Putnam
Asset
Allocation
Funds
ANNUAL REPORT
September 30, 1996
[LOGO: BOSTON * LONDON * TOKYO]
[GRAPHIC HORIZONTAL BAR CHARTS WITHIN PAGE LAYOUT OMITTED]
Targeted portfolio structure *
Large-cap growth stocks 25%
Small-cap growth stocks 15
Value stocks 25
International equities 15
Domestic fixed-income securities 5
International fixed-income securities 5
High-yield securities 5
Cash and money market securities 5
* Balanced Portfolio is designed to seek total return for investors in
their peak accumulation years.
Targeted portfolio structure *
Large-cap growth stocks 20%
Small-cap growth stocks 10
Value stocks 20
International equities 15
Domestic fixed-income securities 10
International fixed-income securities 10
High-yield securities 10
Cash and money market securities 10
* Conservative Portfolio is designed to seek income, while protecting the
original value of the investment, for investors concerned about
maintaining their purchasing power.
Targeted portfolio structure*
Large-cap growth stocks 10%
Small-cap growth stocks 5
Value stocks 10
International equities 10
Domestic fixed-income securities 35
International fixed-income securities 15
High-yield securities 10
Cash and money market securities 5
* The targeted portfolio represents th eideal allocation of assets among
the various investment categories assuming that all securities markets
are displaying historical tendencies and that no extraordinary opportunities
exist withing any category
Allocations in each portfolio will vary over time.
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
From the Chairman
Dear Shareholder:
Allocating assets across a variety of markets and types of securities
makes sense for many investors. Most, however, lack the expertise and
time to do the job themselves. Thus it is not surprising that Putnam
Asset Allocation Funds have found an enthusiastic reception since their
introduction in early 1994.
All three portfolios turned in positive performances during the fiscal
year that ended September 30, 1996. The U.S. stock market soared to new
heights and European stocks continued to benefit from high investor
demand. On the fixed-income side, U.S. high-yield bonds were the
strongest performers, while the international sector benefited from
higher-yielding European bonds and currency hedges. The U.S. government
sector remained subdued.
That, in a nutshell, describes the environment in which your funds'
management team operated during fiscal 1996, searching the world for the
securities it believed held the best potential for meeting each
portfolio's objective. In the following report, the managers discuss the
funds' performance and then offer their views on what lies ahead as the
funds enter fiscal 1997.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
November 20, 1996
Report from the Fund Managers
Peter Carman
Gary N. Coburn
William J. Landes
Each of the Putnam Asset Allocation Funds turned in a solid performance
for fiscal 1996. With stocks greatly outperforming bonds throughout the
12 months ended September 30, 1996, Putnam Asset Allocation: Growth
Portfolio (class A) outpaced its siblings. All three portfolios are
ranked among the universe of 68 comparable global flexible portfolio
funds tracked by the industry research firm of Lipper Analytical
Services. The Growth Portfolio class A shares earned a number one
ranking in total return performance for the period. The Balanced
Portfolio also fared well according to Lipper, with class A shares
placing fifth. True to its greater emphasis on income generation and
protection of principal, the Conservative Portfolio's class A shares
earned total returns that placed the portfolio squarely in the middle of
the pack -- 34 out of the 68 comparable funds. Lipper rankings vary over
time and do not include the effects of sales charges. Results for other
share classes will differ. Past performance is not indicative of future
results.
* U.S. STOCKS OUTPERFORM BONDS BY WIDER-THAN-USUAL MARGIN IN DOMESTIC
MARKET
Fiscal 1996 was characterized by continued economic growth and low
inflation in the United States. Strong corporate earnings kept investors
focused on the stock market and propelled market indexes to record
highs. The U.S. bond market, on the other hand, was generally weak
through the year, reflecting investors' concerns over anticipated
interest-rate changes that had not -- as of the funds' fiscal year's end
- -- come to pass. These factors combined to create an even wider
performance differential than usual between the two markets, a trend
that favored the portfolio allocations Putnam Management had in place.
Stocks. The overall strength of corporate America, exemplified by high
returns on equity and disciplined cost containment, kept the domestic
equity market on an unprecedented positive track throughout the fiscal
year. However, U.S. stocks did experience a sudden downturn in July.
This correction, spurred by a drop in the price of technology stocks,
was reversed in the last few months of the funds' fiscal year as
consumer confidence was restored by positive economic indicators.
The U.S. stock market may well continue to set growth records into the
beginning of fiscal 1997. Nevertheless, Putnam Management remains on
guard for a slowing of economic activity and a possible rise in
inflation caused by increasing labor costs that may ultimately be passed
on to consumers.
Bonds. As fiscal 1996 drew to a close, the U.S. fixed-income market
appeared to be stabilizing. Bond yields have adjusted to reflect the
underlying economic climate, narrowing the performance differential
between domestic stocks and bonds to a more traditional level. Putnam
Management expects this environment to continue over the near term.
Higher-yielding lower-rated corporate bonds outperformed Treasury
securities in the closing six months of the fiscal year as they did in
the first half. In a relatively stable fixed-income market in which
total return performance relies more on coupon income than on price
appreciation, this trend will likely continue over the next few months.
The Treasury market could be poised for a rally later in 1997, however,
if inflation moves higher and peaks as investors begin to detect the
expected slowdown in economic growth.
[GRAPHIC OF WORM CHART OMITTED: WORLD FIXED-INCOME MARKETS]
Growth of $10,000 investment
Starting value (Insert ending total)
- -------------- -------------------
$10,000 U.S. high-yield bonds 1 $11,077
$10,000 U.S. government securities 2 $10,490
$10,000 International bonds 3 $10,403
(Plot points)
U.S. high U.S. gov. International
Date/year yield bonds securities bonds
- --------- ------------ ---------- -------------
9/30/95 $10,000 10,000 10,000
10/31/95 10,111 10,130 10,032
11/30/95 10,159 10,282 10,120
12/31/95 10,288 10,426 10,208
1/31/96 10,483 10,495 9,981
2/29/96 10,539 10,313 10,010
3/31/96 10,510 10,241 10,035
4/30/96 10,567 10,184 10,014
5/31/96 10,653 10,163 10,019
6/30/96 10,676 10,299 10,075
7/31/96 10,772 10,328 10,353
8/31/96 10,889 10,310 10,423
9/30/96 11,077 10,490 10,403
Footnote reads:
Sources: 1 First Boston High Yield Bond Index; 2 Lehman Brothers Aggregate
Bond Index; 3 Salomon Brothers Non-U.S. World Government Bond Index.
See page 12 for descriptions of the indexes. Past performance is not
indicative of future results
* GLOBAL ECONOMIC CYCLES FAVORABLE TO INTERNATIONAL STOCKS AND BONDS
Economic cycles abroad have generally lagged that of the United States
in what Putnam Management is referring to as "the desynchronization of
the global economic cycle." While the U.S. economy accelerated sharply
this year, many foreign economies continued to languish or had just
begun to show signs of sustained growth. Putnam Asset Allocation Funds,
with their flexible portfolio sleeves, are designed to benefit from such
worldwide cyclical disparity.
Stocks. The stock markets of Continental Europe, led by Germany,
performed well during the year and retain attractive equity valuations
as the funds enter fiscal 1997. In addition to favorable cyclical
positioning, Germany and other European leaders stand to benefit from
secular changes that favor their industries' traditional emphasis on
shareholder value.
The equity market of the United Kingdom is poised for growth in the next
year, as the current U.K. economic climate bears important similarities
to the U.S. economy of 12 months ago: interest rates have fallen
sharply, and economic activity is rising in both the consumer and
manufacturing sectors. Putnam Management believes these markets have
room to rise without becoming overvalued.
Of the major overseas economies, Japan shows the weakest recovery. The
government implemented policies last year that successfully stimulated
the economy, but the effects did not last. Corporate profits and
consumer consumption have declined, institutional investors are favoring
the bond market over stocks, and the business confidence level has
fallen. Putnam Management now remains cautious toward investments in
Japanese equities and awaits the implementation of further stimulatory
policies.
Bonds. As expected, economic desynchronization and lagging international
economies helped foreign bonds outperform the U.S. fixed-income market
during fiscal 1996. On the downside, as economic recoveries strengthen
and continue overseas, international bonds are expected to become
increasingly vulnerable to poor performance. An additional long-term
consideration for investors in German and other European bonds is the
currency risk enhanced by the push for a single currency within the
European Monetary Union.
[GRAPHIC OF WORM CHART OMITTED:WORLD EQUITY MARKETS]
Growth of $10,000 Investment
Starting value (Insert ending total)
- -------------- -------------------
$10,000 Large-cap growth stocks 1 $12,032
$10,000 Small-cap growth stocks 2 $11,313
$10,000 International stocks 3 $10,861
(Plot points)
Large Small International
Date/Year cap growth cap growth stocks
- --------- ---------- ---------- -------------
9/30/95 $10,000 $10,000 $10,000
10/31/95 9,964 9,553 9,231
11/30/95 10,401 9,954 10,002
12/31/95 10,602 10,217 10,405
1/31/96 10,962 10,206 10,448
2/29/96 11,064 10,524 10,483
3/31/96 11,170 10,738 10,706
4/30/96 11,335 11,312 11,017
5/31/96 11,627 11,758 10,814
6/30/96 11,671 11,275 10,875
7/31/96 11,156 10,290 10,557
8/31/96 11,391 10,888 10,580
9/30/96 12,032 11,313 10,861
Footnote reads:
Sources: 1 Standard & Poor's 500 Index; 2 Russell 2000 Index; 3 Morgan
Stanley Capital International (MSCI) EAFE Index. See page 12 for
descriptions of the indexes. Past performance is not indicative of
future results
* STRATEGY AND OUTLOOK
Cyclical recovery and secular changes overseas, combined with
expectations of an economic slowdown here at home, give international
stocks the potential to outperform U.S. equities in fiscal 1997. While
Putnam Management expects U.S. stocks to continue to top the returns of
domestic bonds -- albeit at more traditional levels -- it also believes
that U.S. bonds are likely to outperform their overseas counterparts. As
always, within the context of each fund's investment objective and risk
profile, the management team will position each of the portfolios to
take advantage of these trends.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 9/30/96, there is no guarantee the funds
will continue to hold these securities in the future. International
investing may include risks such as currency fluctuations, economic
instability, and political developments. Higher-yielding lower-rated
bonds involve greater risk of nonpayment of principal and interest than
investment-grade bonds. Small-capitalization stocks may be more volatile
than those of larger companies but offer greater growth potential.
Portfolio and performance summary
* GROWTH PORTFOLIO
TOTAL RETURN FOR PERIODS ENDED 9/30/96
(most recent calendar quarter)
Change in value during period plus reinvested distributions
Class A Class B Class C Class M
Inception dates (2/8/94) (2/16/94) (9/1/94) (2/3/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- ------------------------------------------------------------------------
1 year 18.75% 11.96% 18.04% 13.04% 18.01% 17.01% 18.21% 14.11%
- ------------------------------------------------------------------------
Life of class 41.85 33.67 39.32 36.32 39.82 39.82 41.04 36.17
Annual average 14.16 11.62 13.49 12.55 17.48 17.48 23.02 20.44
- ------------------------------------------------------------------------
PRICE AND DISTRIBUTION INFORMATION
12 months ended 9/30/96
Class A Class B Class C Class M
Share value NAV POP NAV NAV NAV POP
- ------------------------------------------------------------------------
9/30/95 $10.06 $10.67 $ 9.97 $ 9.93 $10.01 $10.37
- ------------------------------------------------------------------------
9/30/96 11.41 12.11 11.29 11.24 11.32 11.73
- ------------------------------------------------------------------------
Capital gains
Investment Long- Short-
Distributions Number income term term Total
- ------------------------------------------------------------------------
Class A 1 $0.190 $0.113 $0.161 $0.464
- ------------------------------------------------------------------------
Class B 1 0.143 0.113 0.161 0.417
- ------------------------------------------------------------------------
Class C 1 0.143 0.113 0.161 0.417
- ------------------------------------------------------------------------
Class M 1 0.172 0.113 0.161 0.446
- ------------------------------------------------------------------------
Footnote reads:
Performance data represent past results and the life of class data
reflect an expense limitation in effect until 12/31/94. Without the
limitation, the fund's total return for life of class would have been
lower. For additional performance details, see page 12. POP assumes
5.75% maximum sales charge for class A shares and 3.50% for class M
shares. CDSC reflects the applicable contingent deferred sales charge;
the maximum for class B shares is 5% and for class C shares, 1%.
Investment returns and net asset value will fluctuate so an investor's
shares, when sold, may be worth more or less than their original cost.
Past performance is not indicative of future results.
* BALANCED PORTFOLIO
TOTAL RETURN FOR PERIODS ENDED 9/30/96
(most recent calendar quarter)
Change in value during period plus reinvested distributions
Class A Class B Class C Class M)
Inception dates (2/7/94) (2/11/94) (9/1/94) (2/6/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- ------------------------------------------------------------------------
1 year 17.41% 10.66% 16.54 % 11.54% 16.47% 15.47% 17.05% 12.96%
- ------------------------------------------------------------------------
Life of class 37.35 29.43 34.71 31.71 36.14 36.14 37.48 32.71
Annual average 12.72 10.23 11.95 11.00 15.99 15.99 21.28 18.71
- ------------------------------------------------------------------------
PRICE AND DISTRIBUTION INFORMATION
12 months ended 9/30/96
Class A Class B Class C Class M
Share value NAV POP NAV NAV NAV POP
- ------------------------------------------------------------------------
9/30/95 $9.67 $10.26 $ 9.64 $ 9.62 $9.66 $10.01
- ------------------------------------------------------------------------
9/30/96 10.71 11.36 10.67 10.64 10.71 11.10
- ------------------------------------------------------------------------
Capital gains
Investment Long- Short-
Distributions Number income term term Total
- ------------------------------------------------------------------------
Class A 4 $0.285 $0.111 $0.178 $0.574
- -----------------------------------------------------------------------
Class B 4 0.214 0.111 0.178 0.503
- ------------------------------------------------------------------------
Class C 4 0.214 0.111 0.178 0.503
- ------------------------------------------------------------------------
Class M 4 0.244 0.111 0.178 0.533
- ------------------------------------------------------------------------
Performance data represent past results and the life of class data
reflect an expense limitation in effect until 12/31/94. Without the
limitation, the fund's total return for life of class would have been
lower. For additional performance details, see page 12. POP assumes
5.75% maximum sales charge for class A shares and 3.50% for class M
shares. CDSC reflects the applicable contingent deferred sales charge;
the maximum for class B shares is 5% and for class C shares, 1%.
Investment returns and net asset value will fluctuate so an investor's
shares, when sold, may be worth more or less than their original cost.
Past performance is not indicative of future results.
Portfolio and performance summary
* CONSERVATIVE PORTFOLIO
TOTAL RETURN FOR PERIODS ENDED 9/30/96
(most recent calendar quarter)
Change in value during period plus reinvested distributions
Class A Class B Class C Class M
Inception dates (2/7/94) (2/18/94) (9/1/94) (2/7/95)
NAV POP NAV CDSC NAV CDSC NAV POP
- ----------------------------------------------------------------------
1 year 11.73% 5.31% 10.96% 5.96% 10.86% 9.86% 11.17% 7.31%
- ----------------------------------------------------------------------
Life of class 25.61 18.37 23.20 20.20 25.82 25.82 26.64 22.17
Annual average 8.99 6.57 8.29 7.28 11.68 11.68 15.39 12.90
- ------------------------------------------------------------------------
PRICE AND DISTRIBUTION INFORMATION
12 months ended 9/30/96
Class A Class B Class C Class M
Share value NAV POP NAV NAV NAV POP
- ------------------------------------------------------------------------
9/30/95 $9.19 $ 9.75 $9.16 $9.15 $9.18 $ 9.51
- ------------------------------------------------------------------------
9/30/96 9.69 10.28 9.66 9.64 9.67 10.02
- ------------------------------------------------------------------------
Capital gains
Investment Long- Short-
Distributions Number income term term Total
- ------------------------------------------------------------------------
Class A 4 $0.360 $0.058 $0.122 $0.540
- ------------------------------------------------------------------------
Class B 4 0.292 0.058 0.122 0.472
- ------------------------------------------------------------------------
Class C 4 0.292 0.058 0.122 0.472
- ------------------------------------------------------------------------
Class M 4 0.321 0.058 0.122 0.501
- ------------------------------------------------------------------------
Footnote reads:
Performance data represent past results and the life of class data
reflect an expense limitation in effect until 9/30/95. Without the
limitation, the fund's total return for life of class would have been
lower. For additional performance details, see page 12. POP assumes
5.75% maximum sales charge for class A shares and 3.50% for class M
shares. CDSC reflects the applicable contingent deferred sales charge;
the maximum for class B shares is 5% and for class C shares, 1%.
Investment returns and net asset value will fluctuate so an investor's
shares, when sold, may be worth more or less than their original cost.
Past performance is not indicative of future results.
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/96
(Cumulative total returns)
Lehman Bros. Standard Russell First Boston
Aggregate & Poor's 2000 High Yield
Bond Index 500 Index Index Bond Index
- ------------------------------------------------------------------------
1 year 4.90% 20.32% 13.13% 10.77%
- ------------------------------------------------------------------------
Life of classe A1 14.18 52.95 35.40 22.96
Annual average 5.10 17.29 12.05 8.07
- ------------------------------------------------------------------------
Life of class B
(Growth and
Conservative)2 16.20 57.21 35.89 22.78
Annual average 5.98 19.11 12.58 8.26
- ------------------------------------------------------------------------
Life of class B
(Balanced) 14.18 52.95 35.40 22.96
Annual average 5.10 17.29 12.05 8.07
- ------------------------------------------------------------------------
Life of class C3 17.89 52.25 39.14 26.84
Annual average 8.22 22.35 17.18 12.09
- ------------------------------------------------------------------------
Life of class M4 16.89 52.15 44.06 25.07
Annual average 9.83 28.67 24.52 14.38
- ------------------------------------------------------------------------
1 For the period 1/31/94 through 9/30/96: inception date for Growth
Portfolio class A is 2/8/94; for Balanced and Conservative portfolios,
class A inception dates are 2/7/94.
2 For the period 1/31/94 through 9/30/96, the inception dates for class
B shares are 2/16/94, 2/11/94, and 2/18/94.
3 For the period 8/31/94 through 9/30/96: Growth, Balanced, and
Conservative portfolios class C inception dates are 9/1/94.
4 For the period 1/31/95 through 9/30/96: Growth, Balanced, and
Conservative portfolios class M inception dates are 2/3/95, 2/6/95, and
2/7/95, respectively.
COMPARATIVE BENCHMARKS
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
Lehman Brothers Aggregate Bond Index is an unmanaged list consisting of
securities from Lehman Brothers Government/Corporate Bond Index,
Mortgage-Backed Securities Index, and the Asset-Backed Securities Index.
Standard & Poor's 500 Index is an unmanaged list of common stocks that
is frequently used as a general measure of U.S. stock market
performance.
Russell 2000 Index is an unmanaged list of common stocks that is
frequently used as a general performance measure of stocks of small to
midsize companies.
First Boston High Yield Index is an unmanaged list of lower-rated
higher-yielding U.S. corporate bonds.
Morgan Stanley Capital International (MSCI) EAFE Index is an unmanaged
list of equity securities listed on the stock exchanges of Europe,
Australia, and the Far East, with values expressed in U.S. dollars.
Salomon Brothers Non-U.S. World Government Bond Index is an unmanaged
list of bonds issued by 10 countries.
The performance of each index will differ from that of the funds, assume
reinvestment of all distributions, and does not take into account
brokerage commissions or other costs. The funds' portfolios contain
securities that do not match those in the indexes. Past performance is
not indicative of future results.
[GRAPHIC OF WORM CHART OMITTED: GROWTH OF A $10,000 INVESTMENT]
Cumulative total return of a $10,000 investment
Starting value (Insert ending Total)
- -------------- -------------------
$9,425 Growth Portfolio
(class A shares at POP since 2/8/94) $13,367
$9,425 Balanced Portfolio
(class A shares at POP since 2/7/94) $12,943
$9,425 Conservative Portfolio
(class A shares at POP since 2/7/94) $11,837
$10,000 Consumer Price Index $10,793
(plot points for 10-year total return mountain chart)
Growth Portfolio Balanced Port. Conservative Port
Date/year class A at POP class A at POP class A at POP CPI
- --------- -------------- -------------- ----------------- -------
2/7/94 9,425 9,425 9,425 10,000
09/30/94 9,346 9,285 9,191 10,219
09/30/95 11,257 11,024 10,594 10,479
09/30/96 13,367 12,943 11,837 10,793
Footnote reads:
Past performance is no assurance of future results. A $10,000 investment
in the Growth Portfolio's, Balanced Portfolio's, and Conservative
Portfolio's class B shares at inception on 2/16/94, 2/11/94, 2/18/94,
respectively, would have been valued at $13,932, 13471, and 12,320,
respectively, on 9/30/96 ($13,632 with a redemption at the end of the
period for the Growth Portfolio, and $13,171 and $12,020, respectively,
for the Balanced Portfolio and Conservative Portfolio, with a redemption
at the end of the period).
A $10,000 investment in the Growth Portfolio's, Balanced Portfolio's,
and Conservative Portfolio's class C shares at on 9/1/94 would have been
valued at $13,982, $13,614, and $12,582, respectively, on 9/30/96 ($13,982
with a redemption at the end of the period for the Growth Portfolio, and
$13,614 and $12,582, respectively, for the Balanced Portfolio and Conservative
Portfolio, with a redemption at the end of the period).
A $10,000 investment in the Growth Portfolio's, Balanced Portfolio's, and
Conservative Portfolio's class class M shares at inception on 2/3/95, 2/6/95,
and 2/7/95, respectively, would have been valued at $13,617 , $13,271, and
$12,217, respectively on 9/30/96 at public offering price.
TERMS AND DEFINITIONS
Class A shares are generally subject to an initial sales charge.
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge 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 sales charge on redemption.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares, not including
any initial or contingent deferred sales charge.
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 maximum 5.75% sales charge for class A
shares and 3.50% for class M shares.
Contingent deferred sales charge (CDSC) is 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.
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investor Services has won the DALBAR Quality Tested Service Seal
for the past six years. In 1995, over 146,000 tests of 56 shareholder
service components demonstrated that Putnam outperformed the industry
standard in every category.
* HELP YOUR INVESTMENT GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings
account.*
* SWITCH FUNDS EASILY
You can move money from one account to another with the same class of
shares without a service charge. (This privilege is subject to change or
termination.)
ACCESS YOUR MONEY QUICKLY
You can get 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.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a
helpful Putnam representative.
To make an additional investment in this or any other Putnam fund,
contact your financial advisor or call our toll-free number: 1-800-225-
1581.
* Regular investing of course, does not guarantee a profit or protect
against a loss in a declining market.
Report of independent accountants
To the Trustees and Shareholders of
Putnam Asset Allocation Funds
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments owned, 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 Putnam Asset Allocation Funds (the
"trust") at September 30, 1996, and the results of each of their
operations, the changes in each of their net assets and their financial
highlights for the periods indicated, in conformity with generally
accepted accounting principles. 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
generally accepted auditing standards which 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, 1996 by correspondence with the custodian and brokers and
the application of alternative auditing procedures where confirmations
from brokers were not received, provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
November 15, 1996
<TABLE>
<CAPTION>
Portfolio of investments owned
September 30, 1996
GROWTH BALANCED CONSERVATIVE
76.4% 62.8% 34.2%
COMMON STOCKS* Shares Value Shares Value Shares Value
Advertising 0.3% 0.2% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lamar Advertising Co. + 7,900 327,850 600 24,900 1,100 45,650
Outdoor Systems, Inc. + 17,550 824,850 18,000 846,000 2,650 124,550
Universal Outdoor Holdings, Inc. + 10,600 381,600 11,000 396,000 1,600 57,600
----------- ------------ ------------
1,534,300 1,266,900 227,800
Aerospace and Defense 2.1% 1.7% 0.9%
- ---------------------------------------------------------------------------------------------------------------------------------
Boeing Co. 32,800 3,098,703 40,000 3,779,951 6,000 566,968
General Motors Corp. Class H 47,200 2,725,800 58,300 3,366,825 8,900 513,975
Northrop Grumman Corp. 42,500 3,410,625 52,100 4,181,025 7,700 617,925
Textron, Inc. 16,900 1,436,500 20,200 1,717,000 3,100 263,500
----------- ------------ ------------
10,671,628 13,044,801 1,962,368
Agriculture --% --% --%
- ---------------------------------------------------------------------------------------------------------------------------------
PSF Holdings LLC Class A 3,305 49,575 12,885 193,275 4,186 62,790
Automotive 1.9% 1.8% 1.0%
- ---------------------------------------------------------------------------------------------------------------------------------
Autoliv AB (Sweden) -- -- 12,200 527,149 -- --
Bayerische Motoren Werke (BMW)
AG (Germany) 1,600 916,459 2,600 1,489,246 600 343,672
Bridgestone Corp. (Japan) 44,000 794,538 64,000 1,155,691 13,000 234,750
Custom Chrome, Inc. + 8,750 160,781 8,725 160,322 1,175 21,591
Edaran Otomobil Nasional Berhad
(Malaysia) + 15,000 147,845 26,000 256,265 -- --
General Motors Corp. 57,900 2,779,200 71,100 3,412,800 10,700 513,600
Magna International, Inc. Class A
(Canada) 62,400 3,010,800 75,700 3,652,525 13,000 627,250
Michelin Corp. Class B (France) 14,600 745,562 22,670 1,157,664 5,430 277,288
Mitsubishi Motors Corp. (Japan) 69,000 583,317 95,000 803,118 21,000 177,531
Peugeot Citroen S A (France) 4,000 441,085 7,000 771,899 1,200 132,326
----------- ------------ ------------
9,579,587 13,386,679 2,328,008
Basic Industrial Products 1.8% 1.6% 0.9%
- ---------------------------------------------------------------------------------------------------------------------------------
Ball Corp. 79,400 1,945,300 98,300 2,408,350 15,300 374,850
Case Corp. 32,000 1,560,000 39,000 1,901,250 5,800 282,750
Chargeurs S.A. (France) 690 25,541 1,010 37,386 220 8,143
Daikin Industries Ltd. (Japan) 30,000 293,774 36,000 352,529 12,000 117,510
Danieli & Co. (Italy) 11,500 74,376 -- -- -- --
General Signal Corp. 77,100 3,392,400 94,500 4,158,000 14,700 646,800
Mitsui Fudoscan Co. Ltd. (Japan) 66,000 574,558 108,000 940,185 21,000 182,814
Rieter Holding AG (Switzerland) 916 251,199 1,800 493,622 316 86,658
Sandvik AB Class B, (Sweden) 28,470 675,297 40,610 963,253 6,960 165,088
Sommer Allibert (France) 14,000 371,705 20,000 531,008 3,000 79,651
Weir Group PLC (The) (United Kingdom) 90,000 350,829 72,626 283,103 20,430 79,638
----------- ------------ ------------
9,514,979 12,068,686 2,023,902
Broadcasting 0.8% 0.5% 0.3%
- ---------------------------------------------------------------------------------------------------------------------------------
American Radio Systems Corp. + 8,000 298,000 8,000 298,000 1,400 52,150
BET Holding, Inc. Class A + 9,300 267,375 9,300 267,375 1,400 40,250
Chancellor Broadcasting Corp.
Class A + 5,200 215,800 4,900 203,350 900 37,350
Evergreen Media Corp.
Class A + 23,250 $726,563 23,550 $735,938 3,900 $121,875
Granite Broadcasting Corp. + 26,600 379,050 26,800 381,900 4,000 57,000
Heartland Wireless
Communications, Inc. + 10,425 263,231 11,600 292,900 1,825 46,081
Heftel Broadcasting Corp. Class A + 14,400 628,200 14,100 615,113 2,200 95,975
Mediaset SPA (Italy) + 24,400 120,959 35,500 175,985 7,700 38,171
SAGA Communications, Inc Class A + 14,500 324,438 14,431 322,894 1,931 43,206
Sinclair Broadcast Group, Inc.
Class A + 5,400 215,325 5,500 219,313 1,000 39,875
Young Broadcasting Corp. Class A + 13,700 452,100 13,825 456,225 2,275 75,075
----------- ------------ ------------
3,891,041 3,968,993 647,008
Building and Construction 0.9% 1.0% 0.5%
- ---------------------------------------------------------------------------------------------------------------------------------
Apogee Enterprises, Inc. 13,200 462,000 12,800 448,000 2,100 73,500
Barnett, Inc. + 18,200 429,975 17,500 413,438 2,900 68,513
CRH PLC (Ireland) 94,884 962,186 150,075 1,521,860 32,111 325,627
Lafarge Coppee (France) 13,300 784,855 19,200 1,133,023 3,130 184,706
Sherwin Williams Co. 13,000 602,875 15,800 732,725 2,400 111,300
Shimizu Corp. (Japan) + 34,000 335,999 50,000 494,116 -- --
Sungei Way Holdings Berhad
(Malaysia) 24,250 129,669 28,750 153,731 9,500 50,798
Toda Construction Co. (Japan) -- -- 95,000 836,403 -- --
Tostem Corp. (Japan) 15,000 444,704 25,000 741,173 5,000 148,235
VA Technolgies AG (Austria) 4,380 571,726 6,461 843,361 1,590 207,544
----------- ------------ ------------
4,723,989 7,317,830 1,170,223
Business Equipment and Services 4.5% 3.5% 1.9%
- ---------------------------------------------------------------------------------------------------------------------------------
Alternative Resources Corp. + 9,100 255,938 9,300 261,563 1,450 40,781
Cambridge Technology Partners, Inc. + 16,950 512,738 16,780 507,595 2,585 78,196
Cisco Systems, Inc. + 47,400 2,941,763 57,700 3,581,006 8,800 546,150
Computer Sciences Corp. + 16,500 1,268,438 20,100 1,545,188 2,900 222,938
Corestaff, Inc. + 12,000 321,000 12,225 327,019 1,800 48,150
CORT Business Services Corp. + 23,900 486,963 24,500 499,188 3,900 79,463
Dai Nippon Printing Co., Ltd. (Japan) 39,000 728,776 56,000 1,046,447 12,000 224,239
Data Processing Resources Corp. + 18,400 404,800 18,200 400,400 2,800 61,600
F.Y.I., Inc. + 10,600 212,000 10,800 216,000 1,700 34,000
First Data Corp. 26,100 2,130,413 31,800 2,595,675 4,800 391,800
Glory Ltd. (Glory Kogyo) (Japan) 14,000 420,088 -- -- -- --
HBO & Co. 21,300 1,421,775 26,000 1,735,500 3,800 253,650
Hewlett-Packard Co. 63,600 3,100,500 77,800 3,792,750 12,100 589,875
Interim Services Inc. + 9,500 406,125 10,000 427,500 1,600 68,400
Komori Corp. (Japan) 13,000 300,153 18,000 415,596 4,000 92,355
PeopleSoft, Inc. + 21,500 1,789,875 26,300 2,189,475 4,000 333,000
Precision Response Corp. + 23,900 920,150 26,700 1,027,950 3,700 142,450
Rental Service Corp. + 20,400 441,150 20,550 444,394 3,100 67,038
Robert Half International, Inc. + 28,646 1,056,321 28,628 1,055,658 3,924 144,698
Societe Generale de Surveillance
Holdings S.A. (Switzerland) 280 632,813 420 949,219 90 203,404
SOS Staffing Services, Inc. + 12,200 137,250 12,800 144,000 2,200 24,750
Securior Group PLC Class A
(United Kingdom) 150,245 637,415 154,609 655,929 41,503 176,077
StaffMark, Inc. + 12,900 182,213 12,900 182,213 2,100 29,663
The Registry, Inc. + 6,100 231,800 6,300 239,400 900 34,200
Vincam Group, Inc. + 7,700 294,525 8,200 313,650 1,000 38,250
Wackenhut Corp. Class B 21,200 331,250 21,300 332,813 3,200 50,000
Xerox Corp. 28,400 1,522,950 34,100 1,828,613 5,200 278,850
----------- ------------ ------------
23,089,182 26,714,741 4,253,977
Chemicals 2.0% 1.7% 1.0%
- ---------------------------------------------------------------------------------------------------------------------------------
Akzo-Nobel N.V. (Netherlands) 5,830 $707,183 8,770 $1,063,807 1,900 $230,471
Bayer AG ADR (Germany) 37,300 1,369,705 53,278 1,956,438 10,700 392,918
du Pont (E.I.) de Nemours & Co., Ltd. 25,000 2,206,250 30,500 2,691,625 4,600 405,950
Dutch States Mines N.V. (Netherlands) 3,800 373,377 5,000 491,286 1,200 117,909
Monsanto Co. 72,100 2,631,650 86,600 3,160,900 13,300 485,450
Praxair, Inc. 38,600 1,659,800 47,000 2,021,000 7,100 305,300
Sekisui Chemical Co. Ltd. (Japan) 55,000 652,233 70,000 830,114 22,000 260,893
Solvay S.A. (Belgium) 800 481,943 1,000 602,429 165 99,401
----------- ------------ ------------
10,082,141 12,817,599 2,298,292
Computer Services and Software 5.2% 4.0% 2.1%
- ---------------------------------------------------------------------------------------------------------------------------------
3Com Corp. + 18,000 1,081,125 21,600 1,297,350 3,300 198,206
Analysts International Corp. 14,600 335,800 14,000 322,000 2,200 50,600
Bisys Group, Inc. (The) + 8,500 348,500 8,500 348,500 1,000 41,000
Business Objects S.A., ADR (France) + 10,500 202,125 10,500 202,125 1,500 28,875
Cabletron Systems, Inc. + 13,700 936,738 16,500 1,128,188 2,500 170,938
CCC Information Services Group + 5,400 113,400 5,300 111,300 900 18,900
Claremont Technology Group, Inc. 11,000 396,000 11,300 406,800 1,700 61,200
CMG Information Services, Inc. + 3,800 55,100 3,800 55,100 600 8,700
Compaq Computer Corp. + 20,900 1,340,213 25,100 1,609,538 3,900 250,088
Computer Associates Intl., Inc. 45,950 2,745,513 55,850 3,337,038 8,550 510,863
Computer Horizons Corp. + 26,762 762,717 27,480 783,180 4,240 120,840
Computer Task Group, Inc. 12,200 379,725 11,700 364,163 2,000 62,250
Cotelligent Group, Inc. + 27,100 426,825 27,000 425,250 4,400 69,300
Gensym Corp. + 10,700 232,725 9,900 215,325 1,700 36,975
Getronics Electric N.V. (Netherlands) 26,400 670,113 35,640 904,653 8,744 221,950
HPR, Inc. + 7,800 124,800 7,900 126,400 1,100 17,600
IBM Corp. 24,800 3,087,600 30,500 3,797,250 4,700 585,150
Inso Corp. + 5,680 308,140 5,710 309,768 960 52,080
Keane, Inc. + 12,095 580,560 12,327 591,696 1,840 88,320
McAfee Associates, Inc. + 15,175 1,047,075 14,925 1,029,825 2,325 160,425
Microsoft Corp. + 19,200 2,532,000 22,900 3,019,938 3,500 461,563
National TechTeam, Inc. + 20,400 553,350 20,400 553,350 3,100 84,088
Parametric Technology Corp. + 34,200 1,688,625 41,800 2,063,875 6,400 316,000
Project Software &
Development, Inc. + 4,900 207,025 4,842 204,575 582 24,590
Raptor Systems, Inc. + 16,800 285,600 16,900 287,300 2,600 44,200
Renaissance Solutions, Inc. + 11,700 495,788 11,800 500,025 1,800 76,275
SGS-Thomson Microelectronics
ADR (France) + 21,200 1,004,350 34,000 1,610,750 7,000 331,625
SPSS, Inc. + 17,000 471,750 17,100 474,525 2,700 74,925
Sun Microsystems, Inc.+ 21,700 1,348,113 26,400 1,640,100 4,000 248,500
Sykes Enterprises, Inc. + 19,800 955,350 19,900 960,175 3,000 144,750
Technology Solutions Co. + 32,250 1,124,719 32,250 1,124,719 4,950 172,631
Vantive Corp. + 6,700 433,825 6,600 427,350 900 58,275
Whittman-Hart, Inc. + 3,100 146,475 3,000 141,750 500 23,625
----------- ------------ ------------
26,421,764 30,373,881 4,815,307
Conglomerates 1.1% 0.9% 0.5%
- ---------------------------------------------------------------------------------------------------------------------------------
Axia Inc. 144A + 225 6,750 -- -- -- --
Hutchison Whampoa, Ltd. (Hong Kong) + 60,000 403,476 120,000 806,952 23,000 154,666
Ogden Corp. 139,900 2,815,488 170,500 3,431,313 25,900 521,238
Preussag AG (Germany) 2,500 623,770 4,000 998,033 900 224,557
United Technologies Corp. 13,400 1,609,675 16,300 1,958,038 2,500 300,313
----------- ------------ ------------
5,459,159 7,194,336 1,200,774
Consumer Durable Goods 0.9% 0.7% 0.4%
- ---------------------------------------------------------------------------------------------------------------------------------
Blyth Industries, Inc. + 17,450 $846,325 17,600 $853,600 2,700 $130,950
Electrolux AB (Sweden) 14,030 789,572 18,670 1,050,699 4,000 225,110
Whirlpool Corporation 57,800 2,926,125 70,600 3,574,125 10,500 531,563
----------- ------------ ------------
4,562,022 5,478,424 887,623
Consumer Non Durables 3.4% 2.9% 1.7%
- ---------------------------------------------------------------------------------------------------------------------------------
B A T Industries PLC (United Kingdom) 80,108 533,616 116,854 778,388 26,899 179,180
Clorox Co. 13,900 1,332,663 16,900 1,620,288 2,400 230,100
Dimon, Inc. 151,600 2,899,350 185,700 3,551,513 27,800 531,675
French Fragrances Inc. + 30,000 210,000 27,600 193,200 4,600 32,200
Gillette Co. 47,500 3,425,938 57,900 4,176,038 8,700 627,488
KAO Corp. (Japan) 62,000 774,234 90,000 1,123,888 15,000 187,315
Nike, Inc. 20,800 2,527,200 25,500 3,098,250 3,900 473,850
Onward Kashiyama Co. Ltd. (Japan) 20,000 280,298 16,000 224,239 8,000 112,119
St. John Knits, Inc. 30,310 1,519,289 30,690 1,538,336 4,940 247,618
Svenska Cellulosa AB Series B,
(Sweden) 34,450 707,841 44,200 908,173 10,868 223,304
Tabacalera S.A. (Spain) 15,000 640,486 20,900 892,410 4,500 192,146
Tate & Lyle PLC (United Kingdom) 80,374 588,234 135,078 988,597 24,603 180,062
Tommy Hilfiger Corp. + 10,335 612,349 10,335 612,349 1,545 91,541
Toray Industries Inc. (Japan) 90,000 570,838 143,000 906,999 28,000 177,594
Unilever N.V. (Netherlands) 5,040 796,177 6,980 1,102,642 1,540 243,276
----------- ------------ ------------
17,418,513 21,715,310 3,729,468
Consumer Related 0.6% 0.5% 0.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Lowe's Cos., Inc. 78,489 3,208,238 95,817 3,916,520 14,681 600,086
Consumer Services 2.2% 1.6% 0.8%
- ---------------------------------------------------------------------------------------------------------------------------------
Apple South, Inc. 9,600 128,400 9,900 132,413 1,500 20,063
EZ Communications, Inc. Class A + 19,520 858,880 19,560 860,640 2,965 130,460
Gannett Co., Inc. 16,800 1,182,300 20,500 1,442,688 3,000 211,125
Landry's Seafood Restaurants, Inc.+ 15,530 388,250 15,560 389,000 2,360 59,000
Learning Tree International, Inc. + 3,900 144,300 3,900 144,300 600 22,200
Marriott International, Inc. 21,800 1,201,725 26,600 1,466,325 3,900 214,988
Mirage Resorts, Inc. + 43,900 1,124,938 53,500 1,370,938 8,100 207,563
Morton's Restaurant Group, Inc. + 11,400 199,500 11,600 203,000 1,700 29,750
On Assignment, Inc. + 12,100 414,425 12,300 421,275 1,800 61,650
Payment Svcs., Inc. + 24,450 495,113 24,000 486,000 3,850 77,963
Penn National Gaming Inc. + 2,000 62,000 1,900 58,900 400 12,400
Prime Hospitality Corp. + 44,100 727,650 43,300 714,450 6,900 113,850
Service Corp. International 40,300 1,219,075 48,300 1,461,075 7,400 223,850
Servico, Inc. + 18,800 305,500 18,900 307,125 2,900 47,125
SFX Broadcasting, Inc. Class A + 11,930 542,815 11,860 539,630 1,835 83,493
Stewart Enterprises, Inc. Class A 22,740 767,475 23,165 781,819 3,805 128,419
Strayer Education, Inc. + 14,400 235,800 15,000 245,625 2,500 40,938
Suburban Lodges of America, Inc. + 17,800 373,800 17,500 367,500 2,700 56,700
Tribune Co. 12,800 998,400 15,300 1,193,400 2,300 179,400
----------- ------------ ------------
11,370,346 12,586,103 1,920,937
Correctional Facilities 0.1% 0.1% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
Esmor Correctional Services, Inc. + 30,000 423,750 28,800 406,800 4,800 67,800
Wackenhut Corrections Corp. + 22,100 491,725 22,600 502,850 3,400 75,650
----------- ------------ ------------
915,475 909,650 143,450
Electronics and Electrical Equipment 4.1% 3.6% 2.0%
- ---------------------------------------------------------------------------------------------------------------------------------
Advanced Lighting Technologies, Inc.+ 38,500 760,375 36,300 716,925 5,500 108,625
Baldor Electric Co. 13,263 258,629 13,273 258,824 2,021 39,410
BBC Brown Boveri & Cie
AG (Switzerland) 360 440,242 700 856,027 160 195,663
C.P. Clare Corp. + 23,950 223,034 24,425 227,458 3,750 34,922
Computer Products, Inc. + 41,500 907,813 40,700 890,313 6,300 137,813
Credence Systems Corp. + 10,275 161,831 13,084 206,073 1,628 25,641
Delaware Global Technologies Corp. + 30,591 260,024 30,591 260,024 4,744 40,324
Eltron International, Inc. + 8,600 278,425 8,600 278,425 1,300 42,088
Flextronics International Ltd. + 8,600 237,575 8,700 240,338 1,300 35,913
Futaba Corp. (Japan) 7,000 314,437 12,000 539,035 3,000 134,759
General Electric Co. 28,300 2,575,300 33,600 3,057,600 5,200 473,200
General Electric Co. PLC
(United Kingdom) 126,200 781,374 221,000 1,368,333 39,100 242,090
Harman International Industries, Inc. 8,465 412,669 8,535 416,081 1,302 63,473
Hirose Electric Co. Ltd. (Japan) 9,300 569,814 12,400 759,752 3,100 189,938
Honeywell, Inc. 39,600 2,499,750 48,200 3,042,625 7,300 460,813
Intel Corp. 25,700 2,452,744 31,400 2,996,738 4,700 448,556
Mabuchi Motor (Japan) 3,700 206,091 7,000 389,902 1,200 66,840
Murata Manufacturing Co. Ltd. (Japan) 16,000 572,096 25,000 893,900 5,000 178,780
Nippondenso Co., Ltd. (Japan) 33,000 738,209 50,000 1,118,498 9,000 201,330
Omron Corp. (Japan) 27,000 506,963 48,000 901,267 12,000 225,317
Peak Technologies Group, Inc. + 15,225 331,144 15,480 336,690 2,520 54,810
Philips Electronics N.V.
(Netherlands) 21,000 759,036 34,760 1,256,386 6,970 251,928
Sanmina Corp. + 15,860 638,365 15,680 631,120 2,430 97,808
Secom Co. (Japan) -- -- 8,000 506,693 -- --
Sharp Corp. (Japan) 51,000 847,633 75,000 1,246,519 15,000 249,304
TDK Corp. (Japan) 2,000 124,517 3,000 186,776 1,000 62,259
Texas Instruments, Inc. 58,700 3,235,838 73,100 4,029,638 11,000 606,375
Transwitch Corp. + 11,800 73,750 12,200 76,250 1,800 11,250
----------- ------------ ------------
21,167,678 27,688,210 4,679,229
Energy-Related 0.2% 0.1% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
IHC Caland N.V. (Netherlands) 16,000 843,140 20,310 1,070,260 4,500 237,133
Entertainment 0.9% 0.7% 0.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Anchor Gaming + 8,700 541,575 8,700 541,575 1,400 87,150
Family Golf Centers, Inc. + 26,200 759,800 26,100 756,900 4,100 118,900
Penske Motorsports, Inc. + 14,100 495,263 14,000 491,750 2,200 77,275
Regal Cinemas, Inc. + 13,725 343,125 13,725 343,125 1,950 48,750
Signature Resorts, Inc. + 42,300 1,004,625 41,500 985,625 6,500 154,375
Sodak Gaming, Inc. + 24,400 561,200 25,800 593,400 3,800 87,400
Speedway Motorsports, Inc. + 21,000 551,250 21,050 552,563 3,260 85,575
Studio Plus Hotels, Inc. + 26,550 438,075 26,325 434,363 4,375 72,188
Zodiac (France) -- -- 4,000 1,002,326 -- --
----------- ------------ ------------
4,694,913 5,701,627 731,613
Environmental Control 0.1% 0.1% --%
- ---------------------------------------------------------------------------------------------------------------------------------
Memtec Ltd. ADR (Australia) 11,100 310,800 11,000 308,000 1,700 47,600
Food and Beverages 2.8% 2.4% 1.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Archer Daniels Midland Co. 153,795 2,960,554 189,545 3,648,741 27,975 538,519
Coca-Cola Co. 36,300 1,846,763 43,400 2,207,975 6,700 340,863
Danisco A/S (Denmark) 9,300 535,771 18,800 1,083,064 2,900 167,068
Dole Food Co. 69,400 2,914,800 85,100 3,574,200 12,930 543,060
Goodman Fielder Ltd. ADR (Australia) 320,500 326,994 442,000 450,955 100,500 102,536
Grand Union Co. +++ 4,153 26,475 9,986 63,661 3,270 20,846
Greencore Group PLC (Ireland) + 125,772 711,248 195,874 1,107,679 46,930 265,392
Guinness PLC (United Kingdom) 49,000 350,946 80,000 572,973 19,000 136,081
Nestle S.A. (Switzerland) 870 969,595 1,240 1,381,952 280 312,054
Panamerican Beverages, Inc. Class A 10,000 411,250 10,400 427,700 2,100 86,363
Pete's Brewing Co. + 10,600 82,150 10,800 83,700 1,600 12,400
Whitman Corporation 125,900 2,911,438 154,100 3,563,563 22,800 527,250
----------- ------------ ------------
14,047,984 18,166,163 3,052,432
Funeral/Cemetery Services 0.1% 0.1% --%
- ---------------------------------------------------------------------------------------------------------------------------------
Carriage Services, Inc. + 7,800 150,150 8,100 155,925 1,500 28,875
Equity Corporation International + 11,300 358,775 10,900 346,075 1,800 57,150
----------- ------------ ------------
508,925 502,000 86,025
Health Care 2.4% 1.7% 0.9%
- ---------------------------------------------------------------------------------------------------------------------------------
Abbott Laboratories 41,300 2,034,025 50,300 2,477,275 7,600 374,300
Access Health, Inc. + 10,300 579,375 10,300 579,375 1,650 92,813
Alternative Living Services, Inc. + 9,700 135,800 10,000 140,000 1,500 21,000
American HomePatient, Inc. + 27,825 619,106 27,975 622,444 4,387 97,611
Arthrocare Corp. + 2,800 27,300 2,500 24,375 500 4,875
Assisted Living Concepts Inc. + 13,100 248,900 12,700 241,300 2,000 38,000
Compdent Corp. + 11,350 428,463 11,400 430,350 1,550 58,513
Gelman Sciences, Inc. + 12,800 360,000 12,200 343,125 2,000 56,250
Genesis Health Ventures, Inc. + 19,412 545,963 19,425 546,328 2,965 83,391
Healthsouth Rehabilitation Corp. + 2,000 76,750 2,500 95,938 300 11,513
I-Stat Corp. + 7,100 130,463 7,000 128,625 975 17,916
IMPATH, Inc. + 12,400 151,900 12,200 149,450 1,800 22,050
IRIDEX Corp. + 21,600 178,200 22,100 182,325 3,500 28,875
Lincare Holdings, Inc. + 7,435 297,400 7,190 287,600 1,225 49,000
Lunar Corp. + 9,550 305,600 9,550 305,600 1,600 51,200
Merck & Co., Inc. 28,600 2,012,725 34,800 2,449,050 5,200 365,950
NCS HealthCare, Inc. Class A + 16,200 508,275 16,200 508,275 2,600 81,575
Pediatrix Medical Group, Inc. + 5,800 290,725 5,700 285,713 900 45,113
Physician Support Systems, Inc. + 9,200 223,100 9,200 223,100 1,300 31,525
Renal Care Group, Inc. + 7,500 277,500 7,600 281,200 1,200 44,400
Respironics, Inc. + 18,200 441,350 18,100 438,925 2,900 70,325
Santen Pharmaceutical (Japan) 15,000 327,464 22,000 480,280 -- --
Sierra Health Services + 7,090 243,719 6,725 231,172 950 32,656
Target Therapeutics, Inc. + 6,500 277,875 6,600 282,150 1,100 47,025
U.S. Surgical Corp. 28,500 1,211,250 17,400 739,500 5,300 225,250
United Dental Care, Inc. + 6,300 226,013 6,400 229,600 1,000 35,875
----------- ------------ ------------
12,159,241 12,703,075 1,987,001
Hospital Management
and Medical Services 0.2% 0.1% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
ARV Assisted Living, Inc. + 16,700 242,150 16,800 243,600 2,600 37,700
Emeritus Corp. + 8,200 129,150 8,300 130,725 1,200 18,900
National Surgery Centers, Inc. + 13,950 390,600 13,950 390,600 2,150 60,200
Sterling House Corp. + 15,600 255,450 15,700 257,088 2,500 40,938
----------- ------------ ------------
1,017,350 1,022,013 157,738
Insurance and Finance 10.2% 8.6% 4.8%
- ---------------------------------------------------------------------------------------------------------------------------------
ABN AMRO Holding N.V.
(Netherlands) 13,000 721,546 20,600 1,143,374 4,200 233,115
Aegon N.V. (Netherlands) 14,155 699,554 23,642 1,168,411 4,800 237,221
Ahmanson (H.F.) & Co. 106,100 2,970,800 130,000 3,640,000 19,000 532,000
Allied Irish Banks PLC (Ireland) 119,529 698,922 205,096 1,199,258 37,306 218,139
Baer Holdings AG (Switzerland) 405 421,983 580 604,321 90 93,774
Banco de Bilbao Vizcaya (Spain) 8,362 385,718 11,687 539,092 3,302 152,313
Banco Frances del Rio de la
Plata ADR (Argentina) 690 18,026 -- -- -- --
Banco Frances del Rio de la
Plata S.A. (Argentina) 1,380 11,966 4,715 40,883 1,725 14,957
Banco Totta & Accores S.A. (Portugal) 13,000 227,542 20,000 350,064 5,000 87,516
Bank of Boston Corp. 28,200 1,632,075 34,300 1,985,113 5,200 300,950
Bank of Ireland (Ireland) + 94,945 748,342 113,769 896,708 20,298 159,986
BankAmerica Corp. 29,200 2,398,050 35,600 2,923,650 5,300 435,263
Bankers Trust New York Corp. 35,300 2,775,463 43,700 3,435,913 7,000 550,375
Barclays Bank PLC (United Kingdom) 33,358 490,364 49,841 732,665 8,671 127,464
Beneficial Corp. 49,400 2,840,500 60,400 3,473,000 9,200 529,000
Cetelem Group (France) + 2,400 517,209 5,000 1,077,519 550 118,527
Chase Manhattan Corp. (New) 25,700 2,059,213 31,300 2,507,913 4,700 376,588
Citicorp 35,200 3,190,000 43,000 3,896,875 6,600 598,125
Commonwealth Bank of Australia
(Installment Shares)(Australia) 22,100 130,393 34,500 203,554 7,000 41,301
Commonwealth Bank of
Australia (Australia) 38,600 355,049 60,500 556,489 12,300 113,137
Concord EFS, Inc. + 32,905 847,304 33,409 860,282 5,137 132,278
CRA Managed Care, Inc. + 8,975 484,650 9,200 496,800 1,380 74,520
Credit Locale de France S.A. (France) 8,600 733,333 12,800 1,091,473 2,680 228,527
Daiwa Securities Co. Ltd. (Japan) 18,000 206,990 28,000 321,984 5,000 57,497
Danieli Savings (Italy) 9,700 32,737 50,800 171,446 -- --
Development Bank of Singapore Ltd.
(Singapore) 20,000 245,826 29,000 356,448 8,000 98,330
First Commonwealth, Inc. + 7,300 162,425 7,800 173,550 1,200 26,700
Fleet Financial Group, Inc. 66,100 2,941,450 80,900 3,600,050 11,800 525,100
Franklin Resources, Inc. 62,500 4,148,438 76,700 5,090,963 11,700 776,588
Guoco Group Ltd. (Hong Kong) 80,800 394,972 109,600 535,754 25,400 124,162
HCC Insurance Holdings, Inc. 42,212 1,218,872 42,562 1,228,978 6,767 195,397
HSBC Holdings PLC (Hong Kong) 44,071 817,839 75,229 1,396,048 15,857 294,263
Internationale Nederlanden Groep
(Netherlands) 14,575 455,202 19,292 602,522 6,655 207,847
Jardine Matheson Holdings Ltd.
(Singapore) 40,800 255,000 44,200 276,250 12,000 75,000
Malayan Banking Berhad (Malaysia) 24,000 238,468 34,000 337,829 -- --
Mapfre Vida Seguros (Spain) 9,390 556,054 6,780 401,496 -- --
MBNA Corp. 48,000 1,668,000 58,450 2,031,138 8,950 311,013
Mitsubishi Bank Ltd. (Japan) 26,000 567,604 40,000 873,237 13,000 283,802
NationsBank Corp. 12,700 1,103,313 15,500 1,346,563 2,300 199,813
Reinsurance Group America, Inc. 13,100 574,763 12,910 566,426 1,980 86,873
Salomon, Inc. 60,600 2,764,875 73,000 3,330,625 11,000 501,875
Skandia Forsakrings AB (Sweden) 25,000 693,081 35,000 970,313 8,000 221,786
Swiss Reinsurance Co. (Switzerland) 660 695,568 1,013 1,067,591 210 221,317
Tokio Marine & Fire Insurance
Co. Ltd. (The) (Japan) 49,000 581,080 68,000 806,397 16,000 189,740
Travelers Group, Inc. 37,350 1,834,819 45,650 2,242,556 6,950 341,419
United Overseas Bank Ltd. (Singapore) 31,000 301,741 44,000 428,277 10,000 97,336
USF&G Corp. 165,100 3,054,350 202,400 3,744,400 31,500 582,750
Westpac Banking Corp. (Australia) + 150,000 775,873 217,000 1,122,429 48,000 248,279
Yamaguchi Bank Ltd. (Japan) 1,000 16,171 7,000 113,197 -- --
----------- ------------ ------------
51,663,513 65,959,824 11,021,963
Leisure 0.1% 0.1% --%
- ---------------------------------------------------------------------------------------------------------------------------------
Lewis Galoob Toys, Inc. + 20,100 587,925 20,600 602,550 3,300 96,525
Medical Supplies and Devices 1.2% 0.9% 0.4%
- ---------------------------------------------------------------------------------------------------------------------------------
Becton Dickinson & Co. 34,300 1,517,775 41,800 1,849,650 6,300 278,775
Guidant Corp. 21,300 1,176,825 26,000 1,436,500 3,800 209,950
IDEXX Laboratories, Inc. + 12,400 561,100 12,360 559,290 1,900 85,975
Igen, Inc. + 13,900 100,775 14,000 101,500 1,800 13,050
Medtronic, Inc. 19,800 1,269,675 24,100 1,545,413 3,500 224,438
Minimed, Inc. + 10,000 251,250 10,000 251,251 1,500 37,688
Orthologic Corp. + 11,500 122,188 11,700 124,313 1,800 19,125
Sabratek Corp. + 12,700 207,963 11,900 194,863 2,000 32,750
Sola International, Inc. + 20,525 764,556 21,010 782,623 3,235 120,504
------------ ------------ ------------
5,972,107 6,845,403 1,022,255
Metals and Mining 1.5% 1.2% 0.6%
- ---------------------------------------------------------------------------------------------------------------------------------
Alumax, Inc. + 89,200 2,988,200 110,000 3,685,000 16,300 546,050
Freeport-McMoRan Copper &
Gold Co., Inc. Class A 28,500 840,750 34,700 1,023,650 5,200 153,400
Freeport-McMoRan Copper &
Gold Co., Inc. Class B 91,365 2,855,156 110,929 3,466,531 16,941 529,406
Miller Industries, Inc./Tennessee + 24,400 481,900 24,400 481,900 3,800 75,050
N.V. Bekaert S.A. (Belgium) 344 259,867 490 370,159 150 113,314
------------ ------------ ------------
7,425,873 9,027,240 1,417,220
Oil and Gas 3.2% 2.8% 1.6%
- ---------------------------------------------------------------------------------------------------------------------------------
British Petroleum PLC ADR
(United Kingdom) 13,400 1,675,000 16,500 2,062,500 2,400 300,000
Burmah Oil PLC (United Kingdom) 48,216 863,138 69,733 1,248,325 12,929 231,448
Chevron, Inc. 19,400 1,214,925 23,800 1,490,475 3,500 219,188
Cosmo Oil Co. Ltd. (Japan) 58,000 330,357 78,000 444,273 20,000 113,916
Enron Corp. 52,700 2,147,525 63,800 2,599,850 9,700 395,275
Far East Levingston Shipbuilding
Ltd. (Singapore) 57,000 269,307 79,000 373,250 18,000 85,044
Halliburton Co. 36,900 1,904,963 44,900 2,317,963 6,700 345,888
Occidental Petroleum Corp. 115,600 2,702,150 142,000 3,319,250 21,700 507,238
Repsol S.A. (Spain) 13,000 427,458 20,000 657,628 6,000 197,288
Repsol S.A. ADS (Spain) 7,000 231,875 10,000 331,250 2,000 66,250
Schlumberger Ltd. 18,800 1,588,600 21,900 1,850,550 3,400 287,300
Societe Nationale Elf Aquitaine
(France) 10,162 795,433 14,159 1,108,298 2,900 226,998
Sonat, Inc. 33,900 1,500,075 40,600 1,796,550 6,200 274,350
Total S.A. Class B (France) 10,600 835,058 18,000 1,418,023 3,300 259,971
------------ ------------ ------------
16,485,864 21,018,185 3,510,154
Paper and Forest products --% --% --%
- ---------------------------------------------------------------------------------------------------------------------------------
Mayr-Melnhof Karton AG (Austria) + 4,028 200,959 7,000 349,233 1,245 62,114
Pharmaceuticals 4.0% 3.3% 1.8%
- ---------------------------------------------------------------------------------------------------------------------------------
Amrion, Inc. + 16,100 344,138 15,900 339,863 2,400 51,300
Astra AB (Sweden) 20,000 846,049 28,800 1,218,311 5,900 249,585
Ciba-Geigy AG (Switzerland) 830 1,061,320 1,600 2,045,918 260 332,462
Dura Pharmaceuticals, Inc. + 32,000 1,180,000 32,300 1,191,063 4,800 177,000
Johnson & Johnson 50,500 2,588,125 61,500 3,151,875 9,200 471,500
Lilly (Eli) & Co. 19,700 1,270,650 23,600 1,522,200 3,600 232,200
Medicis Pharmaceutical Corp.
Class A + 17,700 854,025 17,500 844,375 2,800 135,100
Pfizer, Inc. 23,700 1,875,263 28,900 2,286,713 4,400 348,150
Pharmacia & Upjohn, Inc. 79,400 3,275,250 98,110 4,047,038 14,820 611,325
Pharmacia & Upjohn, Inc.
Depository Shares (Sweden) + 17,900 746,397 31,100 1,296,812 5,600 233,510
Warner-Lambert Co. 82,600 5,451,600 101,100 6,672,600 15,600 1,029,600
Yamanouchi Pharmaceutical
Co. Ltd. (Japan) 29,000 614,859 40,000 848,082 10,000 212,021
------------ ------------ ------------
20,107,676 25,464,850 4,083,753
Photography 1.1% 0.9% 0.4%
- ---------------------------------------------------------------------------------------------------------------------------------
Eastman Kodak Co. 33,500 2,629,750 40,500 3,179,250 6,100 478,850
Polaroid Corp. 63,500 2,794,000 78,100 3,436,400 11,500 506,000
------------ ------------ ------------
5,423,750 6,615,650 984,850
Publishing 0.9% 0.7% 0.4%
- ---------------------------------------------------------------------------------------------------------------------------------
Harcourt General, Inc. 26,000 1,436,500 31,500 1,740,375 4,800 265,200
Times Mirror Co. Class A 70,900 3,155,050 87,000 3,871,500 13,600 605,200
------------ ------------ ------------
4,591,550 5,611,875 870,400
Real Estate 2.8% 2.4% 1.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Amoy Properties Ltd. (Hong Kong) 329,000 382,914 448,000 521,415 96,000 111,732
Castle & Cooke, Inc. + 21,733 358,595 26,766 441,639 4,166 68,739
Cheung Kong Holdings Ltd.
(Hong Kong) 136,000 1,046,451 220,000 1,692,789 43,000 330,863
Equity Residential Properties
Trust (R) 82,600 2,952,950 101,100 3,614,325 14,700 525,525
Hong Kong Land Holdings Ltd.
(Hong Kong) 142,000 330,860 202,000 470,660 45,000 104,850
Meditrust Corp. (R) 76,000 2,631,500 93,100 3,223,588 12,400 429,350
Nationwide Health Properties,
Inc. (R) 131,700 2,897,400 161,400 3,550,800 23,400 514,800
Simon DeBartolo Group, Inc. (R) 114,108 2,909,754 139,876 3,566,838 21,740 554,370
Sun Hung Kai Properties Ltd.
(Hong Kong) 73,000 776,465 116,000 1,233,835 24,000 255,276
------------ ------------ ------------
14,286,889 18,315,889 2,895,505
Retail 6.6% 5.2% 2.8%
- ---------------------------------------------------------------------------------------------------------------------------------
99 Cents Only Stores + 6,000 84,000 6,100 85,400 1,300 18,200
CompUSA, Inc. + 4,300 232,200 5,300 286,200 800 43,200
Cost Plus, Inc. + 23,800 550,375 23,200 536,500 3,900 90,188
Cycle & Carriage Ltd. (Singapore) 27,000 293,499 31,000 336,980 8,000 86,963
Dayton Hudson Corporation 145,600 4,804,800 178,100 5,877,300 27,450 905,850
Federated Department Stores Inc. + 41,300 1,383,550 50,300 1,685,050 7,600 254,600
Finish Line, Inc. + 18,800 893,000 18,900 897,750 2,800 133,000
Hollywood Entertainment Corp. + 30,600 627,300 30,600 627,300 4,700 96,350
Home Depot, Inc. (The) 24,000 1,365,000 29,400 1,672,125 4,500 255,938
Ito-Yokado Co., Ltd. (Japan) 17,000 966,760 28,000 1,592,310 5,000 284,341
K mart Corp. 283,000 2,900,750 345,900 3,545,475 52,700 540,175
Kroger Co. + 20,900 935,275 25,500 1,141,125 3,800 170,050
Loehmann's, Inc. + 16,000 429,000 16,100 431,681 2,400 64,350
Marks Brothers Jewelers, Inc. + 20,900 564,300 21,300 575,100 3,200 86,400
Marui Co., Ltd. (Japan) 40,000 772,617 60,000 1,158,926 14,000 270,416
Nautica Enterprises, Inc. + 20,150 649,838 20,226 652,289 3,062 98,750
Officemax, Inc. + 31,800 445,200 38,650 541,100 5,800 81,200
Party City Corp. + 5,900 110,625 7,100 133,125 1,000 18,750
Penney (J.C.) Co., Inc. 51,800 2,803,675 63,400 3,431,525 9,900 535,838
Petco Animal Supplies, Inc. + 6,800 185,300 6,800 185,300 1,000 27,250
Rexall Sundown, Inc. + 38,900 1,419,850 39,000 1,423,500 5,900 215,350
Safeway, Inc. + 44,800 1,909,600 54,400 2,318,800 8,200 349,525
Sears PLC (United Kingdom) 106,800 154,656 210,900 305,402 26,900 38,954
Sears, Roebuck & Co. 67,800 3,034,050 82,600 3,696,350 12,500 559,375
The Men's Wearhouse, Inc. + 29,900 747,500 30,600 765,000 4,500 112,500
The North Face, Inc. + 8,700 245,775 8,300 234,475 1,500 42,375
TJX Cos., Inc. (The) 28,900 1,036,788 34,800 1,248,450 5,300 190,138
Vans, Inc. + 22,400 428,400 22,600 432,225 3,600 68,850
Vendex International N.V.
(Netherlands) 20,000 780,208 30,000 1,170,312 6,000 234,062
Walgreen Co. 32,500 1,202,500 39,600 1,465,200 6,000 222,000
West Marine, Inc. + 15,000 495,000 14,400 475,200 2,200 72,600
Wolverine World Wide, Inc. 36,880 1,023,420 36,858 1,022,810 5,868 162,837
------------ ------------ ------------
33,474,811 39,950,285 6,330,375
Specialty Consumer Products 0.1% 0.1% --%
- ---------------------------------------------------------------------------------------------------------------------------------
Gargoyles, Inc. + 18,100 384,625 18,000 382,500 2,800 59,500
Telecommunications 1.6% 1.2% 0.6%
- ---------------------------------------------------------------------------------------------------------------------------------
Advanced Fibre Communication 200 5,000 200 5,000 100 2,500
Black Box Corp. + 13,400 442,200 13,500 445,500 2,000 66,000
Cable & Wireless PLC (United Kingdom) 2 14 3 21 -- --
CAI Wireless Systems, Inc. + 10,100 73,225 10,800 78,300 1,600 11,600
Centennial Cellular Corp. Class A + 11,620 158,323 11,902 162,165 1,779 24,239
Coherent Communications
Systems Corp. + 22,800 433,200 23,600 448,400 3,600 68,400
Commnet Cellular, Inc. + 8,400 242,550 8,250 238,219 1,275 36,816
Intermedia Communications, Inc. + 9,700 283,725 9,600 280,800 1,400 40,950
MCI Communications Corp. 77,400 1,983,375 94,300 2,416,438 14,100 361,313
MIDCOM Communications, Inc. + 34,000 467,500 33,000 453,750 5,100 70,125
P-Com, Inc. + 15,000 371,250 15,847 392,213 2,400 59,400
RHM Teleservices, Inc. + 9,750 143,813 9,600 141,600 1,500 22,125
Royal PTT (United Kingdom) 11,400 392,713 16,500 568,400 3,500 120,570
Spectralink Corp. + 17,200 118,250 15,800 108,625 2,700 18,563
Tellabs, Inc. + 17,000 1,200,625 20,700 1,461,938 3,000 211,875
Teltrend, Inc. + 16,600 705,500 16,900 718,250 2,600 110,500
Transaction Network Services, Inc. + 23,170 333,069 23,212 333,673 3,510 50,456
Vodafone Group PLC (United Kingdom) 183,334 635,726 299,494 1,038,520 57,748 200,246
------------ ------------ ------------
7,990,058 9,291,812 1,475,678
Transportation 0.6% 0.6% 0.4%
- ---------------------------------------------------------------------------------------------------------------------------------
East Japan Railway Co. (Japan) 145 700,836 220 1,063,337 50 241,667
Expeditors International of
Washington, Inc 14,310 504,428 14,010 493,853 2,320 81,780
K.L.M.-Royal Dutch Airlines
(Netherlands) 15,000 401,801 20,800 557,165 4,800 128,576
Kamigumi Co. Ltd. (Japan) 20,000 168,898 35,000 295,571 8,000 67,559
Singapore Airlines Ltd. (Singapore) 21,000 211,865 44,000 443,908 10,000 100,888
Swire Pacific Ltd. Class A
(Hong Kong) 68,000 608,964 115,800 1,037,031 16,300 145,972
Yamato Transport Co. Ltd. (Japan) 26,000 282,634 36,000 391,340 10,000 108,705
------------ ------------ ------------
2,879,426 4,282,205 875,147
Utilities 3.9% 3.3% 1.9%
- ---------------------------------------------------------------------------------------------------------------------------------
Anglican Water PLC (United Kingdom) 24,900 209,523 34,300 288,619 -- --
Chubu Electric Power, Inc. (Japan) 28,000 593,657 35,000 742,072 8,000 169,616
East Midlands Electricity
(United Kingdom) + -- -- -- -- 12,100 98,596
Hong Kong Electric Holdings Ltd.
(Hong Kong) 84,000 271,570 100,000 323,298 30,000 96,989
Kurita Water Industries Ltd. (Japan) 21,000 454,676 43,000 931,004 7,000 151,559
Kyushu Electric Power Inc. (Japan) 16,000 342,108 20,000 427,635 4,000 85,527
Long Island Lighting Co. 151,700 2,597,863 185,800 3,181,825 24,700 422,988
Nippon Telegraph and Telephone
Corp. (Japan) 100 736,681 114 839,817 30 221,004
Northeast Utilities Co. 213,100 2,637,113 261,300 3,233,588 39,100 483,863
Pacific Gas & Electric Co. 82,200 1,787,850 97,400 2,118,450 14,700 319,725
Pacific Telesis Group 88,100 2,962,363 106,100 3,567,613 15,800 531,275
Scottish Power PLC
(United Kingdom) 144,074 689,049 232,240 1,110,712 48,349 231,234
Sprint Corp. 33,700 1,310,088 40,300 1,566,663 6,200 241,025
Telebras Co. ADR (Brazil) 12,800 1,004,800 17,000 1,334,500 3,400 266,900
United Utilities PLC
(United Kingdom) 44,592 398,259 69,767 623,101 10,582 94,510
US West, Inc. 99,300 2,954,175 120,800 3,593,800 18,400 547,400
Veba (Vereinigte Elektrizitaets
Bergwerks) AG (Germany) + 20,200 1,058,348 31,500 1,650,393 6,400 335,318
------------ ------------ ------------
20,008,123 25,533,090 4,297,529
Total Common Stocks
(cost $326,880,004, $408,229,916
and $67,171,235) $388,725,119 $479,365,667 $78,253,752
- ---------------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
5.5% 11.0% 16.6%
CORPORATE BONDS Principal Principal Principal
AND NOTES* Amount Value Amount Value Amount Value
Advertising --% --% --%
- ---------------------------------------------------------------------------------------------------------------------------------
Adams Outdoor Advertising
sr. notes 10 3/4s, 2006 $25,000 $26,125 $25,000 $26,125 $25,000 $26,125
Key Plastics Corp. sr.
notes 14s, 1999 75,000 77,250 225,000 231,750 70,000 72,100
------------ ------------ ------------
103,375 257,875 98,225
Aerospace and Defense 0.2% 0.3% 0.5%
- ---------------------------------------------------------------------------------------------------------------------------------
Alliant Techsystems, Inc. sr. sub.
notes 11 3/4s, 2003 150,000 162,375 415,000 449,238 200,000 216,500
BE Aerospace sr. notes
9 3/4s, 2003 115,000 119,025 400,000 414,000 100,000 103,500
Howmet Corp. sr. sub.
notes 10s, 2003 150,000 161,250 400,000 430,000 125,000 134,375
Lockheed Martin Corp. company
guaranty 7 1/4s, 2006 120,000 120,026 340,000 340,075 405,000 405,089
Moog Inc. sr. sub. notes Ser. B,
10s, 2006 20,000 20,100 60,000 60,300 20,000 20,100
Sequa Corp. sr. notes 9 5/8s, 1999 100,000 100,250 250,000 250,625 100,000 100,250
Sequa Corp. bonds 8 3/4s, 2001 30,000 29,775 -- -- -- --
UNC, Inc. sr. notes 9 1/8s, 2003 100,000 97,500 305,000 297,375 100,000 97,500
UNC, Inc. 144A sr. sub.
notes 11s, 2006 25,000 26,250 65,000 68,250 20,000 21,000
------------ ------------ ------------
836,551 2,309,863 1,098,314
Agriculture --% 0.1% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
Agco Corp. sr. sub. notes
8 1/2s, 2006 100,000 100,000 500,000 500,000 100,000 100,000
Premium Standard Farms, Inc.
sr. sec. notes 11s, 2003 ++++ 36,382 35,473 141,890 138,344 46,084 44,932
------------ ------------ ------------
135,473 638,344 144,932
Automotive 0.1% 0.2% 0.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Aftermarket Technology Corp.
sr. sub. notes Ser. D, 12s, 2004 $ -- $ -- $550,000 $599,500 $ -- $ --
Aftermarket Technology Corp.
sr. sub. notes 12s, 2004 235,000 256,150 250,000 272,500 110,000 119,900
Daimler-Benz med. term notes
7 3/8s, 2006 140,000 141,218 405,000 408,524 435,000 438,784
Harvard Indsutries Inc. sr. notes
11 1/8s, 2005 50,000 46,875 150,000 140,625 45,000 42,188
Lear Corp. sub. notes 9 1/2s, 2006 85,000 87,975 275,000 284,625 85,000 87,975
Speedy Muffler King, Inc. company
guaranty 10 7/8s, 2006 20,000 20,525 60,000 61,575 15,000 15,394
------------ ------------ ------------
552,743 1,767,349 704,241
Basic Industrial Products 0.1% 0.3% 0.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Clark-Schwebel sr. notes
10 1/2s, 2006 200,000 209,000 750,000 783,750 300,000 313,500
Inter-City Products sr. notes
9 3/4s, 2000 250,000 240,000 600,000 576,000 200,000 192,000
Owens Illinois, Inc. deb. 11s, 2003 -- -- 500,000 546,875 -- --
Owens Illinois, Inc. sr. sub. notes
9 3/4s, 2004 100,000 102,000 300,000 306,000 100,000 102,000
------------ ------------ ------------
551,000 2,212,625 607,500
Broadcasting 0.5% 1.2% 1.1%
- ---------------------------------------------------------------------------------------------------------------------------------
Allbritton Communications sr. sub.
deb. Ser. B, 9 3/4s, 2007 150,000 145,125 500,000 483,750 100,000 96,750
American Telecasting, Inc. sr. disc.
notes stepped-coupon zero %
(14 1/2s, 6/15/99), 2004 ++ 325,000 242,125 1,000,000 745,000 265,000 197,425
Argyle Television Corp. sr. sub.
notes 9 3/4s, 2005 200,000 200,000 600,000 600,000 200,000 200,000
Benedek Broadcasting sr. notes
11 7/8s, 2005 100,000 109,250 750,000 819,375 100,000 109,250
Chancellor Broadcasting Corp.
sr. sub. notes 9 3/8s, 2004 -- -- -- -- 165,000 163,350
Comcast Corp. sr. sub. notes
9 3/8s, 2005 -- -- 750,000 761,250 -- --
Commodore Media, Inc. sr. sub. notes
stepped-coupon 7 1/2s,
(13 1/4s, 5/1/98), 2003 ++ 200,000 207,500 290,000 300,875 100,000 103,750
Diamond Cable Communication Co.
PLC sr. disc. notes stepped-coupon
zero % (13 1/2s, 9/30/99), 2004
(United Kingdom) ++ -- -- 200,000 152,000 -- --
Diamond Cable Communication Co. PLC
sr. disc. notes stepped-coupon zero %
(11 3/4s, 12/15/00), 2005
(United Kingdom)++ 150,000 96,750 450,000 290,250 125,000 80,625
Gray Communications System Inc.
sr. sub. notes 10 5/8s, 2006 10,000 10,275 35,000 35,963 10,000 10,275
Heritage Media Services Corp.
sr. notes 11s, 2002 100,000 107,000 300,000 321,000 100,000 107,000
Jacor Communications, Inc.
sr. sub. notes 10 1/8s, 2006 200,000 206,000 550,000 566,500 200,000 206,000
Lenfest Communications 144A
sr. sub. notes 10 1/2s, 2006 -- -- 500,000 512,500 -- --
Lenfest Communications, Inc.
sr. notes 8 3/8s, 2005 -- -- -- -- 125,000 117,188
Marcus Cable Co. (L.P.) sr.
sub. disc. notes stepped-coupon
zero % (13 1/2s, 8/1/99), 2004 ++ $200,000 $156,000 $500,000 $390,000 $100,000 $78,000
Park Broadcasting, Inc. 144A
sr. notes 11 3/4s, 2006 50,000 57,125 145,000 165,663 50,000 57,125
Paxson Communications Corp. 144A
sr. sub. notes 11 5/8s, 2002 200,000 209,000 500,000 522,500 200,000 209,000
Petracom Holdings, Inc. notes
stepped-coupon zero %
(17 1/2s, 8/1/98), 2003 ++ 150,000 127,688 414,000 352,418 165,000 140,456
Rogers Cablesystem Ltd. deb.
10 1/8s, 2012 (Canada) -- -- 400,000 396,000 -- --
Sinclair Broadcast Group, Inc.
sr. sub. notes 10s, 2005 225,000 227,813 700,000 708,750 200,000 202,500
Sullivan Broadcasting
sr. sub. notes 10 1/4s, 2005 -- -- -- -- 100,000 100,625
TCI Communications Inc. deb.
7 7/8s, 2026 -- -- 500,000 435,365 -- --
Telewest Communications PLC deb.
stepped-coupon zero %
(11s, 10/1/00), 2007
(United Kingdom) ++ 170,000 107,950 440,000 279,400 170,000 107,950
Videotron Holdings. sr. disc. notes
stepped-coupon zero %
(11s, 8/15/2005), 2005
(United Kingdom) ++ 135,000 89,438 350,000 231,875 110,000 72,875
Young Broadcasting Corp. company
guaranty Ser. B, 9s, 2006 -- -- 250,000 233,750 150,000 140,250
------------ ------------ ------------
2,299,039 9,304,184 2,500,394
Building and Construction 0.2% 0.3% 0.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Cemex S.A. 144A bonds 12 3/4s,
2006 (Mexico) 75,000 81,750 220,000 239,800 70,000 76,300
Continental Homes Holding Corp.
sr. notes 10s, 2006 200,000 199,000 500,000 497,500 200,000 199,000
Presley Co. sr. notes 12 1/2s, 2001 60,000 58,350 200,000 194,500 -- --
Schuller International Corp. sr.
notes 10 7/8s, 2004 80,000 87,400 315,000 344,138 105,000 114,713
Scotsman Group, Inc. sr. secd. notes
9 1/2s, 2000 300,000 300,750 745,000 746,863 250,000 250,625
Triangle Pacific Corp. sr. notes
10 1/2s, 2003 100,000 104,000 300,000 312,000 125,000 130,000
Waxman Industries Inc. sr. notes
stepped-coupon Ser. B, zero %
(12 3/4s, 6/1/99), 2004 ++ 20,000 14,200 60,000 42,600 20,000 14,200
------------ ------------ ------------
845,450 2,377,401 784,838
Business Equipment and Services 0.1% 0.2% 0.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Corporate Express, Inc. sr. sub.
notes Ser. B, 9 1/8s, 2004 150,000 150,000 300,000 300,000 155,000 155,000
Iron Mountain Inc. sr. sub. notes
10 1/8s, 2006 15,000 15,281 50,000 50,938 15,000 15,281
Lamar Advertising Co. sr. secd.
notes 11s, 2003 200,000 209,500 600,000 628,500 200,000 209,500
Muzak Inc. sr. notes 10s, 2003 15,000 15,094 45,000 45,281 15,000 15,094
Pierce Leahy Corp. sr. sub. notes
144A 11 1/8s, 2006 35,000 37,362 105,000 112,087 30,000 32,025
United Stationer Supply, Inc.
sr. sub. notes 12 3/4s, 2005 250,000 270,000 545,000 588,600 200,000 216,000
------------ ------------ ------------
697,237 1,725,406 642,900
Cable Television 0.1% 0.1% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
Charter Communications
International disc. notes
stepped-coupon Ser. B,
zero % (14s, 3/15/01), 2007 ++ $200,000 $121,000 $490,000 $296,450 $200,000 $121,000
Charter Communications
International sr. notes
11 1/4s, 2006 -- -- 250,000 257,500 -- --
UIH Australia sr. disc. notes
stepped-coupon Ser. B, zero %
(14s, 5/15/01), 2006 ++ 210,000 112,350 610,000 326,350 200,000 107,000
------------ ------------ ------------
233,350 880,300 228,000
Cellular Communications --% 0.1% 0.2%
- ---------------------------------------------------------------------------------------------------------------------------------
Airtouch Communications, Inc.
notes 7 1/8s, 2001 140,000 140,904 390,000 392,519 405,000 407,616
Orbcomm Global Capital Corp.
144A sr. notes 14s, 2004 60,000 61,500 175,000 179,375 55,000 56,375
------------ ------------ ------------
202,404 571,894 463,991
Chemicals 0.2% 0.5% 0.5%
- ---------------------------------------------------------------------------------------------------------------------------------
Acetex Corp. sr. notes 9 3/4s, 2003
(Canada) 135,000 131,625 275,000 268,125 115,000 112,125
Arcadian Partner sr. notes
10 3/4s, 2005 250,000 275,000 750,000 825,000 200,000 220,000
Carlisle Plastic sr. notes
10 1/4s, 1997 75,000 75,656 325,000 327,844 100,000 100,875
G-I Holdings, Inc. sr. disc. notes
Ser. B, zero %, 1998 -- -- 1,500,000 1,293,750 -- --
Great Lakes Carbon Corp.
sr. notes 10s, 2006 -- -- 225,000 236,250 150,000 157,500
IMC Fertilizer Group, Inc. deb.
9.45s, 2011 200,000 214,000 -- -- -- --
Sociedad Quimica Y Minera de Chile
S.A. 144A bonds 7.7s, 2006 (Chile) 55,000 55,206 160,000 160,600 170,000 170,638
Texas Petrochemical 144A sr. sub.
notes 11 1/8s, 2006 15,000 15,825 50,000 52,750 15,000 15,825
Union Carbide Global Enterprises
sr. sub. notes Ser. B, 12s, 2005 150,000 171,188 250,000 285,313 250,000 285,313
------------ ------------ ------------
938,500 3,449,632 1,062,276
Conglomerates 0.1% 0.1% --%
- ---------------------------------------------------------------------------------------------------------------------------------
ADT Ltd. sr. sub. notes 9 1/4s, 2003 50,000 51,750 -- -- -- --
Axia, Inc. sr. sub. notes Ser. B,
11s, 2001 75,000 75,750 -- -- -- --
Congoleum Corp. sr. notes 9s, 2001 -- -- 500,000 488,750 -- --
MacAndrews & Forbes Holdings, Inc.
sub. deb. notes 13s, 1999 130,000 130,000 215,000 215,000 5,000 5,000
------------ ------------ ------------
257,500 703,750 5,000
Consumer Durable Goods --% 0.1% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
Exide Corp. sr. notes 10 3/4s, 2002 -- -- -- -- 125,000 130,313
Remington Products Co. LLC
144A sr. sub. notes 11s, 2006 35,000 35,350 595,000 600,950 30,000 30,300
Selmer Co., Inc. sr. sub. notes
11s, 2005 160,000 168,000 250,000 262,500 25,000 26,250
------------ ------------ ------------
203,350 863,450 186,863
Consumer Non Durables 0.1% 0.1% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
E&S Holdings Corp. 144A sr. sub.
notes 10 3/8s, 2006 $20,000 $20,350 $60,000 $61,050 $20,000 $20,350
Foamex (L.P.) Capital Corp. sr.
notes 11 1/4s, 2002 10,000 10,400 -- -- 15,000 15,600
Guess Jeans, Inc. sr. sub. notes
9 1/2s, 2003 200,000 203,500 425,000 432,438 100,000 101,750
------------ ------------ ------------
234,250 493,488 137,700
Consumer Services 0.5% 0.9% 1.2%
- ---------------------------------------------------------------------------------------------------------------------------------
Adelphia Communications Corp.
sr. notes 12 1/2s, 2002 125,000 131,875 350,000 369,250 100,000 105,500
Cablevision Systems Corp. sr. sub.
deb. 9 7/8s, 2023 300,000 282,000 610,000 573,400 90,000 84,600
Cablevision Systems Corp. sr. sub.
notes 9 7/8s, 2013 -- -- 100,000 96,250 -- --
Cellular, Inc. sr. sub. disc. notes
stepped-coupon zero %
(11 3/4s, 9/1/98), 2003 ++ 100,000 84,500 350,000 295,750 100,000 84,500
Century Communications Corp.
sr. sub. deb. 11 7/8s, 2003 10,000 10,700 25,000 26,750 -- --
Century Communications Corp.
sr. notes 9 1/2s, 2005 -- -- 750,000 748,125 -- --
CF Cable TV, Inc. sr. notes 11 5/8s,
2005 (Canada) 75,000 84,750 300,000 339,000 125,000 141,250
Coinmach Corp. sr. notes Ser. B,
11 3/4s, 2005 105,000 112,350 -- -- 79,000 84,530
Continental Cablevision, Inc.
sr. notes 8 1/2s, 2001 -- -- -- -- 70,000 73,228
Falcon Holdings Group, Inc. sr. sub.
notes 11s, 2003 ++++ 150,019 138,768 486,599 450,104 169,625 156,903
Host Marriott Corp. sr. notes
Ser. B, 9 1/2s, 2005 250,000 251,250 750,000 753,750 210,000 211,050
John Q Hammons Hotels, Inc.
1st mtge. 8 7/8s, 2004 20,000 19,200 -- -- 40,000 38,400
Marvel Parent Holdings, Inc. sr.
secd. disc. notes zero %, 1998 200,000 157,000 680,000 533,800 245,000 192,325
Metrocall, Inc. sr. sub. notes
10 3/8s, 2007 200,000 166,000 -- -- 200,000 166,000
Mohegan Tribal Gaming 144A sr. secd.
notes 13 1/2s, 2002 100,000 125,000 425,000 531,250 100,000 125,000
Rogers Communications, Inc. sr. deb.
10 7/8s, 2004 75,000 77,250 -- -- 125,000 128,750
Service Corp. International notes
6 3/8s, 2000 110,000 107,837 300,000 294,102 375,000 367,628
SFX Broadcasting, Inc. sr. sub.
notes Ser. B, 10 3/4s, 2006 200,000 208,000 510,000 530,400 200,000 208,000
Specialty Retailers, Inc. sr.
sub. notes 11s, 2003 200,000 205,000 500,000 512,500 200,000 205,000
Telemedia Broadcasting Corp. 144A
deb. stepped-coupon 3.8s,
(16s, 6/15/99), 2004 ++ -- -- 209,000 189,668 -- --
Universal Outdoor, Inc. sub. deb.
11s, 2003 125,000 140,000 275,000 308,000 275,000 308,000
------------ ------------ ------------
2,301,480 6,552,099 2,680,664
Electronics and Electrical Equipment --% 0.1% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
Amphenol Corp. sr. sub. notes
12 3/4s, 2002 $25,000 $27,563 $ -- $ -- $120,000 $132,300
Amphenol Corp. sr. notes
10.45s, 2001 -- -- 500,000 540,105 -- --
International Semi-Tech. Corp.
sr. secd. disc. notes stepped-coupon
zero % (11 1/2s, 8/15/00),
2003 (Canada) ++ 200,000 121,500 588,000 357,210 185,000 112,388
------------ ------------ ------------
149,063 897,315 244,688
Entertainment 0.3% 0.5% 0.7%
- ---------------------------------------------------------------------------------------------------------------------------------
Argosy Gaming Co. 144A
1st. mtge. 13 1/4s, 2004 50,000 49,750 135,000 134,325 45,000 44,775
Bally Park Place Funding
1st mtge. 9 1/4s, 2004 -- -- 400,000 430,000 125,000 134,375
Cinemark USA, Inc. 144A sr. sub.
notes 9 5/8s, 2008 80,000 80,000 240,000 240,000 70,000 70,000
Guitar Center Management 144A
sr. notes 11s, 2006 20,000 20,950 65,000 68,088 20,000 20,950
Harveys Casino Resorts sr. sub.
notes 10 5/8s, 2006 25,000 26,125 70,000 73,150 20,000 20,900
Premier Parks, Inc. sr. notes
Ser. A, 12s, 2003 250,000 267,500 450,000 481,500 225,000 240,750
Six Flags Corp. sr. sub. notes
stepped-coupon zero %
(12 1/4s, 6/15/98), 2005 ++ 275,000 241,313 700,000 614,250 150,000 131,625
Time Warner Entertainment Co.
deb. 7 1/4s, 2008 95,000 90,089 275,000 260,785 365,000 346,133
Time Warner, Inc. notes
8 7/8s, 2012 70,000 74,448 210,000 223,343 220,000 233,979
Trump A.C. 1st. mtge.
11 1/4s, 2006 250,000 246,250 750,000 738,750 200,000 197,000
Trump Holdings & Funding Corp.
sr. notes 15 1/2s, 2005 210,000 243,600 350,000 406,000 -- --
Viacom International, Inc.
sub. deb. 8s, 2006 250,000 233,438 500,000 466,875 200,000 186,750
------------ ------------ ------------
1,573,463 4,137,066 1,627,237
Enviromental Control --% --% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
WMX Technologies Inc.
notes 7.1s, 2026 95,000 96,255 285,000 288,765 305,000 309,029
Food and Beverages 0.1% 0.1% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
Canandaigua Wine sr. sub. notes
8 3/4s, 2003 125,000 120,625 300,000 289,500 -- --
Mafco, Inc. sr. sub. notes
11 7/8s, 2002 150,000 162,000 -- -- 150,000 162,000
Stater Brothers sr. notes
11s, 2001 145,000 153,700 455,000 482,300 140,000 148,400
------------ ------------ ------------
436,325 771,800 310,400
Health Care 0.1% 0.3% 0.5%
- ---------------------------------------------------------------------------------------------------------------------------------
Columbia/HCA Healthcare Corp.
notes 6.41s, 2000 150,000 148,121 400,000 394,988 450,000 444,362
Ivac Corp. sr. notes 9 1/4s, 2002 175,000 177,188 500,000 506,250 150,000 151,875
Manor Care, Inc. sr. notes
7 1/2s, 2006 85,000 85,302 245,000 245,870 285,000 286,012
Merit Behavioral Care sr. sub.
notes 11 1/2s, 2005 -- -- 150,000 158,250 -- --
Paracelsus Healthcare sr. sub.
notes 10s, 2006 $190,000 $196,650 $700,000 $724,500 $200,000 $207,000
Quorum Health Group, Inc.
sr. sub. notes 8 3/4s, 2005 -- -- -- -- 100,000 100,250
Total Renal Care Holdings, Inc.
sr. disc. notes stepped-coupon 8s,
(12s, 8/15/97), 2004 ++ -- -- -- -- 65,000 68,413
------------ ------------ ------------
607,261 2,029,858 1,257,912
Insurance and Finance 0.9% 1.5% 4.6%
- ---------------------------------------------------------------------------------------------------------------------------------
ABN AMRO Bank N.V. sub. notes
7.55s, 2006 165,000 168,099 505,000 514,484 525,000 534,860
Aegon NV sub. notes 8s, 2006
(Netherlands) 105,000 109,811 315,000 329,433 335,000 350,350
American Life Holding Co.
sr. sub. notes 11 1/4s, 2004 250,000 280,625 500,000 561,250 200,000 224,500
AIM Management Group
sr. secd. notes 9s, 2003 50,000 51,500 200,000 206,000 -- --
Berkeley Federal Bank & Trust
sub. deb. 12s, 2005 35,000 37,975 120,000 130,200 35,000 37,975
BankAmerica Corp. sub. notes
8 3/8s, 2002 150,000 159,324 410,000 435,486 505,000 536,391
Banponce Financial Corp. med. term
notes 6 3/4s, 2001 95,000 93,900 285,000 281,700 300,000 296,526
Capital One Bank sr. notes 7.35s,
2000 250,000 251,610 700,000 704,508 900,000 905,796
Chevy Chase Savings Bank Inc. sub.
deb. 9 1/4s, 2005 150,000 153,375 350,000 357,875 100,000 102,250
Citicorp sub. notes 7 5/8s, 2005 250,000 254,215 650,000 660,959 850,000 864,331
Commercial Credit Co. notes
7 7/8s, 2025 175,000 183,334 400,000 419,048 500,000 523,810
Conseco Inc. sr. notes 10 1/2s, 2004 95,000 109,710 280,000 323,355 300,000 346,452
Contifinancial Corp. sr. notes
8 3/8s, 2003 150,000 149,625 465,000 463,838 145,000 144,638
First Nationwide Holdings sr.
sub. notes 9 1/8s, 2003 150,000 147,375 100,000 98,250 150,000 147,375
First Nationwide Holdings 144A
sr. sub. notes 10 5/8s, 2003 30,000 31,350 200,000 209,000 50,000 52,250
Ford Motor Credit Corp.
sr. notes 7s, 2001 235,000 236,322 700,000 703,938 745,000 749,191
General Motors Acceptance Corp.
med. term notes 6 3/4s, 2002 250,000 246,123 600,000 590,694 800,000 787,592
Keystone Group, Inc. sr. secd. notes
9 3/4s, 2003 95,000 101,650 290,000 310,300 100,000 107,000
MCII Holding (USA), Inc. bonds
stepped-coupon zero %
(12.0s,11/15/98), 2002 ++ 200,000 162,000 505,000 409,050 200,000 162,000
Merita Bank Ltd. sub. notes 6 1/2s,
2006 (Finland) 220,000 205,372 605,000 564,774 710,000 662,792
NationsBank Corp. sub. notes
6 1/2s, 2006 200,000 188,228 600,000 564,684 700,000 658,798
Ocwen Financial Corp. notes
11 7/8s, 2003 25,000 26,188 70,000 73,325 20,000 20,950
Pioneer Finance Corp. 1st mtge.
13 1/2s, 1998 -- -- 25,000 22,438 -- --
Reliance Group Holdings, Inc.
sr. sub. deb. 9 3/4s, 2003 85,000 85,850 25,000 25,250 80,000 80,800
Reliance Group Holdings, Inc.
sr. notes 9s, 2000 75,000 75,750 425,000 429,250 50,000 50,500
Royal Bank of Scotland sub. notes
6 3/8s, 2011 (United Kingdom) 235,000 210,569 700,000 627,228 825,000 739,233
Sampoerna International Finance Co.
144A company guaranty 8 3/8s,
2006 (Indonesia) $100,000 $101,421 $280,000 $283,979 $335,000 $339,760
Smith Barney Hldgs. notes 7s, 2000 130,000 130,595 355,000 356,626 435,000 436,992
Travelers Group, Inc. sr. notes
7 3/4s, 2026 70,000 69,600 200,000 198,856 265,000 263,484
Van Kampen Merritt sr. notes
9 3/4s, 2003 250,000 266,875 525,000 560,438 250,000 266,875
------------ ------------ ------------
4,288,371 11,416,216 10,393,471
Lodging --% --% --%
- ---------------------------------------------------------------------------------------------------------------------------------
Wyndham Hotel Corp. sr. sub.
notes 10 1/2s, 2006 20,000 20,525 60,000 61,575 20,000 20,525
Medical Supplies and Devices --% 0.1% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
Graphic Controls Corp. sr. sub.
notes Ser. A, 12s, 2005 100,000 108,250 300,000 324,750 150,000 162,375
Wright Medical Technology,
Inc. sr. secd. notes Ser. B,
10 3/4s, 2000 100,000 99,750 130,000 129,675 40,000 39,900
------------ ------------ ------------
208,000 454,425 202,275
Metals and Mining --% 0.1% 0.2%
- ---------------------------------------------------------------------------------------------------------------------------------
Noranda Inc. notes 7s, 2005
(Canada) 160,000 154,051 400,000 385,128 460,000 442,897
Renco Metals, Inc. sr. notes
11 1/2s, 2003 25,000 26,063 80,000 83,400 25,000 26,063
Royal Oak Mines, Inc. 144A
sr. sub. notes 11s, 2006
(Canada) 45,000 46,069 130,000 133,088 40,000 40,950
------------ ------------ ------------
226,183 601,616 509,910
Oil and Gas 0.2% 0.3% 0.7%
- ---------------------------------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp. sr. notes
10 1/2s, 2002 100,000 105,750 -- -- -- --
Chesapeake Energy Corp. sr. notes
9 1/8s, 2006 -- -- 125,000 123,438 -- --
Cliffs Drilling Co. company guaranty
Ser. B, 10 1/4s, 2003 20,000 20,800 60,000 62,400 20,000 20,800
Columbia Gas System, Inc. notes
Ser. E, 7.32s, 2010 150,000 144,030 400,000 384,080 500,000 480,100
Flores & Rucks Corp. sr. sub. notes
9 3/4s, 2006 25,000 25,313 70,000 70,875 20,000 20,250
Gulf Canada Resources Ltd. sr. sub.
notes 9 5/8s, 2005 (Canada) 125,000 130,313 350,000 364,875 100,000 104,250
Lasmo (USA) Inc. company guaranty
7 1/2s, 2006 100,000 100,706 200,000 201,412 200,000 201,412
Maxus Energy Corp. global notes
9 7/8s, 2002 50,000 50,750 175,000 177,625 50,000 50,750
Norcen Energy Resources Inc. deb.
7 3/8s, 2006 (Canada) 45,000 44,478 -- -- 150,000 148,260
Petroliam Nasional Berhad 144A
notes 6 7/8s, 2003 (Malaysia) 130,000 128,127 350,000 344,957 400,000 394,236
Transcontinental Gas Pipeline deb.
9 1/8s, 2017 100,000 104,704 -- -- -- --
TransTexas Gas Corp. sr. secd. notes
11 1/2s, 2002 125,000 132,813 375,000 398,438 100,000 106,250
------------ ------------ ------------
987,784 2,128,100 1,526,308
Packaging and Containers --% 0.2% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
Ivex Packaging Corp. sr. sub. notes
12 1/2s, 2002 $170,000 $179,350 $495,000 $522,225 $185,000 $195,175
Printpack, Inc. 144A sr. notes
10 5/8s, 2006 15,000 15,450 40,000 41,200 15,000 15,450
Printpack, Inc. 144A sr. notes
9 7/8s, 2004 30,000 30,675 85,000 86,913 25,000 25,563
Riverwood International company
guaranty 10 7/8s, 2008 -- -- 750,000 738,750 -- --
------------ ------------ ------------
225,475 1,389,088 236,188
Paper and Forest Products 0.2% 0.4% 0.4%
- ---------------------------------------------------------------------------------------------------------------------------------
Doman Industries Ltd. sr. notes
8 3/4s, 2004 (Canada) 200,000 186,000 600,000 558,000 150,000 139,500
Domtar, Inc. deb. 9 1/2s, 2016
(Canada) 50,000 52,250 175,000 182,875 70,000 73,150
Domtar, Inc. notes 8 3/4s, 2006
(Canada) 20,000 20,400 70,000 71,400 -- --
Florida Coast Paper LLC 144A
1st. mtge. 12 3/4s, 2003 205,000 220,887 650,000 700,375 200,000 215,500
Gaylord Container Corp. sr. notes
11 1/2s, 2001 160,000 169,600 300,000 318,000 100,000 106,000
Rainy River Forest Products
sr. notes 10 3/4s, 2001 (Canada) 225,000 242,156 250,000 269,063 200,000 215,250
Repap New Brunswick sr. notes
10 5/8s, 2005 (Canada) 150,000 151,125 400,000 403,000 150,000 151,125
Stone Container Corp. sr. notes
11 1/2s, 2004 50,000 52,500 250,000 262,500 75,000 78,750
Stone Container Corp. sr.
sub. notes 10 3/4s, 1997 10,000 10,150 30,000 30,450 15,000 15,225
------------ ------------ ------------
1,105,068 2,795,663 994,500
Pharmaceuticals 0.1% 0.1% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
Phar-Mor, Inc. sr. notes 11.72s,
2002 100,000 103,750 300,000 311,250 100,000 103,750
Twin Laboratories, Inc. 144A
sr. sub. notes 10 1/4s, 2006 200,000 201,000 250,000 251,250 200,000 201,000
------------ ------------ ------------
304,750 562,500 304,750
Publishing 0.1% 0.1% 0.2%
- ---------------------------------------------------------------------------------------------------------------------------------
American Media Operation, Inc.
sr. sub. notes 11 5/8s, 2004 175,000 184,188 475,000 499,938 150,000 157,875
News America Holdings, Inc.
sr. notes 8 5/8s, 2003 (Australia) 115,000 122,622 300,000 319,884 375,000 399,855
------------ ------------ ------------
306,810 819,822 557,730
Real Estate --% --% --%
- ---------------------------------------------------------------------------------------------------------------------------------
Chelsea Piers 1st mtge. Ser. B,
12 1/2s, 2004 110,000 102,850 250,000 233,750 90,000 84,150
Chelsea Piers 144A 1st mtge.
stepped-coupon Ser. B, zero%
(11s, 6/15/99), 2009 ++ 5,000 4,675 10,000 9,350 5,000 4,675
------------ ------------ ------------
107,525 243,100 88,825
Recreation 0.2% 0.3% 0.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Alliance Gaming Corp. 12 7/8s, 2003 170,000 175,950 60,000 62,100 20,000 20,700
Casino America, Inc. sr. notes
12 1/2s, 2003 40,000 41,850 120,000 125,550 35,000 36,619
Casino Magic Corp. 144A
1st mtge. 13s, 2003 40,000 40,600 125,000 126,875 35,000 35,525
Coast Hotels & Casino
company guaranty Ser. B,
13s, 2002 200,000 216,500 600,000 649,500 200,000 216,500
Empress River Casino sr. notes
10 3/4s, 2002 100,000 107,000 450,000 481,500 125,000 133,750
Grand Casinos, Inc. 1st mtge.
10 1/8s, 2003 150,000 147,563 450,000 442,688 125,000 122,969
Lady Luck Gaming 1st mtge.
11 7/8s, 2001 150,000 147,000 500,000 490,000 100,000 98,000
------------ ------------ ------------
876,463 2,378,213 664,063
Retail 0.2% 0.4% 0.5%
- ---------------------------------------------------------------------------------------------------------------------------------
Brylane (L.P.) sr. sub.
notes 10s, 2003 200,000 204,500 500,000 511,250 190,000 194,275
Finlay Enterprises, Inc. sr. notes
10 5/8s, 2003 240,000 243,000 700,000 708,750 200,000 202,500
K mart Corp. deb. 7 3/4s, 2012 250,000 193,750 750,000 581,250 200,000 155,000
Loehmann's, Inc. sr. notes
11 7/8s, 2003 55,000 58,300 155,000 164,300 50,000 53,000
Safeway, Inc. sr. notes 10s, 2002 -- -- 200,000 224,750 50,000 56,188
Safeway, Inc. sr. sub. notes
9.35s, 1999 30,000 30,900 -- -- -- --
Sears Roebuck Acceptance
Corp. med. term notes
6.15s, 2005 65,000 63,521 185,000 180,791 245,000 239,426
Southland Corp. 1st priority
sr. sub. deb. 5s, 2003 275,000 215,875 675,000 529,875 250,000 196,250
Waban, Inc. sr. sub.
notes 11s, 2004 50,000 52,875 150,000 158,625 150,000 158,625
------------ ------------ ------------
1,062,721 3,059,591 1,255,264
Specialty Consumer Products --% 0.1% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
Herff Jones, Inc. sr. sub.
notes 11s, 2005 190,000 201,400 550,000 583,000 150,000 159,000
Telecommunications 0.7% 1.4% 1.7%
- ---------------------------------------------------------------------------------------------------------------------------------
A+ Network Inc. sr. sub. notes
11 7/8s, 2005 250,000 243,125 550,000 534,875 -- --
American Communication
Services, Inc. sr. disc. notes
stepped-coupon zero %
(12 3/4s, 4/1/01), 2006 ++ 230,000 121,900 1,215,000 643,950 185,000 98,050
Arch Communications Group
sr. disc. notes stepped-coupon
zero % (10 7/8s, 3/15/01),
2008 ++ 500,000 280,000 1,250,000 700,000 500,000 280,000
BellSouth Telecommunication
deb. 6 3/4s, 2033 175,000 154,137 425,000 374,332 550,000 484,429
Brooks Fiber Properties sr. disc.
notes stepped-coupon zero %
(10 7/8s, 3/1/01), 2006 ++ 250,000 153,750 500,000 307,500 250,000 153,750
Call-Net Enterprises sr. disc.
notes stepped-coupon zero %
(13 1/4s, 12/1/99), 2004 ++ 160,000 124,400 585,000 454,838 190,000 147,725
Compania Telecom Chile notes
7 5/8s, 2006 (Chile) 135,000 135,813 405,000 407,438 430,000 432,589
Dial Call Communication, Inc.
sr. disc. notes stepped-coupon
Ser. B, zero % (10 1/4s,
12/15/98), 2005 ++ $40,000 $25,600 $135,000 $86,400 $75,000 $48,000
GST Telecommunications, Inc. company
guaranty stepped-coupon zero %
(13 7/8s, 15/15/00), 2005 ++ 168,000 91,140 472,000 256,060 136,000 73,780
ICG Holding, Inc. company guaranty
stepped-coupon zero % (12 1/2s,
5/1/01), 2006 ++ 220,000 132,000 925,000 555,000 275,000 165,000
ICG Holding, Inc. sr. disc. notes
stepped-coupon zero %
(13 1/2s, 9/15/00), 2005 ++ 130,000 87,100 260,000 174,200 100,000 67,000
Intermedia Communication of Florida,
Inc. sr. disc. notes stepped-coupon
zero % (12 1/2s, 5/15/01), 2006 ++ 200,000 125,000 300,000 187,500 -- --
Intermedia Communications of Florida,
Inc. sr. notes Ser. B, 13 1/2s, 2005 100,000 114,500 350,000 400,750 -- --
International Cabletel, Inc.
sr. notes stepped-coupon Ser. B,
zero % (11 1/2s, 2/01/01), 2006 ++ 175,000 105,000 525,000 315,000 260,000 156,000
Milicom International Cellular 144A
sr. disc. notes stepped-coupon
zero % (13 1/2s, 6/01/00), 2006
(Luxembourg) ++ 130,000 74,263 365,000 208,506 125,000 71,406
MFS Communications sr. disc. notes
stepped-coupon zero %
(9 3/8s, 1/15/99), 2004 ++ 80,000 67,200 435,000 365,400 60,000 50,400
MFS Communications sr. disc. notes
stepped-coupon zero %
(8 7/8s, 1/1/01), 2006 ++ 150,000 105,000 100,000 70,000 150,000 105,000
Mobile Telecommunications Tech.
sr. notes 13 1/2s, 2002 150,000 156,000 375,000 390,000 100,000 104,000
Mobilemedia Corp. sr. sub. notes
9 3/8s, 2007 -- -- 200,000 160,000 75,000 60,000
NEXTEL Communications, Inc.
sr. disc. notes stepped-coupon
zero % (11 1/2s, 9/1/98),
2003 ++ 200,000 148,000 750,000 555,000 175,000 129,500
NEXTEL Communications, Inc.
sr. disc. notes stepped-coupon
zero % (9 3/4s, 2/15/99),
2004 ++ 260,000 167,700 1,715,000 1,106,175 450,000 290,250
Nextlink Communications sr. notes
12 1/2s, 2006 250,000 256,250 750,000 768,750 250,000 256,250
Omnipoint Corp. 144A sr. notes
11 5/8s, 2006 35,000 36,400 115,000 119,600 35,000 36,400
Pagemart Nationwide, Inc. sr. disc.
notes stepped-coupon zero %
(15s, 2/1/00), 2005 ++ 210,000 142,800 600,000 408,000 210,000 142,800
Pricellular Wireless Corp. sr. disc.
notes stepped-coupon
Ser. B, zero % (14s, 11/15/97),
2001 ++ 150,000 141,750 360,000 340,200 175,000 165,375
Sygnet Wireless, Inc. sr. notes
11 1/2s, 2006 25,000 25,563 75,000 76,688 20,000 20,450
Teleport Communications Group Inc.
sr. disc. notes stepped-coupon
zero % (11 1/8s, 7/1/01), 2007 ++ 170,000 108,800 430,000 275,200 170,000 108,800
Wireless One, Inc. sr. notes 13s,
2003 150,000 155,250 350,000 362,250 125,000 129,375
------------ ------------ ------------
3,478,441 10,603,612 3,776,329
Textiles --% 0.1% 0.1%
- ---------------------------------------------------------------------------------------------------------------------------------
Polysindo International Finance
company guaranty 11 3/8s,
2006 (Indonesia) $60,000 $63,150 $185,000 $194,713 $65,000 $68,413
Reeves Industries Inc. sub. deb.
13 3/4s, 2001 -- -- -- -- 150,000 134,625
Tultex Corp. sr. notes 10 5/8s, 2005 150,000 157,500 400,000 420,000 125,000 131,250
------------ ------------ ------------
220,650 614,713 334,288
Tobacco --% --% 0.10%
- ---------------------------------------------------------------------------------------------------------------------------------
RJR Nabisco, Inc. notes
8 3/4s, 2005 50,000 49,068 145,000 142,297 155,000 152,111
Transportation --% --% --%
- ---------------------------------------------------------------------------------------------------------------------------------
Blue Bird Body Co. sub. deb.
Ser. B, 11 3/4s, 2002 30,000 31,050 80,000 82,800 20,000 20,700
Greenwich Air Services, Inc. sr.
notes 10 1/2s, 2006 65,000 66,788 185,000 190,088 60,000 61,650
------------ ------------ ------------
97,838 272,888 82,350
Utilities 0.2% 0.4% 0.8%
- ---------------------------------------------------------------------------------------------------------------------------------
Connecticut Light & Power
1st mtge. 7 7/8s, 2001 40,000 40,176 125,000 125,550 130,000 130,572
Empresa National Electric company
guaranty 7.2s, 2006 (Chile) 100,000 97,954 250,000 244,885 345,000 337,941
First PV Funding deb. 10.15s, 2016 75,000 79,500 375,000 397,500 90,000 95,400
Hidroelectric Pierda Aguila 144A
bonds 10 5/8s, 2001
(Argentina) 15,000 15,075 50,000 50,250 15,000 15,075
Iberdrola S.A. notes 7 1/2s,
2002 (Spain) + 75,000 76,875 325,000 333,125 375,000 384,375
Long Island Lighting Co. refunding
mtge. notes 9 5/8s, 2024 200,000 199,310 700,000 697,585 200,000 199,310
Midland Funding Corp. deb. Ser. A,
11 3/4s, 2005 150,000 161,615 250,000 269,358 25,000 26,936
Midland Funding Corp. deb. Ser. B,
13 1/4s, 2006 53,000 60,373 400,000 455,648 175,000 199,346
Niagara Mohawk Power Corp.
1st mtge. 6 7/8s, 2003 150,000 134,814 400,000 359,504 150,000 134,814
Niagara Mohawk Power Corp.
1st mtge. 7 3/4s, 2006 -- -- -- -- 25,000 22,722
Southern California Edison 1st
ref. mtge. 5 7/8s, 2004 70,000 64,795 210,000 194,384 220,000 203,641
Texas New Mexico Pwr. deb.
12 1/2s, 1999 -- -- 250,000 272,520 -- --
------------ ------------ ------------
930,487 3,400,309 1,750,132
Total Corporate Bonds and Notes
(cost $27,513,067, $81,405,530
and $37,513,862) $27,951,628 $83,759,192 $38,103,123
- ---------------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
4.5% 9.1% 13.7%
FOREIGN GOVERNMENT Principal Principal Principal
BONDS AND NOTES* Amount Value Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
AUD Australia (Government of)
bonds Ser. 803, 9 1/2s, 2003 525,000 $456,537 1,555,000 $1,352,220 840,000 $730,459
CAD Canada (Government of)
deb. Ser. A-76, 9s, 2025 385,000 324,527 1,145,000 965,153 520,000 438,323
CAD Canada (Government of)
deb. 8 3/4s, 2005 753,000 615,427 2,570,000 2,100,463 870,000 711,052
CAD Canada (Government of)
deb. 7 1/2s, 2001 2,810,000 2,166,824 7,800,000 6,014,672 4,045,000 3,119,147
CAD Canada (Government of)
bonds 7s, 2006 920,000 668,753 2,810,000 2,042,605 1,260,000 915,901
DKK Denmark (Government of)
bonds 9s, 2000 3,090,000 595,846 7,935,000 1,530,109 4,610,000 888,948
DKK Denmark (Government of)
bonds 8s, 2003 7,310,000 1,359,605 22,465,000 4,178,320 9,175,000 1,706,481
DKK Denmark (Government of)
bonds 7s, 2004 1,700,000 297,007 5,005,000 874,423 2,725,000 476,084
FRF France Treasury bill 7s, 2000 5,145,000 1,072,872 15,690,000 3,271,791 7,175,000 1,496,182
FRF France Treasury bill 4 1/2s, 1998 3,285,000 642,039 10,225,000 1,998,433 4,670,000 912,732
DEM Germany (Federal Republic of)
bonds Ser. 95 7 3/8s, 2005 690,000 492,502 2,020,000 1,441,816 835,000 595,998
DEM Germany (Federal Republic of)
bonds Ser. 95 6 7/8s, 2005 220,000 152,125 785,000 542,808 895,000 618,870
DEM Germany (Federal Republic of)
bonds Ser. 96, 6 1/4s, 2006 780,000 517,102 2,335,000 1,547,990 1,065,000 706,043
DEM Germany (Federal Republic of)
bonds Ser. 115 5 7/8s, 2000 1,305,000 892,107 2,871,000 1,962,634 -- --
DEM Germany (Federal Republic of)
bonds 5 5/8s, 1998 355,000 241,051 1,165,000 791,054 490,000 332,718
DEM Germany (Federal Republic of)
bonds Ser. 116
5 3/4s, 2000 1,635,000 1,112,336 5,290,000 3,598,934 2,485,000 1,690,615
DEM Germany (Federal Republic of)
bonds Ser. 118, 5 1/4s, 2001 2,765,000 1,840,311 8,685,000 5,780,508 3,980,000 2,648,984
ITL Italy (Government of) bonds
9 1/2s, 2001 1,370,000,000 952,615 4,185,000,000 2,909,995 1,880,000,000 1,307,238
ITL Italy (Government of) bonds
9 1/2s, 2001 3,760,000,000 2,608,304 11,390,000,000 7,901,219 5,140,000,000 3,565,607
USD Quebec (Province of) deb.
Ser.. NN, 7 1/8s, 2024 135,000 123,516 395,000 361,397 420,000 384,271
ESP Spain (Government of)
deb. 10.1s, 2001 212,000,000 1,821,839 640,100,000 5,500,751 289,900,000 2,491,279
SEK Sweden (Government of)
bonds Ser. 1036 10 1/4s, 2000 4,500,000 762,804 13,700,000 2,322,315 6,200,000 1,050,974
SEK Sweden (Government of)
deb. Ser. 1035 6s, 2005 4,200,000 581,426 12,600,000 1,744,279 5,700,000 789,078
DEM Treuhandanstalt (Germany
Republic of) 7 1/8s, 2003 -- -- -- -- 230,000 162,961
GBP United Kingdom Conversion
stock 9s, 2000 180,000 300,371 520,000 867,739 265,000 442,213
GBP United Kingdom Treasury bonds
8 1/2s, 2007 780,000 1,287,871 1,655,000 2,732,599 965,000 1,593,328
GBP United Kingdom Treasury
notes 7 3/4s, 2006 225,000 353,558 665,000 1,044,961 300,000 471,411
GBP United Kingdom Treasury
notes 7s, 2001 -- -- 1,676,000 2,612,312 -- --
GBP United Kingdom Treasury
bonds 6 3/4s, 2004 480,000 717,159 1,105,000 1,650,960 745,000 1,113,091
------------ ------------ ------------
Total Foreign Government Bonds
and Notes (cost $22,848,557,
$69,241,666 and $31,186,075) $22,956,434 $69,642,460 $31,359,988
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GROWTH BALANCED CONSERVATIVE
3.2% 6.5% 21.9%
U.S. GOVERNMENT AND Principal Principal Principal
AGENCY OBLIGATIONS* Amount Value Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal National Mortgage
Association pass-through
certificates
9 1/2s, Dwarf, May 1, 2007 $170,788 $179,059 $644,481 $675,694 $773,378 $810,833
7 1/2s, June 1, 2026 1,007,745 995,773 2,497,731 2,468,059 3,523,855 3,481,993
7.4s, May 1, 2026 209,483 206,079 573,584 564,264 698,276 686,930
7s, with various due date from
June 1, 2025 to May 1, 2026 373,927 360,720 552,942 533,413 1,066,029 1,028,379
7s, TBA, October 16, 2026 1,015,000 979,150 3,020,000 2,913,334 3,215,000 3,101,446
6 1/2s, with various due dates
from August 1, 2025 to
May 1, 2026 728,901 684,482 1,704,378 1,600,516 1,968,082 1,848,149
6 1/2s, Dwarf, with various due
dates from January 1, 2011
to June 1, 2011 603,161 584,686 1,627,486 1,577,637 2,063,445 2,000,244
Financing Corp. bonds 9.8s,
November 30, 2017 200,000 252,406 500,000 631,015 750,000 946,523
Financing Corp. bonds zero %,
April 4, 2006 300,000 152,919 900,000 458,757 1,200,000 611,676
Financing Corp. deb. zero %,
March 11, 2006 300,000 151,929 900,000 455,787 1,200,000 607,716
Government National Mortgage
Association pass-through
certificates
9s, with various due dates from
July 15, 2024 to May 15, 2026 605,913 634,882 1,630,065 1,708,000 2,227,456 2,333,953
9s, Midget, November 15, 2006 195,184 203,174 548,954 571,427 731,938 761,903
8s, with various due date from
November 15, 2022 to
15-Sep-26 693,000 699,493 2,160,878 2,181,422 2,650,042 2,679,899
7 1/2s, with various due dates
from August 15, 2025 to
June 15, 2026 1,126,884 1,112,797 3,151,144 3,111,756 4,241,706 4,188,690
7s, with various due dates from
December 15, 2025 to
15-Jun-26 710,085 683,456 1,712,474 1,648,258 1,994,701 1,919,901
7s, Midget, with various dues date
from December 15, 2007 to
15-Jun-09 126,895 125,903 665,611 660,407 674,922 669,645
7s, TBA, October 16, 2026 -- -- 340,000 327,250 435,000 418,688
U.S. Treasury Bonds
9 7/8s, November 15, 2015 $ -- $ -- $535,000 $693,660 $ -- $ --
8 1/8s, August 15, 2019# 1,875,000 2,096,775 5,485,000 6,133,766 5,050,000 5,647,314
U.S. Treasury Notes
6 7/8s, August 31, 1999# 660,000 670,105 2,625,000 2,665,189 4,760,000 4,832,876
6 1/2s, August 15, 2005 620,000 612,058 200,000 197,438 2,080,000 2,053,355
6 3/8s, July 15, 1999# 1,010,000 1,013,474 2,925,000 2,935,062 1,765,000 1,771,072
6 1/4s, April 30, 2001 3,575,000 3,546,507 7,630,000 7,569,189 7,935,000 7,871,758
6 1/4s, June 30, 1998# -- -- 1,985,000 1,990,578 -- --
5 3/4s, August 15, 2003 -- -- 5,150,000 4,912,637 -- --
------------ ------------ ------------
Total U.S. Government and
Agency Obligations
(cost $15,997,964, $49,359,579,
and $50,573,580) $15,945,827 $49,184,515 $50,272,943
- ---------------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
0.3% 0.5% 2.1%
ASSET-BACKED Principal Principal Principal
SECURITIES* Amount Value Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------------------------------------
Aames Mortgage Trust Ser. 96-B,
Class A1C, 7 5/8s, 2024 $230,000 $233,019 $635,000 $643,334 $750,000 $759,844
Associates Manufactured Housing
Ser. 96-1, Class A3, 7s, 2027 120,000 120,675 360,000 362,025 385,000 387,166
Discover Card Master Trust
Ser. 95-2, Class A, 6.55s, 2003 150,000 149,015 400,000 397,372 500,000 496,715
Fifth Third Auto Grantor Trust
Ser. 96-B, Class A, 6.45s, 2002 120,000 120,384 365,000 366,168 385,000 386,232
First Deposit Master Trust
Ser. 93-2A, 5 3/4s, 2001 50,000 49,641 175,000 173,742 195,000 193,598
First Plus Home Loan Trust
Ser. 96-2, Class A2, 6.95s, 2006 194,942 195,826 529,843 532,244 639,810 642,710
Green Tree Financial Corp.
Ser. 93-4, Class A1, 4.85s, 2019 17,355 17,317 45,534 45,434 49,453 49,344
Green Tree Financial Corp.
Ser. 95-10, Class A, 5 3/4s, 2027 77,231 77,207 205,951 205,885 283,182 283,091
MBNA Master Card Trust Ser. 95-F,
Class A, 6.6s, 2003 145,000 144,727 390,000 389,267 490,000 489,079
Premier Auto Trust Ser. 96-4,
Class A4, 6.4s, 2001 110,000 109,622 345,000 343,813 360,000 358,762
Standard Credit Card Master Trust
Ser. 94-4A, 8 1/4s, 2003 225,000 236,671 570,000 599,566 660,000 694,234
------------ ------------ ------------
Total Asset-Backed Securities
(cost $1,463,482, $4,079,320
and $4,766,873) $1,454,104 $4,058,850 $4,740,775
- ---------------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
0.3% 0.5% 1.9%
COLLATERALIZED MORTGAGE Principal Principal Principal
OBLIGATIONS* Amount Value Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------------------------------------
Chase Mortgage Finance
Corp. Ser. 94-1, Class B2,
6.611s, 2025 $ -- $ -- $189,505 $170,436 $189,133 $170,101
Citicorp Mtge. Securities, Inc.
Ser. 94-9, Class A3,
5 3/4s, 2009 205,000 196,800 535,000 513,600 615,000 590,400
CBM Funding Corp. Ser. 96-1,
Class A1, 7.55s, 2004 105,410 106,580 265,635 268,582 320,449 324,004
Collateralized Mortgage
Obligation Trust Ser. 64,
Class Z, 9s, 2020 407,953 437,275 1,266,354 1,357,373 1,359,843 1,457,582
Federal National Mortgage
Association Ser. 94-63A,
7s, 2023 115,336 104,379 408,481 369,675 408,481 369,675
GE Capital Mortgage
Services, Inc. Ser. 94-8A2,
6s, 2024 90,000 87,975 335,000 327,463 375,000 366,563
GE Capital Mortgage
Services, Inc. Ser. 96-12,
Class A4, 7 1/4s, 2011 139,141 136,619 377,667 370,822 452,207 444,011
Residential Funding Mortgage
Securities I Ser. 93-S36,
Class A3, 5.065s, 2008 225,000 216,984 500,000 482,188 600,000 578,625
------------ ------------ ------------
Total Collateralized
Mortgage Obligations
(cost $1,283,273, $3,831,436
and $4,273,073) $1,286,612 $3,860,139 $4,300,961
- ---------------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
0.2% 0.4% 0.4%
PREFERRED STOCKS* Number of Number of Number of
Shares Value Shares Value Shares Value
- ---------------------------------------------------------------------------------------------------------------------------------
Cablevision Systems Corp.
Ser. M, $11.125 dep. shs. pfd. 2,084 $203,190 6,149 $599,528 1,928 $187,980
California Federal Bank Ser. B,
$10.625 exch. pfd. 1,455 160,050 3,150 346,500 1,650 181,500
Chevy Chase Savings Bank Inc.
$3.25 pfd. 5,675 183,019 12,500 403,125 3,150 101,588
El Paso Electric Co. $11.40 pfd 2,500 287,500 7,500 862,500 2,000 230,000
First Nationwide Bank $11.50 pfd. -- -- 3,500 395,500 -- --
Pantry Pride Inc. Ser. B,
$14.875 pfd. 152 15,200 800 80,000 500 50,000
Time Warner, Inc. 144A Ser. K,
$10.25 pfd. 204 214,200 613 643,650 153 160,650
------------ ------------ ------------
Total Preferred Stocks
(cost $1,023,133, $3,463,638
and $887,787) $1,063,159 $3,330,803 $911,718
- ---------------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
0.1% 0.2% 0.2%
UNITS* Number of Number of Number of
Units Value Units Value Units Value
- ---------------------------------------------------------------------------------------------------------------------------------
Celcaribe S.A. 144A units
stepped-coupon zero %
(13 1/2s, 3/15/98), 2004 ++ 3 32,700 22 239,800 2 21,800
Cellnet Data Systems Inc. units
stepped-coupon zero %
(13s, 6/15/00), 2005 ++ 125 97,500 400 312,000 100 78,000
Cobblestone Holdings, Inc.
144A units zero %, 2004 30 11,850 90 35,550 30 11,850
Diva Systems Corp. 144A units
stepped-coupon zero %
(13s, 5/15/01), 2006 ++ 75 42,750 220 125,400 75 42,750
Fitzgerald Gaming Co. units
13s, 2002 75 57,000 225 171,000 100 76,000
Interact Systems, Inc. 144A units
stepped-coupon zero %
(14s, 8/1/99), 2003 ++ 100 69,000 300 207,000 90 62,100
International Wireless
Communications units zero %, 2001 40 21,200 115 60,950 40 21,200
Sterling Chemical Holdings units
stepped-coupon zero %
(13 1/2s, 8/15/01), 2008 ++ 35 20,738 110 65,175 30 17,775
Terex Corp. 144A units
13 3/4s, 2002 125 131,563 150 157,875 50 52,625
Wireless One Inc. units
stepped-coupon zero %
(13 1/2s, 8/1/01), 2006 ++ 130 70,525 400 217,000 120 65,100
------------ ------------ ------------
Total Units
(cost $508,488, $1,493,336
and $431,873) $554,826 $1,591,750 $449,200
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GROWTH BALANCED CONSERVATIVE
PURCHASED OPTIONS
OUTSTANDING* --% 0.1% 0.1%
EXPIRATION DATE/ Number of Number of Number of
STRIKE PRICE Contracts Value Contracts Value Contracts Value
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Italian Government
Bonds Futures
Contracts (Call) Nov 96/119.6 ITL 1,200,000,000 $19,068 4,000,000,000 $63,559 1,800,000,000 $28,601
Japanese Government
Bonds Futures
Contracts (Call) Nov 96/117.5 JPY 397,000,000 169,414 1,211,000,000 516,778 542,000,000 231,291
-------- -------- --------
Total Purchased
Options Outstanding
(cost $163,442, $499,919
and $223,785) $188,482 $580,337 $259,892
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GROWTH BALANCED CONSERVATIVE
--% --% 0.1%
CONVERTIBLE PREFERRED
STOCKS* (cost $120,250,
$252,525 and $102,213) Shares Value Shares Value Shares Value
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Granite Broadcasting Corp.
$1.938 cv. pfd. 2,000 $151,000 4,200 $317,100 1,700 $128,350
- ---------------------------------------------------------------------------------------------------------------------------------
GROWTH BALANCED CONSERVATIVE
--% --% 0.1%
CONVERTIBLE Principal Principal Principal
BONDS AND NOTES* Amount Value Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------------------------------------
GST Telecommunications, Inc.
sr. disc. notes stepped-coupon
zero % (13 7/8s, 15/15/00), 2005 ++ 21,000 $19,530 59,000 $54,870 17,000 $15,810
Pricellular Wireless Corp. 144A
cv. sub. notes stepped-coupon
zero % (10 3/4s, 8/15/00), 2004 ++ 94,000 89,300 206,000 195,700 77,000 73,150
------------ ------------ ------------
Total Convertible Bonds
and Notes (cost $66,538,
$171,127 and $61,008) $108,830 $250,570 $88,960
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GROWTH BALANCED CONSERVATIVE
--% --% --%
Expiration Number of Number of Number of
WARRANTS+* Date Warrants Value Warrants Value Warrants Value
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Commodore Media
Inc. 144A + 5/1/00 60 $7,800 -- $ -- -- $ --
County Seat Holdings,
Inc. + 10/15/98 65 65 200 200 110 110
Danieli & Co. (Italy) + 11/30/99 3,350 2,090 4,500 2,807 1,550 967
Intelcom Group 10/15/05 429 6,650 858 13,299 330 5,115
Intermedia Communications
Inc. 144A 6/1/00 100 4,000 350 14,000 -- --
Petracom Holdings, Inc. 8/1/05 -- -- 1,001 7,132 399 2,843
Rieter Holdings
(Switzerland) 2/28/97 916 1,095 1,800 2,152 316 378
Telemedia Broadcasting
Corp. 144A 4/1/04 -- -- 4 3,371 -- --
UCC Investor Holding, Inc. 10/30/99 10 130 30 390 20 260
Wireless One, Inc. 10/14/00 450 2,363 1,050 5,513 375 1,969
------- ------- -------
Total Warrants (cost $5,999,
$26,521 and $5,648) $24,193 $48,864 $11,642
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
GROWTH BALANCED CONSERVATIVE
9.1% 8.4% 8.9%
SHORT-TERM
INVESTMENTS*
(cost $46,328,270, Principal Principal Principal
$63,646,987 and $20,304,186) Amount Value Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------------------------------------
Interest in $374,793,000
joint repurchase agreement
dated September 30, 1996
with Morgan Stanley due
October 1, 1996 with respect
to various U.S. Treasury
obligations -- maturity value of
$46,328,270, $63,646,987 and
$20,304,186, for an effective
yield of 5.65% 46,321,000 $46,328,270 63,637,000 $63,646,987 20,301,000 $20,304,186
- ---------------------------------------------------------------------------------------------------------------------------------
Total Investments
(cost $444,202,467, $685,701,500
and $217,501,198) *** $506,738,484 $759,637,234 $229,185,490
- ---------------------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets as follows:
Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Growth portfolio $508,628,270
Balanced portfolio $763,329,625
Conservative portfolio $228,860,587
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
*** The aggregate identified cost on a tax basis is as follows:
Net
Aggregate Gross Unrealized Gross Unrealized Unrealized
Identified Cost Appreciation Depreciation Appreciation
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth portfolio $444,735,172 $70,837,420 $8,834,108 $62,003,312
Balanced portfolio 687,989,308 84,092,296 12,444,370 71,647,926
Conservative portfolio 221,403,886 10,332,121 2,550,517 7,781,604
- ---------------------------------------------------------------------------------------------------------------------------------
+ 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 receiving interest at this rate.
[DBL. DAGGER] Restricted, excluding 144A securities, as to public resale. Grand Union was
acquired on various dates from 3/7/94 to 12/8/94 with a cost of $115,725,
$252,731, and $112,188 for Growth, Balanced and Conservative portfolios,
respectively. The total mark
[2 DBL. DAGGERS] Income may be received in cash or additional securities at the discretion
of the issuer.
# A portion of these securities were pledged to cover margin requirements for futures
contracts at September 30, 1996. The market value of segregated securities with
the custodian for transactions on futures contracts are as follows:
Market % of
Value Net Assets
- ---------------------------------------------------------------------------
Growth portfolio $2,741,252 0.54%
Balanced portfolio $3,570,447 0.47%
Conservative portfolio $1,166,591 0.51%
- ---------------------------------------------------------------------------
(R) Real Estate Investment Trust.
144A after the name of a security represents those exempt from registration under Rule 144A
of the Securities Act of 1933. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
ADR or ADS after the name of a foreign holding stands for American Depository Receipts or
American Depository Shares, respectively, representing ownership of foreign securities
on deposit with a domestic custodian bank.
TBA after the name of a security represents to be announced securities (Note 1).
<CAPTION>
Forward Currency Contracts to Buy
at September 30, 1996 GROWTH
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Australian Dollars $1,294,146 $1,293,659 12/18/96 $487
British Pounds 1,010,542 1,008,987 12/18/96 1,555
Deutschemarks 5,037,053 5,112,899 12/18/96 (75,846)
Euro Currency 543,945 550,269 12/18/96 (6,324)
French Franc 2,628,480 2,686,285 12/18/96 (57,805)
Italian Lira 479,126 480,260 12/18/96 (1,134)
Japanese Yen 4,645,028 4,795,513 12/18/96 (150,485)
Swedish Krona 210,953 210,892 12/18/96 61
- --------------------------------------------------------------------------------------------
($289,491)
- --------------------------------------------------------------------------------------------
Forward Currency Contracts to Sell
at September 30,1996 GROWTH
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
British Pounds $1,314,374 $1,274,448 11/12/96 ($39,926)
Canadian Dollars 1,341,822 1,331,446 12/18/96 (10,376)
Danish Krona 1,596,107 1,624,539 12/18/96 28,432
Deutschemarks 7,136,699 7,228,011 12/18/96 91,312
Deutschemarks 2,974,169 3,035,047 11/12/96 60,878
Dutch Guilders 2,927,527 2,964,102 11/12/96 36,575
French Francs 1,416,323 1,450,385 12/18/96 34,062
French Francs 4,720,345 4,712,897 11/12/96 (7,448)
Italian Lira 1,566,036 1,564,374 12/18/96 (1,662)
Japanese Yen 5,005,617 5,070,300 12/18/96 64,683
Japanese Yen 13,189,958 13,363,394 1/6/97 173,436
Spanish Pesetas 842,607 848,426 12/18/96 5,819
Swedish Krona 805,221 806,338 12/18/96 1,117
Swiss Francs 1,297,583 1,319,919 12/18/96 22,336
- --------------------------------------------------------------------------------------------
$459,238
- --------------------------------------------------------------------------------------------
Futures Contracts Outstanding
at September 30, 1996 GROWTH
Unrealized
Aggregate Expiration Appreciation /
Total Value Face Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
Dax Index (long) $10,335,639 $10,181,891 Dec-96 $153,748
FT-SE 100 Index (long) 12,171,215 11,703,638 Dec-96 467,577
Japanese Government
Bonds (short) 4,937,427 5,011,885 Dec-96 74,458
Nikkei 225 SMX (long) 15,007,751 14,415,586 Dec-96 592,165
S&P Index (long) 4,494,100 4,354,675 Dec-96 139,425
UK Treasury Bonds (short) 1,700,035 1,676,651 Dec-96 (23,384)
US Treasury Bonds (short) 7,391,563 7,350,000 Dec-96 (41,563)
US Treasury Bonds (short) 9,869,875 9,780,452 Dec-96 (89,423)
- --------------------------------------------------------------------------------------------
$1,273,003
- --------------------------------------------------------------------------------------------
Forward Currency Contracts to Buy
at September 30,1996 BALANCED
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
Australian Dollars $3,863,340 $3,861,178 12/18/96 $2,162
British Pounds 7,773,123 7,944,069 12/18/96 (170,946)
Deutschemarks 6,616,731 6,749,953 12/18/96 (133,222)
Euro Currency 1,614,413 1,633,182 12/18/96 (18,769)
French Franc 1,939,812 1,936,827 12/18/96 2,985
Italian Lira 1,971,745 1,976,412 12/18/96 (4,667)
Japanese Yen 15,436,464 15,937,225 12/18/96 (500,761)
Swedish Krona 718,815 718,608 12/18/96 207
- --------------------------------------------------------------------------------------------
($823,011)
- --------------------------------------------------------------------------------------------
Forward Currency Contracts to Sell
at September 30,1996 BALANCED
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
British Pounds $2,262,089 $2,207,133 11/12/96 ($54,956)
Canadian Dollars 3,771,249 3,742,283 12/18/96 (28,966)
Danish Krona 4,783,097 4,863,959 12/18/96 80,862
Deutschemarks 12,912,800 13,104,032 12/18/96 191,232
Deutschemarks 4,498,406 4,597,307 11/12/96 98,901
Dutch Guilder 4,435,291 4,486,839 11/12/96 51,548
French Francs 4,134,316 4,233,744 12/18/96 99,428
French Francs 7,098,000 7,094,058 11/12/96 (3,942)
Italian Lira 5,370,198 5,363,951 12/18/96 (6,247)
Japanese Yen 16,528,103 16,752,247 12/18/96 224,144
Japanese Yen 19,971,823 20,242,604 1/6/97 270,781
Spanish Peseta 2,505,266 2,522,583 12/18/96 17,317
Swedish Krona 2,528,094 2,531,461 12/18/96 3,367
Swiss Francs 3,832,306 3,898,205 12/18/96 65,899
- --------------------------------------------------------------------------------------------
$1,009,368
- --------------------------------------------------------------------------------------------
Futures Contracts Outstanding
at September 30, 1996 BALANCED
Unrealized
Aggregate Expiration Appreciation/
Total Value Face Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
Dax Index (long) $16,992,492 $16,766,619 Dec-96 $225,873
FT-SE 100 Index (long) 21,221,605 20,439,404 Dec-96 782,201
Japanese Government
Bonds (short) 7,131,840 7,228,032 Dec-96 96,192
Nikkei 225 SMX (long) 17,718,828 17,047,027 Dec-96 671,801
S&P Index (long) 6,568,300 6,364,525 Dec-96 203,775
UK Treasury Bonds (short) 4,845,100 4,771,017 Dec-96 (74,083)
US Treasury Bonds (short) 8,341,906 8,295,000 Dec-96 (46,906)
US Treasury Bonds (short) 10,728,125 10,630,924 Dec-96 (97,201)
- --------------------------------------------------------------------------------------------
$1,761,652
- --------------------------------------------------------------------------------------------
Forward Currency Contracts to Buy
at September 30,1996 CONSERVATIVE
Unrealized
Aggregate Face Delivery Appreciation/
Market Value Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
Australian Dollars $1,620,922 $1,620,022 12/18/96 $900
British Pounds 1,362,382 1,360,285 12/18/96 2,097
Deutschemarks 3,641,519 3,714,863 12/18/96 (73,344)
Euro Currency 733,323 741,848 12/18/96 (8,525)
French Franc 3,788,381 3,871,695 12/18/96 (83,314)
Italian Lira 666,879 668,457 12/18/96 (1,578)
Japanese Yen 7,711,037 7,960,430 12/18/96 (249,393)
Swedish Krona 215,948 215,885 12/18/96 63
- --------------------------------------------------------------------------------------------
($413,094)
- --------------------------------------------------------------------------------------------
Forward Currency Contracts to Sell
at September 30,1996 CONSERVATIVE
Unrealized
Market Aggregate Face Delivery Appreciation/
Value Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
British Pounds $414,654 $402,058 11/12/96 ($12,596)
Canadian Dollar 1,832,350 1,817,871 12/18/96 (14,479)
Danish Krone 2,116,082 2,155,268 12/18/96 39,186
Deutschemarks 6,114,133 6,209,631 12/18/96 95,498
Deutschemarks 908,755 927,837 11/12/96 19,082
Dutch Guilder 904,659 916,356 11/12/96 11,697
French Franc 2,169,839 2,222,023 12/18/96 52,184
French Franc 1,436,500 1,432,682 11/12/96 (3,818)
Italian Lira 2,174,014 2,171,723 12/18/96 (2,291)
Japanese Yen 4,047,247 4,102,471 1/6/97 55,224
Japanese Yen 8,207,506 8,323,042 12/18/96 115,536
Spanish Peseta 1,104,877 1,112,537 12/18/96 7,660
Swedish Krona 1,042,433 1,043,918 12/18/96 1,485
Swiss Franc 1,762,817 1,793,165 12/18/96 30,348
- --------------------------------------------------------------------------------------------
$394,716
- --------------------------------------------------------------------------------------------
Futures Contracts Outstanding
at September 30, 1996 CONSERVATIVE
Unrealized
Aggregate Expiration Appreciation/
Total Value Face Value Date (Depreciation)
- --------------------------------------------------------------------------------------------
Dax Index (long) $5,255,410 $5,187,351 Dec-96 $68,059
FT-SE 100 Index (long) 6,553,731 6,313,130 Dec-96 240,601
Japanese Government
Bonds (short) 2,194,412 2,223,231 Dec-96 28,819
Nikkei 225 SMX (long) 5,228,507 5,032,516 Dec-96 195,991
S&P Index (long) 2,074,200 2,009,850 Dec-96 64,350
UK Treasury Bonds (short) 2,380,049 2,342,815 Dec-96 (37,234)
US Treasury Bonds (short) 2,006,281 1,995,000 Dec-96 (11,281)
US Treasury Bonds (short) 3,003,875 2,976,658 Dec-96 (27,217)
- --------------------------------------------------------------------------------------------
$522,088
- --------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1996
Putnam Asset Allocation: Growth Portfolio
<S> <C>
Assets
- ------------------------------------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $444,202,467) (Note 1) $506,738,484
- ------------------------------------------------------------------------------------------------------------------------------
Cash 1,829,835
- ------------------------------------------------------------------------------------------------------------------------------
Foreign currency 1,019,476
- ------------------------------------------------------------------------------------------------------------------------------
Dividends and interest receivable 2,135,183
- ------------------------------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 2,273,901
- ------------------------------------------------------------------------------------------------------------------------------
Receivable for securities sold 7,778,808
- ------------------------------------------------------------------------------------------------------------------------------
Receivable for variation margin 159,089
- ------------------------------------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 615,007
- ------------------------------------------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 307,383
- ------------------------------------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 6,257
- ------------------------------------------------------------------------------------------------------------------------------
Total assets 522,863,423
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------
Payable for securities purchased 11,674,176
- ------------------------------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 268,773
- ------------------------------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 812,547
- ------------------------------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 294,665
- ------------------------------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,099
- ------------------------------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 318,085
- ------------------------------------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 13,264
- ------------------------------------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 445,260
- ------------------------------------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 196,108
- ------------------------------------------------------------------------------------------------------------------------------
Other accrued expenses 210,176
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 14,235,153
- ------------------------------------------------------------------------------------------------------------------------------
Net assets $508,628,270
- ------------------------------------------------------------------------------------------------------------------------------
Represented by
Paid-in capital (Notes 1 and 4) $413,302,519
- ------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 2,624,826
- ------------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment and foreign currency transactions (Note 1) 28,733,715
- ------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and liabilities in foreign currencies 63,967,210
- ------------------------------------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $508,628,270
- ------------------------------------------------------------------------------------------------------------------------------
Computation of net asset value and offering price
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share ($210,531,044 divided by 18,450,959 shares) $11.41
- ------------------------------------------------------------------------------------------------------------------------------
Offering price per Class A share (100/94.25 of $11.41)* $12.11
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share ($199,870,658 divided by 17,703,575 shares)** $11.29
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value and offering price per class C share ($27,556,472 divided by 2,452,249 shares)** $11.24
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share ($12,369,117 divided by 1,092,639 shares) $11.32
- ------------------------------------------------------------------------------------------------------------------------------
Offering price per Class M share (100/96.5 of $11.32)* $11.73
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share ($58,300,979 divided by 5,084,268 share $11.47
- ------------------------------------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales 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.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended September 30,1996
Putnam Asset Allocation: Growth Portfolio
<S> <C>
Investment Income
- ---------------------------------------------------------------------------------------------------------------------------------
Interest income (net of foreign tax of $23,500) $6,508,042
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $107,843) 5,622,541
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment income 12,130,583
Expenses:
- ---------------------------------------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 2,703,753
- ---------------------------------------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,623,073
- ---------------------------------------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 13,754
- ---------------------------------------------------------------------------------------------------------------------------------
Administrative services (Note 2) 8,421
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 406,772
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 1,528,618
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 159,994
- ---------------------------------------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 44,914
- ---------------------------------------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 2,653
- ---------------------------------------------------------------------------------------------------------------------------------
Reports to shareholders 45,563
- ---------------------------------------------------------------------------------------------------------------------------------
Registration fees 71,230
- ---------------------------------------------------------------------------------------------------------------------------------
Auditing 46,140
- ---------------------------------------------------------------------------------------------------------------------------------
Legal 11,075
- ---------------------------------------------------------------------------------------------------------------------------------
Postage 131,115
- ---------------------------------------------------------------------------------------------------------------------------------
Other 13,574
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses 6,810,649
- ---------------------------------------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (115,714)
- ---------------------------------------------------------------------------------------------------------------------------------
Net expenses 6,694,935
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 5,435,648
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 32,749,725
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Notes 1 and 3) (2,631,152)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 16,468
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on forward currency contracts and foreign currency translation. 1,498,547
- ---------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in foreign currencies 106,467
- ---------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments futures and written options during the year 29,660,779
- ---------------------------------------------------------------------------------------------------------------------------------
Net gain on investments 61,400,834
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $66,836,482
- ---------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Putnam Asset Allocation: Growth Portfolio
Year ended September 30
---------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ------------------------------------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $5,435,648 $3,056,348
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 31,633,588 6,293,162
- ------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and liabilities in foreign curr 29,767,246 32,012,561
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 66,836,482 41,362,071
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income:
Class A (2,471,036) (496,426)
- ------------------------------------------------------------------------------------------------------------------------------
Class B (1,771,400) (367,240)
- ------------------------------------------------------------------------------------------------------------------------------
Class C (137,682) (17,618)
- ------------------------------------------------------------------------------------------------------------------------------
Class M (60,532) --
- ------------------------------------------------------------------------------------------------------------------------------
Class Y (894,776) (16,310)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments:
- ------------------------------------------------------------------------------------------------------------------------------
Class A (3,563,495) --
- ------------------------------------------------------------------------------------------------------------------------------
Class B (3,394,151) --
- ------------------------------------------------------------------------------------------------------------------------------
Class C (263,811) --
- ------------------------------------------------------------------------------------------------------------------------------
Class M (96,428) --
- ------------------------------------------------------------------------------------------------------------------------------
Class Y (1,178,695) --
- ------------------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 160,838,514 158,827,779
- ------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 213,842,990 199,292,256
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Beginning of year 294,785,280 95,493,024
- ------------------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income
of $2,624,826 and $2,524,604 respectively) $508,628,270 $294,785,280
- ------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Growth Portfolio
For the period
July 14, 1994
Year Year (commencement
ended ended of operations) to
September 30 September 30 September 30
- ----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
Class Y
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.09 $8.43 $8.22
- ----------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) .21 .17 (a) .03(a)
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.65 1.57 .18
- ----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.86 1.74 .21
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ----------------------------------------------------------------------------------------------------------------------------------
From net investment income (.21) (.08) --
- ----------------------------------------------------------------------------------------------------------------------------------
From net realized gain (.27) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.48) (.08) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.47 $10.09 $8.43
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 19.20 20.94 2.55 *
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $58,301 $45,150 $775
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.21 1.28(a) .20(a)*
- ----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 1.97 2.05(a) .50(a)*
- ----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 100.93 88.36 39.9*
- ----------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $.0486
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
Putnam Asset Allocation: Growth Portfolio
For the period
February 3, 1995
Year (commencement Year
ended of operations) to ended
September 30 September 30 September 30
- -------------------------------------------------------------------------------------------------------------------------------
1996 1995 1996
- -------------------------------------------------------------------------------------------------------------------------------
Class M Class C
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $10.01 $8.39 $9.93
- -------------------------------------------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) .12 .08 (a) .10
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.64 1.54 1.63
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.76 1.62 1.73
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income (.18) -- (.15)
- -------------------------------------------------------------------------------------------------------------------------------
From net realized gain (.27) -- (.27)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.45) -- (.42)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.32 $10.01 $11.24
- -------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 18.21 19.31* 18.01
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $12,369 $3,160 $27,556
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.95 1.45(a)* 2.23
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 1.16 .79(a)* .94
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 100.93 88.36 100.93
- -------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $.0486 $.0486
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
Putnam Asset Allocation: Growth Portfolio
For the period
September 1, 1994
Year (commencement Year
ended of operations) to ended
September 30 September 30 September 30
- --------------------------------------------------------------------------------------------------------------------------------
1995 1994 1996
- --------------------------------------------------------------------------------------------------------------------------------
Class C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.39 $8.46 $9.97
- --------------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) .11(a) .01(a) .10
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.51 (.08) 1.64
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.62 (.07) 1.74
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------------
From net investment income (.08) -- (.15)
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain -- -- (.27)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.08) -- (.42)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.93 $8.39 $11.29
- --------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 19.46 (.83)* 18.04
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $7,985 $385 $199,871
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 2.23(a) .15(a)* 2.21
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 1.24(a) .14(a)* .95
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 88.36 39.9 * 100.93
- --------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $.0486
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
Putnam Asset Allocation: Growth Portfolio
For the period
February 16, 1994
Year (commencement Year
ended of operations) to ended
September 30 September 30 September 30
- -------------------------------------------------------------------------------------------------------------------------------
1995 1994 1996
- -------------------------------------------------------------------------------------------------------------------------------
Class B
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.39 $8.50 $10.06
- -------------------------------------------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) .11(a) .06(a) .18
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.52 (.17) 1.63
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.63 (.11) 1.81
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income (.05) -- (.19)
- -------------------------------------------------------------------------------------------------------------------------------
From net realized gain -- -- (.27)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.05) -- (.46)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.97 $8.39 $11.41
- -------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 19.57 (1.29)* 18.75
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $116,263 $50,664 $210,531
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 2.23(a) 1.21(a)* 1.45
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 1.22(a) .80(a)* 1.72
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 88.36 39.9 * 100.93
- -------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $.0486
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
Putnam Asset Allocation: Growth Portfolio
For the period
February 8, 1994
Year (commencement
ended of operations) to
September 30 September 30
- -----------------------------------------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $8.43 $8.50
- -----------------------------------------------------------------------------------------------------------
Investment operations
- -----------------------------------------------------------------------------------------------------------
Net investment income (d) .18(a) .10(a)
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.53 (.17)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations 1.71 (.07)
- -----------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------
From net investment income (.08) --
- -----------------------------------------------------------------------------------------------------------
From net realized gain -- --
- -----------------------------------------------------------------------------------------------------------
Total distributions (.08) --
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.06 $8.43
- -----------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 20.45 (.82)*
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $122,228 $43,669
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.49(a) .78(a)*
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 1.98(a) 1.31(a)*
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 88.36 39.9*
- -----------------------------------------------------------------------------------------------------------
Average commission rate paid (e)
- -----------------------------------------------------------------------------------------------------------
* Not annualized
(a) Reflects an expense limitation. As a result of such limitation, expenses for the period ended September 30,
1994, reflect a reduction of $0.05, $0.05, $0.01 and $0.01 per share for class A, class B, class C and class
Y shares, respectively. Expenses for the year ended September 30, 1995 reflect a reduction of less than $0.01
per share for class A, class B, class C, class M and class Y, respectively.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expenses to average net assets for the period ended September 30, 1995 and thereafter, includes
amounts paid through expense offset and brokerage service arrangements. Prior period ratios exclude these
amounts (See Note 2)
(d) Per share net investment income has been determined on the basis of the weighted average number of shares
outstanding during the period.
(e) Average commision rate paid is presented for fiscal periods beginning on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1996
Putnam Asset Allocation: Balanced Portfolio
<S> <C>
Assets
- --------------------------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $685,701,500) (Note 1) $759,637,234
- --------------------------------------------------------------------------------------------------------------------
Cash 89,590
- --------------------------------------------------------------------------------------------------------------------
Foreign currency 1,470,086
- --------------------------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 5,304,679
- --------------------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 2,589,275
- --------------------------------------------------------------------------------------------------------------------
Receivable for securities sold 15,983,989
- --------------------------------------------------------------------------------------------------------------------
Receivable for variation margin 185,932
- --------------------------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 1,148,359
- --------------------------------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 1,089,190
- --------------------------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 6,246
- --------------------------------------------------------------------------------------------------------------------
Total assets 787,504,580
Liabilities
- --------------------------------------------------------------------------------------------------------------------
Payable for securities purchased 19,799,299
- --------------------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 543,430
- --------------------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 1,209,960
- --------------------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 310,533
- --------------------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 3,102
- --------------------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 449,810
- --------------------------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 13,263
- --------------------------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 962,002
- --------------------------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 644,908
- --------------------------------------------------------------------------------------------------------------------
Other accrued expenses 238,648
- --------------------------------------------------------------------------------------------------------------------
Total liabilities 24,174,955
- --------------------------------------------------------------------------------------------------------------------
Net assets $763,329,625
Represented by
- --------------------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $646,528,067
- --------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 2,877,150
- --------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions (Note 1) 38,037,352
- --------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and liabilities in foreign currencies 75,887,056
- --------------------------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $763,329,625
Computation of net asset value and offering price
- --------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share ($327,326,301 divided by 30,562,789 shares) $10.71
- --------------------------------------------------------------------------------------------------------------------
Offering price per Class A share (100/94.25 of $10.71)* $11.36
- --------------------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share ($264,830,138 divided by 24,821,055 shares)** $10.67
- --------------------------------------------------------------------------------------------------------------------
Net asset value and offering price per class C share ($29,723,864 divided by 2,794,696 shares)** $10.64
- --------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share ($14,967,055 divided by 1,397,303 shares) $10.71
- --------------------------------------------------------------------------------------------------------------------
Offering price per Class M share (100/96.5 of $10.71)* $11.10
- --------------------------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share ($126,482,267 divided
by 11,807,817 shares) $10.71
- --------------------------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales 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.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended September 30, 1996
Putnam Asset Allocation: Balanced Portfolio
<S> <C>
Investment Income
Interest income (net of foreign tax of $76,254) $16,094,718
- ---------------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $173,046) 6,895,324
- ---------------------------------------------------------------------------------------------------------
Total investment income 22,990,042
Expenses:
- ---------------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 3,833,531
- ---------------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,771,206
- ---------------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 15,623
- ---------------------------------------------------------------------------------------------------------
Administrative services (Note 2) 11,521
- ---------------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 583,257
- ---------------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,091,403
- ---------------------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 195,454
- ---------------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 61,710
- ---------------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 2,660
- ---------------------------------------------------------------------------------------------------------
Reports to shareholders 36,461
- ---------------------------------------------------------------------------------------------------------
Registration fees 116,778
- ---------------------------------------------------------------------------------------------------------
Auditing 80,013
- ---------------------------------------------------------------------------------------------------------
Legal 13,790
- ---------------------------------------------------------------------------------------------------------
Postage 110,356
- ---------------------------------------------------------------------------------------------------------
Other 16,914
- ---------------------------------------------------------------------------------------------------------
Total expenses 8,940,677
- ---------------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (161,709)
- ---------------------------------------------------------------------------------------------------------
Net expenses 8,778,968
- ---------------------------------------------------------------------------------------------------------
Net investment income 14,211,074
- ---------------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 39,759,803
- ---------------------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (26,805)
- ---------------------------------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 46,422
- ---------------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 2,193,514
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in foreign currencies 236,996
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments, futures and written options during the year 32,720,833
- ---------------------------------------------------------------------------------------------------------
Net gain on investments 74,930,763
- ---------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $89,141,837
- ---------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Putnam Asset Allocation: Balanced Portfolio
Year ended September 30
----------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ------------------------------------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $14,211,074 $8,310,131
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 41,972,934 9,582,060
- ------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and
liabilities in foreign currencies 32,957,829 39,125,762
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 89,141,837 57,017,953
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income:
Class A (6,120,832) (2,407,935)
- ------------------------------------------------------------------------------------------------------------------------------
Class B (4,209,053) (1,845,737)
- ------------------------------------------------------------------------------------------------------------------------------
Class C (365,863) (109,649)
- ------------------------------------------------------------------------------------------------------------------------------
Class M (164,641) (21,252)
- ------------------------------------------------------------------------------------------------------------------------------
Class Y (2,550,204) (1,632,242)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments:
Class A (5,171,891) --
- ------------------------------------------------------------------------------------------------------------------------------
Class B (5,203,895) --
- ------------------------------------------------------------------------------------------------------------------------------
Class C (396,189) --
- ------------------------------------------------------------------------------------------------------------------------------
Class M (121,806) --
- ------------------------------------------------------------------------------------------------------------------------------
Class Y (2,134,847) --
- ------------------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 301,988,514 145,539,251
- ------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 364,691,130 196,540,389
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Beginning of year 398,638,495 202,098,106
- ------------------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income
of $2,877,150 and $2,076,669 respectively) $763,329,625 $398,638,495
- ------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Putnam Asset Allocation: Balanced Portfolio
For the
period
July 5, 1994
Year Year (commencement
ended ended of operations) to
September 30 September 30 September 30
- ---------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
Class Y
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $9.66 $8.33 $8.11
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income(d) .31 .29(a) .05(a)
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.34 1.26 .22
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.65 1.55 .27
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.31) (.22) (.05)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain (.29) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.60) (.22) (.05)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.71 $9.66 $8.33
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 17.81 18.89 3.34 *
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $126,482 $71,661 $66,081
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.08 1.07(a) .23(a)*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 3.03 3.35(a) .62(a)*
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 122.12 106.03 52.62*
- ---------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $0.0470
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
Putnam Asset Allocation: Balanced Portfolio
For the
period
February 6, 1995
Year (commencement Year
ended of operations) to ended
September 30 September 30 September 30
- --------------------------------------------------------------------------------------------------------------------------------
1996 1995 1996
- --------------------------------------------------------------------------------------------------------------------------------
Class M Class M
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $9.66 $8.34 $9.62
- --------------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income(d) .24 .14(a) .22
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.34 1.31 1.30
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.58 1.45 1.52
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------------
From net investment income (.24) (.13) (.21)
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain (.29) -- (.29)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.53) (.13) (.50)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.71 $9.66 $10.64
- --------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 17.05 17.46* 16.47
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $14,967 $3,509 $29,724
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.84 1.38(a)* 2.09
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 2.42 1.56(a)* 2.18
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 122.12 106.03* 122.12
- --------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $0.0470 $0.0470
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
Putnam Asset Allocation: Balanced Portfolio
For the
period
September 1, 1994
Year (commencement Year
ended of operations) to ended
September 30 September 30 September 30
- ---------------------------------------------------------------------------------------------------------------------------------
1995 1994 1996
- ---------------------------------------------------------------------------------------------------------------------------------
Class C
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.31 $8.41 $9.64
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income(d) .20(a) .01(a) .21
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.27 (.08) 1.32
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.47 (.07) 1.53
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.16) (.03) (.21)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain -- -- (.29)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.16) (.03) (.50)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.62 $8.31 $10.67
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 17.89 (.84)* 16.54
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $11,921 $441 $264,830
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 2.09(a)* .16(a)* 2.08
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 2.22(a)* .11(a)* 2.08
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 106.03 52.62* 122.12
- ---------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $0.0470
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
Putnam Asset Allocation: Balanced Portfolio
For the
period
February 11, 1994
Year (commencement Year
ended of operations) to ended
September 30 September 30 September 30
- -------------------------------------------------------------------------------------------------------------------------------
1995 1994 1996
- -------------------------------------------------------------------------------------------------------------------------------
Class B
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.31 $8.50 $9.67
- -------------------------------------------------------------------------------------------------------------------------------
Investment operations
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income(d) .20(a) .11(a) .29
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.26 (.27) 1.32
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.46 (.16) 1.61
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -------------------------------------------------------------------------------------------------------------------------------
From net investment income (.13) (.03) (.28)
- -------------------------------------------------------------------------------------------------------------------------------
From net realized gain -- -- (.29)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions (.13) (.03) (.57)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.64 $8.31 $10.71
- -------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%) (b) 17.83 (1.89)* 17.41
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $159,230 $81,093 $327,326
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 2.07(a) 1.23(a)* 1.33
- -------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 2.26(a) 1.41(a)* 2.83
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 106.03 52.62* 122.12
- -------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $0.0470
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
(For a share outstanding throughout the period)
Putnam Asset Allocation: Balanced Portfolio
For the
period
February 7, 1994
Year (commencement
ended of operations) to
September 30 September 30
- -----------------------------------------------------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------------------------------------------------
Class A
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $8.33 $8.50
- -----------------------------------------------------------------------------------------------------------
Investment operations
- -----------------------------------------------------------------------------------------------------------
Net investment income(d) .27(a) .16(a)
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.27 (.28)
- -----------------------------------------------------------------------------------------------------------
Total from investment operations 1.54 (.12)
- -----------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------
From net investment income (.20) (.05)
- -----------------------------------------------------------------------------------------------------------
From net realized gain -- --
- -----------------------------------------------------------------------------------------------------------
Total distributions (.20) (.05)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.67 $8.33
- -----------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 18.73 (1.47)*
- -----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $152,317 $54,483
- -----------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.32(a) .83(a)*
- -----------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 2.95(a) 2.13(a)*
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 106.03 52.62*
- -----------------------------------------------------------------------------------------------------------
Average commission rate paid (e)
- -----------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Reflects an expense limitation. As a result of such limitation, expenses for the period ended September
30, 1994 reflect a reduction of $0.05, $0.03, $0.01 and none per share for class A, class B, class C and
class Y shares, respectively. Expenses for the year ended September 30, 1995 reflect a reduction of less
than $0.01 per share for class A, class B, class C, class M and class Y, respectively.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expenses to average net assets for the year ended September 30, 1995 and thereafter, includes
amounts paid through expense offset and brokerage service arrangements. Prior period ratios
exclude these amounts (Note 2).
(d) Per share net investment income has been determined on the basis of the weighted average number of shares
outstanding during the period.
(e) Average commission rate paid is required for fiscal periods beginning on or after September 1, 1995.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1996
Putnam Asset Allocation: Conservative Portfolio
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost $217,501,198) (Note 1) $229,185,490
- -----------------------------------------------------------------------------------------------------------------------------
Cash 13,963
- -----------------------------------------------------------------------------------------------------------------------------
Foreign currency 489,878
- -----------------------------------------------------------------------------------------------------------------------------
Dividends, interest and other receivables 2,437,139
- -----------------------------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 514,468
- -----------------------------------------------------------------------------------------------------------------------------
Receivable for securities sold 6,050,381
- -----------------------------------------------------------------------------------------------------------------------------
Receivable for variation margin 48,806
- -----------------------------------------------------------------------------------------------------------------------------
Receivable for open forward currency contracts 438,280
- -----------------------------------------------------------------------------------------------------------------------------
Receivable for closed forward currency contracts 477,917
- -----------------------------------------------------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 6,257
- -----------------------------------------------------------------------------------------------------------------------------
Total assets 239,662,579
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------
Payable for securities purchased 8,969,710
- -----------------------------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 296,499
- -----------------------------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 378,569
- -----------------------------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 132,960
- -----------------------------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,942
- -----------------------------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 160,053
- -----------------------------------------------------------------------------------------------------------------------------
Payable for organization expenses (Note 1) 13,263
- -----------------------------------------------------------------------------------------------------------------------------
Payable for open forward currency contracts 456,658
- -----------------------------------------------------------------------------------------------------------------------------
Payable for closed forward currency contracts 284,256
- -----------------------------------------------------------------------------------------------------------------------------
Other accrued expenses 108,082
- -----------------------------------------------------------------------------------------------------------------------------
Total liabilities 10,801,992
- -----------------------------------------------------------------------------------------------------------------------------
Net assets $228,860,587
Represented by
- -----------------------------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $207,083,099
- -----------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 2,258,348
- -----------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investment and foreign currency transactions (Note 1) 7,323,170
- -----------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and liabilities in foreign currencies 12,178,050
- -----------------------------------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $228,860,587
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share ($106,932,611 divided by 11,038,202 shares) $9.69
- -----------------------------------------------------------------------------------------------------------------------------
Offering price per Class A share (100/94.25 of $9.69)* $10.28
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share ($94,954,295 divided by 9,833,891 shares)** $9.66
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value and offering price per class C share ($16,326,055 divided by 1,693,468 shares)** $9.64
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share ($4,622,324 divided by 478,010 shares) $9.67
- -----------------------------------------------------------------------------------------------------------------------------
Offering price per Class M share (100/96.50 of $9.67)* $10.02
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price per class Y share ($6,025,302 divided by 621,763 shares) $9.69
- -----------------------------------------------------------------------------------------------------------------------------
* On single retail sales of less than $50,000. On sales of $50,000 or more and on group sales 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.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended September 30, 1996
Putnam Asset Allocation: Conservative Portfolio
<S> <C>
Investment income:
- ------------------------------------------------------------------------------------------------------------
Interest income (net of foreign tax of $27,151) $8,798,356
- ------------------------------------------------------------------------------------------------------------
Dividends (net of foreign tax of $40,531) 1,305,197
- ------------------------------------------------------------------------------------------------------------
Total investment income 10,103,553
Expenses:
- ------------------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) $1,281,120
- ------------------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 797,695
- ------------------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 11,546
- ------------------------------------------------------------------------------------------------------------
Administrative services (Note 2) 7,803
- ------------------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 215,227
- ------------------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 792,793
- ------------------------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 120,680
- ------------------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 18,964
- ------------------------------------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 2,653
- ------------------------------------------------------------------------------------------------------------
Registration fees 42,128
- ------------------------------------------------------------------------------------------------------------
Auditing 44,001
- ------------------------------------------------------------------------------------------------------------
Legal 7,133
- ------------------------------------------------------------------------------------------------------------
Other 34,366
- ------------------------------------------------------------------------------------------------------------
Total expenses 3,376,109
- ------------------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (49,211)
- ------------------------------------------------------------------------------------------------------------
Net expenses 3,326,898
- ------------------------------------------------------------------------------------------------------------
Net investment income 6,776,655
- ------------------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 8,420,228
- ------------------------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 66,676
- ------------------------------------------------------------------------------------------------------------
Net realized gain on written options (Notes 1 and 3) 25,376
- ------------------------------------------------------------------------------------------------------------
Net realized gain on foreign currency transactions (Note 1) 428,274
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of assets and liabilities in foreign currencies 53,968
- ------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments futures and written options during the year 3,730,458
- ------------------------------------------------------------------------------------------------------------
Net gain on investments 12,724,980
- ------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $19,501,635
- ------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Putnam Asset Allocation: Conservative Portfolio
Year ended September 30
----------------------------------
1996 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ------------------------------------------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $6,776,655 $3,922,130
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 8,940,554 2,032,757
- ------------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and assets and liabilities in foreign currencies 3,784,426 8,264,658
- ------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 19,501,635 14,219,545
- ------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholder
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income:
Class A (3,204,010) (1,220,712)
- ------------------------------------------------------------------------------------------------------------------------------
Class B (2,376,868) (1,272,028)
- ------------------------------------------------------------------------------------------------------------------------------
Class C (350,861) (99,096)
- ------------------------------------------------------------------------------------------------------------------------------
Class M (77,650) (14,906)
- ------------------------------------------------------------------------------------------------------------------------------
Class Y (120,711) (30,206)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments:
Class A (1,368,540) --
- ------------------------------------------------------------------------------------------------------------------------------
Class B (1,343,244) --
- ------------------------------------------------------------------------------------------------------------------------------
Class C (177,029) --
- ------------------------------------------------------------------------------------------------------------------------------
Class M (29,335) --
- ------------------------------------------------------------------------------------------------------------------------------
Class Y (41,182) --
- ------------------------------------------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 84,941,848 56,995,676
- ------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets 95,354,053 68,578,273
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Beginning of year 133,506,534 64,928,261
- ------------------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income
of $1,791,818 and $1,145,263 respectively) $228,860,587 $133,506,534
- ------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
Putnam Asset Allocation: Conservative Portfolio
(For a share outstanding throughout the period)
For the
period
July 14, 1994
Year Year (commencement
ended ended of operations ) to
September 30 September 30 September 30
- ----------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
Class Y
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $9.19 $8.23 $8.23
- -----------------------------------------------------------------------------------------------------------------------------------
Investment operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income .38 .36(a) .07(a)(d)
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .68 .89 --
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.06 1.25 .07
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- -----------------------------------------------------------------------------------------------------------------------------------
From net investment income (.38) (.29) (.07)
- -----------------------------------------------------------------------------------------------------------------------------------
From net realized gain (.18) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total distributions (.56) (.29) (.07)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.69 $9.19 $8.23
- -----------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 11.99 15.54 1.01*
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $6,025 $1,818 $163
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.22 .92(a) .21(a)*
- -----------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 4.45 4.93(a) 1.04(a)*
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 183.67 159.8 59.27*
- -----------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $.0495
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
Putnam Asset Allocation: Conservative Portfolio
(For a share outstanding throughout the period)
For the period
February 7, 1995
Year (commencement Year
ended of operations) to ended
September 30 September 30 September 30
- ---------------------------------------------------------------------------------------------------------------------------------
1996 1995 1996
- ---------------------------------------------------------------------------------------------------------------------------------
Class M
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $9.18 $8.21 $9.15
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .33 .21(a) .30
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .66 .92 .66
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations .99 1.13 .96
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income (.32) (.16) (.29)
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain (.18) -- (.18)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.50) (.16) (.47)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.67 $9.18 $9.64
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 11.17 13.92 * 9.86
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $4,622 $1,366 $16,326
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.96 1.10(a)* 2.22
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 3.60 2.73(a)* 3.30
- ---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 183.67 159.8 183.67
- ---------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $.0495 $.0495
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
Putnam Asset Allocation: Conservative Portfolio
(For a share outstanding throughout the period)
For the
period
September 1, 1994
Year (commencement Year
ended of operations ) to ended
September 30 September 30 September 30
- --------------------------------------------------------------------------------------------------------------------------------
1995 1994 1996
- --------------------------------------------------------------------------------------------------------------------------------
Class C
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.22 $8.33 $9.16
- --------------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income .29(a) .03(a)(d) .29
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .87 (.10) .68
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.16 (.07) .97
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------------
From net investment income (.23) (.04) (.29)
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain -- -- (.18)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.23) (.04) (.47)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.15 $8.22 $9.66
- --------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 14.41 (.80)* 10.96
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $7,198 $273 $94,954
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.89(a) .16(a)* 2.22
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 3.92(a) .48(a)* 3.33
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 159.8 59.27* 183.67
- --------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $.0495
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (Continued)
Putnam Asset Allocation: Conservative Portfolio
(For a share outstanding throughout the period)
For the period
February 18, 1994
Year (commencement Year
ended of operations) to ended
September 30 September 30 September 30
- --------------------------------------------------------------------------------------------------------------------------------
1995 1994 1996
- --------------------------------------------------------------------------------------------------------------------------------
Class B
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.22 $8.50 $9.19
- --------------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income .30(a) .15(a)(d) .36
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .85 (.39) .68
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.15 (.24) 1.04
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------------
From net investment income (.21) (.04) (.36)
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain -- -- (.18)
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.21) (.04) (.54)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.16 $8.22 $9.69
- --------------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 14.22 (2.79)* 11.73
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $65,783 $38,711 $106,933
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.98(a) 1.21(a)* 1.47
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 3.81(a) 1.92(a)* 4.08
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 159.8 59.27* 183.67
- --------------------------------------------------------------------------------------------------------------------------------
Average commission rate paid (e) $.0495
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial Highlights (continued)
Putnam Asset Allocation: Conservative Portfolio
(For a share outstanding throughout the period)
For the period
February 7, 1994
Year (commencement
ended of operations ) to
September 30 September 30
- ------------------------------------------------------------------------------------------------------------
1995 1994
- ------------------------------------------------------------------------------------------------------------
Class A
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $8.23 $8.50
- ------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------
Net investment income .33(a) .18(a)(d)
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .90 (.39)
- ------------------------------------------------------------------------------------------------------------
Total from investment operations 1.23 (.21)
- ------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------
From net investment income (.27) (.06)
- ------------------------------------------------------------------------------------------------------------
From net realized gain -- --
- ------------------------------------------------------------------------------------------------------------
Total distributions (.27) (.06)
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.19 $8.23
- ------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(b) 15.27 (2.47)*
- ------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $57,341 $25,782
- ------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(c) 1.22(a) .75(a)*
- ------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 4.48(a) 2.41(a)*
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 159.8 59.27*
- ------------------------------------------------------------------------------------------------------------
Average commission rate paid (e)
- ------------------------------------------------------------------------------------------------------------
* Not annualized.
(a) Reflects an expense limitation. As a result of such limitation, expenses for the period ended September 30, 1994
reflect a reduction of $0.05, $0.04, none and $0.01 per share for class A, class B, class C and class Y shares,
respectively. Expenses for the year ended September 30, 1995 reflect a reduction of $0.03, $0.03, $0.03, $0.02 and
$0.03 per share for class A, class B, class C, class M and class Y, respectively.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expenses to average net assets for the year ended September 30, 1995 and thereafter, includes
amounts paid through expense offset and brokerage service arrangements. Prior period ratios
exclude these amounts (Note 2).
(d) Per share net investment income has been determined on the basis of the weighted average number of shares
outstanding during the period.
(e) Average commission rate paid is presented for fiscal periods beginning September 1, 1995.
</TABLE>
Notes to financial statements
September 30, 1996
Note 1
Significant Accounting Policies
Putnam Asset Allocation Funds (the "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.
The trust offers class A, class B, class C, class M and class Y shares.
Class A shares are sold with a maximum front-end sales charge of 5.75%.
Class B shares, which convert to class A shares after approximately
eight years, do not pay a front-end sales charge but pay a higher
ongoing distribution fee than class A shares, and may be subject to a
contingent deferred sales charge, if those shares are redeemed within
six years of purchase. Class C shares are subject to the same fees and
expenses as class B shares, except that class C shares have a one-year
1.00% contingent deferred sales charge and do not convert to class A
shares. Class M shares are sold with a maximum front end sales charge of
3.50% and pay an ongoing distribution fee that is higher than class A
shares but lower than class B shares. Class Y shares, which are sold at
net asset value, are generally subject to the same expenses as class A,
class B, class C and class M shares, but do not bear a distribution fee.
Class Y shares are sold to defined contribution plans that initially
invest at least $250 million in a combination of Putnam Funds.
Expenses of the trust are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if that fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies followed
by the trust in the preparation of its financial statements. The
preparation of financial statements is in conformity with generally
accepted accounting principles and requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities. Actual results could differ from those estimates.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is determined using
the last reported sale price, or, if no sales are reported -- as in the
case of some securities traded over-the-counter -- the last reported bid
price. Securities quoted in foreign currencies are translated into U.S.
dollars at the current exchange rate. Short-term investments having
remaining maturities of 60 days or less are stated at amortized cost
which approximates market, and other investments, including restricted
securities, are stated at fair value following procedures approved by
the Trustees. Market quotations are not considered to be readily
available for certain long-term corporate bonds and notes; such
investments are stated at fair value on the basis of valuations
furnished by a pricing service, approved by the Trustees, which
determines valuations for normal, institutional-size trading units of
such securities using methods based on market transactions for
comparable securities and various relationships between securities that
are generally recognized by institutional traders. (See Sections F, G
and H of Note 1 with respect to valuation of futures and options
contracts, forward currency contracts, and TBA purchase commitments.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the fund may transfer uninvested
cash balances into a joint trading account along with the cash of other
registered investment companies and certain other accounts managed by
Putnam Investment Management, Inc. ("Putnam Management"), the fund's
Manager, a wholly-owned subsidiary of Putnam Investments, Inc.. These
balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
C) Repurchase agreements The funds, 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. 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 accounted for on the trade date (date the order to buy
or sell is executed). Interest income is recorded on the accrual basis.
Dividend income is recorded on the ex-dividend date except that certain
dividends from foreign securities are recorded as soon as the fund is
informed of the ex-dividend date. Discounts on zero coupon bonds,
original issue, stepped-coupon bonds and payment in kind bonds are
accreted according to the effective yield method.
E) Foreign currency translation The accounting records of the funds are
maintained in U.S. dollars. The market value of foreign securities,
currency holdings, other assets and liabilities are recorded in the
books and records of the fund after translation to U.S. dollars based on
the exchange rates on that day. The cost of each security is determined
using historical exchange rates. Income and withholding taxes are
translated at prevailing exchange rates when accrued or incurred. The
fund does not isolate that portion of realized or unrealized gains or
losses resulting from changes in the foreign exchange rate on
investments from fluctuations arising from changes in the market prices
of the securities. Such fluctuations are included with the net realized
and unrealized gain or loss on investments. Net realized gains and
losses on foreign currency transactions represent net exchange gains or
losses on closed forward currency contracts, disposition of foreign
currencies and the difference between the amount of investment income
and foreign withholding taxes recorded on the fund's books and the U.S.
dollar equivalent amounts actually received or paid. Net unrealized
gains and losses on foreign currency transactions 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.
F) Forward currency contracts The funds may engage in forward currency
contracts, which are agreements between two parties to buy and sell
currencies at a set price on a future date, 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). The U.S. dollar value of forward currency contracts is
determined using 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. A 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 a fund is unable to enter into a closing position.
G) Futures and options contracts The funds may use futures and options
contracts to hedge against changes in the values of securities the funds
own or expect to purchase. The funds may also write options on
securities it owns or in which it invests to increase its current
returns.
The potential risk to the funds 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.
Futures contracts are valued at the quoted daily settlement prices
established by the exchange on which they trade. 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.
H) TBA purchase commitments The funds may enter into "TBA" (to be
announced) purchase 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 fluctuate
more than 1.0% from the principal amount. The funds hold, and maintain
until settlement date, cash or high-grade debt obligations in an amount
sufficient to meet the purchase price, or the funds may enter into
offsetting contracts for the forward sale of other securities they own.
Income on the securities will not be earned until settlement date. TBA
purchase commitments may be considered securities in 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 the current market value of the
underlying securities, according to the procedures described under
"Security valuation" above.
Although the funds will generally enter into TBA purchase commitments
with the intention of acquiring securities for their 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.
I) Federal taxes It is the policy of each fund to distribute all of its
income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of each fund to
distribute an amount sufficient to avoid imposition of any excise tax
under Section 4982 of the Internal Revenue Code of 1986. 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.
J) Distributions to shareholders Distributions to shareholders from net
investment income are recorded by the funds on the ex-dividend date.
Capital gain distributions, if any, are recorded on the ex-dividend date
and paid 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 treatment of losses on wash sale transactions,
realized and unrealized gains and losses on forward foreign currency
contracts, currency gains and losses on foreign bonds, market discount
and unrealized gains on passive foreign investment companies.
Reclassifications are made to the fund's capital accounts to reflect
income and gains available for distribution (or available capital loss
carryovers) under income tax regulations. Reclassifications for the year
ended September 30, 1996 were as follows:
- ------------------------------------------
Undistributed Net
Investment Income
Growth Portfolio $1,941,337
Balanced Portfolio 3,085,089
Conservative Portfolio 466,530
- ------------------------------------------
- ------------------------------------------
Accumulated Net
Realized Gain (Loss)
Growth Portfolio $(1,879,068)
Balanced Portfolio (3,075,420)
Conservative Portfolio (484,450)
- ------------------------------------------
- ------------------------------------------
Additional
Paid-in Capital
Growth Portfolio $(62,269)
Balanced Portfolio (9,669)
Conservative Portfolio 17,920
- ------------------------------------------
The calculation of net investment income per share in the financial
highlights table excludes these adjustments.
K) 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.
L) Unamortized organization expenses Expenses incurred by the trust in
connection with its organization, its registration with the Securities
and Exchange Commission and with various states and the initial public
offering of its shares aggregated $39,790.
- ------------------------------------------
Growth Portfolio $13,264
Balanced Portfolio 13,263
Conservative Portfolio 13,263
- ------------------------------------------
These expenses are being amortized by each fund on a straight-line basis
over a five-year period. The funds will reimburse Putnam Management for
payment of these expenses.
Note 2
Management fee, administrative services, and other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund. Such fee is based on the following annual rates: 0.70% of the
first $500 million of average net assets of a fund, 0.60% of the next
$500 million, 0.55% of the next $500 million, 0.50% of any amount over
$1.5 billion, subject, under current law, to reduction in any year by
the amount of certain brokerage commissions and fees (less expenses)
received by affiliates of Putnam Management on the fund's portfolio
transactions.
The trust reimburses Putnam Management for the compensation and related
expenses of certain officers of the trust and their staff who provide
administrative services to the funds. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Trustees of the Trust receive an annual Trustee's fee as follows:
- ------------------------------------------
Growth Portfolio $ 910
Balanced Portfolio 1,260
Conservative Portfolio 780
- ------------------------------------------
Trustees receive an additional fee for each Trustee's meeting attended.
Trustees who are not interested persons of Putnam Management and who
serve on committees of the Trustees receive additional fees for
attendance at certain committee meetings.
The fund adopted a Trustee Fee Deferral Plan (the "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 in the funds
and are invested in certain Putnam funds until distribution in
accordance with the Plan.
Custodial functions for each of the funds' assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the year ended September 30, 1996, fund expenses were reduced by
$115,714, $161,709, and $49,211 (for Growth Portfolio, Balanced
Portfolio, and Conservative Portfolio, respectively) under expense
offset arrangements with PFTC and brokerage service arrangements.
Investor servicing and custodian fees reported in the Statement of
operations exclude these credits. The funds could have invested a
portion of the assets utilized in connection with the expense offset
arrangements in an income producing asset if they had not entered into
such arrangements.
Each fund has adopted distribution plans (the "Plans") with respect to
its class A, class B class C and class M shares pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the Plans is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of
Putnam Investments Inc., for services provided and expenses incurred by
it in distributing shares of each fund. The Plans provide for payments
by the funds to Putnam Mutual Funds Corp. at an annual rate up to 0.35%,
1.00%, 1.00% and 1.00% of the average net assets attributable to class
A, class B, class C and class M shares, respectively. The Trustees have
approved payment by each fund at an annual rate of 0.25%, 1.00%, 1.00%
and 0.75% of the average net assets attributable to class A, class B,
class C and class M shares, respectively.
For the year ended September 30, 1996, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $571,538 and $50,718 from the
sale of class A and class M shares, respectively and received $698,746
and $21,004 in contingent deferred sales charges from redemptions of
class B and C shares, respectively. A deferred sales charge of up to 1%
is assessed on certain redemptions of class A shares. For the year ended
September 30, 1996, Putnam Mutual Funds Corp., acting as underwriter
received $1,766 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended September 30, 1996, aggregate
purchases and sales of investment securities other than
short-term investments were as follows:
U.S. Government Obligations
- ----------------------------------------------------
Purchases Sales
- ----------------------------------------------------
Growth
Portfolio $ 51,507,813 $ 45,450,520
- ----------------------------------------------------
Balanced
Portfolio 144,759,193 119,317,944
- ----------------------------------------------------
Conservative
Portfolio 168,471,921 148,964,570
- ----------------------------------------------------
Other Securities
- ----------------------------------------------------
Purchases Sales
- ----------------------------------------------------
Growth
Portfolio $425,822,574 $311,566,047
- ----------------------------------------------------
Balanced
Portfolio 724,648,322 501,071,851
- ----------------------------------------------------
Conservative
Portfolio 208,082,151 155,687,763
- ----------------------------------------------------
In determining the net gain or loss on securities sold,
the cost of securities has been determined on the
identified cost basis.
Written option transactions during the year are
summarized as follows:
Growth Portfolio
- ----------------------------------------------------
Contract Amount
Premiums Received
- ----------------------------------------------------
Contracts
outstanding at
the beginning
of the year $ 1,260,000 $ 5,418
Options opened 3,400,000 11,050
Options expired (4,660,000) (16,468)
- ----------------------------------------------------
Written options
outstanding at
the end of
the year $ -- $ --
- ----------------------------------------------------
Balanced Portfolio
- ----------------------------------------------------
Contract Amount
Premiums Received
- ----------------------------------------------------
Contracts
outstanding at
the beginning
of the year $ 3,540,000 $ 15,222
Options opened 9,600,000 31,200
Options expired (13,140,000) (46,422)
- ----------------------------------------------------
Written options
outstanding at
the end of
the year $ -- $ --
- ----------------------------------------------------
Conservative Portfolio
- ----------------------------------------------------
Contract Amount
Premiums Received
- ----------------------------------------------------
Contracts
outstanding at
the beginning
of the year $ 1,820,000 $ 7,826
Options opened 5,400,000 17,550
Options expired (7,220,000) (25,376)
- ----------------------------------------------------
Written options
outstanding at
the end of
the year $ -- $ --
- ----------------------------------------------------
Note 4
Capital shares
At September 30, 1996 there was an unlimited number of
shares of beneficial interest authorized. Transactions
in capital shares were as follows:
Year ended September 30,
- ----------------------------------------------------
Class A 1996
- ----------------------------------------------------
Growth Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 9,342,955 $98,031,198
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 595,871 5,887,021
- ----------------------------------------------------
Shares
repurchased (3,635,586) (38,017,740)
- ----------------------------------------------------
Net increase 6,303,240 $65,900,479
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class A 1995
- ----------------------------------------------------
Growth Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 14,353,882 $127,971,056
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 59,865 482,510
- ----------------------------------------------------
Shares
repurchased (7,449,039) (69,842,038)
- ----------------------------------------------------
Net increase 6,964,708 $58,611,528
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class B 1996
- ----------------------------------------------------
Growth Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 7,548,843 $79,009,071
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 497,487 4,890,441
- ----------------------------------------------------
Shares
repurchased (1,998,408) (20,969,644)
- ----------------------------------------------------
Net increase 6,047,922 $62,929,868
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class B 1995
- ----------------------------------------------------
Growth Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 6,951,562 $61,045,632
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 43,865 352,239
- ----------------------------------------------------
Shares
repurchased (1,379,271) (12,220,928)
- ----------------------------------------------------
Net increase 5,616,156 $49,176,943
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class C 1996
- ----------------------------------------------------
Growth Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 1,769,324 $18,487,199
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 39,163 383,411
- ----------------------------------------------------
Shares
repurchased (159,930) (1,670,535)
- ----------------------------------------------------
Net increase 1,648,557 $17,200,075
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class C 1995
- ----------------------------------------------------
Growth Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 821,798 $7,132,757
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,371 17,618
- ----------------------------------------------------
Shares
repurchased (66,382) (605,500)
- ----------------------------------------------------
Net increase 757,787 $6,544,875
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class M 1996
- ----------------------------------------------------
Growth Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 892,131 $9,515,068
- ----------------------------------------------------
Shares issued in
connections with
reinvestment of
distributions 15,633 153,833
- ----------------------------------------------------
Shares
repurchased (130,938) (1,395,250)
- ----------------------------------------------------
Net increase 776,826 $8,273,651
- ----------------------------------------------------
For the period
February 3, 1995
(commencement of
operations) to
September 30
- ----------------------------------------------------
Class M 1995
- ----------------------------------------------------
Growth Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 333,330 $3,079,142
- ----------------------------------------------------
Shares issued in
connections with
reinvestment of
distributions -- --
- ----------------------------------------------------
Shares
repurchased (17,517) (167,985)
- ----------------------------------------------------
Net increase 315,813 $2,911,157
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class Y 1996
- ----------------------------------------------------
Growth Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 1,379,049 $14,660,733
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 209,229 2,073,471
- ----------------------------------------------------
Shares
repurchased (979,250) (10,199,763)
- ----------------------------------------------------
Net increase 609,028 $6,534,441
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class Y 1995
- ----------------------------------------------------
Growth Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 5,637,392 $53,736,669
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,026 16,310
- ----------------------------------------------------
Shares
repurchased (1,256,098) (12,169,703)
- ----------------------------------------------------
Net increase 4,383,320 $41,583,276
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class A 1996
- ----------------------------------------------------
Balanced Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 18,927,602 $190,362,013
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,131,747 10,987,765
- ----------------------------------------------------
Shares
repurchased (5,244,795) (52,838,483)
- ----------------------------------------------------
Net increase 14,814,554 $148,511,295
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class A 1995
- ----------------------------------------------------
Balanced Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 12,676,147 $109,974,749
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 266,456 2,332,824
- ----------------------------------------------------
Shares
repurchased (3,735,484) (33,822,706)
- ----------------------------------------------------
Net increase 9,207,119 $78,484,867
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class B 1996
- ----------------------------------------------------
Balanced Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 10,510,356 $104,852,168
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 908,070 8,719,363
- ----------------------------------------------------
Shares
repurchased (3,118,506) (31,217,860)
- ----------------------------------------------------
Net increase 8,299,920 $82,353,671
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class B 1995
- ----------------------------------------------------
Balanced Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 8,479,183 $73,038,471
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 196,141 1,698,419
- ----------------------------------------------------
Shares
repurchased (1,913,610) (16,699,005)
- ----------------------------------------------------
Net increase 6,761,714 $58,037,885
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class C 1996
- ----------------------------------------------------
Balanced Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 1,806,776 $18,035,995
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 76,593 735,352
- ----------------------------------------------------
Shares
repurchased (328,036) (3,269,359)
- ----------------------------------------------------
Net increase 1,555,333 $15,501,988
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class C 1995
- ----------------------------------------------------
Balanced Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 1,213,766 $10,392,267
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,482 61,714
- ----------------------------------------------------
Shares
repurchased (35,983) (322,975)
- ----------------------------------------------------
Net increase 1,186,265 $10,131,006
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class M 1996
- ----------------------------------------------------
Balanced Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 1,164,306 $11,746,862
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 28,876 282,108
- ----------------------------------------------------
Shares
repurchased (159,031) (1,609,042)
- ----------------------------------------------------
Net increase 1,034,151 $10,419,928
- ----------------------------------------------------
For the period
February 6, 1995
(commencement of
operations) to
September 30
- ----------------------------------------------------
Class M 1995
- ----------------------------------------------------
Balanced Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 372,713 $3,387,197
Shares issued in
connection with
reinvestment of
distributions 2,154 20,066
- ----------------------------------------------------
Shares
repurchased (11,715) (111,247)
- ----------------------------------------------------
Net increase 363,152 $3,296,016
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class Y 1996
- ----------------------------------------------------
Balanced Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 5,351,957 $55,035,755
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 482,727 4,684,889
- ----------------------------------------------------
Shares
repurchased (1,444,270) (14,519,012)
- ----------------------------------------------------
Net increase
(decrease) 4,390,414 $45,201,632
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class Y 1995
- ----------------------------------------------------
Balanced Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 570,980 $5,007,677
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 188,914 1,632,242
- ----------------------------------------------------
Shares
repurchased (1,275,768) (11,050,442)
- ----------------------------------------------------
Net increase
(decrease) (515,874) $(4,410,523)
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class A 1996
- ----------------------------------------------------
Conservative
Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 6,732,230 $63,071,227
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 409,779 3,757,996
- ----------------------------------------------------
Shares
repurchased (2,345,290) (22,006,931)
- ----------------------------------------------------
Net increase 4,796,719 $44,822,292
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class A 1995
- ----------------------------------------------------
Conservative
Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 5,500,165 $46,870,569
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 64,785 581,106
- ----------------------------------------------------
Shares
repurchased (2,454,372) (20,455,442)
- ----------------------------------------------------
Net increase 3,110,578 $26,996,233
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class B 1996
- ----------------------------------------------------
Conservative
Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 4,048,229 $37,715,056
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 314,695 2,871,854
- ----------------------------------------------------
Shares
repurchased (1,709,914) (15,938,534)
- ----------------------------------------------------
Net increase 2,653,010 $24,648,376
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class B 1995
- ----------------------------------------------------
Conservative
Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 3,690,750 $31,111,330
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 56,433 503,950
- ----------------------------------------------------
Shares
repurchased (1,275,100) (10,800,154)
- ----------------------------------------------------
Net increase 2,472,083 $20,815,126
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class C 1996
- ----------------------------------------------------
Conservative
Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 1,074,609 $9,967,768
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 49,029 447,214
- ----------------------------------------------------
Shares
repurchased (217,121) (2,022,937)
- ----------------------------------------------------
Net increase 906,517 $8,392,045
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class C 1995
- ----------------------------------------------------
Conservative
Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 803,430 $6,783,192
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 6,822 60,859
- ----------------------------------------------------
Shares
repurchased (56,504) (482,246)
- ----------------------------------------------------
Net increase 753,748 $6,361,805
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class M 1996
- ----------------------------------------------------
Conservative
Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 409,443 $3,838,426
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 9,203 84,406
- ----------------------------------------------------
Shares (89,556) (836,049)
- ----------------------------------------------------
Net increase 329,090 $3,086,783
- ----------------------------------------------------
For the period
February 7, 1995
(commencement of
operations) to
September 30
- ----------------------------------------------------
Class M 1995
- ----------------------------------------------------
Conservative
Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 160,768 $1,386,854
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 732 6,702
- ----------------------------------------------------
Shares
repurchased (12,580) (111,656)
- ----------------------------------------------------
Net increase 148,920 $1,281,900
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class Y 1996
- ----------------------------------------------------
Conservative
Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 527,405 $4,960,017
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 13,676 125,494
- ----------------------------------------------------
Shares
repurchased (117,166) (1,093,159)
- ----------------------------------------------------
Net increase 423,915 $3,992,352
- ----------------------------------------------------
Year ended September 30
- ----------------------------------------------------
Class Y 1995
- ----------------------------------------------------
Conservative
Portfolio Shares Amount
- ----------------------------------------------------
Shares sold 193,082 $1,672,448
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,234 20,103
- ----------------------------------------------------
Shares
repurchased (17,269) (151,939)
- ----------------------------------------------------
Net increase 178,047 $1,540,612
- ----------------------------------------------------
Federal tax information
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, the Funds hereby
designate $0.113, $0.111 and $0.058 per share (or if different, the
amounts necessary to offset net capital gain earned by the Funds) for
all classes of shares as capital gain dividends for the taxable year
ended September 30, 1996 for the Growth, Balanced and Conservative
Portfolios, respectively.
The funds have designated 20.85%, 14.49%, and 6.10% of the distributions
from net investment income for the Growth, Balanced and Conservative
Portfolios, respectively as qualifying for the dividends received
deduction for corporations.
The Form 1099 you receive in January 1997 will show the tax status of
all distributions paid to your account in calendar 1996.
Results of September 5, 1996 shareholder meeting
(Unaudited)
An annual meeting of shareholders of the funds was held on September 5,
1996. At the meeting, each of the nominees for Trustees was elected, as
follows:
Growth Portfolio
Votes
Votes for withheld
Jameson Adkins Baxter 22,795,420 303,375
Hans H. Estin 22,796,246 302,549
John A. Hill 22,792,027 306,768
R.J. Jackson 22,789,154 309,641
Elizabeth T. Kennan 22,787,166 311,629
Lawrence J. Lasser 22,800,352 298,443
Robert E. Patterson 22,797,874 300,921
Donald S. Perkins 22,784,920 313,875
William F. Pounds 22,797,906 300,889
George Putnam 22,798,667 300,128
George Putnam, III 22,797,199 301,596
E. Shapiro 22,773,749 325,046
A.J.C. Smith 22,772,907 325,888
W. Nicholas Thorndike 22,773,330 325,465
Balanced Portfolio
Votes
Votes for withheld
Jameson Adkins Baxter 33,620,426 750,247
Hans H. Estin 33,621,206 749,467
John A. Hill 33,546,356 824,317
R.J. Jackson 33,618,792 751,881
Elizabeth T. Kennan 33,591,048 779,625
Lawrence J. Lasser 33,626,223 744,450
Robert E. Patterson 33,598,571 772,102
Donald S. Perkins 33,617,914 752,759
William F. Pounds 33,622,411 748,262
George Putnam 33,603,920 766,753
George Putnam, III 33,591,102 779,571
E. Shapiro 33,561,432 809,241
A.J.C. Smith 33,538,456 832,217
W. Nicholas Thorndike 33,613,750 756,923
Conservative Portfolio
Votes
Votes for withheld
Jameson Adkins Baxter 13,410,075 225,218
Hans H. Estin 13,410,075 225,218
John A. Hill 13,410,075 225,218
R.J. Jackson 13,408,963 226,330
Elizabeth T. Kennan 13,407,513 227,780
Lawrence J. Lasser 13,410,075 225,218
Robert E. Patterson 13,410,075 225,218
Donald S. Perkins 13,410,075 225,218
William F. Pounds 13,410,075 225,218
George Putnam 13,408,190 227,103
George Putnam, III 13,403,862 231,431
E. Shapiro 13,403,646 231,647
A.J.C. Smith 13,410,075 225,218
W. Nicholas Thorndike 13,407,900 227,393
Results of September 5, 1996 shareholder meeting.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund *
Health Sciences Trust
International Growth Fund +
International New Opportunities Fund
Investors Fund
New Opportunities Fund
OTC Emerging Growth Fund
Vista Fund
Voyager Fund
Voyager Fund II
PUTNAM GROWTH
AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
Intermediate U.S. Government
Income Fund
Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE
INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds (DBL. DAGGER)
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
LIFESTAGESM FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments to help maximize your return and reduce your risk.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENTS [SECTION MARK]
Putnam money market funds: **
California Tax Exempt Money Market Fund
Money Market Fund
New York Tax Exempt Money Market Fund
Tax Exempt Money Market Fund
CDs and savings accounts [DBL.DAGGER]
* Formerly Natural Resources Fund
+ Formerly Overseas Growth Fund
[DBL. DAGGER] Not available in all states.
[SECTION MARK] Relative to above.
** An investment in a money market fund is neither insured
nor guaranteed by the U.S. government. These funds are
managed to maintain a price of $1.00 per share, although
there is no assurance that this price will be maintained
in the future.
++ Not offered by Putnam Investments. Certificates of
deposit offer a fixed rate of return and may be insured
up to certain limits by federal/state agencies. Savings
accounts may also be insured up to certain limits. Please
call your financial advisor or Putnam at 1-800-225-1581
to obtain a prospectus for any Putnam fund. It contains
more complete information, including charges and
expenses. Please read it carefully before you invest or
send money.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
William J. Curtin
Vice President
Peter Carman
Vice President and Fund Manager
Gary N. Coburn
Vice President and Fund Manager
William J. Landes
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
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, which gives details of sales
charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information, or to request a prospectus, call toll free: 1-800-225-1581.
You can also learn more at Putnam Investments' website:
http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution, are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board
or any other agency, and involve risk, including the possible loss of
principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- -----------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- -----------------
28342-250/259/264 11/96
