000,000 and the Trustees had approximately $72,000,000 invested in Putnam mutual funds. These amounts include investments by the Trustees’ and employees’ immediate family members as well as investments through retirement and deferred compensation plans.

Liquidity risk management program

Putnam, as the administrator of the fund’s liquidity risk management program (appointed by the Board of Trustees), presented the most recent annual report on the program to the Trustees in April 2022. The report covered the structure of the program, including the program documents and related policies and procedures adopted to comply with Rule 22e-4 under the Investment Company Act of 1940, and reviewed the operation of the program from January 2021 through December 2021. The report included a description of the annual liquidity assessment of the fund that Putnam performed in November 2021. The report noted that there were no material compliance exceptions identified under Rule 22e-4 during the period. The report included a review of the governance of the program and the methodology for classification of the fund’s investments. The report also included a discussion of liquidity monitoring during the period, including during the market liquidity challenges caused by the Covid-19 pandemic, and the impact those challenges had on the liquidity of the fund’s investments. Putnam concluded that the program has been operating effectively and adequately to ensure compliance with Rule 22e-4.

 

 

Financial statements

These sections of the report, as well as the accompanying Notes, 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 period.

Statement of changes in net assets shows how the fund’s net assets were affected by the fund’s net investment gain or loss, by distributions to shareholders, and by changes in the number of the fund’s shares. It lists distributions and their sources (net investment income or realized capital gains) over the current reporting period and the most recent fiscal year-end. The distributions listed here may not match the sources listed in the Statement of operations because the distributions are determined on a tax basis and may be paid in a different period from the one in which they were earned. Dividend sources are estimated at the time of declaration. Actual results may vary. Any non-taxable return of capital cannot be determined until final tax calculations are completed after the end of the fund’s fiscal period.

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 highlights table also includes the current reporting period.

 

 

The fund’s portfolio 4/30/22 (Unaudited)

U.S. GOVERNMENT AND AGENCY MORTGAGE OBLIGATIONS (143.5%)*	Principal amount	Value
U.S. Government Guaranteed Mortgage Obligations (4.0%)
Government National Mortgage Association (1 YR WSJ LIBOR + 1.49%), 3.469%, 12/20/68	$1,210,003	$1,225,580
Government National Mortgage Association Pass-Through Certificates
6.50%, with due dates from 3/15/31 to 10/15/31	91,555	98,882
6.00%, with due dates from 12/20/48 to 4/20/49	432,493	470,704
5.50%, with due dates from 1/20/49 to 11/20/49	2,203,346	2,341,824
5.00%, with due dates from 6/15/40 to 3/20/50	6,805,847	7,150,473
4.70%, with due dates from 6/20/65 to 8/20/67	791,844	801,920
4.661%, 9/20/65	233,744	236,676
4.66%, 5/20/65	177,784	180,688
4.658%, 6/20/65	12,703	12,878
4.65%, 6/20/67	524,792	533,129
4.547%, 5/20/65	38,497	39,063
4.507%, 8/20/65	50,929	51,522
4.50%, TBA, 5/1/52	8,000,000	8,159,880
4.50%, with due dates from 5/20/44 to 1/20/50	3,765,556	3,906,268
4.499%, 3/20/67	763,384	777,455
4.496%, 5/20/65	750,503	760,470
4.468%, 6/20/65	28,700	29,074
4.423%, 6/20/65	26,181	26,476
4.419%, 5/20/65	42,826	43,326
4.33%, 5/20/67	364,280	369,193
4.00%, with due dates from 2/20/48 to 3/20/50	4,373,696	4,418,321
3.50%, TBA, 5/1/52	44,000,000	43,039,955
3.50%, with due dates from 11/15/42 to 3/20/50	19,021,674	18,771,269
3.00%, TBA, 5/1/52	3,000,000	2,859,420
3.00%, with due dates from 3/20/43 to 2/20/50	2,848,936	2,728,947
		99,033,393
U.S. Government Agency Mortgage Obligations (139.5%)
Federal Home Loan Mortgage Corporation Pass-Through Certificates
5.00%, with due dates from 3/1/41 to 6/1/49	208,322	219,083
4.50%, with due dates from 7/1/44 to 11/1/49	650,281	678,036
4.00%, with due dates from 12/1/44 to 7/1/49	3,369,883	3,413,365
3.50%, with due dates from 4/1/42 to 11/1/47	3,349,516	3,299,979
3.00%, 10/1/46	1,494,007	1,433,007
2.50%, with due dates from 4/1/43 to 2/1/51	488,033	451,258
Federal National Mortgage Association Pass-Through Certificates
6.00%, with due dates from 2/1/36 to 5/1/41	1,581,096	1,730,512
5.50%, with due dates from 1/1/33 to 2/1/35	250,953	266,717
5.00%, with due dates from 3/1/40 to 8/1/49	2,802,336	2,935,737
4.50%, with due dates from 7/1/44 to 11/1/49	3,032,293	3,151,525
4.00%, 1/1/57	3,972,504	4,026,720
4.00%, with due dates from 8/1/44 to 11/1/49	4,105,272	4,156,135
3.50%, with due dates from 5/1/56 to 9/1/57	10,048,295	9,803,503
3.50%, with due dates from 5/1/42 to 2/1/47	7,931,956	7,830,834
3.50%, 6/1/31	306,671	308,630
3.00%, with due dates from 9/1/42 to 3/1/47	10,576,999	10,186,017
2.50%, with due dates from 12/1/47 to 5/1/51	4,472,900	4,129,420

U.S. GOVERNMENT AND AGENCY MORTGAGE OBLIGATIONS (143.5%)* cont.	Principal amount	Value
U.S. Government Agency Mortgage Obligations cont.
Uniform Mortgage-Backed Securities
6.00%, TBA, 5/1/52	$1,000,000	$1,049,923
4.50%, TBA, 6/1/52	659,000,000	667,186,360
4.50%, TBA, 5/1/52	437,000,000	444,579,416
4.00%, TBA, 6/1/52	341,000,000	337,909,654
4.00%, TBA, 5/1/52	477,000,000	474,186,417
3.50%, TBA, 6/1/52	203,000,000	196,330,964
3.50%, TBA, 5/1/52	326,000,000	316,092,371
3.00%, TBA, 6/1/52	304,000,000	285,937,870
3.00%, TBA, 5/1/52	352,000,000	331,842,193
2.50%, TBA, 5/1/52	122,000,000	111,305,919
2.00%, TBA, 6/1/52	104,000,000	91,533,832
2.00%, TBA, 5/1/52	155,000,000	136,687,029
		3,452,662,426
Total U.S. government and agency mortgage obligations (cost $3,606,088,024)		$3,551,695,819

U.S. TREASURY OBLIGATIONS (0.2%)*	Principal amount	Value
U.S. Treasury Bonds 1.875%, 11/15/51 i	$163,000	$129,204
U.S. Treasury Inflation Index Notes 0.125%, 7/15/31 i	616,581	664,494
U.S. Treasury Notes 0.25%, 9/30/25 i	4,389,000	4,008,913
Total U.S. treasury obligations (cost $4,802,611)		$4,802,611

MORTGAGE-BACKED SECURITIES (39.2%)*		Principal amount	Value
Agency collateralized mortgage obligations (16.4%)
Federal Home Loan Mortgage Corporation
REMICs IFB Ser. 3408, Class EK, ((-4.024 x 1 Month US LIBOR) + 25.79%), 23.563%, 4/15/37		$312,701	$487,813
REMICs IFB Ser. 2976, Class LC, ((-3.667 x 1 Month US LIBOR) + 24.42%), 22.388%, 5/15/35		44,903	60,619
REMICs IFB Ser. 3065, Class DC, ((-3 x 1 Month US LIBOR) + 19.86%), 18.198%, 3/15/35		234,607	297,951
REMICs IFB Ser. 2990, Class LB, ((-2.556 x 1 Month US LIBOR) + 16.95%), 15.529%, 6/15/34		72,582	78,388
REMICs IFB Ser. 4738, Class QS, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 5.646%, 12/15/47		13,423,032	2,093,864
REMICs IFB Ser. 4461, Class SB, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 5.646%, 4/15/45		11,877,975	1,779,792
REMICs IFB Ser. 4839, Class WS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.546%, 8/15/56		16,748,330	2,763,475
REMICs IFB Ser. 4596, Class CS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.546%, 6/15/46		13,149,155	1,380,661
REMICs IFB Ser. 4077, Class HS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.546%, 7/15/42		6,780,934	806,638
REMICs IFB Ser. 4839, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.496%, 6/15/42		10,750,797	793,170
REMICs IFB Ser. 3852, Class NT, ((-1 x 1 Month US LIBOR) + 6.00%), 5.446%, 5/15/41		377,843	348,502

MORTGAGE-BACKED SECURITIES (39.2%)* cont.		Principal amount	Value
Agency collateralized mortgage obligations cont.
Federal Home Loan Mortgage Corporation
REMICs IFB Ser. 4912, Class PS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.382%, 9/25/49		$7,863,202	$976,642
REMICs IFB Ser. 4994, Class SD, IO, ((-1 x 1 Month US LIBOR) + 5.60%), 4.932%, 2/25/49		35,405,920	3,373,122
REMICs Ser. 5170, Class IC, IO, 4.50%, 8/25/50		3,767,095	731,683
REMICs Ser. 4973, Class BI, IO, 4.50%, 5/25/50		48,443,961	9,931,012
REMICs Ser. 4975, Class EI, IO, 4.50%, 5/25/50		33,919,173	6,309,170
REMICs Ser. 4132, Class IP, IO, 4.50%, 11/15/42		1,157,097	129,248
REMICs Ser. 4122, Class TI, IO, 4.50%, 10/15/42		692,719	130,289
REMICs Ser. 4018, Class DI, IO, 4.50%, 7/15/41		447,048	32,518
REMICs Ser. 5184, Class IO, IO, 4.00%, 1/25/52		3,177,013	589,717
REMICs Ser. 5168, Class CI, IO, 4.00%, 11/25/51		3,942,537	709,432
REMICs Ser. 5052, Class KI, IO, 4.00%, 12/25/50		49,939,211	9,348,121
REMICs Ser. 5019, Class MI, IO, 4.00%, 10/25/50		42,492,863	7,481,931
REMICs Ser. 4546, Class TI, IO, 4.00%, 12/15/45		4,575,250	797,458
REMICs Ser. 5140, Class BI, IO, 3.50%, 9/25/51		58,036,330	11,018,714
REMICs Ser. 5070, Class AI, IO, 3.50%, 2/25/51		56,518,507	11,062,192
REMICs Ser. 5050, Class IM, IO, 3.50%, 10/25/50		66,029,341	12,804,806
REMICs Ser. 4165, Class AI, IO, 3.50%, 2/15/43		3,270,828	496,665
REMICs Ser. 5007, Class IP, IO, 3.00%, 7/25/50		47,475,659	7,469,136
REMICs Ser. 4141, Class PI, IO, 3.00%, 12/15/42		2,237,348	276,956
REMICs Ser. 4158, Class TI, IO, 3.00%, 12/15/42		4,679,212	363,201
REMICs Ser. 4176, Class DI, IO, 3.00%, 12/15/42		5,838,470	418,750
REMICs Ser. 4171, Class NI, IO, 3.00%, 6/15/42		2,609,883	258,448
REMICs Ser. 4183, Class MI, IO, 3.00%, 2/15/42		1,657,574	112,218
REMICs Ser. 4201, Class JI, IO, 3.00%, 12/15/41		3,242,546	138,113
REMICs Ser. 4206, Class IP, IO, 3.00%, 12/15/41		1,418,815	153,838
REMICs Ser. 4004, IO, 3.00%, 3/15/26		109,308	403
REMICs Ser. 5118, Class NI, IO, 2.00%, 2/25/51		69,812,115	9,542,966
REMICs Ser. 3369, Class BO, PO, zero %, 9/15/37		5,239	4,453
REMICs Ser. 3391, PO, zero %, 4/15/37		47,462	41,766
REMICs Ser. 3175, Class MO, PO, zero %, 6/15/36		8,904	7,925
REMICs Ser. 3210, PO, zero %, 5/15/36		3,626	3,445
REMICs FRB Ser. 3117, Class AF, (1 Month US LIBOR + 0.00%), zero %, 2/15/36		9,637	8,480
Strips Ser. 315, PO, zero %, 9/15/43		6,590,208	5,243,999
Federal National Mortgage Association
REMICs IFB Ser. 06-62, Class PS, ((-6 x 1 Month US LIBOR) + 39.90%), 35.893%, 7/25/36		145,774	269,681
REMICs IFB Ser. 06-8, Class HP, ((-3.667 x 1 Month US LIBOR) + 24.57%), 22.118%, 3/25/36		144,297	183,235
REMICs IFB Ser. 05-106, Class JC, ((-3.101 x 1 Month US LIBOR) + 20.12%), 18.053%, 12/25/35		199,280	269,028
REMICs IFB Ser. 11-4, Class CS, ((-2 x 1 Month US LIBOR) + 12.90%), 11.564%, 5/25/40		209,192	242,360
REMICs IFB Ser. 15-66, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.25%), 5.582%, 9/25/45		17,628,077	1,915,719
REMICs IFB Ser. 14-87, Class MS, IO, ((-1 x 1 Month US LIBOR) + 6.25%), 5.582%, 1/25/45		11,434,761	1,325,746

MORTGAGE-BACKED SECURITIES (39.2%)* cont.		Principal amount	Value
Agency collateralized mortgage obligations cont.
Federal National Mortgage Association
REMICs IFB Ser. 18-44, Class SA, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 5.532%, 6/25/48		$21,387,999	$2,811,453
REMICs IFB Ser. 18-29, Class S, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 5.532%, 5/25/48		10,692,747	1,405,562
REMICs IFB Ser. 18-1, Class MS, IO, ((-1 x 1 Month US LIBOR) + 6.15%), 5.482%, 2/25/48		6,566,916	855,012
REMICs IFB Ser. 17-108, Class SA, IO, ((-1 x 1 Month US LIBOR) + 6.15%), 5.482%, 1/25/48		13,550,342	2,047,295
REMICs IFB Ser. 19-3, Class SA, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.432%, 2/25/49		19,087,612	2,109,372
REMICs IFB Ser. 18-94, Class SA, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.432%, 1/25/49		4,193,987	377,459
REMICs IFB Ser. 16-91, Class AS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.432%, 12/25/46		14,682,550	1,541,668
REMICs IFB Ser. 17-33, Class LS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.432%, 5/25/39		3,972,094	472,004
REMICs IFB Ser. 20-12, Class SK, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.382%, 3/25/50		35,363,813	4,852,976
REMICs IFB Ser. 19-59, Class SD, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.382%, 10/25/49		13,826,874	1,861,045
REMICs IFB Ser. 16-8, Class SA, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.382%, 3/25/46		24,140,010	3,616,840
REMICs FRB Ser. 19-74, Class S, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 5.332%, 12/25/49		29,826,934	3,988,414
REMICs IFB Ser. 19-71, Class CS, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 5.332%, 11/25/49		8,149,190	1,419,996
REMICs IFB Ser. 19-57, Class LS, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 5.332%, 10/25/49		23,377,298	3,459,354
REMICs Ser. 20-45, Class GI, IO, 5.00%, 7/25/50		68,763,101	14,598,743
REMICs Ser. 20-93, Class WI, IO, 5.00%, 6/25/50		65,398,629	13,725,864
REMICs Ser. 15-33, Class AI, IO, 5.00%, 6/25/45		12,249,455	2,095,011
Interest Strip Ser. 409, Class C24, IO, 4.50%, 4/25/42		4,703,578	903,536
REMICs Ser. 18-3, Class AI, IO, 4.50%, 12/25/47		10,140,505	1,754,815
REMICs Ser. 17-87, Class IA, IO, 4.50%, 11/25/47		19,932,262	3,587,807
REMICs Ser. 17-72, Class ID, IO, 4.50%, 9/25/47		16,374,683	2,865,570
REMICs Ser. 20-62, Class CI, IO, 4.00%, 6/25/48		51,780,185	10,421,606
REMICs Ser. 15-3, Class BI, IO, 4.00%, 3/25/44		320,805	4,807
REMICs Ser. 12-124, Class UI, IO, 4.00%, 11/25/42		4,508,764	788,046
REMICs Ser. 12-62, Class EI, IO, 4.00%, 4/25/41		651,073	18,514
REMICs Ser. 12-22, Class CI, IO, 4.00%, 3/25/41		963,167	45,281
REMICs Ser. 20-95, Class GI, IO, 3.50%, 1/25/51		32,633,387	5,835,017
REMICs Ser. 17-12, IO, 3.50%, 3/25/47		2,793,509	493,481
REMICs Ser. 15-10, Class AI, IO, 3.50%, 8/25/43		1,554,219	48,868
REMICs Ser. 13-18, Class IN, IO, 3.50%, 3/25/43		1,288,459	201,260
REMICs Ser. 14-10, IO, 3.50%, 8/25/42		1,106,843	135,309
REMICs Ser. 12-128, Class QI, IO, 3.50%, 6/25/42		3,145,568	219,607
REMICs Ser. 21-84, Class KI, IO, 3.00%, 12/25/51		4,209,494	676,718
REMICs Ser. 20-68, Class LI, IO, 3.00%, 10/25/50		53,936,897	8,645,276
REMICs Ser. 20-60, Class CI, IO, 3.00%, 9/25/50		63,611,905	12,297,453

MORTGAGE-BACKED SECURITIES (39.2%)* cont.		Principal amount	Value
Agency collateralized mortgage obligations cont.
Federal National Mortgage Association
REMICs Ser. 13-55, Class IK, IO, 3.00%, 4/25/43		$1,454,553	$181,467
REMICs Ser. 12-151, Class PI, IO, 3.00%, 1/25/43		2,567,669	323,249
REMICs Ser. 12-144, Class KI, IO, 3.00%, 11/25/42		2,740,652	220,159
REMICs Ser. 13-55, Class PI, IO, 3.00%, 5/25/42		1,364,310	58,856
REMICs Ser. 13-35, Class PI, IO, 3.00%, 2/25/42		2,150,251	71,001
REMICs Ser. 13-67, Class IP, IO, 3.00%, 2/25/42		1,293,306	35,676
REMICs Ser. 13-30, Class IP, IO, 3.00%, 10/25/41		296,799	3,077
REMICs Ser. 13-23, Class LI, IO, 3.00%, 6/25/41		505,502	7,638
REMICs Ser. 14-28, Class AI, IO, 3.00%, 3/25/40		2,170,711	43,803
REMICs Ser. 21-12, Class NI, IO, 2.50%, 3/25/51		29,749,786	5,020,276
REMICs FRB Ser. 01-50, Class B1, IO, 0.378%, 10/25/41 W		170,344	852
Trust FRB Ser. 05-W4, Class 1A, IO, 0.063%, 8/25/45 W		44,655	54
REMICs Ser. 03-34, PO, zero %, 4/25/43		75,869	69,041
REMICs Ser. 07-14, Class KO, PO, zero %, 3/25/37		55,544	49,990
REMICs Ser. 06-125, Class OX, PO, zero %, 1/25/37		4,407	3,923
REMICs Ser. 06-84, Class OT, PO, zero %, 9/25/36		4,826	4,247
REMICs Ser. 06-46, Class OC, PO, zero %, 6/25/36		4,836	4,086
Government National Mortgage Association
IFB Ser. 10-9, Class YD, IO, ((-1 x 1 Month US LIBOR) + 6.80%), 6.206%, 1/16/40		7,861,094	1,168,892
Ser. 09-79, Class IC, IO, 6.00%, 8/20/39		4,318,578	617,600
IFB Ser. 20-112, Class MS, IO, ((-1 x 1 Month US LIBOR) + 6.30%), 5.706%, 8/20/50		36,896,134	6,064,986
IFB Ser. 20-142, Class SB, IO, ((-1 x 1 Month US LIBOR) + 6.30%), 5.706%, 9/20/50		33,130,552	5,367,978
IFB Ser. 18-91, Class SJ, IO, ((-1 x 1 Month US LIBOR) + 6.25%), 5.656%, 7/20/48		5,489,042	619,703
IFB Ser. 20-98, Class KS, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 5.606%, 7/20/50		32,515,651	5,072,546
IFB Ser. 14-131, Class BS, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 5.606%, 9/16/44		10,096,947	1,928,191
IFB Ser. 12-149, Class GS, IO, ((-1 x 1 Month US LIBOR) + 6.20%), 5.606%, 12/20/42		10,126,999	1,298,686
IFB Ser. 19-123, Class SL, IO, ((-1 x 1 Month US LIBOR) + 6.15%), 5.556%, 10/20/49		19,350,888	1,976,746
IFB Ser. 18-168, Class KS, IO, ((-1 x 1 Month US LIBOR) + 6.15%), 5.556%, 12/20/48		21,739,608	2,754,286
IFB Ser. 13-129, Class SN, IO, ((-1 x 1 Month US LIBOR) + 6.15%), 5.556%, 9/20/43		793,273	101,015
IFB Ser. 20-32, Class GS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.506%, 3/20/50		18,784,548	2,580,789
IFB Ser. 20-11, Class SY, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.506%, 1/20/50		38,937,468	4,204,079
IFB Ser. 19-83, Class JS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.506%, 7/20/49		13,238,591	1,423,149
IFB Ser. 19-83, Class SW, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.506%, 7/20/49		18,960,348	2,233,719
IFB Ser. 19-65, Class BS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.506%, 5/20/49		8,391,351	1,018,458

MORTGAGE-BACKED SECURITIES (39.2%)* cont.		Principal amount	Value
Agency collateralized mortgage obligations cont.
Government National Mortgage Association
IFB Ser. 19-20, Class SB, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.506%, 2/20/49		$18,238,767	$2,354,631
IFB Ser. 18-155, Class SE, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.506%, 11/20/48		9,653,664	1,045,814
IFB Ser. 18-148, Class GS, IO, ((-1 x 1 Month US LIBOR) + 6.10%), 5.506%, 2/16/46		12,960,787	1,623,253
IFB Ser. 20-55, Class SA, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.456%, 4/20/50		49,057,816	5,319,829
IFB Ser. 20-15, Class CS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.456%, 2/20/50		1,059,117	101,293
IFB Ser. 20-18, Class GS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.456%, 2/20/50		51,115,384	6,961,578
IFB Ser. 19-125, Class SG, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.456%, 10/20/49		4,458,257	835,255
IFB Ser. 20-34, Class SQ, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.456%, 10/20/49		20,433,083	2,312,605
IFB Ser. 19-119, Class KS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.456%, 9/16/49		20,392,024	3,941,029
IFB Ser. 19-108, Class S, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.456%, 8/20/49		13,656,557	1,731,651
IFB Ser. 19-99, Class KS, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.456%, 8/20/49		2,702,447	293,824
IFB Ser. 19-78, Class SJ, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.456%, 6/20/49		6,113,328	594,130
IFB Ser. 19-44, Class SA, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.456%, 4/20/49		11,748,693	1,137,379
IFB Ser. 19-30, Class SH, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.456%, 3/20/49		16,277,657	1,908,731
IFB Ser. 19-21, Class SJ, IO, ((-1 x 1 Month US LIBOR) + 6.05%), 5.456%, 2/20/49		8,112,726	850,214
FRB Ser. 20-47, Class SG, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 5.406%, 2/20/49		43,215,066	5,293,845
IFB Ser. 19-121, Class SD, IO, ((-1 x 1 Month US LIBOR) + 6.00%), 5.406%, 10/20/49		3,132,415	560,407
IFB Ser. 10-31, Class SA, IO, ((-1 x 1 Month US LIBOR) + 5.75%), 5.156%, 3/20/40		11,567,487	1,330,262
Ser. 18-127, Class ID, IO, 5.00%, 7/20/45		124,155	18,058
Ser. 15-69, IO, 5.00%, 5/20/45		6,197,665	1,250,193
Ser. 14-180, IO, 5.00%, 12/20/44		8,407,763	1,718,631
Ser. 14-76, IO, 5.00%, 5/20/44		2,234,025	432,050
Ser. 13-3, Class IT, IO, 5.00%, 1/20/43		1,043,516	219,452
Ser. 11-116, Class IB, IO, 5.00%, 10/20/40		8,080	613
Ser. 10-35, Class UI, IO, 5.00%, 3/20/40		690,445	134,744
Ser. 10-9, Class UI, IO, 5.00%, 1/20/40		6,208,472	1,284,409
Ser. 09-121, Class UI, IO, 5.00%, 12/20/39		2,908,016	588,407
Ser. 19-83, IO, 4.50%, 6/20/49		11,578,948	1,840,473
Ser. 15-13, Class BI, IO, 4.50%, 1/20/45		12,211,097	2,295,220
Ser. 14-108, Class IP, IO, 4.50%, 12/20/42		1,043,283	73,844
Ser. 13-20, Class QI, IO, 4.50%, 12/16/42		4,386,783	522,558
Ser. 12-129, IO, 4.50%, 11/16/42		2,424,590	466,830

MORTGAGE-BACKED SECURITIES (39.2%)* cont.		Principal amount	Value
Agency collateralized mortgage obligations cont.
Government National Mortgage Association
Ser. 10-35, Class QI, IO, 4.50%, 3/20/40		$979,242	$171,970
Ser. 10-9, Class QI, IO, 4.50%, 1/20/40		1,016,146	188,800
Ser. 14-71, Class BI, IO, 4.50%, 5/20/29		1,923,038	83,537
Ser. 20-46, Class MI, IO, 4.00%, 4/20/50		21,099,979	3,458,774
Ser. 15-149, Class KI, IO, 4.00%, 10/20/45		5,939,649	989,070
Ser. 15-94, IO, 4.00%, 7/20/45		352,721	68,181
Ser. 15-99, Class LI, IO, 4.00%, 7/20/45		347,441	37,779
Ser. 15-53, Class MI, IO, 4.00%, 4/16/45		7,998,893	1,557,384
Ser. 14-2, Class IL, IO, 4.00%, 1/16/44		2,269,064	382,141
Ser. 14-63, Class PI, IO, 4.00%, 7/20/43		2,081,874	176,782
Ser. 12-56, Class IB, IO, 4.00%, 4/20/42		2,152,673	372,127
Ser. 12-38, Class MI, IO, 4.00%, 3/20/42		15,918,472	2,803,084
Ser. 12-50, Class PI, IO, 4.00%, 12/20/41		3,622,040	375,374
Ser. 20-138, Class IC, IO, 3.50%, 8/20/50		6,551,252	1,091,963
Ser. 19-158, Class PI, IO, 3.50%, 12/20/49		89,719,834	13,906,574
Ser. 19-151, Class NI, IO, 3.50%, 10/20/49		21,156,649	2,911,589
Ser. 15-20, Class PI, IO, 3.50%, 2/20/45		3,332,966	535,941
Ser. 15-24, Class IA, IO, 3.50%, 2/20/45		2,728,019	310,449
Ser. 13-100, Class MI, IO, 3.50%, 2/20/43		584,880	43,322
Ser. 13-37, Class JI, IO, 3.50%, 1/20/43		785,929	89,612
Ser. 12-145, IO, 3.50%, 12/20/42		2,511,931	400,923
Ser. 13-27, Class PI, IO, 3.50%, 12/20/42		533,751	64,466
Ser. 12-136, IO, 3.50%, 11/20/42		6,911,555	1,034,487
Ser. 12-113, Class ID, IO, 3.50%, 9/20/42		9,168,834	1,522,228
Ser. 18-127, Class IA, IO, 3.50%, 4/20/42		3,741,916	243,487
Ser. 15-36, Class GI, IO, 3.50%, 6/16/41		1,968,145	79,304
Ser. 14-102, Class IG, IO, 3.50%, 3/16/41		1,752,865	97,856
Ser. 15-52, Class KI, IO, 3.50%, 11/20/40		3,268,596	245,799
Ser. 15-26, Class AI, IO, 3.50%, 5/20/39		2,399,595	21,836
Ser. 15-24, Class IC, IO, 3.50%, 11/20/37		1,447,740	29,244
Ser. 14-100, Class JI, IO, 3.50%, 7/16/29		4,586,069	278,686
Ser. 20-186, Class DI, IO, 3.00%, 12/20/50		5,613,559	850,542
Ser. 20-176, Class BI, IO, 3.00%, 11/20/50		47,849,363	7,693,220
Ser. 14-46, Class KI, IO, 3.00%, 6/20/36		50,923	112
Ser. 14-30, Class KI, IO, 3.00%, 2/16/29		1,672,751	85,143
Ser. 14-5, Class LI, IO, 3.00%, 1/16/29		1,745,603	89,200
Ser. 13-164, Class CI, IO, 3.00%, 11/16/28		3,273,550	177,099
Ser. 21-107, Class QI, IO, 2.50%, 6/20/51		71,584,567	10,968,016
Ser. 20-151, Class MI, IO, 2.50%, 10/20/50		34,487,008	4,752,655
Ser. 17-H12, Class QI, IO, 2.36%, 5/20/67 W		13,428,610	660,393
Ser. 17-H18, Class CI, IO, 2.34%, 9/20/67 W		9,456,877	746,206
Ser. 16-H27, Class BI, IO, 2.336%, 12/20/66 W		7,389,785	381,889
Ser. 18-H17, Class GI, IO, 2.251%, 10/20/68 W		18,534,256	990,424
Ser. 18-H02, Class EI, IO, 2.121%, 1/20/68 W		10,852,674	759,688
Ser. 19-H02, Class DI, IO, 2.114%, 11/20/68 W		16,381,147	839,534
Ser. 16-H11, Class HI, IO, 2.098%, 1/20/66 W		24,391,587	1,036,642
Ser. 16-H23, Class NI, IO, 2.094%, 10/20/66 W		27,482,121	1,242,191
Ser. 19-H14, Class IB, IO, 2.088%, 8/20/69 W		19,330,954	933,322

MORTGAGE-BACKED SECURITIES (39.2%)* cont.		Principal amount	Value
Agency collateralized mortgage obligations cont.
Government National Mortgage Association
Ser. 20-H02, Class GI, IO, 2.081%, 1/20/70 W		$25,088,504	$1,266,185
Ser. 16-H24, Class JI, IO, 1.973%, 11/20/66 W		10,588,104	600,544
Ser. 17-H10, Class MI, IO, 1.966%, 4/20/67 W		12,475,862	509,015
Ser. 15-H15, Class JI, IO, 1.955%, 6/20/65 W		13,307,941	775,853
Ser. 17-H08, Class NI, IO, 1.908%, 3/20/67 W		9,340,016	453,925
Ser. 17-H23, Class BI, IO, 1.883%, 11/20/67 W		14,012,012	836,517
FRB Ser. 15-H16, Class XI, IO, 1.878%, 7/20/65 W		14,887,306	841,132
Ser. 15-H12, Class AI, IO, 1.862%, 5/20/65 W		19,100,941	964,598
Ser. 15-H20, Class AI, IO, 1.826%, 8/20/65 W		17,735,322	892,086
Ser. 15-H10, Class CI, IO, 1.808%, 4/20/65 W		19,455,942	1,068,131
Ser. 15-H12, Class GI, IO, 1.793%, 5/20/65 W		23,103,969	1,231,442
Ser. 15-H25, Class CI, IO, 1.717%, 10/20/65 W		15,428,852	617,154
Ser. 15-H12, Class EI, IO, 1.706%, 4/20/65 W		18,653,037	897,211
Ser. 15-H26, Class DI, IO, 1.701%, 10/20/65 W		13,771,555	641,713
Ser. 15-H09, Class BI, IO, 1.676%, 3/20/65 W		20,016,956	854,244
Ser. 18-H05, Class AI, IO, 1.628%, 2/20/68 W		14,430,286	1,001,101
Ser. 16-H04, Class KI, IO, 1.623%, 2/20/66 W		17,975,654	443,774
Ser. 15-H25, Class AI, IO, 1.613%, 9/20/65 W		15,847,927	789,227
Ser. 17-H14, Class EI, IO, 1.586%, 6/20/67 W		15,913,341	529,616
Ser. 15-H01, Class CI, IO, 1.578%, 12/20/64 W		12,502,653	299,101
Ser. 15-H28, Class DI, IO, 1.566%, 8/20/65 W		14,122,977	578,943
Ser. 15-H17, Class CI, IO, 1.56%, 6/20/65 W		14,862,280	333,940
Ser. 15-H04, Class AI, IO, 1.543%, 12/20/64 W		19,927,697	594,718
Ser. 16-H02, Class HI, IO, 1.536%, 1/20/66 W		29,507,330	805,550
Ser. 14-H11, Class GI, IO, 1.496%, 6/20/64 W		31,206,016	1,320,483
Ser. 14-H07, Class BI, IO, 1.472%, 5/20/64 W		26,417,035	1,209,405
Ser. 10-H19, Class GI, IO, 1.405%, 8/20/60 W		14,604,757	546,408
IFB Ser. 11-70, Class YI, IO, ((-1 x 1 Month US LIBOR) + 5.00%), 0.15%, 12/20/40		4,211,616	15,030
			405,510,019
Commercial mortgage-backed securities (13.3%)
AREIT CRE Trust 144A FRB Ser. 20-CRE4, Class D, 3.572%, 4/15/37		5,659,000	5,680,504
Banc of America Commercial Mortgage Trust
FRB Ser. 16-UB10, Class C, 5.009%, 7/15/49 W		3,113,000	3,025,947
FRB Ser. 15-UBS7, Class B, 4.502%, 9/15/48 W		7,695,000	7,300,445
FRB Ser. 07-1, Class XW, IO, 0.508%, 1/15/49 W		136,086	2
BANK
FRB Ser. 20-BN26, Class XA, IO, 1.346%, 3/15/63 W		35,051,481	2,543,479
FRB Ser. 18-BN13, Class XA, IO, 0.645%, 8/15/61 W		194,638,741	4,142,302
Barclays Commercial Mortgage Trust 144A Ser. 19-C5, Class D, 2.50%, 11/15/52		499,000	382,181
BBCMS Mortgage Trust 144A Ser. 21-C10, Class E, 2.00%, 7/15/54		4,200,000	2,908,352
Bear Stearns Commercial Mortgage Securities Trust FRB Ser. 07-T26, Class AJ, 5.566%, 1/12/45 W		1,373,917	68,692
CD Commercial Mortgage Trust FRB Ser. 17-CD6, Class C, 4.406%, 11/13/50 W		3,594,000	3,379,066
CD Commercial Mortgage Trust 144A Ser. 17-CD3, Class D, 3.25%, 2/10/50		416,000	323,093

MORTGAGE-BACKED SECURITIES (39.2%)* cont.		Principal amount	Value
Commercial mortgage-backed securities cont.
CFCRE Commercial Mortgage Trust 144A
FRB Ser. 11-C2, Class D, 5.249%, 12/15/47 W		$333,800	$340,509
FRB Ser. 11-C2, Class E, 5.249%, 12/15/47 W		3,258,000	3,244,557
Citigroup Commercial Mortgage Trust
FRB Ser. 14-GC19, Class XA, IO, 1.285%, 3/10/47 W		61,338,777	963,387
FRB Ser. 13-GC17, Class XA, IO, 1.15%, 11/10/46 W		28,564,375	332,646
FRB Ser. 20-GC46, Class XA, IO, 1.105%, 2/15/53 W		68,560,304	4,007,617
Citigroup Commercial Mortgage Trust 144A FRB Ser. 06-C5, Class XC, IO, 0.599%, 10/15/49 W		6,236,469	135
COMM Mortgage Trust
FRB Ser. 12-CR1, Class C, 5.452%, 5/15/45 W		4,003,000	3,976,395
FRB Ser. 14-CR17, Class C, 4.945%, 5/10/47 W		300,000	296,617
Ser. 12-LC4, Class B, 4.934%, 12/10/44 W		2,593,508	2,590,172
FRB Ser. 14-CR18, Class C, 4.907%, 7/15/47 W		2,758,000	2,639,226
Ser. 13-CR11, Class AM, 4.715%, 8/10/50 W		949,000	962,685
FRB Ser. 18-COR3, Class C, 4.712%, 5/10/51 W		11,276,000	10,765,113
FRB Ser. 14-UBS6, Class C, 4.588%, 12/10/47 W		504,000	491,143
Ser. 14-LC17, Class B, 4.49%, 10/10/47 W		2,308,000	2,279,956
FRB Ser. 14-UBS4, Class XA, IO, 1.25%, 8/10/47 W		25,033,045	459,379
FRB Ser. 14-LC15, Class XA, IO, 1.224%, 4/10/47 W		60,541,911	937,806
FRB Ser. 13-LC13, Class XA, IO, 1.166%, 8/10/46 W		24,711,788	250,857
FRB Ser. 14-CR18, Class XA, IO, 1.152%, 7/15/47 W		18,501,108	320,069
FRB Ser. 14-CR17, Class XA, IO, 1.117%, 5/10/47 W		25,373,542	385,323
FRB Ser. 14-CR19, Class XA, IO, 1.096%, 8/10/47 W		20,184,664	346,817
FRB Ser. 15-CR23, Class XA, IO, 1.019%, 5/10/48 W		30,543,289	622,839
FRB Ser. 14-UBS6, Class XA, IO, 1.002%, 12/10/47 W		44,088,616	760,132
FRB Ser. 14-LC17, Class XA, IO, 0.831%, 10/10/47 W		16,408,347	219,970
FRB Ser. 19-GC44, Class XA, IO, 0.763%, 8/15/57 W		90,187,849	3,047,069
COMM Mortgage Trust 144A
FRB Ser. 12-CR1, Class D, 5.452%, 5/15/45 W		1,651,000	1,439,307
FRB Ser. 13-LC13, Class D, 5.436%, 8/10/46 W		720,000	663,726
FRB Ser. 13-CR13, Class E, 5.042%, 11/10/46 W		1,524,000	1,294,176
FRB Ser. 14-CR17, Class D, 5.009%, 5/10/47 W		4,337,000	3,903,422
FRB Ser. 14-CR19, Class D, 4.854%, 8/10/47 W		2,364,000	2,201,099
Ser. 12-LC4, Class E, 4.25%, 12/10/44		1,918,000	495,228
FRB Ser. 13-CR6, Class D, 4.222%, 3/10/46 W		1,683,000	1,638,105
Ser. 13-LC6, Class E, 3.50%, 1/10/46		3,735,000	3,184,845
Ser. 15-LC19, Class D, 2.867%, 2/10/48		4,050,000	3,617,609
Credit Suisse Commercial Mortgage Trust 144A
FRB Ser. 08-C1, Class AJ, 6.01%, 2/15/41 W		9,821,289	4,838,949
FRB Ser. 07-C2, Class AX, IO, 0.048%, 1/15/49 W		6,147,590	5
CSAIL Commercial Mortgage Trust
FRB Ser. 15-C1, Class C, 4.402%, 4/15/50 W		3,716,000	3,342,800
FRB Ser. 19-C17, Class XA, IO, 1.501%, 9/15/52 W		60,213,320	4,346,643
CSAIL Commercial Mortgage Trust 144A FRB Ser. 15-C1, Class D, 3.902%, 4/15/50 W		4,076,000	3,219,596
CSMC Trust FRB Ser. 16-NXSR, Class XA, IO, 0.861%, 12/15/49 W		100,952,366	2,473,333
DBUBS Mortgage Trust 144A FRB Ser. 11-LC3A, Class D, 5.55%, 8/10/44 W		4,380,729	4,355,758

MORTGAGE-BACKED SECURITIES (39.2%)* cont.		Principal amount	Value
Commercial mortgage-backed securities cont.
Federal Home Loan Mortgage Corporation Multifamily Structured Pass-Through Certificates FRB Ser. K110, Class X1, IO, 1.814%, 4/25/30 W		$38,296,751	$4,118,218
FREMF Mortgage Trust 144A FRB Ser. 18-KF43, Class B, (1 Month US LIBOR + 2.15%), 2.602%, 1/25/28		3,250,375	3,220,178
GS Mortgage Securities Corp., II FRB Ser. 13-GC10, Class XA, IO, 1.616%, 2/10/46 W		57,535,002	400,852
GS Mortgage Securities Corp., II 144A Ser. 13-GC10, Class C, 4.285%, 2/10/46 W		12,605,000	12,579,295
GS Mortgage Securities Trust
FRB Ser. 14-GC18, Class C, 5.226%, 1/10/47 W		5,144,000	3,839,510
FRB Ser. 14-GC22, Class C, 4.843%, 6/10/47 W		3,264,000	3,202,401
FRB Ser. 13-GC12, Class XA, IO, 1.524%, 6/10/46 W		28,056,710	246,394
FRB Ser. 14-GC18, Class XA, IO, 1.205%, 1/10/47 W		32,955,614	464,368
FRB Ser. 14-GC22, Class XA, IO, 1.097%, 6/10/47 W		51,675,808	692,797
GS Mortgage Securities Trust 144A Ser. 12-GCJ9, Class C, 4.448%, 11/10/45 W		11,564,000	11,450,364
JPMBB Commercial Mortgage Securities Trust
FRB Ser. 13-C15, Class C, 5.358%, 11/15/45 W		7,601,000	7,612,569
FRB Ser. 13-C12, Class C, 4.228%, 7/15/45 W		337,000	333,090
FRB Ser. 14-C25, Class XA, IO, 0.968%, 11/15/47 W		25,113,124	429,008
JPMBB Commercial Mortgage Securities Trust 144A
FRB Ser. 13-C14, Class E, 4.699%, 8/15/46 W		4,371,000	3,180,960
FRB Ser. C14, Class D, 4.699%, 8/15/46 W		5,853,000	3,224,190
FRB Ser. 14-C25, Class D, 4.086%, 11/15/47 W		3,567,000	2,695,043
Ser. 14-C25, Class E, 3.332%, 11/15/47 W		4,818,000	2,610,638
JPMDB Commercial Mortgage Securities Trust FRB Ser. 19-COR6, Class XA, IO, 1.065%, 11/13/52 W		69,002,590	3,585,112
JPMorgan Chase Commercial Mortgage Securities Trust
Ser. 06-LDP9, Class AMS, 5.337%, 5/15/47		2,703,234	2,553,593
Ser. 13-LC11, Class B, 3.499%, 4/15/46		4,970,000	4,895,140
FRB Ser. 12-LC9, Class XA, IO, 1.533%, 12/15/47 W		21,799,646	102,127
FRB Ser. 13-LC11, Class XA, IO, 1.363%, 4/15/46 W		35,508,933	284,789
FRB Ser. 13-C10, Class XA, IO, 1.064%, 12/15/47 W		59,933,630	275,646
FRB Ser. 13-C16, Class XA, IO, 1.019%, 12/15/46 W		35,949,076	351,632
JPMorgan Chase Commercial Mortgage Securities Trust 144A
FRB Ser. 11-C3, Class D, 5.708%, 2/15/46 W		1,395,000	1,030,122
FRB Ser. 11-C3, Class F, 5.708%, 2/15/46 W		4,436,000	654,981
FRB Ser. 11-C4, Class C, 5.574%, 7/15/46 W		489,519	493,138
FRB Ser. 12-C6, Class E, 5.35%, 5/15/45 W		2,494,000	2,320,452
FRB Ser. 12-C8, Class D, 4.973%, 10/15/45 W		2,815,000	2,745,880
FRB Ser. 12-C8, Class C, 4.925%, 10/15/45 W		6,475,000	6,384,931
FRB Ser. 12-LC9, Class D, 4.509%, 12/15/47 W		621,000	605,450
FRB Ser. 13-LC11, Class E, 3.25%, 4/15/46 W		2,038,000	1,188,128
FRB Ser. 21-1MEM, Class E, 2.742%, 10/9/42 W		5,750,000	4,443,404
Morgan Stanley Bank of America Merrill Lynch Trust
FRB Ser. 14-C14, Class C, 5.219%, 2/15/47 W		3,567,000	3,608,942
FRB Ser. 15-C27, Class C, 4.652%, 12/15/47 W		4,000,000	3,917,156
FRB Ser. 15-C21, Class C, 4.267%, 3/15/48 W		300,000	260,322
FRB Ser. 13-C7, Class XA, IO, 1.402%, 2/15/46 W		44,521,429	148,657

MORTGAGE-BACKED SECURITIES (39.2%)* cont.		Principal amount	Value
Commercial mortgage-backed securities cont.
Morgan Stanley Bank of America Merrill Lynch Trust
FRB Ser. 15-C26, Class XA, IO, 1.125%, 10/15/48 W		$33,269,908	$769,466
FRB Ser. 13-C12, Class XA, IO, 0.731%, 10/15/46 W		101,980,505	579,392
Morgan Stanley Bank of America Merrill Lynch Trust 144A
FRB Ser. 12-C5, Class E, 4.843%, 8/15/45 W		508,000	506,908
FRB Ser. 13-C11, Class D, 4.496%, 8/15/46 W		3,329,000	234,082
FRB Ser. 13-C11, Class F, 4.496%, 8/15/46 W		6,212,000	57,709
FRB Ser. 13-C10, Class E, 4.21%, 7/15/46 W		4,172,000	1,393,865
FRB Ser. 13-C10, Class F, 4.21%, 7/15/46 W		2,331,000	524,475
Ser. 14-C17, Class E, 3.50%, 8/15/47		2,709,000	1,807,935
Morgan Stanley Capital I Trust
FRB Ser. 16-BNK2, Class XA, IO, 1.097%, 11/15/49 W		23,695,948	800,688
FRB Ser. 18-H4, Class XA, IO, 1.003%, 12/15/51 W		55,614,791	2,324,459
FRB Ser. 18-H3, Class XA, IO, 0.985%, 7/15/51 W		56,706,866	2,017,704
FRB Ser. 16-UB12, Class XA, IO, 0.792%, 12/15/49 W		66,760,033	1,660,716
Morgan Stanley Capital I Trust 144A FRB Ser. 12-C4, Class E, 5.425%, 3/15/45 W		1,406,000	998,401
Multifamily Connecticut Avenue Securities Trust 144A
FRB Ser. 20-01, Class M10, 4.418%, 3/25/50		6,355,000	6,083,416
FRB Ser. 19-01, Class M10, 3.918%, 10/15/49		17,455,000	16,598,867
RIAL Issuer, Ltd. 144A FRB Ser. 22-FL8, Class B, 3.669%, 1/19/27 ##		5,659,000	5,634,304
TIAA Real Estate CDO, Ltd. 144A Ser. 03-1A, Class E, 8.00%, 12/28/38 (In default) †		1,661,295	17
UBS Commercial Mortgage Trust
FRB Ser. 17-C7, Class XA, IO, 1.161%, 12/15/50 W		71,296,478	2,926,257
FRB Ser. 18-C12, Class XA, IO, 0.97%, 8/15/51 W		123,618,912	4,942,494
UBS Commercial Mortgage Trust 144A FRB Ser. 12-C1, Class D, 6.069%, 5/10/45 W		2,986,644	2,708,765
UBS-Barclays Commercial Mortgage Trust 144A
FRB Ser. 12-C3, Class C, 5.216%, 8/10/49 W		660,000	661,688
Ser. 12-C2, Class F, 5.00%, 5/10/63 W		2,565,000	257
Ser. 13-C6, Class B, 3.875%, 4/10/46 W		4,129,000	4,067,555
FRB Ser. 12-C4, Class C4, 3.718%, 12/10/45 W		368,000	365,827
Ser. 13-C6, Class E, 3.50%, 4/10/46		1,319,000	1,110,970
FRB Ser. 12-C4, Class XA, IO, 1.715%, 12/10/45 W		38,754,313	99,657
UBS-Citigroup Commercial Mortgage Trust 144A FRB Ser. 11-C1, Class D, 6.654%, 1/10/45 W		5,657,000	5,006,445
Wachovia Bank Commercial Mortgage Trust FRB Ser. 06-C29, IO, 0.416%, 11/15/48 W		2,822,925	1,245
Wachovia Bank Commercial Mortgage Trust 144A FRB Ser. 05-C21, Class E, 5.275%, 10/15/44 W		2,739,453	2,523,037
Wells Fargo Commercial Mortgage Trust
FRB Ser. 18-C46, Class C, 5.156%, 8/15/51 W		6,689,000	6,518,308
FRB Ser. 20-C57, Class C, 4.157%, 8/15/53 W		2,112,000	1,995,843
FRB Ser. 19-C50, Class XA, IO, 1.599%, 5/15/52 W		113,889,161	8,587,926
FRB Ser. 20-C55, Class XA, IO, 1.434%, 2/15/53 W		65,307,486	5,039,596
FRB Ser. 17-C41, Class XA, IO, 1.332%, 11/15/50 W		81,228,371	3,827,725
FRB Ser. 14-LC16, Class XA, IO, 1.248%, 8/15/50 W		60,392,142	1,054,006

MORTGAGE-BACKED SECURITIES (39.2%)* cont.		Principal amount	Value
Commercial mortgage-backed securities cont.
Wells Fargo Commercial Mortgage Trust 144A
Ser. 16-C33, Class D, 3.123%, 3/15/59		$3,952,000	$3,388,520
Ser. 19-C50, Class D, 3.00%, 5/15/52		6,209,000	4,530,116
WF-RBS Commercial Mortgage Trust
FRB Ser. 13-C12, Class C, 4.456%, 3/15/48 W		227,000	225,199
FRB Ser. 14-C22, Class XA, IO, 0.938%, 9/15/57 W		29,935,164	386,403
FRB Ser. 13-C14, Class XA, IO, 0.788%, 6/15/46 W		74,389,745	364,205
FRB Ser. 14-C23, Class XA, IO, 0.702%, 10/15/57 W		56,266,183	616,284
WF-RBS Commercial Mortgage Trust 144A
FRB Ser. 13-UBS1, Class D, 5.192%, 3/15/46 W		3,873,000	3,836,255
Ser. 11-C4, Class E, 5.026%, 6/15/44 W		1,776,768	1,302,782
FRB Ser. 11-C4, Class C, 5.026%, 6/15/44 W		4,135,936	3,993,172
Ser. 11-C4, Class F, 5.00%, 6/15/44 W		6,151,000	3,047,205
Ser. 11-C3, Class E, 5.00%, 3/15/44 W		1,601,000	189,719
FRB Ser. 12-C7, Class D, 4.787%, 6/15/45 W		4,142,000	1,822,480
FRB Ser. 12-C10, Class D, 4.558%, 12/15/45 W		1,105,000	779,480
FRB Ser. 12-C10, Class E, 4.558%, 12/15/45 W		3,645,000	925,012
FRB Ser. 12-C9, Class XA, IO, 2.00%, 11/15/45 W		43,444,107	86,601
FRB Ser. 12-C10, Class XA, IO, 1.623%, 12/15/45 W		34,934,282	99,283
FRB Ser. 13-C11, Class XA, IO, 1.254%, 3/15/45 W		17,069,343	71,073
			330,252,354
Residential mortgage-backed securities (non-agency) (9.5%)
Arroyo Mortgage Trust 144A
Ser. 19-3, Class M1, 4.204%, 10/25/48 W		3,050,000	2,828,162
Ser. 20-1, Class A3, 3.328%, 3/25/55		150,000	144,998
Bellemeade Re, Ltd. 144A
FRB Ser. 20-2A, Class B1, (1 Month US LIBOR + 8.50%), 9.168%, 8/26/30 (Bermuda)		1,278,000	1,367,448
FRB Ser. 20-2A, Class M1C, (1 Month US LIBOR + 4.00%), 4.668%, 8/26/30 (Bermuda)		1,227,320	1,203,394
FRB Ser. 17-1, Class M2, (1 Month US LIBOR + 3.35%), 4.018%, 10/25/27 (Bermuda)		4,674,516	4,670,584
FRB Ser. 19-4A, Class M1C, (1 Month US LIBOR + 2.50%), 3.168%, 10/25/29 (Bermuda)		6,026,000	5,931,509
BRAVO Residential Funding Trust 144A
Ser. 20-RPL1, Class M1, 3.25%, 5/26/59 W		5,430,000	5,082,637
FRB Ser. 21-HE2, Class B1, (US 30 Day Average SOFR + 2.40%), 2.689%, 11/25/69		3,000,000	3,000,000
Bunker Hill Loan Depositary Trust 144A FRB Ser. 20-1, Class A3, 3.253%, 2/25/55 W		2,100,000	2,059,439
Cascade Funding Mortgage Trust 144A Ser. 21-HB6, Class M3, 3.735%, 6/25/36 W		2,000,000	1,864,473
Chevy Chase Funding, LLC Mortgage-Backed Certificates 144A FRB Ser. 04-3A, Class A2, (1 Month US LIBOR + 0.30%), 0.968%, 8/25/35		730,225	692,837
COLT Funding, LLC 144A Ser. 21-1, Class B1, 3.144%, 6/25/66 W		2,996,000	2,452,709
COLT Mortgage Loan Trust 144A Ser. 20-2, Class A2, 3.094%, 3/25/65 W		175,000	173,583
Credit Suisse Mortgage Trust 144A FRB Ser. 20-RPL3, Class A1, 2.691%, 3/25/60 W		83,197	81,460

MORTGAGE-BACKED SECURITIES (39.2%)* cont.		Principal amount	Value
Residential mortgage-backed securities (non-agency) cont.
Eagle Re, Ltd. 144A
FRB Ser. 18-1, Class M2, (1 Month US LIBOR + 3.00%), 3.668%, 11/25/28		$1,210,000	$1,203,297
FRB Ser. 18-1, Class M1, (1 Month US LIBOR + 1.70%), 2.368%, 11/25/28 (Bermuda)		1,755,056	1,738,580
Ellington Financial Mortgage Trust 144A FRB Ser. 20-1, Class A2, 3.149%, 5/25/65 W		131,000	127,793
Federal Home Loan Mortgage Corporation
Structured Agency Credit Risk Debt FRN Ser. 16-HQA1, Class M3, (1 Month US LIBOR + 6.35%), 7.018%, 9/25/28		280,173	300,973
Structured Agency Credit Risk Debt FRN Ser. 17-DNA2, Class B1, (1 Month US LIBOR + 5.15%), 5.818%, 10/25/29		2,692,000	2,882,646
Structured Agency Credit Risk Debt FRN Ser. 16-HQA2, Class M3, (1 Month US LIBOR + 5.15%), 5.818%, 11/25/28		191,643	202,072
Structured Agency Credit Risk Debt FRN Ser. 16-DNA3, Class M3, (1 Month US LIBOR + 5.00%), 5.668%, 12/25/28		142,926	150,684
Structured Agency Credit Risk Debt FRN Ser. 15-DNA3, Class M3, (1 Month US LIBOR + 4.70%), 5.368%, 4/25/28		120,601	125,260
Structured Agency Credit Risk Debt FRN Ser. 17-HQA3, Class B1, (1 Month US LIBOR + 4.45%), 5.118%, 4/25/30		1,000,000	1,046,112
Structured Agency Credit Risk Debt FRN Ser. 17-DNA3, Class B1, (1 Month US LIBOR + 4.45%), 5.118%, 3/25/30		2,000,000	2,079,762
Seasoned Credit Risk Transfer Trust Ser. 19-3, Class M, 4.75%, 10/25/58 W		4,560,000	4,296,328
Structured Agency Credit Risk Debt FRN Ser. 14-DN2, Class M3, (1 Month US LIBOR + 3.60%), 4.268%, 4/25/24		1,314,238	1,339,548
Structured Agency Credit Risk Debt FRN Ser. 17-HQA1, Class M2B, (1 Month US LIBOR + 3.55%), 4.218%, 8/25/29		7,511,000	7,768,849
Structured Agency Credit Risk Debt FRN Ser. 17-DNA2, Class M2, (1 Month US LIBOR + 3.45%), 4.118%, 10/25/29		224,383	231,321
Structured Agency Credit Risk Debt FRN Ser. 17-HQA2, Class M2B, (1 Month US LIBOR + 2.65%), 3.318%, 12/25/29		1,565,000	1,574,325
Structured Agency Credit Risk Debt FRN Ser. 18-HQA1, Class M2, (1 Month US LIBOR + 2.30%), 2.968%, 9/25/30		73,934	74,399
Federal Home Loan Mortgage Corporation 144A
Structured Agency Credit Risk Trust REMICs FRB Ser. 22-HQA1, Class M2, (US 30 Day Average SOFR + 5.25%), 5.539%, 3/25/42		7,493,000	7,642,860
Structured Agency Credit Risk Trust FRB Ser. 19-DNA1, Class B1, (1 Month US LIBOR + 4.65%), 5.318%, 1/25/49		10,684,210	10,909,444
Structured Agency Credit Risk Trust FRB Ser. 19-DNA2, Class B1, (1 Month US LIBOR + 4.35%), 5.018%, 3/25/49		700,000	707,267
Seasoned Credit Risk Transfer Trust Ser. 19-2, Class M, 4.75%, 8/25/58 W		3,279,000	3,061,295
Structured Agency Credit Risk Trust FRB Ser. 18-DNA3, Class B1, (1 Month US LIBOR + 3.90%), 4.568%, 9/25/48		1,280,000	1,282,346
Seasoned Credit Risk Transfer Trust Ser. 19-4, Class M, 4.50%, 2/25/59 W		2,474,000	2,228,504
Structured Agency Credit Risk Trust FRB Ser. 18-DNA2, Class B1, (1 Month US LIBOR + 3.70%), 4.368%, 12/25/30		7,040,000	6,936,797
Structured Agency Credit Risk Trust REMICs FRB Ser. 20-HQA3, Class M2, (1 Month US LIBOR + 3.60%), 4.268%, 7/25/50		798,805	799,804

MORTGAGE-BACKED SECURITIES (39.2%)* cont.		Principal amount	Value
Residential mortgage-backed securities (non-agency) cont.
Federal Home Loan Mortgage Corporation 144A
Structured Agency Credit Risk Trust REMICs FRB Ser. 20-HQA4, Class M2, (1 Month US LIBOR + 3.15%), 3.818%, 9/25/50		$114,475	$114,618
Structured Agency Credit Risk Trust REMICs FRB Ser. 20-HQA2, Class M2, (1 Month US LIBOR + 3.10%), 3.768%, 3/25/50		3,932,286	3,946,698
Structured Agency Credit Risk Trust FRB Ser. 19-DNA1, Class M2, (1 Month US LIBOR + 2.65%), 3.318%, 1/25/49		3,689,181	3,716,376
Structured Agency Credit Risk Trust REMICs FRB Ser. 20-DNA2, Class B1, (1 Month US LIBOR + 2.50%), 3.168%, 2/25/50		5,000,000	4,718,734
Structured Agency Credit Risk Trust FRB Ser. 19-DNA2, Class M2, (1 Month US LIBOR + 2.45%), 3.118%, 3/25/49		10,749,797	10,816,984
Structured Agency Credit Risk Trust FRB Ser. 19-HQA1, Class M2, (1 Month US LIBOR + 2.35%), 3.018%, 2/25/49		2,517,793	2,531,878
Structured Agency Credit Risk Trust FRB Ser. 18-HQA2, Class M2, (1 Month US LIBOR + 2.30%), 2.968%, 10/25/48		3,917,300	3,930,124
Structured Agency Credit Risk Trust FRB Ser. 19-FTR2, Class M2, (1 Month US LIBOR + 2.15%), 2.818%, 11/25/48		928,000	902,024
Structured Agency Credit Risk Trust FRB Ser. 18-DNA2, Class M2, (1 Month US LIBOR + 2.15%), 2.818%, 12/25/30		81,031	81,692
Structured Agency Credit Risk Trust FRB Ser. 19-DNA3, Class M2, (1 Month US LIBOR + 2.05%), 2.718%, 7/25/49		3,735,308	3,746,981
Structured Agency Credit Risk Trust REMICs FRB Ser. 20-HQA1, Class M2, (1 Month US LIBOR + 1.90%), 2.568%, 1/25/50		1,460,049	1,460,048
Structured Agency Credit Risk Trust REMICs FRB Ser. 20-DNA2, Class M2, (1 Month US LIBOR + 1.85%), 2.518%, 2/25/50		1,431,960	1,430,169
Federal National Mortgage Association
Connecticut Avenue Securities FRB Ser. 16-C01, Class 1M2, (1 Month US LIBOR + 6.75%), 7.418%, 8/25/28		40,507	42,842
Connecticut Avenue Securities FRB Ser. 16-C02, Class 1M2, (1 Month US LIBOR + 6.00%), 6.668%, 9/25/28		107,730	113,367
Connecticut Avenue Securities FRB Ser. 15-C04, Class 1M2, (1 Month US LIBOR + 5.70%), 6.368%, 4/25/28		37,379	40,103
Connecticut Avenue Securities FRB Ser. 17-C02, Class 2B1, (1 Month US LIBOR + 5.50%), 6.168%, 9/25/29		390,000	423,399
Connecticut Avenue Securities FRB Ser. 16-C03, Class 1M2, (1 Month US LIBOR + 5.30%), 5.968%, 10/25/28		88,176	91,894
Connecticut Avenue Securities FRB Ser. 17-C03, Class 1B1, (1 Month US LIBOR + 4.85%), 5.518%, 10/25/29		5,177,000	5,488,573
Connecticut Avenue Securities FRB Ser. 18-C04, Class 2B1, (1 Month US LIBOR + 4.50%), 5.168%, 12/25/30		4,331,600	4,505,404
Connecticut Avenue Securities FRB Ser. 16-C05, Class 2M2, (1 Month US LIBOR + 4.45%), 5.118%, 1/25/29		54,663	56,685
Connecticut Avenue Securities FRB Ser. 18-C05, Class 1B1, (1 Month US LIBOR + 4.25%), 4.918%, 1/25/31		5,684,000	5,773,056
Connecticut Avenue Securities FRB Ser. 16-C06, Class 1M2, (1 Month US LIBOR + 4.25%), 4.918%, 4/25/29		54,868	57,085
Connecticut Avenue Securities FRB Ser. 17-C06, Class 1B1, (1 Month US LIBOR + 4.15%), 4.818%, 2/25/30		2,480,000	2,575,605
Connecticut Avenue Securities FRB Ser. 17-C07, Class 1B1, (1 Month US LIBOR + 4.00%), 4.668%, 5/25/30		2,975,000	3,026,996
Connecticut Avenue Securities FRB Ser. 17-C05, Class 1B1, (1 Month US LIBOR + 3.60%), 4.268%, 1/25/30		648,000	643,918